11 UNIVERSITY OF CALIFORNIA LOS ANGELES SCHOOL OF LAW LIBRARY COMMERCIAL LAW CASES VOLUME ONE PERRIN AND BABB COMMERCIAL LAW CASES BY HAROLD L. PERRIN, LL.M., Ph.D. Professor and Head of the Department of Law of the College of Business Administration, and the College of Secre- tarial Science, Boston University AND HUGH W. BABB, B.A. (Oxon.), LL.B. Assistant Professor of Law at the College of Business Administration, Boston University IN TWO VOLUMES VOLUME ONE CONTRACTS — SALES AGENCY NEW xair YORK GEORGE H. DORAN COMPANY p m^ CL COPYRIGHT, 1 92 1, BY GEORGE H. DORAN COMPANY PRINTED IN THE UNITED STATES OF AMERICA ^ PREFACE The object of this book is to furnish material which, in the hands of a competent instructor, shall be adequate for a two years' course in commercial law in institutions of collegiate rank. To this end, the authors have attempted to combine the advan- tages of the text book and case systems, and have attempted further to eliminate some of the disadvantages of each. The text presents to the student the fundamental principles of each sub- ject in such form that he may appreciate the relation of the cases to each other and to the whole; the cases have been so sum- marized and abstracted as to reduce to a minimum the tedious verbiage upon which the student ordinarily wastes time. In order to accomplish this result within a limited number of pages, the authors have been obliged to assume competent instruc- tion, or, in its absence, such general familiarity with the subject matter by the student that he can appreciate what subjects have been exhaustively covered and what subjects are less completely represented. While the main topics in every branch treated have been at least touched upon, it has been necessary to confine within the scope of two volumes material which in the ordinary law school instruction requires at least twelve. Obviously, every branch of every subject cannot be completely set forth. With this difficulty in view, the authors have not lost sight of the main elements and fundamental principles, yet have been obliged to treat conflicts in minor rules as of secondary importance. More space and minuteness of detail have been given to the discussion of the law of contracts than to any other branch, since experience shows that a proportionately longer period devoted to the first and fundamental subject in commercial law results in a quicker and surer grasp of the derivative principles of subjects subsequently treated. The relative space occupied in this volume by the law of contracts represents to the authors' minds the relative time which should be spent upon that subject in any course on com- mercial law. It may be thought that a text purporting to cover two years* work should comprise other branches of the law in addition to those here represented : Contracts, Sales, Agency, Negotiable Instruments, Partnership and Corporations. In teaching, it has become apparent that far better results are reached by confining VI PREFACE the instruction to these particular subjects with a few additional lectures by the instructor upon insurance, torts, bankruptcy, car- riers and real property. Students who have attempted to study subjects in addition to the six included in this text are almost invariably found to have so broad a knowledge that it has no depth. While the primary object of the book is, as has been said, to furnish a text for institutions of a certain standing, the authors believe tliat its usefulness will be by no means limited to this particular field. The business man who desires stronger meat than the necessarily incomplete works on commercial law now in the market, will, in the opinion of the authors, find this book a more satisfactory diet than the perusal of additional texts on commer- cial law. This statement is not intended as a criticism of these other works : it is merely a plain statement of the fact, apparent to every teacher, that it is impossible to cover the field in the limited space of one text book without generalizing at the expense of the particular exception in which the business man happens to be interested. So far as this book goes, it represents not only what the authors think about the law, but the actual law in the particular cases set forth. The summaries of facts are entirely the work of the authors. All details not essential to the particular questions in issue have been eliminated, and facts bearing upon matters collateral to the excerpts have been disregarded. The holding of the court has been occasionally broadened to indicate the relation of the par- ticular case to the subject in hand. The remainder of each case is the judgment of the court, omitting unnecessary discussion. In order to make these truncated judgments readable, the authors have been obliged to take some liberties with spelling, quotation marks, marks of omission, and punctuation generally. Omissions have not usually been indicated, and only quotations from text writers have been properly signified. This course the authors be- lieve to be justified in the interest of legibility and concentration. A few words may be in order concerning the use of the book in college classes : The authors believe that the best results will be obtained by assigning the text and cases for reading by the student before coming to class. The text material should be thoroughly learned by the student in order that he may be fa- miliar with the subject matter when the instructor lectures upon it. The instructor may then analyze the facts and comment on the facts and the law contained in the cases, giving additional examples and illustrations of the rules involved, and amplifying the text to any extent that he considers advisable. It is too often true that a text book leaves little for the instructor to add to the PREFACE Vll material there presented, and the course thereby becomes dry and uninteresting. This difficulty the authors have had in mind, and have purposely left large scope for the instructor's individual knowledge and point of view. It may be considered that the book appears too large for classes which have a limited time at their disposal. This difficulty is more apparent than real, as it is feasible for the instructor to skip cases at will and thereby choose for himself only the more important ones. Furthermore, it is possible and very practicable to require no reading of the opinion of the court in many cases. While the book has been in preparation, the authors have been furnishing their classes with mimeographed statements of facts and holdings, with no opinion appended. This system has worked well and can be used to advantage even with the book in complete form by omitting the reading of the opinion. The course may be much shortened by the elimination of this requirement, and at the same time those students who desire to do additional work will have the material at hand. The acknowledgment of the authors is due to Miss Bessie N. Page, instructor in History and Law in the College of Secretarial Science at Boston University, for her careful comparison of the text and for valuable suggestions concerning the subject matter. H. L. P. Boston, H. W. B. September i, igsi. Page Ivine 404 14 405 9 408 5 423 30 448 36 457 41 461 7 478 24 470 32 480 31 480 33 489 12 492 21 503 10 TABLE OF ERRATA VOLUME ONE Insert "his" before "employment" Delete comma before parenthesis Should read "Eiability of Joint Principals" "Plaintiff's," not "plaintiffs' " "Sub agent," not "sub-agent" "Defendant," not "defendants" "Plaintiff," not "plaintiffs" Should read, "it is not to be applied", etc. Should read, ' qni ftxcit per aliiim facit per se "Plaintiffs'," not "plaintiff's" "plaintiffs" instead of "defendants" Lloyd's "Applying this principle", etc. ''Plaintiffs'," not "plaintiff's" TABLE OF CONTENTS VOLUME ONE FAGB PREFACE V INTRODUCTION i COMMEROAL LaW I Legal Rights i Sources of Law 2 common law 2 EQUITY 3 STATUTE LAW 4 OTHER SOURCES 4 CANON LAW 4 CIVIL LAW .,.,.>: . 4 THE LAW MERCHANT S Jurisdiction S STATE COURTS 6 FEDERAL COURTS 7 CHAPTER I: Formation of Contracts ...... 9 1. Express, Implied and Quasi Contracts ...... 10 2. Implied Contracts ii 3. Implied Contracts : Necessity of Privity between Parties 12 4. Executory and Executed Contracts 13 5. Legal and Moral Obligation 13 I. Agreement 15 A. Offers 1. Offer and Acceptance by Conduct 16 2. Communication of Offer: Necessity of Knowledge of Offeree of Offer l6 3. Advertisements Distinguished from Offers 17 4. Uncompleted Negotiations 18 5. Indications of Intention I9 6. Vague Agreements 20 7. Notice of Revocation 21 ix TABLE OF CONTENTS PAGE 8. Revocation by Death of Offerer 22 9. Sealed Offers. (Majority Rule) 23 10. Revocation of Offer to Public in Manner of Offer , . 23 ir. Revocation by Lapse of Time 24 B. Acceptance 1. Communication of Acceptance 25 2. Acceptance by Act 26 3. When Acceptance Takes Place 28 4. Acceptance to Place Specified 29 5. Acceptance in Manner Implied 30 6. Necessity of Unconditional Acceptance 31 7. Termination of Offer by Counter-Offer 32 II. Form of Contr.\cts 33 A. Scaled Instruments 1. Nature of a Seal 36 2. Delivery 37 3. Estoppel 37 4. Merger of Prior Simple Contract 38 5. Nature of Consideration Usually Immaterial at Law . . 39 6. Illegality or Immorality of Consideration of Sealed Con- tract 40 7. Nature of Consideration Material in Equity .... 41 B. Statute of Frauds 1. Promise by Executor or Administrator 42 2. Promise to Answer for Debt of Another 43 3. Promise to Debtor to Answer for His Debt .... 44 4. Contract Made on Credit of Promisor 45 5. Extinction of Original Debt 46 6. Promise for Benefit Received by Promisor from Creditor 47 7. Promise for Benefit Received by Promisor from Debtor . 48 8. Promise upon Consideration of Marriage 49 9. Contracts for Sale of Interest in Land. (Majority Rule) 50 10. Contracts for Sale of Interest in Land. (Massachusetts Rule) 51 11. Contracts not to be Performed within a Year ... 52 12. Contracts which May be Performed within a Year by Death 52 13. Nature of Memorandum Required 54 14. Nature of Memorandum Required 55 15. Signature of Memorandum by Party to be Charged . . 55 16. Effect of Non-Compliance with the Statute .... TABLE OF CONTENTS XI PAGE III. Consideration 57 1. Nature of Consideration 59 2. Good and Valuable Consideration 60 3. Consideration in Sealed Instruments 61 4. Exchange of Even Values 61 5. Adequacy of Consideration in Equity 63 6. Forbearance 63 7. Part Payment of Debt not yet Due as Consideration . 64 8. Part Payment : Effect of Voucher Check 66 9. Part Payment Accompanied by Other Benefit or Detri- ment 68 10. Compromise of Amount Due 68 11. Compositions with Creditors 69 12. Doing What One is Bound to Do 70 13. Promise of Additional Compensation. (General Rule) . 71 14. Promise of Additional Compensation. (Conflicting Rule) 72 15. Additional Promise by Third Party 7/ 16. Conditional Consideration 75 17. Past Consideration 76 18. Moral Obligation as Past Consideration yy 19. Past Consideration in Case of Debt Discharged by Law 78 20. Consideration Part Past and Part Present .... 80 21. Privity to Consideration. (Majority Rule) 81 22. Privity to Consideration. (Minority Rule) 82 23. Subscriptions SLj IV. Capacity of Parties 85 A. Contracts of Infants. 1. Contracts of Infants in General 86 2. Contracts for Necessaries . . 87 3. Executory Contracts for Necessaries 88 4. Money as a Necessary 8g 5. Contracts which an Infant may be Compelled by Law to Perform 90 6. Contracts of which an Infant has Enjoyed the Benefit . 91 7. Conditions Under Which Infant May Rescind. (Ma- jority Rule) 92 8. Conditions Under Which Infant May Rescind. (Mi- nority Rule) 94 9. Ratification 95 10. Ratification by Lapse of Time 96 11. Ratification: Knowledge of Right of Rescission Imma- terial 97 12. Mere Acknowledgment Not Ratification 98 13. Statutory Requirement of Written Ratification ... 99 Xll TABLE OF CONTENTS PAGE 14. Appointment of Agent by Infant 100 15. Infant's Liability for Tort Distinguished lOi B. Contracts of Insane Persons. 1. What Constitutes Inability to Contract 102 2. Liability of Insane Person for Necessaries .... I02 3. Knowledge of Insanity by Other Party Immaterial . . 104 4. Necessity of Return of Consideration on Disaffirmance. (Majority Rule) 105 5. a. Necessity of Return of Consideration on Disaffirm- ance. (Minority Rule) 106 h. Ratification 106 C. Contracts of Married Women. 1. Common Law Disability 108 2, Contracts Between Husband and Wife 109 V. Reality of Consent no A. Mistake. 1. No Mistake When Minds Meet 112 2. Failure of Minds to Meet 114 3. Efifect of Unilateral Mistake 114 4. IMistake as to Nature of Transaction 115 5. Mistake as to Identity of Person 116 6. Mistake as to Identity of Person 116 7. Mistake as to Existence of Subject IMatter .... 118 8. Mistake as to Identity of Subject Matter 119 9. IMistake as to Nature of Promise Known to Other Party 121 10. Mistake as to Value of Subject Matter 122 11. Mistake of Law 123 12. Mistake as to Law of Another Jurisdiction .... 124 B. Misrepresentation and Fraud. 1. Innocent Misrepresentation in General 126 2. Misrepresentation a Term of the Contract .... 127 3. Misrepresentation a Ground of Relief in Equity . . . 129 4. Misrepresentation by One in Confidential Relationship . 130 5. Elements of Fraud 131 6. Promissory Misrepresentation of Fact 132 7. Misrepresentation of Intention as Fact 133 8. Misrepresentation by Concealment 134 9. Knowledge of Falsity 135 10. Intention that Other Parly Act 136 11. Action by Other Party 137 12. Damage 138 13. Effect of Fraud 140 TABLE OF CONTENTS Xlll PAGE C. Duress and Undue Influence. 1. What Constitutes Duress 141 2. Threat of Lawful Act 143 3. Threat of Lawful Imprisonment 144 4. Duress of Goods 145 5. Ratification of Contract Obtained by Duress .... 146 6. Undue Influence 147 7. Effect of Undue Influence 148 VI. Legality of Subject Matter 151 1. Effect of Illegality 152 2. Agreement to Commit a Crime 153 3. Agreement to Commit a Private Wrong 154 4. Agreement to Violate Directory Statute not Void . . 155 5. Agreement to Violate Statute for Revenue Purposes Only Not Void 156 6. Agreement to Violate Statute : Sunday Contracts . . 157 7. Agreement to Violate Statute : Dealing in Futures . . 160 8. Agreement to Violate Statute: Bucket Shops ... 161 9. Agreement to Violate Statute : Lotteries 162 10. Agreement to Violate Statute : Usury 163 11. Agreement Against Public Policy: Influencing Official Action 164 12. Agreement Against Public Policy: Ousting Court of Jurisdiction 166 13. Agreement Against Public Policy: Secret Advantage in Composition with Creditors 167 14. Agreement Against Public Policy : Secret Advantage in Composition with Creditors. (Conflicting Rule) . . 168 15. Agreement Against Public Policy : Restraint of Trade i6g 16. Effect of Partial Illegality 171 17. Effect of Partial Illegality 171 18. Effect of Withdrawal from Illegal Contract .... 173 19. Agreement in Violation of the Law of Another Jurisdic- tion 174 CHAPTER II: Operation and Discharge of Contracts 176 I. Parties to Contracts 176 A. Parties Privy to Contract. 1. Necessity of Privity 177 2. Right to Recover Money Had and Received .... 179 3. See Cases Under Chapter I, III, Consideration . . . 179 B. Assignment. 1. In General 180 2. Assignment of Rights Not Yet in Existence .... 182 XIV TABLE OF CONTENTS PAGE 3. Assignment of Future Wages 183 4. Assignment of Contract Involving Personal Credit . . 184 5. Assignment of Part of Debt Due 186 6. Form of Assignment 187 7. Rights of Assignee after Notice to Debtor 187 8. Assignee Takes Subject to Equities against Assignor . 188 9. Rights of Successive Assignees 189 ID. Assignment by Death 191 II. Assignment by Bankruptcy 192 C. Joint and Several Contracts. 1. Intent to Make Joint or Several Contract . . 193 2. Suit Against Joint Contractors 194 3. Suits on Joint Contracts When Some of the Joint Con- tractors are Outside the Jurisdiction 195 4. Release of One Joint Debtor 196 5. Suit by Joint Contractors 197 6. Right of Joint Contractor to Contribution from the Others 198 II. Construction of Contracts 199 A. Legal Effect of Language. 1. Intent of Parties 200 2. Correction of Obvious Mistakes 201 3. Efifect of General Words 203 4. Technical Words 204 5. Effect of Custom 205 6. Requisites of Valid Custom . . 207 7. Construction of Terms in Order to Give Contract Validity 208 8. Contract to be Construed Reasonably 209 9. Contracts to be Construed According to the Construc- tion Placed Upon Them by the Parties 2il 10. Inconsistent Written and Printed Provisions .... 212 11. Terms Implied in a Contract 213 12. Construction of Contracts as to Time 214 13. When Time is the Essence of the Contract .... 215 14. Time as the Essence of the Contract in Equity . . . 217 B. Dependent and Independent Terms. 1. In General 218 2. Entire and Severable Contracts 220 3. Instalment Contracts 222 4. Tender of Performance as a Condition Precedent . . 224 5. Time of Delivery as Condition Precedent 225 6. Effect of I'aiiure to Perform Condition Precedent . . 226 TABLE OF CONTENTS XV PAGE 7. Mutually Dependent Conditions 227 8. Conditions Subsequent 228 9. Conditions Subsequent : See Cases Under Discharge by Agreement, iii, A, Infra 229 III, Discharge of Contracts 229 A. Discharge by Agreement. 1. Waiver 231 2. Substitution of New Contract 232 3. Efifect of Substitution of New Contract ..... 233 4. Discharge by Condition Subsequent: Occurrence of Par- ticular Event 235 5. Discharge by Condition Subsequent : Exercise of Option 236 6. Discharge by Condition Subsequent : Cancellation . . 22,7 7. Form of Discharge : Contracts under Seal .... 238 8. Form of Discharge : Contracts Within the Statute of Frauds 239 B. Discharge by Performance. 1. What Constitutes Performance 241 2. Substantial Performance 242 3. Quantum Meruit 244 4. Quantum Meruit: Effect of Non-Compliance with Terms of Contract 245 5. Negotiable Instruments as Payment 247 6. Application of Payments on Account 248 7. Effect of Tender 249 C. Discharge by Breach. 1. Anticipatory Breach 251 2. Damages for Breach During Course of Performance . 252 3. Bankruptcy as Breach 253 4. Recovery of Penalty for Breach 254 D. Discharge by Impossibility. 1. When Impossibility of Performance Operates as a Dis- charge 256 2. Impossibility Created by War 258 3. Discharge by Impossibility of Performance Arising from Destruction of the Subject Matter 260 4. Discharge by Subsequent Illegality 262 E. Discharge by Operation of Law. r. Merger 264 2. Alteration 265 XVI TABLE OF CONTENTS PAGE 3. Death ,, 266 4. Bankruptcy 267 CHAPTER III: Sales 269 I. The Contract of Sale 269 A. The Contract of Sale in General. 1. Definition 272 2. Sale and Contract to Sell Distinguished 274 3. Necessity of Agreement on Terms of Sale .... 275 4. What is Property 276 5. What are Goods 277 6. What is Price 278 B. Sales Distinguished from Similar Transactiofis. 1. License 279 2. Bailment and Conditional Sale 280 3. Return of Identical Goods in Bailment 282 4. Bailment of Goods Mixed with Other Goods .... 283 5. Bailment with Option to Buy 284 6. Conditional Sale 285 7. Pledge 287 8. Chattel Mortgage 288 9. Barter 289 ID. Contract for Work, Labor and ]\Iaterials 290 C. Statute of Frauds. 1. Application in General to Contracts of Sale .... 293 2. Nature of Memorandum Required 295 3. What the Alemorandum Must Contain 296 4. What Constitutes Acceptance and Receipt 298 5. Constructive Acceptance and Receipt 300 6. Necessity of Act Indicative of Acceptance and Receipt . 301 7. Acceptance Must be Under the Contract 302 8. Amount Received Not Material 303 9. What Constitutes Part Payment 304 10. Necessity of Actual Payment 305 II. Warranties 306 1. Express and Implied Warranties 307 2. Dealers' Talk 308 3. Implied Warranty of Title 310 4. Implied Warranties of Quiet Enjoyment and Against Incumbrances 312 5. Sale by Inspection : Caveat Emptor 313 TABLE OF CONTENTS XVll PAGE 6. Sale by Inspection : Warranty When Seller is Manufac- turer 314 7. Sale by Description : Warranty of Conformity to Descrip- tion 316 8. Sale by Description: Warranty of Merchantability . 317 9. Sale by Sample: What is Sale by Sample . . . . . 318 ID. Sale by Sample: Warranty of Correspondence to Sample 319 11. Sale by Sample: Warranty of Right of Inspection . . 320 12. Sale by Sample : Warranty against Defects not Apparent 321 13. Warranty of Fitness for Particular Purpose . . . 322 14. Warranty of Fitness : Reason for the Rule .... 323 15. Warranties Annexed by Usage 324 III, Transfer of Property Between Buyer and Seller . . . 325 A. When Title Passes. 1. Intent the Determining Factor r . . 326 2. To What Goods Title May Pass 329 3. To What Goods Title May Pass : Mortgage of Stock in Trade 330 4. Goods Must be Ascertained and Appropriated to the Contract 33^ 5. Ascertained Goods Sold by Weight, Measure or Count 332 6. Sale of Goods from a Mass 333 7. Minority Requirement of Physical Separation .... 335 8. Selection by Buyer from Mass 33^ 9. Efifect of Delivery to Common Carrier 338 10. Efifect of Delivery to Carrier of Goods Agreed to be Delivered 339 11. Sales by Auction 340 12. Efifect of Bill of Lading 342 13. Efifect of Invoice 343 14. Efifect of Transfer of Bill of Lading 345 15. Efifect of Transfer of Warehouse Receipt 346 B. Risk. 1. Goods at Risk of Owner .......... 348 2. Risk on Buyer in Conditional Sale 349 C. Rights of Innocent Purchaser from Seller not Having Title. 1. General Rule . . ., 349 2. Further Discussion of General Rule 352 3. Who are Bona Fide Purchasers 354 4. Estoppel to Assert Title 355 5. What Raises Estoppel 356 XVlll TABLE OF CONTENTS PAGE 6. Sale by Thief 358 7. Sale by Fraudulent Vendee 359 D. Rules Concernmg Passing of Title Under Sales Act. 1. General Rules 360 2. Eflfect of Bill of Lading 361 3. Effect of Negotiable Document of Title 362 IV. Rights of the Parties 364 A. Unpaid Vendor's Lien. 1. In General 365 2. Lien on Expiration of Credit 367 3. Effect of Delivery of Negotiable Receipt on Lien . . 369 4. Lien not Applicable to Property After Purchaser has Changed its Character 371 5. Lien Unaffected by Judgment 372 B. Stoppage in Transitu. 1. Of What the Right Consists 373 2. To What Carriage the Right Extends 373 3. Termination of Transit 375 4. Termination of Transit 376 5. Effect of Assignment of Bill of Lading 378 6. Right Not Lost by Wrongful Dispossession .... 379 C. Rights Accruing Upon Breach of the Contract. 1. Rights of Seller in General 381 2. Right of Resale 382 3. Right to Resell Goods Stopped in Transit 382 4. Right of Carrier to Resell 385 5. Necessity of Tender before Resale 386 6. When Tender Must be ]\Iade 388 7. Right of Rescission 389 8. Right of Rescission for Breach of Warranty . . . 391 9. Right to Sue for Price 392 ID. Rules for Determination of Measure of Damages . . 393 11. Damages in Stock Transactions 395 12. Damages for Breach of Warranty 396 13. Damages for Breach of Warranty 398 14. Specific Performance 399 CHAPTER IV: Agency 401 I. Relationship of PRI^'CII•AL and Agent 401 A. Relation in General. 1. Servants and Agents 404 2. Powers of Joint Agents 407 TABLE OF CONTENTS XIX PAGE 3. Liability of Joint Principals 408 4. Relationship by Agreement 409 5. Form of Authority: Parol Authority to Sign Written Instrument 410 6. Form of Authority to Give Sealed Instrument . . .411 7. Instrument Sealed by Agent in Presence of Principal . 411 8. Authority of Agent to Fill Blanks in Sealed Instrument 412 B. Ratification. 1. Definition 414 2. What Constitutes Ratification 415 3. Necessity of Ratification or Disaffirmance 416 4. Consideration for Ratification Unnecessary .... 418 5. Form of Ratification 419 6. Form of Ratification of Sealed Contract 420 7. Necessity of Existence of Principal at Time of Act Ratified 421 8. Knowledge of Facts Necessary to Ratification . . . 422 9. Ratification of Entire Contract Necessary .... 423 10. Intervening Rights of Third Parties 424 11. Right of Third Party to Withdraw before Ratification . 425 12. Ratification of Criminal Act 426 C. Agency by Estoppel. 1. The Idea of Estoppel 428 2. To What Acts of the Agent Estoppel Extends , . . 429 3. Estoppel to Assert Secret Limitations 430 4. Necessity of Misleading Third Person in Order to Create Estoppel 432 5. Right of Third Party to Rely on Apparent Authority . 433 6. Principles of Estoppel Equally Applicable to General and Special Agents 434 D. Agency by Necessity. 1. What Constitutes Agency by Necessity 435 2. What is Necessity 437 3. Agency by Necessity of Wife 438 II. Operation of Agency 440 A. Mutual Rights and Duties of Principal and Agent. 1. Duty of Principal to Compensate and Indemnify Agent 442 2. Rights of Servant Wrongfully Discharged .... 443 3. Duty of Care for Safety of Employees 444 4. Duty of Agent to Follow Instructions 446 5. Duty to Exercise Good Faith 447 XX - TABLE OF CONTENTS PAGE 6. Duty to Act in Person Unless Otherwise Authorized . 448 7. Liability of Gratuitous Agent 450 B. Ostensible Authority of Agent. 1. Agent to Sell: To Fix Terms of Sale 451 2. Agent to Sell: Warranty 452 3. Agent to Sell : To Receive Payment 453 4. Agent to Sell : Payment of Commission 453 5. Agent to Sell : Exchange 455 6. Agent to Sell : To Rescind Sale 455 7. Agent to Purchase 456 8. General Agent 457 9. Superintendent 458 ID. Doctrine of Estoppel not Applicable to Public Agents . 460 C. Liability for Torts of Servant or Agent. 1. In General 461 2. Fraud Committed for Benefit of Agent 462 3. Wilful Torts of Servant 462 4. Servants for Whose Acts Master is Responsible . . . 463 5. Deviation 465 6. Servant Loaned to Another 466 7. Liability for Act of Compulsory Employee .... 467 8. Independent Contractor 4^7 9. Torts of Public Servants 468 10. Torts of Agents of Charitable Organization .... 470 D. Liability of Agent to Third Party. 1. In General : . . . . 471 2. For Torts 472 3. Liability of Unauthorized Agent 474 4. Liability of Unauthorized Public Agent 475 III. Undisclosed Pri nopal 476 A. Liability of Undisclosed Principal. 1. In General 477 2. EfTcct of Refusal to Deal with Principal 480 3. Election to Hold Agent 480 4. Suit Upon Scaled Instrument 481 5. Suit Upon Negotiable Instrument 483 6. Effect of Disclosure of Principal in Negotiable Instru- ment 484 7. Effect of Clotiiing Agent with Indicia of Ownership . 484 8. Effect of Factor's Acts 485 TABLE OF CONTENTS XXI PAGE B. Liability of Third Person to Undisclosed Principal. 1. General Rule 488 2. Right to Assert Debt Due from Agent 489 3. Exclusive Credit Given to Agent 490 4. Contract Involving Financial Responsibility of Agent . 491 5. Right of Third Party to Withdrav^^ from Executory Con- tract 492 IV. Termination of Agency 493 1. Accomplishment of Purpose 494 2. Change in Subject Matter 495 3. Provision Against Termination by Change in Subject Matter 496 4. Death of Principal 497 5. Insanity of Principal 498 6. Revocation of Agency 500 7. Irrevocable Agency : Power Coupled with Interest . . 501 8. Irrevocable Agency: Power Coupled with Duty . . 503 TABLE OF CASES > 505 GLOSSARY. ... . . ..... 523 COMMERCIAL LAW CASES VOLUME ONE COMMERCIAL LAW CASES INTRODUCTION COMMERCIAL LAW. Law, in the technical sense of the term, is the body of general rules regulating human conduct, recognized and enforced by public authority. Commercial law is that body of law which determines the rights and duties of per- sons engaged in commerce, manufacture, and trade. Its scope is bounded only by the limits of modern business enterprise, as no part of the field of law is entirely immaterial to some aspect of industry. Nevertheless, there are certain branches of law which are so specially related to business transactions and or- ganization that they are commonly referred to as commercial law, as distinguished from other branches of law not so intimately concerned with trade. Hence, while complete knowledge of commercial law would necessitate familiarity with all law, it is usual to restrict the term to those subjects dealing with rights arising from contractual relations and from the particular forms of business activity through which those contractual rights are exercised. The field of law is divided into substantive law, which deals with legal rights and duties as such, and adjective law, which deals with the means of securing enforcement of those rights and duties in the courts. Commercial law belongs in the former category, and is limited to a consideration of legal princi- ples. It is hot concerned with metheds of procedure. LEGAL RIGHTS. The legal rights with which commercial law, as indeed all law, is concerned, may be divided into two broad classes : Rights in rem, rights in or against a thing itself, and rights in personam, rights against a person, without specific ref- erence to any property in controversy. Rights in rem arise only in reference to ownership or possession of property, while rights in personam arise out of the infraction of legal duty. Every right, of whatever sort, carries with it a corresponding duty. If A has the right of title to goods, it follows that B has the duty to refrain from interfering with those goods of A. If A has the right to walk upon the highway without injury arising from the 2 COMMERCIAL LAW CASES recklessness of B, B has the duty so to use the highway that he shall not recklessly injure A. All substantive law deals with that obligation inherent in legal rights and duties which is imposed by the authority of the sovereign body that secures its enforcement. Rights generally arise either ex contractu, out of some form of agreement, which is the basis of dealings between the parties, or ex delicto, out of a wrong of one party independent of agree- ment, or, in fact, of any privity between the parties. Contractual rights are the basis of the lazu of contracts, the corner-stone of the structure of commercial law, while rights arising from a wrong form the basis of the lazv of torts, a subject less directly connected with commercial law, although essential to a complete under- standing of the subject. SOURCES OF LAW. Laws, like customs, differ with in- dividual states and races. As most of our customs are founded on those of England, so most of our law had its origin in the law of that country. Law has been well described as a crystallization of public opinion ; it expresses in itself the ideas of justice, mo- rality, and right dealing, inherent in the particular race or state which gives it authority. This being true, it follows that every great movement in the development of civilization has left its traces in the law, and that the sources of our law must be found in social and economic tendencies of the past. The chief of these sources are the following : Common law. The common law of England, upon which our own common law is based, is that great body of unwritten law founded on immemorial usage and the general consent of the people, which began with customs of the Saxons and has been subject to steady development since their time. The earlier law of England, whether arising from usage or from statute, was a part of the inheritance of our Colonial ancestors and was, so far as compatible with conditions in the new country, brought intact by them into the New World. Later English decisions and developments are of value as- analogy but are not controlling law, because both the legal and political systems of the two nations became distinct and independent as a result of the American Revolution. The great difference between the common law, adopted in all English speaking countries, and the civil law of Continental Europe, which originated in the Roman law, grows out of the fact that the common law is unwritten and is therefore flexible. It adapts itself, often without conscious change, to new con- ditions as they arise. Such a body of unwritten law must, in order to have the stability indispensable to the foundation of a system under which men can live and act, be accompanied by INTRODUCTION 3 a certain rigidity of rule, to the end that individuals may appreci- ate their legal rights and duties in advance of action and may have a guide to conduct. This rigidity finds its place in our law in the determining force of precedent, the so-called doctrine of "stare decisis," the theory that previous decisions are to be fol- lowed in subsequent rulings of the court unless they are plainly wrong. This does not mean that the previous decision may not be overruled, but rather that it shall be regarded as the law until such time as it seems necessary to consider the previous case no longer appropriate in its application to the facts in hand. In the early growth of the law, the doctrine of precedent was far more rigid than at the present time, and, as manifested in the enforcement of procedural forms in the common law courts of England, led to injustice which could be cured only by direct appeal to the residuary justice administered by the king in accordance with his conscience, rather than by the formal law of precedent applied in the courts. These appeals to the king came to be referred for decision to the council and later to the chancellor, who was the "keeper of the king's conscience" and who decided them in accordance with what he considered to be the conscience of the king. Equity. The administration of such appeals was called equity, as distinguished from the common law. In it we find another source of law. The chancellor, who was not bound by legal doctrine any more than was the king in whose stead he made decisions, was enabled to exercise a greater amount of personal judgment than were the judges of the law courts. This judg- ment was necessarily affected by the habit of mind and by the training of the individual who gave it. The habit of mind was almost invariably that of a churchman, and the training was that of one versed in the Roman law, the basis of the ecclesiastic or canon law administered in the monasteries under their preroga- tive. It followed that certain principles of the Roman law were grafted upon the English law through the decisions of the chan- cellors ; and as each chancellor, searching for a rule of decision in preference to abstract morality, inclined to follow judgments given in similar cases by his predecessors, there grew up in the equity courts a body of rules which in time became little less rigid than those of the law courts themselves. This new body of law based upon the rulings of successive chancellors, affected as it was by their leaning toward the Roman law, came into conflict with the decisions of the law judges, and a struggle for precedence resulted. After long conflict between the courts, a division of authority gradually became recognized, so that thereafter the equity courts entertained jurisdiction over 4 COMMERCIAL LAW CASES certain classes of cases, while other cases were still retained and finally adjudicated in the law courts. This distinction re- mains until the present day, both in England and the United States ; and equity retains jurisdiction over those cases in which there is fraud, breach of trust, hardship against which the com- mon law affords no relief, or where the machinery of the common law is not adapted to do substantial justice between the parties. Some states have gone so far as to abolish all distinction between actions brought at law and in equity, resting each case upon equitable or purely legal principles, as the facts may warrant. Most states, however, still adhere to the different forms of plead- ing in the two classes of cases, although a given court may have jurisdiction over both law and equity matters. Only a very few states still have different j'udges for the two kinds of suits. Statute law. In addition to the unwritten law, a great and ever-changing source of law is to be found in the enactment of rules of conduct by the legislative authority of the sovereign power, bound by no precedent or authority other than that of its own constitution, which itself can be changed by the proper procedure. In England, the legislative body is Parliament ; in the United States, Congress and the legislatures of the several states. Legislative bodies are constantly enacting new laws to correct defects in existing law and to conform to the progress of the community. These statutes, written laws, supersede the common law when the two come into conflict, but otherwise leave it in full force and effect. Some states, for example New York, have gone so far as to attempt codification of the entire common law and to re-enact it by means of statute law. Such codes, how- ever, have not come into general use and it seems unlikely that the attempt will be further extended. Other sources. While the common law, the rules of equity, and statute law are the main bases of our law, there are certain other sources of law which have had a more or less direct effect upon it: A. Tlic Canon Lazv. The ecclesiastical, or canon law, the law of the Church, first of Rome and then of England, as de- veloped from the Roman law, formerly regulated those rights and duties which were deemed to be especially within the sphere of spiritual authority. The leading example of this type of case is that of marital relations, until comparatively recently heard and determined in England by the spiritual courts. 1). Ciznl Lazv. The civil law is that great body of written law in effect on the continent of Europe, originating in the Roman law, and coming from the Roman law by various channels, gen- erally direct, into the modern European law. These principles INTRODUCTION 5 find chief expression in our law of admiralty, the law of maritime affairs, which was long regulated by a special court nominated originally by the merchants for the settlement of disputes arising in such matters. While the civil law is not recognized by the American law as a direct source, it has left its impress not only on admiralty law but also on the law of those states, such as Florida and Louisiana, which were originally under Spanish and French control, and were subject to the civil law itself. C. The Law Merchant. The law merchant rests upon a body of principles found by English traders to exist upon the Continent in the Middle Ages and adopted by them as better suited to commercial usages than many of the rules of the English common law. This law was for a time enforced only by action of the merchants themselves, but in early modern times, it was brought into the common law, recognized as a system of valid mercantile customs, and enforced by the common law courts. The law of bills, notes, and checks is a direct outgrowth from the law merchant based upon the idea of negotiability, an idea diametrically opposed to the English common law idea that only those persons who are direct parties to a contract can acquire rights under it. JURISDICTION. In England, the source of all legal au- thority is a single sovereign, while in the United States we live under a divided sovereignty and are subject both to the laws of the states and of the United States. When the thirteen colonies declared their independence of the mother country, they re- nounced all allegiance to that sovereign and themselves assumed the attributes of sovereignty, that authority which owes allegiance to no other and is bound by no duties other than those of in- ternational law. During the war of the Revolution there were, then, thirteen separate and distinct sovereigns, each of them autonomous and acting in concert with the others only as its inter- ests might appear best served by so doing. After the exigencies of war had passed, it became evident that thirteen separate sovereigns, each with its own system of taxation, currency and tariff, could not have that unity of purpose which was by all con- ceded to be desirable. For that reason, by the adoption of the Constitution, each of the thirteen states gave up a portion of its sovereignty to the central federal government, reserving to itself those attributes which were not expressly or impliedly granted under the terms of the Constitution of the United States of America. From this it follows that a citizen of the United States of America owes allegiance to two sovereigns: First, to the United States of America, in respect to those attributes of sovereignty granted to the federal government by the states, and, O COMMERCIAL LAW CASES second, to the particular state of which he may be a citizen. Per- sons within the borders of the United States, whether citizens or not, are subject to the laws of the United States of America, in so far as those laws may be material, and to those of the states so far as all other obligations are concerned. In passing, it is well to note that there is, strictly speaking, no common law of the United States. All powers of the federal government are derived from the Constitution, which is really an authority given by the states to the central government to legislate concerning certain specified subjects, and those only. Until such time as Congress acts, the states retain their previous control. As juris- diction by the central authority can be acquired, then, only by legislation, all federal law must be statutory, and while the com- mon law may aid in its interpretation, no direct sanction can be found in any source other than the Constitution and the acts of Congress. State Courts. The courts of any state may be broadly divided into three classes: i. Inferior Courts. 2. Superior Courts. 3. Supreme Courts. The inferior courts, consisting of a judge sitting without a jury, have jurisdiction over small crimes and the smaller civil actions. From them, an appeal almost invariably lies both on questions of law and fact to the Superior Court, sitting in the county in which the action was brought. It is here that the more important cases are originally brought ; that a jury trial is had if claimed by either of the parties ; and that most questions of fact are finally determined. Of equal dignity and power, often as a part of the Superior Court, are the courts of Equity, the Probate Court, and, in some states, the Land Court. The Equity Court in most jurisdictions is now a part of the Superior Court and the same judges sit one term at law and another term in equity. Though a jury may be granted in the discretion of the judge, there is no right of trial by jury in the Equity Court, a principle which necessarily follows from the historical develop- ment of equity jurisdiction, originally based upon an appeal to the king. Probate Courts have jurisdiction over matters concern- ing the estates of deceased persons and often, to a certain extent, over domestic relations. Land Courts are established in those states which have a system of registration of land, and have juris- diction over matters pertaining to such registration. From courts of superior jurisrliction, questions of law may be taken to the Su- y)reme Court, which is the final arbiter on matters of law, and which may have original jurisdiction in the larger civil cases, both at law and in eciuity. Questions of law are brought to the Sui)rcme Court by means of exceptions taken at the trial in INTRODUCTION 7 the Superior Court or by means of appeal. From the Supreme Court of the state, there is no appeal except on questions in- volving the Constitution of the United States. These cases may be taken to the Supreme Court of the United States. This arrangement of courts is in effect in all states, although the nomenclature may differ. For example, in New York, the Supreme Court corresponds to what has been here designated as the Superior Court, and the Court of Appeals to the Supreme Court. Federal Courts. The courts of the United States are em- powered to hear cases arising under the Constitution, laws and treaties of the United States ; they may also take judisdiction over controversies between states, and between citizens of dif- ferent states. They are composed as follows : The District Court, the lowest federal court, corresponds to the Superior Court in the state, and has jurisdiction over a district, generally state- wide except in the larger states. It sits both at law and in equity and is the final court of fact. It is also a Bankruptcy Court, having jurisdiction over cases arising under the bankruptcy law of the United States. From the District Court, lies an appeal on questions of law to the Circuit Court of Appeals, made up of judges chosen from several districts, sitting to review matters of law but not of fact. From the Circuit Court of Appeals, in turn, there is an appeal on certain questions of law to the Supreme Court of the United States, sitting at Washington, and composed of a Chief Justice and eight Associate Justices. This court has original j'urisdiction over proceedings brought against for- eign representatives, and controversies of a civil nature to which a state is a party. It has appellate jurisdiction on matters of law in cases which involve the jurisdiction of the court below, con- viction for a capital crime against the United States, or the construction or application of the United States Constitution. Chapter I. FORMATION OF CONTRACTS. A contract is an agreement resulting in an obligation enforce- able by law. Agreement is assent regarding something to be done or forborne by one person for another. It is reached when the parties express their mutual assent to be bound and entitled by its terms. It may be express, when the parties actually state the terms to each other ; implied, when, without specifying all the terms, they indicate by their conduct a common intention to con- tract ; or quasi contractual, when the agreement is imposed by law without the assent of parties, as, for example, when they are unwilling to agree, or incapable of so doing. The obHgation of a contract consists in the right of one party to require the other to perform, and the duty of that other to perform accordingly. A legal obligation, as distinguished from a moral obligation, which may or may not be a legal obligation as well, is one enforceable by law. To summarize in anticipation the elements necessary to enforceability, a contract must satisfy the following requirements : 1. An agreement of the parties. 2. Proper form. 3. Consideration. 4. Contractual capacity. 5. Real consent to its terms. 6. A legal object. These will be considered in order. A contract is executory when something remains to be done by one or all the parties to it ; it is executed when nothing remains to be done by any party. An executory contract, then, becomes an executed contract on fulfilment of the obligation of all parties. Contracts are often said to be unilateral or bilateral. Strictly speaking, a unilateral contract is one in which there is a promise on one side only, the consideration on the other side being ex- ecuted. A bilateral contract consists solely of mutual promises to do some future acts, the promise of one party being given for the promise of the other. 9 lO COMMERCIAL LAW CASES I. Express, Implied and Quasi Contracts. Highway Commissioners v. The City of Bloomington. 2^^ III. 164. The Board of Highway Commissioners sues the city to obtain the amount of taxes collected by the city under a statute subse- quently held unconstitutional. This amount, which should prop- erly have gone to the Board, the city tries to retain on the ground that there was no contract between the Board and the city. Held, that the Commissioners could recover on the theory that when one person has money or other property in his hands which he ought to deliver to the owner, no contract is required other than that implied in law. Vickers, J. As ordinarily understood, the only difference between an express contract and an implied contract is, that in the former the parties arrive at their agreement by words, either oral or written, sealed or unsealed, while in the latter their agreement is arrived at by a con- sideration of their acts and conduct. In both of these cases there is, in fact, a contract existing between the parties, the only difference being in the character of the evidence necessary to establish it. A familiar illustration of an implied contract is, where one person, in the absence of any express agreement, renders valuable services to an- other which are knowingly accepted by such other, the law will imply a promise to pay a fair and reasonable compensation for such services. If an attorney renders services without any express agreement as to the amount of compensation to be received, the law implies a promise to pay him reasonable compensation for the work done. These illus- trations are examples of genuine implied contracts, in all of which there is some act or line of conduct as a basis for the implication and which furnish the necessary privity to support the action. This class of implied contracts is sometimes called contracts implied as of fact. After subtracting express contracts and contracts implied in fact, there is still left another large class of obligations. The principle upon which this latter class of obligations rests is equitable in its nature, and was, like most other equitable principles, derived from the civil law. This obligation was under the civil law designated qtiasi- contractns. Stated as a civil law principle, it was "an obligation sim- ilar in character to that of a contract, but which arises not from an agreement of parties but from some relation between them or from a voluntary act of one of them, or, stated in other language, an obligation springing from voluntary and lawful acts of parties in the absence of any agreement." In quasi contracts the obligation arises not from consent, as in a case of contracts, but from the law or nat- ural equity. The term was not found in the common law, but it has been taken by writers upon the common law from the Roman law and may be considered now as quite domesticated. FORMATION OF CONTRACTS II The class of oblip^ations now under consideration, and which are treated in works on contracts as "contracts implied in law," or quasi contracts, are recognized and enforced by common law courts. The liability exists from an implication of law that arises from the facts and circumstances independent of agreement or presumed intention. In this class of cases the notion of a contract is purely fictitious. There are none of the elements of a contract that are necessarily present. The intention of the parties in such case is entirely disregarded, while in cases of express and implied contracts in fact the intention is of the essence of the transaction. In the case of contracts the parties fix their terms and set the bounds upon their liability. As has been well said, in the case of contracts the agreement defines the duty, while in the latter class of cases "the duty defines the contract." The action is in form ex contractu, but the alleged contract being purely fictitious, the right to recover does not depend upon any principles of privity of contract between the plaintiff and the defendant and no privity is necessary. The right to recover is governed by principles of equity although the action is at law. The action is maintainable in all cases where one person has received money or its equivalent under such circumstances that in equity and good conscience he ought not to retain it and which ex cequo et bono belongs to another. 2. Implied Contracts. Day V. Cat on. up Mass. 5/j. Day built a brick party wall upon and between adjoining estates, one of which he owned, and the other of which Caton, the defendant, owned. They had had no conversation about the wall, but the plaintiff undertook and completed the building of the wall with the expectation that the defendant would pay him for it. Caton had reason to know that the plaintiff was acting with that expectation and allowed him thus to act without objec- tion. The plaintiff sues to recover one-half of its value. Held, that the plaintiff may recover upon the theory of an implied contract. Dez'ens, J. The fact that the plaintiff expected to be paid for the work would certainly not be sufficient of itself to establish the existence of a con- tract, when the question between the parties was whether one was made. It must be shown that, in some manner, the party sought to be charged assented to it. If a party, however, voluntarily accepts and avails himself of valuable services rendered for his benefit, when he has the option whether to accept or reject them, even if there is no distinct proof that they were rendered by his authority or request, a promise to pay for them may be inferred. His knowledge that they were valuable, and his exercise of the option to avail himself of them, justify this inference. And when one stands by in silence and sees 12 COMMERCIAL LAW CASES valuable services rendered upon his real estate by the erection of a structure (of which he must necessarily avail himself afterwards in his proper use thereof), such silence, accompanied with the knowledge on his part that the party rendering the services expects payment there- for, may fairly be treated as evidence of an acceptance of it, and as tending to show an agreement to pay for it. If silence may be interpreted as assent where a proposition is made to one which he is bound to deny or admit, so also it may be if he is silent in the face of facts which fairly call upon him to speak. The circumstances of each case would necessarily determine whether silence with a knowledge that another was doing valuable work for his benefit, and with the expectation of payment, indicated that consent which would give rise to the inference of a contract. The question would be one for the jury. 3. Implied Contracts; Necessity of Privity Between Parties. Boston Ice Co. v. Potter. 12s Mass. 28. Potter took ice from the Boston Ice Company, but on account of some dissatisfaction with the manner of supply, terminated his contract and took ice from the Citizens' Ice Company. The Citizens' Ice Company thereafter sold its business to the Boston Ice Company, which left ice every day with Potter. Potter knew nothing of the change in ownership of the business and supposed that he was getting ice from the Citizens' Ice Company. Upon his refusal to pay the Boston Ice Company for the ice left by it, the Boston Ice Company sues to recover the price of the ice delivered. Held, that in order to recover, the plaintiff must show some contract with the defendant. There was no express contract, and upon the facts no contract with him was implied. Endicott, J. A party has a right to select and determine with whom he will contract, and cannot have another person thrust upon him without his consent. It may be of importance to him who performs the contract, as when he contracts with another to paint a picture, or write a book, or furnish articles of a particular kind, or when he relies upon the character or qualities of an individual, or has, as in this case, reasons why he docs not wish to deal with a particular party. In all these cases, as he may contract with whom he pleases, the sufficiency of ills reasons for so doing cannot be inquired into. If the defendant, before receiving the ice, or during its delivery, had received notice of the change, and that the Citizens' Ice Company could no longer perform its contract with him, it would then have been his undoubted right to have rescinded the contract and to decline to have it executed by the plaintiff. lUit this he was unable to do, because the plaintiff FORMATION OF CONTRACTS I3 failed to inform him of that which he had a right to know. If he had received notice and continued to take the ice as deHvered, a contract would be implied. 4. Executory and Executed Contracts. Fletcher v. Peck. 6 Cranch {U. S.) 8/. The state of Georgia passed an act authorizing the governor to sell certain unappropriated state territory. This act was sub- sequently repealed and declared null and void. In the meantime, Fletcher had become possessed of certain land under the legisla- tive act by purchase from Peck, the original grantee. He now sues for breach of Peck's covenant that he gave a good title. Held, that under the Federal Constitution no state may pass a law impairing the obligation of contracts, which would result, were the repealing act constitutional ; and that therefore Fletcher has a good title. Marshall, C. J. Is a grant a contract? A contract is a compact between two or more parties, and is either executory or executed. An executory contract is one in which a party binds himself to do, or not to do, a particular thing; such was the law under which the conveyance was made by the governor, A contract executed is one in which the object of contract is performed; and this, says Blackstone, differs in nothing from a grant. The contract be- tween Georgia and the purchasers was executed by the grant. A contract executed, as well as one which is executory, contains ob- ligations binding on the parties. A grant, in its own nature, amounts to an extinguishment of the right of the grantor, and implies a con- tract not to reassert that right. A party is, therefore, always estopped by his own grant. It is, then, the unanimous opinion of the court, that, in this case, the estate having passed into the hands of a purchaser for a valuable consideration, without notice, the state of Georgia was restrained, either by general principles which are common to our free institu- tions, or by the particular provisions of the constitution of the United States, from passing a law whereby the estate of the plaintiff in the premises so purchased could be constitutionally and legally impaired and rendered null and void. 5. Legal and Moral Obligation. Mills V. Wyniaii. ^ Pick. (Mass.) 2oy. Wyman's adult son, who had ceased to be a member of his family, was taken sick on his return from a sea voyage and was boarded and nursed by the plaintiff, Mills. The defendant, 14 COMMERCIAL LAW CASES Wyman, subsequently wrote a letter to the plaintiff promising- to pay for these expenses. Held, that there was here no obligation beyond a moral obligation. Parker, C. J. The defendant, his father, on being informed of this event, influ- enced by a transient feeling of gratitude, promises in writing to pay the plaintiff for the expenses he had incurred. But he has determined to break this promise, and is willing to have his case appear on record as a strong example of particular injustice sometimes necessarily resulting from the operation of general rules. It is said a moral obligation is a sufficient consideration to support an express promise ; and some authorities lay down the rule thus broadly ; but upon examination of the cases we are satisfied that the universality of the rule cannot be supported, and that there must have been some pre-existing obligation, which has become inoperative by positive law, to form a basis for an effective promise. The cases of debts barred by the statute of limitations, of debts incurred by infants, of debts of bankrupts, are generally put for illustration of the rule. Express promises found on such pre-existing equitable obligations may be enforced; there is a good consideration for them; they merely remove an impediment created by law to the recovery of debts hon- estly due, but which public policy protects the debtors from being compelled to pay. In all these cases there was originally a quid pro quo; and according to the principles of natural justice the party receiving ought to pay; but the legislature has said he shall not be coerced ; then comes the promise to pay the debt that is barred, the promise of the man to pay the debt of the infant, of the discharged bankrupt to restore to his creditor what by the law he had lost. In all these cases there is a moral obligation founded upon an antecedent valuable consideration. These promises, therefore, have a sound legal basis. They are not promises to pay something for nothing; not naked pacts ; but the voluntary revival or creation of obligation which before existed in natural law, but which had been dispensed with, not for the benefit of the party obliged solely, but principally for the public convenience. If moral obligation, in its fullest sense, is a good substratum for an express promise, it is not easy to perceive why it is not equally good to support an implied promise. What a man ought to do, generally he ought to be made to do, whether he promise or refuse. But the law of society has left most of such obligation to the interior forum, as the tribunal of conscience has been aptly called. A deliberate promise, in writing, made freely and without any mistake, one which may lead tlie party to whom it is made into con- tracts and expenses, cannot be broken without a violation of moral duty. But if there was nothing paid or promised for it, the law, perhaps wisely, leaves the execution of it to the conscience of him FORMATION OF CONTRACTS I5 who makes it. It is only when the party making the promise gains something, or he to whom it is made loses something, that the law gives the promise validity. These principles are deduced from the general current of decided cases upon the subject, as well as from the known maxims of the common law. The general position, that moral obligation is a suffi- cient consideration for an express promise, is to be limited in its appli- cation to cases where at some time or other a good or valuable con- sideration has existed. I. AGREEMENT. An agreement is usually reached by an ofifer of one party and an acceptance by the other. The ofifer may consist of a promise or an act. The acceptance may be made by the giving of a promise, by the doing of an act, or, in a few cases, by simple assent. The offer must be communicated by words or conduct ; it must contemplate the formation of a legal relationship, and must be more than an advertisement, ofifer to deal, or step in uncompleted nego- tiations. It may be made to a definite person or to one of a class of persons, but no contract will result until it has been ac- cepted by a definite person with knowledge of the ofifer. The offer itself must also be definite. An offer may be revoked at any time before it has been accepted, unless the offer is under seal. Revocation takes effect when notice of the revocation reaches the offeree. Death of the offerer prior to acceptance revokes that offer. The offer will lapse without notice of revocation, when the time specified has passed, on rejection of the offer, or within a reasonable time. The acceptance must ordinarily be communicated unless the offer contemplates the performance of, or forbearance from, an act, in which case the performance or forbearance may itself be the acceptance. Such an act or forbearance must be the one con- templated by the offerer and must indicate unambiguous acceptance by the offeree. Acceptance by silence can be made only in the case of sealed contracts or when the relationship of the parties is such that silence may properly imply consent. Acceptance takes effect when the acceptor puts notice thereof beyond his own con- trol, unless the terms of the offer require receipt of notice of acceptance. The manner of acceptance may be defined by the offer ; otherwise the express or implied intent of the parties will govern. The acceptance must be absolute and unconditional ; iden- tical with the terms of the offer ; within the time contemplated ; and must not be a counter-offer. l6 COMMERCIAL LAW. CASES A. Offers. I. Offer and Acceptance by Conduct. Austin V. Biirgc. i^6 Mo. App. 286. The plaintiff, Austin, was the pubHsher of a newspaper which he sent to the defendant, Biirge, for two years, the subscription being paid by the defendant's father-in-law. Austin continued to send the paper to the defendant for several years more. On two occasions. Burge paid a bill presented for the subscription price, but each time directed that the paper be stopped. Notwithstand- ing this order, the plaintiff' continued to send the paper to him and he continued to receive and read it. Held, that a contract was formed between the parties by their conduct, the act of sending the paper being the offer, and the receipt and use of it the acceptance. Ellison, J . It is certain that one cannot be forced into contractual relations with another and that therefore he cannot, against his will, be made the debtor of a newspaper publisher. But it is equally certain that he may cause contractual relations to arise by necessary implication from his conduct. The law in respect to contractual indebtedness for a newspaper is not different from that in relation to other things which have not been made the subject of an express agreement. Thus, one may not have ordered supplies for his table, or other household necessities, yet if he continue to receive and use them, under circum- stances where he had no right to suppose they were a gratuity, he will be held to have agreed, by implication, to pay their value. In this case defendant admits that notwithstanding he ordered the paper discon- tinued at the time when he paid a bill for it, yet the plaintitY continued to send it and he continued to take it from the post otSce to his home. This was an acceptance and use of the property, and there being no pretense that a gratuity was intended, an obligation arose to pay for it. 2. Communication of Offer: Necessity of Knowledge of Of- feree of Offer. Broadnax z'. Ledbcttcr. 100 Tex. ^/^. Ledbetter, the sheriff" of Dallas County, offered a reward for the re-capture of an escaped convict. Broadnax captured the pris- oner and returned him to custody, having no knowledge of the reward. He later sues to recover the amount of the reward. Held, that notice or knowledge of the offer of the reward, when the re-capture was made, was essential to the plaintiff's right to recover. FORMATION OF CONTRACTS 17 Williams, A. J. The liability for a reward of this kind must be created, if at all, by contract. There is no rule of law which imposes it except that which enforces contracts voluntarily entered into. A mere offer or promise to pay does not give rise to a contract. That requires the assent or meeting of two minds and therefore is not complete until the offer is accepted. Such an oft'er as that alleged may be accepted by anyone who performs the service called for, when the acceptor knows that it has been made and acts in performance of it, but not otherwise. He may do such things as are specified in the offer, but, in so doing, does not act in performance of it and therefore does not accept it, when he is ignorant of its having been made. There is no such mutual agreement of minds as is essential to a contract. The offer is made to anyone who will accept it by performing the specified acts, and it only becomes binding when another mind has embraced and accepted it. The mere doing of specified things without reference to the offer is not the consideration for which it calls. This is the theory of the authorities which we regard as sound. Reasons have been put forward of a supposed public policy, assuming that persons will be stimulated by the enforcement of offers of rewards in such cases to aid in the detection of crime and the arrest and punishment of criminals. But, aside from the fact that the principles of law to be laid down cannot on any sound system of reasoning be restricted to offers made for such purposes, it is difficult to see how the activities of people can be excited by offers of rewards of which they know nothing. If this reason had foundation in fact, it would hardly justify the courts in requiring private citizens to minister to the supposed public policy by paying rewards, merely because they have made offers to pay upon which no one had acted. Courts can only enforce liabilities which have in some way been fixed by the law. While we have seen no distinction suggested, it may well be supposed that a person might become legally entitled to a reward for arresting a criminal, although he knew nothing of its having been offered, where it was offered in accordance with law by the govern- ment. A legal right might in such a case be given by law without the aid of a contract. But the liability of the individual citizen must arise from a contract binding him to pay. 3. Advertisements Distinguished from Offers. Moid ton V. Kershaw. 59 Wis. j/d. Kershaw & Son wrote to Moulton : "We are authorized to offer Michigan Fine Salt, in full car load lots of 80-95 barrels," on certain terms. Moulton replied, "You may ship me 2,000 bar- rels Michigan Fine Salt as offered in your letter." He now seeks to enforce the contract. Held, that the language of the letter was that of an advertise- ment, and not of an offer. 1 8 COMMERCIAL LAW CASES Taylor, J. If the letter of the appellants is an ofifer to sell salt to the respondent on the terms stated, then it must be held to be an offer to sell any quantity at the option of the respondent not less than one car- load. Rather than introduce such an element of uncertainty into the contract, we deem it much more reasonable to construe the letter as a simple notice to those dealing in salt that the appellants were in a condition to supply that article for the prices named, and requesting the person to whom it was addressed to deal with them. This case is one where it is eminently proper to heed the injunction: "That care should always be taken not to construe as an agreement letters which Ihe parties intended only as preliminary negotiations." We do not wish to be understood as holding that a party may not be bound by an offer to sell personal property, where the amount or quantity is left to be fixed by the person to whom the offer is made, when the offer is accepted and the amount or quantity fixed before the offer is withdrawn. We simply hold that the letter of the appel' lants in this case was not such an offer. If the letter had said to the respondent, we will sell you all the Michigan Fine Salt you will order, at the price and on the terms named, then it is undoubtedly the law that the appellants would have been bound to deliver any reasonable amount the respondent might have ordered, possibly any amount. We, however, place our opinion upon the language of the letter of the appellants, and hold that it cannot be fairly construed into an offer to sell to the respondent any quantity of salt he might order, nor any reasonable amount he might see fit to order. The language is not such as a business man would use in making an offer to sell to an individual a definite amount of property. The word "sell" is not used. They say, "We are authorized to offer Michigan fine salt," etc., and volunteer an opinion that at the terms stated it is a bargain. They do not say. we offer to sell to you. They use general language proper to be addressed generally to those who are interested in the salt trade. It is clearly in the nature of an advertisement or business circular, to attract the attention of those interested in that business to the fact that good bargains in salt could be had by applying to them, and not an offer by which they were to be bound, if accepted, for any amount the persons to whom it was addressed might see fit to order. 4. Uncompleted Negotiations. Mayer v. McCrcery. //p A''. Y. 4^4. Mayer wrote to the defendant, McCreery, "I will take your building, 483 Fifth Avenue, on a twenty-one years' lease from May I, 1895, to be altered by you similar to one Hume & Co. is now altering, and floors, etc., arranged as spoken about, etc., at the yearly rent of $5,250 for each year of the term, net rent, no taxes, assessments, etc. Plans, etc.. to be mutually agreed upon." FORMATION OF CONTRACTS I9 McCreer}^ replied, "I hereby accept your offer." Four days later he wrote to Mayer, "The proposed lease cannot and will not be made." Mayer now seeks to enforce the agreement. Held, that no contract was formed by these negotiations. Peckham, J. It is, in substance, an agreement that if the parties shall thereafter agree upon plans for the alteration of the building, that thereupon a lease of the building upon the terms specified in the letters will be given by the defendant to the plaintiff. The whole language is con- ditional ; the making of the lease is plainly based upon the condition that an agreement shall be arrived at between the parties as to the plans and scope of the alterations which are to be thereafter made by the defendant. It is conceded that no such agreement was ever made. We think it was entirely immaterial what reason was given by the defendant for or what motive actuated him in his refusal to make the lease. He had agreed to make it only provided the parties thereafter agreed upon the plans and alterations to be made, and if no such agreement were arrived at, there was necessarily no lease. We do not think it is a case where the plaintiff might waive the condition for making the alterations and demand a lease without such agreement having been arrived at. The defendant has agreed that he would give a lease, provided he and the plaintiff" should subse- quently agree upon plans for alterations to be made. But he was under no obligation to agree upon such plans. On the contrary he might arbitrarily refuse to agree upon them and his refusal would be a sufficient answer to the demand for the execution of the lease. It would be no answer for the plaintiff to show that he had offered to agree on plans which were reasonable and proper, but that the defendant had, without reason, refused to agree upon them. It did not belong to that class of agreements where one party agrees to do work to the satisfaction of another, and in which the court holds the other should, as a matter of law, be satisfied with upon proof that it would be utterly unreasonable not to be so satisfied. Here the condition whether there was to be a lease executed depended wholly upon the fact of the agreement thereafter to be made between the parties as to plans for the alteration of the building. In this instance the parties did agree, the one to lease and the other to receive the lease upon certain conditions to be thereafter mutually agreed upon. Those conditions never were thereafter mutually agreed upon, and hence no right to claim the lease ever existed. The motives of the defendant for his refusal are wholly immaterial. 5. Indications of Intention. Farina V. Fickus. L. R. (igoo) i Ch. (Eng.) JJJ. Farina married Miss Fickus after correspondence with her father, in which the father gave his consent to the marriage, and 20 COMMERCIAL LAW CASES Stated that his daughter should have a share of what he left, after the death of her mother. The Farinas contend that the marriage following this statement was an acceptance of an offer, and that the marriage was made pursuant thereto. Held, that a statement of intention is not an oft'er. Cosens-Hardy, J. A mere representation that the writer intends to do something: in the future is not, though the person to whom it is made relies upon it, sufficient to entitle that person to obtain specific performance or damages. There must be a contract in order to entitle the party to obtain any relief. The material words in the letter are these : "You are of course aware that with my large family Eliza will have little fortune. She will have a share of what I leave after the death of her mother, whom I wish to leave in comfortable independence if I should leave her a widow." The plaintiff's contention is that the true meaning and effect of the letter is this: "If you, Mr. Farina, will make a settlement on my daughter before her marriage, I will give my assent, and — subject only to the rights of my widow, as to which I reserve myself a free hand — I will bind myself to leave her by my will an equal share with all my other surviving children in my prop- erty, subject only to debts and testamentary expenses." Upon consid- eration, I cannot bring myself to believe that this is the true effect of the letter. I regard it as in no sense a proposal or offer, but rather as a representation that the testator was not in a position to make any proposal or to give his daughter anytiiing at the time, but that he intended to give her something at his death. I do not regard it as an offer resulting in a contract by the testator. 6. Vague Agreements. Varney v. Dittnars. 21"/ N. Y. 22^. Varney and Ditmars made an agreement whereby Ditmars should pay Varney, an architect emj^loyed by him, a fair share of the profits of his business. Varney was subsequently discharged, and sues for a share of the profits. Ucld, that an agreement to give a fair share of profits is too vague and indefinite to be the basis of a contract. Chase, J . The statement alleged to have been made by the defendant about giving the i)laintiff and said designer a fair share of his profits is vague, indefinite and uncertain, and the amount cannot be computed from anything that was said by the parties or by reference to any document, pajjcr or other transaction. The minds of the parties never met upon any particular share of the defendant's profits to be given the cmi)]oyces or upon any plan by which such share could be com- FORMATION OF CONTRACTS 21 puted or determined. The contract so far as it related to the special promise or inducement was never consummated. It was left subject to the will of the defendant or for further negotiations. It is urged that the defendant by the use of the word "fair" in referring to a share of his profits, was as certain and definite as people are in the purchase and sale of a chattel when the price is not expressly agreed upon, and that if the agreement in question is declared to be too indefinite and uncertain to be enforced a similar conclusion must be reached in every case where a chattel is sold without expressly fixing the price therefor. The question whether the words "fair" and "reasonable" have a definite and enforceable meaning when used in business transactions is dependent upon the intention of the parties in the use of such words and upon the subject matter to which they refer. In cases of mer- chandising and in the purchase and sale of chattels the parties may use the words "fair and reasonable value" as synonymous with "mar- ket value." A promise to pay the fair market value of goods may be inferred from what is expressly agreed by the parties. The fair, reasonable or market value of goods can be shown by direct testimony of those competent to give such testimony. Such contracts are common, and when there is nothing therein to limit or prevent an implication as to the price, they are, so far as the terras of the contract are concerned, binding obligations. The contract in question, so far as it relates to a share of the defendant's profits, is not only uncertain but it is necessarily affected by so many other facts that are in themselves indefinite and uncertain that the intention of the parties is pure conjecture. A fair share of the defendant's profits may be any amount from a nominal sum to a material part according to the particular views of the person whose guess is considered. Such an executory contract must rest for per- formance upon the honor and good faith of the parties making it. The courts cannot aid parties in such a case when they are unable or unwilling to agree upon the terms of their own proposed contract. It is elementary in the law that, for the validity of a contract, the promise, or the agreement, of the parties to it must be certain and explicit and that their full intentions may be ascertained to a reason- able degree of certainty. Their agreement must be neither vague nor indefinite. 7. Notice of Revocation. Braucr v. Shaiv. i68 Mass. 198. The defendants telegraphed at 11:30 A. M. from Boston, offering to let to the plaintiffs the space on the Warren line of steamships during the month of May, for the carriage of cattle from Boston to Liverpool at so much per head. The telegram was received by the plaintiffs in New York at 12:16 and at 12:28 a reply was sent accepting the offer. This reply was not received 22 COMMERCIAL LAW CASES until I :20. At i :oo the defendants telegraphed revoking their offer, the message being received in New York at i :43. The plaintiffs seek to hold the defendants to the contract. Held, that revocation of an offer does not become effective until it is received. Holmes, J. There is no doubt that the reply was handed to the telegraph company promptly, and at least it would have been open to a jury to find that the plaintiffs had done all that was necessary on their part to complete the contract. If then the offer was outstanding when it was accepted, the contract was made. But the offer was outstanding. At the time when the acceptance was received, even, the revocation of the offer had not been received. It seems to us a reasonable re- quirement that, to disable the plaintiffs from accepting their offer, the defendants should bring home to them actual notice that it had been revoked. By their choice and act they brought about a relation be- tween themselves and the plaintiffs which the plaintiffs could turn into a contract by an act on their part and authorized the plaintiffs to understand and to assume that that relation existed. When the plaintiffs acted in good faith on the assumption, the defendants could not complain. Knowingly to lead a person reasonably to suppose that you offer and to offer are the same thing. The offer must be made before the acceptance, and it does not matter whether it is made a longer or shorter time before, if by its express or implied terms it is outstanding at the time of the acceptance. Whether much or little time has intervened, it reaches forward to the moment of acceptance and speaks then. It would be monstrous to allow an inconsistent act of the offerer, not known or brought to the notice of the offeree, to affect the making of the contract. 8. Revocation by Death of Offerer. Jordan v. Dobbins' Adm. 122 Mass. 168. Dobbins agreed with Jordan, Marsh & Company, to guarantee the payment of all goods which the said company should sell Moore until Dobbins should notify them to the contrary. Notice of acceptance of the guaranty was waived. Dobbins died. Later Jordan, Marsh & Company sold goods to Moore, not knowing of the death of Dobbins. They sue to recover on the guaranty. Held, that until a guaranty, in reality a continuing offer, is acted upon, it imposes no obligation and creates no liability on the guarantor. Morton, J. The agreement which the guarantor makes with the person receiving tlie guaranty is not tliat I now become liable to you for FORMATION OF CONTRACTS 2^ anything, but that if you sell goods to a third person, I will then become liable to pay for them if such third person does not. It is of the nature of an authority to sell goods upon the credit of the guar- antor, rather than of a contract which cannot be rescinded except by mutual consent. Thus such a guaranty is revocable by the guar- antor at any time before it is acted upon. Such being the nature of a guaranty, we are of the opinion that the death of the guarantor operates as revocation of it, and that the person holding it cannot recover against his executor or administrator for goods sold after the death. Death terminates the power of the deceased to act, and revokes any authority or license he may have given, if it has not been executed or acted upon. His estate is held upon any contract upon which a liability exists at the time of his death, although it may depend upon future contingencies. But it is not held for a liability which is created after his death, by the exer- cise of a power or authority which he might at any time revoke. g. Sealed Offers. (Majority Rule.) O'Brien z: Boland. i66 Mass. 481. Boland made an offer under seal to O'Brien, to sell property owned by Boland at any time within ten days for a specified price. Three days later he notified O'Brien that he withdrew the offer. Four days thereafter O'Brien accepted the offer, and sues to en- force the contract. Held, that the offer under seal could not be revoked prior to the time of its expiration. Barker, J. In the present case, because the offer was under seal, it was an irrevocable covenant, conditional upon acceptance within ten days, and the written acceptance within that time made it a mutual contract which the plaintiff can enforce. The plaintiff might have assented to the withdrawal, and the offer would have been at an end. But he was not bound to assent, and could treat the withdrawal as inoperative. 10. Revocation of Offer to Public in Manner of Offer. Shiiey V. United States. g2 U. S. /j. On April 20, 1865, the Secretary of War published in the newspapers, and otherwise, a proclamation announcing a reward of $25,000 for the apprehension of John H, Surratt, one of Booth's accomplices, and a reward for any information that should conduce to the arrest of either Surratt or Booth, or their accomplices. On November 24, 1865, the President caused to be published his order revoking the reward offered for the arrest of 24 COMMERCIAL LAW CASES Surratt. Ste. Marie, in ignorance of the withdrawal of the offer, gave information which led to the arrest of Surratt, who was in the military service of the Papal government as a Zouave. His executor seeks to recover the reward. Held, that the revocation was effective, although the service was rendered without knowledge thereof. Strong, J. It is not to be doubted that the offer was revocable at any time before it was accepted, and before anything had been done in reliance upon it. There was no contract until its terms v/ere complied with. Like any other offer of a contract, it might, therefore, be withdrawn before rights had accrued under it ; and it was withdrawn through the same channel in which it was made. The same notoriety was given to the revocation that was given to the offer; and the findings of fact do not show that any information was given by the claimant, or that he did anything to entitle him to the reward offered, until five months after the offer had been withdrawn. True, it is found that then, and at all times until the arrest was actually made, he was ignorant of the withdrawal ; but that is an immaterial fact. The offer of the reward not having been made to him directly, but by means of a published proclamation, he should have known that it could be revoked in the manner in which it was made. II. Revocation by Lapse of Time. Loring v. City of Boston. 7 Mete. {Mass.) 40Q. Loring sues the city of Boston to recover a reward offered by the city for the apprehension and conviction of any person setting fire to any building within the city limits. The offer was never withdrawn. Three years and eight months after the appear- ance of the offer, an incendiary set fire to a building. He was apprehended and convicted through the efforts of Loring. Held, that the offer had been revoked by lapse of time. Shaw, C. J. By fair implication, there must be some limit to this offer, and there being no limit in terms, then by a general rule of law it must be limited to a reasonable time after the offer was made. Every consideration arising from the nature of the case confirms the belief that such offer of reward, for a special service of this nature, is not unHmited and perpetual in its duration, but must be limited to some reasonable time. The difficulty is in fixing it. One circum- stance, perhaps a slight one, is, that the act is done by a board of officers who themselves are annual officers. But as they act for the city, which is a permanent body, and exercise its authority for the time being, and as such a reward might be offered near the end of FORMATION OF CONTRACTS 25 the year, we cannot necessarily limit it to the time for which the same board of mayor and aldermen have to serve ; though it tends to mark the distinction between a temporary act of one branch and a permanent act of the whole city government. We have already alluded to the fact of the discontinuance of the advertisement as one of some weight. It is some notice to the public that the exigency has passed, for which such offer of a reward was particularly intended. And though such discontinuance is not a revo- cation of the offer, it proves that those who made it no longer hold it forth conspicuously as a continuing offer ; and it is not reasonable to regard it as a continuing offer for any considerable term of time afterwards. But it is not necessary, perhaps not proper, to undertake to fix a precise time as reasonable time ; it must depend on many circum- stances. Under the circumstances of the present case, the court are of opinion that three years and eight months is not a reasonable time within which, or rather to the extent of which, the offer in question can be considered as a continuing offer on the part of the city. B. Acceptance, I. Communication of Acceptance. White V. Codies. 46 N. Y. 46/. Corlies & Company, after negotiating with White concerning the fitting up of offices, wrote White that upon an agreement to finish the fitting up of these offices within two weeks he could begin work at once. White purchased the lumber and began w^ork thereon. The next day the order was countermanded. White claims he had accepted the offer. Held, that an acceptance must ordinarily be communicated. Folger, J. We understand the rule to be, that where an offer is made by one party to another when they are not together, the acceptance of it by that other must be manifested by some appropriate act. It does not need that the acceptance shall come to the knowledge of the one making the offer before he shall be bound. But though the manifesta- tion need not be brought to his knowledge before he becomes bound, he is not bound if that manifestation is not put in a proper way to be in the usual course of events, in some reasonable time, communicated to him. Thus a letter received by mail containing a proposal, may be answered by letter by mail containing an acceptance. And in general, as soon as the answering letter is mailed, the contract is concluded. Though one party does not know of the acceptance, the manifestation thereof is put in the proper way of reaching him. 26 COMMERCIAL LAW CASES In the case in hand, the plaintiff determined to accept. But a mental determination not indicated by speech, or put in course of indication by act to the other party, is not an acceptance which will bind the other. Nor does an act, which in itself is no indication of an acceptance, become such because accompanied by an unevinced mental determination. Where the act, uninterpreted by concurrent evidence of the mental purpose accompanying it, is as well referable to one state of facts as another, it is no indication to the other party of an acceptance and does not operate to hold him to his offer. Conceding that the testimony shows that the plaintiff did resolve to accept this offer, he did no act which indicated an acceptance of it to the defendants. He, a carpenter and builder, purchased the stuff for the work. But it was stuff as fit for any other like work. He began work upon the stuff, but as he would have done for any other like work. There was nothing in his thought, formed but not uttered, or in his acts that indicated or set in motion an indication to the defendants of his acceptance of their offer, or which could necessarily result therein. 2. Acceptance by Act. Carlillv. The Carbolic Smoke Ball Co. (i8p^) i Q.B. (Eng.) 256. The defendants, who were proprietors and vendors of a medical preparation called the Carbolic Smoke Ball, inserted in the Pall Mall Gazette the following advertisement : "One hundred pounds reward will be paid by the Carbolic Smoke Ball Company to any person who contracts the increasing epidemic influenza, colds, or any disease caused by taking cold, after having used the ball three times daily for two weeks according to the printed directions supplied with each ball. One thousand pounds is deposited with the Alliance Bank, Regent Street, showing our sincerity in the matter." The plaintiff, on the faith of this advertisement, bought some of the balls at a druggist's and used them as directed, from November 20 to January 17, when she was attacked by the influ- enza. She sues for the reward. Held, that an offer contained in an advertisement may be accepted by the act called for, without notice of acceptance. Lindley, L. J. In the first place, it is said that it is not made with anybody in particular. Now, that point is common to the words of the advertise- ment and to the words of all other advertisements offering rewards. They are offers to anybody who performs the conditions named in the advertisement, and anybody who does perform the conditions acccifts the offer. In [joint of law this advertisement is an offer to FORMATION OF CONTRACTS 2^ pay one hundred pounds to anybody who will perform these condi- tions, and the performance of the conditions is the acceptance of the offer. Bowen, L. J. One cannot doubt that, as an ordinary rule of law, an acceptance of an offer made ought to be notified to the person who makes the offer in order that the two minds may come together. Unless this is done, the two minds may be apart, and there is no consensus, which is necessary according to the English law — I say nothing about the laws of other countries — to make a contract. But there is this clear gloss to be made upon that doctrine, that as notification of acceptance is required for the benefit of the person who makes the offer, the person who makes the offer may dispense with notice to himself if he thinks it desirable to do so; and I suppose there can be no doubt that where a person in an offer made by him to another person, ex- pressly or impliedly intimates a particular mode of acceptance as suf- ficient to make the bargain binding, it is only necessary for the other person to whom such offer is made to follow the indicated method of acceptance; and if the person making the offer, expressly or impliedly intimates in his offer that it will be sufficient to act on the proposal without communicating an acceptance of it back again to himself, performance of the condition is a sufficient acceptance without noti- fication. Now, if that is the law, how are we to find out whether the person who makes the offer does intimate that notification of acceptance will not be necessary in order to constitute a binding bargain? In many cases you look to the offer itself. In many cases you extract from the character of the transaction that notification is not required, and in the advertisement cases it seems to me to follow as an inference to be drawn from the transaction itself that a person is not to notify his acceptance of the offer before he performs the condition, but that if he performs the condition, notification is dispensed with. It seems to me that from the point of view of common sense no other idea could be entertained. If I advertise to the world that my dog is lost, and that anybody who brings the dog to a particular place will be paid some money, are all persons to be expected to sit down and write me a note saying that they have accepted my proposal? Why, of course, they at once look for the dog, and as soon as they find the dog, they have performed the condition. The essence of the transaction is that the dog should be found, and it is not necessary under such circum- stances, as it seems to me, that in order to make the contract binding there should be a notification of acceptance. It follows from the nature of the thing that the performance of the conditions is suffi- cient acceptance without the notification of it, and a person who makes an offer in an advertisement of that kind makes an offer which must be read by the light of that common sense reflection. He does, there- fore, in his offer impliedly indicate that he does not require notifica- tion of the acceptance of the offer. 