PRINCIPLES ENGLISH LAW OF CONTRACT AND OP AGENCY IN ITS RELATION TO CONTRACT ANSON J. PETER MAYER LIBRARY LONDON HENRY FROWDE, M.A. PUBLISHER TO THE UNIVERSITY OF OXFORD AND STEVENS AND SONS, LIMITED PRINCIPLES OF THE ENGLISH LAW OF CONTRACT AND OP AGENCY IN ITS RELATION TO CONTRACT BY SIR WILLIAM R. ANSON, BART., D.C.L. OP THE INNER TEMPLE, BARBISTER-AT-LAW WARDEN OF ALL SOULS COLLEGE, OXFORD Eleventh Edition OXFORD AT THE CLARENDON PRESS LONDON AND NEW YOKK : HENEY FROWDE ALSO SOLD BY STEVENS & SONS, LIMITED, 119 & 120 CHANCERY LANE, LONDON 1906 OXFORD PRINTED AT THE CLARENDON PRESS BY HORACE HART, M.A. PRINTER TO THE UNIVERSITY Copyright in the United States of America, by the Oxford University Press American Branch, 1906 LIBRAKY 4iHlVERSn Y OF CALIFORNIA BARBARA I HAVE little to say in offering the eleventh edition of this book to the public. The preface to the sixth edition, which I leave as it was written in 1891, will explain, to any one who may be interested in the matter, the origin and purpose of the book. I have endeavoured in the eleventh edition to bring the book up to date, to introduce new authorities with the least possible enlargement of the text, to simplify passages that seemed obscure, and to preserve the character of an elementary treatise. I have again to thank my friend Mr. Graham- Harrison, of All Souls College and of Lincoln's Inn, for valuable help in the suggestion of improvements, in advice on points of difficulty, in correction, and in revision. W. R A. ALL SOULS COLLEGE, April, 1906. PREFACE TO THE SIXTH EDITION WHEN the subject of Contract was first introduced into the School of Jurisprudence at Oxford, in the year 1877, teachers of Law had to consider the books which their pupils might best be directed to read. Some works on the subject, of acknowledged value to the practising lawyer, were hardly suitable for beginners, and the choice seemed to lie between the works of Mr. Leake, Sir Frederick Pollock, and the late Mr. Smith. Of these, Mr. Smith alone wrote expressly for students, and I had, as a student, read his book with interest and advantage. But I thought that it left room for an elementary treatise worked out upon different lines. Neither Sir Frederick Pollock nor Mr. Leake wrote for beginners, and I feared lest the mass of statement and illustration which their books contain, ordered and luminous though it be, might tend to oppress and dishearten the student entering upon a course of reading for the School of Law. Being at that time the only public teacher of English Law in the University, I had some practical acquaintance with the sort of difficulties which beset the learner, and I endeavoured to supply the want which I have described. In working out the plan of my book I necessarily studied the modes of treatment adopted by these two writers, and I became aware that they are based on two totally different principles. Mr. Leake treats the contract as a subject of litigation, from the point of view of the pleader's chambers. He seems to ask, What are the kinds of contract of which this may be one? Then What have I got to prove 1 ? By what defences may I be met? Sir Frederick Pollock regards the subject ab extra ; he inquires what is the nature of that legal relation which we term contract, and how it is PREFACE TO THE SIXTH EDITION Vll brought about. He watches the parties coming to terms, tells us how the contract may be made, and by what flaws in its structure it may be invalidated. Mr. Leake treats the subject from every point of view in which it can interest a litigant. Sir Frederick Pollock wrote a treatise on the Formation of Contract : only in later editions has he introduced a chapter on Performance. To both these writers I must own myself to be under great obligations. If I try to apportion my gratitude. I should say that perhaps I obtained the most complete information on the subject from Mr. Leake, but that Sir Frederick Pollock started me on my way. The object which I set before me was to trace the principles which govern the contractual obligation from its beginning to its end ; to show how a contract is made, what is needed to make it binding, whom it may affect, how it is interpreted, and how it may be discharged. I wished to do this in outline, and in such a way as might best induce the student to refer to cases, and to acquire the habit of going to original authorities instead of taking rules upon trust. So I have cited few cases : not desiring to present to the reader all the modes in which principles have been applied to facts, and perhaps imperceptibly qualified in their application, but rather to illustrate general rules by the most recent or most striking decisions. In successive editions I have made some changes of arrangement, and have tried to keep the book up to date. Since it first appeared, in 1879, the Legislature has been busy with the law of Contract. The law relating to Married Women's Property, to Bankruptcy, to Bills of Exchange, to Partnership, to Mercantile Agency, has either been recast or thrown for the first time into statutory form : the effects of the Judicature Act in the general application of equitable rules and remedies have become gradually apparent in judicial decisions. Thus it has been necessary to alter parts of my book from time to time, but in this, Vlll PREFACE the sixth, edition I have made many changes for the sake of greater clearness and better arrangement. The whole of the chapters on Offer and Acceptance, on the Effects of Illegality, on the Discharge of Contract by Breach, and a great part of the chapters on Mistake and Fraud, Infants and Married Women, have been re-written, and the rest of the book has undergone many minor alterations as the result of a general revision. I should add one word as to the place assigned to Agency. It is a difficult subject to put precisely where the reader would except to find it. It is a mode of forming the con- tractual relation : it is also a form of the Contract of Employment. From the first of these points of view it might form part of a chapter on Offer and Acceptance, regarding the agent as a mode of communication; or it might form part of a chapter on the Capacity of Parties, regarding Representation as an extension of contractual capacity; or, again, it might form part of a chapter on the Operation of Contract, regarding Agency as a means whereby two persons may make a contract binding on a third. But upon the whole I think it is best to try and make the student understand that the agent represent^ his prin- cipal in virtue of a special contract existing between them, the Contract of Employment. There is a disadvantage, no doubt, in introducing into a treatise on the general prin- ciples of contract a chapter dealing with one of the special sorts of contract, but I believe that the student will find less difficulty in this part of the law if he is required to understand that the agent acquires rights and incurs liabilities for his principal, not in virtue of any occult theory of representation, but because he is employed for the purpose, by a contract which the law recognizes. I should not close this Preface without an expression of thanks to the friends who from time to time in the last ten years have helped me with suggestions or corrections of TO THE SIXTH EDITION IX this book. To his Honour Judge Chalmers, to Sir Frederick Pollock, and in especial to the Vinerian Professor, Mr. Dicey, I owe much in the way of friendly communication on points of novelty or difficulty. Nor should a teacher of law be unmindful of his debt to the student. The process of explaining a proposition of law to a mind unfamiliar with legal ideas, necessitates a self-scrutiny which is apt to lead to a sad self-conviction of ignorance or confusion of thought ; and the difficulties of the learner will often present in a new light what had become a commonplace to the teacher. Therefore I would not seem ungrateful to the law students of Trinity College, past and present, whom I have tried, and sometimes not in vain, to interest in the law of Contract. I hope that the present edition of this book may be a little shorter than the previous one. I strongly desire to keep it within such limits as is proper to a statement of elementary principles, with illustrations enough to explain the rules laid down, and, as I hope, to induce the student to consult authorities for himself. W. R. A. ALL SOULS COLLEGE, January, 1891. TABLE OF CONTENTS PART I PLACE OF CONTRACT IN JURISPRUDENCE PACK Outline of subject 1 Analysis of Agreement . . . . .. . . 2 Distinction of Contract from Agreement 3 Analysis of Obligation . . . . . . . . 5 Distinction of Duty from Obligation 6 Sources of Obligation .......... 7 Definition of Contract ' o PART II FORMATION OF CONTRACT Elements necessary to a valid Contract . . . . .11 Remedies available to parties to a Contract . . . . .12 The meaning of the terms raid, voidable, unenforceable . . . .14 CHAPTER I Offer and Acceptance Agreement traceable to Question and Answer 1 7 Forms in which Contract may originate . . . . . . .18 Offer and Acceptance may be made by words or conduct . . .21 Offer must be communicated . . . . . . . .23 Acceptance must be communicated ....... 26 What amounts to communication of Acceptance 2 s Offer inoperative till accepted 35 How offer may lapse .......... 35 Under what circumstances offer may be revoked 37 Diclciiwon r. Doe free from doubt or difference ..... 46 General offers to unascertained persons ... ... 50 Representation of Intention aw distinct from Offer .... 52 CONTENTS XI CHAPTER II Form and Consideration PAGE Form or Consideration necessary to validity of Contract . . 55 Historical outline of the subject 55 Classification of English Contracts . . . . . . . ' . 61 Formal Contract. Contracts of Record . . . . . . . . .62 Contract under Seal . . ... . . . . .64 How made ......... 64 Their characteristics ....... 65 When a Deed is essential to validity of a Contract . . 69 Simple Contract. Simple Contracts required to be in writing . . . . .71 The Statute of Frauds Fourth Section . . . . -72 The Contracts included under it ..... 73 Its requirements as to form . . . . -77 The effect of a breach of its provisions . . . .82 The Sale of Goods Act Fourth Section 84 Nature of Contract specified ...... 85 Its requirements as to form . . . . . -87 Effect of a breach of its provisions . . . . .87 Consideration. Definition of Consideration 88 Its necessity to the validity of every Simple Contract . . .88 It need not be adequate to the promise ..... 90 But must be real . . ....... 91 Differs therein from motive ....... 93 Must move from promisee -94 Must be of some ascertainable value ...... 95 Impossible aud vague promises ...... 96 Forbearance to sue and compromise of suit . . . -97 Gratuitous bailment and gratuitous employment . . . 98 Must be more than discharge of existing liability . . . 100 Payment of smaller sums in satisfaction of larger . . . 102 Composition with creditors . . . ... . 104 Shadwellv. Shadwell and Scotson v. Peyg discussed . .106 Legality of Consideration . . . . . . . .108 Executory and executed Consideration 108 Past Consideration is no Consideration . . . . .110 First alleged exception to this rule, Consideration executed upon request in The rule in Lampleigh v. Braithwait discussed . . . . 1 1 1 Second alleged exception, voluntary discharge of legal liability of another person . . . . . . . . .115 Third exception, revival of Promise 117 Xll CONTENTS CHAPTER III Capacity of Parties PAGE 1 . Political or Professional Status . ; 122 2. Infancy. Ratification at Common Law 123 Infants' Relief Act 126 Effect of first section of Infants' Relief Act 1 26 Of second section 1 30 Necessaries, what they are, and how ascertained . . . .132 Liability of Infant for wrong arising from Contract . . . . 1 34 Or apart from Contract . . . . . . . ' 34 3. Corporations. Necessary limits to their capacity to Contract 1 35 Express limitations . . . 1 35 4. Lunatics and Drunken Persons. Their Contracts voidable, not void 137 ;. Married Women. Their Contracts as a general rule void at Common Law . . .138 Exceptions 138 Married Women's Property Acts, 1882 and 1893 . . . .140 Nature of the liability which their contracts create .... 142 CHAPTER IV Heality of Consent Mistake. Limited character of its effect on Contract . . . . . .145 As to nature or existence of Contract . . . . . . 1 47 As to identity of person with whom the Contract is made . . 1 50 As to identity of subject-matter of Contract 152 As to existence of subject-matter of Contract . . . . .152 As to extent of promise concerning subject-matter . . . . 154 Equitable remedies available 158 Effect of Mistake is to avoid Contract 1 59 Mi# rep reenta tion. Difficulties attending its discussion 160 Misrepresentation as distinguished from Fraud 162 Representations as distinguished from terms 164 Effects of Misrepresentation, before Judicature Act .... 168 at Common Law . 168 in Equity 170 Since Judicature Act, Redgrave v Hurd and Newbigginy v. Adam . 172 Expressions of opinion or commendation not representations . . 1 74 CONTENTS Xlll PAGE Effects of non-disclosure 175 In contracts of marine insurance 175 ,, ,, fire insurance . . . . . . .176 ,, life insurance 177 Sale of land 178 Prospectus inviting purchase of shares . . . . .179 Suretyship and Partnership . . . . . . . .180 Remedies for misrepresentation 181 The nature of estoppel . . . 182 Limits of the right of rescission 184 Fraud. It is a false representation . , . . . . . .185 It is a representation of fact 186 Intentionally false, or made without belief. ..... 187 Effect of absence of reasonable ground for belief 190 It must be intended to be acted upon by the person injured . . 192 It must actually deceive ......... 193 Its effect it gives rise to action ex delicto . . . . .194 it makes contract voidable, within limits . . .195 Duress. Its nature and effect 196 Undue Influence. How distinct from Fraud 198 Conditions under which it is presumed 198 Inequality of parties, Moneylenders Act 199 Relationship of parties 200 Where no presumption, must be proved in fact .... 201 Its effect : it gives right to rescind 202 CHAPTER V Legality of Object I. Nature of illegality 204 Contracts illegal by Statute ; effect of penalty .... 205 Wagering contracts A wager defined and described . .206 History of legislation on the subject ..... 209 Contracts illegal at Common Law. (a) Agreements to commit a crime or wrong . . . .216 (V) Agreements to do that which it is the policy of the law to prevent . . . . 217 Public policy ; its general application 217 Agreements tending to injure the state with foreign states . 218 ,, tending to injure public service . . . .219 ., tending to pervert the course of justice . .220 ,, tending to abuse of legal process . . . .221 ,, contrary to good morals . . . . .223 ,, affecting freedom or security of marriage or dis- charge of parental duty 223 ,, in restraint of trade . . . . . .224 XIV CONTENTS PACK 3. Effect of illegality . . . . . . . .227 When the contract is divisible 337 When the contract is indivisible 228 Comparative effects of avoidance and illegality . . .229 The intention of the parties 232 Securities for money clue on void or illegal transactions . .234 Promises under Seal 335 Negotiable instruments 335 Securities affected by 5 & 6 Will. IV. c. 41 . . . . 237 Relief from a contract known to be unlawful .... 238 Where parties are not in pan delict o 238 Where there is a locus poenitentiae 339 Contracts lawful where made, but unlawful in England . 242 PART III THE OPERATION OF CONTRACT CHAPTER I The Limits of the Contractual Obligation A contract only affects the legal relations of the parties to it . . . 246 Trust no real exception to this rule 246 I. Contract cannot impose an obligation on a third party . . 247 But may impose a duty ........ 348 3. Contract cannot confer rights on a third party .... 249 Though expressed so to do by the contracting parties . .250 CMOO where one of many contractors may sue, or be sued as representative 253 CHAPTER II The Assignment of Contract I. Assignment by act of the parties 255 Liabilities cannot be assigned 255 Rights assignable at Common Law only by substituted agreement . 257 Or by custom of merchants ........ 258 Some rights assignable in Equity 258 Notice must be given to persons liable . . . . 260 The assignment 'is subject to equities' 361 Rights may be assigned by Statute in certain cases . . .262 Negotiability, its characteristics 265 Illustrated by bills of exchange and promissory notes. . . 365 List of negotiable instruments not closed 369 Rules as to consideration, how far applicable to these . .370 Nature of bills of lading 372 How far negotiable 373 CONTENTS XV PAGE 2. Assignment by operation of law . . . . . . .273 Obligations assigned on transfer of interests in land . . . . 2 74 In the case of leasehold interests . . . . . .274 In the case of freehold interests 2 76 Obligations how affected by marriage . . . . . .277 Obligations assigned by death . .278 Obligations assigned by bankruptcy . . . . . . .279 PART IV THE INTERPRETATION OF CONTRACT CHAPTER I Rules relating to Evidence Provinces of Court and Jury . . . . . . . . .281 Difference in proof of formal and simple contract . . . . . . . ; . 282 1. Proof of Document purporting to be a contract ..... 283 2. Evidence as to fact of agreement 284 3. Evidence as to terms of contract ....... 286 Supplementary or collateral terms ...... 286 Ambiguous terms . . . 287 Usage 289 Equitable rules as to rectification and avoidance . . . .291 CHAPTER II Rules relating to Construction General rules ............ 293 Rules as to Time and Penalties 294 PART V DISCHARGE OF CONTRACT Modes in which it may take place 297 CHAPTER I Discharge of Contract by Agreement i. Waiver as a mode of discharge ........ 298 Only applicable to executory contracts ..... 298 And to bills of exchange and promissory notes .... 300 XVI CONTENTS FAM a. Substituted contract : How different from postponement of rights 300 Substituted terms or parties 301 3. Provisions for discharge 302 (1) Promise subject to right of rescission in a certain event . . 302 (2) Conditions subsequent 303 Excepted risks . . 303 Act of God 304 (3) Provisions making contract detenninable at option . . . 304 Form needed for discharge by agreement 305 CHAPTER II Discharge of Contract by Performance Performance when a complete discharge 307 Payment as a discharge 307 Tender as a discharge . 309 CHAPTER III Discharge of Contract by Breach Breach of Contract always gives a right of action, not always a discharge 311 1. Position of party discharged by Breach . . . . . .312 He is exonerated from further performance . . . -312 May sue as upon a contract arising from conduct . . . . 313 Even if his performance be only partial a quantum meruit . 313 2. Forms of Discharge by Breach : Renunciation before performance is due . . . . .1 ' 5 Impossibility created by one party before performance is due . 317 Renunciation in the course of performance 317 Impossibility created by one party in the course of performance . 318 Failure of performance, when a discharge 319 Independent and conditional promises of three kinds .... 320 Absolute promises and concurrent conditions . . . -322 Divisible promises and virtual failure of consideration . . . 323 Conditions and Warranties ........ 327 3. Remedies for Breach 333 Damages, rules governing their ascertainment .... 333 Specific performance and injunction, rules for granting . . 336 4. Discharge of Right of Action arising from Breach .... 340 By consent of parties, (i) Release 341 (a) Accord and Satisfaction . . . 341 By judgment 34 2 By lapse of Time. Statutes of Limitation 343 CONTENTS XV11 CHAPTER IV Discharge of Contract by Impossibility of Performance PAGE Phases of Impossibility of Performance 347 Subsequent Impossibility as a rule is no discharge ..... 347 Unless it be created by change in the general law .... 349 Or by destruction of a thing the continued existence of which is con- templated ........... 349 Or by incapacity for personal service 350 Difficulties created by Coronation cases . . . . . . 351 CHAPTER V Discharge of Contract by Operation of Law Merger 352 Alteration or loss of a written instrument ...... 352 Bankruptcy 354 PART VI AGENCY A form of the contract of employment 355 Outline of subject 356 CHAPTER I Mode in which the Relation of Principal and Agent is created Capacity of Parties 357 Creation of Agency follows ordinary rules for formation of contract . 357 Authority in one case must be given by Deed ..... 358 Authority from conduct 358 of necessity .......... 360 by ratification 360 CHAPTER II Effect of Relation of Principal and Agent Their rights and liabilities inter se : Duty of principal to reward and indemnify agent .... 3^4 of agent 364 Must use diligence 364 XV111 CONTENTS PACK Must account for any profit other than hia commission . 365 Must not take up contract himself 366 Compare sale, commission agency, brokerage . . . 366 Must not delegate his authority 368 Relations of parties where agent contracts for a named principal : Agent acting within his powers incurs no liability .... 369 Kinds of agents and their authority . . . . . 371 Cases where agent is personally liable 374 Position of agent acting without authority 375 Relations of parties where principal is unnamed : Extent of agent's liability 376 Relations of parties where existence of principal is undisclosed : Alternative liability of principal and agent 378 Determination of alternative liability ...... 379 Liability of principal for fraud of agent . ... . . . .381 How far knowledge of agent is knowledge of principal . . .382 CHAPTER III Determination of Agent's Authority By agreement 383 Right to revoke limited by interest of third parties .... 383 by interest of agent 385 By change of status .......... 3^5 By death of principal 386 CONTRACT AND QUASI CONTRACT Historical connexion of the two legal relations 388 Debt and Assumpsit .......... 388 The Indebitatus Counts 389 Legal relation arising from Judgment 390 ,, ,, ,, account stated ...... 39 money paid by plaintiff for defendant . . 390 ,, money received by defendant to plaintiff's use 391 APPENDIX Form of Charter- Party 392 Form of Bill of Lading 393 Form of Policy of Marine Insurance . . . . . . 394 Forms of Bill of Exchange and Promissory Note 395 INDEX 396 INDEX OF CASES A. CASE. DATE. REFERENCE. PAG* Aaron's Reefs Co. v. Twisa (1896) A. C. 273 196 Adams v. Lindsell (1818) i B. & Aid. 681 30 Agius v. G. W. Colliery Co (1899) I Q. B. 413 334 Allcard v. Skinner (1887) 36 Ch. D. 145 202 Allen v. Rescous (1687) 2 Lev. 174 216 Alliance Bank v. Broom (1864) 2 Dr. & Sm. 289 97 Anderson v. Pacific Insurance Co. (1872) L. R. 7 C. P. 65 174 Andrews v. Mockford (1896) I Q. B. (C. A.) 372 193 Andrews v. Ramsay (1903) 2 K. B. 635 365 Anglesey (Marquis of), In re (1901) a Ch. (C. A.) 548 334 Angus v. Clifford (1891) 2 Ch. (C. A.) 449 183,191 Appleby v. Myers (1867) L. R. 2 C. P. 651 350 Archer v. Hudson (1844) 7 Beav. 560 200 Arkwright v. Newbold (1881) 17 Ch. D. 320 162,193 Armstrong v. Stokes (1872) L.R.7Q.B.598 ...374,377,379 Ashbury Carriage Co. v. Riche ... (1874) L. R. 7 H. L. 653 136, 228, 251 Astley v. Weldon (1801) 2 B. & P. 346 295 Atherfold v. Beard (1788) 2 T. R. 610 237 Atkins v. Banwell (1802) 2 East 505 115 Atkinson v. Denby C l86l )J7 H.' & N.' 934} 2 3 8 Atlee v. Backhouse (1838) 3 M. & W. 633 197 Attorney-General v. London Co. (1901) fi Ch. C. A. 781! * Council (i 9 o2)\A. C. 165 / 3 Avery v. Bowden (1855) 5 E. & B. 714 316,317 Ayerst v. Jenkins ( J 873) 16 Eq. 275 223,234 Aylesford (Earl of) v. Morris ... (1873) 8 Ch. 490 198 B. Babcock v. Lawson ^879) 4 Q. B. D. 394 15,196 Bagel v. Miller ( I 93) 2 K. B. 212 30, 35 Baguely v. Hawley (1867) L. R. 2 C. P. 625 331 Baillie's Case (^S) I Ch. no 151 Baily v. De Crespigny (!869) L.R.4Q.B. 180 349 Bainbridge v. Firmstone 0838) 8 A. & E. 743 91 Baines v. Geary 6887) 35 Ch. D. 154 228 Baker v. Hedgecock (1888) 39 Ch. D. 520 228 Balkis Co. v. Tomkinson ( I 893) A. C. 396 184 Bank of England, Ex parte (1895) I Ch. 37 342 Bannerman v. White (1861) ioC.B.,N.S.844 168,169,173,174 Barclay v. Pearson fa^S) 2 Ch. 154 50,241 Barrow v. Dyster (1884) 13 Q. B. D. 635 377 Barry v. Croskey (1861) 2 J. & H. i 193,194 Barter, Ex parte (1884) 26 Ch. D. 510 216 Barwickv. English Joint Stock Bank (1867) L. R. 2 Ex. 259 380 Bateman v. Faber (1898) i Ch. (C. A.) 144 142 Bawden v. London & Cy. Ass. Co. (1892) 2 Q. B. 534 382 Baiter v'. Burfield 074 6 ) 2 Str. 1266 278 Bayley v. Homan ^837) 3 Bing. N. C. 920 341 XX INDEX OF CASES CASK. DATE. REFERENCE. PAGE Beauchamp (Earl) v. VVinn ...... (1873) L. R. 6 H. L. 332 ......... 291 Beaumont v. Greathead ......... (1846) 20.6.499 ............ 334 Beaumont v. Reeve ......... (1846) 8 Q. B. 483 ......... 223,234 Bechuanaland Exploration Co. v.l /TQ ., . r\ -o & a London Trading Bank ...... J(i8 9 8) 2 Q. B. 658 ......... 269,270 Beckham v. Drake ............ (1841) 9 M. & W. 95 ......... 374 Bedford (Duke of) v. Ellis ...... (1901) A.C.I ............... 253 Begbie v. Phosphate Sewage Co (1875) L. R. 10 Q. B. 499 ...... 217 Bell v. Balls ............... (1897) I Ch. 671 ............ 371 Bellamy v. Debenham ......... (1890)450^0.481 ......... 49 Bentley v. Vilmont ............ ( I 87) 12 App. Ca. 471 ......... 190 Berkeley v. Elderkin ......... (1853) I E. & B. 805 ......... 63 Bettiniv. Gye ............... (1876) i Q. B. D. 183 ......... 329 Beverley v. Lincoln Gas & Coke Co. (1837) 6 A. & E. 829 ......... 313 Bickerton v. Burrell ......... (1816) 5 M. & S. 383 ......... 373 Bidder v. Bridges ............ (1887) 37 Ch. D. (0. A.) 406 ...... 341 Biugham v. Bingham ......... ( I 748) I Ves. Sen r . 126 ......... 153 Bird v. Brown ................ (^850) 4 Ex. 799 ............ 362 Birkmyr v. Darnell ......... (i74) i Sm. L. C. 299, i Salkeld 27 75 BirnringhamLandCo.&Allday,/re (1893) i Ch. 348 ............ 277 Blachford v. Preston ......... (1799) 8 T. R. 89 ............ 219 Blackburn v. Vigors ......... (i886){j7 2^ . ^^ 553 } '?6, 3 Blades v. Free ............... (1829) 9 B. & C. 167 ......... 387 Blair v. Bromley ............ (1846) 5 Hare 559 ............ 344 Bloomenthal v. Ford ......... (1897) A. C. 156 ............ 184 Bloomer v. Bernstein ......... (1874) L. R. 9 C. P. 588 ......... 3 3 5 Bloxam v. Sanders ............ (1825) 4 B. & C. 941 ......... 323 Bolitho v. Gidley ............ (1905)^0.98 ............ 142 Bolton v. Madden ............ (1873) L. R. 9 Q. B. 55 ......... 90 Bonnard v. Dott ............ (1906) i Ch. 740 ......... xxxvii Bostock v. Nicholson ......... (1904) I K. B. 725 ......... 327,335 Boulton v. Jones ............ (1857) 2 H. & N. 564 ...... 150,151 Bourne v. Mason ............ ( J 679) i Ventr. 6 ............ 251 Bowenv. Hall ............ (1881) 6 Q. B. D. 333 ......... 248 Bowman v. Taylor ............ (1834) 2 A. & E. 278 ......... 65 Boydv. Hind ............... (1857) i H. & N. 938 ... ...... 105 Boydell v. Drummond ......... ^809) n East 142 ............ 80 Bradford v. Roulston ......... (1858) 8 Ir. C. L. 468 ...... 112,113 Bradlaugh v. Newdegate ...... (1882) nQ. B. D. 5 ........... 222 Braithwaitev. Foreign Hard wood Co. (1905) a K. B. (C. A.) 543 ...... 318 Brandts v. Dunlop Rubber Co. ... (1905) A. C. 461 ............ 263 Braahford v. Buckingham and wife (1605) Cro. Jac. 77 ............ 138 Brayshaw v. Eaton ......... (1839) 7 Scott 187 ........ ... 133 Brice v. Bannister ............ (i 8 77) 3 Q. B. D. 569 ..... .' ... 263 Bridger v. Savage ............ (1884) 15 Q. B. D. (C. A.) 363 ... 232 Britain v. Rossiter ............ (1882) n Q. B. D. 123 ...... 83,87 British Waggon Co. v. Lea ...... (1879) 5 Q. B. D. 149 ......... 256 Brittain v. Lloyd ............ (1845) 14 M. & W. 762 ......... no Brogden v. Metropolitan Railway (1877) 2 App. Ca. 691 ...... 3, 27 Brook v. Hook ............ (1871) L. R. 6 Ex. 80 ......... 362 Brown v. Byrne ............ (1854) 3 E. & B. 710 ......... 290 Brown v. Dimbleby ......... (1904) I K. B. 28 ............ 142 Brown v. Duncan ............ (*8*9) ioB.&0.93 ............ 205 Brownlie v. Campbell ......... (1880) 5 App. Ca. 950 ......... 191 Bruner v. Moore ............ (*94) 106.305 ............ 33 Bryant v. Herbert ............ (1878) 3 C. P. D. 389 ......... 57 Budgett v. Binnington ......... (1891) i Q. B. 35 ............ 348 INDEX OF CASES CASK. DATE. BEFERENCE. PAGB Burge v. Ashley & Smith, Ltd. ... (1900) i Q. B. (C. A.) 744 ... 212, 242 Surges v. Wickham (1863) 3 B. & S. 669 288,289 Burgess v. Eve (i8? 2 ) 13 Eq. 450 181 Burnard v. Haggis (1863) 14 C. B., N. S. 45 134 Burrell's Case (1876) i Ch. D. 552 187 Butler and Baker's Case ( I 59 I ) Coke, Rep. iii. 26. b 39 Buxton v. Rust (1872) L. R. 7 Ex. I & 279 79 Byrne v. Van Tienhoven (1880) 5 C. P. D. 344 40 C. Caddick v. Skidmore ( l8 57) 2 De G. & J. 52 80 Callisher v. Bischoffsheiin (1879) L. R. 5 Q. B. 449 98 Cannan v. Bryce ( J 8i9) 3 B. & Aid. 179 230 Canning v. Farquhar (^885) 16 Q. B. D. 727 48 Card v. Hope (1824) 2 B. & C. 661 219 Carlill v. Carbolic Smoke Bull Co. {gg \ % J; fifjfiif}* ^, 5L 53 Carmiohael's Case (1896) 2(^.648 385 Carney v. Plimmer (l 8 97) I Q. B. (C. A.) 634 211 Carringtons Limited v. Smith ... (1906) K. B. 79 199 Carter v. Silber (1892) 2 Ch. (C. A.) 278 130 Cartwright v. Cartwright (1858) 3 D. M. & G. 989 224 Cassaboglou v. Gibbs (1882) 9 Q. B. D. 220 367 Castellain v. Preston (1883) n Q. B. D. (C. A.) 380 ...215 Castlegate Steamship Co.v.Dempsey (1892) i Q. B. (C. A.) 854 348 Chamberlain v. Williamson ( T 8i4) 2 M. & S. 408 278 Chandler v. Webster ( I 9<>4) l K. B. 493 351 Chanter v. Hopkins (^sS) 4 M. & W. 404 326,331 Charnley v. Winstanley (1804) 5 East 266 385 Charter v. Trevelyan (1844) u Cl. & F. 714 196 Clabbon, In re ( T 94) 201.465 127,128 Clarke v. Dunraven : see Satanita, The. Clayv.Yates (1856) i H. & N. 73 216 Cleggv. Hands (1890) 44 Ch. D. 503 275,338 Clements v. London & N. W. R. Co. (1894) 2 Q. B. (C. A.) 482 128 Clifford v. Watts (1871) L. R. 5 C. P. 577 ... Clough v. London & N. W. R. Co. (1871) L. R. 7 Ex. 35 Cole v. Gibson (1756) I Ves. Sen r . 503 ... Colegate v. Bachelor ( I 596) Cro. Eliz. 872 331 196 223 22 4 Coles v. Trecothick ............ (1804) 9 Ves. 246 ....... ., 91,198 Collenv. Wright ............ (i8 5 7){| E] J 5." 6$ l8l > 33', 375, 37 Collins v. Blantern ............ ( J 766) i Sm. L. C. 355 ......... 67 Collins v. Evans ............ (1844) 5 Q. B. 820 ............ 189 Collins v. Godefroy ............ O^S 1 ) i B. & A. 950 ......... 101 Colson'sCase ............... (1871) L. R. 6 Ex. 108 ......... 32 Commins v. Scott ............ (1875) L. R. 20 Eq. 15 ......... 79 Conflans Quarry Co. v. Parker ... (1867) L. R. 3 C. P. i ......... 354 Consolidated Exploration & Finance! / \ m. Co.r.Musgrave ............ } (1900) I Ch. 3 7 ............... "i Cooch v. Goodman ............ (1842) 2 Q. B. 597 ............ 64 Cookv.Oxley ............... (1790)31.^653 ............ 41 Cooper v. Phibbs ............ (1867) L. R. 2 H. L. 170 ...... 153,187 Cope v. Rowlands ............ (1836) 2 M. & W. 158 ......... 205 Corn v. Matthews ............ (1893) i Q. B. 310 ............ 128 Cornish v. Stubbs ............ (1870) L. R. 5 C. P. 339 ......... 275 Cort v. Ambergate Railway Co. ... (1851) 17 Q. B. 127 ...... 314, 317, 318 Couturier v. Hastie ......... (1856) 5 H. L. C. 673 ......... 153 XX11 INDEX OF CASES CASE. DATE. BEFKRENCE. PAGE Coverdale v. Eastwood ^872) 15 Eq. iai 164 Cowan v. Milbourn ( l ^7) L. R. 2 Ex. 230 234 Cowan v. O'Connor (1888) 20 Q. B. D. 640 34 Coxhead v. Mullis (1878) 3 C. P. D. 439 132 Crears v. Hunter (1887) 19 Q. B. D. 345 22 Cronmire, In re (1898) 2 Q. B. 383 214 Crouch v. Credit Fonder of England (1873) L. R. 8 Q. B. 374 ... 261, 268, 269 Cumber v. Wane (i7 J 8) i Sm. L. C. 325 102 Cundy v. Lindsay ('878) 3 App. Ca. 459 15, 150, 151, 196 Currie v. Misa (1875) L. R. 10 Ex. 162 88,92 Cutter v. Powell U795) 6 T. R. 320 325 Cuxon v. Chadley (1824) 3 B. & C. 591 257 D. Dalby v. The Lond. Life Assur. Co. (1854) 150.8.365 216 Dalton v. Mid. Coun. Railway Co. (1853) 130.6.478 138 Darrell v. Tibbitts (1880) 5 Q. B. D. 560 215 Davies v. Davies (1887) 36 Ch. D. 359 46,96 Davies v. London Insurance Co. ... (1878) 8 Ch. D. 475 180 Davis v. Foreman (1894) 3 Ch. 654 339 Dawson v. G. N. & City Railway (1905) i K. B. (C. A.) 270 259 Debenham v.Mellon ( l88o ){6 App.' Ca." 4 ' 4 3 } 359, 383, 384 De Bussche v. Alt (1878) 8 Ch. D. 310 368 De Francesco v. Barnum (1890) 43 Ch. D. 165 129 De Lassalle v. Guildford (1901) 2 K. B. (C. A.) 215 287 De Mattos v. Benjamin (1894) 63 L. J., Q. B. 248 212 Denton v. G. N. Railway Co. ... (1856) 5 E. & B. 860 53 Deny v. Peek (1889) H App.Ca. M^ 6 *' 174 ']^ 1 ^ De Wutz v. Hendricks (1824) 2 Bing. 316 219 Dickinson v. Dodds ( I 876) 2 Ch. D. 463 36,42,43,44 Dick son v. Router's Telegraph Co. (1877) 3 C. P. D. I 188 Dimmock v. Hallett (1866) 2 Ch. 27 175 Ditcham v. Worrall (1880) 5 C. P. D. 410 132 Dixon v. Clarke (1848) 50.8.377 310 Dixon v. Sadler ( X 834) 5 M. & W. 414 331 Dobson v. Espie (1857) 2 H. & N. 79 299 Doe d. Garnona v. Knight (1826) 5 B. & C. 71 39 Donellan v. Read (1832) 3 B. & A. 899 78 Dowden v. Pook C 10 ^) i K. B. (C. A.) 45 226 Drake v. Beckham ( J 843) nM. &W. 319 279 Drewv. Nunn (1879) 4 Q. B. D. 661 385,387 Duncan & Co.v. N.-S. Wales Bank (1880) 6 App. Ca. I 266 Dunlop v. Higgins (1848) i H. L. C. 381 .,. 31 Dunn v. Macdonald (1897) I Q. B. (C. A.) 557 375 Durham v. Robertson (1898) I Q. B. (C. A.) 773 263 Durnford v. Messiter (l8r6) 5 M. & S. 446 247 Dutton v. Poole (1688) 2 Lev. 210 94 E. Earle v. Oliver (1848) a Ex. 90 117 Eastland v. Burchell (1878) 3 Q. B. D. 436 360 Eastwood v. Kenyon (1840) u A. & E. 438 ... 94,116,119 Edelstein v. Schuler ft Co ( I 9 2 ) 2 K. B. 144 269,270 Edgington v. Fitzmaurice (1885) 29 Ch. D. 483 188 Edmunds v. Bushell & Jones ... (1865) L. R. i Q. B. 97 371 Edwards v. Aberayron Inaur. Soc. (1876) I Q. B. D. 587 221,284 INDEX OF CASES XX111 CASE. DATE. BEFEKENCE. PAGE Edwards v. Carter (1893) A. C. 360 130 Egerton v. Earl Brownlow (^SS) 4 H. L. C. I 217,218,220 Ehrman v. Bartholomew C 1 ^**) i Ch. 671 340 Eicholz v. Bannister (1864) 17 C. B., N. S. 708 331 Elderton v. Emmens (1847) 40.6.496 112 Eley v. Positive Life Assur. Co. ... (1876) I Ex. D. (C. A.) 88 ... 251, 252 Eliason v. Henshaw (1819) 4 Wheaton 225 36 Ellinger v. Mutual Life Ins. Co. ... (1905) I K. B. 31 331 Elsee v. Gatward ( J 793) 5 T. R. 143 loo Empress Engineering Co., In re ... (1880) 16 Ch. D. (C. A.) 125 252 England v. Davidson (^840) n A. & E. 856 ... 51,101,110 England v. Marsden (1866) L. R. i C. P. 529 391 Erskine v. Adeane (*873) 8 Ch. 766 287 Esposito v. Bowden (1875) 7 E. & B. 763 218 Evelyn v. Chichester C 1 ?^) 3 Burr. 1717 124 Exall v. Partridge (1799) 8 T. R. 308 391 F. Fairlie v. Denton (1828) 8 B. & C. 400 257 Fairlie v. Fenton (1870) L. R. 5 Ex. 169 372 Falck v. Williams (^o) A. C. 176 46 Farina v. Fickus ( I 9o) I Ch. 331 45 Farrington v. Forrester (1893) 2 Ch. 461 131 Faulkner v. Lowe (1848) 2 Ex. 595 6 Fawcett & Holmes, In re (1889) 42 Ch. D. 156 178 Fawcett v. Whitehouse ( I 829) I R. & M. 132 180 Felthouse v. Bindley (1862) n C. B., N. S. 869 27 Ferguson v. Wilson (1866) 2 Ch. 89 135 Fetherston v. Hutchinson ( I 59) Cro. Eliz. 199 229 Filby v. Hounsell (1896) 2 Ch. 737 48 Findon v. Parker (1843) u M. & W. 682 222 Finlay v. Chirney (1887) 20 Q. B. D. (C. A.) 494... 278, 335 Firbank's Exors. v. Humphreys ... (1886) 18 Q. B. D. (C. A.) 62... 182, 375 Fisher v. Bridges ( I 854) 3 E. & B. 642 235 Fishmongers' Co. v. Robertson ... (1843) 5 M. & Gr. 192 71 Fitch v. Jones O^SS) 5 E. & B. 245 213,236 Fitch v. Snedaker (1868) 38 N.Y.248; LangdeU no.. .23,51 Fitch v. Sutton ^804) 5 East 230 104 Fleet v. Murton (1871) L. R. 7 Q. B. 126 373,377 Fleming v. Bank of New Zealand (1900) A. C. 587 95 Flight v. Bolland (1828) 4 Russ. 298 338 Flight v. Booth (1834) I Bing. N. C. 370 178 Flight v. Reed (1863) i H. & C. 703 118 Flower v. Sadler (1882) 10 Q. B. D. 572 236,268 Foakes v. Beer ( J 884) 9 App. Ca. 605 69,104 Fordv.Beech (1848) 11 Q. B. 866 293 Ford v. Newth ( I 9 I ) i K. B. 690 39 Formby v. Barker (1903) 2 Ch. 539 277,278 Foster v. Charles (1830) 7 Bing. 107 162 Foster v. Dawber (1851) 6 Ex. 839 20,103,299 Foster v. Mackinnon (1869) L. R. 4 C. P. 711 148,149 Fowkes v. Manchester Assur. Assoc. (1863) 3 B. & S. 929 294 Fowler v. Fowler (1859) 4 D. & J. 250 291 Freeman v. Cooke (1848) 2 Ex. 663 154 Freethv. Burr (1874) L. R. 9 C. P. 208 324 Frost v. Knight (1872) L. R. 7 Ex. 114 315, 316 Fry, In re (1888) 40 Ch. D. 324 203 XXIV INDEX OF CASES G. CASI. DATE. REFERENCE. PAQR Garrard v. Frankel (1862) 30 Beav. 445 159,292 Geipel v. Smith (1872) L. R. 7 Q. B. 404 303 General Accident Corporation v.l, , v ^ No el . j(i92) i K. B. 377 340 Gibbons v. Proctor (^z) 64 L. T. R. 594 23, 5* Gibbsv. Guild (1882) 9 Q. B. D. 66 345 Gibson v. Carruthers (1841) 8 M. & W. 339 272 Gilbert v. Sykes (1812) 1 6 East 150 209,217 Glaholm v. Hays (^i) 2 M. & G. 257 ...166,328,329 Goddard v. O'Brien (1882) 9 Q. B. D. 37 103,341 Godsall v. Boldero (1807) 9 East 72 216 Goman v. Salisbury ( J 684) i Vern. 240 306 Good v. Cheesman C 1 ^!) 2 B. & Ad. 328 105 Goode v. Harrison (1821) 5 B. & Aid. 159 ... 125 Goodman v. Chase (1818) i B. & Aid. 297 75 Goodwin v. Robarts ( J 875) L. R. 10 Ex. 337 269, 270 Gordon v. Street ^899) 2 Q. B. (C. A.) 641 150 Goss v. Lord Nugent ( J 833) 5 B. & Ad. 65 306 Graham v. Johnson .'.. (1869) 8 Eq. 36 261 Graves v. Legg (1854) 9 Ex. 717 332 Gray v. Mathias (1800) ; Ves. 285 a 223; Gray v. Pearson (1870) L. R. 5 C. P. 568 252 Great North. Rail. Co. v. Witham. . . (1873) L. R. 9 C. P. 16 36, 38 Greaves v. Ashlin (^is) 3 Camp. 426 81 Greaves, In re (1881) 18 Ch. D. 554 343 Green v. Thompson (1899) 2 Q. B. i 128 Grellv. Levy (1864) 16 C. B., N. S. 73 243, 2 44 Griffith v. Tower Publishing Co. ... (1897) I Ch. 21 259 Guild v. Conrad (1894) 2 Q. B. 884 74 Gurney v. Behrend ( J 854) 3 E. & B. 634 273 Guthing v. Lynn (1831) 2 B. & Ad. 232 46 Gylbert v. Fletcher (1629) Cro. Car. 179 129 H. Hadley v. Baxendale ( I 8j4) 9 Ex. 354 334 Haigh v. Brooks ( X 839) 10 A. & E. 309 91,294 Halbot v. Lens C 1 ^ 1 ) I Ch. 344 387 Halifax v. Barker (1600) 3 Dyer 272 a; Cro. Eliz. 741 114 Hallv. Ewin (1887) 37 Ch. D. (C. A.) 74 277 Hall v. Warren 6805) 9 Ves. 605 137 Hamilton v. Kendall ( I $79) 4 App. Ca. 514 379 Hamilton v. Vaughan-Sherrin Elec-1 , Q N n , Q trical Engineering Co }(i8 94 ) 3 Ch. 589 129 Hammersley v. de Biel ( I 845) 12 Cl. & F. 62 22,106 Hampden v. Walsh (1876) i Q. B. D. 189 241 Hancocks v. Lablache O^TS) 3 C. P. D. 197 140 Hansard v. Robinson ( 1 % 2< j) 7 B. & C. 90 354 H ^f n IndiaRubberComb - C - v -}(i 9 o2) iK. B. 778 74 Harding v. Harding ... (1886) 17 Q. B. D. 442 260 Hardman v. Booth (1863) i H. & C. 803 151 Harrington v. Viet. Graving Dock Co. (1878) 3 Q. B. D. 549 365 Harris v. Brisco (1886) 17 Q. B. D. 504 222 Harris' Case (1872) L. R. 7 Ch. 587 32 Harris v. Nickeraon (1873) L. R. 8 Q. B. 286 52 Harris v. Pepperell (1867) L. R. 5 Eq. i 159 Harris v. Rickett (1859) 4 H. & N. i 284 INDEX OF CASES XXV CASE. DATE. REFERENCE. PACK Harse v. Pearl Life Assurance Co. (1904) i K. B. (C. A.) 558 238 Hart v. Alexander (1837) 2 M. & W. 484 302 Hart v. Miles (1858) 4 C. B., N. S. 571 99 Hart v. Mills (1846) 15 M. & W. 87 21,109 Hartley v. Ponsonby OtSs?) 7 E. & B. 872 101 Hartley v. Rice (1808) 10 East 22 323 Harvey v. Facey (1893^.0.552 47 Harvey v. Gibbons (1675) 2 Lev. 161 96 Harvey v. Johnston ( I $48) 60.6.304 30 Harvey v. Young (1602) i Yelv. 20 187 Hastelow v. Jackson (1828) 8 B. & 0. 225 342 Hawken v. Bourne (1841) 8 M. & W. 710 359 Haydon v. Williams (1830) 7 Bing. 163 353 Hayes v. Warren ( I 73 I ) 28^.932 389 Haywood v. Brunswick Build. Soc. (1881) 8 Q. B. D. 410 277 Head v. Tattersall (1871) L. R. 7 Ex. 7 302 Heather v. Webb (1876) 2 0. P. D. i 354 Hebb'sCase (1867) L. R. 4 Eq. 9 33 Helby v. Matthews (^95) A. 0. 471 372 Henderson v. Stevenson ( J 875) L. R. 2 H. L. Sc. App. 470 ... 25 Henthorn v. Fraser Hermann v. Charlesworth Hermann v. Jeuchner Hichens v. Congreve Hickman v. Haynes Higgen's Case ... (1892) 2 Ch. 27, C.A. 33.. ... (1905) 2 K.B.(C.A.)I2 3 (1885) 15 Q. B. D. 561 . ... 32,4! 223, 239,241 221, 240 ... (1829) i R. &M. 150 ... (1875) L. R. loC. P. 606 (i6oO 6 Co. Rep. 45 b 180 30 352 ... 373,3/8 4 290 347 187 Higgins v. Senior . (1841) 8M. &W. 834 Hill v.Wilson ... (1873) L.R. 8 Ch. 888 ... Hills v. Evans ... (1861) 31 L. J., Ch. 457 ... Hills v. Sughrue ... (1846) 15 M. & W. 233 .., Hirschfield v. London, Brighton South Coast Railway Co. . . . ' & 1( I 876) 2 Q. B. D. i . Hitchcock v. Coker ( J 837) 6 A. & E. 438 227 Hoadley v. M'Laine ( J 834) 10 Bing. 482 87,109 Hoare v. Rennie ( I 859) 5 H. & N. 19 325 Hochster v. Delatour (1853) 2 E. & B. 678 315 Hoghton v. Hoghton ( J 852) 15 Beav. 299 198,200 Hollins v. Fowler ^874) L. R. 7 H. L. 757 151,196 Holman v. Johnson 0*875) Cowp. 343 219 Holmes v. Bell ( J 84i) 3 M. & G. 213 352 Holtby v. Hodgson (1889) 24 Q. B. D. 109 142 Honck v. Muller (1881) 7 Q. B. D. 92 325 Honeyman v. Marryatt O^S?) 6 H. L. C. 113 49 Hood-Barrs v. Heriot (1896) A. C. 174 142 Hope v. Hope (1857) 8 D. G. & M. 731 243,244 Hopkins v. Logan ( I 839) 5 M. & W. 241 390 Home v. Midland Railway Co. ... (1873) L. R. 8 C. P. 131 335 Homer v. Graves C^S 1 ) 7 Bing. 735 226 Horsfall v. Thomas (1862) i H. & C. 90 193,194 Houlds worth v.City of Glasgow Bank (1880) 5 App. Ca. 317 195 Household Fire Ins. Co. v. Grant... (1879) 4 Ex. D. 216 30, 32 Hoylev. Hoyle (1893) i Ch. (C. A.) 99 6,74,76 Hughes v. Pump House Hotel Co. (1902) 2 K. B. 195 263 Huguenin v. Baseley (1807) 14 Ves. 273 200 Hufle v. Heightman (1802) 2 East 145 313 Humble v. Hunter (1848) 12 Q. B. 310 255,376,379 Humphrys v. Polak (19!) 2 K. B. (C. A.) 385 224 Hunt v. Bate (1568) 3 Dyer 272 a 112 Hunter v. Walters (1871) 7 Ch. 84 147 XXVI INDEX OF CASES CASE. DATE. REFERENCE. PAGE HuBcombe v. Standing (1607) Cro. Jac. 187 197 Hussey v. Home Payne (1879) 4 App. Ca. 311 49 Hutcheson v. Eaton (1884) 13 Q. B. D. 861 377 Button v. Warren (1836) I M. & W. 466 289 Hyde v. Wrench (1840) 3 Beav. 334 47 I. Imperial Bank of Canada v. Bank , . . ~ , ofHamilton (1903) A. C. 56 160 Imperial Loan Co. v. Stone ( J 892) I Q. B. 599 137, 386 lonides v. Pacific Insurance Co. ... (1871) L. R. 6 Q. B. 686 152 lonides v. Fender (1874) L. E. 9 Q. B. 537 175,176 Ireland v. Livingston (^7^ L. K. 5 H. L. 407 367,373 Irvine v. Watson (1879) 5 Q. B. D. 107 (C. A.) 414... 380 Irving v. Veitch 0837) 3 M. & W. 106 390 J. Jackson v. Colegrave (1694) Carth. 338 209 Jackson v. Nortnanby Brick Co. ... (1899) i Ch. 438 338 Jackson v. Union Marine Ins. Co. . (1874) L. R. 10 C. P. 148 326 Jakeman v. Cook (1878) 4 Ex. D. 26 118 James v. Kerr ('889) 4oCh.D.46o 199 Janson v. Driefontein Consolidated! , x . ~ Gold Mines, Ltd. J(i9oa) A, C. 484 218,219 Jay v. Robinson ^890) 25 Q. B. D. 467 142 Jenkins v. Betham (1854) 15 C. B. 168 364 Jennings v. Rundall (1799) 8 T. R. 335 134 Jervis v. Berridge (1873) 8 Ch. 351 286 Johnson v. Gallagher (1861) 3 D. F. & J. 494 140 Johnson v. Royal Mail Steam. Co. . . (1867) L. R. 3 C. P. 43 390 Johnston v. Boyes ^899) 2 Ch. 75 53 Johnstone v. Marks ^887) 19 Q. B. D. 509 133 Jones, Ex parte (1881) 18 Ch. D. 109 129 Jones, In re (1898) 3 Ch. D. 440 67 Jones v. Ashburnham ('804) 4 East 455 97 Jones v. Daniel ^894) 2 Ch. 332 47 Jones v. Just (1868) L. R. 3 Q. B. 197 326,331 Jones v. Leea (1856) i H. & N. 189 225 Jones v. Morris (^49) 3 Ex. 742 391 Kaufman v. Gerson ('94) i K. B. (C. A.) 591 243 Kaye v. Dutton (1844) 7 M. & Gr. 807 112 Kearley v. Thomson (1890) 24 Q. B. D. 742 240,241 Keates v. Lord Cadogan (1851) 10 C. B. 591 186 Keighley, Maxsted & Co. v. Durant (1901) A. C. 240 361 Keir v. Leeraan (1844) 6 Q. B. 321 & 9 Q. B. 395 ... 220 Kekewich v. Manning (1851) i D. M. & G. 188 198, 338 Kelly v. Solan (1841) 9 M. & W. 58 160 Kelner v. Baxter (1866) L. R. 2 C. P. 174 ... fe' ^ Kemble v. Farren ( l ^2g) 6 Bing. 147 295, 296 Kemp v. Finden (1844) 12 M. & W. 421 391 Kemp v. Pryor (1802) 7 Ves. 246 360 Kennedy v. Broun (1863) 13 C. B., N. S. 677 ... H3 12 3 Kennedy v. Panama Steam Co. ... (1867) L. R. 2 Q. B. 580 164, 173 Keppel v. Baily (1834) 2 Myl. & K. 535 276 INDEX OF CASES XXV11 CASE. DATE. BEFEKENCE. PAGE Kibble's Case (^75) L. R. 10 Ch. 373 131 King v. Gillett (1840) 7 M. & W. 55 299 King v. Victoria Ins. Co C 1 *^) A. C. 250 258 Kingsford v. Merry (^56} i H. & N. 503 151 Kirkham v. Marter (1819) 2 B. & Aid. 613 75 Knight v. Lee (1893) i Q. B. 41 211 Knowland v. Bluett (1874) L. R. 9 Ex. 307 77 Lamare v. Dixon (1873) L. R. 6 H. L. 414 171 Lampleigh v. Braithwait ^^{Hoba'rt'ios HI } IIO ' II:I ' "4,357 Lancaster v. Walsh (1838) 4 M. & W. 16 51 Langridge v. Levy ( J 837) 2 M. & W. 519 192 Langrish v. Watts ( 1 93) i K. B. 636 345 Laver v. Fielder (1863) 32 Beav. i 45 Lavery v. Pursell (1888) 39 Ch. D. 519 83 Law v. Local Board of Redditch ... (1892) I Q. B. 127 295 Law v. London Indisputable Life! , v -. . T Policy Co j(i8 55 ) i K.& J. 228 ai., Lawford v. Billericay Rural Council (1903) I K. B. 772 7 Leak v. Driffield (1889) 24 Q. B. D. 98 141 Le Blanche v. L. & N. W. R. Co.... (1876) i C. P. D. 286 54, 330 Lee v. Griffin (1861) i B. & S. 272 87 Lee v.Jones (1864) 17 C. B., N. S. 482 180 Lee v. Muggeridge (1813) 5 Taunt. 36 118, 119 Leeds Bank v. Walker (1883) n Q. B.D.Sj. 353 Le Lievre v. Gould (1893) i Q. B. 491 183 Lennard v. Robinson ( J 855) 5 E. & B. 125 374 Leroux v. Brown ( l %5 2 ) 12 C. B. 801 82 Leslie v. Fitzpatrick (1877) 3 Q. B. D. 229 128 Lever v. Koffler C 1 ^ 1 ) x Ch. 543 49 Lewis v. Clay (1898) 2 L. J., Q. B. 224 148 Lewis v. Nicholson ( X 852) 18 Q. B. 503 374 Lickbarrow v. Mason (1893) I Sm. L. C. 693 272 Lindsay Petroleum Co. v. Hurd ... (1874) L. R. 5 P. C. 243 187 Lister v. Lancashire & Yorkshire! , . -,, _ Railway Co }( 1903) i K. B. 878 304 Lister v. Stubbs ( I 89o) 45 Ch. D. 15 366 Litchfield v. Dreyfus (1906) I K. B. 590 xxxvii Littlefield v. Shee (1831) 2 B. & Ad. 811 119 Liversidge v. Broadbent (1859) 4 H. & N. 603 257,258 LlanellyR. Co.v. L.&N.W.R. Co. (1875) L. R. 7 H. L. 567 343 London & Northern Bank, In re... (1900) i Ch. 220 34 London Assurance Co. v. Mansel ... (1879) n Ch. D. 363 177 London Freehold Co.v. Lord Suffield. (1897) 2 Ch. 621 65 I Tavell General m " ibU8 C ' V j(i902) I Ch. (C. A.) 135 194 London JointStock Bank v.Simmons (1892) A. C. 217 268 Long v.Millar (1879) 4 C. P. D. 454 80,284 Lovelock v. Franklyn (1846) 8 Q. B. 371 317 Low v. Bouverie (1891) 3 Ch. (C. A.) 82 183 Lowe v. Peers C 1 ?^) 4 Burr. 2225 223 Lucan, In re (1890) 45 Ch. D. 470 338 Lumleyv. Gye (1853) 2 E. & B. 216 248,249 Lumley v. Wagner C!852) I D. M. & G. 604 338, 340 Lumsden's Case (1868) 4 Ch. 31 125 Lynn v. Bruce -... (1794) 2 H. Bl. 319 104 XXV111 INDEX OF CASES M. CASE. DATE. REFERENCE. I'AUK Macartney v. Garbutt (1890) 24 Q. B. D. 368 122 Macdonald v. Longbottom ('859) iE.4E.977 287 MGregor v. M c Gregor (1888) 21 Q. B. D. 424 77, 139 M e Gruther v. Pitcher ( I 94) 2 Ch. 306 277 MIver v. Richardson (1813) i M. & S. 557 22,30 Mackenzie v. Coulson (1869) 8 Eq. 375 291 MKenzie v. British Linen Co. ... (1881) 6 A. C. 99 362 M'Kinnell v. Robinson (1838) sM.&W. 434 230 MManus v. Bark (1870) L. R. 5 Ex. 65 341 M c Manus v. Cooke (1887)35^.0.697 83 M c Pherson v. Watt (1877) 3 App. Ca. 254 368 Maddick v. Marshall (1864) 16 C. B., N. S. 393 370 Maddison v. Alderson (i88 3 ){ Q P ^ J*j} ... 83,84,87 Maleverer v. Redshaw ( l ^9) i Mod. 35 228 Malms v. Freeman (1838) 4 Bing. N. C. 395 16 Mallalieu v. Hodgson ('851) 16 Q. B. 689 216 Mallan v.May ... (,8 4 3){;j * ^ *} 67,293 Manby v. Scott ( J 659) i Sid. 129 134 Mangles v. Dixon (1852) 3 H. L. C. 735 261 Mann v. Edinburgh Tramways Co. (1893) A. C. 79 362 Marchant v. Morton, Down & Co. (1901) 2 K. B. 829 261 Marlow v. Pitfield (1719) I P. Wms. 558 127 Harriot v. Hampton ( I 79^) 2 Sm. L. C. 441 391 Matthews v. Baxter (1873) L. R. 8 Ex. 132 137 Mattock v. Kinglake (1839) 10 A. & E. 50 323 Mavor v. Pyne (1825) 3 Bing. 288 21, 313 Maxim-NordenfeltCo.v.NordenfeltlS 1 ? 93 } \ C ^^ C - A ^ 63O 1.2i8,225,227, 228 iA I8 94J A - ** 549 May v. Lane (1894) 64 L. J., Q. B. (C. A.) 236 ... 258 May v. Platt (1900) i Ch. 616 159 MayorofKidderminsterv.Hardwick (1873) L. R. 9 Ex. 24 71 Mayor of Ludlow v. Charlton ... (1840) 6 M. & W. 815 69 Melhado v. Porto Alegre Rail. Co. (1874) L. R. 9 C. P. 503 251 Mersey Steel & Iron Co. v. Naylor (1884) 9 App. Ca. 434 316, 324 M g^itan Electric Supply Co. v.| (l90l) 2 Clu 8<>7 ^ o Meyer T. Dresser [ 864) 16 C. B., N. S. 660 290 Mighellv. The Sultan of Johore... (1894) i Q. B. (C. A.) 149 122 Milnes v. Dawson ( I 85o) 5 Ex. 950 270 Minett v. Forester (1811) 4 Taunt. 541 385 Minshull v. Oakes (1858) 2 H. & N. 793 274 Mitchell v. Homfray (1881) 8 Q. B. D. 587 202 Molton v. Camroux (1848) 2 Ex. 487 & 4 Ex. 17 137 Molyneux v. Hawtrey (1903) 2 K. B. 487 ... 178 Montagu v. Forwood (1893) 2 Q. B. 350 379 Montreal Gas Co. v. Vasey ('9) A. C. 595 46 Morel Brothers & Co. Ltd. v. Earll , , * v ~R fr A ^ ft- * E 8 of Westmoreland |(i 9 O3) i K. B. (C. A.) 64 358 Morley v. Loughnan (*893) I Ch. 736 202 Mortimore v. Wright (1840) 6 M. & W. 482 93 Morton v. Lamb (i?97) 7 T. R. 125 323 Moses v. Macferlan C 1 ?^) 2 Burr. 1005, 1010 ...389,391 Moss v. Moss (1897) P. 267 4 Mountstephen v. Lakeman (1871) L. R. 7 H. L. 17 75 Moxon v.Payne (1873) 8 Ch. 881 203 INDEX OF CASES XXIX CASE. DATE. BEFKREKCE. PAGE ine Co. v. Inland] ............ 34 Murray v. Flavell ............ (1883) 25 Ch. D. 89 ............ 252 Murray v. Parker ............ ( 1 854) 19 Beav. 305 ............ 291 Musurus Bey v. Gadban ...... ( J 894) 2 Q. B. (C. A.) 352 ...... 344 N. Nash v. Armstrong ......... (1861) 10 C. B., N. S. 259 ...... 305 National Benefit Society v.William-1, ,, v ~, National Exchange Co. v. Drew ... (1855) 2 Macq. H. L. C. 146 ...... 381 Newbigging v. Adam ......... (1886) 34 Ch. D. 583 ...... 173,181 iDr.&Sm. 3 8i ......... ,79 New York Bowery Fire Ins. Co. v.l ,_ TIT j ,./: New York Fire Ins. Co ....... } '7 Wend. 359 ......... i?6 New Zealand Co. v. Watson ...... (1881) 7 Q. B. D. (C. A.) 374 ...... 369 Nichol T. Bestwick ............ (1858) 28 L. J. Ex. 4 ......... 353 Nichol v. Godts ............ (1854) 10 Ex. 191 ............ 326 Nicholson v. Bradfield Union ... (1866) L. R. I Q. B. 620 ......... 70 Nickoll & Knight v. Ashton."!, ^ ,. TT-D/OAN f. (i 9 oi) 2K.B. (C. A.)i26 . . ^ ,. /AN . Eldridge&Co. ......... i 9 oi) 2.. (. A.)i2 ...... 350 Noble v. Ward ............ (1867) L. R. 2 Ex. 135 ......... 306 Norden Steam Co. v. Dempsey ... (1876) i C. P. D. 658 ......... 290 Northcote v. Doughty ......... (1879) 4 C. P. D. 385 ......... 132 N. W. Rail. Co. v. McMichael ... (1850) 5 Ex. 114 ............ 124 Nowlan v. Ablett ............ 8 35) 2 C. M. & R. 54 ......... 305 Nugent v. Smith ............ ^875) i C. P. D. 19, 423 ...... 304 O. Oakes v. Turquand ............ (1867) L. R. a H. L. 325 ......... 196 Offord v. Davies ............ (1862) 12 C. B., N. S. 748 ... 37,38 Ogden's Ltd. v. Nelson ......... (1905) A. C. 109 ............ 319 Ogle v. Earl Vane ............ ^^{L! R. 3 Q. B.' 272} ...... 3Oi O'Mealey v. Wilson ......... (1808) I Camp. 482 ............ 122 O'Neil v. Armstrong ......... (1895) 2 Q. B. 418 ............ 319 On ward Building Society T.Smithsou (1893) I Ch. i ............... 65 O'Rorke v. Bolingbroke ......... (1877) 2 App. Ca. 823 ......... 200 P. Page v. Morgan ............ (1885) 15 Q. B. D. 228 ......... 84 Paget v. Marshall ............ ( X 884) 28 Ch. D. 225 ... 159, 160, 292 Palliser v. Gurney ............ (1887) 19 Q. 6.0.519 ......... 141 Palmer v. Johnson ............ (1884) 13 Q. B. D. (C. A.) 351 ... 179 Palmer v. Temple ............ ( I 839) 9 A. & E. 321 ......... 342 Paquin v. Beauclerk ......... (1906) A. C. 148 ...... xxxvii, 359 Paradine v. Jane ............ ( J 647) Aleyn 26 ............ 348 Parker v. Ibbetson ............ (1858) 4 C. B., N. S. 347 ......... 305 Parker v. S. E. Railway Co. ... ... (1877) 2 C. P. D. 416 ......... 26 Pattinson v. Luckley ......... ( J 875) L. R. lo Ex. 330 ......... 353 Pattle v. Hornibrook ......... (1897) I Ch. 25 ............ 49,285 Payne v. Haine ............ (1847) 16 M. & W. 541 ......... 289 Payne v. Mayor of Brecon ...... (1858) 3 H. & N. 579 ......... 235 Pay nter T. Williams ......... (1833) i C. & M. 810 ...... 21,116 Pearce v. Brooks ............ (1866) L. R. i Ex. 213 ... 223, 230, 233 Pearce v. Gardner ............ (1897) i Q. B. 688 ............ 79 XXX INDEX OF CASES CASE. DATE. REFERENCE. PAOB Peekv. Derry (1888) 37 Ch. D. 541 190 Peek v. Gurney (1873) L. R. 6 H. L. 403 { I?9 ' J*|- J9* Pelton v. Harrison ^892) i Q. B. 121 143 Perry v. Barnett (1885) 15 Q. B. D. 388 232 Peter v. Compton (1693) i Sm. L. C. 316 77 Phillips v. Foxall (1872) L. R. 7 Q. B. 666 180 Pickard v. Sears (1837) 6 A. & E. 469 lg 2 Pickering v. Busk ( l8 i2) 15 East 38 359,37! Pickering v. Ilfracombe Railway... ( 1868) L. R. 3 C. P. 250 228 Pigot's Case (1614) n Co. Rep. 27 (b) 228 Pike v. FitzGibbon (1881)1701.0.454 140 Pillans v. Van Mierop C 1 ?^) 3 Burr. 1663 60,88 Pinnel's Case (1602) 5 Co. Rep. 117 102 Planche* v. Colburn (1831) 8 Bing. 14 314, 318, 319 Plant v. Bourne (1897) 2 Ch. (C. A.) 281 79 Polhill v. Walter (1832) 3 B. & Ad. 114 ...162,191,375 Potter v. Duffield (1874) 18 Eq. 4 79 Poulton v. Lattimore (1829) 9 B. & C. 259 327 Powell v. Powell C I 9) * Ch. 243 201 Powell &Thomasv.EvanJones&Co. (1905) i K. B. u 369 Powles v. Innes (1843) II M. &. W. 10 256 Price v. Easton (1833) 4 B. & Ad. 433 250 Priestly v. Fernie (1865) 3 H. & C. 984 379 Printing Co. v. Sampson ( J 875) 19 Eq. 465 218 Prosser v. Edmonds (1835) i Y. & C. 499 222 Protector Loan Co. v. Grice (1880) 5 Q. B. D. (C. A.) 592 296 Pustv. Dowie (1863) 32 L. J., Q. B. 179 332 Pyev. British Automobile Syndicate (1906) i K. B. 425 296 Pyke'sCase (1878)800.0.756 231 Pym v. Campbell (1856) 6 E. & B. 370 ... 49,285,286 Q. Quinn v. Leathern (1901) A. C. 495 249 Raffles v. Wichelhaus ......... (1864) 2 H. & C. 906 ......... 152 Rainbow v. Howkins ......... ( I 94) 2 K. B. 326 ............ 371 Ramsgate Hotel Co. v. Montefiore (1866) L. R. i Ex. 109 ......... 37 Rann v.Hughes ............ (1778) 7 T. R. 350 ... 60,73,89,120 Rannie v. Irvine ............ (1844) 7 M. & G. 969 ......... 225 Reader v. Kingham ......... (1862) 13 C. B., N. S. 344 ...... 74 Redgrave v. Hurd ............ (1881) 20 Ch. D. I ...... 172,173,178 Rees v. de Bernardy ......... (1896) 2011.447 ............ 222 Reese River Mining Co. v. Smith (1869) L. R. 4 H. L. 64 ......... 163 Reg. v. Demers ............ (19) A. C. 103 ............ 39 Reg. v. Wilson ............ (1879) 5 Q. B. D. 28 ............ 129 Reuss v. Picksley ............ (1866) L. R. i Ex. 342 ......... 78 Reuterv. Sala ............... (1879) 4 C. P. D. (C. A.) 249 ...... 295 Reynell v. Sprye ............ (1852) I D. M. & G. 660 ......... 238 Rhodes, In re ............... (1890) 44 Ch. D. (C. A.) 105 ...... 138 9 L - J - Ch - 8l 3 ..... 3i6 Richards v. Delbridge ......... (1874) i8Eq.ii INDEX OF CASES XXXI DATE. REFERENCE. PAQB Richardson v. Rowntree ...... (1894) A. C. 217 ............ 26 Richardson v. Williamson ...... (1871) L. R. 6 Q. B. 276 ......... 375 Ritchie v. Atkinson ......... (1808) 10 East 308 ............ 325 River Steamer Co., In re ...... (1871) 6 Ch. 828 ............ 345 Roberts v. Hardy ............ (1815) 3 M. & S. 533 ......... 122 Robinson v. Davison ......... (1871) L. R. 6 Ez. 269 ...... 350, 351 Robinson v. Harman ......... (1848) i Ex. 855 ......... 334, 336 Robinson v. Heuer ............ (1898) a Ch. (C. A.) 451 ......... 340 Robinson v. Mollett ......... (1874) L. R. 7 H. L. 802 ......... 368 Robinson v. Read ............ ( I 829) 9 B. & C. 455 ......... 309 Robson & Sharpe v. Drummond ... (1831) 2 B. & A. 303 ...... 255, 256 Rogers v. Parry ............ (1613) Bulst. 136 ............ 224 Rooke v. Dawson ............ (1896) 65 L. J., Ch. 31 ......... 53 Roper v. Johnson ............ (1873) L. R. 8 C. P. 167 ......... 336 Roscorla v. Thomas ......... (1842) 3 Q. B. 234 ............ in Rossiter v. Miller ............ (1878) 3 App. Ca. 1124 ...... 48,79 Rotheram Alum Co., In re ...... (1883) 25 Ch. D. 103 ......... 252 Rothschild v. Brookman ...... (1831) 2 Dow & Cl. 188 ......... 367 Rumball v. Metropolitan Bank ... (1877) 2 Q. B. D. 194 ......... 265 Ryan v. Mutual Tontine Ass. Co.... (1893) i Ch. (C. A.) 126 ......... 337 Ryder v. Wombwell ......... C 1868 )^'. R.' 4 Ex. 31} ......... T 3 2 S. Safiery v. Mayer ............ (1901) i K. B. (C. A.) 1 1 ...... 211 Saltonv. New Beeston Cycle Co. ... (1900) i Ch. 43 ............... 386 Santos v. Illidge ............ (1860) 8 C. B., N. S. 861 ... 242, 243, 244 Sard v.Rhodes ............ (1836) i M. & W. 153 ......... 309 Saunders v. Newbold ......... ( J 95) I Ch. (C. A.) 260 ......... 199 Saunderson v. Piper ......... (1839) 5 Bing. N. C. 425 ......... 289 Sayer v. Wagstaff ............ (1844) 5 Beav. 423 ............ 309 Schmaling v. Thomlinson ...... (1815) 6 Taunt. 147 ............ 348 Schmaltz v. Avery ............ (1851) 16 Q. B. 655 ............ 377 Scotson v. Pegg ............ (1861) 6 H. & N. 295 ...... 106,107 Scott v. Avery ............ (1855) 5 H. L. C. 811 ......... 331 Scott, v. Conlson ............ (19 O 3) 2 Ch. (C. A.) 249 ...... 153, 347 Scott v. Lifford ............ (1808) i Camp. 246 ............ 270 Scott v. Littledale ............ (1858) 8 E. & B. 815 ......... 157 Scott v. Morley ............ (1887) 20 Q. B. D. 120 ......... 143 Seager,/nrs ......... ... (1889) 60 L.T.R. 665 ......... 134 , 1(1899) i Q. B. (C. A.) 782! Seatonv.Burnand ............ {(19^) A. C. 135 } ...... l8 Seddon v. North Eastern Salt Co. (1905) i Ch. 326 ............ 184 Seeger v. Duthie ............ (1860) 8 C. B., N. S. 45 ......... 166 Seymour v. Bridge ............ (1885) 14 Q. B. D. 460 ......... 232 Shadwell v. Shadwell ......... (1860) 9 C. B., N. S. 159 ...... 106,107 Ship way v. Broad wood ......... (*899) * Q- B. 373 ............ 366 Shuey v. United States ......... (1875) 92 U. S. 73 ............ 41 Simpson v. Crippin ............ (1872) L. R. 8 Q. B. 14 ......... 324 Simpson v. L. & N. W. R. Co. ... (1876) i Q. B. D. 274 ......... 336 Skeet v. Lindsay ............ (1877) 2 Ex. D. 317 ............ 346 Skeete v. Silberbe ............ (1895) n T. L. R. 491 ......... 106 Skelton v. L. & N. W. R. Co. ... (1867) L. R. 2 C. P. 636 ......... 100 Blade's Case ............... (1603) 4 Co. Rep. 92 ......... 389 Slater v. Jones ............ ( J 873) L. R. 8 Ex. 193 ......... 105 XXX11 INDEX OF CASES CASE. DATE. REFERENCE. PAGE Smart v. Sandars ............ (1848)50.8. 895 ...... ... 385 Smith v. Chadwick ............ (1882) 20 Ch. D. 44 ............ 189 Smith v. Gold Coast Co ....... (i93) i K. B. 285 ............ 77 Smith v. Hughes ............ (1871) L. R. 6 Q. B. 597... 154, 156, 194 Smith v. Kay ............... (1859) 7 H. L. C. 779 ......... 201 Smith v. King ............... (1892) 2 Q. B. 543 ............ 131 Smith v. Land & House Property Co. (1884) 28 Ch. D. 7 ............ 175 Smith v. Mawhooil ............ C 1 ^) 14 M. & W. 464 ......... 205 Smith v. Wilson ............ (1832) 3 B. & Ad. 728 ......... 290 Smout v. Ilbery ............ (1843) 10 M. & W. i ...... 386,387 Snook v. Watts ............ (1848) II Beav. 107 ............ 137 Souch v. Strawbridge ......... (1846) 2 C. B. 808 ......... ... 77 South African Territories Co. v.l , fi a A n Wallington ............... } (1898) A. C. 309 ............ 337 '}(i868)L.R. 3 C.P. 4 6 9 ......... 70 South Wales Miners Federation v.l , \ A n Glamorgan Coal Co ......... }(i 9 o 5 ) A. C. 239 ............ 249 Southwell v. Bowditch ......... (1876) I C. P. D. (C. A.) 374 ... 372, 377 Spencer's Case ......... ... (1583) I Sm. L. C. 53 ...... 274,275 Spencer v. Harding ......... (1870) L. R. 5 C. P. 561 ......... 52 Spiller v. Paris Skating Rink ... (1878) 7 Ch. D. 368 ............ 251 Stackeinann v. Paton ......... (t96) i Ch 774 ......... xxxvii Stamford Banking Co. v. Smith ... (1892) I Q. B. (C. A.) 765 ...... 346 Stanley v. Jones ............ (1831) 7 Bing. 369 ............ 221 Starkey v. Bank of England ... (1903) A. C. 114 ......... 182,375 Startup v. Macdonald ......... (1843) 6 M. & G. 593 ......... 39 Steeds v. Steeds ............ (1889)220.6.0.537 ......... 305 Stevenson v. M'Lean ......... (1880)5(3.6.0.346 ......... 47 Stewart v. Casey ............ (1892) I Ch. 115 ............ 114 Stewart v. Eddowes ......... (1874) L. R. 9 C. P. 311 ......... 78 Stilk v. Myrick ............ (^og) a Camp. 317 ............ 101 Stockport Waterworks Co. v. Potter (1864) 3 H.&C. 300 ......... 276 Stocks v. Dobson ............ (1853) 4 D. M. & G. 15 ......... 260 Street v.Blay ............... (1831) a B. & A. 456 ...... 327,331 Strickland v. Williams ......... (1899)1(3.6.382 ............ 295 Stuart v.Joy ............... (1904) I K. B. (C. A.) 362 ...... 275 Suffell v. Bank of England ...... (1882) 9 Q. B. D. 555 ......... 353 Sumpter v. Hedges ............ (1898) I Q. B. 673 ............ 314 Synge v. Synge ............ (1894)1(3.6.466 ...... 22,106,317 T. Tailby v. Official Receiver ...... (1888) 13 App. Ca. 533 ......... 259 Tamplin v. James ............ (1880) 15 Ch. D. 221 ......... 158 Tarrabochia v. Hickie ......... (1856) I H. & N. 183 ......... 166 Taylor v. Best ............ (1854)140.6.487 ............ iaa Taylor v. Bowers ............ (1876) i Q. B. D. (C. A.) 300... 239, 240 Taylor v. Brewer ............ (1813) i M. & S. 290 ......... 96 Taylor v. Caldwell ......... (1863) 3 B. & S. 826 ............ 350 Taylor v. Great Eastern Railway Co. (1901) i K. B. 774 ......... 84,87 Taylor v. Laird ............ (1856) 25 L. J. Ex. 329 ...... 24, 109 Taylor v. Smith ............ (1893) 2 Q. B. (C. A.) 65 ......... 84 Temperton v. Russell ......... (1893) I Q. B. (C. A.) 435 ...... 253 Thacker v. Hardy ............ (1878) 4 Q. B. D. 685 ......... 213 Thiisv. Byers ............ (1876) i Q. B. D. 244 ......... 348 Thomas v. Hayward ......... (1869) L. R. 4 Ex. 311 ......... 275 Thomas v. Thomas ......... (1842)2(3.6.851 ............ 93 Thomson v. Davenport ......... (1829)96.40.78 ......... 376,377 Thornett v. Haines ......... (1846) 15 M. & W. 367 ......... 53 INDEX OF CASES XXX111 CASE. DATE. REFERENCE. PAGE Thornhill v. Neats (1860) 8 C. B., N. S. 831 301 Thoroughgood's Case ( I 584) 2 Co. Rep. 9 147 Thurstan v. Nottingham Building!, , A c 6 I27 Society /^ y A> ' Tiedemann v. Ledermann ( l %99) 2 Q. B. 63 362 Tolhurst v. Associated &c. Manu-1 ( , R R 6fi8 6 facturers \^ y ' Torkington v. Magee (1902) 2 K. B. 430 257,259,262 Touche v. Metrop. Warehousing Co. (1871) 6 Ch. 671 251 Townson v. Tickell (1819) 3 B. & Aid. 37 19 Trueman v. Fenton (*777) 2 Cowp. 544 117 Trueman v. Loder (1840) n A. & E. 589 79, 378 Tulk v. Moxhay (1848) 2 Ph. 777 277 Turner v. Owen (1862) 3 F. & F. 176 102 Turner v. Stallibrass (1898) i Q. B. (C. A.) 59 57,99 Tweddle v. Atkinson (1861) i B. & S. 393 94,250,251 U. Udell v. Atherton (1861) 7 H. & N. 172 380 Underwood v. Barker ( I $99) I Ch. (C. A.) 300 226 Universal Stock Exchange Co. v. Strachan j(i896) A. C. 173 214 V. Valentini v. Canali (1889) 24 Q. B. D. 166 129 Venezuela Railway Co. v. Kisch... (1876) L. R. 2 H. L. 113 179 Vezey v. Rashleigh C I 94) i Ch. 636 286 W. Wade v. Simeon (1846) 2 C. B. 548 98,101 Wain v. Warlters ^804) 5 East 10 81 Wake v. Harrop (1861) 6 H & N. 768 282,283,287 Walker v. Bradford Old Bank ... (1884) 12 Q. B. D. 511 263 Wallis, In re (1902) i K. B. 719 279 Wallis v. Smith (1882) 21 Ch. D. 257 296 Walton v. Mascall (1844) 13 M. & W. 458 310 Wardv.Hobbs (1878) * l85> l86 Ward v. Monaghan Ware v. Chappell ... (1895) HT.L.R. (C.A.)53 9 ... ... (1849) Style 186 ... 295 .. 322 Warlow v. Harrison Waters v. Tompkins Watkins v. Rymill ... (1858) i E. &E. 295 ... (1835) 2C. M. &R. 723 ... (1883) 10 Q. B. D. 178 ... 53 ... 346 24 Watson, In re ... (1886) i8Q. B. D. 116 3 6i Watson v. Swann ... (1862) ii C. B., N. S. 769 ... ... 361 Watson v. Turner rBuller, Nisi Prius, 147 \ ... (1767)0 Selwyn, Nisi Prius, > 115,116 Watteau v. Fenwick I 51, n. II J .. (1802) i Q. B. 346 . .. 378 Waugh v. Morris ............ (1873) L. R. 8 Q. B. 202 ......... 233 Webster v. Cecil ............ (1861) 30 Beav. 62 ...158,160,291,338 Weeks v. Tybald ............ ( J 6o5) Noy n ............... 45 Weir v. Bell ............... (1878) 3 Ex. D. 242 ............ 189 Wells v. Foster ............ (1841) 8 M. & W. 151 ......... 220 Wenlock (Baroness) v. River Dee Co. (1888) 36 Ch. 685, n .......... 136 Western Waggon Co. v. West ... (1892) i Ch. 271 ............ 259 XXXIV INDEX OF CASES CASE. DATE. BEFEBENCE. PAGE West of England Fire Ins.Co.v.Isaacs (1897) i Q. B. 226 ............ 215 Wettenhall v. Wood ......... (*793) I Esp. 17 ............ 231 Wheeler, In re ............ 094) 2 Ch. 70 ............ 141 Wheelton v. Hardisty ......... (1857) 8 E. & B. 298 ......... T 77 White v. Bluett ............ (1853) 23 L. J. Ex. 36 ......... 96 Whiteley's Case ............ (1899) I Ch. 770 ............ 196 Whittaker, Ex parte ......... (1875) 10 Ch. 446 ............ 187 Whittingham v. Murdy ......... (1889) 60 L. T. B. 956 ......... 130 Whittington v. Seale-Hayne ...... (1900) 16 T. L. R. 181 ......... 181 Whitwood Chemical Co. v.Hardrnan (1891) 2 Ch. (C. A.) 428 ......... 339 Wigglesworth v. Dallison ...... (l7?8) I Sm. L. C. 545 ......... 289 Wilkinson v. Byers ......... (1834) I A. & E. 106 ......... 103 Wilkinson v. Coverdale ......... (i?93) I Esp. 75 ......... 100,357 Wilkinson v. Johnson ......... (1824) 3 B. & C. 428 ......... 353 Wilkinson v. Oliveira ......... (1835) I Bing. N. C. 490 ......... 113 Williams v. Bayley ......... (1866) L. R. I H. L. 220 ......... 220 Williams v. Carwardi ne ...... (1833} 4 B. & Ad. 621 ...... 23,51 Williams v. Jones ............ (1845) 13 M. & W. 628 ...... 63,390 Williams v. Jordan ......... (1877) 6 Ch. D. 517 ............ 79 Williams v. Lake ............ (1859) 2 E. & E. 349 ...... ... 79 Williams v. Moor ......... "... (1843) n M. & W. 256 ...... 117,123 Williams v. Sorrell ............ ( J 799) 4Ves. 389 ............ 260 Wilson v. Finch-Hatton ...... (1877) 2 Ex. D. 336 ............ 186 Wilson v. Glossop ............ (1888) 20 Q. B. D. (C. A.) 354 ...360 Wilson v. Jones ............ (*867) L. R. 2 Ex. 139 ......... 208 Wilson v. Strugnell ......... (1881) 7 Q. B. D. 548 ......... 240 Wilson v. Tumm an ......... ( ! 843) 6 M. & G. 242 ...... 360,361 Windhill Local Board v. Vint ... (1890) 45 Ch. D. (C. A.) 351 ...... 221 Wing v. Mill ............... 8l 7) i B. & Aid. 105 ......... 115 Withers v. Reynolds ......... (1831) 2 B. & Ad. 882 ......... 325 )^E q . 4 39 ............ 337 Wood v. Abrey ............ (1818) 3 Mad. 423 ............ 198 Woolf v. Hamilton ......... (1898) 2 Q. B. (C. A.) 338 ...... 210 Woolfe v. Home ............ 6 8 77) 2 Q- B - D - 355 ......... 37 1 Wright v. Carter ............ 093) * Ch. (C. A.) 27 ......... 201 X. Xenos v. Wickham ......... (1866) L. R. 2 H. L. 296 ...... 39,64 Y. Yeoland's Consols, In re ...... (1888) 58 L.T.R. 922 ......... 130 SOME ABBKEVIATIONS USED IN REFERENCE REPORTS 1 . A. & E Adolphus and Ellis Q. B. 1834-1841 B. & Ad Barnwall and Adolphus K. B. 1830-1834 B. & Aid Barnwall and Alderson K. B. 1817-1822 B. & C Barnwall and Cresswell K. B. 1822-1830 B. &P Bosanquet and Puller C. P. 1796-1804 Beav Beavan Rolls Court, 1838-1866 B. &S Best and Smith Q. B. 1861-1866 Bing. Bingham i n T> e c Bing. N. C Bingham's New Cases \ Bulst Bulstrode K. B. 1610-1625 Burr Burrows K. B. 1756-1772 Camp Campbell K. B. & C. P. Nisi Prius, 1807-1818 Carth Carthew K. B. 1686-1701 C. B Common Bench ) n T> e c/; C. B., N. S Common Bench, New Series \ ' r> I8 45-i5 Cl. &F Clark & Finelly House of Lords, 1831-1846 C. & M. Crompton and Meeson ) v s ox C. M. & R Crompton, Meeson, and Roscoe \ M ' I8 34- I 3 Co. Rep Coke's Reports Eliz. and James Cowp Cowper K. B. 1774-1778 Cro. Eliz. or i Cro. Croke, of the reign of Elizabeth. Cro. Jac. or 2 Cro. James. D. & J De Gex and Jones Ch. App. 1857-1859 D. F. & J De Gex, Fisher, and Jones 1859-1862 D. M. & G De Gex, Macnagh ten, and Gordon... 1851-1857 Dow & Cl Dow and Clark House of Lords, 1827-1832 Dr. & Sm Drewry and Smale V.'C. Kindersley, 1859-1866 Dr. & War Drury and Warren Chancery, 1841-1843 E. &B Ellis and Blackburn Q. B. 1852-1858 E. &E Ellis and Ellis Q. B. 1859-1861 Esp Espinasse K. B. & C. P. Nisi Prius, 1793-1806 Ex Exchequer 1847-1856 F. & F Foster and Finlason Cases at Nisi Prius, 1856-1867 H. Bl Henry Blackstone C. P. 1786-1788 H. L. C House of Lords Cases 1846-1866 H. & C Hurlstone and Coltman Ex. 1862-1865 H. & N Hurlstone and Norman Ex. 1856-1862 Ir. C- L Irish Common Law Reports. J. & H Johnson and Hemming ... V. C. Page Wood, 1859-1862 K. &J. * Kay and Johnson V. C. Page Wood, 1854-1856 L. J. Ex Law Journal Exchequer } L. J. Q. B Queen's Bench [ 1828- L. J. Ch ,, Chancery J L. T. R Law Times Reports J 859 Lev Levinz K. B. & C. P. 1660-1696 1 References to the Law Journal reports have not been given throughout the ensuing pages because the system of marginal references imposed certain limits as to space. The reports cited are accessible to any student at Oxford, and it is hoped that the information given as to the Court in which the case was decided, and the date of the report to which reference is made, will enable those who can only refer to the Law Journal to discover the cases with little difficulty. XXXVI SOME ABBREVIATIONS USED IN REFERENCE Mad Maddock Vice-Chancellor's Court, 1817-1829 M. & G Manning and Granger C. P. 1840-1845 M.&S Maule and Selwyn K. B. 1813-1817 M. &W Meeson and Welsby Ex. 1836-1847 Mer Merivale Chancery, 1813-1817 Mod. Rej Modern Reports Common Law and Chancery, 1660-1702 M. A- K. Mylne and Keen Chancery, 1832-1837 P. Wms Peere Williams Chancery, 1695-1736 Ph Phillips 1841-1849 Q. B. Queen's Bench 1841-1852 Rep. in Ch Reports in Chancery 1625-1688 Rolle Abr Rolle's Abridgment 1614-1625 Russ Russell Chancery, 1826-1829 R. & M Russell and Mylne 1829-1831 Salk Salkeld K. B. C. P. Ch. & Ex. 1689-1712 Sch. & L. Schoales and Lefroy ... Irish Chancery, 1802-1806 Sid Siderfin K. B. C. P. & Ex. 1657-1670 Sm. L. C. Smith's Leading Cases. Str Strange 1727-1784 Taunt Taunton C. P. 1807-1819 T. L. R Times Law Reports 1884- Ventr Ventris K. B. 1660-1685 Vern Vernon Chancery, 1680-1718 Ves Vesey junior Chancery, 1789-1816 Ves. Sen r Vesey senior Chancery, 1746-1755 Y. & C Young and Collyer ... V. C. Knight-Bruce 1834-1842 Yelv Yelverton K. B. 1601-1613 LAW REPORTS, 1865-1906. L. R. Q. B Queen's Bench L. R. C. P Common Pleas L. R. Ex Exchequer Eq Equity Ch. Chancery Appeals L. R. H. L. . . . ) T-T f T j ( English and Irish Appeals L.R.Sc.App. j House of Lords jfiStohAppedi Q. B. D Queen's Bench Division 1875-1891 C. P. D. . . . ... Common Pleas Division ) Ex. D. Exchequer Division ] I8 <5~ Ch. D Chancery Division ... ) _ App. Ca. ... House of Lords and Privy Council Appeal Cases ) ' s ~ (189-) Q. B Queen's Bench Division 1891- (19-) K. B King's Bench Division 1901- (189-) Ch Chancery Division 1891- (189-)? Probate, Divorce, and Admiralty Division 1891- (189-) A. C. ...House of Lords and Privy Council Appeal Cases ... 1891- IJJ.lfU.UDC) *-/ V -LJO/ vv ^ nv^iiiv^UAiuiici CLSL/.I V/c*<_-iixui4i i/v/ UJULI.O W-JLJ*J.V/J.*JJ. i.^ y As the law relating to property had its origin in the attempt to ensure that what a man has lawfully acquired he shall PAKT I INTRODUCTION THE PLACE OF CONTRACT IN JURISPRUDENCE. AT the outset of an inquiry into the principles of the law Outline of Contract it may be well to state the nature of the inquiry, its main purposes, and the order in which they arise for dis- cussion. First, therefore, we must ask what we mean by Contract, Nature of and what is the relation of Contract to other legal concep- tions. Next we must ask how a contract is made ; what things Its forma- are needful to the Formation of a valid contract. When a contract is made we ask whom it affects, or can be Its opera- made to affect. This is the Operation of contract. Then we inquire how the Courts regard a contract in respect its inter- of the evidence which proves its existence, or the construction pl placed on its terms. This we may call the Interpretation of contract. Last we come to the various modes by which the con- its dis- tractual tie is unfastened and the parties relieved from c contractual liability. This is the Discharge of Contract. And first as to the nature of Contract. The object of Law is Order, and the result of Order is that men can look ahead with some sort of security as to the future. Although human action cannot be reduced to the uniformities of nature, men have yet endeavoured to re- produce, by Law, something approaching to this uniformity.' As the law relating to property had its origin in the attempt to ensure that what a man has lawfully acquired he shall 2 INTRODUCTION Part I retain ; so the law of contract is intended to ensure that what a man has been led to expect shall come to pass ; that what has been promised to him shall be performed. Such is the object of Contract, and we have to analyse this conception, and ascertain and test the machinery by which men are constrained to keep faith with one another. Contract Contract results from a combination of the two ideas of Agreement and Obligation. This statement must be limited resulting fa ^ s application to a scientific system of Jurisprudence in in Obliga . . tion. which rights have been analysed and classified. The con- ception of Obligation, as we understand it, was probably not clearly present to the minds of the judges who first enforced promises to do or to forbear ; and we may be quite sure that they did not rest their decisions, as to the validity of such promises, upon Agreement or the union of wills. But the analysis is none the less accurate because it has not always been made or understood. Contract is that form of Agreement which directly con- templates and creates an Obligation; the contractual Ob- ligation is that form of Obligation which springs from Agree- ment. We should therefore try to get a clear idea of these two conceptions, and to this end Savigny's analysis of them may well be considered with reference to the rules of English Law. I will begin with his analysis of Agreement. 1. Agreement. Requisites i . Agreement requires for its existence at least two parties. menf re There may be more than two, but inasmuch as Agreement Two or j s the outcome of consenting minds the idea of plurality is more per- sons, essential to it. distinct a. The parties must have a distinct intention and this common must be common to both. Doubt or Difference are incom- to both, p a tible with Agreement. The proposition may be illustrated Uus : Doubt. 'Will you buy my horse if I am inclined to sell it ? ' ' Very possibly/ i PLACE OF CONTRACT IN JURISPRUDENCE 3 Difference. 'Will you buy my horse for 50?' 'I will give 20 for it/ 3. The parties must communicate to one another their known to * _ I l~" 'I -- T- I I 1 ..... UJIIM III - '~ J ~~ ~ *""** J ,.1 common intention. Thus a mental assent to an offer cannot constitute an agreement 1 . A writes to X and offers to buy A's horse for 50. X makes up his mind to accept, but never tells A of his intention to do so. He cannot complain if A buys a horse elsewhere. 4. The intention of the parties must refer to legal re- referring lations : it must contemplate the assumption of legal rights r i a e t fo ns and duties as opposed to engagements of a social character. It is not easy to prescribe a test which shall distinguish these two sorts of engagements, for an agreement may be reducible to a pecuniary value and yet remain outside the sphere of legal relations. The matter is one which the Courts must decide, looking at the conduct of the parties and the circumstances of the case. 5. The consequences of Agreement must affect the parties and affect- themselves. Otherwise, the verdict of a jury or the decision pa rti e s. of a court sitting in banco would satisfy the foregoing re- quisites of Agreement. Agreement then is the expression by two or more persons of a common intention to affect their legal relations. But Agreement as thus defined by Savigny has a wider Agree- meaning, and includes transactions of other kinds than a Contract as we commonly use the term. term than Contract. (i) There are Agreements the effect of which is concluded it ma y so soon as the parties thereto have expressed their common Q tion. 1 See the dicta of Lord Blackburn in Brogden v. Metropolitan Railway Com- pany (2 App. Ca. 691). It appears from the Records of the Proceedings in the House of Lords (Appeal Cases, 1877, vol. vii. pp. 98, 106) that Lord Coleridge, C. J., and Brett, J., had in giving judgment in the Common Pleas used language suggesting that an uncommunicated mental consent might create a binding agreement. Lords Selborne and Blackburn express their dissent from such a proposition, the latter very fully and decidedly. B 2 4 INTRODUCTION Part I consent in such manner as the law requires. Such are Con- As to Gift, vevances and Gifts, wherein the agreement of the parties see Hill v. wi'son.L-R- effects at once a transfer of rights in rent, and leaves no o C h. Soo. obligation subsisting between them. Or may (2) There are Agreements which create obligations inci- create it dental to the transaction which is the main purpose of the mcidc agreement. These also effect that purpose immediately upon the expression of intention ; but they differ from simple con- veyance and gift in creating further outstanding obligations between the parties, and sometimes in providing for the coming into existence of other obligations, and those not between the original parties to the agreement. Marriage, for instance, effects a change of status directly the consent of the parties is expressed before a competent authority ; at the same time it creates obligations between MOSSV. the parties which are incidental to the transaction and to Moss, [1897] p. at p. 367. {^ i mrne diate objects of their expression of consent. So too a settlement of property in trust, for persons born and unborn, effects much more than the mere conveyance of a legal estate to the trustee; it imposes on him incidental obligations some of which may not come into existence for a long time ; it creates possibilities of obligation between him and persons who are not yet in existence. These obligations are the result of Agreement. Yet they are not Contract. (3) Savigny's definition would include Agreements which, though intended to affect legal relations, fail to do so because they fail to satisfy some requirement of the law of the country in which they are made. It remains to ascertain the characteristic of Contract as distinguished from the forms of Agreement just described. A promise An essential feature of Contract is a promise by one party essential to con- to another, or by two parties to one another, to do or rorbear from doing certain specified acts. By a promise we mean an accepted offer as opposed to an offer of a promise, or, as Austin called it, a pollicitation. 2 PLACE OF CONTRACT IN JURISPRUDENCE 5 An offer must be distinguished from a statement of in- Nature of tention ; for an offer imports a willingness to be bound to the party to whom it is made. Thus, if A says to X ' I mean to sell one of my sheep if I can get 5 for it/ there is a mere statement which does not admit of being turned into an agreement: but if A says to X ' I will sell you whichever of my sheep you like to take for 5,' we have an offer. A promise, again, must be distinguished from an offer. Of a pro- An offer becomes a promise by acceptance : until acceptance it may be withdrawn, after acceptance its character is changed. If A says to X f I will sell you my horse for 50,' and Xsays ' Agreed/ there is a promise by A to sell, a promise by X to buy, and a contract between the two. To make that sort of agreement which results in contract, there must be (i) an offer, (2) an acceptance of the offer, resulting in a promise 1 , and (3) the law must attach a binding force to the promise, so as to invest it with the character of an obligation. Or we may say that such an agreement consists in an expression of intention by one of two parties, of expectation by the other, wherein the law requires that the intention should be carried out according to the terms of its expression and the expectation thereby fulfilled. Contract then differs from other forms of Agreement in having for its object the creation of an Obligation between the parties to the Agreement. 2. Obligation. Obligation is a legal bond whereby constraint is laid upon Nature of a person or group of persons to act or forbear on behalf of tion ga another person or group. Savigny, 1 fc Obl.ch. i. Its characteristics seem to be these. ** 2 --t- I . It consists in a control exerciseable by one or both of A control two persons or groups over the conduct of the other. They 1 It will be shown on page 18 that an offer may be of an act, and that the promise resulting from acceptance may be made by the acceptor. 6 INTRODUCTION Pail T are thus bound to one another, by a tie which the Roman lawyers called vinc-ulmn juris, which lasts, or should last, until the objects of the control are satisfied, when their fulfilment effects a solutio obligations, an unfastening of the legal bond. That this unfastening may take place in other ways than by Part' v v. fulfilment will be shown hereafter. needing a. Such a relation as has been described necessitates two parties. parties, and these must be definite. There must be two, for a man cannot be under an obligation to himself, or even to himself in conjunction with others. Where a man borrowed money from a fund in M'hich he and Faulkner v. others were jointly interested, and covenanted to repay the am^see 95 money to the joint account, it was held that he could not be Hoyie, v * sue( l upon his covenant. 'The covenant to my mind is [c! 9 l Vw. ' senseless/ said Pollock, C. B. 'I do not know what is meant in point of law by a man paying himself/ The And the persons must be definite. A man cannot be parties must be obliged or bound to the entire community : his liabilities to the political society of which he is a member are matter of public, or criminal law. Nor can the whole community be under an obligation to him : the right on his part correlative to his liabilities aforesaid would be a right in rem, would be in the nature of Property as opposed to Obligation. The word Obligation has been unfortunately used in this sense by Austin and Bentham as including the general duty, which the law imposes on all, to respect such rights as the law sanctions. Whether the right is to personal freedom or security, to character, or .to those more material objects which we commonly call Property, it imposes a corresponding Holland, duty on all to forbear from molesting the right. Such Jurispru- dence ed. 9. a right is a right in rem. But it is of the essence of pp. 158, aag. o Obligation that the liabilities which it imposes are imposed on definite persons, and are themselves definite : the rights which it creates are rights in personam. bilities 3. The liabilities of Obligation relate to definite acts or ulso definite, forbearances. The freedom of the person bound is limited 2 PLACE OF CONTRACT IN JURISPRUDENCE 7 only in reference to some particular act or series or class of acts. A general control over the conduct of another would affect his status as a free man, but Obligation, as was said by Savigny, is to individual freedom what servitus is to dominium. One may work out the illustration thus : I am owner of a field ; my proprietary rights are general and indefinite ; my neighbour has a right of way over my field ; my rights are to that extent curtailed by his, but his rights are very definite and special. So with Obligation. My indi- vidual freedom is generally unlimited and indefinite. As with my field so with myself, I may do what I like with it so long as I do not infringe the rights of others. But if I contract to do work for A by a certain time and for a fixed reward, my general freedom is abridged by the special right of A to the performance by me of the stipulated work, and he too is in like manner obliged to receive the work and pay the reward. 4. The matter of the obligation, the thing to be done or The forborne, must possess, at least in the eye of the law, a reducible pecuniary value, otherwise it would be hard to distinguish legal from moral and social relations. Gratitude for a past kindness cannot be measured by any standard of value, nor can the annoyance or disappointment caused by the breach of a social engagement ; and Courts of law can only deal with matters to which the parties have attached an importance estimable by the standard of value current in the country in which they are. Obligation then is a control exerciseable by definite persons over definite persons for the purpose of definite acts or for- bearances reducible to a money value. We'may note here the various sources of Obligation. Sources of i. Obligation may arise from Agreement. Here we find ti n ?a that form of Agreement which constitutes Contract. An offer Agree- is made by one, accepted by another, so that the same thing is, by mutual consent, intended by the one and expected by the other; and the result of this agreement is a legal tie binding the parties to one another in respect of some future acts or forbearances. 8 INTRODUCTION Part I Delict. 2. Obligation may arise from Delict. This occurs where a primary right to forbearance has been violated ; where, for instance, a right to property, to security, or to character has been violated by trespass, assault, or defamation. The wrong- doer is bound to the injured party to make good his breach of Duty in such manner as is required by law. Such an obliga- tion is not created by the free-will of the parties, but springs up immediately on the occurrence of the wrongful act. Breach of 3. Obligation may arise from Breach of Contract. While A is under promise to X, X has a right against A to the performance of his promise when performance becomes due, and to the maintenance up to that time of the contractual relation. But if A breaks his promise, the right of X to per- formance has been violated, and, even if the contract is not discharged, a new obligation springs up, a right of Action, precisely similar in kind to that which arises upon a delict or breach of a Duty. Judg- 4. Obligation may arise from the judgment of a Court of competent jurisdiction ordering something to be done or for- borne by one of two parties in respect of the other. It is an obligation of this character which is unfortunately styled a Con- tract of Record in English Law. The phrase is unfortunate because it suggests that the obligation springs from Agreement, whereas it is really imposed upon the parties ab extra. Quasi- 5. Obligation may arise from Quasi-Contract. This is a convenient term for a multifarious class of legal relations which possess this common feature, that without agreement, and without delict or breach of duty on either side, A has been compelled to pay or provide something for which X ought to have paid or made provision, or X has received something which A ought to receive. The law in such cases imposes a duty upon X to make good to A the advantage to which A is entitled; and in some cases of this sort, which will be dealt with later, the practice of pleading in English Law has assumed a promise by X to A and so invested the relation with the semblance of contract. 2 6. Lastly, Obligation may spring from Agreement and Acts yet be distinguishable from Contract. Of this sort are the f rom Obligations incidental to such legal transactions as marriage or the creation of a trust. wider It is no doubt possible that contractual obligations may Contract. arise incidentally to an agreement which has for its direct object the transfer of property. In the case of a conveyance of land with covenants annexed, or the sale of a chattel with a warranty, the obligation hangs loosely to the conveyance or sale and is so easily distinguishable that one may deal with it as a Contract. In cases of Trust or Marriage the agreement is far-reaching in its objects, and the obligations incidental to it are either contingent or at any rate remote from its main purpose or immediate operation. In order, then, to keep clear of other forms of Agreement which may result in Obligation we should bear in mind that to create an obligation is the one object which the parties have in view when they enter into that form of Agreement which is called Contract 1 . 1 In an earlier edition (ed. 2. pp. 9-13) I discussed the views of Mr. Justice Holmes as to the nature of the contractual obligation, and of Dr. Holland as to its source : but these topics are better suited to a treatise on Jurisprudence than to an elementary book on the law of contract, and I now omit them from the text. Mr. Justice Holmes regards a contract as 'the taking of a risk.' He Holmes on rigorously insists that a man must be held to contemplate the ultimate \ he c mmon Law, p. 300. legal consequences of his conduct, and, in making a promise, to have in view not its performance but the payment of damages for its breach. I cannot think it desirable to push legal analysis so far as to disregard altogether the aspect in which men view their business transactions. At the same time I feel it difficult to do justice to the argument of Mr. Justice Holmes within the limits which I could assign to myself here. I may say the same of Dr. Holland's view that the law does not require Jurispru- contracting parties to have a common intention but only to seem to have p e "?5* 9 ' one, that the law ' must needs regard not the will itself, but the will as expressed.' Our difference may be shortly stated. He holds that the law does not ask for ' a union of wills ' but only for the phenomena of such a union. I hold that the law does require the wills of the parties to be at one, but that when men present all the phenomena of agreement they are not allowed to say that they were not agreed. For all practical purposes our conflict of view is immaterial. But, 10 INTRODUCTION Parti Definition And so we are now in a position to attempt a definition of tract. Contract, or the result of the concurrence of Agreement and Obligation : and we may say that it is an Agreement enforce- able at law, made between two or more persons, by which rights are acquired by one or more to acts or forbearances on the part of the other or others. after all, it is the intention of the parties which the Courts endeavour to ascertain ; and it is their intention to agree which is regarded as a necessary inference from words or conduct of a certain sort. PAET II THE FORMATION OF CONTRACT. WE have now to ascertain how contracts are made. A part of the definition of contract is that it is an agreement enforceable at laic \ it follows therefore that we must try to analyse the elements of a contract such as the law of England will hold to be binding between the parties to it. We look in the first instance for : 1 . A distinct communication by the parties to one another Elements of their intention ; in other words, Offer and Acceptance. to a valid 2. The presence of certain evidence, required by law, of contract - the intention of the parties to affect their legal relations. This evidence is Form, or Consideration. If these two requisites are satisfied we have a contract which, primd facie, will hold, or at any rate we have the outward appearance of a contract; and yet some necessary elements of validity may nevertheless be wanting. Such are : 3. The Capacity of the parties to make a valid contract. 4. The Genuineness of the consent expressed in Offer and Acceptance. 5. The Legality of the objects which the contract proposes to effect. Where all these elements co-exist, there is a valid Contract : Results of where one is absent the Contract may be unenforceable, that is valid but incapable of proof: or voidable, that is capable of being affirmed or rejected at the option of one of the parties : or the transaction may be void, that is destitute of legal effect, and there is no contract. To say that in the last case the Contract is void may be convenient but is technically inaccurate. It may be useful to the student at this point, and before 12 FORMATION OF CONTRACT Part considering in detail the various elements of validity in Contract, to take note of some rules of procedure, and some features of terminology which if not understood and kept in view may cause him difficulty and confusion of mind. PROCEDURE. In working out the law of Contract mainly with the aid of decided cases it is important to know so much of pro- cedure as will inform us what it is that the parties are asking or resisting. Under the same conditions of fact a suitor may succeed if he asks for the remedy appropriate to his case, or fail if he seeks one that is not appropriate. We may say that a plaintiff in an action on a contract asks for one of five things : Damages, or compensation for the non-performance of a contract : Specific performance, or a direction that a contract should be carried into effect according to its terms : Injunction, or the restraint of an actual or contemplated breach of contract: Gamellation, or the setting aside of a contract : Rectification, or the alteration of the terms of a contract so as to express the true intention of the parties. The first of these is the remedy formerly given in the Common Law Courts ; the other remedies were formerly special to the Chancery as administering Equity. The Chancery did not give damages 1 , but directed that certain things should be done or forborne, whereby the rights of the parties were adjusted. The Judicature Acts now enable the High Court 36 & 37 Viet of Justice, the Court of Appeal, and every Judge of those c. 66. s. 24. Courts, to give effect to all equitable, as well as to all legal rights and remedies. Nevertheless the remedy formerly given by the Common Law Courts is not only different in kind, but is administered 1 The power of giviug damages, conferred on the Chancery Courts in 1858 (ai & aa Viet c. 27) was rarely used. II PROCEDURE 13 on different principles to the remedies formerly given by the Chancery. If A has made a valid contract with B, he will obtain damages from B if B breaks the contract the measure of damages is a topic to be dealt with hereafter but it does not follow that he will get a decree for the specific performance of the contract, or an injunction to restrain B from doing such acts as would amount to its violation. Equitable remedies are limited partly by their nature, partly by the principles under which they have always been adminis- tered in the Chancery. The remedy by specific performance is necessarily limited in application to cases in which a Court can enforce its direc- tions. Engagements for personal service illustrate the class /w of cases in which it would be neither possible nor desirable for a Court to compel parties to a performance of their contract ; and where the contract is such that a Court will not grant a decree for specific performance it will not, as a rule, grant an injunction restraining from breach. The principle on which equitable remedies are given imposes a further limit to their application. Their history shows that they are special interventions of the king's grace, where the Common Law Courts are unable to do complete justice. They are therefore supplemental and discretionary. The suitor must show that he cannot obtain elsewhere the remedy suited to his case, and also that he is a worthy recipient of the favour which he seeks. Hence we find that where damages afford an adequate remedy, equity will not intervene, a rule which is constantly exemplified in cases where specific performance is asked for, and the suitor is told that damages will give him all the compensation which he needs. And again we find that the application of equitable remedies is affected by the maxim, ' he who seeks equity must do equity/ One who asks to have his contract cancelled or rectified, on the ground that he has been the victim of mistake, fraud, or sharp practice (which is 14 FORMATION OF (X)NTRACT Part not technically the same as fraud), must show that his deal- ings throughout the transaction have been straightforward in every respect. This rule applies to all equitable remedies, and should not be forgotten by the student. He will do well to inform him- self, at the outset of a case, of the remedies which the parties seek ; for a party to a suit may lose his case, not because he has no claim of right, but because he has sought the wrong remedy. TERMINOLOGY. There are certain terms to which the attention of the stu- dent must be called, because they are of constant use in the law of contract, because they are not infrequently used with insufficient precision, and because they signify very real dif- ferences in the rights arising out of contract. The terms are void, voidable, and unenforceable. A void contract is one which is destitute of legal effect. Strictly speaking, f a void contract' is a contradiction in terms; for the words describe a state of things in which, despite the intention of the parties, no contract has been made. Yet the expression, however faulty, is a compendious way of putting a case in which there has been the outward semblance without the reality of contract. A voidable contract is one which one of the parties may affirm or reject at his option. An unenforceable contract is one which is good in substance, though, by reason of some technical defect, one or both of the parties cannot sue upon it. Such a contract is sometimes called an agreement of imperfect obligation. Contract A void contract may be void on the face of it, or proof may be required to show that it is void. Where offer and acceptance do not correspond in terms, or where there is an agreement to commit a crime, the transaction is plainly void. Where a contract is made under certain conditions of mistake, or where an infant makes a promise which Parliament has II TERMINOLOGY 15 declared, in the case of infancy, to be void, the mistake in the one case, the infancy in the other, must be proved. Other- wise such a transaction, good upon the face of it, and not shown to possess any legal flaw, would be enforced by the Courts. But this does not alter the nature of the transaction, as will be seen when we compare that which is void, and that which is voidable. When a contract is shown to be void it can create no legal rights. It is a nullity. But a voidable contract is a contract Voidable. with a flaw of which one of the parties may, if he please, take advantage. If he chooses to affirm, or if he fails to use his right of avoidance within a reasonable time so that the position of parties becomes altered, or if he take a benefit under the contract, or if third parties acquire rights under it, he will be bound by it. An illustration will show the essential difference between what is void and what is voidable. (i) A sells goods to X, being Jed to think that X is Y: Cundyv. Lindsay, X sells the goods to M. The transaction between A and X is 3 App. ca. 459- void, and M acquires no right to the goods. (2,) A sells goods to X, being led by the fraud of X to think that the market is falling. Before A has discovered the Babcock v. fraud or has acted on the discovery X resells the goods to M, ' who is innocent of the fraud, and gives value for the goods. M acquires a good title to the goods, and A is left to his remedy against X by the action for Deceit. In the first of these cases the nullity of the contract prevents any rights arising under it when the mistake is proved. In the second there is a contract, and one capable of creating rights, and the person defrauded has a right to affirm or avoid, limited as above described. The difference between what is voidable and what is Unen- unenforceable is mainly a difference between substance and procedure. A contract may be good, but incapable of proof owing to lapse of time, want of written form, or failure to 16 FORMATION OF CONTRACT Part II affix a stamp. Writing in the first cases, a stamp in the last, may satisfy the requirements of law and render the contract enforceable, but it is never at any time in the power of either party to avoid the transaction. The contract is unimpeachable, only it cannot be produced in Court. Confu- This much will suffice to guide the student as to the termino- meaning of these terms, but he must be prepared to find their distinction obscured by laxity in the uses of the word ' void/ Not only is the term ' void contract ' in itself technically inaccurate, but a contract is sometimes said to be void, not because it was destitute of legal effect from its commencement, but because it has been. fully performed, and so has ceased to have legal operation. It would be more proper to describe such a contract as ' discharged.' Again the word ' void ' has been used, even by judges, and the framers of Statutes, where ' voidable ' is meant. One illustration will suffice. By 1 7 Geo. Ill, c. 50, failure to pay Maiinsv. certain duties at an auction is stated to make a bidding 'null Freeman, t^'" 2 ' N '' an ^ v id to all intents/ but this does not entitle a purchaser 395* who has repented of his bargain to avoid the contract by his own wrong, that is by refusal to pay the Statutory duty. The contract is voidable at the option of the party who has not broken the condition imposed by law. CHAPTER I Offer and Acceptance. A CONTRACT consists in an actionable promise or promises. Every such promise involves two parties, a promisor and a promisee, and an expression of common intention and of expectation as to the act or forbearance promised. So on the threshold of our subject we must bring 1 the parties together, and must ask, How is this expectation created which the law will not allow to be disappointed? This part of our subject may be set forth briefly in the rules which govern Offer and Acceptance. 