28 COMMERCIAL LAW CASES 3. When Acceptance Takes Place. Tayloe v. The Merchants' Fire Insurance Co. 9 How. {U. S.) 390- Tayloe applied for insurance with the defendant company, which stated terms and asked for a check to conclude the matter in case he accepted. On the 20th of December he mailed a letter expressing his assent to the terms and enclosing a check. On the 22nd, one of the insured buildings was burned. On the 31st the letter of acceptance was received. Hchi, that this was a binding contract, as acceptance dates from the time of mailing it. Nelson, J. An offer under the circumstances stated, prescribing the terms of insurance, is intended, and is to be deemed a valid undertaking on the part of the company that they will be bound according to the terms tendered, if an answer is transmitted in due course of mail, accepting them; and that it cannot be withdrawn, unless the with- drawal reaches the party to whom it is addressed before his letter of reply announcing the acceptance has been transmitted. This view of the effect of the correspondence seems to us to be but carrying out the intent of the parties, as plainly manifested by their acts and declarations. On the acceptance of the terms proposed, transmitted by due course of mail to the company, the minds of both parties have met on the subject in the mode contemplated at the time of entering upon the negotiation, and the contract becomes complete. The party to whom the proposal is addressed has a right to regard it as intended as a continuing offer until it shall have reached him, and shall be in due time accepted or rejected. Such is the plain import of the offer. And besides, upon any other view the proposal amounts to nothing, as the acceptance would be but the adoption of the terms tendered, to be in turn proposed by the ajjplicant to the company for their approval or rejection. For, if the contract is still open until the company is advised of an acceptance, it follows, of course, that the accei)tance may be repu- diated at any time before the notice is received. Nothing is effectually accomplished by an act of acceptance. It is apparent, therefore, that such an interpretation of the acts of the parties would defeat the object which both had in view in entering upon the correspondence. The fallacy of the argument, in our judgment, consists in the assumption that the contract cannot be consummated without a knowl- edge on the part of the com])any tliat 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 dis- FORMATION OF CONTRACTS 2g tance 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. The negotiation being carried on through the mail, the offer and acceptance cannot occur at the same moment of time ; nor, for the same reason, can the meeting of the minds of the parties on the subject be known to each at the moment of concurrence ; the acceptance must succeed the offer after the lapse of some interval of time; and, if the process is to be carried farther in order to complete the bargain, and notice of the acceptance must be received, the only effect is to reverse the position of the parties, changing the knowledge of the completion from the one party to the other. It is obviously impossible, therefore, under the circumstances stated, ever to perfect a contract by correspondence, if a knowledge of both parties at the moment they become bound is an essential ele- ment in making out the obligation. And as it must take effect, if effect is given at all to an endeavor to enter into a contract by cor- respondence, in the absence of the knowledge of one of the parties at the time of its consummation, it seems to us more consistent with the acts and declarations of the parties to consider it complete on the transmission of the acceptance of the offer in the way they themselves contemplated; instead of postponing its completion till notice of such acceptance has been received and assented to. The unqualified acceptance by the one of the terms proposed by the other, transmitted by due course of mail, is regarded as closing the bargain from the time of the transmission of the acceptance. 4. Acceptance to Place Specified. Eliason v. Hcnshaw. 4 Wheat. {U. S.) 22^. Eliason and others offered to buy from Henshaw two or three hundred barrels of fiour to be delivered at Georgetown by water for $9.50 per barrel. They requested in a postscript that Henshaw should write by return of wagon whether the oifer was accepted and sent the offer by a wagon hauling flour in Henshaw's service from his mill to Harper's Ferry, near which tl^^e defendants then were. Henshaw replied by mail to Georgetc n accepting the offer and now sues on the contract. Held, that there was no contract, as the accefitance was not in the manner and at the place specified in the ofier. Washington, J. It is an undeniable principle of the law of contracts, that an offer of a bargain by one person to another imposes 10 obligation upon the former until it is accepted by the latter, according to the terms in which the offer was made. Any qualification of, or departure from, those terms invalidates the offer, unless the same be agreed to by the person who made it. Until the terms of the agreement have received 30 COMMERCIAL LAW CASES the assent of both parties, the negotiation is open and imposes no obligation upon either. It appears that no answer to this letter was at any time sent to Harper's Ferry. Their offer, it is true, was accepted by the terms of a letter addressed "Georgetown," and received at that place ; but an acceptance communicated at a place different from that pointed out by the offerers, and forming a part of their proposal, imposed no obligation binding upon them unless they had acquiesced in it, which they declined doing. It is no argument, that an answer was received at Georgetown; the [offerers] had a right to dictate the terms upon which they would purchase the flour, and unless they were complied with, they were not bound by them. All their arrangements may have been made with a view to the circumstance of place, and they were the only judges of its importance. There was, therefore, no contract concluded between these parties. 5. Acceptance in Manner Implied. Lucas V. The Western Union Tel. Co. i^i la. 66p. Lucas had been negotiating for an exchange of property with Sas, and had received an offer by mail from Sas which he accepted by telegraph, instead of by mail. The telegram was delayed by the company, and was not received until Sas had revoked his offer. This suit is brought against the defendant for delay in transmission of the telegram on the contention of the plaintiff that he had thereby lost the contract with Sas. Held, that acceptance must be by the agency implied; otherwise it will not take effect until it is received. Ladd, J. The proposition of an exchange was made to the plaintiff by let- ter. In committing it, properly addressed to the mails for transmission, the post office became the agent of Sas to carry the offer, he taking the chances of delays in transmission. Having sent tlie proposition by mail he impliedly authorized its acceptance through the same agency. Such implication arises (i) when the post is used to make the offer and no other mode is suggested, (2) when the circumstances are such that it must have been within the contemplation of the parties that the post would be used in making the answer. The con- tract is coni]jlcte in such a case when the letter containing the accep- tance is properly addressed and deposited in the United States mails. This is on the ground that the offerer, by depositing this letter in the post office, selects a common agency through which to conduct the negotiations and the delivery of the letter to it is in effect a delivery to the offerer. Thereafter the acceptor has no right to the letter and FORMATION OF CONTRACTS 3 1 cannot withdraw it from the mails. Even if he should succeed in doing so, the withdrawal will not invalidate the contract previously entered into. But the plaintiff did not adopt this course. On the contrary, he chose to indicate his acceptance by transmitting a telegram to Sas by the defendant company. Sas had done nothing to indicate his willing- ness to adopt such agency, and the defendant in undertaking to trans- mit the message was acting solely as the agent of the plaintiff. The latter might have withdrawn the message or stopped its delivery at any time before it actually reached Sas. It is manifest that handing the message to his own agent was not notice to the sendee of the telegram. The most formal declaration of an intention of acceptance of an offer to a third person will not constitute a contract. A written letter or telegram, like an oral acceptance, must be communicated to the party who has made the offer or to some one expressly or impliedly author- ized to receive it, and this rule is not complied with by delivering it to the writer's own agent or messenger even with direction to deliver to the offerer. The party making the offer may be entirely satisfied to trust the mails, and not be willing to chance the use of the telegraph. It is very evident on authority and principle that, in the absence of any suggestion, one transmitting an offer by mail cannot be bound by an acceptance returned in some other way until it is received or he has notice thereof. The plaintiff, then, did not accept the offer of Sas until the tele- gram was received by the latter, a few minutes after 6 P. M. of the day after the letter had been received. 6. Necessity of Unconditional Acceptance. Poel V. Brunswick-Balke-Collender Co. 216 N. Y. 5/0. Peel & Arnold attempt to hold the Brunswick Company for breach of a contract alleged to have been made by two written communications. Poel & Arnold sent a form of contract for the sale of 12 tons of rubber at $2.42 per lb. to the Brunswick Com- pany, whose agent in behalf of the defendant replied with an order for the amount, but added new terms, viz., a condition that the goods should be delivered when specified and that acceptance of the order be acknowledged. Held, that no contract was made by the conditional acceptance. Seabury, J. The defendant's letter of April 6th was not an acceptance of this offer made by the plaintiffs in their letter of April 4th. It was a counter-offer or proposition for a contract. Its provisions make it perfectly clear that the defendant (i) asked the plaintiff' to deliver 32 COMMERCIAL LAW CASES rubber of a certain quality and quantity at the price specified in designated shipments; (2) it specified that the order therein given was conditional upon the receipt of its order being promptly acknowl- edged; (3) upon a further condition that the plaintiff would guarantee delivery within the time specified. It may be urged that the conditions specified in the defendant's order, that the plaintiffs would guarantee the delivery of the goods within the time specified, added nothing of substance to the agreement, because if the offer was accepted the acceptance itself would involve this obligation on the part of the plaintiffs. The other condition specified by the defendant cannot be disposed of in the same manner. That provision of the defendant's offer provided that the offer was conditional upon the receipt of the order being promptly acknowledged. It embodied a condition that the defendant had the right to annex to its offer. The import of this proposal was that the defendant should not be bound until the plain- tiffs signified their assent to the terms set forth. When this assent was given and the acknowledgment made, this contract was then to come into existence, and would be completely expressed in writing. The plaintiffs did not acknowledge the receipt of this order and the proposal remained unaccepted. As the party making this offer deemed this provision material and as the offer was made subject to compli- ance with it by the plaintiffs, it is not for the court to say that it is immaterial. When the plaintiffs submitted this offer in their letter of April 4th to the defendant, only one of two courses of action was open to the defendant. It could accept the offer made and thus mani- fest that assent which was essential to the creation of a contract or it could reject the offer. There was no middle course. If it did not accept the offer proposed, it necessarily rejected it. A proposal to accept the offer if modified or an acceptance subject to other terms and conditions was equivalent to an absolute rejection of the offer made by the plaintiffs. 7. Termination of Offer by Counter-offer. Minneapolis & St. Louis Railway v. Columbus Rolling Mill, up U. S. 149. The railroad company sues the mill, alleging an agreement for the purchase and sale of 2,000 tons of rails. On December 5, the railroad asked for a quotation on prices for 2,000 to 5,000 tons of iron rails. On December 8, the mill offered to sell 2,000 to 5,000 tons at $54.00 per gross ton, and stated that in case of acceptance it expected to be notified before December 20. On December 16, the railroad ordered 1,200 tons. On December 18, the mill declined to take the order. On December 19, the railroad ordered 2,000 tons, which the mill refused to deliver. I fold, that no contract was formed, as the counter-offer termi- nated the original offer. FORMATION OF CONTRACTS 33 Gray, J. As no contract is complete without the mutual assent of the parties, an offer to sell imposes no obligation until it is accepted accord- ing to its terms. So long as the offer has been neither accepted nor rejected, the negotiation remains open and imposes no obligation upon either party ; the one may decline to accept, or the other may withdraw his offer; and either rejection or withdrawal leaves the matter as if no offer had ever been made. A proposal to accept, or an acceptance, upon terms varying from those offered, is a rejection of the offer and puts an end to the negotiation, unless the party who made the original offer renews it, or assents to the modification suggested. The other party, having once rejected the offer, cannot afterwards revive it by tendering an acceptance of it. If the offer does not limit the time for its acceptance, it must be accepted within a reasonable time. If it does, it may, at any time within the limit and so long as it remains open, be accepted or rejected by the party to whom, or be withdrawn by the party by whom, it was made. The defendant, by the letter of December 8, offered to sell to the plaintiff two thousand to five thousand tons of iron rails on certain terms specified, and added that if the offer was accepted the defendant would expect to be notified prior to December 20. This offer, while it remained open, without having been rejected by the plaintiff or revoked by the defendant, would authorize the plaintiff to take at his election any number of tons not less than two thousand nor more than five thousand, on the terms specified. The offer, while unrevoked, might be accepted or rejected by the plaintiff at any time before December 20. Instead of accepting the offer made, the plaintiff, on December 16, by telegram and letter referring to the defendant's letter of December 8, directed the defendant to enter an order for twelve hundred tons on the same terms. The mention in both tele- gram and letter of the date and the terms of the defendant's original offer, shows that the plaintiff's order was not an independent proposal, but an answer to the defendant's offer, a qualified acceptance of that offer varying the number of tons, and therefore in law a rejection of the offer. On December 18, the defendant by telegram declined to fulfill the plaintiff's order. The negotiation between the parties was thus closed, and the plaintiff could not afterwards fall back on the defendant's original offer. The plaintiff's attempt to do so, by the telegram of December 19, was therefore ineffectual and created no rights against the defendant. II. FORM OF CONTRACTS. Certain contracts, though possessing the other elements neces- sary to make a valid contract, must be in a particular form in order to be enforceable. These contracts may be divided into contracts 34 COMMERCIAL LAW CASES which must be sealed and contracts which must be in writing. All other contracts are equally good whether sealed, written, or oral. Grants or conveyances of land; bonds (obligations con- ditioned upon the payment of money or the doing of, or forbear- ance from, some act) ; covenants (warranties of the performance or non-performance of certain acts, or of the existence or non- existence of certain facts) ; and releases, must be sealed. At the present time, the seal need be nothing more than an attached wafer of any sort and some states have gone so far as to hold that the seal may be made by a mark upon the paper itself. Indeed, some states have by statute abolished the distinction between sealed and unsealed instruments. The following are characteristics of agreements under seal : 1. They must be delivered in order to create a contractual obligation. This delivery may be to the other contracting party himself, or it may be to a third person to hold pending the fulfilment of conditions, in which case the delivery is said to be in escrow. 2. The Statute of Limitations, which limits the time within which actions may be brought, allows a longer period for this purpose in the case of sealed than in the case of un- sealed instruments. 3. Recitals in a sealed instrument are conclusive against the parties thereto, who are said to be estopped to deny them. 4. A contract under seal merges a prior simple contract (i.e., any contract not under seal, whether written or oral), which no longer exists independently. 5. In most cases, no consideration for an agreement under seal is necessary ; although when there has been a consid- eration it may be shown to be illegal or immoral. Courts of equity, however, will not grant specific performance (i.e., literal performance of the terms of the. contract as distinguished from damages for its breach) when the contract is without, or is upon inadequate, consideration. Certain contracts to be enforceable must be in writing under the terms of the Statute of Frauds, originally enacted in England in 1677, and intended to restrain the prevalent tendency toward fraud and perjury. This statute, parts of which have been enacted in similar form by all jurisdictions basing their legal systems on the law of England, specifies certain kinds of contracts which shall not be sued upon unless evidenced by a memorandum of their terms signed by the party to be charged. Two sections of this statute, the fourth and the seventeenth, have been universally reenacted in substance in the modern statutes. The fourth section provides that unless a contract is evidenced by the reciuired mcnioranchini, no suit shall be brought thereon: FORMATION OF CONTRACTS 35 1. To charge an executor or administrator upon a special promise to pay out of his own estate. 2. To charge a person to answer for the debt, default or misdoings of another. It has generally been held under this head that when the payment of the debt of another is incidental only, the case is not within the prohibition of the statute. The case is also not within the statute : (a) if the promise is a promise to the debtor, not the creditor, to pay his debt ; (b) if exclusive credit is given to the promisor; (c) if the liabilit}^ is shifted from the debtor to the promisor ; and (d) if the main object of the promise is to serve some special business purpose of the promisor. 3. To charge a person upon an agreement made upon consid- eration of marriage. 4. To charge a person upon a contract for the sale of lands or any interest in or concerning them. 5. To charge a person upon an agreement that is not to be performed within a year from the time it is made, a provision which is restricted to contracts impossible of performance within that time. In order to satisfy the provisions of this section, a note or memorandum is essential, although no particular form is required. It must express the substance of the contract with reasonable certainty, must show who are the parties to the contract, and must be signed by the party against whom suit is brought, or by his duly authorized agent. A few jurisdictions hold that it must be signed by both parties. Failure to comply with the fourth section excludes oral proof of the contract and makes it unenforceable unless the other party has paid money, performed services, or conveyed property under it to such an extent that he cannot be placed in statu quo. In that event, he is entitled to recover for the benefit conferred. In addition to the foregoing, certain states provide that a promise to pay a debt discharged by bankruptcy or insolvency, an infant's ratification of his contract when he becomes of age, a contract to make a will, or a representation concerning the credit of another party, must be in writing in order to support an action. The seventeenth section of the statute of frauds relates to the sale of goods, wares and merchandise, if the sale involves more than a specified price, ranging from fifty dollars to two thousand five hundred dollars in the several states. This section may be satisfied not only by the memorandum, but by part payment or receipt and acceptance of part of the goods, a subject to be dis- cussed under the law of Sales. 36 COMMERCIAL LAW CASES A. Scaled Instruments. I. Nature of a Seal. Lor ah v. Nissley. if,6 Pa. St. ji'p. Nissley made a note payable to the order of Lorah, which note he sealed by writing his name to the left of a printed word "seal." The question arises whether this was a sealed instrument within the meaning of the statute of limitations, which provides that actions may be brought on sealed contracts within twenty years from the due date, while actions on unsealed contracts must be brought within six years. Held, that the printed word "seal" is at the present time a suf- ficient seal. Mitchell, J. The days of actual sealing of legal documents, in its original sense of the impression of an individual mark or device upon wax or wafer, or even on the parchment or paper itself, have long gone by. It is immaterial what device the impression bears, and the same stamp may serve several parties in the same deed. Not only so, but the use of wax has almost entirely, and even of wafers very largely, ceased. In short, sealing has become constructive rather than actual, and is in a great degree a matter of intention. Decisions establish beyond question that any flourish or mark however irregular or inconsiderable, will be a good seal, if so intended, and a fortiori the same result must be produced by writing the word "seal," or the letters "L. S.," meaning originally locus sigilli, but now having acquired the popular force of an arbitrary sign for a seal, just as the sign "&" is held and used to mean "and" by thousands who do not recognize it as the Middle Ages manuscript contraction for the Latin "et." If therefore the word "seal" on the note in suit had been written by Nissley after his name, there could have been no doubt about its efficacy to make a scaled instrument. Docs it alter the case any that it was not written by him, but printed beforehand? We cannot see any good reason why it should. The note itself was a printed form with blank s])accs for the i)articulars to be filled in, and the use of it raises a conclusive presumption that all parts of it were adopted by tbe signer, except such as were clearly struck out or intended to be canceled before signing. Tbe pressure of business life and tbe sub- division of labor in our day, have brought into use many things ready- made by wholesale which our ancestors made singly for each occasion, and among otbers tlie conveniences of printed blanks for tbe common forms of written in iruments. FORMATION OF CONTRACTS ^y 2. Delivery. Tisher v. Becknnth. jo Wis. ^§. Tisher made a deed of certain real estate to his son, Charles, which was neither dated nor delivered. The deed was kept by Tisher in a trunk ,in which the son kept some of his papers, and from which the son stole it, and mortgaged the premises to the defendants. Tisher seeks to restrain them from foreclosing on the mortgage given by the son. Held, that a deed must be delivered in order to be valid. Dixon, C. J. It is essential to the validity of a deed that it should be delivered, and such delivery to be valid must be voluntary, that is, made with the assent and in pursuance of an intention on the part of the grantor to deliver it, and if not so delivered it conveys no title. A deed pur- loined or stolen from the grantor, or the possession of which was fraudulently or wrongfully obtained from him without his knowledge, consent or acquiescence, is no more effectual to pass title to the sup- posed grantee than if it were a total forgery, and an instrument of the latter kind had been spread upon the record. The only question which can ever arise to defeat the title of the supposed grantor in such cases, is whether he was guilty of any negligence in having made, signed and acknowledged the instrument, and in suffering it to be kept or deposited in some place where he knew the party named as grantee might, if so disposed, readily and without trouble obtain such wrong- ful possession of it and so be enabled to deceive and defraud inno- cent third persons. It might possibly be that a case of that kind could be presented where the negligence of the supposed grantor in this respect was so great, and his inattention and carelessness to the rights of others so marked, that the law would on that account estop him from setting up his title as against a bona fide purchaser for value under such deed. There are some facts and circumstances in this case strongly suggestive of such a defense, and were it not for the fact found by the court that the deed was never fully executed, and the further fact fully established in evidence that it was unstamped when put away by the plaintiff' in the trunk in the manner described by himself and the other witnesses, we might possibly have some hesi- tation about affirming the judgment of the court below on this ground. 3. Estoppel. .Ulantic Dock Co. v. Lcovitt. ^4 N. Y. S5- The Atlantic Dock Company sold a piece of property to the defendants' predecessor in title. The deed recited that the said predecessor in title and his assigns should not use the property 38 COMMERCIAl. LAW CASES for a distillery. The defendants built a distillery on the prop- erty and the plaintiff sues to restrain them from violating the covenant. Held, that a person who is a party to a deed is estopped to deny the recitals therein contained. Earl, C. In the case of a deed containing covenants to be performed by the grantee, the grantee who has induced the grantor to give the deed in reliance upon the covenants, and who has accepted the deed and enjoyed the estate granted, is estopped from denying his covenants. He is estopped from denying that the seal attached to the deed is his as well as that of the grantor, and hence when sued upon his cov- enants, the proof of the deed and of his acceptance thereof and enjoyment of the estate conclusively establishes that he has covenanted as stated in the deed. "A recital of a fact in a deed, is as against the grantee in such deed, and all persons claiming under him through that deed, evidence of the fact recited therein, so as to save the necessity of further proof thereof by the grantor or those who claim under him." The acceptance of the deed operates as an estoppel upon the grantee and his assigns or representatives. "A man who admits a fact or deed in general terms, either by reciting it in an instrument executed by him or by acting under it, shall not be re- ceived to deny its existence." And such estoppels run with the land into whose hands so-ever it comes. 4. Merger of Prior Simple Contract. Griswold v. Eastman, fji Minn. i8p. Eastman and Merriam owned an island in the Mississippi, part of which they laid out in lots according to a plat, showing Park Street running along the edge of the bluff. Purchasers of lots claim that Eastman and Merriam represented that the land between Park Street and the river was dedicated to public use, although neither the plat nor their deeds so provided. They sue to enjoin Eastman from asserting title to the land. Held, that any prior contracts are merged in the subsequently executed deeds. Mitchell, J. After the plat was executed and filed, conveyances according and with reference to it were accepted in performance of these executory contracts; and there is not a particle of evidence that at the time of acceptance of these conveyances the purchasers were not fully aware of the nature and contents of the recorded plat. Where deeds are executed and accepted in performance of ex- ecutory contracts to convey, the latter become functus officio, and FORMATION OF CONTRACTS 39 thenceforth the rights of the parties are to be determined by the deeds, and not by the contracts, the presumption being that the deeds give expression to the final purposes of the parties; and the deeds will be conclusive unless it be show^n that the grantees have been led by fraud or mistake of fact to accept something different from what the executory contracts called for, in which cases, the courts will give relief as in other cases of fraud or mistake. 5. Nature of Consideration Usually Immaterial at Law. Hartshorn v. Day. ip How. (U. S.) 211. Day sues Hartshorn and Hayward in an action to determine the .title to a patent for the preparation of rubber. Both parties claim under Chaffee, the original patentee, who had attempted to rescind a sealed agreement under which Hartshorn and Hay- ward hold, asserting that the agreement had been procured by fraud. Following this attempted rescission Chaffee assigned the patent to Day. Held, that in the case of a sealed instrument a lav^ court will not go behind the seal to determine fraud. Nelson, J. The general rule is, that in an action upon a sealed instru- ment in a court of law, failure of consideration, or fraud in the consideration, for the purpose of avoiding the obligation, is not admissible as between parties and privies to the deed; and, more especially, where there has been a part execution of the contract. The difficulties are in adjusting the rights and equities of the parties in a court of law; and hence, in the states where the two systems of jurisprudence prevail, of equity and the common law, a court of law refuses to open the question of fraud in the considera- tion, or in the transaction out of which the consideration arises, in a suit upon the sealed instrument, but turns the party over to a court of equity, where the instrument can be set aside upon such terms as, under all the circumstances, may be equitable and just between the parties. A court of law can hold no middle course; the question is limited to the validity or invalidity of the deed. Fraud in the execution of the instrument has always been ad- mitted in a court of law, as where it has been misread, or some other fraud or imposition has been practiced upon the party in procuring his signature and seal. The fraud in this aspect goes to the question whether or not the instrument ever had any legal existence. It is said that fraud vitiates all contracts, and even records, which is doubtless true in a general sense. But it must be reached in some regular and authoritative mode ; and this may depend upon the form in which it is presented, and also upon the parties to the 40 COMMERCIAL LAW CASES litigation. A record of judgment may be avoided for fraud, but not between the parties or privies in a court of law. The case in hand illustrates the impropriety and injustice of admitting evidence of fraud to defeat agreements of the character in question in a court of law. Goodyear and his licensees had acquired vested and valuable rights under the agreements in this patent, and were in no way privy to, or connected with, the alleged fraud, nor parties to this suit; and yet it is assumed, and without the assumption the fraud would be immaterial, that the effect of avoid- ing the agreements would be to abrogate these rights. They had been in the enjoyment of them for nearly three years, and may have invested large amounts of capital in the confidence of their validity. They were derived from Chaffee himself, the patentee of the improvement. A court of equity, on an application by him to set aside the agreements on the ground of fraud, would have required that these third parties in interest should have been made parties to the suit, and would have protected their rights or secured them against loss, if it interfered at all, upon the commonest prin- ciples of equity jurisprudence. 6. Illegality or Immorality of Consideration of Sealed Contract. Collins V. Blantern. 2 Wil. (Eng.) ^41. Collins, the plaintifif, gave a note to Rudge as a reward for failing to appear in a criminal suit. The defendant, Blantern, executed a bond to Collins to guarantee payment of the note, which was the only consideration for the bond, on vjrhich Collins now sues. Held, that the consideration for a sealed instrument may be shown to be illegal or immoral. Wilmot, L. C. J. It is now objected, as a maxim, that the law will not endure a fact outside of what appears in a specialty to be averred against it, and that a deed cannot be defeated by anything less than a deed, and a record by a record, and that if there be no considera- tion for a bond it is a gift. I answer, that the present condi- tion is for the payment of a sum of money, but that payment to be made was grounded upon a vicious consideration, which is not in- consistent with the condition of the bond, but strikes at the con- tract itself in such a manner as shows that, in truth, the bond never had any legal entity, and if it never had any being at all, then the rule or maxim that a deed must be defeated by a deed of equal strength does not apply to this case. The law will legiti- mate the showing it void ah initio, and this can only be done by pleading; nothing is due under such a contract; then the law gives FORMATION OF CONTRACTS 4I no action, the debitnni never existed; as much as if it had been said it shall be void because there is no debt; but if this wicked contract be not pleadable, it will be good at law, be sanctified thereby, and have the same legal operation as a good and an honest con- tract, which seems to me most unreasonable and unrighteous, and therefore, unless I am chained down by law to reject this plea, I will admit it, and let justice take place. What strange absurdity would it be for the law to say that this contract is wicked and void, and in the same breath for the law to say, you shall not be permitted to plead the facts which clearly show it to be wicked and void ! I am not for stirring a single pebble of the common law, and without altering the least tittle thereof, I think it is competent, and reaches the case before us. 7. Nature of Consideration Material in Equity. Crandall v. Willig. i66 III. 2^^. Mr. and Mrs. Willig gave Wickersham an option to buy a piece of property at any time within a year and a half. The option was sealed, but no other consideration was given. Cran- dall, an assignee of the original holder of this option, seeks to enforce specific performance of the contract to convey the real estate, he having demanded a conveyance within the time specified buC after the Willigs had repudiated the agreement. Held, that specific performance will not be granted in the case of a contract for which there is no consideration, even though it be under seal. Carter, J. It rests in the sound legal discretion of the court whether it will or not compel the specific performance of a contract. True, that discretion must be exercised according to the settled principles of equity, and not arbitrarily. But to entitle the complainant to a decree the contract must be founded on a sufficient consideration, and must be reasonable, fair and just. Relief will not be granted unless it will subserve the ends of justice. And in the case of unilateral contracts the courts will exercise their discretion with great care, and will view any delay of the purchaser with especial strictness. The contract in the case at bar was a mere option given by the Willigs to Wickersham to purchase the land in question within the time mentioned, and there was, before its acceptance, no con- sideration to support the contract. It was therefore within the power of the Willigs to withdraw this option at any time before their offer to sell was accepted. True, the contract was under seal, and purported to be based upon the nominal consideration of one dollar; but the evidence showed that there was in fact no 42 COMMERCIAL LAW CASES consideration whatever, and it is well settled that in equity the real consideration may be inquired into, and the parties are not concluded by the recitals in the contract, though under seal. "Equity will never enforce an executory agreement unless there was an actual valuable consideration, and, unlike the common law, it does not permit a seal to supply the place of a real consideration. Disre- garding mere forms and looking at the reality, it requires an actual, valuable consideration as essential in any such agreement, and allows the want of it to be shown, notwithstanding the seal, in the enforcement of covenants, settlements and executory contracts of every description." B. Statute of Frauds. I. Promise by Executor or Administrator. Dillaby v. Wilcox. 60 Conn. 71. The defendant, the administratrix of the estate of William Wilcox, promised the plaintiff, the collector of taxes, that if he would forbear levying for taxes upon property of Gordon Wilcox on which the estate of William Wilcox had a mortgage, she would pay the taxes. A suit is brought upon this promise. Held, that this is not a promise by an executor or administra- tor to answer out of his own estate for a claim against a deceased person. Seymour, J. The first clause has reference to promises by an executor or administrator to answer out of his own estate for a claim against his decedent — some liability resting upon the executor or administrator strictly in his representative character and which, but for the promise, he would have been liable to discharge only in due course of the administration of the estate. To change the expression — this clause of the statute covers a special promise made by the executor or administrator to pay, out of his own estate, what, (being the legal representative of the party originally liable) he is already, in that representative capacity, under a liability to pay to the extent of the property which has come into his hands. "The particular object of this provision," says a recent writer upon the statute, "was evidently to guard executors and administrators against being held to a personal liability to pay debts, legacies or distributive shares in consequence of a wilful or mistaken perversion of expres- sions of encouragement which they may have used in conversation with claimants and which were not justified by the ultimate result of administration of the assets in their hands." However that may be, the suggestion illustrates the nature of the promise referred to in FORMATION OF CONTRACTS 43 this section. The promise proved, in the case before us, was to answer for the debt or default of Gordon Wilcox, a third party, and is a promise to which that clause has no reference. The suggestion that the defendant, if compelled to pay the judgment, can repay herself out of the assets of the estate does not tend to bring the promise within the clause. Most of the personal obligations of an executor con- tracted in the course of his administration are proper charges against the estate in the final settlement of his account, but they are none the less his private debts for which he is alone liable in his private capacity. In Pratt v. Humphrey, 22 Conn. 317, a leading case upon this clause, the promise was to pay a debt due from the estate of which the defendants were administrators — an entirely different case from the one at bar. 2. Promise to Answer for Debt of Another. Mallory v. Gillett. 21 N. Y. 412. Mallory had lien upon a canal boat belonging to Haines. Gil- lett promised Mallory to pay him the amount due if he would deliver the boat to Haines, which Mallory accordingly did. Mal- lory sues to recover the amount promised. Held, that this promise is within the statute of frauds, it being a promise to answer for the debt, default, or misdoings of another. Comstock, C. J. There is no pretense that the defendant's promise was given or accepted as a substitute for the original demand, or that such demand was in any manner extinguished. The promise was, there- fore, to answer for the existing and continuing debt of another, or, in the language of the books, it was a collateral promise. The consideration was perfect, but as there was no writing, the case seems to fall within the very terms of the statute. Authorities need not be cited to prove that the sufficiency of the consideration never takes a case out of the statute. Indeed, there can be no question under the statute of frauds in any case, until it is ascer- tained that there is a consideration to sustain the promise. Without that element, the agreement is void before we come to the statute. A naked promise is void on general principles of law, although it be in writing. The mere existence of a past debt of a third person will not sustain an agreement to pay it, unless there be forbearance to sue, or some other new consideration. In such a case, when we find there is a new consideration, we then, and not till then, reach the inquiry whether the agreement must be in writing. Such is this case. It is nothing to say that here was a new consideration. If such were not the fact, there would be no question in the case. There is sometimes danger of error creeping into the law 44 COMMERCIAL LAW CASES through a mere misunderstanding or misuse of terms. The words "original" and "collateral" are not in the statute of frauds, but they were used at an early day — the one to mark the obligation of a principal debtor, the other that of the person who undertook to answer for such debt. What is a promise to answer for the "debt or default" of an- other person? Under this language, perplexing questions may arise, and many have arisen, in the courts. But some propositions are extremely plain; and one of them is, that the statute points to no distinction between a debt created at the time when the collateral engagement is made, and one having a previous existence. The requirement is, that promises to answer for the debt, etc., of a third person, be in writing. The original and collateral obligations may come into existence at the same time, and both be the founda- tion of the credit, or the one may exist and the other be created afterwards. In either case, and equally in both, the inquiry under the statute is whether there be a debtor and a surety, and not when the relation was created. If A say to B, "If you will suffer C to incur a debt for goods whicli you will now or hereafter sell and deliver to him, I will see you paid," the promise is within the statute. This no one ever doubted. But if A say to B, "If you will forbear to sue C for six months on a debt heretofore incurred by him for goods sold and delivered to him, I will see you paid," — is not the case equally plain? So if, in such a case, instead of for- bearance, there is some other sufficient consideration, for example, forgiving a part of the debt or relinquishing some security for it, the difference is still one of circumstance, but not of principle. In the case first put, the consideration of the guaranty is the original sale of the goods on the faith of it : in the other, it may be forbearance or the relinquishment of some advantage, the original debt still remaining. It is said that the promise now in question need not be in writing, because it was new and original, and was founded on the relinquish- ment to the debtor of a security which the creditor held. To say that it was new and original, expresses no idea of any importance. Every promise is new and original that was never made before. An undertaking to answer for an old debt of a third person certainly has no more of originality than one to answer for a debt now contracted. As to the relinquishment of the lien or security, this, although a meritorious consideration, is, in judgment of law, no more so than any other which is sufficient to sustain a contract. Forbearance to sue has the same legal merit, and so has the release of a part of the debt. 3. Promise to Debtor to Answer for his Debt. /lldrich V. Auics. p Gray {Mass.) j6. Ahlrich, the plaintiff, at the request of Ames, the defendant, and for a valuable consideration, furnished bail for Crehore, upon FORMATION OF CONTRACTS 45 which Ames promised Aldrich to save him harmless. The defense is that this was a promise to pay the debt of another and that therefore the action cannot be maintained without an agreement in writing. Held, that a promise to the debtor, not the creditor, is not, as between the debtor and the promisor, within the statute. Shaw, C. J. This is a promise by the defendant to another, to pay his debt, or, in other words, to save him from the performance of an obligation which might result in a debt. But it is a promise to the debtor to pay his debt, and thereby to relieve him from the payment of it himself, which is not within the statute of frauds. The theory of the statute of frauds is this ; that when a third party promises the creditor to pay him a debt due to him from a person named, the effect of such a promise is to become a surety or guarantor only, and shall be manifested by written evidence. The promise in such case is to the creditor, not to the debtor. For instance, if A., a debtor, owes a debt to B., and C. promises B., the creditor, to pay it, that is a promise to the creditor to pay the debt of A, But in the same case, should C, on good consideration, promise A., the debtor, to pay the debt to B. and indemnify A. from the payment, although one of the results is to pay the debt to B., yet it is not a promise to the creditor to pay the debt of another, but a promise to the debtor to pay his debt. 4. Contract Made on Credit of Promisor. Swift V. Pierce, ij Allen (Mass.) i^6. Swift sues to recover from Pierce and another, for meat which he had delivered to Hoar, at the request of the defendants. The evidence was conflicting whether or not credit had been given exclusively to the defendants. The statute of frauds was pleaded and the case came up on the question of the correctness of instruc- tions to the jury. Hct\d, that an oral promise to pay for goods delivered to an- other is collateral unless credit is given exclusively to the promisor. Hoar, J. If the contract of the defendants was a collateral and not an original promise, then, being a promise to pay the debt of another, and not in writing, tbe statute of frauds was a good defense. And the jury were rightly instructed that, if they found that the defendants were guarantors only, they should find a verdict for them. The judge added "that the defendants would be guarantors only, if at the time said articles were delivered to Hoar the plaintiff gave credit to Hoar alone." The instruction should have been that the defendants 4t> COMMERCIAL LAW CASES would be only guarantors, unless, when the meats were delivered, the plaintiff gave credit to them alone. It seems to be well settled by the authorities that where goods are delivered to one person, and another, not a joint contractor with him, promises to pay for them, if any credit is given to the former, the promise of the latter is collateral, and within the statute of frauds. Chancellor Kent states the rule thus: "If the whole credit be not given to the person who comes in to answer for another, his undertaking is collateral, and must be in writing." The statement of the learned judge was certainly true, that if the credit was given to Hoar only, the defendants were only guaran- tors. But he did not inform the jury that the defendants might be guarantors also in case any credit was given to Hoar, although the plaintiff gave credit in part to their guaranty beside. 5. Extinction of Original Debt. The Merideii Britannia Co. v. Zingsen. 48 N. Y. 247. Mattison owed money to the plaintiff which he could not pay, and which the defendant Zingsen agreed to pay for him, the plain- tilT agreeing to release Mattison. Suit is brought upon this prom- ise and the defendant sets up the statute of frauds. Held, that when the original debt is extinguished in consid- eration of the promise of a third person, the contract is not within the statute of frauds. Earl, C. It is not every verbal promise to pay the debt of another that is void within this statute. There are many exceptions, as disclosed by the numerous cases upon the subject. A promise to pay the debt of a third person is not within the statute, where it is agreed between the parties, the creditor, debtor and promisor, that the debt shall be extinguished and the creditor shall look only to the promisor for payment upon the new promise. In such case no other person remains liable for the debt but the promisor, and his undertaking is not collateral but original to pay his own debt, and not to answer for the debt of another. There is then what is known in the civil law as a delegation, and the creditor takes a new debtor, who is called the delegated debtor. Chief Justice Mansfield said that he did not see "how one person could undertake for the debt of another, when the debt for which he was supposed to undertake was discharged by the very bargain." "A promise to assume an antecedent liability of a third person is without the statute, if the third person's liability had become extinct at the time when that of the promisor came into existence, or if the third person's antecedent liability to the promisee is discharged FORMATION OF CONTRACTS 47 in consideration of its assumption by the promisor." And, in this case, it was distinctly agreed between the three parties — the cred- itor, debtor and promisor — that in consideration that the father of the debtor would pay the promisor $i,ooo in money, and the debtor give him his own notes for the balance, the promisor would pay the claim of the creditor in plated ware, in the months of February and March thereafter, and the creditor should release the debtor. 6. Promise for Benefit Received by Promisor from Creditor. Davis V. Patrick. 141 U. S. 4yp. Patrick, manager of a mine in which Davis was interested as a creditor, was induced to continue work at the mine by Davis' promise to see that Patrick was paid for his services. Held, that when the leading object of the transaction is to secure a benefit to the promisor, the case is not within the statute of frauds. Brewer, J. The purpose of this provision of the statute of frauds was not to effectuate, but to prevent, wrong. It does not apply to promises in respect to debts created at the instance and for the benefit of the promisor, but only to those by which the debt of one party is sought to be charged upon and collected from another. The reason of the statute is obvious, for in the one case if there be any conflict between the parties as to the exact terms of the promise, the courts can see that justice is done by charging against the promisor the reasonable value of that in respect to which the promise was made, while in the other case, and when a third party is the real debtor, and the party alone receiving benefit, it is impossible to solve the conflict of memory or testimony in any manner certain to accomplish justice. There is also a temptation for a promisee, in a case where the real debtor has proved insolvent or unable to pay, to enlarge the scope of the promise, or to torture mere words, of encouragement and confidence into an absolute promise; and it is so obviously just that a promisor receiving no benefits should be bound only by the exact terms of his promise, that this statute requiring a memorandum in writing was enacted. Therefore, whenever the alleged promisor is an absolute stranger to the transaction, and without interest in it, courts strictly uphold the obligations of this statute. But cases sometimes arise in which, though a third party is the original obligor, the primary debtor, the promisor has a personal, immediate and pecuniary interest in the transaction, and is therefore himself a party to be benefited by the performance of the promisee. In such cases the reason which imderlies and which prompted this statutory provision fails, and the courts will give effect to the promise. As said by this court in Emerson v. Slater, 22 Howard 28, 43 : "Whenever the main purpose 48 COMMERCIAL LAW CASES and object of the promisor is not to answer for another, but to sub- serve some pecuniary or business purpose of his own, involving either a benefit to himself or damage to the other contracting party, his promise is not within the statute, although it may be in form a promise to pay the debt of another, and although the performance of it may incidentally have the effect of extinguishing that liability." To this may be added : "The statute contemplates the mere promise of one man to be responsible for another, and cannot be interposed as a cover and shield against the actual obligations of the defendant himself." The thought is, that there is a marked difference between a promise which, without any interest in the subject matter of the promise in the promisor, is purely collateral to the obligation of a third party, and that which, though operating upon the debt of a third party, is also and mainly for the benefit of the promisor. The case before us is in the latter category. 7. Promise for Benefit Received by Promisor from Debtor. Furbish v. Goodnow. p8 Mass. 2g6. Furbish held a note executed by Redding. Redding conveyed real estate to the defendant, Goodnow, upon his promise to pay Furbish the amount of the note. This arrangement was oral, but Furbish contends that it was not within the statute, as the defendant received property in return for his promise. Held, that the contract is within the statute of frauds, as it is a promise to answer for the debt of another, regardless of the benefit to the promisor from the debtor. Gray, J. If the principal and immediate object of the transaction is to benefit the promisor, not to secure the debt of another person, the promise is considered not as collateral to the debt of another, but as creating an original debt from the promisor, which is not within the statute, although one effect of its payment may be to discharge the debt of another. It must however be constantly borne in mind that the question under the statute is not whether there is a suf- ficient consideration for the defendant's promise, but whether that promise is to answer for the debt of another. The common law re- quires a consideration for every promise, oral or written ; the statute also requires that, if it is a promise to answer for the debt of another, it shall be in writing. When the original debtor remains liable, yet if the creditor, in consideration of the new promise, releases some interest or advantage relating to or affecting the original debt, and inuring to the benefit of the new promisor, his promise is considered as a promise to answer for his own debt, and the case is not within the statute. But if no consideration moves from the creditor to the new promisor, and the original debtor still remains liable for the FORMATION OF CONTRACTS 49 debt, the fact that the promisee gives up something to that debtor, or that a transfer of property is made or other consideration moves from that debtor to the new promisor to induce the latter to make the new promise, does not make this promise the less a promise to answer for the debt of another; but, on the contrary, the fact that the only new consideration either inures to the benefit of that other person, or is paid by him to the new promisor, shows that the object of the new promise is to answer for his debt. 8. Promise upon Consideration of Marriage. Ogden V. Ogden. i Bland (Md.) 284. Ogden wrote to the father of the fiance of his niece, Nancy, that he would give her $6,000 upon her marriage and $6,000 at his death. He died without having made either gift, and the plaintiffs contend that this was a contract whereby he agreed to pay this amount in consideration of their marrying. Held, that a contract made upon consideration of marriage is within the statute of frauds. Bland, C. The statute of frauds, so far as it is applicable to this case, is expressed in these words : — "No action shall be brought whereby to charge any person, upon any agreement made upon consideration of marriage, unless the agreement 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." This clause was at one time supposed to embrace mutual prom- ises to marry, but that notion has long since been abandoned, and it is now held to extend only to agreements to pay marriage por- tions, or to such cases as the one now under consideration. The word "agreement," it has been settled, must not be loosely con- strued, but be taken in its proper and correct sense, as signifying a mutual contract on consideration between two or more parties; the whole of which, the consideration as well as the promise, must be in writing. The whole of this case rests upon the letter of the 226. of May, 1817. If that cannot be considered as an agreement within the meaning of the statute of frauds, there is an end of the case. The cases in which letters have been considered as constituting such an agreement, have gone fully as far, perhaps farther, than a just construction of the statute will warrant. They all, however, go upon the principle that the court must be satisfied by a fair inter- pretation of the letters that they import a concluded agreement; or afford sufficient materials for a more formal agreement. But this letter is deficient in almost every substantial particular. 50 COMMERCIAL LAW CASES g. Contracts for Sale of Interest in Land. (Majority Rule.) Hirth V. Graham. 50 Oh. St. 57. Hirth sues Graham to recover damages for breach of an oral agreement to sell Hirth certain growing timber. The defense is that the case is within the statute of frauds, as it deals with an interest in land. Held, that according to the Ohio and general rule, a contract for the sale of growing timber is within the statute of frauds. Bradbury, J. Whether a sale of growing trees is the sale of an interest in or concerning land has long been a much controverted subject in the courts of England as well as in the courts of the several states of the Union. The question has been differently decided in dif- ferent jurisdictions, and by different courts, or at different times by the same court within the same jurisdiction. The courts of England, particularly, have varied widely in their holdings on the subject. Many decisions have been announced by the English courts, the tendency of which have been to greatly narrow the application of the fourth section of the statute of frauds to crops, or timber, growing upon land. Crops planted and raised annually by the hand of man are practically withdrawn from its operation while the sale of other crops, and in some instances growing timber, also, are withdrawn from the statute where, in the contemplation of the con- tracting parties, the subject of the contract is to be treated as a chattel. The conflict among the American cases on the subject cannot be wholly reconciled. In Massachusetts, Maine. Maryland, Kentucky and Connecticut, sales of growing trees to be presently cut and removed by the vendee, are held not to be within the operation of the fourth section of the statute of frauds. The courts of most American states, however, that have consid- ered the question, hold, expressly, that a sale of growing or stand- ing timber is a contract concerning an interest in lands, and within the fourth section of the statute of frauds. The question is now, for the first time, before this court for determination ; and we are at liberty to adopt that rule on the sub- ject most conformable to sound reason. In all its other relations to the affairs of man, growing timber is regarded as an integral part of the land upon which it stands; it is not subject to levy and sale upon execution as chattel property ; it descends with the land to the heir, and passes to the vendee with the soil. Coal, petroleum, building- stone, and many other substances constituting integral parts of the land have become articles of commerce, and easily detached and removed, and, when detached and removed, become personal prop- erty as well as fallen timber; but no case is found in which it is suggested that sales of such substances, with a view to their immediate FORMATION OF CONTRACTS 5I removal, would not be within the statute. Sales of growing timber are as likely to become the subjects of fraud and perjury as are the other integral parts of the land, and the question whether such sale is a sale of an interest in or concerning lands should depend, not upon the intention of the parties, but upon the legal character of the subject of the contract, which, in the case of growing timber, is that of realty. 10. Contracts for Sale of Interest in Land. (Massachusetts Rule.) Drake v. Wells, ii Allen (Mass.) 141. Standing wood was orally sold at auction to the defendants. Afterwards, the land on which the timber stood was sold to the plaintiffs, who sue the defendants for cutting and carrying away the wood sold. Held, that an oral sale of standing timber does not pass title until the timber is cut and that a subsequent sale of the land passed title to such timber to the plaintiffs. Bigelow, C. J. The doctrine is now well settled that a sale of timber or other product of the soil, which is to be severed from the freehold by the vendee under a special license to enter on the land for that purpose is, in contemplation of the parties, a sale of chattels only, and cannot be regarded as passing an interest in the land, and is not for that reason required to be in writing as being within the statute of frauds. Such license to enter on the land of another, so far as it is executed, is irrevocable ; because, by the severance of the timber or other growth of the soil from the freehold, in execu- tion of the license, it becomes personal property, the title to which is vested in the vendee absolutely, and the rule applies that where chattels belonging to one person are placed or left on the land of another, with the permission or assent of the latter, the owner of the chattels has an implied irrevocable license to enter and remove them. In such case the owner of land cannot, by withdrawing his assent to enter upon his premises, deprive the owner of chattels of his property, or prevent him from regaining possession of them. The law will not lend its aid to the perpetration of a fraud. But it is otherwise where the contract has not been executed by a severance of the subject matter of a contract of sale from the freehold. So long as the timber or other product of the soil continues in its natural condition, and no act is done by the vendee towards separation from the soil, no property or title passes to the vendee. The whole rests in contract. A revocation of the license to enter on the land does not defeat any valid title; it does not deprive an owner of chattels of his property in or possession of them. The contract being still 52 COMMERCIAL LAW CASES executory, no title has passed to the vendee, and the refusal of the vendor to permit the vendee to enter on the land for the purpose of disconnecting from the freehold the property agreed to be sold is only a breach of contract, the remedy for which is an action for damages, as in the common case of a failure or refusal to deliver ordinary chattels in pursuance of a contract of sale. II. Contracts not to be Performed Within a Year. Warner v. Texas & Pacific Raihvay Co. 164 U. S. 418. The railway company agreed with Warner, the plaintiff, that if he would grade the ground for a switch, and put on the ties at a certain point, the railroad would ptit down the rails and main- tain the switch for shipping purposes of the plaintiff as long as he needed it. The company defends an action brought for breach of this contract on the ground that it was within that section of the statute of frauds requiring contracts not to be performed within a year to be in writing. Held, that a contract which may be performed within a year, even though it probably will not be so performed, is not within the statute. Gray, J. It appears to have been the settled construction of this clause of the statute in England, before the Declaration of Independence, that an oral agreement which, according to the intention of the par- ties, as shown by the terms of the contract, might be fully performed within a year from the time it was made, was not within the statute, although the time of its performance was uncertain, and might probably extend, and be expected by the parties to extend, and did in fact extend, beyond the year. The several states of the Union, in reenacting this provision of the statute of frauds in its original words, must be taken to have adopted the known and settled construction which it had received by judicial decisions in England. 12. Contracts Which May be Performed Within a Year by Death. Doyle V. Dixon, p/ Mass. 208. Dixon sold out his grocery business to Doyle, and orally agreed not to go into that business in Chicopee for five years thereafter. He did enter the grocery business there, two years after mak- ing the agreement, and sets up the statute of frauds in defense to an action brought by Doyle for breach of his contract. FORMATION OF CONTRACTS 53 Held, that a contract extending over a term of years is not within the statute of frauds if the contract may be performed upon the death of the promisor within a year. Gray, J. It is well settled that an oral agreement which according to the expression and contemplation of the parties may or may not be fully performed within a year is not within that clause of the statute of frauds, which requires any "agreement not to be performed within one year from the making thereof" to be in writing in order to main- tain an action. An agreement therefore which will be completely per- formed according to its terms and intention if either party should die within the year is not within the statute. Thus in Peters v. West- borough, 19 Pick. 364, it was held that an agreement to support a child until a certain age at which the child would not arrive for several years was not within the statute, because it depended upon the contingency of the child's life, and, if the child should die within one year, would be fully performed. On the other hand, if the agreement cannot be completely performed within a year, the fact that it may be terminated, or further performance excused or ren- dered impossible, by the death of the promisee or of another person within a year, is not sufficient to take it out of the statute. It was therefore held in Hill v. Hooper, i Gray 131, that an agreement to employ a boy for five years and to pay his father sums at stated periods during that time was within the statute ; for although by the death of the boy the services which were the consideration of the promise would cease, and the promise therefore be determined, it would certainly not be completely performed. So if the death of the promisor within the year would merely prevent full performance of the agreement, it is within the statute; but if his death would leave the agreement completely performed and its purpose fully car- ried out, it is not. It has accordingly been repeatedly held by this court that an agreement not hereafter to carry on a certain business at a particular place was not within the statute, because, being only a personal engagement to forbear doing certain acts, not stipulating for anything beyond the promisor's life, and imposing no duties upon his legal representatives, it would be fully performed if he died within the year. An agreement not to engage in a certain kind of business at a particular place for a specified number of years is within the same principle ; for whether a man agrees not to do a thing for his life, or never to do it, or only not to do it for a certain number of years, it is in either form an agreement by which he does not promise that anything shall be done after his death, and the per- formance of which is therefore completed with his life. An agreement to do a thing for a certain time may perhaps bind the promisor's representatives, and at any rate is not performed if he dies within that time. But a mere agreement that he will himself refrain from doing: 54 COMMERCIAL LAW CASES a certain thing is fully performed if he keeps it so long as he is capable of doing or refraining. The agreement of the defendant not to go into business again at Chicopee for five years was therefore not within the statute of frauds. 13. Nature of Memorandum Required. Grafton v. Cummings. pp U. S. 100. Cummings sues Grafton on an agreement, the only memo- randum of which was a paper signed by Grafton stating that he acknowledged himself the purchaser of the Glen House in the White Mountains, for an amount specified. The name of the vendor was omitted from the memorandum. Held, that the memorandum required by the statute of frauds must specify with reasonable certainty the parties to the trans- action. Miller, J. The statute not only requires that the agreement on which action is brought or some memorandum thereof, shall be signed by the party to be charged, but that the agreement or memorandum shall be in writing. In an agreement of sale there can be no contract without both a vendor and a vendee. There can be no purchase without a seller. There must be a sufficient description of the thing sold and of the price to be paid for it. It is, therefore, an essential element of a contract in writing that it shall contain within itself a description of the thing sold by which it can be known or identified, of the price to be paid for it, of the party who sells it, and the party who buys it. There is a defect in this memorandum in giving no indication of the party who sells. If Grafton was bound to purchase, it was because somebody was bound to sell. If he was bound to pay, somebody was bound to receive the money and deliver the considera- tion for the price so paid. There can be no bargain without two parties. There can be no valid agreement in writing without these parties are named in such manner that some one whom he can reach is known to the other to be bound also. No one is bound in this paper to sell the Glen House, or to convey it. No one is mentioned as the owner, or the other party to this contract. Let it be understood that we are not discussing the question of mutuality in the obligation, for it may be true, that if a vendor was named in this paper, the offer to perform on his part would bind the party who did sign. But Grafton did not agree to buy this property of anybody who might be found able and willing to furnish him a title. He was making a contract which required a vendor and a vendee at the time it was made, and he is liable only to that vendor. The name of that vendor, or some FORMATION OF CONTRACTS 55 designation of him which could be recognized without parol proof extraneous to the instrument, was an essential part of that instrument to its validity. 14. Nature of Memorandum Required. Desmarais v. Taft. 210 Mass. 560. Taft agreed to sell Desmarais a parcel of land, and the follow- ing memorandum of the transaction was drawn up: "$100.00 Northbridge, Mass., Aug. 7, 1900. "Received one hundred dollars from E. Desmarais in part pay- ment for a piece of land next to Pelequin, seventy feet on the road and back to an old wall. "Elenor Taft." Held, that the memorandum was sufficient to satisfy the statute of frauds. Rugg, C. J. The statute of frauds requires a memorandum "to contain a description of the land sufficient for purposes of identification, when read in the light of all the circumstances of ownership of the prop- erty by the vendor. Attendant circumstances may be shown outside the writing and by parol for the purpose of interpreting and applying the memorandum." On the other hand, a description which, when applied to the physical features upon the surface of the earth and read in the light of the facts surrounding the parties at the time of its execution, fails to identify particular land as alone conforming to its terms, does not satisfy the statute of frauds. Objects and circumstances can be resorted to for applying and translating the words of the memorandum into terms of land. The language of the memorandum is not unlike that which country folk would use when they meant a strip with parallel sides. Although verging to- ward vagueness, the description in the memorandum applied to the facts on the surface of the earth identifies a specific tract of land. The exact consideration for the conveyance under our authori- ties need not be stated in the memorandum. 15, Signature of Memorandum by Party to be Charged. Kilday v. Schanciipp. gi Conn. 2Q. Mrs. Kilday agreed to sell real estate to Schancupp, who, as a memorandum of the transaction, wrote out a statement reciting that the property was sold to him on certain terms. This instru- ment was signed by Mrs. Kilday but Schancupp's signature was not on the document unless his writing his name as the pur- 56 COMMERCIAL LAW CASES chaser constituted such signature. He defends an action brought for refusal to carry out the contract on the ground that there was no memorandum signed by him. Held, that the writing of his name by the defendant in the body of the memorandum constituted a proper signature, Wheeler, J. General Statutes, 1089, provides that "no civil action shall be maintained . . . upon any agreement for the sale of real estate, or any interest in or concerning it, . . . unless such agreement, or some memo- randum thereof, be made in writing, and signed by the party to be charged therewith, or his agent." We have said that our statute does not make agreements not made in this way invalid, but pre- vents their proof unless by such a writing. It is immaterial whether the action be one for specific performance, or for damages for the breach of a contract of sale of land. The proof must be in the manner provided by our statute ; and the agreement in its essentials must be the same in either action. The agreement must have been signed by this defendant, since he is the party to be charged. This agreement was caused to be pre- pared by the defendant and it begins, "Sold to J. Schancupp." This is the written declaration of the defendant himself that the plaintiff has sold him the property described, upon the terms described, and likewise it is his written declaration of purchase of this prop- erty upon the named terms. The statute is intended to relieve against fraud; to hold that this defendant, by writing his name in the body of this instrument instead of at its end, did not sign the instrument would help perpetrate, instead of prevent, a wrong. An instrument signed by one in any part of it after the body of it is written, or signed in any part and, when completed, produced from his custody, must be taken to be the instrument of the party so signing. Under these circumstances he authenticates by his signature, or by the signature to the instrument produced from his custody, the instrument so signed, and such a signature fully meets the requirements of the statute of frauds. The authorities are equally decisive that the signature may be printed or written. And we have held that a signature by a rubber stamp made by an agent duly authorized is a signature within the statute. 16. Effect of Non-Compliance with the Statute. Bacon v. Parker. 1^7 Mass. sog. Bacon owned a warehouse on Pearl Street in Boston, which was burned in the Great Fire. Parker and others orally agreed that if Bacon would buy the adjoining land and build a warehouse on both parcels, they would take a five year lease. Bacon put up the building on both lots, making additions and alterations at FORMATION OF CONTRACTS 57 the request of the defendants, and now sues them for failure to take the lease. Held, that the building of the warehouse was not such per- formance that it would take the contract out of the operation of the statute of frauds. Holmes, J. It has been held repeatedly that, when a person pays money, ren- ders service, or conveys property as the stipulated consideration of a contract within the statute of frauds, if the other party re- fuses to perform his part, and sets up the statute, the void contract shall not be relied on as a means to accomplish a fraud, and keep what was furnished as quid pro quo for nothing. The fact that words were spoken in the form of a contract which did not bind the speaker and which is repudiated, is not allowed to displace or override the obligation which would otherwise arise from the receipt and retention of value on the understanding that value is to be returned. These cases, however, do not apply when that which has been done is not the contemplated consideration of any promise, void or otherwise, but merely a step taken by one party as a means to enable him to furnish the consideration. The mode in which one party to a bargain shall enable himself to do what he has agreed to do, is no concern of the other party, and is no part of the contract. In the present case, what the defendants were to have was a five years' lease of certain land with certain structures upon it; what they were to pay was rent. If the structures had been built by trespassers, the plaintiff would still have tendered the whole consideration stipulated for, if he had tendered a lease in due time. What the defendants agreed to pay for was the right to occupy the land when built upon, not the purchase or erection. That was the only thing they requested in such a sense that the law could found a promise upon their act. A request is only im- portant when it implies a promise to pay for the thing requested. The request to purchase or build did not imply a promise to pay for doing either, because both were simply means enabling the plain- tiff to furnish the defendants what they were to pay for. That they have never had, and therefore they are not bound to pay anything. III. CONSIDERATION. Consideration, the quid pro quo required in all contracts except contracts under seal, in which the binding assent of the parties exists at law regardless of consideration, is any benefit to the promisor or detriment to the promisee. The amount and nature 58 COMMERCIAL LAW CASES of this benefit or detriment are immaterial, so long as the parties change their legal position. Formerly a distinction was made be- tween "good" and "valuable" consideration. Good consideration, otherwise known as "consideration of blood," was based on natural affection assumed to be inherent in any agreement between near relatives regardless of tangible benefit or detriment. At the pres- ent time, the idea of good consideration has practically disappeared and the courts recognize only valuable consideration, i.e., actual benefit or detriment. Any valuable consideration will support a contract regardless of the relative value of the goods or services exchanged, except (i) in the case of the exchange of even values, generally money values, when inadequacy of consideration is a defense ; (2) in equity, where specific performance will not be granted if the consideration is inadequate. Consideration may consist of a promise to do, or to forbear from doing, any act which one can legally do. Doing what one isi)ound to do is as a rule no consideration. Such a promise to do what one is bound to do often takes the form of part performance of an obligation in consideration of a release of the remainder. Such a release is not good unless the release is under seal, unless it represents a compromise of an unliquidated claim, or unless somecning additional to the original obligation is done or promised. This rule does not apply to a debt not yet due. Courts uphold compositions with creditors (agreements whereby the debtor meets his obligations by paying each creditor a certain pro- portion of his debt) upon the somewhat unsatisfactory theory that the consideration is to be found in the agreement of all the creditors or in the efiforts of the debtor to secure the composition. This proposition rests ultimately upon broad grounds of public policy rather than upon technical theories of consideration. The same principle is to be found in promises of additional compen- sation for work already contracted to be done. The general rule is that in such cases there is no consideration for the promise of additional compensation, although some jurisdictions hold that consideration arises out of an election of the promisor to secure the actual work rather than damages for breach of contract. Yet other jurisdictions, while holding to the general rule, consider that the original contract is discharged by waiver and a new one sub- stituted. The consideration must be definite. It may be conditional. In this connection, an agreement to supply all that a party may order is to be distinguished from an agreement to supply all FORMATION OF CONTRACTS 59 goods that a party uses in his business. In such cases, the agree- ment lo supply all orders is without consideration because there is no obligation to order, whereas an agreement to supply all goods used in a business requires an order if any such goods are used in the business. The consideration must usually be present or future; in general, a past consideration will not sup- port a contract unless it was given at the request of the promisor ; unless it represents a previous debt discharged by law ; or unless the consideration for an entire transaction is part past and part present. Most courts hold that a contract intended to benefit a third person may within limits be enforced by that person, but by the English and Massachusetts rule, only those parties who are privy to the consideration may sue. This rule applies to subscriptions for the benefit of a third person who tries to enforce the subscription. It is generally held that such a sub- scription is not enforceable until some promise or act has been done by the beneficiary in accordance with it, whereupon it becomes a binding obligation on the theory that it was an offer accepted by that beneficiary. By statute, beneficiaries under insurance policies may sue upon them. I. Nature of Consideration. Brady v. Equitable Trust Co. ij8 Ky. 6pj. Dr. Brady, who was interested in a cooperage concern, over- drew the account of the company at the bank. Mrs. Brady gave a mortgage and note for $3,000 to the bank to secure the defi- ciency, and in addition deposited with the bank a note of the com- pany given to her to secure her own note. The bank forbore for more than four years to sue Dr. Brady. The plaintiff, an assignee of the first bank, sues Mrs. Brady on her note. Her defense is that as against her there was no consideration for the execution of the mortgage. Held, that forbearance on the part of the bank to press its claim against Dr. Brady was sufficient consideration for the note. Hurt, J. A consideration, in a legal sense, sufficient to uphold a contract may be a benefit to the promisor or a loss, forbearance or detri- ment suffered by the promisee. To make a binding obligation, it is not necessary that some benefit should accrue thereby to the obligor. It is sufficient if the obligee suffers some detriment or prejudice. Indeed, there is a consideration if the promisee in re- turn for the promise does anything legal which he is not bound 60 COMMERCIAL LAW CASES to do, or refrains from doing anything which he has a right to do, whether there is any actual loss or detriment to him or actual benefit to the promisor or not. 2. Good and Valuable Consideration. Groves v. Groves. 65 Oh. St. 442. Groves acquired title to property by a deed from his father which recited that Groves had paid $9,165 for the land, whereas in fact he had paid nothing. Upon the death of Groves, his widow, the plaintiff, claims complete ownership of the property under a statute which provides that a widow shall have complete ownership of real estate acquired by her husband by purchase. The defendants, Groves' brother and sister, claim the estate subject to a life interest of the widow, under a provision in the statute which gives a surviving widow only a life estate in land acquired by her husband otherwise than by purchase. Held, that the land, though really acquired by gift, must be considered to be acquired by purchase on account of the fact that the heirs cannot contradict the recitals in the deed. Bitrkct, J. If the land came to Groves by purchase, his widow took it in fee. but if it came to him by deed of gift, she took it for life only, with remainder to his brother and sister. Upon the face of the deed, as it recites a money consideration, the land came to him by purchase. In this state title to lands may be acquired in four ways, by descent, by devise, by deed of gift, and by purchase. Lands that are not acquired by descent, by devise, or by deed of gift, are acquired by purchase. At common law a conveyance of real estate as a gift was sup- ported by a good consideration only, but some eminent judges have held that such a deed would be valid without any consideration whatever; but the weight of authority seems not to go to that ex- tent, although sound reason would seem to support it. Blackstone regards a deed supported by no consideration as of no efifect, and as inuring to the use of the grantor only. "The consideration may be either a good or a valuable one. A good consideration is such as that of blood, or of natural love and affection, when a man grants an estate to a near relation ; being founded on motives of generosity, prudence, and natural duty; a valuable consideration is such as money, marriage, or the like, which the law esteems an equivalent given for the grant; and is therefore founded in motives of justice." Blackstone seems to regard marriage as a valuable considera- tion, rather than as a good one, but marriage consummated is a good consideration, and marriage to be thereafter consummated, is a valuable consideration. Failure to note this distinction often leads to confusion. It is clear that a deed of conveyance by a grantor to a near FORMATION OF CONTRACTS ' 6l relative by blood for no consideration other than natural love and affection, and so expressed in the deed, is a deed of gift under our statute of descent and distribution. If a valuable consideration, such as money or marriage to be thereafter consummated, is expressed, the title passes by purchase, and not by deed of gift. The parties by their deed impress upon the title the character which it is to bear in the hands of the grantee, and those coming after him. If they say the consideration is good only, they thereby impress upon the title the character of a deed of gift. If they say that the consideration is a valuable one, they thereby impress upon the title the character of title by purchase. In this case the deed expresses a money consideration, and the title is therefore on the face of the deed a title by purchase. 3. Consideration in Sealed Instruments. Page v. Triifant. 2 Mass. /jfp. The defendant, Trufant, who was living apart from his wife, gave a bond running to Page in return for which Truf ant's wife released him and his estate from all claims for the support and education of their daughter. Page sues upon the bond. Held, that actual consideration is unnecessary in a sealed in- strument. Sczvall, J.. The amount of the defendant's pleas is, that the wife not being bound by her covenants in the articles of separation, and no cov- enants having been made by the plaintiff pursuant to his engagement, there was therefore no consideration for this bond. Sedgwick, J. The question, then, brought before the court is, whether the consideration for which this bond was given is sufficient to support an action upon it. Every bond, from the solemnity of the instru- ment, carries with it an internal evidence of a good consideration; and is to be supported in a court of law, except facts are disclosed to the court whereby the consideration appears to be immoral, il- legal, or against the policy of the law. These pleadings show neither. Separate maintenance is lawful, and a bond given to secure it to a wife is meritorious, and therefore valid and binding. The de- fendant's pleas are insufficient. 4. Exchange of Even Values. Schnell v. Nell. // Ind. 2g. Schnell's wife made a will leaving $200 to Nell, among others. She died leaving no estate. Schnell made a written agree- ment with Nell and the two others, that he personally would pay 62 COMMERCIAL LAW CASES $200 to each. The agreement contained an averment that it was executed in consideration of one cent, of the love and affec- tion which he bore his wife, of the fact that she had done her part in the acquisition of his property, and of the fact that she had expressed her desire that the money should be paid. Held, that a promise to pay a larger sum in consideration of a smaller sum is not valid consideration. Perkins, J. The consideration of one cent will not support the promise of Schnell. It is true that as a general proposition, inadequacy of consideration will not vitiate an agreement. But this doctrine does not apply to a mere exchange of sums of money, of coin, whose value is exactly fixed, but to the exchange of something of, in itself, indeterminate value, for money, or, perhaps, for some other thing of indeterminate value. In this case, had the one cent mentioned been some particular one cent, a family piece, or ancient, remark- able coin, possessing an indeterminate value extrinsic from its simple money value, a different view might be taken. As it is, the mere promise to pay six hundred dollars for one cent, even had the portion of that cent due from the plaintiff been tendered, is an unconscion- able contract, void, at first blush, upon its face, if it be regarded as an earnest one. The consideration of one cent is, plainly, in this case, merely nominal, and intended to be so. As the will and testa- ment of Schnell's wife imposed no legal obligation upon him to discharge her bequests out of his property, and as she had none of her own, his promise to discharge them was not legally binding upon him on that ground. A moral consideration, only, will not support a promise. And for the same reason, a valid consideration for his promise cannot be found in the fact of a compromise of a disputed claim ; for where such claim is legally groundless, a promise upon a compromise of it, or of a suit upon it, is not legally binding. There was no mistake of law or fact in this case, as the agreement admits the will inoperative and void. The promise was simply one to make a gift. The past services of his wife, and the love and affection he had borne her, are objectionable as legal considerations for Schnell's promise, on two grounds: ( 1 ) They are past considerations. (2) The fact that Schnell loved his wife, and that she had been industrious, constituted no consideration for his prom- ise to pay J. B. Nell and tlic Lorenzes a sum of money. Whether, if his wife in her lifetime had made a bargain with Schnell, that, in consideration of his promising to pay after her death to the persons named, a sum of money, she would be industrious and worthy of his affection, such a promise would have been valid and consistent with public poHcy, we need not decide. Nor is the fact that Schnell now venerates the memory of his deceased wife a legal consideration for a promise to pay any third person money. FORMATION OF CONTRACTS 63 5. Adequacy of Consideration in Equity. Margraf v. Muir. 57 N. Y. 135. Mrs. Muir, ignorant of the real value of certain property fairly worth $2000, agreed to sell it to Margraf for $800. Margraf seeks specific performance of the contract. Held, that equity will not decree specific performance of a contract if the consideration is unfair. Earl, C. This was an unconscionable contract and could not be specifi- cally enforced on the ground of the inadequacy of the considera- tion. The plaintiff lived near the lot and knew its value. The defendant lived at a distance and did not know its value. While the plaintiff did not make any misrepresentations, he concealed his knowledge of the recent rise in value of the lot and took advantage of her ignorance, and thus got from her a contract to convey to him the lot for but a little more than one-third of its value. Such a contract, it is believed, has never yet been enforced in a court of equity in this country. When a contract for the sale of lands is fair and just and free from legal objection, it is a matter of course for courts of equity to specifically enforce it. But they will not decree specific performance in cases of fraud or mistake, or of hard and unconscionable bargains, or when the decree would pro- duce injustice, or when such a decree would be inequitable under all circumstances. Formerly, in case courts of equity refused specific performance on the ground of mere inadequacy of consideration, the party claim- ing performance still had his remedy by a new action in the courts of law for damages for the breach of contract, and, in such courts, mere inadequacy of consideration, not so great as to be evidence of fraud, was never a defense. This practice has, however, been changed by the Code; and, now, equitable and legal jurisdiction being united in the same court, a party can unite in the same com- plaint both legal and equitable causes of action arising out of the same transaction. In this case the referee denied the equitable relief, but awarded damages for the breach of the contract, and in this he did not err, provided he adopted the proper rule of damage. 