1. Every contract springs from the Acceptance of an Offer. Every expression of a common intention arrived at by two Agree- or more parties is ultimately reducible to question and answer, must In speculative matters this would take the form, ' Do you j""^** 6 think so and so ? ' 'I do/ For the purpose of creating and ac - ceptance. obligations it may be represented as, 'Will you do so and so ? ' ' I will/ If A and X agree that A shall purchase from X a property worth 50,000, we can trace the process to a moment at which X says to A, ' Will you give me 50,000 for my property?' and A replies, 'I will/ If A takes a sixpenny book from X's book-stall the transaction is re- ducible to the same elements. X in displaying bis wares says in act though not in word, ' Will you buy my goods at my price ? ' and A, taking the book with X's cognizance, says in act, ' I will/ So the law is laid down by Blackstone : Comm. bk. 2 . C, 2Q. 1 If I take up wares from a tradesman without any agreement of price, the law concludes that I contracted to pay their real value/ 18 FORMATION OF CONTRACT Part II There may be difficulty in the uniform application of Contracts, this rule. Sir F. Pollock suggests cases to which it may ed. 7. p. 7. not readily apply the signature of a prepared agreement the acceptance by two parties of terms suggested by a third. But I should be disposed to say that his instances are reducible to question and answer in an elliptical form. If A and X are discussing the terms of a bargain, and eventually accept a suggestion made by M } there must be a moment when A, or X, says or intimates to the other, 'I will accept if you will 1 / It is unwise, as Sir F. Pollock truly says, to push analysis too far : but on the other hand it is a pity to give up a good working principle because its application is sometimes difficult. As a promise involves something to be done or forborne it follows that to make a contract, or voluntary obligation, this expression of a common intention must arise from an offer made by one party to another who accepts the offer made, with the result that one or both are bound by a promise or obligatory expression of intention. This process of offer and acceptance may take place in any one of four ways. How offer i. In the offer to make a promise or to accept a promise ceptance made, followed in either case by simple assent: this, in English law, applies only to contracts under seal. 2. In the offer of an act for a promise ; as if a man offers goods or services which when accepted bind the acceptor to reward him for them. 3. In the offer of a promise for an act ; as when a man offers a reward for the doing of a certain thing, which being done he is bound to make good his promise to the doer. 4. In the offer of a promise for a promise, in which case, when the offer is accepted by the giving of the pro- mise, the contract consists in outstanding obligations on both sides. 1 The case of Clarke v. Dunraven instanced by Sir F. Pollock will be discussed later : see p. 50. It suggests difficulties of a different character. Chap. I. i OFFER AND ACCEPTANCE 19 It appears then that offer may assume three forms, the offer to make a promise, the offer to assent to a promise, and the offer of an act. Acceptance may likewise assume three forms, simple assent, the giving of a promise, or the doing of an act. But the foregoing modes of offer and acceptance need explanation. 1. The first is, in English law, applicable only to such Illustra- contracts as are made under seal, for no promise, not under seal, is binding unless the promisor obtains something from the promisee in return for his promise. This something, which may be an act, a forbearance, or a promise, is called Consideration. The offer may take the form, ' I will promise you 50 if you will accept it/ or, f I will accept 50 if you will promise it to me/ In either case the promise must be made under seal if it is to bind the promisor. In the first case assent is needed to turn the offer of a Townson v. Tickell, promise into a contract : for a man cannot be forced to accept 3 B - & Ald - a benefit. In the second case acceptance takes the form of a promise to which assent has been secured by the terms of the offer. 2. A man gets into a public omnibus at one end of Oxford Street and is carried to the other. The presence of the omnibus is a constant offer by its proprietors of such services upon certain terms; they offer an act for a promise; and the man who accepts these services promises by his acceptance to pay the fare when duly demanded. 3. A man who loses his dog offers by advertisement a reward of 5 to any one who will bring the dog safe home ; he offers a promise for an act ; and when X, knowing of the offer, brings the dog safe home the act is done and the promise becomes binding. . 4. A offers X to pay him a certain sum on a future day if X will promise to perform certain services for him before that day. When X makes the promise asked for he accepts the c a 20 FORMATION OF CONTRACT Part II promise offered, and both parties are bound, the one to do the work, the other to allow him to do it and to pay for it. Difference It will be observed that cases 2 and 3 differ from 4 in an contracts important, respect. In a and 3 the contract does not come cutetT'nd * n ^ ex ^ s ^ ence until one party to it has done all that he can executory be required to do. It is performance on one side which considera- -1.1 tions. makes obligatory the promise of the other ; the outstanding obligation is all on one side. In 4 each party is bound to some act or forbearance which, at the time of entering into the contract, is future : there is an outstanding obligation on each side. In case I the promisee alone is benefited : in cases 2 and 3 the promisor and promisee alike take benefit, but the promise does not come into existence until the promisor has obtained all that he is to get under the contract : in case 4 the benefits contemplated by the parties are expressed in their mutual promises. We may, if we please, call i, 2, 3, unilateral, and 4 bilateral contracts. Where, as in cases z and 3, it is the doing of the act which concludes the contract, then the act so done is called an executed* or present consideration for the promise. Where a promise is given for a promise, each forming the considera- tion for the other, such a consideration is said to be executory or future. 1 The words executed and executory are used in three different senses in relation to Contract, according to the substantive with which the adjective is joined. Leake, ed. 4. Executed consideration as opposed to executory means present as opposed ^'k g to future, an act as opposed to a promise. in Foster v. Executed contract means a contract performed wholly on one side, while o Exch.'Ssi. an executory contract is one which is either wholly unperformed or in which there remains something to be done on both sides. Chalmers, Executed contiact of sale means a bargain and sale which has passed the c* od f A L P r P er *y i n ^ ne thing sold, while executory contracts of sale are contracts ed. 4. p. 7. as opposed to conveyances, and create rights in personam to a fulfilment of their terms instead of rights in rem to an enjoyment of the property passed. Chap. I. 2 OFFER AND ACCEPTANCE 21 2. An Offer or its Acceptance or loth may be made either liy words or by conduct. The description which I have given of the possible forms of offer and acceptance shows that conduct may take the place of written, or spoken words, in offer, in acceptance, or in both. A contract so made is sometimes called a tacit contract : the intention of the parties is a matter of inference from their conduct, and the inference is more or less easily drawn according to the circumstances of the case. If A allows X to work for him under such circumstances Offer and that no reasonable man would suppose that X meant to do the ance by work for nothing, A will be liable to pay for it. The doing conduct - of the work is the offer, the permission to do it, or the Williams, iC.&M.Sio. acquiescence in its being done constitutes the acceptance. A common illustration is afforded by the sending of goods, and their use or consumption by the person to whom they are sent. The sending is the offer, the use or consumption Han v. Mills. 65 . r I5M&W.8 7 . is the acceptance, importing a promise to pay the price. A ordered of X a publication which was to be completed in twenty-four monthly numbers. He received eight and then refused to receive more. No action could be brought upon the original contract because the duration of time over which his performance extended necessitated a memorandum in writ- ing under the Statute of Frauds; but it was held that, al- though A could not be sued on his promise to take twenty- four numbers, there was an offer and acceptance of each of Mavor v. Pyne, the eight numbers received, and a promise to pay for them 3 Bing. 289. thereby created. The offer may be made in words or writing and accepted Accept- by conduct. If A ask X to work for him for hire, or to conduct. do work for which payment would obviously be expected, X may accept by doing the work. But we must note that, in order to make a contract, there must be a definite request for the work to be done, and not a 22 FORMATION OF CONTRACT Part II mere inquiry as to whether, or no, X would be willing to do the work. Mciver v. And further, if A has prescribed a method of acceptance, or Richardson, '- - ' ........ 1 1 M i. & 8.557 jf th e character of the contract makes it reasonable that ac- iti /ra, p. 30. ________ ceptance should be signified by words or writing, then conduct alone will not suffice. The ordinary case of an offer of reward for services or for information has been already referred to. A less familiar illustration is afforded by offers to grant property by deed or to dispose of it by will in favour of a man or woman in Hammersiey conpideration of his or her marriage. Such an offer would v. de Biel, "CLfcPA. become binding on the marriage of the person to whom the s>^s*jt l8 94] offer was made, whether it was made by a third party, .A.) 466. or wag a p ar Q fa e terms on which two persons agree to many. Sometimes the inference from conduct is not so clear, but the conduct of the parties may be inexplicable on any other ground than that they intended to contract. In the case of 19 Q. B.D. Crears v. Hunter, JPs father was indebted to A, and X gave 345- to A a promissory note for the amount due with interest payable half-yearly at five per cent. A thereupon forbore to sue the father for his debt. The father died, and A sued X on the note. Was there evidence to connect the making of the note with the forbearance to sue ? In other words, did X offer the note in consideration of a forbearance to sue ? ' It was argued,' said Lord Esher, M. R., ' that the request to forbear must be express. But it seems to me that whether the request is express or is to be inferred from circumstances is a mere question of evidence. If a request is to be implied from circumstances it is the same as though there was an express request.' The Court of Appeal held that the jury were entitled to infer a contract in which X made himself responsible for the debt if A would give time to the debtor. Chap. I .3 OFFER AND ACCEPTANCE 23 3. An_ offer is made when, and not, until, U in communicated to tli? (fierce. This rule is not the truism that it appears. Offer (a) X offers a promise for an act. A does the act in communi- ignorance of the offer. Can he claim performance of the cated - promise when he becomes aware of its existence? The only English authority on this point is Williams v. 4B.&A.6ai. Carwardine, where reward was offered for such information as might lead to the discovery of a murder, and the plaintiff gave information ' believing she had not long to live, and to ease her conscience/ Afterwards she recovered, and sued for Fortuitous the reward. It was held that she was entitled to it. Her ^f^ w claim was not contested on the ground that she was ignorant of tual - the offer, but because the reward offered was not the motive of her act. The report is silent as to her knowledge of the offer, and the judgments delivered only show that the motive of compliance with the terms of the offer was immaterial 1 . An American case Fitch v. Sneda/cer is directly in point. 33N.Y.248. It is there laid down that a reward cannot be claimed by one who did not know that it had been offered. The decision seems undoubtedly correct in principle. One who does an act for which a reward has been offered, in ignorance of the offer, cannot say either that there was a consensus of wills between him and the offeror, or that his conduct was affected by the promise offered. On no view of contract could he set up a right of action 2 . (b) A does work for X without the request or knowledge of X. Can he sue for the value of his work ? A man cannot be forced to accept and pay for that which 1 Hawkins, .1. , in a note to his judgment in Carlill v. Carbolic Smoke Ball Co., [iSgzjaQ. B. says that he assumes in Williams v. Catwardine that ' the offer had been ^ 9 ' "' 2 ' brought to the knowledge of the plaintiff before the information was given.' 2 The authority of the State Courts on this point is not uniform. See Ruling Cases, vol. vi. p. 138, American notes, and cases there cited. Gibbons v. Proctor is the only English case which runs counter to the [1892] 64 proposition which I have laid down, but I agree with Sir F. Pollock ' ' 94 * (ed. 7. p. 22) that ' it cannot be law as reported.' 24 FORMATION OF CONTRACT Part II he has had no opportunity of rejecting. Under such circum- Silence stances acquiescence cannot be presumed from silence. Where the offer is not communicated to the party to whom it is gi vtf cuii" * / sent, intended to be made, there is no opportunity of rejection ; hence there is no presumption of acquiescence. Taylor was engaged to command Laird' % ship ; he threw up his command in the course of the expedition but helped to work the vessel home, and then claimed reward for services where thus rendered. It was held that he could not recover. eommuni- Evidence 'of a recognition or acceptance of services may be sufficient to show an implied contract to pay for them, if at, the time the defendant had power to refuse or accept the services.' Here the defendant never had the option of accepting or refusing the services while they were being rendered ; and Taylor v. he repudiated them when he became aware of them. The L.J.&C. plaintiff's offer being uneommunicated, did not admit of acceptance, and could give him no rights against the party to whom it was addressed. Offer with (c) Where an offer consists of various terms, some of which numerous , ., ,, ., , , . terms. " n *> appear on the race or it, to what extent is an acceptor bound by terms of which he was not aware ? This question is answered, and the cases on the subject 10 Q. B. D. carefully summarized by Stephen, J., in Walking v. Rymill. 'A great number of contracts are, in the present state of society, made by the delivery by one of the contracting parties to the other of a document in a common form stating the terms by which the person delivering it will enter into the proposed contract. Such a form constitutes the offer of the party who tenders it. If the form is accepted without objection by the person to whom it is tendered he is as a general rule bound by its contents, and his act amounts to an acceptance of the offer made to him, whether he reads the document or otherwise informs himself of its contents, or not.' Railway companies, for instance, make continuous offers to carry or to take care of goods on certain conditions. The traveller who takes a ticket for a journey, or for luggage left at a cloak-room, accepts an offer containing many terms. A very prudent man with abundance of leisure would perhaps Chap. I. .3 OFFER AND ACCEPTANCE 25 inquire into the terms before taking a ticket. Of the mass of mankind some know that there are conditions and assume that they are fair, the rest do not think about the matter. The general rule, settled after the question had presented itself to the Courts in many forms, is laid down in the passage above cited 1 . We may take it that if a man accepts General a document which purports to contain the terms of an offer, all the terms have been communicated to him, though he may not choose to inform himself of their tenor or even of their existence. The exceptions to this rule, apart from such a wilful mis-statement of conditions as would amount to fraud, and apart from conditions which a Court would hold to be unreasonable or oppressive, fall under two heads. The offer may contain on its face the terms of a complete Excep- contract, and then the acceptor will not be bound by any others terms intended to be included in it. Such a case was Henderson v. Stevenson. The plaintiff pur- a. Offer chased of the defendant Company a ticket by steamer from complete. Dublin to Whitehaven. On the face of the ticket were these SC^IMMJO' words only, ' Dublin to Whitehaven ' ; on the back was an intimation that the Company incurred no liability for loss, injury, or delay to the passenger or his luggage. The vessel was wrecked by the fault of the Company's servants and the plaintiff's luggage lost. The House of Lords decided that the Company was liable to make good the loss, since the plaintiff could not be held to have assented to a term ' which he has not seen, of which he knows nothing, and which is not in any way ostensibly connected with that which is printed or written upon the face of the contract presented to him' Or again, the plaintiff may assert, not that the offer was b. Notice of complete upon its face, but that the mode of calling his sumc i en t. attention to the terms which it included was not such as to amount to reasonable notice. 1 The conditions under which the liability of a Kailway Company in respect of the carriage of goods can be limited, under 17 & 18 Viet. c. 31, are a matter too special to be discussed here. 26 FORMATION OF CONTRACT Part II iC. p. D. Parser v. South Eastern Railway Company was a case of deposit of luggage in a cloak-room on terms contained in a ticket. The conditions limiting the liability of the Company were printed on the back of the ticket and were indicated by the words ' See back ' on the face of the ticket. The plaintiff, while he admitted a knowledge that there was writing on the ticket, denied all knowledge that the writing contained con- ditions. The Court of Appeal held that he was bound by the condition if a jury was of opinion that the ticket amounted to a reasonable notice of its existence. [1894] A. c. Richardson and others v. Rowntree illustrates the provinces of Court and jury in these matters. A passenger sued for injuries sustained by the negligence of a steamship company ; the company had limited its liability by a clause on the ticket which was printed in small type and further obscured by words stamped across it in red ink. The jury found that the plaintiff knew that there was writing on the ticket, that she did not know that the writing contained conditions relating to the contract of carriage, and that she had not received reasonable 9*r. L.R. notice of these conditions. The Court of Appeal and House 297. of Lords held that there was evidence to go to the jury and that the finding of the jury should not be disturbed. Excep- There is one exception to the inoperative character of an nature of uncommunicated offer : this is the case of an offer under seal. >fferunder y e j. ^ p ar fy making such an offer cannot be said to be bound by contract, for this can arise only where an offer is accepted. He would seem to have made an offer which he infra, p. 39. cannot withdraw : and so the matter is best dealt with under the head of the revocation of offers. 4. Acceptance mutt le communicated by words or conduct. Acceptance means communicated acceptance. What amounts to communication, and how far it is necessary that communi- cation should reach the offeror, are matters to be dealt with presently. It is enough to say here that acceptance must be something more than a mere mental assent. Chap. I. 4 OFFER AND ACCEPTANCE 27 In an old case it was argued that where the produce of a field was offered to a man at a certain price if he was pleased with it on inspection, the property passed when he had seen and approved of the subject of the sale. But Brian, C. J., said : ' It seems to me the plea is not good without showing that he Year Book, had certified the other of his pleasure ; for it is trite learning that the thought of man is not triable, for the devil himself knows not the thought of man ; but if you had agreed that if the bargain pleased then you should have signified it to such an one, then I grant you need not have done more, for it is matter of fact.' This dictum was quoted with approval by Lord Blackburn 2 App. Ca. in the House of Lords in support of the rule that a contract is formed when the acceptor has done something to signify his intention to accept, not when he has made up his mind to do so. A modern case will show that mental consent does not Mental amount to acceptance, even where the offerer has said that * c ?-~ ^^^^_ l ; * _ - ^ _ ___________^__ T _ rrm ** "~~~~~ allots 111- such a mode of acceptance will suffice. effectual. Felthouse offered by letter to buy his nephew's horse for 30 15*., adding, 'If I hear no more about him I shall consider the horse is mine at 30 15*.' No answer was returned to this letter, but the nephew told Bindley, an auctioneer, to keep the horse out of a sale of his farm stock, as it was sold to his uncle Felthouse. Bindley sold the horse by mistake, and Felthouse sued him for wrongful dealing with his property. The Court held that as the nephew had Felthouse v. . . Bindley. 1 1 never signified to Felthouse his acceptance of the offer, there c. B..N.S. was no contract of sale, and that the horse did not belong to Felthouse at the time of the auctioneer's dealings with it. O Here silence did not amount to consent. Felthouse had given no intimation of any mode in which acceptance of his offer should be signified, and the nephew's statement to the auctioneer that the horse was sold to Felthouse was no more than an expression of his intention to accept : it could not be construed to be an acceptance. 28 FORMATION OF CONTRACT Part II Effect of ance. P Communi- Accept? differs tion of Requisites illation" 1 " fi8oV|i 5. Acceptance is communicated when it is made in a manner prescribed } or indicated by tie offerer. Contract is formed by the acceptance of an offer. When * ne ^ cr ls accepted it becomes a promise : till it is accepted neither party is bound, and the offer may be revoked by due notice of revocation to the party to whom it was made. Acceptance is necessarily irrevocable, for it is acceptance that binds the parties. An offer is accepted when the acceptance is communicated, an d we have seen that this means more than a tacit formation O f intention. There must be some overt act or speech to give evidence of that intention. But there is this marked difference ^ etween communication of Offer and communication of Ac- ceptance, that whereas an offer is not held to be communicated until it is brought to the knowledge of the offeree, acceptance may be held to be communicated though it has not come to the knowledge of the offeror : a contract would then be made. In such cases two things are necessary. There must be ?- n ex P r ess or implied intimation from the offeror that a particular mode of acceptance will suffice. And some overt act must be done or words spoken by the offeree which are evidence of an intention to accept, and which conform to the mode of acceptance indicated by the offeror. The law on this subject was thus stated by Bowen, L. J., in the Carbolic Smoke Ball case. Q B. 'One cannot doubt that, as an ordinary rule of law, an acceptance *' of an offer made ought to be notified to the person who made the offer, in order that the two minds may come together. Unless this is so, the two minds may be apart, and there is not that consensus which is necessary according to the rules of 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 expressly or impliedly intimates a particular mode Chap. I. 5 OFFER AND ACCEPTANCE 29 of acceptance as sufficient to make the bargain binding, it is only necessary for the other person to whom such offer is made to follow the indicated mode 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 acceptance of it to himself, performance of the condition is a sufficient acceptance without notification.' From this statement of the law we may draw the following conclusions. The offerer may indicate a mode in which acceptance depend should be communicated, and he will then be bound by O f O ff er- a communication so made, whether it reaches him or not : or the offeror may invite performance without communication of acceptance, and it will then be sufficient for the purpose of binding him that the offeree should ' act on the proposal/ In either case we start with the general principle that acceptance must be communicated to the offeror, and we must then look to the terms and the nature of the offer, and ascertain whether the offeror has committed himself to a particular mode of acceptance, or has invited the offeree to act on the proposal and accept by performance. We will take the latter class of cases first. It is sometimes offer of impossible for the offeree to express his acceptance otherwise 0^ than by performance of his part of the contract. This is specially true of what are called general offers, offers made to unascertained persons, wherein performance is expressly or to unas- impliedly indicated as a mode of acceptance. An offer of person^ reward for the supply of information or for the recovery of a lost article does not contemplate an intimation from every person who sees the offer that he intends to search for the information or for the article : he may have already found or become possessed of the thing required, and can do no more than send it on to the offeror. But when a specified individual receives an offer capable to an indi- of acceptance by performance we need to consider more carefully the nature and terms of the offer, and whether they entitle the offeree to dispense with notice of acceptance. 30 FORMATION OF CONTRACT Part IT Harvey v. If ^ tells X by letter that he will receive and pay for Johnston, r j 6QB. at cer tain goods if X will send them to him, such an offer p. 3 { *4- Bagei v. may be accepted by sending the goods. But if A tells X that Miller, [1903] * 2 K. B. 212. k e j s p re p ar ed to guarantee advances made by X to M, notice of acceptance is required. In such a case where X without notice to A advanced money to M and afterwards charged A upon M's default, it was held that X should have notified his Mciverv. acceptance to A, and that for want of such notification no Richardson, i M.& 5.557. contract had been made. Offer of When we pass from offers of a promise for an act to for pro- offers of a promise for a promise, that is from offers capable miae> of being accepted by performance to offers which require for their acceptance an expression of intention to accept, we need no longer consider whether the offeror asks for any notification at all, but must ask how far he has bound himself as to the mode in which the acceptance should be communicated. If he requires, or suggests, a mode of ac- ceptance which proves, as a means of communication, to be nugatory or insufficient, he does so at his own risk. Offer de- We obtain a good illustration of this rule in the case of no.~WA' This may be of importance when we inquire, as is sometimes necessary, what is the law which governs the validity of the contract or the procedure by which it may be enforced. In Cowan v. O'Connor a contract was made by two tele- grams one of offer and one of acceptance. The amount at issue made it necessary that the whole cause of action should arise within the jurisdiction of the Court (that of the City of London) in which the action was to be tried. The telegram of acceptance had been sent from the City, and the Court held that the contract was there made, and that consequently the whole cause of action arose within the jurisdiction of the Lord Mayor's Court. Mailer's So too in the ^ase of a contract made between parties some Margarine Co. v. inland o f \vhom are resident in England and some abroad the con- Revenue, ... [iqoojiQ.B. tract has been held to be made in the country in which the signature of the last necessary party is affixed. Can ac- There is a result following from the foregoing decisions which has been the subject of criticism. Acceptance con- voked ? eludes the contract ; so if acceptance takes place when a letter Chap. I 6 OFFER AND ACCEPTANCE 35 is put into the post office, a telegram revoking the acceptance would be inoperative, though it reached the offerer before the letter. It is not easy to see how the English courts could now decide otherwise. Nor is it easy to see that any hard- ship need arise from the law as it stands. The offeree need not accept at all : or he may send a qualified acceptance, ' I accept unless you get a revocation from me by telegram before this reaches you ' : or he may telegraph a request for more time to consider. If he chooses to send an uncon- ditional acceptance there is no reason why he should have an opportunity of changing his mind which he would not have enjoyed if the contract had been made ' inter praesentes V 6. Offer creates no legal rights until acceptance, but may lapse or be revoked. Acceptance is to Offer what a lighted match is to a train of Lapse and gunpowder. It produces something which cannot be recalled O f offer, or undone. But the powder may have lain till it has become damp, or the man who laid the train may remove it before the match is applied. So an offer may lapse for want of acceptance, or be revoked before acceptance. Lapse. (a) The death of either party before acceptance causes an Death of offer to lapse. An acceptance communicated to the represen- p tatives of the offerer cannot bind them. Nor can the repre- sentatives of a deceased offeree accept the offer on behalf of his estate. An order for goods does not create a claim forsageiv. goods sold and delivered until the goods are delivered, and if * K. B. 212! the offerer die before delivery no action will lie against the estate of the deceased by reason of a subsequent delivery. 1 The Indian Contract Act has unfortunately adopted this pseudo- scientific view of acceptance. 'The communication of an acceptance is complete as against the proposer when it is put in course of teansmission to him so as to be out of the power of the acceptor ; as against the acceptor, when it comes to the knowledge of the proposer.' I. C. A. c. i, 4. What is to happen if the letter of acceptance is lost ? Is the proposer to be for ever bound though the acceptor is free ? D 1 36 FORMATION OF CONTRACT Part II Failure to (#) It has been shown that acceptance is communicated if manner 11 ma( k in a manner prescribed or indicated by the offerer. prescnb- j ^ ne communication of the offer does no more than ed; suggest a mode of acceptance, it would seem that the offeree would not be bound to this mode so long as he used one which did not cause delay, and which brought the acceptance to the knowledge of the offerer. A departure from the usual or the suggested method of communication would probably throw on the offeree the burden of ensuring a notification of his acceptance. Subject to this an offer made by post might be accepted by telegram, or by messenger sent by train. But if a mode of acceptance is prescribed and the offeree departs from this, it is open to the offerer to treat the accept- ance as a nullity. Eiiason v. Eliason offered to buy flour of Henshaw. requesting that an Henshaw, 4 wheaton, answer should be sent by the wagon which brought the offer. Henshaw sent a letter of acceptance by mail, thinking that this would reach Eliason more speedily. He was wrong, and the supreme Court of the United States held that Eliason was entitled to refuse to purchase. ' It is an undeniable principle of the law of contract, that an offer of a bargain by one person to another imposes no 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 these terms invalidates the offer unless the same be agreed to by the person who made it.' or within (c) Sometimes the parties fix a time within which an offer scribed? * s * remain open ; more often it is left to a Court of law, in the event of litigation, to say what is a reasonable time within which an offer may be accepted. Instances of a prescribed Dickinson v. time are readily supplied. ' This offer to be left over till aCh. 6.463. Friday, 9 a.m. I2th June/ allows the offeror to revoke, or the offeree to accept the offer, if unrevoked, at any time up to the date named, after which the offer would lapse. G. N. R. Co. An offer to supply groods of a certain sort at a certain price v. Witham. ^ J * L. R. 9 c. P. for a year from the present date an offer to guarantee the Chap. I. 6 OFFER AND ACCEPTANCE 37 payment of any bills discounted for a third party for a year offord v. Davies. 12. from the present date are offers which may be turned into c. B., N. s. contracts by the giving 1 of an order in the one case, the dis- count of bills in the other. Such offers may be revoked at any time, except as regards orders already given or bills already discounted, and they will in any event lapse at the end of a year from the date of offer. A promise to keep an offer open would need consideration und would only become binding if the party making the offer were to get some benefit by keeping it open, such as a higher price in the event of acceptance. But the fixing of a pre- scribed time means no more than that the offer is open for acceptance during that time unless previously revoked. In the first case the offeror by his promise precludes himself from exercising his right to revoke the offer; in the second he merely says, 'You may accept within such and such a time unless in the meantime I have revoked the offer/ An instance of an offer lapsing by the efflux of a reasonable time is supplied by the case of the Ramsgate Hotel Co. v. L.R. i Exc Montefiore. Montefiore offered by letter dated the 28th of June to purchase shares in the Company. No answer was made to him until the 33rd of November, when he was informed that shares were allotted to him. He refused to accept them, and it was held that his offer had lapsed by reason of the delay of the Company in notifying their acceptance. Revocation. (1) An offer may be revoked at any time before acceptance. Revoca- (2) An_offer is made irrevocable by acceptance. (i) The first of these statements is illustrated by the case of Offord v. Davies. Messrs. Davies made a written offer 12 c. B., to the plaintiff that if the plaintiff would discount bills for another firm of Davies and Co. they would guarantee the valid payment of such bills to the extent of 600 during a period of twelve calendar months. Some bills were discounted by Offord, and duly paid, but 38 FORMATION OF CONTRACT Part II useless ceptance before the twelve months had expired Messrs. Davies re- voked their offer and announced that they would guarantee no more bills. Offord continued to discount bills, some of which were not paid, and then sued Messrs. Davies on the guarantee. It was held that the revocation was a good defence to the action. The alleged guarantee was an offer, extending over a year, of promises for acts, of guarantees for discounts. Each discount turned the offer into a promise, pro tanto, but the entire offer could at any time be revoked except as regarded discounts made before notice of revocation 1 . L. R. 90. P. (2) The second statement is illustrated by the Great Northern Railway Company v. Witham, a transaction of the same character. The Company advertised for tenders for the su Ppty ^ suc ^ iron articles as they might require between ist November 1871 and 3ist October 1872. Witham offered to supply them on certain terms and his tender was accepted by the Company. Orders were given and executed for some time on the terms of the tender, but after a while Witham refused to execute orders. The Company sued him for non- performance of an order given and he was held liable. It is important to note the exact relations of the parties. The Company by advertisement invited all dealers in iron to make offers. The tender of Witham was an offer which might be accepted at any time, or any number of times in the ensuing twelve months. The acceptance of the tender did not make a contract, it was merely an intimation by the Company that they regarded Witham's tender as an offer. The Company were not bound to order any iron : and Witham might, at any time before an order was given, have revoked his offer by notice to the Company : but each order given 1 It should be noticed that in the judgment in Offord v. Dames, and also to a less extent in the Great Northern Railway Company v. Witham, the word 'promise' is used where 'offer of promise' is clearly meant. A revocable promise is unknown to our law. A promise may be void, voidable, or unenforceable from defects in the formation of the contract, or it may be discharged by some subsequent event, but a promise, whether action- able or not, is not revocable at the pleasure of the promisor. Chap. I. 6 OFFER AND ACCEPTANCE 39 was an acceptance of Witham's standing offer, and bound him to supply so much iron as the order comprised 1 . An order given after 3ist October 1872 would have been an acceptance after the prescribed time, and inoperative 2 . An exception to this general rule as to the revocability of Offer an offer must be made in the case of an offer under seal, This cannot be revoked : even though it is not communi- cable - cated to the offeree it remains open for his acceptance when he becomes aware of its existence. There is no doubt that a grant under seal is binding on the DOC d. grantor and those who claim under him, though it has never Knight, 5 been communicated to the grantee, if the deed has been duly delivered; and it would seem that an obligation created by deed is on the same footing. The promisor is bound, but the promisee need not take advantage of the promise unless he choose : he may repudiate it, and it then lapses. ' If A make an obligation to B and deliver it to C, this is the Butler & deed of A presently. But if C offers it to B, then B may refuse gj '^ c e a p sc - it in pais, and thereby the obligation will lose its force.' "' a6 - b - The question as to an offer under seal arose in Xenos v. L. R. 2 Wickham. A policy of marine insurance, executed by the insurers and delivered to their clerk to be kept till the ship- owner sent for it, was never accepted by the shipowner till he claimed the benefit of it on learning that his ship was lost. The House of Lords took the opinion of the Judges, and held that the policy was binding on the insurers. ' It is clear,' said Blackburn, J., in giving his opinion, ' on the 1 A person whose tender has been accepted by a corporation has an Ford v. 'interest in a contract' which under s. 12 of the Municipal Corporations r,^i',Q B Act, 1882, disqualifies him for being elected on the town council. It is 690. unfortunate that the language of the judges in Ford v. Newth should throw some obscurity over the relation of parties where a price list or tender is sent in by one and accepted by the other. 2 We must distinguish such offers from contracts, such as was made in R. v. Demers, in which prices are fixed, zmd the seller cannot revoke, during [1900] A. C. the continuance of the contract, though the buyer is under no obligation to buy. 40 FORMATION OF CONTRACT Part II authorities as well as on the reason of the thing, that the deed is binding on the obligor before it comes into the custody of the obligee, nay, even before he knows of it: though of course if he has not previously assented to the making of the deed the obligee may refuse it.' The situation in such a case is anomalous. It is in fact irreconcileable with the modern analysis of Contract as meaning an expression by at least two persons of a common intention whereby expectations are created in the mind of o ne or both. A promise under seal isfactum, a thing done beyond recall ; and the promisor is in the position of one who has made an offer which he cannot withdraw, or a conditional promise depending for its operation on the assent of the promisee. Revoca- It remains to state that Revocation, as distinct from Lapse, be com- ^ i^ ^ s to be operative, must be communicated. In the case "ed" ^ Acceptance we have seen that it is communicated, and the contract made, if the offeree does by way of acceptance that which the offerer has directly or indirectly indicated as suffi- cient. The posting of a letter, the doing of an act, may constitute an acceptance and make a contract. The question at once arises, Can revocation be communicated in the same way, by the posting of a letter of revocation, by the sale of an article offered for purchase ? The answer must be (subject to the consideration of two cases to which I will presently advert), that revocation of an offer is not communicated unless broitght to the knowledge of the offeree. The rule of law on this subject was settled in 5 c. P. D. Byrne v. Fan Tienhoven. The defendant, writing from Cardiff on October ist, made an offer to the plaintiff in New York asking for a reply by cable. The plaintiff received the offer on the i ith, and at once accepted in the manner requested. On the 8th the defendant had posted a letter revoking his offer. The questions which Lindley, J., considered to be raised were two. (i) Has a revocation any effect until communi- Chap. I. 6 OFFER AND ACCEPTANCE 41 cated? (2) Does the posting of a letter of revocation amount to a communication to the person to whom the letter is sent ? He held (i) that a revocation was inoperative until com- municated, (2) that the withdrawal of an offer was not com- municated by the mere posting of a letter ; and that therefore an acceptance made by post is not affected by the fact that a letter of revocation is on its way. He points out the inconvenience which would result from any other conclusion. ' If the defendant's contention were to prevail no person who ; had received an offer by post and had accepted it, would know his \ position until he had waited such time as to be quite sure that a letter withdrawing the offer had not been posted before his acceptance of it. It appears to me that both legal principle and practical convenience require that a person who has accepted an offer not known to him to have been revoked, shall be in a position safely to act upon the footing that the offer and acceptance constitute a contract binding on both parties V The case of Rent-horn v. Fraser. decided in the Court of [1892] 2 ch. 27, C. A. Appeal, extends this rule to the case of a written offer delivered by hand and accepted by post. Lord Herschell there says: ' The grounds on which it has been held that the acceptance of an offer is complete when it is posted, have I think no application to the revocation or modification of an offer. These can be no more effectual than the offer itself unless brought to the mind of the person to whom the offer is made.' There are two cases which have been thought to suggest Cases con- that when the offer is an offer to sell property it may be w j t h t hi s revoked merely by the sale of the property to a third person, rule> and without communication to the offeree. This view may be dismissed, but the cases raise other points of interest. In Cook v. Oxley the defendant offered to sell specific goods cook \. to the plaintiff on certain terms and to keep the offer open $ T - 6 53- 1 There is American authority for the view that the revocation of an offer made by advertisement need n^(; be communicated to the offeree. As such an offer is made to the whole world, it clearly can be revoked only in the way in which it is made by advertisement. See Shuey v. United States, 92 U. S. 73. 42 FORMATION OF CONTRACT Part II until 4 o'clock that day. Cook averred that he did agree within the time allowed, but that Oxley failed to deliver. The Court held that a promise to keep the offer open till 4 o'clock was not binding for want of consideration, and that 'The promise can only be supported on the ground of a new contract made at 4 o'clock; but there is no pretence for that. It has been argued that this must be taken to be a complete sale from the time the condition was complied with ; but it was not complied with, for it is not stated that the defendant did agree at 4 o'clock PerBoller.J. to the terms of the sale, or even that the goods were kept till that time.' These last words suggest that, in the view of the Court, Oxley was not only free to revoke his offer at any time before acceptance, but free to revoke it by a mere sale of the goods without notice. But if this case is carefully examined it will be seen that while the pleader stated a good cause of action, the arguments of counsel for the plaintiff took a different and an untenable ground. The plaintiff's declaration sets forth clearly enough an offer turned into a contract by acceptance at 4 p.m. But the argument addressed to the Court set up a conditional sale of the property if Cook chose to declare himself a buyer before 4 o'clock : so that Oxley was bound to sell if required, but Cook was not bound to buy. The Court held that the alleged promise to keep the goods till 4 p.m. was nudum pactum, and the case is merely authority for saying that such a promise is not binding without consideration. The question of the suf- ficiency of the revocation was never raised. Dickinson The other case is Dickinson v. Dodd*. a suit for specific v. Dodds, 201.0.463. performance of a contract under the following circumstances. On the loth of June, 1874, Dodds gave to Dickinson a memo- randum in writing as follows: 'I hereby agree to sell to Mr. George Dickinson the whole of the dwelling-houses, garden ground, stabling and out-buildings thereto belonging situated at Croft, belonging to me, for the sum of 800. As witness my hand this loth day of June, 1874. 800 (Signed) John Dodds. Chap. I. 6 OFFER AND ACCEPTANCE 43 PS. This offer to be left over until Friday, 9 o'clock a.m. J. D. (the twelfth) I2th June, 1874. (Signed] J. Dodds.' On the nth of June he sold the property to another person without notice to Dickinson. As a matter of fact Dickinson was informed of the sale, though not by any one acting under the authority of Dodds. He gave notice, after the sale but before 9 o'clock on the 1 2th, that he accepted the offer to sell, and sued for specific performance of what he alleged to be a contract. The Court of Appeal held that there was no contract. James, L. J., after stating that the promise to keep the offer open could not be binding, and that at any moment before a complete acceptance of the offer one party was as free as the other, goes on to say : 'It is said that the only mode in which^Dodds could assert that freedom was by actually and distinctly saying to Dickinson, "now I withdraw my offer." I apprehend that there is neither principle nor authority for the proposition that there must be an actual and express withdrawal of the offer, or what is called a retractation. It must to constitute a contract appear that the two minds were one at the same moment of time, that is, that there was an offer continuing up to the moment of acceptance. If there was not such a continuing Dickinson, offer, then the acceptance comes to nothing.' The language used is wider than was needed to cover the facts of the case, and is at variance with the theory of communication of acceptance and revocation as settled by the cases which I have discussed. In business there must be many offers which do not contemplate an immediate answer : a reasonable time is here allowed during which the offer is continuing, and a mental revocation would not avail against an acceptance made within such a time. So far Dickinson v. Dodds is at variance with Byrne v. Van Tienhoven, and must be regard^, as overruled by Henthorn v. Fraser\ the language of the judges in these cases would seem to negative the idea that a sale of the goods offered 44 FORMATION OF CONTRACT Part II would be more operative than the posting of a letter, as a revocation of an offer to sell. What is to happen then if M offers to sell a specific thing to A, and while his offer is yet open for acceptance, actually sells it to X, and then A accepts within a reasonable or prescribed time? Clearly M cannot sell the same thing to two different persons, and clearly also he is under liability to two persons. A may not be able to enforce the performance of the contract, but he is at any rate entitled to damages for its breach. And yet we can well understand that if the acceptor knew for a fact, though his informant had no authority from the offerer, that the offer was revoked, his acceptance would not entitle him to specific performance of the contract, and might greatly reduce the amount recoverable in an action for damages. But can we hold that knowledge of the offerer's intention to revoke, from whatever source it reaches the offeree, is good notice of revocation? This is one ground of the judgment 4 CK. 0.474. of James and Hellish, L.JJ. But if it is correct the incon- venience might be grave. Suppose a merchant to receive an offer of a consignment of goods from a distant correspondent, with liberty to reserve his answer for some days. Meantime an unauthorized person tells him that the offerer has sold or promised the goods to another. What is he to do ? His informant may be right, and then, if he accepts, his accept- ance would be worthless. Or his informant may be a gossip or mischief-maker, and if on such authority he refrains from accepting he may lose a good bargain. Such is the real and only difficulty created by Dickinson r. Doflds. The case is no authority for the validity of an uncommunicated revocation : but it does raise a question, which remains unanswered, as to the source whence notice of revocation must come. We have now dealt with the rules governing Communica- tion in the cases of Offer, of Acceptance, and of Revocation Chap. I. 7 OFFER AND ACCEPTANCE 45 of Offer. I will now deal with two sets of rules relating to the serious and definite character with which Offer and Ac- ceptance must be invested if they are to create legal relations. 7. The offer must be intended to create, and capable of creating legal relation*. In order that an offer may be made binding by acceptance, Offer must it must be made in contemplation of legal consequences ; tended to a mere statement of intention made in the course of con- legal versation will not constitute a binding promise, though acted relations, upon by the party to whom it was made. In an old case, the defendant said, in conversation with the plaintiff, that he would give 100 to him who married his daughter with his consent. Plaintiff married defendant's daughter with his consent, and afterwards brought an action on the alleged promise. It was held that it is not reason that the defendant Weeks v. * should be bound by general words spoken to excite suitors/ "y- A stronger illustration is supplied by a recent case. A father writing to the plaintiff who was about to marry his daughter used these words : ' She will have a share of what I leave after the death of her mother/ This was held by Cozens- Hardy, J.. not to be an offer capable of being turned Farina v. ' Fickns,[iqoo] into a promise on marriage taking place, but a mere state- ' Ch - 33'- ment of an intention by the father to give the daughter something at his death 1 . On a like footing stand engagements of pleasure, or agree- ments which from their nature do not admit of being regarded as business transactions. We cannot in all cases decline to regard such engagements as contracts on the ground that they are not reducible to a money value. The acceptance of an invitation to dinner or to play in a cricket match 1 The learned judge held that if there was a contract it was satisfied by a legacy left to the daughter, which only represented a small share of the father's estate. The student ma% compare with advantage this case and that of Laver v. Fielder, where words addressed to a suitor were 32 Beav. i. held to constitute a promise to leave such a share as the daughter would have been entitled to on intestacy. 46 FORMATION OF CONTRACT Part II forms an agreement in which the parties may incur expense in the fulfilment of their mutual promises. The damages resulting from breach might be ascertain able, but the Courts would probably hold that, as no legal consequences were contemplated by the parties, no action would lie. and cap- And an offer must be capable of affecting legal relations. creating The parties must make their own contract : the Courts will not construct one for them out of terms which are indefinite or illusory. A bought a. horse from X and promised that 'if the horse was lucky to him he would give 5 more or Guthing v. the buying of another horse ' : it was held that such a promise 2 B. i Ad. was too loose and vague to be considered in a court of law. 232. A covenanted with X to retire wholly from the practice of a trade ' so far' as the law allows ' : it was held that the Daviesv. parties must fix the limit of their covenant and not leave Ch. D. 359. their agreement to be framed for them by the Court. Montreal A made a contract with X and promised that if ' satisfied vasey,[Qoo] with you as a customer ' he ' would favourably consider ' an application for a renewal of the contract: it was held that there was nothing in these words to create a legal obligation. A communicated with X by telegraphic code, and owing to a mistaken economy of words the parties differed in the construction of the contract. Here the party relying on the contract must fail, for the Court will not determine a question Williams, [to 176. .C. which the parties should not have left in doubt. are 8. Acceptance must be absolute, and must correspond with the terms of the offer. Forms of If a contract is to be made, the intention of the offeree to accept must be expressed without leaving room for doubt as ^ ^ ie ^ ac * ^ acce P* ;ance ; or as to the correspondence of the terms of the acceptance with those of the offer. The forms of difficulty which arise in determining whether or no an acceptance is conclusive, may be said to be three. The alleged acceptance (i) maybe a refusal and counter-offer, or a mere statement of fact relating to the proposed trans- Chap. I. 8 OFFER AND ACCEPTANCE 47 action : (2) may be an acceptance with some addition or variation of terms : (3) may be an acceptance of a general character, to be limited and defined by subsequent arrange- ment of terms. (i) In the case of Hyde v. Wrench, A offered to sell a farm 3 Beav. 334. to X for 1,000. X said he would give 950. A refused, & ^^ and Xthen said he would give 1,000, and, when A declined c nter - to adhere to his original offer, tried to obtain specific per- formance of the alleged contract. The Court, however, held that an offer to buy at 950 in response to an offer to sell for 1,000 was a refusal and a counter-offer. An offer once refused cannot be accepted unless renewed ; Stevenson v. but an inquiry as to whether the offerer will modify his terms s Q- B. b. does not necessarily amount to a refusal. The case of Harvey v. Facey, decided by the Judicial ['8931 A. c. Committee, was not one of counter-offer, but of a statement statement ,.,.,..,. , of fact in as to price which the intending acceptor chose to treat as answer to an offer. X telegraphed to A { Will you sell us Bumper Hall offer< Pen ? Telegraph lowest cash price, answer paid/ A replied by telegram ' Lowest price for Bumper Hall Pen 900.' X telegraphed c We agree to buy Bumper Hall Pen for 900 asked by you/ On this correspondence X alleged that a contract had been made for the sale of Bumper Hall Pen at the price stated by A to be the lowest that he would take. It was held that no contract had been made, that A in stating the lowest price which he would take was not accepting an offer but supplying information, that the third of the telegrams set out above was an offer by X an offer which he called an acceptance and that this offer had never been accepted by A. (3) The acceptance of an offer may introduce terms not comprised in the offer, and in such cases no contract is made. In the case of Jones v. Daniel, A offered 1,450 for a [1894] 2 CH. 33 2 - property belonging to X. In accepting the offer X enclosed New terms with the letter of acceptance a contract for signature by A. a" ce p^. This document contained various terms as to payment of ance - 48 FORMATION OF CONTRACT Part II deposit, date of completion, and requirement of title which had never been suggested in the offer. The Court held that there was no contract ; that it would be equally unfair to hold A to the terms of acceptance, and X to those of the offer. 16 Q. B. D. The case of Canning v. Farquhar is decided substantially, 7^7- though not so obviously, on the same ground. A proposal for life insurance was made by Canning to the defendant company, and was accepted at a premium fixed in their answer, subject to a proviso that 'no assurance can take place until the first premium is paid/ Before the premium was paid and the policy prepared Canning suffered a serious injury, and the company consequently refused to accept a tender of the premium and to issue the policy. It was held that the company's acceptance of the proposal was really a counter-offer, and that the change in the risk which occurred between this counter-offer and the acceptance which was made by tender of the premium entitled the company to refuse to issue the policy. Reference (3) In cases where offer or acceptance is couched in terms ng general terms, but refers to a contract in which the intentions good. o f ^hg parties may be more precisely stated, it is important to note whether the terms of such a contract were in existence, and known to the parties, or whether they were merely in contemplation. In the former case the offer and acceptance are made subject to, and inclusive of, the fuller conditions and terms : in the latter case the acceptance is too general to constitute a contract. A verbal offer was made to purchase land, the offeror was told that the land must be purchased under certain printed conditions, and the offer, which was still continued, was Rossiter v. accepted ' subject to the conditions and particulars printed on a App.' Ca. the plan/ As these were contemplated in the offer a complete contract was thus constituted. An offer was made to buy land, and * if offer accepted, to Houn^ii P a y Deposit and sign contract on the auction particulars ' ; this 737 961 2 Ch was acce P^j ' subject to contract as agreed/ The acceptance Chap. I. 8 OFFER AND ACCEPTANCE 49 clearly embodied the terms of the contract mentioned in the offer, and constituted a complete contract. On the other hand where an offer to sell property was Reference accepted ' subject to the terms of a contract being arranged ' terms between the solicitors of the parties, no contract was made. bad - The acceptance was not, in fact, more than an expression of Honeyman v. Marryatt, willingness to treat. ^ H- L< c There are cases which at first sight may appear to be cases Questions of doubt or difference in the acceptance of an offer, but really ^ence turn out to involve only questions of the admissibility of evidence or the interpretation of terms. Such are cases in which the parties have made a written agreement, dependent for its coming into effect on a verbal condition or stipulation. Pym v. Campbell, and Pattle v. eE.&B.ajo. [1897] i Ch. Hornibrook are instances of contracts, apparently complete, 2 5- held in abeyance until a verbal condition is fulfilled; and this verbal condition is admitted in evidence as forming part of the written contract. Such too are cases in which a contract has to be made or of inter- out of a correspondence involving lengthy negotiations. The parties discuss terms, approach and recede from an agreement ; offers are made and met by the suggestion of fresh terms; finally there is a difference ; and one of the parties asserts that a contract has been made, and the other that matters have never gone beyond a discussion of terms. Where such a correspondence appears to result, at any moment of its course, in a definite offer and acceptance, it is necessary to ask whether this offer and acceptance include all Hussey v. Home the terms under discussion. For where the parties have come Pavne, 4 App. Ca. to terms a subsequent revival of negotiations may amount to B l e T jj am a rescission on one side, and consequent breach, but does not ^ch^rx"' ^ MMn ^*^m^iOTW^^^ MMaMM ^***HVMMMMWMVW1N^VW . o alter the fact that a contract has been made. In the case of an alternative offer by letter to let the whole Lever v. of an estate, called Minydon, or to* sell a portion, the terms of [1901] i ch. each offer being stated, an acceptance couched in the terms, 50 FORMATION OF CONTRACT Part II ' I accept your offer of Minydon on the terms named therein/ was held to be an acceptance of the offer to let, the two letters making a completed contract. But these cases turn rather on the meaning- to be given to the words of the parties, than on rules of law. 9. An nffer need not be made to an ascertained person, but no contract can arise until it has been accepted by an ascertained person. The proposition is best understood by an illustration. An offer The offer, by way of advertisement, of a reward for the made to all rendering of certain services, addressed to the public at but t^e rld ' l ar e > becomes a contract to pay the reward so soon as an comes a individual renders the services, but not before. only when To hold that any contractual obligation exists before the accepted services are rendered, would amount to saying that a man by one. ma y b e bound by contract to an indefinite and unascertained body of persons, or, as it has been expressed, that a man may have a contract with the whole world. This view has never been seriously entertained in English law x ; the promise is regarded as being made, not to the many who might accept the offer, but to the person or persons by whom it is accepted. The contract may assume a form not so simple. Where competitors are invited to enter for a race, subject to certain conditions, by a committee or other agency, each competitor who enters his name thereby offers, to such other persons as may also compete, an undertaking to abide by the conditions under which the race is run. The offer is made through an agent or a committee to uncertain persons who define them- selves by entry under conditions which are binding on all. Such was the contract made in the case of the Satanita, or . 255. Clarke v. Dunraven : and such is the case of a lottery where [1897] A. C. w- each one of a number of persons unknown to one another Barclay v. | I ixc>3] 0n ' P^ces money in the hands of a stakeholder on the terms that _ ' . 1 The view of Savigny that an obligation arises at once from an offer sect. 61. of this sort, but that performance of the condition can only create a debt of honour, seems to the English lawyer neither logical nor equitable. Chap. I. 9 OFFER AND ACCEPTANCE 51 the whole sum should be paid to one of them on a given conclusion of an event uncertain at the time. Such offers suggest more practical difficulties. Difficul- (1) The offer may be susceptible of acceptance by a number of persons. When it is a conditional offer of reward to any person who does a specified act, the number of persons who may do the Cariui v. * Carbolic act and satisfy the condition does not appear to affect the Smoke Bali validity of the offer. ' & B '- 2 8 - But where there is an offer of reward for the supply of a specified piece of information the offerer clearly does not mean to pay many times over for the same thing. So where information has been collected and contributed by various per- Who is sons the question arises, Which of these has accepted the offer? In Lancaster v. Wahk it was held that he who gave the 4M.&\v.i6. earliest information was entitled to the reward. (2) Where a constable has given information for which Whatisac- reward has been offered, it may be asked whether he has done more than in the ordinary course of duty he is bound to do. It would seem from the case of England v. Davidson, A.&E. 856. where a policeman not only gave information but collected evidence, and was thereupon held entitled to the reward, that unless a police constable does something more than the ordinary course of duty would require, he cannot claim a reward. But there are more serious difficulties. (3) Is knowledge of the existence of an offer essential to Is know- its acceptance, or can it be accepted by an accidental com- offer pliance with its terms? essential? Williams v. Carwardine is authority for saying that the 4 B. & Ad. motive of compliance is immaterial ; it is not authority for saying that knowledge of the offer is immaterial. In Fitch v. Snedaker it is laid down with clear and con- tf N - Y 2 * | ante p. 23. vincing argument that knowledge of the offer is essential, but this conclusion is not uniformly accepted in the State Courts of America. E 2 52 FORMATION OF CONTRACT Part II Distinc- tion be- tween offer and invitation to treat. 64 L. T.S94. Giblons v. Proctor is the only English case which appears to lay down a rule that knowledge of the offer is imma- terial. The decision comes to this, that if the offerer gets what he wants he must pay for it, even though the infor- mation wanted was supplied in ignorance that a reward was offered, was supplied before the reward was offered, and was supplied by a constable in the ordinary course of his duty. It is impossible to accept this case as an authority. (4) It is often difficult to distinguish statements of inten- tion which can result in no obligation ex contractu from offers which admit of acceptance, and so become binding promises. Such statements may relate to the whole transaction or only to a subordinate part of the transaction. A man announces that he will sell goods by tender or by auction, or that he is prepared to pay money under certain conditions : or again, a railway company offers to carry passengers from A to X and to reach Xand the intermediate stations at certain times. In such cases it may be asked whether the statement made is an offer capable of acceptance or merely an invitation to make offers, and do business; whether the railway company by its published time-table makes offers which become terms in the contract to carry, or whether it states probabilities in order to induce passengers to take tickets. We may note the distinction in the following cases. An invitation to compete for a scholarship does not import a promise that the scholarship will be given to the candidate who obtains the highest marks if examiners report that he is not of sufficient merit to receive the scholarship. An announcement that goods would be sold by tender, unaccompanied by words indicating that they would be sold to the highest bidder, was held to be ' a mere attempt to ascertain whether an offer can be obtained within such a margin as the sellers are willing to adopt/ An advertisement by an auctioneer, that a sale of certain articles would take place on a certain day, was held not to i 1 bind the auctioneer to sell the goods, nor to make him liable Rooke v. Dawson, 65 L. J. 31, Spencer i Hai din L. R. 5 i 561. Harris v. Nickrrson L. R. 8 Q. 286. Chap. I. 9 OFFER AND ACCEPTANCE 53 upon a contract to indemnify persons who were put to expense in order to attend the sale. 'Unless every declaration of intention to do a thing creates a binding contract with those who act upon it, and in all cases after advertising a sale the auctioneer must give notice of any articles / that are withdrawn, we cannot hold the defendant liable.' On the other hand we find in the following cases a contract made by acceptance of a general offer, such acceptance being signified by performance of its terms. In Warlow v. Harrison the advertisement of a sale icithout iE.AE.295. reserve was held to create a binding contract between the auctioneer and the highest bidder that the goods should be sold to the latter. The law was stated thus by Martin, B. : ' The sale was announced by them (the auctioneers) to be " without reserve." This, according to all the cases both at law and in equity, means that neither the vendor nor any person in his behalf shall bid at the auction, and that the property shall be sold to the highest bidder, whether the sum bid be equivalent to the real value or not. 1 ' We cannot distinguish the case of an auctioneer putting up Thomctt v. property for sale upon such a condition from the case of the loser ^^"^ \v~. of property offering a reward, or that of a railway company pub- 36 7- lishing a time-table stating the times when, and the places to Demon v. which, the trains run. It has been decided that the person giving ^^ GO the information advertised for, or a passenger taking a ticket, may 5E.&B.86o. sue as upon a contract with him. Upon the same principle, it seems to us that the highest bona fide bidder at an auction may sue Warlow v. the auctioneer as upon a contract that the sale shall be without J*E r & S E%6 reserve.' This view of the rights of the highest bidder at an auction was adopted by Cozens- Hardy, J., in the more recent case of [1899] 2 Ch. Johnston v. Boyes. In the 'Smoke Ball' case the Carbolic Smoke Ball Com- [1892] 2 Q. u. 484. pany offered by advertisement to pay ico to any one ' who u&Bi Q-B. 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/ It was added that 1,000 was deported with the Alliance Bank 1 showing our sincerity in the matter.' Mrs. Carlill used the Smoke Ball as required by the direc- (AXTV B^*"*" "'"''' """ * 54 FORMATION OF CONTRACT Part II tions ; she afterwards suffered from influenza and sued the ; Company for the promised reward. The Company was held liable. It was urged that a notification of acceptance should have been made to the Company. The Court held that this was one of the class of cases in which, as in the case of reward offered for information or for the recovery of lost property, there need be no acceptance of the offer other than the per- 11893] ' QB., formance of the condition. It was further argued that the C. A. 262. alleged offer was an advertisement or puff which no reasonable person would take to be serious. But the statement that 1,000 had been deposited to meet demands was regarded as evidence that the offer was sincere. Thus too statements made in the time-tables of a railway company must be regarded as something more than a mere inducement to travellers. They have been held to be promises made to each person who accepts the standing offer of the v^L 3 ^ >r c w com P an y to carry him for hire. The passenger then becomes f c.'^ a ^) Co '' entitled to the use of reasonable diligence on the part of the company that its promises as to the hours of arrival and departure shall be performed. On the other hand a bookseller's catalogue, with prices stated against the names of the books, would seem to contain a number of offers. But if the bookseller receives by the same post five or six letters asking for a particular book at the price named, to whom is he bound ? To the man who first posted his letter of acceptance? How is this to be ascertained? The catalogue is clearly an invitation to do business, and not an offer. In all these cases the same question presents itself under various forms. Is there an offer? And, to constitute an offer, the words used, however general, must be capable of application to specific persons, and must be distinguishable from invitations to transact business, and from advertisement or puffery which does not contemplate legal relations. CHAPTER II Form and Consideration. Historical Introduction. OFFER and Acceptance bring the parties together, and con- Necessity stitute the outward semblance of contract ; but most systems these of law require some further evidence of the intention of the a ^ n s lish parties, and in default of such evidence refuse to recognize an law - obligation. In English law this evidence is supplied by Form and Consideration : sometimes one, sometimes the other, some- times both are required to be present in a contract to make it enforceable. By Form we mean some peculiar solemnity attaching to the expression of Agreement which of itself gives efficacy to the contract ; by Consideration we mean some gain to the party making the promise, arising from the act or forbearance, given or promised, of the promisee. Alike in English and Roman law, Form, during the in- History fancy of the system, is the most important ingredient in ma tter. Contract. The Courts look to the formalities of a transaction as supplying the most obvious and conclusive evidence of the intention of the parties ; the notion of Consideration, if not unknown, is at any rate imperfectly developed. This is no place for an antiquarian discussion, however interesting, but we may say that English law starts, as Roman law may Common perhaps have started, with two distinct conceptions of history Contract. One, that a promise is binding if expressed in of J Form of a certain kind : the other, that the acceptance of list benefits of a certain kind imports a liability to repay them. The history of the Roman Contracts is difficult and obscure. The theory of Sir Henry Maine, that they developed out of Conveyance in an order of moral progression, has long been 56 FORMATION OF CONTRACT Part II abandoned. But under many varieties of procedure we detect two leading- ideas the binding character of an undertaking- clad in solemn form and the re- adjustment of proprietary right where money or goods had been lent for consumption or use. In English law we find that before the end of the thirteenth century there were two liabilities analogous in character to those I have just described : one Formal, the promise under seal which was looked on as something in the nature of a present grant : one Informal, arising from sale and delivery of goods, or loan of money, in which considera- tion has passed on one side, and the liability was expressed in the action of Debt. Beyond this, the idea of enforcing an informal promise, simply because a benefit was accruing or was about to accrue to the promisor by the act or forbear- ance of the promisee, does not appear to have been entertained before the middle or end of the fifteenth century. The formal The Formal Contract of English law is the Contract under English Seal. Only by the use of this Form could a promise, as such, be made binding, until the doctrine of consideration began to prevail. We have to bear in mind that it is to the Form only that the Courts look in upholding this Contract; the consensus of the parties has not emerged from the ceremonies which surround its expression. Courts of law will not trouble themselves with the intentions of parties who have not couched their agreement in the solemn Form to which the law attaches legal consequences. Nor, on the other hand, where Form is present will they demand or admit further evidence as to intention. It is probably due to the influence of the Court of Chan- cery that, later on, the Common Law Courts begin to take account of the intention of the parties. The idea of the importance of Form thenceforth undergoes a curious change. When a contract comes before the Courts, evidence is re- quired that it expresses the genuine intention of the parties ; and this evidence is found either in the solemnities of the Contract under Seal, or in the presence of Consideration, Chap. II FORM AND CONSIDERATION 57 that is to say, in some benefit to the promisor or loss to the promisee, granted or incurred by the latter in return for the promise of the former. Gradually Consideration comes to be regarded as the important ingredient in Contract, and then the solemnity of a deed is said to make a contract binding because it ' imports consideration/ though in truth there is no question of consideration ; it is the Form which brings about legal consequences. But we must return to the Informal promise. I have said that the only contracts which English law The in- originally recognized, were the Formal contract under Seal, promise, and the Informal contract in which what we now call Con- sideration was executed upon one side. How then do we arrive at the modern breadth of doctrine that any promise based upon Consideration is binding upon the promisor ? This question resolves itself into two others. How did informal executory contracts become actionable at all ? How did Consideration become the universal test of their actiona- bility ? To answer the first question we must look to the remedies Remedies which, in the early history of our law, were open to persons O f prorn i se complaining of the breach of a promise, express or implied. ' n Brac ' The only actions of this nature, during the thirteenth and fourteenth centuries, were the actions of Covenant, of Debt, and of Detinue. Covenant lay for breach of promises made under Seal : Debt for liquidated or ascertained claims, arising either from breach of covenant, or from non-payment of a sum certain, due for goods supplied, work done, or money lent : Detinue * lay for the recovery of specific chattels 1 Detinue has been the subject of contention from the thirteenth century as to whether it is founded on contract or in wrong (Pollock and Maitland, Hist, of English Law, ed. z. ii. 180). In our own time the Bryant v. action of Detinue has been decided to bf an action of tort. Detinue is in 3 c. P!*!). fact founded in bailment, but the contract of bailment imposes general 3&9- common law duties the breach of which may be treated, and should be treated, as a wrong. The judgment of Collins, L. J., in Turner v. StaUibrass [c 9 ^.) states this clearly. 58 FORMATION OF CONTRACT Part II kept back by the defendant from the plaintiff. These were the only remedies based upon contract. An executory agree- ment therefore, unless made under seal, was remediless. The remedy found for such promises is a curious instance of the shifts and turns by which practical convenience evades technical rules. The breach of an executory contract, until comparatively recent times, gave rise to a form of the action of Trespass on the Case. Spence, This was a development of the action of Trespass : Tres- Chancery ... . . . . jurisdict. p ass l av for injuries resulting from immediate violence : Trespass on the Case lay for the consequences of a wrongful act, and proved a remedy of a very extensive and flexible character. Origin of Note the process whereby this action came to be applied to assumpsit. contract. It lay originally for a malfeasance, or the doing an act which was wrongful ab initio : it next was applied to a mis- feasance, or improper conduct in doing what it was not other- wise wrongful to do, and in this form it was applicable to Reeves, promises part-performed and then abandoned or negligently 395, 396. ' executed to the detriment of the promisee : finally, and not with- out some resistance on the part of the Courts, it came to be applied to a non-feasance, or neglect to do what one was bound to do. In this form it adapted itself to executory contracts. The Pollock, first reported attempt so to apply it was in the reign of Henry IV, when a carpenter was sued for a non-feasance because he had undertaken (quare assumpsissefy to build a house and had made default. The judges in that case held that the action, if any, must be in covenant, and it did not appear that the promise Reasons was under seal. But in course of time the desire of the tension. Common Law Courts to extend their jurisdiction, and their fear lest the Chancery by means of the doctrine of con- sideration, which it had already applied to the transfer of interests in land, might enlarge its jurisdiction over contract, produced a change of view. Early in the sixteenth century it was settled that the form of Trespass on the Case known henceforth as the action of Assumpsit would lie for the non- Chap. II FORM AND CONSIDERATION 59 feasance, or non-performance of an executory contract; and the form of writ by which this action was commenced, perpetuated this peculiar aspect of a breach of a promise until recent enactments for the simplification of procedure. It is not improbable that the very difficulty of obtaining a remedy for breach of an executory contract led in the end to the breadth and simplicity of the law as it now stands. If the special actions ex contractu had been developed so as to give legal force to informal promises, they might have been applied only to promises of a particular sort : a class of contracts similar to the consensual contracts of Roman law, privileged to be informal, would then have been protected by the Courts, as exceptions to the rule that Form or executed Consideration was needed to support a promise. But the conception that the breach of a promise was some- thing akin to a wrong the fact that it could be remedied only by a form of action which was originally applicable to wrongs had a somewhat peculiar result. The cause of action was the non-performance of an undertaking ; not the breach of a particular kind of contract; it was therefore of universal application. Thus all promises would become binding, and English law avoided the technicalities which must needs arise from a classification of contracts. Where all promises may be actionable it follows that there must be some universal test of actionability, and this test was supplied by the doctrine of Consideration. It is a hard matter to say how Consideration came to Origin of form the basis upon which the validity of informal promises tion as a might rest. Probably the ' quid pro quo ' which furnished the te ^* of ground of the action of Debt, and the detriment to the pro- bility is T . , ,. . uncertain, misee on which was based the delictual action of Assumpsit, were both merged in the more general conception of Con- sideration as it was developed in the Chancery. For the Chancellor was wont ro inquire into the intentions of the parties beyond the Form, or even in the absence of the Form in which, by the rules of Common Law, that 60 FORMATION OF CONTRACT Part II intention should be displayed, and he would find evidence of the meaning of men in the practical results to them of their acts or promises. It was thus that the Covenant to stand seised and the Bargain and Sale of lands were enforced in the Chancery before the Statute of Uses ; and the doctrine once applied to simple contract was found to be of great practical convenience. When a promise came before the Courts they asked no more than this, 'Was the party making the promise to gain anything from the promisee, or was the promisee to sustain any detriment in return for the promise ? ' if so, there was a ' quid pro quo ' for the promise, and an action might be maintained for the breach of it 1 . Gradual So silent was the development of the doctrine as to the doctrine, universal need of Consideration for contracts not under seal, and so marked was the absence of any express authority for the rule in its broad and simple application, that Lord Mansfield in 1765 raised the question whether, in the case of commercial contracts made in writing, there was any necessity for Consideration to support the promise. In the case of 3 Burr. 1663. Pittans v. Van Mierop he held that consideration was only required as evidence of intention, and that where such evidence was effectually supplied in any other way, the want of consideration would not affect the validity of a parol promise. This doctrine was emphatically disclaimed in the opinion of the judges delivered not long afterwards in the House of 7 T. R. 350. Lords, in Rann v. Hughes. The logical completeness of our law of Contract as it stands at present is apt to make us think that its rules are inevitable and must have existed from all time. To such an impression the views set forth by Lord Mansfield in 1765 are a useful corrective. 1 In the foregoing historical sketch I have refrained from citing authorities. To do so would encumber with detail a part of my book in which brevity is essential to the general plan. I may now refer the student to the chapter on Contract in the History of English Law. by Pollock and Maitland, .ed. 2. vol. ii. pp. 184-233, a storehouse of learning upon the subject.' Chap. II CLASSIFICATION OF CONTRACTS 61 Classification of Contracts. English law recognizes only two kinds of contract, formal Contracts and simple : the Deed or Contract under Seal, and the contract j^. ma i which depends for its validity on the presence of consideration. or Sim P le - The Legislature has, however, imposed upon some of these simple contracts the necessity of some kind of Form, either as a condition of their existence or as a requisite of proof, and these stand in an intermediate position between the Deed to which its form alone gives legal force, and the Simple Contract which rests upon Consideration and is free from the imposition of any Statutory Form. In addition to these a certain class of Obligation has been imported into the Law of Contract under the title of Contracts of Record, and though these obligations are wanting in the principal features of Contract, it is necessary, in deference to established authority, to treat of them here. Formal and Simple contracts may then be further classified as follows : A. Formal. \ Classifica- i . Contracts of Record. tion of i. e. dependent for contracts. their validity I 3 . Contracts under Seal, upon their Form, j B. Simple. \ 3. Contracts required by i. e. dependent for law to be in some their validity form other than un ~ upon the pre- der SeaL sence of Con- 4. Contracts for which no sideration. form is required. It will be best to deal first with the essentially formal contracts, then with those forms which are superimposed upon certain simple contracts, and then with Consideration, the requisite common to all simple contracts. 62 FORMATION OF CONTRACT Part II FORMAL CONTRACT. 1. Contracts of Record. Contracts The obligations which are styled Contracts of Record are Judgment, Recognizance, Statutes Merchant and Staple, and Recognizances in the nature of Statute Staple. (i)Judg- And first as to Judgment. The proceedings of Courts of Record are entered upon parchment rolls, and upon these an entry is made of the judgment in an action, when that judgment is final. A judgment awarding a sum of money to one of two litigants, either by way of damages or for costs, lays an obligation upon the other to pay the sum awarded. How it Such an obligation may be the final result of a lawsuit when ' the Court pronounces judgment ; or the parties may agree to enter judgment in. favour of one of them. This may be done before litigation has commenced or while it is pending ; and it is done by a contract of a formal character. A warrant of attorney may give authority from one party to the other to Leake, enter judgment upon terms settled : a cognovit actionem is an Contracts, J ed. 4, 105. acknowledgment by one party of the right of the other in respect of a pending dispute and confers a similar authority. Itscharac- The characteristics of an obligation of this nature may be shortly stated as follows : 1. Its terms admit of no dispute, but are conclusively proved by production of the record. 2. So soon as it is created the previously existing rights with which it deals merge, or are extinguished in it: for instance, A sues X for breach of contract or for civil injury : judgment is entered in favour of A either by consent or after trial : A has no further rights in respect of his cause of action, he only becomes creditor of X for the sum awarded. 3. Such a creditor has certain advantages which an ordinary creditor does not possess. He has a double remedy for his debt; he can have execution upon the judgment and so obtain directly the sum awarded from the personal property of the debtor; he can also bring an action for the non- Chap. II. I FORM. CONTRACTS OF RECORD 63 fulfilment of the obligation. For this purpose the judgment not only of a Court of Record l , but of any Court of com- petent jurisdiction, British or foreign, other than a County Court 2 , is treated as creating an obligation upon which an Williams r. Jones, 13. action may be brought for money due. M - & w - 628 - Before IJ and 28 Viet. c. 112 he had, during the lifetime of the judgment debtor, a charge upon his lands ; but since the passing of that statute lands are not affected by a judg- ment until they have been formally taken into execution. Recognizances are aptly described as ' contracts made with (2) Recog- _,, ., . j. . , .. . . . . nizance. the Crown in its judicial capacity. A recognizance is a p iiock, ed. writing acknowledged by the party to it before a judge or officer having authority for the purpose, and enrolled in a Court of Record. It may be a promise, with penalties for the breach of it, to keep the peace, or to appear at the assizes. Statutes Merchant and Staple, and Recognizances in the (3) Sta- nature of a Statute Staple, have long becoine obsolete. They Merchant were once important, because they were acknowledgments of andSta P le - debt which, when duly made, created a charge upon the lands of the debtor. There is little of the true nature of a contract in the so- called Contracts of Record. Judgments are obligations de- pendent for their binding force, not on the consent of the parties, but upon their direct promulgation by the sovereign authority acting in its judicial capacity. Recognizances are promises made to the sovereign with whom, both by the tech- nical rules of English law and upon the theories of Jurispru- dence, the subject cannot contract. Statutes Merchant and Staple share the characteristics of judgments. We need con- sider these obligations no further. 1 The essential features of a Court of Record are (i") that its 'acts and judicial proceedings are enrolled for a perpetual testimony,' (2) that it Stephen, can fine or imprison for contempt. Comm.ed. 2 51 & 52 Viet. c. 43. 63. If action'could be brought in a Superior 294, 295. Court on a County Court judgment the cheap remedy which County Courts are intended to give would become expensive. Berkeley v. Elderkin, i E. and B. 805. 64 FORMATION OF CONTRACT Part II 2. Contract under Seal. Contract The only Formal Contract of English law is the Contract ' under Seal, sometimes also called a Deed and sometimes a Speciality. It is the only Formal Contract, because it derives its validity neither from the fact of agreement, nor from the consideration which may exist for the promise of either party, but from the form in which it is expressed. Let us then con- sider (i) how the contract under seal is made; (2) in what respects it differs from simple contracts ; (3) under what cir- cumstances it is necessary to contract under seal. (i) How a Contract under Seal is made. Sheppard, A deed must be in writing or printed, on paper or parch- Touchstone, S3- ment. It is often said to be executed, or made conclusive as Signed. between the parties, by being ' signed, sealed, and delivered/ Of these three things there is some doubt as to the necessity Cooch v. of a signature, though no one, unless ambitious of giving his 2 Q. B. 597. name to a leading case, would omit to sign a deed. But that which identifies a party to a deed with the execution of it is Sealed. the presence of his seal ; that which makes the deed operative, so far as he is concerned, is the fact of its delivery by him. Delivered. Delivery is effected either by actually handing the deed to the other party to it, or to a stranger for his benefit, or by Xenosv. words indicating an intention that the deed should become Wickham, . ... .,., . L. R. 2 H. L. operative though it is retained in the possession of the party executing. In the execution of a deed seals are commonly affixed beforehand, and the party executing the deed signs his name, places his finger on the seal intended for him, and utters the words ' I deliver this as my act and deed/ Thus he at once identifies himself with the seal, and indi- cates his intention to deliver, that is, to give operation to the deed. Escrow. A deed may be delivered subject to a condition; it then does not take effect until the condition is performed : during ' ' Chap. II. 2 FORM. CONTRACT UNDER SEAL 65 this period it is termed an escrow, but immediately upon the fulfilment of the condition it becomes operative and acquires the character of a deed. There is an old rule that a deed; Sheppard, 3 Touchstone, thus conditionally delivered, must not be delivered to one who 59 ~ is a party to it, else it takes effect at once, on the ground that a delivery in fact outweighs verbal conditions. But the n< Jn J Freehold Co. modern cases appear to show that the intention of the parties gjjy prevails if they clearly meant the deed to be delivered condi- Lt 8 p. 7 62i Ch ' tionally. The distinction between a Deed Poll and an Indenture is Indenture and deed no longer important since 8 & 9 Viet. c. 106. 5. Formerly poll. a deed made by one party had a polled or smooth-cut edge, a deed made between two or more parties was copied for each on the same parchment, and the copies cut apart with indented edges, so as to enable them to be identified by fit- ting the parts together. Such deeds were called Indentures. An indented edge is not now necessary to give the effect of an Indenture to a deed purporting to be such. (a) Characteristic* of Contract under Seal. (a) Estoppel is a rule of evidence whereby a man is not (a) Estop- allowed to disprove facts in the truth of which he has by words or conduct induced others to believe, knowing that they might or would act on such belief. This rule of evidence is of strict application to statements made under seal. Recitals and other statements in a deed, if express and clear, are conclusive against the parties to it in any litigation arising upon the deed J . ' Where a man has Taunton, j., in Bowman entered into a solemn engagement by and under his hand * J a lo |' and seal as to certain facts, he shall not be permitted to 278t deny any matter he has so asserted/ (b) Where two parties have made a simple contract for (6) Merger. any purpose, and afterwards havef entered into an identical 1 The limitations of this rule have been discussed in recent cases, of which the most recent is The Onward Building Society v. Smithson. For Estoppel [1893]! Ch. i. in pais, that is by conduct, words, or writing not under seal, see c. iv. a (3), 66 FORMATION OF CONTRACT Part II engagement by deed, the simple contract is merged in the deed and becomes extinct. This extinction of a lesser in a higher security, like the extinction of a lesser in a greater interest in lands, is called merger. (c)Limita- ( c ) A right of action arising out of simple contract is actions, barred if not exercised within six years. A right of action arising out of a contract under seal is barred if not exercised within twenty years. See Part v. These general statements must be taken with some quali- ch. in. 4. fications to be discussed hereafter. (d) Beme- (d) If a man dies leaving debts unpaid, those creditors dies against whose rights are evidenced by deed had, and still have, some estate 8 advantages which are not possessed by creditors whose rights rest upon simple contract. In administering the personal estate of a testator or intes- tate person, creditors by specialty were formerly entitled to a priority over creditors by simple contract. Their privilege in this respect is taken away by 32 & 33 Viet. c. 46. As regards the real estate of a debtor, the creditor by specialty had an advantage. If the debtor bound himself and his heirs by deed, the Common Law gave to the creditor a right to have his debt satisfied by the heir out of the lands of his ancestor; the liability thus imposed on the heir was extended to the devisee by 3 & 4 Will. & Mary, c. 14. a. This statute was repealed by 1 1 Geo. IV. & I Will. IV. c. 47, only for the purpose of extending the creditor's remedy to some cases not provided for by the previous Act. During the present century, however, creditors by simple contract have also acquired a right to have their debts satis- fied out of the lands of the debtor. By 3 & 4 Will. IV. c. 104 real estate not charged with the payment of the debts of the deceased might be adminis- tered in a Court of Equity for the payment of debts, specialty creditors ranking before simple contract creditors. By 32 & 33 Viet. c. 46 this priority of the specialty creditor was taken away, but the simple contract creditor Chap. II. 2 FORM. CONTRACT UNDER SEAL 67 needed to get the estate administered in Chancery in order 32 & 33 J Viet c. 46. to make good his claim, and place himself on an equal footing with the specialty creditor. But the 'real repre- sentative' created by the Land Transfer Act, 1897, dispenses 6o&6i vict. c. 65. with the need for administration by the Court. The only advantage retained by the specialty creditor is that the fund available for him is not liable, as is the fund for simple contract creditors, to the executor's right of retainer unless for a specialty debt, and so far specialty retains an advantage 1 . fcb'i^^o (e) A gratuitous promise, or promise for which the promisor ( e ) Gratui obtains no consideration present or future, is binding if made mise un- under seal, is void if made verbally, or in writing not under i s e bi^di n g seal. I have noted above that this feature of contracts under seal has been explained by the solemnity of their form which is said to import consideration, and so to supply evidence of intention. But this is historically untrue. The Form bound the promisor, and not the intention of which the Form was the expression. The doctrine of Consideration is, as we have seen, of a much later date than that at which the promise under seal was held to be binding. And the doctrine, as it has developed, has tended to limit this peculiarity of the promise under seal, and has introduced exceptions to the general rule that a gratuitous promise so made is binding. At Common Law, contracts in restraint of trade, though under seal, must be shown to be reasonable : and one test Maiian v. May, Ji M. of the reasonableness of the transaction is the presence of & w - &>s- Consideration. And the rule is general that if there be Con- sideration for a deed, the party sued upon it may show that the Consideration was illegal, or immoral, in which case Coiiinsv. Blantern, the deed will be void. ' Sm. L. c. P. 369- But it is in the Chancery that we find this privilege most encroached upon. The idea of Consideration as a necessary element of Contract as well as off Conveyance, if it did not 1 The right of retainer is the right of the executor to pay to himself, before any other creditor of equal rank, any debt due to him by the deceased. F 2, 68 FORMATION OF CONTRACT Part II Equitable view of absence of considera- tion. See Part V. ch. iii. 3. actually originate in the Chancery, has always met with peculiar favour there. It was by means of inferences drawn from the presence or absence of Consideration that the Cove- nant to stand seised, the Bargain and Sale of lands, and the Resulting Use first acquired validity. And in administering its peculiar remedies, where they are applicable to Contract, Equity followed the same principles. The Court will not grant specific performance of a gratuitous promise, whether or no the promise is made by deed. And absence of Consideration is corroborative evidence of the presence of Fraud or Undue Influence, on sufficient proof of which the Court will rectify or cancel the deed. Bonds. Legal aspect of a bond. The best illustration of a gratuitous promise under seal is supplied by a Bond. A Bond may be technically described as a promise defeasible upon condition subsequent; that is to say, it is a promise by A to pay a sum of money, which promise is liable to be defeated by a performance by A of a condition stated in the bond. The promise, in fact, imposes a penalty for the non -performance of the condition which is the real object of the bond. The condition desired to be secured may be a money payment, an act or a forbearance. In the first case the instrument is called a common money bond : in the second a bond with special conditions. For instance : A promises X, under seal, that on the ensuing Christmas Day he will pay to X .500 ; with a condition that if before that day he has paid to X 250 the bond is to be void. A promises X, under seal, that on the ensuing Christmas Day he will pay to X 500 ; with a condition that if before that day M has faithfully performed certain duties the bond is to be void. Common law has differed from Equity in its treatment of bonds much as it did in its treatment of mortgages. Common law took the contract in its literal sense and enforced the fulfilment of the entire promise upon breach of the condition. Chap. II. 2 FORM. CONTRACT UNDER SEAL 69 Equity looked to the object which the bond was intended Equitable to secure, and would restrain the promisee from obtaining more than the amount of money due under the condition, or the damages which accrued to him by its breach. Statutes have long since limited the rights of the promisee 8*9 wai. to the actual loss sustained by breach of the condition. 4 & 5 Anne, 3- (3) When it is essential to employ the Contract under Seal. It is sometimes necessary for the validity of a contract Require- to employ the form of a deed. Statute : A sale of sculpture with copyright 1 ; a transfer of shares in companies governed by the Companies Clauses Act 2 ; a transfer of a British ship or any share therein 3 ; a lease of lands, tenements, or hereditaments for more than three years, must be made under seal 4 . Common Law requires in two cases that a contract should at Com- , , , , mon Law, be made under seal. (a) A gratuitous promise, or contract in which there is no gratuitous consideration for the promise made on one side and accepted pl on the other, is void unless made under seal. ' It is not really unreasonable, or practically inconvenient that the Foakes law should require particular solemnities, to .give to a gratuitous ca promise the force of a binding obligation.' (b) A corporation aggregate can only be bound by con- contracts tracts under the corporate seal. porations. 'The seal is the only authentic evidence of what the corporation has done, or agreed to do. The resolution of a meeting however numerously attended is, after all, not the act of the whole body. Every member knows he is bound by what is done under the common seal and by nothing else. It is a great mistake, therefore, to speak of the necessity for a seal as a relic of ignorant times. It is no such thing. Either a seal, or some substitute for a seal, Mayor of which by law shall be taken as conclusively evidencing the sense chariton, 6 of the whole body corporate, is a necessity inherent in the very M ' &w - 8 '5- nature of a corporation.' * 1 54 Geo. III. c. 56. 2 8 & 9 Viet. c. 16. 14. 3 57 & 58 Viet. c. 60. 24. See Form in Schedule A of the Act. 4 29 Car. II. c. 3. i & 2, and 8 & 9 Viet. c. 106. 3. 70 FORMATION OF CONTRACT Part II Excep- To this rule there are certain exceptions. Matters of trifling importance, or daily necessary occurrence, do not require the form of a deed. The supply of coals to a workhouse, the hire Nicholson v. of an inferior servant, furnish instances of such matters. Or, Bradfield Union, L. R. again, where a municipal corporation owned a graving dock Weils v. i n constant use, it was held that agreements for the admission Mayor of H'UI^L" of ships might be made by simple contract. Trading corporations may through their agents enter into simple contracts relating to the objects for which they were created. ' A company can only carry on business by agents, managers and others; and if the contracts made by these persons are contracts which South of relate to the objects and purposes of the company, and are not incon- ColfieryCo. sistent with the rules and regulations which govern their acts, they T' w 21 e v, ar e valid and binding on the company, though not under seal.' \f R. 3 (-" J 469. In addition to the Common Law exceptions to the general rule, the Legislature has in some cases freed corporations from the necessity of contracting under seal, and provided other forms in which their common assent may be expressed. On the other hand the Public Health Act, 1875, s - I 74> requires all contracts above 50 made by an urban authority to be made under seal. Effects of There has been some conflict of judicial decision as to the ance by liability of a corporation in cases where no contract has been one party. ma( j e un( j er sea l but where goods have been supplied, or work done for the purposes for which the corporation exists. The 1 1003! iK.B. point has now been settled in Lawford v. Billericay Rural Council. The Committee of a Rural District Council employed an engineer, already engaged by the Corporation for certain purposes, to do a number of acts in reference to work for which he had not been engaged. The Committee had no power to bind the corporation by entering into contracts, but their minutes were approved, and their acts thereby affirmed and adopted by the Council. The Court held that the work done was work for the doing of which the corpora- ' Chap. II. 3 SIMPLE CONTBACTS IN WHITING 71 tion was created, and that having taken the benefit of the work they could not refuse to pay for it. It should be noted that a contract of employment made with an engineer, not under seal, would clearly have given no right of action to the engineer or to the corporation. It would appear that where a corporation has done all ^" ers . that it was bound to do under a simple contract it may in like manner sue the other party for a non-performance of his fo 2 .' part. But a part-performance of a contract by a corporation Kidder- will not take the case out of the general rule, and entitle it Pardwick, L. R. 9 Ex. to sue. 24> SIMPLE CONTRACT. 3. Simple Contracts required to be in writing.] We have now dealt with the contract which is valid by Simple reason of its Form alone, and we pass to the contract which cc depends for its validity upon the presence of Consideration. Allrequire In other words, we pass from the Formal to the Simple c nsidera - Contract, or from the Contract under Seal to the parol Contract, so called because, with certain exceptions to which I will at once refer, it can be entered into by word of mouth. Certain simple contracts cannot be enforced unless written g ome evidence of the terms of the agreement and of the parties to it ?* ust also is produced ; but Form is here needed, not as giving efficacy pressed in to the contract, but as evidence of its existence. Considera- tion is as necessary as in those cases in which no writing is required: 'if contracts be merely written and not specialties, see/ possibility be performed within the year the Statute does not apply/ A contract to pay a weekly sum for the maintenance Souch v. i'ii i> < 10 11111 Strawbridgr, of a child, or of a wife separated from her husband, have 2 c. B. 8og. McGregor v. been held, on this ground, to be outside the section. So too Mc r B s has a contract to pay 300 a year for the maintenance of 429 ' illegitimate children. Either party might have brought the agreement to an end at any time, with reasonable notice, and there was nothing-, at the outset, to bind the parties i^R- 9 Eich. 307- to observe the terms of the contract for more than a year. An agreement for service for the term of one year from smith v. the 7th of December verbally made on the 6th of December Co., 1003, . . i K. B. 265. is not within the Statute, for it would presumably commence on the morning of the 7th, and epd at midnight on the fol- lowing 6th of December, and the law recognizes no part of a day. The contract is therefore one which is to be performed within a year from its making. Donellan 3B &A. 78 FORMATION OF CONTRACT Part II (b) The contract does not fall within the section if that which one of the parties is to do, is all to be done within the year. A was tenant to X under a lease of 20 years and promised verbally to pay an additional 5 a year during the remainder of the term in consideration that X laid out 50 in alterations : X did this and A was held liable upon his promise, since the consideration for it had been executed within the year. w Require- T ne form required is the next point to be considered. ments of form. What is meant by the requirement that 'the agreement or some memorandum or note thereof shall be in writing and signed by the party to be charged therewith or some ether person thereunto by him lawfully authorized ' ? We may, with regard to this part of the subject, lay down the following rules l . The form (a) The Form required does not go to the existence of the evident ^ contract. The contract exists though it may not be clothed tiar y- w ith the necessary form, and the effect of a non-compliance with the provisions of the statute is simply that no action can be brought until the omission is made good. Illustra- It is not difficult to illustrate this proposition. The note in writing may be made so as to satisfy the statute, at any time between the formation of the contract and the commence- ment of an action : or the signature of the party charged may be affixed before the conclusion of the contract. Stewart v. Thus one party to the contract may sign a rough draft of Eddowes, V J . . L. R. 9 c. P. its terms, and acknowledge his signature by way of conclud- ing the contract when the draft has been corrected. RCUSSV. Again, an offer containing the names of the parties and the Picksley, ,.R.I Exch. terms of an offer signed by the offerer will bind him though the contract is concluded by a subsequent parol acceptance. In the first of these cases the signature of the party charged 1 With the exception of rule (d), what is said under this head may be taken to apply to the 4th section of the Sale of Goods Act, as well as to the 4th section of the Statute of Frauds. Chap. II. 3 SIMPLE CONTRACTS, 29 CAR. II. C. 3. 4 79 in the second not the signature only but the entire memo- randum was made before the contract was concluded. It may even happen that one of the parties to a contract which he has not signed may acknowledge it in a letter which sup- plies his signature and contains at the same time an announce- Buxton Rust, ment of his intention to repudiate the contract. He has then i & 279. supplied the statutory evidence, and, as the contract had al- ready been made, his repudiation is nugatory. (b) The parties and the subject-matter of the contract must The par- ~: -r\ -- ~ 5 ties must appear in the memorandum. appear. The parties must be named, or so described as to be iden- tified with ease and certainty. A letter beginning 'Sir/ signed by the party charged but not containing the name of Williams v. the person to whom it is addressed, has more than once been *,& E.. W . Williams v. held insufficient to satisfy the statute. iso^D 5 , 7 But, if the letter can be shown to have been contained Pearce v. in an envelope on which the name appears, the two papers will [|p7] i Q. B. 688. be regarded as one document, and the statute is satisfied. "Where one of the parties is not named, but is described, parol evidence will be admitted for the purpose of indentifica- tion if the description points to a specific person but not SeeCommins v. Scott, otherwise. If A contracts with X in his own name, beinsr L - R -aoEq. & is, 16. really agent for M, X or M may show that M was described L^ e e an v - in the memorandum in the character of A. l ^' & E If property is sold by an agent on behalf of the owner or proprietor it may be proved by parol that X was the owner or proprietor : if the sale was made by the agent on behalf of Rossiter v. Miller, the vendor, of his client, or his friend, there would be no such 3 A PP- Ca. certainty of statement as would render parol evidence ad- Duffilid. missible. l8Bq ''*' The same principle is applied to descriptions of the subject- matter of a contract. Where X agreed to sell and A to buy ' 34 acres of land Plant v. I Bourne, freehold and all appurtenances thereto at Totmanslow in the [ l *97\* Ch - (C.A.)a8i. parish of Draycott in the County of Stafford ' parol evidence was admitted to identify the land. But a receipt for money 80 FORMATION OF CONTRACT Part II paid by A to X ' on account of his share in the Tividale mine ' skidmo^e? was ^ e ^ to be too uncertain as to the respective rights 52. e ( fc J ' and liabilities of the parties, to be identified by parol evidence. The terms (c) The memorandum may consist of various letters and collected papers, but they must be connected and complete, va'rious ^e s^ute requires that the terms, and all the terms of docu- the contract, should be in writing-, but these terms need not ments : . . appear in the same document : a memorandum may be proved from several papers or from a correspondence, but the con- nexion must appear from the papers themselves. but must Parol evidence is admissible to connect two documents be con- nected on where each obviously refers to another, and where the two of them; when thus connected make a contract without further ex- 4 c. p. D. planation. This is the principle laid down in Long v. Millar, and adopted in more recent cases. It is not inconsistent with 1 1 East, 14*. ^g (J ec i s ion in the often-cited case of Boydell v. Drummond. There two forms of prospectus were issued by the plaintiff, inviting subcriptions to an illustrated edition of Shakespeare. Subscribers might purchase the prints only, or the work in its entirety. The defendant entered his name in a book in the plaintiff's shop, entitled ' Shakespeare Subscribers, their signatures ' ; afterwards he refused to carry out his purchase ; and it was held that the subscription book and the prospectus were not connected by documentary evidence, and that parol evidence was not admissible to connect them. But though the rule as to the admission of parol evidence has been undoubtedly relaxed since 1809, it seems that Boydell v. Drummond would not now be decided differently, for the evidence sought to be introduced went further than the mere connexion of two documents and seems to have dealt perBayieyj. w ith the nature and extent of the defendant's liability. must be Again, the terms must be complete in the writing. Where complete. a contract does not fall within the statute, the parties may either (i) put their contract into writing, (3) contract only by parol, or (3) put some of the terms in writing and Chap. II. 3 SIMPLE CONTRACTS, 29 CAR. II. C. 3. 4 81 arrange others by parol. In the last case, although that which is written may not be varied by parol evidence, yet the terms arranged by parol are proved by parol, and they then supplement the writing, and so form one entire contract. But where a contract, falls within the statute, all its terms Greaves v. must be in writing, and the offer of parol evidence of terms sCamp.426. not appearing in the writing would at once show that the contract was something other than that which appeared in the written memorandum. (r/) The consideration must appear in writing as well as Considera- the terms of the promise sued upon. This rule has been settled since the year 1 804. It is not wholly applicable to the sale of goods (see p. 87) and is subject to an ^EastTio. exception, created by the Mercantile Law Amendment Act, in the case of the ' promise to answer for the debt, default or miscarriage of another' : such a promise shall not be : 'Deemed invalid to support an action, suit, or other proceeding to charge the person by whom such promise shall have been made by reason only that the consideration for such promise does not appear us- v f t . i 19 & 20 Viet, in writing, or by necessary inference from a written document. c. 97. 3. (e) The memorandum must be signed by the party charged Signature of party or or his agent. agent. The contract therefore need not be enforceable at the suit Se . e Be 5J a ,- mm on Sales, of both parties; it may be optional to the party who has Pj?^ 2 ^~ 23 ^ not signed to enforce it against the party who has. The. signature need not be an actual subscription of the party's name, it may be a mark ; nor need it be in writing, it may be printed or stamped ; nor need it be placed at the end of the document, it may be at the beginning or in the middle. But it must be intended to be a signature, and as such to be a recognition of the contract, and it must govern the entire contract. / These rules are established by a number of cases turning upon difficult questions of evidence and construction. The principal cases are elaborately set forth in Benjamin on Sales, 4th ed. 82 FORMATION OF CONTRACT Part II pp. 230-240, but a further discussion of them would here be out of place. (3) Statute Ifc remains to consider what is the position of parties who does not . avoid con- have entered into a contract specified in section 4, but have not complied with the provisions of the section. Such a contract is neither void nor voidable, but it cannot be enforced by action because it is incapable of proof. Supra, p. 78. I have shown that a memorandum in the requisite form, whether made before or after the fact of agreement, will satisfy the requirements of the statute. But the nature of the disability attaching to parties who have not satisfied these requirements may be illustrated by cases in which they have actually come into Court without supplying the missing form. isC.B. 801. In the case of Leroux v. Brown, the plaintiff sued upon tract can- a con * rac ^ not ^o be performed within the year, made in not be France and not reduced to writing. French law does not proved. ... require writing in such a case, and by the rules of private international law the validity of a contract, so far as regards its formation, is determined by the lex loci contracts. The procedure however, in trying the rights of parties under a contract, is governed by the lex fori } and the mode of proof would thus depend on the law of the country where action was brought. If, therefore, the 4th section avoided contracts made in breach of it, the plaintiff could have re- covered, for his contract was good in France where it was made, and the lex loci contractus would have been applicable. If, on the other hand, the 4th section affected procedure only, the contract, though not void, was incapable of proof. Leroux tried to show that his contract was void by English law. He would then have succeeded, for he could have proved, first, his contract, and then the French law which made it valid. But the Court held that the 4th section dealt only with procedure, did not avoid his contract, but only, made it incapable of proof, unless he could produce a memo- randum of it. This he could not do, and so lost his suit. Chap. II. 3 SIMPLE CONTRACTS, 29 CAB. II. C. 3. 4 83 The rule is further illustrated by the mode in which equity The doc- has dealt with such contracts. The history of the matter pa^per- needs attention. formance. In suits for obtaining specific performance, equity would admit parol evidence to show that a contract had been made where one of the parties had so acted on the faith of pro- mises made by the other, as to render it unfair that both should not be bound. When the Judicature Act enabled all the divisions of the High Court to recognize and administer equitable rights and remedies, then the rationale of the rule and its limitation to this form of remedy were at first overlooked, and so in Britain v. Rossiter an action was brought for wrongful nQ. B. D. 123. dismissal, in breach of a verbal contract of service not to be performed within the year and performed in part : but the To what Court held that the rule of equity was inapplicable to con- appiic- tracts which did not relate to an interest in land. This limitation of the doctrine seems somewhat arbitrary, and not wholly consistent with earlier authorities. Probably the true rule is laid down by Kay, J., in McManus v. Cooke, > Ch - D. o7- after a careful examination of the cases bearing on the subject. been in writing.' The Judicature Act, therefore, has not extended the remedy, but only the jurisdiction through which the remedy may be obtained, and as the Chancery could not have given damages in lieu of specific performance before the Act, so damages cannot be obtained where parol evidence is admitted as above Purseii, J -U J 39Cb.D. described. s9- For a review of the acts which have been held to constitute part performance, the reader must Vb referred to Fry on Specific |^b d ornei c Performances, ed. 4, pp. 264-276. But it must be borne in ^AwS mind that ' the acts relied upon as part performance, must 47g. PP> G 2 84 FORMATION OF CONTRACT Part II be unequivocally and in their own nature referable to some such agreement as is alleged.' 7Q.BD.i74. In Maddison v. Alderson a promise of a gift of land was made to the plaintiff in consideration that she remained in the service of the promisor during his lifetime. She did so ; but the House of Lords, affirming the judgment of the Court of Appeal, held that the service so rendered was not exclusively referable to the promised gift. It might have been given for other reasons, and so was not such part performance as admitted parol evidence of the promise. 8 A pp. Ca. 467. 56 Sf 57 Viet. c. 71. 4. Sale of Good* Act. (1) A contract for the sale of any goods of the value of 10 or upwards shall not be enforceable by action unless the buyer shall accept part of the goods so sold, and actually receive the same, or give something in earnest to bind the contract, or in part payment, or unless some note or memorandum in writing of the contract be made and signed by the party to be charged or his agent in that behalf 1 . (2) The provisions of this section apply to every such contract, notwithstanding that the goods may be intended to be delivered at some future time or may not at the time of such contract be actually made, procured, or provided, or fit or ready for delivery, or some act may be requisite for the making or completing thereof, or rendering the same fit for delivery 2 . (3) There is an acceptance of goods within the meaning of this section when the buyer does any act in relation to the goods which recognizes a pre-existing contract of sale, whether there be an acceptance in performance of the contract or not 3 . 1 This sub-section contains the substance of 17, now repealed, of the Statute of Frauds. The language is altered so as to leave no doubt that the effect of this section, both as to the form required and the effect of its absence, is identical with that of 4 of the Statute of Frauds. J This sub-sectionembodies the section, now repealed, of Lord Tenterden's Act, which settled the doubt as to the operation of the i7th section of the Statute of Frauds upon an agreement to sell. 8 For what does not, and what does, constitute acceptance, see Page v. Morgan, (1885) 15 Q.B. D. 228 ; Taylor v. Smith, (1893) 2 Q. B. (C. A.) 65 ; and see Taylor v. Great Eastern Railway Company, (1901) i K. B. 774. Chap. II 3 SIMPLE CONTRACTS, 56 & 57 VICT. C. 71. 4 85 We have here to consider, as in the case of the 4th section of the Statute of Frauds (1) The nature of the contract. (2) The form required. (3) The effect of non-compliance with these requirements. The Statute deals with the sale of goods, and goods are Contract defined therein as ' chattels personal other than things in action and money ' ; but the words ' contract of sale ' include two sorts of agreement a sale and an agreement to sett, and the 4th section deals with both. The essential difference appears in an earlier section of the Act. ' Where under a contract of sale the property in the goods is transferred from the seller to the buyer the contract is called a sale ; but where the transfer of the property in the goods is to take place at some future time, or subject to some condition thereafter to be 56 57 Viet, fulfilled, the contract is called "an agreement to sell." ' 3.' ' S " b The contract for the sale of goods may therefore contem- plate an instantaneous, or a future or conditional transfer of property in the goods ; and a subsequent section of the Act supplies us with the tests which determine whether a contract is a sale or an agreement to sell. To constitute a sale the goods sold must be specific, they must includes be in. a deliverable state, and the sale must be unconditional. If A orders any ten sheep out of X's flock the goods are and an not specific. If he orders a table which he sees in course of to sell? 6 making in X's shop the goods are incomplete. If he buys .Ps stack of hay at so much a ton, the price to be ascertained when the hay is taken down and weighed, there is yet some- thing to be done to fix the price. Where the conditions of a sa^e are satisfied the contract operates as a conveyance. When, and so soon as, the parties are agreed the property in the goods passes to the buyer : he 86 FORMATION OF CONTRACT Part II has the remedies of an owner in respect of the goods them- selves besides an action ex contractu against the seller if the latter fail to carry out his bargain, or part with the goods to a third party : the goods stand at his risk, if they are destroyed the loss falls on him and not on the seller. It is further important to bear in mind, not only that the difference between a sale and an agreement to sell is the dif- ference between conveyance and contract, but that an agreement to sell may become a sale on the fulfilment of the conditions on which the property in the goods is to pass to the buyer. As a rule there is no great difficulty in determining whether, as a fact, these conditions have been fulfilled. But questions sometimes arise which admit of some doubt, in cases where there is an agreement for the purchase of goods which are not specific, and the seller has to appropriate the goods to the contract. Upon such appropriation the contract becomes a sale : it is therefore desirable to ascertain the precise moment at which property and risk pass to the buyer. If the buyer selects the goods to be appropriated, if he approves the selection made by the seller, or if the goods are delivered to a carrier on the authority of the buyer the appro- priation takes place at the moment of approval, or of delivery. If however the seller has selected the goods on the authority of the buyer, but without his express approval, doubts may arise whether his selection is irrevocably binding upon him or whether it merely expresses an intention which he may alter. Chalmers, The question is one which I will not discuss here ; it is a part hoods Act, o f the subiect of the special contract of sale, pp. 41-47. A different sort of question has arisen in cases where skilled labour has been expended on the thing sold in pursuance of the contract, and before the property is transferred. It has been asked whether the contract is a contract of sale or for the hire of services. The law may be taken to be now settled, that, whatever the respective values of the labour and the material, if the parties contemplate the ultimate delivery of a chattel the contract is for the sale of goods. Chap. II. 3 SIMPLE CONTRACTS, 56 & 57 VICT. C. 71. 4 87 ' I do not think,' said Blackburn, J., ' that the test to apply in these cases is whether the value of the work exceeds that of the materials used in its execution ; for if a sculptor was employed to execute a work of art, greatly as his skill and labour, supposing it to be of the highest description, might exceed the value of the marble on which he worked, the contract would in my opinion be nevertheless Lee v. for the sale of a chattel.' asS/. B ' As to the form, it is enough to say that where, in absence Difference of a part acceptance and receipt or part payment, a note or *^ g f m memorandum in writing is required, the rules applicable to contracts under 4 of 29 Car. II. c. 3 apply to contracts under the Sale of Goods Act with one exception. The consideration for the sale need not, under this section, appear in writing unless the price is fixed by the parties. It then becomes a part of the bargain and must appear in the memorandum. Since the enactment only applies to con- tracts for the sale of goods, it will be presumed, if no consideration for the sale be set forth, that there is a promise to pay a reasonable price : but this presumption may be rebutted by evidence of an express verbal agreement as to price, so as to show that a memorandum which does not Hoadieyv. McLaine, contain the price is insufficient. loBing. 482. It remains to note that if there be no acceptance and Effect of receipt, no part payment, and no memorandum or note in prance writiner, the section declares that the contract shall not be Wlt ^ section. ' enforceable by action/ The Sale of Goods Act has thus set at rest another question which, though practically settled 1 , had remained for a long time uncertain in the case of the iyth section of the Statute of Frauds. Like the 4th section of that Statute, the requirements of the Sale of Goods Act do not affect the ^Raliwa^'' validity of the contract but only ^ie proof of it. I 7 ^ l] l ' 1 See the opinions expressed by Brett, L.J., in Britain v. Rossiter, and by " Q- B - D - Lord Blackburn in Maddison v. Alderson. 8 App. Ca. 488. 88 FORMATION OF CONTRACT Part II & 4. Consideration. m I have stated that Consideration is the universal requisite of contracts not under seal, and this is generally true of such contracts, even when the law has prescribed a form in which they should be expressed, so long as the form is not that of a Deed. It will be well therefore to start with a definition of Considera- Consideration ; and we may take that which is given in the tion de- ^ . , fined. case oi Currie v. Misa : 'A valuable consideration in the sense of the law may consist either in some right, interest, profit, or benefit accruing to one party, or some forbearance, detriment, loss, or responsibility given, io Exch. 162. suffered, or undertaken by the other.' Consideration is something done, forborne, or suffered, or promised to be done, forborne, or suffered by the promisee in respect of the promise. It must necessarily be in respect of the promise, since consideration gives to the promise a binding force. We may now lay down some general rules as to Considera- tion : 1. It is necessary to the validity of every promise not under seal. 2. It need not be adequate to the promise, but must be of some value in the eye of the law. 3. It must be legal. 4. It must be either present or future, it must not be past. I. Consideration is necessary to the validity of every simple contract. 3 Barr. 1663. The case of Pillans v. Van Mierop shows that the rule which I have laid down was still open to question in the year Necessity 1765. Lord Mansfield held that consideration was only one sideration. f several modes for supplying evidence of the promisor's intention to bind himself ; and that if the terms of a contract were reduced to writing by reason of commercial custom, or Chap. II. 4 CONSIDERATION 89 in obedience to statutory requirement, such evidence dispensed with the need of consideration. The question arose again in 1778. In Rann v. Hughes, Mrs. Hughes, administratrix of an estate, promised in writing to pay out of her own pocket money which was due from the estate to the plaintiff. There was no consideration for the promise, "and it was contended that the observance of the form required by 29 Car. II. c. 3. 4 made consideration unnecessary. The case went to the House of Lords. The opinion of the judges was taken, and was thus delivered by ;T.R.35o(n). Skynner, C.JB. : ' It is undoubtedly true that every man is by the law of nature bound to fulfil his engagements. It is equally true that the law of this country supplies no means nor affords any remedy to compel the performance of an agreement made unthout sufficient consideration. Such an agreement is " nudum pactum ex quo non oritur actio " ; and whatsoever may be the sense of this maxim in the civil law, it is in the last-mentioned sense only that it is to be understood in our law All contracts are by the law of England divided into agreements by specialty and agreements by parol ; nor is there any such third class as some of the counsel have endeavoured to main- tain as contracts in writing. If they be merely written and not specialties, they are parol and a consideration must be proved.' We here get a rule of universal application, a uniform Excep- test of the actionability of every promise made by parol. general In each case we must ask, Does the promisor get any rule * benefit or the promisee sustain any detriment, present or future, in respect of the promise? If not, the promise is gratuitous, and is not binding. In working out this doctrine to its logical results it has, no doubt, happened from time to time that the Courts have been compelled to hold a pro- mise to be invalid which the parties intended to be binding, or that the slightness of the benefit or detriment which may constitute a consideration has tended to bring the requirement into ridicule. / But the value of the rule must be tested by its practical convenience. We need some means of ascertaining whether 90 FORMATION OF CONTRACT Part II the maker and receiver of a promise contemplated the creation of a legal liability. The rule, or doctrine, of consideration affords a uniform test for this purpose; and it may be questioned whether the general convenience is not better served by adopting this test in its logical completeness than by allowing distinctions and subtilties to refine the rule away. Two exceptions we may note to the universality of the rule. (1) The promise of a gratuitous service, although not Seep. 98. enforceable as a promise, involves a liability to use ordinary care and skill in performance. (2) In dealings arising out of negotiable instruments, such as bills of exchange and promissory notes, a promise to pay See pan in. money may be enforced though the promisor gets nothing and the promisee gives nothing in respect of the promise. These two exceptions represent legal obligations recognized in the Courts before the doctrine of Consideration was clearly formulated ; they were engrafted upon the Common Law, in the first case from the historical antecedents of contract, in the second from the law merchant. It is better to recognize these exceptions, to define them and to note their origin, than to apply the doctrine of Consideration by forced and artificial reasoning to legal relations which grew up outside it. 3. Consideration need not be adequate to the promise, but must be of some value in the eye of the law. Adequacy Courts of law will not make bargains for the parties to si ^ a man e ^ s what he has contracted for, will not inquire whether it was an equivalent to the promise which he gave in return. The consideration may be a benefit to the promisor, or to a third party, or may be of no apparent benefit to anybody, but merely a detriment to the promisee : in any Per Black- case ' its adequacy is for the parties to consider at the time Boiton v. of making the agreement, not for the Court when it is sought Madden, >* L. R. 9Q.B. to be enforced. 55- The following case will illustrate the rule. Chap. II. 4 CONSIDEKATION 91 Bainbridge owned two boilers, and at the request of Bainbrid^e . - v.Firmstone, Firmstone allowed him to weigh them on the terms that 8 A. &E. 743. they were restored in as good a condition as they were lent. Firmstone took the boilers to pieces in order to weigh them not re- garded by and returned them in this state, and for breach of his promise the courts, Bainbridge sued him. It was argued that Bainbridge suffered no detriment, nor did Firmstone get any benefit by the permission to weigh the boilers, and that there was no con- sideration for the promise to restore them in good condition. But the defendant was held liable. ' The consideration is that the plaintiff, at the defendant's request, had consented to allow the defendant to weigh the boilers. I suppose the defendant thought he had some benefit : at any rate there is a detriment to the plaintiff from his parting with the possession for ever so short a time.' In Haiqk v. Brooks, the consideration of a promise to pay 10 A. & E. as- certain bills of a large amount was the surrender of a docu- ment supposed to be a guarantee. The guarantee turned out to be unenforceable, but the worthlessness of the document surrendered was held to be no defence to an action on the promise. 'The plaintiffs were induced by the defendant's promise to part with something which they might have kept, and the defendant obtained what he desired by means of that promise.' Equity treats inadequacy of consideration as corroborative evidence of Fraud or undue influence, such as may enable except in a promisor to resist a suit for specific performance, or get equitable his promise cancelled, in the Chancery Division of the High remedles - Court. But mere inadequacy of consideration, unless, in the words of Lord Eldon, it is so gross as ' to shock the con- Coles \. '. \ IP -., -^--. Trecothick, science and amount in itself to conclusive evidence of fraud, 9 Ves. 246. is not of itself a ground on which specific performance of a contract will be refused. / Though consideration need not be adequate it must be Reality of real. This leads us to ask what is meant by saying that ^J^ 1 92 FORMATION OF CONTRACT Part II consideration must be ( something of some value in the eye of the law.' The definition of Consideration, supplied by the Court of L.R.ioExch. Exchequer Chamber in Currie v. Misa, amounts to this that 162. ... consideration is something done, forborne, or suffered, or pro- mised to be done, forborne, or suffered, by the promisee in Forms of respect of the promise. Therefore it may be, (i) a present act, forbearance, or sufferance, constituting either the offer or the acceptance of one of the parties, and being all that can be required of him under the contract ; or (2) a promise to do, forbear, or suffer, given in return for a like promise. In the first case the consideration is present or executed, in the second it is future or executory. The offer of a reward for information, accepted by the supply of the information required; the offer of goods, accepted by their use or consumption, are illustrations of executed consideration. Mutual promises to marry; a pro- mise to do work in return for a promise of payment, are illustrations of executory consideration. And the fact that the promise given for a promise may be dependent upon a con- dition does not affect its validity as a consideration. A promises X to do a piece of work for which X promises to pay if the workmanship is approved by M. The promise of X is consideration for the promise of A. Tests of In the application of this rule we must ask, when action reality. 11, is brought upon a promise : (a) Did the promisee do, forbear, suffer, or promise anything in respect of his promise ? (5) Was his act, forbearance, sufferance, or promise of any ascertainable value? (c) Was it more than he was already legally bound to do, forbear, or suffer? On the answer to these questions depends the reality of the consideration. (a) Apart from the opinions expressed by Lord Mansfield, we find cases in comparatively modern times which have raised Chap. II. 4 REALITY OF CONSIDERATION 93 a doubt whether consideration, under certain circumstances, is necessary to make a promise actionable. The cases have resulted in the establishment of two rules : Motive is not the same thing as consideration. Consideration must move from the promisee. Motive must be distinguished from consideration. In Thomas v. Thomas, a widow sued her husband's executor sQ. B. 851. for breach of an agreement to allow her to occupy a house, which had been the property of her husband, on payment of a small portion of the ground-rent. It appeared at the trial Motive . . and con- that the executor in making the agreement was carrying out sideration, a wish expressed by the deceased that his wife should have the use of the house. The Court held that a desire on the part of an executor to carry out the wishes of the deceased would not amount to a consideration. ' Motive is not the same thing with consideration. Consideration means something of some value in the eye of the law, moving from the plaintiff.' But it was further held that the undertaking to pay ground- rent by the plaintiff was a consideration for the defendant's promise, and that the agreement was binding. The confusion of motive and consideration has appeared in other ways. The distinction between good and valuable consideration, or good con- family affection as opposed to money value, is only to be found in the history of the law of Real Property. Motive has most often figured as consideration in the form of a moral obligation to repay benefits received in the past. It is clear that the desire to repay or reward a benefactor is indistinguishable, for our purposes, from a desire on the part of an executor to carry out the wishes of a deceased friend, or a desire on the part of a father to pay the debts of his Mortimore 7 . . v. Wright, son. The mere satisfaction of such a desire, unaccompanied 6 M - & w - by any present or future benefit accruing to the promisor or any detriment to the promisee, cannot be regarded as of any value in the eye of the law. 94 FORMATION OF CONTRACT Part II past con- At the end of the last and beginning of the present century, ' the moral obligation to make a return for past benefits had obtained currency in judicial language as an equivalent to consideration. The topic belongs to the discussion of past as distinguished from executed or present consideration, but it is well here to insist on the truth that past consideration is no consideration, and that what the promisor gets in such a case is the satisfaction of motives of pride or gratitude. The 1 1 A. & E. question was settled once for all in Eastwood v. Kenyan, and 43" a final blow given to the doctrine that past benefits would support a subsequent promise on the ground of the moral obligation resting on the promisor. ( The doctrine/ says Lord Denman, ( would annihilate the necessity for any con- sideration at all, inasmuch as the mere fact of giving a promise creates a moral obligation to perform it/ Consideration must move from the promisee. Considera- It has been argued that where two persons make a contract be fur- i n which one of them promises to confer benefits upon a third nished by party, the third party can sue upon the contract for the money or other benefit which it is agreed that he should receive. Part in. The matter concerns mainly the operation of contract, but ch - ' * . . . it is plain that if such a contention were well founded, a man could sue on a promise not made to him, nor supported by any consideration which he had furnished. It was at one time held that where A made a binding promise to X to do something for the benefit of the son or daughter of X, the nearness of relationship, and the fact that Dutton v. the contract was prompted by natural affection, would give aio. a right of action to the person interested. This however is no longer law. ' It is now established that Tweddiev. no stranger to the consideration can take advantage of a con- Atkinson, IB.&S.39& tract, though made for his benefit 1 .' 1 As to the effect of a promise which amounts to a declaration of trust, see Part III. ch. i. a. Chap. II. 4 REALITY OF CONSIDERATION 95 The point was raised before the Privy Council in 1900 or by his in a somewhat different form. A was requested by X to advance to him and deposit with a bank 1000 as security to the bank against overdrafts contemplated by X. Instead of 1000 he deposited, by arrangement with the bank, securities available by himself, and which would then be available by the bank, against X. The overdrafts of X were dishonoured, and in an action brought by him against the bank it was argued that the consideration for the promise to honour the cheques did not move from X but from A. In fact the promise had been obtained by an agent for and on behalf of his principal, for a consideration different in form to that which the principal had contemplated when he instructed his agent. That which was deposited was not cash, but securities ; but the bank accepted this with full knowledge and acquiescence, and the Court held that under these circum- stances the promisor could not ' avoid performance of his Fleming v. Bank, of promise to the third party on the ground that the considera- New tion did not move from him.' f'Q 00 ^ A - c - so/- The case seems to make it clear that where an agent is instructed to obtain a promise for his principal and to provide consideration, the consideration moves from the principal, not from the agent. And so the rule holds good that a promisor cannot be sued on his promise if he made it merely to satisfy a motive or wish, nor can he be sued on it by one who did not furnish the consideration on which the promise is based. (I) "We now come to the class of cases in which the con- sideration turns out to be of no ascertainable value. Physical or legal impossibility, obvious upon the face of the Prima contract, makes the consideration unreal. The impossibility must be obvious, for if it is on]^ a practical impossibility, bilit y- present or subsequent, such as would arise from the death or destruction of the subject of the contract, unknown to the 96 FORMATION OF CONTRACT Part II Physical or legal. Harvey v. Gibbons, 3 Lev. 161. Uncer- tainty. White v. Bluett, 33 L. J. Exch. 36. Taylor v. Brewer, i M. & 8.390. Davies v. Davies, 36, Ch. D. 359, parties or unexpected by them when the contract was made, the effect would be different. The contract might be avoided in the first case on the ground of mistake, or discharged in the second case on the ground of subsequent impossibility. But a promise to pay money in consideration of a promise to discover treasure by magic, to go round the world in a week, or to supply the promisor with a live pterodactyl, would be void for unreality in the consideration furnished. And an old case furnishes us with an instance of a legal impossibility. A bailiff was promised 40 in consideration of a promise made by him that he would discharge a debt due to his master. The Court held that the bailiff could not sue ; that the consideration furnished by him was ' illegal/ for the servant cannot discharge a debt due to his master. By ' illegal ' it is plain that the Court meant legally impossible. Again, a promise which purports to be a consideration may be of too vague and unsubstantial a character to be enforced. A son gave a promissory note to his father: the father's executors sued him upon the note, and he alleged that his father had promised to discharge him from liability in con- sideration of a promise on his part that he would cease from complaining, as he had been used to do, that he had not enjoyed as many advantages as his brothers. It was said that the son's promise was no more than a promise ' not to bore his father/ and was too vague to form a consideration for the father's promise to waive his rights on the note. So too promises to pay such remuneration as shall be deemed right ; to retire from the practice of a trade so far as the law allows, have been held to throw upon the Courts a respon- sibility of interpretation which they were not prepared to assume. These cases correspond with offers held to be in- capable of creating legal relations, as described on p. 46. Cases occur in which it is hard to determine whether the consideration is or is not real. A good illustration of such Chap. II. 4 REALITY OF CONSIDERATION 97 cases is afforded by promises of forbearance to exercise a right of action or agreements to compromise a suit. A forbearance to sue, even for a short time, is consideration Forbear- for a promise, although there is no waiver or compromise sue . of the right of action. In the Alliance Bank v. Broom Messrs. Broom being largely * r. & Sm. indebted to the Bank were asked to give security for the debt. They promised to assign the documents of title to certain goods ; they failed to do so and the Bank sued for specific performance of the promise. It was argued that the promise to give security was without consideration inasmuch as the Bank gave HO corresponding promise not to sue : but the Court held that ' although there was no promise on the part of the Bank to abstain for any certain time from suing for the debt, the effect was that the Sank did give and Messrs. Broom received the benefit of some degree of forbearance, not indeed for any definite time, but at .all events some degree of forbearance.' To use the expression adopted by the Court in a similar case, the promise to give security * stayed the hand of the creditor/ But in order that the forbearance should be a consideration some liability must be shown to exist, or to be reasonably supposed to exist by the parties. In Jones v. AsTiburnham 4 East. 455. action was brought on a promise to pay 20 to the plaintiff in consideration of his forbearance to sue for a debt which he alleged to be due to him from a third party deceased. The pleadings did not state that there were any representatives of the dead man towards whom this forbearance was exercised, nor that he had left any assets to satisfy the claim. It was a mere promise not to sue persons unknown for a sum which was not stated to be in existence or recoverable. Such a forbearance was held to be no consideration for a promise. ' How,' said Lord Ellenborough, ' does the plaintiff show any damage to himself by forbearing to sue when there was no fund which could be the object ^of suit, when it does not appear that any person in rerum natura was liable to him ? ' ANSON H FORMATION OF CONTRACT Part II Compro- The compromise of a suit furnishes consideration of the suit. same character. In the case of forbearance the offer may be put thus : ' I admit your claim but will do or promise something if you will stay your hand/ In the case of a compromise the offer is ' I do not admit your claim ' (or 'defence' as the case may be), 'but I will do or promise something 1 if you will abandon it/ But it has been argued that if the claim or defence is of an unsubstantial character the consideration fails. The answer is to be found in the judgment of Cockburn. C. J., in Callisker v. Bischoffsheim. ' Every day a compromise is effected on the ground that the party making it has a chance of succeeding in it, and if he bona fide believes that he has a fair chance of succeeding he has a reasonable ground for suing and his forbearance to sue will constitute a good consideration. When such a person forbears to sue he gives up what he believes to be a right of action and the other party gets an advantage, and instead of being annoyed with an action he escapes the vexations incident to it. It would be another matter if a person Caliisher v. made a claim which he knew to be unfounded and, by a compromise, hehn h< L 8 R derived an advantage under it : in that case his conduct would be 5 Q. B. 449, fraudulent.' Gratuitous bailment. If therefore it is clear that one of the parties to the compromise has no case, and knows that he has none, the agreement to compromise would not be held binding. A different kind of difficulty has arisen in cases of the gratuitous bailment or deposit of chattels, and in cases of gratuitous employment. Here the law imposes a liability, independent of contract, upon the depositary or the person employed. The relations of the parties therefore originate sometimes in contract, sometimes in the voluntary act of the party liable, and the cases need to be carefully studied in order to ascertain the precise legal relation with which the Courts are dealing. A chattel may be bailed, or placed in the charge of a bailee or depositary, for various purposes for mere custody, for loan, for hire, for pledge, for carriage, or in some other Chap. II. 4 REALITY OF CONSIDERATION 99 way to be dealt with or worked upon. In every case the relations of the parties originate in contract : in every case the law imposes on the bailee a duty to use reasonable care, and treats the failure to use such care as a wrong inde- pendently of contract. If therefore the bailor has to complain of failure to use care he brings an action for negligence : if his matter of Turner \. t -I i i -i i Stallibrass, complaint extends beyond this he must rely upon the terms [1898] of the contract. But if the bailment is gratuitous, and the action is ex contracts, we must seek for the consideration which supports the contract. It has been laid down constantly, and may be taken as settled law, that the fact of parting with the possession of property is a detriment to the bailor which furnishes consideration for a promise by the bailee to take reasonable care of the property, or to do certain services in respect of it. Thus A allowed two bills of exchange to remain in the hands of X, and X thereon promised that if he could get the bills discounted he would do so and pay the proceeds to the account of A. This -promise was held to be made Hart v. on good consideration, namely the permission given to X ^ l1 ^^' B ' to retain the custody of the bills. It will be noted that the bailee here undertook something more than mere custody, that the action was ex contractu, and that therefore consideration was required to be shown. In the case of bailment of a chattel the owner parts with possession, but no such consideration is to be found in cases of gratuitous employment. A offers to do X a service without reward : the offer Gratuitous is accepted : no action would lie if the service were not ment. performed, because there is no consideration for the promise of A : and yet there is abundant/ authority for saying that if the service is entered upon, and performed so negligently that X thereby suffers loss or injury, there is a liability which the Courts would recognize. H 2 100 FORMATION OF CONTRACT Part II Gratuitous A promised X to build him a warehouse by a certain day. ment y " ^ sue< ^ -^ ^ or non-completion of the warehouse within the promised time, and also for having- increased the cost of the building by having used new materials instead of old materials, which he was ordered to use as far as they would go. The promise of A was gratuitous, and the Court held that though, for want of consideration, he was not liable on his promise to complete within a given time, yet that he was liable for a misfeasance in that having entered on the employ- Kisee v. ment he had. by his disobedience to orders, increased the cost Gatward, ' J 5 T. R. , 43 . O f the work. Again, Coverdale undertook, gratuitously, to effect an in- surance of Wilkinson's house. This he did, but owing to his neglect of some formalities Wilkinson could recover nothing Wilkinson v. on the policy when the house was burned down. Coverdale Covrrdale, , Esp. 7S . was h^d liable in damages to Wilkinson, but if he had not effected the insurance he would have incurred no liability. Grounds We may base this liability on old decisions in which the liability. Courts gave damages for the misfeasance of an undertaking though they did not recognize a non-feasance as a ground of action. Or we may take the broad ground adopted by Willes, J., in Skelton v. L. fy N. W. Railway Co. ' If a person undertakes to perform a voluntary act he is liable if he performs it improperly, but not if he neglects to perform it/ L.R., ac.p. But there is another possible view. In the contract 636. Mandatum no liability was created until the service asked for was entered upon; thenceforward the one party was bound to use reasonable care in performance, the other was bound to indemnify against loss incurred in doing the service. Such liabilities, reasonable enough in themselves, are difficult to reconcile with a logical use of the English doctrine of Consideration. It remains a question whether they may not be exceptions to its universal application in Contract. (c) Does the promisee do, forbear, suffer, or promise more than that to which he is legally bound ? If the promisor Chap. II. 4 REALITY OF CONSIDERATION 101 gets nothing in return for his promise but that to which he is already legally entitled, the consideration is unreal. This may occur where the promisee is under a public duty Perform- to do that which he promises to do. Where a witness has public received a subpoena to appear at a trial, a promise to pay him du *y- anything beyond his expenses, is based on no consideration; Godelroy', the witness is bound to appear and give evidence. 950. But a police-constable who sued for a reward offered for the supply of information, leading to a conviction, was held England v. . . . T Davidson, entitled to recover, since the services rendered were outside A. & E. 856. the scope of his ordinary duties. On the same principle a promise not to do what a man legally cannot do is an unreal consideration. The case of Wade v. Simeon, cited in discussing forbearance as a considera- a c. B. 548. tion, is a sufficient illustration of this point. Again, we find unreality of consideration where the promisee Promise undertakes to fulfil the conditions of an existing contract. existing In the course of a voyage from London to the Baltic and contracfc - back two seamen deserted, and the captain, being unable to supply their place, promised the rest of the crew that if they would work the vessel home the wages of the two deserters should be divided amongst them. The promise was held not to be binding. 'The agreement is void for want of consideration. There was no consideration for the ulterior pay promised to the mariners who remained with the ship. Before they sailed from London they Stilk v. My- had undertaken to do all they could under all the emergencies l'ij.' 2 of the voyage. . . . The desertion of a part of the crew is to be considered an emergency of the voyage as much as their death ; and those who remain are bound by the terms of their original contract to bring the ship in safety to her destined port.' But the decision would have been otherwise if uncon- Hartley v. """t* , . j . ., '. . . Ponsonby, templated risks had arisen. The contract into which a seaman 7 E. & 6.872. usually enters, contains an implyd condition that the ship should be seaworthy. So where a seaman had signed articles of agreement to help navigate a vessel home from the Falkland Isles, and the vessel proved to be unseaworthy, a promise of 102 FORMATION OF CONTRACT Part II Turner v. Owen, 3F.&F. 176. Perform- ance of existing contract. What is done must be different : Pinnel'scase 5 Co. Rep. 117. else no considera- tion for the pro- mise to forego. extra reward to induce him to abide by his agreement was held to be binding 1 . The actual performance of that which a man is legally bound to do, stands on the same footing as his promise to do that which he is legally compellable to do. This rule seems a logical deduction from the doctrine of consideration, but some applications of it have met with severe criticism. The payment of a smaller sum in satisfaction of a larger is not a good discharge of a debt \ Such payment is no more than a man is already bound to do, and is no consideration for a promise, express or implied, to forego the residue of the debt. The thing done or given must be somehow different to that which the recipient is entitled to demand, in order to support his promise. The difference must be real, but the fact that it is slight will not destroy its efficacy in constituting a considera- tion, for if the Courts inquired whether the thing done in return for a promise was sufficiently unlike that to which the promisor was already bound, they would inquire into the adequacy of the consideration. ' Thus, the giving a negotiable instrument for a money debt, or ' the gift of a horse, a hawk or a robe, in satisfaction, is good. For it shall be intended that a horse, a hawk or a robe might be more beneficial to the plaintiff than money, in respect of some circumstance, or other- wise the plaintiff would not have accepted it in satisfaction.' It would hardly seem open to doubt that a promise, not under seal, to forego legal rights, must needs depend for its validity upon the rules common to all promises. But we should look at a promise of this sort when it is made before, or again when it is made after, the contract is broken : for the general rule is subject to some variations of detail in the two cases. i Sm. L. C. 325. ed. 10. 1 It is strange that this rule should still be spoken of as the rule in Cumber v. Wane. In that case it was held that a promissory note for 5 was no satisfaction for a debt of 15, not because there was no consideration (for a negotiable instrument was given for a debt) but because the satisfaction was inadequate. Such a decision would hardly be supported now. Chap. II. 4 REALITY OF CONSIDERATION 103 If a contract is wholly executory, and the liabilities of both Contract parties as yet unfulfilled, it can be discharged by mutual e3 consent, the acquittance of each from the other's claims being the consideration for the promise of each to waive his own. ' A contract in which A , one of the parties, has done his part, Contract and X, the other, remains liable, cannot (except in the case of bills of exchange or promissory notes) be discharged by mere Foster v. consent, but it may be discharged by the substitution of a| Ex - 8 39- new agreement. A has supplied X with goods according to ch> L a contract. X owes A the price of the goods. If A waives his claim for the money, where is the consideration for his promise to waive it? If A and X substitute a new agree- ment, to the effect that X on paying half the price shall be exonerated from paying the remainder, where is the con- sideration for A's promise to forego the payment of half the sum due to him ? The new agreement needs consideration : there must be some benefit to A or detriment to X in return for A's promise. Detriment to X there can be none in paying half of a sum the whole of which he may at any time be compelled to pay; and benefit to A there can be none in receiving a portion of a sum the payment of which he can at any time compel. Unless A receives something different in kind, a chattel, or a negotiable instrument, or a fixed for an Goddardv. O Bnen, uncertain sum, his promise is gratuitous and must be made 9 Q- 8.0.37. under seal. We now come to cases where the contract is broken and Contract broken * a promise made to forego the right arising from the breach. Where the right itself is in dispute the suit may be com- right in promised as already described. Where the right is undisputed, the amount due may be Eight , . , admitted : uncertain or certain. If it is uncertain, the payment of a liquidated or certain damages sum would be consideration for foregoing a claim for a larger Wilkinson though uncertain amount. iA.& e E.'io6. If it is certain, the promise to forego the claim or any Right admitted : 104 FORMATION OF CONTRACT Part II damages portion of it can only be supported by the giving of something different in kind, or by a payment at an earlier date or in different manner to that agreed on. And whether the sum due is of certain or uncertain amount the consideration for the promise to forego must be executed. The parties must not only have agreed, but their agreement must be carried out if it is to be an answer to the original cause of action. Where it has been carried out it is an accord and satisfaction, where it has not been carried out it is an Lynn v. accord executory. As is said in an old case, ' accord executed is Bruce, 2 H. BI. 319. satisfaction : accord executory is only substituting one cause of action in the room of another, which might go on to any extent.' Some denunciation and some ridicule have been expended on the rule that the payment of a smaller sum in satisfaction of a larger is not a good discharge of a debt. And yet, as was said in a judgment in which the House of Lords recently Foakesv. affirmed the rule, ' it is not really unreasonable, or practically Beer, 9 App. . . * Ca.6o5. inconvenient, that the law should require particular solem- nities to give to a gratuitous contract the force of a binding obligation/ There seems to be no difference between a promise by A to X to give him 45 on demand, and a promise by A to X to excuse him 45 out of 50 then due. If consideration is needed in the one case, it is needed in the other, and there can be no reason why the law should favour a man who is excused money which he ought to pay, more than a man who is pro- mised money which he has not earned. Composi- A composition with creditors appears at first sight to be tl0 j-T rith an infraction of the rule, inasmuch as each creditor under- creditors. takes to accept a less sum than is due to him in satisfaction of a greater. But the promise to pay, or the payment of a portion of the debt, is not the consideration upon which the creditor renounces the residue. That this is so is apparent 5 East, 230. from the case of Fitch v. Sutton. There the defendant, a debtor, compounded with his creditors and paid them 7*. in Chap. II. 4 REALITY OF CONSIDERATION 105 the pound ; he promised the plaintiff, who was one of the creditors, that he would pay him the residue when he could ; but the plaintiff nevertheless gave him a receipt of all claims which he might have against him 'from the beginning of the world to that day/ The plaintiff subsequently brought an action for the residue of his claim ; the defendant pleaded the acceptance of 7*. in the pound in full of all demands : but this was held to be no answer to the plaintiff's claim. 'It is impossible,' said Lord Ellenborougb, 'to contend that acceptance of 17 los. is an extinguishment of a debt of 50. There must be some consideration for a relinquishment of the residue ; something collateral, to show a possibility of benefit to the party relinquishing his further claim, otherwise the agreement is nudum pactum.' The consideration in a composition with creditors must Considera- therefore be something other than the mere acceptance of composi- a smaller sum in satisfaction of a larger : it is the substitution tlon ls a new of a new agreement with new parties and a new consideration, agree - The Common Law on this point (apart from the various Bankruptcy Acts) was settled in the case of Good v. Ckeewnan. 2 B. & Ad. There the defendant, a debtor who had compounded with his creditors, set up as against an individual creditor suing for the whole of his debt, not a separate promise by that creditor to forego the residue, but a composition made with all the creditors. The composition was held to be a good defence to the action, and the consideration which supported each creditor's promise to accept a lesser sum in satisfaction of a greater was thus stated by Parke, J. : * Here each creditor Good v. entered into a new agreement with the defendant (the debtor), aB.&Ad.' the consideration of which, to the creditor, was a forbearance by all the other creditors, who were parties, to insist upon their claims/ It is not the payment of a portion of the debt, which forms the consideration ijl the case of a composition Hind, i H. & N. 938. with creditors, but the substitution of a new agreement with | ^ e e s r R different parties for a previous debt. p.^93. at The composition with creditors is therefore no exception 106 FORMATION OF CONTRACT Part II to the general rule, inasmuch as the debtor not only pays the creditor a portion of the sum due, but procures a promise by each of his other creditors, or by a certain number of them, that each will be content with a similar proportionate payment if the others will forbear to ask for more. And creditor X not merely gets payment of 10*. in the pound from his debtor A, but a promise from creditors Y and Z that they too will be content with a payment of 10*. in the pound. Promise to It is not difficult to see that consideration is unreal if it contract consist in a promise given to perform a public duty, to per- with third f orm a contract already made with the promisor, or to discharge an existing liability. It is harder to answer the question whether the performance or promise to perform an existing contract with a third party is a real consideration. We must note two cases dealing with this form of con- sideration, gc. B., N. s. In Shadwell v. Shadwell the plaintiff had promised to marry 'S9- X: his uncle promised him in writing that if he married X he should receive [50 a year during the uncle's lifetime. He married X ; the annuity fell into arrear ; the uncle died, and the plaintiff sued his executors. The Court differed as to the existence of a consideration for the uncle's promise. Erie, C. J., and Keating, J., inclined to regard it as the offer of a promise capable of becoming a binding contract when the marriage took place. Byles, J., dissented, holding that the plaintiff had done no more than he was legally bound to do, and that his marriage was therefore no consideration for the uncle's promise *. 6H.4N.29s. In Scotoon v. Pegg, Scotson promised to deliver to Pegg a 1 In other cases where there is a promise to pay money, in considera- tion of a marriage taking place the promise is a part of the engagement to marry, as in Synge v. Synge [1894] i Q. B. 466, or an inducement to the engagement, as in Hammersley v. de Biel 12 Cl. & F. 62, or is made in con- sideration of an immediate fulfilment of the promise as in Sheets v. Silberbeer n T. L. R. 491. Chap. II. 4 REALITY OF CONSIDERATION 107 cargo of coal then on board a ship belonging to Scotson, and Pegg promised in return to unload it at a certain rate of speed. This he failed to do, and when sued for breach of his promise, pleaded that Scotson was under contract to deliver the coals to X or to X } s order, and that X had made an order in favour of Pegg. Scotson therefore in promising to deliver the coals promised no more than he was bound to perform under his contract with X, and Pegg alleged that there was no con- sideration for his promise to unload speedily. The Court held that Pegg was liable, since it was not inconsistent with the pleadings that there might have been some dispute as to Pegg's right to the coals, or some claim upon them foregone by Scotson : but Wilde, B., said, ' If Difficul- a person chooses to promise to pay a sum of money in order ge^teTby to induce another to perform that which he has already con- Shadwell J v. Shad- tracted with a third person to do, I confess I cannot see why well and such a promise should not be binding.' Pegg. In both these cases we can reconcile the decisions with the doc- trineof consideration, but not the reasons given for the decisions. In Shadwell v. Shadwell the original contract was executory ; the nephew and M } to whom he was engaged, might have put an end to it by a mutual waiver of their respective promises. The nephew, at the request of his uncle, abandoned, or agreed to abandon, a right which he might have exercised in concurrence with M ; and the abandonment of a right has always been held to be consideration for a promise. In Scotson v. Pegg the Court clearly thought that the promise to deliver coals to the defendant might have been something more than a mere performance of an existing promise to a third party ; that there might have been a right waived or claim foregone which did not appear on the plead- ings. So far the decisions are consistent with principle, but there are dicta which seem to show that two judges in the first case, and Baron Wilde in the second, thought that a promise given in consideration of the performance or promise to perform a contract with a third party was binding. 108 FORMATION OF CONTRACT Part II The deci- Whether the promise is conditional on the performance of sistent the contract made with the third party, or whether it is given with pnn- j n re um f or a promise to perform, does not seem to make any difference in principle. If we say that the consideration is the detriment to the promisee in exposing- himself to two suits instead of one for the breach of contract we beg the question, for we assume that an action would lie on such a promise. If we say that the consideration is the fulfilment of the promisor's desire to see the contract carried out, we seem to confound motive and consideration. At least, one may say that on principle the performance or promise to perform an outstanding contract with a third party is not of itself consideration for a promise l t and that the practical result of the cases is not inconsistent with this rule. 3. Consideration must le legal. Legality This rule should be mentioned here, but we must deal with sidera- ^ ^ a ^ er when the time comes to consider, as an element in the tion. Formation of Contract, the legality of the objects which the parties have in view when they enter into a contract. 4. Consideration may be executory or executed, it must not he past. Considera- We now come to deal with the relation of the consideration to the promise in respect of time. The consideration may executory, be executory, and then it is a promise given for a promise; executed, or it may be executed, and then it is an act or forbearance and past, given for a promise ; or it may be past, and then it is a mere sentiment of gratitude or honour prompting a return for benefits received ; in other words, it is no consideration at all. Executory As to executory considerations, nothing remains to be added considera- lon. i rp^e g rea j preponderance of judicial decision in America is in favour of this view. See note to American edition, p. in. For a summary of the opinions of jurists on the subject, see Law Quarterly Review, vol. xx, p. 9, and the Harvard Law Review, vol. xvii, p. 71. Chap. II. 4 CONSIDERATION EXECUTED 109 to what has been said already. I have shown that a promise on one side is good consideration for a promise on the other. Ante, p. 9Z . A contract arises upon executed consideration when one Executed of the two parties has, either in the act which constitutes ti an offer or the act which constitutes an acceptance, done all that he is bound to do under the contract, leaving an outstanding liability on one side only. These two forms of consideration are described by Mr. Leake as ' acceptance of Leake on an executed consideration/ and ( consideration executed upon first ed., p. 23. request ' : corresponding to the offer of an act for a promise, and the offer of a promise for an act. In the first case a man offers his labour or goods under Offer of an such circumstances that he obviously expects to be paid for promise, them ; the contract arises when the labour or goods are accepted by the person to whom they are offered, and he by his acceptance becomes bound to pay a reasonable price for them. ' If I take up wares from a tradesman without any Per Tindai, agreement of price, the law concludes that I contracted to HoaeHeyv. M c Laine, pay their real value/ So in Hart v. Mills the defendant had I0 m "S- ** 2 - ordered four dozen of wine and the plaintiff sent eight, the defendant retained thirteen bottles and sent back the rest, and the plaintiff sued him on the original contract for the purchase of four dozen. It was held that the retention of thirteen bottles was not an acquiescence in the misperform- ance of the original contract, but a new contract arising upon the acceptance of goods tendered, and that the plaintiff could only recover for thirteen bottles. f The defendant orders two Ham-. Mills, *.,- , 5 m & w dozen of each wine and you send four : then he had a right 87- to send back all ; he sends back part. What is it but a new contract as to the part he keeps ? ' It must, however, be borne . in mind that where the person to whom such an offer is made has no opportunity of accept- ing or rejecting the things offeree^ an acceptance to which he cannot assent will not bind him. The case of Taylor v. Laird, 25L.j.Exch. already cited, illustrates this proposition. The difficulty -<4i p- 24- which would arise, should such an enforced acceptance create 110 FORMATION OF CONTRACT Part II a promise, is forcibly stated by Pollock, C. B. : ' Suppose I clean your property without your knowledge, have I then a claim on you for payment ? One cleans another's shoes ; what can the other do but put them on ? Is that evidence of a contract to pay for the cleaning ? ' Offer of a The ' consideration executed upon request/ or the contract for an act. which arises on the acceptance by act of the offer of a pro- mise is best illustrated by the case of an advertisement of a reward for services which becomes a promise to give the reward when the service is rendered. In such cases it is not the offeror, but the acceptor, who has done his part at the moment when he enters into the contract. If A makes a general offer of reward for information and X supplies the England v. information, ,^'s offer is turned into a promise by the act of X. Davidson, " A - & E - and X simultaneously concludes the contract and performs his part of it. And this form of consideration will support an implied as well as an express promise where a man is asked to do some service which will entail risk or expense. The request for such services embodies or implies a promise, which becomes binding when liabilities or expenses are incurred. A lady employed an auctioneer to sell her estate ; he was compelled in the course of the proceedings to pay certain duties to the Crown, and it was held that the fact of employ- Brittain v. ment implied a promise to indemnify for money paid in the *62 & W ' course f th e employment. ' Whether the request be direct, as where the party is expressly desired by the defendant to, pay ; or indirect, as where he is placed by him under a liability to pay, and does pay, makes no difference.' i Sm. L. c. It is probably on this principle, the implication of a pro- mise in a request, that the case of Lampleigk v. Braithwait is capable of explanation. If so, we do not need the theory with which I shall have to deal presently in discussing that case. Present It remains to distinguish executed from past consideration, guished -^ P 35 ^ consideration is, in effect, no consideration at all; that Chap. II. 4 CONSIDERATION EXECUTED 111 is to say, it confers no benefit on the promisor, and involves no from past detriment to the promisee in respect of his promise. It is some ti ^ s act or forbearance in time past by which a man has benefited without thereby incurring any legal liability. If afterwards, whether from good feeling or interested motives it matters not, he makes a promise to the person by whose act or for- bearance he has benefited, and that promise is made upon no other consideration than the past benefit, it is gratuitous and cannot be enforced; it is based upon motive and not upon consideration. The rule that a past consideration will not support a subse- quent promise is only another mode of saying that every promise, whether express or implied, must, in order to be binding, be made in contemplation of a present or future benefit to the promisor. A purchased a horse from X, who afterwards, in considera- tion of the previous sale, promised that the horse was sound and free from vice. It was in fact a vicious horse. The Court held that the sale created no implied warranty or promise that the horse was not vicious ; that the promise must therefore be regarded as independent of the sale, and as an express promise based upon a previous transaction. It fell therefore ' within Roscoria v. ... 1-11 Thomas. the general rule that a consideration past and executed will sup- 3 Q- B. 234. port no other promise than such as would be implied by law/ To the general rule thus laid down certain exceptions are said to exist ; they are perhaps fewer and less important than is sometimes supposed. (a) A past consideration will, it is said, support a subse- Consider- quent promise, if the consideration was given at the request ^ov^d by of the promisor. previous request. In Lampleigli v. Braithwait, which is regarded as the leading Hobart, 105; case upon this subject, the plaintiff sued the defendant for i Sm. L. c. 120 which the defendant had promised to pay to him in consideration of services rendered at his request. The Court here agreed that a mere voluntary courtesy will not have consideration to uphold an assumpsit. But if that courtesy 112 FORMATION OF CONTRACT Part II were moved by a suit or request of the party that gives the assumpsit it will bind ; ' for the promise, though it follows, yet it is not naked, but couples itself with the suit before, and the merits of the party procured by that suit/ The case of Lampleigh v. Braitkwait was decided in the year 1615, and for some time before and after that decision, cases are to be found which, more or less definitely, support the rule as stated above 1 . But from the middle of the seventeenth century until the present time no direct authority can be sir. c. L. discovered, except the case of Bradford v. Revision, decided 4-OO. Langdeii, i n the Irish Court of Exchequer in 1858. The rale is laid down in text-books, but in the few cases in which it is referred to by the judges the interpretation placed on it in the books is regarded as open to question. 7 M. & Gr. Thus in Kaye v. Dutton, Tindal, C. J., first lays down the rule that where a consideration executed implies a promise of a particular sort, a subsequent promise based on the same Modem consideration is not binding. By this he means that when tatfonTof from the acceptance of consideration executed, the law implies the rule. a p rom i se by the acceptor to make a return, the consideration is exhausted upon that promise. There is nothing further to support a subsequent and independent promise. He goes on to say that the case may be different where con- sideration given on request is not so given as to import a promise : and that ' it has been held in some instances ' that an act done at the request of the party charged is sufficient consideration to render binding a subsequent promise. But on this point he expresses no opinion, and clearly regards the old interpretation of the rule as open to question. Its application 4 c. a at p. is further narrowed by Maule, J., in Elderton v. Emmens. He 496. says, 'An executed consideration will sustain only such a promise as the law will imply ' ; and this really means that the explicit promise in LampleigJi v. Braithwait would only be valid if the law would have implied it anyhow from the words or conduct of the parties. 1 See cases collected in the note to Hunt v. Bate, 3 Dyer, 272 a. Chap. II. 4 CONSIDERATION EXECUTED 113 In Kennedy v. Broun, Erie, C. J., puts the case of Lampleigh ISC.B-.N. v. Braithwait from a modern point of view. ' It was assumed,' lie says, ' that the journeys which the plaintiff performed at the request of the defendant and the other services he rendered would have been sufficient to make any promise binding if it had been connected therewith in one contract : the peculiarity of the decision lies in connecting a subsequent promise with a prior consideration after it had been executed. Probably at the present day, such service on such a request would have raised a promise by implication to pay what it was worth ; and the subsequent promise p. 740- of a sum certain would have been evidence for the jury to fix the amount.'' This would seem to be the ratio decidendi in Wilkinson v. i Bing. N. 490. Oliveira, where the plaintiff at the defendant's request gave him a letter for the purposes of a lawsuit. .The letter proved the defendant's case, by which means he obtained a large sum of money, and he subsequently promised the plaintiff i,oco. Here the plaintiff evidently expected some return for the use of the letter, and the defendant's request for it was, in fact, an offer that if the plaintiff would give him the letter he would pay a sum to be hereafter fixed. Regarded from this point of view the rule which we are discussing is no departure from the general doctrine as to past consideration. Where a request is made which is in substance an offer of a promise upon terms to be afterwards ascertained, and services are rendered in pursuance of that request, a subsequent promise to pay a fixed sum may be re- garded as a part of the same transaction, or else as evidence to assist the jury in determining what would be a reasonable sum. In opposition to this view stands Bradford v. Roulston, the s ir. c. L. only case in modern times in which the rule in Lampleiqh v. Laard* 11 . _ Contr. 450. Braithwait has come before the Courts for express decision. Bradford, who had a ship to sell, was introduced by Roulston to two persons who were willing to purchase it. At the time of the sale the purchasers were 55 short of the money agreed to be paid. Bradford nevertheless executed the bill of sale at the request of Roulston, and in consideration of 114 FORMATION OF CONTRACT Part II this, Roulston upon a subsequent day guaranteed the pay- ment of the balance of 55 still due. There seems to have been some evidence that the guarantee was given at the time of the sale and was subsequently put into writing, but the Court felt it necessary to give an express decision, on the supposition that the consideration was wholly past, and held that the execution of the bill of sale to third parties upon the request of the defendant was consideration for a subsequent promise by him to answer for their default. The authorities were elaborately reviewed and the rule in Lampleigh v. Braithwait was adhered to in its literal sense. This decision cannot be received without hesitation, and indeed obvious difficulties would arise from such an interpre- Practical tation of the rule. Is any limit to be assigned to the time presented 8 which may elapse between the act done upon request and the by the promise made in consideration of it ? This difficulty pressed 3 Dyer, upon the Court in one of the oldest cases upon this subject, 5'ote 7 * Cro. Halifax v. Barker, where a promise was held not to be binding Eliz. 741. which was given upon consideration of a payment made upon request a year before. That case confirms the view that the subsequent promise is only binding when the request, the con- sideration, and the promise form substantially one transaction ; and I cannot avoid the conclusion that, unless the request is virtually an offer of a promise the precise extent of which is Probable e*- hereafter to be ascertained, the rule in Lampleigh v. Braithwait planation of . -. t . ^ as no application. This view is supported by the language of Bowen, L. J., in a more recent case. Stewart ] ' The fact of a past service raises an implication that at the f Ch y j 5 ' ! ^ me i* was rendered it was to be paid for, and if it was a service I which was to be paid for, when you get in the subsequent docu- ment a promise to pay, that promise may be treated either as an admission which evidences or as a positive bargain which fixes the amount of that reasonable remuneration on the faith of which the service was originally rendered.' It may not therefore be presumptuous to say that in spite of the cases decided between 1568 and 1635, of the con- Chap. II. 4 CONSIDERATION EXECUTED 115 tinuous stream of dicta in text-books, and of the decision in Bradford v. Roulston, the rule cannot be received in such a sense as to form a real exception to the principle that a promise, to be binding, must be made in contemplation of a present or future benefit to the promisor. (b] We find it laid down that ' where the plaintiff volun- Volunta- tarily does that whereunto the defendant was legally com- w hat an- pellable, and the defendant afterwards, in consideration thereof, ? was expressly promises/ he will be bound by such a promise, bound But I would submit that the authority for this rule wholly , sm. L. c. fails in so far as it rests on the cases which are habitually * 4 cited in support of it. The cases all turn upon the liability of parish authorities for medical attendance on paupers who are settled in one parish but resident in another. Watson v. Turner (1767) was decided on the ground that Buiier, Nisi V ' " Pfius,p.i 4 7. the moral obligation resting upon overseers of a parish to provide for the poor would support a promise made by them ButseeiSei- -111 i wyn's Nisi to pay for services previously rendered to a pauper by a P"US, p. 51, medical man. In Atkins v. Banwell (1802) it was held that the moral East, 505. obligation resting upon the parish in which a pauper is settled, to reimburse another parish, in which the pauper happened to be taken ill, for expenses incurred in medical attendance, is not sufficient to create a legal liability without an express promise. In Wing v. Mill (1817), the pauper was also residing out B. &AW. of his parish of settlement ; but that parish acknowledged its liability for his maintenance by making him a weekly allow- ance. The pauper fell ill and died; during his illness he was attended by Wing, an apothecary, who, after the pauper's death, was promised payment of his bill by Mill, the overseer of the parish of settlement. The Court held the overseer liable. It is not easy to ascertain Hie grounds of their decision from the judgments of Lord Ellenborough, C. J., and Bayley, J. i 3 116 FORMATION OF CONTRACT Part II Some sentences suggest that they held, on the authority of Watson v. Turner, that a moral obligation will support a promise; others suggest that they held that there was a legal obligation cast on the parish of residence to do that which the parish of settlement might legally have been See chapter compelled to do, and that a quasi-contractual relation thus on Quasi- Con tract, arose between the parties ; others again suggest that the allowance made to the pauper by the parish of settlement showed a knowledge that the pauper was being maintained at their risk, and amounted to an implied authority for bestowing the necessary medical attendance. This last is the view entertained as to the ratio decidendi in Wing v. Mill by the Court of Exchequer in the only case remaining for examination. ic. &M. In Paynter v. Williams (1833) the facts were similar to those in Wing v. Mill, with this very important exception, that there was no subsequent promise to pay the apothe- cary's bill. The defendant parish, the parish of settlement, was nevertheless held liable to pay for medical attendance supplied by the parish of residence. The payment of an allowance by the parish of settlement was held by Lord t Lyndhurst, C. B., to amount 'to a request on the part of the officers that the pauper shall not be removed, and to a promise that they will allow what was requisite/ It would seem then that the promise in the cases cited to support this supposed rule, was either based upon a moral 1 1 A. & E. obligation, which, since the decision in Eastwood v. Kenyan^ would be insufficient to support it, or was an acknowledgment of an existing liability arising from a contract which might be implied by the acts of the parties, a liability which, as Paynter v. William* shows, did not need a subsequent promise to create it. And this is stated on high authority to be the true ground upon which the decision in Watson v. Turner may be supported. i Selwyn's ' The defendants, being bound by law to provide for the poor of the p.'si, D! U II. parish, derived a benefit from the act of the plaintiff, who afforded Chap. II. 4 CONSIDERATION EXECUTED 117 that assistance to the pauper which it was the duty of the defendants to have provided ; this was the consideration, and the subsequent promise by the defendants to pay for such assistance was evidence from which it might be inferred that the consideration was performed by the plaintiff with the consent of the defendants, and consequently suffi- cient to support a general indebitatus assumpsit for work and labour performed by the plaintiff for the defendants, at their request.' The reiteration of this rule, resting as it does on such scanty and unsatisfactory authority, is almost inexplic- able 1 . (c) A real exception to the general rule is to be found Real ex- in the cases in which a person has been held capable of general reviving an agreement by which he has benefited, although rule - by rules of law since repealed, incapacity to contract no longer existing, or mere lapse of time, the agreement is not enforceable against him. The principle upon which these cases rest is, ' that where the consideration was originally beneficial to the party promising, yet if he be protected from liability by some provision of the statute or common law, meant for his advantage, he may Parke, B., renounce the benefit of that law: and if he promises to pay the debt, oii^er' ev ' which is only what an honest man ought to do, he is then bound by 2 Ex - 9- the law to perform it. 1 The following illustrations of the principle are to be found in the Reports. (i) A promise by a person of full age to satisfy debts con- wmiamsv. . , * IT i'ii i Moor, 1 1 M. tracted during infancy was binding upon him before the & w. 256. Infants' Relief Act made it impossible to ratify, on the attainment of majority, a promise made during infancy. (2) A promise made by a bankrupt, discharged from debts Tmeman v. Fenton, 2 by a certificate of bankruptcy, to satisfy the whole or part Cowp. 544. of debts due to a creditor was binding before 1849. The Bankruptcy Act of that year, now repealed, and successive Bankruptcy Acts release the Discharged bankrupt from all 1 These eidola of the text-books have been stereotyped in the Indian Contract Acts, s. a. sub-s. (d) and s. 25. sub-s. a. 118 FORMATION OF CONTRACT Part II debts provable in bankruptcy, with some exceptions which here are immaterial 1 . 