6. Forbearance. Silver v. Graves. 210 Mass. 26. The plaintiffs, three sisters of the defendant, Graves, executor of their father's will, sue him on his agreement that if they would withdraw from a contest of the will, which gave to the defendant $750 and only $100 to each of the plantiffs, he 64 COMMERCIAL LAW CASES would "give them a sum of money that would be satisfactory." The plaintiffs withdrew their appearance, the will was allowed, and they sue to recover for breach of the agreement. Held, that forbearance to sue is an adequate consideration, and that the consideration was sufficiently definite. Rugg, J. The only element left undetermined in this contract is that of price. But this is not infrequently found to be indefinite in contracts of sale and for work and labor. It is not necessary that the subject matter of such a contract should possess a price in the market or be bartered commonly in trade. It is enough if there is a reasonable value, which can be ascertained by the practical methods of trial. The difficulty of fixing the compensation is no greater than occurs in many cases. There is no doubt that the forbearance to prosecute a genuine contest in the courts is a sufficient consideration for a promise. In order that it may have this effect, however, the intention must be sincere to carry on a litigation which is believed to be well grounded and not false, frivolous, vexatious or unlawful in its nature. The abandonment of an honest purpose to carry on a litigation, even though its character be not such, either in law or fact or both, as ultimately to commend itself to the judgment of the tribunal which finally passes upon the question, is a surrender of something of value, and is a sufficient consideration for a contract. But the giving up of litigation which is not founded in good faith, and which does violence to an enlightened sense of justice in view of the knowledge of the one making the concession, is not the relinquishment of a thing of value, and does not constitute a sufficient consideration for a contract. As was said by Morton, J., in Mackin v. Dwyer, 205 Mass. 492, "A threat to contest the will, merely for the purpose of compelling the defendant to settle with her and buy his peace without any intention on her part of actually contesting the will if no such settlement was made, would not be sufficient and would not constitute a valid consideration for the defendant's promise." 7. Part Payment of Debt Not Yet Due as Consideration. Brooks V. White. 2 Mete. (Mass.) 28^. Brooks & Saunders held Keith, White & Company's note for $865. Before the note became due, the plaintiffs accepted from White, one of the partners, two notes of third persons for a smaller sum in settlement of all demands. They now try to col- lect the balance from White. Ihid, that the payment of a smaller amount before the larger amount becomes due is good consideration for a release of the larger auKjunt. FORMATION OF CONTRACTS 6$ Dewey, J. The general principle, that the acceptance of a less sum in money than is actually due cannot be a satisfaction and will not operate to extinguish the whole debt, although agreed by the cred- itor to be received upon such condition, seems to be recognized in books of unquestionable authority. The reason of the rule is that there must be some consideration for the relinquishment of the excess due beyond the sum paid; something to show a possibility of benefit to the party thus relinquishing a legal right ; otherwise the agreement is midum pactum. So in Pinnel's case, 5 Co. 117, where it was resolved that payment of a less sum, on the day, in satisfac- tion of the greater, cannot be a satisfaction of the whole, because it appears to the judges that by no possibility a less sum of money can be a satisfaction to the plaintiff for a greater sum: But the gift of a horse or the like, in satisfaction, is good; for it shall be intended that the horse might be more beneficial to the party than the money, or he would not have accepted it in satisfaction. The foundation of the rule seems therefore to be, that in the case of the acceptance of a less sum of money in discharge of a debt, inasmuch as there is no new consideration, no benefit accruing to the creditor, and no damage to the debtor, the creditor may violate with legal impunity his promise to his debtor, however freely and understandingly made. This rule, which obviously may be urged in violation of good faith, is not to be extended beyond its precise import ; and whenever the technical reason for its application does not exist, the rule itself is not to be applied. Hence judges have been disposed to take out of its application all those cases where there was any new consideration, or any collateral benefit received by the payee, which might raise a technical consideration, although it was quite apparent that such consideration was far less than the amount of the sum due. Thus, where any other articles than money are received and agreed to be accepted in full satisfaction of a debt, the court will not estimate their value in money's worth, but hold the consideration to be good, and the promise to discharge the entire debt a valid contract. The distinction was recognized in the resolu- tions in Pinnel's case, already cited. In Boyd v. Hitchcock, 20 Johns. 76, the receiving of a note of hand for a less sum than was due, with the name of another person as promisor or indorser, where the creditor agreed to accept the same as a satisfaction of the whole debt, was held a valid discharge, as an accord and satisfaction. In that case, the courts say, "here was a beneficial interest acquired, and a valuable consideration received by the plaintiffs, when they agreed to accept less than their whole demands." But there is another principle which the facts in the present case authorize us to apply, which is equally fatal to the maintenance of the technical objection relied on by the plaintiffs. The same an- cient authority which declares that the payment and acceptance of a less sum, on the day the debt becomes due, in satisfaction of a 66 COMMERCIAL LAW CASES greater, is no defense beyond the amount paid, also declares that the payment and acceptance of a less sum before the day of payment has arrived, in satisfaction of the whole, would be a good accord and satisfaction; for it is said, peradventure parcel of the sum before the day it fell due would be more beneficial to him than the whole at the day; and the value of the satisfaction is not material. "If the obligor pay a lesser sum, either before the day, or at another place than is limited by the condition, and the obligee receiveth it, this is a good satisfaction." The transfer of the notes was therefore a sufficient consideration for a promise by the plaintiffs to receive them in full discharge of the note. 8. Part Payment; Effect of Voucher Check. Whittaker CJiain Tread Co. v. Standard Auto Supply Co. 216 Mass. 204. The Auto Supply Company owed the Chain Tread Company for chains. It paid the bill by a voucher check "in full settle- ment." The check contained a statement that credit was claimed for certain chains, and a further statement that if the items were incorrect, the check should be returned with explanation by return mail. The Auto Supply Company was not entitled to the amount it deducted from the bill, and in a suit by the Chain Tread Com- pany for the balance due, the question arises whether the plain- tiff, having accepted the check, can sue for the remainder. Held, that the taking of a check will not prevent collection of the remainder of the amount due, when there is no considera- tion for any release. Loring, J. In Day v. McLea, 22 Q.B.D. 610, it was decided by the Court of Appeal in England that a creditor who cashes a check sent in full settlement is not barred from contending that he did not agree to take it on the terms on which it was sent if at the time he accepts it he says that he takes it on account. But the true rule is to the contrary. The true rule is put with accuracy in Nassoiy v. Tomliiison, 148 N.Y. 326, in these words: "The plaintiff could only accept the money as it was offered, which was in satisfaction of his demand. He could not accept the benefit and reject the condition, for if he accepted at all, it was cion oncrc. When he indorsed and collected the check, referred to in the letter asking him to sign the enclosed receipt in full, it was the same, in legal effect, as if he had signed and returned the receipt, because acceptance of the check was a conclusive election to be bound by the condition upon which the check was offered." But in cases (like the case at bar) where there is a dispute as to the amount due under a contract and payment of an amount which FORMATIOX OF CONTRACTS 6/ he (the debtor) admits to be due (that is to say, as to which there is no dispute) is made by the debtor in discharge of the whole con- tract, further and other questions arise. The question whether the creditor who under these circumstances accepts such a payment, protesting that he takes it on account, is or is not barred, is a question upon which again the authorities are in conflict. The decision in most of these cases was made to turn upon the question whether payment of the amount admitted to be due without dispute did or did not constitute a valid consideration for the dis- charge of the balance of the debt about which there was a dispute. In the case at bar there was no express agreement by the creditor to forego the balance of his claim on receiving payment of the amount admitted without dispute to be due. The only way in which such an agreement can be made out in the case at bar is on the ground that the plaintiff had to take the check sent him on the condition on which it was sent, and that by cashing the check he elected to accept the condition and so took the part admittedly due in full discharge of the whole debt. But while the doctrine of elec- tion is sound where a check is sent in full discharge of a claim no part of which is admitted to be due, it does not obtain where a debtor undertakes to make payment of what he admits to be due conditioned on its being accepted in discharge of what is in dis- pute. Such a condition, under those circumstances, is one which the debtor has no right to impose, and for that reason is void. In such a case the creditor is not put to an election to refuse the payment or to take it on the condition on which it is offered. He can take the payment admittedly due free of the void condition which the debtor has sought to impose. Take an example : Suppose the defendant had agreed to deliver to the plaintiff a stipulated quantity of iron for a stipulated price during each month of the year, and after six months the market price of iron was double that stipulated for in the contract. Suppose further that the defendant on the seventh month sent the stipulated amount of iron but on condition that the plaintiff should pay double the stipulated price, can there be any doubt of the plaintiff's right to retain the iron without paying the double price ? That is to say, can there be any doubt that the condition which required the plaintiff to pay double the contract price for the instalment sent was void and that the plaintiff under those circumstances is not put to an election but can keep the iron under the contract ? There can be no doubt on that question in our opinion ; and in our opinion the principle of law governing that case governs the case at bar, where the debtor undertook without right to impose upon a payment of what admittedly was due a void condition that it be received in full discharge of what was in dispute. It follows that in accepting the check in the case at bar as a payment on account, the plaintiff was within its rights and that it has not agreed to accept it in full settlement of the balance of the account. 68 COMMERCIAL LAW CASES 9. Part Payment Accompanied by Other Benefit or Detri- ment. Roberts v. Banse. y8 N. J. L. ^y. Roberts sued Banse for slander, and recovered a judgment of $75 against him. He afterwards took $20 in full satis- faction, thereby causing Banse to drop an appeal which he con- templated taking. He now sues for the remainder. Held, that receipt of a smaller sum in consideration of the re- lease of a larger debt is good consideration if accompanied by some other detriment. Garrison, J. There would be no question as to the defendant's right to have this judgment canceled were it not for the legal rule, that the pay- ment of a less sum in satisfaction of a larger one is no satisfaction. This rule, however, "has been constantly departed from upon slight distinctions" as is generally the case with a technical rule that is not, on the whole, conducive to sound morals. To many other grounds of departure that have been recognized there should be added: that if the debtor, in addition to the payment of a part of the debt as an agreed satisfaction of the whole, does at the request of his creditor some substantial thing of detriment to his interests, that he was not bound to do, upon the mutual under- standing that it was an additional consideration for the creditor's promise to accept the less for the larger sum, legal effect may be given to such compact of the parties if the debtor has fully performed his part thereof to his detriment. Both on the ground of a new consideration and on that of estoppel, an agreement thus made and performed should obtain legal consideration. 10. Compromise of Amount Due. Donohuc V. Woodbury. 6 CiisJi. (Mass.) 148. Donohue had a claim against Woodbury for labor. There was a dispute as to the amount owing, and Woodbury offered $35 to the attorney for the plaintiff, which was accepted without comment. The action is brought to recover the balance claimed by Donohue. Held, that a compromise of an unliquidated amount du° con- stitutes valid consideration. Shmv, C.J. The rule is well settled, that the i)ayment of a part of a debt, though offered in satisfaction, is not a payment of the whole, and FORMATIOX OF CONTRACTS 69 is no defense to an action for the balance. But that rule applies strictly to a case of debt, or a claim for a liquidated amount. It does not apply to an unliquidated claim for damages. Originally, the present was a claim for services, and was for unliquidated dam- ages. Some services were admitted to have been rendered, but the . amount was denied ; and an offer was made of a less sum than that claimed. The case was open to two inquiries, first, as to the time of service, and second, as to the rate. The offer therefore of $35 was both to liquidate the claim and pay that sum in satisfaction; the acceptance of the offer fixed and liquidated the sum, and discharged it. II. Compositions with Creditors. li'liite V. Kimta. 107 N. Y. jiS. J. and L. F. Kuntz made an assignment for the benefit of their creditors. White, the plaintiff, a creditor to the extent of about $18,000, received notes indorsed by the assignee to the amount of about $6,000, pursuant to a composition agreement assented to by White in consideration of a secret collateral agree- ment for the repurchase of these notes by the assignee for $10,000. White now sues on that agreement. Held^ that in a composition with creditors, an agreement where- by one creditor receives more than the others, is void. Earl, J. It is a general rule of law that the acceptance of a lesser sum, or an agreement to accept it, does not bar a demand for a greater sum. There is an exception to this general rule, however, in the case of a composition by a debtor with his creditors, in which they agree to accept less than their entire demands. Such an agreement, if entered into by a debtor with a number of his creditors, each acting on the faith of the engagement of the others, will be binding upon them, for each in that case has the undertaking of the rest as a consideration for his own undertaking. "Where creditors thus mutu- ally agree with each other, the beneficial consideration to each creditor is the engagement of the rest to forbear. A fund is thereby secured for the general advantage of all; and if any one of the parties were allowed afterwards to enforce his own claim, it would operate to the detriment of the other creditors who have relied upon his agreement to forbear, and might even deprive them of the sum it was mutually agreed they should receive by putting it out of the power of the debtor to carry out the composition." "Every composition deed is in its spirit, if not in its terms, an agreement between the creditors themselves, as well as between them and the debtor. It is an agree- ment that each shall receive the sum or the security which the deed stipulates to be paid and given, and nothing more ; and that, upon this consideration, the debtor shall be wholly discharged from all 70 COMMERCIAL LAW CASES the debts then owing to the creditors who sign the deed." It is, therefore, held that every agreement made by one creditor for some advantage to himself over other creditors who unite with him in a composition of their debts, is fraudulent and void. So scrupulous are courts in compelling creditors to the observance of good faith toward one another in cases of this kind, that any security taken for an amount beyond the composition agreed upon, or even for that sum, better than that which is common to all, if unknown at the time to the other creditors, is void and inoperative ; and no contract to pay money or do any other valuable thing, and no security, given upon any such promise, whereby a creditor obtains an advan- tage peculiar to himself, can be enforced. 12. Doing What One is Bound to Do. Pool V. The City of Boston. 5 Cush. (Mass.) 2ig. Pool, a watchman of the city of Boston, while in the discharge of his duty as such, discovered a person setting fire to a building and secured his conviction. He claims a reward offered by the city government for the detection and conviction of any incen- diary. Held, that a person is not entitled to a special rfeward for acts done in accordance with his duty. Wilde, J. The defense to this action is, that the plaintiff has done no more than it was his duty as a watchman to do, and that a promise of a reward to a man for doing his duty is illegal, or void for want of consideration. The same principle has been applied to promises made to persons not public officers. So it has been decided that a promise of extra compensation to a witness, in case he would attend court and give testimony, at considerable expense and inconvenience to himself, was void, and that he could only recover his fees allowed by law, he having done no more than he was duty bound to do. These decisions, and the ])rinciples on which they are founded, are decisive against the plaintiffs claim in the present case; it was his duty, when on the watch he discovered Hollihan setting fire to the outhouse, to make complaint and cause him to be arrested, or to give notice to the mayor, or some other city officer, that they might prosecute him. He preferred himself to prosecute rather than to give notice to the city authorities; doubtless with the hope of entitling himself thereby to the large reward oiTered. But this will not help him. The i)rincii)al object of the reward offered was to obtain the detection of the offender; the conviction was required to ascertain who was the oft'endcr. But to entitle the plaintiff to the reward, he must show that he is so entitled, as well for the FORMATION OF CONTRACTS 7I detection as for the conviction of the offender. The reward cannot be apportioned. But the plaintiff is not entitled thereto for either service. He discovered the offender while he was on duty as a watch- man, and was bound to give notice, or to cause him to be arrested; and he preferred the latter course, but he could not thereby subject the defendants to a liability to which they would not be subject if he had given notice to some one of the city officers. 13. Promise of Additional Compensation. (General Rule.) Parrot v. Mexican Central Railway Co. 20J Mass. 184. The plaintiffs sue to recover unexpected expenses incurred by them in the production of a book called "The Sportsman's Guide Book of Mexico." The terms for the publication of the book were contained in a written contract made by the defendant rail- road, but subsequently the representatives of the road orally agreed to pay an additional sum towards expenses. It is this sum that the plaintiffs seek to recover. Held, that upon the facts of the case, there was no consideration for the subsequent agreement. Knowlton, C. J. The defendant contends that there was no consideration for the promise to pay money to the plaintiff's, because they were already bound by the writing to do all that they undertook to do under the oral agreement. As a general proposition, it is settled in this Com- monwealth that a promise to pay one for doing that which he was under a prior legal duty to do is not binding for want of a valid consideration. It has often been said that the principle involved is the same that lies at the foundation of the doctrine that a promise to accept or pay a less sum in discharge of a debt for a greater amount is not binding. A limitation of the general proposition has been established in Massachusetts in cases where a plaintiff, having entered into a con- tract with the defendant to do certain work, refuses to proceed with it, and the defendant, in order to secure to himself the actual per- formance of the work in place of a right to collect damages from the plaintiff, promises to pay him an additional sum. This limitation is not intended to affect the rule that a contract cannot be binding without a consideration ; but it rests upon the doctrine that, under these circumstances, there is a new consideration for the promise. In Rollins V. Marsh, 128 Mass. 116, the court said: "The parties had made a contract in writing with which the plaintiff had become dis- satisfied, and which she had informed the defendant that she would not fulfill unless the terms were modified. If she had abandoned her contract, he might have made a new arrangement with some one else for the support of his ward, and enforced whatever remedy he had ^2 COMMERCIAL LAW CASES for the breach against the plaintiff. Instead of this, he made a new contract with her, which operated as a rescission of the original agree- ment." In such a case, the new promise is given to secure the per- formance, in place of an action for damages for not performing, as was pointed out by this court. This limitation in the application of the general rule to such facts is not recognized in England, nor in most of the states in this country. While it is well established in Massachusetts, the doctrine should not be extended beyond the cases to which it is applicable upon the recognized reasons that have been given for it. A majority of the court are of the opinion that it is not applicable to the evi- dence in this case, and that the defendant is right in its contention that, upon the assumption that the parties were bound by the written contract, there was no consideration for the new promise of the defendant. 14. Promise of Additional Compensation. (Conflicting Rule.) Moore v. Detroit Locomotive Works. 14 Mich. 266. The Detroit Locomotive Works failed to fulfill an agreement to manufacture and deliver a locomotive to Moore, Smith & Com- pany within a specified time. Three or four months later deliv- ery was ofifered and accepted upon a new agreement whereby Moore, Smith & Company waived all claim for damages for non- delivery. The Detroit Locomotive Works now sues for the price, and Moore, Smith & Company seek to recoup damages for non- delivery. Held, that the delivery was sufficient consideration to support the agreement for waiver. Coolcy, J. There are several cases which hold that where a party abandons a contract, and the other party promises that if he will go on and complete it, a further compensation shall be made beyond what was originally agreed, such promise is based upon sufficient consideration, and may be enforced. In Munroe v. Perkins, 9 Pick. 298, the plaintiff had agreed by deed to erect a building for defendants. Finding his contract a losing one, he had concluded to abandon it, but resumed work on the oral promise of the defendants that, if he would do so, they would pay him what the work was worth, without regard to the contract. The court say that whether the parol promise was without consideration "depends entirely on the question whether the first contract was waived. The plaintiff having refused to perform that contract, as he might do, subjecting himself to such damages as the other parties might show they were entitled to recover, he after- wards went on, on the faith of the new promise, and finished the work. This was a sufficient consideration. If defendants were will- FORMATION OF CONTRACTS 73 ing to accept his relinquishment of the old contract, and proceed on a new agreement, the law, we think, would not prevent it." In Lattimore v. Harsen, 14 Johns. 330, the plaintiffs had en- tered into an agreement under seal to perform certain work under a penalty, and were afterwards released by defendant by parol from a further performance under the agreement, he promising them that if they would go on and complete the work, he would pay them for their labor by the day. The court held, that as the plaintiffs might have released themselves from the agreement by incurring the penalty, there was a sufficient consideration for the promise of the defendant, and that the plaintiffs might recover under the substitute agreement. In Lawrence v. Davey, 28 Vt. 264, there was a contract to deliver coal at specified times and rates. A portion of it was delivered, and plaintiff then informed defendant that he could not deliver at those rates, and if the latter intended to take advantage of it, he should not deliver any more; and that he should deliver no more unless the defendant would pay for the coal independently of the contract. The defendant agreed to do so, and the coal was delivered. On suit being brought for the price, the court say : "Although the promise to waive the contract was after some portion of the coal sought to be recovered for had been delivered, and so delivered that probably the plaintiff, if defendant had insisted upon strict performance of the contract, could not have recovered anything for it, yet nevertheless, the agreement to waive the contract, and the promise, and above all, the delivery of coal after this agreement to waive the contract, and upon the faith of it, will be a sufficient consideration to bind the defendant to pay for the coal already received." Each of these cases is to the point now in issue before us. It is true that in each the abandonment of the contract by the plaintiff was before very much had been done under it, and on the claim that the bargain was a hard one upon him. But neither of these circum- stances can distinguish the cases from the present. An unprofitable contract is not, by that circumstance, made any the less binding on the promisor ; and the promisee has the same right and the same power to discharge a contract in consideration of a new promise, after breach as before. A different case would be presented if the plaintiffs had relied upon an agreement to waive the damages made after delivery; for in that case nothing would have remained for them to do or to promise which could be a consideration for the waiver. But here, although they had done the work which enabled them to de- liver the engine, they refused altogether, according to their statement, to go further, except under the substituted agreement; so that the plaintiffs in error actually received the property under the promise which they now insist is invalid. If they regarded it for their in- terest at the time to make the arrangement, and have obtained the property under it, it is not in our power now to set it aside on the ground of their being entitled to just as much under the contract before existing. They knew their legal rights at the time, and must be supposed to have consulted their own interests in entering into the new arrangement. 74 COMMERCIAL LAW CASES 15. Additional Promise by Third Party. DeCicco V. Schweizer. 221 N. Y. 4J1. Schweizer executed a contract whereby he agreed to pay $2,500 a year as a marriage settlement to his daughter, then engaged to Count GuHnelh. After ten years, he refused to make further payments under the agreement, and the plaintiff, an assignee of the contract, sues for payments due. Held, that a promise by one person to pay a certain sum for the performance of a contract between third parties, rests upon a valid consideration. Cardoao, J, That marriage may be a sufficient consideration is not disputed. The argument for the defendant is, however, that Count Gulinelli was already affianced to Miss Schweizer, and that the marriage was merely the fulfilment of an existing legal duty. For this reason, it is insisted, consideration was lacking. The argument leads us to the discussion of a vexed problem of the law which has been debated by courts and writers with much subtlety of reasoning and little harmony of results. There is a general acceptance of the proposition that where A is under a contract with B, a promise made by one to another to induce performance is void. The trouble comes when the promise to induce performance is made by C, a stranger. Dis- tinctions are then drawn between bilateral and unilateral contracts ; between a promise by C in return for a new promise by A, and a promise by C in return for performance by A. Some jurists hold that there is consideration in both classes of cases. Others hold that there is consideration where the promise is made for a new promise, but not where it is made for performance. Others hold that there is no consideration in either class of cases. The courts of this state are committed to the view that a promise by A to B to induce him not to break his contract with C is void. If that is the true nature of this promise, there was no consideration. We have never held, however, that a like infirmity attaches to a promise by A, not merely to B, but to B and C jointly, to induce them not to rescind or modify a contract which they are free to aban- don. To determine whether that is in substance the promise before us, there is need of closer analysis. The defendant's contract, if it be one, is not bilateral, it is uni- lateral. The situation is the same in substance as if the promise had run to husband and wife alike, and had been intended to induce per- formance by both. They were free by common consent to terminate their engagement or to postpone the marriage. If they forebore from exercising that right and assumed the responsibilities of mar- riage in reliance on the defendant's promise, he may not now retract FORMATION OF CONTRACTS 75 it. The distinction between a promise by A to B to induce him not to break his contract with C, and a Hke promise to induce him not to join with C in a vokmtary rescission, is not a new one. It has been suggested in cases where the new promise ran to B solely, and not to B and C jointly. The criticism has been made that in such cir- cumstances there ought to be some evidence that C was ready to withdraw. Whether that is true of contracts to marry is not certain. It does not seem a far-fetched assumption in such cases that one will release where the other has repented. We shall assume, however, that the criticism is valid where the promise is intended as an induce- ment to only one of the two parties to the contract. It may then be sheer speculation to say that the other party could have been per- suaded to rescind. But where the promise is held out as an induce- ment to both parties alike, there are new and different implications. One does not commonly apply pressure to coerce the will and action of those who are anxious to proceed. The attempt to sway their conduct by new inducements is an implied admission that both may waver ; that one equally with the other must be strengthened and persuaded; and that rescission or at least delay is something to be averted, and something, therefore, within the range of not unreason- able expectation. If pressure, applied to both, and holding both to their course, is not the purpose of the promise, it is at least the natural tendency and the probable result. The defendant knew that a man and a woman were assuming the responsibilities of wedlock in the belief that adequate provision had been made for the woman and for future offspring. He offered this inducement to both while they were free to retract or to delay. That they neither retracted nor delayed is certain. It is not to be expected that they should lay bare all the motives and promptings, some avowed and conscious, others perhaps half-conscious and inar- ticulate, which swayed their conduct. Undoubtedly, the prospective marriage is not to be deemed a con- sideration for the promise "unless the parties have dealt with it on that footing." But here the very formality of the agreement suggests a purpose to affect the legal relations of the signers. That the parties believed there was a consideration is certain. The document recites the engagement and the coming marriage. It states that these were the "consideration" for the promise. In these circumstances we cannot say that the promise was not intended to control the conduct of those whom it was designed to benefit. 1 6. Conditional Consideration. Higbie v. Rust. 211 111. jjj. Rust agreed to sell Higbie all the five-pound jelly pails he might want at 40c per dozen, f. o. b. Keene, N. H. Rust subsequently advanced the price and refused to fill orders for Higbie as agreed. 76 COMMERCIAL LAW CASES Higbie claims that Rust was obliged to furnish him with all the pails he might want for his trade. Held, that an agreement to sell all the goods of a particular description that a party may want or order is without consideration. Scott, J. It will be observed that both by the conversation at Keene and the letter relied upon, Rust stated that he would furnish all the pails that Higbie "wanted." If it be conceded that the latter accepted this proposition, we think the contract cannot be enforced, for the reason that it is lacking in mutuality. By its terms Rust would be obliged to sell, but Higbie would not be obliged to buy. The fact that Higbie was an extensive dealer in pails, supplying many custo- mers, does not alter the situation. He might elect to sell no five- pound pails whatever, or to purchase all he should sell from some person other than Rust. There was no agreement on Higbie's part to take or want such pails as he might sell to his trade, or to take or want any pails whatever. Where there is no consideration for the promise of one party to furnish or sell so much of the commodity as the other may want, except the promise of the other to take and pay for so much of the commodity as he may want, and there is no agreement that he shall want any quantity whatever, and no method exists by which it can be determined, whether he will want any of the commodity, or, what quantity he will want, the contract is void for lack of mutuality. Plaintiff in error regards the case, National Furnace Co. v. Keystone Manufacturing Co., no 111. 427, as supporting his position. In that case, the Keystone Manufacturing Company was engaged in a large manufacturing business, necessarily using a large quantity of iron in the transaction of its affairs, and contracted for all the iron, at a fixed price, which it would need in its business during the ensuing year, and the National Furnace Company agreed to furnish the same at that price. In that case, there was something by which to measure the needs of the purchaser and fix the amount of the commodity to be delivered under the contract, viz., such quantity as should be needed during the year in the manufacturing business which the purchaser was then conducting and in which it was certain some quantity would be needed. Here there is no method to de- termine what quantity, if any, the purchaser would want, as his wants would be measured by his sales and so far as Rust was con- cerned, would only exist if he, Higbie, was unable to purchase else- where at a better price. 17. Past Consideration. Roscorla V. Thomas, j Q. B. (Eng.) 2^4. Roscorla bought a horse from Thomas without any warranty. Thomas subsef|uently warranted the horse, and Roscorla now sues on tlie warranty. FORMATION OF CONTRACTS yj Held, that the executed consideration for the sale of the horse would not support the subsequent promise. Lord Denman, C. J. It may be taken as a general rule, subject to exceptions not applicable to this case, that the promise must be coextensive with the consideration. In the present case, the only promise that would result from the consideration, as stated, and be coextensive with it, would be to deliver the horse upon request. The precedent sale, without a warranty, though at the request of the defendant, imposes no other duty or obligation upon him. It is clear, therefore, that the consideration stated would not raise an implied promise by the defendant that the horse was sound or free from vice. But the promise in the present case must be taken to be, as in fact it was, express : and the question is, whether that fact will warrant the extension of the promise beyond that which would be implied by law ; and whether the consideration, though insufficient to raise an implied promise, will nevertheless support an express one. And we think that it will not. i8. Moral Obligation as Past Consideration. Freeman v. Robinson. j8 N. J. L. j^j. Robinson's firm sold goods to Freeman's minor son, without order or consent of Freeman, w^ho, nevertheless, later promised to pay the bill. They now sue Freeman for the amount. Held, that as in New Jersey the duty of a father to provide maintenance for his son is a mere moral obligation, there is no consideration to support the promise to pay. Depue, J. In Hawkes v. Saunders, Cowp. 290, Lord Mansfield said that, "where a man is under a moral obligation, which no court of equity or law can enforce, and promises, the honesty and rectitude of the thing is a consideration." And Justice Buller declared the true rule to be that "wherever a defendant is under moral obligation, or is liable in conscience and equity to pay, that is sufficient con- sideration." The influence of these great names induced the opinion, which at one time prevailed, that a mere moral obligation, under all circumstances, was a sufficient consideration for an express prom- ise. Subsequent examination of this doctrine, in the light of legal principles, has led to a modification of this opinion, and a repudiation of the principle in its generality of application. In an elaborate note to Wennall v. Adney, 3 B. & P. 247, it is observed, that Lord Mansfield "used the term moral obligation not as expressive of any vague and undefined claim arising from near- ness of relationship, but of those imperative duties which would yS COMMERCIAL LAW CASES be enforceable by law, were it not for some positive rule, which, with a view to general benefit, exempts the party in that instance from legal liability." The justice of this observation is apparent from the cases stated by the Chief Justice as illustrations of the application of the doctrine. He enumerates promises to pay debts, the recovery of which is barred by the statute of limitations; a promise by a man after he becomes of age to pay a just debt con- tracted during minority, but not for necessaries; a promise by a bankrupt after his certificate to pay his debts in full; and a promise to perform a secret trust, or a trust void for want of writing by the statute of frauds. In each of these instances there was, originally, a consideration of benefit to the promisor, from which a promise would have been implied capable of legal enforcement, if some statutory provision or positive rule of law had not debarred the party from legal remedy. Indeed, in the case then in hand, which was an action on a promise by an executrix, into whose hands assets had come, more than sufficient to pay debts and legacies, to pay the plaintiff his legacy, the defendant had received a consideration with respect to which a remedy might have been had by action, were it not for a technical rule of law. In the note referred to, the conclusion is arrived at from an examination of all the cases, that "an express promise can only re- vive a precedent good consideration which might have been enforced at law through the medium of an implied promise, had it not been suspended by some positive rule of law, but can give no original right of action, if the obligation on which it is founded never could have been enforced at law, though not barred by any legal maxim or statute provision." It may now be considered as the settled law, established on prin- ciple and authority, that a mere moral obligation or duty, as an executed consideration, is not a sufficient consideration to support a subsequent express promise. If services be rendered at the request of the promisor, which are for the benefit of a third party towards whom the promisor owes only moral duties, they may be recovered for. In such cases, the precedent request and services rendered in com- pliance therewith afford a consideration from which a promise to pay would be implied, or such as is needed to uphold an express promise. But where the duty is one of moral obligation only, and the service is rendered without a previous request, a subsequent promise to pay is without the consideration which is necessary to the validity of the contract. 19. Past Consideration in Case of Debt Discharged by Law. Ilerrinfjton 7'. Dozntf. 220 N. V. 162. Davitt made a note to the plaintiff. He afterwards went into bankruptcy and effected a composition with his creditors. After that composition was accepted by the plaintiff, Davitt promised her to pay the debt. FORMATION OF CONTRACTS 79 Held, that a previous obligation will support a subsequent promise to pay, if the original obligation has been discharged by a rule intended for the debtor's advantage. Collin, J. The debtor does not promise to pay the debt discharged in bankruptcy, unless there is a distinct and unequivocal expression by him, by a writing of the prescribed form, of a clear intention to bind himself to its payment. The acknowledgment of the exist- ence of the debt by the payment of a part of it or interest upon it or by express written words is not sufficient. For the purpose of creating anew the liability, the law does not imply a promise. The promise need not be made to the creditor, but it must with certainty refer to the debt. No particular form of words need be used. The promise is constituted by words which, in their natural import, express the present intention to obligate or undertake to pay. The payment may, however, depend upon a contingency or condition. If so dependent, it must be proved that the contingency has happened or the condi- tion has been performed. A promise made at any time after the adjudication, and, perhaps, after the filing of the petition, is actionable. The letter of the defendant's testator constituted a distinct and unqualified promise to pay the debt. The rule of law is well-nigh universal that such a promise made has an obligating and validating consideration in the moral obliga- tion of the debtor to pay. The debt is not paid by the discharge in bankruptcy. It is due in conscience, although discharged in law, and this moral obligation, uniting with the subsequent promise to pay, creates a right of action. The appellant asserts that the rule does not obtain or have applicability where, as in the present case, there was a composition between the bankrupt and his creditors, as- sented to and accepted by the creditors seeking to enforce the unpaid debt. The clear weight of judicial opinion and correct reasoning declare such assertion erroneous. In Cohen v. Lachenmaier, 147 Wis. 649, the Supreme Court of Wisconsin said: "It is further contended that each promise, if made, is nudum pactum, because the plaintiff as one of the creditors joined with the majority of the creditors in number and amount in accepting the defendant's offer of a composition with the creditors in settlement of their claims. This claim is based upon the ground that a discharge in bankruptcy in a composition is not a discharge by operation of law, but is one effected by the voluntary assent of the creditors. The adjudica- tions are to the effect that a debt which has been extinguished by a voluntary agreement of the debtor and creditor will not support a new promise, and that one discharged by operation of law will support one. The proceeding resulting in the discharge of a debtor from liability, based on a composition after bankruptcy proceedings are instituted, is not in its nature such a voluntary act of the creditor as is considered in law as being a voluntary assent of the creditor to the satisfaction of the debt." 8o COMMERCIAL LAW CASES The adequate consideration was the moral obHgation to keep the original promise; this rule does not apply to a composition inter partes which derives its validity merely from the will of the parties; and if a debt is legally discharged by the voluntary act of the party, there remains no obligation which can be deemed a consideration for a promise ; a discharge by performance of the terms of a bank- ruptcy composition, is a discharge by operation of law; the composi- tion is as to the assenting creditor both a voluntary act and an act of the law, but its efficiency is derived from the compulsory power of the law. 20. Consideration Part Past and Part Present. Blackwell v. Kercheval. 27 Ida. 5^7- Blackwell sold certain stock for Kistler, and without authority took in payment a note instead of cash. Kistler agreed to hold Blackwell harmless in respect of this unauthorized act, upon Black- well's agreement to continue to attempt collection of the amount due. In a suit by Blackwell against Kistler's administrator to enforce this contract, it was urged in defense that there was no consideration for the agreement to hold Blackwell harmless. Held, that the request for continuance of Blackwell's efforts to collect would support a promise to be responsible for those in the past. Budge, /. Where there is a request to continue services of a character theretofore rendered, the continuance of such services is a sufficient consideration to support a promise to pay for those rendered prior to such request. It is quite certain that the request to perform the services, coupled with the promise to pay for them, takes the case out of the rule that no action will lie for services rendered voluntarily or performed gratuitously, and that the same facts take the case out of the rule declaring an executed consideration to be insufficient to support a promise. Whatever may be thought of the reasoning of some of the earlier English cases, it cannot be denied that the con- clusion that where there is a request, and continuous services of value are rendered to the person making the request, the considera- tion is a valid one, and will support a promise to pay for such serv- ices, although some of them were rendered prior to the request. An entire promise founded partly on a past and executed con- sideration and partly on an executory consideration, is supported by the executory consideration. "A consideration which is executed in part only is called a con- tinuing consideration and is valid, the executory portion of it being sufficient to support the entire promise." FORMATION OF CONTRACTS 8 1 21. Privity to Consideration. (Majority Rule.) Seaver v. Ransom. 2^4 N. Y. ^jj. Ransom was executor of the estate of Beman, who had prom- ised his wife when she was about to die, that if she would not change her will, he would himself leave certain property to Miss Seaver, as Mrs. Beman had herself intended to do. This Beman did not do, and Miss Seaver sues on the agreement, as one for whose benefit it was made. (In New York, by statute, husband and wife may contract together except in regard to relieving the husband from liability to support the wife.) Held, that the person for whose benefit a contract is made may sue upon it in New York. Pound, J. Contracts for the benefit of third persons have been the prolific source of judicial and academic discussion. The general rule, in both law and equity, was that privity between a plaintiff and a de- fendant is necessary to the maintenance of an action on the contract. The consideration must be furnished by the party to whom the promise was made. The contract cannot be enforced against the third party and, therefore, it cannot be enforced by him. On the other hand, the right of the beneficiary to sue on a contract made expressly for his benefit, has been fully recognized in many American jurisdic- tions, either by judicial decision or by legislation, and it is said to be "the prevailing rule in this country." It has been said that "the establishment of this doctrine has been gradual, and is a victory of practical utility over theory, of equity over technical subtlety." The reasons for this view are that it is just and practical to permit the person for whose benefit the contract is made to enforce it against one whose duty it is to pay. Other jurisdictions still adhere to the present English rule that a contract cannot be enforced by or against a person who is not a party. In New York the right of the benefi- ciary to sue on contracts made for his benefit is not clearly or simply defined. It is at present confined, first, to cases where there is a pecuniary obligation running from the promisee to the beneficiary; "a legal right founded upon some obligation of the promisee in the third party to adopt and claim the promise as made for his benefit" : secondly, to cases where the contract is made for the benefit of the wife, affianced wife, or child of a party to the contract. The close relationship cases go to the early King's Bench case (1677), long since repudiated in England, of Dutton v. Poole, 2 Lev. 210. The natural and moral duty of the husband or parent to provide for the future of wife or child sustains the action on the contract made for their benefit. "This is the farthest the cases in this state have gone," says Cullen, J., in the marriage settlement case of Borland v. Welch, 162 N. Y. 104, no. 82 COMMERCIAL LAW CASES The right of the third party is also upheld in, thirdly, the public contract cases where the municipality seeks to protect its inhabitants by covenants for their benefit and, fourthly, the cases where, at the ■ request of the party to the contract, the promise runs directly to the beneficiary although he does not furnish the consideration. It may be safely said that a general rule sustaining recovery at the suit of the third party would include but few classes of cases not included in these groups, either categorically or in principle. On principle, a sound conclusion may be reached. If Mrs. Beman had left her husband the house on condition that he pay the plaintiff $6,000 and he had accepted the devise, he would have become personally liable to pay the legacy and plaintiff could have recovered in an action at law against him, whatever the value of the house. That would be because the testatrix had in substance bequeathed the promise to the plaintiff and not because close relationsliip or moral obligation sustained the contract. The distinction between an im- plied promise to a testator for the benefit of a third party to pay a legacy and an unqualified promise on a valuable consideration to make provision for the third party by will is discernible but not obvious. The tendency of American authority is to sustain the gift in all such cases and to permit the donee-beneficiary to recover on the contract, 22. Privity to Consideration. (Minority Rul».) Exchange Bank of St. Louis z'. Rice. 10/ Mass. j/. Hill, at St. Louis, consigned cotton to the defendants in Boston and drew on them a draft for $3,300, payable to the order of Pitman & Company. The draft was indorsed by Pitman & Com- pany to the plaintiff bank, which discounted it and presented it before maturity to the defendants, who refused to accept it in spite of the fact that they had w-ritten Hill that they would honor the draft. Held, that the plaintiff cannot recover for the reason that it was not a party to the consideration. Gray, J. The general rule of law is, that a person who is not a party to a simple contract, and from whom no consideration moves, cannot sue on the contract, and consequently that a promise made by one person to another, for the benefit of a third person who is a stranger to the consideration, will not support an action by the latter. The first and principal exception to the general rule, consists of those cases in which the defendant has in his hands money which in equity and good conscience belongs to the plaintiff, as where one person receives from another money or property as a fund from which certain creditors of the depositor are to be paid, and promises, either exjiressly, or by implication from his acceptance of the money FORMATIOM OF CONTRACTS 83 or property without objection to the terms on which it is delivered to him, to pay such creditors. The only illustration which the decisions of this court afford of the second class of exceptions, is Felton v. Dickinson, 10 Mass. 287, in which it was held, in accordance with a number of early English authorities, and hardly argued against that a son might sue upon a promise made for his benefit to his father. The third exception is the case of Brewer v. Dyer, 7 Cush. 337, in which the defendant made a written promise to the lessee of a shop to take his lease (which was under seal) and pay the rent to the lessor accordingly to its terms, entered into possession of a shop with the lessor's knowledge, paid him the rent quarterly for a year, and then before the expiration of the lease left the shop, and was held liable to an action by the lessor for the rent subsequently ac- cruing. That case may perhaps be supported on the ground that such payment and receipt of the rent after the agreement between the defendant and the lessee warranted the inference of a direct promise by the defendant to the lessor to pay the rent to him for the residue of the term. It certainly cannot be reconciled with the later authorities, without limiting it to its own special circumstances, and affords no safe guide in the decision of the present case. In the case at bar, the plantift's had acquired no title in the cotton against which the draft was drawn. The bill of lading was not attached to the draft, or made payable to the holder thereof, or delivered to the plaintiffs. The cotton was not of sufficient value to pay the draft, and the balance of account between the defendants and the drawer, at the time of their receipt and sale of the cotton, and ever since, was in favor of the defendants. There is no ground therefore for implying a promise from the defendants to the plaintiff's to pay to them cither the amount of the draft or the proceeds of the cotton. The plaintiffs did not take the draft, or make advances, upon the faith of any promise of the defendants, or of any actual receipt by them of the cotton or the bill of lading, but solely upon the faith of the drawer's signature and implied promise that the de- fendants should have funds to meet the draft. The whole considera- tion for the defendants' promise moved from the drawer and not from the plaintiffs. And the defendants made no promise to the plaintiffs. Their only promise to accept the draft was made to Hill, the drawer, after the draft had been negotiated to the plaintiffs : and there is no proof that the defendants authorized that promise to be shown to the plaintiffs, or that Hill, to whom that promise was made, was an agent of the plaintiffs. His relation to them was that of drawer and payee, not of agent and principal. To infer, as suggested in behalf of the plaintiffs, that he was their agent in receiving the defendants' promise, so that they might sue thereon in their own name, would be unsupported by any facts in the case, and would be an evasion of the rules of the law, which will not allow any person, who took the draft before that promise was made, to maintain an action upon that promise, either as an acceptance or a promise to accept. 84 COMMERCIAL LAW CASES 23. Subscriptions. The Presbyterian Church v. Cooper. 112 N. Y. 51 y. Cooper was administrator of the estate of Cook, who had signed a subscription paper promising $5,500 for the purpose of paying ofif a mortgage on the Church. The Church sues to recover the amount of the subscription. Held, that a subscription for charitable or other purposes is not enforceable for want of consideration. Andrews, J. It has sometimes been supposed that when several persons promise to contribute to a common object desired by all, the promise of each may be a good consideration for the promise of others, and this although the object in view is one in which the promisors have no pecuniary or legal interest, and the performance of the promise by one of the promisors would not in a legal sense be beneficial to the others. The doctrine seems to us unsound in principle. It proceeds on the assumption that a stranger both to the consideration and the promise, and whose only relation to the transaction is that of donee of an executory gift, may sue to enforce the payment of the gratuity for the reason that there has been a breach of contract between the several promisors and a failure to carry out as between themselves their mutual engagement. It is in no proper sense a case of mutual promises, as between the plaintiff and defendant. In the disposition of this case we must, therefore, reject the mutual promise between the subscribers, because there is no privity of contract between the plaintiff and the promisors. Some considera- tion must, therefore, be found other than that expressly stated in the subscription paper, in order to sustain the action. It is urged that a consideration may be found in the efforts of the trustees of the plaintiff during the year, and the time and labor expended by them during that time, to secure subscriptions in order to fulfill the condition upon which the liability of the subscribers depended. Tbere is no doubt that labor and services, rendered by one party at the request of another, constitute a good consideration for a promise made by the latter to the former, based on the rendition of the service. But the plaintiff encounters the difficulty that there is no evidence, express or implied, on the face of the subscription paper, nor any evidence outside of it, that the corporation or its trustees did, or undertook to do anything upon the invitation or request of the subscribers. Nor is there any evidence that the trustees of the plaintiff, as representatives of the corporation, in fact did anything in their corporate capacity, or otherwise than as individuals inter- ested in promoting tlie general object in view. Leaving out of the subscription paper the affirmative statement of the consideration (which, for reasons stated, may be rejected), FORMATION OF CONTRACTS 85 it stands as a naked promise of the subscribers to pay the several amounts subscribed by them for the purpose of paying the mortgage on the church property upon a condition precedent limiting their liability. Neither the church nor the trustees promise to do any- thing, nor are they requested to do anything, nor can such a request be implied. IV. CAPACITY OF PARTIES. The parties to a contract must be under no legal incapacity. While all persons are in a sense capable of contracting, there are certain relative disabilities extending to infants, insane persons, and in some measure to married women. Some contracts of an infant are valid, most of them are void- able, and in certain jurisdictions a few are void. The following contracts of an infant are binding: 1. Executed contracts for the purchase of necessaries, which are strictly speaking quasi contracts : the law imposes the obligation regardless of contractual capacity. The cir- cumstances of the infant determine what are necessaries. Money itself is not a necessary unless expended under the direction of the lender for necessaries. 2. A contract which an infant may be compelled to execute by equity or by authority of law. 3. An executed contract beneficial as a matter of law to an infant who is unable to restore the other party to his original position. In most jurisdictions, all other contracts of an infant may be rescinded by him at will. Some jurisdictions consider a few con- tracts of an infant, particularly those concerning the appointment of an agent, void. There is also a rule in some courts that when an infant has made a contract beneficial to himself, he can- not rescind unless he returns the consideration. Other jurisdic- tions hold that an infant may rescind even those contracts with- out returning the consideration unless he has it, and unless it is a contract which by law may be pronounced to be for his benefit. Upon reaching his majority (the age of twenty-one in most states), the infant must ratify or disaffirm a voidable contract previously made. Ratification may be express or by conduct. No particular form of ratification is required except in those jurisdictions where the matter is regulated by statute. Mere lapse of time after coming of age, coupled with enjoyment of the proceeds of the contract, 86 COMMERCIAL LAW CASES is sufficient to warrant an inference of ratification. The person must know all facts connected with the contract ratified, but this requirement does not ordinarily extend to the necessity of knowl- edge of the right to rescind. Mere acknowledgment of a debt does not constitute ratification. The protection which the law gives to an infant does not re- lieve him from responsibility for his torts. An infant is liable for all torts which do not arise out of the subject matter of a voidable contract. Contracts of insane persons are considered upon much the same basis as contracts of infants. In order that insanity shall afifect contractual capacity, it must prevent the mind of the insane person from freely meeting with that of the other party upon the subject matter of the contract. Insane persons are liable for necessaries, and are bound by contracts which they may be com- pelled by law to execute. If there has been an adjudication of insanity, their contracts are entirely void in most jurisdictions, while contracts made prior to such adjudication are merely void- able. An insane person's contracts may be ratified or avoided by him upon his recovering sanity and upon his death may be ratified or avoided by his heirs and representatives whether he has re- covered sanity or not. Knowledge of insanity by the other con- tracting party is immaterial; but many jurisdictions consider that an insane person may not disaffirm a contract without returning the consideration. The disability of married women has now been almost entirely removed by statute in most jurisdictions. Formerly a married woman could not contract unless her husband was civilly dead or had abandoned the country. At the present time, married women are still unable to contract with their husbands, unless the right has been specifically given by statute, as in New York. Apart from this restriction, enabling statutes passed in practically all states have brought it about that a woman's contractual rights are not affected by marriage. A. Contracts of Infants. I. Contracts of Infants in General. Riley v. Mallory. jj Conn. 201. Riley, a minor, bought a gun from the defendant Mallory. After he has used the gun for some time, he attempts to disaffirm the C(jntract and secure the return of his money. Held, that most contracts of an infant are voidable, and may be rescinded at his election. FORMATION OF CONTRACTS 87 Butler, J. The privilege of an infant to avoid contracts which are in- jurious to him, and rescind those which are not, is not an exception to a general rule, but a general rule with exceptions. The law assumes the incapacity of an infant to contract. It also recognizes the fact that the limitation of infancy is arbitrary ; that it is indis- pensably necessary that an infant should be at liberty to contract for necessaries ; and that he may happen to make other contracts which will be beneficial to him. It does not therefore forbid him to contract, but gives him for his protection the privilege of avoiding contracts which are injurious to him and rescinding all others, whether fair or not, whether executed or executory, and as well before as after he arrives at full age — excepting from the operation of the privilege only contracts for necessaries, contracts which he may be compelled in equity to execute, and executed contracts where he has enjoyed the benefit of them and cannot restore the other party to his original position. These exceptions are founded in the neces- sities of the infant, or required by a just regard for the equitable rights of others. 2. Contracts for Necessaries. Tupperv. Cadzvell. 12 Mete. (Mass.) 55g. Tupper repaired a dwelling house for Cadwell, a minor, such repairs being necessary to prevent immediate and serious in jury- to the house. In a suit for payment, Cadwell defends on the ground of infancy. Held, that this is not a case of "necessaries" for which an infant is liable. Dewey, J. . An infant may make a valid contract for necessaries ; and the matter of doubt in the present case is, what expenditures are em- braced in the terms "necessaries." It is said, an infant may bind himself to pay for his necessary meat, drink, apparel, and such other necessaries, and likewise for his good teaching or instruction, whereby he may profit himself afterwards. The term ''necessaries," it is well settled, also embraces necessary articles for the support of his wife and children, if he has such to maintain. The wants to be supplied are. however, personal ; either those for the body, as food, clothing, lodging, and the like ; or those necessary for the proper cultivation of the mind, as instruction suitable and requisite to the useful development of the intellectual powers, and qualifying the individual to engage in business when he shall arrive at the age of manhood. It has sometimes been contended that it was enough to charge 88 COMMERCIAL LAW CASES the party, though a minor, that the contract was one plainly beneficial to him in a pecuniary point of view. That proposition is by no means true, if, by it, it be intended to sanction an inquiry, in each particular case, whether the expenditure, or articles contracted for, were beneficial to the pecuniary interests of the minor. The ex- penditures are to be limited to cases where, from their very nature, expenditures for such purposes would be beneficial ; or, in other words, they must belong to a class of expenditures which are in law termed beneficial to the infant. What subjects of expenditures are included in this class is a matter of law, to be decided by the court. The further inquiry may often arise, whether expenditures, though embraced in this class, were necessary and proper in the particular case; and this may present a question of fact. No necessity can exist for expenditures [upon real estate of the character and under the circumstances here stated] solely upon the credit of the minor. The fact that he has real estate which may require supervision, and may need repairs, furnishes occasion for the appointment of a guardian. 3. Executory Contracts for Necessaries. Gregory v. Lee. 64 Conn. 407. Lee, a minor student at Yale University, hired a room from Gregory for the college year of forty weeks. After occupying the room for three months, he gave it up, and the plaintiff brings this action against him for the rent for the balance of the term. Held, that an infant may repudiate an executory contract whether for necessaries or not. Torrance, J. This room at the time the defendant hired it, and during the time he occupied it, came within the class called "necessaries," and also to him during said period it was an actual necessary ; for lodging comes clearly within the class of necessaries, and the room in ques- tion was a suitable and proper one, and during the period he occupied it, was his only lodging room. "Things necessary, are those without which an individual cannot reasonably exist. In the first place, food, raiment, lodging, and the like. About these there is no doubt." So long then as the defendant actually occupied the room as his sole lodging room it was clearly a necessary to him, for the use of which the law would compel him to pay; but as he paid the agreed price for the time he actually occupied it, no question arises upon that part of the transaction between these parties. The question now is whether he is bound to pay for the room after December 20th, 1892. The obligation of an infant to pay for necessaries actually furnished to him does not seem to arise out of a contract in the legal sense of that term, but out of a transaction FORMATION OF CONTRACTS 89 of a qua^i contractual nature; for it may be imposed on an infant too young to understand the nature of a contract at all. And where an infant agrees to pay a stipulated price for such necessaries, the party furnishing them recovers not necessarily that price but only the fair and reasonable value of the necessaries. This being so, no binding obligation to pay for necessaries can arise until they have been supplied to the infant; and he cannot make a binding executory agreement to purchase necessaries. As a general rule, with but few exceptions, an infant may avoid his contracts of every kind, whether beneficial to him or not, and whether executed or executory. The alleged agreement in this case does not come within any of the recognized exceptions to this rule. In this case the defendant gave up the room and repudiated the agree- ment, so far as it was in his power to do so, in the most positive and unequivocal manner. The plea of infancy then, under the circumstances, must prevail. 4. Money as a Necessary. Kilgorc v. Rich. 83 Me. J03. Kilgore, at the request of Rich, an infant, paid for him a board bill which he had previously contracted while attending school. In a suit for this money. Rich pleads infancy as a defense. Held, that, while money loaned is not a necessary, money ex- pended for necessaries for an infant, at his request, represents a binding obligation, Peters, J. It was ruled at the trial than an infant being liable to one person for such a bill, could make himself liable to another who should pay such bill for him at his request; the liability to such other person not to be measured by the amount actually paid, but limited, irrespective of the contract price, to such sum as would be a reasonable compensation for the board. This ruling is well supported by the authorities. The infant's liability is in no way enlarged by owing the debt to one rather than to another. The rule lends no temptation to create a debt as it is already created. The right to transfer the liability from one to another might be a great convenience to a minor. One creditor might be unable or unwilling to wait for payment, while a friend and acquaintance, as a substituted creditor, might be accommodating in that respect. It would give a self-supporting minor more facilities for support. We have not, in our examination of authorities, noted any case that opposes the principle. It was held that an infant who was threatened with arrest upon a process sued out against him on a debt for necessaries, would be liable to a person who, at his request, advanced money to release him. In that 90 COMMERCIAL LAW CASES case there was legal pressure, but in many instances moral pressure would be great. Where an infant bought an outfit for a whaling voyage, drawing for the amount of the bill on the plaintiffs, who accepted the bill and paid it when it became due, they were allowed to collect of the infant what the goods were reasonably worth to him, in an action for money paid on his account. So a person who signed an infant's note given for necessaries, as a surety, was allowed after payment of the note to recover the amount paid; not upon the note, but as money paid for the benefit of the infant. The defendant relies on the rule generally prevailing in the cases that money is not a necessary, though lent to an infant who afterwards purchases necessaries with it. But one who pays money at his request to a third person for necessaries can recover it. The difference is between lending and paying. The doctrine adopted in late American cases, [is] that a person who lends money to an infant to purchase "specific" necessaries stands in the position of the tradesman who furnishes the necessaries. 5. Contracts Which an Infant may be Compelled by Law to Perform. Elliott V. Home. 10 Ala. ^48. James Cobb, in order to defraud his creditors, took title to a piece of property in the name of his son, John, a minor. Later, John, at the direction of his father, executed a deed to Herndon, a creditor of the father, through whom one of the parties claims. The other parties claim under a later deed from John Cobb after he came of age. Held, that the deed to Herndon was good, as it was a convey- ance which the infant could have been compelled by law to make. Ormond, J . Here the infant, though the legal title was cast upon him by the fraudulent conduct of his father, had no right to the land against a creditor, or purchaser; when, therefore, he conveyed to the purchaser from his father, he merely parted with the naked title, and only did that which a court of equity would have com- pelled him to do, and we are unable to perceive any reason for per- mitting him, by a disaffirmance of this act, to reinvest himself with the title to be again deprived of it. We do not understand the law to be that every act of an in- fant, though it be by deed, is voidable at his election on his attaining his majority. It is an ancient maxim of the common law, that "generally, whatsoever an infant is bound to do by law, the same shall bind him, albeit he doth it without suit of law." This point was so determined in the case of an infant mortgagee, in whom the title was vested, who, upon the payment of the mortgage debt to FORMATION OF CONTRACTS QI the persons entitled to receive it, made a re-conveyance of the land, and the court held, that as this was an act which by law he could be compelled to perform, his voluntary performance of it, though during minority, should bind him, and he could not afterwards dis- affirm it. We are aware that this celebrated judgment has been the subject of some critical animadversion, on account of some of the general positions advanced by Lord Mansfield. The true point of the case has never been seriously questioned, but is admitted to be law by the highest authority at the present day. 6. Contracts of Which an Infant has Enjoyed the Benefit. Breed v. Jiidd. i Gray {Mass.) 455. Breed, a minor, seeks to recover money paid by him to the defendants, under an agreement whereby they furnished an out- fit to enable him to go to Cahfornia, and received one-third of his earnings while he was away. Held, that having executed a contract beneficial to him as a matter of law, an infant cannot afterwards disatifirm it. Thomas, J. Not having means of his own, he enters into an arrangement with the defendants to furnish them, upon a special agreement, indeed, but reasonable and beneficial in its terms. Viewing the con- tract in this light, or as an agreement for the services of the plaintiff for a limited time, to be repaid by the advancement and by retain- ing also two thirds of the fruits of his labor, it would, if fairly made and fully executed, be within the principles, if not within the direct authority of Stone v. Dennison, 13 Pick. i. In that case, the plaintiff, an infant over fourteen years of age, made an agreement with the defendant, his guardian assenting, by which he was to continue in the service of the defendant till he should arrive at the age of twenty-one, for his board, lodging, and education; and it was held, that the plaintiff not having been over- reached in the contract, and the contract not being so unreasonable in itself as to raise a suspicion of fraud, and having been fully executed on both sides, the plaintiff could not maintain a quantum meruit for his services, by showing that in the event, as it happened, his services were worth more than the stipulated compensation. In- deed, to say that an infant could make no contract for. his labor, however reasonable and beneficial to himself, by which he should be bound, even when fully executed on both sides, instead of serving as a protection to the infant, would have the effect only to prevent his being employed. Men of business want to know beforehand what they have got to pay, and also to know that when an agreement for labor, reasonable and just, has been justly made and fully executed, and the price paid, there is an end of the matter. 92 COMMERCIAL LAW CASES 7. Conditions Under Which Infant May Rescind. (Majority Rule.) Johnson v. Northwestern Mutual Life Insurance Co. 56 Minn. 365- Johnson, a minor, insured his hfe with the Insurance Company upon a participating basis. Immediately upon his coming of age, he gave notice that he wished to avoid the pohcy, and demanded a return of the money he had paid. He brings this action to re- cover that money. Held, that according to the Minnesota rule an infant is not entitled to recover what he paid for a benefit unless he can return the consideration. Mitchell, J. The following propositions are well settled, everywhere, as to the rescindable contracts of an infant, and in that category we include all contracts except for necessaries : First. That, in so far as the contract is executory on the part of an infant, he may always interpose his infancy as a defense to an action for its enforcement. He can always use his infancy as a shield. Second. If the contract has been wholly or partly per- formed on his part, but is wholly executory on part of the other party, the minor having received no benefits from it, he may recover back what he has paid or parted with. Third. Where the contract has been wholly or partly performed on both sides, the infant may always rescind, and recover back what he has paid, upon restoring what he has received. Fourth. A minor, on arriving at full age, may avoid a conveyance of his real estate without being required to place the grantee in statu quo, although a different rule has some- times been adopted by courts of equity when the former infant has applied to them for aid in avoiding his deeds. Whether this distinction between conveyances of real property and per- sonal contracts is founded on a technical rule, or upon con- siderations of policy growing out of the difference between real and personal property, it is not necessary here to con- sider. Fifth. Where the contract has been wholly or partly performed on both sides, the infant, if he sues to recover back what he has paid, must always restore what he has received, in so far as he still retains it in specie. Sixth. The courts will always grant an infant relief FORMATION OF CONTRACTS 93 where the other party has been guilty of fraud or undue influence. As to what would constitute a sufficient ground for relief under this head, and what relief the courts would grant in such cases, we will refer to hereafter. But suppose that the contract is free from all elements of fraud, unfairness, or overreaching, and the infant has enjoyed the benefits of it, but has spent or disposed of what he has received, or the benefits received are, as in this case, of such a nature that they cannot be restored. Can he recover back what he has paid? It is well settled in England that he cannot. At least a respectable minority of the American decisions are in full accord with what we have termed the "English rule." But many — perhaps a majority — of the American decisions, apparently thinking that the English rule does not sufficiently protect the infant, have modified it; and some of them seem to have wholly repudiated it, and to hold that, although the contract was in all respects fair and reasonable, and the infant had enjoyed the benefits of it, yet if the infant had spent or parted with what he had re- ceived, or if the benefits of it were of such a nature that they could not be restored, still he might recover back what he had paid. The problem with the courts seems to have been, on the one hand, to protect the infant from the improvidence incident to his youth and inexperience, and on the other hand, to compel him to conform to the principles of common honesty. The result is that the Ameri- can authorities — at least the later ones — have fallen into such a condition of conflict and confusion that it is difficult to draw from them any definite or uniform rule. If the party dealing with the infant was guilty of actual fraud or bad faith, we think the infant should be allowed to recover back all he had paid, without making restitution, except, of course, to the extent to which he still retained in specie what he had received. Such a case would be a contract essentially improvident, calculated to facili- tate the squandering the infant's estate, and which the other party knew, or ought to have known to be such, for to make such a contract at all with an infant would be fraud. But if the contract was free from any fraud or bad faith, and otherwise reasonable, except that the price paid by the infant was in excess of the value of what he received, his recovery should be limited to the difference between what he paid and what he received. The objections to this rule are, in our opinion, largely imaginary, for we are confident that in practice it can and will be applied by courts and juries so as to work out substantial justice. Our conclusion is that where the personal contract of an infant, beneficial to himself, has been wholly or partly executed on both sides, but the infant has disposed of what he has received, or the benefits recovered by him are as such that they cannot be restored, he cannot recover back what he has paid, if the contract was a fair and reasonable one, and free from any fraud or bad faith on part of the other party, but that the burden is on the other party to prove 94 COMMERCIAL LAW CASES that such was the character of the contract; that, if the contract involved the element of actual fraud or bad faith, the infant may recover all he paid or parted with, but if the contract involved no such elements, and was otherwise reasonable and fair, except that what the infant paid was in excess of the value of what he received, his recovery should be limited to such excess. It seems to us that this will sufficiently protect the infant, and at the same time do justice to the other party. Of course, in speaking of con- tracts beneficial to the infant, we refer to those that are deemed such in contemplation of law. Applying these rules to the case in hand, we add that life insurance in a solvent company, at the ordinary and usual rates, for an amount reasonably commensurate with the infant's estate, or his financial ability to carry it, is a provident, fair, and reasonable contract, and one which is entirely proper for an insurance company to make with him, assuming that it practices no fraud or other unlawful means to secure it; and if such should appear to be the character of this contract the plaintiff could not recover the premiums which he has paid in, so far as they were intended to cover the current annual risk assumed by the company under its policy. 8. Conditions Under Which Infant May Rescind. (Minority Rule.) Simpson v. Prudential Insurance Co. 184 Mass. ^48. The plaintiff, Simpson, a minor, sues to recover the premiums paid by her on a life insurance policy issued to her by the defen- dant insurance company. There had been certain expenses to the defendant in keeping the policy in force, and the defendant con- tends that its expenses should be deducted against premiums. Held, that an infant may rescind without returning the value of benefits received under an executed contract. Morton, J. The policy was what is termed a twenty-year endowment policy for $500, and the agreed facts state that there was no fraud or undue influence practised upon the plaintiff by the defendant or its agents, and that the contract was a reasonable and prudent one for a person in the plaintiff's situation and condition in life. The premiums paid amounted to $54 and it is agreed that the expense to the defendant of keeping the policy in force was $28.72. The defendant contends that this should be deducted from or set off against the premiums if the plaintiff is allowed to recover for them. It is manifest, we think, that liowever reasonable and prudent it may be for an infant to take out a policy of life insurance, it does not come within the class of necessaries, or within the class of con- FORMATION OF CONTRACTS 95 tracts which have been held as matter of law to be beneficial to and therefore binding upon an infant. It is only when the contract comes within the class of contracts which as a matter of law are binding upon an infant that the question of its reasonableness and prudence is material. The defendant contends that the contract having been executed in part at least the plaintiff cannot recover without making the de- fendant whole for the expense to which it has been subjected. But that would be compelling the plaintiff to carry out to that extent a contract which is not binding on her and which she may avoid. It is well settled in this Commonwealth, whatever may be the law elsewhere, that in order to avoid a contract an infant is not obliged to put the other party in statu quo. g. Ratification. Boyden v. Boyden. p Mete. (Mass.) §ip. The defendants, both minors, gave a note to Boyden for a horse and plow, which they bought from him. They sold the horse and kept the plow after they came of age, but now seek to defend on the ground of infancy at the time of purchase. Held, that by using property after an infant comes of age, he ratifies the contract under which the property was purchased. Shaw, C. J. If a minor gives a written promise for the purchase money for goods sold to him by an adult person, the contract is voidable and not void, and may be ratified by the infant, after coming of age. It is also well settled, that it is the privilege of the minor only to disaffirm the contract, and, until he does so, the other party is bound by it. The minor, when of age, may regard it as beneficial, and choose to affirm it. But if he elects to disaffirm it, he annuls it on both sides, ab initio, and the parties revert to the same situation as if the contract had not been made. If the minor refuses to pay the price, as he may, the contract of sale is annulled, and the goods revest in the vendor. But until some notice given by the purchaser, after coming of age, of his purpose to annul the contract, or some significant act done, the vendor cannot reclaim his property, and his taking of it would be a trespass. If, therefore, the minor purchaser, after coming of age, retains the specific property, treating it as his own, when it is in a condition to be restored, and it is of any value, and if, for an un- reasonable time, he neglects to restore it, or to tender it, or give notice of his readiness to restore it, according to the circumstances of the property and of the parties, it manifests his determination to keep the property and affirm the contract. And further; if, after coming of age, he retains the property for his own use, or sells or otherwise disposes of it, such detention, use or disposition — which 96 COMMERCIAL LAW CASES can be conscientiously done only on the assumption that the contract of a sale was a valid one, and by it the property became his own — is evidence of an intention to affirm the contract, from which a ratifica- tion may be inferred. In the present case, the defendants retained the plow, one of the articles for which the note was given, between two and three years after they both came of age. ID. Ratification by Lapse of Time. Goodiiow V. Empire Lumber Co. j/ Minn. 468. Mrs. Hamilton, while still a minor, sold property to Huff, under whom the Lumber Company claims title. Mrs. Hamilton's children bring an action to avoid the conveyance, a number of }ears after her death, which occurred when she was twenty-five years of age. They contend that as their mother was a minor when she made the deed, they may avoid the conveyance. Held, that a failure to disaffirm a conveyance of real estate within a reasonable time after coming of age constitutes rati- fication, Gilfillan, C. J. Must one who, while a minor, has conveyed real estate, dis- affirm the conveyance within a reasonable time after minority ceases, or be barred? Of the decided cases the majority are to the effect that he need not (where there are no circumstances other than lapse of time and silence), and that he is not barred by mere acquiescence for a shorter period than that prescribed in the statute of limitations. On the other hand, there are many decisions to the effect that mere acquiescence beyond a reasonable time after minority ceases bars the right to disaffirm. The rule holding certain contracts of an infant voidable (among them his conveyances of real estate), and giving him the right to affirm or disaffirm after he arrives at majority, is for the protection of minors, and so that they shall not be prejudiced by acts done or obligations incurred at a time when they are not capable of determining what is for their interest to do. For this purpose of protection the law gives them an opportunity, after they have become capable of judging for themselves, to determine whether such acts or obligations are beneficial or prejudicial to them, and whether they will abide by or avoid them. If the right to affirm or disaffirm extends beyond an adequate opportunity to so determine and to act on the result, it ceases to be a measure of protection, and becomes, "a dangerous weapon of offence, instead of a defense." For we cannot assent to the reason that by his silent acquiescence he occasions no injury to other |)ersons, and secures no benefits or new rights to himself. There is nothing to urge him as a duty to otliers to act speedily. The exist- FORMATION OF CONTRACTS 97 ence of such an infirmity in one's title as the right of another at his pleasure to defeat it, is necessarily prejudicial to it; and the longer it may continue, the more serious the injury. Such a right is a con- tinual menace to the title. Holding such a menace over the title is of course an injury to the owner of it; one possessing such a right is bound in justice and fairness towards the owner of the title to determine without unnecessary delay whether he will exercise it. The right of a minor to disaffirm on coming of age, like the right to dis- affirm in any other case, should be exercised with some regard to the rights of others, — with as much regard to those rights as is fairly consistent with due protection to the interests of the minor. In every other case of a right to disaffirm, the party holding it is required, out of regard to the rights of those who may be affected by its exercise, to act upon it within a reasonable time. What is a reasonable time will depend on the circumstances of each particular case, and may be either for the court or for the jury to determine. Where, as in this case, there is mere delay, with nothing to explain or excuse it, or show its necessity, it will be for the court. Three years and a half, the delay in this case (excluding the period of plaintiffs' minority), after the time within which to act had com- menced to run, was prima facie more than a reasonable time, and prima facie the conveyance was ratified. II. Ratification: Knowledge of Right of Rescission Im- material. Morse v. Wheeler. 