21 jac. i. c. (3) A debt barred by the Statute of Limitations is con- 1 6. sideration for a subsequent promise to pay it. 5 Taunt. 36. (4) In Lee v. Muggeridge a married woman gave a bond for money advanced at her request to her son by a former husband. Afterwards, when a widow, she promised that her executors should pay the principal and interest secured by the bond, and it was held that this promise was binding. IH.& 0.703. (5) In Flight v. Reed bills of exchange were given by the defendant to the plaintiff to secure the repayment of money lent at usurious interest while the usury laws were in force. The bills were by those laws rendered void as between the plaintiff and defendant. After the repeal of the usury laws by 17 & 1 8 Viet. c. 90 the defendant renewed the bills, the consideration for renewal being the past loan, and it was held that he was liable upon them. Common There are certain features common to all these cases. in all the The parties are clearly agreed : the contract has been fulfilled cases. or ^ ie b ene fit o f one o f ^he parties, while the other cannot get what he was promised, either because he has dealt with one who was incapable of contracting, or because a technical rule of law makes the agreement unenforceable. If the party who has received the benefit which he expected from the agree- ment afterwards acquires capacity to contract ; or if the rule of law is repealed, as in the case of the Usury Acts ; or, as in the case of the Statute of Limitations, admits of a waiver by the person whom it protects, then a new promise based upon the consideration already received is binding. They do The cases thus regarded seem a plain and reasonable upon 68 exception to the general rule that a past consideration will not support a promise. Unfortunately, they were at one time tion. 1 46 & 47 Viet. c. 52. 30. By 6 Geo. IV. c. 16. 131 this promise had to be in writing. At the present day such a promise is only binding if there be new consideration. Jakeman v. Cook, 4 Ex. D. 26. Chap. II. 4 CONSIDERATION EXECUTED 119 based upon the moral obligation which was supposed to bind the person benefited and to give efficacy to his promise. It would have seemed enough to say that when two persons have made an agreement, from which one has got all the benefit he expected, but is protected by technical rules of law from liability to do what he had promised in return, he will be bound if, when those rules have ceased to operate, he renews his original promise. But when once the law of contract was brought into the cloudland of moral obli- gation, it became extremely hard to say what promises might or might not be enforced. The phrase was far larger than the circumstances needed, and the language used in some of the cases cited above was calculated to make the validity of contracts turn upon a series of ethical problems. In Lee 5 Taunt 46. v. Muggeridge, Mansfield, C. J., says, ' It has long been estab- lished, that where a person is bound morally and conscien- tiously to pay a debt, though not legally bound, a subsequent promise to pay will give a right of action. The only question therefore is whether upon this declaration there appears a good moral obligation.' In no case did ' moral obligation ' play a more prominent part than in Lee v. Muggeridge ; but the doctrine, after it had undergone some criticism from Lord Tenterden, was finally Littiefieid v. limited by the decision in Eastwood v. Kenyan. The sufficiency Ad. 8u. of moral obligation to support a promise was there definitely called in question. Eastwood had been guardian and agent of Mrs. Kenyon, and, while she was a minor, had incurred expenses in the improvement of her property : he did this voluntarily, and in order to do so was compelled to borrow money, for which he gave a promissory note. When the minor came of age she assented to the transaction, and after her marriage her husband promised to pay the note. Upon this promise she was sued. The moral duty to fulfil such a promise was insisted on by the plaintiffs Counsel, but was held by the Court to be insufficient where the consideration was wholly past. 'Indeed,' said Lord Denman in delivering judgment, 120 FORMATION OF CONTRACT Part ir 'the doctrine would annihilate the necessity for any con- sideration at all, inasmuch as the mere fact of giving a ii A. & E. promise creates a moral obligation to perform it.* Thus was finally overthrown the doctrine formulated by Lord Mansfield that consideration was only one of various modes by which it could be proved that parties intended to 7 T. R 350. contract : a doctrine which, in spite of the decision in Rann v. Hughes, survived in the theory that the existence of a moral obligation was evidence that a promise was intended to be binding. Consideration is not one of several tests, it is the only test of the intention of the promisor to bind himself by contract. CHAPTER III Capacity of Parties. IN the topics which we have hitherto discussed we have Further dealt with the primary elements of Contract. The parties inquiry 8 . must be brought together by Offer and Acceptance, and they must make an agreement which the Courts will regard as a legal transaction either by reason of its Form, or because of the presence of Consideration. But such a transaction may take place between parties, one or both of whom are under some disability for making a valid contract : it is therefore necessary to deal with these disabili- ties : in other words, with the Capacity of Parties. Certain persons are by law incapable, wholly or in part, Capacity of binding themselves by a promise, or of enforcing a promise made to them. And this incapacity may arise from the fol- lowing causes : (1) Political or professional status. (2) Youth, which, until the age of 21 years, is supposed to imply an immaturity of judgment needing the protection of the law. (3) Artificiality of construction, such as that of corpora- tions, which, being given a personality by law, take it upon such terms as the law imposes. (4) The permanent or temporary mental aberration of lunacy or drunkenness. (5) Until the 1st of January 1883 marriage effected a merger of the contractual capacity of the wife in that of her husband, subject to certain exceptions. The Married Women's Property Acts of 1882 and 1893 have greatly changed the law in this respect. 122 FORMATION OF CONTRACT Part II 1. Political or Professional Status. An alien. An alien has the contractual capacity of a natural-born British subject, except that he cannot acquire property in a British ship. An alien ^An alien enemy, or British subject adhering to the king's enemies x , cannot, without license from the Crown, make any fresh contract or enforce any existing contract during the v. Wilson, i Camp. 482. continuance of hostilities ; but his rights as to contracts made before the commencement of war are suspended, not annulled, and can be enforced (subject to the effect of the Statute of Limitations) upon the conclusion of peace. Foreign Foreign States and sovereigns and their representatives, reigns. the officials and household of their representatives, are not su bject to the jurisdiction of the Courts of this country unless they submit themselves to it. Their contracts cannot therefore be enforced against them unless they so choose, although they are capable of enforcing them. This immunity ex te nc is to- a British subject accredited to Great Britain by QB.D. 3 68. a foreign state> A recent case illustrates the rule. A foreign sovereign Th Sultan f J ohore, residing in this country as a private person, made a promise (C.A.)i49- of marriage under an assumed name. He did not thereby subject himself to the jurisdiction of our courts. Felon un- A person convicted of treason or felony cannot, during the sentence, continuance of his conviction, make a valid contract ; nor can he enforce contracts made previous to conviction : but 33 & 34 Viet, these may be enforced by an administrator appointed for the c. 23 ,8, 9 , crsr-7; io- purpose by the Crown. Barrister. A barrister cannot sue for fees due to him for services rendered in the ordinary course of his professional duties, 1 It does not seem to be clearly settled that anything short of residence in a hostile country for trading purposes constitutes adherence to the king's enemies. The case of Roberta v. Hardy, 3 M. & S. 533, exhibits the reluctance of the courts to draw conclusions from the mere fact that a man was resident in a hostile country when it was possible for him to have removed. Chap. III. 2 INFANTS 123 whether the action be framed as arising upon an implied Kennedy v. contract to pay for services rendered on request, or upon l ^ c. B., an express contract to pay a certain sum for the conduct o a particular business. A physician, until the year 1 858, was so far in the position Physician, of a barrister that the rendering of services on request raised no implied promise to pay for them, though the patient might bind himself by express contract. The Act 21 & 22 Viet. c. 90. 31 enabled every physician to sue on such an implied contract, subject to the right of any College of physi- cians to make by-laws to forbid the exercise of this privilege by their Fellows. And this is re-enacted in substance by the Medical Act 1886. 4Q&5<>yict. c. 48. 6. 2. Infants. The rights and liabilities of infants under contracts entered into by them during infancy rest upon Common Law rules which have been materially affected by Statute. I will first state the Common Law upon the subject. Common Law treated an infant's contract as being void- General able at his option, either before or after the attainment of his common majority. But the rule was thus limited : Law - , Infant's (1) The contract ceased to be voidable if ratified upon contract ,, , . p c voidable, the attainment or 21 years or age. (2) The contract was not voidable if it were for necessaries, or, in certain cases, if it were for the infant's benefit. (i) Ratification, and the Infants' Relief Act. Sir F. Pollock, in an exhaustive argument, shows clearly Pollock on that by the rules of Common Law the contract of an infant pp. 55-61, ' ed. 7. was not void but voidable at his option, even though it were (i) Ratifi- not for the infant's benefit. Being so voidable, the infant might (apart from statutory restrictions) affirm and ratify his contract when he attained his jyajority, and thus assume the Williams v. rights and liabilities arising from it. It may be well to M.&W. remind the reader that such a ratification is, or was, an illustration of the limited class of cases in which a past 124 FORMATION OF CONTRACT Part II Ante, p. 117. Ratifica- kinds. ^ r Contracts rescinded Interests in corpo- rate pro- perty, Evelyn v. ^Burr. 8 !;!- N. W. R. McMichael, consideration has been allowed to support a subsequent promise. Some contracts were invalid unless ratified, others valid un less disaffirmed within a reasonable time. It would seem that where an infant acquired an interest in permanent property to which obligations attach, or entered into a contract wn i n involves continuous rights and duties, benefits and liabilities, and took some benefit under the contract, he would be bound unless he expressly disclaimed the contract. On the other hand, a promise to perform an isolated act such as to pay a reward for services rendered or a contract wholly executory, would not be binding upon the infant unless he expressly ratified it upon coming of age. Illustrations of contracts requiring a special disclaimer to avoid them valid unless rescinded may be found in the following cases. These do not appear to be affected by recent legislation. An infant lessee who occupies until majority is liable for arrears ^ ren ^ which accrued during his minority. Shareholders who became possessed of their shares during infancy are liable for calls which accrued while they were infants. The grounds of infants' liability under these conditions have , , been thus stated : ' They have been treated therefore as persons in a different situa- tion from mere contractors, for then they would have been exempt : but in truth, they are purchasers who have acquired an interest, not in a mere chattel, but in a subject of a permanent nature, either by contract with the company, or purchase or devolution from those who have contracted, and with certain obligations attached to it which they were bound to discharge, and have been thereby placed in a situation analogous to an infant purchaser of real estate who has taken possession, and thereby becomes liable to all the obliga- tions attached to the estate ; for instance, to pay rent in the case of a lease rendering rent, and to pay a fine due on the admission in ^ ne case f a copyhold to which an infant has been admitted, unless they have elected to waive or disagree the purchase altogether, either during infancy or after full age, at either of which times it is competent for an infant to do so.' Chap. III. 2 INFANTS 125 Similarly an infant may become a partner, and at Common in partner- Law may be entitled to benefits, though not liable for debts, s lp ' arising from the partnership during his infancy. Equity however would not allow an infant, in taking the partnership accounts, to claim to be credited with profits and not debited with losses. But what is important for our present purpose Lindiey. , . Partnership, to note is, that unless on the attainment of majority there be 88,89(ed. 7 ). an express rescission and disclaimer of the partnership, the partner will be liable for losses accruing after he came of age. Where an infant held himself out as in partnership with X, and continued to act as a partner till shortly before he came of age, and then, though ceasing to act as a partner, did nothing to disaffirm the partnership, he was held liable on debts which accrued, after he came of age, to persons who supplied X with goods. ' Here/ said Best, J., * the infant, by holding himself out as a partner, contracted a continual obligation, and that obli- gation remains till he thinks proper to put an end to it d . e v - Harrison, If he wished to be understood as no longer continuing a f :?; & AId * partner, he ought to have notified it to the world? And so where shares were assigned to an infant who attained his majority some months before an order was made for winding up the company, it was held that in the absence of any disclaimer of the shares the holder was liable as a ca^, sden * contributory. Although the liabilities incurred by the infant are some- what different in these different cases, yet there is this feature common to all of them, that nothing short of express dis- claimer will entitle a man, on attaining his majority, to be free of obligations such as we have described. It is other- Contracts wise in contracts which are not thus continuous in their until operation. The infant was not bound unless he expressly ratlfied - ratified them. / Such was the Common Law upon the subject : let us consider how it has been affected by legislation. 126 FORMATION OF CONTRACT Part II Lord Tenterden's Act required that ratification should be 14. in the form prescribed by the Act. This enactment was rendered unnecessary by the Infants' Relief Act, and was repealed by the Statute Law Revision Act of 1875. Infants' The Infants' Relief Act of 1874 appears to have been de- ' signed to guard not merely against the results of youthful inexperience, but against the consequences of honourable scruples as to the disclaimer of contracts upon the attainment of majority. Its provisions are as follows : 37*s8.Vict. i. A11 contracts whether by specialty or by simple contract henceforth entered into by infants for the repayment of money lent or to be lent, or for goods supplied or to be supplied (other than contracts for necessaries), and all accounts stated with infants, shall be absolutely void : provided always that this enactment shall not invalidate any contract into which an infant may by any existing or future statute, or by the rules of Cotnmon Law or Equity enter, except such as now by law are voidable. 2. 'No action shall be brought whereby to charge any person upon any promise made after full age to pay any debt contracted during infancy, or upon any ratification made after full age of any promise or contract made during infancy, whether there shall or shall not be any new consideration for such promise or ratification after full age.' The precise meaning of the provisions of this Act, if indeed any precise meaning was present to the minds of its framers, is not easy to ascertain. We must examine the two sections and the construction which has been placed on them by the Courts. The first The first section applies only to contracts of a certain class, on * and these it makes void. But to this general provision two tions to it exceptions are specified. Contracts (i) An infant can bind himself by contract for necessaries, whether these take the form of a supply of goods or a loan of money; but it must be assumed that the loan is made in immediate contemplation of the purchase of necessaries, and is expended on them. But the precise ground of the infant's liability in either Chap. III. 2 INFANTS 127 case is not clear, and may not be co-extensive with the excep- tion made by i of the Act. The liability in respect of a loan seems in Equity to rest on Loan to a rule which is of wider application than the rule as to neces- neces- 88 * saries. A loan of money to pay for necessaries was not saries - recoverable at Common Law ; but in the Chancery Courts it was held that if an infant borrowed money to pay a debt for which by law he was liable, and the debt was paid therewith, Mariowy. Pitfield, the lender ' stood in the place of the person paid ' and was ' |- Wms - entitled to recover the money lent. National This principle was extended to a case of a loan which could Society v. Williamson, not be regarded as a loan for necessaries in the somewhat 5 ch. 313. complicated case of Thurstan v. the Nottingham Building Society. [ioo3]A.c. 6. The liability for necessaries in the form of goods has been Goods placed on another ground than that of exemption from Sl Statutory disability to contract, and has been so placed by a subsequent Statute and by judicial decision. The Sale of 56 & 57 vict. c. 71. Goods Act 2, enacts : ' Where necessaries are sold and delivered to an infant or to a person who by reason of mental incapacity or drunkenness is incompetent to contract, he must pay a, reasonable, price therefor. 1 Here the legal liability to pay and the incapacity to contract Grounds of are put side by side as coexistent, and the infant would seem to be liable for necessaries, not because he was in this respect able to contract, but because he was bound quasi ex contractu. And this was the view taken by Farwell, J v in re Clabbon. [1904] 2 ch. An infant pauper, maintained for six years by guardians of the poor, became entitled to a legacy of 100. The guardians were held entitled to recover from the executor of the will so much of the legacy as repaid them for the necessary expenditure of the past six years, on the ground that there was 'a common law liability to repay expenses necessarily incurred for the infant's benefit/ The liability is undoubted, through it is placed on different grounds in two modern Statutes, while it is treated as a liability at common law by Farwell, J. Ill 128 FORMATION OF CONTRACT Part II Goods to be Neither the Sale of Goods Act nor In re Clabbon touch the contract for goods to be supplied. It is quite possible that an supplied, infant might order goods which were undoubtedly necessaries when ordered, but that his needs might be met from some unforeseen source before the goods were supplied. His liability would then rest on the terms of the Infants' Relief Act. (a) Contracts into which an infant may enter 'by any existing or future statute, or by rules of Common Law or Equity/ and which were not voidable at the date of the enactment, are not affected by the Act. This second exception needs an explanation. Before the Act of 1 874 an infant's contracts for necessaries were binding, and his other contracts were as a rule voidable. We must therefore look for contracts which were not for necessaries and yet were not voidable. Such are to be found where an infant enters into a contract of service so as to provide him with the means of self-support. ' It has always been clearly held that contracts of apprenticeship 1 and with regard to labour are not contracts to an action on which the I ; plea of infancy is a complete defence. The question has always been i j whether the contract, when carefully examined in all its terms, is for H the benefit of the infant. If so the Court will not allow the infant to I repudiate it. 1 Clements v. L. & N. W. R. Co., [1894] 2 Q.B. 48* i Q. B. 3 to. [1X09] 2 Q. B. i. 43 & 44 Viet 0.42. Leslie v. Fitzpatrick, 3Q.B.D.229. Instances of terms which do, and of terms which do not entitle the infant to repudiate a contract of this sort are to be found in Corn v. Matthews and Green v. Thompson. In the case cited above an infant entered into a contract of service with a Railway Company, promising to accept the terms of an insurance against accidents in lieu of his rights of action under the Employers' Liability Act. It was held that the contract was for his benefit and that he was bound by his promise. And an infant may be held liable for the breach of such a contract under the Employers and Workmen Act I875 1 - 1 38 A 39 Viet. c. 90. No civil proceedings can be taken against an infant on an apprenticeship deed ; though if he misbehave he may be corrected Chap. III. 2 INFANTS 129 Apart from the two exceptions aforesaid the section seems clear, and has been strictly construed. An infant who had contracted trading debts was convicted Decisions on an indictment charging him with having defrauded his r creditors within the meaning of the Debtors' Act 1869. The conviction was quashed on the ground that the transactions R.v.wiison, . 5 Q B. D. which resulted in debts were void under the Infants' Relief (c. C.RO 28. Act. There were consequently no creditors to defraud. On the same reasoning- an infant cannot be made a bankrupt in EX pane Jones, 18 Ch. respect of such debts. D - 10 9- But, it may be asked, can an infant who has received goods and paid their price recover his money, or the trades- man his goods, on the ground that the transaction is void ? This much is clear, that if an infant has paid money and taken benefit under the contract he cannot recover the money so paid. An infant hired a house and agreed to pay the landlord Valentin! v. 100 for the furniture. He paid 60 and gave a pro- Q- B - D. 66. missory note for the balance. After some months' use of Goods the house and furniture he came of age, and then took ^nlfusod proceedings to get the contract and the promissory note set aside, and to recover the money which he had paid. He obtained relief from future liabilities on the contract and note, but could not recover money paid for furniture of which he had enjoyed the benefit. On the other hand, although there is no authority precisely [189+1 3 Ch. in point, the case of Hamilton v. V aughan-SJierrin Electrical Engineering Co. shows that an infant who has bought shares on which no dividend has been paid, may within a reason- able time repudiate the shares and recover the money. In this case six weeks had elapsed, and the infant had not attended any meeting or otherwise affirmed his position as a shareholder. Although the purqfcase of shares in a Company is not a transaction which would fall under I of the Infants' by his master, or brought before a justice of the peace. De Francesco v. Barnum, 43 Ch. D. 165. Gylberi v. Fletcher, Cro. Car. 179. ANSON K 130 FORMATION OF CONTRACT Part II Relief Act, the language of the Court is so full and ex- plicit as to suggest a general rule, that where benefit has been received the infant cannot recover money paid ; that where no benefit has been received he can. The second section. Infant's right of action. Implied ratifica- tion. In re Yeoland's Consols, 58 L. T. 922. Whitting- hain v. Murdy. 6oL.T. 956. Carter v. Silber, fifga] 2 Ch, (C. A.) 278. Edwards v. Carter, [1893] A. C. 360. The second section would seem to deal with all contracts except those which are excluded from the operation of i. A man of full age cannot make himself liable upon a contract entered into during infancy, even though there be fresh con- sideration for his ratification of such liability. But we must note some points which are not quite obvious in reading the section. The contract cannot be enforced against the party who contracted during infancy, but he may sue upon it. The words of the section do not avoid the contract; they only make it unenforceable against one of the parties. But though damages may be recovered specific performance cannot be obtained for the reason that the contract cannot be mutually enforced. Next we must take note of the fact that the old distinction still exists between contracts which heeded ratification to affirm them and contracts which needed renunciation to avoid them. Three eases establish this important distinction. An infant received an assignment of shares in 1883: he said he would repudiate them, but did not do so. He reached full age in 1886 : in 1887 the Company was wound up and he was not permitted to take his name off the list of con- tributories. An infant became a member of a building society, received an allotment of land, and for four years after he came of age paid instalments of the purchase money. Then he endea- voured to repudiate the contract. He was npt permitted to do so. An infant became a party to a marriage settlement, under which he took considerable benefits. Nearly four years after coming of age he repudiated the settlement. It was held that a contract of this nature was binding unless repudiated Chap. III. 2 INFANTS 131 within a reasonable time of the attainment of majority, and that he was too late. Reasonableness in respect of time must depend entirely on the circumstances of each case. A lapse of more than thirty years has been held not to bar the right to avoid a settlement made during infancy, but in that case the settlement had remained inoperative during the whole time. Fan-ington 3 v. Forrester, and the infant had been ignorant of its provisions. ll |93l 2 Ch - On the other hand, the Courts have been strict in their application of 2, to contracts of the sort that, before the Act, were invalid unless ratified. King, an infant, became liable to a firm of brokers for Express 547 : after he came of age they sued him, and he compro- tion. raised the suit by giving two bills of exchange for 50. The firm endorsed one of the bills to Smith, who sued upon it, The Queen's Bench Division held that the bills were a promise, based on a new consideration, to pay a debt contracted during minority, that here was a ratification of the sort contemplated Iby the Act, and that Smith could not recover. ' We have in the present case,' said Charles, J., ' first a promise by King during his minority to pay a sum of money ; secondly, a promise by him after full age to pay a portion of that sum. It is said that the forbearance of the then plaintiffs to carry on their action afforded a new consideration and a good consideration for King's promise to pay the bills of exchange. In my opinion, how- ever, that case is amply provided for by 2 of the Act. I think that there was here a new consideration for the defendant's promise ; but the section expressly says that no action shall be brought on such a promise even where there is a new consideration for it. The case L. R. 10 Ch. of ex parte Kibble seems strongly to support that view. In that case 373 " the plaintiff had obtained a judgment by default for a debt incurred by the defendant during infancy, and the judgment had been followed by a judgment debtor summons and a petition for an adjudication in bankruptcy. The Court inquired into the consideration for the judgment, and finding that it was a debt contracted during infancy held that 2 applied to the case, and dismissed the petition for Smith v. , . ,. .. , King. [1802] adjudication. 2 Q. B. 543. In dealing with contracts other than those of debt the , . . . n an difficulty of distinguishing between the ratification of an old new pro- K 2 132 FORMATION OF CONTRACT Part II promise and the making of a new one has led to extreme refinements. Strictly construed the Act would make it impossible for a man to become liable on any agreement made during infancy however advantageous to him. Where the parties to mutual promises of marriage remain M^iiil, ad V on * ne fti n g f an engaged couple after the promisor has 439! P ' ' attained his majority, the maintenance of the engagement has been held to be a ratification, and to be insufficient to sustain an action for breach of the promise. But where Noithcote v. the mutual promises made during infancy are conditional on 385 ' consent of the man's parents, and the promise is renewed by him, after majority, with their consent ; or where an engage- ment is made during minority with no date fixed for the marriage, and after the man comes of age the parties agree w'orraiT v " * name a day on which it shall take place, the promises so 4^. P ' D ' made have been held to be new promises, and the breach of them is actionable. (2) Neces- (2) Necessaries. what are 1^ nas always been held that an infant may render himself they ? liable for the supply to him not merely of the necessaries of life, but of things suitable to his station in life and to his particular circumstances at the time. The locus classicus on this subject is the judgment of Bramwell, B., in Ryder v. L.R.3RX. Wombwell, the conclusions of which were adopted by the QO. L.R. 4 Ex. Exchequer Chamber. The main difficulty is to determine the provinces of the Court and the Jury in ascertaining what are necessaries; but we may venture to state the following rules : (a) Evidence being given of the things supplied and of the circumstances of the infant, the Court determines whether the things supplied can reasonably be considered necessaries at all; and if it comes to the conclusion that they cannot, the case may not even be submitted to the jury. Bramweii Things may obviously be outside the range of possible v.'w'oJL necessaries. 'Earrings for a male, spectacles for a blind well. person, a wild animal, might be suggested/ Chap. III. 2 INFANTS 133 Things may be of a useful character, but the quality or quantity supplied may take them out of the character of necessaries. Elementary text-books might be a necessary to a student of law, but not a rare edition of ' Littleton's Tenures/ or eight or ten copies of ' Stephen's Commentaries/ Necessaries also vary according to the station in life of the infant or the peculiar circumstances in which he may be placed. The quality of clothing suitable to an Eton boy would be unnecessary for a telegraph clerk; the medical attendance and diet required by an invalid would be un- necessary to one in ordinary health. It does not follow therefore that, because a thing is of a useful class, a judge is bound to allow a jury to say whether or no it is a necessary. (fy If the judge conclude that the question is an open Provinces one, and that the things supplied are such as may reasonably andjifry : be considered to be necessaries, he leaves it to the jury to say whether, under the circumstances of the case, the things supplied were necessaries as a fact. And the jury determines this point, taking into consideration the character of the things supplied, the actual circumstances of the infant, and the extent to which the infant was already supplied with them. I say ' actual circumstances,' because a false impression which the infant may have conveyed to the tradesman as to his station and circumstances will not affect his liability : if a tradesman supplies expensive goods to an infant because Brayshaw v. he thinks that the infant's circumstances are better than 7 Scott, at - , '"U." P- '87- in fact they are, or if he supplies goods of a useful class not knowing that the infant is already sufficiently supplied, he does so at his peril 1 . 'Italics upon the plaintiff to prove, not that the goods supplied johnstone v. belong to the class of necessaries as distinguished from that of ^ a Q k \ D _ luxuries, but that the goods supplied, when supplied, were necessaries for 59- the infant. The fact that the infarfb was sufficiently supplied at the time of the additional supply is obviously material to this issue as well as fatal to the contention of the plaintiff in respect of it.' 1 See the definition of necessaries in the Sale of Goods Act, 56 & 57 Viet., c. 71, a. 134 FORMATION OF CONTRACT Part II of Court of Infant charged * upon con- tract framed ' lenmngfs v. hut may though originat- ing in /rseager, >s ' (c) The ruling of the Court and the finding of the jury are alike subject to review by successive Courts of Appeal. An infant is liable for wrong : but a breach of contract ma y no ^ ^ e treated- as a wrong so as to make the infant liable ; the wrong must be more than a misfeasance in the ~ performance of the contract, and must be separate from and independent of it. Thus where an infant hired a mare to ride * and injured her by over-riding, it was held that he could not be made liable upon the contract by framing the action in tort for negligence. Nor can an infant be made liable for goods sold and delivered by charging him in trover and con- version : and yet the Infants' Belief Act makes a sale of goods to an infant absolutely void, and so would appear to prevent any property from passing to him. But when an infant hired a horse expressly for riding and no * ^ or i 11131 ?! 11 ^ an d then lent it to a friend who jumped the horse and killed it. he was held liable : for ' what was done by the defendant was not an abuse of the contract, but was ^he doing of an act which he was expressly forbidden by the owner to do with the animal/ A butcher boy appropriated some of the meat which he was employed to carry to his master's customers : he sold it and kept the money. He was detected, an account was made of the money due from him, which he acknowledged to be correct, and when he came of age he gave a promissory note for the amount. He was held liable for the amount. It was argued that the liability arose on an account stated, which was void under i , or on a ratification which was unenforceable under 2. But the Court held that he was liable to an action ex delicto, and that his promise to pay when he came of age was the compromise of a suit, for which, being of age, he was competent to contract. Chap. III. 3 CORPORATIONS 135 3. Corporations. A corporation is an artificial person created by law. Hence the limitations to the capacity of a corporation for entering into a contract may be divided into necessary and express. The very nature of a corporation imposes some necessary r - Neces- sary limits restrictions upon its contractual power, and the terms of its to its con- . ii tractual incorporation may impose others. capacity. A corporation has an existence separate and distinct from that of the individuals who compose it ; their corporate rights and liabilities are something apart from their individual rights and liabilities; they do not of themselves constitute the corpora- tion, but are only its members for the time being 1 . Thus a corporation, having this ideal existence apart from Must con- its members, is impersonal, and must contract by means of through an agent. It ' cannot act in its own person, for it has no an a ent - . Ferguson v. person. Wilson. It follows also that a corporation must give some formal evidence of the assent of its members to any legal act which, as a corporation, it may perform. Hence the requirement that a corporation must contract under seal. Ante, p. 69. The exceptions to this requirement have been dealt with elsewhere. It should however be noticed that where a cor- poration either expressly, or by the necessary construction of the terms of its incorporation, has power to make negotiable &? c & 4 6 instruments, exception is made by the Bills of Exchange Act 9I (2)- (1882) to the general rule that by the law merchant an instrument under seal is not negotiable. Before this Act a trading corporation whose business it might be to make such instruments could render them valid by the signature of an agent duly appointed, but the validity of a bill or note made under the seal of a corporation was doubtful. The express limitations upon^he capacity of corporate bodies a- Express must vary in every case by the terms of their incorporation, tions. Much has been and still may be said as to the effect of these terms in limiting the contractual powers of corporations, but 136 FORMATION OF CONTRACT Part IT it is outside the purpose of this book to discuss the doctrine of ' Ultra vires/ The question whether the terms of incorpora- tion are the measure of the contracting powers of the cor- poration, or whether they are merely prohibitory of contracts which are inconsistent with them, was discussed at length in L.R.;H.L. the much litigated case of the Ashbury Carriage Company 653. v. Riche ; and the results of this and other cases point to a distinction between two kinds of corporations. A corporation created by charter, in the exercise of the royal prerogative a corporation at common law can deal with its property, or bind itself by contract like an ordinary See Baroness person, subject always to such special directions given in the River Dee charter as might make certain contracts inconsistent with the Co., 30 Cn. at p. 685, n. O bj ec t s of its creation. Attorney But a corporation created by or in pursuance of statute General v. London Co. j s limited to the exercise of such powers as are actually Council, c 9 A. l .~78i7 h ' conferred, or may reasonably be deduced from the language jo^ 21 A ' C ' of the statute. And thus a company incorporated under the Ashbary Companies Act of 1862 is bound by the terms of its memo- Carriage Co. L R'^H L randum of association to make no contracts inconsistent with, or foreign to, the objects set forth in the memorandum. 3*S4 The Companies Act of 1890 enables such a company to alter its memorandum under certain conditions and for certain objects. The assent of a Court which has jurisdiction to make an order for such a purpose, and notice to the parties interested ibid. i. (5). are the chief conditions. The objects are the furtherance of its business, the addition of cognate business or the abandonment of some of its original objects. Contracts A contract made ultra vires is void ; but not on the ground notVo'icT ^ illegality. Lord Cairns in the case last above cited takes for ille- exception to the use of the term c illegality/ pointing out that gality, but .-.-- _., . . for in- it is not the object of the contracting parties, but the incapacity capaci y. Q Q ^ Q ^ them, that avoids the contract. Chap. III. 4 LUNATIC AND DRUNKEN PERSONS 137 4. Lunatic and drunken persons. The contract of a lunatic is binding upon him unless it The con- can be shown that at the time of making the contract he was voidable : wholly incapable of understanding what he was doing and that the other party knew of his condition. ' When a person enters into a contract and afterwards alleges that he was so insane at the time that he did not know what he was doing and proves the allegation, the contract is as binding upon him in every respect, whether it is executory or executed, as if he had been sane when he made it,_unlj6ss_he__can prove further imperial that the person with whom he contracted knew him to be so insane ston", [1892] as not to be capable of understanding what he was about.' 1 Q- B - 6 I - This decision enables us to dispense with the distinction whether of between executory and executed contracts made with lunatics which is suggested in Molton v. Camroux. aExch. 48?; 4 Exch. 17. A lunatic, even though he has been found insane by in- Snook i -IIP v - Watts . quisition 1 , is not on that account incapable of contract- " Beav. at r P. 107. ing: the validity of the contract depends on the knowledge Haiiv. War- which the other party may be shown, or reasonably sup- &* posed, to have possessed of the state of mind of the insane person. A contract made by a person in a state of intoxication or drunk- may be subsequently avoided by him, but if confirmed is binding on him. A man, while drunk, agreed at an auction to make a purchase of houses and land. Afterwards, when sober, he affirmed the contract, and then repented of his bargain, and when sued on the contract pleaded that he was Matthews v. Baxter, L.R. drank at the time he made it. But the Court held that 8 Ex - J 3 2 - although he had once had an option in the matter and might have avoided the contract, he was now bound by his affirma- tion of it. 'I think/ said Martin, B., 'that a drunken man, 1 Commissions de lunatico inquirendo are no longer issued specially in each case of alleged insanity. A generaJT commission is now, by 53 & 54 Viet. c. 5, issued from time to time, under the Great Seal, to Masters in Lunacy appointed by that Act, who conduct an inquiry in each case in a manner prescribed by the Act. 138 FORMATION OF CONTRACT Part II when he recovers his senses, might insist on the fulfilment of Barter I! R n * s b ar g a i n > an( * therefore that he can ratify it so as to bind 8 EX. 132. hi mse lf to a performance of it/ The rules of equity are in accordance with those of common law in this respect. Under such circumstances as we have described, Courts of Equity will decree specific performance against a lunatic or a person who entered into a contract when intoxicated, and will on similar grounds refuse to set aside their contracts. 56 & 57 Viet., By the Sale of Goods Act a lunatic or a drunkard is liable f/iiasi f,p confrart.n, for necessaries sold and delivered, if by reason of mental incapacity or drunkenness he is incapable of 44 CH. D. contracting. The liability had already been so regarded by the Court of Appeal in Re Rhodes. 5. Married Women, Before Until the 1st of January 1883, it was true to state contracts that, as a general rule, the contract of a married woman was void - void. Excep- Yet there were exceptions to this rule : in some cases a married woman could make a valid contract, but could not sue or be sued apart from her husband ; in others she could sue but could not be sued alone ; in others she could both sue and be sued alone. Brashfordv. (\\ K married woman might acquire contractual rig-hts by Buckingham v ' c"o Tac 77 reason of personal* services rendered by her, or of the assign- M?dCoun men ^ to her of a chose in action. In such cases the husband J3'c. B.478. might ' reduce into possession' rights pf this nature accruing to his wife, but unless he did this by some act indicating an intention to deal with them as his, they did not pass, like other personalty of the wife, into the estate of the husband. They survived to the wife if she outlived her husband, or passed to her representatives if she died in his lifetime. (2) The wife of the king of England ' is of capacity to grant and to take, sue and be sued as a feme sole, at the Co. Litt. i ) i 33 a. common law. Chap. III. 5 MARRIED WOMEN 139 (3) The wife of a man civiliter mortuus 1 had similar rights. (4) The custom of the City of London enabled a married woman to trade, and for that purpose to make valid contracts. She could not sue or be sued upon these (except in the City Courts) unless her husband was joined with her as a party, but she did not thereby involve him in her trading liabilities. (5) A group of exceptions to the general rule was created * g & Viet. by the Divorce and Matrimonial Causes Act. A woman divorced from her husband is restored to the Divorce, position of a feme sole. Judicial separation, while it lasts, causes the wife 'to be judicial considered as a feme sole for the purpose of contract, and ^on wrongs and injuries, and suing and being sued in any judicial proceeding/ 35, 26. And a wife deserted by her husband, and having obtained desertion. a protection order from a magistrate or from the Court, is ' in the like position with regard to property and contracts, and suing and being sued, as she would be under this Act if she had obtained a judicial separation/ ai. (6) Akin to the last exception, though not resting upon Contract Statute, is the capacity of a married woman to make a t^onT^ contract with her husband that they should live apart, and to compromise proceedings commenced or threatened in the Divorce Court. For all contracts incident to such a trans- JJ c 9 re r v - McGregor, action the wife is placed in the position of a feme sole. 2 4 \' B ' D ' (7) The separate estate of a married woman has in various Separate degrees, in Equity and by Statute, been treated as a property equity. in respect of which and to the extent of which she can make contracts. The doctrine arose in the Chancery. Property, real and personal, might be held in trust for the separate use of a married woman independent of her husband. Sometimes this property was settled on ^her with a ' restraint upon anticipation ' : in such a case she could use the income, but 1 Civil death arises from outlawry : it seems doubtful whether there are any other circumstances to which the phrase is now applicable. 140 FORMATION OF CONTRACT Part II could neither touch the corpus of the property, nor create future rights over the income. But where it was not so Johnson v. restrained, then to the extent of the rights and interests created, Gallagher, 3 D. F. 4 j. a married woman was treated by Courts of Equity as having power to alienate and contract. But she could not sue or be sued alone in respect of such estate, nor could she bind by contract any but the estate of Fitz e Gibbon which she was in actual possession or control at the time the i 7 Ch.D. 454- liabilities accrued. Separate The Married Women's Property Acts of 1870 and 1874 statute, specified various forms of property as the separate estate of married women, enabled them to sue for such property and 33&34Vict. gave them all remedies, civil and criminal, for its protection 37 & 38 Viet, that an unmarried woman would have had under the circum- c. 50. stances. Under this Act a married woman might make a contract for the exercise of her personal skill or labour, and maintain an action upon it in her own name. Thus was constituted a new legal separate estate, not vested in trustees, and in respect of which a married woman could sue apart from her husband. But this estate was limited in character, and the married woman could not defend alone any Hancocks v. action brought concerning it : it was necessary that her c. p. D. 197. husband shpuld be joined as a party. 45 A 46 Viet. The Married Women's Property Act of 1882 repeals the c. 7S Acts of 1870 and 1874, except as regards all rights acquired 1882. or acts done while those statutes were in force. It affects : (1) Every woman married after 1882. (2) Every woman married before 1883 as respects property and choses in action acquired after 1882. We may summarize its effect, so far as it relates to our present purpose, as follows : i i. sab-s. i. All property, real and personal, in possession, reversion or remainder, vested or contingent, held by a woman before, or acquired after marriage, is her separate property. She can acquire, hold, and dispose of it by will or otherwise, ' as her Chap. III. 5 MARRIED WOMEN 141 separate property in the same manner as if she were & feme gole without the intervention of any trustee/ ' In respect of and to the extent of her separate property ' > sub-s. 2. a married woman may enter into contracts, and render herself liable thereupon, as though she were a, feme sole. On such contracts she may sue and be sued alone. By the Married Women's Property Act 1893, every con- 56*57 Viet, tract made by a married woman since December 5, 1893, binds her separate estate, and binds separate estate acquired after the contract was made though she possessed none at the 1893. time of making the contract. The last enactment extends in two ways the operation of > sub-s. 3. the Act of 1882. fi) By that Act the Court might draw Leak v.Drif- \ ' J field, 24 inferences as to the intention of a married woman to bind Q- B - D - & or not to bind her separate estate. Since 1893 the existence of an intention to bind such estate is presumed and cannot be negatived. (2) The Act of 1882 has been interpreted to mean that the power of a married woman to bind her PaiHser v. Gurney, 19 separate estate depended on the existence of such estate atQ- B -"-5 u > the date of the contract. The amending Act, as regards all contracts made after December 5, 1893, binds separate estate when acquired, whether or no the married woman possessed any at the date of the contract. But these contracts must in re . Wheeler have been made since the passing of the Act : an acknow- ['904] * Ch. ledgement of a pre-existing debt on which a married woman could not have been sued before the Act is not a contract within the meaning of the Act. This extended liability does not affect separate estate which Restraint a married woman is restrained from anticipating. Where pation. property is settled upon a married woman in trust, and subject to a restraint on anticipation, such property is not then free and she cannot make it liable, in advance, for the satisfaction of her contracts. Thus, if a judgment is recovefed against a married woman who has separate estate which is not free, such a judgment can only affect so much of the estate as is actually in her 142 FORMATION OF CONTRACT Part II Hood-Bam hands at the time, or income from it which is due and in v. Heriot, [1896] A. c. arrear at the date of the judgment. It cannot affect income Boiithov. from such property accruing and coming into her hands after [1905] A. c. the date of the judgment. Batemanv. The restraint cannot be removed by a statement made in fisolj' good faith, or otherwise, that it is withdrawn. And the 144. words in the Act of 1893 which protect such property ' at the DimbiebV, time of making the contract or thereafter ' extend the proteC- hc^] iK. B. . tion after coverture has ceased. But an unmarried woman possessed of property and debts, cannot upon marriage evade her debts by settling her property jay v.Robin- upon herself without power of anticipation. Property owned son, 25 Q. B. 0.467. before marriage is liable to debts contracted before marriage, however the property may be settled upon marriage. On the same principle, where debts are incurred by a mar- ried woman on the faith of her free separate estate, they bind her estate when coverture has ceased by reason of widowhood or dissolution of marriage. Nature of But the liability to which a married woman can thus 1 y ' subject herself is not a personal liability. It cannot come into existence unless there is separate estate, and it does not extend beyond the separate estate* not Thus where a joint judgment is given against husband and wife, it is to be given against the husband personally, and s . 15. against the wife as to her separate property. And again, a^ married woman cannot be made a bankrupt or committed 32 & 33 Viet to prison under 5 of the Debtors' Act 1869, for non-payment c* 62* of a sum for which judgment has been given against her, under i. sub-s. a of the Act of 1882, The Debtors' Act relates to persons from whom a debt is due, and damages or costs recovered against a married woman do not constitute bcott v. i Q.B. e J) ^ . a dzbt due from her, but ' shall be payable out of her separate i. sut>-s. 2. estate, and not otherwise/ Hoitbyv. Beyond this a judgment against a married woman 'is Hodgson, 24 ... . . . . . Q. B. D. 109. precisely the same as a judgment against an unmarried woman/ The judgment is against her : 'the fact that execu- Chap. III. 5 MARRIED WOMEN 143 tion is limited to her separate property does not make it any Peiton v. Harrison, the less a judgment against her/ ^92] i Q.B. Thus the Acts of 1882 and 1893 increase in two ways the powers of contracting possessed by a married woman. Marriage no longer involves any proprietary disability. All Results the property which a woman owns when she marries remains statute. hers, and all property which she may subsequently acquire becomes hers, unless it is placed in the hands of trustees with a restraint upon anticipation. The area of separate estate is immensely extended, and therewith the contractual capacity of the woman. Full effect is given to this extension by the provision in the Act that future as well as existing separate estate is rendered liable to satisfy the contract. And the rights and liabilities thus increased are rendered more easy of enforcement by the provision which enables the married woman to sue and be sued alone. Mistake. Misrepre- sentation. Fraud. Duress. Undue influence. CHAPTER IV Reality of Consent. THE next feature in the Formation of Contract which has to be considered is Genuineness or Reality of Consent ; and here the same question recurs in various forms : Given an apparent Agreement, possessing the element of Form or Con- sideration, and made between parties capable of contracting, was the consent of both or either given under such circum- stances as to make it no real expression of intention ? This question may have to be answered in the affirmative for any one of the following reasons. (i) The parties may not have meant the same thing ; or one or both may, while meaning the same thing, have formed untrue conclusions as to the subject-matter of the agreement. This is Mistake. (ii) One of the parties may have been led to form untrue conclusions respecting the subject-matter of the contract by statements innocently made, or facts innocently withheld by the other. This is Misrepresentation. (iii) These untrue conclusions may have been induced by representations of the other party made with a knowledge of their untruth and with the intention of deceiving. This is Fraud. (iv) The consent of one of the parties may have been extorted from him by the other by actual or threatened personal violence. This is Duress. (v) Circumstances may render one of the parties morally incapable of resisting the will of the other, so that his consent is no real expression of intention. This is Undue Influence. Chap. IV. i MISTAKE 1. Mistake. The confusion which attends all discussions on Mistake Mistake of makes it important to strike off at once all topics which, Differs in though superficially connected with the subject, are not effectfrom relevant to Mistake as invalidating a contract. First then we must strike off cases where the parties are mistake genuinely agreed, though the terms employed in making pre ssion, their agreement do not convey their true meaning. In such cases they are permitted to explain, or the Courts are willing to correct their error ; but this is Mistake of expression, and concerns the Interpretation, not the Formation, of Contract. Next, we must strike off all cases in which there was never want of the outward semblance of agreement because offer and accept- ance never agreed in terms. Thirdly, we must strike off all cases in which the assent of false state- one party has been influenced by a false statement, innocent or fraudulent, made by the other ; by violence, or by oppression on the part of the other. Lastly, we must strike off all cases in which a man is dis- failure of appointed as to his power to perform his contract, or in the ft performance of it by the other. This last topic relates to the performance of Contract, and should not be mentioned here, but for a practice, common even to learned and acute writers, of confusing Mistake and Failure of Consideration. If a man alleges that a contract to which he was a party has not been performed as he expected, or has altogether failed of perform- ance, the question is not whether he made a contract, but whether the terms of the contract justify his contention. A man who knows with whom he is dealing, and the nature of the contract which he wants to make, has only himself to blame, if the terms of the contract do not bind the other Failure of party to carry out the agreement, or pay damages f or default. And though the terms may not express what he Mistake. 146 FORMATION OF CONTRACT Part II intended them to express, his failure to find words appropriate to his meaning is not Mistake ; if it were so a contract would be no more than a rough draft of the intention of the parties, to be explained by the light of subsequent events, and cor- rected by the Court and Jury. We must assume that the terms of the contract correspond to the intention of the parties. If performance does not correspond to the terms of the contract, or if the subject- matter of the contract, or the conditions under which it has to be performed are not such as the parties contemplated, still we cannot say that the rights of the parties are affected by mistake. Every honest man, making a contract, expects that he and the other party will be able to perform and will perform his undertaking. The disappointment of such expec- tations cannot be called mistake, otherwise Mistake would underlie every breach of contract which the parties had not deliberately intended to break when they made it. Cases of The cases in which Mistake affects Contract are the rare Mistake^ exceptions to an almost universal rule that a man is bound by an agreement to which he has expressed a clear assent, uninfluenced by falsehood, violence, or oppression. If he exhibits all the outward signs of agreement the law will hold that he has agreed. It will be found that where Mistake is allowed to invalidate a contract, the mistake is sometimes brought about by the act of a third party, sometimes by the dishonesty of one of the parties to the contract, and that the cases of genuine mutual mistake are very few. The circumstances under which mistake is operative would thus arise in one of three ways. Act of Two parties are brought into contractual relations by party ^ e ^ rau( ^ or negligence of a third, inducing one to enter into a transaction which he did not contemplate, or deal with a party unknown or unacceptable to him. Dis- Again, one of two parties allows the other to enter into one party, an agreement with him, knowing that the other is mistaken 'Chap. IV. I MISTAKE as to his identity, or knowing that he attaches one meaning to the terms of the agreement while the other party attaches to them another and different meaning. Or lastly, there are cases of genuine mutual Mistake where Mistake of parties contract for a thing which has ceased to exist, or are in error as to the identity of one another or of the subject of the contract. These three forms of Mistake may be illustrated, though not amply, from the reports. Beyond these the law will not assist people whose judgment leads them astray, unless their judgment was influenced by the fraud or misrepresentation of the other party to the contract. It will be found that the cases which follow fall under one or other of these three heads. Mistake as to the nature, or as to the existence of the contract. It is hard to suppose that this can arise, except from the Act of falsehood or carelessness of a third party. The Courts would pa rt y not permit one who had entered into a contract to avoid its operation on the ground that he did not attend to the terms which were used by himself or the other party, or that he did not read the document containing the contract, or was misin- Hunter v. Walters, formed as to its contents, or that he supposed it to be a mere 7 Ch - 8 4- form. In like manner one may suppose, though the case has never arisen, that a man who posts a letter of offer or of acceptance, which he had written and addressed, would not be excused from his contract on the ground that be had changed his mind after writing the letter, and had posted it from inadvertence. The only cases furnished in the reports are cases in which fraudu- by the fraud of a third party the promisor has been mistaken as to the nature of the contract into which he was entering, and the promisee has in consequence been led to believe in the intention of the other party to contract when he did not so intend. In Thoroughgood's Case, an illiterate man executed 2 Co. Rep. 9. a deed, which was described to him as a release of arrears of L 2 148 FORMATION OF CONTRACT Part II Act of third party fraudu- lent, rent : in fact it was a release of all claims. The deed was not read to him, but when told that it related to arrears of rent, he said, ' If it be no otherwise, I am content/ and executed the deed. It was held that the deed was void. In Foster v. Mac&innon, Mackinnon an old man of feeble sight was induced to endorse a bill of exchange for 3,000, on the assurance that it was a guarantee. Later the bill was endorsed for value to Foster, who sued Mackinnon ; the jury found that there was no negligence on the part of Mackinnon, and though Foster was innocent of the fraud, it was held that he could not recover. Foster v. ' It seems plain on principle and on authority that if a blind man, or a man who cannot read, or who for some reason (not implying negligence) forbears to read, has a written contract falsely read over to him, the reader misreading to such a degree that the written contract is of a nature altogether different from the contract pre- tended to be read from the paper, which the blind or illiterate man afterwards signs ; then, at least if there be no negligence, the signature so obtained is of no force. And it is invalid, not merely on the ground of fraud, where fraud exists, but on the ground that the mind of the signer did not accompany the signature ; in other words, that he Mackinnon, never intended to sign, and therefore in contemplation of law never 7/1. ' * did sign, the contract to which his name is appended.' The more recent case of Lewis v. Clay was decided on the 2 L. j. Q. B. same grounds as Foster v. Mackinnon. [-898! 4. . , . . .. .Lewis was the payee or a promissory note made jointly by Clay and Lord William Nevill. Clay had been induced to sign his name on a piece of paper, concealed from him by blotting-paper with the exception of the space for his signature. He was told by Nevill that the document con- cerned private affairs, and that his signature was wanted as a witness. The jury found that he had signed in misplaced confidence, but without negligence : and Russell, C. J., setting aside any questions which might arise from the character of the instrument, or the construction of the Bills of Exchange Act 1882, held that he was not liable because 'his mind never went with the transaction/ but was 'fraudulently Chap. -IV. I MISTAKE 149 directed into another channel by the statement that he was merely witnessing a deed or other document V Here the Court must say which of two innocent parties is to suffer for mistake occasioned by the fraud of a third; but the same question may arise where the act of the third officious, party is merely officious or careless. It has been held that a man is not bound by an offer wrongly transmitted by a tele- Henkei v. J & J J p L R graph clerk and accepted by the offeree. The Post Office 6 * ^ had no authority to convey the message except in the form presented to it. It is quite possible to imagine more difficult cases. A writes to X, a broker, an order to buy certain shares, that is, he makes an offer to buy shares importing a promise to pay their market price. After the letter is written and directed, he receives intelligence which causes him to change his mind, and he takes other letters to the post, leaving this on his table. A servant or a friend, seeing the letter, thinks it has been forgotten, and posts it. The shares are bought just before a commercial panic, and they fall heavily in value. Is A or X to lose by the interference of A's friend or servant ? Or let us suppose that A has given the letter with others to a friend, requesting him to post the others, but only to read the letter to the broker, and advise him upon it. The friend carelessly posts all the letters and the shares are bought by X at a loss to A. It may be said for A that in neither ease did the mind of the offerer accompany the offer : as in Foster v. Mackinnon L. R. 4 c. p. the mind of the signer did not accompany the signature. It might be said on X's behalf that A was negligent in his dealings with an important letter and should suffer accord- ingly. This much seems clear, that Mistake as to the nature of the transaction entered into, or as^ito the intention of the other 1 The principle in Foster v. Mackinnon is generally approved in the American Courts, though they are strict on the point of negligence. Ruling Cases, v. p. 229. 150 FORMATION OF CONTRACT Part II party to make a contract, must be mutual Mistake ; that it must arise from some deceit which ordinary diligence could not penetrate, or some mischance which ordinary diligence could not avert ; that this deceit or mischance must be the work of a third party, otherwise the contract, if affected at all, would be voidable for fraud or misrepresentation and would not be void on the ground of mistake. Mistake as to the identity of the person with whom the contract is made. Mistake as Mistake of this sort can only arise where A contracts with y X, believing him to be M : that is, where the offerer has in contemplation a definite person with whom he intends to contract. It cannot arise in the case of general offers which any one may accept, such as offers by advertisement, or sales for ready money. In such cases the personality of the acceptor is plainly a matter of indifference to the offerer l . 2 H. & N. In Boulton v. Jones, Boulton had taken over the business 564. known to of one Brocklehurst, with whom Jones had been used to deal, and against whom he had a set-off. Jones sent an order for goods to Brocklehurst, Boulton supplied them without any notice that the business had changed hands; when Jones learned that the goods had not come from Brocklehurst he refused to pay for them, and it was held that he need not pay. ' In order to entitle the plaintiff to recover, he must show that r Jones, 2 H. . & N. 566. there was a contract with himself/ 3 A P p. Cas. In Cundy v. Lindsay, a person named Blenkarn, by imitating the signature of a respectable firm named Blenkiron, induced produced AB to supply him with goods which he afterwards sold to X. of third It was held that an innocent purchaser could acquire no right party. 1 Where the personality of one party may be important to the other | the assumption of a false name is fraudulent and makes the contract [ 1890] 2 Q.B. voidable. In Gordon v. Street the defendant was induced to borrow money " from Gordon, a money-lender, whose usurious practices were notorious, who on this occasion contracted under the name of Addison. On dis- covery of the fraud Street repudiated the contract and was held entitled to do so. Chap. IV. I MISTAKE 151 to the goods, because as between AB and Blenkarn there was no contract. ' Of him,' says Lord Cairns, ' they knew nothing, and of him they never thought. With him they never intended to deal. Their minds never even for an instant of time rested upon him, and as between him and them there was no con- sensus of mind, which could lead to any agreement or contract whatever. As between him and them there was merely the one side to a contract, where in order to produce a contract, two sides would be required' At p. 465. The result of the two cases is no more than this, that if a man accepts an offer which is plainly meant for another, or if he becomes party to a contract by falsely representing him- self to be another 1 , the contract in either case is void. In the first case one party takes advantage of the Mistake, in the other he creates it. The reports furnish us with no case of genuine Mistake, in Cases of which A makes an offer to M believing him to be X, and M error> accepts, believing the offer to be meant for him. If in Boulton v. Jones the plantiff had succeeded a predecessor 2 H. & N. 564, in business of the same name, he might reasonably have sup- posed that the order for goods was meant for him. If the order had been given to Boulton (A), and accepted by Boulton (X), it is very doubtful whether Jones could have avoided the contract on the ground that though he obtained the goods he wanted from the man to whom his order was addressed, the Boulton whom he had addressed was not the Boulton whom he intended to address. Circumstances might indicate to the offeree that the offer 1 Cundy v. Lindsay has been more recently followed in Baillie's Case. There [1*8] i Ch. is a mass of authority to the effect that where a man induces another n r to contract with him or to supply him with goods by falsely representing himself to be some one else than he ft, or to have an authority which he ; : does not possess, no contract is made, and no property in the goods / passes. Hardman v. Booth, i H. & C. 803 ; Kingsford v. Merry, i H. & N. 503 ; { and Hollins v. Fowler, L. K. 7 H. L. 757, where all or nearly all the cases bearing on the subject are reviewed. 152 FORMATION OF CONTRACT Part II was intended for a different person. An offer of marriage falling into the hands of a lady for whom it was not intended, where two ladies chanced to have the same name and address, might or might not be turned into a promise by acceptance, according as the terms of acquaintance, or age of the parties might justify the recipient in supposing that the offer was meant for her. An offer for the purchase of goods might not call for the same nicety of consideration on the part of the offeree. Mistake as to the subject-matter. Mistake of identity as to the thing contracted for. A contract may be void on the ground of Mistake, if two things have the same name, and A makes an offer to X con- cerning M, thinking that X is referring to M, which offer X accepts concerning m, thinking that A is referring to m. If Mistake of there is nothing in the terms of the contract to point to M, 1 y ' or m, as its subject-matter, evidence may be given to show that the mind of each party was directed to a different object : that A offered one thing, and X accepted another. a H. & c. In Raffles v. Wichelhaus the defendant agreed to buy of the plaintiff a cargo of cotton ' to arrive ex Peerless from Bombay/ There were two ships called Peerless, and both sailed from Bombay, but Wichelhaus meant a Peerless which arrived in October, and Baffles meant a Peerless which arrived in Decem- ber. It was held that there was no contract. But if Wichelhaus had meant a ship of a different name, he would have had to take the consequences of his carelessness in lonidesv. no * expressing his meaning properly. Nor could he have stance Co., avoided the contract if its terms had contained such a descrip- 686. tion of the subject-matter as would practically identify it. Mistake as to the existence of the thing contracted for. Mistake Jt nag been doubted whether this can be regarded as and impos- sibility. Mistake, or whether the parties to every contract do not act Chap. IV. i MISTAKE 153 on an assumption, or implied condition vital to the contract, that the subject-matter of the contract is in existence l . The language of the Courts is, however, in favour of treating these cases as cases of Mistake. In Couturier v. Hastie. a contract was made for the sale of 5 H. L. c. 673. a cargo of corn, which the parties supposed to be on its voyage from Salonica to England : it had in fact, before the date of sale, become so heated that it was unloaded at Tunis and sold for what it would fetch. The Court held that the contract was void, inasmuch as 'it plainly imports that there was something to be sold, and something to be purchased, whereas the object of the sale had ceased to exist/ In Scott v. Couhon, a contract for the assignment of [1903] 2 CH. a policy of life insurance was made upon the basis of a belief common to both parties that the assured was alive. He had, in fact, died before the contract was made. It was held that ' there was a common mistake, and therefore the contract was one that cannot be enforced/ The same rule- applies where parties contract under a mutual Mistake as belief that a right exists, which in fact is non-existent. If A en ^^f " agrees with X to hire or buy an estate from him which both a right, believe to belong to X, but which is found to belong to A, the contract will not be enforced. And this is not, as would at first sight appear, an infringement of the maxim ' ignorantia Bingham v. . 7 , Bingham, jurn /laud excusat. i Ves.Sen'. 126. 'In that maxim, 1 said Lord Westbury, 'the word jus is used in Cooperv. the sense of denoting general law, the ordinary law of the country, f H_ L! 170. But when the word jus is used in the sense of denoting a private right, that maxim has no application. Private right of ownership is a matter of fact ; it may be the result also of matter of law ; but if parties contract under a mutual mistake, and misapprehension as to their relative and respective rights, the result is that that agree- ment is liable to be set aside as having proceeded upon a common mistake.' / 1 By 56 & 57 Viet. c. 71. 6 such a condition is implied in every sale of goods. 154 FORMATION OF CONTRACT Part II Mistake by one party as to the intention of the other } known to that other. We come here to the limits of operative Mistake in regard to the subject-matter of a contract, and must be very careful to define them so as to avoid confusion. Exch. 663. A general rule laid down in Freeman v. Coo&e, and often cited with approval, may be taken to govern all cases in which one of two parties claims to repudiate a contract on the ground that his meaning was misunderstood, or that he misunderstood that of the other party. 1 If whatever a man's real intention may be he so conducts himself that a reasonable man would believe that he was assenting to the terms proposed by the other party, and that other party upon that Smith v. : belief enters into the contract with him, the man thus conducting R. U Q?'B.,* himself would be equally bound as if he had intended to agree to the at p. 607. t Qther party s terms.' As regards the quantity and the price of the subject- matter concerned, a man's statement must usually be taken to be conclusive against himself. Responsi- As regards the quality of a thing sold, or the general cir- parties. cumstances of a contract entered into, a man must use his own judgment, or if he cannot rely upon his judgment, must take care that the terms of the contract secure to him what he wants. In two cases the law will protect one of the parties to a contract. statutory Where goods are bought by description, or in reliance on condi- *h e judgment of a seller who knows the purpose for which tions. they are require^ the Sale of Goods Act introduces into the 57 & 58 vict. contract implied conditions that the goods supplied shall be of 15- a merchantable quality, or reasonably fit for the purpose for which they are required. So where the sale is by sample, there are implied conditions that the bulk shall correspond with the sample, that the buyer shall have an opportunity for in- spection, and that there shall be no defect not apparent on reasonable examination which would render the goods un- merchantable. And again, in certain contracts said to be t uberrimae fidei/ Chap. IV. I MISTAKE 155 in which one of the two parties is necessarily at a disadvantage Rule of as to knowledge of the subject-matter of the contract, the law closure, requires the other to disclose every material fact, that is, every fact which might have influenced the mind of a prudent person, ffot, 175. Beyond this, where the terms of a contract are clear, the ques- tion is, not what the parties thought, but what they said and did. Suppose that A sells to X, and X believes that he is buying, a bar of gold : the bar turns out to be brass. The parties are honestly mistaken as to the subject-matter of the contract, both believed the bar to be gold. But their rights are not affected by their state of mind; they depend on the answer to the question Did A sell to X a bar of metal, or a bar of gold ? A contract for a bar of gold is not performed by the delivery of a bar of brass ; a contract for a bar of metal is performed by the delivery of a bar of metal. It does not matter what the metal may be, nor does it matter what the parties may have thought that it was. There are two things which have to be considered by one who is entering into a contract. The first is the quality of the thing, or circumstances of the transaction : the matter of his bargain. The second is the statements, promises, and conditions of which the contract consists : the terms of his bargain. As to these things, and subject to the exceptions which I have mentioned, a contracting party must take care of himself; he cannot expect the other party to correct his judgment as to the matter of his bargain, or ascertain by cross-examination whether he understands, its terms. But the law will not allow a man to make or accept a promise, which he knows that the other party understands in a different sense from that in which he understands it himself. We can best illustrate these propositions by an imaginary sale. Illustra- A sells X a piece of china. (a) X thinks it is Dresden ^hina, A thinks it is not. Mistake as Each takes his chance. X may get a better thing than A - intended to sell, or a worse thing than he intended to buy ; in neither case is the validity of the contract affected. 156 FORMATION OF CONTRACT Part II (ft) X thinks it is Dresden china. A knows that X thinks so, and knows that it is not. The contract holds. A must do nothing to deceive X, but he is not bound to prevent X from deceiving himself as to the quality of the article sold. Mistake (y) X thinks that it is Dresden china and thinks that A promise, intends to sell it as Dresden china ; and A knows it is not Dresden china, but does not know that X thinks that he intends to sell it as Dresden china. The contract says nothing of Dresden, but is for a sale of china in general terms. The contract holds. The misapprehension by X of the extent of A s promise, unknown to A, has no effect. It is not A's fault that X omitted to introduce terms which he wished to form part of the contract. (8) X thinks it is Dresden china, and thinks that A intends to sell it as Dresden china. A knows that X thinks he is . promising Dresden china, but does not mean to promise more than, china in general terms. The contract is void. X's error was not one of judgment as to the quality of the china, as in (/3), but regarded the quality of A's promise, and A, knowing that his promise was misunderstood, allowed the mistake to continue. The last instance given corresponds to the rule laid down L. R. 6Q. B. in Smith v. Hughes. In that case Hughes was sued for refusing to accept some oats which he had agreed to buy of Smith ; he alleged that he had intended and agreed to buy old oats, and that those supplied were new. The jury were told that if Smith knew that Hughes thought he was buying old oats, then he could not recover. But the Court of Queen's Bench held that this was not enough, and that to avoid the sale Smith must have known that Hughes thought he was being promised old oats. Smith might recover if he had known that Hughes thought he was buying old oats ; not so if he knew that Hughes thought he was being promised old oats. Mistake of Blackburn, J., said, ' In this case I agree that on the sale of buyer as to a specific article, unless there be a warranty making it part of the Chap. IV. I MISTAKE 157 bargain that it possesses some particular quality, the purchaser must quality take the article he has bought though it does not possess that n t known i -A /rm. \ to seller, quality. (This is instance a.) ' And I agree that even if the vendor was aware that the purchaser Mistake of thought that the article possessed that quality, and would not have buyer as to entered into the contract unless he had so thought, still the purchaser j| now n to is bound, unless the vendor was guilty of some fraud or deceit upon seller, him, and that a mere abstinence from disabusing the purchaser of that impression is not fraud or deceit ; for whatever may be the case in a court of morals, there is no legal obligation on the vendor to inform the purchaser that he is under a mistake, not induced by the act of the vendor.' (This is instance .) And Hannen, J., said, ' It is essential to the creation of a contract Mistake of that both parties should agree to the same thing in the same buyer as to sense But one of the parties to an apparent contract p rom is e( j may, by his own fault, be precluded from setting up that he had not known entered into it in a different sense to that in which it was under- * seller. stood by the other party. Thus in a case of sale by sample where the vendor, by mistake, exhibited a wrong sample, it was held that the contract was not avoided by this error of the vendor.' Scott v. 8 E. & B. Littledale l . (This corresponds to instance y.) And further he says, ' If, in the present case, the plaintiff knew Mistake of that the defendant, in dealing with him for oats, did so on the buyer as to assumption that the plaintiff was contracting to sell him old oats, p r0 mise In the cases which we have just considered there is statement of fact accompanied either with knowledge of falsehood or else M a 164 FORMATION OF CONTRACT Part II with intention or willingness to deceive. Herein misrepresen- tation differs from fraud ; for misrepresentation is a misstate- ment of facts not known to be false or a non-disclosure of facts not intended to deceive ; fraud is a statement known to be false, or made in ignorance as to its truth or falsehood, but confidently so as to represent that the maker is certain when he is uncertain. The injured party is then entitled to the action of deceit. (2) Representations distinguished from Terms. Eepresen- Equally important with the distinction between misrepre- and terms sentation and fraud is the distinction between statements which are terms in a contract and statements which are inducements to enter into a contract. Much subtlety of reasoning has been wasted because, where a man has in good faith made a promise which he is ultimately unable to perform, it has been said that his Pan n ^a y v ' P rom i se was misrepresentation, or was made under a mistake L te R m 2 < Q ) .'B. of fact, and so questions proper to the performance or breach of contract have been mixed with questions relating to the formation of contract. And other difficulties have arisen from a view at one time Coverdaie v. entertained by Courts of Equity, that there may be repre- i s Eq. 121. gentations which are not terms in a contract but which ought nevertheless to be made good by the party responsible for them. Such representations, in the cases where they occur, can all be resolved into terms of a contract l . We must bear in mind, first, that a representation which is embodied in a contract ceases to be a representation and pollock on becomes a promise that a certain thing is or shall be; and "A* 5 * a K d next, that, unless a representation is so embodied, it cannot of itself confer any right of action with a view to its realization. At Common Law if a representation was not part of a 1 1 touch at the close of this chapter on representation which creates an estoppel, and so may prevent the disproof of an alleged right, but this is a different thing from the theory advanced in Coverdaie v. Eastwood. Chap. IV. 2 MISREPRESENTATION 165 contract, its truth, except in certain excepted cases and apart from fraud, was immaterial. If it be part of a contract (and this proposition is still undoubtedly true) it receives the name of a Condition or a Warranty, its untruth does not affect the formation of the contract but operates to discharge the injured party from his obligation, or gives him a right of action, ex contractu^ for loss sustained by the untruth of a statement which is regarded in the light of a promise. We shall get a clearer notion of these various phases of repre- 3 B. & s. sentation from the case of Behn v. Burness. Action was brought upon a charter party dated the day of Oct. 1860, in which it was agreed that Behn's ship then in the port of Amsterdam should proceed to Newport and there load a cargo of coals which she should carry to Hong Kong. At the date of the contract the ship was not in the port of Amsterdam and did not arrive there until the 23rd. 'When she reached Newport, Burness refused to load a cargo and repudiated the contract. Thereupon action was brought, and the question for the Court was whether the words now in the port of Amsterdam amounted to a condition the breach of which entitled Burness to repudiate the contract, or whether they only gave him a right, after carrying out the contract, to sue for such damages as he had sustained. Williams, J., in Behn v. . . . Burness, giving judgment in the Exchequer Chamber, thus distin- B- & s. guishes the various parts or terms of a contract : 3 B. & s. 753" 'Properly speaking, a representation is a statement or assertion, made by one party to the other, before or at the time of the con- tract, 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 Represen- not broken though the representation proves to be untrue; nor tation, (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 innocent, whatever unless the representation wMs 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 fraudu- it was true or untrue . . . Though representations are not usually lent> 166 FORMATION OF CONTRACT Part II contained in the written instrument of contract, yet they sometimes are. But it is plain that their insertion therein cannot alter their Descrip- nature. A question however may arise whether a descriptive . statement in the written instrument is a mere representation, or statement. . . 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, Condition and not a mere representation, the often-discussed question may, 1 " of course, be raised, whether this part of the contract is a condition precedent, or only an independent agreement, a breach of which Independ- w jjj no ^ i us tify a repudiation of the contract, but will only be ent agree- . ,. , , . . , ment a cause * action for a compensation in damages. Giaholm v. ' In the construction of charter parties, this question has often 2 $.\ G. been raised, with reference to stipulations that some future thing See' shall be done or shall happen, and has given rise to many nice v-P^thie, distinctions. Thus a statement that a vessel is to sail, or be ready 45.' to receive a cargo, on or before a given day, has been held to be v. a Rk:kie, '* a condition, while a stipulation that she shall sail with all con- ig" & N venient speed, or within a reasonable time, has been held to be only an agreement. 'But with respect to statements in a contract descriptive of the subject-matter of it, or of some material incident thereof, the true doctrine, established by principle as well as authority, appears to be, generally speaking, that if such descriptive statement was intended to be a substantive part of the contract, it is to be regarded as a warranty, that is to say, a condition on the failure or non-performance of which the other party may, if he is so minded, repudiate the contract in foto, and so be relieved from performing his part of it, provided it has not been partially executed in his favour. If, indeed, he has received the whole or any substantial part of the consideration for the promise on his part, the warranty loses the character of a condition, or, to speak perhaps more properly, ceases to be available as a condition, and becomes a warranty in the narrower sense of the word, viz. a stipula- tion by way of agreement, for the breach of which a compensation must be sought in damages.' The Court held that the statement that the ship was in the port of Amsterdam at the date of the contract was intended by the parties to be a Condition; the breach of it therefore discharged the charterer from the obligation to perform his promise. I have cited the judgment in this case at length, partly Chap. IV. 2 MISREPRESENTATION 167 because it is the fullest judicial analysis of the terms of a contract, partly also because it affords a good illustration of the provoking confusion of the terminology of this part of the subject. It will be observed that Condition is used in two senses, Various as meaning a statement that a thing is, and a promise that condition a thing shall be ; in either case the statement or promise is *anty f of so important a nature that the untruth of the one, or the breach of the other, discharges the contract. Warranty is used in three senses. It is first made a convertible term with a condition; it is then used 'in the narrower sense of the word/ in which sense it means (i) an c independent agreement ' or subsidiary promise in the contract, the breach of which can only give rise to an action for damages, and (2) a condition, the breach of which might have discharged the contract had it not been so far acquiesced in as to lose its effect for that purpose, though it may still give rise to an action for damages. Yet in spite of this verbal confusion the judgment gives us a clear idea of the various terms in a contract. (a) Representations, made at the time of entering into the Represen- contract, but not forming a part of it, have no effect on its validity except in certain special cases. When they do operate, their falsehood vitiates the formation of the contract and makes it voidable. (/9) Conditions are either statements, or promises which Condi- form the basis of the contract. Whether or not a term in the contract amounts to a Condition must be a question of construction, to be answered by ascertaining the intention of the parties from the wording of the contract and the circum- stances under which it was made. But when a term in the contract is ascertained to be a Condition, then, whether it be a statement or a promise, the Untruth, or the breach, of it 1 For a fuller discussion of the terms Condition and Warranty see part v. ch. iii. 2. 168 FOKMATION OF CONTRACT Part II will entitle the party to whom it is made to be discharged from his liabilities under the contract. Warranty (y) Warranties, used in ' the narrower sense,' are inde- pendent subsidiary promises, the breach of which does not discharge the contract, but gives to the injured party a right of action for such damage as he has sustained by the failure of the other to fulfil his promise. Warranty ($) A Condition may be broken and the injured party may fado** n0 ^ ava il himself of his right to be discharged, but continue to take benefit under the contract, or at any rate to act as though it were still in operation. In such a case the con- dition sinks to the level of a warranty, and the breach of it, being waived as a discharge, can only give a right of action for the damage sustained. (3) Effect* f Misrepresentation. In order to ascertain the effect of misrepresentation or non-disclosure upon the formation of contract, I will first compare the attitude of Common Law and of Equity towards misrepresentation before the Judicature Act, and then con- sider how far the provisions of the Judicature Act, interpreted by judicial decision, enable us to lay down in general terms a rule which was previously applicable only to a special class of contracts. Common The case of Behn v. Burness shows that in the view of the ment'of " Common Law Courts a representation was of no effect unless represen- ft wag e fther fraudulent, or a term in the contract : the case tation an- terior to of Bannerman v. White shows that the strong tendency of IOC.B..N.S. judicial decision was to bring, if possible, into the terms of RAA the contract, any statement which was material enough to affect consent. Bannerman offered hops for sale to White. White asked if any sulphur had been used in the treatment of that year's growth. Bannerman said 'no/ White said that he would not even ask the price if any sulphur had been used. They then discussed the price, and White ultimately purchased by Chap. IV. 2 MISREPRESENTATION 169 sample the growth of that year ; the hops were sent to his warehouse, were weighed, and the amount due on their purchase was thus ascertained. He afterwards repudiated the contract on the ground that sulphur had been used in the treatment of the hops. Bannerman sued for their price. It was proved that he had used sulphur over 5 acres, the entire growth consisting of 300 acres. He had used it for the purpose of trying a new machine, had afterwards mixed the whole growth together, and had either forgotten the matter or thought it unimportant. The jury found that the repre- sentation made as to the use of sulphur was not wilfully false, and they further found that e the affirmation that no sulphur had been used was intended by the parties to be part of the contract of sale, and a warranty by the plaintiff/ The Court had to consider the effect of this finding, and held that Bannerman's representation was a part of the contract, a preliminary condition, the breach of which discharged White from liability to take the hops. Erie, C. J., said : 'We avoid the term warranty because it is used in two senses, Bannerman and the term condition because the question is whether that term is applicable. Then, the effect is that the defendants required, and 86 - that the plaintiff gave his undertaking that no sulphur had been used. This undertaking was a preliminary stipulation ; and, if it had not been given, the defendants would not have gone on with the treaty which resulted in the sale. In this sense it was the condition upon which the defendants contracted ; and it would be contrary to the intention expressed by this stipulation that the contract should remain valid if sulphur had been used. ' The intention of the parties governs in the making and in the construction of all contracts. If the parties so intend, the sale may be absolute, with a warranty super-added; or the sale may be conditional, to be null if the warranty is broken. And, upon this statement of facts, we think that the intention appears that the contract should be null if sulphur had been used : and upon this ground we agree that the rule should^be discharged.' Note that in this case the representation was made before the parties commenced bargaining ; whereas the representation in Behn v. Burness was a term in the charter party. 170 FORMATION OF CONTRACT Part II Note, further, that the actual legal transaction between the parties was an agreement to sell by sample a quantity of hops, a contract which became a sale 1 J so as to pass the property, when the hops were weighed and their price thus ascertained. The contract of sale contained no terms making the acceptance of the hops conditional on the absence of sulphur in their treatment : and the language of Erie, C. J., shows that he felt it difficult to apply the terms ' condition ' or ' warranty ' to the representation made by the plaintiff. 1 The undertaking,' he says, ' was a preliminary stipulation ' ; to introduce it into the contract was to include in the con- tract the discussion preliminary to the bargain. What had happened was that Bannerman made a statement to White, and then the two made a contract which did not include this statement, though but for the statement the parties would never have entered on a discussion of terms. The consent of the buyer was, in fact, obtained by a misrepresentation of a material fact, and was therefore unreal ; but the Common Law Courts had precluded themselves from giving any effect to a representation unless it was a term in the contract, and so in order to do justice they were compelled to drag into the contract terms which it was never meant to contain. Equitable In considering the principles on which Equity has dealt with treatment . of misre- misrepresentation and non-disclosure of fact we must bear in mind that certain classes of contracts have always been anteriorto regarded as needing more exact and full statement than contract. others of every material fact which might influence the minds of the parties. Some of these were of a sort with which the Court of Chancery was more particularly concerned contracts to take shares in companies contracts for the sale and purchase of land. We must also remember that judges in the Court of Chancery never had occasion to define fraud with precision as 1 For the distinction between a sale, and an agreement to sell, see p. 85, supra, and Sale of Goods Act, 1893, 56 & 57 Viet. c. 71. x. Chap. IV. 2 MISREPRESENTATION 171 an actionable wrong. They therefore, not unnaturally, used the term ' fraudulent ' as applicable to all cases in which they refused specific performance or set aside an instrument on the ground that one of the parties had not acted in good faith ; and somewhat unfortunately they applied the same term to representations which were made in good faith though they afterwards turned out to be untrue. But we find no general rule as to the effect of innocent misrepresentation until 1873, when, in a case precisely similar to Bannerman v. White, a similar result was reached by the application of a different principle. Lamare, a merchant in French wines, entered into nesrotia- Lamare v. Dixon, L. R. tions with Dixon for a lease of cellars. He stated that it was 6 H - L - * I4> essential to his business that the cellars should be dry, and Dixon assured him, to his satisfaction, that the cellars would be dry. He thereupon made an agreement for a lease, in which there was no term or condition as to the dryness of the cellars. They turned out to be extremely damp. Lamare declined to continue his occupation, and the House of Lords Misrepre- refused to enforce specific performance of the agreement, not a g roun d because Dixon's statement as to the dryness of the cellars f< "! refusing was a term in the contract, but because it was material in specific obtaining consent and was untrue in fact. ance, 'I quite agree', said Lord Cairns, 'that this representation was not a guarantee 1 . It was not introduced into the agreement on the face of it, and the result of that is that in all probability Lamare could not sue in a Court of Law for a breach of any such guarantee or undertaking : and very probably he could not maintain a suit in a Court of Equity to cancel the agreement on the ground of misrepresentation. At the same time if the representation was made and if that representation has not been and cannot be fulfilled, it appears to me upon all the authorities that that is a perfectly good defence in a suit for specific performance, if it is at p. 428- proved in point of fact that the representation so made has not been fulfilled.' 1 'Guarantee' must be understood here to mean 'warranty,' and not the contract dealt with on p. 74. 172 FORMATION OF CONTRACT Part II Thus it appears, that up to the passing of the Judicature Act the Court of Chancery would refuse specific performance of a contract induced by innocent misrepresentation, and that in transactions of certain kinds it was prepared to set contracts aside on the same grounds. The latter remedy had not by express decision been limited to transactions of the kind I have mentioned, while on the other hand no general rule had been laid down which might apply to all contracts. The Judicature Act provides that a plaintiff may assert sub-ss. i, 2 anv e q u itable claim and a defendant set up any equitable defence in any Court, and in their treatment of this provision there is no doubt that the Courts have extended the application of equitable remedies and altered the character of the Common Law rule. Innocent misrepresentation which brings about and for a contract is now a ground for setting the contract aside, and contract, this rule applies to contracts of every description. aoCh.D. i. The case of Redgrave v. Hurd was the first in which this rule was applied. It was a suit for specific performance of a contract to buy a house. Redgrave had induced Hurd to take, with the house, his business as a solicitor, and Growth of it was for misstatement as to the value of this business rule. that Hurd resisted specific performance, and set up a counter- claim to have the contract rescinded and damages given him on the ground of deceit practised by Redgrave. The Court of Appeal held that there was no such deceit, or statement false to Redgrave's knowledge, as would entitle Hurd to damages ; but specific performance was refused and the contract rescinded on the ground that defendant had been induced to enter into it by the misrepresentation of the plaintiff. The law on this subject is thus stated by Jessel, M. R. : 'As regards the rescission of a contract there was no doubt a difference between the rules of Courts of Equity and the rules of Courts of Common Law a difference which of course has now disappeared by the operation of the Judicature Act, which makes the rules of Equity prevail. According to the decisions of Courts Chap. IV. 2 MISREPRESENTATION 173 of Equity it was not necessary, in order to set aside a contract 1 , obtained by material false representation, to prove that the party who obtained it knew at the time that the representation was made Redgrave v. , . Kurd, 20 that it was false. Ch. D. 12. In Newbigging v. Adam the rule laid down in Redgrave 34 CH. D. * v. Hurd was adopted as of general application. The plaintiff had been induced to enter into a partnership with one Townend by statements made by the defendants who were either the principals or concealed partners of Townend. The Court of Appeal held that ' there was a substantial misstate- ment though not made fraudulently, which induced the plaintiff to enter into the contract/ and the contract was set aside. Bo wen, L. J., after quoting the passage set forth above from the judgment of Jessel, M. R., endeavours, not altogether effectually, to reconcile the views of Common Law and Equity on the subject of innocent misrepresentation. at p. 59*. ' If the mass of authority there is upon the subject were gone through, I think it would be found that there is not so much dif- ference as is generally supposed between the view taken at Common l^aw and the view taken in Equity as to misrepresentation. At Common Law it has always been considered that misrepresenta- tions which strike at the root of a contract are sufficient to avoid the contract on the ground explained in Kennedy v. Panama, New L-R Q-B. Zealand and Royal Mail Co. Now this case was one of cross actions by a shareholder, Compari- to recover calls paid, and by a company, to recover calls due. ie^ a land The shareholder contended that he had been induced to take e< l uitable rules. shares on t)ie faith of a statement in the prospectus, which turned out to be untrue ; and that this statement was so vital to the contract that its untruth amounted to a total failure of consideration, and entitled him to be discharged from his liability to calls. The position of the Court of Queen's Bench in this case was very similar to that of the Court of Common Pleas in Bannerman v. White. A Court & Equity might or might not g?P' B '' N ' s ' 1 This statement is not quite in accord with Lord Cairns' view of the rules of Equity, as set out on p. 171 in Lamare v. Dixon. It has nevertheless become the accepted rule, though it may have been an exaggeration in 1881. 174 FORMATION OF CONTRACT Part II have set the transaction aside on the ground that consent had been obtained by a material misrepresentation made prior to the contract. A Court of Common Law could only deal with the matter by incorporating the representation with the contract, and then asking whether its untruth amounted to a total failure of consideration or the breach of a condition vital to the contract. In Bannerman v. White the Court held that the representa- L R. 2 Q B. tion was a vital condition : in Kennedy v. Panama Company *)8o. the Court held that it was not a vital condition. Equity would give or withhold the same relief, but upon a different and more intelligible principle. This principle is clearly stated nApp.ca. by Lord Bramwell in Derry v. Peek, speaking of the various rights of one who has been injured by the untruth of state- Result, ments inducing a contract : ' To this may now be added the equitable rule that a material misrepresentation, though not fraudulent, may give a right to avoid or rescind a contract where capable of such rescission.' Thus a general rule is settled ; innocent misrepresentation, if it furnishes a material inducement, is ground for resisting specific performance of the contract or for asking to have it set aside ; this relief is of general application, and is not peculiar to the contracts described as uberrimae fidei. Expres- But the representation must form a real inducement to the opinion. pgjty__to whom it is addressed. The mere expression of an opinion which proves to be unfounded will not invalidate a contract. In effecting a policy of marine insurance the insured communicated to the insurers a letter from the master of his vessel stating that in his opinion the anchorage of the place to which the vessel was bound was safe and good. The vessel was lost there : but the Court held that the insured, in reading the master's letter to the insurers, communicated Anderson v. to them all that he himself knew of the voyage, and that the surance Co , letter was not a representation of fact, but of opinion, which 6 5- the insurers could act upon or not as they pleased. C/L^/U Chap. IV. 2 MISREPRESENTATION 175 Nor are commendatory expressions such as men habitually Commen- use in order to induce others to enter into a bargain dealt pressions. with as serious representations of fact. A certain latitude is allowed to a man who wants to gain a purchaser, though it must be admitted that the border line of permissible assertion is not always discernible. At a sale by auction land was stated to be ' very fertile and improvable ' : it was in fact partly abandoned as useless. This was held to be f a mere Dimmock v Hallett, aCh. flourishing description by an auctioneer/ But where in the at P- 2 7- sale of an hotel the occupier was stated to be ' a most desirable tenant.' whereas his rent was much in arrear and he went f L into liquidation directly after the sale, such a statement was ^tyCo!', " held to entitle the purchaser to rescind the contract. Non-disclosure of material fact. Contract* uberrimae fidei. There are some contracts in which more is required than the absence of misrepresentation or fraud. These are contracts in which one of the parties is presumed to have means of knowledge which are not accessible to the other, and is there- fore bound to tell him everything which may be supposed likely to affect his judgment. In other words, every contract may be invalidated by material misrepresentation, and some contracts even by non-disclosure of a material fact. Contracts of marine, fire, and life insurance, contracts for the sale of land, for family settlements, and for the allotment of shares in companies, are of the special class affected by non-disclosure. To these are sometimes added, in my opinion erroneously, contracts of suretyship and partnership. (a) Contracts of marine insurance. Marine In the contract of marine insurance the insured is bound 1D to give to the underwriter all such information as would be likely to determine his judgment in accepting the risk ; and misrepresentation or concealmen^of any such matter, though without fraudulent intention, avoids the policy. In lonides v. Pender goods were insured upon a voyage for an amount largely in excess of their value ; it was held that 176 FORMATION OF CONTRACT Part II although the fact of over-valuation would not affect the risks of the voyage, yet, being a fact which underwriters were in the habit of taking into consideration, its concealment vitiated the policy. Per Black- 'It is perfectly well established that the law as to a contract trades v" ' ^ insurance differs from that as to other contracts, and that a con- Pe o d B\ L R cea l men t f a material fact, though made without any fraudulent intention, vitiates the policy.' Nor is the liability of the insured, in this respect, confined to facts within his own knowledge. ' It is a condition of Blackburn v. the contract,' said Lindley, L. J., in a dictum quoted with Vigors, 17 ' J ' Q- B - D rc.A.) approval in the House of Lords, ' that there is no mis- representation or concealment either by the insured or ty any one who ought, as a matter of business and fair dealing, to have stated or disclosed the facts to him or to the underwriter for him.' Fire in- (/3) Contracts of fire insurance. The description of the premises appears to form a representa- tion on the truth of which the validity of the contract depends. American authorities go further than this, and hold that the innocent non-disclosure of any material facts vitiates the New York policy. In an American case, referred to by Blackburn. J., in Bowery Fire * ? J U v a N C e e w *ke judgment above cited, ' the plaintiffs had insured certain property against fire, and the president of the company heard that the person insuring with them, or at least some one of the same name, had been so unlucky as to have had several fires, in each of which he was heavily insured. The plaintiffs reinsured with the defendants, but did not inform them of this. A fire did take place, the insured came upon the plaintiffs, who came upon the defendants. The judge directed the jury, that if this information given to the president of the plaintiff company was intentionally kept back, it would vitiate the L.R.9Q.B. policy of reinsurance. The jury found for the plaintiffs, but the Court, on appeal, directed a new trial on the ground that the concealment was of a material fact, and whether intentional or not, it vitiated the insurance/ Chap. IV. 2 MISREPRESENTATION 177 (y) Contracts of life insurance. In The London Assurance v. Mansel an action was brought u ch.D. 363. to set aside a policy of life insurance on the ground that material facts had been concealed by the party effecting the insurance. He had been asked and had answered questions Life in- ,, surance as rollow : Has a proposal ever been made on \ your life at other offices ? If so, where? Insured now in two offices Was it accepted at the ordinary >- for 16,000 at ordinary rates, premium or at an increased premium Policies effected last year, or declined ? ) The answer was true so far as it went, but the defendant had endeavoured to increase his insurance at one of the offices at which he was already insured, and to effect further in- surances at other offices, and in all these cases he had been refused. The contract was set aside, and Jessel, M. B., thus laid down the general principle on which his decision was founded. ' I am not prepared to lay down the law as making any difference in substance between one contract of assurance and another. Whether it is life, or fire, or marine assurance, I take it good faith is required in all cases, and though there may be certain circumstances, from the peculiar nature of marine insurance, which require to be disclosed and which do not apply to other contracts of insurance, that is T r J London As- rather, in my opinion, an illustration of the application of the surance Co. . i ., ... .. .. . . . , , v. Mansel, n principle than a distinction in principle. Ch. D. 367. But where A is effecting an insurance on the life of X, and X makes false statements as to his life and habits which A in good faith passes on to the insurance office, such statements have been held not to vitiate a policy. The ground of the decision was (i) that the statements were not conditions on the truth of which the validity of the contract depended, and (2) that X was not the agent of A for the purpose of effect- \yheeitor. v. ing the policy, so that the fraud of X was not imputable to 8 E. & B . ^ 298. A under the rule that the principal is liable for the fraud of his agent. It is possible that if such a case were to occur since equitable 178 FORMATION OF CONTRACT Part II remedies for misrepresentation have become general it might be decided otherwise. It precisely corresponds to the case 20 Ch. D.I. described in Redgrave v. Hurd : ' where a man having obtained a beneficial contract by a statement which he now knows to be false, insists upon keeping that contract.' (8) Contracts for the sale of land. Sale of In agreements of this nature a misdescription of the premises sold or of the terms to which they are subject, though made without any fraudulent intention, will vitiate the con- i Bing. N. c. tract. In Flight v. Sooth, leasehold property was agreed to be purchased by the defendant. The lease contained restrictions against the carrying on of several trades, of which the par- ticulars of sale mentioned only a few; Tindal, C. J., held that the plaintiff could rescind the contract and recover back money paid by way of deposit on the purchase of the property. 1 We think it is a safe rule to adopt, that where the misdescription, although not proceeding from fraud, is in a material and substantial point, so far affecting the subject-matter of the contract that it may reasonably be supposed that, but for such misdescription, the purchaser might never have entered into the contract at all, in such cases the contract is avoided altogether, and the purchaser is not Flight v. bound to resort to the clause of compensation. Under such a state N C ^ ^ ac ^ 8 *he purchaser may be considered as not having purchased 370- the thing which was really the subject of the sale. a'^B 8 ^e particulars of sale in Flight v. Sooth might make this case one of misdescription. Molyneux v. Hawtrey is a case of non-disclosure. A lease was sold by plaintiff to defendant containing onerous and unusual covenants. The vendor had not disclosed these covenants nor given to the purchaser a reasonable opportunity for informing himself of them; and the contract could not be enforced. Pollock, ed. Equitable remedies however are given subiect to the mate- 7, 537-544. riality of the misdescription. The purchaser may be entitled to refuse to conclude the sale; or, if the misdescription is 42 Ch. D. a matter of detail, as in In re Fawcett v. Holme, may be com- pelled to conclude the sale subject to compensation to be made by the vendor. Chap. IV. 2 MISREPRESENTATION 179 < The parties may also provide in the contract of sale for compensation in case of misdescription, and this right, if so expressed, will not merge in the deed of conveyance but may Palmer v. be exercised after the property has passed. r Contracts preliminary to family settlements need no special illustration. (e) Contracts for the purchase of shares in Companies. Purchase The rule as to the fullness of statement required of projectors influenced of an undertaking in which they invite the public to join is . y p ^*, clearly stated by Kindersley, V. C., in the case of the New state- Brnnswick and Canada Railway Company v. Muggerid,ge. j Dr. &*Sm. at p. 381. ' Those who issue a prospectus holding out to the public the great advantages which will accrue to persons who will take shares in a proposed undertaking, and inviting them to take shares on the faith of the representations therein contained, are bound to state everything with strict and scrupulous accuracy, and not only to abstain from stating as fact that which is not so, but to omit no one fact within their knowledge the existence of which might in any degree affect the nature, or extent, or quality of the privileges and advantages which the prospectus holds out as inducements to take shares.' These dicta are quoted with approval by Lord Chelmsford L. R - 2 H - L in The Venezuela Railway Company v. Kisch. In a later case Lord Cairns points out the distinction between Fraud and such non-fraudulent Misrepresentation as makes a contract of this nature voidable. He intimates that mere non-disclosure can never amount to fraud unless accompanied with such substantial representations as give a false air to facts, but that 'it might be a ground in a proper proceeding and at a proper time for setting aside an gj^J- allotment or purchase of shares' ^ R - 6 H> L - "We should distinguish this right of avoidance for non-dis- closure, (a) from the remedy in deceit for actual fraud; (b) from the remedy in tort apparently given by the Companies Act 63*64 yict. 1900 (repealing s. 38 of the Companies Act 1867) against 30 & 3 ivict. persons responsible for the issue of a prospectus from which material facts are omitted, to those who suffer pecuniary loss by such omissions ; and (c) from the right to compensation N 2, 180 FORMATION OF CONTRACT Part II 53&54Vict. given by the Directors Liability Act, 1890, to persons who have sustained loss by purchasing shares on the faith of an untrue statement in the prospectus of a company. Surety- Suretyship and Partnership are sometimes described as con- ship is not t rac t s w hich need a full disclosure of all facts likely to affect uoemmae fidei. the judgment of the intending surety or partner. There seems no authority 1 for this view; either contract would be invalidated by material though innocent misrepre- sentation, or by such non-disclosure of a fact as would amount Lee v Jones, to an implied representation that the fact did not exist ; but 482- neither requires the same fullness of disclosure which is necessary to the contract to sell land or to allot shares. The intending surety or partner cannot claim the protection accorded to the intending insurer, investor or buyer of land. Davies v. Bat though the contract between surety and ' creditor is one London In- .... . . stance Co., in which there is no universal obligation to make disclosure V 8 Ch. D. 475. until the yet when once the contract has been made, the surety is made : entitled to be informed of any agreement which alters the relations of creditor and debtor, or any circumstance which L.R. 7Q.B. might give him a right to avoid the contract. So in Phillips v. Foxatt, the defendant had guaranteed the honesty of a servant in the employ of the plaintiff; the servant was guilty of dishonesty in the course of his service, but the plaintiff continued to employ him and did not inform the defendant of what had occurred. Subsequently the servant committed further acts of dishonesty. The plaintiff required the defendant to make good the loss. It was held that the defendant was not liable. The concealment released the surety from liability for the subsequent loss. It would seem i R.&M. l The only authorities cited in Lindley on Partnership, p. 342 (ed. 7), ;l ' I3 *' are Hichens r. Congreve and Fawcett v. Whilehouse. But both are cases of actual fraud. [i8oq]jQ.B. * See the curious case of Seaton v. Burnand which was one of an in- (C. A.) 782. surance of a guarantee ; the decision in the House of Lords turned on a question of fact, but the judgment of Romer, L. J., in the Court of Appeal marks very clearly the distinction between insurance, and surety - A. C. 135. ship : the first is, and the second is not uberrimae fidei. Chap. IV. 2 MISREPRESENTATION 181 that if the surety knew that the servant had committed acts Burgess v. Eve, 13 Eq. of dishonesty which would justify his dismissal, he would be 450. entitled to withdraw his guarantee. And so with partnership. The relation of partners inter #e nor P^ rt * nership. is that of principal and agent, so that one partner can bind the firm in transactions concerning the partnership. Thus, when the contract of partnership has been formed, each partner is bound to disclose to the others all material facts, and to exercise the utmost good faith in all that relates to their common business. Remedies for Misrepresentation. A statement upon the faith of which one man induces another to contract, may, if it prove to be false, give a right of action for damages in two cases, (i) ex contractu if it is a term in the contract, (2) ex delicto if it is false to the know- ledge of the party making it. But if the statement does not satisfy either of these conditions it can do no more than furnish a defence to an action brought upon the contract, and entitle the injured party to take proceedings to get the contract set aside, subject to such limitations as to rescission as are set forth below. The relief thus given may include an indemnity ' against the obligations which he has contracted under the Newbigging contract which is set aside ' : in the case of a lease rescinded ch - D - 5&>- on the ground of innocent misrepresentation such relief may v. Seai"- R include money actually expended under the lease : but it T.L.R. 181. cannot include damages for loss sustained. To this rule that no damages can be obtained for innocent Excep- misrepresentation there are three exceptions. (a) The first is where an agent in good faith assumes an Warranty authority which he does not possess and induces another to ity U deal with him in the belief that Jle has the authority which he Coiien v. J Wright, assumes 1 . SE.& 8.647. 1 This liability was, by the decision in Colkn v. Wright, applicable to cases in which a contract was brought about by the innocent assumption 182 FORMATION OF CONTRACT Part II 63*64 Viet (b) The Companies Act 1900 requires that a prospectus of Companies a Company should contain a number of particulars which must be assumed to be material to the formation of the judgment of an intending applicant for an allotment of shares. The duty cast by the Statute upon those interested in the formation of the Company would seem to create a corresponding liability to an action for damages. 53 & 54 Viet. (c) The Directors Liability Act 1890 gives a right to any c. 64* Directors' person who has been induced to subscribe for shares in a com- pany by untrue statements in a prospectus, to obtain compen- sation from the directors for loss sustained, unless they can show that they had reasonable ground to believe the statement and continued to believe it till the shares were allotted, or that the statement was a fair account of the report of an expert or a correct representation of an official document. From the cases in which innocent misrepresentation gives rise to a liability in damages we must carefully distinguish the sort Estoppel, of liability which is supported rather than created by estoppel. ' Estoppel is a rule of evidence/ and the rule may be stated in the words of Lord Denman : 1 Where one' by his words or conduct wilfully causes another to believe the existence of a certain state of things, and induces him to act on that belief so as to alter his own previous position, the former Pickardv. j s concluded from averring against the latter a different state of 6A.& .469. things as existing at the same time.' Where a defendant is forbidden to disprove certain facts, and where on the assumption that such facts exist the plaintiff would have a right, then estoppel comes in aid of the establish- ment of the right by preventing the denial or disproof of these facts. But an estoppel can only arise from words or conduct which 18 O. B. U. of a non-existent authority. More recent cases, Firbank v. Humphreys, and [igc>3] A.^C. Starkey v. Bank of England, have extended the liability to every transaction;" 1 *4- contractual or otherwise, brought about by such an assumption. Chap. IV. 2 MISREPRESENTATION 183 are clear and unambiguous. This rule, and the effect of estoppel, may be illustrated by the case of Low v. Bouverie. [ Low was about to lend money to X on the security of X's share of a trust fund, of which Bouverie was trustee. He asked Bouverie whether this share was mortgaged or otherwise encumbered, and if so to what extent. Bouverie named such charges as occurred to him but did not name all, and the loan was made. In fact the interest of X was heavily encumbered, and when Low sued Bouverie X was an undischarged bankrupt. Low claimed that Bouverie, the trustee, was liable to make good the loss. The Court of Appeal held (i) that Bouverie's statement could not be construed as a warranty, so as to bind him by contract to Low ; (2) that the statement was not false to his knowledge; (3) that the misrepresentation, being innocent, could not give rise to an action for damages, unless a duty was cast upon Bouverie to use care in statement l ; (4) that no such duty rested upon a trustee, requiring him to answer questions concerning the trust fund to strangers about to deal with the cestui gue trust; (5) that therefore Bouverie could only be held liable if he was estopped from contending that there were other incumbrances upon the trust fund than those which he had mentioned to Low. If he had been so estopped he might have been ordered to Per Lmdiey, L. J., p. 103. pay to Low the trust fund, subject only to the incumbrances disclosed in his letters ; and, as there were other charges in abundance, he would have had to make good the deficiency out of his own pocket. But the Court held that the letters 1 The mention of this duty would seem to be an excess of judicial caution, for it is hard to see how such a duty could arise so as to give a right of action for negligent, as distinct from fraudulent, misrepresentation. Such a liability may exist in the case of employer and employed, where the person employed acquires and gives information on which the em- ployer will act. But a failure to use due care in the supply of such information would be a breach of the contract of employment, creating a liability ex contractu not ex delicto. Ii* cases turning on negligent state- ment, the duty, since Derry v. Peek, has been held, in each case, not to 14 App. Ca. exist, and it is probably, apart from contract, altogether non-existent. See Angus v. Clifford, [1891] 2 Ch. 449, and Le Lievre v. Gould, [1893] i Q. B. 491. 184 FORMATION OF CONTRACT Part II upon which Low sought to make Bouverie liable could not be construed as explicitly limiting the charges on the trust P . 106. fund to those specified in the letters. t An estoppel/ said Bowen, L. J., ( that is to say, the language on which the estoppel is founded, must be precise and unambiguous.' Instances of such precise and unambiguous statement may Bioomenthai be found in the cases of Companies which issue certificates A. c. 156. stating that the holders are entitled to shares, or to ' fully paid up ' shares. If the certificate is obtained by means of a deposit with the Company of a forged transfer of shares, the BaikisCo. v. Company are nevertheless estopped from disputing the title Tomkinson, J [1803] A. c. to shares which their certificates confer. 396. Misrepresentation which induces a man to enter into a contract may furnish a good defence to an action for breach of contract or to a suit for specific performance. Such misrepre- sentation may also under certain circumstances be treated as ground for a rescission of the contract. The limitations on this remedy are not very clearly defined, but it would seem that, except in case of fraud, rescission will not be granted North after property has changed hands under a contract, and that Salt Co.. the party who has been misled must take steps to repudiate [1005] i Ch. J s* 6 - the transaction at the earliest possible moment. & 3. Fraud. o Fraud. Fraud is an actionable wrong. As such it is susceptible of fairly precise definition; and as such I treat of it here. Fraud which gives rise to the action of deceit is a very different thing from the sharp practice or unhandsome dealing which would incline a Court of Equity to refuse the remedy of specific performance, or to grant relief by the cancellation of a contract. It represents the reasoned, logical conclusions of the Common Law Courts as to the nature of the deceit which makes a man liable in damages to the injured party. Its essen- Fraud is a false representation of fact, made with a know- tures**" ledg 6 f i ts falsehood, or recklessly, without belief in its truth, Chap. IV. 3 FRAUD 185 with the intention that it should be acted upon by the com- plaining party, and actually inducing him to act upon it. Let us consider these characteristics in detail. Fraud is a false representation. There must be It differs here from non-disclosure such as may vitiate a ' sentation. contract uberrimae fidei ; there must be an active attempt to deceive either by a statement which is false, or by a statement not untrue in itself but accompanied with such a suppression of facts as to convey a misleading impression. Concealment of this kind is sometimes called ' active/ ' aggressive/ or 'industrious'; but perhaps the word itself, as opposed to non-disclosure, suggests the active element of deceit which constitutes fraudulent misrepresentation. The distinction between misrepresentation by non-disclosure, which can only affect contracts uberrimae fidei, and misrepresentation which gives rise to an action of deceit, is clearly pointed out by Lord Cairns in the case of Peek v. Gurney. 'Mere non-disclosure of material facts, however morally censur- L.R.6H. L. able, however that non-disclosure might be a ground in a proper p- * 3 ' proceeding at a proper time for setting aside an allotment or a pur- chase of shares, would, in my opinion, form no ground for an action in the nature of an action for misrepresentation. There must, in my opinion, be some active misstatement of fact, or, at all events, such a ; partial and fragmentary statement of fact, as that the withholding of that which is not stated makes that which is stated absolutely false' Caveat emptor is the ordinary rule in contract. A vendor Non-dis- is under no liability to communicate the existence even of ^fraJd latent defects in his wares unless by act or implication he represents such defects not to exist. Hobbs sent to a public market pigs which were to his Ward v. knowledge suffering from typhoid fever ; to send them to 3 Q- B. D. market in this state was a breach of a penal statute. Ward 3* & 33 vict.j bought the pigs, ( with all faults Ano representation being made as to their condition. The greater number died : other pigs belonging to Ward were also infected, and so were the stubble- fields in which they were turned out to run. It was contended 186 FORMATION OF CONTRACT Part II that the exposure of the pigs in the market amounted to a representation, under the circumstances, that they were free of any contagious disease. The case went up to the House of Lords, where Lord Selborne thus states the law on this point : ' Upon the question of implied representation I have never felt any doubt. Such an implication should never be made without facts to warrant it, and here I find none except that in sending for sale (though not in selling) these animals a penal statute was violated. To say that every man is always to be taken to represent 4App.Ca.29. in his dealings with other men, that he is not, to his knowledge, violating any statute, is a refinement which (except for the purpose of producing some particular consequence) would not, I think, appear reasonable to any man.' 10 c. B. 591. In Keates v. Lord Cadogan, the plaintiff sued for damages arising from the defendant's fraud in letting to the plaintiff a house l which he knew to be required for immediate occupation, without disclosing that it was in a ruinous condition. It was held that no such action would lie. 'It is not pretended,' said Jervis, C. J., 'that there was any war- ranty, expressed or implied, that the house was fit for immediate occupation : but, it is said, that, because the defendant knew that the plaintiff wanted it for immediate occupation, and knew that it was in an unfit and dangerous state, and did not disclose that fact to the plaintiff, an action of deceit will lie. The declaration does not allege that the defendant made any misrepresentation, or that he had reason to suppose that the plaintiff would not do, what any man in his senses would do, viz. make proper investigation, and satisfy himself as to the condition of the house before he entered upon the occupation of it. There is nothing amounting to deceit.' A repre- The representation must be a representation of fact. mentation of fact not A mere expression of opinion, which turns out to be of opinion; 1 The house was leased for a term of years. The law is otherwise where a furnished house is hired for a short period, as for instance the London season. In such a case immediate occupation is of the essence of the contract, and if the house is uninhabitable the lessee is discharged, not on the ground of fraud, but because ' he is offered something sub- stantially different from that which was contracted for.' This undertaking as to sanitary condition is extended by the Housing of the Working Classes Act, 1890, to small tenements of a specified value. 53 & 54 Viet. c. 70. 75. Wilson v. Pinch-Hat- ton, 2 Ex. E 336. Chap. IV. 3 FRAUD 187 unfounded, will not invalidate a contract. There is a wide Harvey v. i i- Young, difference between the vendor of property saying that it j Yeiv. 20 r r J J Lindsay Pe- is worth so much, and his saying that he gave so much for ^H^d Co ' it. The first is an opinion which the buyer may adopt if he ^'24*'" will : the second is an assertion of fact which, if false to the knowledge of the seller, is also fraudulent. Again, we must distinguish a representation that a thing nor ex- is from a promise that a thing shall be : neither a statement intention, of intention nor a promise can be regarded as a statement ^" e |'c h of fact except in so far as a man may knowingly misrepresent D- 552 ~ the state of his own mind. Thus there is a distinction between a promise which the promisor intends to perform, and one which the promisor intends to break. In the first case he represents truly enough his intention that something shall take place in the future : in the second case he misrepresents his existing intention ; he not only makes a promise which is ultimately broken, but when he makes it he represents his state of mind to be something other than it really is. Thus it has been laid down that if a man buy goods, not in ex parte Whittaker, intending to pay for them, he makes a fraudulent misre- ioCh.446. presentation. Again, it is said that misrepresentation of law does not give rise to the action of deceit, nor even make a contract voidable as against the person making the statement. There is little direct authority upon the subject, but it may be submitted that the distinction drawn in Cooper v. Phibos L - R - 2 H. L. , . I TO. between ignorance of general rules of law and ignorance of the existence of a right would apply to the case of a fraudu- lent misrepresentation of law, and that if a man's rights were concealed or misstated knowingly, he might sue the person who made the statement for deceit. A decided opinion Hirschfieid v. London, has been expressed in the King's Bench Division, that a anTsomn fraudulent representation of the^effect of a deed can be relied S^cSf 1 ' J ^ ji i T zQ. B.D.i. upon as a detence in an action upon the deed. The representation must be made with knowledge of its There falsehood or without belief in its truth. know- *' "' ' I Illl I 188 FORMATION OF CONTRACT Part II ledge of Unless this is so, a representation which is false gives DickLn v ' no right f action to the party injured by it. A Telegraph T^ieg^aph Company, by a mistake in the transmission of a message 3 c.' p. D.I. caused the plaintiff to ship to England large quantities of barley which were not required, and which, owing to a fall in the market, resulted in a heavy loss. It was held that the representation, not being false to the knowledge of the Company, gave no right of action to the plaintiff. 'The general rule of law,' said Bramwell, L. J., 'is clear that no action is maintainable for a mere statement, although untrue, and although acted on to the damage of the person to whom it is P. 5. made, unless that statement is false to the knowledge of the person making it.' i4A PP .Ca. This rule is to be supplemented by the words of Lord Herschell in Deny v. Peek : 'First, in order to sustain an action of deceit there must be proof of fraud, and nothing short of that will suffice. Secondly, or disre- fraud is proved when it is shown that a false representation has gard of been made, (i) knowingly, or (2) without belief in its truth, or (3) recklessly, careless whether it be true or false. Although I have treated the second and third as distinct cases, I think the third is but an instance of the second, for one who makes a statement under such circumstances can have no real belief in the truth of what he states.' Therefore if a man makes a false statement, honestly believing it to be true, he cannot be rendered liable in an action of deceit. It is fraudulent to represent yourself as possessing a belief which you do not possess. This is the ground of liability in the case of reckless misstatement of fact. The maker of the statement represents his mind as certain in the matter, whereas in truth it is not certain. He says that he believes, when he really only hopes or wishes. It is just as fraudulent for a man to misrepresent wilfully his state of mind as to misrepresent wilfully any other matter of fact. 'The state of a man's mind/ said Bowen, L. J., ' is Fitzmaurice, . 483. jugt as much a fact as the state of his digestion ' ; and the rule as to reckless misstatement laid down by Lord Herschell does not in any way widen the definition of Fraud. Chap. IV. 3 FRAUD 189 But from time to time attempts are made to extend the Want of results of Fraud, and to make men liable not merely for wilful ground for misstatements of fact or of belief, but for misstatements of belie f ; fact made in the honest belief of their truth, but not based upon reasonable grounds. The rule was settled in the Common Law Courts, as long Collins v. ago as 1 844, that a misstatement of fact made with an honest Q- B. 20. belief in its truth was not a ground for an action of deceit, and that ' fraud in law ' or f legal fraud ' is a term which has no meaning as indicating any ground of liability. But shortly after the Judicature Act came into effect judges whose experience had lain chiefly in Courts of Equity came to deal with the Common Law action of deceit, and applied to it from time to time the somewhat ill-defined notions of Fraud, which had prevailed in the Equity Courts 1 . In a EX. 0.248. Weir v. Sett the dissenting judgment of Cotton, L. J., contains a dictum that a man is liable for deceit, ' if he its effect has made statements which are in fact -untrue, recklessly, that is, without any reasonable grounds for believing them to be true/ This view of liability for deceit was not accepted by the majority of the Court, and the case is remarkable for an emphatic condemnation by B ram well, L. J., of the use of the term ' legal fraud ' : 'To make a man liable for fraud, moral fraud must be proved against him. I do not understand legal fraud ; to my mind it has no more meaning than legal heat or legal cold, legal light or legal shade.' P- 43- Nevertheless in Smith v. Chadwick the view of Fraud ex- 20 CH. 0.44. pressed by Cotton, L. J., was adopted and extended by Sir G. Jessel. He there says that a misstatement made care- lessly, but with a belief in its truth and with no intention to deceive, renders the maker liable to an action for deceit. Evidently a confusion was Rowing up between misrepre- 1 Thus Sir E. Fry (Specific Performance, p. 306, ed. 4) speaks of Fraud as including ' not only misrepresentation when fraudulent, but also all other unconscionable or deceptive dealing of either pirty to any contract.' 190 FORMATION OF CONTRACT Part II sentation which is a ground for rescinding a contract, and misrepresentation which is a ground for an action of deceit. The matter came to an issue in Peek v. Derry. till settled The defendants were directors of a tramway company, Peek, ' which had power by a special Act to make tramways, and with the consent of the Board of Trade to use steam power to ** 337 move the carriages. In order to obtain the special Act the plans of the Company required the approval of the Board of Trade, and the directors assumed, that as their plans had been approved by the Board before their Act was passed, the consent of the Board to the use of steam power, which they had to obtain after the Act was passed, would be given as of course. They issued a prospectus in which they called attention to their right to use steam power as one of the important features of their undertaking. The consent of the Board of Trade was refused : the Company was wound up, and a shareholder brought an action of deceit against the directors. Peek v. Stirling, J.. found as a fact that the defendants ' had Deny, 3 i 6' reasona ble grounds for the belief ' expressed in the prospectus, and that they were innocent of fraud. The Court of Appeal held that although the prospectus expressed the honest belief of the directors, it was a belief for which no reasonable grounds existed, and that the directors were therefore liable. The House of Lords reversed the decision of the Court of Appeal. The cases are exhaustively discussed in the judg- ment of Lord Herschell, and the conclusion to which he comes is thus expressed : Absence of ' In my opinion making a false statement through want of care reasonable f a ^ g f ar 8nor t O f, and is a very different thing from, fraud, and belief not the same ma y be said of a false representation honestly believed, a cause of though on insufficient grounds. ... At the same time, I desire to action, ga y distinctly that when a false statement has been made, the questions whether there were reasonable grounds for believing it, and what were the means of knowledge in the possession of the person making it, are most weighty matters for consideration. The ground upon which an alleged belief was founded is a most important test of its reality. I can conceive many cases where the Chap. IV. 3 FRAUD 191 fact that an alleged belief was destitute of all reasonable foundation Deny v. would suffice of itself to convince the Court that it was not really 14 App. Ca. entertained, and that the representation was a fraudulent one.' 375- The rule may therefore be regarded as settled that a state- ment made with an honest belief in its truth cannot render the maker liable for deceit l , though the absence of reasonable but may grounds for belief may go to show that the belief expressed dishonest was not really entertained, in other words that the man who motlve - made the statement represented himself to possess a belief which he did not possess. It may well happen in the course of business that a man is tempted to assert for his own ends that which he wishes to be true, which he does not know to be false but which he strongly suspects to have no foundation in fact. If he asserts such a thing with a confident assurance of belief, or if he neglects accessible means of information, his statement is not made in an honest belief of its truth ; he may have taken care not to acquaint himself with inconvenient facts. ' But Peek v. Derry has settled once for all the controversy which was well known to have given rise to very considerable difference of opinion as to whether an action for negligent misrepresentation, Angus v. as distinguished from fraudulent misrepresentation, could be main- [ tained.' ( There is another aspect of fraud in which the fraudulent Dishonest intent is absent but the statement made is known to be need not untrue. Such is the case of Polhill v. Walter, cited above. That decision is confirmed by the judgment of Lord Cairns A **^ p- *& in Peek v. Gurney. The plaintiff in that case had purchased ^o 9 R ' 6H ' L ' shares from an original allottee on the faith of a prospectus issued by the directors of a Company, and he brought an if state- action of deceit against the directors. Lord Cairns compared jfncwn to the statements in the prospectus with the circumstances of the be faise ' 1 It is stated on high authority th<^ a representation, believed to be Lord Black- true when made, but afterwards discovered to be false, amounts to fraud grownlie v if the transaction is allowed to continue on the faith of it. If this means Campbell, that an action of deceit would lie, there must be something said or done p . 9 ^o! confirmatory of the statement after it is known to be false. 192 FORMATION OF CONTRACT Part II Company at the time they were made, and came to the con- clusion that the statements were not justified by facts. He then proceeded to point out that though these statements were false, yet the directors might well have thought, and probably did think, that the undertaking would be a profitable one. 'But,' he says, 'in a civil proceeding of this kind all that your Lordships have to examine is the question, Was there or was there not misrepresentation in point of fact ? And if there was, however innocent the motive may have been, your Lordships will be obliged to arrive at the consequences which would properly result from what was done.' There is good reason for such a rule ; if a man chooses to assert what he knows or even suspects to be false, hoping, perhaps believing, that all will turn out well, he cannot be permitted to urge upon the injured party the excellence of the motives with which he did him a wrong, but must submit to the natural inferences and results which follow upon his conduct. The state- The representation must be made with the intention that not be ^ should be acted upon ty the injured party. made to injured We may divide this proposition into two parts, (i) The P artv > representation need not be made to the injured party ; (2) it must be made with the intention that he should act upon it. Latijrridirev. (i) Levy sold a gun to the father of Langridge for the use &\v.'si9. of himself and his sons, representing that the gun had been made by Nock and was 'a good, safe, and secure gun': Langridge used the gun ; it exploded, and so injured his hand that amputation became necessary. He sued Levy for the false representation, and the jury found that the gun was unsafe, was not made by Nock, and found generally for the plaintiff. It was urged, in arrest of judgment, that Levy could not be liable to Langridge for a representation not made to him ; but the Court of Exchequer held that, since the gun was sold to the father to be used by his sons, and the false representation made in order to effect the sale, and as Chap. IV. 3 FRAUD 193 ' there was fraud, and damage, the result of that fraud, not from an act remote and consequential, but one contemplated by the defendant at the time as one of its results, the party guilty of the fraud is responsible to the party injured.' P- S3 2 - (a) In Peek v. Gurney directors were sued by persons who L.R.6H.L. had purchased shares in a Company on the faith of false statements contained in a prospectus issued by the directors, tut must be made The plaintiffs were not those to whom shares had been with the allotted on the first formation of the Company ; they had purchased their shares from such allottees. It was held that should act upon it. the prospectus was only addressed to the first applicants for shares ; that the intention to deceive could not be supposed to extend to others than these : and that on the allotment ' the prospectus had done its work : it was exhausted/ L.R.6H.L. at p. 410. The law had been so stated in an earlier case. ' Every man must be held responsible for the consequences of a false Barry representation made by him to another upon which a third person 2 'j. & H. i! acts, and so acting is injured or damnified, provided it appear that P- 22 - such false representation was made with the intent that it should be acted upon by such third person in the manner that occasions the injury or loss. . . . But to bring it within the principle, the injury, I apprehend, must be the immediate and not the remote consequence of the representation thus made.' But if a prospectus is only a part of a scheme of fraud Andrews v. "~* ~~~-~- Mockford, maintained by false statements deliberately inserted in the Wo ' Q- 2 B - press, its effect is not held to be exhausted by the allotment of shares, and its falsehoods will afford ground for an action of deceit to others than the allottees. The representations must actually deceive. Deceit which 'In an action of deceit the plaintiff cannot establish a title to does not relief simply by showing that the defendants have made a fraudulent ^fr^j statement: he must also show that he was deceived by the state- Arkwrightv. ment and acted upon it to his prejudice.' N< Ch >< D d '24. Thomas bought a cannon of Horsfall. The cannon had a Horsfaii v. Thomas, defect which made it worthless, yid Horsfall had endeavoured IH.&C go- to conceal this defect by the insertion of a metal plug into the weak spot in the gun. Thomas never inspected the gun ; he accepted it, and upon using it for the purpose for which he 194 FORMATION OF CONTRACT ( Part II bought it the gun burst. It was held that the attempted fraud, having had no operation upon his mind, did not Pe r , B am ' exonerate him from paying for the gun. ' If the plug, which i H. & c. 99. j was sa j(j was p U t, i n fa conceal the defect, had never been there, his position would have been the same ; for, as he did not examine the gun or form any opinion as to whether it was sound, its condition did not affect him/ See rf/cfa of This judgment has been severely criticized by high Cockbarn, Smith v. authority, but it seems to be founded in reason, and a Hughes, ' ' recent case has been decided on the same principle. Action was brought by an omnibus company to restrain an omnibus proprietor from so painting and lettering his omni- buses as to induce the public to believe that they were the plaintiffs'. The learned judge who tried the case viewed two omnibuses, and decided against the defendant on the ground that the painting of his omnibus was calculated to deceive the public. The Court of Appeal dismissed the action on *h e ground that there was no evidence that any member ^ * ne Public had actually been deceived. We may lay down the general rule that deceit which does not affect conduct cannot create liabilities. Effect of We may now consider the Effect of Fraud, such as we have described it to be, upon rights ex contractu. Remedies Apart from Contract, the person injured by Fraud, such as we have described, has the Common Law action for deceit, and may recover by that means such damage as he has sustained ; an analogous remedy exists in Equity where the plaintiff would otherwise, as in cases of Fraud by directors, have to bring a number of separate actions of deceit, or would for Barry v. some reason be destitute of legal remedy. These remedies Croskey, J 2 j. & H. 30. are not confined to Fraud as affecting the formation of con- tract ; they apply to any fraudulent statement which leads the person to whom it is made to alter his position for the worse. But we have to consider Fraud and its effects in relation to contract. We must therefore ask what are the remedies Chap. IV. 3 FRAUD 195 ex contractu open to one who finds that he has been induced to enter into a contract by fraud. 1. He may affirm the contract and ask for a fulfilment of Remedies its terms or damages for such loss as he has sustained by their ^^u' non-fulfilment. He cannot, however, enforce a fulfilment of the terms of the contract unless the false statement by which he has been deceived is of such a character as to take effect by way of estoppel. The nature of the liability which may arise from the application of this rule of evidence has been explained elsewhere, and is not limited to cases in which the relations of Ante, p. i8a. the parties originated in contract. In like manner one who has been induced to purchase a chattel by fraud may retain the chattel and sue for loss sustained by the fraud. But the exercise of this right must depend on the nature of the contract. A man cannot remain a shareholder and sue the Company of which he is a member, though he was induced to purchase shares by the fraud of the directors. Nor can he divest himself of the character of a shareholder, and so put himself in a position to sue. after the Company has gone into worth v.city r J of Glasgow liquidation. Bank, S Ap P . 2. He may avoid- the contract, either by taking active steps Right of to get it cancelled in the Chancery Division on the ground of Fraud, or by resisting a suit for specific performance, or an action for damages brought in respect of it. 3. If after becoming aware of the fraud he does not give notice of his intention to avoid the contract, he may lose his option to affirm or avoid the contract, and may be thrown back upon the action for deceit. This loss of his right to affirm or avoid may accrue firstly, Limits of if he takes any benefit under the contract or does any act rescind, which amounts to an affirmatioi/of it. Or secondly, if before he makes his choice circumstances have so altered that the parties can no longer be replaced in their former position. Such would be the case of a share- o z 196 FORMATION OF CONTRACT Part II holder induced to take shares by false statements in a pro- Whiteley's . . J case, f 1 ^] spectus, it a winding-up petition should be presented, or, a Oakes v. fortiori, if the company should go into liquidation, before he L. R. 2 H.'L. can disaffirm. 325. Rights of Or thirdly, since the contract is voidable, not void, is valid tie^ Par un til rescinded, if third parties bond fide and for value acquire Babcock v. property or possessory rights in goods obtained by fraud, these Q. B. D.'394. rights are valid against the defrauded party. There is now but one exception to this rule. Cundy v. If the f raud take the form of personation ; if A obtains s App. Ca. goods from X by falsely representing himself to be C or C*s Hoiiins T. agent, and then sells the goods to M, M acquires no title, Fowler, L. R. 7 H. L. though he is ignorant of the fraud and has paid for the goods J . Aaron's But & shareholder who, beginning to suspect fraud, fails to MSotn A c P av ca ^ s * whereupon his shares are forfeited and he becomes merely a debtor to the Company, may, without further repudia- tion, resist payment of his debt on the plea of fraud. charter v. \ Lapse of time has of itself no effect in determining the Trevelyan, ! ii ci. & F. ; rights of the defrauded party. But lapse of time coupled ; with knowledge of the fraud may furnish evidence of intention to affirm, and will in any event increase the chance that by L'S^W R c ^ an & e * n * ne position of the parties or the acquisition of EX ' vT R ' 7 rights by a third party the right to rescind may be lost. 4. Duress. A contract is voidable at the option of one of the parties if he have entered into it under Duress. In what it Duress consists in actual or threatened violence or impri- sonment; the subject of it must be the contracting party himself, or his wife, parent, or child ; and it must be inflicted Bentley v. j * By 24 & 25 Viet. c. 96, s. 100, in the case of goods obtained by false yi'^nf'Ca. ' P re t ences > *^ e totl f th defrauded owner revested in him if the swindler 471. was prosecuted to conviction by or on behalf of the owner, and he might recover the goods from an innocent purchaser for value. The Sale of Goods Act, 56 & 57 Viet. c. 71, s. 24 (2), overrides this provision. The title to goods thus obtained does not revest upon conviction, though the convicting Court may make an order for their restitution. Chap. IV. 4 DURESS 197 or threatened by the other party to the contract, or else by one acting with his knowledge and for his advantage. 688 e A contract entered into in order to relieve a third person Must from duress is not voidable on that ground ; though a simple pr0 misor, contract, the consideration for which was the discharge of ^ t ^ bev " a third party by the promisee from an illegal imprisonment, Cro -J ac - l8 7- would be void for unreality of consideration. Nor is a promise voidable for duress which is made in Atie v. Backhouse, consideration of the release of goods from detention. If the 3 M. & w. 033. detention is obviously wrongful the promise would be void and must l^O T)G1*- for want of consideration ; if the legality of the detention S0 nal. was doubtful the promise might be supported by a com- Q^-%'^ promise. But money paid for the release of goods from tract- wrongful detention may be recovered back in virtue of the quasi-contractual relation created by the receipt of money by one person which rightfully belongs to another. The Court of Appeal has recently held that moral pressure, such as a threat to prosecute a near relation, will amount to duress : I will state, at the close of the chapter on Legality of Object, some reasons for venturing respectfully to question this decision. 5. Undue Influence. I have mentioned that the use of the term Fraud has been Fraud at wider and less precise in the Chancery than in the Common Law j^^d Courts. This followed necessarily from the remedies which in Equity, they respectively administered. Common Law gave damages for a wrong, and was compelled to define with care the wrong which furnished a cause of action. Equity refused specific performance of a contract, or set aside a transaction, where one party had acted unfairly by the other. Thus ' fraud ' at Common Law is a false statement such as is described in the preceding section : ' fraud ' itf Equity has often been used to mean unconscientious dealing. Equitable One form of such dealing: is commonly described as the doctrine of Undue exercise of ' Undue Influence/ The subject can only be dealt influence. 198 FORMATION OF CONTRACT Part II with here in outline. Whether or no relief is granted in any given case must often depend on the view taken by the Court of the character or tendency of a number of transactions extending over a considerable time. Definition But we must find a definition of Undue Influence; and influence, then proceed to consider and classify the circumstances which create it ; and we may be aided in the process of classification by certain principles which equity judges have laid down as to the enforcement of promises or gifts made for no consideration or for a consideration wholly disproportionate to the value of the thing promised or given. 8 ch. 490. Lord Selborne supplies a definition in The Earl of Aylesford v. Morris. Speaking of the cases ( which, in the language of Lord Hardwicke, raise, from the circumstances and conditions of the parties contracting, a presumption of Fraud' he says : Presump- ' Fraud does not here mean deceit or circumvention. ; it means an ttnconscientious use of the power arising out of these circumstances and influence conditions ; and when the relative position of the parties is such as primd facie to raise this presumption, the transaction cannot stand unless the person claiming the benefit of it is able to repel the presumption by contrary evidence, proving it to have been, in point of fact, fair, just, and reasonable.' The principles to which I alluded are these : Kekewichv. ( a ) that equity will not enforce a gratuitous promise even IXM.G. 188. though it be under seal ; Hoghtonv. (^3) that the acceptance of a voluntary donation throws Beav. 299. U p 0n the person who accepts it the necessity of proving ( that the transaction is righteous ' ; wood v. (y) that inadequacy of consideration is regarded as an element 3 Mad! 423. m raising the presumption of Undue Influence or Fraud ; Trecoth'ick (^) ^ut *^at mere inadequacy of consideration will not 9 Ves. 246. (according to the strong tendency of judicial opinion) amount to proof of either. So the question which we have to discuss may be put thus : When a man demands equitable remedies, either as plaintiff or defendant, seeking to escape or avoid a grant or promise made gratuitously or for a very inadequate consideration, Chap. IV. 5 UNDUE INFLUENCE 199 what must he show in addition to this in order to raise the presumption that Undue Influence, has been at work ? The cases fall into three fairly distinct groups : (j) There are cases in which the Court will regard the from in- transaction as primd facie unfair, and require the person who of parties has benefited to show that it is in fact fair and reasonable. Formerly the Usury Laws were supposed to protect the borrower ; while the vendor of a reversionary interest was pro- tected by a rule of equity which required the purchaser, at any time, to show that he had given value for his bargain. Quite recently the Moneylenders Act of 1900 has enabled 63*64 Viet. any Court (including County Courts), in any proceedings taken by a moneylender for the recovery of money lent, to reopen the transaction if satisfied ' that the interest charged in respect of the sums actually lent ia excessive, or that the amounts charged for expenses, inquiries, fines, bonus, premium, renewals, or any other charges, are excessive, and that in either case the transaction is harsh and unconscionable or is otherwise such that a Court of Equity would give relief.' Section i.' The cases decided under this Act have been exhaustively summarised in the judgment of Channell, J., in Carringtons [1906], K. B. Limited v. Smith, and it is enough to say that the court will treat a transaction as harsh and unconscionable not necessarily because there was oppression or advantage taken of one party by the other, but because the rate of interest was excessive, having regard to all the circumstances of the case, among others Saunders v. Newbold, to the character and value of the security given for the debt. [JP$] ' en. ({ A.J 2 DO. The Usury Laws are repealed, and the rule of equity as to reversions is set aside by 31 & 33 Viet. c. 4. So, apart from the Moneylenders Act, we are left to the action of the Courts, which will protect that one of two parties who has dealt with James v. Kerr, 40 Ch. the other on unequal terms as to age, knowledge, or position, at p. 460. If one of the parties was tfheducated or inexperienced, dealing with a person of knowledge and experience; or if he was in urgent need and was thereby induced to sacrifice future advantage, the burden of proof rests, without question, 200 FORMATION OF CONTRACT Part II upon the party benefited to show that the presumption of undue influence is unfounded. ' In ordinary cases each party to a bargain must take care of his own interest, and it will not be presumed that undue advantage or contrivance has been resorted to on either side ; but in the case of "the expectant heir," or of persons under pressure without adequate protection, and in the case of dealings with uneducated, O'Rorke v. ignorant persons, the burden of showing the fairness of the trans- 2 J Aptf b Ca. ke ' ac ti n i s thrown on the person who seeks to obtain the benefit of at p. 823. the contract.' from (2) In the next group of cases the transaction is not, on relation: the face of it, unfair. The party who seeks redress is of Hoghtonv. full capacity, has been within reach of good advice, and is Hoghton, isBeav.299- m no sucn i mme diate want as would put him at the mercy of an unscrupulous speculator. Here the exercise of undue influence will not be assumed unless certain relations, parental or confidential, are shown to exist between the parties. Then a presumption of influence arises, and can only be rebutted by proof that the donor or promisor has been 'placed in such Archer v. aposition as will enable him to form an entirely free and unfettered 7 Beav. 560. judgment independent altogether of any sort of control.' The Court will not necessarily set aside a gift or promise parental; made by a child to its parents, by a client to his solicitor, by a patient to his medical man, by a cestui que trust to his trustee, by a ward to his guardian, or by any person to his spiritual; spiritual adviser; but such relations call for proof that the party benefited did not take advantage of his position. As 14 Ves. 373. was said by Lord Eldon in Huguenin v. Baseley, where a lady made over her property to a clergyman in whom she reposed confidence, ' The question is not whether she knew what she was doing, had done, or proposed to do, but how that intention was produced : whether all that care and providence was placed around her, as against those who advised her, which from their situation, and p. 300. relation in respect to her, they were bound to exert on her behalf. 1 The law as laid down by Lord Eldon has been followed in a long series of decisions. It is enough to mention two of the most recent. Chap. IV. 5 UNDUE INFLUENCE 201 In Powell v. Powell a settlement executed by a young [1900] i ch. woman, under the influence of her stepmother, by which she shared her property with the children of the second marriage, was set aside though a solicitor had advised the plaintiff. The solicitor was acting for the other parties to the settlement as well as for the plaintiff, and it appeared that although he expressed disapproval of the transaction he had not carried his disapproval to the point of withdrawing his services. Wright v. Carter shows how difficult it is to maintain the [1903] i ch. validity of a gift or sale made by a client to his solicitor. It was laid down that in the case of a gift the relation of solicitor and client must have ceased ; the client must, from the outset of the transaction, be in receipt of independent advice; and this advice must be given with the fullest knowledge of every material consideration. In the case of a sale the client must be fully informed as to what he is doing : he must have competent independent advice : and the price must be such as the Court would con- sider to be fair. (3) Where there are no such relations between the parties Where no as create a presumption of influence, the burden of proof rests on the donor or promisor to show that undue influence was, may be in fact, exercised. If this can be shown the Courts will proved, give relief. 'The principle applies to every case where influence is acquired and abused, where confidence is reposed and betrayed. The relations with which the Court of Equity most ordinarily deals are those of trustee and cestui que trust, and such like. It applies specially to those cases, for this reason and for this reason only, that from those relations the Court presumes confidence put and influence exerted. Whereas in all other cases where those relations do not subsist, the confidence and the influence must be proved eoctrinsically ; but where they are proved extrinsically, the rules of reason and common sense and the technical rules of a Court of Equity are just as applicable Smith v. in the one case as the other.' 7 ^...779. The words quoted are those of Lord Kingsdown : the case was one in which a young man, only just of age, had incurred liabilities to the plaintiff by the contrivance of an 202 FORMATION OF CONTRACT Part II older man who had acquired a strong influence over him, and who professed to assist him in a career of extravagance and dissipation. It was held that influence of this nature, though it certainly could not be called parental, spiritual, or fiduciary, entitled the plaintiff to the protection of the Court. [1893] ch. Similar in character is the recent case of Morley v. Loughnan, 736. an action brought by executors to recover money paid by the deceased to a man in whose house he had lived for some years. Wright, J., in giving judgment for the plaintiffs, said that it was unnecessary to decide whether a fiduciary relation existed between the deceased and Loughnan, or whether spiritual influence had determined the gifts. 'The defendant took possession, so to speak, of the whole life of the deceased, and the gifts were not the result of the deceased's own free will, but the effect of that influence and domination/ Rescission. The right to rescind contracts and to revoke gifts made under undue influence is similar to the right of rescinding contracts induced by fraud. Such transactions are voidable, not void. So soon as the undue influence is withdrawn, the Presumed action or inaction of the party influenced becomes liable to j ion ' the construction that he intended to affirm the transaction. s Q. B. D. Thus in Mitchell v. Horn fray a jury found as a fact that a patient who had made a gift to her physician determined to abide by her gift after the confidential relation of physician and patient had ceased, and the Court of Appeal held that the gift could not be impeached. 36 en. D. In Allcard v. Skinner the plaintiff allowed five years to elapse before she attempted to recall gifts made to a sisterhood from which she had retired at the commencement of that time; during the whole of the five years she was in communication with her solicitor and in a position to know and exercise her rights. In this case also the Court of Appeal held that the conduct of the donor amounted to an affirmation of the gift. But the affirmation is not valid unless there be an entire on cessa- Chap. IT. 5 UNDUE INFLUENCE 203 cessation of the Undue Influence which has brought about tion of the contract or gift. The necessity for such a complete relief of the will of the injured party from the dominant influence under which it has acted is thus set forth in Hoxon v. Payne: sch.88i. ' Fraud or imposition cannot be condoned ; the right to property acquired by such means cannot be confirmed in this Court unless there be full knowledge of all the facts, full knowledge of the equitable rights arising out of those facts, and an absolute release from the undue influence by means of which the frauds were practised. 1 The same principle is supplied where a man parts with a valuable interest under pressure of poverty and without proper advice. Acquiescence is not presumed from delay : on the contrary, ' it is presumed that the same distress which pressed him to enter into the contract prevented him from / re Fry, 40 Ch. D. coming to set it aside/ at p. 324. CHAPTER V Legality of Object. THERE is one more element in the formation of contract which remains to be considered the object of the parties. Certain limitations are imposed by law upon the freedom of contract. Certain objects of contract are forbidden or discouraged by law ; and though all other requisites for the formation of a contract be complied with, yet if these objects are in contemplation of the parties when they enter into their agreement the law will not enforce it. Two sub- Two matters of inquiry present themselves in respect of subject. The first is the nature and classification of the (i)the objects regarded by law as illegal. The second is the effect (a] the' of the presence of such objects upon the contracts in which effects of ,-, illegality, ^ey appear. & 1. NATURE ov ILLEGALITY IN CONTRACT. What is The objects of contract may be rendered illegal by express eg x y ' statutory enactments or by rules of Common Law. And the rules of Common Law may be more or less precisely defined. We may arrange the subject in the following manner : A contract may be illegal because (1) its objects are forbidden by Statute ; (2) its objects are defined by the Common Law as con- stituting an indictable offence or civil wrong ; (3) its objects are discouraged by the Common Law as contrary to public policy. But the two latter heads of illegality are in fact two forms, Chap. V.I LEGALITY OF OBJECT 205 one more and one less precise, of Common Law prohibition. The broad distinction is between contracts illegal by Statute and contracts illegal at Common Law, and it is thus that I propose to treat the subject. (i) Contracts which are made in breach of Statute. A statute may declare that a contract is illegal or void. Effects of There is then no doubt of the intention of the Legislature pr ohibi- that such a contract should not be enforced. The difference tlon> between an illegal and a void contract is important as regards collateral transactions, but as between the parties the contract is in neither case enforceable. But a statute may impose a penalty on the parties to a contract, without declaring it to be either illegal or void. In such a case we have to ascertain whether the Legislature intended merely to discourage the contract by making it expensive to both parties ; or to avoid it, so that parties would acquire no legal rights under it ; or to prohibit it, so that any transactions entered into for its furtherance would be tainted with an illegal purpose. If the penalty was imposed for the protection of the revenue, it is possible that the contract is not prohibited. Brown v. . . . Duncan^ that the Legislature only desired to make it expensive to the ioB.&c.93. parties in proportion as it is unprofitable to the revenue. The soundness of this distinction has, however, been called Cope v. ' . . Rowlands, in question. A better test is to be found in the continuity M. & w. I^o. of the penalty. If the penalty is imposed once for all, and is not recurrent on the making of successive contracts of the Smith v. Mawhood, . kind which are thus penalised, or if other circumstances would H M - & w - make the avoidance of the contract a punishment dispropor- tionate to the offence, it may be argued that such contracts are not to be held void. But where the penalty recurs upon the making of every contract of a certain sort, we may assume (apart from revenue cases, as to which there may yet be a doubt) that the contract thus penalised is avoided as between the parties. Whether it is rendered illegal, so as to taint 206 FORMATION OF CONTRACT Part II collateral transactions, must be a question of the construction of the statute. Objects of I will not discuss here in any detail the various statutes by prohibit which certain contracts are prohibited or penalised. They tion. relate (i) to the security of the revenue; (2) to the protection of the public in dealing with certain articles of commerce, (3) or in dealing with certain classes of traders; (4) to the regulation of the conduct of certain kinds of business. An excellent summary of statutes of this nature is to be found Pollock, ed. in the work of Sir F. Pollock, and it is not proposed to deal 7. 707-7 11 ' further with them here. There is, however, a kind of contract which has been the frequent subject of legislation, and which from its peculiar character calls for analysis as well as for historical treatment. Wagering This is the wager. The word has unfortunately been used as a term of reproach ; hence some contracts not permitted by law have been called wagers, while others, precisely similar in their nature but enforced by the Courts under certain conditions are not so called. What is A wager is a promise to give money or money's worth upon the determination or ascertainment of an uncertain event ; the consideration for such a promise is either something given by the other party to abide the event, or a promise to give upon the event determining in a particular way l . The event may be uncertain because it has not happened, or because it is not ascertained, at any rate to the knowledge of the parties. Thus a wager may be made upon the length of St Paul's, or upon the result of an election which is over, though the parties do not know in whose favour it has gone. The uncertainty then resides in the minds of the parties, and the subject of the wager may be said to be the accuracy of 1 It would seem that to constitute a wager there must be mutual chances of gain and loss. A so-called bet of to nothing might be an offer of reward for the exercise of skill, as if JT should bet a jockey 100 to nothing that he did not win a race which X desired him to win ; or it might be a gratuitous promise to pay money on a condition, as if X should bet 5 to nothing that it rained in 24 hours. Chap. V. I LEGALITY OF OBJECT 207 each man's judgment rather than the determination of a particular event. But the parties must contemplate the determination o the uncertain event as the sole condition of their contract. One may thus distinguish a genuine wager from a conditional promise or a guarantee 1 . If A promises to paint a portrait of X and X promises to it differs pay 100 if M approves the likeness this is a contract for aitionai n ~ the sale of a chattel, the payment to depend upon a condition. P romise : A agrees to do a piece of work, for which he is to be paid in the uncertain event of M's approval. If A, wishing to be sure that he gets something, promises D to pay him 20 if M approves, in consideration that D promises to pay A 10 if M does not approve this is a wager on the uncertain event of M 's decision. A bets D 2 to I that M does not approve. Again, if A desires X to advance 500 to M, and promises and that if at the end of three months M does not pay he will this is a promise to answer for the debt or default of another. If A, wishing to secure himself against the possible default of M, were to promise D to pay him 100 if M satisfied his debt at the end of the three months, in consideration that D promised him 250 if M did not satisfy his debt this would be a wager upon the solvency of M. It is obvious that a wager may be a purely gambling or sporting transaction, or it may be directed to commercial objects. A man who bets against his horse winning the Derby is precisely in the same position as a man who bets Marine in- surance is against the safety of his own cargo. Yet we call the one a wager, a wager, while the other is called a contract of marine in- surance. A has a horse likely to win the Derby, and therefore a prospect of a large return for money laid out in rearing 1 The definition of a wagering contract-^ited by Professor Holland, in the Jurispru- French Code, seems faulty. It is said to be ' one the effects of which, as to g| n ^' a88 ' both profit and loss whether for all the parties or for one or several of them, An. 1964. depend on an uncertain event.' This would include any agreement in which the profit and loss of one party depended on a contingency. 208 FORMATION OF CONTRACT Part II and training the horse, in stakes and in bets ; he wishes to secure that he shall in no event be a loser, and he agrees with X that, in consideration of X promising him 4000 if his horse loses, he promises X 7000 if his horse wins. though The same is his position as owner of a cargo : he has ' insurable a prospect of large profits on money laid out upon a cargo interest. o s ^ . ^ e ^g^g j n no ev ent to be a loser, and he agrees with X } an underwriter, that in consideration of his paying X , X promises to pay him if his cargo is lost by certain specified perils. The law forbids A to make such a contrac unless he has what is called ' an insurable interest ' in the cargo, and contracts in breach of this rule have been called mere wagers, while those which conform to it have been called contracts of indemnity. But such a distinction is misleading l . It is not that one is and the other is not a wager : a bet is not the less a bet because it is a hedging bet ; nor yet because the stake is limited to the amount of loss sustained ; it is the fact that one wagering contract is and the other is not permitted ly law which makes the distinction between the two. Lifeinsur- A life insurance is in like manner a wager. Let us corn- wager. P are ^ with an undoubted wager of a similar kind. A is about to commence his innings in a cricket match, and he agrees with X that if X will promise to give him i at the end of his innings, he will pay X a shilling for every run he gets. A may be said to insure his innings as a man insures his life ; for the ordinary contract of life insurance consists in this, that A agrees with X that if X will promise to pay a fixed sum on the happening of an event which must happen sooner or later, A will pay to X so much for every year that elapses until the event happens. In each of these cases A sooner or later becomes entitled to a sum larger than any L. R. a Ex. * In Wilson v. Jones such a distinction is drawn by Willes and Blackburn, * 39- J.J. But though the propriety of a wager may be affected by the existence of an ulterior object in the mind of one of the parties, the nature of the transaction remains the same. Chap. V. I LEGALITY OF OBJECT 209 of the individual sums which he agrees to pay. On the other hand, he may have paid so many of these sums before the event takes place that he is ultimately a loser by the transaction. We may leave here the analysis of a wager, and look at the History of history of the law respecting wagering contracts. mon law They fall into two groups : wagers on the happening or ascertaining of an uncertain event, made entirely for sport ; and wagers in which the uncertain event affects or results from a business transaction in other words, hedging bets by which a man protects himself from a trade risk. I will first deal with sporting wagers, premising that at common law all wagers were enforceable, and, until the latter part of the eighteenth century, were only discouraged by some trifling difficulties of pleading. thw, P ?3s8. But the Courts found that frivolous or indecent matters were brought before them for decision, and a rule came to be established that a wager was not enforceable if it could only be proved by indecent evidence, or evidence calculated to injure or pain a third person j in some cases it was laid down as a rule of public policy that any wager which tempted a man to offend against the law was illegal. Strange, and even ludicrous results followed from these efforts of the Courts to discourage the litigation of wagers. A bet upon the duration of the life of Napoleon was held Gilbert v. Sykes, [1812] to be unenforceable, as tending, on the one side, to weaken l6 East - '5 the patriotism of an Englishman, on the other, to encourage the idea of the assassination of a foreign ruler, and so to provoke retaliation upon the person of our own sovereign. But it is evident that the substantial motive which pressed upon the judges was ' the inconvenience of countenancing idle wagers in courts of justice/ the^f eeling that ' it would be Bayiev, j, a good rule to postpone the trial of every action upon idle v. Sykes, P. 102. wagers till the Court had nothing else to attend to/ Meantime the Legislature has dealt with such wagering contracts. It was enacted by 16 Car. II. c. 7, that any 210 FORMATION OF CONTRACT Part I J of statute sum exceeding 100 lost in playing at games or pastimes, or wagers. m betting on the players, should be irrecoverable, and that 16 Car. ii. all forms of security given for money so lost should be void. g Anne, c. 14. The law was carried a stage further by 9 Anne, c. 14, whereby securities of every kind, whether given for money lost in playing at games, or betting on the players l , or knowingly advanced for such purposes, were rendered void; and the loser of 10 or more was enabled to recover back money so lost and paid, by action of debt brought within three months of payment. Cases of hardship resulted from the working of this Act. Such securities might be purchased from the holders of them by persons ignorant of their illegal origin. These persons, when they sought to enforce them against the giver of the security, discovered, too late, that they had paid value for an instrument which was void as against the party losing 5 & 6 at play. The Act Z & 6 Will. IV. c. 41 therefore enacted that Win. iv. c - 41- securities which would have been void under the Act of Anne should henceforth be taken to have been made, drawn, or accepted for an illegal consideration. The holder of such an instrument may therefore enforce it, if after proof of its ? Part in. illegal inception, he is able to show that he gave value for it and was ignorant of its origin : in other words that he was a bond fide holder for value. s & 9 Viet The next step was to make all wagers void : this was done by the Gaming Act 1 845, s. 1 8, which enacts : ' That all contracts or agreements, whether by parole or in writing, by way of gaming or wagering, shall be null and void ; and that no suit shall be brought or maintained in any Court of Law or Equity for recovering any sum of money or valuable thing alleged to be won upon any wager, or which shall have been deposited in the hands of any person to abide the event on which any wager shall have been made. Provided always that this enactment shall not be deemed to apply to any subscription or contribution or agreement Woolf v. * It was argued as lately as 1898 that horse racing did not come within hSoSl'j'o' B *ke ^ c * 1 ^ Anne > but the Court of Appeal considered that the matter was (C. A.) 338. settled by authority. Chap. V. i LEGALITY OF OBJECT 211 to subscribe or contribute for or towards any plate, prize, or sum of money to be awarded to the winner or winners of any lawful 8 & 9 Viet. Game, Sport, Pastime, or Exercise.' It remained to deal with agreements arising out of wagers or made in contemplation of them. Wagers were only void, so that no taint of illegality attached to transactions collateral to wagers, except in the case of securities given for payment of money due in respect of such as fell under the Acts of Charles II and Anne. Money lent to make or to pay bets could be recovered, and if one man employed another to make bets for him the ordinary rules prevailed which govern the relation of employer and employed. The Gaming Act of 1892 alters the law in this respect. ' Any promise, express or implied, to pay any person any sum 55 Viet. c. 9. of money paid by him under or in respect of any contract or agree- ment rendered null and void by 8 & 9 Viet. c. 109, or to pay any sum of money by way of commission, fee, reward, or otherwise in respect of any such contract, or of any services in relation thereto, or in connexion therewith, shall be null and void, and no action shall be brought or maintained to recover any such sum of money 1 .' A man cannot now recover commission or reward promised to him for making or for paying bets : nor can he recover money paid in discharge of the bets of another. Whether he is a betting commissioner who pays the bets which he has been employed to make and, if lost, to pay : or whether, on request, he settles the accounts of a friend who has lost money at a race-meeting, he. cannot successfully sue for money so ff*^ v- nm'fl [i90i]iK.B. (C.A.). Whether money knowingly lent to make or to pay bets is money paid in respect of a contract rendered null and void by 8 & 9 Viet. c. 109 has not been decided, and must be regarded as open to question 2 . Carney v. Plimmer is not conclusive on this point. Plimmer, [1897) Q- B. wishing to deposit 500 with a stakeholder for the purpose 1 The Act is not retrospective : Knight v. Lee, [1893] i Q. B. 41. * See an article by Mr. Dicey, Law Quarterly Review for 1904, p. 436. P 2 212 FORMATION OF CONTRACT Part II of a wager, borrowed 500 from Carney, on the terms that he was to repay the money if he won, but not otherwise. He won but refused to pay, and it was held that the transaction was not a simple loan of money, but money paid in respect of a wager. DC Mattos It is clear, however, that one who is employed to make bets v. Benjamin, . . . 63 L-J- on behalf of another and who receives the winnings cannot keep them. This is money received on behalf of another, and is not within the Act. And money deposited with a stakeholder to abide the event of a wager is not money paid. For the word ' paid ' is inter- preted to mean 'paid out and out/ and the deposit can be g recovered by the depositor at any time before it has been paid c. A.) 744. awav on ne determination of the bet. The The Act of 1845 repealed the Acts of Charles II and Anne, Acts. so that, apart from Acts forbidding lotteries and certain games, and Acts regulating insurance, we now have three statutes relating to wagers 5 & 6 Will. IV. c. 41, s. i, as to securities given for money lost on certain kinds of wager ; 8 & 9 Viet, c. 109, s. 1 8, as to wagers in general; 55 & 56 Viet. c. 9, as to collateral transactions, other than securities, arising out of wagers. Securities. Securities given for money lost on wagers still fall into two classes, because 5 & 6 Will. IV. c. 41, s. I, retains the distinc- tion between wagers, which fall under the Acts of Charles and Anne and those which do not. Considera- A promissory note given in payment of a bet made upon illegal. a cricket match is given for an illegal consideration ; not only is it void as between the original parties to it, but every subsequent purchaser may be called on to show that he gave value for the note ; and if he can be proved to have known of the illegal consideration for which it was first given, he may still be disentitled to recover upon it. Promise A promissory note given in payment of a wager upon the result of a contested election would, as between the parties to it, be given on no consideration at all, inasmuch as it is Chap.V. i LEGALITY OF OBJECT 213 given in discharge of an obligation which does not exist. But the wager is not illegal, it is simply void; and if the note be endorsed over to a third party, it matters nothing that he was aware of the circumstances under which the note was originally given ; nor does it lie upon him to show that Fitch v. Jones, 5 E. he gave value for the note. & B. 245. As regards wagering contracts entered into for commercial purposes, there are three important subjects with which the Legislature has dealt. These are Stock Exchange trans- actions, marine insurance, and insurance upon lives or other events. Sir John Barnard's Act (1734) dealt with 'the infamous 7 GCO.II.C. 8. practice of stockjobbing/ and was more particularly directed to wagers on the price of stock, or, as they are sometimes Stock Ex- called, ' agreements to pay differences/ These originate in transac- some such transaction as this : A contracts with X for the tlons - purchase of fifty Russian bonds at 78 for every 100 bond. The contract is to be executed on the next settling day. If by that date the bonds have risen in price, say to 80, X, unless he has the bonds on hand, must buy at 80 to sell at 78 ; and if he has them on hand, he is obliged to part with them below their market value. If, on the other hand, the bonds have gone down in the market, A will be obliged to pay the contract price which is in excess of the market value. It is easy to see that such a transaction may be a wager and nothing more, a bet on the price of stock at a future day. A may never intend to buy nor X to sell the bonds in question ; they may intend no more than that the winner should receive from the loser the difference between the contract price and the market value on the settling day. On the other hand A may have intended to buy, and have found so much better an investment for his money between the date of Thacker \. . . Hardy, the contract and the settling da^ that it is well worth his 4 Q- B. D. while to agree to pay a difference in X's favour to be excused performance of the contract. Sir John Barnard's Act has been repealed, and contracts of ^ 214 FORMATION OF CONTRACT Part II this nature, if proved to be simple wagers, fall under the 8 & 9 Viet. c. 109, 5. iS 1 . If the transaction is essentially an agreement to pay differ- ences, and is found to be so as a fact, a term in the wagering contract that either party may at his option require com- pletion of the purchase will not alter the character of the transaction. Such a term is said to be inserted only to 1 cloak the fact that it was a gambling transaction and to i enable the parties to sue one another for gambling debts/ strachalT v- Money due to one of the parties on such an agreement cannot [1896] A. c. ^ recovere( ^ k u t securities deposited with one of the parties to provide for debts arising from a series of agreements to pay differences may be recovered by the depositor on the ground that there was no consideration for the deposit, since /f 8o8 n o'ij ^ e a & reemen ^s, the performance of which was to be secured, were themselves void. Marine Marine insurance is dealt with by 19 Geo. II. c. 37. the insurance. effect of which is to avoid all insurances on British ships or merchandise laden on board such ships unless the person effecting the insurance is interested in the thing insured. What is an insurable interest, that is to say such an interest as entitles a man to effect an insurance, is a question of mercantile law with which we are not here concerned. Insurance Tn e Act 14 Geo. III. c. 48 deals with insurance generally generally. (marine insurance excepted), and forbids insurances on the lives of any persons, or on any events whatsoever in which the person effecting the insurance has no interest. It further requires that the names of the persons interested should be inserted in the policy, and provides that no sum greater than the interest of the insured at the time of in- surance should be recovered by him. A creditor may thus insure the life of his debtor, and a lessee for lives may insure the lives upon which the continuance of his lease depends. 1 The effect of 8 & 9 Viet. c. 109, 5. 18 upon Stock Exchange transactions is well summarized in the Appendix to the Report of the Stock Exchange Commission, 1878 [2157], p. 356. Chap.V.l LEGALITY OF OBJECT 215 But life insurance differs in an important respect from marine or fire insurance. These latter contemplate a specified loss, they are essentially contracts of indemnity 1 . If the Darreii v. Tibbitts, insured recovers the amount of his loss from any other source sQ- D. the insurer may recover from him pro tanto 2 ; and if he has renounced rights which he might have exercised, and which West of & . England if exercised would have relieved the insurer, he may be com- Fi ins. Co. v. Isaacs, pelled to make good to the insurer the full value of these rights. ['^ 7 ^ 226 ' Policies of insurance against fire or marine risk are contracts Life insur- to recoup the loss which parties may sustain from particular causes. jL e When such loss is made good aliunde, the companies are not liable from other for a loss which has not occurred ; but in a life policy there is no contracts such provision. The policy never refers to the reason for effecting it. It is simply a contract that in consideration of a certain annual Law ' v payment, the company will pay at a future time a fixed sum, calcu- London 1 J J ' Indisputable lated by them with reference to the value of the premiums which are Life Policy to be paid, in order to purchase the postponed payment.* , K! & J. 328. Thus, though in a life policy the insured is required to have an interest at starting, that interest is nothing as between him and the company who are the insurers. ' The policy never refers to the reason for effecting it/ The insurer promises to pay a large sum on the happening of a given event, in consideration of the insured paying lesser sums at stated intervals until the happening of the event. Each takes his risk of ultimate loss, and the statutory requirement of interest in the insured is no part of the contract. And so if a creditor effects an insurance on his debtor's life, and afterwards gets his debts paid, yet still continues to pay the 1 The fact that the amount recoverable by the insured is thus limited by the amount of his loss does not alter the character of insurance as a wager. For a wager is not necessarily a gambling transaction; it is only a certain form of contract. 2 This right is called the ' subrogation ' of the insurer into the rights of the insured : it is most fully and clearly set forth in Castellain v. Preston, u Q. B. D. The insurer is not merely entitled to be put in the place of the insured ( * 38 ' for the purpose of enforcing rights of s/ftion, but to have the advantage of every right of the person insured by which the loss has been or can be diminished. The purpose of the doctrine is to prevent these contracts from being anything but contracts of indemnity. 