4 Allen (Mass,) ^yo. Wheeler bought cattle from the plaintiff while he was an infant. After he came of age he promised to pay the balance due, but contends that he is not liable as he made this promise without knowledge that he was not bound. Held, that if an infant subsequently ratifies a contract, the fact that he did not know he might repudiate it is immaterial. Metcalf, J.. It is a long established legal principle, that he who makes a contract freely and fairly cannot be excused from performing it by reason of his ignorance of the law when he made it. If, however, an exception to the application of that principle to a case like this has been authoritatively made, the defendant is entitled to the benefit of it. But we do not find that such an exception has ever been made by any judicial decision, unless it be in a case in Pennsylvania. The notion of such an exception had its origin in the opinion of Lord Alvanley as reported in an action for goods sold and delivered, to which there was a plea of infancy, and a replication of a promise after full age. The evidence was, that the defendant, after he attained full age, on payment being demanded of him, and on being 98 COMMERCIAL LAW CASES threatened with an arrest, promised to give his note for the goods, but afterwards refused to give it. Lord Alvanley said that the de- fendant "might bind himself by a new promise after he obtained full age, but that he held that such promise must be voluntary, and given with knowledge that he then stood discharged by law ; that where an infant, under the terror of an arrest, had a promise extorted from him, or where it was given ignorant of the protection which the law afforded him, he should hold that he was not bound to it. If therefore the jury should be of opinion that the facts were that this promise was so obtained, he should direct them to find for the defendant." But, as no evidence was given, nor question made, con- cerning the defendant's knowledge of his rights, it is manifest that the only adjudged point in the case was, that his promise was made under duress — threats of unlawful imprisonment — and that he might avoid it for that reason. Even if it had been adjudged that knowledge of an infant's rights was necessary to the ratification of his contracts after he comes of age, such judgment would have been virtually overruled by the numerous cases decided since, in which the requisites of a ratifica- tion have been judicially stated without mention of such knowledge. And if such knowledge be necessary to the ratification of an infant's contract, by a new promise after coming of age, why is it not neces- sary in those cases of ratification, not by promise, but by acts done or omitted? We see no difference in principle between the cases. 12. Mere Acknowledgment Not Ratification. Hale V. Gerrish. 8 N. H. 3/4. Gerrish owed Hale money for goods bought in Hale's store while Gerrish was an infant. After Gerrish came of age, Hale asked him to sign a note for the amount. Gerrish acknowledged he owed the debt. Held, that a mere acknowledgment is not sufficient ratification. UpJiam, J. The plaintiff asked the defendant "if he did not owe the debt?" The defendant replied "that he did, and that the plaintiff would get his pay" ; and added, "I suppose this is all you want." He further said, that he had made arrangements to pay all his small debts before he went to New York. The rule in this case is different from that where the statute of limitations is pleaded. An acknowledgment of a subsisting debt, where a claim has been barred by the statute of limitations, furnishes evidence, unless explained or qualified, from which a new promise may be implied; but the promise of an infant cannot be revived so as to sustain an action, unless there be an express confirmation or ratification, after he comes of age. This ratification must either FORMATION OF CONTRACTS 99 be a direct promise, as by saying, "I ratify and confirm," or "I agree to pay the debt," or by positive acts of the infant after he has been of age a reasonable time, in favor of his contract, w^hich are of a character to constitute as perfect evidence of a ratification, as an express and unequivocal promise. In [Ford v. Phillips] i Pick. 202, the declaration of the de- fendant after he had become of age, was "that he owed the plaintiff, but was unable to pay him; he would endeavor, however, to get his brother to be bound with him." It was holden that this did not amount to a renewal of the promise. The declaration, in this case, that the defendant "owed the debt, and that the plaintiff would get his pay," seems to go no further. 13. Statutory Requirement of Written Ratification. Lamkin & Foster v. LeDoux. loi Me. 581. Lamkin & Foster sold boots and shoes to LeDoux, a minor, who, as a retail trader, sold part of the merchandise before he came of age. The rest he continued to sell for some time after coming of age. Lamkin & Foster bring an action to secure pay- ment for the goods. Held, that under the Maine statute ratification must be in writing. Emery, J.. Unfortunately for the plantiffs the promise or contract to pay was made by the defendant while a minor. Even at common law a minor's contract was not enforceable unless ratified by him after coming of age. Our statute goes further and makes such contract unenforceable by action unless it is ratified in writing by the maker after coming of age. The defendant's conduct after coming of age may have shown a sufficient ratification at common law, but there was no ratification in writing, and hence the statute bars the action. If there be any doubt that such is the effect of the statute upon this action, we think it removable by a little study of the language of the statute which is as follows : "No action shall be maintained on any contract made by a minor unless he, or some person lawfully authorized, ratified it in writing after he arrived at the age of twenty-one years, except for necessaries, or real estate of which he has received the title and retains the benefit." The prohibition is absolute. The statute does not impose any conditions to be complied with before the defendant can have the shelter of the statute. It does not require him, before or afterward, to return the consideration as a condition. The only two exceptions named in the statute also show its ap- plication to this case. The statute provides that it shall not apply to a contract made by a minor (i) for necessaries, or (2) for lOO COMMERCIAL LAW CASES "real estate of which he has received the title and retains the benefit." It seems a necessary inference that the statute does apply to a contract made for other kinds of property (not necessaries nor real estate) "of which he has received the title and retains the benefit." The rule is stated and the exceptions are stated. The contract in this case is not within the exceptions. It is therefore within the rule of the statute. 14. Appointment of Agent by Infant. CoiirsoUe v. IVeyerhauscr. 6p Minn. ^28. Coursolle, a minor who owned land, executed a power of at- torney to Dorr to sell it. Dorr sold the property to Brown, under whom the defendants claim. After coming of age, Coursolle agreed to stand by the transaction and ratified it so far as he was able. He now seeks to disaffirm the deed on the ground that his appointment of an agent to sell land was void. Held, that an infant's appointment of an agent to convey land is voidable, not void, and that ratification affirms the contract. Mitchell, J. The rule is that the act to be ratified must be voidable merely, and not absolutely void; and the question [is] whether the act of a minor in appointing an agent or attorney is wholly void, or merely voidable. Formerly the acts and contracts of infants were held either void, or merely voidable, depending on whether they were necessarily prejudicial to their interests, or were or might be benefi- cial to them. This threw upon the courts the burden of deciding in each particular case whether the act in question was necessarily prejudicial to the infant. Latterly the courts have refused to take this responsibility, on the ground that, if the infant wished to de- termine the question for himself on arriving at his majority, he should be allowed to do so, and that he is sufficiently protected by his right of avoidance. Hence the almost universal modern doctrine is that all the acts and contracts of an infant are merely voidable. Upon this rule there seems to have been ingrafted the exception that the act of an infant in appointing an agent or attorney, and consequently all acts and contracts of the agent or attorney under such appointment, are absolutely void. This exception does not seem to be founded on any sound principle, and all the text-writers and courts who have discussed the subject have, so far as we can discover, conceded such to be the fact. On principle, we think the power of attorney of an infant, and the acts and contracts made under it, should stand on the same foot- ing as any other act or contract, and should be considered voidable in the same manner as his personal acts and contracts are considered voidable. If the conveyance of land by an infant personally, who FORMATION OF CON'TRACTS 1 01 is of imperfect capacity, is only voidable, as is the law, it is difficult to see why his conveyance made through an attorney of perfect capacity should be held absolutely void. It is a noticeable fact that nearly all the old cases cited in support of this exception to the general rule are cases of technical warrants of attorney to appear in court and confess judgment. In these cases the courts hold that they would always set aside the judgment at the instance of the infant, but we do not find that any of them go as far as to hold that the judgment is good for no purpose and at no time. The courts have from time to time made so many exceptions to the exception itself that there seems to be very little left of it, unless it be in cases of powers of attorney required to be under seal, and warrants of attorney to appear and confess judgment in court. Hence, notwithstanding numerous general statements in the books to the contrary, we feel at liberty to hold, in accordance with what we deem sound principle, that the power of attorney from plaintiff to Dorr, and the deed to Brown under that power, were not absolutely void because of plaintiff's infancy, but merely void- able, and that they were ratified by him after attaining his majority. 15. Infant's Liability for Tort Distinguished. Slay ton v. Barry. i/'§ Mass. 5/j. Barry fraudulently represented to the plaintifif, Slayton, that he was of age, and thereby secured the delivery of goods. Slayton now sues him in tort, as he cannot prevail in an action of contract on account of Barry's minority. Held, that an action for tort against an infant cannot be main- tained if the wrong arises out of contractual HabiHty. Morton, J. The general rule is, of course, that infants are liable for their torts. But the rule is not an unlimited one, but is to be applied with due regard to the other equally well settled rule that, with certain exceptions, they are not liable on their contracts; and the dominant consideration is not that of liability for their torts but of protection from their contracts. The true rule seems to us to be, if the fraud is directly connected with the contract and is the means of effecting it, and parcel of the same transaction, then the infant will not be liable in tort. The fraudulent act, to charge him (the infant) must be wholly tortious; and a matter arising ex contractu, though infected with fraud, cannot be changed into a tort in order to charge the infant in trover, or case, by a change in the form of the action. In the present case it seems to us that the fraud on which the plaintiff relies was part and parcel of the contract and directly connected with it. The plaintiff cannot maintain his action without 102 COMMERCIAL LAW CASES showing that there was a contract, which he was induced to enter into by the defendant's fraudulent representations in regard to his capacity to contract, and that pursuant to that contract there was a sale and delivery of the goods in question. B. Contracts of Insane Persons. 1. What Constitutes Inability to Contract. Meigs v. Dexter, ijs Mass. 2iy. Dexter claims title to property under a deed from Hall. The question arises whether or not the deed to him is valid, there being doubt as to the sanity of Hall. Held, that in order to avoid a contract, the insanity must be the direct cause of the making of the contract. Knou'lton, J. [The court cited with approval the charge of the judge in the lower court, which was in part as follows :] A person may have an insane delusion, I think, on one subject, as on the subject of religion, of politics even, — to make it a little more practical, — and yet not be insane on other subjects, and have good mental capacity to do business. The question is whether that insane delusion, if a person has it, is a moving cause to some act which would not have been done except for the delusion, and which renders a person of unsound mind in respect to that thing. As I say, people may have notions on religion and politics that others think are insane, delusive ; but that does not make them so, and that does not render all their business acts void. I dare say you may know men you think are deluded on some subjects, and yet they may be good business men perhaps. If the act is not inspired, moved by that particular delusion, it does not affect their transactions, nor would it affect a deed. 2. Liability of Insane Persons for Necessaries. Sceva V. True. 5J N. H. 62/. Sceva sues Fanny True, who is insane and confined in an insane asylum, for necessaries furnished for her support. Sceva had for some time taken charge of the defendant's property, and had sup- ported her in part from its proceeds. Held, that an insane person is liable for necessaries regardless of capacity to contract. FORMATION OF CONTRACTS IO3 Ladd, J. An insane person, an idiot, or a person utterly bereft of all sense and reason by the sudden stroke of accident or disease, may be held liable, in assumpsit, for necessaries furnished to him in good faith while in that unfortunate and helpless condition. And the reasons upon which this rests are too broad, as well as too sensible and humane, to be overborne by any deductions which a refined logic may make from the circumstance that in such cases there can be no contract or promise in fact, — no meeting of the minds of the parties. The cases put it on the ground of an implied contract ; and by this is not meant an actual contract, — that is, an actual meeting of the minds of the parties, an actual, mutual under- standing, to be inferred from language, acts, and circumstances, by the jury — but a contract and promise, said to be implied by the law, where, in point of fact, there was no contract, no mutual understanding, and so no promise. The defendant's counsel says it is usurpation for the court to hold, as matter of law, that there is a contract and a promise, when all the evidence in the case shows that there was not a contract, nor the semblance of one. It is doubtless a legal fiction, invented and used for the sake of the remedy. If it was originally usurpation, certainly it has now become very inveterate, and firmly fixed in the body of the law. It by no means follows that this plaintiff is entitled to recover. In the first place, it must appear that the necessaries furnished to the defendant were furnished in good faith, and with no purpose to take advantage of her unfortunate situation. And upon this question, the great length of time which was allowed to pass without procuring the appointment of a guardian for her is a fact to which the jury would undoubtedly attach much weight. Its significance and importance must, of course, depend very much on the circum- stances under which the delay and omission occurred, all of which will be for the jury to consider upon the question whether every- thing was done in good faith towards the defendant, and with an expectation on the part of the plaintiff that he was to be paid. Again: the jury are to consider whether the support for which the plaintiff now seeks to recover was not furnished as a gratuity, with no expectation or intention that it should be paid for, except so far as compensation might be derived from the use of the defendant's share of the farm. And, upon this point, the relationship existing between the parties, the length of the time the defendant was there in the family without any move on the part of Enoch F. Sceva to charge her or her estate, the absence (if such is the fact) of an account kept by him wherein she was charged with her support, and credited for the use and occupation of the land, — in short, all the facts and circumstances of her residence with the family that tend to show the intention or expectation of Enoch F. Sceva with respect to being paid for her support, are for the jury. If these services were rendered and this support furnished, with no ex- I04 COMMERCIAL LAW CASES pectation on the part of Enoch F. Sceva that he was to charge or be paid therefor, this suit cannot be maintained; for then it must be regarded substantially in the light of a gift actually accepted and appropriated by the defendant, without reference to her capacity to make a contract, or even to signify her acceptance by any mental assent. 3. Knowledge of Insanity by Other Party Immaterial. Seaver v. Phelps. 11 Pick. (Mass.) 304. Seaver seeks to recover the value of a promissory note pledged to Phelps, at a time when he, Seaver, was insane. Held, that an insane person may avoid his contract regardless of the belief of the other party that he w^as sane. Wilde, /.. The general doctrine that the contracts of idiots and insane persons are not binding in law or equity, is not denied. Being bereft of reason and understanding, they are considered incapable of assenting to a contract, or of doing any other valid act. And although their contracts are not generally absolutely void, but only voidable, the law takes care effectually and fully to protect their interests. We are to consider the plaintiff as in a state of insanity at the time he pledged his note to the defendant; and this being ad- mitted, we think it cannot avail him as a legal defense to show that he was ignorant of the fact, and practised no imposition. The fairness of the defendant's conduct cannot supply the plaintiff's want of capacity. Now no one would, we apprehend, undertake to maintain that the plaintiff would have been bound, if he had been a minor when he pledged the note. It does not appear to have been pledged for necessaries; and all contracts of infants are either void or voidable unless made for education or necessaries suitable to their degree and condition. And even if the note had been pledged as security for the payment of necessaries, it would not have been binding if the plaintiff had been an infant. For a pledge is in the nature of a penalty, and may be forfeited, and can be of no advantage to the infant, and therefore shall not bind him. We are aware that insanity is sometimes hard to detect, and that persons dealing with the insane may be subjected to loss and difficulty; but so they may be by dealing with minors. The danger, however, cannot be great, and seems to furnish no sufficient cause for modifying the rules of law in relation to insane people, if we had any power and authority to do so; which we have not. FORMATION OF CONTRACTS IO5 4. Necessity of Return of Consideration on Disaffirmance. (Majority Rule.) McCarthy v. Bowling Green Storage & Van Co. 182 App. Div. (N. Y.) 18. McCarthy bought goods at an auction conducted by the defen- dant. McCarthy, at that time, was of unsound mind, but had not been judicially declared insane. A committee appointed under the New York statute to conserve his estate seeks to avoid the purchase. Held, that a contract made by an insane person with another party who has acted in good faith, cannot be rescinded unless the other party can be placed in statu quo. Laughlin, J. Where a person, pursuant to law, is duly adjudged insane or otherwise incompetent and a committee has been appointed, the world is chargeable with notice, and every contract thereafter made with him is absolutely void ; but contracts made by an incompetent person before such an adjudication and appointment are voidable only, and at his election on recovering from the disability, or at the election of his committee or personal representatives or heirs, and on such election being made, an action either at law or in equity may be brought or defended for the restoration or retention of his property. It does not appear to have been authoritatively decided in this jurisdiction whether on electing to avoid such a voidable contract, the consideration received by the incompetent must be tendered back. Contracts of infants and incompetents are voidable for their protection, in the event that the contracts are not deemed to be beneficial to them. In both classes of cases the right to elect to avoid the contract is based on the incapacity to contract. It is well settled that the right of an infant to avoid or rescind contracts made during his minority does not depend on his ability to restore the consideration, or otherwise make restitution to the other party with whom he contracted, or whether such party can be placed in statu quo; but to the extent that he still has the consideration the other party becomes entitled thereto. It is said in support of that doctrine that the right to avoid or to rescind would be of but little value to the infant, if he were required to make full restitution, for that would afford him no protection in the event that, through lack of mental capacity, he had lost or squandered the consideration. The same reasons would apply to contracts made by incompetents ; but in the one case the other party would ordinarily know whether he was dealing with an infant or an adult, whereas there might be no ground for the slightest suspicion of incompetency. It would seem that one contracting with an infant with knowledge, actual I06 COMMERCIAL LAW CASES or imputed by law of his infancy and contracting with an incom- petent knowing him to be incompetent should be held to have risked rescission without restitution ; but where one in good faith contracts with an incompetent, not so adjudged, without notice or knowledge of his disability, it may well be argued that the exercise of the right of rescission will not be permitted, where full restoration can- not be made for the reason that thereby an undue burden would be cast on honest traders, who would be helpless against such conse- quences, and that it would be more equitable to regard the loss caused by the affliction as the misfortune of the afflicted one. Although everyone is chargeable with constructive notice where there has been an adjudication of incompetency it is evident one might innocently without actual notice contract with such a person ; but the risks of loss from such contracts would be slight for ordinarily the incom- petent is restrained or attended. A distinction is, therefore, made between the avoidance or rescission of contracts made by infants and those made by incompetents. With respect to the latter the rule is that if the contract was fair and for the benefit of the incom- petent and made in good faith and without notice of his incapacity and the other party cannot be placed in statu quo, these facts con- stitute an equitable defense to the avoidance or rescission, to be pleaded and proved as such. 5. a. Necessity of Return of Consideration on Disaffirmance. (Minority Rule.) b. Ratification. Hovey v. Hobson. 55 Me. 451. Neal, an insane person, conveyed lands to Crocker, through whom Hobson holds. After Neal died, Lydia Dennett, his sole heiress, conveyed the property to Hovey. Hovey seeks to avoid the deed to Crocker on the ground that Neal was insane. Held, that ignorance of insanity of the grantor is no defense to a purchaser without notice. Appleton, C. J.' The questions arise, (i) as to rights of an insane man when restored to sanity, or of his heirs to avoid, as against his immediate grantee, his deed executed and delivered when insane; and, (2) as to the rights of those deriving a title in good faith, without notice, and for a valid consideration from such grantee. The deed of an insane man not under guardianship is not void but voidable, and may be confirmed by him if afterwards sane, or by his heirs. If under guardianship, the deed is absolutely void. The right of avoiding a contract exists, notwithstanding the person FORMATION OF CONTRACTS IO7 with whom the insane man contracted was not apprized of and had no reason to suspect the existence of such insanity, and did not overreach him by any fraud or deception. So an infant may avoid his contract, though the person deahng with him supposed him of age ; or even when he fraudulently and falsely represented him- self of age. The deed of an insane man being voidable, he may ratify it after he becomes sane, or his heirs after his decease. An insane person or his guardian may bring an action to recover land of which a deed was made by him while insane, without first restor- ing the consideration to the grantee, the deed not having since been ratified nor confirmed. In this case, the remark of Shaw, C. J., that if "the unfortunate person of unsound mind, coming to the full possession of his mental faculties, desires to relieve himself from a conveyance made during his incapacity, he must first restore the price, if paid, or surrender the contract for it, if unpaid," is limited and restricted by Thomas, J., "to the case of a grantor having in his possession the notes which were the consideration of the deed and restored to the full possession of his mind." In the deed or other contract of an insane man the consenting mind is wanting. "To say that an insane man," observes Thomas, J., "before he can avoid a voidable deed, must first put the grantee in statu quo, would be to say, in effect, that, in a large majority of cases, his deed shall not be avoided at all. The more insane the grantor was when the bargain was made, the less likely will he be to retain the fruits of his bargain, so as to be able to make restitution. It would be absurd to annul the bargain for the mental incompetency of a party, and yet to require of him to retain and manage the proceeds of his sale so wisely and discreetly that they shall be forthcoming, when with restored intellect he shall seek its annul- ment." Lunatics and persons non compos are not bound by their contracts, though no fraud nor imposition has been practised on them. As the deed of an insane man is voidable only, it follows that it is capable of subsequent ratification by the grantor if he be restored to reason, or by his heirs. The retention of the notes after such restoration and receiving payments on them, would be evidence of such ratification. In the analogous case of infancy, it seems that there may be an acquiescence by the grantor under such circumstances as would amount to an equitable estoppel. It was held that an infant's acquiescence in a conveyance for four years after age and seeing the property extensively improved, would be a confirmation. Though mere lapse of time will not amount to a confirmation, unless continued for twenty years, yet in connec- tion with other circumstances it may amount to a ratification. Whether, in the case before us, the deed of Stephen Neal has been affirmed by the reception, by those authorized, of the purchase money for the land, or the heir at law, after the death of her husband or the passage of the laws in relation to married women, is equitably estopped by her omission to act under circumstances I08 COMMERCIAL LAW CASES which required action on her part, are questions which at this time are not pressing for consideration. It is insisted, even if the deed of Neal might have been avoided as between the original grantor and grantee, that this right of avoidance ceases when the title has passed into the hands of third persons in good faith, for an adequate consideration, and ignorant of any facts tending to impeach such title. It is apparent that the protection of the insane and the idiotic will be materially diminished, if the heirs cannot follow the property conveyed, but are limited in their right of avoidance to the im- mediate grantee of such insane or idiotic person. The principles applicable to deeds voidable for the infancy of the grantor are equally applicable where the grantor is insane. When a man is defrauded, he may, as against his grantee, avoid his deed, but not against those deriving in good faith and for an adequate consideration a title from such grantee. He has the ability to convey an indefeasible title — and he does convey such title to all bona fide purchasers from his grantee. The insane man has not the power to convey such indefeasible title. This incapacity inheres in all titles derived from him. The grantee, whose title is thus de- rived, must rely on the covenants of his deed. He risks the capacity to convey of all through whom his title has passed. The right of infants and of the insane alike to avoid their contracts is an absolute and paramount right, superior to all equities of other persons, and may be exercised against bona tide purchasers from the grantee. C. Contracts of Married Women. I. Common Law Disability. Robinson v. Reynolds, i Aikcns (Vt.) 1^4. Robinson brings a common law action against Mrs. Reynolds on a debt. The defense is that as she was a married woman at the time she incurred the debt, she was incapable of contracting. Held, that at common law a married woman cannot contract. Skinner, C. J. In contemplation of law, by marriage, the existence of the wife is merged in that of the husband. And it is a general principle, that she can, during coverture, make no contracts by which she is bound ; or sue or be sued alone. To this rule of law, that a married woman is incapable of suing, or being sued, without her husband, there are excepted cases; and so far as the principles, which have controlled the decisions in such cases extend, the Court feel bound to recognize them, as the law here. FORMATION OF CONTRACTS IO9 Where the husband is accounted in law civiliter mortnus, the wife may sue or be sued alone; as where the husband is exiled, banished for life, or has abjured the realm. So too, where the hus- band is an alien, having never resided in the government, she is capable of suing or being sued alone. But we believe there is no principle of law, that will authorize her to sue, or subject her to a suit, as a feme sole, where the husband is a citizen or subject of the government, on account of her having a separate maintenance, or of his temporary absence. In examining the cases that have been decided, bearing upon the question upon which a decision is called for in this case, it will be found, that although there are some, in which a temporary absence of a citizen or subject, would seem to have been a ground for considering the wife as a feme sole, for the purposes of con- tracting, pleading, and being impleaded; yet it is clearly opposed by the current of authority. If the wife was not liable at the time of contracting, lapse of time cannot make her so. Suppose the husband should return while the action was pending, could the plaintiff proceed with his action and imprison the wife? In the event of the return of the husband, it will hardly be contended that property acquired by the wife in his absence, would be beyond his control, or that she can be endowed. It is not perceived upon what principle the wife for some purposes may be considered as feme sole, and for others as covert, 2. Contracts Between Husband and Wife. Lord V. Parker, j Allen (Mass.) 12/. Suit is brought by Parker on a note of J. H. Lord & Company, a firm of which two partners were Lord and Mrs. Lord. Mrs. Lord contends that she could not legally enter into a contract of partnership with her husband. Held, that husband and wife cannot contract with each other. Hoar, J. The question is, whether it is in the power of a married woman, under the laws of Massachusetts, to form a copartnership with her husband and other persons, with all the consequences and liabilities incident to that relation ? If she has this power, it is because it has been expressly conferred by statute. The Statute of 1855 provides that "any woman hereafter married may, while married, bargain, sell and convey her real and personal property, and enter into any con- tract in reference to the same, in the same manner as if she were sole." The Statute of 1857 provides that "any married woman may, while married, bargain, sell and convey her real and personal prop- erty, which may now be her sole and separate property, or which may hereafter come to her by descent, devise, bequest or gift of no COMMERCIAL LAW CASES any person except her husband, and enter into any contract in refer- ence to the same, in the same manner as if she were sole." The title of these acts is, "An Act," and "An act in addition to an act to protect the property of married women." Their leading object is to enable married women to acquire, possess and manage property, without the intervention of a trustee, free from the inter- ference of control, and without liability for the debts, of their hus- bands. They are in derogation of the common law, and certainly are not to be extended by construction. And we cannot perceive in them any intention to confer upon a married woman the power to make any contract with her husband, or to convey to him any prop- erty, or receive any conveyance from him. The power to form a copartnership includes the power to create a community of property, with a joint power of disposal, and a mutual liability for the con- tracts and acts of all the partners. To enter into a partnership in business with her husband would subject her property to his control in a manner hardly consistent with the separation which it is the purpose of the statute to secure, and might subject her to an indefinite liability for his engagements. The property invested in such an enterprise would cease to be her "sole and separate" property. The power to arrange the terms of such a contract would open a wide door to fraud in relation to the property of the husband. The property which a married woman may acquire and dispose of by Statute 1857 includes such as may come to her "by gift of any person except her husband," clearly indicating that a gift from him was not to be rec- ognized as creating any title to property in her. REALITY OF CONSENT. There must be a real meeting of the minds of the parties to a contract. This implies an actual consent on both sides in order that there shall be an enforceable obligation. Mistake, misrepre- sentation, fraud, duress, and undue influence may constitute grounds for avoiding a contract. Mistake occurs when the parties do not mean the same thing or when one or both form untrue conceptions as to the subject matter of the agreement. Mistake on the part of one party will not ordinarily avoid a contract, for the reason that a man is to be held to that which his acts indicate to be his intention, rather than to a secret purpose in no way evidenced. The gist of a mistake which will serve as basis for rescission lies in a faihire of the minds •to meet. Tf the minds have really met, it is not necessary that either of the parties should get what he thinks he is getting. A mistake as to the nature of the transaction, a mistake as to the iden- tity of the person with whom the contract is made when that FORMATION OF CONTRACTS III identity is material, and a mistake as to the subject matter of the contract, represent the only cases in which a mistake will be ground for avoiding a contract. Mistake as to the subject matter for this purpose is to be limited to mistake as to the existence or identity of the subject matter and mistake as to the nature of the promise, which mistake is known to the other party. A mistake of law will not justify annulment, unless it is a mistake in regard to specific rights rather than to the operation of law in general. The law of a foreign state, by which is meant a state other than the forum, is for this purpose considered a matter of fact, not of law. An innocent misrepresentation will not serve as basis for avoid- ance at law unless the misrepresentation is itself incorporated as a condition of the contract. In equity, and in jurisdictions where an equitable defense may be interposed at law, relief will be given when the contract is induced by an innocent misrepresentation intended by the parties to be a vital term of the contract. It then ceases to be a mere representation and becomes either an induce- ment going to the root of the contract and as such justifying the other party in repudiation, or a warranty, an independent, collat- eral and subsidiary promise which if untrue entitles the other party by the better rule at common law to damages but not to repudiation. Whenever there is a special relationship of con- fidence between the parties, as between trustee and beneficiary, principal and agent, guardian and ward, attorney and client, or partners, and whenever one party expressly or by necessary impli- cation of circumstances relies upon the other for accurate state- ments to the knowledge of that other, as in the case of insurance, an innocent misrepresentation by the party in whom confidence or upon whom reliance is placed will justify the other party in repudiating the contract even at law. Fraud, which always justifies the repudiation of a contract, has the same elements as an action of tort for deceit. It involves : 1. A misrepresentation of a material existing fact, which includes concealment when there is a duty of disclosure. 2. Knowledge of the falsity of the representation by the party making it, which includes a reckless disregard of truth or falsity. 3. An intent that the representation shall be acted upon by the other party. 4. Action in reliance upon the representation, and 5. Damage, which in the case of a contract induced by fraud is to be inferred from its execution. Duress and undue influence operate to make impossible a real consent to the contract. Duress is threatened violence or impris- 112 COMMERCIAL LAW CASES onment by which a person is forced to enter into a contract against his will. It must be inflicted on the contracting party or on a near relative. It must induce the party to enter into the contract and it must prevent the exercise of the free will of the party so induced. Under modern law, detention of goods may constitute duress sufficient to make a contract voidable. Undue influence is a species of fraud, an abuse of confidence by one in a trust relation- ship or in authority, by taking advantage of another's weakness of mind, or by taking an oppressive and unfair advantage of an- other's necessity and distress. It must be more than ordinary persuasion, and must amount to a dominion over the will of the person so influenced to an extent that destroys his free agency. A. Mistake. I. No Mistake When Minds Meet. IVohurn National Bank v. Woods. 77 N. H. iy2. The bank, a creditor of William Woods, seeks to set aside a sale of land made by him to his mother, as a transfer in fraud of creditors. Woods needed money, and gave a deed of this land to his mother for $1000, which he in good faith considered to be the purchase price for the land, but which his mother considered to be a loan. Held, that there was no mistake which would justify setting aside the conveyance. Peaslee, /. ' A contract involves what is called a meeting of the minds of the parties. But this does not mean that they must have arrived at a common mental state touching the matter in hand. The standard by which their conduct is judged and their rights are limited is not internal, but external. In the absence of fraud or incapacity, the question is: what did the party say and do? The making of a contract does not depend upon the state of the parties' minds; it depends on their overt acts. We are to fix the person with such expressed consequences as are the reasonable result of his volition. Where a concurring intent is proved, it is merely a short way of showing that by conduct mutually intelligible the parties have expressed themselves each to the otlier. But when the intent does not concur, it is immaterial. Recourse must then be had to the ex- ternal facts from which intent is usually judged. It must be shown by the words and acts of the parties. Cases where there is as es- toppel form a large part of all that arise. The statement or offer of one party, acted upon by the other, is the typical case of making a contract. FORMATION OF CONTRACTS II3 Evidence of intent may be competent in certain cases as proof of what was in fact the overt conduct of the party. If it is pos- sible to reproduce conversation exactly, yet the manner may often be as important. It may be incapable of reproduction, and some light may be thrown upon it by showing the intent with which the words were spoken. But after this evidence is admitted the final question to be decided is not what the secret intent was, but what intent was expressed by the overt conduct, taken as a whole. It is elementary in the law governing contracts of sale and all other contracts, that the agreement is to be ascertained ex- clusively from the conduct of the parties and the language used when it is made, as applied to the subject matter and to known usages. The assent must be mutual, and the union of minds is as- certained by some medium of communication. A proposal is made by one party and is acceded to by the other in some kind of language mutually intelligible, and this is mutual assent. A party cannot escape the natural and reasonable interpretation which must be put on what he says and does, by showing that his words were used and his acts done with a different and undisclosed intention. It is not the secret purpose, but the expressed intention, which must govern in the absence of fraud and mutual mistake. A party is estopped to deny that the intention communicated to the other side was his real intention. The facts found show that there was a contract between these parties. The vendor proposed to sell at a price named, executed a deed, and delivered it to the vendee's representative. This repre- sentative in turn explained the transaction to the purchaser, who ex- pressed satisfaction therewith, paid the purchase price, and had the deed recorded. The words and acts of the parties are susceptible of but one construction. They show a complete agreement and a full execution of the contract. The effect of this is not destroyed by proof that one party misunderstood the legal eft'ect of what they said and did. The finding that the minds of the parties did not meet is ex- plained by other findings accompanying it. The meaning is that there was a unilateral mistake as to the effect of the contract which had been made. If this could ever be a ground for affording relief from the agreement entered into, it would be only at the instance of the mistaken party. Such a situation would not make the con- tract a nullity. At most, the contract could only be treated as void- able, and that at the option of the party who acted upon an erroneous belief. Until that party saw fit to take action, the contract would stand like any other where the element of mistake did not exist. If in the present case the defendant Adeline could avoid the contract, she has not sought to do so. On the contrary, after she was informed of her error she elected to stand on the contract as made. This elec- tion was not the inception of her title. It did not make the contract. 114 COMMERCIAL LAW CASES The contract existed from the time she first expressed her assent to it. If it was liable to be avoided by her, it was in force until so avoided. 2. Failure of Minds to Meet. Kyle V. Kavanagh. lo^ Moss. 55(5. Kyle agreed in writing to sell Kavanagh certain property "in Waltham" on Prospect Street. Kavanagh supposed he was buying land situated on another Prospect Street in the same city. Kyle sues on the contract. Held, that when the minds of the parties do not meet, there is no contract. [The judge, at the commencement of his charge, instructed the jury that, "if the defendant was negotiating for one thing and the plaintiff was selling another thing, and if their minds did not agree as to the subject matter of the sale, they could not be said to have agreed and to have made a contract" ; and furthermore, after the conclusion of his charge and at the request of the defen- dant, also instructed the jury that, "if the plaintiff or the defendant were in fact mistaken as to the location of the land, it was a good defense, although there was no fraud or misrepresentation on the part of the plaintiff," and that "mistake alone, if proved, was a good defense."] Morton, J. The instructions given were, in substance, that, if the de- fendant was negotiating for one thing and the plaintiff was selling another thing, and their minds did not agree as to the subject matter of the sale, there would be no contract by which the defendant would be bound, though there was no fraud on the part of the plaintiff. This ruling is in accordance with the elementary principles of the law of contracts, and was correct. 3. Effect of Unilateral Mistake. Wheaton Building and Lumber Co. v. City of Boston. 204 Mass. 218. The Lumber Company sues the city of Boston to recover a check which it had deposited to guarantee acceptance in case it should be awarded a contract uj)on which it had bid. The bid was accepted, and then the company found that it had made an honest but imjustified mistake as to the interpretation of the speci- fications. It contends that the contract may be avoided on account of the mistake. FORMATION OF CONTRACTS II5 Held, that a misconception as to the consequences of language is not ground for rescission. Rtigg, J. The specifications were not capable of reasonable misconstruc- tion. The allowance plainly covered only certain interior steel work, and did not include structural steel for roofs, stairs, ceilings or metal lathing, w'hich were to be constructed by the Roebling Com- pany and did not include "any other work than interior floor and column construction." It is not open to argument that as matter of plain construction of language these important and extensive elements of steel construction were outside of the allowance and must be so considered by bidders. It is only when the phrase of the contract has no obvious meaning, or is reasonably capable of diverse interpretation and was in fact differently understood by the parties, that there is no agreement. There was here no mistake of fact, but simply a misconception on the part of the plaintiff of the conse- quences of the language used in making the proposal. Against such a mistake of law the courts afford no remedy. Ignorantia legis neminem exciisat. The erroneous interpretation of the language of the specifications was not induced by anything said or done by any agent of the defendant. This is the typical case of misunderstanding the legal effect of language used in an instrument freely signed. 4. Mistake as to Nature of Transaction. Rupley V. Daggett. 74 III. ^^i. Daggett offered to sell a horse to Rupley for $65 supposing he had said, "$165." Rupley asked if he understood "S65" cor- rectly. Daggett replied in the affirmative, supposing that the amount over $100 was in question, not the entire amount. Rupley took the horse, and Daggett sties to recover it on the grotmd that there w^as no contract. Held, that there is no contract in case of mistake of both parties as to the nature of the contract. Scott, /. ■ It is very clear, from the evidence in this case, there was no sale of the property understandingly made. Appellee supposed he was selling for $165, and it may be appellant was equally honest in the belief that he was buying at the price of $65. If the price was to be $165, he had never agreed to pay that sum, and was under no sort of obligation to keep the property at that price. It was his privilege to return it. On the contrary, appellee had never agreed to sell for $65, and could not be compelled to part with his property for a less sum than he chose to ask. It is according to natural jus- Il6 COMMERCIAL LAW CASES tice, where there is a mutual mistake in regard to the price of an article of property, there is no sale, and neither party is bound. There has been no meeting of the minds of the contracting parties, and hence there can be no sale. This principle is so elementary it needs no citation of authorities in its support. Any other rule would work injustice and might compel a person to part with his property without his consent, or to take and pay for property at a price he had never contracted to pay. 5. Mistake as to Identity of Person. Smith V. Whcatcroff. L. R. p Ch. D. (Eng.) 22^. Wheatcroft agreed in writing to sell certain land to Smith, understanding that he was the real principal, whereas in fact Smith was acting for others. In a suit by Smith and those others for specific performance, Wheatcroft defends on the ground of mis- take as to the identity of the person with whom he was dealing. Held, that, notwithstanding a mistake as to the identity of the person dealt with, if that identity is immaterial, the contract will be enforceable. Fry, J. "Does error in regard to the person with whom I contract de- stroy the consent and annul the agreement? I think that this ques- tion ought to be decided by a distinction. Whenever the consideration of the person with whom I am willing to contract enters as an ele- ment into the contract which I am willing to make, error with regard to the person destroys my consent and consequently annuls the contract. On the contrary, when the consideration of the person with whom I thought I was contracting does not enter at all into the contract, and I should have been equally willing to make the contract with any person whatever as with him with whom I thought I was contracting, the contract ought to stand." I ask myself here whether the defendant has shown that any personal considerations entered into this contract? Has he shown me that he would have been unwilling to enter into a contract in the same terms with any- body else ? I say distinctly that he has failed to produce such an effect on my mind, and that being so, I give judgment for specific performance. 6. Mistake as to Identity of Person. Edmunds v. Merchants' Despatch Transportation Co. 135 Mass. 283. A swindler representing himself to be Pape of Dayton, Ohio, bought goods from the plaintiffs in the name of Pape, and had FORMATION OF COxVTRACTS 11/ them shipped to Dayton. At that place they were deHvered to him by the defendant carrier. The plaintiffs sue the defendant for delivering the goods to the swindler, claiming that the title to the goods was still in them. In another case tried with this case, the swindler, instead of representing himself to be Pape, represented himself to be the brother of Pape, acting as his agent. Held, that mistake as to the identity of the person will not avoid a contract unless that mistake brings it about that there is no sale to such person. Morton, C. J. [In the first case] we think it clear, upon principle and au- thority, that there was a sale, and the property in the goods passed to the purchaser. The minds of the parties met and agreed upon all the terms of the sale, the thing sold, the price and time of pay- ment, the person selling and the person buying. The fact that the seller was induced to sell by fraud of the buyer made the sale void- able, but not void. He could not have supposed that he was selling to any other person ; his intention was to sell to the person present, and identified by sight and hearing ; it does not defeat the sale be- cause the buyer assumed a false name, or practised any other deceit to induce the vendor to sell. In the case before us, there was a de facto contract, purport- ing, and by which the plaintiffs intended, to pass the property and possession of the goods to the person buying them; and we are of opinion that the property did pass to the swindler who bought the goods. The sale was voidable by the plaintiffs ; but the defendant, the carrier by whom they were forwarded, had no duty to inquire into its validity. The person who bought them, and who called him- self Edward Pape, owned the goods, and upon their arrival in Dayton, had the right to demand them of the carrier. In delivering them to him, the carrier was guilty of no fault or negligence. [In the second case] the contract did not purport, nor the plain- tiffs intend, to sell to the person who was present and ordered the goods. The swindler introduced himself as a brother of Edward Pape of Dayton, Ohio, buying for him. By referring to the mer- cantile agency, he tacitly represented that he was buying for the Edward Pape who was there recorded as a man of means. The plaintiffs understood that they were selling, and intended to sell, to the real Edward Pape. There was no contract made with him, because the swindler who acted as his agent had no authority, but there was no contract of sale made with any one else. The relation of vendor and vendee never existed between the plaintiffs and the swindler. The property in the goods, therefore, did not pass to the swindler; and the defendant cannot defend, as in the other case, upon the ground that it has delivered the goods to the real owner. Il8 COMMERCIAL LAW CASES 7. Mistake as to Existence of Subject Matter. Duncan v. The New York Mutual Insurance Co. ij8 N. Y. 88. The Insurance Company insured a vessel belonging to the as- signor of the plaintiff for one year from August 3, 1888, under a contract allowing cancellation of the policy on arrival of the ship at port. The parties agreed in November to cancel the contract as of December 3, 1888, and the unearned part of the premium was returned. Neither party knew that the vessel had been lost in the meantime. Duncan sues for the amount of the policy. Held, that a mistake of fact as to the existence of the subject matter is ground for rescission. Earl, J. The plaintifiF in his complaint alleged all the facts and prayed for relief that the cancellation of the policy should be rescinded and set aside and that he should recover $5,000, less the sum of $233.33 returned to him for the unearned premium. The trial court found, what was absolutely true, that the cancellation was made by mistake. The insured could demand the return of unearned premium only upon the arrival of the steamship at her destina- tion, and it was only upon her arrival that the defendant was bound to make the cancellation and return the premium. Both parties manifestly supposed on the 3rd day of December that the vessel had reached her destination. Both parties were mistaken as to that fact, and both were ignorant of the loss of the vessel prior to that time. So it is entirely clear that the cancellation was made under a mis- take of fact. It was at least made under a mistake of fact by the plaintiff, and, therefore, upon the return of the money paid to him he was entitled, under familiar principles of law, to have the can- cellation rescinded. Ignorance of a fact extrinsic and not essential to a contract, but which, if known, might have influenced the action of a party to the contract, is not such a mistake as will authorize equitable relief; as to such facts the party must rely upon his own vigilance, and if not imposed upon or defrauded he will be held to his contract. Here the essential facts in reference to which the parties were mistaken were not extrinsic but they were intrinsic and essential to the contract of cancellation and were involved therein. The parties were dealing with the i)olicy which both sup- posed to be in force covering the risk insured on the 3d day of December, with premiums which both i)artics believed were un- earned, in reference to a vessel which both parties believed to be in existence. As to all of these facts they were mistaken. The vessel was lost. The policy had matured, and all the premiums had been earned. FORMATION OF CONTRACTS IIQ 8. Mistake as to Identity of Subject Matter. Kennedy v. Panama, etc. Royal Mail Co. L. R. 2 Q. B. Cas. (Eng.) 580. Lord Kennedy subscribed to stock in tbe Mail Company, rely- ing upon a statement by officials of the company that they had a government contract for the carriage of mail to New Zealand. This statement they then believed to be true, although it was sub- sequently determined that the fact was otherwise. Lord Kennedy seeks to set aside his subscription on the ground of mistake. Held, that this was not such a mistake in identity of the sub- ject matter as to be ground for avoiding the contract. Blackburn, J. It was contended that the effect of the prospectus was to war- rant to the intended shareholders that there really was such a contract as is there represented, and not merely to represent that the company bona fide believed it ; and that the difference in sub- stance between shares in a company with such a contract and shares in a company whose supposed contract was not binding, was a dif- ference in substance in the nature of the thing; and that the share- holder was entitled to return the shares as soon as he discovered this, quite independently of fraud, on the ground that he had applied for one thing and got another. And, if the invalidity of the contract really made the shares he obtained different things in substance from those which he applied for, this would, we think, be good law. The case would then resemble [cases] where the person, who had honestly sold what he thought a bill without recourse to him, was nevertheless held bound to return the price on its turning out that the supposed bill was a forgery in the one case, and void under the stamp laws in the other; in both cases the ground of the decision being that the thing handed over was not the thing paid for. There is, however, a very important difference between cases where a contract may be rescinded on account of fraud and those in which it may be rescinded on the ground that there is a difference in substance between the thing bargained for and that obtained. It is enough to show that there was a fraudulent representation as to any part of that which induced the party to enter into the contract which he seeks to rescind; but where there has been an innocent misrepresentation or misapprehension, it does not author- ize a rescission unless it is such as to show that there is a com- plete difference in substance between what was supposed to be and what was taken, so as to constitute a failure of consideration. For example, where a horse is bought under a belief that it is sound, if the purchaser was induced to buy by a fraudulent representation as to the horse's soundness, the contract may be rescinded. If it I20 COMMERCIAL LAW CASES was induced by an honest misrepresentation as to its soundness, though it may be clear that both vendor and purchaser thought that they were deaHng about a sound horse and were in error, yet the purchaser must pay the whole price, unless there was a warranty ; and even if there was a warranty, he cannot return the horse and claim back the whole price, unless there was a condition to that effect in the contract. The principle is well illustrated in the civil law. There, — after laying down the general rule, that where the parties are not at one as to the subject of the contract there is no agreement, and that this applies where the parties have misapprehended each other as to the corpus, as where an absent slave was sold and the buyer thought he was buying Pamphilus and the vendor thought he was selling Stichus; and pronouncing the judgment that in such a case there was no bargain because there was "error in corpore," the answers given are to the effect, that if there be misapprehension as to the substance of the thing there is no contract; but if it be only a difference in some quality or accident, even though the mis- apprehension may have been the actuating motive to the purchaser, yet the contract remains binding. And, as we apprehend, the prin- ciple of our law is the same as that of the civil law ; and the difficulty in every case is to determine whether the mistake or misapprehen- sion is as to the substance of the whole consideration, going, as it were, to the root of the matter, or only to some point, even though a material point, an error as to which does not affect the substance of the whole consideration. In the present case the prospectus states that the issue of the new shares was authorized by a meeting. Had that been a mistake, we think it would have been in the substance, as the applicant would not have had shares at all ; but that statement was quite accurate, and he got shares in the company. It was stated in the prospectus that the motive for the increase of the capital was to enable the company to work the new contract. That also was strictly accurate. It was, by implication, stated that the contract was binding, and this was a misstatement, though an innocent one ; but we do not think that it affected the substance of the matter, for the applicant actually got shares in the very company for shares in which he had applied; and that company has, by means of the invalid contract, got the benefit, and is now carrying the mails on terms, not the same as those they supposed, and perhaps not so profitable, but still on profitable terms. We think there was a misapprehension as to that which was a material part of the motive inducing the applicant to ask for the shares, but not preventing the shares from being in substance those he applied for. These would not be legitimate considerations if there had been fraud in those acting for the company ; doubtless, in such a case the conii>any must bear all the consequences of the fraud of those they employ, lint if the ciucstion be, as we think it is, whether the mis- FORMATION OF CONTRACTS 121 apprehension as to the contract goes to the root and substance of the matter, so as to make the shares which the applicant has obtained in a company with this questionable contract substantially different things from shares in a company with a valid contract, we think those considerations are legitimate ; and they lead us to the conclusion that the case is analogous to that of the horse supposed to be sound and not really so, and not to the case of a thing substantially dif- ferent. 9. Mistake as to Nature of Promise Known to Other Party. The Town of Essex v. Day. 52 Conn. 48 2. The town of Essex issued twenty year bonds, intending that they should be payable at the option of the town at the end of ten years. By mistake, they were issued without that provision. This suit is brought to correct bonds in the hands of Day, who had purchased them with full knowledge of the facts. Held, that a contract may be corrected in case of a mistake in the nature of the promise which is known to the other party. Loomis, J. Was the mistake one of such a character that it can be cor- rected by a court of equity ? It is claimed by the counsel for the defendant that the mis- take, in such a case, must be mutual, and the cause of the agreement ; and numerous authorities are cited in support of the proposition. This rule, within the limits of its proper application, is founded in reason. If a contract is corrected by a court of chancery to make it conform to the intention of one of the parties, it is of course forcing a contract upon the other party which he never intended to make, unless his own intent concurred with that of the other party. But this case is not of that character nor governed by that rule. A grantor by mistake embraces in his deed a parcel of land that neither party intended to have conveyed. The grantee sees his mistake, but does not call the attention of the grantor to it, and afterwards claims the parcel thus accidentally "" conveyed. Or a person offers a reward of $100 for the detection and arrest of a bur- glar, but by mistake and without his notice it is printed $1,000. A man who knows of the mistake arrests the burglar and claims the $1,000. In each of these cases the error is not mutual, but wholly on the one side. What is there on the other? Not mistake, but fraud. That fraud can never stand for a moment in a court of equity. But suppose the case to be one where, instead of actual fraud, there is merely such knowledge, actual or imputed by the law, as makes it inequitable for the purchaser to retain his advantage. The court will deal as summarily with that inequitable position of the party, as in the other case with his fraud. 122 COMMERCIAL LAW CASES "The mistake of one party only is attended by different conse- quences, according as the other party is or is not cognizant of the mistake. An agreement cannot be affected by the mistake of either party in expressing his intention, of which the other party has no knowledge. A man cannot have relief on the ground of mistake, unless the party benefited by the mistake is disentitled in equity and conscience from retaining the advantage which he has acquired." 10. Mistake as to Value of Subject Matter. Wood v. Boynton. 64 Wis. 265. The plaintiff brought a stone to the defendants, partners in the jewelry business, and upon their offer to buy it for a dollar, sold it to them for that price. It was an uncut diamond, but neither party knew that fact. The plaintiff now seeks to rescind the sale on the ground of mistake. Held, that a mistake as to the value of the subject matter will not warrant rescission of a contract. Taylor, J. The only question in the case is whether there was anything in the sale which entitled the vendor to rescind the sale and so revest the title in her. The only reasons we know of for rescinding a sale and revesting the title in the vendor so that he may maintain an action at law for the recovery of the possession against his vendee are (i) that the vendee was guilty of some fraud in procuring a sale to be made to him; (2) that there was a mistake made by the vendor in delivering an article which was not the article sold, — a mistake in fact as to the identity of the thing sold with the thing delivered upon the sale. This last is not in reality a rescission of the sale made, as the thing delivered was not the thing sold, and no title ever passed to the vendee by such delivery. In this case, upon the plaintiff's own evidence, there can be no just ground for alleging that she was induced to make the sale she did by any fraud or unfair dealings on the part of Mr. Boynton. Both were entirely ignorant at the time of the character of the stone and of its intrinsic value. Mr. Boynton was not an expert in uncut diamonds, and had made no examination of the stone, except to take it in his hand and look at it before he made the offer of one dollar, which was refused at the time, and afterwards accepted without any comment or further examination made by Mr. Boynton. The appel- lant had the stone in her possession for a long time, and it appears from her own statement that she had made some inquiry as to its nature and qualities. If she chose to sell it without further investiga- tion as to its intrinsic value to a person who was guilty of no fraud or unfairness which induced her to sell it for a small sum, she cannot FORMATION OF CONTRACTS I23 repudiate the sale because it is afterwards ascertained that she made a bad bargain. There is no pretense of any mistake as to the identity of the thing sold. It was produced by the plaintiff and exhibited to the vendee before the sale was made, and the thing sold was delivered to the vendee when the purchase price was paid. Suppose the appellant had produced the stone, and said she had been told that it was a diamond, and she believed it was, but had no knowledge herself as to its character or value, and Mr. Boynton had given her $500 for it, could he have rescinded the sale if it had turned out to be a topaz or any other stone of very small value? Could Mr. Boynton have rescinded the sale on the ground of mistake ? Clearly not, nor could he rescind it on the ground that there had been a breach of warranty, because there was no warranty, nor could he rescind it on the ground of fraud, unless he could show that she falsely declared that she had been told it was a diamond, or, if she had been told so, still she knew it was not a diamond. II. Mistake of Law. Reggio v. Warren. 2oy Mass. 52^. Reggio seeks to set aside a release of his right to certain pay- ments under a will. The release was given upon an agreement by the trustees to pay a promissory note which they made to Reggio, but which, it subsequently developed, they had no power to make, they and he assuming at the time that such a transaction was proper. Held, that when a person enters into a transaction through a mistake as to his own antecedent rights, he may obtain rescission. Sheldon, J. It is a general doctrine that, as it is the duty of every one to conform his conduct to the requirements of the law, so all men must be treated alike in courts of civil and criminal jurisdiction, as being aware of the duties and obligations which are imposed upon them by the law, and that ordinarily one cannot successfully ask for affirmative relief or defend himself against an otherwise well founded claim, on the bare ground that he was either ignorant of the law or mistaken as to what it prescribed. But it is now well settled that this rule is not invariably to be applied. In some cases VN'here great injustice would have been done by its enforcement, this has been avoided by declaring that a mistake as to the title to property or as to the existence of certain particular rights, though caused by an erroneous idea as to the legal effect of a deed or as to the duties or obligations created by an agreement, was really a mistake of fact and not strictly one of law, and so did not constitute an insuperable bar to relief. In other cases, 124 COMMERCIAL LAW CASES a distinction between ignorance or mistake as to a general rule of law prescribing conduct and establishing rights and duties, and one as to the private right or interests of a party under a written instru- ment, has been laid down; and it has been declared that, while relief could not be given by reason of a mistake of the former kind, one of the latter kind shared by both parties to an agreement and resulting in a loss of the rights of one of them, may be set aside at the suit of the injured party, though no fraud was practised upon him. The distinction taken is between the general law of the country, for ignorance of which no one is excused, and private rights which de- pend upon the existence of particular facts and the rules which the law declares, as to those facts. In other cases, sometimes as the ground of decision and some- times merely in discussion or argument, it has been said that there is no established rule forbidding the giving relief to one injured by reason of a mistake of law, but that whenever it is clearly shown that parties in their dealings with each other have acted under a common mistake of law and the party injured thereby can be relieved without doing injustice to others, equity will afford him redress. So it has been said that the important question was not whether the mistake was one of law or of fact, but whether the particular mistake was such as a court of equity will correct, and this depends upon whether the case falls within the fundamental principle of equity that no one shall be allowed to enrich himself unjustly at the expanse of another by reason of an innocent mistake of law or of fact entertained by both parties. The correct doctrine both upon principle and authority was stated by the Supreme Court of Michigan in Renard v. Clink, 91 Mich. I, 3: "While it is a general rule that equity will not relieve against a mistake of law, this rule is not universal. Where parties, with knowledge of the facts, and without any inequitable incidents, have made an agreement or other instrument as they intended it should be, and the writing expresses the transaction as it was understood and designed to be made, equity will not allow a de- fense, or grant a reformation or rescission, although one of the par- ties may have been mistaken or misconceived its legal meaning, scope, or effect. But where a person is ignorant or mistaken with respect to his own antecedent and existing private legal rights, interests, or estates, and enters into some transaction, the legal scope and operation of which he correctly apprehends and understands, for the purpose of affecting such assumed rights, interests, or estates, equity will grant its relief, defensive or aflirmative, treating the mistake as analogous to, if not identical with, a mistake of fact." 12. Mistake as to Law of Another Jurisdiction. Haven v. Foster, p Pick. (Mass.) iii. Craigie, a resident of Cambridge, Massachusetts, owned real FORMATION OF CONTRACTS I25 estate in New York. Upon his death, the property descended to his niece, the plaintiff, the daughter of his sister EUzabeth, and to his three nephews, one of whom was the defendant, sons of his sister Mary. All four effected a settlement under which each took one quarter of the proceeds, assuming that to be the proper division. However, under a New York statute, of which all parties were ignorant, the plaintiff was entitled to one half the proceeds, and she now sues to recover that share. Held, that a mistake as to the law of another state is a mistake of fact. Morton, J. The misapprehension or ignorance of the parties to this suit related to a statute of the state of New York. Is this, in the present question, to be considered fact or law ? The existence of any foreign law must be proved by evidence showing what it is. And there is no legal presumption that the law of a foreign state is the same as it is here. If a foreign law is unwritten, it may be proved by parol evidence; but if written, it must be proved by documentary evidence. The laws of other states in the Union are in these respects foreign laws. The courts of this state are not presumed to know the laws of other states or foreign nations, nor can they take judicial cog- nizance of them, til! they are legally proved before them. But when established by legal proof, they are to be construed by the same rules and to have the same effect upon all subjects coming within their operation, as the laws of this state. That the lexi loci rei sitae must govern the descent of real estate, is a principle of our law, with which everyone is presumed to be acquainted. But what the Icxi loci is, the court can only learn from proof adduced before them. The parties knew, in fact, that the intestate died seised of estate situated in the state of New York. They must be presumed to know that the distribution of that estate must be governed by the laws of New York. But are they bound, on their peril, to know what the provisions of these laws are ? If the judicial tribunals are not presumed to know, why should private citizens be? If they are to be made known to the court by proof, like other facts, why should not ignorance of them by private individuals have the same effect upon their acts as ignorance of other facts ? We are of opinion, that in relation to the question now before us, the statute of New York is to be considered as a fact. In the view which we have taken of this case, it appears that the defendant received a part of the consideration for which the plaintiff's estate was sold; that it was received by mistake; and that this mistake was in a matter of fact. He therefore has in his hands money which he is bound to repay, and there is no principle of law which interposes to prevent the recovery of it out of his hands. 126 COMMERCIAL LAW CASES B. Misrepresentation and Fraud. I. Innocent Misrepresentation in General. Johnston v. Bent, pj Ala. i6i. The plaintiff, Bent, sold organs to Grambs & Buchanan, upon Buchanan's representation that the firm had a certain excess of assets over liabilities, which Buchanan reasonably believed. Upon the firm becoming insolvent, Bent seeks to recover the goods, contending that the contract was voidable on account of the mis- representation. Held, that an innocent misrepresentation which does not amount to fraud will not justify rescission of the contract. Clapton, J. The authorities differ as to what conduct, misrepresentations or concealments constitute such a fraud as will effectively avoid a sale of goods on credit, so as to authorize the seller to reclaim them. Some hold that actual artifice, contrivance or false pretense, intended and operative to deceive, is essential ; others, that when the vendee induces the owner of goods to sell them on credit by concealing a positive intention not to pay for them, this is a fraud which entitles the owner to disaffirm the contract, and recover the goods from the purchaser, though there may be no fraudulent mis- representation, or actual artifice; and others, that the concealment from the seller of the buyer's insolvency, known to himself, and that he has no reasonable expectation of ability to pay for the goods, is not sufficient, but otherwise if there be actual deceit. As a general proposition, sustained by the preponderance of authority, where a party, being insolvent or financially embarrassed, induces the owner to sell him goods on credit, having an intent not to pay for them, by fraudulently concealing or misrepresenting his insolvency, he perpetrates a fraud which entitles the vendor to disaffirm the contract and recover the goods from him. The case made by the record does not come within either of these kinds or classes of frauds. No contrivance, or device intended to deceive, was used, and there was no fraudulent misrepresentation or concealment. We have mentioned the various statements of the doc- trine on this subject by the authorities for tlie puri)0se of showing that all of them rest on the fundamental principle, that the artifice, representation or concealment must be fraudulent in its nature and character, tliough the authorities differ as to what is sufticient. In order to justify a vendor in disaffirming a sale of goods as fraud- ulent, so as to authorize a recovery in detinue or trover against the purchaser, there must co-exist at the time of the purchase in- solvency, or failing circumstances, a pre-conceived design not to pay FORMATION OF CONTRACTS 127 for the goods, or its equivalent (no reasonable expectation of being able to pay for them), and a fraudulent concealment of, or fraudulent representation in reference to, one or more of these facts. From this statement of the rule it is manifest that intentional fraud in the misrepresentation or concealment is requisite. While an innocent misrepresentation of a material fact, induc- ing a contract, may be regarded in equity as constructive fraud, warranting its avoidance, this court has never declared that it con- stitutes what has been termed a legal fraud, sufficient, by the rules of the common law, to avoid the contract at law, so as to revest the property and authorize the seller to bring detinue for the recovery of the goods, or trover for their conversion. "As to the buyer's right to rescind a contract induced by false representation, the prin- ciples adopted and applied by the courts of equity had, before the judicial act, a much wider scope than those of the common law. At common law, except in the case of an innocent misrepresentation affecting the substance of the contract, the buyer's right to rescind was governed by the same considerations as would have entitled him to maintain an action of deceit ; but it seems clear that, to obtain relief in equity, it was sufficient for the buyer to prove that the misrepresentation was a material one inducing the contract, and was false in fact. The rights of the buyer and seller, in this respect, are correlative. The right to rescind does not arise at law, unless the representation be false to the knowledge of the party making it, or, at least, made by him recklessly, without reasonable grounds for believing it true, or under circumstances showing that he was re- gardless of its truth or falsity, in which case it cannot be regarded as innocently made. A representation, though false, which the party making believes, in good faith and on reasonable grounds, to be true, furnishes no justification for avoiding a sale at law, as obtained by fraud, whatever other remedies may be available." 2. Misrepresentation of a Tei^m of the Contract. Behn v. Burness. ^ B. & S. (Eng.) /ji. Behn agreed to charter his ship, the Montahan, to Burness for carriage of coal to Hong Kong. In the charter party, it was stated that the ship was "now in the port of Amsterdam," at which port the ship did not in fact arrive until several days later. Burness refused to accept the ship when ready to load, and con- tends that the representation was a condition of the contract. Held, that an innocent misrepresentation concerning an essen- tial term of the contract, is ground for rescission of the contract. Williams, J. The question in this case is, whether the statement in the charter party that the ship is "now in the port of Amsterdam," is a "repre- 128 COMMERCIAL LAW CASES sentation" or a "warranty," using the latter word as synonymous with "condition" ; in which sense it has been for many years under- stood with respect to policies of insurance and charter parties. It may be expedient to commence the consideration of this question by some examination into the nature of representations. Properly speaking, a representation is a statement, or assertion, made by one party to the other, before or at the time of the contract, of some matter or circumstance relating to it. Though it is sometimes contained in the written instrument, it is not an integral part of the contract ; and, consequently, the contract is not broken though the representation proves to be untrue; nor, (with the exception of the case of policies of insurance, at all events marine policies, which stand on a peculiar anomalous footing) is such untruth any cause of action, nor has it any efficacy whatever, unless the representation was made fraudulently, either by reason of its being made with a knowledge of its untruth, or by reason of its being made dishonestly, with a reckless ignorance whether it was true or untrue. If this be so, it is difficult to understand the distinction which is to be found in some of the treatises, and is in some degree per- haps sanctioned by judicial authority, that a representation, if it differs from the truth to an unreasonable extent, may affect the validity of the contract. Where, indeed, the misrepresentation is so gross as to amount to sufficient evidence of fraud, it is obvious that the contract would on that ground be voidable. The representations are not usually contained in the written instrument of contract, yet they sometimes are. But it is plain that their insertion therein cannot alter their nature. A question, however, may arise, whether a descriptive statement in the written instrument is a mere representation, or whether it is a substantive part of the contract. This is a question of construction which the court, and not the jury, must determine. If the court should come to the conclusion that such a statement by one party was intended to be a substantive part of his contract, and not a mere representa- tion, the often-discussed question may, of course, be raised, whether this part of the contract is a condition precedent, or only an inde- pendent agreement, a breach of which will not justify repudiation of the contract, but will only be a cause of action for a compensation in damages. In the construction of charter parties, this question has often been raised, with reference to stipulations that some future thing shall be done or shall happen, and has given rise to many nice distinctions. Thus, a statement that a vessel is to sail, or be ready to receive a cargo, on or before a given day, has been held to be a condition, while a stipulation that she sliall sail with all convenient speed, or within a reasonable time, has been held to be only an agreement. But with respect to statements in a contract descriptive of the subject-matter of it. or of some material incident thereof, the true doctrine, established by principle as well as authority, appears to be, generally speaking, that if such descriptive statement was intended to be a substantive part of the contract, it is to be regarded FORMATION OF CONTRACTS 1 29 as a warranty, that is to say, a condition on the failure or non- performance of which the other party may, if he is so minded, repu- diate the contract in toto, and so be relieved from performing his part of it, provided it has not been partially executed in his favor. If, indeed, he has received the whole or any substantial part of the consideration for the promise on his part, the warranty loses the character of a condition, or, to speak perhaps more properly, ceases to be available as a condition, and becomes a warranty in the nar- rower sense of the word — viz., a stipulation by way of agreement, for the breach of which a compensation must be sought in damages. The question on the present charter party is confined to the statement of a definite fact — the place of the ship at the date of the contract. Now the place of the ship at the date of the contract, where the ship is in foreign parts and is chartered to come to Eng- land, may be the only datum on which the charterer can found his calculations of the time of the ship's arriving at the port of load- ing. A statement is more or less important in proportion as the ob- ject of the contract more or less depends upon it. For most charters, considering winds, markets, and dependent contracts, the time of a ship's arrival to load is an essential fact, for the interest of the charterer. In the ordinary course of charters in general it would be so : the evidence for the defendant shows it to be actually so in this case. Then, if the statement of the place of the ship is a substantive part of the contract, it seems to us that we ought to hold it to be a condition. 3. Misrepresentation a Ground of Relief in Equity. Drake v. Fairmont Drain Tile & Brick Co. I2g Minn. 145. Drake was induced to subscribe to stock of the Tile Company, by a representation that the land of the company contained clay peculiarly adapted to the manufacture of tiles. This representa- tion was made by the officers of the company in the belief that it was true, but it was in fact false. Held, that equity will grant relief against a misrepresentation innocently made. Holt, J. We must determine whether one who has been induced by the innocent, but material, misrepresentations of another to enter a contract with the latter is without remedy. When the one deceived asks for no more than to return what he got, and get back what he parted with in the deal, it would seem, at first blush, that courts of justice, whether of law or equity, should be more favorably inclined to him than to the one who admits that he caused the deception, but offers the excuse that, when he was guilty thereof, he believed in good faith that he represented the facts truly. The 130 COMMERCIAL LAW CASES real injury to the one deceived is not lessened in the slightest by the knowledge, motives or state of mind of the one who made the misrepresentations. In an action in equity to rescind, the claim of a defendant that he made the false representations believing, in good faith, that they were true, is of no avail. To entitle a party to relief in equity by reason of fraudulent representations, it is not necessary that it be shown that the party making the false statements knew that they were false when he made them. They may have been inno- cently made, yet, if represented as positive statement of facts, as distinguished from mere opinions, and relied upon by the other party to his prejudice to the extent that he is led to act thereon, equity will afford relief. It can make no difference in this immediate connec- tion whether the representation as made was wittingly or unwittingly false and untrue. In such cases scienter is not of importance. Nearly all the cases upon which the petitioner relies are cases in equity of rescission or equitable estoppel in which bad faith is never indispensable as an element. We think the question has been determined in this state by Martin v. Hill, 41 Minn. 337, an action to rescind the purchase of shares of stock because induced by false representations. Therein Chief Justice Gilfillan states: "That one who, making a purchase, does not get by it substantially what, from the false representa- tions of the vendor as to material facts, he had a right to believe, and does believe he is purchasing, may have a rescission of the contract of purchase, if he is guilty of no laches, is beyond question. It would be the grossest injustice to hold a party to a purchase, where, solely through the fault of the other party, he gets only what he did not intend to buy. And to this right of rescission it is not essen- tial that the false representations were made with actual intent to defraud. The right is not based upon actual fraud, but on a mate- rial mistake of facts caused by the fault of the other party." The false representation having been made, it becomes immaterial, from a legal view, whether the defendant made it innocently or corruptly, if the plaintiff, relying thereon, was in fact misled to his injury. In either case it works a fraud on plaintiff. 4. Misrepresentation by One in Confidential Relationship. Butler V. Glcasun. 214 Mass. 248. Dr. Gleason, the plaintifif's physician, negligently injured her by causing a collision with the carriage he was driving. He pro- cured a release from her upon his assurance that she would be restored to health. She now sues for the negligence, attempting to set aside the release. Held, that wlien persons are in a confidential relationship, abuse of that relationship is to be inferred from misrepresentation. FORMATION OF CONTRACTS I3I Braley, J. The defendant maintains that the representation was merely an encouraging statement not intended as anything more than the expression of a hopeful expectation, which does not constitute action- able deceit. But the relation of a physician to his patient is neces- sarily one of trust and confidence, and commercial transactions be- tween them where fraud or undue influence is charged, are viewed by the courts with some jealousy, and are carefully scrutinized. If he solicits and procures a conveyance to himself of the property of his patient, whether by way of gift or of purchase, the burden, where the good faith of the transaction is attacked, rests upon him to show that the patient's confidence has not been abused, and that undue influence has not been exerted. It is not sufficient that the patient knew what he was doing, but the question is how the intention was produced. 5. Elements of Fraud. Southern Development Co. v. Silva. 12^ U. S. 24^. The Development Company boiight a mine from Silva, on his representations of value and opinion as to ore content. The representations turned out to be false, and the company asserts the right to have the sale set aside. Held, that such representations do not justify rescission of the contract on the ground of fraud. Lamar, J. The burden of proof is on the complainant ; and unless he brings evidence sufficient to overcome the natural presumption of fair dealing and honesty, a court of equity will not be justified in setting aside a contract on the ground of fraudulent representations. In order to establish a charge of this character the complainant must show by clear and decisive proof — First. That the defendant has made a representation in regard to a material fact ; Secondly. That such representation is false ; Thirdly. That such representation was not actually be- lieved by the defendant, on reasonable grounds, to be true ; Fourthly. That it was made with intent that it should be acted on; Fifthly. That it was acted on by complainant to his damage; and, Sixthly. That in so acting on it the complainant was igno- rant of its falsity, and reasonably believed it to be true. 132 COMMERCIAL LAW CASES The first of the foregoing requisites excludes such statements as consist merely in an expression of an opinion or judgment, hon- estly entertained; and, again, (excepting in peculiar cases,) it ex- cludes statements by the owner and vendor of property in respect to its value. Any statements that may have been made by Silva with refer- ence to the value of the mine, cannot, under the circumstances of this case, be considered an act of fraud on his part sufficient to warrant a court of equity in setting aside the contract herein. Yer- ington testifies that Silva said he had been asking $15,000 for the mine, but that he would take $12,500; while Forman says he does not recollect that Silva made any statement as to the value of the mine, but that he heard Silva say he thought it was worth $15,000. Such statements are not fraudulent in law, but are considered merely as trade talk, and mere matters of opinion, which is allowable. 6. Promissory Misrepresentation of Fact. Dawe V. Morris. 