216 FORMATION OP CONTRACT Part II insurance premiums, the fact that the debt has been paid is no answer to the claim which he may have against the com- pany. This rule was established, after some conflict of judicial 15 c. B. 365. opinion *, in Dalby v. The Tndia and London Life Assurance Company. (ii) Contracts illegal at Common Law. (a) Agreements to commit an indictable offence or civil wrong. Agree- It is plain that the Courts would not enforce an agreement commit * commit a crime or an indictable offence; but the ground a crime,. nere ] g a l m0 st entirely covered by statutes in which the Criminal Law has been embodied. or wrong. Nor again will the Courts enforce an agreement to commit a civil wrong. An agreement to commit an assault has been held to be 2 Lev. 174: void, as in Allen v. Rescous, where one of the parties undertook ciayv.Yates, to beat a man. So too has an agreement involving the pub- lication of a libel, or the perpetration of a fraud. A debtor making a composition with his creditors of 6s. 8d. in the pound, entered into a separate contract with the plaintiff to pay him a part of his debt in full. This was held to be a fraud on the other creditors, each of whom had promised to forego a portion of his debt in consideration that the others would forego theirs in a like proportion. ' Where a creditor in fraud of the agreement to accept the composition stipulates Maiiaiieuv. for a preference to himself, his stipulation is altogether void.' 16 Qfiu&Q. On the same ground the Courts will not support a condition Exparte in a contract that in the event of a man's becoming bankrupt Barter, 26 ch. D.SIO. certain articles of his property should be taken from his creditors and go to the promisee. An agreement forming part of a scheme for promoting a company, in which the object of the promoters was to defraud the shareholders, will not furnish a cause of action. A pur- 1 See QodsaU v. Boldero, g East, 72, where Lord Ellenborough treated life insurance as a contract of indemnity. Chap. V. i LEGALITY OF OBJECT 217 chased from X an exclusive right to use a particular scientific process : it turned out that X had no such right as he professed Begbie v. PhSsphate to sell : but A could not recover because the agreement was f*^ a s e ^^' shown to have been made in contemplation of a fraud. at P- *99- Fraud is a civil wrong, and an agreement to commit a fraud Fraud and illegality, is an agreement to do an illegal act. But fraud as a civil wrong must be kept apart from fraud as a vitiating element in contract. If A is induced to enter into a contract with X by the fraud of X the contract is voidable because A's consent is not genuine ; and if A does not discover he fraud in time to avoid the contract he may sue in tort for such damage as he has sustained. If A and X make a contract the object of which is to defraud M the contract is void, because A and X have agreed to do what is illegal. We must not confuse reality o/ As .i nSinith J J onContracts, consent with legality of object. LecL vi- (b) Agreements to do that which it is the policy of the law to prevent. The policy of the law, or public policy, is a phrase of Public common use in estimating the validity of contracts. Its p< history is obscure ; it is most likely that agreements which General tended to restrain trade or to promote litigation were the first tion. to elicit the principle that the Courts would look to the inter- ests of the public in giving efficacy to contracts. Wagers, while they continued to be legal, were a frequent provocative of judical ingenuity on this point, as is sufficiently shown by the case of Gilbert v. Sykes quoted above : but it does not 16 East, 150. seem probable that the doctrine of public policy began in the endeavour to elude their binding force *. Whatever may have been its origin, it was applied very frequently, and not always with the happiest results, during the latter part of the 1 Sir Frederick Pollock holds that the discouragement of wagers was Contract, the foundation of the doctrine of ' public policy,' but restraint of trade e ' ' p ' 29 ^' has a prior claim : see Year Book, 2 Hen. V. pi. 26, and the comment of 4 H. L. C. p. 237. Lord St. Leonards in Egerton v. Earl Brownlow. 218 FORMATION OF CONTRACT Part II v. eighteenth and the commencement of the nineteenth century. Earl Brown- ... lo ! T _ Modern decisions, however while maintaining the duty or the 4 H. I v. . i. Courts to consider the public advantage, have tended more and more to limit the sphere within which this duty may be exercised. This view of the subject is thus stated by Jessel, Printing Co. M.R., in 1875: ' You have this paramount public policy Y. Sampson, 19 Eq. 465. to consider, that you are not lightly to interfere with the jansonv. freedom of contract'; and in 1902 it is expressly laid down consolidated in the House of Lords that public policy is not a safe guide Gold Mines, . , . ". . ,, T T, Ld.. [1002] in determining the validity or a contract. ib. P . 49 i. We may say then that the policy of the law has, on certain subjects, been worked into a set of tolerably definite rules, but no Court has any longer the power to extend its application. Maxim -Nor- Contracts which are void as contrary to public policy differ denfelt Co. J v.Nordenfeit, from those with which I have iust dealt in this way, that the [1893! i Ch. J ' lP6oV at objects aimed at in the latter would, if carried out, constitute an actionable wrong or an indictable offence, whereas that which is against public policy is for the most part not illegal but void, or illegal in the sense that it is contrary to public morals. We may arrange such contracts under certain heads. Agreements which injure the state in its relations with other states. These fall under two heads, friendly dealings with a hostile state, and hostile dealings towards a friendly state. . Contract Not only is it unlawful to enter into contracts with an alien nemy, enemy, but it is unlawful to purchase goods in an enemy's country without license from the crown. Thus in the case of 7E.&B.;63. Esposito v. Bowden a contract of charter-party, in which an English subject chartered a neutral ship to bring a cargo of corn from Odessa, was avoided by the outbreak of hostilities between England and Russia. ' For a British subject (not domiciled in a neutral country) to ship a cargo from an enemy's port, even in a neutral vessel, without license from the crown, is an act primd facie and under all circum- stances a dealing and trading with the enemy, and therefore for- ib. p. 793. bidden by law.' Chap. V. l LEGALITY OF OBJECT 219 We must note that hostilities must actually have broken Janson v. Driefontem out ; a contract made with an alien, whose government sub- ^"J^f*^* 1 sequently declares war, is perfectly valid, even though made in A d c. [ 484 21 view of the possibility of war. But the Sovereign who has the right to proclaim war may, by Order in Council, suspend the effect of such proclamation for a time so as to allow the performance of subsisting con- tracts within that time. An agreement which contemplates action hostile to a or hostile friendly state is unlawful and cannot be enforced. So the state. Courts will afford no assistance to persons who ' set about to raise loans for subjects of a friendly state to enable them De Wutz v. Hendncks, to prosecute a war against their sovereign/ 2 Bin - **? There seems no authority as to the lawfulness of a contract to break the law of a foreign country beyond the opinion of writers on the subject that such a contract could not be enforced. Nor does there seem to be authority for a dictum Hoiman v. Johnson, of Lord Mansfield that ' no country ever takes notice of the Cowp. 343- revenue laws of another/ It must be considered very doubtful whether an agreement to break the revenue laws of a friendly state would now furnish a cause of action. Agreements tending to injure the public service. The public has an interest in the proper performance of Sale of their duty by public servants, and is entitled to be served by the fittest persons procurable. Courts of Law hold contracts to be illegal which have for their object the sale of public offices or the assignment of the salaries of such offices. In Card v. Hope, which is perhaps an extreme case, a deed aB.&c.66i. was held to be void by which the owners of the majority of shares in a ship sold a portion of them, the purchaser acquiring the command of the ship for himself and the nomination to the command for his executors./' The ship was in the service of the East India Company, and this had been held equivalent Biachford v. r " u Preston, to being in the public service, but the judgement proceeded on 8 T. R. 8 9 . the ground that the public had a right to the exercise by the 220 FORMATION OF CONTRACT Part II 5 &6Ed.VI c. 1 6. 49 Geo. III. c. 126. Egerton v. Brownlow. 4H. L.C.I 6 1 & 62 Viet, c. 48. Assign- ment of salaries, 8 M. & W. 151- or pen- sions. owners of any ship of their best judgment in selecting officers for it. The principle on which both Statute and Common Law deal with this subject is that the public has a right to some better test of the capacity of its servants than the fact that they possess the means of purchasing their offices. Thus what has been called ' the policy of the law ' will not uphold a disposition of property which was made conditional on the holder procuring a title of honour : and Statute forbids all agreements for the exercise of any rights of patronage of a benefice in favour, or on the nomination, of any particular person, and only allows the transfer of such rights if certain conditions are complied with. On a somewhat different principle the same rule applies to the assignment of salaries or pensions. 'It is fit/ said Lord Abinger in Wells v. Foster, 'that the public servants should retain the means of a decent subsistence without being exposed to the temptations of poverty/ And in the same case, Parke, B., lays down the limits within which a pension is assignable. ' Where a pension is granted, not exclusively for past services, but as a consideration for some continuing duty or service, then, although the amount of it may be influenced by the length of the service which the party has already performed, it is against the policy of the law that it should be assignable/ Stifling criminal proceed- ings, Williams v. Bayley.L.R i H. L, 220. except where civil and criminal remedies co-exist. Agreements which tend to pervert the course of justice. These most commonly appear in the form of agreements to stifle prosecutions, as to which Lord Westbury said, ( You shall not make a trade of a felony. If you are aware that a crime has been committed you shall not convert that crime into a source of profit or benefit to yourself/ An exception to this rule is found in cases where civil and criminal remedies co-exist : a compromise of a prosecution is then permissible. The exception and its limits are thus stated in the case of Keir v. Leeman. Chap. V.i LEGALITY OF OBJECT 221 'We shall probably be safe in laying it down that the law will permit a compromise of all offences though made the subject of a criminal prosecution, for which offences the injured party might sue and recover damages in an action. It is often the only manner 6O. B. 321, in which he can obtain redress. But, if the offence is of a public gV^SQS- nature, no agreement can be valid that is founded on the considera- tion of stifling a prosecution for it.' This statement of the law was adopted in 1 800 by the windhiii Local Board Court of Appeal. ^"cjTb Another example of this class of agreements is an indemnity *** A -)3S I - given to one who has gone bail for an accused person, whether such indemnity be given by the prisoner himself, as in Hermann 15 Q. B. D. v. Jeuchner, or by a third person on his behalf, as in the more recent case of Consolidated Exploration and Finance Company [1900] i Ch. TUT 37 ' v. Musgrave. Agreements to refer matters in dispute to arbitration have Civil pro- been regarded as attempts to ' oust the jurisdiction of the s^ott*" 88 Courts/ and as such were limited in their operation by c H/L. c. judicial decisions. The rules on the subject are now con- Edwards v. solidated in the Arbitration Act 1889, and govern by both * EX. 213. parties to be so intended. Agreements which affect the freedom or security of Marriage or the due discharge of parental duty. Such agreements, in so far as they restrain the freedom Restraint , . , , , . i ... of mar- of marriage, are discouraged on public grounds as injurious to the moral welfare of the citizen. So a promise under seal p v> to marry no one but the promisee on penalty of paying her 4 Bnrr ' 3 " 5- 1000 was held void, as there was no promise of marriage on either side and the agreement was purely restrictive. So too a wager in which one man bet another that he would Hartley v. not marry within a certain time was held to be void, as giving o East, 22. to one of the parties a pecuniary interest in his celibacy. What are called marriage brocage contracts, or promises or of free- made upon consideration of the procuring or bringing about choice. a marriage, are held illegal ' not for the sake of the particular Q?^^ instance or the person, but of the public, and that marriages ^f* Sen ' may be on a proper foundation/ And so an agreement to Hermann v. * . Charles- introduce a person to others of tae opposite sex with a view worth, . ... [K)05]2K.B. to marriage is unlawful although there is a choice given of ( c - *J 1 3 I - a number of persons, and not an effort to bring about marriage with a particular person. 224 FORMATION OF CONTRACT Part II Agree- Agreements providing for separation of husband and wife separa- are valid if made in prospect of an immediate separation. tion. jj u ^ suc fa a g reemen ts provide for a possible separation in the future they are illegal, whether made before or after marriage, because they give inducements to the parties not cartwrightv. to perform ' duties in the fulfilment of which society has an Cartwnght, J sD.M.&G. interest/ 989. Parental And for the same reason an agreement by a mother to transfer to another her rights and duties in respect of an Humphrys illegitimate child has been held illegal, because the law v Pola.k [i"ooi]2K.B. imposed a duty on the mother ' in respect of the infant and (C. A.) 385. . J for its benefit/ Agreements in restraint of trade. Restraint The law concerning restraint of trade has changed from time to time with the changing conditions of trade, but with trifling exceptions these changes have been a continuous development of a general rule. The early cases show a disposition to avoid all contracts ' to prohibit or restrain any, to use a lawful trade at any time Coiegate v. or at any place/ as being ' against the benefit of the Common- Bacheler, Cro Eiiz. wealth/ But soon it became clear that the Commonwealth 8;a (1596). would not suffer if a man who sold the goodwill of a business might bind himself not to enter into immediate competition Buistrode, with the buyer : thus it was laid down in Rogers v. Parry 136 (1613). that ' a man cannot bind one that he shall not use his trade generally/ 'but for a time certain, and in a place certain, a man may be well bound and restrained from using of his trade/ Permis- Thus we get an established rule; a contract in general strictions, restraint of trade is contrary to public policy, a contract in partial restraint will be upheld. Henceforth, as trade expands and the dealings of an indi- vidual cease to be confined to the locality in which he lives, the construction of agreements in partial restraint of trade expands also. Chap. V. I LEGALITY OF OBJECT 225 A man may limit his freedom as regards the persons with whom he will trade, as in Rannie v. Irvine, or the mode in 7 M. & G. 969- which he will trade, as in Jones v. Lees, but the most common ' ** & N - form of restriction was restriction as to place. Hence the dis- tinction between general and partial restraints became con- fused with a distinction between restraints unlimited as to place and restraints unlimited as to time, and it was laid down that a man might not contract himself out of the right to carry on a certain trade anywhere, for ten years, though he might contract himself out of the right ever to carry on a trade within ten miles of London. The rule as thus expressed was inapplicable to the modern extended conditions of trade. In the sale of a goodwill or a trade policy, secret the buyer might in old times have been sufficiently protected by limited restrictions as to the place or persons with whom the seller should henceforth deal. This is not so where an individual or a company supplies some article of commerce to the civilized world. The old distinction between general and partial restraints was more flexible, and its application is well illustrated by TJie Maxim-Nordenfelt Gun [1893] ' CH. Co. v. Nordenfelt. Nordenfelt was a maker and inventor of guns and ammu- nition : he sold his business to the Company for 287,500, and agreed that for twenty-five years he would cease to carry on the manufacture of guns, gun-carriages, gunpowder, or ammunition, or any business liable to compete with such business as the Company was carrying on for the time being. He retained the right to deal in explosives other than gun- powder, in torpedoes or submarine boats, and in metal cast- ings or forgings. After some years Nordenfelt entered into business with another Company dealing with guns and ammunition ; the plaintiffs sought an injunction to^-estrain him from so doing. The Court of Appeal exhaustively reviewed the cases bear- ing on the subject, and held : (i) that the covenant not to compete with the Company 226 FORMATION OF CONTRACT Part II General in any business which it might carry on was a general restraint of trade, that it was void, but that it was distinct and severable from the rest of the contract ; Partial (2) that the sale of a business accompanied by an agree- ment by the seller to retire from the business, is not a general restraint of trade, provided it is reasonable between the parties, and not injurious to the public. if reason- This restraint was reasonable between the parties, because tween^he Nordenfelt not only received a very large sum of money, but parties, retained considerable scope for the exercise of his inventive and manufacturing skill, while the wide area over which the business extended necessitated a restraint coextensive with and not that area for the protection of the plaintiffs. Nor could the to public, agreement be said to be injurious to the public interest since it transferred to an English Company the making of guns and ammunition for foreign lands. But it should be observed that the very elaborate judgment of Bowen, L. J., seems to lay down a hard and fast rule that agreements in restraint of trade are divisible into two classes general, and partial or particular : that the former are necessarily void and do not even admit of discussion as to their reasonableness, while the latter may be sustained subject to the conditions of reasonableness and public interest above mentioned. Is general The House of Lords affirming the judgment of the Court always 11 * ^ Appeal ^ e ^ that such a distinction, if it ever had existed as void ? a rule of Common Law, was no longer tenable : The only true test in all cases, whether of partial or general 7Binjr, 735, restraint, is the test proposed by Tindal, C. J., in Homer v. Graves: 574^ " What is a reasonable restraint with reference to this particular case ? Underwood We may now, therefore, regard the law as settled that the v. Barker, [ j*9] * ch - duration of the contract, and the area over which it is meant (C. A.) 300. to extend, are not determining factors as regards its validity, but are elements in the general consideration by the Court of ^ ne reasonableness of the transaction, and the question of ' reasonableness is for the Court and not for the jury to decide. Chap. V. 2 LEGALITY OF OBJECT 227 But the reasonableness of the transaction is not the only matter into which the Courts will inquire. A covenant might Nordenfeit . v - Maiim- be fair as between the parties and yet injurious to the public Q^ d c" felt interest. It would then be held void. ^ 4l A< C It remains to note that at one time it was thought that the Courts would inquire into the adequacy of the consideration given for the promise not to trade. But this was disavowed by the Exchequer Chamber in Hitchcock v. Coker, and seems 6 A. & E. to resolve itself into the rule which requires the promisee to satisfy the Court that the transaction is reasonable. 2. EFFECT OF ILLEGALITY UPON CONTRACTS IN WHICH IT EXISTS. The effect of illegality upon the validity of contracts in What is which it exists, must needs vary according to circumstances. O f ju e _ It may affect the whole or only a part of the contract, and the 8 alit y ? legal part may or may not be severable from the illegal. One of the parties may be ignorant of the illegal object which the contract is intended to serve, or both may be ignorant of any illegal intention. The contract may be discouraged in the sense that the law will not enforce it, or prohibited in such a way as to taint collateral contracts and securities given for money advanced to promote an illegal transaction or paid to satisfy a claim arising out of such a transaction. I will endeavour to state some rules which may enable the reader to work his way through a complex branch of the law. (i) When the contract is divisible. A contract may consist of several parts ; it may be divisible Legal into several promises based on several considerations, and contract then the illegality of one or mor^of these considerations will to *** , ., not avoid all the promises if those which were made upon possible legal considerations are severable from the others. This is illegal, an old rule and is set forth in Coke's Reports, ' That if some Q 2 228 FORMATION OF CONTRACT Part II plot's of the Covenants of an Indenture or of the conditions endorsed Case, Co. Rep. 1 1. upon a bond are against law, and some good and lawful; that in this case the covenants or conditions which are against law are void ab initio, and the others stand good.' The rule holds whether the illegality exist by Statute or at Common Law, though at one time the judges thought differently, and fearing lest statutes might be eluded, laid Maieverer v. it down that c the statute is like a tyrant, where he comes he Redshaw, i Mod. 35. makes all void, but the common law is like a nursing father, makes only void that part where the fault is and preserves the rest/ The rule in its modern form may be thus stated : P er .Wj!'ef, 'Where you cannot sever the illegal from the legal part of a ing: v - Hfra- covenant the contract is altogether void, but where you can sever RaTiway, them, whether the illegality be created by statute or common law, L.^R.3 c. P. y OU mav re j ec t the bad part and retain the good.' Illustrations of the rule are to be found in cases where a corporation has entered into a contract some parts of which are ultra vires, and so, in a sense, unlawful * ; or where it is Bainesv. possible to sever covenants in restraint of trade either as Geary, 35 Ch. D. 154. regards the distances within which the restraint applies, or the persons with whom the trade is to be carried on. Recent Maxim Gun decisions furnish instances of covenants of this nature which detifeit, 62 are, and of covenants which are not severable. L.J.,Ch.a8 2 . (ii) When the contract is indivisible. Where there is one promise made upon several considera- tions, some of which are bad and some good, the promise would seem to be void, for you cannot say whether the legal or illegal portion of the consideration most affected the mind of the promisor and induced his promise. An old case which may be quoted in its entirety will illustrate this proposition : 1 These cases may serve as an illustration of the proposition before us, L R. but it must be borne in mind that Lord Cairns, in The Ashbwy Carriage Co. 7 H. L. 653. B _ Riche, has pointed out that contracts of this nature are invalidated not so much by the illegality of their object as by the incapacity of the corporation to bind itself by agreement for purposes beyond its statutory powers. Chap. V.2 LEGALITY OF OBJECT 229 ' Whereas the plaintiff had taken the body of one H. in execution Fetherston at the suit of J. S. by virtue of a warrant directed to him as special son, Cro."^ bailiff ; the defendant in consideration he would permit him to go Eliz- *" at large, and of two shillings to the defendant paid, promised to pay the plaintiff all the money in which H. was condemned. Upon non assumpsit it was found for the plaintiff. It was moved in arrest of judgment, that the consideration is not good, being contrary to the statute of 23 Hen. VI, and that a promise and obligation was all one. And though it be joined with another consideration of two shillings, yet being void and against the statute in part it is void in all.' (iii) Comparative effects of avoidance and illegality. When there is no divisibility of promises or consideration, A contract we have to consider first what was the attitude of the law may b ' towards the transaction contemplated, and next what was the mind of the parties towards the law. The law may deal with a contract which it would dis- courage in one of three ways. It may impose a penalty without avoiding the contract. It may avoid the contract. It may avoid, and penalise or prohibit. In this last case we must take the word ' penalise ' to mean not merely the imposition of a penalty, but the liability to damage for a wrong, or to punishment for a crime. A statu- tory penalty is merely a suggestion of prohibition. Whether it is prohibitory or not is, in every case, a question of con- struction. Thus we may suppose the State to say to the parties as regards these three kinds of transactions : (a) You may make the contract if you please, but you will penalised, have to pay for it. (b) You may make the agreement if you please, but the avoided, Courts will not enforce it. (c) You shall not make the agreement if the law can forbidden, prevent you. With the first case we are not concerned. There is a valid contract though it may be expensive to the parties. 230 FORMATION OF CONTRACT Illegal taint collateral trans- actions. L. R. EX. Robinson, 3M&W. & Aid. 179. As to the second and third, difficulties can only arise as regards collateral transactions, for in neither case can the contract be enforced. The intentions of the parties we will postpone for the present. They must be assumed to know the law. It may be stated at once that there is a clear distinction between agreements which are merely void and agreements which are illegal : between agreements which the law will not aid, and agreements which the law desires to prohibit : and that this distinction comes out, not in the comparative validity of the two, for both are void, but in the effect which their peculiar character imparts to collateral transactions. No contract, however innocent in itself, is good, if designed to promote an illegal transaction, whether the illegality arises at Common Law ^ or by s tatu te. Jn Pearce v. Brooks a coach-builder sued a prostitute for money due for the hire of a brougham, let out to her with a knowledge that it was to be used by her in the furtherance of her immoral trade. It was held that the coach-builder could not recover. . McKinnell lent Robinson money to play at hazard, * knowing that the money was to be so used. Hazard is forbidden 1 , and the players rendered subject to a penalty by 12 Geo. II. c. 28. It was held that the lender could not recover. Nor is a contract valid which is intended to carry into effect a P r hibited transaction. Cannan was the assignee of a bankrupt, and sued Bryce to recover the value of goods given to him by the bankrupt in part satisfaction of a bond, which in its turn had been given to Bryce by the bankrupt to secure the payment of money lent by Bryce to meet losses 1 Certain games with cards or dice are forbidden by 12 Geo. II. c. 28 and by 1 8 Geo. II. c. 34 ; these are, Ace of Hearts, Hazard, Pharaoh, Basset, and Roulet, otherwise Holy Poly. These Acts are prohibitory and penal : they do not merely make winnings at such games irrecoverable or in- validate securities given for money lost. They forbid the games and penalise the players. Chap. V. 2 LEGALITY OF OBJECT 231 which had been incurred by the stock- jobbing transactions of the bankrupt. Sir John Barnard's Act forbade not only wagers on the price 7 Geo. n. of stock, but advances of money to meet losses on such trans- ***! P- 2I 3- actions, and Bryce had lent money knowing that it was to meet such losses. Therefore his bond was void, and no property passed to him in the goods given in satisfaction of it, and Cannan was able to recover their value. The difference between the effect of illegality and of avoid- Void ance is clear when we look at transactions arising out of me nts. wagers before the passing of the Gaming Act 1892. 'The original contract of betting is not an illegal one, but only one which is void. If the person who has betted pays his bet, he does nothing wrong, he only waives a benefit which the statute has given to him, and confers a good title to the money on the person to whom he pays it. Therefore when the bet is paid the transaction is completed, and when it is paid to an agent it cannot be contended L? r j B 5; en ' that it is not a good payment for his principal.' Q- B - D - 367- And so it followed : (1) That money lent to make bets might probably have Wettenhaii been recovered. l ES P- 1 7- (2) That money lent to pay bets was recoverable. Pyke'scase, J r J 8 Ch. 0.756. (3) That as between employer and betting commissioner the ordinary relations of employer and employed held good in all respects, including the ordinary liability of an employer to indemnify the person whom he employed against loss or risk, which might accrue to him in the ordinary course of the employment, though the employment was to make void contracts. Anderson employed Read to make bets for him, and after e ^ dv - * Anderson, 13 the bets had been made and lost, revoked the authority which Q- a D< 779- he had given to Read to pay the bets. Read was a turf -com- missioner and a member of Tattersalls. If he had failed to pay the bets he would have been expelled from Tattersalls, and have lost his business as a turf-commissioner. He paid the bets and Em - , plover s sued Anderson for their amount. The Court of Appeal affirmed liability to the liability of Anderson to repay Read on the principle that, 232 FORMATION OF CONTRACT Part II though Read could not have been compelled to pay the bets, yet the loss of character and business which he would have sus- tained if he had failed to pay, was a risk against which his em- ployer was bound to indemnify him. It was a risk known to both parties and contemplated in the contract of employment. The Gaming Act 1893 has destroyed the authority of such cases as regards their subject-matter, but not as to the principle which they illustrate 1 . 14 Q. B. D. On this principle Seymour v. Bridge was decided. An investor employed a broker to buy shares for him according to the rules of the Stock Exchange. The Stock Exchange enforces among its members, under pain of expulsion, agree- so & 31 Viet, ments made in breach of Leeman's Act. This Act avoids C. 2O. a contract for the sale of bank shares where the contract does not specify their numbers, or the name of the registered proprietor. Bridge knew of the custom, but endeavoured to repudiate the purchase on the ground that it was not made in accordance M Q. B. D. with the terms of the Statute. The case was held to be governed by Read v. Anderson. The employer is bound to in- demnify the employed against known risks of the employment. If the risks are not known to both parties, and might reason- ably be unknown to the employer, he is not so bound. Thus Barm-tX where an investor did not know of the custom, he was held, 1$' ' under circumstances in other respects precisely similar to those 467. ' ' of Seymour v. Bridge, not to be bound to pay for the shares. (iv) The intention of the parties. Intention Where the object of the contract is an unlawful act the imma- contract is void, though the parties may not have known that their act was illegal or intended to break the law. But if the contract admits of being performed, and is per- formed in a legal way, the intention of the parties may become 15 Q. B. D. * The Act, however, does not touch the principle laid down in Bridger v. *A%u p. 212. Sava 9* that a betting commissioner is bound to pay over money received on account of bets won by him on behalf of his principal. Chap. V. 2 LEGALITY OF OBJECT 233 important ; for if they did not intend to break the law, and the law has not in fact been broken, money due under the contract will be recoverable even though the performance as originally contemplated would have involved a breach of the law. Morris chartered a ship belonging to Waugh to take a Waugh v. Morns, cargo of hay from Trouville to London. It was agreed that L. R. s Q. B. the hay should be unloaded alongside ship in the river, and landed at a wharf in Deptf ord Creek. Unknown to the under 32 & parties an Order in Council had forbidden the landing of l/s.' French hay. Morris, on hearing this, took the cargo from alongside the ship without landing it, and exported it. The unless vessel was delayed beyond the lay-days, and Waugh sued for g^be and damages arising from the delay. Morris set up as a defence is that the contract contemplated an illegal act, the landing of formed. French hay contrary to the Order in Council. But the defence did not prevail. 'Where a contract is to do a thing which cannot be performed without a violation of the law, it is void whether the parties knew the law or not. But we think that in order to avoid a contract which can be legally performed, on the ground that there was an intention to perform it in an illegal manner, it is necessary to show that there was the wicked intention to break the law ; and if this be so L R 8 Q B the knowledge of what the law is becomes of great importance.' P- 2 8 - Again, the general rule needs modification where only one Or unless of the parties had the intention to break the law. Such a tent Is ^f" case could only arise where the contract was to do a thing one onl y ; innocent in itself, but designed to promote an illegal purpose. We may perhaps lay down with safety the following rules. Where the innocent party knows nothing of the illegal rights of object throughout the transaction, he is entitled to recover what may be due to him. If the plaintiff in Pearce v. Brooks to sue >. , to avoid. had known nothing of the character of his customer, it cannot L. R. i EX. w 2x3. be supposed that he would have been unable to recover the hire of his brougham. Where the innocent party becomes aware of the illegal 234 FORMATION OF CONTRACT Part II Cowan v. Milbourn, L. R. 2 Ex. 230. How affected by know- ledge. L. R. 2 Ex. 230. Where transac- tion is past, Ayerst v. Jenkins, 16 Eq. 275. Beaumont v. Reeve, 8 Q. B. 483. purpose of the transaction before it is completed or while it is still executory he may avoid the contract. Milbourn let a set of rooms to Cowan for certain days; then he discovered that Cowan proposed to use the rooms for the delivery of lectures which were unlawful because blasphe- mous within the meaning of 9 & 10 Will. III. c. 32; he refused, and was held entitled to refuse, to carry out the agreement. If the innocent party to the contract discover the illegal purpose before it is carried into effect, it would seem that he could not recover on the contract if he allowed it to be per- formed, and that the defendant in Cowan v. Milbourn could not have recovered the rent of his rooms, if, having let them in ignorance of the plaintiff's intentions, he allowed the tenancy to go on after he had learned the illegal purpose which his tenant contemplated. (v) Securities for money due on illegal transactions. The validity of bonds or negotiable instruments given to secure the payment of money due or about to become due upon an illegal or void transaction, does not depend entirely upon the distinction which I have drawn between transactions which are illegal and those which are void. A security may be given in consideration of a transaction which is wholly past. Here comes in the elementary rule that gratuitous promises are not binding unless they are under seal. Applying this rule to bonds and negotiable instruments, we may say that a bond given in return for services rendered in a past transaction would be a valid promise, and that being wholly gratuitous, and founded on motive, a Court of Law would not inquire into the character of the motive. Thus a bond given in consideration of past illicit cohabita- tion is binding ; a negotiable instrument given on such consideration would, as between the immediate parties, be invalid, not on the ground that the consideration was im- moral, but because there was no consideration at all. Chap. V. 2 LEGALITY OF OBJECT 235 As regards transactions which are pending or contemplated, where it , . ,. ., is future. we are met by an anomalous distinction which divides secu- rities for our present purpose into three groups. (1) Let us deal first with securities under seal. Security If given for money due in respect of a prohibited transaction Fisher v ji -i Bridges. they are void. 3E.&B.642. Fisher conveyed land to Bridges in order that it might be resold by lottery, a transaction forbidden under stringent penalties bv 12 Geo. II. c. 28. After the land was conveyed, transac- tion pro- Bridges covenanted to pay a part of the purchase money hibited. by a fixed date, or failing this, by half-yearly instalments. On this covenant an action was brought. The Exchequer Chamber, reversing the judgment of the Queen's Bench, held that the covenant could not be enforced. It was given to secure a payment which became due as the result of an illegal transaction, and the bond was tainted with the illegality of the purpose it was designed to effect. A transaction may be unlawful in the sense that it is Security . . underseal, avoided. In that case a security given in respect of it is on transac- the same footing as a security given in respect of a transaction which is wholly past. It is valid if under seal ; otherwise void as between the immediate parties. A corporation borrowed money on mortgage without first obtaining the leave of the Lords of the Treasury; this was declared to be 'unlawful' by the Municipal Corporations Act. fy^^'"' But as they had received the money, and promised under seal to repay it, they were held bound by their promise. ' Is there anything in the Act which prohibits a corporation from entering into a covenant to pay its lawful debts ? It is argued that 94 renders this covenant void. But that section only says that it shall not be lawful to mortgage any lands of the corporation except with the approbation of the Lords of the Treasury, which was not obtained in this case ; and although the mortgage may be invalid, ^/"oVof that is no reason why the corporation should not be liable on their Brecon, 3 covenant to repay the mortgage money.' (2) We now come to negotiable instruments. Securities In dealing with these we have to consider the effect of ^] UI 236 FORMATION OF CONTRACT Part II a flaw in their original making not only as between the immediate parties but as affecting subsequent holders of the instrument. And we may lay down the following rules : void as A negotiable instrument made and given as security for immediate a v id, or illegal transaction, is, as between the immediate parties, parties, void. A promissory note was given in payment of Fitch v. a bet made on the amount of the hop duty in 1854. The bet 5 E^l 6.245. was void by 8 & 9 Viet. c. 109, and the Court was clear that as between the original or immediate parties the note was void also. There was no liability to pay the lost bet; and therefore no consideration for the note given to secure its payment. The position of the indorsee who brought the action shall be explained presently. If the instrument is made and given to secure payment of money due or about to become due upon an illegal trans- action a subsequent holder loses the benefit of the rule, as to negotiable instruments, that consideration is presumed till the Effect on contrary is shown : he may be called upon to show that he gave consideration, and even then if it can be shown that he was aware of the illegality, he will be disentitled to recover? If the instrument has an honest origin the maker or acceptor cannot set up, as a defence against a subsequent indorsee, that the indorsement was made for an illegal con- sideration, unless he can show that he is injuriously affected by the transaction between indorser and indorsee. If the instrument is given to secure payment of money due or about to become due upon a void transaction, it is as be- tween the immediate parties void, but a subsequent holder is not prejudiced by the fact that the original transaction was avoided by statute. In Fitch v. Jones, above cited, the action was brought by the indorsee of a promissory note given in payment of a bet on the amount of the hop duty. The main question for the Court was ' whether the plaintiff was bound on proof of the origin of the note to show that he had given consideration Right of subse- quent holder. subse- quent holder. Flower v. Sadler, loQ. B.D. 572- Chap. V. 2 LEGALITY OF OBJECT for the note, or whether it was for the defendant to show that he had given none.' ' I am of opinion,' said Lord Campbell, 'that the note did not take its inception in illegality within the meaning of the rule. The note was given to secure payment of a wagering contract, which, even before Stat. 8 & 9 Viet. c. 109, the law would not enforce * : but it was not illegal : there is no penalty attached to such a wager ; it is not in violation of any statute, nor of the Common Law, but it is simply void, so that the consideration was not an illegal consideration, but equivalent in law to no consideration at all.' (3) It remains to note the effect upon certain transactions of 5 & 6 Will. IV. c. 41. This Act deals with securities given for money or valuables lost at any game or in bets on the sides or players in any game, or for money lent either to make or to pay such bets. The Act of Anne had made such gAnne, c. 14. securities wholly void, and this was hard on such persons as bought them at their ostensible value in ignorance of their origin 2 . The Act of Will. IV 3 enacts that such securities should be deemed to have been made on an illegal considera- tion. This places wagers on games in a peculiar position. A wager is not in itself unlawful, it is only void : but securi- Read v. Anderson. ties given for money due on wagers of a certain sort are i^^i?' D> in a worse position than the wagers. The consideration for them is illegal : thus they are not merely void as between the original parties; the taint of illegality affects a subsequent holder, who although the original transaction was only void, must show that he gave consideration for the security, and may yet be disentitled to recover, if it is proved that he knew of its origin. 1 It had been held in a previous case, Atherfold v. Beard, that a wager on 2 T. R. 610. the amount of hop duty was against public policy because the evidence at the trial would expose to the world the state of the public revenue. 2 This same hardship may, under 5 of the Betting and Loans (Infants) Act 1892 affect the bona fide holder of a security given by a person by respect of an agreement to pay a loan, ^rhere the loan was contracted during infancy and is therefore void. 3 By 2 of this Act the maker of such a security, if he is compelled to pay its value to a subsequent bona fide purchaser, may recover the amount from the person to whom it was originally given. 238 FORMATION OF CONTRACT Part II (vi) Can a man be relieved from a contract which he knew to be unlawful ? Illegality It remains to consider whether a party to an illegal contract can under any circumstances make it a cause of no ground zxtivyn.. The rule is clear that a party to such a contract for avoid- ance, cannot come into a Court of Law and ask to have his illegal Harse v. objects carried out ; nor can he set up a case in which he must Assurance necessarily disclose an illegal purpose as the groundwork of i K.B. ' his claim ; and this rule holds although neither party had any intention of breaking the law. The rule is expressed in the maxim, ' in pari delicto potior est conditio defendentis. 3 But there are exceptional cases in which a man may be relieved of an illegal contract into which he has entered; cases to which the maxim just quoted does not apply. They unless foil into two classes: (i) the plaintiff may have been induced plaintiff fo en ter into the contract by fraud or strong pressure ; (2) the in pan contract being unperformed, money paid or goods delivered in furtherance of it may be recovered. The first class of cases is best illustrated by two decisions. i D. M. & G. In Reynell v. Sprye Sir Thomas Eeynell was induced, by the fraud of Sprye, to make a conveyance of property in pursuance of an agreement which was illegal on the ground of champerty. He sought to get the conveyance set aside in Chancery. It Parties was urged that the parties were in part delicto, and that d^icfo VPari therefore his suit must fail; but the Court was satisfied that he had been induced to enter into the agreement by the fraud of Sprye, and considered him entitled to relief. ' Where the parties to a contract against public policy, or illegal, are not in pari delicto (and they are not always so), and where public policy is considered as advanced by allowing either, or at least the more excusable of the two, to sue for relief against the i D. M.&G. transaction, relief is given him.' p. 679. 6H.&N. I n Atkinson v. Denby, the plaintiff, a debtor, offered his 7 7 H. & N. creditors a composition of 5*. in the pound. Denby was an influential creditor, whose acceptance or rejection of the offer Chap. V. 2 LEGALITY OF OBJECT 239 might determine the decision of several other creditors. He refused to assent to the composition unless Atkinson would make him an additional payment of 50, in fraud of the other creditors. This was done : the composition arrangement was carried out. and Atkinson sued to recover the .50, on the ground that it was a payment made by him under oppression and in fraud of his creditors. It was held that he could recover ; and the Court of Exchequer Chamber, affirming the judgment of the Court of Exchequer, said, 'It is said that both parties are in pari delicto. It is true that both are in delicto because the act is a fraud upon the other creditors : but it is not par delictum because one has power to dictate, the other no alternative but to submit.' The second exception relates to cases where money has been paid, or goods delivered, for an unlawful purpose which has not been carried out. The law cannot be said to be satisfactorily settled on this point, but its present condition may be thus stated. "We must separate the cases into two groups: (i) those in which money or goods have been delivered by one party to the other, and (2) those in which money has been placed in the hands of a stakeholder. (i) In Taylor v. Bowers it was held by Mellish, L. J., that 4 If money is paid or goods delivered for an illegal purpose, the or there person who had so paid the money or delivered the goods may recover 1S them back before the illegal purpose is carried out : but if he waits ft^. till the illegal purpose is carried out, or if he seeks to enforce the illegal transaction, in neither case can he maintain an action.' The case to which these words applied was a fictitious assignment of goods in fraud of creditors ; before anything had been done in respect of the contemplated fraud, the assignor desired to have his goods back ; he was held entitled to recover their value from one to whom they had been transferred under a bill of sale. In Hermann v. Charlesworth a lady paid money to the [IQOS] 2 K. B (* A ^ proprietor of a newspaper with a view to obtaining by 123- 240 FORMATION OF CONTRACT Part II advertisement an offer of marriage. After advertisements had appeared, but before any marriage had been arranged she brought an action to recover the money and was held entitled to do so. Hermann v. In a later case a man procured another to go bail for him Q B.D. 561. on the terms that he deposited the amount of the bail in the hands of his surety as an indemnity against his possible default. He sued his surety for the money on the ground that his contract was illegal, that no illegal purpose had been carried out, that the money was still intact, and that he could recover it. The Court of Appeal l held that the illegal object was carried out when by reason of the plaintiff's pay- ment to his surety, the surety lost all interest in seeing that the conditions of the recognizance were performed. 24 Q. B. D. I n Kearley v. Thomson, the Messrs. Thomson, a firm of solicitors acting for the petitioning creditor of Clarke, a bank- rupt, agreed with Kearley, a friend of Clarke, that in con- sideration of the payment of their costs they would not appear at the public examination of Clarke, nor oppose the order for his discharge. They carried out the first part of the agreement, but before any application was made for Clarke's discharge Limita- Kearley sought to recover the money which he had paid on the the rule, ground that it was the consideration for a promise to pervert the course of justice, and that the contract was not wholly carried out. The Court of Appeal held that Kearley could not recover. 'Suppose a payment of 100 by A to B on a contract that the latter shall murder C and D. He has murdered C but not D. Can the money be recovered back ? In my opinion it cannot be. I think 747. ' ' that case illustrates and determines the present one.' Thus it would appear that where an illegal contract has been in part performed, money paid or goods delivered in pursuance of it cannot be recovered : where no such part performance has taken place we have the conditions to which Taylor v. Sowers would apply. The criticisms passed on that 7 Q. B D. ' Overruling Wilson v. StrugneU, in which the facts were precisely similar. 548. Chap. Y. 2 LEGALITY OF OBJECT 241 case by Fry, L. J. in Kearley v. Thomson may be disregarded 24 Q. B. D. ((J. A.) 746- in view of the decision in Hermann v. Charlesworth. (2) There are numerous cases in which money has been placed in the hands of a stakeholder to abide the result of a wager; in such cases the money has been held to be recover- able from the stakeholder either before or after the determina- tion of the wager, and even after the money has been paid to the winner, if the authority to pay was withdrawn before payment by the party seeking to recover. It does not appear to matter whether the wager turns on the result of an unlawful transaction, or not : as between the parties the wager is no more than a void transaction, sup, Nor does the Gaming Act of 1893 affect the rights of the parties. Two cases will illustrate the law on this point. Hampden put 500 into the hands of Walsh to abide the result of a bet that the earth was flat. He lost the bet, and before the money was paid he reclaimed his stake from Walsh. Walsh paid it to the winner and was held liable Hampden T Walsh. to repay the amount to Hampden. i Q. B. D. Pearson started a lottery styled ' The Missing Word Com- petition/ A sentence was published, omitting the last word, Barclay v. ... . * i .I. Pearson, and an invitation was issued to the public, any one of whom [1893] * CH might send a shilling and a word suitable to fill the vacant place in the sentence. Those who guessed the right word shared the sum thus collected. The determination of the right word was reduced to an absolute uncertainty. From a number of sealed packets, each containing a word suitable to fill the gap, one was taken at hazard, and opened when all the competitors had sent in their guesses. This contained the Missing Word. To hold such a lottery was unlawful, and Pearson exposed himself to a penalty under 42, Geo. III. c. 119; but as between the various contributors Hhe transaction was a simple wager in which each man deposited a shilling with a stake- holder to abide the chance of his guess. The payments in one competition amounted to 23,000, 242 FORMATION OF CONTRACT Part II and those who guessed the right word were 1358 in number: but before their shares could be paid over to them the competition was alleged to be illegal, and the money was paid into Court. Stirling, J., found that the transaction was a lottery, and was unlawful ; that the Court could not aid in the distribution of the fund, but that each contributor might recover his shilling from Pearson, to whom he ordered the entire sum to be repaid in order that he might meet any legal claim. These cases do not conflict with the principle of Read v. Anderson, nor with the decision in Kearley v. Thomson. The person employed is only a stakeholder and cannot suffer by the revocation of his authority; the wager which is the Hasteiowv. object of the transaction is only void, not illegal, and so 8B.&c!aas. would not be affected by the unlawfulness of the event which Burge v. Sm h ;th y Ld * s ^ e subject f * ae wager; nor does the Gaming Act of ' l8 9 2 affect the liabilities of a stakeholder. (vii) Contracts lawful where made but unlawful in England. It is a general rule that a contract, valid in the place where it was made, is actionable in the Courts of this country. So far does this rule go that a contract for the purchase and delivery of slaves made, and to be performed, in Brazil, was held to be valid in this country on the ground that the Santos v. contract was lawful in the place where it was made and was Illidjje, x^c. B. N. s. no t distinctly prohibited by our law. But the judges who took this view stated that if the P. 868. transaction ' was an offence against the laws here ', if it was P . 874. ' by Act of Parliament prohibited ', it could not be enforced. No suggestion was made that slavery was an offence against morality, so grave that no dealings concerned with the purchase or delivery of slaves could be considered in English Courts. There are, however, some decisions which indicate that other conditions may exist, short of statutory prohibition, which Chap. V. 2 LEGALITY OF OBJECT 243 would prevent our Courts from enforcing a contract valid in the place where it was made. In Hope v. Hope an agreement was made in France for 8 D. G. & M. obtaining a divorce by collusion. The divorce proceedings were to take place in this country. In Grell v. Levy an agreement, also made in France, pro- i6C.B.N. s. 73 vided for the recovery, by an attorney practising in England, of a debt for his client half of which he was to retain for himself. In each case the Court declined to enforce the agreement. It should be noted that in each case the agreement was to be performed in this country, and that the one involved an interference with the course of justice, while the other not merely contemplated champerty but was made by an officer of the Courts of this country. A more difficult case is that of Kaufman v. Gerson. The [1904] ' K. 9 . , B.(C. A.) husband of Mrs. Gerson, the defendant, living in France, 59- had there appropriated to his own use money entrusted to him for other purposes, and was liable to criminal proceed- ings by French law. Kaufman threatened to prosecute, and Mrs. Gerson promised him a sum of money in consideration of his refraining from the course which he threatened. Such an agreement was valid by French law, but the Court of Appeal held that money due under it was not recoverable in this country because the moral pressure brought to bear upon the wife to compromise proceedings which would have brought discredit on her husband conflicted ' with what are deemed to be in England essential public or moral interests.' On this decision it is necessary to remark that duress, as usually understood in our law, would not include moral pressure of the sort here exercised; that the criminal pro- ceedings which were compromised by the agreement were proceedings in the French Courts, though the balance of the sum agreed to be paid was soughl^to be recovered here ; and that the ' essential public or moral interests involved ' would seem slight as compared with those which Santos v. lllidge called in question the purchase and sale of slaves. E 2 244 FORMATION OF CONTRACT Part If The case is easily distinguishable from Hope v. Hope and Grell v. Levy: it is not easily reconcileable with Santo* v. ttlidge, and with all respect I venture to doubt the correctness of the decision. On the whole it may be safe to say that a contract which is unlawful by our law but valid where it is made and where it is to be performed, will not be treated as invalid by our Courts unless it is penalised or prohibited by Statute or con- templates some gross violation of the moral law such as one can hardly conceive that the law of any country would sanction. If however it is to be performed in this country the Courts will not give assistance to parties who contemplate an infringement of established rules of law. PAET III THE OPERATION OF CONTRACT. WE come now to deal with the effects of a valid contract when formed, and to ask, To whom does the obligation extend ? Who have rights and liabilities under a contract ? And then this further question arises, Can these rights and liabilities be assigned or pass to others than the original parties to the contract ? In answer to these questions we may lay down two general rules. (1) No one but the parties to a contract can be bound by it or entitled under it. (2) Under certain circumstances the rights and liabilities created by a contract may pass to a person or persons other than the original parties to it, either (a) by act of the parties, or (/3) by rules of law operating in certain events. These two rules seem at first to look like one rule subject to certain exceptions, but they are in fact distinct. The parties cannot, by their agreement, confer rights or impose liabilities, in respect of the agreement, upon any but them- selves. But they may by certain methods and under certain circumstances drop out of the obligation so created, and be replaced by others who assume their rights or liabilities under the contract. Thus (i) If John Doe contracts with Richard Roe, their contract cannot impose liabilities or confer rights upon John Styles. (a) But there are circumstancfe under which John Doe or Richard Roe may substitute John Styles for himself as a party to the contract, and there are circumstances under which the law would operate to effect this substitution. CHAPTER I The Limits of the Contractual Obligation. Contract THE general rule that a person who is not a party to a con- confer tract cannot be included in the rights and liabilities which the rights contract creates cannot sue or be sued upon it is an in- tegral part of our conception of contract. A contract is an agreement between two or more persons, by which an obliga- tion is created, and those persons are bound together thereby. If the obligation takes the form of a promise by A to X to confer a benefit upon M, the legal relations of M are un- affected by that obligation. He was not a party to the agree- ment; he was not bound by the vinculum juris which it created ; the breach of that legal bond cannot affect the rights of a party who was never included in it. or impose Nor, again, can liability be imposed on such a third party. on a third It is an essential feature of contract as opposed to other forms party. Q obligation, that the restraint which it imposes on individual freedom is voluntarily created by those who are subject to it that it is the creature of agreement. The relation of principal and agent may from one point of view be held to form an exception to these rules. It needs at any rate a separate chapter. Trustee A Trust has this in common with contract, that it and cestui ... , , que trust, originates in agreement, and that among other objects it aims at creating obligations. If we could place a trust upon the precise footing of contract we might say that it formed a very real and substantial exception to the general rule which we have laid down. Doubtless the creator of a trust and the trustee do, by agreement, bring rights into existence which a third party, the cestui que trust, may enforce. But we will set aside trusts from the discussion, and with reason. Chap. I. I LIMITS OF CONTRACTUAL OBLIGATION 247 For contract differs from other forms of agreement in having for its sole and direct ohject the creation of an obligation. The contractual obligation differs from other forms of obli- gation mainly in springing from the voluntary act of the parties obliged. A trust and the obligations resulting from a trust correspond to neither of these characteristics. The agreement which creates a trust has many other objects besides the creation of obligations, and these objects may include conveyance, and the subsequent devolution of property. The obligation which exists between trustee and cestui que trust does not come into existence by the act of the parties to it. It is better therefore, having noted the similarities between the contractual and the fiduciary obligation, to dismiss the latter altogether from our inquiries. 1. A man cannot incur liabilities from a contract to which he was not a party. This proposition is a part of a wider rule to the effect that Contract liability ex contracts or quasi ex conlractu cannot be imposed poS eliabi-~ upon a man otherwise than by his act or consent. A cannot ^j^ 011 by paying JT's debts unasked, make X his debtor ; ( a man party, cannot, of his own will, pay another man's debt without his Dumford \. Messiter, consent and thereby convert himself into a creditor. 5M.&S446. And in like manner A and M cannot, by any contract into which they may enter, thereby impose liabilities upon X. The Messrs. Thomlinson employed X, a firm of brokers, to transport goods from London to Amsterdam. X agreed with Schmaling to put the whole conduct of the transport into his hands ; Schmaling did the work and sued the Messrs. Thomlin- son for his expenses and commission. It was held that they were not liable, inasmuch as there was no privity between them and Schmaling ; that is to say, that there was nothing either by writing, words, or conduct to Connect them with him in the transaction. X had been employed by them to do the whole work, and there was no 'pretence that the defendants ever authorised them to employ any other to do the whole under 248 OPERATION OF CONTRACT Part III them : the defendants looked to X only for the performance sdimaiingv. of the work, and X had a right to look to the defendants for Thomlinson, 6 Taunt. W- payment, and no one else had that right.' But does A contract cannot impose the burdens of an obligation upon one wuo was no ^ a P ar ty * ^ > 7 e * a duty rests upon persons, duty on though extraneous to the obligation, not to interfere, without third par- ties? sufficient justification, with its due performance. I speak of duty as that necessity which rests upon all alike to respect the rights which the law sanctions; and reserve the term obligation for the special tie which binds together definite, assignable members of the community. Lumieyv. Lumley, being the manager of an opera house, engaged Gye, 2E.&B.2i6. a singer to perform in his theatre and nowhere else. Gye induced her to break her contract. Action was brought, and it was argued that a party to a contract might sue any one who induced the other party to the contract to break it : if that were not so, it was argued that an action would still lie for inducing a servant to quit the service of his master. Peculiar The relation of master and servant has always given the of master master a right of action against one who enticed away his and her- servant, and so the Court was called upon to answer two vant. questions : Does an action lie for procuring a breach of any How far contract ? if not, then does the special rule applicable to the to case of contract of master and servant apply to the manager of Lumky v. a theatre and the actors whom he engages ? The majority of the Court answered both these questions in the affirmative 1 . 6Q.B.D.333. No similar case arose until 1881, when Bowen v. Hall came before the Court of Appeal, offering precisely the same points 2E.&B.2I6. for decision as Lumley v. Gye. The majority of the Court, setting aside the question whether the relation of master and servant affected the rights of the parties, held that a man who 1 In the elaborate dissenting judgment of Coleridge, J., the exception which the law of Master and Servant seems to have engrafted upon the Common Law is traced by the learned Judge, in a detailed historical argument, to the Statutes of Labourers, and is held to be inapplicable to the case of a theatrical performer. Chap. I. i LIMITS OF CONTRACTUAL OBLIGATION 249 induces one of two parties to a contract to break it, intending Induce- thereby to injure the other, or to obtain a benefit for himself } break does that other an actionable wrong 1 . In both these cases it contract > will be observed that the element of motive was introduced, and that the judges appeared to consider the malicious inten- tion to injure as necessary to make the inducement of a breach of contract actionable. This view was negatived in Quinn v. [1901] A. c. 49 'v Leathern, where Lord Macnaghten thus laid down the law. ' The decision [in Lumley v. Gye] was right, not on the ground of malicious intention that was not I think the gist of the action but on the ground that a violation of legal right committed knowingly is a cause of action, and, that it is a violation of legal right to interfere with contractual relations recognised by law, if there be no sufficient justification for the interference.' 5*0! In Quinn v. Leathern a conspiracy to injure was alleged as an additional cause of action, but in the case of the South Wales Miners Federation v. Glamorgan Coal Co. no malice or [1905] A.C. 2 39- ill- will was suggested, and the defendants, under circumstances which they regarded as furnishing sufficient justification, ' counselled and procured ' a breach of contract on the part of a number of miners. It was held that they had committed an actionable wrong. There is a clear distinction between inducing A to break or not to his contract with X, and inducing A not to enter into a contract. contract with X. The man who induces another to break a contract induces him to do what is in itself actionable : but no liability attaches to the refusal to make a contract. Consequently, where A is induced not to contract with X, the inducement, if it is to be actionable, must be offered by more than one person, and in such a manner as to constitute a 2el"hem, conspiracy to injure. j-VJ? 11 ' ' 2. A man cannot acquire rights under a contract to which he is not a party. This rule needs fuller explanation than the one which we Contract T cannot have just been discussing. It is contrary to the common confer 250 OPERATION OF CONTRACT Part III rights on sense of mankind that M should be bound by a contract made party. between X and A. But if A and X make a contract in which X promises to do something for the benefit of M, all three may be willing that M should have all the rights of an actual contracting party ; or if A, and a group of persons which we will call X } enter into a contract, it might be convenient that M should be able to sue on behalf of the multitude of which X consists. If A makes a promise to Xftlae consideration for which is a benefit to be conferred on M by X, this cannot confer a right of action on M. Such is the rule of English Law. Easton promised X that if X would work for him he would pay a sum of money to Price. The work was done and Price sued Easton for the money. It was held that he could not recover because he was not a party to the contract. The judges of the Queen's Bench stated in different forms the same reason for their decision. Lord Denman, C. J., said that the plaintiff did not 'show any consideration for the promise moving from him to defendant/ Littledale, J., said, ' No privity is shown between the plaintiff and the defendant.' Taunton, J., that it was ' consistent with the matter alleged in the declaration that the plaintiff may have been entirely Price v. ignorant of the arrangement between X and the defendant ' : Easton, 48. S & Ad. 433. and Patteson, J., that there was 'no promise to the plaintiff alleged.' Suggested Doubts have been thrown on this rule in two sorts of case, ttons. C an ^ these we will consider, premising that the rule itself remains unshaken. Nearness (a) It was at one time thought that if the person who was promisee, to take a benefit under the contract was nearly related by blood to the promisee a right of action would vest in him. The case i B. & s. 393. of Twedflle v. Atkinson is conclusive against this view. M and N married, and after the marriage a contract was entered into between A and X, their respective fathers, that each should pay a sum of money to M, and that M should have power to sue for such sums. After the death of A and X, Chap. I. 2 LIMITS OF CONTRACTUAL OBLIGATION 251 M sued the executors of X for the money promised to him. It was held that no action would lie. Wightman, J., said : ' Some of the old decisions appear to support the proposition that a stranger to the consideration of a contract may maintain an action upon it, if he stands in such a near relationship to the party from whom the consideration proceeds, that he may be considered a party to the consideration. The strongest of those cases is that cited in Bourne v. Mason, in which it was held that the daughter of a physician ' Ventr. 6. might maintain assumpsit upon a promise to her father to give her a sum of money if he performed a certain cure. But there is no modern case in which the proposition has been supported. On the contrary, it is now established that no stranger to the consideration can i B. & s. 397. take advantage of a contract, although made for his benefit. 1 (1) Equity judges have used language, sometimes very The doe- explicit, to the effect that ' where a sum is payable by A B ^^^ for the benefit of C D. C D can claim under the contract as if Touche v. Metropolitan it had been made with himself/ ^ a co us " The question has most frequently arisen in cases where con- | ch ' 67 *' tracts have been made or work done on behalf of a Company skating which has not yet come into existence. The Company when 7 ch. '0.368. formed cannot ratify such transactions *, and attempts have Baxter, v ' been made to bind it by introducing into the articles of asso- 174. ' 3 ciation a clause empowering the directors to fulfil the terms of the contract, or to repay those who have given work or advanced money to promote the existence of the Company. Common Law judges have uniformly held that no right of Meihadov. 11 . " . . Porto Alegre action accrues to the beneficiary under such a provision ; and Railway recent decisions put this matter on a plain footing and tell us c - p -503- when a third party may or may not sue. The articles of association of a Company provided that the Eiey v. r J r Positive plaintiff should be employed as its permanent solicitor. He sued 4iU |^ e D the Company for a breach of contract in not employing him. (C - Ai) 88- Articles of Association should be distinguished from a memo- randum of association. The Memorandum contains the terms See Ashbury Carriage Co. which confer and limit the corporate powers of the Company. Riche^ ^ The Articles provide for the rights of the members of the at P- 66? - Company inter se. 1 See, as to the rules which govern ratification, Part VI. c. i. 252 OPERATION OF CONTRACT Part III ' They are,' said Lord Cairns, ' an agreement inter socios, and in that view if the introductory words are applied to article 118, it becomes a covenant between the parties to it that they will employ the Eley v. plaintiff. Now so far as that is concerned it is res inter olios acta, Assurance the plaintiff is no party to it. This article is either a stipulation D?c A*v w hi cn would bind the members, or else a mandate to the directors. at p. 89. J In either case it is a matter between the directors and shareholders, and not between them and the plaintiff.' Articles of association, therefore, only bind the parties to them. Third The impression that in any such case a third party who entitled as is to be benefited acquires equitable rights ex contractu arises, trust qW as was ex pl amea< by Jessel, M. R., in the case of the Empress i6Ch. D. Engineering Company, from the fact that an agreement between two parties might well be so framed as to make one of them trustee for a third. But if a trust is to be created in favour of a third party, there must be words amounting to a declaration of trust by one of the contracting parties. It is not enough that one should promise the other to pay money to a third. Whether a trust has or has not been created must be matter of construction, as may be 25 ch. D. 89 seen by reference to the cases of Murray v. FlavelL and the and 103. J J Rotheram Alum Co. It is sufficient to say that a document intended to be a conveyance or a contract will not become a Deibrldge*' declaration of trust because it is inoperative for the purpose L. R. is Eq. Qr wn j c h ft wag intended. Attempts It has been attempted, without success, to break the general to enable , . . H third rule in the case or unincorporated companies and societies who uBfor w ^ n * av id bringing action in the names of all their many members. To this end they introduce into their contracts joint con- _ tractors a term to the effect that their rights of action shall be vested L. R.SC.P. in a manager or agent. Thus in Gray v. Pearson, the have uni- managers of a Mutual Assurance Company, not being failedf members of it, were authorized, by powers of attorney exe- cuted by the members of the Company, to sue upon contracts made by them as agents on behalf of the Company. They sued upon a contract so made, and it was held that they Chap. I. 2 LIMITS OF CONTRACTUAL OBLIGATION 253 could not maintain the action, ' for the simple reason, a reason not applicable merely to the procedure of this country, but one affecting all sound procedure, that the proper person to bring an action is the person whose right Per wiiies, J., at p. 574. has been violated/ The inconvenience under which bodies of this description statutory labour has been met in many cases by the Legislature. tio ^ s " f Certain companies and societies can sue and be sued in the tlie rule - name of an individual appointed in that behalf 1 , and the Rules of the Supreme Court made under the powers given by the Judicature Act provide that ' Where there are numerous parties having the same interest in Order xvi. one action, one or more of such parties may sue or be sued, or may r ' 9 ' be authorized by the Court to defend in such action on behalf of all the parties so interested.' Under this rule any person may sue in a representative Dnke of capacity who has a common interest and a common grievance J 11 ^ [ l ^ l ' with those whom he claims to represent ; thus, for instance, several persons claiming preferential rights to stalls in Co vent Garden market as growers of fruit within the meaning of a certain Act, have been held entitled to sue on behalf of the whole class of such growers. This rule was meant to apply the former practice of the Court of Chancery to actions brought in any division of the High Court, and is not confined (as held in Temperton v. Russell] to persons having some common d 893] Q- 'beneficial proprietary right/ But although A cannot by contract with X confer rights Agency v I.-IM.- -if -MI - postponed, or impose liabilities upon M, yet A may represent M, in virtue of a contract of employment subsisting between them, so as to become his mouthpiece or medium of communication with X. This employment for the purpose of representation 1 Statutes of this nature are 7 Geo. IV. c. 46, relating to Joint Stock Banking Companies ; 7 Will. IV. and i Viet. c. 73, relaUng to chartered companies ; 34 & 35 Viet. c. 31, relating to Trades Unions ; 59 & 60 Viet. c. 25, relating to Friendly Societies ; and in many cases companies formed by private Acts of Parliament possess similar statutory powers. 254 OPERATION OF CONTRACT Part III is the contract of agency. I have described elsewhere the difficulty of assigning to Agency a fit place in a treatise on the law of contract. I regard it as an extension of the limits of contractual obligation by means of representation, but, since its treatment here would constitute a parenthesis of somewhat uncouth dimensions, I will postpone the treatment of it to the conclusion of my book. CHAPTER II The Assignment of Contract. WE have seen that a contract cannot affect any but the Assign- ... ment of parties to it. But the parties to it may under certain circum- contract, stances drop out and others take their places, and we have to ask how this can be brought about, first, by the voluntary act of the parties themselves, or one of them, secondly, by the operation of rules of law. 1. Assignment by act of 'the parties. This part of the subject also falls into two divisions, the assignment of liabilities and the assignment of rights, and we will deal with them in that order. Assignment of liabilities. A promisor cannot assign his liabilities under a contract. Liabilities Or conversely, a promisee cannot be compelled, by the ass ig ne d. promisor or by a third party, to accept performance of the contract from any but the promisor. The rule seems to be based on sense and convenience. A man is not only entitled to know to whom he is to look for the satisfaction of his rights under a contract; but, to use the language of Lord Denman in Humble v. Hunter, 12 Q. 8.317. ' he has a right to the benefit he contemplates from the character, credit, and substance of the person with whom he contracts/ The case of Robson Sf Sharpe v. Drummond illustrates the 2 B. & A. rule. Sharpe let a carriage to Crummond at a yearly rent for five years, undertaking to paint it every year and keep it in repair. Robson was in fact the partner of Sharpe, but 256 OPERATION OF CONTRACT Part III Drummond contracted with Sharpe alone. After three years Sharpe retired from business, and Druinmond was informed that Robson was thenceforth answerable for the repair of the carriage, and would receive the payments. He refused to deal with Robson, and returned the carriage. It was held that he was entitled to do so. Reason 'The defendant,' said Lord Tenterden, 'may have been induced tor rule. ^ Q en ^ er j n this contract by reason of the personal confidence which he reposed in Sharpe. . . . The latter, therefore, having said it was impossible for him to perform the contract, the defendant had a right to object to its being performed by any other person, 2 B. & Ad. and to say that he contracted with Sharpe alone and not with any other person.' Excep- There are certain limitations to this rule. A liability may tions to the rule, be assigned with the consent of the party entitled ; but this Aslod'aLd' is in effect the rescission, by agreement, of one contract and teethe" the substitution of a new one in which the same acts are to at^668. ' be performed by different parties. Panic's to Or again, if A undertakes to do work for X which needs no British ' special skill, and it does not appear that A has been selected v. Lea, with reference to any personal qualification, X cannot com- '49- plain if A gets the work done by an equally competent person. But A does not cease to be liable if the work is ill done, nor can any one but A sue for payment. Again, where an interest in land is transferred, liabilities attaching to the enjoyment of the interest may pass with it. But this arises from the peculiar nature of obligations attached to land, and will be matter for separate discussion. Assignment of rights. (i) AT COMMON LAW. At Common Law, apart from the customs of the Law benefit of a Merchant, the benefit of a contract, or of rights of action Powiesv. arising from contract, cannot be assigned so as to enable &w s 'io. ' the assignee to sue upon it in his own name. The rule is Chap. II. i THE ASSIGNMENT OF CONTRACT 257 sometimes expressed by the phrase 'a chose in action is not assignable 1 / The assignee must sue in the name of the assignor or his representatives; or rather, the Common Law so far takes cognizance of such equitable rights as are created by the assignment that the name of the assignor may be used as trustee of the benefits of the contract for the assignee. Practically the only way in which rights under a contract at corn- can be transferred at Common Law is not by assignment at all, but bv means of a substituted agreement. J stituted If A owes H 100, and M owes X 100, it may be agreed agree- between all three that A shall pay X instead of M, who thus Fatriie v. terminates his legal relations with either party. In such asa&cUoo. case the consideration for A's promise is the discharge by M ; for M's discharge of A, the extinguishment of his debt to X ; for X's promise, the substitution of A's liability for that of M. But there must be ascertained sums due from A to M and in cases of from M to X; and there must also be a definite agreement between the parties, for it is the promise of each which is the consideration for the promises given by the others. A promise by a debtor to pay a third party, even though cuxon v. afterwards it be assented to by the creditor, will not enable SB. &c.'59i. the third party to sue for the sum promised. Again, a written authority from the creditor to the debtor Liversidgev. Broadbent, to pay the amount or the debt over to a third party, even 4H.&N.6os. though the debtor acknowledge in writing the authority given, will not entitle the third party to sue for the amount. 1 The term chose in action has been in common use for a long time, but some doubts have been recently raised as to its precise meaning. (See Law Quarterly Keview for 1893, 1894, 1895.) A Divisional Court, however, has now given us the following definition : Torkington ' "chose in action " is a known legal expression used to describe all personal ^ M ^ g< ^ B rights of property which can only be claimed or enforced by action, and p- 430. not by taking physical possession.' Th^ phrase 'rights of property ' does not seem a very happy one, but it is quite clear that the Court meant to include under the term chose in action not only intangible property, such as copyright, but (what is important for our purpose) rights under a contract and rights of action arising from breach of contract. AXSON S 258 OPERATION OF CONTRACT Part III 'There are two legal principles,' said Martin, B., ' which, so far as I know, have never been departed from : one is that, at Common Law, a debt cannot be assigned so as to give the assignee a right to sue for it in his own name, except in the case of a negotiable instrument ; and that being the law, it is perfectly clear that M could not assign to the plaintiff the debt due from the defendant to him. . . . The other principle which would be infringed by allowing this action to be maintained is the rule of law that a bare promise cannot be the foundation of an action. ... No doubt a debtor may, if he thinks fit, promise to pay his debt to a person other than his creditor; and if there is any consideration for the promise, he is bound to perform it. But here there was none whatever. There was no agreement to give time, or that the debt of M should be extinguished, no indulgence to him or detriment to the plaintiff. Per Martin, There was nothing in the nature of a consideration moving from sidge'v. er " the plaintiff to the defendant, but a mere promise by the defendant JH^KIO. to P av another man's debt.' It is thus apparent that a contract, or right of action arising from contract, cannot be assigned at Common Law except (i) by an agreement between the original parties to it and the intended assignee, which is subject to all the rules for or by the formation of a valid contract, and which is limited in its mer . operation to the transfer of a debt ; or (2) by the rules of the chants. Law Merchant under circumstances to be noted presently. * (ii) IN EQUITY. Assign- Equity would permit the assignment of contractual rights, contract including debts, whether such rights were legal or equitable. in equity, jf they were equitable the assignee might sue in his own name ; if legal, and the assignor refused to allow the use of his name for the enforcement of legal remedies, equity would enable the assignee to sue. Some But it would seem that the rights thus assignable do not action not cover all rights ex contracts which might be included within able 8 ' ^ ne ^ erm chose in action. Antt, p. 222. In the first place, by reason of the rules as to Champerty May v. Lane, . ) Again, where under a contract there are mutual obligations Griffith v. still to be enforced involving personal qualifications, neither Publishing party can assign his benefit under the contract ; an example l Ch - 2I - of such a contract is to be found in an agreement of an author with publishers for the production of some literary work. On the other hand, where the consideration for a contract In what has been executed, or where although mutual obligations still signment subsist no special qualifications are involved, there the benefit 1S P 98lble - of the contract may be assigned. Thus, if A agrees to sell real property to X and X assigns his rights under the contract to M, the latter may sue A in his own name not only for Torkington v. Magee, specific performance but even for unliquidated damages. [1902] 2 K.B. Again, debts which will become due to an individual or firm Taiiby v. .,1 n i -i T t i Official in the course or business may be assigned, but not a right Receiver, . isApp. Ca. arising under a promise to lend money where no fund is 533- f i i i i > Western specified from which the loan is to be made. waggon Co. v West, But certain conditions affect the rights of the assignee. [I8 9 2 1 ' Ch - (a) The assignment will not be supported unless considera- tion has been given by the assignee; if there was no Council decided in favour of the assignability of a right of action in tort, but English Courts are not bound by this decision. The case was a curious one. Goods were insured and damaged by negligence of the defendant in the action, but not through any of the risks insured against. The insurer, the plaintiff in the action, paid a sum of money to the insured, received in return an assignment of his right of action, and covenanted not to use the name of the insured. The Queensland Judica- ture Act contains a clause relating to the assignment of a chose in action which corresponds word for word with our own enactment, and the Judicial Committee held that this right of action for negligence was assignable. S 2 260 OPERATION OP CONTRACT Part III consideration there was no reason for the Court of Equity to interfere as between assignee and assignor l . ($) It will not bind the person liable until he has received notice, although it is effectual as between assignor and assignee from the moment of the assignment. (y) The assignee takes subject to all such defences as might have prevailed against the assignor. In other words, the assignor cannot give a better title than he has got. These last two propositions require some illustration. Notice. It is fair upon the person liable that he should know to whom his liability is due. So if he receive no notice that it is due to another than the party with whom he originally contracted, he is entitled to the benefit of any payment which he may make to his original creditor. A convenient illustra- tion is furnished in the case of covenants to pay interest on a mortgage debt. If the mortgage be assigned by the mortgagee without notice to the mortgagor, and interest be afterwards paid by the mortgagor to the duly-authorized Williams v. agent -of the mortgagee, the money so paid, though due to 4Vesey, 3 8a. the assignee, cannot be recovered by him from the debtor. We may put the case thus : Money is due at regular intervals from A to X, and is ordinarily paid by A to the agent of X: X assigns his interest in the debt to M. '. A receives no notice, but continues to pay the money to X's agent : the money so paid cannot be recovered by M from A. The rationale of the rule is thus expounded by Turner, L. J., 4 D. M. & G. in Stocks v. Dobson : 15. ' The debtor is liable at law to the assignor of the debt, and at law 17 Q. B. D. 1 See Law Quarterly Review, vol. xvii, p. 90. The cases (such as Harding v. Harding) which at first sight suggest that consideration is not necessary to support an equitable assignment prove on examination not to be cases of assignment at all, but of declaration of trust; or else go merely to showing that as between assignee and debtor the question whether the assignor received or did not receive consideration does not concern the debtor. Chap. II. I THE ASSIGNMENT OF CONTRACT 261 must pay the assignor if the assignor sues in respect of it. If so, it follows that he may pay without suit. The payment of the debtor to the assignor discharges the debt at law. The assignee has no legal right, and can only sue in the assignor's name. How can he sue if the debt has been paid ? If a Court of Equity laid down the rule that the debtor is a trustee for the assignee, without having any notice of the assignment, it would be impossible for a debtor safely to pay a debt to his creditor. The law of the Court has therefore required notice to be given to the debtor of the assignment in order to perfect the title of the assignee.' ib< P- l6 - And the same case is authority for this further proposition, that 'equitable titles have priority according to the priority of notice/ The successive assignees of an obligation rank as Marchant v. to their title, not according to the dates at which the creditor Down,&co., [1901] 2 K.B. assigned his rights to them respectively, but according to the 82 9- dates at which they gave notice to the party to be charged. Title. ' The general rule, both at law and in equity, is that no Assignee person can acquire title to a chose in action or any other j ec tto U property, from one who has himself no title to it/ equities. Crouch v. And further, ( if a man takes an assignment of a chose in Credit Fon- cier, L. R. action, he must take his chance as to the exact position in 8 Q- B - 38 - Mangles, v. which the party giving it stands/ D HL c The facts of the case last cited are somewhat complex, and 735 ' the rule is so clear that a complicated illustration would not tend to make it clearer. It is enough that the assignee of contractual rights must take care to ascertain the exact nature and extent of those rights ; for he cannot take more than his assignor has to give, or be exempt from the effect of transactions by which his assignor may have lessened or invalidated the rights assigned. In like manner, if one of two parties be induced to enter Graham v. ^ , Johnson, into a contract by fraud, and theTrraudulent party assign his 8 Eq- 36. interest in the contract for value to X, who is wholly innocent in the matter, the defrauded party may get the contract set aside in equity in spite of the interest acquired in it by X. 262 OPERATION OF CONTRACT Part III It is possible, that two parties to a contract may stipulate that if either assign his rights under it, such an assignment shall be ' free from equities ' ; that is to say, that the assignee shall not be liable to be met by such defences as would have been valid against his assignor. It is questionable, however, whether such a stipulation would protect the assignee against the effects of Fraud, or any vital defect in the formation of the original contract. Assign- ment of contract uri dei- Judica- ture Act. c. 66. 25. sub-S 6. Per Chan- nell, J., Tor- kington v. Magee[lQ02] 2 K B. at pp.430 4435. Uncon- ditional. (iii) BY STATUTE. It remains to consider, so far as mere assignment goes, the statutory exceptions to the Common Law rule that a chose in action is not assignable. (a) The Judicature Act of 1873 gives to the assignee of any debt or legal chose in action all legal rights and legal and other remedies. But (i) the assignee takes subject to equities ; (a) the assignment must be absolute and not by way of charge; (3) must be in writing signed by the assignor; (4) express notice in writing must be given to the party to be charged, and the title of the assignee dates from notice. The sub- section does not touch the rules of assignment in equity or the rights thereby created. On the one hand it does not allow the assignment of any rights which were not previously assignable in Equity, and on the other it extends to all rights which were so assignable : ' the sub- sect ion is merely machinery; it enables an action to be brought by the assignee in his own name in cases where previously he would have sued in the assignor's own name, but only where he could so sue/ But the legal remedy is still of narrower application than the equitable. For the Act requires the assignment to be f absolute ' and not 'by way of charge/ This means that it must not be subject to any condition, and that it must be an assignment Chap. II. i THE ASSIGNMENT OF CONTRACT 263 of the whole l of a sum due or about to become due, not of an amount to be determined by some deficiency in accounts between assignor and assignee. The original debtor is not to Durham v. find his liability to be dependent 'on any question as to the ^s^ ' Q B - state of accounts ' between assignor and assignee. A owes 50 to X due in a month, and X owes 50 to M due in three weeks. If X assigns to M the debt of A conditionally on his not having paid his debt to M when due, or if he assigns so much of the debt of A as will make good any deficiency in his payment to J/, this will disentitle him to the legal remedies conferred by the Act. It would thus appear that there may be a good equitable assignment of a legal chose in action which, nevertheless, would not give the remedies conferred by the Judicature Act. The requirements of the Act as to form are more stringent than in the case of an equitable assignment, since writing is required both for assignment and notice. But without pursuing any further a subject perhaps too complicated for an elementary text-book, it may be well to refer the student to the exposition by Lord Macnaghten, in Brandts v. Duulop Rubber Company, of the law as to the form [1905] A. c. pp. 461, 462. of an equitable assignment and the requirements of the Statute. The Judicature Act says nothing as to consideration, but since it only affects procedure, consideration would be Walker v . J ' Bradford _ necessary aS between assignee and assignor, while the debtor Q B B n j is not concerned with the dealings of the assignee with the 5 "' assignor, and cannot set up as a defence when sued by the assignee, that as between them the transaction was a volun- tary one. An assignment duly made, whether by the rules of equity or by those of the Judicature Act, operates without the consent of the party liable. IntBrice v. Bannister (a, case of 3Q-B.D. v 569- 1 Probably a specified portion only of a debt due cannot be assigned so 3 Q. B. L>. as fco give legal remedies to the assignee : see the comment on Brice v. Ban- \ Q g 774'. nister of Chitty, L. J., in Durham v. Robertson, and the opinion of Mathew, [1902] aK.B. L. J., in Hughes r. Pump House Hotel Co. at P- X 9> 264 OPERATION OF CONTRACT Part III equitable assignment) the defendant received express notice of the assignment of a debt accruing from him to the assignor. He refused to be bound by the assignment and paid his debt to the assignor. He was held liable notwith- standing to the assignees for the amount assigned. Policies of (/3) By 30 & 31 Viet. c. 144, policies of life insurance are ance. assignable in a form specified by the Act, so that the assignee may sue in his own name. Notice must be given by the assignee to the insurance company, and he takes subject to such defences as would have been valid against his assignor. Policies of (y) By 31 & 32 Viet. c. 86, policies of marine insurance are surance. similarly assignable ; but this statute contains no requirement as to notice. Shares. (g) Shares in Companies are assignable under the provisions c.i6.i4 : of the Companies Clauses Act, 1845, an d ^ ne Companies c.8 9 . 22. 'Act, 1862. (e) Mortgage debentures issued by Companies under the tures. Mortgage Debenture Act are assignable in a form specified *8&* 9 vict. by the Act. NEGOTIABILITY. Assign- So far we have dealt with the assignment of contracts by blTdis'fcin'- ^ ne ru ^ es ^ Common Law, Equity, and Statute, and it would guished appear that under the most favourable circumstances the assignment of a contract binds the party chargeable to the assignee, only when notice is given to him, and subject always to the rule that a man cannot give a better title than he possesses in himself. fromnego- We now come to deal with a class of promises the benefit 1 y ' of which is assignable in such a way that the promise may be enforced by the assignee of the benefit without previous notice to the promisor, and without the risk of being met by defences which would have been good against the assignor of the promise. In other words, we come to consider negotiable instruments as distinguished from assignable contracts. Chap. II. i THE ASSIGNMENT OF CONTRACT 265 The essential features of negotiability appear to be these : Firstly, the written promise gives a right of action to the Features holder of .the document for the time being, though he and his tiability. holding may be alike unknown to the promisor. Secondly, the holder is not prejudiced by defects in the title of his assignor ; he does not hold subject to such defences as would be good against his assignor. Notice therefore need not be given to the party liable, and the assignor's title is immaterial. Certain contracts are negotiable by the custom of mer- Negotia- chants recognized by the Courts ; such are foreign and c ^o m y colonial bonds expressed to be transferable by delivery, and ^" t ^ a ". v - scrip certificates which entitle the bearer to become a holder SQ^D"^. of such bonds or of shares in a company, and, perhaps we may say, other instruments to which the character of negotiability jnfra,p.26g. may from time to time be attached by the law merchant. Bills of Exchange were negotiable by the law merchant; by statute, promissory notes by 3 & 4 Anne, c. 9 ; both classes of instru- ments are now governed by the Bills of Exchange Act 45&46Vict. 1882. East India bonds have been made negotiable by 51 Geo. III. c. 4. Bills of lading 1 , which are affected both by the law mer- iS&iQVict. . C. III. chant and by statute, possess some characteristics which will call for a separate consideration. Bills of exchange and promissory notes figure so constantly in the law of contract, and are so aptly illustrative of the nature of negotiability, that we will shortly consider their principal features. A bill of exchange is an unconditional written order A bill of addressed by M to X directing X to pay a sum of money to a specified person or to bearer. Usually this specified person 45&46Vjct. is a third person A, but M may cjjaw a bill upon X in favour of himself. We must assume that the order is addressed to X either because he has in his control funds belonging to M or is prepared to give him credit ; and since we are here dealing 266 OPERATION OF CONTRACT Part III with bills of exchange merely as illustrative of negotiability, we will adopt the most usual, as it is the most convenient form for illustration. How M directs X to pay a sum of money to A or order, or to A or bearer. M is then called the drawer of the bill, and by drawing it he promises to pay the sum specified to A or to any subsequent holder if X do not accept the bill or, having accepted it, fail to pay. How Until acceptance, X } upon whom the bill has been drawn, is called the drawee. When X has assented to pay the sum specified, he is said to become the acceptor. Such assent must be expressed by writing on the bill signed by the acceptor, or by his simple signature. The holder is not bound to take anything but an unconditional promise to pay the sum named when due. He may take an acceptance 19, 44. qualified by conditions as to amount, time, or place, but this releases the drawer or any previous indorser from liability unless they assent to the qualification. If the bill be payable to A or bearer, it may be transferred from one holder to another by mere delivery : if it is payable to A or order, it may be transferred by indorsement. How in- Indorsement is an order, written upon the bill, and signed dorscd * by A } in favour of D. Its effect is to assign to D the right to demand acceptance or payment of the bill from X when due, and in the event of default by X to demand it of M, the original drawer, or of A, against whom he has a concurrent remedy as being to all intents a new drawer of the bill, specially, Every indorser, therefore, becomes an additional security for payment to the holder for the time being 1 . 6 App. Ca. i. l This is exemplified in Duncan * s never presumed It will be for D to show that he gave making va ] ue f or tne bill, but for X to show that D knew that the bill bill : was tainted in its origin. If D proves' his point and X fails to prove his, then D can recover in spite of the defective title of A his assignor. The effect of an illegal consideration for Flower v. a n indorsement should, however, be noticed. The indorsee Sadler, 10 Q. B. D. canno fc sue the indorser on the illegal contract made between for . them; but he can sue the acceptor, and probably a previous ment. S indorser who before the illegality had given value for the bill. A broker pledged his client's bonds, which were negotiable by the custom of merchants, with a bank, to secure advances made to himself. The bank had no notice that the bonds were not his own, or that he had no authority to pledge them : he became insolvent; the bank sold the bonds in satisfaction of the debt due, and the broker's client sued the bank. The House of Lords held that he could not recover; for (i) the bonds were negotiable, and (a) being so negotiable ' It is of the very essence of a negotiable instrument that you may treat the person in possession of it as having authority to deal Stock Ba nk t w ^ **' ^ e ne a g en ^ or otherwise, unless you know to the contrary : v. Simmons, and are not compelled, in order to secure a good title to yourself, to 217. " inquire into the nature of his title or the extent of his authority. 1 L. R. 8 Q. B. The case of Crouch v. Credit Fonder of England illustrates not only the nature of negotiability, but the limits within which the creation of negotiable instruments is permissible. Aninstru- A debenture assignable under the Companies Act and ex- under seal pressed to be payable to the bearer was stolen ; the thief sold 'Jotiable* 3 " it to the plaintiff, and he sued the Company for non-payment ; the jury found that he was a bond fide holder for value of the debenture, but the Court held that he could not recover, because, in spite of the wording of the debenture, it was an instrument under seal * and therefore could not be, what it 45 & 46 Viet. J But note the effect of 91 of the Bills of Exchange Act in making c. 61. 91. y a ii merely avoided the necessity of transmitting cash from place to place. This theory the French law steadily keeps in view. In England bills have developed into a perfectly flexible paper currency. In France a bill represents a trade transaction ; in England it is merely an instrument of credit.' Bill of Though lacking the traits of negotiability the instrument lading. known as a ( bill of lading ' should be noticed here. What it is. A bill of lading is called ' a document of title/ ' a symbol of property'; and for the following reason. The bill of lading is a receipt by the master of a ship for goods bailed to him for delivery to X or his assigns 1 . Of this receipt three copies are made, each signed by the master. One is kept by the consignor of the goods, one by the master of the ship, and one is forwarded to X, the consignee, who on receipt of it acquires a property in the goods which can only be defeated by the exercise of the vendor's equitable right of stoppage in transitu 2 . What If a consignee assigns a bill of lading by endorsement to assign- a holder for value, that holder has a better right than the mentcon- cons ig nee possessed. He has a title to the goods which overrides the vendor's right of stoppage in transitu, and can Lickbarrow claim them in spite of the insolvency of the consignee v. Mason, i Sm. L. c. an d the consequent loss of the price of his goods by the consignor. By law His right, however, which in this respect is based upon the merchant, proprie- law merchant, is a right of property only. The assignment rights ^ *he kill of lading gives a right to the goods. It did not at Common Law give any right to sue on the contract ex- pressed in the bill of lading. 1 See form of bill of lading, in the Appendix. Sale of a Stoppage fn transitu is the right of the unpaid vendor, upon learning ' 8 * ne insolvency of the buyer, to retake the goods before they reach the 89-96. ' buyer's possession. For the history of this right the reader is referred to 339 .' the judgment of Lord Abinger, C. B., in Gibson r. Carruthers. Chap. II. 2 THE ASSIGNMENT OF CONTRACT 273 The Act 1 8 & 19 Viet. c. in confers this right. TheByiS&ig assignment of a bill of lading thereby transfers to the assignee contract- ' not only the property in the goods, but 'all rights of suit' ualri g hts ; and ' all liabilities in respect of the goods, as if the contract contained in the bill of lading had been made with himself/ But in respect of negotiability a bill of lading differs from the instruments with which we have just been dealing. Its assignment transfers rights in rem, rights to specific goods, and these to a certain extent wider than those possessed by the assignor; therein it differs from negotiable instruments, which only confer rights in personam. But though the assignee is relieved from one of the liabili- but not ties of the assignor, he does not acquire proprietary rights dent of as- independently of his assignor's title : a bill of lading stolen, or H transferred without the authority of the person really entitled, Gumey v. gives no rights even to a bond fide indorsee. And again, the| t E -| B - contractual rights conferred by statute are expressly conferred subject to equities. A bill of lading then is a contract assignable without notice; it so far resembles conveyance, that it gives a title to property, but it cannot give a better title, whether proprietary or contractual, than is possessed by the assignor; subject always to this exception, that one who takes from an assignor with a good title is relieved from liability to the vendor's right of stoppage in transitn which might have been exercised against the original consignee. 2. Assignment of contractual rights and liabilities by operation of law. So far we have dealt with the voluntary assignment by parties to a contract of the benefits or the liabilities of the contract. But rules of law may also operate to transfer these rights or liabilities from one to another. If A by purchase or lease acquire an interest in land of Assign- M, upon terms which bind them by contractual obligations interests in respect of their several interests, the assignment by either ln land> party of his interest to X will, within certain limits, operate as a transfer to X of those obligations. 274 OPERATION OF CONTRACT Part III Marriage. Marriage, which once transferred to the husband con- ditionally the rights and liabilities of the wife, has little effect since the Act of 1882. Repre- Representation, in the case of death or bankruptcy, effects an assignment to the executors or administrators of the deceased, or to the trustee of the bankrupt, of his rights and liabilities ; but the assignment is merely a means of continuing, for certain purposes, the legal existence of the deceased or the bankrupt. The assignees of the contract take no benefit by it, nor are they personally losers by the enforcement of it against them. They represent the original contracting party to the extent of his estate and no more. Assignment of obligations upon the transfer of interests in land. Covenants At Common Law these are said to ' run with the land and leasehold no ^ with the reversion ' that is, they pass upon an assign - a. Covenants affecting leasehold interests. oaon Law these are said to ' run with th be reversion ' that is, they pass upon the land men * ^ * ne lease, but not upon an assignment of the reversion. If the lessee assign his lease, the man to whom he assigns it would be bound to the landlord by the same liabilities and entitled to the same rights as his assignor, subject to the following rules: if they (i) Covenants in a lease which ' touch and concern the concern the thing thing demised ' pass to the assignee of the lessee whether or no they are expressed to have been made with the lessee ' and his assigns.' Such are covenants to repair, to leave in good repair, to deal with the land in a specified manner. (2) Covenants in a lease, which touch and concern the thing demised, but relate to something not in existence Minshuii v. at the time of the lease, are said to pass to the assigns only 79"' * N ' ^ named. There is little or no authority for this rule, not if (3) In no case does the assignee of the lessee acquire personal, benefit or liability from merely personal or collateral covenants made between his assignor and his landlord. case, i Sin. L. C. Chap. II. 2 THE ASSIGNMENT OF CONTRACT 275 The reversioner or landlord does not, at Common Law, Covenants . -iit . . do not run by the assignment of his interest in the land convey his w ith the rights and liabilities to the assignee. exceptby It was not till 32 Hen. VIII. c. 34 that the law in this statute, respect was changed. By that Act the assignee of the reversion takes the benefits, and also incurs the liabilities, of covenants entered into with his assignor. These covenants must ' concern the thing demised ' in accordance with the rules which govern covenants running with the land. The Sm. L. c. Act only applies to leases under seal, but in the case of leases from year to year, payment and acceptance of rent Per wiiies, is held to be evidence from which a jury may infer ' a consent '^ ubb p to go on, on the same terms as before/ 339- It should be noted that although an assignment of the Stuart v.joy, [IQO4-J I *. D reversion gives a right of action to the lessee against the (C - A>) 3<52 - assignee on express covenants made with the lessor, it does not thereby exonerate the lessor from liability on these covenants. Two cases will illustrate the distinction between personal, or collateral, covenants and those which concern, and are therefore assignable with, the thing demised. The first is a case of covenants running with the land, the second of covenants running with the reversion. Hayward leased a public-house to X, covenanting for Personal, himself and his assigns that he would not build or keep a public-house within half a mile of the premises. X assigned his lease to Thomas, and Hayward broke his covenant. The Thomas v. Hayward, covenant was personal and did not pass to the assigns of X; L.R.4Exch. Thomas had no remedy. Clegg, a brewer, leased the Alexandra Hotel to Hands, who assignable covenanted for himself and his assigns that he would buy c lt8 ' beer only from Clegg and his assigns. Clegg retired from business, closed his brewery, and assigned his interest in the premises to one Cain. Hands refused to buy beer of Cain, and Clegg obtained an injunctior^to restrain him from buying cieg? v. beer of any one else. The Court of Appeal held that the 44^.0.503. covenant touched and concerned the thing demised. 276 OPERATION OF CONTRACT Part III And the covenant was enforced for another reason, founded on a rule which will be explained on the next page. The lessee had obtained his lease on lower terms because it was subject to a restrictive covenant, and, since the covenant was not necessarily personal or unassignable, the Court would have restrained him from departing from it even though it had not been held to run with the land. /3. Covenants affecting freehold interests. Covenants At Common Law, covenants made with the owner of land, owner. that is, promises under seal made to the owner of land, and for his benefit, pass to his assignees, provided they touch and concern the land conveyed and are not merely personal. A^ a vendor of land covenants with A the purchaser that he has a good right to convey the land ; the benefit of such a covenant would pass from A to his assignees. Not so Dicey, a covenant relating to some matter purely personal between Actions, and X. 120-5. Covenants But covenants entered into by the owner of land, restrict- ing his enjoyment of the land, do not at Common Law bind his assignees, except he thereby create certain well-known interests, as easements and profits, recognized by Law. If a man endeavour to create restrictions on his land which are not included in the circle of rights in re aliend known to the Common Law, he cannot affix those rights to the land so stockport as to bind subsequent owners. The cases which deal with Waterworks . Co. ^Potter, attempts to create 'an easement in gross' illustrate this proposition, the principle of which is thus enunciated by ^Myi. & K. Lord Brougham in Keppel v. Baily : Common ' It must not be supposed that incidents of a novel kind can be Law view, devised and attached to property, at the fancy or caprice of any owner .... Great detriment would arise and much confusion of rights, if parties were allowed to invent new modes of holding and enjoying real property, and to impress upon their lands and tene- ments a peculiar character, which should follow them into all hands however remote.' Chap. II. 2 THE ASSIGNMENT OF CONTRACT 277 To this rule Equity, regarding such covenants as binding Equitable the person not the land, has created a group of exceptions ^nt^f limited in character. Where a man sells land and covenants restrictive covenants, with the buyer that he will only use the adjoining land in a certain way, or where land has been bought or hired with similar covenants as to its use, such restrictive covenants will bind any one who subsequently acquires the land with notice of their existence 1 . The covenants thus enforced are restrictive; they are covenants to use or abstain from using, and the result of the cases decided on the authority of Tulk v. Moxhay is Haywood v. ' that only such a covenant as can be complied with without Building Society, expenditure of money will be enforced against the assignee on 8Q.B.o.4io. the ground of notice/ The principle cannot be applied to compel a lessee to enforce such covenants against his sub-tenant 2 . Haiiv.Ewin, The rule is thus stated by Lord Cottenham : (c. A.) 74. ' That this Court has jurisdiction to enforce a contract between the owner of land and his neighbour purchasing a part of it, that the latter shall either use or abstain from using the land purchased in a particular way, is what I never knew disputed .... It is said that the covenant, being one which does not run with the land, this Court cannot enforce it ; but the question is, not whether the covenant ntns with the land, but whether a party shall be permitted to use his land in a manner inconsistent ivith the contract entered into by his vendor, and Tulk v. . .-, .. . 7 7 7 7 j ! Moxhay with notice of which he purchased. 2 fh. 777. Assignment of contractual obligation upon marriage. The effect of marriage, in this respect, is that if the separate 45 & 46 Viet, estate of the wife be insufficient to satisfy her antenuptial contracts the husband is liable to the extent of all property to which he shall have become entitled through his wife. 1 As to the rights conferred by such covenants upon purchasers inter se, [1893] * Ch. and upon a purchaser against a vendor who retains a portion of the 3< * 8> adjoining land, see In re Birmingham Land Co. and Allday. But it would Formby v. appear that such covenants must be made in respect of adjoining land. Bark ". If a purchaser sells all his property subject to covenants restrictive of its 539- use, these covenants are personal and collateral and do not pass to assigns. 2 For an interesting but unsuccessfujfattempt to apply this principle to a sale of goods, and to impose a condition which would give a right of action to the vendor against every subsequent purchaser who broke the condition, see M c Gruther v. Pitcher. 306? 278 OPERATION OF CONTRACT Part III Assignment of contractual obligation by death. Rights of Death passes to the representatives of the deceased all his represen- * tatives. personal estate, all his devisable real estate, all rights of action 6 & 6 'i Vict (induing rights of action for breach of contract,) affecting Formby v. this estate, and all liabilities chargeable upon it. But in the Barker, [19031 2 ch. case O f rea ] estate this assignment is temporary, and for the 549. 55O. * purpose only of securing creditors who may have claims on the real estate. Covenants which are attached to leasehold estate pass, as to benefit and liability, with the personalty, to the representatives; while covenants affecting freehold, such as covenants for title in a conveyance of freehold property, pass, so soon as the property is handed over by the representatives, to the heir or devisee of the realty. Contracts But performance of such contracts as depend upon the personal service or skill of the deceased cannot be demanded * on sonal O f his representatives, nor can they insist upon offering such service, performance. Contracts of personal service expire with either of the parties to them : an apprenticeship contract is ter- Baxterv. minated by the death of the master, and no claim to the Burfirld, . . 2 str. 1266. services of the apprentice survives to the executor. Nor can executors sue for a breach of contract which 2M.&S.408. involves a purely personal loss. In Chamberlain v. Williamson, an executor sued for a breach of promise to marry the deceased. The promise had been broken and the right of action accrued in the lifetime of the testatrix. But the Court held that such an action could not be brought by representatives, since it was not certain that the breach of contract had resulted in damage to the estate. 'Although marriage may be regarded as a temporal advantage to the >. p. 416. party as far as respects personal comfort, still it cannot be con- sidered as an increase of the transmissible personal estate/ "Q B i>. In Finlay r. Chirney, a converse proposition was laid down (C. A). 4'M* and the Court held that no action would lie against the executors of a man who in his lifetime had broken a promise to marry. The Court would not say that an action might not Chap. II. 2 THE ASSIGNMENT OF CONTRACT 279 lie if special damage was proved, but the contract to marry was personal and did not survive to the representatives. Assignment of contractual obligation by bankmptcy. Proceedings in Bankruptcy commence with the filing of Trustee's a petition in the Court of Bankruptcy either by a creditor their ex- alleging acts of bankruptcy against the debtor or by the i^it^ 1 debtor alleging inability to pay his debts. Unless this petition prove unfounded the Court makes a receiving order and appoints an official receiver who takes charge of the debtor's estate and summons a meeting of the creditors. If the creditors decide not to accept a composition, but make the debtor bankrupt, he is adjudged bankrupt and a trustee appointed. To the trustee passes all the property of the bankrupt vested in him at the time of the act of bankruptcy or acquired by him before discharge, and the capacity for taking pro- ceedings in respect of such property ; but all that we are concerned with in respect of the rights and liabilities of the trustee is to note that (i) Where any part of the property of a bankrupt consists 46& i v. Williams, a promise to pay a sum in compensation tor damages arising [IS^IQ.B. from an act or acts specified in the bond. In the case of bonds or contracts containing provisions of this nature we may state these general rules. (1) If a contract is for a matter of uncertain value, and a fixed sum is to be paid for the breach of one or more of its Law v. Local i Board of provisions, this sum may be recovered as liquidated damages. R | d ^ litc 'l' B (2) If a contract is for a matter of certain value, and on "? breach of it a sum is to be paid in excess of that value, this Astiey v. - Weldon, 28. is a penalty and not liquidated damages. * P- 346. (3) If a contract contains a number of terms, some of certain and some of uncertain value, and a fixed sum is to be paid for Kembie v. Farren, the breach of any of them, this is probably a penalty. 6 Bm *- I47> An illustration of (i) is afforded by clauses in building contracts to pay a fixed sum weekly or per diem for delay; or, in the case of a tenant of a publi^house. to pay to the land- ' ar d v. ' L J Monajjhan, lord a fixed sum as penalty on conviction for a breach of the '' licensing laws. 296 THE INTERPRETATION OF CONTRACT An illustration of (2) is a promise to pay a larger sum if a smaller were not paid by a fixed day. The rule is harsh, for a man might suffer serious loss by the non-receipt of an expected payment : yet he can only recover the smaller sum. protector On the other hand, it is no penalty to provide that if a debt Griw. is to be paid by instalments the entire balance of unpaid in- ( c. A.J592- stalments is to fall due on default of any one payment, or that Smith! l\ a deposit of purchase money should be forfeited on breach of any p. 257- one of several stipulations, some important, some trifling. 6Bin K . 141. An illustration of (3) is offered by Kemble v. Farren. Farren agreed to act at Covent Garden Theatre for four consecutive seasons and to conform to all the regulations of the theatre; Kemble promised to pay him 3 6#. 9>d. for every night during those seasons that the theatre should be open for performance, and to give him one benefit night in each season. For a breach of any term of this agreement by either party, the one in default promised to pay the other 1000, and this sum was declared by the said parties to be 1 liguidafed and ascertained damages and not a penalty or penal sum or in the nature thereof.' Farren broke the contract, the jury put the damages at 750, and the Court refused to allow the entire sum of 1000 to be recovered. 'If, on the one hand, the plaintiff had neglected to make a single payment of 3 6s. 8d. per day, or on the other hand, the defendant had refused to conform to any usual regulation of the theatre, how- ever minute or unimportant, it must have been contended that the clause in question, in either case, would have given the stipulated damages of 1000. But that a very large sum should become Kemble v. immediately payable, in consequence of the non-payment of a very Fn r - ren> <> small sum, and that the former should not be considered as a penalty 6 Bing. 148. appears to be a contradiction in terms. Pye v. The latest decision on the subiect indicates that we may not British Au- J J tomobiie w down a fixed rule for this class of cases, but that 'the Syndicate " ' I'K^B. 425. Court must look to all the circumstances of each contract to what the parties did as well as to the language used and must say from them what the intention of the parties was.' PART V DISCHARGE OF CONTRACT. WE have now dealt with the elements which go to the Discharge formation of contract, with the operation of contract when formed, and with its interpretation when it comes into dispute. It remains to consider the modes in which the contractual tie may be loosed, and the parties wholly freed from their rights and liabilities under the contract. And in dealing with this part of the subject it will be proper to consider, not merely the mode in which the original contract may be discharged, but, in case of its being dis- charged by breach, the mode in which the right of action arising thereupon may be extinguished. The modes in which a contract may be discharged are how these. effected ' (a) It may be discharged by the same process which created Agree- it, mutual agreement. (/3) It may be performed ; the duties undertaken by either Perform- party may be thereby fulfilled, and the rights satisfied. (y) It may be broken ; upon this a new obligation con- Breach. nects the parties, a right of action possessed by the one against the other. (8) It may become impossible by reason of certain circum- impossi- stances which are held to exonerate the parties from their 1 1 y< respective obligations. (f) It may be discharged by the operation of rules of law Operation upon certain sets of circumstances to be hereafter mentioned. CHAPTER I Discharge of Contract by Agreement. Forms of CONTRACT rests on the agreement of the parties : as it is by agree- their agreement which binds them, so by their agreement ment. And this mode of discharge may occur in one of three forms : waiver ; substituted agreement ; condition subsequent. 1. Waiver. Waiver. A contract may be discharged by agreement between the parties that it shall no longer bind them. This is a waiver, or rescission of the contract. Such an agreement is formed of mutual promises, and the consideration for the promise of each party is the abandon- ment by the other of his rights under the contract. The rule, as often stated, that ' a simple contract may, before Ireach, be waived or discharged, without a deed and without considera- tion/ must be understood to mean that, where the contract is executory, no further consideration is needed for an agree- ment to rescind than the discharge of each party by the other from his liabilities. Mere There seems to be no authority for saying that a contract, contract- executed upon one side, can be discharged before breach, consideration; that where A has done all that he was bound to do and the time for X to perform his promise has not yet arrived, a bare waiver of his claim by A would be an effectual discharge to X. According to English law the right to performance of a contract can be abandoned only by release under seal, or DISCHARGE OF CONTRACT BY AGREEMENT 299 for consideration. The plea of ' waiver ' under the old system Buiien and J Leake, Free. of pleading set up an agreement between the parties to waive of Pleadings (CQ. 3/1 1 it, a contract, an agreement consisting of mutual promises, the R^^,, consideration for which is clearly the relinquishment of a right by each promisee. Discharge by waiver, then, requires either a mutual abandonment of claims, or else a new consideration for the waiver. In King v. Gillett t the plaintiff sued for breach of a promise rM.&w.ss. of marriage ; Gillett pleaded that before breach he had been exonerated and discharged by King from the performance of his promise. The Court held that the plea was good in form ; 'yet we think/ said Alderson, B., 'that the defendant will not be able to succeed upon it, . . . unless he proves a proposition to exonerate on the part of the plaintiff, acceded to by himself; ib. p. 99. and this in effect will be a rescinding of the contract/ Dobson sued Espie for non-payment of deposit money due Dobson v. upon a sale of land. Espie pleaded that, before breach of his 2 ". & N. 79. promise to pay, Dobson had given him leave and license not to pay. The Court held that such a plea was inapplicable to a suit for the breach of a contract, and that the defendant should have pleaded an exoneration and discharge ; but it is difficult to see why the pleader should not have adopted the latter form of plea, unless it were that (according to the reasoning of Alderson, B., in King v. Gilletf) an exoneration means a promise to exonerate, which like any other promise needs consideration to support it. In Dobson v. Espie the plaintiff was to obtain nothing for his alleged waiver : neither the relinquishment of a claim, nor any fresh consideration. Finally, we have the express authority of Parke, B., in Foster v. Dawler, for saying that an executed contract, i.e. a contract in which one of the parties has performed all that is due from him, cannot be discharged by a parol waiver. ' It is competent for both partie(f to an executory contract, by mutual agreement, without any satisfaction, to discharge the obligation of that contract. But an executed contract cannot be discharged except by release under seal, or by performance of the 300 DISCHARGE OF CONTRACT Part V obligation, as by payment, where the obligation is to be performed by payment. But a promissory note or a bill of exchange appears 6 Exch. 851. to stand on a different footing to simple contracts.' Peculiar- This last sentence deals with an exception to the principle c/ex- ! S just taid down, for it was a rule of the law merchant imported change -^ j. ne Common Law that the holder of a bill of exchange and pro- _ " missory or promissory note might waive and discharge his rights. Such waiver needed no consideration, nor did it need to be expressed in any written form. The Bills of Exchange Act has given statutory force to this rule of Common Law, subject to the provision that the waiver ?. 5 fr. 4 6 63. ct ' must be in writing or the bill delivered up to the acceptor. 2. Substituted Contract. Substi- A contract may be discharged by such an alteration in its tuted con- ^ enns as substitutes a new contract for the old one. The old tract may be an contract may be expressly waived in the new one, or waiver may discharge ; be implied by the introduction of new terms or new parties. but the But the intention to discharge the first contract must be \ nvust ma de clear in the inconsistency of the new terms with the old. be clear : ^ mere postponement of performance, for the convenience of one of the parties, does not discharge the contract. not a post- This question has often arisen in contracts for the sale and of pe eD Delivery f goods, where the delivery is to extend over some formance. time. The purchaser requests a postponement of delivery, then refuses to accept the goods at all, and then alleges that the contract was discharged by the alteration of the time of performance; that a new contract was thereby created, and that the new contract is void for non-compliance with statutory requirements as to form. But the Courts have always recognized ' the distinction between a substitution of one agreement for another, and Hickman v. a voluntary forbearance to deliver at the request of another/ L.R.IOC.P. and will not regard the latter as affecting the rights of the parties further than this, that if a man asks to have perform- ance of his contract postponed, he does so at his own risk. Chap. I. 2 BY AGREEMENT 301 For if the market value of the goods which he should have accepted at the earlier date has altered at the latter date, the rate of damages may be assessed, as against him, either at the time when the performance should have taken place, Ogle v. Earl and when by non-performance the contract was broken, or L. R.'a Q. B. . 275,& 3 Q.B. when he ultimately exhausted the patience of the vendor, w- and definitely refused to perform the contract 1 . A contract may be discharged by substantial alteration of Substi- tuted its terms. terms. A undertook building operations for X, which were to be Thornhm v. completed by a certain date, or a sum to be paid as com- 1 c- B -. N - s pensation for delay. While the building was in progress an agreement was made between the parties for additional work, by which it became impossible that the whole of the operations should be concluded within the stipulated time. It was held that the subsequent agreement was so far incon- sistent with the first, as to amount to a waiver of the sum stipulated to be paid for delay. A contract may be discharged by the introduction of new Substi- . tuted parties. parties. If A has entered into a contract with X and M, and ^"ip-*55- these two agree among themselves, that M shall retire from the contract and cease to be liable upon it, A may (i) insist upon the continued liability of M, or (2) he may treat the contract as broken and discharged, or (3) by continuing to deal with X after he becomes aware of the retirement of M he may enter into a new contract to accept the sole liability of X; he cannot then hold M to the original contract. ' If one partner goes out of a firm and another comes in, the debts of the old firm may, by the consent of all the three parties the creditor, the old firm, and the new firm 1 Willes, J., in giving judgment in the Exchequer Chamber in the case of Ogle v. Earl Vane, holds that such forbearance or request constitutes an L. R. 3 Q. B- agreement, which for want of consideration was not actionable, but 279- which might affect the measure of damages. He calls it an Accord with- out a Satisfaction. As to the nature of Accord and Satisfaction, see Part V. ch. iii. 4 (a). 302 DISCHARGE OF CONTRACT Part V be transferred to the new firm/ and this consent may be im- Hart v. *M t &"\v r ' pli 6 ^ by conduct, if not expressed in words or writing 1 . 484.' 3. Provisions for Discharge. A contract may contain within itself the elements of its own discharge, in the form of provisions, express or implied, for its determination under certain circumstances. These circumstances may be the non-fulfilment of a condition pre- cedent ; the occurrence of a condition subsequent ; or the exercise of an option to determine the contract, reserved to one of the parties by its terms. Discharge The first of these three cases is somewhat near akin to on non- discharge of contract by breach. But there is a difference of a term, between a non-fulfilment contemplated by the parties, the occurrence of which shall, it is agreed, make the contract determinable at the option of one, and a breach, or non-fulfil- ment not contemplated or provided for by the parties. Head v. Head bought a horse of Tattersall. The contract of sale Tattersall, 7~E R .' 7 contained, among others, these two terms : that the horse was warranted to have been hunted with the Bicester hounds, and that if it did not answer to its description the buyer should be at liberty to return it by the evening of a specified day. The horse did not answer to its description and had never been hunted with the Bicester hounds. It was returned by the day named, but had in the meantime been injured, though by no fault of Head. Tattersall disputed, but without success, Head's right to return the horse. "The effect of the contract/ said Cleasby, B., 'was to vest the property in the buyer subject to a right of rescission in a particular event, when it would revest in the seller. I think in such a case that the person who is eventually entitled to the property in the chattel ought to bear any loss arising from any depreciation in its Head v value caused by an accident for which nobody is in fault. Here the L*R C . r defendant is the person in whom the property revested, and he must 7 Ex. 14. therefore bear the loss.' 1 In the case of partnership these rules are substantially embodied in the Partnership Act 1890, 17. Chap. I. 3 BY AGREEMENT 303 In the second case the parties introduce a provision that Occur- the fulfilment of a condition or the occurrence of an event specified shall discharge them both from further liabilities under the event - contract, Such a provision is called a condition subsequent ; it is well Condition illustrated by a Bond, which is a promise subject to, or defeasible upon, a condition expressed in the Bond. It may be further illustrated by the ' excepted risks ' of Excepted a charter-party l . The ship-owner agrees with the charterer charter- to make the voyage on the terms expressed in the contract, P art y- ' the act of God, the King's enemies, restraints of princes and rulers, fire, and all and every other dangers and accidents of the seas, rivers and navigation, of whatsoever nature or kind, during the said voyage, always excepted.' The occurrence of such an excepted risk releases the ship-owner from a strict performance of his contract ; and if it should take place while the contract is wholly executory, and amount to a frustration of the entire enterprise, the parties are altogether discharged. Geipel chartered a vessel belonging to Smith to go to a Geipei v. spout, load a cargo of coals, and proceed thence to Hamburg : L. R. 7 Q. B. the contract contained the usual excepted risks. Before any- thing was done under it war broke out between France and Germany; the port of Hamburg was blockaded by the French fleet; and Smith, regarding a blockade as a 'restraint of princes/ refused even to load a cargo, and treated the contract as discharged. Geipel sued him for non-fulfilment of such of the terms as would not have involved the risk ; but the Court held that an excepted risk had occurred, had made per- formance impossible, and that the ship-owner was not bound to fulfil the preliminaries of the contract. Similar conditions enter into the contract made by a Limita- _, , -j A tions of common carrier. Such a carrier is said to warrant or insure carrier's the safe delivery of goods entrusted to him ; and by this we liablllt y- mean that he makes an almost unqualified promise to bring the goods safely to their destination or to indemnify the 1 For the form of a charter-party, see Appendix. 304 DISCHARGE OF COXTRACT Part V owner for their loss or injury. But his promise is defeasible upon the occurrence of certain excepted risks, ' The Act of God and of the King's enemies/ and injuries arising from Lister v. defects inherent in the thing carried. This qualification is Lancashire implied in every contract made with a carrier, and the occurrence of the risks exonerates him from liability for loss thereby incurred. The ' Act of God ' is a phrase which needs explanation. i c. p. D. Its meaning is to some extent defined in Nugent v. SmitJi. Meaning The defendant, a common carrier by sea, received from the ^Ac^of 86 pl am tiff a mare to be carried from London to Aberdeen. In God -' the course of the voyage the ship met with rough weather, and the mare, being much frightened and struggling violently, suffered injuries of which she died. No negligence was proved IC.P. D. 19. against the defendant. It was held in the Common Pleas that to constitute the Per Brett,;., 'Act of God ' & loss must arise from 'such a direct and violent and sudden and irresistible act of nature' as could not be foreseen, or if foreseen prevented ; and the carrier was held liable on the ground that the weather, though rough, was not so violent and unusual as to amount to an Act of God thus defined, nor was the struggling of the mare of itself enough to show that she was injured from her own inherent vice. The Court of Appeal reversed this decision. The carrier is perMeiiish, discharged if he show that the loss could by no reasonable precaution under t/ie circumstances have been prevented, This exception from the general liability of the carrier of goods is a known and understood term in every contract which he makes. The discharge hence arising must be dis- tinguished from discharge arising from a subsequent impos- sibility of performance not expressly provided against in the Partv.ch.iv. terms of the contract. With this we shall deal hereafter. Discharge Thirdly, a continuing contract may contain a provision notice. making it determinate at the option of one of the parties Chap. I. 3 BY AGREEMENT 305 upon certain terms. Such a provision exists in the ordinary contract of domestic service ; the servant can terminate the Nowian v. Ablett. contract by a month's notice, the master by a month's notice 2 c - M - & R - . 54- or the payment of a month's wages. And similar terms may be incorporated with other contracts between employer and E a / t e s ^'- employed, either expressly or by the usage of a trade. 4C-B..N.S. As regards the form needed for the expression of an agree- Form of ment which purports to discharge an existing contract, there by agree- was a general rule that a contract must be discharged in the m !nt ' same form as that in which it was made. At common law a contract under seal could only be discharged by agreement expressed under seal : a parol contract may be discharged by parol. But while at common law parties to a deed could only (0 In C&SG Q discharge their obligations by deed, they might make a parol contract contract creating obligations separate from and at variance "J^j r with the deed : giving a right of action to which the deed furnishes no answer : and affording, by performance, an equit- able answer to an action on the deed. M and X entered into a contract under seal, by which M Effect of let to X certain rooms for a certain time at a rent to be tract at ascertained in a certain way. M died, and A, his adminis- ^"^ ^eed trator, agreed with X by parol, that in consideration of 70 to be paid by X and to be taken as a reasonable rent, neither party should be called upon to perform his part under the deed. X failed to make the payment agreed upon, and A sued him upon the parol contract. It was urged on behalf Nash v. Armstrong, of X that this was an attempt to vary a deed by a parol J? C- B .-' contract, the performance of which, being no discharge of the deed, would leave X liable to his previous obligation. But the Court held that the parol contract created a new obligation; that its performance would furnish an equitable answer to an action brought upon the deed; artQ that A might sue upon Per it. Since the Judicature Acts the rule of equity prevails, and P- 26z - a parol contract will discharge a deed. 22 Q. B. D. ,. X 306 DISCHARGE OF CONTRACT BY AGREEMENT (2) In case A parol or simple contract, whether it be in writing or no, oontracts. may be discharged by writing or by word of mouth. The agreement of the parties is evidenced by the writing in which it is expressed. The term* of that agreement, once put in writing, may not be varied by unwritten words; but the agreement as a whole consists in the expressed intention of the parties, not in the writing which is the instrument of that expression ; and this agreement may be discharged ' eo ligamine quo ligatum est' by a valid expression of the intention to put an end to it. Gomanv. Where Statute requires a contract to be in writing there Salisbury, 1 Vem. 240. { s authority for saying that waiver may take place by word Nugent, of mouth. But if the discharge be not a simple rescission, but such an implied discharge as arises from the making of a new agreement inconsistent with the old one, then there must be writing in accordance with the requirements of the Statute. Noble v. A contract for the sale of goods, in writing under 29 Car. II. \\ nrd, L. ix. 2 Ex. 135. c< 3. j>^ provided for the delivery of the goods within a certain time. A verbal agreement to extend the time of delivery was held to be invalid, either to make a new contract or to rescind the old one. ' No rescission could take place by Gossv.Lor.i an invalid contract/ And the same rule is applied to contracts Nugent s B. & A. 6 5 . under 4 of the Statute of Frauds. CHAPTER II Discharge of Contract by Performance. WE must distinguish performance which discharges one of Kinds of two parties from his liabilities under a contract, and perform- ance : ance which discharges the obligation in its entirety. Where a promise is given upon an executed consideration, where the performance of his promise by the promisor discharges g i ven f or * the contract : all has been done on both sides that could be exec ^ ed considera- required to be done under the contract. tion Where one promise is given in consideration of another, where promise is performance by one party does no more than discharge him given for who has performed his part. Each must have done his part pl in order that performance may be a solulio olligationis, and so if one has done his part and not the other, the contract is still in existence and may be discharged in any one of the ways we have mentioned. Whether the alleged performance is a discharge to the party concerned must be a question to be answered, first by ascertaining the construction of the contract, so as to see what the parties meant by performance, and then by ascertaining the facts, so as to see whether that which has been done corresponds to that which was promised. But two sorts of Performance should be briefly noticed : these are Payment and Tender. PAYMENT. Payment may be a discharge^ of the original contract Payment between the parties, or of an agreement substituted for such O f dis- contract. char s e ' X 2 308 DISCHARGE OF CONTRACT Part V of original If in a contract between A and A" the liability of X con- contract. . e . . . sists in the payment of a sum or money in a certain way or at a certain time, such a payment discharges A' by the performance of his agreement. ofsubsti- Or if X being liable to perform various acts under his tract, contract, wishes instead to pay a sum of money, or, having to pay a sum of money, wishes to pay it in a manner at vari- ance with the terms of the contract, he must agree with A to accept the proposed payment in lieu of that to which he may have been entitled under the original contract. The new contract discharges the old one, and payment is a per- formance of X's duties under the new contract, and, for him,. a consequent discharge. of liability Again, where one of two parties has made default in the from performance of his part of the contract, so that a right of contract^ ^Hon accrues to the other, the obligation thus formed may be discharged by accord and satisfaction, an agreement the consideration for which is usually a money payment, made by the party against whom the right exists, and accepted in discharge of his right by the other. Payment Payment, then, may be performance (i) of an original formance. contract, or (2) of a substituted contract, or (3) of a contract in which payment is the consideration for the renunciation of a right of action. Negotiable A negotiable instrument may be given in payment of a sum ment as due, whether as the performance of a contract or in satisfaction payment ; or ^ ne ^j-ej^jj o f j t . an( j ^he giving of such an instrument in payment of a liquidated or unliquidated claim is the substitu- tion of a new agreement for the old one, but it may affect the relations of the parties in either one of two different ways. The giver of the instrument may be discharged from his previous obligation either absolutely or conditionally. may be an A may take the bill or note, and promise, in consideration absolute, . of it, expressly or imphedly to discharge X altogether from his existing liabilities. A then relies upon his rights con- Chap. II. BY PERFORMANCE 309 f erred by the instrument, and if it be dishonoured, must sue Sard v. on it, and cannot revert to the original cause of action. But i M. & w. *53- the presumption, where a negotiable instrument is taken in lieu of a money payment, is, that the parties intended it to be a conditional discharge. Their position then is this : A or con- having certain rights against X, has agreed to take a negotiable discharge, instrument instead of immediate payment, or immediate flagstaff enforcement of his right of action ; so far X has satisfied 5 Beav> 423 ' A's claim. But if the bill be dishonoured at maturity, the consideration for A's promise has wholly failed and his original rights are restored to him. The agreement is ' defeasible upon condition subsequent ' ; the payment by X which is the consideration for the promise by A is not absolute, but may turn out to be, in fact, no payment at all. Payment then consists in the performance either of an original or substituted contract by the delivery of money, or of negotiable instruments conferring the right to receive money; and in this last event the payee may have taken the instrument in discharge of his right absolutely, or sub- ject to a condition (which will be presumed in the absence of expressions to the contrary) that, if payment be not made when the instrument falls due, the parties revert to their D . * Kobmson original rights, whether those rights are, so far as the payee g"a e & d c. is concerned, rights to the performance of a contract or rights slyer vf to satisfaction for the breach of one. 5 Bea^ia. TENDER. Tender is attempted Performance ; and the word is applied Tender to attempted performance of two kinds, dissimilar in their results. It is applied to a performance of a promise to do is of two something, and of a promise to pay something. In each case the performance is frustrated by the act of the party for whose benefit it is to take place. Where in a contract for the sale of goods the vendor Tender of goods, satisfies all the requirements of the contract as to delivery, startup v. i ji t ,1 i n i i Macdonald, and the purchaser nevertheless refuses to accept the goods, 6 M. & G. 310 DISCHARGE OF CONTRACT BY PERFORMANCE the vendor is discharged by such a tender of performance, ?6&.<7 and may either maintain or defend successfully an auction for i 37- the breach of the contract. Tender of But where the performance due consists in the payment of a sum of money, a tender by the debtor, although it may form a good defence to an action by the creditor, does not constitute a discharge of the debt, waiton v. The debtor is bound in the first instance ' to find out the Mascall, 3 g M.& w. creditor and pay him the debt when due' : if the creditor will not take payment when tendered, the debtor must neverthe- less continue always ready and willing to pay the debt. Then, Dixon v. when he is sued upon it. he can plead that he tendered it. but Clarke, . r s c. B. 377. h e must also pay the money into Court. If he proves his plea, the plaintiff gets nothing but the money which was originally tendered to him, the defendant gets judgment for his costs of defence, and so is placed in as good a position as he held at the time of the tender. Tender, to be a valid performance to this extent, must observe exactly any special terms which the contract may contain as to time, place, and mode of payment. And the tender must be an offer of money produced and accessible to the creditor, not necessarily of the exact sum, but of such a sum as that the creditor can take exactly what is due without being called upon to give change 1 . 1 The statutes which define legal tender are these : The Bank of England Act, 1833 (3 & 4 Will. IV. c. 98), 6, enacts that Bank of England notes are legal tender for any sum above 5, except by the Bank itself. The Coinage Act, 1870 (33 & 34 Viet. c. 10), 4, enacts that the coinage of the Mint shall be legal tender as follows : gold coins, to any amount ; silver coins, up to forty shillings ; bronze coins, up to one shilling. And J ii of the same Act gives power to the Crown to determine by proclama- tion what coins issued by a branch of the Mint in any British possession shall be legal tender in other parts of the British dominions. CHAPTER III Discharge of Contract by Breach. IF one of two parties to a contract breaks the obligation Breach of which the contract imposes, a new obligation will in every case arise, a right of action conferred upon the party injured by the breach. Besides this, there are circumstances under which the breach will discharge the injured party from such performance as may still be due from him. But, though every breach of the contractual obligation Its result, confers a right of action upon the injured party, it is not Breach every breach that will discharge him from doing what he has gi^Jright undertaken to do under the contract. The contract may be of f c t lon > * not always broken wholly or in part ; and if in part, the breach may or a dis- may not be sufficiently important to operate as a discharge ; or, if it be so, the injured party may choose not to regard it as a breach, but may continue to carry out the contract, reserving to himself the right to bring action for such damages as he may have sustained. It is often very difficult to ascertain whether or no a breach of one of the terms of a contract discharges the party who suffers by it. By discharge we must understand, not merely the right to bring an action upon the contract because the other party has not fulfilled its terms, but the right to consider oneself exonerated from any further performance under the con- tract, the right to treat the legal relations arising from the contract as having come to an end, and given place to a new obligation, a right of action. The discharge of contract is indicated with some precision Discharge by the pleadings in use before the Judicature Acts. Many ^y old ** 312 DISCHARGE OF CONTRACT Part V forms of of the cases which illustrate this part of the subject turn ng< upon questions of pleading, and we shall find that the under- standing of the remedy, as often happens, is a material assistance to the ascertainment of the right. At the risk of a digression I will turn for a moment to this aspect of the question before us. 1. Position of parties where a Contract is discharged by Breach. Exonera- In a contract between A and X, a breach by X might be perform- considered to be a discharge of the contract if A, in bringing action upon it, was not required to allege that he had per- formed or endeavoured to perform that which was still due from him under the contract ; or if X could not successfully use such non-performance by A either as a cause of action or a ground of defence. Right to And the test of such discharge by the default of A* was the acquisition of a right by A to sue for the value of what he (] one ^ us i n g the form of pleading known as intlebilatus assumpsit. By this was set up a new contract arising from the use of money, goods, or services offered by the plaintiff and accepted by the defendant. This needs a short explanation. Before the Judicature Acts came into operation, it was possible for a plaintiff who sued on a contract arising on consideration executed, that is a promise, acted or uttered, to pay for money, goods, or services offered and accepted, to state his case in certain short forms known as the indebitaiiiK Nature of counts. These, which were an adaptation of the action of ta<" W ' Assumpsil to the subject-matter of the action of Debt, merely counts. stated a liquidated claim existing for money due, goods supplied, or services rendered. When In certain cases these counts were applicable to a claim applicable . . . , . . to special arising out or a special contract, that is a contract arising Contract. ll j )on ex p ress promises made on either side, but they were so applicable only where the contract was discharged by breach. Chap. III. i BY BREACH 313 If A had performed his promise in a contract made with X and nothing more remained for him to do, and if X made default in the performance due from him, either wholly or in a vital term of his promise, A might sue X not only upon the promise broken but upon a new and distinct contract arising upon the offer of that which he had done and its acceptance by X. The form of this last cause of action was indebitatus assumjmt, X being indebted mint le taken to have promised. And this form was only applicable to a special Beveriey v. contract when performed wholly or in part by one side and Light and absolutely broken and so discharged on the other. 6A.&E.8SQ. Where A had done a part, though not all that he was A quantum bound to do under a special contract, and X committed a breach which amounted to a discharge, if that which A had done could be represented in a claim for money payment, he was entitled to sue, not only on the special contract, but in indelitatus assumpsit, for a quantum meruit or the value of so much as he had done. 'If a man agrees to deliver me one hundred quarters of corn, and after I have received ten quarters, I decline taking Best c. )., in Mavor v. any more, he is at all events entitled to recover against me p / g ne ' 3 BiD- the value of the ten that I have received/ But the right to sue in this form on a quantum meruit When it is frequently and emphatically stated to depend on the fact sued upon, that the contract has been discharged. ' It is said to be an invariably true proposition, that -wherever Hulle v. one of the parties to a special contract not under seal has in an ^East**"'. unqualified manner refused to perform his side of the contract, or has disabled himself from performing it by his own act, the other party has thereupon a right to elect to rescind it, and may, on doing so, immediately sue on a quantum meruit, for anything which he had done under it previously to the rescission.' 19. It is possible that A may have done nothing under the contract which can be estimated at a money value, or that the default made by A" is not such as can be stated in the form of a money claim. Then if the breach amount to a 314 DISCHARGE OF CONTRACT Part V discharge, A is exonerated from such performance as may still be due from him, and is entitled to sue at once upon the special contract for such damages as he lias sustained. May be It may be that a lump sum is to be paid by A on the l-xcTuded. completion of work by X. Then if X makes default in the work and leaves it incomplete he cannot sue on a quantum m eruM- The terms of the contract exclude such a claim, and he must produce evidence of a fresh contract to pay for the work done, or he cannot recover. Kules of The rules of pleading which have been issued under the Court" 1 Judicature Act do not alter the relations of the parties, though the forms of pleading are shortened and a simple indorsement on the writ of summons may be substituted for the old indelitatu* counts. Rights of Thus where a contract between A and X is discharged by the default of x > A mav - (a) Consider himself exonerated from any further perform- Behn v. ance which may have been due on his part ; and successf ully *B.&'s>.75i. defend an action brought for non-performance : (/3) Sue at once upon the contract for such damages as h c rgateRaii- ue nas sustained by its breach, without being obliged to show ^o.B .' 1 ^. that such performance has been done or tendered by him : (y) If he has done all or a portion of that which he promised, so as to have a claim to a money payment for such performance, he may treat such a claim as due upon a new I'lanche *. contract arising upon the promise which is understood from a 8*14. * ne acceptance of an executed consideration. 2. Form* of Dhcltarge by Breach. We are now in a position to ask, What are the circum- stances which confer the rights just mentioned ? What is the nature of the breach which amounts to a discharge ? widen"' ^ contract may be broken in any one of three ways: a party to a contract (i) may renounce his liabilities under may arise, it, (2) may by his own act make it impossible that he should Chap. III. 2 BY BREACH 315 fulfil them, (3) may totally or partially fail to perform what he has promised. Of these forms of breach the first two may take place while the contract is still wholly executory, i.e. before either party is entitled to demand a performance by the other of his promise. The last can, of course, only take place at or during 1 the time for the performance of the contract. We will therefore deal first with renunciation and impos- sibility created by the act of one party before and in the course of performance, and then with simple failure in performance. (i) Discharge by renunciation before performance is due. The parties to a contract which is wholly executory have Rcnun- a right to something more than a performance of the contract when the time arrives. They have a right to the maintenance . is due of the contractual relation up to that time, as well as to a performance of the contract when due. The renunciation of a contract by one of the parties before the time for performance has come, discharges the other, if he so choose, and entitles him at once to sue for a breach. A contract is a contract from the time it is made, and not from the time that performance of it is due. Hochster v. Delatour is the leading case upon this subject. 2 E.& 3.678. A engaged X upon the I2th of April to enter into his service as courier and to accompany him upon a tour; the employ- ment was to commence on the first of June, 1852. On the i ith of May A wrote to X to inform him that he should not require his services. X at once brought an action, although the time for performance had not arrived. The Court held that he was entitled to do so. The sense of the rule is very clearly stated by Cock burn, Frost v. . J J J > Knight.L.R. C. J., in a case which goes somewhat further than Ilochster v. 7 EX. 114. Delatonr. In that case a time was fixed for performance, and charge before it arrived the defendant renounced the contract. In Frost v. Knight performance was contingent upon an event ance ... be con- which might not happen within the lifetime of the parties. tingent. 316 DISCHARGE OF CONTRACT Part V A promised to marry T upon his father's death, and during his father's lifetime renounced the contract; A' was held entitled to sue upon the grounds explained above. 'The L. R. 7 EX. promisee/ said Cockburn, C. J., ' has an inchoate right to the performance of the bargain, which becomes complete when the time for performance has arrived. In the meantime he ha* a right to have the contract kept open at a subsisting and effective contract. Its unimpaired and unimpeached efficacy may be essential to his interests/ There are two limitations to this rule. But must The first is that the renunciation must deal with the entire whole* per- performance to which the contract binds the promisor. It formance, mav b e that the promisor may announce his intention of Mersey Steel ... and iron Co. breaking so much, or so vital a part, of the contract as to v. Naylor. 9 App. ca. entitle the promisee to bring- his action at once. But there P. 442. RaTiway y co * s no case * n wn i cn a partial renunciation has been treated Raiiway n co ^ a breach by anticipation conferring an immediate right |i90o]4L.j'. f ,- cfi. i 3 . or action. The second is that if the promisee will not accept the renunciation, and continues to insist on the performance of the promise, the contract remains in existence for the benefit and must and at the risk of both parties, and if anything occur to dis- as a dia- charge it from other causes, the promisor may take advantage charge. of guch discharge. SE.&B.?^ Thus in Avery v. Boicden, A agreed with X by charter- party that his ship should sail to Odessa, and there take a cargo from A''s agent, which was to be loaded within a certain number of days. The vessel reached Odessa, and her master demanded a cargo, but A''s agent refused to supply one. Although the days within which A was entitled to load the cargo had not expired, his agent, the master of the ship, might have treated this refusal as a breach of contract and sailed away. A would then have had a right to sue upon the contract. But the master of the ship continued to demand a cargo, and before the running days were out before therefore a breach by n on -per formance had occurred a war Chap. III. 2 BY BREACH 317 broke out between England and Russia, and the performance of the contract became legally impossible. Afterwards A sued for breach of the charter-party, but it was held that as there had been no actual failure of performance before the war broke out (for the running days had not then expired), and as the agent had not accepted renunciation as a breach, X was entitled to the discharge of the contract which took Avery v. Bowden, place upon the declaration of war. SE.&B./I^ (2) Impossibility created by one party before performance is (hie. If A, before the time for performance arrives, makes it Impossi- impossible that he should perform his promise, the effect is created the same as though he had renounced the contract. before per- formance. A promised to assign to X, within seven years from the date of the promise, all his interest in a lease. Before the end of seven years A assigned his whole interest to another Lovelock v. Franklyn, person. It was held that X need not wait until the end of 8 Q. 3.371. seven years to bring his action. 'The plaintiff has a right to say to the defendant, You have placed yourself in a situation in which you cannot perform what you have promised ; you promised to be ready during the period of seven years, and during that period I may at any time tender you the money and call for an assignment, and expect that you should keep yourself ready ; but if I now were to tender you the money, you would not be ready ; this is a breach of the contract.' The more recent case of Synge v. Synge affirms this rule. [i8o.4]iQ.& (3) Renunciation in the course of performance. If during the performance of a contract one of the parties Renuncia- by word or act definitely refuses to continue to perform his fc^pJJT part, the other party is forthwith exonerated from any further formance - performance of his promise, and is at once entitled to bring action. In Corf v. The Ambergate Ttailicwf Company, Cort contracted 17 Q- 8.127- with the defendant Company to supply them with 3900 tons of railway chairs at a certain price, to be delivered in certain 318 DISCHARGE OF CONTRACT Part V \ quantities at specified dates. After 1787 tons had been delivered, the Company desired Cort to deliver no more, as they would not be wanted. He brought an action upon the contract, averring readiness and willingness to perform his part, and that he had been prevented from doing so by the Company. He obtained a verdict, and when the Company moved for a new trial on the ground that Cort should have proved not merely readiness and willingness to deliver, but an actual delivery, the Court held that where a contract was renounced by one of the parties the other need only show that he was willing to have performed his part l . ' "When there is an executory contract' for the manufacturing and supply of goods from time to time, to be paid for after delivery, if the purchaser, having accepted and paid for a portion of the goods contracted for, gives notice to the vendor not to manufacture any more, as he has no occasion for them and will not accept or pay for them, the vendor having been desirous and able to complete the The'-Amber- con tract, he may, without manufacturing and tendering the rest of gateRaiiwav the goods, maintain an action against the purchaser for breach of Co., 17 Q. B. 148. contract. (4) Impeai&UUy created by one parly in the course of performance. Impossi- The rule of law is similar in cases where one party has by created n ^ s own ^ m &de the contract impossible of performance, during Planche* was engaged by the Messrs. Colburn to write for perform- v nnce. 100 a treatise on ( Costume and Ancient Armour' to be Coibnm*'' published in a serial called 'The Juvenile Library.' He prepared his work at some expense and actually completed a portion of it, but before it was delivered the Messrs. Colburn had abandoned the ' Juvenile Library ' on the ill-success of its first numbers. He sued them for breach of contract and also on a quantum meruit for the work already done by him. He thus set up two distinct contracts, the original executory contract (190^1 aK.R * The case of Braithicaile v. Foreign Hardtoood Co. affords a good illustration C. A.)543- of the rights of the parties where one has repudiated the contract after performance has commenced, but it involves some points which would complicate the treatment of a simple proposition. Chap. III. 2 BY BREACH 319 for the breach of which he claimed damages, and a contract arising from the execution of work upon request, under which he claimed the worth of the work done before the plaintiff put an end to the engagement. It was argued that he could not recover upon the latter of these claims because, his part being unperformed, the original contract was not wholly at an end : but the Court held that the abandonment of the publication in question did put an end to the contract and effect a discharge. ' I agree,' said Tindal, C. J., ' that, when a special contract is in existence and open, the plaintiff cannot sue on a quantum meruit; part of the question here, therefore, was whether the contract did exist or not. It distinctly appeared that the work was finally abandoned ; and the jury found that no new contract had been entered into. Under these circumstances, the plaintiif ought not to lose the fruit of his labour.' 8 Bing. 16. An Englishman was engaged by the captain of a war-ship owned by the Japanese Government to act as fireman on a voyage from the Tyne to Yokohama. In the course of the voyage the Japanese Government declared war with China, and the Englishman was informed that a performance of the contract would bring him under the penalties of the Foreign Enlistment Act. It was held that he was entitled to leave the ship and sue for the wages agreed upon, since the act of the Japanese Government had made his performance of the Armstrong contract legally impossible. $ 5] 2 Q - k The recent case of Ogdens Ltd. v. Nelson is a further authority [1905] A. c. . IO 9- for the proposition that where there is an express promise to do a certain thing for a certain time, the promisor, if he puts it out of his power to continue performance of his promise, is immediately liable to an action for loss sustained. (5) Breach ty failure of performance. When one party to a contract declares that he will not Breach perform his part, or so acts as to no^ke it impossible for him to do so, he thereby releases the other from the contract and its obligations. One of two parties is not required to tender 320 DISCHARGE OF CONTRACT Part V performance when the other has by act or word indicated that he will not or cannot accept it, or will not or cannot do that in return for which the performance was promised. Nor will the Courts hold him any longer bound. or only But one of the parties may claim that though he has ofVction* broken his promise wholly or in part the contract is not thereby brought to an end nor the other party discharged from his liabilities. We have then to ascertain whether the promise of the party injured was given conditionally on the performance by the other of that in which he has made default. If it was, he is discharged from his promise: if it was not, he must perform his promise, and bring an action for the damage occasioned by the default of the other. Herein lies the distinction between conditional and inde- pendent promises. Condi- A condition may affect the performance of a promise, as a condition subsequent , concurrent, or precedent. subse- If two parties agree that the promise of one shall cease to bind him on the happening of a given event, the promise is defeasible or liable to be annulled by a condition subsequent. Ante, p. 303. The excepted risks of a charter-party, the condition of a bond, are the best illustration of conditions of this character. concur- If two parties agree that the performance of their respective promises shall be simultaneous, or at least that each shall be ready and willing to perform his promise at the same time, then the performance of each promise is conditional on this concurrence of readiness and willingness to perform. In a sale of goods where no time is fixed for payment, the buyer must be ready to pay and the seller ready to deliver at one and the same time. precedent, Lastly, when two parties make mutual promises the per- formance of one or both may depend upon a condition precedent. And here we must distinguish the condition the non-fulfilment of which suspends the operation of a promise, and the condition the non-fulfilment of which discharges the promisor from liability. Chap. III. 2 BY BREACH 321 A may promise X that, for a certain consideration, he will (a) sus- s- to that which he bargained for, or practically worthless and unmarketable. The Common Law on this subject has now been superseded 56 & 57 Viet by the Sale of Goods Act, 13, 14. Where goods are sold by description there is an implied condition that they should correspond to the description 1 ; where they are bought for a particular purpose communicated by the buyer to the seller there is an implied condition that they are reasonably fit for that purpose : where the buyer has no opportunity of examining the goods there is an implied condition that they are of a merchantable quality. These ' implied conditions 2 ' go to the root of performance, and their non-fulfilment is a virtual failure of consideration. 1 Chalmers, Sale of Goods Act, pp. 32, 33. Where the sale is by sample and the contract contains a description of the article sold, the description Nichol v. and not the sample is the test of performance. If sample and description 10 Ex. ioi. differ, the buyer may reject the goods, though they correspond with the sample if they do not correspond with the description. Chantrr v. J This section of the Act has happily superseded the use, for this purpose, 4 1 2F. 1 A n w ^ * ne term 'implied warranty,' a use long ago emphatically condemned 404- by Lord Abinger, though it survived till 1894, to the confusion of all Chap. III. 2 BY BREACH 327 If A agrees to buy beef of X the contract is not performed by the supply of mutton, or of an article unfit for human food. Where specific goods are sold, that is to say, ' goods identified where and agreed upon at the time the contract of sale is made/ the property passes to the buyer ; he cannot thereafter reject the goods for non-conformity to the description given at the time of sale. He is left to obtain such damages as he may have suffered by the seller's default; and this, if the goods Bostockv. Nicholson should prove wholly valueless, may represent the whole amount [94l I lv. 15. Ut of the price paid. P- 741- The position of the buyer is the same if he has accepted goods which at the time of the sale were not specific, and which he might therefore have rejected if their worthlessness had been apparent. Such would be the case of seed sold as 'new growing seed/ which turned out wholly unproductive when sown. The buyer in such a case was held entitled Pouiton v. Lattimore, to recover the whole price. 9B.&C.259. Where the property in the goods has not passed to the buyer he is discharged by failure of any of the ' implied con- ditions/ that is, by virtual failure of consideration. He may reject the goods, and may further bring an action for such damage as he has sustained. Where the property in the goods has passed to the buyer he is not discharged though the goods turn out to be worthless ; street v. he must keep the goods, but he may bring an action for money 2 B. & A. paid under the contract in so far as it is in excess of the value of the goods, and for any further damage occasioned by the breach of warranty. Conditions and Warranties, or vital and subsidiary promises. We have now dealt with promises which admit of more or less complete performance; when default is made on one side, the Courts must determine whether or no that default * terminology relating to the contract of sale. I have not thought it right to discuss the numerous cases which illustrate the interpretation of this section. They are really a part of the law of Sale of Goods. 328 DISCHARGE OF CONTRACT Part V amounts to a renunciation of the contract by the party making it, or BO frustrates the objects of the contract as to discharge the party injured from his liabilities. But contracts are often made up of various statements and promises on both sides, differing in character and in impor- tance ; the parties may regard some of these as vital, others as subsidiary, or collateral to the main purpose of the contract. Where one of these is broken the Court must discover, from the tenour of the contract or the expressed intention of the parties, whether the broken term was vital or not. If the parties regarded the term as essential, it is a Con- dition : its failure discharges the contract. If they did not regard it as essential, it is a Warranty : its failure can only give rise to an action for such damages as have been sustained by the failure of that particular term. Condition A Condition Precedent, in this sense, may be defined as a ' statement or promise, the untruth or failure of which discharges the contract. Warranty. A Warranty is a more or less unqualified promise of indemnity against a failure in the performance of a term in the contract 1 . Warranty and Condition alike are parts, and only parts, of a contract consisting in various terms. Vital Bearing in mind that a condition may assume the form ' either of a statement or of a promise, we find a good illustration 3B.&&75I. of such a vital term in Behn v. Burne&s, where a ship was stated in the contract of charter-party to be ' now in the port of Amsterdam,' and the fact that the ship was not in that port at the date of the contract discharged the charterer. Vital A promise vital to the contract is illustrated by the case of "*?* Glakolm v. Hays. A vessel was chartered to go from England 2 M* & * i. to Trieste and there load a cargo, and the charter-party con- tained this clause : ' the vessel to sail from England on or 1 This view of the distinction between Condition and Warranty is sub- stantially adopted in the Sale of Goods Act 1893, so far as that particular species of contract is concerned. See 10-15, and Chalmers, Sale of Goods Act, Appendix ii. Chap. III. 2 BY BREACH 329 before the 4th day of February next/ The vessel did not sail for some days after the 4th of February, and on its arrival at Trieste the charterer refused to load a cargo and repudiated the contract. The judgment of the Court was thus expressed : 'Whether a particular clause in a charter-party shall be held to Glaholmv. be a condition upon the non-performance of which by the one party 2 $\ Q. the other is at liberty to abandon the contract and consider it at 268 - an end, or whether it amounts to an agreement only, the breach whereof is to be recompensed by an action for damages, must de- pend upon the intention of the parties, to be collected in each particular case from the terms of the agreement itself, and from the subject-matter to which it relates. . . . Upon the whole, we think the intention of the parties to this contract sufficiently ap- pears to have been, to insure the ship's sailing at latest by the 4th of February, and that the only mode of affecting this is by holding the clause in question to have been a condition precedent. 1 The nature of a warranty as compared with a condition pre- Warranty. cedent is illustrated by the case of Bettini v. Gue. Bettini i Q. B. D. . '83- entered into a contract with Gye, director of the Italian Opera in London, for the exclusive use of his services as Condition a singer in operas and concerts for a considerable time and ^-ranty. on a number of terms. Among these terms was an under- taking that he would be in London six days at least before the commencement of his engagement, for rehearsals. He only arrived two days before his engagement commenced, and Gye thereupon threw up the contract. Blackburn, J., in delivering the judgment of the Court described the process by which the true meaning of such terms in contracts is ascertained. First he asks, does the contract give any indication of the intention of the parties? ' Parties may think some matter, apparently of very little im- Bettini v. portance, essential ; and if they sufficiently express an intention to , ^'3. D. make the literal fulfilment of such a thing a condition precedent, l8 7- it will be one : or they may think that the performance of some matter apparently of essential importance and prima facie a con- dition precedent is not really vital, and may be compensated for in damages, and if they sufficiently expressed such an intention, it will not be a condition precedent.' 330 DISCHARGE OF CONTRACT Part V He finds in the contract no such expression of the intention of the parties ; this being so, the interpretation of the disputed term remained for the Court. It was held that the term as to rehearsals was not vital to the contract, and was not a condition precedent : its breach did not operate as a dis- charge and could be compensated by damages. Warranty. I have called a warranty 'a, more or less unqualified promise/ The phrase can be illustrated by the contract between a railway company and its passengers. It is some- times said that a railway company as a common carrier warrants the safety of a passenger's luggage, but does not warrant his punctual arrival at his destination in accordance with its time tables. In the true use of the term warranty, as distinct from condition, the company warrants the one just Richards v. as much as it warrants the other. In each case it makes I R fo S C* RaiiwavCo.i a promise subsidiary to the entire contract, but in the case of the luggage its promise is qualified only by the excepted Le Blanche risks incident to the contract of a common carrier: in the V.L.&N.W. R a'iayCo , case O f the time table its promise amounts to no more than iC.P.D. 286. A an undertaking to use reasonable diligence to ensure punctu- ality. The answer to the question whether a promise is or is not a warranty does not depend on the greater or less degree of diligence which is exacted or undertaken in the performance of it, but on the mode in which the breach of it affects the liabilities of the other party. It is right to observe that the word warranty is used in a great variety of senses l , and that in marine and life insurance 1 For the purposes of the contract for the Sale of Goods the sense in which I have used the word warranty is adopted in the Sale of Goods Act, 6a, but it may be worth setting out some of the uses of the term to be found in the Reports : Behn v. (i) It is used as equivalent to a condition precedent in the sense of 3 Belt's! 751. a descriptive statement vital to the contract. (a) It is used as equivalent to a condition precedent in the sense of a promise vital to the contract. Behn v. Burness. (3) It is used as meaning a condition the breach of which has been acquiesced in, and which therefore forms a cause of action but does not create a discharge. Behn v. Burness. Chap. III. 2 BY BREACH 331 the term is not unfrequently convertible with condition. In a case where the insured ' warranted and agreed that he would Eiiinger v. Mutual not commit suicide, sane or insane, during the year/ the L ife i"^^ Court asked ' whether that statement, which purports to be 3I> a " warranty " has the effect of a ' ' condition," a sense in which the word warranty is often used in relation to contracts of insurance : ' and held that it was so used. But I would submit that its primary meaning is that which I have assigned to it. ' A. warranty is an express or implied state- Lord Abin. ment of something which the party undertakes shall be chanter V. Hopkins, a term in the contract and, though part of the contract, 4 M. & w. collateral to the express object of it.' One cause of the confusion which overhangs the use of the A breach term warranty arises from the rule that a condition may tion?urns change its character in the course of the performance of a li mto * warranty. (4) In relation to the sale of goods it is used as an independent sub- Chanter v. sidiary promise, ' collateral to the main object of the contract, the breach jj &w of which gives rise to a claim for damages, but not to a right to reject the 404- goods.' (5) In relation to the sale of goods, warranty is used for an express Street v. promise that an article shall answer a particular standard of quality ; ^g y k A and this promise is a condition until the sale is executed, a warranty 456. after it is executed. (6) Implied warranty is a term used very often in such a sense as to amount to a repetition by implication of the express undertaking of one of the contracting parties. Thus there was said to be an implied warranty in an executory contract of sale that goods shall answer to their specific description and be of a merchantable quality. This is now an implied Tones v. Just, condition. Sale of Goods Act, 13, 14. ' ' 3 ^' ' Implied warranty of seaworthiness is a condition of the same character. It is an undertaking, which is implied in every policy of marine insur- Dixon v. ance, that the vessel insured shall be reasonably fit ' as to repairs, 5 j^. &' W. equipment, and crew, and in all other respects, to encounter the ordinary 4'4- perils of the voyage insured at the time of sailing upon it.' Implied warranty of title has been a vexed question, and there are con- flicting cases. (Eicholz v. Bannister, IT C. B., N. 8.708 ; Bayuely v. Hawley, L. R. 2 C. P. 625). In the contract of sale of goods, the undertaking for 56 & 57 Viet, title is now an ' implied condition.'' Implied warranty of authority is the undertaking which a professed Collen v. agent is supposed to give to the party -v^fth whom he contracts, that he 7K.tB.fOi. has the authority which he professes to have. Implied warranty of 8 E.& 11.647. possibility is a supposed undertaking that a promise is not impossible of W'^S^L'R performance. 5 C. P'. 577. 332 DISCHARGE OF CONTRACT Part V contract ; a condition the breach of which would have effected a discharge if treated so at once by the promisee, ceases to be Graves v. a condition if he goes on with the contract and takes a benefit 9 bx.'yi;. under it. It is then called a warranty l . This aspect of a condition precedent is pointed out by JB.&S. Williams, J., in Behn v. Burners, where he speaks of the 756. right of the promisee, in the case of a broken condition, to repudiate the contract, 'provided it has not already been partially executed in his favour ' ; and adds that if, after breach, the promisee continues to accept performance, the condition loses its effect as such, and becomes a warranty in the sense that it can only be used as a means of recovering damages. 32L.J.Q. B. The case of Pust v. Dowie illustrates this rule. A vessel 179. was chartered for a voyage to Sydney ; the charterer promised to pay ^1550 in full for this use of the vessel on condition of her taking a cargo of not less than 1000 tons weight and measurement. He had the use of the vessel as agreed upon ; but she was not capable of holding so large a cargo as had been made a condition of the contract. He refused to pay the sum agreed upon, pleading the breach of this condition. The term in the contract as to weight and bulk of cargo was held to have amounted, in its inception, to a condition. Blackburn, J., said : 1 If when the matter was still executory, the charterer had refused to put any goods on board, on the ground that the vessel was not of the capacity for which he had stipulated, I will not say that he might not have been justified in repudiating the contract altogether; and in that case the condition would have been a condition prece- ib. 181. dent in the full sense.' But he adds : ' Is not this a case in which a substantial part of the consideration has been received ? And to say that the failure of a single ton (which would be enough to sup- port the plea) is to prevent the defendant from being compelled to pay anything at all, would be deciding contrary to the exception put in the case of Behn v. Bumess.' 1 See 56 & 57 Viet. c. 71. n, 53, and Chalmers, Sale of Goods Act, pp. 27 29, no, iii. Chap. III. 3 BY BEEACH 333 3. Remedies for Breach of Contract. Having endeavoured to ascertain the rules which govern Remedies the discharge of contract by breach, it remains to consider the remedies which are open to the person injured by the breach. If the contract be discharged by the breach, the person injured acquires or may acquire, as we have seen, three distinct rights : (i) a right to be exonerated from further performance ; (2) a right, if he has done anything under the contract, to sue upon a quantum meruit, a cause of action distinct from that arising out of the original contract, and based upon a new contract originating in the conduct of the parties ; (3) a right of action upon the contract, or term of the contract, broken. But we have done with breach of contract as effecting a discharge. We may now consider generally what are the remedies open to a person who is injured by the breach of a contract made with him, whether or no that breach discharges him from further performance. The remedies are of two kinds : he may seek to obtain damages for the loss he has Damages, sustained ; or he may seek to obtain a decree for specific Specific performance, or an injunction, to enforce the promised acts or a nce. forbearances of the other party. But there is this difference between the two remedies : every breach of contract entitles the injured party to damages, though they be but nominal ; but it is only in the case of certain contracts and under certain circumstances that specif c performance or an injunction can be obtained. The topic is one which barely comes within the scope of this work : but I will endeavour to state briefly some elementary rules which govern the two remedies in question. Damages. When a contract is broken and action is brought upon it, the damages being unliquidated, that is to say unascertained in the terms of the contract, how are we to arrive at the amount which the plaintiff, if successful, is entitled to recover ? 334 DISCHARGE OF CONTRACT Part V Parke. B., (j\ The rule of the Common Law is. that where a party in Robinson * ' i 'Ex a 5 an> sustains a loss by reason of a breach of contract, he is, so far Damages as money can do it, to be placed in the same situation, with represent respect to damages, as if the contract had been performed.' led*- Where no loss accrues from the breach of contract, the plaintiff is nevertheless entitled to a verdict, but for nominal damages only, and ' nominal damages, in fact, mean Manic,}., a sum of money that may be spoken of, but that has no in Beaumont J . . v.Greathead, existence in point of quantity/ And so in an action for the a C. B. 499. * , - mi __ i non-payment of a debt, where there is no promise to pay interest upon the debt, nothing more than the sum due can be recovered; for the possible loss arising to the creditor from being kept out of his money is not allowed to enter into the consideration of the jury in assessing damages, unless it was expressly stated at the time of the loan to be within in r*Mar- the contemplation of the parties, or unless an agreement to (i oTfch P av Merest can be inferred from the course of dealing be- &8 ' ' There must be one of three things to take the case out of the Statute (of Limitation). Either there must be an acknowledgment of the debt from which a promise to pay is implied ; or, secondly, there must be an unconditional promise to pay the debt ; or, thirdly, there must be a conditional promise to pay the debt, and evidence that the condition has been performed.' This being the principle, its application in every case must Langrish v. turn on the construction of the wojjds of the alleged promisor. ^P3] ' K - B And 'When the question is, what effect is to be given to particular words, little assistance can be derived from the 34G DISCHARGE OF CONTRACT BY BREACH cieasby, B., effect given to other words in applying a principle which in Skert . v. Lindsay, is admitted. 3 Ex. 0.317. The debt, however, may be revived otherwise than by By pay- express acknowledgment or promise. A part payment, or payment on account of the principal, or a payment of interest upon the debt will take the contract out of the Statute. When this is so Lord Tenterden's Act provides that nothing therein contained 'shall alter, or take away, or lessen the effect of any payment of any principal or interest made by any person/ But the payment must be made with reference Waters v. to the original debt, and in such a way as to amount to an Tompkins, . J i c. M. & R. acknowledgment of it. Payment to a third party is insuffi- cient. Where the maker of a promissory note made a payment on account to the original payee after six years had expired, stamfoni ^ e n te navm ff> * n the meantime, been indorsed to a third ^Smitfl. 00 ' P ar ty, the payment was not an acknowledgment which re- vived the rights of the indorsee. CHAPTER IV Impossibility of Performance. IMPOSSIBILITY of performance may appear on the face of the contract, or may exist, unknown to the parties, at the time of making the contract, or may arise after the contract is made. It is with this last sort of impossibility that we have to do. Where there is obvious physical impossibility, or legal Unreality impossibility apparent upon the face of the promise, there ^deration is no contract, because such a promise is no real consideration Ante ^ p . 8 g. for any promise given in respect of it. Impossibility which arises from the non-existence of the Mistake. subject-matter of the contract avoids it. This may be based couison, on mutual mistake, for the parties have contracted on an (C^A)^,' assumption, which turns out to be false, that there is some- note'i. thing to contract about 1 . Impossibility which arises subsequently to the formation of Subse- a contract does not, as a rule, excuse from performance. impossi- I have spoken of what are termed ( conditions subsequent/ blllt 7 no excuse, or 'excepted risks/ and what was then said may serve to Ante, p. 303. explain the rule now laid down. If the promisor make the performance of his promise conditional upon its continued of the contract. possibility, the promisee takes the risk. If performance should become impossible, the promisee must bear the loss. If the promisor makes his promise unconditionally, he takes the risk of being held liable even though performance should become impossible by circumstances beyond his control. Paradine sued Jane for rent due upon a lease. Jane pleaded 'that a certain Germai^ Prince, by name Prince 1 It may be worth noting that the case of Hills r. Sughrue is irrecon- 15 M. & W. cileable with later cases on this subject. 348 DISCHARGE OF CONTRACT Part V Rupert, an alien born, enemy to the king and his kingdom, had invaded the realm with an hostile army of men; and with the same force did enter upon the defendant's posses- sion, and him expelled, and held out of possession whereby he could not take the profits.' The plea then was Afeyn, 26. [ n substance that the rent was not due, because the lessee had been deprived, by events beyond his control, of the profits from which the rent should have come. But the Court held that this was no excuse; 'and this difference was taken, that where the law creates a duty or charge and the party is disabled to perform it without any default in him, and hath no remedy over, there the law irill excuse him. As in the case of Waste, if a house be destroyed by tempest, or by enemies, the lessee is excused. . . . But when the party by his oivn contract creates a duty or charge upon himself, he is bound to make it good, if he may, notwith- standing any accident by inevitable necessity, because he might hare provided against it by his contract. And therefore if the lessee cove- nant to repair a house, though it be burnt by lightning, or thrown down by enemies, yet he ought to repair it.' Modern illustrations of the rule are to be found in the promise made by the charterer of a vessel to the ship-owner that the cargo shall be unloaded within a certain number SeeAppen- of days or payment made as ' demurrage/ form of char- A cargo of timber was agreed to be made up into rafts by ter-party. * the master of the ship, and in that state removed by the THUS v. charterer. Storms prevented the master from doing his part, i Q. B. D. but this default did not release the charterer from his promise to have the cargo unloaded within the time specified. So too a dock strike affecting the labour engaged both by ship-owner Bod^ctt v. and charterer does not release the latter. He makes ' an Binnington, ii8oi)iQ.B. absolute contract to have the cargo unloaded within a specified time. In such a case the merchant takes the risk V J'i't, p-347- To the general rule there is a group of exceptions, some- what widened by recent decisions, in which subsequent im- Ca*tlegte ' Compare this case with one in which the charter-party does not fix Co.v. Demp- a definite time for unloading the cargo. In such cases a reasonable time S f&'B*$?