14P Mass. 188. Dawe was induced to enter into a contract to build thirty miles of the Florida Midland Railway, by false representations of Mor- ris that he had already purchased a certain quantity of rails at a certain price, and would sell them to Dawe at that price if Morris would make the contract. Dawe sues for deceit, a tort action which requires the same elements of fraud that justify rescission of a contract. Held, that there was no representation of a material existing fact. Devens, J. A representation, in order that, if material and false, it may form the ground of an action where one has been induced to act by reason thereof, should be one of some existing fact. A statement promissory in its character that one will thereafter sell goods at a particular price or time, will pay money, or do any similar thing, or any assurance as to what shall thereafter be done, or as to any further event, is not properly a representation, but a contract, for the violation of which a remedy is to be sought by action thereon. The statement by the defendant that he would thereafter sell rails at a particular price if the plaintiff would contract with the railway company was a promise, the breach of which has occasioned the injury to the plaintiff. The plaintiff contends that, even if this is so, the representa- tion that the defendant had thus purchased the rails at the price named was material and false; but if the allegation that the defend- ant had purchased the rails be separated from that of the promise to sell them to the plaintiff, it is seen at once to be quite unimportant FORMATION OF CONTRACTS I33 and immaterial. Had the defendant actually sold, or had he been ready to sell, the rails at the time and price he promised that he would, no action could have been maintained by reason of any false representation that he had purchased them when he made his prom- ise, and no possible injury could thereby have resulted to the plaintiff. In order that a false representation may form the foundation of an action of deceit, it must be as to some subject material to the contract itself. If it merely affects the probability that it will be kept, it is collateral to it. 7. Misrepresentation of Intention as Fact. Edging ton v. Fitzmaurice. L. R. 2Q Ch. D. (Eng.) 4^p. Edgington bought bonds of a company, relying upon a prospec- tus issued in its behalf by the defendants, which stated that the purpose of the issue was to develop the business. In fact, the issue was for the purpose of paying off existing obligations. This action is brought by Edgington for repayment of his money. Held, that a statement of intention is a representation of fact. Bowen, L. J. This is an action for deceit, in which the plaintiff complains that he was induced to take certain debentures by the misrepresenta- tions of the defendants, and that he sustained damage thereby. The loss which the plaintiff sustained is not disputed. In order to sus- tain his action he must first prove that there was a statement as to facts which was false ; and secondly, that it was false to the knowl- edge of the defendants, or that they made it not caring whether it was true or false. For it is immaterial whether they made the statement knowing it to be untrue, or recklessly, without caring whether it was true or not, because to make a statement recklessly for the purpose of influencing another person is dishonest. It is also clear that it is wholly immaterial with what object the lie is told. But it is material that the defendant should intend that it should be relied on by the person to whom he makes it. But, lastly, when you have proved that the statement was false, you must further show that the plaintiff has acted upon it and has sustained damage by so doing: you must show that the statement was either the sole cause of the plaintiff's act, or materially contributed to his so acting. The objects for which the money was to be raised were stated to be to complete the alterations and additions to the buildings, to purchase horses and vans, and to develop the supply of fish. A mere suggestion of possible purposes to which a portion of the money might be applied would not have formed a basis for an action of deceit. There must be a misstatement of an existing fact: but the state of a man's mind is as much a fact as the state of his 134 COMMERCIAL LAW CASES digestion. It is true that it is very difficult to prove what the state of a man's mind at a particular time is, but if it can be as- certained it is as much a fact as anything else. A misrepresenta- tion as to the state of a man's mind is, therefore, a misstatement of fact. Having applied as careful consideration to the evidence as I could, I have reluctantly come to the conclusion that the true objects of the defendants in raising the money were not those stated in the circular. I will not go through the evidence, but looking only to the cross-examination of the defendants, I am satisfied that the objects for which the loan was wanted were misstated by the defendants, I will not say knowingly, but so recklessly as to be fraudulent in the eye of the law. 8. Misrepresentation by Concealment. Stewart v. Wyoming Cattle Ranche Co. 128 U. S. s^3- The Ranche Company bought a herd of cattle from Stewart, who prevented the purchasing agent from making inquiries on his own account as to the truth of the Ranche Company's repre- sentation regarding the number of calves branded. These in- quiries would have revealed the fact that many of the cattle had recently been lost. The Ranche Company sues in tort for deceit, instead of attempting to rescind the contract. Held, that a misrepresentation may be made by concealment of a material fact, as well as by actual falsehood. Gray, J. It is true that silence as to a material fact is not necessarily, as matter of law, equivalent to a false representation. But mere silence is quite different from concealment ; a suppression of the truth may amount to a suggestion of falsehood ; and if, with intent to deceive, either party to a contract of sale conceals or suppresses a material fact, which he is in good faith bound to disclose, this is evidence of and equivalent to a false representation, because the concealment or suppression is in effect a representation that what is disclosed is the whole truth. The gist of the action is fraudulently producing a false impression upon the mind of the other party ; and if this result is accomplished, it is unimportant whether the means of accomplishing it are words or acts of the defendant, or his con- cealment or suppression of material facts not equally within the knowledge or reach of the plaintiff. In an action by the buyer of tobacco against the sellers to re- cover possession of it, there was evidence that before the sale the buyer, upon being asked by Girault, one of the sellers, whether there was any news which was calculated to enhance its price or value, was silent, although he had received news, which the seller had not, of the Treaty of Ghent. The court below, "there being no FORMATION OF CONTRACTS I35 evidence that the plaintiff had asserted or suggested anything to the said Girault, calculated to impose upon him with respect to the said news, and to induce him to think or believe that it did not exist," directed a verdict for the plaintiff. Upon a bill of ex- ceptions to that direction, this court, in an opinion delivered by- Chief Justice Marshall, held that while it could not be laid down, as a matter of law, that the intelligence of extrinsic circumstances which might influence the price of the commodity, and which was ex- clusively within the knowledge of the vendee, ought to have been communicated by him to the vendor, yet at the same time, each party must take care not to say or do anything tending to impose upon the other, and that the absolute instruction of the judge was erroneous, and the question whether any imposition was practised by the vendee upon the vendor ought to have been submitted to the jury. The instructions excepted to in the case at bar clearly af- firmed the same rule. The words and conduct relied on as amounting to false representations were those of the seller of a large herd of cattle ranging over an extensive territory, and related to the number of the herd itself, of which he had full knowledge, or means of information, not readily accessible to a purchaser coming from abroad; and the plaintiff introduced evidence tending to show that the defendant, while going over the ranch with the plaintift''s agent, made positive false representations as to the number of calves branded during the year, and also fraudulently prevented him from procuring other information as to the number of calves and conse- quently as to the number of cattle on the ranch. 9. Knowledge of Falsity. Litchfield v. Hutchinson. 117 Mass. 195. Hutchinson", in selling a horse, falsely represented to Litch- field, the buyer, that it was sound, when in fact it was not sound. Litchfield sues for deceit. Held, according to the Massachusetts rule, that a false state- ment as of one's own knowledge, of a fact susceptible of knowl- edge, is fraudulent. Morton, J. To sustain such an action it is necessary for the plaintiff to prove that the defendant made false representations, which were material, with a view to induce the plaintiff to purchase, and that the plaintiff was thereby induced to purchase. But it is not al- ways necessary to prove that the defendant knew that the facts stated by him were false. If he states, as of his own knowledge, material facts susceptible of knowledge, which are false, it is a fraud which renders him liable to the party who relies and acts upon the Statement as true, and it is no defense that he believed the facts I3t> COMMERCIAL LAW CASES to be true. The falsity and fraud consist in representing that he knows the facts to be true, of his own knowledge, when he has not such knowledge. If the defect in the horse was one which might have been known by reasonable examination, it was a matter susceptible of knowledge and a representation by the defendant made as of his own knowledge that such defect did not exist, would, if false, be a fraud for which he would be liable to the plaintiff, if made with a view to induce him to purchase, and if relied on by him. 10. Intention that Other Party Act. Wells V. Cook. 16 Oh. St. 67. Cook sold diseased sheep to Osmund Wells, representing them to be sound. Osmund, not knowing their condition, sold them to Orlando Wells, who made the original purchase for Osmund rely- ing on the truth of Cook's representations, and who now sues Cook. Held, that there was no intention that the plaintiff should act upon the representation. Brinkerhoff, C. J. If A fraudulently makes a representation which is false, and which he knows to be false, to B, meaning that B shall act upon it, and B, believing it to be true, does act upon it, and thereby suffers a damage, B may maintain an action on the case for deceit. We have been able to find no case which transcends the limit thus de- fined — no case which purports to hold, or is decided on the principle, that if A makes a false and fraudulent representation to B, mean- ing that C, and C alone, shall act upon it, and B thereupon assumes to act upon it, and suffers damage, B can maintain an action against A for the deceit. And as transactions of the kind last supposed must be of frequent occurrence in every commercial country, the fact that no such case can be found, is strong evidence that such a doctrine is unknown to the law. And the case last above supposed, is, really, the case before us. The representations complained of were not made to the plaintiff, meaning that the plaintiff should act upon them in any manner or matter affecting his own interests, but were made to the plaintiff, acting as the avowed agent of his brother, simply in a representative capacity, meaning that the brother should act upon them ; and the fact that the brother was meant to act upon them, through the plaintiff, as his agent, cannot, it seems to us, alter the case in any legal aspect. It was held, that a dealer in drugs and medicines, who carelessly labels a deadly poison as a harmless medicine, and sends it, so labelled, into market, is liable to all persons, who, without fault on their part, are injured by using it as such medicine in consequence of the FORMATION OF CONTRACTS 137 false label, and this, though the poisonous drug with such label may have passed through many intermediate sales before it reaches the hands of the person injured. In that case the article sold purported to be a medicine, was intended for retail in minute quantities, and to be administered in doses to a great number of persons. And the court regarded the accompanying label as a continuous representation to, and intended to be acted on by, whomsoever it might concern, that the article was what its label purported. In these particulars, and others, the case differs from that before us, and falls short of being conclusive of it, if the case be accepted as authority. The influences of human conduct, good or bad, are far-reaching, and are often seen and felt in consequences exceedingly remote, but uncertain and complicated. It is simply impossible that munic- ipal law should take cognizance of all these consequences. From necessity, a large share of them must be left to the jurisdiction of public opinion, individual conscience, and, finally, to the retribu- tions of another world. There must, somewhere, be fixed a limit between the near and remote, direct and indirect consequences, beyond which the law will not take cognizance of them. And in this case we are satisfied that one of the prescribed limits is this — that the false and fraudulent representations must have been intended to be acted on, in a matter affecting himself, by the party who seeks redress for consequential injuries. If this limit is to be ex- tended, it must be the work of the legislature. II. Action by Other Party. Mabardy v. McHugh. 202 Mass. 148. The plaintififs went upon land sold them by the defendant, who pointed out the true boundaries, but stated that the acreage was much larger than was actually the case. The plaintiffs affirmed the sale, but sue in tort for deceit. Held, that a misrepresentation of acreage of property is not a misrepresentation of fact which justifies avoidance of the contract. Ritgg, J. If the point were now presented for the first time, it is possi- ble that we might be convinced by the argument of the plaintiffs and the great weight of persuasive authority in its support. But there is something to be said in support of two earlier decisions now questioned. A purchase and a sale of real estate is a transaction of importance, and cannot be treated as entered into lightly. Peo- ple must use their own faculties for their protection and informa- tion, and cannot assume that the law will relieve them from the natural effects of their heedlessness, or take better care of their interests than they themselves do. Thrift, foresight and self-reliance would be undermined if it was the policy of the law to attempt to 138 COMMERCIAL LAW CASES afford relief for mere want of sagacity. It is an ancient and widely, if not universally, accepted principle of the law of deceit that, where representations are made respecting the subject as to which the complaining party has at hand reasonably available means for ascer- taining the truth and the matter is open to inspection, if, without being fraudulently diverted therefrom, he does not take advantage of this opportunity, he cannot be heard to impeach the transaction on the ground of the falsehoods of the other parties. This rule in its general statement applies to such a case as that before us. It is easy for one disappointed in the fruits of a trade to imagine, and perhaps persuade himself, that the cause of his loss is the deceit of the other party, rather than his own want of judgment. It is highly desirable that laws for conduct in ordinary affairs, in themselves easy of comprehension and memory, when once estab- lished, should remain fast. The doctrine of stare decisis is as salutary as it is well recognized. 12. Damage. Randall v. Hazelton. 12 Allen {Mass.) 412. Randall owned property mortgaged to an insurance company, which, after the mortgage had become overdue, promised to notify Randall in ample time when it wanted payment. The defendants obtained an assignment of the mortgage by falsely representing to the insurance company that Randall so desired. They then foreclosed. Randall sues for their false representation to the company. Held, that as the plaintiff was bound to pay the mortgage, he was not damaged. Colt, J. The question raised by the demurrer is whether, upon the facts charged, the action can be maintained. It is an ancient and well established legal principle that fraud without damage or damage without fraud gives no cause of action ; yet when the two do concur, there an action lieth. Actions like the one under consideration are all based upon this proposition ; but it cannot safely be applied as a test by which to determine whether the facts in any case con- stitute an actionable wrong, without keeping in mind the meaning which the law, by a series of judicial decisions, has attached to the terms used. It is well settled that every falsehood is not necessarily a legal fraud or false representation. It is said that a false rep- resentation is an affirmation of that which the party knows to be false or does not know to be true, to another's loss or his own gain. So in reference to the term damage, the law is that it must be a loss brought upon the party complaining by a violation of some legal ri^iit, or it will be considered as merely chunnnm absque injuria. FORMATION OF CONTRACTS 139 There is a large class of moral rights and duties, sometimes called imperfect rights and obligations, which the law does not attempt to enforce or protect. The refusal or discontinuance of a favor gives no cause of action. If one trusts to a mere gratuitous promise of favor from another and is disappointed, the law will not protect him from the consequence of his undue confidence, nor encourage care- lessness or want of prudence in affairs. Damages can never be recovered where they result from a lawful act of the defendant. The exercise of a right conferred by a valid contract, in the manner provided by its terms, cannot be the ground of an action. The law will not inquire into the motives of the party exercising such right, however unfriendly and selfish. The trouble and expense and risk of loss ought to and must be presumed to have been contemplated when the contract was entered into. The foreclosure of a mortgage under a power of sale, for example, may be made at such time and under such circumstances as to cause great distress and sacrifice to the mortgagor; but, whatever the motive of the mortgagee, no remedy is afforded for his oppressive conduct, if the requirements of the contract have been fulfilled. But a more important consideration in this connection is, that the damage which this doctrine contemplates must not only be caused by the fraud and misconduct of the defendant, but it must be the direct and immediate consequence of the wrongful act. The law looks to the proximate and not the remote cause of the injury. "It were infinite," says Lord Bacon, "to consider the causes of causes and their impulsion of each other; therefore it contenteth itself with the immediate cause, and judgeth of acts by that, without looking to any further degree." This is the only practical rule which, in view of the complication which surrounds this doctrine of causation, can be adopted in the administration of justice by human tribunals. Where the fraud and damage sustain this intimate relation of proximate cause and effect, and not otherwise, they are said to concur in the sense of the proposition above stated. Applying the doctrine thus explained to the plaintiff's case, we are of opinion that he sets forth no legal cause of action. The declaration shows no consideration for the alleged promise of the mortgagees to inform the plaintiff, in case the amount of the debt should be wanted by them. It was an agreement not legally binding upon them. There was nothing in it to prevent them in law from proceeding to do all the acts in relation to advertising and selling the property which were done by the defendants; nor did it prevent them from assigning the mortgage. It cannot be said to be an inva- sion of any legal right for the defendants to deprive the plaintiff even by falsehood of the benefit of this gratuitous undertaking. This specific act of obtaining the assignment in the manner stated in itself produced no direct and immediate damage to the plaintiff. The damage resulted solely from the foreclosure and forced sale of the premises, and would have been no more and no less if the mortgage had not been assigned, and the mortgagees had pursued pre- 140 COMMERCIAL LAW CASES cisely the course charged upon the defendants in regard to the sale. It was undoubtedly a necessary step in order that the defendants might practise the alleged oppression ; but it was not the immediate cause of the injury. The substantial, efficient and immediate cause of the loss to the plaintiff was the foreclosure and sale. And we are not permitted to go behind and inquire into the antecedent causes, near or remote, 13. Effect of Fraud. Rowley v. Bigelow. 12 Pick. (Mass.) jo6. Rowley sold corn to Martin, who fraudulently obtained it while he was insolvent without intending to pay for it. Martin sold and shipped the goods to the defendant, Bigelow. Rowley now seeks to set aside the sale. Held, that the effect of a sale of goods procured by fraud is to vest a voidable title in the vendee, which becomes a valid title in an innocent purchaser for value from the fraudulent vendee. Shaw, C. J. This contract and delivery were sufficient in law to vest the property in Martin, and make a good title, if not tainted by fraud. But being tainted by fraud, as between the immediate parties, the sale was voidable, and the vendors might avoid it and reclaim their property. But it depended upon them to avoid it or not, at their election. They might treat the sale as a nullity and reclaim their goods ; or affirm it and claim the price. And cases may be imagined, where the vendor, notwithstanding such fraud practised on him, might, in consequence of obtaining security by attachment or other- wise, prefer to affirm the sale. The consequence thereof is, that such sale is voidable, but not absolutely void. The consent of the vendor is given to the transfer, but that consent being induced by false and fraudulent representations, it is contrary to justice and right that the vendor should suffer by it, or that the fraudulent pur- chaser should avail himself of it; and upon this ground, and for the benefit of the vendor alone, the law allows him to avoid it. The difference between the case of property thus obtained, and property obtained by felony, is obvious. In the latter case, no right either of property or possession is acquired and the felon can con- vey none. We take the rule to be well settled, that where there is a con- tract of sale, and an actual delivery pursuant to it, a title to the property passes, but voidable and defeasible as between the vendor and vendee, if obtained by false and fraudulent representations. The vendor therefore can reclaim his ])roi)erty as against the vendee or any other person claiming under him and standing ui)on his title, but not against a buna fide purchaser without notice of the fraud. FORMATION OF CONTRACTS I4I The ground of exception in favor of the latter is, that he purchased of one having a possession under a contract of sale, and with a title to the property, though defeasible and voidable on the ground of fraud; but as the second purchaser takes without fraud and without notice of the fraud of the first purchaser, he takes a title freed from the taint of fraud. C. Duress and Undue Influence. I. What Constitutes Duress, Galusha v. Sherman. lo^ Wis. 26^. Sherman bought tainted meat from Galusha and was poisoned. His attorney forced Galusha and his wife to mortgage their farm for $1,000 in order to settle the claim of Sherman, by threatening to prosecute Galusha criminally. The attorney accompanied these threats with demonstrations of violence towards Galusha which put him, a man of somewhat w^eak character, in fear. Held, that a contract entered into under duress is voidable. Marshall, J. Anciently, duress in law by putting in fear could exist only where there was such a threat of danger to the object of it as was deemed sufficient to deprive a constant or courageous man of his free will, and the circumstances requisite to that condition were distinctly fixed by law ; that is to say, the resisting power which every person was bound to exercise for his own protection was measured, not by the standard of the individual affected, but by the standard of a man of courage ; and those things which would overcome a person, assuming that he was a prudent and constant man, were not left to be determined as facts in the particular case, but were a part of the law itself. The theories advanced by appellants' counsel to support the claim that the finding as regards respondent suffering from wrong- ful deprivation of his will power at the time he made the papers in controversy is not warranted by the evidence are [now] unsound. Those theories are : ( i ) Oppression does not constitute duress unless sufficient to overcome the will of a person of ordinary courage ; (2) a threat to arrest a person for an offense of which he is not guilty does not constitute duress; (3) a threat to arrest a person on a charge that does not constitute a criminal offense does not con- stitute duress. All of such theories have some support, but all are out of harmony with the real foundation principle of duress, which is that it is the condition of the mind of the wronged person at the time of the act sought to be avoided, not the means by which such condition was produced. Such theories are also out of harmony with 142 COMMERCIAL LAW CASES the theory upon which duress of a contracting party renders the con- tract voidable as to him, which is that the free meeting and blend- ing of the minds of contracting parties are requisite to a binding contract. Early in the development of the law, the legal standard of re- sistance that a person was bound to exercise for his own protection was changed from that of a constant or courageous man to that of a person of ordinary firmness. That one should be led astray on the question of there being a legal standard of resisting power, by which the sufficiency of the oppressive conduct claimed to have produced duress in a given case must be tested, is most natural in view of the number and character of the authorities to that effect. Sufficient has been said to show the conflict that exists on the subject under discussion. Under [the more advanced doctrine], ad- vantages obtained by what was considered duress by old common- law rules, — or such rules as changed in respect to the standard of resisting power which the threatened person is legally bound to exer- cise for his own protection or be remediless at law for the conse- quences, and in respect to the nature of the threats deemed legally sufficient to overcome a person of the legal standard of resisting power, — and also advantages wrongfully obtained, — though not by duress in law and remediable as such, but remediable in equity upon the ground of unjust compulsion, — are now practically in one class. Duress, in its broad sense, now includes all instances where a condition of mind of a person, caused by fear of personal injury or loss of limb, or injury to such person's property, wife, child, or husband, is produced by the wrongful conduct of another, rendering such person incompetent to contract with the exercise of his free will power, whether formerly relievable at law on the ground of duress or in equity on the ground of wrongful compulsion. The making of a contract requires the free exercise of the will power of the contracting parties, and the free meeting and blending of their minds. In the absence of that, the essential of a contract is wanting; and if such absence be produced by the wrongful conduct of one party to the transaction, or conduct for which he is respon- sible, whereby the other party, for the time being, through fear, is bereft of his free will power, for the purpose of obtaining the con- tract, and it is thereby obtained, such contract may be avoided on the ground of duress. There is no legal standard of resistance which a party so circumstanced must exercise at his peril to protect him- self. The question in each case is, Was the alleged injured person, by being put in fear by the other party to the transaction for the purpose of obtaining an advantage over him, deprived of the free exercise of his will power, and was such advantage thereby obtained? If the proposition be determined in the affirmative, no matter what the nature of the threatened injury to such person, or his property, or the jjerson or liberty of his wife or child, the advantage thereby obtained cannot be retained. The idea is that what constitutes duress FORMATION OF CONTRACTS I43 is wholly a matter of law and is simply the deprivation by one person of the will power of another by putting such other in fear for the purpose of obtaining, by that means, some valuable advantage of him. The means by which that condition of mind is produced are matters of fact, and whether such condition was in fact produced is usually wholly matter of fact, though of course the means may be so op- pressive as to render the result an inference of law. From the foregoing it will be seen that the true doctrine of duress, at the present day, both in this country and England, is that a contract obtained by so oppressing a person by threats regarding his personal safety or liberty, or that of his property, or of a mem- ber of his family, as to deprive him of the free exercise of his will and prevent the meeting of minds necessary to a valid contract, may be avoided on the ground of duress, whether the oppression causing the incompetence to contract be produced by what was deemed duress formerly, and relievable at law as such, or wrongful compulsion remediable by an appeal to a court of equity. The law no longer allows a person to enjoy, without disturbance, the fruits of his iniquity because his victim was not a person of ordinary courage ; and no longer gauges the acts that shall be held legally sufficient to produce duress by an arbitrary standard, but holds him who, by putting another in fear, shall have produced in him a state of mental incompetency to contract, and then takes advantage of such condition, no matter by what means such fear be caused, liable at the option of such other to make restitution to him of everything of value thereby taken from him. 2. Threat of Lawful Act. Silsbee v. Webber. lyi Mass. j/8. Webber accused Mrs. Silsbee's son of stealing money from him, and forced the son to confess and to promise security for $1500. His mother, the plaintiff, met Webber, who threatened to tell her husband the facts if she did not assign to him her share in her father's estate to secure the son's debt. She did this for the reason that her husband was then on the verge of insanity and she feared that knowledge of the situation would drive him insane. She now seeks to recover the money paid to Webber. Held, that duress may consist of threats of a lawful act. Holmes, J. The strongest objection to holding the defendant's alleged action illegal duress is, that, if he had done what he threatened, it would not have been an actionable wrong. In general, duress going to motives consists in the threat of illegal acts. Ordinarily, what you may do without liability, you may threaten to do without liability. But this is not a question of liability for threats as a cause of action, 144 COMMERCIAL LAW CASES and we may leave undecided the question whether, apart from spe- cial justification, deliberately and with foresight of the consequences, to tell a man what you believe will drive him mad is actionable if it has the expected effect. If it should be held not to be, contrary to the intimations in the cases cited, it would be only on the ground that a different rule was unsafe in the practical administration of justice. If the law were an ideally perfect instrument, it would give damages for such a case as readily as for a battery. When it comes to the collateral question of obtaining a contract by threats, it does not follow that, because you cannot be made to answer for the act, you may use the threat. In the case of the threat there are no difficulties of proof, and the relation of cause and effect is as easily shown as when the threat is of an assault. If a contract is extorted by brutal and wicked means, and a means which owes its immunity, if it have immunity, solely to the law's distrust of its own powers of investigation, in our opinion the contract may be avoided by the party to whom the undue influence has been applied. Some of the cases go further, and allow to be avoided contracts obtained by the threat of unquestionably lawful acts. 3. Threat of Lawful Imprisonment. Morse v. Woodworth. i^j Mass. ^jj. Morse sues to recover certain notes given by him to Wood- worth. Morse, a bookkeeper for Woodworth, was short in his accounts, and gave the notes in suit to Woodworth in order to avoid prosecution. He now attempts to avoid this transaction on the ground of duress. Held, that a threat of arrest and imprisonment for an offense of which a party is guilty, may constitute duress. Knowlton, J. To set aside a contract for duress it must be shown that the will of one of the parties was overcome, and that he was thus sub- jected to the power of another, and that the means used to induce him to act were of such a kind as would overcome the mind and will of an ordinary person. It has often been held that threats of civil suits and of ordinary proceedings against property are not enough, because ordinary persons do not cease to act voluntarily on account of such threats. But threats of imprisonment may be so violent and forceful as to have that effect. It must also be shown that the other party to the contract is not, through ignorance of the duress or for any other reason, in a position which entitles him to take advantage of a contract made under constraint without voluntary as- sent to it. If lie knows that means have been used to overcome the will of him with whom he is dealing, so that he is to obtain a for- mal agreement which is not a real agreement, it is against equity FORMATION OF CONTRACTS 145 and good conscience for him to become a party to the contract, and it is unlawful for him to attempt to gain a benefit from such an influence improperly exerted. A contract obtained by duress of unlawful imprisonment is voidable. And if the imprisonment is under legal process in regular form, it is nevertheless unlawful as against one who procured it improperly for the purpose of obtaining the execution of a contract; and a contract obtained by means of it is voidable for duress. So it has been said that imprisonment under legal process issued for a just cause is duress that will avoid a contract. It has sometimes been held that threats of imprisonment, to constitute duress, must be of unlawful imprisonment. But the ques- tion is whether the threat is of imprisonment which will be unlaw- ful in reference to the conduct of the threatener who is seeking to obtain a contract by his threat. Imprisonment that is suffered through the execution of a threat which was made for the purpose of forcing a guilty person to enter into a contract may be lawful as against the authorities and the public, but unlawful as against the threatener, when considered in reference to his effort to use for his private benefit processes provided for the protection of the public and the punishment of crime. The question in every such case is, whether his liability to imprisonment was used against him, by way of a threat, to force a settlement. If so, the use was improper and unlawful, and if the threats were such as would naturally overcome the mind and will of an ordinary man, and if they overcome his, he may avoid the settlement. 4. Duress of Goods. Hackley v. Headley. 45 Mich. 569. Headley sues Hackley and McGordon for compensation for logs which he had cut, hauled, and delivered, under a contract with them. A dispute had arisen between the parties over the amount due, and Hackley had given Headley a note for $4,000, which was less than Hackley admitted was due, taking a receipt in full settlement. Headley now claims that he is entitled to more money, as the settlement was forced upon him when he was badly in need of money, and so was made under duress. Held, that this was not a case of duress of goods, which neces- sarily involves an illegal exaction to which the other party is forced to submit in order to obtain them. Cooley, J. Duress exists when one by the unlawful act of another is in- duced to make a contract or perform some act under circumstances which deprive him of the exercise of free will. It is commonly 146 COMMERCIAL LAW CASES said to be of either the person or the goods of the party. Duress of the person is either by imprisonment, or by threats, or by an exhibition of force which apparently cannot be resisted. It is not pretended that duress of the person existed in this case ; it is if anything duress of goods, or at least of that nature, and properly enough classed with duress of goods. Duress of goods may exist when one is compelled to submit to an illegal exaction in order to obtain them from one who has them in possession but refuses to surrender them unless the exaction is submitted to. The case of Vyne v. Glenn, 41 Mich. 112, differs essentially from this. There was not a simple withholding of moneys in that case. The decision was made upon facts found by referees who reported that the settlement upon which the defendant relied was made at Chicago, which was a long distance from plaintiff's home and place of business; that the defendant forced the plaintiff into the settlement against his will, by taking advantage of his pecuniary necessities, by informing plaintiff that he had taken steps to stop the payment of money due to the plaintiff from other parties, and that he had stopped the payment of a part of such moneys ; that defendant knew the necessities and financial embarrassments in which the plaintiff was involved, and knew that if he failed to get the money so due to him he would be ruined financially; that plaintiff consented to such settlement only in order to get the money due to him, as aforesaid, and the payment of which was stopped by defendant, and which he must have to save him from financial ruin. The report, therefore, showed the same financial embarrassment and the same great need of money which is claimed existed in this case, and the same withholding of moneys lawfully due, but it showed over and above all that an unlawful interference by defendant between the plaintiff and other debtors, by means of which he had stopped the payment to plaintiff of sums due to him from such other debtors. It was this keeping of other moneys from the plaintift''s hands, and not the refusal by defendant to pay his own debt, which was the ruling fact in that case, and which was equivalent, in our opinion, to duress of goods. 5. Ratification of Contract Obtained by Duress. The Oregon Pacific Railroad Co. v. Forrest. 128 N. Y. 83. The Railroad Company and Garrison entered into a contract, whereby Garrison aji^reed to furnish steel rails to the railroad. He took bonds of tlie Company as security. Subsecjuently, the parties annulled the contract, and upon Garrison's refusal other- wise to redeliver any of the bonds held by him, the Company agreed that he might retain one hundred bonds, to which he would have been entitled had the contract been performed. The Company now seeks, several years later, to recover the bonds from Garrison's FORMATION OF CONTRACTS I47 executors on the ground that Garrison's refusal to deliver other securities unless he might retain those in suit, constituted duress of goods. Held, that a contract originally voidable because of duress may be ratified. Earl, J. The facts constituting the duress were immediately known to the plaintifif and it was its duty to act promptly in repudiating the agreement which it had been induced to enter into by duress. In- stead of so doing it never repudiated the agreement until it com- menced this action, more than six years after the agreement of August thirteenth had been entered into and the bonds had been surrendered to Garrison ; and during all that time down to the com- mencement of this action, it paid the semi-annual interest coupons upon the bonds. Even if it was induced to pay the interest during the life-time of Garrison, by promises on his part to extend financial aid in other ways to the plaintiff, the conduct of the plaintiff was, nevertheless, a complete and express ratification of the agreement of August thirteenth. If it surrendered its right to repudiate that agreement on account of duress it should have taken its remedy by holding Garrison to the agreement he made with it for financial aid; but it continued to pay the interest upon these bonds for several years after Garrison had failed to keep the alleged promise he had made for financial aid to the plaintiff and after all efforts and negotiations in that direction had ceased. During several years prior to the commencement of this action the payment of interest upon these bonds was entirely voluntary. It thus emphatically and repeatedly acknowledged the defendant's title to the bonds, and when this action was commenced it was too late to claim that they had been obtained by duress. One entitled to repudiate a contract on the ground of duress should, like one who attempts to repudiate a contract on the ground of fraud, act promptly. 6. Undue Influence. V albert v. V albert. 282 III. 41^. Francois Valbert executed deeds to two of his children during his lifetime for the purpose of equalizing a division of his prop- erty between them and the others. He afterwards made a codicil to his will expressing his intention to leave his property equally among his children. Francois was eighty-four years old at the time, was childish, and his actions were erratic. Franklin Valbert, another son, seeks to set aside these deeds on the ground of undue influence by Jay Valbert, one of the children to whom the property was conveyed. 148 COMMERCIAL LAW CASES Held, that in order to constitute undue influence, there must be such abuse of confidence that the grantor is deprived of his free agency. Carter, C. J. Undue influence is a species of constructive fraud which the courts will not undertake to define by definite words or rules. In- fluence, to render a conveyance inoperative, must be of such a na- ture as to deprive the grantor of his free agency. Undue influence means a wrongful influence, — such an influence as makes the grantor or testator, in the instrument executed, speak the will of another and not his own. It is not sufficient to avoid a will or deed that its execution was procured by honest argument, untainted with fraud. Proper and legitimate influence, honestly acquired, is not the exercise of undue influence. Such influence must be exercised and operate at the time of the transaction sought to be impeached. Something more than suspicion is required to prove the allegation of fraud. The evidence must be clear and cogent and must leave the mind well satisfied that the allegation is true. None of the defendants in error were present at the time of the execution of these deeds, and there is not the slightest evidence that tends to prove that they were exercising any undue influence on the mind of the grantor at that time. Counsel for plaintiff in error argue that a fiduciary relation existed between the defendant in error Jay Valbert and his father, and that therefore the deeds were prima facie void. Conceding for the purpose of this case that such a relation did exist between the son and the father, the execution of deeds under such circumstances will be held valid if it appears it was entered into with full knowl- edge of the nature and effect of the deeds and resulted from the de- liberate, voluntary and intelligent desire of both and not through influence engendered by their relationship. The evidence, as we have already said, shows conclusively that the execution of these deeds was the result of the voluntary wish of the grantor, and not because of any undue influence exercised upon him by the son or any other person connected with the transaction. 7. Effect of Undue Influence. Bensel v. Anderson. 85 N. J. E. jp/. Bensel, a man ninety years of age, was induced by his son-in- law, Kline, to indorse notes jointly with Anderson, with wIkmii Kline was engaged in business. Successive notes were so indorsed for the accommodation of Kline and Anderson until the business failed and judgments were recovered by the bank upon several of the notes. This action is brought by Bensel to avoid the effect of these indorsements, which he contends were secured by the un- due influence of Kline. FORMATION OF CONTRACTS I49 Held, that agreements secured by undue influence may be avoided Ijoth as to the person with whom they are made, and as to third persons for whose benefit they are made. Backcs, V. C. The determination of the issue, if it were confined to Bensel and KHne, would involve no difficulty in condemning the transaction as fraudulent. For here we have a tottering old man, in years far beyond the allotted time, dependent for his temporal wants entirely upon his children, and in a large measure upon his son-in-law, a member of his household, in whom he undoubtedly reposed great confidence, involving himself, at the latter's instance, in obliga- tions which in nowise could have benefited him, and if permitted to stand would result in sweeping away his meagre competence, leaving him impoverished, a subject of charity, or, possibly, a public charge. From such calamity, equity in a measure shields him. In all transactions between parties occupying relations, whether legal, natural or conventional in their origin, in which confidence is nat- urally inspired, or, in fact, reasonably exists, the burden of proof is thrown upon the person in whom the confidence is reposed, and who has acquired an advantage, to show affirmatively not only that no deception was practiced therein, no undue influence used, and that all was fair, open and voluntary, but that it was well under- stood. Where parties hold positions in which one is more or less dependent upon the other, courts of equity hold that the weaker party must be protected, and they set aside his gifts if he had not proper advice, independently of the other. The presumption against the validity of the gift is not limited to those instances where the relation of parent and child, guardian and ward, or husband and wife exists, but in every instance where the relation between the donor and donee is one in which the latter has acquired a dominant position. And where one so situated is despoiled of all his property, a rule putting an additional burden upon the bene- ficiary is brought into play. Mr. Justice Garrison explains it with marked clarity thus : "That a person already aged or infirm, or otherwise dependent, should give to the one upon whom he thus de- pends practically his whole living beyond recall, and at the very time when apparently he had most need to retain it, raises in the mind of a chancellor the presumption that the donor may net have appreciated the irrevocable character of his act or that he did not foresee its legal consequences to himself. This presumption of ap- parent improvidence gives rise to [a] special rule which may be called the rule of independent advice. By force of this rule, if a person upon whom another has in fact come to be dependent accepts a gift from such dependent person of all his or her estate, a court of equity, moved by the apparent improvidence of such a gift, casts upon the donee the burden of showing that the donor had the benefit of proper independent advice. Proper independent advice in this 150 COMMERCIAL LAW CASES connection means that the donor had the preliminary benefit of conferring fully and privately upon the subject of his intended gift with a person who was not only competent to inform him correctly as to its legal effect, but who was furthermore so disassociated from the interests of the donee as to be in a position to advise with the donor impartially and confidently as to the consequences to himself of his proposed benefaction." These beneficent rules of equity have been chiefly employed in cases of outright gifts, but their underlying principles call for their application as vigorously, in circumstances where the subject, by enmeshing and entangling himself, has his property taken from him by legal process, as where he gives it away. The result is the same. And, when inspired by confidential relation, the presumption of undue influence is as much excited in the former as in the latter instance, and the rules applicable to the one are as fitting to the other. The important inquiry in the case then is, is the vice in Ben- sel's undertaking — the constructive fraud — chargeable to Anderson? Courts of equity have been prone to disallow contracts in favor of third parties, where advantage is derived through confidential re- lations, and the opinions plainly indicate how far the beneficiary must go to overcome impeachment on this ground. The authorities, in instances of duress by parents, where parental influence was pre- sumed to prevail after the child had arrived at legal age, are especially apposite, inasmuch as the complainant's advanced years and dependency put Kline in the ascendant position. Other cases where trust and confidence subsisted are also in point. In Berdoe V. Dawson, 34 Beav. 603, two sons mortgaged their estate to secure a debt of the father. They were the age of twenty-five and twenty- three, respectively, and lived with the father. In setting aside the mortgages, the master of the rolls, Sir John Romilly, said that, "When a person executes a deed by which his father, or any other person nearly related and connected with him, or who, from any other cause, has necessarily a considerable influence over him is benefited, then the person who claims the benefit of that deed is bound to establish two things — he is bound to establish, in the first place, that the person who executed the deed knew what he was about when he executed it ; and, in the next place, he is bound to show that it was made of his own free will, and unbiased by and without being subject to that influence which he could not easily resist. The cases upon the subject are exceedingly strong in showing that this sort of security cannot be relied upon." FORMATION OF CONTRACTS I5I VI. LEGALITY OF SUBJECT MATTER. An agreement does not result in a valid contract if its object is illegal. Such agreements may conteir.plate a violation of positive law or a refusal to do acts required by law. They may involve the commission of a crime or the doing of a civil wrong. They make a contract void, not voidable. A distinction exists between agreements to violate statutes enacted for the benefit of the public and agreements to violate statutes enacted for revenue purposes or for direction as to the conduct of business. The first are void, but the second are valid. It is a matter of considerable nicety to draw the line between these two classes of cases. In general, statutes regulating trade or business, and traffic in intoxicating liquors, as v/ell as statutes prohibiting the making of contracts on Sunday, the taking of usury, gaming and lotteries are held to be for the benefit of the public. Contracts made in violation thereof are void. Sunday contracts are illegal if the entire contract is completed on Sunday. If preliminary terms are agreed upon on Sunday but the contract is not completed before the following day, the contract is valid. Some states allow ratification of a contract made on Sunday, though the majority do not. If goods are de- livered pursuant to a contract made on Sunday, the seller may recover their value on the theory of an implied contract, but may not sue on the contract itself. Usury consists of taking a greater amount of interest than the law allows. In most jurisdictions, the efifect is to prevent the recovery of the illegal interest merely, though in some states the entire transaction is void. Gaming contracts include wagers, bets, card playing for money and engaging in sports for a stake. A lottery is the payment of money for a consideration which depends upon chance. Stock transactions which do not involve an actual purchase or sale of securities are held to be illegal contracts of this nature. Most states have passed statutes regulating such contracts. Other contracts are void as against public policy because of their mischievous tendency. They may or may not be expressly prohibited by common law or by statute. In general, any agree- ment of an immoral or fraudulent tendency when the public is involved, or of a sort calculated to injure the public welfare, comes under this heading. Such agreements include contracts in- juring the public service, perverting the course of justice, ousting 152 COMMERCIAL LAW CASES the courts of jurisdiction, abusing legal process, affecting freedom of marriage, together with contracts against good morals, contracts intended to secure secret advantages in compositions with creditors, and contracts irj restraint of trade. When a contract is illegal in part only, and that part may be separated from the rest, the valid portion may be enforced. If, however, the illegal portion goes to the root of the whole matter, the contract is void. In an executory contract which is illegal, a person who has paid money under it may withdravv^ and recover back the money until such time as the contract is partly executed. Courts allow this opportunity to withdraw on the ground that there exists a right to recede so long as the party may repent without having been seriously tainted by the illegality. I. Effect of Illegality. Atwood V. Fiske. loi Mass. jdj. Joseph Atwood, a bookkeeper in the employ of the defendants, was charged by them with embezzlement. The plaintiffs gave two mortgages and notes, now overdue, to the defendants, in considera- tion of their forbearance to prosecute Joseph Atwood, and they now bring bills in equity to secure cancellation of the notes and mortgages on the ground that the contract was illegal. Held, that the court will not interfere on behalf of either party to an illegal contract. Ames, J. A note, given in consideration of a composition of felony, or of a promise not to prosecute for a crime of a lower degree than a felony, is illegal, and cannot be enforced by the promisee against the promisor. And it makes no difference that, of various elements making up the entire consideration, a part, and even the larger part, was legal and valid. If part of the consideration was illegal, the effect upon the note would be the same as if the whole were illegal. But it has also long been settled that if the law will not aid either party to an illegal contract to enforce it against the other, neither will it relieve a party to such a contract who has actually fulfilled it, and who seeks to reclaim his money or whatever article of property he may have applied to such a purpose. The meaning of the familiar maxim, in pari delicto potior est conditio defcndcntis, is simply that the law leaves the parties exactly where they stand; not that it pre- fers the defendant to the plaintiff, but that it will not recognize a right of action, founded on the illegal contract, in favor of either party against the other. They must settle their own questions in such cases without the aid of the courts. In the somewhat quaint language FORMATION OF CONTRACTS 153 of Lord Chief Justice Wilmot, "all writers upon our law agree in this; no polluted hand shall touch the pure fountains of justice. Whoever is a party to an unlawful contract, if he hath once paid the money stipulated to be paid in pursuance thereof, he shall not have the help of a court to fetch it back again ; you shall not have a right of action when you come into a court of justice in this unclean manner to recover it back." In this respect the rule in equity is the same as at law. Equity follows the rule of the law, and will not interfere for the benefit of one such party against a particeps criminis. The sup- pression of illegal contracts is far more likely in general to be accom- plished, by leaving the parties without remedy against each other. And so the modern doctrine is established, that relief is not granted where both parties are truly in pari delicto. 2. Agreement to Commit a Crime. Arnold V. Clifford. 2 Sumner (C. C. JJ. S.) 2j8. The defendant, who had secured the publication in a news- paper of a libel concerning the plaintiff, agreed to indemnify the publisher against any consequences arising from the publication. The question arises whether such an agreement is valid. Held, that an agreement to commit a crime, or to indemnify one who commits a crime, is illegal and void. Story, J. A promise to indemnify another for doing a private wrong, or for committing a public crime, is against public policy, and is void in law. It is common learning, that among tort-feasors, who are know- ingly such, there can be no contribution for damages recovered against any one of them, even although there be a promise of indemnity or contribution. The same doctrine applies to cases of indemnity for the commission of a public crime. No one ever imagined that a promise to pay for poisoning of another, was capable of being en- forced in a court of justice. It is universally treated as illegal, it being against the first principles of justice, and morals, and religion. The man who is hired to publish a libel against another, is guilty of an offence equally reprehensible in morals, though not so aggravated in its character; for the publication may not only be ruinous to the reputation of the individual aspersed, but may involve an innocent family in agonizing distress, and, perhaps, destroy its peace forever. There is no such right recognized in civil society, or at least in our forms of government, as the right of slandering or calumniating another. The liberty of the press does not include the right to publish libels. Much less does it include the right to be indemnified against the just legal consequences of such publications. 154 COMMERCIAL LAW CASES 3, Agreement to Commit a Private Wrong. Hinnen v. Newman. 55 Kas. /op. Newman, an auctioneer, was employed to sell two horses. He induced Hinnen, the plaintiff, to huy in the horses for him, agreeing to reimburse Hinnen, and Hinnen made the purchase. Newman subsequently got possession of the horses, but Hinnen claims that they belong to him, and seeks to recover them from Newman. Held, that a contract to commit a private wrong is illegal, and neither party can take advantage of the contract. Johnston, J. The whole transaction between these parties contravenes public policy and is clearly illegal, and the general rule is that an action founded upon an illegal transaction, where the parties are in pari delicto, cannot be maintained. In all such cases the courts refuse to assist the parties to carry out or to reap the fruits of tlie illegal trans- action, but will leave them in the condition in which they were found. The law leaves the parties to such a contract as it found them. If either has sustained a loss by the bad faith of a particeps criminis, it is but a just infliction for premeditated and deeply-practiced fraud, which, when detected, deprives him of anticipated profits, and sub- jects him to unexpected losses. He must not expect that a judicial tribunal will degrade itself by the exertion of its powers by shifting the loss from the one to the other, or equalize the benefits or burdens which may have resulted by the violation of every principle of morals and of laws. Here, both of the parties before the court were directly concerned in the transaction. Together they secretly conspired to and did com- mit a wrong against others. The transaction tainted with illegality was voluntarily entered into and consummated by them. There was no restraint upon the plaintiff compelling him to carry out the unlaw- ful purpose, nor does any fact appear which affords him any excuse for his misconduct or that would bring him within any of the excep- tions to the rule that have been stated. He concedes that the contract was illegal, but to escape the penalty which the law justly imposes upon a guilty participant, he says that the property was bid in in his own name, and paid for with his own funds, and he claims that his right of action is based on these facts rather than on the illegal trans- action, and that he can make out his cause of action without the aid of that transaction. It is claimed that the true test for determining his right of recovery is by considering whether he can establish his case without the necessity of having recourse to the illegal transaction, and if so, he must prevail. This test is applied for the only purpose of determining whether the parties before the court are in pari delicto, in which case they are remediless. There is little necessity or room FORMATION OF CONTRACTS 155 for the application of this test where the plaintiff and defendant are so obviously in equal fault as we have seen the parties are in this case. But if the test proposed is applicable, it will not avail the plaintiff. The only interest or right of possession which he has in the property is derived from the sale, which is confessedly illegal. To establish his case, he must show that he purchased the property at that sale, and he thereby brings the illegal transaction into the case. Both parties claim under that sale — the plaintiff because he bid in the property in his own name, and the defendant because it was bid in for him and not for the plaintiff. Neither of them can come into court with clean hands and ask anything under the fraudulent and illegal transaction. If the possession of the property was changed and the defendant were in court seeking to obtain possession of it, he would be refused assistance, although from the findings it appears that the property was purchased solely for him. He is in no better position than the plaintiff, and would be entitled to no greater con- sideration. 4. Agreement to Violate Directory Statute not Void. Bowditch V. New England Mutual Life Insurance Co. 141 Mass. 2^2. Burgess, a member of the finance committee of the defendant company, borrowed money from it in the name of his son, in violation of a statute prohibiting loans to officers of such com- panies. His trustee now sues to recover bonds put up as collat- eral security for notes signed by Sidney W. Burgess, his son. Held, that although such a contract is prohibited in the case of an individual, the contract itself does not thereby become void. Morton, C. J. The statute provides that "no member of a committee or officer of a domestic insurance company, who is charged with the duty of investing its funds, shall borrow the same, or be surety for such loans to others, or directly or indirectly be liable for money borrowed of the company." It is a rule universally accepted, that, if a statute prohibits a contract in the lensc of making it unlawful for anyone to enter into it, such a contract, if made, is wholly void, and cannot be enforced. But it is often a difficult question to determine whether a statute forbidding an act to be done, or enjoining the mode of doing it, is prohibitory, so as to make any contract in violation of it absolutely void, or whether it is directory in its purpose, and does not necessarily invalidate the contract. Though it may be impossible to formulate a rule which will reconcile all the adjudications, yet the decisions recognize a clear distinction between these two classes of cases. There is a large class of cases, both h\ tliis country and in England, 156 COMMERCIAL LAW CASES in which statutes have enacted, in substance, that goods should only be sold in certain measures, or in a certain manner, or after being inspected and branded by pubHc officers ; and it has been held that contracts of sale which do not meet the requirements of such statutes are absolutely void. The purpose of such statutes is to protect the buyer from the imposition of the seller, a purpose which would be wholly thwarted unless the contracts are held void, and therefore the intention of the legislature to make them void is inferred. So statutes prohibiting any work on the Lord's Day, except work of necessity or charity, have been construed to make entirely void any contract made in violation of their provisions. On the other hand, there are numerous cases where statutes forbid certain acts to be done, and in a sense forbid certain contracts to be made, and yet it is held that contracts made in contravention of the statutes are not void. When usurious contracts were forbidden by our laws, under a penalty of forfeiting threefold the amount of interest reserved or taken, the act of making such a contract was illegal, but the contract was not void. The imposition of the defined penalty showed that the legislature did not intend that the contract should be wholly void, as this woi:."d be imposing an added penalty. Many other cases might be cited, in which it has been held that contracts made in violation of the provisions of statutes are not void, upon the ground that the statutes are intended merely to be directory to the officers or persons to whom they are addressed, and not to be conditions precedent to the validity of contracts made in reference to them. Each statute must be judged by itself as a whole, regard being had not only to its language, but to the objects and purposes for which it was enacted. If the statute does not declare a contract made in violation of it to be void, and if it is not necessary to hold the contract void in order to accomplish the purposes of the statute, the inference is that it was intended to be directory, and not prohibitory of the contract. For the reasons stated, we are of opinion that the notes signed by Sidney W. Burgess are valid contracts, which can be enforced by the corporation. 5. Agreement to Violate Statute for Revenue Purposes Only Not Void. Aiken v. Blaisdell. 41 Vt. 655. Blaisdell bought liquor on credit from Crapo and Aiken. Crapo and Aiken, through an oversight, did not have the federal h'cense required by law, when they sold the liquor. In an action for the price, the defense is in part that any sale by them was illegal and void. Held, that a contract in violation of the provisions of a statute enacted for revenue purposes only, is not void. FORMATION OF CONTRACTS 1 57 Pierpoint, C. J. The question recurs: Was this contract made in violation of the act of congress? Or in other words, did congress, by the act referred to, intend to prohibit such a transaction, so as to invaHdate the sale? This, we think, must be determined by the object, intent and purpose of congress in passing the law under consideration. Did congress intend that the act should operate upon the business community, or only upon the persons that should engage in the business? It was manifestly not the intention of congress, by the enactment referred to, to make any kind of business illegal, or to prohibit it. The purpose was not to diminish, restrain, control, or regulate business. The transaction of all kinds of business was just as legal after the passage of the law as before. The law is strictly a revenue law, the sole object being to get money into the treasury, and that is accomplished by requiring all persons that engage in certain kinds of business to contribute a certain amount towards paying the liabilities of the government. Its object is to raise money, and not to regulate the business of the country. If a man engages in the kind of business referred to, he is engaged in a legal business, whether he has a license or not. If he has no license, he has no legal right to do it, and subjects himself to the penalty. The law, we think, was intended to operate upon the person, and not upon the business. If the object of the law had been to prohibit certain kinds of business, or to regu- late it, with a view to its effect upon public morals or public security, by limiting it in its extent, or the place where it is to be carried on, or the persons who shall conduct it, or otherwise, in all such cases the law operates upon the business as well as the person; revenue mainly in such cases is not the object, it is only incidental, or the means by which the law regulates and controls the business. The act in question imposes no restrictions upon the business; all are at liberty to engage therein where, and when, and to any extent they choose upon paying for the license. 6. Agreement to Violate Statute: Sunday Contracts. Cranson v. Goss. 10/ Mass. 4^p. A note, dated the following Wednesday, was made by Goss on Sunday to the order of George Wells, and was by him indorsed to Cranson. Cranson had no knowledge of the fact that the con- tract for which the note was given was completed on Sunday, nor that the note was made at any time other than its date indicated. Held, that a holder in due course of a note made on Sunday may enforce it against the maker. Gray, J. The ground upon which courts have refused to maintain actions on contracts made in contravention of statutes for the observance of 158 COMMERCIAL LAW CASES the Lord's Day, is the elementary principle that one who has himself participated in a violation of law cannot be permitted to assert in a court of justice any right founded upon or growing out of the illegal transaction. The general principle was long ago stated: "The objection that a contract is immoral or illegal, as between plaintifif and defendant, sounds at all times very ill in the mouth of the defendant. It is not for his sake, however, that the objection is ever allowed; but it is founded on general principles of policy, which the defendant has the advantage of, contrary to the real justice, as between him and the plaintiff; by accident, if I may so say. No court will lend its aid to a man who founds his cause of action upon an immoral or an illegal act. If from the plaintiff's own statement or otherwise, the cause of action appears to arise ex turpi causa, or the transgres- sion of a positive law of this country, then the court says he has no right to be assisted. It is upon that ground the court goes; not for the sake of the defendant, but because they will not lend their aid to such a plaintiff. So if the plaintiff and defendant were to change sides, and the defendant were to bring his action against the plaintiff", the latter would then have the advantage of it." It is upon this principle that a bond, promissory note or other executory contract, made and delivered upon the Lord's Day, is in- capable of being enforced, or, as is sometimes said, absolutely void as between the parties. And it follows that as between them it is incapable of being confirmed or ratified; for, in suing upon the original contract after its ratification by the defendant, it would still be necessary for the plaintiff, in proving his case, to show his own illegal act in making the contract at first. Upon the same principle, if the contract has been executed by the illegal act of both parties on the Lord's Day, the law will not assist either to avoid the effect of his own unlawful act. Thus if the amount of a preexisting debt has been paid and received on Sunday, the law will neither assist the debtor to recover back the money, nor the creditor, while retaining the amount so paid, to treat the payment as a nullity, and enforce payment over again. If a chattel has been delivered by the owner to another person on the Lord's Day by way of bailment or pledge, the latter may retain it for the special purpose for which he received it; or, if it has been delivered to him on the Lord's Day by way of sale or exchange, it cannot, at least if he has at the same time paid or delivered the consideration on his part, be recovered back at all. If a chattel has been sold and delivered on the Lord's Day without payment of the price, the seller cannot recover either the price or the value ; not the price agreed on that day, because, whether the property is deemed to have passed to the defendant, or to be held by him without right, there is no ground upon which a promise to pay for it can be implied. But if the whole evidence shows a complete cause of action, independently of any participation of the plaintiff in an illegal trans- action, he may recover. Thus an agreement made on the Lord's Day FORMATION OF CONTRACTS 159 for the use and occupation of the land is void ; but a subsequent entry upon and occupation of the land will sustain an action upon an implied promise to pay what its use is reasonably worth. So if a written or oral request for the performance of services, and promise to pay a certain compeusation therefor, is made and received on the Lord's Day, but there is no proof of assent to the request on that day, and the services are performed on a subsequent day, before the request has been withdrawn, the promised compensation may be recovered. The law simply refuses to allow either party to invoke any aid from the court to give effect to an illegal transaction in which he has taken part. An additional illustration of this is afforded by a recent case in this court, in which it was held that if a bargain is made on the Lord's Day for a sale of chattels (which is of itself void and incapable of ratification) and the chattels are delivered and accepted on the following day, with the purpose that they be sold and paid for, the seller may recover upon the implied contract of the buyer to pay what they are reasonably worth, and neither party can be permitted to prove the terms, either as to price or warranty, agreed between them on the Lord's Day. A promissory note given and received on Sunday, and therefore void as between the original parties, might be equally void in the hands of a subsequent holder who took it with notice of the original illegality. Even if the note bore date of a Sunday, however, that mere fact would not be conclusive evidence that he took it with such notice; for, though dated on Sunday, it might have been delivered on another day and so valid even as between original parties. In the present case, it is agreed that the contract which was the consideration of the note in suit was made on Sunday, and that the note was made, signed and fully delivered on Sunday to the original payee. Clearly therefore he could not have maintained an action upon it. But it is also agreed that the note bears date of a secular day; and that the plaintiff is a bona fide holder of the note, for a valuable consideration, and took it before it became due, without notice of any defect, illegality or other infirmity in the same. The plaintiff there- fore, not having participated in any violation of law, and having taken the note before its maturity for good consideration and without notice of any illegality in its inception, may maintain an action thereon against the maker. To hold otherwise would be to allow that party, who alone had been guilty of a breach of the law, to set up his own illegal act as a defense to the suit of an innocent party. This view is supported by the judgments of all the courts, English and American, that have considered the question. And it is in accordance with the decisions of this court upon notes made in violation of other statutes, except those against usury and gaming, which last have often con- tained peculiar provisions, and, as observed by Chief Justice Shaw, "declared that the note should be absolutely void to all intents and purposes, or, as is sometimes said, applied to the contract and not to the party." l6o COMMERCIAL LAW CASES 7. Agreement to Violate Statute: Dealing in Futures. Irunn v. Williar. no U. S. 4Qp. Irwin and Davis operated a flour mill in Indiana, Davis had bought wheat futures of the plaintiff, Williar, in Baltimore. After the death of Davis, Williar sues Irwin, as surviving partner, to recover a balance due on these transactions. Irwin defends upon the ground that the contract was a gambling contract, and therefore illegal. Held, that a contract for the purchase and sale of goods for future delivery is valid unless the parties intend merely to spec- ulate in the rise and fall of prices, and the goods are not to be delivered. Matthews, J. The generally accepted doctrine in this country is, that a contract for the sale of goods to be delivered at a future day is valid, even though the seller has not the goods, nor any other means of getting them than to go into the market and buy them; but such a contract is only valid when the parties intend and agree that the goods are to be delivered by the seller and the price to be paid by the buyer; and, if under guise of such a contract, the real intent be merely to speculate in the rise or fall of prices, and the goods are not to be delivered, but one party is to pay to the other the difference between the contract price and the market price of the goods at the date fixed for executing the contract, then the whole transaction constitutes nothing more than a wager, and is null and void. And this is now the law in England by statute altering the common law in that respect. Brokers who [have] negotiated such contracts, suing not on the contracts themselves, but for services performed and money advanced for defendant at his request, though they might under some circum- stances be so connected with the immorality of the contract as to be affected by it, are not in the same position as a party sued for the enforcement of the original agreement. It is certainly true that a broker might negotiate such a contract witbout being privy to the illegal intent of tlie principal parties to it which renders it void, and in such a case, being innocent of any violation of law, and not suing to enforce an unlawful contract, has a meritorious ground for the recovery of comj)cnsation for services and advances. But we are also of the opinion that when the broker is privy to the unlawful design of the parties, and brings tliem together for the very purpose of entering into an illegal agreement, he is particeps criminis. and cannot recover for services rendered or losses incurred by himself on bebalf of either in forwarding the transaction. In England, it is held that | such | contracts, although wagers, were not void at common law, and that the statute has not made them illegal, but only non-enforceable, while generally, in this country, all FORMATION OF CONTRACTS l6l wagering contracts are held to be illegal and void as against public policy. 8. Agreement to Violate Statute: Bucket Shops. Smith V. Western Union Telegraph Co. 84 Ky. 664. Smith ran a bucket shop. The Telegraph Company refused to continue its ticker service for him unless he would agree to sign a contract to send by it all his messages at message rates. This he refused to do. and sues to restrain the Company from discon- tinuing the ticker. Held, that a bucket shop is illegal, and that a carrier of mes- sages will not be required to deal with it. Bennett, J . We are satisfied from the proof in the case that the contract with the appellee, by which appellant was furnished with the market reports and the use of the "ticker," was necessary to enable the appellant to carry on the business. In this kind of business nothing is actually bought or sold; nor do the parties intend an actual sale of the commodity which they pretend to deal in. They merely wager on the market price of the commodity at some specified time in the future. A mere statement of the character of business done by appellant shows it to be a species of gambling as well defined and as reprehensible as that of keeping a faro bank or a dice machine, and is, therefore, illegal and contrary to public policy. The question then is, can the appellee avail itself of the fact that appellant was engaged in an illegal business as an excuse for with- holding the market reports from him and withdrawing the ticker, both of which were used by appellant in carrying on said business. The law goes further than merely to annul contracts, where the obvious and avowed purpose is to do, or cause the doing of, unlawful acts ; it avoids contracts and promises made with a view to place one under wrong influences ; those which offer him a temptation to do that which may injuriously affect the rights and interests of third persons. These reports were the essence — the very sinew — of appellant's gambling business, and without the prompt supply of which his busi- ness was a failure. Can the appellee be compelled to continue the supply ? We think not. Not upon the ground that the appellee is the innocent victim of an illegal enterprise ; not that it has been entrapped into aiding a gambling business ; for it says that it was willing to furnish the reports as long as the terms of the contract suited it, but upon the ground that appellant was engaged in a gambling enterprise, which is contrary to law, good morals and public policy. It is for the sake of the law and the best interests of society that we relieve the appellee from continuing to furnish to appellant the reports. l62 COMMERCIAL LAW CASES It is contended, that, although the appellant may be engaged in a gambling business, the appellee has no right to withhold the reports from him because of its position as a public servant, bound to serve the public indiscriminately and without questioning the motives or the purposes of the persons who employ it. The general rule is, that a telegraph company is under no obli- gation to contract to communicate an illegal or an immoral message. This rule is not only correct as to telegraph companies, but it applies to all persons who undertake to carry for the public. A con- trary rule would convert a telegraph company into a public vehicle for the purpose of communicating unlawful, treasonable or felonious schemes of all kinds, or the consummation of any and all kinds of illegal transactions and enterprises. Of course, a telegraph company, in assuming to refuse to send a message because it is illegal or immoral, acts upon its peril. If it is mistaken, or has misjudged the tenor or purpose of the message, it would be held responsible to the injured party for any damage sustained by reason of the refusal. g. Agreement to Violate Statute : Lotteries. Hull V. Ruggles. 56 N. Y. 424. Hull sold Ruggles' firm candy and silverware, the candy being put up in prize packages, some of which contained tickets entitling the holder to a special piece of silverware. In an action by the seller for the price, the defense is that the contract was for pur- poses of a lottery, and hence illegal. Held, that a consideration to be acquired by chance or lot is a lottery, and that a contract based upon it is void. Folgcr, J . The Revised Statutes declare that every lottery, game, or device of chance in the nature of a lottery, by whatsoever name it may be called, other than such as have been authorized by law, shall be deemed unlawful. It must have been set on foot for the purpose of disposing of property. It cannot be doubted, but that the purpose of the defendants, in contracting for the goods sold to them by the plaintiff, was to dispose of them to the public at more than their real value. This was to be effected by the incitement and temptation held out to each purchaser, and while he paid more than the real value of the package that he bought, he also bought the chance of obtaining another article much exceeding in value the price paid. He would it is true get some real value, but so much less than the price that he paid, that he would not have been likely to pay that sum for it, but for the chance, and the hope excited by the chance, that he might also get therefor another article of greater value than the amount paid. This was a lottery within the meaning of the statute. It was to set up chattels to be distributed by lot to any person who should FORMATION OF CONTRACTS 163 have paid a valuable consideration for the chance of obtaining such chattels. It was a lottery, or device of chance in the nature of a lottery. It is directly within the definition of Worcester: "A hazard in which sums are ventured for the chance of obtaining a greater value." Where a pecuniary consideration is paid, and it is determined by lot or chance, according to some scheme held out to the public, what and how much he who pays the money is to have for it, that is a lottery. It was unauthorized by law. It therefore fell within the prohibition of the statute. We are not left to the rules of the common law alone to determine whether this conclusion of law is correct. The statutes against lot- teries have provisions touching the subject. Section 38 of the Revised Statutes above cited declares that every sale of any goods, for the purpose of aiding in a lottery is void and of no effect. It is difficult to perceive how a sale of goods so packed and arranged as to enable the purchaser, without alteration or readjustment of them, to carry out a scheme, which when accomplished is an unlawful lottery ; and sold thus with knowledge, or with reasonable cause for belief, that the purchaser by the disposal to the public of the goods thus arranged intended to violate the statutes against lotteries, is not a sale for the purpose of aiding in such lotterj'. It cannot be otherwise. 10. Agreement to Violate Statute: Usury. Lloyd V. Scoff. 4 Peters (U. S.) 205. Scholfield granted Moore an annual rent charge of $500 on certain lands belonging to him in consideration of a payment of $5,000 by Moore to Scholfield. The incumbrance might be dis- charged at any time on the payment of $5,000 by Moore. Schol- field then sold the land subject to the terms of this agreement to Lloyd, the plaintiff. A statute of Virginia prohibited the taking of more than 6% interest, whether directly or indirectly. This action is brought by Lloyd to recover goods and chattels which Scott, on behalf of Moore, had taken on default of one payment of the annuity. Held, that under a statute prohibiting the taking of more than a certain rate of interest, the contract is void. M'Lean, J. The requisites to form an usurious transaction are three : 1. A loan either express or implied. 2. An understanding that the money lent shall or may be returned. 3. That a greater rate of interest than is allowed by the statute, shall be paid. 164 COMMERCIAL LAW CASES The intent with which the action is done, is an important in- gredient to constitute this offense. An ignorance of the law will not protect a party from the penalties of usury, where it is committed ; but where there is no intention to evade the law, and the facts which amount to usury, whether they appear upon the face of the contract, or by other proof, can be shown to have been the result of mistake or accident, no penalty attaches. At an early period in the history of English jurisprudence, usury, or as it was then called, the loaning of money at interest, was deemed a very high offense. But since the days of Henry VIII, the taking of interest has been sanctioned by statute. In this country, some of the states have no law against taking any amount of interest, which may be fixed by the contract. The act of usury has long since lost that deep moral stain which was formerly attached to it ; and is now generally considered only as an illegal or immoral act because it is prohibited by law. The purchase of an annuity, or any other device used to cover an usurious transaction, will be unavailing. If the contract be in- fected with usury, it cannot be enforced. Where an annuity is raised with the design of covering a loan, the lender will not be exempted by it from the penalties of usury. On this point there is no contradiction in the authorities. If a party agree to pay a specific sum exceeding the lawful in- terest, provided he do not pay the principal by a day certain, it is not usury. By a punctual payment of the principal he may avoid the payment of the sum stated, which is considered as a penalty. Where a loan is made to be returned at a fixed day with more than the legal rate of interest, depending upon a casualty which hazards both principal and interest, the contract is not usurious; but where the interest only is hazarded, it is usury. The principle seems to be settled, that usurious securities are not only void as between the original parties, but the illegality of their inception affects them even in the hands of third persons who are entire strangers to the transaction. A stranger must "take heed to his assurance, at his peril"; and cannot insist on his ignorance of the contract, in support of his claim to recover upon a security which originated in usury. II. Agreement Against Public Policy: Influencing Official Action. Brooks V. Cooper. 50 N. J. E. ySr. Cooper published the "Gazette" and Brooks the "Star of the Cape," both newspapers in Cape May County, N. J. They agreed that the acts of the legislature should l)e published by the ".Star of the Cape" and that both newspapers should divide the profits. An act of the legislature empowered the governor and other officers FORMATION OF CONTRACTS 1 65 to select a newspaper in each county to publish such acts. A bill in equity is brought by Cooper to compel division of the profits. Held, that the contract was against public policy and void. Lippincott, J. The contract not being fulfilled between the parties, the question arises, Can it be enforced, or is it so manifestly contrary to public policy, in contravention of the statute, and so injurious to the public good, that it defeats itself? In determining this there must be kept in view the general rule of law that, where there is no statutory prohibition, the law will not readily pronounce an agreement invalid on the ground of policy or convenience, but is, on the contrary, inclined to leave men free to regulate their afifairs as they think proper. Where, however, a contract is of such a nature that it cannot be carried into execution without reaching beyond the parties and exercising an injurious influence over the community at large, everyone has an interest in its suppression and it will be pronounced void from a due regard to the public welfare. Now, it is only upon judicial determination that a contract contra- venes the policy of some public statute, or some well known rule of law, that it is held to be void. Turning to the judicial decisions upon this subject, we find them so numerous and of such variety that a consideration of them at any length is not practicable. The general principles governing the matter are well established by a long line of authorities, and in the case now before the court they do not appear to be of difficult application. It has been declared that public policy is a variable quality, but the principles to be applied have always remained unchanged and unchangeable, and public policy is only variable in so far as the habits, capacities and opportunities of the public have become more varied and complex. The relations of society become from time to time more complex; statutes defining and declaring public and private rights multiply rapidly, and public policy often changes as the laws change, and therefore new applications of old principles are required. Whatever tends to injustice or oppression, restraint of liberty, restraint of legal right; whatever tends to the obstruction of justice, a violation of a statute, or the obstruction or perversion of the administration of the law ; whatever tends to interfere with or control the administration of the law as to executive, legislative or other official action, whenever embodied in and made the subject of a contract, the contract is against public policy and therefore void and not susceptible of enforcement. Any contracts which have for their object the influencing the action of public officials are void as against public policy. An agree- ment whose object or tendency is to influence any officer of the state in the performance of a legal duty, partially or completely, is void. 1 66 COMMERCIAL LAW CASES It is distinctly held that an agreement for compensation for procuring a contract from the government of our own, or that of another, country, is against public policy and void. An agreement between two candidates for the same office, that one shall withdraw, and the other, if successful in the attempt to obtain the office, shall divide the fees with him, is void as against sound public policy. All agreements, for financial consideration, to control or influence the business opera- tions of the government, or the appointment of public officers, are void as against public policy, without reference to the question whether improper measures are contemplated or used in their execu- tion. The law looks to the general tendency of such agreements, and it closes the door to temptations by refusing them recognition in the courts. And so considerations of the same kind, of inferior moment, apply, whenever the necessary or even probable effect of the contract will be to divert any public servant from the path of duty, or cause favoritism or interest to prevail in the determination of questions which should be examined with a view to the general good and the just claims of the parties in interest. Such an agreement as the one now under consideration is simply, in plain language, a financial bargain between two seekers after public position to get one or the other out of the way, so that the other may succeed in obtaining it, and it must be held illegal and void. 12. Agreement Against Public Policy: Ousting Court of Jurisdiction. Miles V. Schmidt. i68 Mass. 339. The plaintiff sues on a written contract which contained a pro- vision that in case of any alleged violation thereof, the dispute should be settled by referees whose decision should be final. Held, that a contract ousting the courts from their jurisdiction is illegal and void. Morton, J . Perhaps, if the question were a new one, no objection would be found to permitting parties to select their own tribunals for the settle- ment of civil controversies, even though the result might be to oust the courts of jurisdiction in such cases. But the law is settled other- wise in this state. When the question is a preliminary one, or in aid of an action at law or suit in equity, such, for instance, as the ascer- tainment of damages, an agreement for arbitration will be upheld. The agreement for arbitration in this case expressly provided, amongst other things, that the referee shall "hear the parties and determine whether or not there has been any violation and what damage either party has sustained," and that "the decision of a majority shall be final and binding." FORMATION OF CONTRACTS 1 6/ 13. Agreement Against Public Policy: Secret Advantage in Composition with Creditors. The Hanover National Bank v. Blake. 142 N. Y. 404. Blake & Company effected a composition with creditors for forty cents on the dollar, paid by four notes, the last two of which were indorsed by Mrs. Blake. The bank, one of the creditors, insisted upon her indorsing all of the notes. It now sues Mrs. Blake upon the third of these notes, the defense being that the agreement whereby the bank received a greater security than the other creditors made the whole transaction void as against public policy. Held, that although any advantage acquired by one creditor over the other parties to a composition is void, according to the New York rule, the entire composition is not therefore avoided. Gray, J. The general principle has been long settled in England and here that a secret agreement which induces a creditor to agree to a com- position by the promise of a preference, or of some undue advantage, over the other creditors, is utterly repugnant to the composition agree- ment, and. from its fraudulent nature, is avoided by the law. The very essence of a composition agreement is that all creditors come in upon terms of equality ; and that equality would be destroyed if the secret agreement were given effect. Where the creditors in general have bargained for an equality of benefit and mutuality of security, it shall not be competent for one of them to secure any partial benefit or security to himself. From all the early cases in England and in this state the inference from the decisions is, not that the composition agreement is avoided [by the secret giving of additional security], but the security taken for an amount beyond the composition agreed upon, or even for that sum, better than that which is common to all, is void and inoperative. The law would set aside all secret terms made by the creditors with the debtor, more favorable to the former than is allowed to the other creditors. It is the secret agreement itself which is fraudulent and void. It would certainly seem to be the logical outcome of the propo- sition asserted below that, if the composition agreement has been avoided, it has become inoperative as an agreement for any purpose. We assert a wholesome rule and one which works a just result, if we hold that the secret and fraudulent agreement, itself, is illegal and is inoperative to confer any rights or advantages upon the creditor. Perfect equality is to be maintained among the creditors. It was thought that the secret agreement and the composition agreement constituted but a single and indivisible transaction or agreement. I am not prepared to accede to that proposition ; though it has support 1 68 COMMERCIAL LAW CASES in some English cases. It seems to me the case falls easily within the rule, which permits a severance of the illegal from a legal part of the covenant. Here the agreement with other creditors for a composition was lawful and valid (unless they should elect to rescind it upon the dis- covery of the secret agreement, an element not present) ; but the agreement for, and the giving of, additional security was unlawful and void. Is there any reason why the bad may not be rejected and the good retained? We should be careful, in our desire to punish the harsh and unscrupulous creditor, who presses his debtor and bargains for an advantage over other creditors, by deprivation of legal rights and remedies, that we do not go too far and lay down a rule which may result unjustly in other ways. It ought not to be possible that through his fraud he may be reinstated in his original position as a creditor for the whole sum due. The operation of a secret agreement is such that the other innocent creditors may, because of the fraud of their debtor, elect to refuse to be bound by their agreement of composition with him. If the secret agreement is executory they may not so elect, and may rely that the creditor, secretly seeking to obtain some promise of advantage over them, will be prevented from enforcing it and from gaining anything by his fraud. Its illegality is a perfect defense in the hands of the promisor. The composition agreement is one thing, as an agreement between all the creditors to release some part of the insolvent's indebtedness to them, upon terms equal as to each ; and the secret fraudulent agree- ment with one or more of them is a stipulation, which, from its inception, was unlawful and which the law annuls. It seems wiser simply to 'regard the secret agreement as one which the law avoids for its fraud. The creditor makes it with the risk of its worthlessness, if repudiated, and the debtor makes it with the peril that its discovery will furnish cause for his other creditors to avoid the composition agreement. 14. Agreement Against Public Policy: Secret Advantage in Composition with Creditors. (Conflicting Rule.) Frost V. Gage, j Allen (Mass.) ^60. Richard Frost made a composition with creditors. Gage being the assignee. In order to get Gage to assent to the assignment. Frost's son, also a creditor, agreed to make no claim for a dividend against Gage and to give him a note for part of the debt due Gage from his father. The son now seeks his share of the estate, in spite of this agreement. Held, that according to the Massachusetts rule any fraud upon creditors in a composition with them vitiates the entire transaction as to persons parlicii)ating in the fraud. FORMATION OF CONTRACTS I69 Bigelozv, C. J. The fraud in which [the plaintiff] participated, and by which he aided in inducing creditors to become parties to the release of their debtor, taints the whole transaction as to him, and deprives him of the right of maintaining an action to enforce in a court of law that part of the agreement of composition to which the secret agreement did not immediately relate. It may be suggested that the application of this rule leads in the present case to the result of leaving in the hands of the defendant, who was equally guilty with the plaintiff, the fruits of the fraud. But this is often the consequence of allowing a party to plead in defense the illegality of a transaction on which a cause of action is founded. Such defenses are allowed, not out of favor to defendants, or to protect them from the effects of their unlawful contracts, but on the grounds of public policy, which does not permit courts of justice to be used to aid either party in enforcing contracts which are unlawful or tainted with fraud, but leaves them in the condition in which their illegal or immoral acts have placed them. 15. Agreement Against Public Policy: Restraint of Trade. Anchor Electric Co. v. Haivkes. iji Mass. loi. The Anchor Electric Company sues to enforce the terms of a contract between itself and Hawkes, who had sold his interest in a business to the Anchor Company, and had agreed not to compete with it for a period of five years. Held, that an agreement for a reasonable restraint of trade is not illegal and will be made efifective. Knowlton, J. From very early times certain contracts in restraint of trade have been held void as against public policy. They are objectionable on two grounds : they tend to deprive the party restrained of the means of earning a livelihood, and they deprive the community of the benefit of his free and unrestricted efforts in his chosen field of activity. The distinction was long ago taken between contracts involving a partial restraint of trade and contracts involving a general restraint of trade, the former being held valid if not unreasonable, and the latter invalid. The changes in the methods of doing business and the increased freedom of communication which have come in recent years have very materially modified the view to be taken of particular contracts in reference to trade. The comparative ease with which one engaged in business can turn his energies to a new occupation, if he contracts to give up his old one, makes the hardship of such a contract much less for the individual than formerly, and the com- mercial opportunities which open the markets of the world to the I/O COMMERCIAL LAW CASES merchants of every country leave little danger to the community from an agreement of an individual to cease work in a particular field. The general principle that arrangements in restraint of trade are not favored is, however, firmly established in law, and now, as well as formerly, is given effect whenever its application will not interfere with the right of everybody to make reasonable contracts. Whenever one sells a business with its good will, it is for his benefit, as well as for the benefit of the purchaser, that he should be able to increase the value of that which he sells by a contract not to set up a new business in competition with the old. The right to make reasonable contracts of this kind in connection with the sale of the good will of a business is well established. But the particular pro- visions which are reasonably necessary for the protection of the good will of many kinds of business are very different now from those required in the daj's of Queen Elizabeth. Then the courts had occasion to inquire whether a limitation upon the right to engage in the same business as that sold was unreasonable because it included a town instead of a single parish, or extended a distance of ten miles instead of five. Xow the House of Lords in England has held by a unanimous decision in a recent case that such a limitation which covered the whole world was not unreasonable. Because in early times it seemed inconceivable that an agreement to refrain from establishing a business of the same kind anywhere in the kingdom should be necessary to the protection of the good will of any existing business, it was laid down as an arbitrary rule that agreements so comprehensive in their terms were void. Thus the distinction between a general restraint of trade and a partial restraint of trade grew up. Contracts applying to any territory less than the whole kingdom were considered in reference to their reasonableness, having regard to the purpose for which tlje contract was made. By the unanimous decision of the House of Lords, it is now settled in England that a covenant unrestricted as to space, not to engage in a particular kind of business for twenty-five years, made in connection with the sale of the property of a manufacturing establishment, is valid, if, having regard to the nature of the business and the limited number of its customers, it is not wider than is necessary for the protection of the covenantee, nor injurious to the public interests of the country, as were found to be the facts of that case. Arbitrary rules which were originally well founded have thus been made to yield to changed conditions, and underlying principles are applied to existing methods of doing business. The tendencies in most of the American courts are in the same direction. fin United Shoe Machinery Co. v. Kimball, 193 Mass. 351, it is stated, quoting Anchor Electric Co. v. Hawkes, supra, "Under this rule in conceivable cases, a covenant may be valid which is unlimited both in time and space."] FORMATION OF CONTRACTS I7I 16. Effect of Partial Illegality. Eastern Expanded Metal Co. v. Webb Granite and Construc- tion Co. ip^ Mass. J5d. The Metal Company sues to recover the value of work done for the defendant under a building contract which, unknown to the plaintiff, had in it a specification which violated the ordinances of the city of Boston, where the work was to be done. The plaintiff had stopped work upon the discovery of the illegal provi- sion, but the defendant contends that it is entitled to recover nothing on account of the illegality of the contract. Held, that when a contract is partly legal and partly illegal, if the two elements may be separated, the plaintiff may recover under that portion of the contract which is legal. Knowlton, C. J . It has been held in many cases that, where the matters called for in the contract that render it illegal do not involve moral turpitude, but are merely rnala prohibita, either party, while it remains executory, may disaffirm it on account of its illegality and recover back money or property that he has advanced under it. If the contract has been executed the court will not relieve either party from the consequences of his own violation of law. But so long as it is entirely unexecuted in that part which the law forbids, there is a locus penitentice. Most of these cases relate to the recovery of money or property that has been advanced under the illegal contract which is subsequently re- pudiated. In the present case labor and materials for the improve- ment of real estate were furnished by the plaintiff. In this Common- wealth, when labor and materials are furnished and used upon real estate under a special contract, and for reasons which are not preju- dicial to the plaintiff the contract becomes of no effect, it is held that the party furnishing them may recover upon a quantum meruit for their value as a benefit to the real estate. When labor and materials have been furnished upon real estate under a contract which contains an illegal element under a prohibitory statute, and when the contract remains entirely executory in that part which is illegal, and is dis- affirmed because of its illegality, the disaffirming party has the same right to have compensation for the benefit conferred upon the real estate that he would have to recover for money or property received by the other party before the disaffirmance of such a contract. 17. Effect of Partial Illegality. Lindsay v. Smith. y8 N. C. ^28. Lindsay was indicted for erecting and maintaining a public nuisance by constructing a dam across a certain creek. The de- 172 COMMERCIAL LAW CASES fendants agreed for a certain sum to maintain a ditch through Lindsay's land, and that the indictment should not be prosecuted. They failed to construct the ditch, and Lindsay sues for breach of their contract. Held, that when a contract, illegal in part, is not divisible, the entire contract is void. Bynuiii J. The general doctrine was admitted, that no executory contract, the consideration of which is against the public policy or the laws of the state, can be enforced in a court of justice. It was further admitted that when the consideration of a contract is the compounding a felony, or the suppressing a prosecution of an offense strictly public in its character, such a contract cannot be enforced. But it was con- tended that this doctrine applied only to felonies, or at most to public misdemeanors, and that it had no application to offenses, though indictable, yet private in their nature, as affecting an individual or a community, as in this case. In our state it has been decided directly otherwise. So in civil cases, all contracts prohibiting parties from bringing an action and all agreements purporting to oust the courts of their jurisdiction; all agreements to pay money to stifle or suppress evi- dence or to give evidence in favor of one side only, or not to appear as a witness in a civil suit ; all contracts, bonds, indemnities and under- takings, tending to induce sheriffs, clerks, jailors and other public officers to violate or neglect their duty or made to protect them from the consequences of their misconduct, are absolutely null and void, as contracts obstructing or interfering with the administration of public justice, and as being contrary to the public policy of the law. But counsel contends that there are two covenants in this sealed instrument, and that they are divisible, part being good, and part bad; that the contract of the defendants is to do two things : first, to dismiss the indictment, which is illegal and void, but second, to cut and keep up the ditch, which is legal and valid, and is the contract for the breach of which the action is brought. In regard to this proposition the general rule is that if there are several considerations for separate and distinct contracts, and one is good and the other is bad, the one may stand and be enforced, although the other fails, under the maxim utile per inutile non vitiattir. But where there is but one entire consideration for two several contracts, and one of these contracts is for the performance of an illegal act, the whole is void, as where one sum is to be paid for the doing of a legal and illegal act. There was but one indivisible consick'ration moving from tbe plaintiff, to wit: the sum of fifty dollars, and for that consideration, the defendants covenanted to do two things — the one legal and tlie other illegal. The consideration cannot be divided and enough of it assigned to support the contract to cut and maintain the ditch, but it, as it were, enters into and sui)i)orts both promises. FORMATION OF CONTRACTS 1 73 i8. Effect of Withdrawal from Illegal Contract. Hermann v. Charlesworth. (ipoj) 2 K. B. {Eng.) 12^. Miss Hermann made a contract with the defendant, editor of the "Matrimonial Post and Fashionable Marriage Advertiser," whereby she paid him £52, of which £47 was to be restored to her in nine months, should no engagement take place within that time. She repudiated this contract and seeks the return of her money. Held, that in the case of an illegal contract, one party may with- draw so long as it is executory. Collins, M. R. Assuming that the contract was illegal, it has been contended that there has been such part performance of the contract that the plaintiff cannot insist upon having it undone. It is said that this lady comes to the court setting up the fact tliat she was party to an illegal contract and asking for relief, and that she should not be allowed to do so, for though it is true that in modern times persons have been allowed to resile from illegal contracts, they cannot do so if any part of the illegal purpose has been accomplished. For authority on this point I may refer to the judgment in Barclay v. Pearson (1893), 2 Ch. D. 154. The learned judge, after considering several cases, referred to Hastelow v, Jackson, 8 B. & C. 221, in these terms: "Hastelow v. Jackson was an action in which the plaintiff and one Wilcoxon de- posited money in the hands of a stakeholder to abide the event of a boxing match between them, and after the battle the plaintiff demanded the whole sum from the stakeholder and threatened him with an action if he paid it over to Wilcoxon. This he nevertheless did by the direc- tion of the umpire, and it was held that the plaintiff was entitled to recover from him his own stake as money had and received to his use." Mr. Justice Littledale stated the law very clearly and shortly thus : "If two parties enter into an illegal contract, and money is paid upon it by one to the other, that may be recovered back before the execution of the contract, but not afterwards. In the case of persons entering into such a contract and paying money to a stakeholder, if the event happens and the money is paid over without dispute, that is considered as a complete execution of the contract, and the money cannot be reclaimed; but if the event has not happened, the money may be recovered. With respect to a stakeholder there is a third case, viz., where the event has happened, but before the money has been paid over, one party expresses his dissent from the payment. Under such circumstances he may recover it ; and perhaps it may then be said, that although the event has happened, yet the contract is not com- pletely executed until the money has been paid over, and therefore the party may retract at any time before that has been done." Upon this ground the common law position of the plaintiff is made good. Equity did not take the view that in the case of a contract of this 174 COMMERCIAL LAW CASES particular kind, tainted with illegality, a case for relief could only be considered where there had been a total failure of consideration. As was pointed out by Lord Hardwicke, equity reserves to itself the right to intervene even when something has been done in part performance of the contract, or even when the marriage has taken place. In Tappenden v. Randall [2 Bos. & P. 467], Heath, J., said: "It seems to me that the distinction adopted by Mr. Justice Buller between con- tracts executory and executed, if taken with those modifications which he would have necessarily applied to it, is a sound distinction. Un- doubtedly there may be cases where the contract may be of a nature too grossly immoral for the Court to enter into any discussion of it; as where one man has paid money by way of hire to another to murder a third person. But where nothing of that kind occurs, I think there ought to be a locus penit entice, and that a party should not be compelled against his will to adhere to the contract." Where the parties to a contract against public policy, or illegal, are not in pari delicto, 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. I cite these cases to show that the jurisdiction exercised by the courts of equity was broader than that of the common law courts, and was not bound by the hard and fast rule that if anything had been done in the further- ance of an illegal contract the court would not intervene. It seems to me that, whether this case is regarded from the point of view of the common law or from the broader point of view of the courts of equity, we are entitled to grant the relief asked for, and are not debarred from doing so by reason that the defendant has taken certain steps and incurred some expense towards carrying out his part of the contract. 19. Agreement in Violation of the Law of Another Jurisdic- tion. Graves v. Johnson. 156 Mass. 211. Graves' firm in Massachusetts sold and deli^ared liquor to Johnson, proprietor of a Maine hotel, with a view to resale by Johnson in Maine in violation of the law of that state. Graves sues for the price. Held, that a contract to violate the law of another state is illegal and void. Holmes, J. Of course it would be possible for an independent state to enforce all contracts made and to be performed within its territory, without regard to how much they might contravene the policy of its neighbors' laws. But in fact no state pursues such a course of barbarous isolation. As a general proposition, it is admitted that an FORMATION OF CONTRACTS 1/5 agreement to break the laws of a foreign country would be invalid. The courts are agreed on the invalidity of a sale when the contract contemplates a design on the part of the purchaser to resell contrary to the laws of a neighboring state, and requires an act on the part of the seller in furtherance of the scheme. On the other hand, plainly, it would not be enough to prevent a recovery of the price that the seller had reason to believe that the buyer intended to resell the goods in violation of law ; he must have known the intention in fact. As in the case of torts, a man has a right to expect lawful conduct from others. In order to charge him with the consequences of the act of an intervening wrongdoer, you must show that he actually contemplated the act. Between these two e.xtremes, a line is to be drawn. But as the point where it should fall is to be determined by the intimacy of the connection between the bargain and the breach of the law in the particular case, the bargain having no general and necessary tendency to induce such a breach, it is not surprising that courts should have drawn the line in slightly different places. It has been thought not enough to invalidate a sale, that the seller merely knows that the buyer intends to resell in violation even of the domestic law. But there are strong intimations in the later Massachusetts cases that the law on the last point is the other way. And the English decisions have gone great lengths in the case of knowledge of intent to break the domestic law. We assume that the sale would have taken place, whatever the buyer had been expected to do with the goods. But we understand the judge to have found that the seller expected and desired the buyer to sell unlawfully in Maine, and intended to facilitate his doing so, and that he was known by the buyer to have that intent. The question is whether the sale is saved by the fact that the intent mentioned was not the controlling inducement to it. As the connection between the act in question, the sale here, and the illegal result, the sale in Maine — the tendency of the act to produce the result — is only through the later action of another man, the degree of connection or tendency may vary by delicate shades. If the buyer knows that the sale is made only for the purpose of facilitating his illegal conduct, the connection is at the strongest. If the sale is made with the desire to help him to his end, although primarily made for money, the seller cannot complain if the illegal consequence is attributed to him. If the buyer knows that the seller, while aware of his intent, is indifferent to it, or disapproves of it, it may be doubtful whether the connection is sufficient. It appears to us not unreasonable to say that, when the illegal intent of the buyer is not only known to the seller, but encouraged by the sale as just explained, the sale is void. The accom- plice is none the less an accomplice because he is paid for his act. Chapter II. OPERATION AND DISCHARGE OF CON- TRACTS. I. PARTIES TO CONTRACTS. Ordinarily a contract does not impose liability or confer rights upon persons who are not parties to it. Some courts, however, hold that if a contract is made for the benefit of a third person, he may sue upon it ; while all allow a beneficiary to enforce a trust agreement, and all permit a party to recover money properly belonging to him, in the hands of another who has received it in pursuance of a contract made with a third party. A person not originally a party to a contract may sue upon it if it has been assigned to him by act of one of the parties or by operation of law. Credits in money or goods may almost universally be assigned, but liability upon a contract cannot be assigned, unless ( 1 ) the other party assents, (2) the contract involves work requiring no personal skill or qualifications, or (3) the contract relates to an interest in land which itself implies certain liabilities. No form of assignment is necessary, though the debtor is not bound until he receives notice. As between assignor and assignee, the rights are fixed at the time of the assignment. There is a conflict as to the rights of successive assignees, when the last gives notice first. Most courts hold that a later assignee giving notice to the debtor first is entided to the credit assigned, but others hold that the first assignee even in these cases is entitled to the property. If the debtor has paid any assignee without notice, he is of course under no liability to an assignee who subsequently notifies him of the assignment. All assignees take subject to equities against their assignors, and are therefore said to stand in the shoes of the assignor. This rule does not apply to negotiable instruments, which are governed by the independent principles of the law mer- 176 OPERATION AND DISCHARGE OF CONTRACTS 1 7/ chant. Certain assignments result from the operation of law. An assignment of an interest in land carries with it rights inci- dental to the transfer of the property; marriage operates to vest rights of courtesy or dower in the land of the spouse ; death transfers property, together with some contractual rights and duties, to the executor, administrator, or heirs ; and bankruptcy vests title to the bankrupt's estate in his trustee. Parties to a contract may contract individually ; jointly, when several persons on one side agree to do a thing together ; severally, when they agree to do it independently; or jointly and severally when they agree to do it both together and independently. In joint contracts, all promisors must, as a general rule, be sued together though each is liable for the full amount of the debt. If one joint promisor dies, actions at law must be brought against the survivors, although in equity the estate of the deceased joint promisor may be joined. If one joint, or joint and several, prom- isor is released, the effect is to release all. When joint parties are promisees, they are entitled to performance jointly, not sev- erally, and in the case of death of one of thero, the rights devolve upon the survivors. In order to bring action upon the contract, they must all join in the suit. If one joint debtor pays the entire debt, he may enforce contribution from the others and recover from each his portion of the debt. When the contracts are sev- eral, the parties cannot sue or be sued jointly. Suit must be brought by or against each. When contracts are joint and sev- eral, suit may be brought by or against all jointly or by or against each severally: less than all cannot sue or be sued jointly in joint and several contracts. A. Parties Privy to Contract. I. Necessity of Privity. Dunlop Pneumatic Tyre Co., Ltd. v. Selfridge & Co., Ltd. L. R. (191 5) A. C. '(Eng.) 847. The Dunlop Company, Ltd., sues Selfridge & Company, Ltd., for breach of an agreement not to cut the Dunlop Company's list prices. The agreement in question was entered into between Selfridge & Company, Ltd., and Dew & Company, factors, who had a contract with the Dunlop Company to procure such an under- taking from their (Dew & Company's) retail customers. This action is brought by the Dunlop Company to enforce the agree- ment between Dew & Company and Selfridge & Company, Ltd. Held, that the plaintiffs were not parties to the contract between 17° COMMERCIAL LAW CASES Dew & Company and Sel fridge & Company, Ltd., and hence cannot maintain an action on the agreement. Viscount Haldanc, L. C. In the law of England certain principles are fundamental. One is that only a person who is a party to a contract can sue on it. A second principle is that if a person with whom a contract not under seal has been made is to be able to enforce it. consideration must have been given by him to the promisor or to some other person at the promisor's request. These two principles are not recognized in the same fashion by the jurisprudence of certain Continental countries or of Scotland, but here they are well established. Lord Dunedin: ' I confess that this case is to my mind apt to nip any budding affection which one might have had for the doctrine of consideration. For the effect of that doctrine in the present case is to make it possible for a person to snap his fingers at a bargain deliberately made, a bargain not in itself unfair, and which the person seeking to enforce it has a legitimate interest to enforce. Notwithstanding these con- siderations, I cannot say that I have ever had any doubt that the judgment of the Court of Appeal was right. "An act or forbearance of 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 enforceable." Now the agreement sued on is an agreement which on the face of it is an agreement between Dew and Selfridge. But speaking for myself, I should have no difficulty in the circumstances of this case in holding it proved that the agreement was truly made by Dew as agent for Dunlop, or in other words that Dunlop was the undisclosed principal, and as such can sue on the agreement. None the less, in order to enforce it he must show consideration, as above defined, moving from Dunlop to Selfridge. In the circumstances, how can he do so? The agreement in question is not an agreement for sale. It is only collateral to an agreement for sale ; but that agreement for sale is an agreement entirely between Dew and Selfridge. The tires, the property in which upon the bargain is transferred to Selfridge. were the property of Dew, not of Dunlop, for Dew under his agreement with Dunlop held these tires as proprietor, and not as agent. What then did Dunlop do, or forbear to do, in a question with Selfridge? The answer must be, nothing. He did not do anything, for Dew, having the right of projjcrty in tlie tires, could give a good title to any one he liked, subject, it might be, to an action of damages at the instance of Dunlop for breach of contract. He did not forbear in anything, for he had no action against Dew which he gave up, because Dew had fulfilled his contract with Dunlop in obtaining, on tlie occasion of the sale, a contract from Selfridge in tlie terms prescribed. OPERATION AND DISCHARGE OF CONTRACTS 1/9 2. Right to Recover Money Had and Received. Roberts v. Ely. 113 N. Y. 128. Geiger & Company bought tea of Ely, which tea was then in the custody of the Chicago and China Tea Company. Geiger & Company made an agreement with the China Tea Company that the tea should be insured for their benefit. The tea was subse- quently burned, and the entire insurance money paid to Ely, who paid no portion of it to Geiger & Company. The plaintiff, the assignee of Geiger & Company, seeks an accounting from Ely for this money so paid to Ely's firm. Held, that when one person has money in his hands properly belonging to another person, that other is entitled to sue without further privity of contract. Andretvs, J . Assuming that the plaintiff is right in his construction of the facts, the case falls within the familiar doctrine that money in the hands of one person, to which another is equitably entitled, may be recovered in a common-law action by the equitable owner upon an implied promise arising from the duty of the person in possession to account for and pay over the same to the person beneficially entitled. The action for money had and received to the use of another is the form in which courts of common law enforce the equitable obligation. The scope of this remedy has been gradually extended to embrace many cases which were originally cognizable only in courts of equity. Whenever one person has in his possession money which he cannot conscientiously retain from another, the latter may recover it in this form of action, subject to the restriction that the mode of trial and the relief which can be given in a legal action are adapted to the exigencies of the particular case, and that the transaction is capable of adjustment by that procedure, without prejudice to the interests of third persons. No privity of contract between the parties is required, except that which results from the circumstances. The right on the one side, and the correlative duty on the other, create the necessary privity and justify the implication of a promise by the defendant to do that which justice and equity require. It is immaterial, also, whether the original possession of the money by the defendant was rightful or wrongful. It is sufficient that the duty exists on his part, created by the circumstances, to account for and pay it over to the plaintiff. 3. See Cases under Chapter I, III, Consideration. l8o COMMERCIAL LAW CASES B. Assignment. I. In General. Atlantic & North Carolina Railroad Co. v. Atlantic and North Carolina Co. 14'/ N. C. ^68. Ives agreed to cut and deliver 15,000 cords of wood to the plaintiff. The plaintiff then leased its property to the Rowland Improvement Company, which in turn assigned to the North Carolina Company. The North Carolina Company refused to con- tinue the contract with Ives. Ives recovered judgment against the Railroad Company, which now sues the defendant, the North Carolina Company, for its expenses in that suit on the ground that the defendant agreed to be responsible for its debts. The defense is that the contract with Ives was not assignable and there- fore would not pass with the other liabilities. Held, that a contract involving no personal relation or con- fidence is assignable, both as to credits and as to liabilities. Hoke, J. While at common law the rights and benefits of a contract, except in the case of the law merchant and in cases where the crown had an interest, could not be transferred by assignment, the rule in its strictness was soon modified in practical application by the common law courts themselves and more extensively by the decisions of the courts of equity ; and the principles established have been sanctioned and extended by legislation until now it may be stated as a general rule that, unless expressly prohibited by statute or in contravention of some principle of public policy, all ordinary business contracts are assignable, and that actions for breach of same can be maintained by the assignee in his own name. The following criterion is universally adopted : All things in action which survive and pass to the personal representatives of a decedent creditor as assets, or continue as liabilities against the repre- sentatives of a decedent debtor, are in general assignable ; all which do not thus survive, but which die with the person of the creditor or of the debtor, are not assignable. The first of these classes, according to the doctrine prevailing throughout the United States, includes all claims arising from contract, express or implied, with certain well- defined exceptions; and those arising from torts to real or personal property and from frauds, deceits and other wrongs whereby an estate, real or personal, is injured, diminished or damaged. The second class embraces all torts to the person or character, where the injury and damage arc confined to the body and the feelings; and also those contracts, often imi)lied, the breach of which jjroduces only direct injury and damage, bodily or mental, to the person, such as promises OPERATION AND DISCHARGE OF CONTRACTS 151 to marry, injuries done by the want of skill of a medical practitioner contrary to his implied undertaking, and the like ; and also those contracts, so long as they are executory, which stipulate solely for the special personal services, skill or knowledge of a contracting party. There is an exception to the effect that executory contracts for personal services involving a personal relation or confidence between the parties cannot be assigned. And another, equally well established and well-nigh as broad as the rule itself, is that executory contracts imposing liabilities or duties which in express terms or by fair in- tendment from the nature of the liabilities themselves import reliance on the character, skill, business standing or capacity of the parties, cannot be assigned by one without the assent of the other. It is contended that, by reason of those exceptions stated in the authorities referred to, the contract before us was not assignable so as to impose liability of performance on defendant lessee, but we think the position is not well taken. In the first place, the exception noted arises for the protection of the other party, and if such party assents, as he did in this instance, the restriction no longer exists. But, apart from this, it will be noted that the exception referred to does not arise or apply when the contract is entirely objective in its nature, and gives clear indication that the personality of the other contracting party was in no way considered. The contract in question was assignable. It was an ordinary business contract for the delivery of so much cord wood on the lessee's right of way, not requiring or importing any special reliance on Ives' skill or business qualifications. It could be performed as well by one man as another. As a matter of fact, there is testimony to the effect that it was to be done in this instance by convicts and that quarters had already been constructed for their protection and accommodation while doing the work. It was a contract of employment in the sense that it was to be performed by means of personal labor, but not in the sense that it was expected or intended that it should be performed by Ives. Nor did the credit or business responsibility of the original parties affect the matter one way or the other ; not that of Ives, for the wood was not to be paid for till it was delivered, and so the defendant assignee was fully protected; nor that of the assignor, for unless Ives had agreed to accept the defendant's responsibility in stead and place of the assignor, making it a new contract by way of novation, the assignor would, notwithstanding the assignment, still remain liable. This, ordinarily, is all the books mean when they state the propo- sition in general terms that a contract imposing liability cannot be assigned; that the assignment of such a contract does not, as a rule, relieve the assignor from responsibility. It may be well to note that we are speaking of the assignment of the contract and not of the transfer of the property about which parties may have contracted. In the last case it is a generally accepted doctrine that, in the absence of an agreement, express or implied, a party who buys property from a vendee to whom the owner has contracted to sell it, does not, as a 1^J COMMFKCIAI. LAW CASKS rule, ooino under personal obligation to the owner to pay the purchase price. 2. Assignment of Rights Not Yet in Existence. Taylor r. Barton Chihi Co. -"sS Mass. ij6. The Barton Child Coni^viny assii:nied its hook accounts due and which should become duo to McCarthy, who in turti assigned to the plaintitf. This bill is brought to enforce the i^ledge and trattsfer of the book accounts, against the trustee in bankruptcy of the Barton Child Company. Held, that there can in general be no assignment of things not yet in being. Rugg, C. J. The crucial question is whether the assig:nnient of book accounts, which are to come into existence in the future in connection with an established business, will be enforced in equity against a trustee in bankruptcy. It is a well recognized principle of the common law that a man cannot sell or mortgage property- which he does not possess and to which he has no title. The vendor must have a vested right in per- sonal property in order to be able to make a sale of it. "A man cannot grant or charge that which he hath not." There can be no present conveyance or transfer of property not in existence, or of property not in the possession of the seller to which he has no title. A sale of personal chattels is not good against creditors unless there has been a deliver^-. Manifestly there can be no deliven.- of chattels not in existence. In order that after acquired chattels may be brought under the lien of a mortgage, or of hj-pothecation. there must be some act of the parties subsequent to the time when such chattels come into existence and into the ownership and possession of the mortgagor. The mortgage is held not to have the etTect of changing the title to after acquired chattels without some further act of the parties. There is an exception at the common law to the effect that one may sell that in which he has a potential title although not present actual possession. The present owner might sell the wool to be grown upon his flock, the crop to be harvested from his tield or the young to be born of his herd, or assign the wages to be earned under existing employment. That principle of the common law has never been carried so far as to include the case at bar. The catch of fish expected to be made upon a voyage about to begin cannot be sold. There can be no sale of the wool of the sheep, the crop of a field, or the increase of herds not owned but to be bought, and there can be no assignment of wages to be earned under a contract of employ- ment to be made in the future. OPERATION AND DISCHARGE OF CONTRACTS 1 83 It is also the established doctrine in this Commonwealth that a mortgage of future acquired property will not be enforced in equity before actual possession taken by the mortgagee as against persons subsequently acquiring an interest therein for value and having possession. That has long been settled here, although the contrary rule prevails more widely. It would be anomalous for a court governed by these principles as to sales and mortgages of future acquired goods and chattels to hold that there could be an assignment of future acquired book accounts valid and enforceable under circum- stances where a like attempt to hypothecate future acquired chattels would be held unenforceable. Practical difficulties of no small consequence would be encountered in the operation of the contrary doctrine. Assignments of book accounts do not require recording or any public act for their validity. Notice need not be given in order that they be valid against third persons. Merchants and manufacturers well might acquire a con- siderable credit upon the supposed strength of book accounts which later might turn out to have been assigned long before they came into existence. A door would be opened for the accomplishment of fraud in business. There are decisions by the courts of other jurisdictions where a contrary result has been reached. The principles and spirit of our jurisprudence have been that owners of personal propert>' ought not to acquire any false credit by creating incumbrances more or less secret and unknown to the world upon property of which they are to come into possession in the future as ostensible owners in absolute right. In the light of these decisions it would be illogical and discordant with the policy of our law to uphold the assignment in the case at bar. 3. Assignment of Future Wages. Rodijkeit v. Andrews. 7^ Oh. St. 104. Rodijkeit assigned his wages to become due from the L. S. & M. S. Railroad to Andrews for a valuable consideration. Rodij- keit now sues the railroad for his wages, in spite of the previous assignment. Held, that an assignment of future wages is valid if they are to be earned under an existing employment. Summers, J. The question presented is the right of a person in the employ of another, in the absence of a contract for a definite time of employ- ment, to assign future earnings from such employment. It is well settled that a mere expectancy or possibility is not assignable at law-; consequently wages to be earned in the future, not under an existing engagement but under engagements subsequently 184 COMMERCIAL LAW CASES to be made, are not assignable. If there is an existing employment, under which it may reasonably be expected that the wages assigned will be earned, then the possibility is coupled with an interest and the wages may be assigned. Some' of the early cases were to the effect that the engagement must be for a time covering the wages assigned. And later cases held that the assignment was valid although the engagement was subject to be terminated at any time. But in Kane v. Clough, 36 Mich. 436, Cooley, C. J., states that he is unable to distinguish a case of existing employment merely, where there is no contract for a definite time, but only an employment, and an expectation of continuous work, from a case of an existing contract for a fixed time but subject to the right to discharge at will, and, accordingly, it is there ruled that an assignment of wages to be earned in the future under an existing employment is valid. "An assignment of his wages by a laborer, executed when he is not engaged in, and not under contract for, the employment in which the wages are to be earned, is too vague and uncertain to be sustained as a valid assignment and transfer of property." But "an assignment of wages expected to be earned in the future in a specified employ- ment, though not under an existing employment or contract, is valid in equity." The reason such an assignment is not good at law but may be in equity is tersely stated thus : "To make a grant or assign- ment valid at law, the thing which is the subject of it must have an existence, actual or potential, at the time of such grant or assignment. But courts of equity support assignments of contingent interests and expectations, and also of things which have no present actual or potential existence, but rest in mere possibility only." 4. Assignment of Contract Involving Personal Credit. Arkansas Valley Smelting Co. v. Belden Mining Co. I2y U. S. 379- The Belden Mining Company made a contract in writing with Billing and Eilers to deliver lead ore to Billing and Eilers, pay- ment to be made in accordance with an assay to be taken. The firm of Billing & Eilers was dissolved and the contract assigned to Billing who in turn assigned the contract to the Arkansas Valley Smelting Company, the plaintiff. The Belden Company thereupon refused to perform the contract. Held, that when a contract involves personal credit, it is not assignable. Gray, J. 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 OPERATION AND DISCHARGE OF CONTRACTS 185 terms of the contract, whether by requiring something to be after- wards 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. In the familiar phrase of Lord Denman, "You have the right to the benefit you anticipate from the character, credit and substance of the party with whom you contract." The rule upon this subject, as applicable to the case at bar, is well expressed in a recent English treatise. "Rights arising. out of contract cannot be transferred 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." The contract here sued on was one by which the defendant agreed to deliver ten thousand tons of lead ore from its mines to Billing and Eilers at their smelting works. The price was not fixed by the contract, or payable upon the delivery of the ore. During the time that must elapse between the delivery of the ore, and the ascer- tainment and payment of the price, the defendant had no security for its payment except in the character and solvency of Billing and Eilers. The defendant, therefore, could not be compelled to accept the liability of any other person or corporation as a substitute for the liability of those with whom it had contracted. The cases tending to support this action are distinguishable from the case at bar, and the principal ones may be classified as follows : First. Cases of agreements to sell and deliver goods for a fixed price, payable in cash on delivery, in which the owner would receive the price at the time of parting with his property. Nothing further would remain to be done by the purchaser, and the rights of the seller could not be affected by the question whether the price was paid by the person with whom he originally contracted or by an assignee. Second. Cases upon the question how far executors succeed to rights and liabilities under a contract of their testator. Assignment by operation of law, as in the case of an executor, is quite different from assignment by act of the party ; and the one might be held to have been in the contemplation of the parties to this contract although the other was not. A lease, for instance, even if containing an express covenant against assignment by the lessee, passes to his executor. And it is by no means clear that an executor would be bound to perform, or would be entitled to the benefit of, such a con- tract as that now in question. Third. Cases of assignments by contractors for public works, in which the contracts, and the statutes under which they were made, were held to permit all persons to bid for the contracts, and to execute them through third persons. Fourth. Other cases of contracts assigned by the party who was to do certain work, not by the party who was to pay for it, and in l86 COMMERCIAL LAW CASES which the question was whether the work was of such a nature that it was intended to be performed by the original contractor only, 5. Assignment of Part of Debt Due. James v. City of Neivton. 142 Mass. j66. Stewart entered into a written contract with the city of Newton to build a school house. He made an assignment to the plaintiff of $600 of the money to become due to him from the city, to be paid out of the money reserved by the city on the guaranty of per- formance. Gilkey was appointed assignee in insolvency of Stew- art's property, and the question now arises whether the assignment of part of the amount due is valid. Held, that in equity an assignment of part of a credit may be made although the rule is different at law. Field, J. Courts of law originally refused to recognize any assignments of choses in action made without the assent of the debtor, but for a long time they have recognized and enforced assignments of the whole of a debt, by permitting the assignee to sue in the name of the assignor under an implied power which they hold to be irre- vocable. Partial assignments such courts have never recognized, because they hold that an entire debt cannot be divided into parts by the creditor without the consent of the debtor. It is not wholly a question of procedure, although the common law procedure is not adapted to determining the rights of different claimants to parts of a fund or debt. The rule has been established, partially at least, on the ground of the entirety of the contract, because it is held that a creditor cannot sue his debtor for a part of an entire debt, and, if he brings such an action and recovers judgment, the judgment is a bar to an action to recover the remaiiiing part. There must be dis- tinct promises in order to maintain more than one action. It is said that, in equity, there may be, without the consent of the debtor, an assignment of a part of an entire debt. It is conceded that, as between assignor and assignee, there may be such an assign- ment. In many jurisdictions, courts of equity have gone further, and have held that an assignment of a part of a fund or debt may be enforced in equity by a bill brought by the assignee against the debtor and assignor while the debt remains unpaid. The procedure in equity is adai)ted to determining and enforcing all the rights of the parties, and the debtor can ]iay the fund or debt into court, have his costs if he is entitled to them, and thus be compensated for any expense or trouble to which he may have been jnit by the assignment. But some courts of equity have gone still further, and have held that after notice of a i)artial assignment of a debt, the debtor cannot rightfully pay the sum assigned to his creditor, and, if he docs, that OPERATION AND DISCHARGE OF CONTRACTS iS/ this is no defense to a bill by the assignee. The doctrine carried to this extent effects a substantial change in the law. Under the old rule, the debtor could with safety settle with his creditor and pay him, unless he had notice or knowledge of an assignment of the whole of the debt; under this rule, he cannot, if he have notice or knowledge of an assignment of any part of it. 6. Form of Assignment. Moore v. Loivrey. 2^ la. ?jd. Miles & Keeler owed money to Fowler & Munson. They requested Lowrey to pay a balance due them to Fowler & Mim- son, or order, intending thereby to transfer and assign the claim against Lowrey to Fowler and Munson. The plaintiff, a creditor of Miles & Keeler, seeks to have this assignment set aside on the ground that its form was improper. Held, that no particular form is necessary to constitute an assignment. Beck, J. No particular form is necessary to constitute an assignment of a debt. If the intent of the parties to effect an assignment be clearly established, that is sufficient. Neither is it necessary that the assign- ment be in writing. If in writing, it may be in the form of an agree- ment, an order, or of any other instrument which the parties may use for that purpose. Neither is it necessary that the intent and the contract of the parties fully appear in the writing, but they may be otherwise shown. It is objected, that the order is negotiable, and was not taken by the intervenors in payment pro tanto of their claims upon Miles & Keeler. These facts may be admitted, yet it does not follow that the assignment is thereby defeated. If the assignment of the debt was made in good faith, and the order given for the purpose of effectuat- ing its collection, the negotiability of the order certainly could not defeat the assignment. 7. Rights of Assignee after Notice to Debtor. Brice v. Bannister. L. R. j Q.B.D. (Eng.) ^6p. Gough, who had agreed to build a ship for Bannister, assigned iioo of the money to become due, to Brice. Brice gave notice of the assignment to Bannister. Subsequently Bannister paid Gough all the money due under the contract. Brice sties for the amount assigned to him. Held, that after notice of assignment, the rights of the as- signee cannot be divested by the assignor and debtor. l88 COMMERCIAL LAW CASES Cotton, L. J. It was urged that the assignee of a chose in action takes subject to all equities. But these must be equities existing or arising out of circumstances existing before notice is given of the assignment; the advances made by the defendant were in no way sanctioned by the contract, and in no sense an equity between Gough and the defendant existing or arising from circumstances existing at the date of the notice to the defendant of the assignment to the plaintiff. The plaintiff was assignee for value of the moneys payable under the contract, without any deduction for cost of materials or other costs of construction. The defendant, for his own purposes, determined not to complete the ship himself, but to let Gough do so under the contract. To enable him to do so, he, after notice of the assignment to the plaintiff, paid money to Gough so as to exhaust the contract price. By so doing, he could not, in my opinion, defeat or prejudice the plaintiff's right. Brannvell, L. J, If Gough had broken his engagement, or threatened to break his engagement to finish the vessel, or to finish it in a reasonable time, and the defendant to remedy and avert such breach, reasonably and bona fide, not to defeat the plaintiff but to protect himself, advanced money to Gough before it was done, so that it never became due according to the contract, I should have hesitated long before holding that the defendant was liable in this action. But the defendant's advancing of the money as he did was quite voluntary and in no sense compulsory. 8. Assignee Takes Subject to Equities against Assignor. The Goshen National Bank v. Bingham. ii8 N. Y. ^49. Brown fraudulently secured the certification by the Goshen Bank of his personal check, and in exchange for this check, which he neglected to indorse, procured a check from Bingham & Co. which he cashed. He then left for Canada. Bingham & Co. subse- quently got from Brown a power of attorney to indorse the certi- fied check which they had received from him, and sue to recover the amount from the bank. Held, that the transfer of an unindorsed negotiable instrument is like any other assignment ; the assignee is bound by equities against the assignor. Parker, J . As against Brown, to whose order the check was payable, the bank had a good defense. But it could not defeat a recovery by a bona fide holder to whom the check had been indorsed for value. By OPERATION AND DISCHARGE OF CONTRACTS 1 89 an oversight on the part of both Brown and Bingham & Co., the check was accepted and cashed without the indorsement of the payee. Before the authority to indorse the name of the payee upon the check was procured and its subsequent indorsement thereon, Bingham & Co. had notice of the fraud which constituted a defense for the bank as against Brown. It is too well settled by authority, both in England and in this country, to permit of questioning, that the purchaser of a draft, or check, who obtains title without an indorsement by the payee, holds it subject to all equities and defenses existing between tlie original parties, even though he has paid full consideration, without notice of the existence of such equities and defenses. The general rule is that no one can transfer a better title than he possesses. An exception arises out of the rule of the law merchant, as to negotiable instruments. It is founded on the com- mercial policy of sustaining the credit of commercial paper. Being treated as currency in commercial transactions, such instruments are subject to the same rule as money. If transferred by indorsement, for value, in good faith and before maturity, they become available in the hands of the holder, notwithstanding the existence of equities and defenses which would have rendered them unavailable in the hands of a prior holder. This rule is only applicable to negotiable instruments which are negotiated according to the law merchant. When, as in this case, such an instrument is transferred but without an indorsement, it is treated as a chose in action assigned to the purchaser. The assignee acquires all the title of the assignor and may maintain an action thereon in his own name. And like other choses in action it is subject to all the equities and defenses existing in favor of the maker or acceptor against the previous holder. Prior to the indorsement of this check, therefore, Bingham & Co. were subject to the defense existing in favor of the bank as against Brown, the payee. It would seem, therefore, that having taken title by assignment, for such was the legal effect of the transaction, by reason of which the defense of the bank against Brown became effectual as a defense against a recovery on the check in the hands of the plaintiffs as well, ];rown and Bingham & Co. could not, by any subsequent agree- ment or act, so change the legal character of the transfer as to affect the equities and rights which had accrued to the bank. The subse- quent act of indorsement could not relate back so as to destroy the intervening rights and remedies of a third party. 9. Rights of Successive Assignees. Phillips's Estate. No. 5. 205 Pa. 515. Moses assigned his interest in the Phillips estate to four persons for varied amounts, the aggregate of which exceeded his IQO COMMERCIAL LAW CASES interest. The Life Insurance Company, one of the assignees, claims priority over other assignees, although third in point of date, because it first gave notice of the assignment. Held, that in Pennsylvania, as between successive assignees the one first giving notice is entitled to the property assigned. How far, as between successive assignees of a fund in the hands of a third person, notice of the assignment to such person is necessary to complete the title of the assignee as against a subsequent assignee having no actual knowledge of the prior assignment, who gives such notice, does not appear to have been decided in Pennsylvania, though it has been held that an assignment is good without notice, as against a subsequent attachment. But an attaching creditor stands precisely in the position of the assignor, with only such rights as he has against his assignee ; while the rights of a subsequent purchaser for value depend upon entirely different considerations. In England and in many of the states of the union it is perfectly well settled that the title of an assignee does not become complete until he has given notice, and the rule is that the assignees have priority according to the priority of notice. A different doctrine, it appears, however, is held in some of the states, where, between different assignees of a chose in action, he who is first in time is first in right, notwithstanding he has given no notice to the debtor or the subsequent assignee, though the debtor will be protected if he has made payment to the assignor or to the second assignee before notice of the prior assign- ment. '"The American decisions upon this subject cannot be reconciled. In England and in some of the states the rule giving to the assignee who first notifies the debtor party or trustee a precedence over all others, even those who are earlier in date, furnishes a certain and simple criterion for determining the priority, it being remembered that this rule is confined to pure personal things in action, and does not extend to liens and other equitable interests in real estate. In the states where the rule referred to does not prevail, the question must turn upon other doctrines. If the interests are equitable in their nature, and the equity of the assignee is intrinsically superior to the others, the settled principles of equity should control, that the order of time determines the order of priority ; or in other words, that the subsequent assignee takes subject to the rights of the one prior in time; and this principle has been applied in such cases by many able decisions. On the other hand, if the subsequent assignee has acquired the legal title, and was a purchaser for a valuable consideration and without notice, he is protected, and this doctrine of bona fide purchase seems to have been extended, by some decisions, to subsequent as- signees who had only obtained an equitable interest." The analogies with regard to sales of personal property in pos- session are certainly in favor of the view taken in tlie decisions last referred to, the vendee, in such case, being required, for the protection of subsequent purchasers, to take possession to the exclusion of the OPERATION AND DISCHARGE OF CONTRACTS IQI vendor where the property is capable of actual possession, or by assuming such open ownership as the case admits of, where it is not. Why should a different rule apply to purchases of choses in action? Why should the purchaser not be required to do all that lies in his power to make it impossible for the assignor to commit a fraud or to do an injury to subsequent purchasers, relying on his integrity and having no means of knowing that he has ceased to be the owner except by inquiry of the person in whose hands the fund is? The failure to give notice to such person puts it in the power of the assignor to do this wrong, and the consequences of the failure ought, therefore, to be upon him who commits it. (The foregoing excerpt is taken from the opinion of the District Court, whose judgment was affirmed on appeal.) 10. Assignment by Death. Billings's Appeal. io6 Pa. 558. Billings made a written contract with Colton whereby Colton was to cut pine timber from land of Billings. Colton then con- tracted with Putnam that Putnam should do part of the work. Billings and Colton both died and the question is raised in the administration of the Billings estate whether the contract in ref- erence to the cutting of the timber was thereby terminated. Held, that a contract which does not involve personal service may be enforced by or against an executor or administrator. Clark, J. The plaintiffs maintain that the contract under which the de- fendants assume to act is personal in its character; that it provides for the performance of such services, and the exercise of such per- sonal skill and experience upon the part of Colton, in the matters involved, as necessarily limited its performance to Colton himself; and, further, that the contract is such that at the death of Billings, its continuance devolved such duties and created such obligations upon his legal representatives as are inconsistent with the settlement of his estate ; that, therefore, the survival of the contract was neces- sarily not in contemplation of the parties at the time of its execution. It is urged, therefore, that upon the death of either party, the obliga- tion of the contract ceased as to both. It is certainly true that the rights and responsibilities of executors and administrators depend, in many cases, upon the relations of the original parties ; the former do not, in all cases, succeed to the con- tracts of the latter; what may be termed mere contract, personal relations do not survive. Where the agreement is for services which involve the peculiar skill of an expert, by whom alone the particular work in contemplation of the parties can be performed, or more generally, where distinctly personal considerations are at the founda- 192 COMMERCIAL LAW CASES tion of the contract, the relation of the parties is dissolved by the death of him whose personal quaHties constituted the particular inducement to the contract. The casus must be such, however, as to wholly prevent the performance of the contract; what is impossible to be done cannot be required to be done, and a subsequent interven- ing incapacity will, in such case, work a dissolution of the contract. But where a party agrees to do that which does not necessarily require him to perform in person (that which he may, by assignment of his contract or otherwise, employ others to do), we may fairly infer, unless otherwise expressed, that a mere personal relation was not contemplated. It is true, also, perhaps, that a contract may involve matters of such a nature as to render the performance of them so incompatible with the settlement of a decedent's estate, and so incon- sistent with the general duties of an administrator or executor that, in the absence of any express provision to the contrary, the parties may be presumed to have intended its dissolution at death. The whole question in each case is one for construction, and depends upon the intention of the parties, that intention to be found under the rules regulating the construction of contracts in general. Resorting in the first instance to the instrument itself, we find there an express provision that for the faithful performance of each and every the covenants and agreements aforesaid, each of said parties doth bind himself, his heirs, executors and administrators, to the other, his heirs, executors and administrators, firmly by these presents. We discover nothing in the nature of the obligation assumed, or of the duties to be performed on either side that would tend to create any merely personal relation between the parties, or involve such a performance as would indicate that a survival of the contract was not in contemplation; a contrary intention, however, is distinctly shown by the subsequent conduct of the parties. II. Assignment by Bankruptcy. In re Wright, i^j Fed. ^44. Wright, a bankrupt, was entitled to commissions upon renewal premiums on insurance policies. A creditor applied for an order to have this interest assigned to the trustee in bankruptcy. Held, that under the bankruptcy act, this was property of the bankrupt which he might have transferred and which, therefore, passes to his trustee. Noyes, Cir. J . Section 70 of the bankrupt act (Act July i, 1898, c. 541) provides that the trustee shall be vested with "the title of the bankrupt, as of the date he was adjudged a bankrupt, except so far as it is property whicli is exempt." It may be conceded tliat this contract as a whole is based upon OPERATION AND DISCHARGE OF CONTRACTS I93 personal trust and confidence, and is not assignable. But there is a difference between an absolute assignment of a contract and an assign- ment of rights under a contract. The personal confidence which precludes the transfer of rights arising out of a contract must be involved in the nature of the rights themselves. It is not ordinarily- involved in the right to receive moneys due or to grow due under a contract, and this right is generally assignable without the consent of the other party. The right to receive the renewal commissions under the present contract, which is the right involved in the question certi- fied, seems not to involve personal confidence. The contracts of insurance have already been obtained. The collection of renewal premiums is largely a ministerial act. It is possible that, if the interests under the contract are transferred to the trustee, the insur- ance company may defeat the object of the transfer by withholding its consent. But the fact that the interest is defeasible does not prevent its transfer. Defeasible and contingent interests of this nature are assignable. C. Joint and Several Contracts. I. Intent to Make Joint or Several Contract. Keightley v. Watson, j Ex. Rep. (Eng.) /i6. Dobbs, Keightley and R. and H. Watson entered into an agree- ment under seal whereby Dobbs agreed to buy certain land from Keightley, and resell it to the Watsons and another. The Watsons made separate covenants with Dobbs and with Keightley that they would pay the remainder of the purchase money, if any was due. Upon a suit by Keightley against the Watsons for the remainder of the purchase price, it was insisted that this was a joint contract and that Dobbs should have been made a party to it. Held, that a contract is to be construed as a joint, or as a several, contract according to the expressed intent of the parties. Pollock, C. B. The inquiry really is as to the true meaning of the covenant, at the same time bearing in mind the rule — a rule which I am by no means willing to break in upon — that the same covenant cannot be treated as joint or several at the option of the covenantee. If a covenant be so constructed as to be ambiguous, that is, so as to serve either the one view or the other, then it will be joint if the interest be joint, and it will be several if the interest be several. On the other hand, if it be in its terms unmistakably joint, then, although the interest be several, all the parties must be joined in the action. So, if the covenant be made clearly several, the action must be several, although the interest be joint. It is a question of construe- 194 COMMERCIAL LAW CASES tion. What, then, in this case, did the parties mean ? The words of the covenant are, "And the said R. Watson, H. Watson, . . . for themselves, their heirs, executors, administrators, hereby covenant with the said W. T. Keightley, his executors, administrators, and assigns, and as a separate covenant with the said A. A. Dobbs, his executors, administrators, and assigns, that they" will do so and so. If I am to put a construction upon that, I should say that it is intended to be a several or separate covenant. The words of this instrument are several, and its terms disclose a several interest ; the covenant, therefore, must be construed according to the words as a several covenant, and it appears to me that the words used by the parties were intended to create such a covenant. I think, therefore, that the plaintiff is entitled to sue alone. 2. Suit against Joint Contractors. State of Maine v. Chandler, /p Me. i'/2. The state sues the defendants as sureties on a joint and sev- eral bail bond of one Condon, who was indicted. They insist that Condon should have been made a party to the suit. Held, that joint and several contractors must be sued either to- gether or each severally. Foster, J. It is elementary law that where three or more parties contract jointly and severally, all are to be sued in one action, or each may be sued severally. It is improper, as all the authorities hold, to join two and omit the others, for in such case they are sued neither jointly nor severally, as they promised. And in case the plaintiff does not see fit to proceed against them severally, it is the undoubted right of the defendants to have all their joint promisors or obligors joined with them in the suit. This action, then, must stand or fall like any other founded upon contract. It is brought against two only of the three parties who jointly and severally recognized to the state — now plaintiff in this suit. It is not brought against them in accordance with their obligation entered into by them. They are sued neither jointly nor severally. There are too many joined as defendants to correspond with their several obligation — too few to correspond with it as joint. This being so, the misjoinder in the one case, or the non-joinder in the other, as we have said, is good ground of demurrer, since the fact appears upon the face of the plaintiff's declaration that there was a joint and several obligation entered into by three, all of whom are known as well to the plaintiff as to the defendants in this suit. It makes no difference that one of the recognizors was the prin- cipal in the criminal process, and the other two were his sureties. The recognizance itself determines the liability of the parties, and, OPERATION AND DISCHARGE OF CONTRACTS I95 as appears from the record, that liability was joint and several in relation to the three parties who became bound by it. It was not a joint and several undertaking on the part of the sureties only; and the plaintifif cannot by its pleading change their liability from that which they assumed. 3. Suits on Joint Contracts When Some of the Joint Con- tractors are Outside the Jurisdiction. Rand v. Nutter. ^6 Me. S39- Rand sued G. H. Chadwick, W. F. Chadwick and Nutter jointly on a joint debt. Nutter was the only one within the juris- diction of the state and Rand discontinued suit against the others. Held, that when some of the joint contractors are outside the jurisdiction, the action may be brought against the rest. Appleton, C. J. The rule of the common law is well established that, in case of joint and several liability, the suit may be joint or several. But when the claim is joint, the action must be against all who are jointly liable. If a suit is brought against one, the non-joinder of the others may be pleaded in abatement, but if not so pleaded, the judgment thus obtained may be pleaded in bar to a suit brought against the others. Thus, if two are jointly liable upon a note or other joint liability, a judgment against one is a bar to a suit against the other, the cause of action being merged in the judgment thus obtained. To this rule there are exceptions. In joint actions, there may be a severance by operation of law, as by bankruptcy, infancy, etc. ; in such case, the plaintiff may pro- ceed without joining those having special discharge. So, where there are several defendants sued on a joint demand, and some are without the jurisdiction and having no property within the same, the plaintiff may cause his writ to be served on those within the state, and proceed against them for a breach of the contract. If one of two joint promisors have neither domicile nor property in this state, a separate action may be maintained against the other. Neither is a judgment in another state against one of two joint promisors, without satis- faction, a bar to an action in this state against the other upon the joint contract. When one of two joint contractors is without the state, as appears by the officer's return, so that no service can be made upon him, judgment may be rendered against such of the joint contractors as are found within the jurisdiction, and such judgment, remaining unsatisfied, is no bar to a subsequent suit and judgment against the remaining signer or signers. 196 COMMERCIAL LAW CASES 4, Release of One Joint Debtor. In re E. IV. A., a Debtor. ( 1901) 2 K. B. (Eng.) 642. A bank obtained a joint and several judgment against the debtor and B., and presented a petition in bankruptcy against B. That petition was withdrawn upon terms emhodied in a receipt in full discharge of all guaranties, given to B. by the bank for £3000. The bank then presented a petition against the debtor for the alleged balance. Held, that a receipt, amounting to an accord and satisfaction, equivalent to a release of one of two joint and several debtors, will release both. Collins, L. J. The debt upon which the petition was founded in this case is a debt on a joint and several judgment which was given in respect of the joint and several liability of the debtor under a guarantee; and the ground of the appeal is that the liability of the debtor has been released by reason of the fact that a release had been given to his joint debtor. After that arrangement was made with B, these proceedings in bankruptcy were commenced against the present debtor, and his answer to them is that this document, when properly considered, amounts to an accord and satisfaction which is equivalent to a release of the joint debt which was the foundation of the judgment, and is, therefore, a satisfaction of his liability under the judgment. The question really turns on this, whether or not this document has the effect of accord and satisfaction in getting rid of the joint and several liabiHty of B under the judgment. If it has that effect, it is not disputed that the rule of law applies, namely, that the release of one of two joint debtors has the effect of releasing the other. It is clear that, although a document in terms purports to release one of two joint debtors, yet it may contain in terms a reservation of rights against the other joint debtor. Where you find those two provisions you construe the document, not as a release, but merely as an undertaking not to sue a particular in- dividual, and the result is that the right to proceed against the co-debtor is reserved and can be put in force against him. When- ever you can find from the terms of the document an agreement for the reservation of rights against the co-debtor, then, I agree, the document cannot be construed as an accord and satisfaction of the joint debt, and, therefore, as a release of the co-debtor. But it appears to me that, on the face of this document, there is no in- tention shown so to limit its effect, and that it is framed in the widest possible terms so as to cover, not only this particular debt, but all other claims by the bank in connection with the Profes- sional and Trades Papers, Limited, for it is admitted that the OPERATION AND DISCHARGE OF CONTRACTS IQ/ foundation of the judgment was the guarantee, and at the time this document was drawn up there was this joint Hability on the judgment to the extent of £6000. And there is this circumstance to be ob- served, that this document expressly states that the cash and bills are accepted "in full discharge of all claims by the Capital and Counties Bank, Limited, against Mr. B in connection with the Professional and Trades Papers, Limited." Now, having regard to the fact that the fundamental claim against B was the judgment for £6000, it is impossible to say that this judgment is not one of the "claims" within the words I have read. The person giving it may not realize the full legal consequences of it as regards the release of the co-debtor; but that is not, in my opinion, a sufficient ground for reading into the document some- thing that is not expressed in it; and unless you find in it some- thing qualifying the general words, it appears to me that the legal consequences of the general words of discharge must follow, not- withstanding that those consequences may go beyond what the person giving the document would have intended if they had been pointed out to him at the time, and if he had had an opportunity of addressing his mind to them. 5. Suit by Joint Contractors. Capen v. Barrows, i Gray (Mass.) j/d. Capen, Clapp, and Barrows formed a partnership, agreeing to give their whole time and attention to the business. This Barrows did not do, and Capen sues him at law without jdining Clapp. Held, that one of several joint contractors cannot sue sepa- rately. (The action could not be maintained for the further reason that suits between partners must as a general rule be brought in equity.) Metcalf, J. The defendant's covenants, declared on in this case, were made with the plaintiff and Clapp jointly and not severally, and there- fore if an action at law can be maintained on those covenants, it must be an action by the plaintiff and Clapp. It is a settled rule of construction, that when the legal interest in a covenant and in the cause of action thereon is joint, the covenant is joint, although it may, in its terms, be several, or joint and several, "i. Where the covenant is in its terms several, but the interest of the cove- nantees is joint, they must join in suing upon the covenant. 2. Where the covenant is in its terms expressly and positively joint, the cov- enantees must join in an action upon the covenant, although as be- tween themselves their interest is several. 3. Where the language of the covenant is capable of being so construed, it shall be taken to be joint or several, according to the interest of the covenantees." 198 COMMERCIAL LAW CASES The present case comes within the third of the foregoing rules. The covenants in suit, not being in terms either joint or several, are capable of being construed according to the interest of the covenantees. And their interest, legal and beneficial, is clearly joint and not several. They were co-partners, and the interest of each is the same in kind and amount, and each is equally injured by a breach of those covenants. And the defendant ought not to be held liable to two actions for the same breach. 6. Right of Joint Contractor to Contribution from the Others. Putnam v. MisocJii. i8p Mass. 421. Putnam, a stockholder of a Maine corporation, who had been forced to pay judgment creditors of the corporation to«the amount of his unpaid subscription, seeks to recover from Misochi and others, also stockholders whose subscriptions were not fully paid, their proportionate share of stich payments. Held, that a person jointly liable with others for a debt which he alone is forced to pay, is entitled to contribution from the others. Knowlton, C. J. It is a familiar principle that, when several parties are equally liable for the same debt and one is compelled to pay the whole of it, he may have contribution against the others to obtain from them the payment of their respective shares. This right to con- tribution is not founded upon contract, but upon a principle of natural equity and justice. "The doctrine of contribution rests on the principle that when the parties stand in eqiiali jure, the law requires equality which is equity, and one of them shall not be obliged to bear the burden in ease of the rest. It is founded, not on contract, but on the principle that equality of burden as to common right, is equity. And the obligation to contribute arises from the nature of the relation between the parties." The prin- ciple has long been applied to the liability of stockholders in cor- porations for the corporate debts. "A court of chancery will compel subscribers to pay in full the amount of their unpaid subscriptions if the corporate indebtedness make it necessary, leaving them to seek contribution from the other stockholders. The rule, however, is well settled that a stockholder who has been compelled to pay more than his proportion of the debts of the company may maintain an action against his co-stockholders for contribution." The neglect of a sub.scriber for stock to pay for it in full is not a tort, which deprives him of his right to contrilnition ; but it leaves him in the position of a surety, who is liable for a debt equally with other sureties. This is recognized in the numerous suits for contribution by stock- holders which are sustained by the courts. OPERATION AND DISCHARGE OF CONTRACTS I99 The fact that the plaintiff, after satisfying the judgment, made no demand upon the corporation and took no action against it, under the Revised Statutes of Maine, does not affect his right to contribution. The contribution should be decreed against the solvent defend- ants who are w^ithin this jurisdiction. II. CONSTRUCTION OF CONTRACTS. Contracts are to be interpreted by the following rules : 1. The contract will be given that meaning which makes it valid, rather than invalid, and reasonable rather than unreasonable. The meaning of general words will be restricted to the parts of the contract to which they are intended to apply. Obvious mistakes of writing or grammar, incltiding punctuation, will be corrected. 2. Words are to be understood in their plain and literal mean- ing, though technical words are to be given their technical construc- tion. Words are construed most strongly against the party who has used them. When there is a confliction between printed and written words, the latter control. 3. Usage may vary the usual meaning of words. In order that it shall affect a contract, it must have existed at the time the contract was made ; be general, definite, reasonable, and not op- pressive ; and not inconsistent with any rule of law or with the terms of the contract. 4. If the meaning of the contract is doubtful, the construction given by the parties is of weight in determining the true meaning. Terms obviously intended to be included in the contract may be read into it, and the law will itself imply necessary terms which have been omitted through oversight. When no time for performance is fixed, the contract is con- sidered to intend a reasonable time. Time itself is generally not of the essence of the contract, unless it appears that such is the intention of the parties. From this, it ordinarily follows that a party in default on account of time may sue upon the contract, and only such damages as proximately result from his failure to complete the contract within the time specified will be deducted. The parties may, however, make time a condition of the contract. Equity is somewhat more liberal in regard to stipulations as to time than are the courts of law. Terms of a contract to be performed by the respective parties may be independent of each other or the}' may each be dependent 200 COMMERCIAL LAW CASES upon the performance of the other. Terms are construed to be independent if an absokite promise is given in return for another equally absolute promise. When a contract is divisible, a breach of one promise will not discharge the whole contract but will warrant damages only to the extent of that breach. Failure to perform a subsidiary promise, whether independent or dependent, will not discharge the contract unless it is vital to the obligation. Dependent terms, generally conditions of the contract, are classified as conditions precedent, concurrent, and subsequent. A condition precedent is a term which must be performed by one party before there is any obligation of performance on the other ; a condition concurrent, generally impossible except in contemplation of law, is similar to a condition precedent and must be performed con- currently with performance by the other party ; a condition subse- quent is a condition which operates to discharge an existing obli- gation of performance upon the occurrence of circumstances con- templated by the contract. A. Legal Effect of Language. I. Intent of Parties. Hawes v. Smith. 12 Me. 42^. Smith went bail for Nealley, who had been arrested on civil process by Hawes and Lyon. He agreed in consideration of the release of Nealley to pay "all sums of money as may now be due and owing from the said Nealley, whether on note or account." Hawes contends that this included notes made but not yet payable. Held, that contracts are to be interpreted according to the intent of the parties. Parris, J. If such was the understanding of the parties, if they made such a contract, they are to be held to it. It is our business to enforce, not to make, contracts for parties. But it is not for us to enforce as an aj^reement what the parties never assented to. It is admitted that the language of the promise, according to its strict legal import, might embrace all that is contended for by the plaintiff. But cases often arise wliere the meaning of language is to be accommodated to the situation and circumstances of the parties using it. Nothing can be more equitable than that the situation of the parties, the subject matter of their transactions and tile whole language of their instruments should have operation in settling the legal effect of their contract; — and it would be a disgrace to any system of jurisprudence to permit one party to catch OPERATION AND DISCHARGE OF CONTRACTS 20I another, contrary to the spirit of their contract, by a form of words which perhaps neither party understood. The maxims for the exposition of contracts are simple and consistent, and well calculated to effect their sole object; namely, to do justice between the parties by enforcing a performance of their agreement, according to the sense in which they mutually understood it at the time it was made; — and all latitude of construc- tion must submit to this restriction, that the words and language of the instrument bear the sense intended to be put upon them. The plain, ordinary and popular sense or meaning of the terms adopted by the parties shall prevail. It never was a rule of con- struction that the words in a contract were to be taken in their technical sense, but according to their proper and most known sig- nification, that which is most in use. The necessary use of par- ticular technical expression is chiefly regarded in the sense of law terms. The rules laid down in respect to the construction of contracts are founded in law, reason and common sense ; that they shall operate according to the intention of the parties, if by law they may; and if they cannot operate in one form, they shall operate in that which by law will effectuate the intention. In the construction of agreements the intention of the parties is principally to be attended to. We can have no doubt from the situation, circumstances and objects of the parties, as they are developed in their written agree- ment, that the phraseology, "all such sums of money as may now be due and owing, whether on note or account," was supposed and in- tended to mean and include only such as were then payable, and for the recovery of which Neally had been arrested, and this, no doubt, would be considered the popular meaning of such language, although we admit that the strict technical or legal significance of the terms may be different. 2. Correction of Obvious Mistakes. Sisson V. Donnelly, jd A^. /. L. 4^2. Peters gave a deed to Harrison without inserting the word "heirs" in the deed, the legal effect of which omission was that Harrison received only a life estate. A second instrument under seal was prepared between Peters as party of the first part, Har- rison as party of the second part, and Burden as party of the third part, which recited that Peters had previously mortgaged the premises to Burden giving him by mistake only a life estate, and that Peters and Harrison agreed that Burden should take a fee simple. The lower court held that this deed was sufficient to vest the fee in Harrison without recourse to the previous deed, as it ran to "the party of the second part," instead of to "the party of the third part," as was intended. The plaintiff, Sisson, had a 202 COMMERCIAL LAW CASES deed from Peters' heir conveying full ownership to him, and brings this suit to establish his title. Held, that obvious mistakes in a written instrument may be corrected. Beasley, C. J. The intention of the parties is clear on the face of the con- veyance, the only question being whether or not the deed can be read so as to effectuate such intention. The rule of construction, which is universal and is applicable to conveyances as well as to all other kinds of deeds is that it "be favorable and as near the minds and apparent intents of the parties as it possibly may be, and the law will permit." This has ever since and in a great multitude of cases, been recognized as the leading canon in giving effect to every variety of written instruments. "The primary object of inquiry is the intention of the parties, and where that is on the face of the instrument, clearly and satisfactorily ascertained, and found not to be contrary to any rule of law, the court is bound, if the words will admit of a construction conform- able to the intention, to adopt that construction, however contrary it may be to technical meaning and inference." It will be observed that by the limitations of the rule itself, the intention is to be enforced whenever "the law will permit." I take that to mean that the intention will prevail whenever such intention is unmistakably manifested, having regard to all parts of the instrument, unless the law requires the use of technical terms to effectuate such intention, or unless such intent is contrary to legal rules. The first of these classes of cases is aptly exemplified by the imperfect form of the deed to which I first called attention. It created but a life estate, and it was insisted that the intention was to create a fee ; but such intention could not have been carried into effect, no matter how plainly apparent, because the law requires the use of certain terms of art in the creation of a fee simple. So, as an illustration of the second branch of the exception, "If one give land to another and his heirs for twenty years, in that case the executor, and not the heir, shall have that land after the death of him to whom it is given." But, unless in these instances, where artificial terms are requisite, or an attempt is made to do something inconsistent with established principles, I am not aware of any exception to the rule that the intention of the party must prevail. There appears to be nothing technical in legal regulations respecting the description of the parties to written instruments. Unless a misdescription in this particular renders a deed uncertain as to its meaning, such defect is of no consequence. A plain misnomer can do no hurt, the only question being whether it is clear who is intended. It has been decided that a mistake in the christian name is immaterial, if the deed explains who is intended. "A deed, to kolxrt, iiisliop of K., will be good, though his real name is Roland." OPERATION AND DISCHARGE OF CONTRACTS 2O3 So where a deed purported to be that of a married woman, her name only appearing as grantor, but it was signed by her and her husband, it was held to be good as a grant of the husband as well as the wife. And an omission by an evident mistake of the name of the grantor in a deed of bargain and sale, was supplied by intend- ment, "and the court was of opinion that this deed passes the free- hold, because such was the intention of it." I think it is not reasonably to be denied, that if the name of a party which has been altogether omitted in the operative part of a deed can be inserted, when read by the court, on the ground that the meaning of the instrument to that effect is clear, from the same consideration, the erroneous desig- nation of the grantee may be rectified. In my opinion, the deed under consideration is to be read as though the grantee was de- scribed according to what parties plainly meant, as the party of the third part. Under this construction, no title to the premises in dis- pute ever came to the defendants by the operation of this tripartite deed. 3. Effect of General Words. Vatighan v. Porter. i6 Vt. 26J. Vaughan sold Porter a patent for making "Vaughan's Patent Balance" under an agreement that "if there should be any defect in said patent, whereby all its privileges cannot be enforced, or if there should be any other defect whatever," the contract should be void. In a suit by Vaughan for the price. Porter contends that the balance was likely to get out of order and therefore within the expression, "other defect." Held, that the efifect of general expressions is to be restricted to that part of the contract to which they are intended to apply. Redfield, J. Now it is obvious, we think, for two reasons, that the con- dition of the contract had reference to no such defects as those alluded to in the requests. 1. It is hardly supposable that the general expression, "or if there should be any other defect whatever," could have been in- tended to include all possible defects in the machine. That would be to stipulate that the machine should be perfect, which is im- possible ; and such a stipulation would render the contract void on its face, which would be absurd. If, then, it does not extend to all defects, to what defects docs it extend? This brings us to the second reason. 2. That this general expression must be confined to the same class of defects before enumerated. The expression, any other defect, presupposes that some defects had been already enumerated, and that this sweeping expression had reference to the same class of 204 COMMERCIAL LAW CASES defects. The other defects, by reference to the contract, were all defects in the patent, and not in the machine. This expression, then, clearly was intended to include all possible defects in the patent, and nothing more. 4. Technical Words. Collender v. Dinsmore. 55 N. Y. 200. Phelan & Collender shipped merchandise to Nova Scotia by the Adams Express Company, of which Dinsmore was presi- dent, and took a receipt which specified "C.O.D. $375, from Turn- er's Express, Boston, Mass." The Adams Express Company did not collect the $375 from Turner's Express Company and the plain- tiffs sue for its failure to do so. The defendants contend that the contract meant simply that the goods were to be delivered to Turner's Express Company which should collect the amount. Held, that technical words are to be construed according to their technical meaning. Allen, J. The rule is that words, or forms of expression which are not of universal use, but are purely local or technical, may be ex- plained by parol evidence, and the same is true of words or phrases having two meanings, one common and universal, and the other pecu- liar, technical or local. In such case parol evidence may be given of facts tending to show in which sense the words were used. Where characters, marks or technical terms are used in a particular business, unintelligible to persons unacquainted with such business, and occur in a written instrument, their meaning may be explained by parol evidence, if the explanation is consistent with the terms of the contract. To the usual symbolical direction ordinarily accompanying mer- chandise by express, subject to charges, are [added] the words, "from Turner's Express, Boston," so that it reads "Collect on delivery $375 from Turner's Express, Boston." The direction is a very plain and direct one to collect $375 from Turner's Express, and can only be read as a direction to collect from that company, on delivery of the goods to it, the sum mentioned; and it can only receive another or different interpretation by a change in the language used, as by inserting "by" in place of "from," or by some other change which would give the phrase a meaning different from that which it would, in the language which the parties have used, ordinarily have. The evidence of the meaning put upon the simple direction to "collect on delivery," by usage, docs not aid in interpreting a direction so entirely different as this is, by the addition of a very material clause. The right of the parties to make a different contract can- not be denied them, and every contract must be interpreted accord- OPERATION AND DISCHARGE OF CONTRACTS 205 ing to its peculiar terms, and a change so essential as this cannot be assumed to have been made unintentionally. The words added to the usual contract are of familiar and universal use, and have a well-defined meaning; they are not technical or peculiar, or used only in a particular business; and there is no evidence that they were ever used in any other than the usual and ordinary sense. It was not competent for the defendants to prove the meaning of the contract; they could only prove the peculiar meaning of technical words used; and if words of universal use were used in a technical or peculiar sense, they could prove facts tending to show that they were thus used; but this being done it was for the court to interpret the contract. Neither was it competent for the plaintiff to prove a custom or usage inconsistent with the terms of the contract; and. if the language was explicit, it could not be varied or contradicted by parol evidence, or meaning given to the contract different from that called for by its terms. Custom and usage is resorted to only to ascertain and explain the meaning and intention of the parties to a contract when the same could not be ascertained without extrinsic evidence, but never to contravene the express stipulations ; and if there is no uncer- tainty as to the terms of a contract, usage cannot be proved to contradict or qualify its provisions. In matters as to which a con- tract is silent, custom and usage may be resorted to for the pur- pose of annexing incidents to it. But the incident sought to be imported into the contract must not be inconsistent with its express terms or any necessary implication from those terms. Usage is some- times admissible to add to or explain, but never to vary or contra- dict, either expressly or by implication, the terms of a written instrument, or the fair and legal import of a contract. As before suggested, there was no evidence of any usage which could add to, vary or affect, in any way, the meaning of the words "from Turner's Express, Boston." They are to receive the interpretation and have the meaning given them which they have, as universally used; and in no waj' can they be read except as a direction to collect the money specified from Turner's Express, on the delivery of the merchandise to that company. Whether such a direction was reasonable or unreasonable is not for us to consider. 5. Effect of Custom. Coyiahnn v. Fisher. 2^^ Mass. 2^4. Mrs. Conahan was injured by falling through a defective rail- ing of a veranda, which the court found not to be within the con- trol of the landlord, against whom this suit is brought for her in- juries. However, the plaintiff attempts to show a custom in Boston that the owner shall make necessary repairs and keep the property tenantable. 206 COMMERCIAL LAW CASES Held, that a contract is not to be interpreted by reference to a custom which is contrary to positive law. Rugg, C. J. A thorough discussion of the nature of custom or usage, the field of human relations which may be affected thereby, and the bounds to which it is subject, is found in Dickinson v. Gay, 7 Allen 29, where previous decisions are reviewed, and the controlling prin- ciple on the subject is deduced and formulated. It there was held in effect that, although often a usage or custom has been sustained or rejected on the ground that it was or was not regarded as reason- able, the true principle is that a custom or usage, "having refer- ence to the methods of transacting business," is valid, but one which relates to the "mere adoption of a peculiar or local rule of law, contrary to the terms of the contract or to a general rule of law applicable to its construction," is invalid. Respecting the al- leged custom there in question of holding a merchant, selling goods by sample, where both sample and the bulk delivered contained a latent defect, nevertheless responsible as upon a warranty against defect, it was said, "the usage proved does not relate to any par- ticular course of dealing, but is the adoption of a mere doctrine as to the rights and obligations of the parties under a contract of sale, which doctrine is contrary to the rule of the common law on the subject. It holds that a warranty is implied, when by law it is not implied. There is no necessity for such usages; because if the parties agree that there shall be a warranty where the law im- plies none, they can insert the warranty in the bill of sale; or if the manufacturer sells without warranty, he can so express it. But if such usages were to prevail they would be productive of misunder- standing, litigation and frequent injustice, and would be deeply in- jurious to the interests of trade and commerce. They would make it necessary to prove the law of the case by witnesses on the stand, and it would be settled by the jury in each particular case. Public policy, therefore, requires that when parties assume obligations which the law does not impose, or release obligations which it does impose, it should be done by express contract." That statement of law is precisely applicable to the custom here sought to be shown. The law itself has fixed with precision the respective rigiits and obligations of landlord and tenant under an oral lease as to repairs upon the demised premises in the absence of definite con- tract. It is beyond the province of custom to vary this rule. It can be done only by express contract. Two diametrically opposed princij)k'S of law cannot govern the same facts at the same moment. (iencral commercial cu.stoms or particular usages of trade, when not contrary to the express terms or necessary implications of the contract, or a special meaning attaching under the dialect of a particular business, occupation or i)rofession to the use of a word or nil rase, and not invokint: the ai)i)lication of law contrary to the OPERATION AND DISCHARGE OF CONTRACTS 20/ established principles of the common or statutory law, are valid. But customs which are in conflict, either with the express or implied terms of the contract, or undertake to avoid the effect of settled rules of law, or to make for a definite class of cases or persons a law singular unto such class, are bad. 6. Requisites of Valid Custom. Strong v. The Grand Trunk Railroad Company. 75 Mich. 206. Strong's schooner carried corn from Chicago to Sarnia, and delivered it to the defendant railroad as intermediate consignee. The railroad refused to pay the freight except subject to a deduc- tion of the value of a deficiency of some 200 bushels, which was indicated by comparison with an inaccurate bill of lading. The railroad justified its refusal to pay upon the ground that there was a custom to make such deduction. Held, that a custom is not to be considered a term of the con- tract unless it is general and uniform. Cooley, J. There can be no doubt that although the bill of lading specifies the amount received, it is, notwithstanding, like other receipts, open to explanation, and the carrier is at liberty to show that the actual amount which came to his hands is different from that stated. The qualification of this rule is where third persons have acquired rights by purchase or advance of money, based upon the statement contained in the bill of lading, and relying upon its accuracy : the extent of which qualification, and when and against whom applicable, it does not become important to discuss here, in- asmuch as it is not claimed that any such rights have intervened. Although the consignee of property is authorized to recoup from the freight earned any losses properly chargeable to the car- rier, it is well settled, and indeed follows logically from the rule before stated, that he is not entitled to deduct as deficiencies any difference between the amount delivered to him, and that receipted by the bill of lading, where the carrier can show an error in the bill, and that he actually delivered all that he received. The custom alleged, if valid, changes the settled law in several important particulars. There are many customs which, to a certain extent, are con- venient, but to which the law does not allow a compulsory force, either because they have never been generally acquiesced in, or because, to give them general application, would in some cases violate fundamental principles and rights. The law has established certain rules which are to test the legal validity of a custom ; and we shall now examine the one alleged, in the light of the standard thus afforded. 208 COMMERCIAL LAW CASES 1. Before any custom can be admitted into the law, it must ap- pear that the usage has been general and uniform, the custom peace- ably acquiesced in, and not subject to contention and dispute. It is not very clear that the evidence in this case establishes any such custom. 2. Another essential to a good custom is, that it be certain. The evidence of usage in this case does not inform us whether, under it, the carrier is to have any remedy for the freight deducted, and if he is, whether that remedy is left to common law rules, or is provided for by the custom itself. 3. All customs must be reasonable. If the one in question were confined to vesting in the intermediate consignee the same power to refuse to pay freight in cases in which the owner would be justified in doing so, it would not exceed the reasonable province of a mer- cantile usage. But it goes very much further when it makes the bill of lading conclusive in favor of the intermediate carrier, and allows him to make deductions for supposed deficiencies, not in fact existing, which the owner himself would not be permitted to make. 7. Construction of Terms in Order to Give Contract Validity. Hunter v. Anthony. 5j A^. C. ^85. Holt gave an order to Hyinter, a constable, directing Anthony to pay to Hunter all executions against Holt and his brother in Hunter's hands "as they become due." This order Anthony accepted. Hunter now seeks to hold Anthony on certain execu- tions which had been stayed at the time of the order, although they were in the hands of the officer for collection. Held, that the terms of a contract are to be construed in such a way as to make it valid rather than invalid. Pearson, C. J. The papers which were in the hands of the plaintifiF can be made to fit the description given in the acceptance of the defendant by aid of the maxim that instruments should be liberally construed, so as to give them effect and carry out the intention of the parties; and when an instrument is susceptible of two constructions, one by which it will take effect, and the other, by which it will be in- oi)erative for the want of a subject-matter to act on, it shall receive that construction which will give it effect. This rule is based on the presumption that when parties make an instrument, the inten- tion is that it shall l)e effectual, and not nugatory. "Executions in the hands of an officer," taken literally, would apply to process in his hands which was then in a condition to be acted on, and would not fit judgments in the officer's hands, on which execution had been stayed; but by aid of the words, "as they become due," we see that the word, "executions" is not to be OPERATION AND DISCHARGE OF CONTRACTS 2O9 taken literally, for the papers to which reference was made were some that were about to become due at different times ; and taking the whole description, they as aptly point out judgments on which were entered, "executions issued and stayed," as any other terms of description that could have been used. The suggestion that these words ought to be considered sur- plusage, has nothing to support it. That is sometimes done in order to give effect to an instrument in which repugnant words are used, but is never applied for the purpose of defeating an instrument. 8. Contract to be Construed Reasonably. Gillet V. Bank of America. i6o N. Y. 5^9. Gillet's assignors, Dan Talmage's sons, were customers of the defendant bank. They procured from the bank a loan of $35,000, giving a note and collateral security which they agreed the bank might apply upon any liabilities due or to become due to it from them. Subsequently the bank purchased a dishonored note made by Talmage's sons and seeks to apply the collateral to the payment of this note. Held, that a contract is to be construed reasonably rather than unreasonably. Martin, J. The question in this case is whether, under any proper con- struction of the contract, the defendant was authorized to retain the property pledged until the $5,000 note was paid. The respondent's contention is that this agreement and note authorized the defendant to hold the property pledged, not only as security for the sum loaned and such other liabilities as were contracted or existed between them as bank and customer, but also for any and all claims against the plaintiff's assignors which it might purchase, regardless of their character, so long as they were liabilities of the assignors and owned by the defendant. It further claims that under the contract it could have transferred the note and collateral, and that thereupon the transferee would be entitled to retain and sell the property pledged, or in its possession for safe- keeping or otherwise, not only for the payment of the liabilities of the assignors to the defendant, but also for the payment of all and any claims or liabilities of theirs held by the transferee. If these contentions are to be sustained, it must be because they are plainly stated in the contract or necessarily implied from its ex- press provisions. Such unusual and almost unlimited power over the property of another is not to be implied or inferred from doubtful or uncertain language. If there is any uncertainty or ambiguity as to the meaning of the agreement, it should be resolved in favor of the plaintiff, as 2IO COMMERCIAL LAW CASES it was the defendant who prepared this contract. If there is any doubt as to the meaning of the terms employed, the defendant is responsible for it as the language is wholly its own. We think the principle controlling as to the construction of insurance policies and other similar instruments is applicable to this agreement, and that it should be liberally construed in favor of the plaintiff. If the language can, without violence, be interpreted to include only such liabilities to the defendant as resulted from transactions be- tween the plaintiff's assignors as customers and the defendant as a bank, or their liabilities which came into its hands in the ordi- nary course of its banking business, it should be adopted. The reason of the rule that the language of an instrument is to be construed against the person who proposes it rather than against the person who is invited to accept it, is that men are supposed to take care of themselves, and that he who chooses the words by which a right is given ought to be held to the strict interpretation of them, rather than he who only accepts them. Where a doubt exists as to the meaning of words, resort may be had to the sur- rounding facts and circumstances to determine the meaning in- tended. If the language of a promise may be understood in more senses than one, it is to be interpreted in the sense in which the promisor had reason to believe it was understood. In the construction of written contracts it is the duty of the court, as near as may be, to place itself in the situation of the parties, and from a consideration of the surrounding circumstances, the occasion and apparent object of the parties, to determine the meaning and intent of the language employed. Indeed, the great object, and practically the only foundation of rules for the con- struction of contracts is to arrive at the intention of the parties. This is a most conspicuous and far-reaching rule, and involves the nature of the instrument, the condition of the parties and the objects which they had in view, and when the intent is thus ascertained, it is to be effectuated unless forbidden by law. "Contracts are not to be interpreted by giving a strict and rigid meaning to general words or expressions without regard to the surrounding circumstances or the apparent purpose which the parties sought to accomplish." Where there is uncertainty or doubt as to the meaning of words or phrases used in a contract, in seeking for the intent of the par- ties as evidenced by the words used, the fact that a construction contended for would make the contract unreasonable and place one of the parties at the mercy of the other, may properly be taken into consideration. The liabilities to the bank, which were contemplated by the parties, were those which arose out of transactions between them, and not through a title to which the bank succeeded by purchase or assignment. OPERATION AND DISCHARGE OF CONTRACTS 211 g. Contracts to be Construed According to the Construction Placed Upon Them by the Parties. Topliff V. Topliff. 122 U. S. 121. Isaac Topliff, the owner of a patent, contracted with John Topliff that John Topliff should have the right to sell certain patented articles and that any improvement by either party should be for the benefit of both. John Topliff subsequently secured a new patent for an improvement and now contends that Isaac Topliff is not entitled to use it. on the ground that the right of each party to the benefit of improvements related only to improve- ments in the particular type first patented, although the parties had acted upon the contrary assumption. Held, that contracts are to be construed in accordance with the construction placed upon them by the parties. Matthews, J . The subject of the contract is the manufacture and sale of bows and bow-sockets for carriage and buggy tops, in which the par- ties were to have mutual interests, as defined in the contract. It was supposed, and this undoubtedly was the original basis of the agreement, that the appellee had secured the exclusive right to a valuable improvement in the manufacture of this description of articles. His application for the patent was then pending; the patent was in fact subsequently issued. In the meantime the article as proposed was manufactured and put on sale, and ascertained by experience not sufficiently to answer the purpose. By mutual sug- gestion and assent improvements in the manufacture were adopted, and some of them embraced in the second patent to the appellee of May 16, 1871. The article made under that patent was treated as the article intended by the contract. Other improvements were sub- sequently devised and adopted for perfecting the same article, and these were embraced in the patent to John A. Topliff of August 24, 1875. The operations of the parties in the manufacture and sale of the article were carried on, and continued to enlarge and prosper, and became profitable ; and the parties throughout acted upon the assumption and understanding that the article thus manufactured was the article contemplated by the contract between them. If there were any doubt or ambiguity arising upon the words employed in the clause of the contract under consideration, they would be ef- fectually removed by this practical construction continuously put upon them by the conduct of the parties for so long a period. "In cases where the language used by the parties to the contract is indefinite or ambiguous, and hence of doubtful construction, the practical interpretation of the parties themselves is entitled to great, if not controlling, influence. The interest of each generally leads 212 COMMERCIAL LAW CASES him to a construction most favorable to himself, and when the difference has become serious and beyond amicable adjustment, it can be settled only by the arl^itrament of the law. But in an executory contract, and where its execution necessarily involves a practical con- struction, if the minds of both parties concur, there can be no great danger in the adoption of it by the courts as the true one." 10. Inconsistent Written and Printed Provisions. Hagan v. Scottish Insurance Company. i86 U. S. 42^. Hagan insured a tug boat with the defendant insurance com- pany, the printed policy running by a written insert to "Peter Hagan & Company for account of whom it may concern." Hagan then sold one-half interest in the boat to the other plaintiff, Martin. Upon destruction of the tug, the insurance company claims that it is not liable to Martin on accotmt of a printed provision that no change should take place in the title of the insured. Held, that when there is a conflict betw'een written and printed provisions in a contract, the written provisions prevail. Peckham, J . Where a marine policy is thus taken out upon a blank policy providing by many of its terms for insurance on property or goods on land, it becomes doubly important to keep, and apply with strict- ness, the rule that the written shall prevail over the printed por- tion of a policy, as in such case the written, even more clearly than usual, will evidence the real contract between the parties. Courts will not endeavor to limit what would otherwise be the mean- ing and effect of the written language by resorting to some printed provision in the policy, which, if applied, would change such mean- ing and render the written portion substantially useless and without application. If there be any inconsistency between the written provision of the policy and the printed portions thereof, the written lan- guage must prevail. It becomes necessary, therefore, to determine what is the meaning of the written portion of the policy, and what was intended by the parties by the language "on account of whom it may concern." We concur in the view that by virtue of the language contained in the policy, "on account of whom it may concern," it is not nec- essary that the person who takes out such a policy should have at that time any specific individual in mind. If he intended the policy should cover the interest of any person to whom he might sell the entire or any part of the interest insured, that would be enough. In this case there is no question of receiving parol evidence to alter or change any condition in the policy. It is simply a ques- tion of construction as to the meaning of the language used in the OPERATION AND- DISCHARGE OF CONTRACTS 21 2 policy, and as to the intention of the party taking it out, and whetlier the written portion (the intention of the party being so stated) is inconsistent with any printed portion thereof; and if so, whether it would prevail as against such printed portion. We think the written portion is inconsistent with the printed condition as to change of interest, and as to sole ownership, and there being such inconsistency the written portion must be held to cover the assignee of a part interest in the tug, as intended at the time by the party taking out the insurance. II. Terms Implied in a Contract. Genet V. The Delaware and Hudson Canal Co. 1^6 N. Y. §p^. The Canal Company agreed with Mr. and Mrs. Genet to oper- ate a coal mine belonging to the Genets and to pay a certain royalty upon the coal mined, specifying a minimum amount to be paid. The Canal Company so negligently mined the coal that it caused the mine to cave in, rendering it thereby totally worthless. The Genets now sue on an implied stipulation against such negligent destruction. Held, that a contemplated term of the contract may be implied. Finch, J. There is no such express stipulation, but I think one is to be implied, and fairly and justly may be found interwoven with the terms expressed, and growing out of their scope and meaning. Here, the lessor, beyond her minimum royalty, took the risk of the defendant's capacity and necessities, of its judgment of markets, of its ability to sell and find customers for the product, of the demands of its own interest and welfare ; but the risk she did not take was that the lessee should make royalties beyond the minimum absolutely impos- sible by a total destruction of the mine out of which the royalties were to come, and that through the agency of its own wilful or negligent act. The plaintiff took a chance undoubtedly; but she was entitled to have it and to have it as she took it ; bad enough at the best, but such as it was, hers ; and which the defendant was not at liberty wilfully or negligently to destroy. Implied promises are to be cautiously and not hastily raised. They always exist where equity and justice require the party to do or to refrain from doing the thing in question ; where the covenant on one side involves some corresponding obligation on riie other; where by the relations of the parties and the subject-matter of the contract a duty is owing by one not expressly bound by the contract to the other party in reference to the subject of it. In this court we have thrown some safeguards about the doctrine to secure its pru- dent application, and have said that a promise can be implied only where we may rightfully assume that it would have been made if 214 COMMERCIAL LAW CASES attention had been dravvn to it, and that it is to be raised only to enforce a manifest equity, or to reach a result which the unequivocal acts of the parties indicate that they intended to effect. It seems to me that within the rule the plaintiff has a right of action upon the implied promise of the defendant not wilfully or negligently to incapacitate itself from taking out more than the minimum quantity of coal, 12. Construction of Contracts as to Time. Jones V. Newport News and Mississippi Valley Co. 6^ fed. 736. Jones built a coal trestle leading to his coal business upon an agreement with the defendant railroad that it would maintain the switch running to it. A freight train belonging to the railroad failed to take the switch and damaged the property of the plaintiff. The railroad company then took out the switch. Jones sues for damages for the taking out of the switch, no time having been specified as to the duration of the contract. The switch had in fact been maintained for some eight years. Held, that if no time is specified in the contract, it will be construed to imply a reasonable time. Tajt, Cir. J. The petition makes no better case for the plaintiff on the theory of a contract than on a common law liability. It is not alleged that either the defendant or its predecessor agreed to keep the switch in the main line for any definite time, or that either expressly agreed to keep it there forever. The plaintiff contends that, nothing having been said as to the time, the implication is that the switch was to be maintained at all times, i. e., forever. Such a construction is quite at variance with the views of the supreme court, in [a] case [in which] the city of Marshall filed a bill in equity to enforce an agreement with [a] railroad company under which it had given the railroad company $300,000 in county bonds and 66 acres of land in the city limits, and the company, in consideration of the donation, agreed "to permanently establish its eastern terminus and Texas office at the city of Marshall, and to establish and construct at said city the main machine shops and car works of said railroad company." It was held that the contract on the part of the railroad company was satisfied and performed when the company had established and kept a depot and offices at Marshall, and set in operation said car works and machine shops there, and kept thcni going for eight years, and until the interests of the railway company and the public demanded a removal of all or part of these subjects of the contract to some other j)lace; that the word "permanent." in the contract, was to be con- strued with reference to the subject-matter of the contract, and. OPERATION AND DISCHARGE OF CONTRACTS 21 5 under the circumstances of the case, it was complied with by the establishment of the shops, with no intention at the time of remov- ing or abandoning them; that if the contract were to be interpreted as one to maintain forever the eastern terminus and the shops and Texas office at Marshall, without regard to the convenience of the public, it would become a contract that could not be enforced in equity. [The contract] "did not amount to a covenant that the company would never cease to make its eastern terminus at Marshall ; that it would forever keep up the depot at that place ; that it would for all time continue to have its machine shops and car shops there ; and that, whatever might be the changes of time and circumstances of railroad rivalry and assistance, these things alone should remain forever unchangeable. Such a contract, while we do not say that it would be void on the ground of public policy, is undoubtedly so far ob- jectionable as obstructing improvements and changes which might be for the public interest, and is so far a hindrance in the way of what might be necessary for the advantage of the railroad itself, and of the community which enjoyed its benefits, that we must look the whole contract over critically before we decide that it bears such an imperative and such a remarkable meaning." In the light of this construction of an express agreement to locate and maintain a depot permanently at a town on the line of a railroad, it would seem clear that we should not imply in a contract for a private switch connection a term that it shall be perpetual, and thus forever limit the discretion of the directors to deal with a subject which may seriously affect the convenience or safety of the public in its use of the road. 13. When Time is the Essence of the Contract. Beck & Pauli Lithographing Co. v. Colorado Milling and Ele- vator Co. ^2 Fed. yoo. The Lithographing Company agreed to furnish to the MilHng Company certain hthographs to be specially manufactured upon its order, and to be delivered before January i, 1890. They did not deliver until shortly after that date, but now sue for the price. Held, that in contracts for work or skill, time is not construed to be of the essence of the contract. Sanborn, Cir. J. It is a general principle governing the construction of con- tracts that stipulations as to the time of their performance are not necessarily of their essence, unless it clearly appears in the given case from the express stipulations of the contract or the nature of its subject-matter that the parties intended performance within the time fixed in the contract to be a condition precedent 2l6 COMMERCIAL LAW CASES to its enforcement, and, where the intention of the parties does not so appear, performance shortly after the time limited on the part of either party will not justify a refusal to perform by the party aggrieved, but his only remedy will be an action or counter- claim for the damages he has sustained from the breach of the stip- ulations. In the application of this principle to the cases as they have arisen, in the promulgation of the rules naturally deduced from it, and in the assigmnent of the various cases to the re- spective classes in which the stipulation as to time of perform- ance is, or is not, deemed of the essence of the contract, the con- trolling consideration has been, and ought to be, to so decide and classify the cases that unjust penalties may not be inflicted, nor unreasonable damages recovered. Thus, in the ordinary contract of merchants for the sale and delivery, or the manufacture and sale, of marketable commodities within a time certain, it has been held that performance within the time is a condition precedent to the enforcement of the contract, and that a failure in this regard would justify the aggrieved party in refusing performance at a later day. This application of the general principle commends itself as just and reasonable, on account of the frequent and rapid interchange and use of such commodities made necessary by the demands of com- merce, and because such goods, if not received in time by the vendee, may usually be sold to others by the vendor at small loss, and thus he may himself measure the damages he ought to suffer from his delay by the difference in the market value of his goods. On the other hand, it has been held that an express stipulation in a contract for the construction of a house, that it should be completed on a day certain, and that, in case of failure to complete it within the time limited, the builder would forfeit $i,ooo, would not justify the owner of the land on which the house was constructed in refusing to accept it for a breach of this stipulation when the house was completed shortly after the time fixed, nor even in re- taining the penalty stipulated in the contract, but that he must perform his part of the contract, and that he could retain from or recover of the builder the damages he sustained by the delay and those only. This application of the general rule is equally just and reasonable. The lumber and material bestowed on a house by a builder become of little comparative value to him, while they are ordinarily of much greater value to the owner of the land on which it stands, and to permit the latter to escape payment because his house is completed a few days later than the contract requires would result in great injustice to the contractor, while the rule adopted fully protects the owner, and does no injustice to any one. The cases just referred to illustrate two well-settled rules of law which have been deduced from this general principle, and in accordance with which this case must be determined. They are : In contracts of merchants for the sale and delivery or for the manufacture and sale of marketable commodities a statement descriptive of the subject-matter, or some material incident, such OPERATION AND DISCHARGE OF CONTRACTS 21J as the time of shipment, is ^ condition precedent, upon the failure or nonperformance of which the party aggrieved may repudiate the whole contract. But in contracts for work or skill, and the mate- rials upon which it is to be bestowed, a statement fixing the time of performance of the contract is not ordinarily of its essence, and a failure to perform within the time stipulated, followed by a substan- tial performance after a short delay, will not justify the aggrieved party in repudiating the entire contract, but will simply give him his action for damages for the breach of the stipulation. It only remains to determine whether the contracts in the case at bar are the ordinary contracts of merchants for the manufacture and sale of marketable commodities or contracts for labor, skill, and materials, and this is not a difficult task. A contract to manu- facture and furnish articles for the especial, exclusive, and peculiar use of another, with special features which he requires, and which render them of value to him, but useless and unsalable to others, — articles whose chief cost and value are derived from the labor and skill bestowed upon them, and not from the materials of which they are made, — is a contract for work and labor, and not a contract of sale. 14. Time as the Essence of the Contract in Equity. Carter v. Phillips. 144 Mass. 100. Carter and Phillips entered upon a j'oint enterprise for the manufacture and sale of cloaks, under an agreement whereby either party might terminate the contract on sixty days' notice. It was further agreed that if Phillips should so give notice, Carter might buy the business for a certain price within the time of the notice. Carter informed Phillips of his desire to exercise this option, upon notice by Phillips, but did not offer to perform within the sixty days. He insists, however, that in equity time is not the essence of the contract, and that he may enforce his right within a reasonable time. Held, that although time is not so strictly construed as the essence of the contract in equity as at law, nevertheless, if the parties agree in a specific case that time shall be of the essence, it is so held. Morton, C. J. The contract provided that he should have the privilege of purchasing within sixty days after the notice by the defendant. As he did not offer, and was not able and ready to perform his part of the contract, he cannot insist upon a performance by the defendant if the rights of the parties are governed by their contract. But the plaintiff contends that time is not of the essence of the contract; and that, in equity, he ought to be permitted to per- 2l8 COMMERCIAL LAW CASES form his part of the contract within a reasonable time after the expiration of the sixty days. The equitable doctrine to which the plaintiff appeals has been recognized and acted upon in many cases in this court. [It] was formerly carried to an unreasonable extent, but in modern times it has been more guardedly applied; "and it is now held that time, although not ordinarily of the essence of a contract in equity, yet may be made so by clear manifestation of the intent of the parties in the contract itself, by subsequent no- tice from one party to the other, by laches in the party seeking to enforce it, or by change in the value of the land, or other circum- stances which would make a decree for the specific performance inequitable." In Goldsmith v. Guild, lo Allen 239, where the plaintiff agreed to pay for land "within ten days" from the date of the contract, it was held that time was of the essence of the contract, as the land was fluctuating in value from day to day. Mr. Justice Chapman says in the opinion, "But this doctrine applies to sales of property only in cases where time is immaterial to the value, and is urged only by way of pretence and evasion, and does not apply to a sale of property the value of which is subject to daily fluctuation." In applying this doctrine to any contract, a court of equity seeks to look through the language used to the real intentions and purposes of the parties ; and if a time for performance is stipulated in the contract, and it appears that the parties intended to make such time an essential element of their agreement, the court will carry it into effect. To do otherwise would be to enforce a different contract from that which the parties made. In the case before us, the contract carefully stipulates the time of the notice for terminating it. B. Dependent and Independent Terms. 1. In General. Paine V. Broum. 57 A^. Y. 228. Chamberlain, assignor of the plaintiff, agreed to sell Brown one-fifth of the Central canal in Indiana, for $10,000, $2,000 to be paid in July, and the balance in one and two years. In a suit for the first instalment. Brown contends that the plaintiff had not offered to perform and therefore cannot recover. Held, that no tender of performance is necessary by a party who sues upon an independent term of a contract. Davies, C.J. By the terms of this contract. Chamberlain, the assignor of the plaintiff, bound himself to sell and convey by deed of relea9e OPERATION AND DISCHARGE OF CONTRACTS 219 the property described to the defendant for the sum of ten thousand dollars, and the defendant agreed to purchase the same and pay that price therefor. No time was fixed by the contract for the conveyance of the property, but the defendant was to pay two thousand dollars of the purchase-money in the month of July, 1859, and the re- mainder in one and two years, with interest from May i, 1859. This case is not unlike that of Pordage v. Cole, i Saund. 319, and is clearly within the doctrine there settled. Sergeant Williams, in his learned note to this case, says : "It is to be observed that covenants are to be construed to be either dependent or independent of each other according to the intention and meaning of the parties and the good sense of the case, and that, in order to discover that intention, and learn with some degree of certainty when performance is necessary to be averred in the declara- tion and when not, it may not be improper to lay down a few rules. First, if a day be appointed for payment of money or part of it, or for doing any other acts, 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 be brought for the money, or for not doing such other act before performance, for it appears that the party relied upon his remedy and did not intend to make the performance a condition precedent, and so it is where no time is fixed for the performance of that which is the consideration of the money or other act." And he adds : "This seems to be the ground of the judgment in this case, the money being appointed to be paid on a fixed day, which might happen before the lands were or could be conveyed. But, second, when a day is appointed for the payment of money, etc., and the day is to happen after the thing which is the consideration of the money, etc., is to be performed, no action can be maintained for the money, etc., before performance. Third, when a covenant goes only to a part of the consideration on both sides, and a breach of such covenant may be paid for in damages, it is an independent covenant, and an action may be maintained for a breach of the covenant on the part of the defendant, without averring performance in the declaration. Fourth, where two acts are to be done at the same time, as where A covenants to convey an estate to B on such a day, and in consideration thereof B covenants to pay A a sum of money on the same day, neither can maintain an action without showing performance of or an offer to perform his part, though it is not certain which of them is obliged to do the first act." The principles here enunciated have received the approval of the courts of this state. "Where the payments are to precede the conveyance, it is no excuse for nonpayment, that there is not a present existing capac- ity to convey a good title, unless fhe one whose duty it is to pay, offers to do so on receiving a good title and then it must be made to him or the contract will be rescinded." In Grant v. Johnson, i Seld. 247, the question was whether the 220 COMMERCIAL LAW CASES plaintiff could sustain an action for the second instalment of the purchase-money secured by the agreement, without averring and prov- ing the delivery [of], or an offer to deliver, a deed of the premises. This court said: "The parties have declared that certain payments were to be made and certain acts performed by them respectively at the times specified in the agreement. They must be held to have intended the performance of these acts, where and of course in the order of time indicated in their covenants." So, in the case at bar, the covenants to pay the purchase-money in the instalments men- tioned were all independent of and intended by the parties to pre- cede the actual conveyance of the property described. The covenant to pay the $2,000 in July, 1859, was independent of and to precede any act to be done or performed by the assignor of the plaintiff. 2. Entire and Severable Contracts. Wooten V. Walters, no N. C. 2^1. Wooten orally agreed to sell Walters two stores and his stock in trade. The terms of price adjustment were separately indicated. Walters took possession of the stores and goods. Wooten now seeks to recover the property. Held, that the two contracts were severable, and although the contract in reference to the stores was not enforceable because of the statute of frauds, the contract for the sale of the goods was valid. Merrimon, C. J. A contract is entire, and not severable, when by its terms, nature and purpose it contemplates and intends that each and all of its parts, material provisions and the consideration, are com- mon each to the other and interdependent. Such a contract pos- sesses essential oneness in all material respects. The considera- tion of it is entire on both sides. Hence, where there is a con- tract to pay a gross sum of money for a certain definite considera- tion,* it is entire, and not severable or apportionable in law or equity. Thus, where a particular thing is sold for a definite price, the contract is an entirety and the purchaser will be liable for the entire sum agreed to be paid. And so also, when two or more things are sold together for a gross sum, the contract is not severable. The seller is bound to deliver the whole of the things sold, and the buyer to pay the whole price, in the absence of fraud. Hence, it has been held that where a cow and four hundred pounds of hay were sold for seventeen dollars the contract was entire. "The prin- ciple upon which this rule is founded, seems to be that as the con- tract is founded upon a consideration dependent upon the entire per- formance thereof, if for any cause it be not wholly performed the casus foederis docs not arise, and the law will not make provision OPERATION AND DISCHARGE OF CONTRACTS 221 for exigencies against which the parties have neglected to fortify themselves." Such contracts are enforceable only as a whole. On the other hand, a severable contract is one in its nature and purpose susceptible of division and apportionment, having two or more parts, in respect to matters and things contemplated and embraced by it, not necessarily dependent upon each other, nor is it intended by the parties that they shall be. Hence, an action may be maintained for a breach of it in one respect and not neces- sarily in another, or for several breaches, while in other material respects it remains intact. In such a contract the consideration is not single and entire as to all its several provisions as a whole; until it is performed it is capable of division and apportionment. Thus, though a number of things be bought together without fixing an entire price for the whole, but the price of each article is to be ascertained by a rate or measure as to the several articles, or when the things [are] of different kinds, though a total price is named, but a certain price is affixed to each thing, the contract in such cases may be treated as a separate contract for each article, although they all be included in one instrument of conveyance, or by one contract. Thus where a party purchased two parcels of real estate, the one for a specified price and the other for a fixed price, and took one conveyance of both, and he was afterwards ejected from one of them by reason of defect of title, it was held that he was entitled to recover therefor from the vendor. So also it was held, where a certain farm and dead stock and growing wheat were all sold together, but a separate price was affixed to each of these things, that the contract was entire as to each item and was severable into three contracts, and hence a failure to comply with the contract as to one item did not invalidate the sale and give the vendor a right to reject the whole contract. In such case the con- tract may be entire or severable, according to the circumstances of each particular case, and the criterion is to be found in the question whether the whole quantity-*-all of the things as a whole — is of the essence of the contract. If it appear that the purpose was to take the whole or none, then the contract would be entire ; other- wise, it would be severable. It is sometimes difficult to determine whether the contract is entire or severable in such cases, and there is great diversity of decisions on the subject, "but on the whole, the weight of opinion and the more reasonable rule would seem to be that where there is a purchase of different articles at different prices at the same time, the contract would be severable as to each article, unless the taking of the whole was rendered essential either by the nature of the subject-matter or by the act of the parties." This rule makes the interpretation of the contract depend on the intention of the parties as manifested by their acts and the circum- stances of each particular case. Applying the rules of law thus stated to the case before us, we are of the opniion that the contract to be interpreted, treated \ as executory, is severable and the sale of the goods therein men- 222 COMMERCIAL LAW CASES tioned was not necessarily an inseparable part of the land embraced by this contract. Although it is single, it embraces the sale of two distinct things, each havirig a certain price affixed to it, and the price paid for the whole being susceptible of apportionment. Neither by the terms of the contract settled by the findings of fact, nor by its nature and purpose, does it appear that the store- house lot of land and stock of goods, distinct things, were both necessary parts of an entire contract. These things were not nec- essary parts of each other ; they were entirely capable of being sold separately. Nor does it appear that they were sold as a single whole. 3. Instalment Contracts. Norrington v. IVright. 115 U. S. 188. Norrington & Company agreed to ship 5,000 tons of rails "from a European port or ports" to Wright & Sons, at the rate of about 1,000 tons per month, the entire amount to be shipped before August I, 1880. They shipped 400 tons the first month, 885 the second month, 1571 the third month and continued to deliver fluctuating amounts until Wright & Sons, upon knowledge of the amounts which were being shipped, refused to accept further deliveries. Norrington & Company sue on the contract. Held, that a contract for the shipment of a quantity of goods by a definite amoimt per month is not a divisible contract and that a failure to ship the required amoimts will justify rescission of the entire contract. Gray, J. In the contracts of merchants, time is of the essence. The time of shipment is the usual and convenieait means of fixing the prob- able time of arrival, with a view of providing funds to pay for the goods, or of fulfilling contracts with third persons. A state- ment descriptive of the subject-matter, or of some material incident, such as the time or place of shipment, is ordinarily to be regarded as a warranty, in the sense in which that term is used in insur- ance and maritime law, that is to say, a condition precedent, upon the failure or nonperformance of which the party aggrieved may repudiate the whole contract. 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 ship- ping in different months, and as to paying for each shipment upon its delivery, do not split up the contract into as many contracts as there shall be shipments or deliveries of so many distinct quanti- ties of iron. The cijntract is not one fur the sale of a specific lot of goods, OPERATION AND DISCHARGE OF CONTRACTS 223 identified by independent circumstances, such as all those deposited in a certain warehouse, or to be shipped in a particular vessel, or that may be manufactured by the seller, or may be required for use by the buyer, in a certain mill — in which case the mention of the quantity, accompanied by the qualification of "about," or "more or less," is regarded as a mere estimate of the probable amount, as to which good faith is all that is required of the party making it. But the contract before us comes within the general rule : "When no such independent circumstances are referred to, and the engage- ment is to furnish goods of a certain quality or character to a certain amount, the quantity specified is material, and governs the contract. The addition of the qualifying words 'about,' 'more or less,' and the like, in such cases, is only for the purpose of providing against accidental variations, arising from slight and unimportant excesses or deficiencies in number, measure or weight." 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 to these first two in- stalments justified the defendants in rescinding the whole contract, provided they distinctly and seasonably asserted the right of re- scission. The plaintiff, denying the defendants' right to rescind, and asserting that the contract was still in force, was bound to show such performance on his part as entitled him to demand performance on their part, and, having failed to do so, cannot maintain this action. The plaintiff in the case at bar greatly relied on the very recent decision of the House of Lords in Mersey Co. v. Naylor, 9 App. Cas. 434. But the point there decided was that the failure of the buyer to pay for the first instalment of the goods upon delivery does not, unless the circumstances evince an intention on his part to be no longer bound by the contract, entitle the seller to rescind the con- tract and to decline to make further deliveries under it. And the grounds of the decision are applicable only to the case of a failure of the buyer to pay for, and not to that of a failure of the seller to deliver, the first instalment. The Lord Chancellor said : "The contract is for the purchase of 5,000 tons of steel blooms of the company's manufacture; therefore it is one contract for the purchase of that quantity of steel blooms. No doubt there are subsidiary terms in the contract, as to the time of delivery, 'Delivery 1,000 tons monthly commencing January next;' and as to the time of payment, 'Payment nett cash within three days after receipt of shipping documents;' but that does not split up the contract into as many contracts as there shall be deliveries for the purpose, of so many distinct quantities of iron. It is quite consistent with the natural meaning of the contract, that it is to be one contract for the purchase of that quantity of iron to be de- livered at those times and in that manner, and for which payment is 224 COMMERCIAL LAW CASES SO to be made. It is perfectly clear that no particular payment can be a condition precedent of the entire contract, because the delivery under the contract was most certainly to precede payment ; and that being so, I do not see how, without express words, it can possibly be made a condition precedent to the subsequent fulfilment of the unfulfilled part of the contract, by the delivery of the undelivered steel." 4. Tender of Performance as a Condition Precedent. Loud V. Pomona Land and Water Co. i^j U. S. 564. The Pomona Land and Water Company agreed to sell prop- erty to Loud under a contract whereby he was to pay a certain amount at the time of the making of the contract and a certain amount on other specified dates, and whereby he was to receive no title until after all instalments were paid. The Land Company sues for the first instalment ; Loud defends on the groimd that the Company did not tender a deed as a condition precedent to the recovery of the instalment. Held, that the tender of the deed was not a condition precedent to the recovery of the instalment, but on the contrary the payment was a condition precedent to the right to a deed. Jackson, J. If the acts to be performed by the land company and the pur- chaser, respectively, are dependent and concurrent, neither party would be entitled to an action against the other without the aver- ment of performance, or the tender of performance, on his part. If, however, the payment of the purchase price for the lands is a condition precedent to the land company's covenant to convey, then it is entitled to enforce payment without conveyance or tender of conveyance, and the allegation of its readiness and willingness to convey, upon payment of the purchase money, was sufficient. The question whether covenants are dependent or independent must be determined in each case upon the proper construction to be placed on the language employed by the parties to express their agreement. If the language is clear and unambiguous it must be taken according to its plain meaning as expressive of the intention of the parties, and under settled principles of judicial decision should not be controlled by the supposed inconvenience or hardships that may follow such construction. If ])arties think proper, they may agree that the right of one to maintain an action against another shall [not] be conditional or dependent upon the plaintiff's performance of covenants entered into on his part. On the other hand, they may agree that the performance by one shall be a condition precedent to the performance by the other. The question in each case is, which intent is disclosed l)y the language employed in the contract? OPERATION AND DISCHARGE OF CONTRACTS 225 A subsequent clause of the contract provides that "this instru- ment is not and shall not be construed as a conveyance, equitable or otherwise, and until the delivery of the final deed of conveyance, or tender of all payments precedent thereto, the party of the second part, his heirs or assigns, shall have no title, equitable or other- wise, to said premises," and it is further provided that time is of the essence of the contract. If these terms and provisions of the contracts are to be under- stood in their plain and obvious meaning, they clearly express the intention of the parties to be that the purchaser shall first pay the purchase price of the lands contracted for before he is entitled to demand a conveyance therefor. It is also clear that the pur- chaser (the defendant below) could not have legally demanded from the land company a deed or conveyance for the lands until after the purchase money had been fully paid. The payment or tender of pay- ment of the purchase price for the land was a condition precedent to the right to the conveyance. The authorities, both in England and in this country, fully sustain this construction of the contract. The payment of all the instalments of purchase money is a con- dition precedent to the performance of the land company's covenant to convey. 5. Time of Delivery as Condition Precedent. Sunshine Cloak and Suit Co. v. Roqiiette Bros, jo N. Dak. 14^. The Sunshine Cloak and Suit Company sold merchandise to Roquette Brothers, agreeing to ship for the fall trade. They did not ship until too late for the fall trade and Roquette Brothers refused to accept the goods. The Sunshine Suit Company sues for the price. Held, that in a contract of sale, delivery within the time speci- fied is a condition precedent to liability for the price. Christiansen, J. Whether one promise be the consideration for another, or whether the performance, and not the mere promise, be the con- sideration, is to be determined by the intention and meaning of the parties, as collected from the instrument, and the application of good sense and right reason to each particular case. Where an act is to be performed by the plaintiff before the accruing of the defendant's liability under his contract, the plaintiff must prove either his performance of such condition precedent, or an offer to perform it which the defendant rejected, or his readiness to ful- fil the condition until the defendant discharged him from so doing, or prevented the execution of the matter which the contract re- quired him to perform. The rule in such cases is that time is and will be of the es- 226 COMMERCIAL LAW CASES sence of the contract, so long as the contract remains executory, and that the purchaser will not be bound to accept and pay for the goods, if they are not delivered or tendered on the day specified in the contract. Cases arise where either party, in case of a breach of the con- tract, may be compensated in damages ; and in such cases it is usually held that the conditions are mutual and independent; but where the conditions are dependent and of the essence of the contract, it is everywhere held that the performance of one depends on the perform- ance of another, in which case the rule is universal that, until the prior condition is performed, the other party is not liable to an action on the contract. Where time is of the essence of the contract, there can be no recovery at law in case of failure to perform within the time stip- ulated. "Conditions," says Story, "may be either precedent or subse- quent, but a condition precedent is one which must happen before either party becomes bound by the contract. Thus, if a person agrees to purchase a cargo of a certain ship at sea, provided the cargo proves to be of a particular quality, or provided the ship arrives be- fore a certain time, or at a particular port, each proviso is a condition precedent to the performance of such a contract; and unless the cargo proves to be of the stipulated quality, or the ship arrives within the agreed time or at the specified port, no contract can possibly arise." If the agreement between the parties was to the efifect that the goods were to be shipped by August 15th, then it was incumbent upon plaintiff to show a compliance with this condition in order to recover. When plaintiff failed to comply with this condition defend- ants were justified in treating the contract as terminated, if they so desired. No duty was incumbent upon them to notify plaintiff. 6. Effect of Failure to Perform Condition Precedent. Cutter V. Powell. 6 T. R. (Eng.) ^20. A seaman took a note for his services on a voyage from Jamaica to England, agreeing to work the entire voyage. He died three weeks before the ship reached England and his widow sues for the proportionate part of his wages. Held, that when complete performance of a contract is a condi- tion precedent, partial performance will not warrant compensation. Ashhurst, J. We cannot collect that there is any custom prevailing among merchants on these contracts; and therefore we have nothing to guide us but the terms of the contract itself. And as it is entire, and as the defendant's promise depends on a condition precedent OPERATION AND DISCHARGE OF CONTRACTS 22/ to be performed by the other party, the condition must be per- formed before the other party is entitled to receive anytliing under it. It has been argued however that tlie plaintiff may now recover on a qiiantiun meruit: but she has no right to desert the agreement; for wherever there is an express contract, the parties must be guided by it; and one party cannot relinquish or abide by it as it may suit his advantage. Here the intestate was by the terms of his contract to perform a given duty before he could call upon the defendant to pay him anything; it was a condition precedent, without perform- ing which the defendant is not liable. And that seems to me to conclude the question : the intestate did not perform the contract on his part; he was not indeed to blame for not doing it; but still as this was a condition precedent, and as he did not perform it, his representative is not entitled to recover. 7. Mutually Dependent Conditions. Diem v. Koblitc. 4p Oh. St. 41. Diem sold Koblitz Brothers a quantity of paper bags on thirty, sixty, and ninety days' credit. After shipment, but before the credit expired, Diem stopped the goods, claiming Koblitz was insolvent, and sold them to another party. Koblitz sues for breach of the contract. Held, that in a sale on credit, the extension of credit is made on condition that the other party shall keep his credit good. Williams, C.J. The general rule is, that in contracts of bargain and sale, where there is no agreement for credit, the promise of the vendor to sell and deliver the property, and that of the purchaser to pay the con- tract price, are mutually dependent, and neither party is bound to perform without contemporaneous performance by the other. Pay- ment, or tender of the price, is the condition upon which the pur- chaser can require delivery of the property; and delivery or tender by the seller is just as essential on his part if he would sue for the price, or for damages for its nonpayment. If both parties are unable to perform, neither can maintain on action against the other; and therefore, while it is necessary for the vendor, if he would sue, to offer performance on his part, he is in a position to defend, without doing so, if the vendee is not able to perform. When the sale is upon credit, it is one of the implied conditions of the contract that the vendee shall keep his credit good; his promise to pay at a future day, involving an engagement on his part that he will remain, and then be, able to pay; which engagement is broken when he becomes insolvent, and unable to pay, and hence, the right of the vendor to then stop performance of the contract on his part. Nor is the rule varied by the fact that the vendee has 228 COMMERCIAL LAW CASES given his notes or bills, or other securities for the price, payable at the end of the time for which the credit is allowed. The vendor, in such case, incurs no liability by not delivering the property, unless the vendee pay or tender the contract price. But in order to sue the vendee, he should offer to deliver according to the contract. "The insolvency of the vendee in a contract for the sale and future delivery of personal property in instalments, payment to be made in notes of the vendee as each instalment is delivered, is sufficient to justify the vendor for refusing to continue the delivery, unless payment be made in cash ; but it does not absolve him from offering to deliver the property in performance of the contract if he intends to hold the purchasing party to it; he cannot insist upon damages for nonperformance by the insolvent without showing performance on his own part, or an offer to perform, with ability to make the offer good." The rule must work both ways. The rights and obligations of the vendor and vendee are correlative. If the insolvency of the vendee is sufficient to justify the vendor in refusing to deliver the property, unless payment be made in cash, it follows that the vendor incurs no liability by his refusal, and therefore, no right of action accrues to the vendee, unless payment be made by him. And if the vendor cannot insist upon damages for the vendee's non- performance, without showing an offer on his part with the ability to perform, so, neither can the vendee, if he is without the ability to perform, recover from the vendor. 8. Conditions Subsequent. Ray V. Thompson. 12 Cush. (Mass.) 281. Ray sold Thompson a horse, agreeing that he would take the horse back within a specified time if the horse was not satisfactory. Thompson abused and injured the horse so that he was of less value than at the time of the sale, and Ray refused to take him back. Ray sues to recover the price of the horse. Held, that a person who has put it beyond his power to per- form a condition subsequent cannot avail himself of it. The Court: The sale was on a condition subsequent; that is, on the condition he did not elect to keep the horse, to return him within the time limited. Being on a condition subsequent, the property vested pres- ently in the vendee, defeasible only on the performance of the condition. If the defendant, in the meantime, disabled himself from performing the condition, — and if the horse was substantially injured by the defendant by such abuse, he would be so disabled, — then the sale became absolute, the obligation to pay the price became uncon- OPERATION AND DISCHARGE OF CONTRACTS 229 ditional, and the plaintiff might declare as upon an indebitatus as- sumpsit, without setting out the conditional contract. 9. Conditions Subsequent: See Cases under Discharge by Agreement, III, A, Infra. III. DISCHARGE OF CONTRACTS. Contracts may be discharged as follows : 1. By agreement. This form of discharge includes waiving, canceling, and rescinding the contract. It also includes a sub- stituted contract made by a change of terms or a change of parties. Substitution may arise impliedly or expressly. At law, a sealed contract may ordinarily be discharged by executory agreement only if the agreement be under seal, but an agreement not under seal, whether written or oral, may be discharged orally. In some juris- dictions, when the original contract is within the statute of frauds, although a complete discharge may be oral, any substituted agree- ment must be written. This fo of discharge includes that by condition subsequent, which takes place : (i ) by reason of the nonfulfilment of a specified term of the contract, (2) by the occurrence of a particular event, or (3) by the exercise of an option. In order to discharge a contract by agreement, consideration is necessary. It is usually found in the mutual promises of the parties to release each other from the contract. 2. By performance, when the contract has been executed upon both sides. At common law, a strict performance of the terms of a contract was required. At the present time, when a party has slightly deviated from the terms of the contract, but not wil- fully, he is entitled to recover the contract price, subject to deduc- tion for the variation, on the theory of substantial performance ; or he is entitled to recover the value of the benefit which he has conferred upon the defendant by reason of his work, labor and materials, i. e., upon a quantum meruit. Performance may be by payment, including the giving of a negotiable instrument. In most jurisdictions, a negotiable instrument is held to be accepted as payment conditionally upon its payment at maturity. In others, it is assumed to be a complete discharge unless a contrary intent appears. Payment on account must be applied as the debtor directs. If he gives no directions, the creditor may apply it to 230 COMMERCIAL LAW CASES any debt which he chooses. If neither makes any application, the court will usually apply it to the earliest debt. When one party tenders performance which is not accepted by the other, the party tendering is ordinarily discharged from further liability. If, however, the tender is an offer to pay something already owing, the party tendering is not discharged, but must keep the tender good. In that event, the effect of the tender, which must always conform exactly to the terms of the contract, is merely to prevent the running of interest and costs. 3. By breach of the obligation which the contract imposes. When one party refuses performance to which the other is entitled, a breach occurs. It may be brought about by renuncia- tion made by one party before the time of performance has ar- rived. Renunciation operates to discharge the contract if the other party so elects. If, however, he brings suit for damages before the time of performance has arrived, there is a conflict as to his right of recovery. By the general rule, upon the occur- rence of such an anticipatory breach, the party injured may sue at once for damages, but another rule requires that he must delay suit until such time as he is entitled to performance. In all juris- dictions, when a breach occurs during the time when a party is entitled to performance, he may sue for future as well as past damages. 4. By impossibility of performance, when that impossibility is created by law. Impossibility of performance arising from sub- sequent events not contemplated by the parties at the time of the making of the contract will not relieve a party from its obliga- tion unless those events operate as a discharge by condition subse- quent, express or implied, contained within the terms of the original contract. Discharge by destruction of the subject matter of the contract is an example of this latter type of case, although it is often considered a discharge by impossibility. 5. By operation of law. Such a discharge may be by: (i) Merger. Acceptance of a higher security in place of a lower, merges or extinguishes the lower security. The two securities must be different, the object identical, and the parties the same. A written contract is not a higher security than an oral contract. (2) Alteration. Alteration of a written instrument destroys the contract if it is made intentionally by one party with- f)ut the assent of the other. (3) Death. Death of a party discharges those contracts for the fulfdment of which the personal service of the de- ceased is necessary. Otherwise it has no effect : the executor, administratf)r or heirs succeed to the rights and liabilities nf the original contractor. OPERATION AND DISCHARGE OF CONTRACTS 23 1 (4) Bankruptcy. Bankruptcy transfers the assets of the debtor to a trustee, who thereupon administers the bank- rupt estate. Discharge in this manner may also be a discharge by breach. A. Discharge by Agreement. I. Waiver. Collyer v. Moidton. p R. I. go. Collyer & Company sue to recover money for a wire bending machine constructed for the defendant partners. After a small part of the work of construction had been done, the plaintiffs' firm dissolved ; whereupon the defendant Moulton notified them that he would no longer be responsible for the machine. He claims that the plaintiffs agreed to release him from liability. Held, that a contract may be waived by mutual consent, so far as it is executory. Potter, J. Where two parties contract, one to do a particular piece of work and the other to pay for it, the latter may at any time counter- mand the completion of it, and in such case the former cannot go on and complete the work and claim the whole price, but will be entitled only to pay for his part performance, and to be compensated for his loss on the remainder of the contract. As [to] the manner in which a simple contract may be annulled, the rule is that so long and so far as the contract remains executory and before breach, it may be annulled by agreement of all parties ; but that when it has been broken and a right of action has accrued, the debt or damages can only be released for a consideration; and even so far as it remains executory, it may be said that the agree- ment to annul on one side may be taken as the consideration for the agreement to annul on the other side. So far, therefore, as the contract in the present case remained unfinished on the loth February, 1865, when the notice was given and the alleged waiver was made, we may consider either that the contract was annulled or waived by consent, in which case (the machine, so far as completed, being tendered or delivered) the plain- tiffs could claim only for work and materials to that date without further damages, — or that the work was countermanded by the de- fendant Moulton, without the assent of the plaintiffs, in which case the defendant would be liable for the part performed and for loss on the part unperformed. We consider the present case to fall under the first head, the notice to, and declarations and conduct of the plaintiffs amounting 22^2 COMMERCIAL LAW CASES to a waiver of the fulfTlment of the contract as first made, that is, to a release of the defendant Moulton for the part still unperformed. But the claim for payment for the part performed, stands, as we have seen, on a different ground. Was there any agreement to release Moulton from liability for this, i.e., the part performed; and if so, was there any agreement to take the other partner's individ- ual promise in lieu of the promise of the firm, or anything which would amount to a consideration for the release of the firm? If, by a mutual arrangement between the plaintifif Collyer and the two defendants, Moulton had been released from his liability for the work already done, and a new promise made by Bromley, the other defendant, to pay for it, this would have been a valid release for a valuable consideration — one debt would have been substituted for the other. But we cannot find sufficient evidence of any promise on the part of the other partner, Bromley, to assume the liability; and if there was none, then the release of liability for the work already done was without consideration, as it is not claimed that there was any other consideration. 2. Substitution of New Contract. Redding v. Vogt. 140 N. C. ^62. John P. Redding and his wife conveyed two tracts of land to their daughter, Lizzie C. Redding, who agreed to give one-half to her brother, S. A. Redding. Later, Redding and his wife in- cluded the same property in another deed to their daughter, this time reserving to themselves a life estate in the entire tract. Lizzie C. Redding then conveyed one-half to her brother, reserving the life estate. In this suit, Lillian Redding, the widow of S. A. Redding, seeks to enforce her rights of dower on the ground that her husband was entitled to his half of the land without reserva- tion of the life estate, founding her claim on the deed first given. Held, that when two contracts are made concerning the same subject matter, the first will be considered to have been waived by adoption of the second. Walker, J. That parties may rescind a contract, either expressly or by substituting another in its place which is so inconsistent with it that the two cannot well coexist and operate at one and the same time, cannot be doubted. Rights acquired under a contract may be abandoned or relinquished either by agreement, or by conduct clearly indicating such a purpose. A contract may be discharged by the substitution of a new contract, and this results: (1) Where a new contract is expressly substituted for the old one; (2) where a new contract is inconsistent with the old one; (3) where new terms are "■ OPERATION AND DISCHARGE OF CONTRACTS 233 agreed upon, in which case a new contract is formed, consisting of the new terms and of the terms of the old contract which are consistent with them, and (4) where a new party is substituted for one of the original parties by agreement of all three. Where parties make two contracts upon the same subject matter, which cannot be recon- ciled without rejecting some of the material stipulations in the one or the other or both, the court will not enter upon this work of expurgation, but will endeavor to give effect to the one contract or the other, as the intention of the parties shall seem to require. "When the parties to a contract come to a fresh agreement of such a kind that the two cannot stand together, the effect of the second agreement is to rescind the first. This is one form of novation in the Roman Law. When an agreement is thus rescinded by novation, the contract in existence prior to the novation loses its individuality, and becomes merged in the new contract. Any circumstances or course of conduct from whence can be clearly deduced an agreement to put an end to the original contract, will amount to a rescission of it." When the provisions of two contracts are inconsistent and the second cannot be operative if the first is still in existence, the first is no longer a subsisting agreement. If, upon the facts of our case, therefore, we can gather that the parties intended the two con- tracts not to coexist, and the second was designed to take the place of the first, the former must be taken to embody the entire and final agreement of the parties. 3. Effect of Substitution of New Contract. Adams v. Power. 48 Miss. 4^0. Power and Jones gave a note running to Carter and Cook for a one-fourth interest in a paper called the Clarion, which they bought from Shannon, a debtor of Carter and Cook, to whom the note was made payable at Shannon's request. Without the knowledge of Carter and Cook, Shannon agreed that they would allow the note to be satisfied by means of advertisements to be secured by Shannon. Mrs. Adams sues as assignee of Carter and Cook. Power and Jones attempt to show in defense the collateral contract with Shannon. Held, that when the note was made to the payees, a novation resulted by substituting them for Shannon as the creditor of the defendants ; and that they and their assigns are not bound by any collateral agreement with Shannon. Peyton, C. J. In the civil law there are three kinds of novation, i. Where the debtor and creditor remain the same, bvit a new debt takes the place of the old one. 2. Where the debt remains the same, but a new debtor is substituted for the old one. This transaction is 234 COMMERCIAL LAW CASES called delegation. The essential distinction between delegation and any other novation [is] that the former demands the consent of all three parties, but the latter, that only of the two parties to the new debt. 3. Where the debt remains the same, but a new creditor is substituted for the old one. This is also called delegation, for the reason above given, to wit: that all three parties must assent to the new bargain. Delegation is the change of one debtor for another, when he who is indebted substitutes a third person who obligates himself in his stead to the creditor; so that the first debtor is acquitted and his obligation extinguished, and the creditor contents himself with the obligation of the second debtor. "Delegation is not made but by the consent of the debtor who delegates another in his place, of the person who is delegated, and of the creditor who accepts the dele- gation, and who contents himself with the new debtor." The common law doctrine of novation mainly agrees with that of the civil law, but in some parts differs from it. "If A. owes B. £100 and B. owes C. £100, and the three meet and it is agreed between them that A. shall pay to C. £100, B.'s debt is extinguished, and C. may recover that sum against A." There must always be a debt once existing, and now canceled, to serve as a consideration for the new liability. The action in all cases is brought on the new agreement. But in order to give the right of action, there must be an extinguishment of the original debt. A good novation is an accord executed. In that kind of novation, called in the civil law delegation, no new creditor could be substituted without the debtor's consent. This rule is observed in the common law. Hence, without this con- sent and promise to pay, a new creditor can have no action against the debtor, because there is no privity of contract between them. To establish such privity, there must be a new promise founded on sufficient consideration. And the extinction of the prior debt is a sufficient consideration in such case. When assent or consideration is wanting, the novation operates only as a species of collateral security. This assent on the part of the debtor is said to be essential, for the reason that he may have an account with his assignor; and he shall not be barred of his right to a set-off, or any defense he may have. Still, if any- thing like an assent on his part can be inferred, he will be con- sidered as the debtor. If A. owes B., and B. owes C, and it is agreed by these three parties that A. shall pay this debt to C, and A. is by this agreement discharged from his debt to B., and B. is also discharged from his debt to C, then there is an obligation created from A. to C, and C. may bring an action against A. in his own name. This would be no contradiction or exception to the ancient rule, that a personal contract cannot be assigned so as to give the assignee a right of action in his own name. It is the case of a new contract formed and a former contract dissolved; and the general principles in rela- OPERATION AND DISCHARGE OF CONTRACTS 235 tion to consideration attach to the whole transaction. Thus, to give the transaction its full legal efficacy, the original liabilities must be extinguished; for, if the debt from A. to B. be not discharged by A.'s promise to pay it to C, then there is no consideration for this promise, and no action can be maintained upon it; but, if this liability be discharged, then it is a sufficient consideration, and if, at the same time, C. gives up his claim on B. as the ground on which B. orders A. to pay C, then the consideration for which A. promises to pay C. may be considered as moving from C. An important rule of novation is, that the extinction of the debt destroys also all rights and liens appertaining thereto. Hence, if any hypothecations be attached to the old contract, they will be canceled by the new one, unless express words retain them. The second contract is simple and independent, and upon its terms the action is brought. Hence, too, the new parties cannot avail them- selves of defenses, claims and set-offs which would have prevailed between the old parties. This necessarily results from the extinguish- ment of the old liabilities and the creation of the new relation of debtor and creditor. 4. Discharge by Condition Subsequent: Occurrence of Par- ticular Event. Gray v. Gardner. ly Mass. 187, Gray contracted with Gardner and others to sell them a certain amount of sperm oil. The parties agreed that a higher price should be paid if the supply of sperm oil brought in should be small. To effectuate this intention they agreed upon a fixed price per gallon, and further agreed upon an additional payment if a smaller amount of oil should arrive at certain ports between the first day of April and the first day of October than arrived the previous year during the same period. The price turned out to depend upon the ques- tion whether a certain ship had "arrived" on the first day of October, as it had come into harbor on that date, but had not anchored or moored. Gardner contends that the ship had "ar- rived," and that therefore Gray is not entitled to the additional sum sued for. Held, that the contract to pay the additional sum was not dis- charged by the occurrence of the particular event which should discharge the contract by the operation of a condition subsequent. Parker, C. J. The very words of the contract show that there was a promise to pay, which was to be defeated by the happening of an event, viz., the arrival of a certain quantity of oil at the specified places in a given time. It is like a bond with a condition; if the obligor would 236 COMMERCIAL LAW CASES avoid the bond, he must show performance of the condition. The defendants in this case promise to pay a certain sum of money, on condition that the promise shall be void on the happening of an event. It is plain that the burden of proof is upon them; and if they fail to show that the event has happened, the promise remains good. The other point is equally clear for the plaintiff. Oil is to arrive at a given place before twelve o'clock at night. A vessel with oil heaves in sight, but she does not come to anchor before the hour is gone. In no sense can the oil be said to have arrived. The vessel is coming until she drops anchor, or is moored. She may sink, or take fire, and never arrive, however near she may be to her port. It is so in contracts of insurance ; and the same reason applies to a case of this sort. Both parties put themselves upon a nice point in this contract; it was a kind of wager as to the quantity of oil which should arrive at the ports mentioned before a certain period. They must be held strictly to their contract, there being no equity to interfere with the terms of it. 5. Discharge by Condition Subsequent: Exercise of Option. Fitzgerald v. Allen. 128 Mass. 2^2. Fitzgerald agreed to do certain work on a conduit for Allen, who had a contract for the entire work with the Boston Water Board. The contract provided that Allen might cancel the con- tract if so ordered by the city engineer. This was done, and the plaintiff sues for the value of the work done previous to the cancellation of the contract. Held, that a contract may be discharged by exercise of an option contained therein. Lord, J. The plaintiff commenced to work under a written contract; and, while that contract was in force, his rights, remedies and liabilities were all to be determined by the terms of that contract; but, when that contract was wholly terminated, his rights would depend upon the mode in which it was terminated. It may have been terminated by his own voluntary refusal to continue to perform it, or by the absolute prohibition of the defendants to permit him to perform it, or by his absolute inability by act of God or otherwise, to continue its performance, or by the mutual consent of the parties, or by termination, as in this case, under a power reserved by the terms of the contract itself. If the special contract is terminated by any means other than voluntary refusal of the plaintiff to perform the same upon his part, and the defendant has actually received benefit from the labor per- formed and materials furiushed by the plaintiff, the value of such OPERATION AND DISCHARGE OF CONTRACTS 237 labor and materials may be recovered upon a count upon a quantum meruit, in which case the actual benefit which the defendant re- ceives from the plaintiff is to be paid for, independently of the terms of the contract. The contract itself is at an end. Its stipulations are as if they had not existed. But this does not imply that the contract may not be put in evidence, and its terms referred to, upon the question of the real value to the defendant of the plaintiff's labor and materials. If the time of performance is extended very far beyond the time fixed by the contract, if the materials furnished are of a very different quality from that provided for by the con- tract, these facts have necessarily a bearing upon the real value of the services and labor. The original contract price, too, is an im- portant element in determining the value of the labor and materials ; and the proportion in value which the work done bears to the whole value of the contract labor and materials is also important in deter- mining the quantum meruit. It follows that the plaintiff was entitled to recover what, under all the circumstances of the case, his labor and materials were act- ually worth. 6. Discharge by Condition Subsequent: Cancellation. The Peoria Insurance Company v. Botto. 4/ III. 516. Botto took out with the defendant insurance company a fire policy which contained a clause that the company might cancel the policy at its election. Botto was notified of cancellation to take effect the twenty-third day of November, but although he was told that his money would be refunded upon his calling at the company's office, no premiums were returned to him. The in- sured property was afterwards destroyed by fire, and Botto claims that the policy was still in force. Held, that in order to effect the cancellation of a contract, the party canceling must restore the consideration. Breese, C. J. Admitting, under the clause quoted from the policy, that the company, without cause, could cancel the policy, this power con- ceded to them did not relieve them from the obligations a party to any other contract is under when a cancellation has been deter- mined upon. The general rule in such cases, we believe, is that the party canceling must restore whatever he has obtained by the contract. If one party rescinds he must return the property pur- chased in as good condition as when he received it, unless it is en- tirely worthless. To effect a cancellation of this policy, the notice should have been accompanied by the tender of the unearned premium. It -o' COMMERCIAL LAW CASES was no part of the business of the assured to take his policy to the office, there have it canceled, and then receive the unearned premium. The assured did not desire to have it canceled, and it would be unreasonable that he should put himself to trouble and inconvenience to have that done which he did not wish to have done, and in doing which he was not obliged to take any step. We do not think, with appellants, that Botto's saying "All right," when the letter was handed him, was an assent on his part that he would call at the office, for he testifies he did not read the letter whilst the bearer of it was present, and that not a word was said about premium to be refunded at the office, or at any other place. We think it is incumbent on every insurance company acting under such a clause as in this policy to tender the unearned premium with the notice of cancellation. The tender must be held to be a condition precedent, else in case of litigation growing out of the transaction, the company would, all the time, have the use of the money of the assured, and he, to that extent, be prevented from effecting any other insurance. We think justice and fair dealing require this, as nothing short of it will put the contracting parties in statu quo. 7. Form of Discharge: Contracts under Seal. McCreery v. Day. up N. Y. i. McCreery and others had contracted to build part of the Pitts- burgh, Youngstovvn and Chicago Railroad, a one- fourth interest in which they assigned by contract under seal to Garrison, who agreed to bear one-fourth of the expenditures in construction. Later, this agreement was annulled by an unsealed indorsement on the contract. This suit is against Garrison's executor to recover his share of the construction expenses under the original contract. Held, that a contract under seal may be discharged by a subse- quent contract not under seal. Andrews, J. The plaintiffs make a point, founded on the doctrine of the common law, that a contract under seal cannot be dissolved by a new parol executory agreement, although supported by a good and valuable consideration, "for, every contract or agreement ought to be dissolved by matter of as high a nature as the first deed." The api)Iication of this rule often produced great inconvenience and in- justice, and the rule itself has been overlaid with distinctions in- vented by the judges of the common law courts to escape or mitigate its rigor in particular cases. I>ut in equity the form of the new agreement is not regarded, and under the recent blending of the jurisdiction of law and equity, and the right given by the modern OPERATION AND DISCHARGE OF CONTRACTS 239 rules of procedure in this country and in England to interpose equi- table defenses in legal actions, the common law rule has lost much of its former importance. "The ancient technical rule of the common law, that a contract under seal cannot be varied or discharged by a parol agreement, is thus practically superseded." Courts of equity often interfered by injunction to restrain proceedings at law to enforce judgments, covenants, or obligations equitably discharged by transactions of which courts of law had no cognizance. It is a necessary consequence of our changed system of procedure, that whatever formerly would have constituted a good ground in equity for restraining the enforcement of a covenant, or decreeing its dis- charge, will now constitute a good equitable defense to an action on the covenant itself. The technical distinction between a satisfac- tion before or after breach, seems to have been disregarded in this state, and a new agreement by parol, followed by actual performance of the substituted agreement, whether made and executed before or after breach, is treated as a good accord and satisfaction of the cov- enant. So also, a new agreement, although without performance, if based on a good consideration, will be a satisfaction if accepted as such. In the present case it may be justly said, that when the agree- ment annulling the contract of March 2, 1882, was executed, there had been no breach by Garrison of his covenant therein, as he had not been called upon by the plaintiffs to pay his share of the con- struction account. But it was the plain intention of the parties that the new arrangement, then entered into, should be a substitute for the liability of Garrison, present and prospective, under the contract of March 2, 1882. The transaction constituted a new agreement in satisfaction of the prior covenant, and was accepted as such. More- over, it [is] admitted by the reply that the contracts of October 25, 1882, were carried out. It is a case, therefore, of an executory parol con- tract, made in substitution of the prior sealed contract, afterwards fully executed, which clearly, under the authorities in this state, discharged the prior contract. 8. Form of Discharge: Contracts Within the Statute of Frauds. Cummings v. Arnold, j Mctc. (Mass.) 486. Arnold agreed to sell cloth to Cummings' firm on specified terms. The parties later agreed that Cummings should pay cash for the cloth and receive a 5% discount. The defendant, /Vrnold, insists that such payments have not been made. The question arises v^^hether this new contract can be proved, as the original contract was within the statute of frauds. Held, that new terms of performance may be substituted orally for a contract originally within the statute of frauds. 240 COMMERCIAL LAW CASES Wilde, J. The general rule is that no verbal agreements between the parties to a written contract, made before or at the time of the execution of such contract, are admissible to vary its terms or to affect its construc- tion. All such verbal agreements are considered as varied by and merged in the written contract. But this rule does not apply to a subsequent oral agreement made on a new and valuable consideration before the breach of the contract. Such a subsequent oral agreement may enlarge the time of performance, or may vary any other terms of the contract, or may waive and discharge it altogether. The principal design of the statute of frauds was that parties should not have imposed on them burdensome contracts which they never made, and be fixed with goods which they never contemplated to purchase. The statute, therefore, requires a memorandum of the bargain to be in writing, that it may be made certain ; but it does not undertake to regulate its performance. That is left to be decided by the rules and principles of law in relation to the admission of parol evidence to vary the terms of written contracts. We have no doubt, therefore, that accord and satisfaction, by a substituted performance, would be a good defense in this action. So if the plaintiffs had paid for the goods according to the oral agreements to pay cash or give security, and the defendants had thereupon completed the delivery of the goods contracted for, it would have been a good performance of the written contract. If two contracting parties are bound to do certain reciprocal acts simultaneously, the offer of one of the parties to perform the contract on his part, and the refusal of the other to comply with the contract on his part, will be equivalent to a tender and refusal; and in the present case, we think it equivalent to an accord and satisfaction, which was prevented by the fault of the plaintiffs, who agreed, for a valuable consideration — if what the defendants offered to show be true — to vary the terms of the written contract as to the time of payment, and afterwards refused to comply with their agreement. If the defendants on their part had refused to perform the verbal agreement, then indeed it could not be set up in defense of the present action; for the party who sets up an oral agreement for a substituted performance of a written contract is bound to prove that he has performed, or has been ready to perform, the oral agreement. This distinction avoids the difficulty suggested in some of the cases cited, where it is said that to allow a party to sue partly on a written and partly on a verbal agreement, would be in direct opposi- tion to the requisitions of the statute; and it undoubtedly would be; but no party having a right of action can be compelled to sue in this form. He may always declare on the written contract; and unless the defendant can prove performance according to the terms of the contract, or according to the agreement for a substituted performance, the plaintiff would be entitled to judgment. We think, therefore, that the evidence of the oral agreements, offered at the trial, should have OPERATION AND DISCHARGE OF CONTRACTS 24 1 been admitted; the same not being within tlie statute of frauds, and the evidence being admissible by the rules of law. B. Discharge by Performance. I. What Constitutes Performance. Smith V. Brady, i/ N. Y. 1/3. Smith agreed to pay Brady a certain sum for building houses under a contract which provided that the final payment shotild be made when the architects certified that the work was completed. Smith failed to procure such a certificate, but sues on the con- tract. Held, that having failed to perform or to attempt to perform a condition precedent, the plaintiff cannot recover. Harris, J. Assuming that the contracts had been so far performed as to justify the plaintiff in treating them as substantially executed, as I am inclined to think they were, yet the final payment for the work was to be made when it was completed and a certificate of the architects to that effect obtained. The parties have seen fit to make the pro- duction of such a certificate a condition precedent to the payment. The plaintiff is as much bound by this part of his contract as any other. It is not enough for him to bring his action and say that he has completed the work which he undertook to do. He has agreed that the architects named should decide whether the work is completed or not. He cannot now withdraw the decision of this question from them and refer it to the determination of a legal tribunal. Had it been shown by the plaintiff that he had made application to the architects for the requisite certificate, and that they had obsti- nately and unreasonably refused to certify, it might have been proper perhaps for the plaintiff to establish his right to recover by other evidence. However this may be, it is not pretended in this case that the plaintiff ever made an effort to procure the certificate. The referee merely finds the fact that "the architects had not given certifi- cates that the work was all done and finished." The referee has found that the defendant took possession of the cottages and appendages without objection at the time, and appro- priated the same to his own use, and it is insisted that, if the produc- tion of the architect's certificate was a condition precedent to the right of the plaintiff to bring his action for the balance due upon the contracts, yet the defendant has waived this condition by accepting the work without objection; but it is a sufficient answer to this position to say that, whether or not the performance of the condition in question was waived was a question of fact to be determined by the referee 242 COMMERCIAL LAW CASES from the evidence before him, and no such fact has been found by him. 2. Substantial Performance. Daly & Sons, Inc. v. The Nciv Haven Hotel Co. gi Conn. 280. Daly & Sons contracted in writing to install a heating and ventilating system in the Hotel Taft at New Haven, in accordance with specifications. When Daly & Sons had nearly completed the work, which could have been fully completed for $500, the architects ordered certain changes, and. as Daly & Sons did not agree to these changes, authorized the Hotel Company to secure others to finish the work. The plaintiffs sue for the unpaid balance. Held, that when a contract is terminated by the other party without fault of one who has substantially performed, he may re- cover the contract price less what it would cost to complete the contract. Prentice, C. J. Doubtless counsel for the defendant are right in saying that the complaint gives evidence that the plaintiff was not looking to a recovery upon the basis of performance, since the averment that the work was done under a contract providing for payment after com- pletion, is unaccompanied by one of completion. But it does not follow from that fact that the amount for which foreclosure may be had is to be determined upon direct proof of the reasonable worth of the labor performed and materials furnished, and not with refer- ence to the contract price presumably embodying an element of profit. On the contrary, the well established rule in this and other juris- dictions is that the reasonable value for which recovery may be had in cases of substantial performance of building contracts, is to be ascei tained with reference to the contract price and by deducting from that price such sum as ouglit to be allowed for the omissions and variations. The rule stated as applicable to building contracts is an exception to that governing contracts generally. It had its origin in considera- tions of equity and justice, and its recognition is due to the fact that substantial justice in such cases can be done in no other way. There is no reason why one who has substantially performed such a contract, but unintentionally failed of strict performance in the matter of minor details, should liave imposed upon him as a condition of recovery for that of wliich the other party has received the benefit, the burden of "-bowing by direct evidence its reasonable value, or why he should be deprived of all benefit of the contract which he has substantially per- formed. The doctrine of substantial performance has had the ap- OPERATION AND DISCHARGE OF CONTRACTS 243 proval of the courts for the very purpose of avoiding the hardships arising from the operation of the general rule, and the principles governing its application were designed to work to the fullest attain- able extent approximate justice to all concerned. In the determination of the amount of deduction which ought to be made in the application to specific cases of the rule stated, regard must be had to the circumstances which each presents. A different method, for instance, is required to accomplish the ends of justice where the shortcomings are such as may be remedied and completion according to the contract had without substantial interference with the structure of the building, than where the remedy and completion involves substantial structural changes. In the first case — and that, upon the finding, is this case — the approved method under ordinary conditions is to deduct from the contract price such sum as it would cost to make the work comply with the contract. In the latter case, the amount of deduction might be measured by the diminished value of the building to the owner by reason of the defects. In any case, the deduction is to be so determined that the owner's resultant pay- ment will be fair and reasonable compensation with reference to the contract price for what of value to him he has received and no more, and that the contractor shall receive a fair reward determined by the contract standard for the benefit conferred by him in his attempt to execute the contract. The fact that the plaintiff was wrongfully prevented by rtie defendant from continuing with the work does not stand in the way of the defendant's indebtedness to it being determined on the basis of substantial performance. By such performance it won the right to recover with reference to the contract price, and it was not in the defendant's power to deprive it of the benefits of such recovery by a wrongful act. It well may be that in such case the contractor would have the right to treat the contract as rescinded, and avail himself of redress against the wrongdoer by the recovery of damages. But to hold that by reason of an act of wrongdoing on the part of the owner a contractor loses the right which was his by virtue of his substantial performance, is quite another matter. It is one of the conditions of a contractor's right to recover as for substantial performance, that his default was not wilful or voluntary. The fact that the plaintiff did not continue in its efforts to complete performance until its accomplishment, did not convert its default in that respect into a wilful or voluntary one. It was deprived of the opportunity to do what it was proposing to do and engaged in doing by way of completion of details and correction of faults, by the act of the defendant who, acting upon the authority of a certificate of default given by the architects and proceeding as provided in the contract, terminated its employment. Had this action on the part of the architects and owner been justified by the plaintiff's conduct in respect to the execution of its contract, a very different situation would be presented. But the court has found that there was no such justi- fication for the termination of the plaintiff's employment. 244 COMMERCIAL I AW CASES 3. Quantum Meruit. Hayward v. Leonard. 7 Pick. (Mass.) 180. Hayward contracted to build a house for Leonard to conform to certain specifications. As some of the work done was not in accordance with the terms of the contract, Leonard refused to accept the house. The plaintiff sues to recover the value of his work. Held, that when a contract has been performed without wilful violation of its terms but not exactly in accordance with the con- tract, the plaintiff may recover the value of his work and materials. Parker, C. J. Different judges and different courts have held different doctrines, and sometimes the same court at different times. The point in con- troversy seems to be this: whether when a party has entered into a special contract to perform work for another, and to furnish materials, and the work is done and the materials furnished, but not in the manner stipulated for in the contract, so that he cannot recover the price agreed by an action on that contract, yet nevertheless the work and materials are of some value and benefit to the other contracting party, he may recover on a quantum meruit for the work and labor done, and on a quantum valebant for the materials. We think the weight of modern authority is in favor of the action, and that upon the whole it is conformable to justice, that the party who has the possession and enjoyment of the materials and labor of another, shall be held to pay for them, so as in all events he shall lose nothing by the breach of the contract. If the materials are of a nature to be removed and liberty is granted to remove them, and notice to that effect is given, it may be otherwise. But take the case of a house or other building fixed to the soil, not built strictly according to contract, but still valuable and capable of being advantageously used, or profitably rented — there having been no prohibition to proceed in the work after a deviation from the contract has taken place — no absolute rejection of the building, with notice to remove it from the ground; it would be a hard case indeed if the builder could recover nothing. ArTd yet he certainly ought not to gain by his fault in violating his contract, as be may, if he can recover the actual value; for he may bave contracted to build at an under price, or the value of such property may have risen since the contract was entered into. The owner is entitled tosethe benefit of the contract, and therefore he should be held to pay in damages only so much as will make the price good, deducting the loss or damage occasioned by the variation from the contract. When we speak of the law allowing the party to recover on a quantum meruit or quantum valebant, where there is a special contract. OPERATION AND DISCHARGE OF CONTRACTS 245 we mean to confine ourselves to cases in which there is an honest intention to go by the contract, and a substantive execution of it, but some comparatively slight deviations as to some particulars provided for. Cases of fraud or gross negligence may be exceptions. 4. Quantum Meruit: Effect of Non-Compliance with Terms of Contract. Gillis V. Co be. 777 Mass. 584. Gillis contracted to build an addition to a brewery belonging to the defendants. Hi.s firm failed to put iron rods in the con- crete as required by the specifications and the floor sank because of the weight of the tanks placed upon it. Gillis sues to recover for the value of his work, not upon the special contract. Held, that when a special contract has been made and not per- formed, the plaintiff can recover only to the extent of the value given to the defendant by reason of his efforts. Loring, J. Where a contractor does work and furnishes materials under a special contract, he has no right to recover the value of the work plus the value of the materials under a quantum meruit, but is limited tO'the right to be paid for them specified in the contract; no suit can be maintained by him on the common counts until the contract is fully performed, and then only to recover the contract price. If he resorts to a recovery under the rule in Hayward v. Leonard, 7 Pick. 181, because, being in default of the performance of the con- tract, or, what is the same thing, because, being unable to prove that he did perform the contract, he has no rights under it, he has not the same right to recover for the value of the work done and materials furnished by him, that a person has who has done work and furnished materials as he has been requested to do. In the latter case, it is immaterial whether the result of his work is of any value to the defendant or not. But one who has done work under a special con- tract, and resorts to a recovery under the principle of Hayward v. Leonard, recovers on the ground, and only on the ground, that the result of his work is of some benefit to the defendant; he comes into court admitting that he has not done what he agreed to do and that he cannot hold the defendant on his promise to pay him the contract price ; more than that, he admits that the part which he has failed to perform, is one that so far goes to the essence of the contract, that it is a condition precedent to a recovery by him on the contract ; for, if the part which he agreed to perform and did not perform, was of slight importance, it is not a condition precedent ; he can recover the contract price without performing it, and the only advantage which the defendant can take of it is by way of recoupment, or by a cross- action, in which the burden is on him, the defendant, to prove the 246 COMMERCIAL LAW CASES damage he has suffered from its nonperformance. The only ground on which a plaintiff who resorts to a recovery under the principle of Hayward v. Leonard is entitled to recover anything is that, though, so far as his contract rights are concerned, he is entirely out of court, yet it is not fair that the defendant should go out of the transaction as a whole with a profit at his, the plaintiff's expense, and therefore if the structure, which, for the purpose of a recovery on this ground, he necessarily admits does not come up to the contract requirements in essential particulars, is, nevertheless, a thing of some value, the defendant ought to make him compensation therefor. That such is the ground on which a recovery can be had in such a case was laid down in the original case of Hayward v. Leonard, and has been repeated in the subsequent decisions. It is plain, therefore, that the plaintiff who seeks a recovery under the principle of Hayward v. Leonard for work done under a special contract does not recover on the same ground as that on which a plaintiff recovers, who has done work as he has been requested to do. So far as his case travels on that ground, he is out of court; his sole claim to be paid anything is that if he is not paid, the defendant will profit at his expense ; until he has proved that the defendant will in that case profit at his expense, he has not made out a prima facie case to be paid anything, and until he has proved how much that profit will be, his prima facie case is not complete. When the fact appears in evidence that the work for which money is sought was done under a special contract, and that the plaintiff cannot recover under the special contract, but still seeks a recovery, there is no question of the value of his work and materials proved in the usual way, and he does not make out a prima facie case by proving their value according to regular rules ; to make out a case for recovery for such work and materials so furnished, he must prove how much the result of his work had benefited the defendant, he must prove what the fair market value of the thing produced by his misdirected work is, and, until he has done that, he has not made out even a prima facie case on which he is entitled to recover anything. It is not correct to say that the plaintiffs are in this way made liable for the consequential damages caused by the sinking of the floor in cancellation of a sum otherwise due them, without proving that they are to blame for it. In this case, there is no sum otherwise due the plaintiffs. Unless by a happy accident it turns out that the building produced by their work has added to the value of the defendants' land, nothing is due to them. They have failed to prove that they complied with the contract in the construction of the part of the building which has given way, and in satisfying the architect of that fact; that being so, nothing is due them at all, so far as the terms of the contract are concerned; they have no claim to be paid the contract price, for they have failed to prove that they complied with the requirements of the contract in matters going to the essence of it ; they have no claim to the value of the work i)ius the value of the materials, for the work was done and the materials were furnished OPERATION AND DISCHARGE OF CONTRACTS 247 under a special contract, and no payment is due for them except upon the terms of the special contract. Their only claim is that it is not fair that the defendants should profit at their expense, and that, for that reason, if the building which is the result of their labor has added to the value of the defendants' land, the defendants should make them compensation therefor and to that extent. That being the sole ground on which the plaintiffs are entitled to anything, the burden does not lie on the defendants to prove that the thing which caused the floor to sink and the building to be of no market value (if it is of no market value), is a thing for which the plaintiffs were to blame. The plaintiffs' case is that the building which they have placed upon the land of the defendants against their wishes has added to the value of the defendants' land ; if it does not, they have no rights in addition to their rights under the contract, and it is of no consequence why it is that the building does not add to the value of the land. 5. Negotiable Instruments as Payment. The Kimball 3 Wall. (U. S.) 3/. The owners of the Kimball chartered her for a sum of money, part of which was payable "after discharge of homeward cargo." While the ship was still at sea, the charterers gave their note for $10,000 "on account of the charter." They afterwards failed. The owners claim a lien on the cargo for unpaid money. Held, that by the general rule, the giving of a note does not constitute payment. Field, /. The notes were given before the termination of the voyage, and consequently before the balance of the charter became due. Treating them as an advance of a portion of the freight, they could be recovered back, or their amount, if paid, if the vessel did not arrive. Freight being the compensation for the carriage of goods, if paid in advance, is in all cases, unless there is a special agreement to the contrary, to be refunded if from any cause not attributable to the shipper the goods be not carried. And there was no such special agreement in this case. The notes were drawn so as to mature near the time of the anticipated arrival of the ship, and according to the statement of the broker who made the arrangement, they were given for the accommodation of the shipowner, and were to be held over or renewed in case they fell due before the arrival. The statement is consistent with the nature of the transaction, and is sufficient to repel any presumption, under the law of Massachusetts, that the notes were taken in discharge or payment of the claim for the charter money. The presumption which prevails in that state, that a promissory note extinguishes the debt or 248 COMMERCIAL LAW CASES claim for which it is given, may be repelled by any circumstances showing that such was not the intention of the parties. By the general commercial law, as well of England as of the United States, a promissory note does not discharge the debt for which it is given unless such be the express agreement of the parties ; it only operates to extend until its maturity the period for the payment of the debt. The creditor may return the note when dishonored, and proceed upon the original debt. The acceptance of the note is considered as accompanied with the condition of its payment. Thus it was said, as long ago as the time of Lord Holt, that "a bill shall never go in discharge of a precedent debt, except it be part of the contract that it should be so." Such has been the rule in England ever since ; and the same rule prevails, with few exceptions, in the United States. The doctrine proceeds upon the obvious ground that nothing can be justly considered as payment in fact, but that which is in truth such, unless something else is expressly agreed to be re- ceived in its place. That a mere promise to pay cannot of itself be regarded as an effective payment is manifest. The rule in Massachusetts is an exception to the general law ; but even there, as we have said, the presumption that the note was given in satisfaction of the debt may be repelled and controlled by evidence that such was not the intention of the parties, and this evidence may arise from the general nature of the transaction, as well as from direct testimony to the fact. 6. Application of Payments on Account. Caldzvell v. IVentzvorth. 14 N. H. 4^1. At different times Caldwell sold Wentworth quantities of rum, saleratus and molasses. These sales were in part illegal, as Cald- well had no license to sell liquor. Wentworth paid money on ac- count without specifying the items to which it should be applied. Caldwell sues for the balance and the question arises whether any portion of the money paid shotild be considered as a voluntary payment on account of the illegal sales. Held, that payments on account are to be applied as the parties intend, but if they have made no application, the law will apply them to the earliest legal debts. Parker, C. J. A debtor paying money to a creditor who has several claims against him, may direct the application of the payment to which claim he pleases. The creditor cannot apply what he -thus receives against the will and directions of him who makes the payment, and who has at the time a right to control what is then his own. There is no evidence, however, in this case, that Brown gave any express direction re.sj)ccting the application of the payments. OPERATION AND DISCHARGE OF CONTRACTS 249 If the debtor makes no application of the payment, the creditor may at the time apply it to any demand due from the debtor. It has been held that the creditor may make the application at any time before suit, but this is, perhaps, not quite clear. But the right of the creditor to apply a payment made generally to which claim he pleases, extends only to lawful demands. If he have two claims, one of which is legal and the other illegal, he has no right even at the time of payment to apply the payment to the illegal claim. But there is no evidence in the present case that the plaintiff has at any time made any special application of these payments. If no application of the payment be made at the time by either debtor or creditor, the law will make the application. Some decisions say to the earliest debt. Following out this principle in Bosanquet v. Wray, 6 Taunt. 597, the creditor was permitted to apply the payment to a purely equitable debt, and to sue at law for the later legal debt. Other decisions qualify this rule respecting the application to the earliest debt. Particular equities have a precedence, and the prin- ciple may be stated to be, that where there is no particular equity or reason for a different application, the law will apply the payment to the earliest debt. Some cases hold, in favor of a surety, that such an application shall be made as will be for his benefit. Other cases hold that for the benefit of the creditor, the application shall be made to the debt least secured. Perhaps these two classes of cases do not present any conflict in principle, although one is in favor of the creditor as against the debtor, and the other favors the surety at the creditor's expense. They may well stand together, applying the last to those cases where there is no surety. They constitute exceptions to the rule applying the payment to the earliest debt, but the present case raises neither of these exceptions. If the earlier debt is not due and payable at the time of the payment, the law will apply it to the debt which had a later origin but was then due, upon the obvious presumption that the one party intended to pay, and the other must have understood that he was receiving the money in discharge of something which the creditor had the right to claim at the time, 7. Effect of Tender. Salinas & Son v. Ellis. 26 S. C. 337- Ellis owed money to Salinas & Son, partly on a mortgage, and partly on an unsecured note. He offered to pay the money due on the mortgage, which the attorney for Salinas & Son refused to accept, unless the whole indebtedness was discharged. Salinas & Son bring an action to foreclose the mortgage. Held, that tender of payment of money due under a mortgage will discharge the mortgage, although the debt re- mains. 250 COMMERCIAL LAW CASES McGowan, J. A tender is defined to be "an offer by a debtor to his creditor of the amount of the debt. The offer must be in lawful money, which must be actually produced to the creditor, unless by words or acts he waives production, and the offer must be definite and unconditional." It seems that when the proceeding was instituted to foreclose the mortgage, the defendant did not make good the tender or follow it up by bringing into court the money which had been tendered and refused; and as that was not done, the plaintiffs insist that the mere tender and refusal must go for nothing. But the defendant claims that while it did not satisfy the debt, upon which there may be judg- ment, it had at least the effect of discharging the lien of the mort- gage, the mere security and accessory of the debt. There is un- doubtedly a difference between a mere tender and the payment of money into court. As it was expressed in Black v. Rose, 14 S. C. 278: "The payment of money into court under order is certainly more than a simple tender. A tender is an offer to pay by the debtor before suit, and cannot be made after suit brought. It is purely ex parte. If it is not accepted, the debtor must retain his money, and if estab- lished on plea, the only effect is to stop interest thenceforward on the amount tendered. But a payment into court is different. It is not ex parte, but done by order of the court. The money paid in is for the plaintiff, and the possession of it cannot be resumed by the debtor. In the further prosecution of the case, that much is stricken from the record, whether the plaintiff takes out the money or not." This as to the debt itself. But suppose there is a mortgage of real estate to secure the debt; does a tender (although not brought into court) have any effect upon the lien of that mortgage, and if so, what ? All the authorities agree that even at common law, where the legal title is in the mortgagee, the eft'ect of a tender "at the law day," was to satisfy the condition of the mortgage as fully as if payment had been made and the estate revested in the mortgagor. As the question is really reduced to the time at which the tender is made — whether it must be the day on which the debt falls due and the condition of the mortgage is broken, or may be at any time after- wards before action brought — it is very obvious that the question must be greatly affected by the character given to a mortgage of land in the different states. In those states where the old common law mortgage is still retained, giving to the mortgagee an estate on condition, to become absolute upon the breach of that condition by nonjjayment at the day named, we can well understand how the courts would have, as a logical consequence, to hold that, in order to have the effect of discharging the mortgage, a tender must be made punctually at the hour of the day named. But we must confess that where, as in this state, the mortgage is a mere security for the debt, and the legal title remains in the mortgagor, precisely the same after as before the debt is due, we cannot understand why a tender after it becomes due but before suit, should not have the same effect as if OPERATION AND DISCHARGE OF CONTRACTS 25 1 it had been made "at the law day." It strikes us that in all the states where the mortgage of real estate is a mere security for the debt, this, upon principle, should be the ruling. C. Discharge by Breach. I. Anticipatory Breach. O'Neill V. Supreme Council, American Legion of Honor, yo N. J. L. 410. O'Neill had a life insurance policy for $5,000 with the de- fendant association which it refused to regard as in force beyond the sum of $2,000, although O'Neill had tendered all payments required. He sues for breach of contract. Held, that by the general rule an action may be brought for breach of contract before the time of performance has arrived. Pitney, J. Numerous reported decisions have laid down the doctrine that where a contract embodies mutual and interdependent conditions and obligations, and one party either disables himself from performing, or prevents the other from performing, or repudiates in advance his obligations under the contract and refuses to be longer bound thereby, communicating such repudiation to the other party, the latter party is not only excused from further performance on his part, but may, at his option, treat the contract as terminated for all purposes of performance, and maintain an action at once for the damages occa- sioned by such repudiation, without awaiting the time fixed by the contract for performance by the defendant. The doctrine has been followed in the English courts for more than a half century. In the leading case of Hochster v. De la Tour, 2 El. & B. 678, Justice Crompton said, during the argument: "When a party announces his intention not to fulfil the contract, the other side may take him at his word and rescind the contract. That word 'rescind' implies that both parties have agreed that the contract shall be at an end as if it had never been. But I am inclined to think that the party may also say : 'Since you have announced that you will not go on with the con- tract, I will consent that it shall be at an end from this time (meaning, of course, for purposes of further performance) ; but I will hold you liable for the damage I have sustained; and I will proceed to make that damage as little as possible by making the best use I can of my liberty.' This is the principle of those cases in which there has been a discussion as to the measure of damages to which a servant is entitled on a wrongful dismissal." And Lord Campbell, Chief Justice, in delivering judgment, said: "It seems strange that the defendant, after renouncing the contract 252 COMMERCIAL LAW CASES and absolutely declaring that he will never act under it, should be permitted to object that faith is given to his assertion and that an opportunity is not left to him of changing his mind. The man who wrongfully renounces a contract into which he has deliberately entered, cannot justly complain if he is immediately sued for a com- pensation in damages by the man whom he has injured; and it seems reasonable to allow an option to the injured party, either to sue immediately or to wait till the time when the act was to be done, still holding it as prospectively binding for the exercise of this option, which may be advantageous to the innocent party and cannot be prejudicial to the wrongdoer." The same rule prevails in the Supreme Court of the United States, where numerous previous decisions of the same court are cited. And the great weight of authority in the state courts is to the same effect. So far as observed, the only states dissenting from the doctrine are Massachusetts, Nebraska and North Dakota. In Daniels v. Newton, 114 Mass. 530, which is the leading case upon this side of the question, it is held that a mere refusal of performance by the promisor, before the time for performance arrives, cannot form a ground of damages. Even in Massachusetts the reasoning on which the decision in Daniels v. Newton was based is hardly carried to its logical conclusion. Upon the precise point now presented, however, the authority of Daniels v. Newton is still recognized in Massachusetts, as appears from a recent decision in a case that is "on all fours" with the one now before us. There seems to be no controlling decision in our own state, at least no reported case that is precisely in point. Upon the whole we are satisfied that the doctrine of Hochster v. De la Tour is well founded in principle as well as supported by authority. We are also clear that it applies to such a contract as the one in suit ; and the declaration sets forth a renunciation so clear and unequivocal as to give ground for an action, it being averred that the defendant has declared to the plaintiff that it will not perform the contract and has refused to accept the monthly assessments tendered by the plaintiff in performance of conditions precedent on his part. 2. Damages for Breach During Course of Performance. Parker v. Russell, ijj Mass. 7^. Parker conveyed land to the defendant under an agreement that the defendant would support him for life. The defendant's house was destroyed by fire, and she ceased to support Parker, who now claims damages for a breach of the entire contract. Held, that damages for a breach of the contract during a time when the plaintiff is entitled to performance will be allowed for future as well as past effects of the breach. OPERATION AND DISCHARGE OF CONTRACTS 253 Field, J. If the breach has been such that the plaintiff has the right to treat the contract as absolutely and finally broken by the defendant, and he elects so to treat it, the damages are assessed as of a total breach of an entire contract. When the defendant, for example, absolutely refuses to perform such a contract after the time for entering upon the performance has begun, it would be a great hardship to compel the plaintiff to be ready at all times during his life to be supported by the defendant, if the defendant should at any time change her mind; and to hold that he must resort to successive actions from time to time to obtain his damages piecemeal, or else leave them to be recovered as an entirety by his personal representatives after his death. Daniels v. Newton, 114 Mass. 530, decides that an absolute refusal to perform a contract before the performance is due by the terms of the contract is not a present breach of the contract for which any action can be maintained ; but it does not decide that an absolute refusal to perform a contract after the time and under the conditions in which the plaintiff is entitled to require performance, is not a breach of the contract, even although the contract is by its terms to continue in the future. 3. Bankruptcy as Breach. Central Trust Co. v. Chicago Auditorium Association. 240 U. S. 581. The Frank E. Scott Transfer Company had a contract with the Chicago Auditorium Association whereby the Transfer Com- pany for a term of five years secured the baggage and livery privileges of the Atiditorium Hotel. The Transfer Company sub- sequently went into bankruptcy, and the question arises in banlc- ruptcy proceedings whether the Auditorium Association may claim damages for breach of the contract catised by the bankrtiptcy of the Transfer Company. Held that bankruptcy constitutes a breach of a contract ter- minated by it. Pitney, J. It is no longer open to question in this court that, as a rule, where a party bound by an executory contract repudiates his obliga- tions or disables himself from performing them before the time for performance, the promisee has the option to treat the contract as ended, so far as further performance is concerned, and maintain an action at once for the damages occasioned by such anticipatory breach. The rule has its exceptions, but none that now concerns us. There. 254 COMMERCIAL LAW CASES is no doubt that the same rule must be applied where a similar re- pudiation or disablement occurs during performance. Whether the intervention of bankruptcy constitutes such a breach and gives rise to a claim provable in the bankruptcy proceedings is a question not covered by any previous decision of this court, and upon which the other federal courts are in conflict. "The parties to a contract which is wholly executory have a right to the maintenance of the contractual relations up to the time for performance, as well as to a performance of the contract when due." Commercial credits are, to a large extent, based upon the reasonable expectation that pending contracts of acknowledged validity will be performed in due course ; and the same principle that entitles the promisee to continued willingness entitles him to continued ability on the part of the promisor. In short, it must be deemed an implied term of every contract that the promisor will not permit himself, through insolvency or acts of bankruptcy, to be disabled from making performance ; and, in this view, bankruptcy proceedings are but the natural and legal consequence of something done or omitted to be done by the bankrupt, in violation of his engagement. It is the pur- pose of the Bankruptcy Act, generally speaking, to permit all creditors to share in the distribution of the assets of the bankrupt, and to leave the honest debtor thereafter free from liability upon previous obli- gations. Executory agreements play so important a part in the commercial world that it would lead to most unfortunate results if, by interpreting the Act in a narrow sense, persons entitled to per- formance of such agreements on the part of bankrupts were excluded from participation in bankrupt estates, while the bankrupts them- selves, as a necessary corollary, were left still subject to action for nonperformance in the future, although without the property or credit often necessary to enable them to perform. We conclude that proceedings, whether voluntary or involuntary, resulting in an adjudi- cation of bankruptcy, are the equivalent of an anticipatory breach of an executory agreement. 4. Recovery of Penalty for Breach. Law V. Redditcli. (1892) i Q. B. (Eng.) izy. Law agreed to construct sewerage works for the town of Red- ditch and further agreed that the work should be finished by a certain date or he should forfeit £100, and £5 a week for sucli time as tiie work should remain uncompleted. He sues for the amount due, and the town sets up a claim to £160, liquidated damages for failure to complete within the specified time. Held, that li(juidated damages are to be distinguished from penalties, and may be recovered upon non fulfilment of the terms of the contract. OPERATION AND DISCHARGE OF CONTRACTS 255 Kay, L. J. This contract contains a provision that a lump sum of £100 and £5 for every seven days during which the works remain incomplete after April 30, 1889, may be recovered "as and for liquidated dam- ages." What the meaning of these words is, and why they were inserted in the contract, a short statement of the law on the subject may assist in showing. In early times it was decided by courts of equity that, where a sum of money was agreed to be paid as penalty for nonperformance of a collateral contract, equity would not allow the whole sum to be recovered; but, where the damages for non- performance of such contract could be estimated-, would cut down the penalty to the amount of the actual damages sustained. It was for that very reason that the words "as and for liquidated damages," and similar words, came to be inserted in contracts. The contracting parties meant by the use of them to exclude this rule of equity, and to say that the sum agreed upon should be considered not to be a penalty, but the amount which they themselves assess as being the damages which would be incurred in the event of the contract being broken. It was to avoid the interference of courts of equity that such words were introduced. But then the courts of law interfered, and, as it seems to me, went further than courts of equity had, originally. They held that, though the parties had expressly said that the sum agreed to be paid was liquidated damages and not a penalty, they would construe the agreement as meaning that it should be a penalty. Lopes, L. J. The distinction between penalties and liquidated damages depends on the intention of the parties to be gathered from the whole of the contract. If the intention is to secure performance of the contract by the imposition of a fine or penalty, then the sum specified is a penalty; but if, on the other hand, the intention is to assess the damages for breach of the contract, it is liquidated damages. There is a canon of construction which has been referred to by the Master of the Rolls, according to which, if the sum is payable on the happen- ing or nonhappening of one event, it is to be regarded as liquidated damages; but if, on the other hand, it is payable on the happening of several events, some of which would entail very trifling damage, then it is to be regarded as a penalty. For the purpose of applying that rule to the present case, it is necessary first to construe the contract. The material words are, "the works shall be completed in all respects, and cleared of all implements, tackle, impediments, and rubbish, on or before April 30, 1889." I think that two events are here contemplated, one being the completion of the works, the other the removal of the tackle, &c. These are separate matters. Then the contract says, that "in default of such completion" the sums in question shall become payable. In my view those words do not refer 256 COMMERCIAL LAW CASES to the clearance of the works, but to the completion of the works mentioned in the first part of the clause. According to the construc- tion which I put upon the contract, only one event is contemplated as that upon which the sums mentioned are to become payable, viz., the noncompletion of the works by the specified day. That being so, it seems to me that those sums are liquidated damages. D. Discharge by Impossibility. I. When Impossibility of Performance Operates as a Dis- charge. Piaggio v. Somerville. up Miss. 6. The W. A. Powell Transport Company secured a charter of the schooner Henry S. Little and assigned that charter to Benn & Company, which in turn assigned to Somerville. Somerville in his turn assigned to Piaggio under an agreement to the effect that Piaggio should pay $1500 for the assignment upon the clearance of the vessel at Mobile. Owing to the unrestricted submarine warfare condticted by Germany, the owners refused to let the ves- sel clear and paid a substantial sum to Piaggio in settlement of his rights. Somerville now sues for the $1500, and Piaggio defends on the ground that the clearance of the vessel was a condition precedent to any liability to the plaintiff. Held, that performance of a contract is not excused on account of war, and that as the defendant had a subsisting contract, there was either a waiver of clearance or the clearance merely indicated the time of payment. Smith, C. J. The contention of the defendant is that the clearance of the schooner Henry S. Little at Mobile under the charter party is a condition precedent to any obligation on his part to pay the plaintiff the money sued for, to which the plaintiff replies that the performance of this condition, if such it is, was waived by the defendant when he accepted the seven thousand five hundred dollars from the owners of the vessel, and released them from furtiier liability to him under the charter party, to which defendant rejoins that his acceptance of the money and release of the owners of the vessel from further liability under the charter party cannot be construed to be a waiver of the condition precedent for the reason that he could not have enforced its performance had he tried to do so; the owners of the vessel having i)ecn released from the obligation of the charter party because of the danger of being siuik by a ( lernian submarine to which OPERATION AND DISCHARGE OF CONTRACTS 257 the vessel would have been subjected had it attempted to make the voyage. The charter party contains no such qualification of the obligation. Consequently the owners of the vessel were bound to transport the cargo of lumber as provided therein, notwithstanding the risk to the vessel of being sunk by a submarine, or pay damages for their failure so to do, for the rule is that when a party by his own contract creates a duty or charge upon himself he is bound to discharge it, although so to do should subsequently become unexpectedly burdensome or even impossible; the answer to the objection of hardship in all such cases being that it might have been guarded against by a proper stipulation. There are, however, certain classes of events the occurring of which are said to excuse from performance because "they are not within the contract," for the reason that it cannot reasonably be supposed that either party would have so intended had they contem- plated their occurrence when the contract was entered into, so that the promisor cannot be said to have accepted specifically nor promised unconditionally in respect to them. These three classes are : First, a subsequent change in the law, whereby performance becomes unlaw- ful. Second, the destruction, from no default of either party, of the specific thing, the continued existence of which is essential to the performance of the contract. And, third, the death or incapacitating illness of the promisor in a contract which has for its object the rendering by him of personal services. The case at bar cannot be referred to any of these classes, and, in order for it to be brought within the exceptions to the rule of absolute liability, it will be necessary for us to add thereto a fourth class, to wit, a subsequent foreign war or a subsequent change by one or more of the belligerents in the method of waging such a war which renders performance more burdensome to the promisor than when the contract was entered into, but so to do would be without the reason of the exception and contrary to the authorities. There are a few cases which cannot be referred to any of the three foregoing classes, such as The Kronprinzessen Cecilie, 244 U. S. 12, which is erroneously supposed by counsel for the defendant to sustain his contention. In that case a German-owned vessel sailed from New York to Bremerhaven via Plymouth, England, and Cher- bourg, France, on the eve of the outbreak of the recent war, having on board, among other articles, a number of kegs of gold consigned to Plymouth and Cherbourg. In order to escape capture by the French or English, it turned back before reaching either of the last-named ports and returned the gold to the shippers, who instituted libels against it to recover the damages alleged to have been sustained by them because of its failure to deliver the gold. The probabilities of the vessel's capture, had it continued its voyage to either the French or the English port, were so great that the court held that it was justified in turning back, and that its owners were thereby excused from performing their contract to transport and deliver the gold. 258 COMMERCIAL LAW CASES for the reason that the capture of the vessel was a risk "which, if it had been dealt with (when the contract of shipment was made), it cannot be beHeved that the contractee would have demanded or the contractor would have assumed." No such reason can be assigned here for the exclusion from the contract of the risk which the Henry S. Little would have run by making the voyage to Italy demanded by the defendant when we remember that commerce was not sus- pended because of Germany's unrestricted submarine warfare ; but, on the contrary, vessels owned by citizens of both neutral and bel- ligerent countries sailed continuously in the waters in which that warfare was being waged. 2. Impossibility Created by War. Blackburn Bobbin Co., Ltd., v. Allen & Sons, Ltd. (igi8) i K. B. (Eng.) 540. Allen & Sons contracted to deliver to the Bobbin Company Finland birch timber, the delivery of which became impossible upon the outbreak of the war. The Bobbin Company sues for damages. The defense is that the continuation of peace was an implied term of the contract. Held, that a contract is not discharged by impossibility of per- formance arising from a state of war. McCardie, J. The question at issue is this: When will a change of circum- stances (not due to the default of either party) cause a dissolution of contract? The law upon the matter is undoubtedly in process of evolution. The point must presumably be solved upon broad existing principles of contract law. Those principles, I conceive, should be the same whether the case be one of charter party, building contract, or sale of goods. But the application of the principles may vary with the terms and subject matter of the contract. Is there a conflict at the present time between the rules which are relevant to the present case ? The original rule of English law was clear in its insistence that where a party by his own contract creates a duty or charge ui)on himself, he is bound to make it good notwithstanding any accident by inevitable necessity, because he might have provided against it by his contract. The original rule has again and again been restated. The first true modification of the original rule was created, I think, by the doctrine of commercial frustration. "Where a contract is made with reference to certain anticipated circumstances, and where, without any default of cither party, it becomes wholly inapi)lical)lc to or im])ossiblc of ajjplication to any such circumstances, it ceases to have any ai)plication ; it cannot be applied to other cir- cimistanccs which could not have been in the contemplation of the parties when the contract was made." If these words are to be OPERATION AND DISCHARGE OF CONTRACTS 259 applied to their widest extent they may well effect a revolution of contract law. The next true modification of the original rule was finally effected by the decision in Taylor v. Caldwell, 3 B. & S. 826. There the contract was held dissolved by the destruction of its subject matter. The doctrine of Taylor v. Caldwell was enlarged by the Coronation cases, of which Krell v. Henry, (1903) 2 K. B. 740, is the most vivid example, for in Krell v. Henry the court held that a collateral, though important, circumstance was the basis of the con- tract between the parties, and that when the basis ceased it followed that the contract was dissolved. So stood the decisions at the outbreak of the present war. Since that event judgments have been delivered as to the true effect of the decisions I have stated. On the one hand the original rule has been stated to exist in its integrity, whilst on the other hand the modification of the rule is deemed to be clearly settled. But by what tests and subject to what limitations is the Krell v. Henry rule to be applied? No indication has yet been given as to the extent of its operation. At the outbreak of war a vast body of commercial contracts existed which contained no clauses whatever providing for that event. No one can doubt that such contracts had been made upon the assumption that peace would continue. Neither side contemplated the occurrence of war. But it cannot be that all such contracts were dissolved by the events of August, 1914. The mere continuance of peace was not a condition of the contract. The destruction of a state of peace is not of itself a destruction of any specific set of facts within the Krell v. Henry rule. Nor can it be that grave difficulty on the part of a vendor in procuring the contract articles will excuse him from the performance of his bargain. To supply an answer to the above questions is a task of great difficulty in the absence of any authoritative guidance, for it calls not only for a reconciliation of apparently conflicting lines of cases, but it calls also for the ever embarrassing duty of deciding whether an implied term shall be read into a given contract to the effect that dissolution shall take place if an uncontemplated and serious change of circumstances occurs. The decisions with respect to personal services throw, I feel, but little light on the matter, for it seems just and reasonable to imply a condition in such agreements that the con- tract shall be dissolved upon the death or physical incapacity of the person who has agreed to give his personal services. Death and illness are unceasing features of human society. I think, however, that assistance is derived from considering broadly the nature of the cases in which the Krell v. Henry rule has been applied, whether before or after that decision in 1903. It will be observed that they appa- rently fall into several classes : First, where British legislation or Government intervention has removed the specific subject matter of the construction from the scope of private obligation. I myself ven- ture to think that this is an independent class of case, though, for the purpose of clearness, I classify it as falling within Krell v. Henry; secondly, where the actual and specific subject matter of the contract 26o COMMERCIAL LAW CASES has ceased to exist, apart from British legislation or administrative intervention; thirdly, where a specific set of facts directly affecting a specific subject matter has ceased to exist (see Jackson v. Union Marine Insurance Co., L. R. lo C. P. 125, the case of a ship) ; fourthly, where a specific set of facts collaterally only affecting a specific subject matter, but yet constituting the basis of contract, has ceased to exist (see Krell v. Henry, (1903) 2 K. B. 740, the letting of specific premises); and, fifthly, where British administrative inter- vention has so directly operated upon the fulfilment of a contract for a specific work as to transform the contemplated conditions of per- formance. I need not, of course, classify or illustrate the cases in which British legislation has directly prohibited the performance of a contract. In such cases the doctrine of illegality dissolves the bargains. My conclusion upon the matter is that in the absence of any question as to trading with the enemy, and in the absence also of any administrative intervention by the British Government authorities, a bare and unqualified contract for the sale of unascertained goods will not (unless most special facts compel an opposite implication) be dissolved by the operation of the principle of Krell v. Henry, even though there has been so grave and unforeseen a change of circum- stance as to render it impossible for the vendor to fulfil his bargain. If I were to hold otherwise, I should create a rule the results of which no man can foresee, and to the operation of which no judge can satisfactorily fix the limits. 3. Discharge by Impossibility of Performance Arising from Destruction of the Subject Matter. Butter field v. Byron. 755 Mass. 5/7. Butterfield made a contract with Byron whereby Byron agreed to build a hotel on land belonging to Butterfield, Butterfield doing the excavating, brick work, painting and plumbing. The hotel was struck by lightning and burned to the ground jtist before com- pletion. Butterfield sues to recover the amounts he had already paid Byron and expended upon the property. Held, that when a contract becomes impossible of performance by reason of the destruction of the subject matter, it is dis- charged. Knowlton, J. It is well established law, that, where one contracts to furnish labor and materials, and construct a chattel or build a house on land of another, he will not ordinarily be excused from performance of his contract by the destruction of the chattel or building, without his fault, before the time fixed for the delivery of it. It is equally well OPERATION AND DISCHARGE OF CONTRACTS 26 1 settled, that when work is to be done under a contract on a chattel or building which is not wholly the property of the contractor, or for which he is not solely accountable, as where repairs are to be made on the property of another, the agreement on both sides is upon the implied condition that the chattel or building shall continue in existence, and the destruction of it without the fault of either of the parties will excuse performance of the contract, and leave no right of recovery of damages in favor of either against the other. In such cases, from the very nature of the agreement as applied to the subject matter, it is manifest that, while nothing is expressly said about it, the parties contemplated the continued existence of that to which the contract relates. The implied condition is a part of the contract, as if it were written into it, and by its terms the contract is not to be performed if the subject matter of it is destroyed, without the fault of either of the parties, before the time for complete performance has arrived. The fundamental question in the present case is. What is the true interpretation of the contract? Was the house while in the process of erection to be in the control and at the sole risk of the defendant, or was the plaintiff to have a like interest, as the builder of a part of it? What are the rights of the parties in regard to what has been done in part performance of a contract in which there is an implied condition that the subject to which the contract relates shall continue in existence, and where the contemplated work cannot be completed by reason of the destruction of the property without fault of either of the parties, is in dispute upon the authorities. The decisions in England differ from those of Massachusetts, and of most of the other states of this country. There the general rule, stated broadly, seems to be that the loss must remain where it first falls, and that neither of the parties can recover of the other for anything done under the contract. In England, on authority, and upon original grounds not very satisfactory to the judges of recent times, it is held that freight advanced for the transportation of goods subsequently lost by the perils of the sea cannot be recovered back. In the United States and in Continental Europe the rule is different. In England it is held that one who has partly performed a contract on property of another which is destroyed without the fault of either party, can recover nothing; and on the other hand, that one who has advanced payments on account of labor and materials furnished under such circumstances cannot recover back the money. One who has ad- vanced money for the instruction of his son in a trade cannot recover it back if he who received it dies without giving the instruction. But where one dies and leaves unperformed a contract which is entire, his administrator may recover any instalments which were due on it before his death. In this country, where one is to make repairs on a house of another under a special contract, or is to furnish a part of the work and materials used in the erection of a house, and his contract 262 COMMERCIAL LAW CASES becomes impossible of performance on account of the destruction of the house, the rule is uniform, so far as the authorities have come to our attention, that he may recover for what he has done or furnished. In Cleary v. Sohier, 120 Mass. 210, the plaintiff made a contract to lath and plaster a certain building for forty cents per square yard. The building was destroyed by fire which was an unavoidable casualty. The plaintiff had lathed the building and put on the first coat of plaster, and would have put on the second coat, according to his contract, if the building had not been burned. He sues on an implied assumpsit for work done and materials found. It was agreed that, if he was entitled to recover anything, the judgment should be for the price charged. It was held that he could recover. In Hollis v. Chapman, 36 Texas i, and in Clark v. Franklin, 7 Leigh I, the recovery was a proportional part of the contract price. If the owner in such a case has paid in advance, he may recover back his money, or so much of it as was an overpayment. The principle seems to be that when, under an implied condition of the contract, the parties are to be excused from performance if a certain event happens, and by reason of the happening of the event it becomes impossible to do that which was contemplated by the contract, there is an implied assumpsit for what has properly been done by either of them, the law dealing with it as done at the request of the other, and creating a liability to pay for it its value, to be deter- mined by the price stipulated in the contract, or in some other way if the contract price cannot be made applicable. Where there is a bilateral contract for an entire consideration moving from each party, and the contract cannot be performed, it may be held that the consideration on each side is the performance of the contract by the other, and that a failure completely to perform it is a failure of the entire consideration, leaving each party, if there has been no breach or fault on either side, to his implied assumpsit for what he has done. 4. Discharge by Subsequent Illegality. Heart v. East Tennessee Bren*ing Company. 121 Tenn. 6g. In 1902, Heart leased property in Knoxville to the Brewing Company for a term of eight years to be used as a saloon. In 1907, the sale of intoxicating liquor was prohibited in Knoxville from and after Nov. i. Heart sues for rent accruing after Nov. i. Held, that he cannot recover for the reason that when per- formance of a contract becomes illegal, each party thereto is dis- charged from further obligation thereunder. Shields, J. It is a principle of general application that all contracts are void OPERATION AND DISCHARGE OF CONTRACTS 263 which provide for doing a thing which is contrary to law, moraHty, and pubUc pohcy. It has been apphed to contracts of this character, and held, for that reason, that the rent contracted to be paid could not be col- lected. The rule is the same when the purpose of the contract, although lawful when made, becomes unlawful by statute enacted before the full performance of its terms. That the illegality of a contract is in general a perfect defense must be too obvious to need illustration. It may indeed be regarded as an impossibility by act of law ; and it is put upon the same footing as an impossibility by act of God, because it would be absurd for the law to punish a man for not doing, or, in other words, to require him to do that which it forbids his doing. Therefore, if one agrees to do a thing which is lawful for him to do, and it becomes unlawful by an act of the legislature, the act avoids the promise, and so if one agrees not to do that which he may lawfully abstain from doing, but a subsequent act requires him to do, this act also avoids the agreement. Where the performance of an executory agreement which was lawful in its inception is made unlawful by subsequent enactment, the agreement is thereby dissolved and the parties discharged from its obligations. The rule has also been frequently applied by this and other courts of last resort. In Railroad Company v. Green, 9 Heisk. 592, it was held that a contract for the payment of Confederate notes, lawful when made, but afterwards made unlawful by law, could not be enforced. It is there said : "The law has therefore made it impossible for the plaintiff to perform that portion of the condition precedent which required them to demand payment in Confederate notes. The nonperformance of a contract will always be excused where it is occasioned by act of law." The case of Gray v. Sims, Fed. Cas. No. 5729, is directly in point. This was a suit upon a policy of marine insurance. The vessel in- sured was to be employed in importing goods from Calcutta or Madras into the United States, and the contract of insurance specified this as one of the purposes of the voyage. After the policy was written, and before the return of the vessel, it became by act of congress illegal to import goods into the United States from these points. The master undertook to do so. and the ship was seized and con- fiscated. The loss was within the terms of the policy. A recovery was denied. The court said: "But if the contract be legal when it is made, and the performance of it is rendered illegal by a subsequent law, the parties are both of them discharged from its obligation. The insured loses his indemnity and the insurer his premium." 264 COMMERCIAL LAW CASES E. Discharge by Operation of Law. I. Merger. Witheck V. Waine. 16 N. Y. 5^2. Witbeck bought land from Waine under an agreement in writ- ing which provided that the price should be increased or reduced pro rata, as the farm contained more or less than 130 acres. A deed was given containing no statement as to this contract. Wit- beck sues to recover the proportionate amount of the price paid as the farm contained less than 130 acres. Waine contends that the original contract was merged in the deed. Held, that a contract is ordinarily merged in a subsequently executed deed, but the rule applies only when the contract relates to the same subject matter. Denio, J. Unless there is a sound distinction between the present case and those which were referred to by the defendant's counsel, we must hold the law to be that the delivery and acceptance of the conveyance canceled and extinguished the prior executory agreement, and that it cannot be any longer resorted to to ascertain the terms upon which the land was sold. It is a general rule of evidence, as well settled as it is salutary, that a written contract executed between parties super- sedes all their prior negotiations and agreements upon the same subject. This is especially true where the final contract is an executed one, and those which preceded it were in their nature executory and looked for their consummation to a conveyance after- wards to be made. The rule, however, is not applicable where the last contract covers only a part of the subjects embraced in the prior one. Where, for example, one contracts, for a specified consideration, to convey land at a future time, and to do, at a still later period, other acts for the benefit of the other contracting party, or where the contract is for a series of acts to be performed at successive periods, it is plain that the prior contract is superseded only as to such of its provisions as are covered by the conveyance made pur- suant to its terms. The agreement remains in full force as to all its other provisions. This is so obvious, upon the reason of the thing, that we need not ask for authority to sustain it. I think, moreover, that the authorities which are relied on are clearly distinguishable from the present case. In the case before us the plaintiff's stipulations respecting the unpaid portions of the purchase money remained, and were intended to remain, unaffected; and the provision for adjusting that purchase money according to the actual contents of the farm was inseparably connected with and naturally formed a part of the covenants for its OPERATION AND DISCHARGE OF CONTRACTS 265 payment. I conclude, therefore, that the fact of the conveyance of the farm did not preclude the plaintiff from subsequently claiming a proper deduction on account of the deficiency of the land. 2. Alteration. Wood V. Steele. 6 Wall. (U. S.) 80. Newson secured a loan of money from Wood upon a note made by himself and Steele. After Steele had signed the note, the date was changed from Sept. 11 to October 11, without the knowledge of Steele, who contends that the alteration releases him from liability. Held, that a material alteration of a contract discharges it by operation of law. Swayne, J . It was a rule of the common law as far back as the reign of Edward III, that a rasure in a deed avoids it. In Master v. Miller, 4 Term. 320, the subject was elaborately examined with reference to commercial paper. It was held that the established rules apply to that class of securities as well as to deeds. It is now settled, in both English and American jurisprudence, that a material alteration in any commercial paper, without the consent of the party sought to be charged, extinguishes his liability. The materiality of the altera- tion is to be decided by the court. The question of fact is for the jury. The alteration of the date, whether it hasten or delay the time of payment, has been uniformly held to be material. The fact in this case that the alteration was made before the note passed from the hands of Newson, cannot affect the result. He had no authority to change the date. The grounds of the discharge in such case are obvious. The agreement is no longer the one into which the defendant entered. Its identity is changed: another is substituted without his consent; and by a party who had no authority to consent for him. There is no longer the necessary concurrence of minds. If the instrument be under seal, he may well plead that it is not his deed; and if it be not under seal, that he did not so promise. In either case, the issue must necessarily be found for him. To prevent and punish such tampering, the law does not permit the plaintiff to fall back upon the contract as it was originally. In pursuance of a stern but wise policy, it annuls the instrument, as to the party sought to be wronged. The rules, that where one of two innocent persons must suffer, he who has put it in the power of another to do the wrong, must bear the loss, and that the holder of commercial paper taken in good faith and in the ordinary course of business, is unaffected by any latent infirmities of the security, have no application in this class of cases. 266 COMMERCIAL LAW CASES The defendant could no more have prevented the alteration than he could have prevented a complete fabrication; and he had as little reason to anticipate one as the other. The law regards the security, after it is altered, as an entire forgery with respect to the parties who have not consented, and so far as they are concerned, deals with it accordingly. 3. Death. Siler, Adm'r. v. Gray, Adin'r. 86 N. C. 566. J. R. Siler conveyed property to his son, L. F. Siler, in con- sideration of which the son agreed to support his father and mother as long as they should live. After the death of both father and son, the plaintiff, the administrator of the estate of J. R. Siler, sues the defendant, the administrator of the estate of L. F. Siler, for failure, after the death of L. F. Siler, to support the father and mother prior to the death of the father, and the mother thereafter. Held, that death discharges a contract which contemplates per- sonal services. Rufhn, J. The general rule unquestionably is, that the personal represen- tatives of a party are bound to perform all his contracts, whether specially named in them or not, or else make compensation for their nonperformance out of his estate. But to this there is the exception, as well established as the rule itself, of all such contracts as require something to be done by the party himself in person. "All contracts for personal service, which can be performed only during the life of the contracting party, are subject to the implied condition that he shall live to perform them, and should he die, his executor is not liable to an action for the breach of contract occasioned by his death." In such cases, it is held that the act of God furnishes an excuse sufficient. Assuming such to be the law, under which does the case at bar fall ? The general rule, or the exception as stated ? This must depend upon the intention of the parties, for at last, it is in every case purely a question as to their intention. It is true that the cases put down in the books, like those cited by us, are generally those in which the contracts sued on have been to marry — to teach an apprentice — to render services as an author, or as a doctor or a lawyer — such as will be determined by the very nature of the services to be rendered or the skill requisite to perform them, to the exclusion of all thought of performance by any other person than the contracting party. OPERATION AND DISCHARGE OF CONTRACTS 267 But Still this is so, even in contracts of that nature, because the law implies such to have been the intention of the parties, and for that reason, and that alone, construes them to be personal contracts, and takes them out of the general rule. If in the lifetime of all the parties, the defendant's intestate had sought to introduce a stranger into the family, and through his agency to have performed the services stipulated to be rendered by himself, can it be supposed that the law would, for one moment, have tolerated such a course? And if not. then should the law, after his death, furnish a substitute for him, in his administrator, when he, himself, could not appoint one? We think not; and for the reason that the parties to the contract, manifestly, never contemplated or intended that there should be one. Our conclusion is therefore that so much of said agreement as imposed upon the defendant's intestate the duty of providing for the plaintiff's intestate and his wife, and of looking after their comfort, was purely personal in its nature, and inasmuch as the defendant could not have enforced his right to perform it, so neither is he liable to an action for not having done so. 4. Bankruptcy. Zaz'elo V. Reeves. 22^ U. S. 62^. Reeves sues Zavelo upon a debt, a portion of which had been discharged by a composition with creditors made by Zavelo in the course of bankruptcy proceedings, in which Reeves joined. Reeves had loaned Zavelo $500 for the purpose of eflfecting that composition, upon a promise by Zavelo to pay the balance as part consideration for the loan. Held, that a new promise made during bankruptcy proceedings revives a debt otherwise discharged by operation of law. Pitney, J. It is contended that although a debt barred by discharge in bank- ruptcy may be revived by a new promise made after the discharge, this cannot be done by a new promise made in the interim between the adjudication and the discharge. It is settled, however, that a discharge, while releasing the bank- rupt from legal liability to pay a debt that was provable in the bankruptcy, leaves him under a moral obligation that is sufficient to support a new promise to pay the debt. And in reason, as well as by the greater weight of authority, the date of the new promise is immaterial. The theory is that the discharge destroys the remedy but not the indebtedness ; that, generally speaking, it relates to the inception of the proceedings, and the transfer of the bankrupt's estate for the benefit of creditors takes effect as of the same time ; that the 268 COMMERCIAL LAW CASES bankrupt becomes a free man from the time to which the discharge relates, and is as competent to bind himself by a promise to pay an antecedent obligation, which otherwise would not be actionable because of the discharge, as he is to enter into any new engagement. And so, under other bankrupt acts, it has been commonly held that a promise to pay a provable debt, notwithstanding the discharge, is as effectual when made after the filing of the petition and before the discharge as if made after the discharge. Chapter III. SALES. I. THE CONTRACT OF SALE. The law of sales is a branch of the law of contracts subject to special rules at common law and by statute. Most of the great commercial states* have adopted the Uniform Sales Act, which embodies in statutory form the main principles of the common law and tends to eliminate conflict of decisions. This chapter will in general follow the terms of that statute. A sale of goods is an agreement whereby the seller transfers the title to goods to the buyer for a consideration called the price. An agreement to sell is distinguished from a sale in that a sale represents an actual transfer of title, while an agreement to sell is merely a contract to make such a transfer in the future. A sale gives rights against the goods themselves, while an agreement to sell gives only a right of action for breach of contract. A sale involves as its elements : 1. An agreement. 2. A transfer of property. This property is called the title, or general ownership. It is to be distinguished from that special title which belongs to anyone who law- fully has goods in his possession. 3. Goods. Goods include all personal property other than things in action and money. Things in action is a translation of the old legal term, "choses in action," which means rights flowing from one person to another. * The jurisdictions which have adopted the Sales Act are as follows: Arizona Michigan Ohio Connecticut Minnesota Oregon Idaho Mississippi Pennsylvania Illinois Nevada Rhode Island Iowa New Jersey Tennessee Maryland New York Utah Massachusetts North Dakota Wisconsin Wyoming Alaska 269 2/0 COMMERCIAL LAW CASES 4. Price. The price may be fixed by the terms of the contract or may be left to be fixed in such manner as may later be agreed upon. It may be determined by the course of dealing between the parties. Under the statute it may be made payable in any personal property. A sale is to be distinguished from other transactions somewhat similar in nature : 1. Bailment. A bailment is the delivery of an article of per- sonal property to another for a special purpose, with the under- standing that it is to be returned when that purpose is accomplished. The bailee has a special, not a general, property in the goods. That is true even though the goods are to be returned in a dif- ferent form. A difficult question arises when goods are entrusted to another on the understanding that they may be mixed with goods belonging to other persons, with an agreement for the return, not of the specific goods, but of a proportionate part of the mass. Some courts hold that such a transaction is a sale, on the theory that the agreement does not require the return of the goods so deposited. Other courts hold that it is a bailment, since the dif- ferent depositors own the entire mass in common. Care should be taken to distinguish between a bailment with an option to buy, and a sale or contract to sell. A bailment with option to buy should in turn be distinguished from a conditional sale, which is a contract to sell accompanied by the delivery of goods, with reser- vation of the title in order to secure payment of the price, which the buyer is bound to pay. 2. Pledge. A transfer of property as security for a debt without transfer of title, is a pledge. The pledgor may still transfer the title to a third person, subject to the special property of the pledgee. If goods are delivered by way of security, it may always be shown that the real intention of the transaction was to pledge and not to sell, even though the form is that of a sale. 3. Chattel Mortgage. A chattel mortgage differs from a pledge in that the general property in the mortgaged goods is transferred to the mortgagee. It differs from a sale in that the title reverts to the mortgagor upon performance of the condition. 4. Exchange. If the consideration for a transfer of the property in goods is other property, no price being fixed for either, tiie transaction is an exchange or barter, not a sale. 5. Contract for work, labor and material. The distinction between a sale of goods and a contract to do work or furnish material is important chiefly in reference to the statute of frauds. Some courts hold that if the proi)erty is to be manufactured espe- cially for the buyer ujjon liis order, and is not such as the seller SALES 271 ordinarily manufactures for the general market, the contract is for work, labor, and material, and not a contract to sell. Other courts hold that such a contract is a contract to sell in spite of the fact that the vendor must furnish materials and do special work for the vendee. The ordinary rules of the law of contracts as to offer and accep- tance, form, consideration, capacity, reality of consent, and legal- ity of subject matter apply to the law of sales. The section of the statute of frauds which applies to these contracts is the seven- teenth section of the old English Statute of Frauds, which in the Sales Act is as follows : "A contract to sell or a sale of any goods or choses in action of the value of five hundred dollars or upward shall not be enforceable by action unless the buyer shall accept part of the goods or choses in action so contracted to be sold, or sold and actually receive the same, or give some- thing in earnest to bind the contract, or in part payment, or unless some note or memorandum in writing of the contract or sale be signed by the party to be charged or his agent in that be- half." The amount of money involved which brings a sale within the statute differs with the different states. Under the early English act, it was ten pounds, and many of the states originally adopted the sum of fifty dollars. The amount is now generally higher. In all the states which have enacted the Uniform Sales Act without amendment, this amount is five hundred dollars. A dif- ferent sum is specified in the statutes of the following states : Arkansas 1 Connecticut Maine Missouri 100 lCUt\