\ ) ' 9 allowed, and the event of a dock strike would extend the time which 854- should be rpgarded as reasonable. Chap. IV IMPOSSIBILITY OF PERFORMANCE 349 possibility discharges the contract. These we must distinguish Per Curia from cases in which the Act of God is said to discharge DC Cres- pigny, a contract ; for this use of the term ' Act of God ' has been L - R - $_ Q - * tit p. I o.i. condemned by high authority. The Act of God, as we have seen, is introduced into certain contracts as an express, or, by custom, an implied condition subsequent absolving the promisor. But there are also forms Excep- of impossibility which are said to excuse from performance because 'they are not within the contract, 3 that is to say, that neither party can reasonably be supposed to have contem- plated their occurrence, so that the promisor neither excepts them specifically, nor promises unconditionally in respect of them. With these we will deal seriatim. (1) Legal impossibility arising from a change in the lav: of a) Where , 7 . there be our own country exonerates the promisor. change of the law. Baily was lessee to De Crespigny, for a term of 89 years, of L. R. 4 Q- a plot of land : De Crespigny retained the adjoining land, and covenanted that neither he uor his assigns would, during the term, erect any but ornamental buildings on a certain paddock fronting the demised premises. A Railway Company, acting under parliamentary powers, took the paddock compulsorily, and built a station upon it. Baily sued De Crespigny upon the covenant : it was held that impossibility created by Statute excused him from the observance of his covenant. 'The Legislature, by compelling him to part with his land to a railway company, whom he could not bind by any stipulation, as he could an assignee chosen by himself, has created a new kind of assign, such as was not in the contemplation of the parties when the contract was entered into. To hold the defendant responsible for the acts of such an assignee is to make an entirely new contract ibid. p. 186. for the parties.' (2) Where the existence of a spectyc thing is essential to the & I>e- performance of the contract, its destruction, from no default of f subject either party, operates as a discharge. 350 DISCHARGE OF CONTRACT Part V 3B.&s.8a6. In the case of Taylor v. Caldwell the defendant agreed to let the plantiff have the use of a music hall for the purpose of giving concerts upon certain days : before the days of performance arrived the music hall was destroyed by fire, and Taylor sued Caldwell for losses arising from the consequent breach of contract. The Court held that, ' In the absence of any express or implied warranty that the thing shall exist, the contract is not to be construed as a positive contract, but as subject to an implied condition that the parties shall be excused in case, before breach, performance becomes impossible from the perishing of the thing without default of the contractor. 1 L. R. a c. P. The same principle was applied in Applebi/ v. Myers. The plaintiffs undertook to erect certain machinery upon the defendant's premises and keep it in repair for two years. While the work was in progress the premises were wholly destroyed by fire. It was held that there was no absolute promise by Myers that his premises should continue in a fit state for Appleby's work, that the fire was a misfortune equally affecting both parties, and discharging the contract. And it is not necessary that the destruction of the thing should be absolute : it is enough if it ceases so to exist as to be fit for the purpose contemplated by the contract. In \^A)^' Ni c &M and Knight v. Ashton, Mdridge fy Co., a cargo sold by the defendants to the plaintiffs was to be shipped by a speci- fied ship; without default on the defendants' part the ship was so damaged by stranding as to be unable to load within the time agreed, and the Court held that in these circumstances the contract must be treated as at an end. .s6&5;Vict. By the Sale of Goods Act an agreement to sell specific goods is avoided if, before the risk has passed to the buyer, by fault of neither party the goods perish. (3) Inca- (3) A contract which has for its object the rendering of personal personal services is discharged by the death or incapacitating service. m ne8t O f fa promisor. L. R. 6 EX. In Robinson v. Davison, an action was brought for damage 269. Chap. IV IMPOSSIBILITY OF PERFORMANCE 351 sustained by a breach of contract on the part of an eminent pianoforte player, who having promised to perform at a con- cert, was prevented from doing so by dangerous illness. The law governing the case was thus laid down by Bram- well, B.:- 'This is a contract to perform a service which no deputy could perform, and which in case of death could not be performed by the executors of the deceased ; and I am of opinion that, by virtue of the terms of the original bargain, incapacity of body or mind in the performer, without default on his or her part, is an excuse for non-performance. Of course the parties might expressly contract that incapacity should not excuse, and thus preclude the condition of health from being annexed to their agreement. Here they have not done so ; and as they have been silent on that point, the con- tract must, in my judgment, be taken to have been conditional and not absolute.' ibid. p. 277. The cases which arose out of contracts made in view of ceremonies contemplated at the time of the Coronation in 1902, and frustrated by His Majesty's sudden illness, have somewhat enlarged this group of exceptions. They stand apart from the general rules governing this subject, and would seem to be at variance with them. The Court of Appeal has held that where, by no default of either party, and through circumstances not in contemplation of the parties when the contract was made, a contract becomes impossible of performance no further obligation exists. But everything done or paid up to the moment that impossibility supervenes, and everything which by the contract should have been done Kreii v. J Hrnry[i90 3 or paid before the event, continues to hold good. The lia- * K - - 740 Chandler v. bilities under the contract are, as it were, broken off short, r Webster > ' ' * L'SKHJ and the parties discharged from further performance of it. It must be admitted that these cases are difficult to recon- cile with a great mass of authority on the subject, and it is possible that the law may be regarded as not finally settled. * Merger. Seep. 342 case, 6 Co. Rep. 45 b. Holmes v. Bell, 3 M. & G. Discharge of Contract by Operation of Law. THERE are rules of law which, operating upon certain sets of circumstances, will bring about the discharge of a con- tract, and these we will briefly consider. Merger. If a higher security be accepted in the place of a lower, the security which in the eye of the law is inferior in operative power, ipso facto, whatever may be the intention of the parties, merges and is extinguished in the higher. We have already seen an instance of this in the case of judgment recovered which extinguishes by merger the right of action arising from breach, of contract. And, in like manner, if two parties to a simple contract embody its contents in a deed which they both execute, the simple contract is thereby discharged. The rules governing this process may be thus sum- marized : (a) The two securities must be different in their legal operation, the one of a higher efficacy than the other. A . . ..... second security taken in addition to one similar in character will not affect its validity, unless there be discharge by substituted agreement. (/3) The subject-matter of the two securities must be identical. (>) The parties must be the same. Alteration or Loss of a Written Instrument. Rules as to If a deed or contract in writing be altered by addition or alteration, erasure, it is discharged, subject to the following rules : OPERATION OF LAW 353 (a) The alteration must be made by a party to the con- Pattinson \. tract, or by a stranger while the document is in the possession L - R - I0 Ex of a party to the contract and for his benefit. Alteration by accident or mistake occurring under such Wilkinson v. Johnson, circumstances as to negative the idea of intention will not 3 J- & c. invalidate the document. (/3) The alteration must be made without the consent of the other party, else it would operate as a new agreement. (y) The alteration must be made in a material part. What materi- amounts to a material alteration must needs depend upon the character of the instrument, and it is possible for the character of an instrument to be affected by an alteration which does not touch the contractual rights set forth in it. In a Bank of England note the promise to pay made by the Bank is not touched by an alteration in the number of the note ; but the fact that a Bank note is a part of the currency, and that the number placed on it is put to im- portant uses by the Bank and by the public for the detection Suffeii v. of forgery and theft, causes an alteration in the number to be England, regarded as material and to invalidate the note. sss- An alteration, therefore, to effect a discharge of the con- tract, need not be an alteration of the contract, but must be 'an alteration of the instrument in a material way/ The 46*47 Vkt. c. 61. 64. Bills of Exchange Act 1882 provides that a bill shall not be avoided as against a holder in due course, though it has been materially altered, ' if the alteration is not apparent ' : and the provisions of the Act respecting bills apply to pro- missory notes ' with the necessary modifications/ These last ibid. 89. words have been held to exclude Bank of England notes, and v. walker, ii Q. B. D. therefore do not affect the decision in Suff ell's case. 8 +- v The loss of a written instrument only affects the rights Loss, of the parties in so far as it may occasion a difficulty of proof 1 ; 1 Where the documents are proved to be lost, parol evidence may be given of the contents of a written acknowledgment of a debt barred by the Statute of Limitation (Haydon v. Williams, 7 Bing. 163). In the case of a memorandum under the Statute of Frauds the matter is not clear (Nichol v. Besticick, 28 L. J. Ex. 4). AXSON A a 354 DISCHARGE OF CONTRACT but an exception to this rule exists in the case of bills of Hansard %. exchange and promissory notes. If the holder of the instru- Robinson, . . 7 B. & c. 90. ment lose it, he loses his rights under it, unless he offer Conflans . .. . . . Quarry Co. to the party primarily liable upon it an indemnity against L.R.3C.P.I. possible claims. Bankruptcy. Bank- Bankruptcy effects a statutory release from debts and liabilities provable under the bankruptcy, when the bank- rupt has obtained from the Court an order of discharge. It is sufficient to call attention to this mode of discharge, without entering into a discussion as to the nature and 46 & 47 Viet effects of Bankruptcy, or the provisions of the Bankruptcy 53 & 54 vict. Act of 1883, or the amending Act of 1890. C. /I. When a man becomes bankrupt his property passes to his trustee, who can, as far as rights ex contractu are concerned supra, (and we are not concerned with anything else), exercise the rights of the bankrupt, and can do what the bankrupt could not do, since he can repudiate contracts if they appear to be unprofitable. 46 & 47 Viet. When the bankrupt obtains an order of discharge he is Webb"*' discharged from all debts provable under the bankruptcy, a c. P. D. i. wne ther or no they were proved, and even if the creditor was in ignorance of the bankruptcy proceedings. But this general discharge is subject to exceptions. The Court may require that the bankrupt should consent to judgment being entered sub-j 6. against him for debts unsatisfied at the date of the discharge : and execution may be issued on such judgment with leave of the Court. 5 3- In no case is the bankrupt discharged from liability incurred by fraud or fraudulent breach of trust exercised by him. PART VI AGENCY WHEN dealing with the Operation of Contract we had to note that although one man cannot by contract with another confer rights or impose liabilities upon a third, yet that one man might represent another, as being employed by him, for the purpose of bringing him into legal relations with a third. Employment for this purpose is called Agency. The subject of Agency is interesting as a matter of legal history, as well as of practical importance, but we can only deal with it in outline here, in its relation to Contract. English law, though it leaned strongly against the assign- Agency ment of contractual or other rights of action, found no difficulty employ - in permitting the representation of one man by another for m purposes of contract or for wrong. And it seems that this liability of one for the act or default of another springs uni- versally from the contract of employment l . The liability of the master for the negligence of his servant is the undesigned result of such a contract ; the liability of the principal for the act of his agent is its designed or contemplated result. But the master is not liable for the act of his servant done outside the scope of his employment, nor the principal for the act of his agent done outside the limits of his authority. To discuss the law of master and servant from this point of view is out of place here, otherwise it might be interesting to inquire how far the doctrine of representation in such cases is of modern origin. It may be that the form which the 1 Writers on Agency seem loth to recognize that agency is a form of employment. Yet in dealing with the principal's liability for the agent's wrong, they always introduce large selections from the law of Master and Servant. A a 2 356 AGENCY Part VI employer's liability has assumed in English law is an appli- cation to modern society of rules properly applicable to the relation of master and slave, where the master is liable for injury caused by that which is a part of his property. But Agency for the purpose of creating contractual relations retains no trace in English law of its origin in status. Even where a man employs as his agent one who is incapable of entering into a contract with himself, as where he gives authority to his child, being an infant, the authority must be given, it is never inherent. There must be evidence of intention on the one side to confer, on the other to undertake, the authority given, though the person employed may, from defective status, be unable to sue or be sued on the contract of employment. except From this rule we must, however, except that form of agency known as e agency of necessity/ a quasi-contractual relation formed by the operation of rules of law upon the circumstances of the parties, and not by the agreement of the parties themselves. Outline of The rules which govern the relation of Principal and Agent subject. fall into three chapterg J. The mode in which the relation is formed. 2. The effects of the relation when formed; and here we have to consider (a) The contract of employment as between Principal and Agent. (/3) The relations of the parties where the agent contracts for a principal whom he names. (y) The relations of the parties where the agent contracts as agent, but without disclosing the principal's name : or in his own name, without disclosing his principal's existence. 3. The mode in which the relation is brought to an end. CHAPTER I The Mode in which the Belation of Principal and Agent is created. FULL contractual capacity is not necessary to enable Capacity a person to represent another so as to bring him into legal pai relations with a third. An infant can be an agent, although he could not incur liability under the contract of employment. But no one can appoint an agent who is not otherwise capable of entering into contracts. Employment for the purpose of agency is brought about How the like any other contract by Offer and Acceptance. And we J^ay a'rise. should bear in mind that 'agency' is not co-extensive with 'employment,' though it is, unfortunately, not uncommon to speak of a person employed for any purpose as the agent of the employer. By agency I mean employment for the purpose of bringing the employer into legal relations with a third party. (a) Offer and acceptance for this purpose may take the By offer of form of an offer of a promise for an act. Such are allf ]. anac t. cases of requests for services, which, even if gratuitously rendered, entitle the person employed to an indemnity for loss, risk, or expense, and the employer to the exercise of reasonable diligence on the part of the employed. We should bear in mind in dealing with contracts of this nature, which only come into existence upon the rendering of the service requested, that reward may be offered when the request is made, or may be implied from the nature of the service requested, and that there may be cases of gratuitous employment, where the employed only becomes liable if, after Ante, p. 100 entering on the service, he performs it improperly. ($) Or secondly, the relation may be created by the accep- By offer of tance of an executed consideration. Such is the case where A an a< _.* ratines a contract which X, without anv antecedent authority, as fe y rati - J J fication. 358 AGENCY Part VI has made on his behalf. A accepts the bargain and thereby takes over its liabilities from X. By offer of (y) Or thirdly, the relation may be created by mutual pro- f r e mises, to employ and remunerate on one side, and to do the promise. wor k required on the other. Formal We will now speak no longer of employer and employed, but authority of principal and agent. The authority given by the principal to the agent, enabling the latter to bind the former by acts done within the scope of that authority, may be given by writing, words, or conduct. requisite In one case only is it necessary that the authority should be tract given in a special form. In order that an agent may make undersea!. & b m ding contract under seal it is necessary that he should receive authority under seal. Such a formal authority is called a power of attorney. Conduct: There is nothing to be said as to the formation of the contract by writing or words which has not been said in the chapter on Offer and Acceptance. As regards its formation by conduct the inference of intention may be affected by the relation in which the parties stand to one another. The relation of master and servant, of husband and wife, is sometimes thought to give an inherent authority to the servant or the wife. But such an authority can only spring from the words or conduct of the master or husband. in case of If a master allows his servant to purchase goods for him of an( j X habitually, upon credit, X becomes entitled to look to the master for payment for such things as are supplied in the i Shower 95. r J ordinary course of dealing. of bus- s o too with husband and wife. Cohabitation does not band and wife : necessarily imply agency ; a prima facie presumption of agency Brothers arises where goods for the use of the household are supplied v. Eari of ' to the wife's order, but this presumption may be rebutted by Westmore- . * ncVl^A 1 ) evi " ence showing that such agency did not in fact exist. If, <"* however, the husband has recognized, and taken on himself the liability in respect of, his wife's past dealings with the Chap. I FORMATION OF AGENCY 359 tradesman, he will as regards future transactions be deemed Debenham to hold her out as his agent and be liable accordingly, unless Thesiger,' L. J., meanwhile he actually brings to the tradesman's knowledge S Q Q- B - D. the fact that she is not his agent *. We may contrast this relation with that of partnership, different Marriage does not of itself create the relation of agent and partners, principal : partnership does. The contract of partnership confers on each partner an authority to act for the others ins3&54Vict. c. 39. 5. the ordinary course of the partnership business. And each Hawkenv. partner accepts a corresponding liability for the act of hisSM. &'w. fellows. The relations above described, employment and marriage, enable an authority to be readily inferred from conduct. But apart from these, the mere conduct of the parties may create an irresistible inference that an authority has been conferred by one upon the other. In Pickering v. B^lsk the plaintiff allowed a broker to 15 East, 38. purchase for him a quantity of hemp, which by the plaintiff's desire was entered in the place of deposit in the broker's name. The broker sold the hemp and it was held that the conduct of the plaintiff gave him authority to do so. ' Strangers,' said Lord Ellenborough, ' can only look to the acts of the parties and to the external indicia of property, and not to the private communications which may pass between a principal and his broker : and if a person authorize another to assume the apparent right of disposing of property in the ordinary course of trade, it must be presumed that the apparent authority is the real ibid 43. authority.' We may, if we please, apply to these cases (excepting, of course, partnership) the term agency by estoppel. They differ only in the greater or less readiness with which the 1 This rule needs to be construed with reference to the Married Women's Paqnin v. Property Act 1893, which enacts that all present or future separate estate of a married woman shall be available to satisfy contracts made by her 148. 'otherwise than as agent.' But this Coes not mean that her future separate estate will be bound unless she contract expressly as agent. It is enough that she should in fact have her husband's authority for what she does. 360 AGENCY Part VI presumption will be created by the conduct of the parties. For es/oppel means only that a man may not resist an inference which a reasonable person would necessarily draw from his words or conduct. Necessity: Circumstances operating upon the conduct of the parties may create in certain cases Agency from necessity. A husband is bound to maintain his wife : if therefore he Burchell, 3 Q. B. D. wrongfully leave her without means of subsistence she becomes at p. 436; J Wilson v ' an a & en ^ f necessity to supply her wants upon his credit/ M!Q^*D. A carrier of goods, or a master of a ship, may under certain may create c i rcums tances, in the interest of his employer, pledge his agency credit, and will be considered to have his authority to do so. quasi ex contractu. It has even been held that where goods are exported, un- pinjor, Vves. ordered, or not in correspondence with samples, the consignee has, in the interest of the consignor, an authority to effect a sale. In all these cases the relation of principal and agent does not arise from agreement, it is imposed by law on the circumstances of the parties. The agent occupies the position of the negotiorum gestor of Roman Law. Ratifica- It remains to consider Ratification, or the adoption by A of the benefit and liabilities of a contract made by X on his behalf, but without his authority. The rules which govern Ratification may be stated thus. rules The agent must contract as agent, for a principal who is in govern it. contemplation, and who must also be in existence at the time, for such things as the principal can and lawfully may do. 'An act done for another, by a person not assuming to act for himself, but for such other person, though without any precedent authority whatever, becomes the act of the principal, if subsequently ratified by him. In that case the principal is bound by the act, WiUonv. whether it be for his detriment or his advantage, and whether it Tumman, 6M.&G.242. be in tort or in contract.' (a) The agent must contract as agent. Agency He must not incur a liability on his own account and then declared, assign it to some one else under colour of ratification. If Chap. I FORMATION OF AGENCY 361 he has a principal and contracts in his own name he cannot divest himself of the liability to have the contract enforced See/,/, p. 375. against him by the party with whom he dealt, who is entitled under such circumstances to the alternative liability of the agent and principal. If he has no principal and contracts in his own name he can only divest himself of his rights and liabilities in favour of another by assignment to that other, subject to the rules laid down in Part III. ch. ii. I ; and in such a case it is immaterial that the person contracting intends to contract on behalf of some third person, if he Keighley, i Maxsted ' at the same time keeps his intention locked up in his own & Co. y. Durant, breast/ ^ I] A - c - (b) The agent must act for a principal who is in contem- plation. He must not make a contract, as agent, with a vague for a con - . . , templated expectation that parties of whom he is not cognizant at the principal, time will relieve him of his liabilities. The act must be ' done Tnmman for another by a person not assuming to act for himself but 242.' for such other person/ Apparent, though not real, exceptions to this rule should be noted. A broker may make contracts, as agent, expecting that customers with whom he is in the habit of dealing will take them off his hands. Thus, in contracts of marine insur- ance made by an insurance-broker, persons ' who are not named or ascertained at the time the policy is effected are allowed to come in and take the benefit of the insurance. But then they Watson v. * Swann, must be persons who ivere contemplated at the time the policy ** c- a, icas made' So too where work is done on behalf of the estate of a deceased person, if it is done by order of one who afterwards becomes administrator and ratifies the contract for the work so done, such a ratification creates a binding promise to pay for the work. Here the principal contemplated is the estate /rWatson, _o f\ o -TV of the deceased person, this is jp. existence, although there " 6 - may be no one capable of acting on its behalf until letters of administration have been obtained. 362 AGENCY Part VI Ti*dc- The converse of these cases is that of an agent who purports mann v. h8^ rm o I B w ' tnou t authority to contract for a principal fraudulently in- 681 tending to avail himself, for his own ends, of the contract so made. Under such circumstances the principal can ratify and take the benefit of the contract. (c) The principal must be in existence. who is in This rule is important in its bearing on the liabilities of companies for contracts made by the promoters on their L. R. a c. P. behalf before they are formed. In Kelner v. Haxter the >74- promoters of a company as yet unformed entered into a contract on its behalf and the company when duly incor- porated ratified the contract. It became bankrupt and the defendant who had contracted as its agent was sued upon the contract. It was argued that the liability had passed, by ratification, to the company and no longer attached to the defendant, but the Court held that this could not be. 'Could the "company,"' said Willes, J., 'become liable by a mere ratification ? Clearly not. Ratification can only be by a person ascertained at the time of the act done, by a person in existence either actually or in contemplation of law, as in the case of the assignees of bankrupts, or administrators whose title for the pro- ibid. p. 184. tection of the estate vests by relation.' [1904] A. c. The rule has been cited with approval in a recent case in 1 T- rv the Privy Council. (d) The agent must contract for such things as the prin- cipal can, and lawfully may do. A man may adopt the wrongful act of another so as to &ann 7 v"' ma ^ e himself civilly responsible : but if an agent enter into Noahern h & contract on behalf of a principal who is incapable of making it, or if he enter into an illegal contract, no ratification is possible. The transaction is void, in the one case from the incapacity of the principal, in the other from the illegality of the act. Brook v. On this last ground it has been held that a forged 6Ex.'sg. ' signature cannot be ratified, so as to constitute a defence to British Linen criminal proceedings. But is ratification here in question ? 99- ' For one who forges the signature of another is not an agent, Chap. I FORMATION OF AGENCY 363 actually or in contemplation. The forger does not act for another, he personates the man whose signature he forges. The principal who accepts the contract made on his behalf Principal by one whom he thereby undertakes to regard as his agent, may, as in the acceptance of any other simple contract, signify r con - his assent by words or by conduct. He may avow his responsibility for the act of his agent, or he may take the benefit of it, or otherwise by acquiescence in what is done create a presumption of authority given. Where conduct is relied upon as constituting ratification the relations of the parties and their ordinary course of dealing may create a greater or less presumption that the principal is liable. CHAPTER II Effect of the relation of Principal and Agent. THE effects of the relation of Principal and Agent when created as described above may be thus arranged. 1 . The rights and liabilities of Principal and Agent inter se. 2. The rights and liabilities of the parties where an agent contracts as agent for a named principal. 3. The rights and liabilities of the parties where an agent contracts for a principal whose name, or whose existence, he does not disclose. I. THE RIGHTS AND LIABILITIES OF PRINCIPAL AND AGENT inter se. Relations The relations of Principal and Agent infer se are made up pal and ^ the ordinary relations of employer and employed, and of Agent. those which spring from the special business of an agent to bring two parties together for the purpose of making a con- tract to establish privity of contract between his employer and third parties. Duty of The principal must pay the agent such commission, or to'indem- reward f r the employment, as may be agreed upon between nify wi them. He must also indemnify the agent for acts lawfully rcwftixij done and liabilities incurred in the execution of his authority. of agent The agent is bound, like every person who enters into diligence ; a contract of employment, to account for such property of his employer as comes into his hands in the course of the employ- ment; to use ordinary diligence in the discharge of his Jenkins v. duties ; to display any special skill or capacity which he may 15 c. B.' i6s. profess for the work in hand. There are besides these ordinary relations of employer and Chap. II RELATIONS OF PRINCIPAL AND AGENT 365 employed certain duties, owing by the agent to the principal, which arise from the confidential character of the relations created by contractual agency. (i) The agent must make no profit out of transactions into C 1 ) Agent may make which he may enter on behalf of his principal in the course of no profit the employment beyond the commission agreed upon between them. sion : Where an agent is promised a reward or payment which might induce him to act disloyally to his employer, or might diminish his interest in the affairs of his employer, he cannot recover the money promised to him. If he obtains money by a transaction of this nature, he is bound to account for it to his principal, or pay it over to him. If he does not do so the money can be recovered by the principal as a debt due to him. An engineer in the employ of a Railway Company was cannot promised by the defendant Company a commission the con- promised sideration for which was, partly the superintendence of their rewa ' work, partly the use of his influence with the Railway Com- pany to obtain an acceptance by them of a tender made by his new employers. He did not appear in fact to have advised his first employers to their prejudice, but it was held that he could not recover in an action brought for this com- mission. ' It needs no authority to show that, even though the employers are not actually injured and the bribe fails to Harrington have the intended effect, a contract such as this is a corrupt Graving Dock (fo., one and cannot be enforced. 3 Q- B- D. 549- In Andrews v. Ramsay the plaintiff, a builder, engaged the [1903] 2 K. B. defendants, who were auctioneers, to sell some property on the terms that he should receive 50 commission. Ramsay sold the property and received 20 commission from the must ac- purchaser. It was held that he was bound not merely to pay it"f n re . r this 20 to his employer, but that he was not entitled to the ceive ^ . . * toprmci- 50 commission promised, and Inat though this sum had pal or his already been paid it could be recovered. It would be easy tatives : to multiply illustrations of this principle. 366 AGENCY Part VI Lister & Co. v. Stubbs, 45 Ch. D. 15. offer of reward makes contract voidable. Shipway v. Broadwood, [1899] i Q-B. 373- (a) May not be- come prin- cipal as against his em- ployer. See Story on Agency, fi210, HI. Compare () sale, (6) com- mission agency. But the agent is his principal's debtor, not his trustee for money so received. If the money is invested in land or securities these cannot be claimed by the principal, any more than he can claim profits made out of the sums thus received. They constitute a debt due to him, and this he can recover. It is open to the principal who discovers that his agent has been paid or promised, by the other party, a reward for bringing about the contract, to repudiate the transaction. Nor is it material to inquire what was the effect of the payment or promise on the mind of the agent. ' No man should be allowed to have an interest against his duty/ (2) The agent may not depart from his character as agent and become a principal party to the transaction even though this change of attitude do not result in injury to his employer. If a man is employed to buy or sell on behalf of another he may not sell to his employer or buy of him. Nor if he is employed to bring his principal into con- tractual relations with others may he assume the position of the other contracting party. In illustrating these propositions we may usefully distin- guish employment to buy upon commission, from employment to represent a buyer or seller : the one is commission agency, which is not agency in the strict sense of the word, the other is genuine agency. (a) A may agree with X to purchase goods of X at a price fixed upon. This is a simple contract of sale and each party makes the best bargain for himself that he can. (b) Or A may agree with X that X shall endeavour to procure certain goods and when procured sell them to A, receiving not only the price at which the goods were purchased but a commission or reward for his exertions in procuring them. Here we have a contract of sale with a contract of em- ployment added to it, such as is usually entered into by a commission agent or merchant, who supplies goods to a foreign correspondent. In such a case the seller procures and sells the goods not at the highest but at the lowest price Chap. II RELATIONS OF PRINCIPAL AND AGENT 367 at which they are obtainable : what he gains by the transaction is not a profit on the price of the goods but a payment by way of commission, which binds him to supply them according to Ireland v. r J Livingston, the terms of the order or as cheaply as he can. 407* 5 H ' L ' If a seller of goods warrants them to be of a certain quality he is liable to the buyer, on the non-fulfilment of the warranty, for the difference in value between the goods promised and those actually supplied. If a commission agent promises to procure goods of a certain quality and fails to do so the measure of damages is the loss which his employer has actually sustained, not the profit which he might have made. A seller of goods with a warranty promises that they shall possess a certain quality. A commission agent only Cassabogiou v. Gibbs, undertakes to do his best to obtain goods of such a quality 9 Q- B. D. for his employer. And here the person employed has no authority to pledge' his employer's credit to other parties, but undertakes simply to obtain and supply the goods ordered on the best terms. Yet it would seem that he might not, without his employer's Rothschild J v.Brookman, assent, supply the goods himself, even though they were the 2 g Dow & ci. best obtainable and supplied at the lowest market price. This is an implied term in his contract of employment. (c) Or thirdly, A may agree with X that in consideration of and (c) a commission paid to X he shall make a bargain for A with some third party. X is then an agent in the true sense of the word, a medium of communication to establish privity of contract between two parties. Under these circumstances it is imperative upon X that Agent to he should not divest himself of his character of agent and contract become a principal party to the transaction. This may be must . 1 r J J remain said to arise from the fiduciary relation of agent and agent. principal : the agent is bound to do the best he can for his principal; if he put himself in a position in which he has an interest in direct antagonism to this duty, it is difficult to suppose that the special knowledge, on the strength of which he was employed, is not exercised to the 368 AGENCY Part VI disadvantage of his employer. Thus if a solicitor employed v. AVatt 3 App. a. to effect a sale of property purchase it, nominally for another, but really for himself, the purchase cannot be enforced. Not merely does the agent under such circumstances create for himself an interest antagonistic to his duty : he fails to do that which he is employed to do, namely, to establish a contractual relation between his employer and some other party. The employer may sustain no loss, but he has not got what he bargained for. L. R. ;H.L. Robinson gave an order to Mollett, a broker in the tallow 802. trade, for the purchase of a quantity of tallow. In accordance with a custom of the market unknown to Robinson, the broker did not establish privity of contract between his client and a seller, but simply appropriated to him an amount of tallow, corresponding to the order, which he had purchased from a selling broker. Robinson It was held that Robinson could not be required to accept v. Mollett, L.^R.7H.L. goods on these terms, and that he was not bound by a custom of which he was not aware and which altered the 'intrinsic character ' of the contract. (3) May (3) The agent may not, as a rule, depute another person to gate 6 do that which he has undertaken to do. authority. rj\^ e reason of this rule, and its limitations, are thus stated 8Ch.D. 3 m. by Thesiger, L. J., in De Bmsche v. Alt. 'As a general rule, no doubt, the maxim delegatm non poteM delegare applies so as to prevent an agent from establishing the relationship of principal and agent between his own principal and a third person ; but this maxim when analysed merely imports that an agent cannot, without authority from his principal, devolve upon another obligations to the principal which he has himself undertaken personally to fulfil ; and that inasmuch as confidence in the particular person employed is at the root of the contract of agency, such authority cannot be implied as an ordinary incident to the contract.' The Lord Justice points out that there are occasions when such an authority must needs be implied, occasions springing from the conduct of the parties, the usage of a trade, the Chap. II CONTRACTING FOR NAMED PRINCIPAL 369 nature of a business, or an unforeseen emergency, 'and that when such implied authority exists and is duly exercised, privity of contract arises between the principal and the sub- stitute, and the latter becomes as responsible to the former for the due discharge of the duties which his employment casts on him, as if he had been appointed agent by the principal himself.' The establishment of the fiduciary rela- tion between principal and sub-agent follows where privity of contract exists between the two, as is shown in fy Thomas v. Evan Jones fy Co. The rule is really an illustration of the more general rule Supra, p- 256- that liabilities under a contract may not be assigned without the consent of the promisee. But where there is no such implied authority and the agent employs a sub-agent for his own convenience, no privity of contract arises between the principal and the sub-agent. On New Zealand Co. v. default of the agent the principal cannot intervene as an Wats n . 7 Q. B. D. undisclosed principal to the contract between agent and sub- ( c - A>) 37*- agent. Nor can he treat the sub-agent as one employed by him, and follow and reclaim property which has passed into the sub-agent's hands. II. RIGHTS AND LIABILITIES OP THE PARTIES WHERE AN AGENT CONTRACTS POR A NAMED PRINCIPAL. Where an agent contracts, as agent, for a named principal, Agent for so that the other party to the contract looks through the principal agent to a principal whose name is disclosed, it may be laid down, as a general rule, that the agent drops out of the drops out transaction so soon as the contract is made. rontract Where the transaction takes this form only two matters made > arise for discussion: the nature and extent of the agent's authority; and the rights of the parties where an agent enters into contracts, either without authority, or in excess of an authority given to him. An idle distinction has been drawn between general and 370 AGENCY Part VI special agents, as though they possessed two sorts of authority different in kind from one another. There is no such difference, whether If John Styles, having authority to act on behalf of Richard Is general Re and describing himself as agent for Richard Roe, makes or special. a contract on Roe's behalf with John Doe, he brings Roe and Doe into the relation of two contracting parties, and him- self drops out. The authority may have been wide or narrow, general or special, but the difference is only one of degree. For instance, X sends A to offer 100 for 31' s horse Robin Hood, or to buy the horse for a price not exceeding 100, or for as low a price as he can, or to buy the best horse in M's stable at the lowest price, or X sends A to London to get the best horse he can at the lowest price, or X agrees with A that A shall keep him supplied with horses of a certain sort and provide for their keep : all these cases differ from one another in nothing but the extent of the authority given, there is no difference in kind between any one of the cases and any other: in none of them does A incur any personal liability to M or any one with whom he contracts on behalf of X so long as he acts as agent, names his principal, and keeps within the limits of his authority. It should be observed indeed it follows from what has been said that X cannot by private communications with A limit the authority which he has allowed A to assume. Maddick v. ' There are two cases in which a principal becomes liable for the MctrsnAJl, i6C.B.,N.s. acts of his agent: one where the agent acts within the limits of his authority, the other where he transgresses the actual limits but acts within the apparent limits, where those apparent limits have been sanctioned by the principal. 1 Jones employed Bushell as manager of his business, and it was incidental to the business that bills should be drawn and accepted from time to time by the manager. Jones, however, forbade Bushell to draw and accept bills. Bushell accepted some bills, Jones was sued upon them and was Chap. II CONTRACTING FOR NAMED PRINCIPAL 371 held liable. ' If a man employs another as an agent in Edmunds v. J . . Bushell and a character which involves a particular authority, he cannot ^J!^ 1 " R - by a secret reservation divest him of that authority/ We may note the authority with which certain kinds of agents are invested in the ordinary course of their employment. () An auctioneer is an agent to sell goods at a public auction. Auc- He is primarily an agent for the seller, but, upon the goods being knocked down, he becomes also the agent of the buyer ; he is so for the purpose of recording the bidding ' at the time Bell v. Balis, i Ch. and as part of the transaction] so as to provide a memorandum 671- within the meaning of the 4th section of the Statute of Frauds and of the Sale of Goods Act. He has not merely an authority to sell, but actual possession of the goods, and a lien upon them for his charges. He may sue tne purchaser in his own name, and even where he contracts avowedly as agent, and for a known principal, he may introduce such terms into the contract made Wooife v. with the buyer as to render himself personally liable. 2(2.3.0.355. But the principal will be bound if the auctioneer act within his apparent authority, though he disobey instructions privately given. An auctioneer through inadvertence and contrary to instructions put up an article for sale without reserve. His Rainbow v. Howkins, principal was bound by the terms of sale, [1904] aK.B. 326. (b) A factor by the rules of Common Law and of mer- Factor. cantile usage is an agent to whom goods are consigned for the purpose of sale, and he has possession of the goods, authority to sell them in his own name, and a general dis- cretion as to their sale. He may sell on the usual terms of credit, may receive the price, and give a good discharge to the buyer. He further has a lien upon the goods for the balance of account as between himself and his principal, and an in- surable interest in them. Such is the authority of a factor at Common Law, an authority wJiich the principal cannot Pickering w v Busk restrict, as against third parties, by instructions privately s given to his agent. B b 2 372 AGENCY Part VI 5* & 53 Viet. c.44. Broker. Forms of bought and sold notes. Fairlie v. Fenton, L. R. 5 Ex. 169. Southwell v. Bowditch, i C. P. D. (C.A.)374- Helby v. Matthews, [1895] A. C. 471- By the Factors Act iSSg 1 the presumed authority of the factor is extended. Persons who, in good faith, advance money on the security of goods or documents of title are thereby given assurance that the possession of the goods 2 , or of the documents of title to them, carries with it an authority to pledge them. And so long as the agent is left in possession of the goods revocation of authority by the principal does not prejudice the right of the buyer or pledgee if the latter has not notice of the revocation at the time of the sale or pledge. ( 6l - But if that were so the right of action, being no longer based on contract but on wrong, would not survive to the representatives of the injured party. But the relation is really one of contract, and was so [1897] i Q- B. J (C.A.)557- treated in Dunn v. Macdonald, where the Court of Appeal held that a servant of the Crown, who was alleged to have warranted an authority which he did not possess, could not be personally liable on contracts made on behalf of the Crown. (6) If the professed agent knew that he had not the autho- Action rity which he assumed to possess, he may be sued by the injured party in the action of deceit. The case of Polkill v. Walter is an illustration of this. The 3 B. & A. defendant accepted a bill as agent for another who had not given him authority to do so. He knew that he had not the authority but expected that his aft would be ratified. It was not ratified, the bill was dishonoured, and the defendant was held liable to an indorsee of the bill as having made a repre- 376 AGENCY Part VI sentation of authority false to his knowledge, and falling under the definition of Fraud given in a previous chapter. The reason why the alleged agent should not be made personally liable on such a contract is plain. The man whom he induced to enter into the contract did not contemplate him as the other party to it, or look to any one but the alleged principal. His remedy should be, as it is, for misrepresenta- tion, innocent or fraudulent. III. RIGHTS AND LIABILITIES OF THE PARTIES WHERE THE PRINCIPAL is UNDISCLOSED. Where the name of the Principal is not disclosed. Denman, A man ( has a right to the benefit which he contemplates Humble v. from the character, credit and substance of the person with Hunter, 12 Q. B.3>7- whom he contracts'; if therefore he enters into a contract principal with an agent who does not give his principal's name, the n " presumption is that he is invited to give credit to the agent. Still more if the agent do not disclose his principal's existence. In the last case invariably, in the former case within certain limits, the party who contracts with an agent on these terms gets the benefit of an alternative liability and may elect to sue agent or principal upon the contract. agent not An agent who contracts as agent but does not disclose the contract name ^ h* s principal, is said to render himself personally a agent, liable if the other party to the contract choose to treat him so, but this must depend on the construction of terms. The Thomson v. exceptions to the general rule are wide and its application in Davenport, ... .11 i -nr 9 B & c. 78. reported cases is not as frequent as might be expected. We may state two propositions, which must be taken subject to exceptions to be hereafter mentioned : (i) An agent who contracts for an unnamed principal as agent, will not be personally liable. The agent who describes himself as such in the contract, and signs himself as such, if the contract be in writing, protects himself against liability. Chap. II THE UNNAMED PRINCIPAL 377 ' There is no doubt at all in principle,' said Blackburn, J., in Fleet v. Murton, 'that a broker as such, merely dealing as broker L. R. 7 Q. B. and not as purchaser, makes a contract, from the very nature of 12 ' things, between the buyer and seller, and is not himself either buyer or seller, and that consequently where the contract says " sold to AB" or "sold to my principals" and the broker signs himself And see Southwell v. simply as broker he does not make himself by that either the Bowditch, purchaser or seller of the goods.' 'c.A.Ja?^. (2) An agent who contracts for an unnamed principal, with- Excep- tions, out expressly contracting as agent, will be personally liable. In the absence of words indicating agency, the word Hutcheson ' broker' attached to a signature is merely descriptive and^|Q- B - D - does not limit liability, so that if the agent do not by words exclude himself from liability, it may be assumed that one who deals with an agent for an unnamed principal expects and is entitled to the alternative liability of the principal and Thomson v. Davenport, the agent. Q B. & c. 78. Even where the agent is distinctly described as such, the usage of a trade, as in Fleet v. Murton, may make him liable 1 : ^- 6 R - 7 ^ B- so too may the general rule that an agent acting for a foreign ^ I s 1 to t ) [" g principal has no authority to pledge his credit. ^o 5 R> 7 Q ' B ' Where a man has under these circumstances contracted as agent, he may declare himself to be the real principal. The other party to the contract does, no doubt, lose the alternative liability of the agent or the unnamed principal. Yet, if he was willing to take the liability of an unknown person, it is hard to suppose that the agent was the one man in the world with whom he was unwilling to contract ; and at any rate the character or solvency of the unnamed principal could not have induced the contract. Thus in Schmaltz v. Avery, Schmaltz sued on a contract of l6 Q- B - 6 55- charter-party into which he had entered 'on behalf of another 1 Barrow v. Dyster is an instance of conflict between the terms of a con- 13 Q. B. D. tract and the custom of a trade. Hides were purchased through brokers 35 ' who did not disclose the name of their ^principals. The selling brokers were to arbitrate in case of difference under the contract. Evidence of a custom of the hide trade which would make them personally liable, was rejected, as inconsistent with the arbitration clause, which would thus have made them judges in their own cause. 378 AGENCY Part VI party ' with Avery. He had named no principal and it was held that he might repudiate the character of agent and adopt that of principal. Where the existence of the Principal is undisclosed. Alterna- If the agent acts on behalf of a principal whose existence litv where ne ^ oes no ^ disclose, the other contracting party is entitled principal to elect whether he will treat principal or agent as the party closed. with whom he dealt. The reason of this rule is plain. If A enters into a contract with X he is entitled at all events to the liability of the party with whom he supposes himself to be contracting. If he subsequently discovers that X is in fact the representative of M he is entitled to choose whether he will accept the actual state of things, and sue M as principal, or whether he will adhere to the supposed state of things upon which he entered into the contract, and continue to treat X as the principal party to it *. Supra, I have stated the rule of evidence by which a man who P. 287. has contracted as principal may be shown to be an agent. Where a contract is ostensibly made between A and X, A Higgins v. may prove that X is agent for M with a view of fixing M 8 M. & w. with the liabilities of the contract. But A'' cannot, by proving Truemanv. that M is his principal, escape the liabilities of a contract ii Ad.'& E. into which he induced A to enter under the supposition that he (X) was the real contracting party. Neither party may escape any liability which he assumed under the contract, but A may show that his rights are wider than the words of the contract would indicate. Defence The real principal, M may intervene and sue upon the contract ; but A may set up against him any defence which available would have been good against X the agent, and which accrued principal, while A still supposed that he was dealing with X as prin- Wattean v. l ^ *he 'her party elect to treat the agent as agent the principal will r8Q W i' Ck ' ^ e bound by a ^ acts which fall within the authority usually conferred i Q. B. 346. upon an agent of the character in question. He cannot set up any special instructions limiting the ostensible character of the agency. Chap. II THE UNNAMED PRINCIPAL 379 cipal. Any set-off which A may have against X and which Montagu . . v. Forwood, accrued while A still regarded X as principal, may be used [1893] 2 Q-B. against a demand made by M the real principal. But the right of the other contracting party to sue agent Alterna- or principal to avail himself of an alternative liability may, nty, how in various ways, be so determined, that he is limited to one of conc uded> the two and has no longer the choice of either liability. (a) The agent may contract in such terms that the idea of agency is incompatible with the construction of the contract. Thus where an agent in making a charter-party described Humble v. himself therein as owner of the ship it was held that he could 12 Q. B'. 310. not be regarded as agent, that his principal could not inter- vene, nor could, by parity of reasoning, be sued. (b) If the other party to the contract after having dis- covered the existence of the undisclosed principal do anything which unequivocally indicates the adoption of either principal or agent as the party liable to him, his election is determined and he cannot afterwards sue the other. (c) If, before he ascertain the fact of agency, he sue the Per Lord agent and obtain judgment, he cannot afterwards recover j^JJ^" 1 v - against the principal. But merely to bring an action under ^ APR- Ca. these circumstances would not determine his rights. 'For it may be that an action against one might be discontinued Priestly v . and fresh proceedings be well taken against the other.' 3 H. & c. (d) Again, if, while exclusive credit is given to the agent, the undisclosed principal pays the agent for the price of goods sold to him, he cannot be sued when he is discovered to be the purchaser. In Armstrong v. Stores the defendants employed Messrs. L. R. ^ Q. B. 508. Ryder, a firm of commission agents, to buy goods for them. Messrs. Ryder bought the goods in their own names from Armstrong who gave credit to them and to no one else. The defendants paid their agents for Che goods in the ordinary course of business, and a fortnight later the Messrs. Ryder stopped payment, not having paid Armstrong. When it 380 AGENCY Part VI appeared from their books that they had been acting as agents for the defendants, Armstrong claimed to demand payment from the undisclosed principal. It was held that the demand could not be made from ' those who were only discovered to be principals after they had fairly paid the price to those whom the vendor believed to be principals^ and to whom alone the vendor gave credit? It is important to note the difference between such a case as this and one in which the existence of the principal is known, though his name is not disclosed. There the other contracting party presumably looks beyond the agent to the credit of the principal. ' The essence of such a transaction/ s Q. B. u. said Bowen, J., in Irvine v. Watson, ' is that the seller as an (c. A.) 414- ultimate resource looks to the credit of some one to pay him if the agent does not.' If, in such a case, the principal settles accounts with his agent before the ordinary period of credit has expired, he is not thereby discharged ; if he were, the seller would be deprived of the liability to which he was induced to look when he entered into the contract. Liability of Principal for Fraud of Agent. Is that of A principal is liable to an action for Deceit for the fraud pk>yer for ^ his agent, if the fraud was committed in the ordinary fraud of C0 urse of his employment. The liability of the principal is in vant. no wise different from that of an employer who is responsible EngTi'sh ' for wrongful acts done by those in his service, within the Sank, scope of their employment. A man is equally liable for the 2 59- negligence of his coachman who runs over a foot passenger in driving his master's carriage from the house to the stables, and for the fraud of his agent who, being instructed to obtain a purchaser for certain goods, obtains one by false statements as to the quality of the goods. But if the person employed act beyond the scope of his employment he no longer represents his employer so as to udeii v. make him liable in tort or contract. An agent was employed Atherton, 7 H. & N. to sell a log of mahogany ; he was not authorized to warrant Chap. II LIABILITY FOR AGENTS FRAUD 381 its soundness, but he did so knowing 1 it to be unsound. The employer could not be sued for deceit because the agent had no authority to give a warranty : nor could the contract be avoided, because the parties could no longer be replaced in their previous positions, for the log had been sawn up and partly used. The rights of the parties may be thus stated. If the agent commits a fraud in the course of his employ- Liability , i v i i , ... . . , ex delicti; ment, he is liable, and so is his principal. If he commits a fraud outside the scope of his authority he would be liable, but not his principal. In the first case the other party might sue upon the contract, excontractit. and in either case he would be entitled to avoid the contract subject to the conditions described on pages 194, 195. Where a principal allows his agent to make a statement which he knows, but which the agent does not know, to be false, it would seem difficult to sue either principal or agent for deceit ; for the one did not make the statement, and the other honestly believed it to be true. But the contract could be set aside or resisted on the ground of material misrepre- sentation if not on the ground of fraud : and it would be National Ex- change Co. strange if the consequences of fraud did not attach to of Glasgow v. Drew, a principal who knowingly employed an ignorant agent in fj M L C ,, 6 order to profit by his misrepresentations. In the case of a contract uberrimae fidei, the principal Liability would seem to be liable to the avoidance of the contract if a^o^re. his agent conceals a material fact. It is said that f the knowledge of the agent is the knowledge of the principal/ and this doctrine has been carried so far that, in the Court of Appeal, a principal was held to be unable to recover on Blackburn v. Vigors, a policy of insurance because an agent whom he had employed, *i 0- B. D. but who had not effected the insurance, knew of facts, materially affecting the risk, which he did not communicate to his employer, and of which the em^toyer was unaware. This decision was overruled by the House of Lords. 12 A PP . Ca. The agent is employed to represent the principal for one 382 AGENCY Part VI When knowledge of agent is know- ledge of principal. Bawden v. London & Cy. Assur- ance Co., [1892] a Q.B. 534- or more transactions. What he does in the course of the transaction is the act of his principal; what he knows and does not tell is if he ought to tell it and if the transaction is carried out a non-disclosure which may affect his principal's rights. But he represents his principal for the purpose of the transaction in question, and if, before it is effected, his authority is revoked, the relation of employer and employed ceases to exist. In fact the knowledge of the agent is the knowledge of the principal when, and only when, it is imparted to the principal, or the transaction to which the knowledge is material is carried out. Hence it follows that if the agent knows that the principal is being defrauded, the principal cannot set aside the contract on the ground of fraud. An agent of an insurance company obtained a proposal for insurance from a one-eyed man who, being also illiterate, signed at the request of the agent a form stating among other things that he was free from any physical infirmity. The agent knew that the insured had but one eye. The insurance was against partial or total disablement; after a while, the insured lost his second eye, and claimed the amount due under a policy for a total disablement. The company resisted the claim, on the ground of the falsehood contained in the proposal; but it was held that the knowledge of the agent was their knowledge and that they were liable. CHAPTER III Determination of Agent's authority. AN agent's authority may be determined in any one of three ways : by agreement ; by change of status ; or by death. (i) Agreement. The relation of principal and agent is founded on mutual Agree- consent, and may be brought to a close by the same process which originated it, the agreement of the parties. Where this agreement is expressed by both parties, or where, at the time the authority was given, its duration was fixed, the matter is obvious and needs no discussion. Where authority is determined by revocation it must be Revoca- borne in mind that the right of either party to bring the relation to an end by notice given to the other is a term in subse - the original contract of employment. But the principal's right to revoke is affected by the in- Limits of terests (i) of third parties, (2) of the agent. revoke. (i) A principal may not privately limit or revoke an authority which he has allowed his agent publicly to assume. He will be bound by the acts of the agent which he has given , other persons reason to suppose are done by his authority. The case of Delenham v. Mellon is a good illustration of the 5 Q- B. D. 394. nature and limits of this right of revocation. 6App.Ca.z4 A husband who supplied his wife with such things as Illustra- might be considered necessaries for her forbade her to pledge case O f his credit ; any authority she might ever have enjoyed for that purpose was thereby determined. She dealt with a tradesman who had not before supplied her with goods 384 AGENCY Part VI on her husband's credit and had no notice of his refusal to authorize her dealings. He supplied these goods on the husband's credit and sued him for their price. It was held 'that the husband was not liable, and the following rules were lajd down in the judgments given. Marriage (a) Marriage does not of itself create by implication an rity!" authority from the husband to the wife to pledge the hus- band's credit ; except in such cases of necessity as we have Supra, described above. P. 360. The wife therefore can only be constituted her husband's agent by express authority or by such conduct on his part as would estop him from denying the agency. But may (b) Where the husband has habitually ratified the acts of sumption 6 " n * s w ^ e * n Fudging his credit, he cannot, as regards those from con- W h m he has thus induced to look to him for payment, revoke duct. her authority without notice. Debenham ' If a tradesman has had dealings with the wife upon the credit 5 Q.'B.'D! of the husband, and the husband has paid him without demur in 43- respect of such dealings, the tradesman has a right to assume, in the absence of notice to the contra}"!/, that the authority of the wife which the husband has recognized continues. The husband's quiescence is in such cases tantamount to acquiescence, and forbids his denying an authority which his own conduct has invited the tradesman to assume.' Otherwise (c) In the absence of such authority arising from conduct auth'orit * ne ^ us ^and is entitled as against persons dealing with his revocable w if e to revoke any express or implied authority which he without , J . J notice. may have given her, and to do so without notice to persons so dealing. 'The tradesman must be taken to know the law; he knows that PerThesiger, the wife has no authority in fact or in law to pledge the husband's S'Q B. D. credit even for necessaries, unless he expressly or impliedly gives 403- it her, and that what the husband gives he may take away.' The case of husband and wife is perhaps the best, as it is the strongest, illustration of the limits within which the principal may revoke an authority consistently with the rights of third parties. Chap. Ill DETERMINATION OF AUTHORITY 385 (2) The right of revocation may be expressly or impliedly Cases limited by the liability of the employer to save or to agent indemnify the agent from loss occurring- in consequence of * the employment. The rule laid down that 'an authority coupled with an interest is irrevocable' is explained by Wilde, C. J., in Smart v. Sandars, to mean that ' where an agreement 5 c. B. 917. is entered into on sufficient consideration, whereby an authority is given for the purpose of conferring some benefit on the donee of that authority, such an authority is irrevocable. That is what is usually meant by an authority coupled with an interest.' An illustration of the application of this principle is to be found in Carmichael's case. But the rule [1896] 2 ch. 648. has a somewhat wider application, as appears from the language of Bowen, L. J., in Bead v. Anderson, where ^ g Q - B D the revocation of authority to carry out a contract would have involved an injury to the agent which must have or incurs i" i *i'f been in contemplation of the parties when the contract of employment was made. ' There is a contract of employment between the principal and the agent which expressly or by implication regulates their rela- tions ; and if as part of this contract the principal has expressly or impliedly bargained not to revoke the authority and to indemnify the agent for acting in the ordinary course of his trade and business he cannot be allowed to break his contract.' 7^' ' ' (ii) Change of Status. Bankruptcy of the principal determines, and before 1883 Bank- marriage of the principal, if a woman, determined, an authority T^ ptcy ' given while the principal was solvent, or sole. f Tswn e t ri - It is still open to question whether insanity annuls an winstinV" authority properly created while the principal was yet sane. 5 East> 266 " The latest case on this point is Drew v. Nunn. The defendant 4 Q- B. u. 66 1. there, being at the time sane, gave^an authority to his wife to deal with the plaintiff ; he then became insane ; the wife continued to deal with the plaintiff and gave no notice of the AXSOS C C 386 AGENCY Part VI insanity of her husband; the defendant recovered and resisted payment for goods supplied to his wife while he was insane. Insanity. The Court did not expressly decide how insanity affected the continuance of an authority, but held that ' the defendant by holding out his wife as agent, entered into a contract with the plaintiff that she had authority to act on his behalf, and that until the plaintiff had notice that this authority was revoked he was entitled to act upon the defendant's repre- (i89a]iQ.B. sentations/ Since the decision in the Imperial Loan Co. v. S99- Stone it might be said that one who contracts is entitled to assume that the other party is sane, unless the contrary should appear, nor would he be expected when dealing with an agent to inquire whether the principal was of sound mind. Knowledge of the defendant's insanity would probably have disentitled the plaintiff to rely on the authority of the wife ; for the decision in his favour rested mainly on the ground that the authority had been made known to him, but not the insanity which might have annulled it. In fact the defendant seems to have been held liable rather on the ground of his own representations than on the agency of his wife. It is possible that, since 1883, ^e w^ 6 who, knowing that her husband was insane, continued to exercise an authority once given by him, might be sued on a warranty AHU, p. 375. of authority. (iii) Death of Principal. Death. The death, or (if the principal is an artificial entity like NewBeeston a com P an y) the dissolution, of the principal determines at once ugoo) f c'L the authority of the agent a , leaving the third party without Smoutv a remedy upon contracts entered into by the agent when .i. ignorant of the death of his principal. The agent is not 1 This statement should be qualified in respect of powers of attorney expressed to be irrevocable under sections 8 and 9 of the Conveyancing Act of 1882. See 44 & 45 Viet. c. 41. 47, and 45 & 46 Viet. c. 39. 8, 9. But these exceptions are of a very limited character and do not affect the principle laid down in the text. Chap. Ill DETERMINATION OF AUTHORITY 387 personally liable, as in Kelner v. Baxter, as having contracted L. R. 2 c. p. on behalf of a non-existent principal ; for the agent had once received an authority to contract. Nor is he liable on a warranty of authority as in Gotten v. Wright; for he had no8E.&B.64 7 . means of knowing that his authority had determined J . Nor is the estate of the deceased liable : for the authority was Blades v. . . Free . given for the purpose of representing the principal and not 9 B - & c. his estate. The case seems a hard one, but so the law stands at present. It would appear probable, however, from some expressions of Brett, L. J., in Drew v. Nunn, that the Court 4 Q- B- D. of Appeal might be disposed to attach liability to the estate of the deceased principal, should the question again arise. 1 According to a dictum of Kekewich, J., in Halbot r. Lens the proposition [1901] i Ch. in Smout v. Ilbery that there must be some wrong or omission on the part 34 of the agent to make him personally liable on a warranty of authority was overruled by Gotten v. Wright ; if this dictum is right, the agent who professes to act for a deceased principal will now be liable. C C 2 CONTRACT AND QUASI CONTRACT. IT is necessary to touch on some forms of obligation, called Quasi Contract for want of a better name, because they acquired, for purposes of pleading-, the form of agreement. In early notions of Contract, whether in Roman 1 or in English Law, we must not look for an analysis of Agreement, as emanating from Offer and Acceptance. The fact that one man had benefited at the expense of another under circum- stances which called for a readjustment of rights might give rise to the action of Debt. And this was the remedy, not only for breaches of contract based on executed consideration where such breach resulted in an ascertained money claim, but for any case where statute, common law, or custom laid a duty upon one to pay an ascertained sum to another. The action of Assumpsit, on the other hand, was primarily an action to recover an unliquidated sum, or such damages as the breach of a promise had occasioned to the promisee. But there were certain inconveniences attaching to the action of Debt. The defendant might ' wage his law/ and . the action was then determined, not upon the merits, but by a P rocess f compurgation, in which the defendant came into Court and declared upon oath that he did not owe the debt, and eleven respectable neighbours also declared upon oath that they believed him to speak the truth. Again, the technical rules of pleading forbade the inclusion in the same suit of causes of action arising from debt and from assumpsit, of actions for liquidated and for unliquidated 1 Thus Gaius, after illustrating the nature of the contract Re, by the instance of Mutwim or loan for consumption, goes on to say, ' is qui non Gains,3.oi. debitum accepit ab eo qui per errorem solvit, re obligator.' By the time of Justinian this legal relation had been definitely assigned to the province of Quasi Contract. Institutes, iii. 27. 6. Assump- Comm. iii. 34- CONTRACT AND QUASI CONTRACT 389 damages; for the one was based upon contract real or feigned, the other upon a form of wrong, the non-feasance of an undertaking. Assumpsit therefore was preferred to Debt as a form of action, and, after a while, by the pleader's art, a money debt was stated in the form of an assumpsit, or undertaking to pay it. First it was decided in Slade's case that an action might 4. Co. Rep. . 9 2 - be maintained in assumpsit, though the contract was a bargain for goods to be sold, resulting in a liquidated claim or Debt. Then, where the breach of a contract resulted in such a claim, indeutatus the plaintiff was enabled to declare in the form of a short statement of a debt, based upon a request by the defendant for work to be done or goods to be supplied, and a promise to pay for them. This was settled in the last twenty- five years of the seventeenth century. Thenceforth a man might state claims se expres- . . . sionsofHolt. arising from contract variously in the same suit as a special c.^., quoted agreement which had been broken and as a debt arising from ^st^T' agreement and hence importing a promise to pay it. Such a mode of pleading was called an indebitatus count, or count in indebitatus assumpsit ; the remedy upon a special contract which resulted in a liquidated claim was now capable of being stated as a debt with the addition of a promise to pay it. In this form it was applied to the kinds of liability which, though devoid of the element of agreement, gave rise Moses v. to the action of Debt, and thence in all cases where A was 2 Burr. 10^5. liable to make good to X a sum gained at X's expense. Thus for the convenience of the remedy certain liabili- ties have been made to figure as though they sprang from contract, and have appropriated the form of Agreement. The distinction between Assumpsit and Debt was practically abolished by the Common Law Procedure Act (1852). The i5&i6Vi. c. 7^* plaintiff was no longer required to specify the form in which 3 . his action was brought; he was allowed to join various forms of action in the same suit, sftd might omit the feigned 4>- promise from the statement of the cause of action. The 49- form of pleading, in such cases as resolved themselves into 390 CONTRACT AND QUASI CONTRACT a simple money claim, was reduced to a short statement of a debt due for money paid or received; and now the Judicature Act has abolished formal pleadings, and has substituted for the indebitatu* counts a simple indorsement upon the writ of summons. In deference to their historical connexion with contract, I will notice legal relations which once, in the pleader's hands, wore the semblance of offer and acceptance. Such relations may arise from the judgment of a court of competent jurisdiction, or from the acts of the parties. Judgment. As to the former, it is enough to say that the judgment of a court of competent jurisdiction, ordering a sum of money to be paid by one of two parties to another, is not merely enforceable by the process of the Court, but can be sued upon W j '^ s as creating a debt between the parties, whether or no the L^ W- Court be a Court of Record. Acts of The acts of the parties may bring about this obligation either (i) from the admission by A of a claim due to Xupon an account stated, or (2) from the payment by A of a sum which A ought to have paid, or (3) from the acquisition by A of money which should belong to X, Account (i) An account stated is an admission by one who is in stated. irvingv. account with another that there is a balance due from him. a M. C & w. Such an admission imports a promise to pay upon request, and Hopkins v. creates an actionable liability ex contractu. Logan, .sM. &w. ( 2 ) It is a rule of English Law that no man 'can make fj^'dh^- himself the creditor of another by paying that other's debt Maust^ against his will or without his consent/ L. R. 3 c.p. But if A requests or allows X to take up a position in Money which he is compelled by law to discharge A's legal liabilities, for the 7 A ^ e ^ aw ^P 01 "* 8 a request and promise made by A to X, use of x. a request to make the payment, and a promise to repay. If one of several co-debtors pays the entirety of the debt he may recover from each of the others his proportionate share. In such a case a request to pay and a promise to repay were feigned in order to bring plaintiff within the CONTRACT AND QUASI CONTRACT 391 remedy of assumpsit, and he could recover his payment from Kemp v. 11- Finden, his co-debtors as money paid to their use. 12 M. & w. A sub-tenant who pays the rent of his lessor to the superior landlord under a threat of distress to his goods *, may recover jones v. the amount so paid or deduct it from his rent ; and a man 3 EX. 742. who in the course of business leaves his goods on the other's premises and has to pay the other's debt to prevent distraint Exaii v. * J Partridge, of his goods may in like manner recover his money. 8 T - R - 3 8 We might multiply instances of this kind of liability, bat we must not forget that legal liability incurred by X on behalf of A without any concurrence or privity on the part of A, will not entitle X to recover for money which under such circumstances he may pay to A's use. The liability must have been in some manner cast upon X by A. Otherwise the mere fact that X has paid under compulsion of law what A might have been compelled to pay, will give to X no right of action against A. X may have been acting for England \ . Marsden, his own benefit and not by reason of any request or act of A. L. R. i c. P. (3) There are many cases in which A may be required to Money repay to X money which has come into his possession under ^ eceiv |d circumstances which disentitle him to retain it. the use of A This class of cases, though at one time in the hands of Lord Mansfield it threatened to expand into the vagueness of ' moral obligation/ is practically reducible to two groups Moses v. . _ Macferlan, or circumstances now pretty clearly denned. 2 Burr. 1010. The first of these are cases of money obtained by wrong, such as payments under contracts induced by fraud, or duress; the second are cases of money paid under such mistake of fact as creates a belief that a legal liability Marriot v. Hampton, rests on the payer to make the payment 2 . Such cases lie ^' n d' c " outside the limits of our subject. "hereto. 1 The goods of a lodger are protected from distress by the Lodger Protection Act, 34 & 35 Viet. c. 79. 2 The liability to repay money paid- for a consideration which has wholly failed is sometimes classed among the foregoing obligations, but is based upon genuine contract, though shortly stated in the form of an indebitatus count. APPENDIX FORM OF CHARTER-PARTY. 19 IT IS THIS DAY MUTUALLY AGREED, between of the good Ship or Vessel called the of the measurement of Tons Register, or thereabouts, and Merchant, that the said ship being tight, staunch, and strong, and in every way fitted for the Voyage, shall with nil convenient speed, sail and proceed to or as near thereunto as she may safely get, and there load from the factors of the said Merchant a full and complete cargo which is to be brought to and taken from alongside at Merchants Risk and Expense, and not exceeding what she can reasonably stow and carry over and above her tackle, apparel, provisions, and furniture, and being so loaded shall therewith proceed to or as near thereunto as she may safely get, and deliver the same on being paid freight. Restraint of Princes and Rulers, the Act of God, the King's Enemies, Fire, and all and every other Dangers and Accidents of the Seas, Eivers, and Navigation of whaterer Nature and Kind soever, during the said Voyage, always excepted. Freight to be paid on the right delivery of the cargo. days to be allowed the said Merchant (if the Ship be not sooner despatched), for and days on Demurrage 1 over and above the said laying days at per day. Penalty for non-performance of this agreement, estimated amount of freight. Witness to the signature of \ Witness to the signature of 1 It is usual to fix a certain number ot days, called the ' lay days,' for the loading und unloading of the ship. Beyond these the merchant may be allowed to detain the hip, if need be, on payment of a fixed um per diem. The detention and the pay- ment are called APPENDIX 393 FORM OF BILL OF LADING FOR GOODS SHIPPED ON SAILING VESSEL 1 . in good Order and well conditioned by in and upon the good Ship called the whereof is Master for this present Voyage and now riding at Anchor in the and bound for to say being marked and numbered as in the Margin, and are to be delivered in the like good order and well conditioned at the aforesaid Port of \the Act of God, the King's Enemies, Fire, and all and every other Dangers, and Accidents of the Seas, Rivers, and Navigation of whatever nature and kind soever excepted} unto or to Assigns he or they paying Freight for the said Goods with Primage and Average accustomed 2 . Xn 22JtttU$ whereof the Master or Purser of the said Ship hath affirmed to Bills of Lading all of this Tenor and Date the one of which Pills being accomplished the other to stand void. Dated in 1 A Bill of Lading for goods shipped on a steamship includes among the excepted risks those from ' Fire, Machinery, Boiler, Steam,' and all other dangers and accidents of steam navigation. 8 Primage is a small customary payment to the master, and A verage here means small necessary payments made by the master and repaid him by the merchant. Particular average means the incidence of loss from damage to any part of ship or cargo upon the individual owner or his insurer. General average means the apportynment of the loss among all the parties interested in ship or cargo in proportion to their interest where the loss is caused intentionally and for the common safety, as by cutting away masts or throwing cargo overboard. 394 APPENDIX FORM OF POLICY OF MARINE INSURANCE. s -- 2Be it knoton tfjat as well in own Name, as for and in the Name and Names of all and every other Person or Persons to whom the same doth, may, or - shall appertain in part or in all, doth make assurance, and cause and them and every of them, to be insured, lost or not lost, at and from upon any kind of Goods and Merchandises, and also upon the Body, Tackle, Apparel, Ordnance, Munition, Artillery, Boat and other Furniture, of and in the good Ship or Vessel called the whereof is Master, under God, for this present voyage, or whosoever else shall go for Master in the said Ship, or by whatsoever other Name or Names the said Ship, or the Master thereof is or shall be named or called, beginning the Adventure upon the said Goods and Merchandises from the loading thereof aboard the said Ship upon the said Ship, &c. and shall so continue and endure, during her Abode there, upon the said Ship, &c. ; and further, iintil the said Ship, with all her Ordnance, Tackle, Apparel, &c., and Goods and Merchan- dises whatsoever, shall be arrived at upon the said Ship, &c., until she hath moored at Anchor Twenty-four Hours in good Safety, and upon the Goods and Merchandises, until the same be there discharged and safely landed ; and it shall be lawful for the said Ship, &c., in this Voyage to proceed and sail to and touch and stay at any Ports or Places whatsoever without Prejudice to this Insurance. The said Ship, &c., Goods and Merchandises, &c., for so much as concerns the Assured, by Agreement between the Assured and Assurers in this Policy, are and shall be valued at Touching the Adventures and Perils which we the Assurers are contented to bear and to take upon us in this Voyage, they are, of the Seas, Men-of-War, Fire, Enemies, Pirates, Rovers, Thieves, Jettisons, Letters of Mart and Countermart, Surprisals, Takings at Sea, Arrests, Restraints and Detainments of all Kings, Princes, and People, of what Nation, Condition, or Quality soever, Barratry of the Master and Mariners, and of all other Perils, Losses, Misfortunes that have or shall come to the Hurt, Detriment, or Damage of the said Goods and Mer- chandises and Ship, &c., or any Part thereof; and in case of any loss or Misfortune, it shall be lawful to the Assured, their Factors, Servants, and Assigns, to sue, labour and travel for, in, and about the Defence, Safeguard and Recovery <>f the said Goods and Merchandises, and Ship, &c., or any Part thereof, without Prejudice to this Insurance ; to the Charges whereof we, the Assurers, will con- tribute, each one according to the Rate and Quantity of his Sum herein assured. And it is agreed by us the Insurers, that this Writing or Policy of Assurance shall be of as much Force and Effect as the surest Writing or Policy of Assurance heretofore made in Lombard Street, or in the Royal Exchange, or elsewhere in London. And so we the Assurers are contented, and do hereby promise and bind ourselves, each one for his own Part, our Heirs, Executors, and Goods, to the Assured, their Executors, Administrators, and Assigns, for the true Performance of the Premises, confessing ourselves paid the Consideration due unto us for this Assurance by the assured at and after the Rate of IN WITNESS whereof, we the Assurers have subscribed our Names and Sums assured in N. B. Corn, Fish, Salt, Fruit, Flour, and Seed are warranted free from Average, unless general, or the Ship be stranded ; Sugar, Tobacco, Hemp, Flax, Hides, and Skin's are warranted free from Average under Five Pounds per Cent. ; and all other Goods, also the Ship and Freight, are warranted free from Average under Three Pounds per Cent. ; unless general, or the Ship be stranded. APPENDIX 395 FORM OF INLAND BILL OF EXCHANGE. OXFORD, ist January, 1891. 100. , i i Three months after date S pay S 1 to Mr. ( JOHN STYLES or order the *> ~ sum of one hundred pounds a, for "s value e received. 18 (V? " J9 IS '* 1 JOHN DOE. To RICHARD ROE, Esq. FORM OF PROMISSORY NOTE. OXFORD, 25th December, 1890. 100. I promise to pay to RICHARD ROE or order at the Old Bank, Oxford, six months after date the sum of roo, for value received. JOHN DOE. A. Acceptance : of offer of contract, pp. 5, 17-26. must be absolute and unconditional, 46, 47- its effect in concluding contract, 5, 30. must be communicated, 5, 23-26. may be made by conduct, 21, 22. in contracts by correspondence, 28-35. motive of acceptance immaterial, 51. of bill of exchange must be in writing, 71, 266. consideration for, 88, 267. Accommodation bill : its character, 270. Accord and Satisfaction : how constituted, 104, 341. a form of discharge of right of action, 342. accord without satisfaction, effect of, 301 . Account stated : with infant, void, 126. its general effect, 390. Acquiescence : how far equivalent to acceptance, 24. in fraud, affirms contract, 191. in breach of condition, 166, 167, 332. in act of agent, a ratification, 362, 384. Act of God : definition of, 304. a condition subsequent, 304. an excepted risk, when, 303. Act of Parliament : .tee Statute. Action : of assumpsit, 58, 59, 388. 389. of covenant, 57. of debt, 57, 382, 389. of detinue. 57. of deceit, 162, 183, 193. effect of bringing action, 344. right of action, as a form of obligation, 8. springs from breach of contract, 311, 333. right of, assignment of, 222. 258, 259. how discharged, 340-346. Adequacy : of consideration, how regarded at Com- mon Law, 90, 91. in Equity, 91, 199. Admission : of written contract, how made, 283. Advertisement : ofl'er made by. 50-52. acceptance of by act, 29. Affirmation : <>f contract in case of fraud, 195. Agency : s*< Principal and Agent. Agency : place of the topic, 253. 355. character of the relation, 355-356. Agent : who may be an agent, 357. of necessity, 360. for purposes of 29 Car. II. c. 3. 4., 72, 8i,37i- of 9 Geo. IV. c. 14. i., 72, 345. Agreement : the origin of contract, 2, 7, 9. analysis of, 2 , 3. definition of, 3. a source of obligation, 7. assignment of contract by, 256, 257. discharge of contract by, 298-306. forms needed for discharge by agree- ment, 305, 306. determination of agency by, 383-387. Alien : his capacity to contract, 122. alien enemy, contract with, 122, 128. Alteration of Instrument : when it effects discharge, 352, 353. Ambiguity : latent and patent, 289. Apprenticeship : contracts of, 128. Arbitration : agreements to refer to, 221. Articles of association : of company, 251. Assignment: concerns the operation of contract, 245. of liabilities, 255. of rights at Common Law, 256-258. in Equity, 258-262. by Statute, 262, 264. of covenants affecting leasehold, 274-276. affecting freehold, 376-277. of contracts of deceased, 278. of bankrupt, 279. Assumpsit : a form of trespass on the case, 58. its relation to action of debt, 389. how adapted to liquidated claims, 312. applied by fiction to claims quasi ex eontractu, 390, 391. Attestation : when necessary to validity of a deed, 283. Auctioneer : his liabilities on advertisement, 52, 53. his position as a general agent, 371. Authority : see Agency. warranty of, 331, 375, 385-387- INDEX 397 Authority : general and special, 369. kinds of, 371. coupled with an interest, 385. Average : general and particular, 393. Avoidance : right of, in infant's contract, 123-125, 129, 130. in case of mistake, 159. of misrepresentation, 175, 184. of non-discloaure, 175, 180. of fraud, 195, 196, 238. of undue influence, 202. B. Bailment : may give rise to action of detinue, 57. gratuitous, nature of consideration for, 97. Bankruptcy : its effect in assigning contract, 279. in discharging contract, 354. in determining authority, 385. Bankruptcy Act : see Statute. Barrister : his professional status, 122, 123. Bill of exchange : form of, 395. must be in writing, 71, 72. consideration for it presumed, 90. how affected by want of consideration, 212, 236. by unlawfulness of consideration, 212, 236. discharged by waiver, 102, 300, 341. negotiable by custom, 265. now by statute, 265. how drawn, accepted, and indorsed, 266. Bill of lading : what it is, 272. effect of its assignment, 273. differs from a negotiable instrument, 273. form of, 393. Bills of Exchange Act : see Statute. Bond : nature of, 68. penalties in, 68, 295. conditions subsequent in, 303. Breach of Contract : see Condition, Warranty, Independent Promise.' consideration for waiver of, 341 . as a cause of action, 311. may act as discharge, 31 1 et sqq. rights conferred by it, 311, 333. modes in which it may take place, 314. renunciation before performance, 315. t if treated as a discharge by the other partj; 3I5- renunciation during performance, 317. impossibility created by one party, 318, 3I9- Breach of Contract : failure in performance, 319. by breach of concurrent condition, 320. by total failure of consideration, 323. by breach of vital condition, 327. Broker : his rights and liabilities, 232,372,373,377. C. Cancellation : see Avoidance. of contract, 12. Carrier: his promise as to safety of goods, 303, 330. when an agent of necessity, 360. Champerty : how it affects contract, 221, 222. and assignment of contract, 258. Chancery : remedies obtainable in, 12, 13, 67. Chancery Division : actions assigned to, 291, 340. Charter-party : construction of, 165, 290, 325, .332. excepted risks in, 303. form of, 392. Chose in action : doubtful meaning of term, 257. cannot be assigned at Common Law, 2~,f>, 257. how far assignable in Equity, 258. and by statute, 262, 263. Civil death : meaning of term, 1 39. Cognovit actionem : nature of, 62. attestation necessary to its validity, 283. Cohabitation : illicit, is null as a consideration, 223. does not necessarily create agency, 358. Collateral promise : see Warranty. Commission Agent : his relation to his employer, 364, 369. Company : capacity of to contract, 135, 136. to make negotiable instruments, 138, 265. to sue and be sued through an agent, 253. cannot ratify contracts made before its formation, 262, 351. articles of association of, 251. memorandum of association of, 136, 251. Composition with creditors : consideration for, 104, 105, 341, 342. fraudulent preference, 216, 238, 239. Compromise of suit : as consideration for a promise, 97, 98. Concealment : how different from non-disclosure, 186. Condition : see Breach of Contract. condition subsequent, 303. concurrent, 322. suspensory, 321. precedent, 301, 320, 328. 398 INDEX Condition : either statement or promise, 167. implied in sale of goods, 326. how distinguished from warranty, 327, 328. may after breach become warranty, 331. formerly sometimes called warranty, 330. Consideration: its place in English Law of Contract, 17-20. essential where contract is not under seal, 19, 57, 60, 67, 88, 299, 341. definition of, 88. executed and executory, 20, 93, 108,357, 358. history of, 55-60. is different from motive, 93, 94. must move from promisee, 94, 250. must not be past, 108, no, in. adequacy of, 90, 102. reality of, 91-108. in cases of forbearance to sue, 97, 98, 103. of discharge of existing liability, 101, 102, 105-108. of composition with creditors, 104, 105. of waiver, 298-300. when it must appear in writing Stat. of Frauds, 4., 76, 81. Sale of Goods Act, 4., 87. exceptions to necessity for alleged, 89, 92, 111-120. real, revived promise, 117,118, 344-346. gratuitous employment, 29, 357. negotiable instrument, 370, 300. failure of, a discharge, 145, 323-327. Construction : rules as to, 293. Contract in writing : when writing is required, 71, 72. See Statute. the writing is only evidence of the con- tract, 78, 282, 283. how proved, 283-286. See Evidence, rectification of, in Equity, 158, 159, 291. how discharged by agreement, 304, 305. Contract of Record : see Judgment. a form of obligation, 8. its form and characteristics, 62, 63. is not a true contract, 62, 63. Contract under Seal : offer under seal irrevocable, 26, 39. mode of execution, 64. characteristics, 65-69, 283. when necessary, 69, 70. illegality of consideration for, 234, 235. when negotiable, 135, 268. how it is proved, 283. may be discharged by parol contract at variance with it, 305. agent being a party to it contracts per- sonally, 374. Conveyance : how different from contract, 3, 4. a sale is a conveyance, 85. Convict : his incapacity to contract, 132. Copyholder : liable, though an infant, to pay fine, 1 24. Corporations : their contracts must be under seal, 69. exceptions to general rule, 70. necessary limits to their power to con- tract, 135, 136. express limits, 135. negotiable instruments made by, 135, 268. Correspondence : contracts made by, 30-34. Covenant : action of, 57, 58. assignment of affecting leasehold interests, 274, 275, 276. affecting freehold interests, 276-277. Coverture : see Marriage. Custom : see Usage. Custom of merchants, as to negotiable instruments, 265, 267, 269. as to bills of lading, 272, 273. as to agent's liability where principal is unnamed, 377. of City of London as to contract of married women, 139. D. Damages : rules relating to, 12, 13, 333-336. penalty and liquidated damages, 295, 296. interest by way of damages, 334. how different from indemnity, 18 1. Death : causes lapse of offer, 35. its effect in assigning contract, 278. in determining authority of agent, 386. civil death, in what it consists, 139. Debt: action of, 56, 57. why supplanted by action of Assumpsit, 389, 39- assignment of, 257, 258. Deceit : see Fraud. action of, 162, 183, 193. Deed : see Contract under Seal. Del credere agent : liabilities to his employer, 373. Delivery: of deed, 64, 65. negotiable instruments transferable by, 265. of goods, a form of tender, 309. Demurrage : for detention of ships, 392. Detinue : action of, 57. INDEX 399 Directors : their liability under the Directors' Lia- bility Act 1890, and the Companies Act 1900, 182. Discharge : see Agreement, Breach, Im- possibility, Operation of Law, Per- formance. Disclosure : duty of, in certain contracts, 155, 175. by agent, 381. Divisible contract : where consideration in part illegal, 227. where consideration in part fails, 323-3* 5. Divorce : makes a woman a, feme sole, 139. Drunken person : his contract voidable at his option, 1 37. Duress : to person, 196. to goods, 197. by moral pressure, 197, 243. Duty: as distinct from obligation, 6. not to interfere with performance of contract, 248, 249. E. Equity : how different from Common Law in treatment of gratuitous promise under seal, 67, 68. of inadequate consideration, 91. of bonds, 69. of misrepresentation, 170, 171. of fraud, 189, 197. of assignment of rights, 258, 259. of admission of evidence, 290. stipulations as to time, 294. of penalties, 295. its peculiar remedies, 12, 13, 68, 290, 336. when obtainable only in Chancery Divi- sion, 12, 13, 68, 291, 340. Escrow : a deed delivered under condition, 64. evidence that deed is an escrow, 282, 285. Estate : of deceased debtor, 66. of bankrupt, 279. ratification of contract made on behalf of deceased's, 361. Estoppel : by statements made in a deed, 65. by words or conduct, 182, 359. the effect of, 182, 183. by judgment, 342. agency created by, 359, 384. Evidence : parol, inadmissible to prove contract under 29 Car. II. c. 3. 4., 72, 83. Evidence : or to supplement its terms, Si . or to connect documents, 80, 84. exception as to part performance, 83. when admissible, 281. extrinsic to prove document, 283. to prove or disprove agreement, 284, 285. secondary of contents of document, 284. of condition suspensory, 285. of supplementary terms, 286. explanatory of latent ambiguity, 289. of usage, 289, 290. for purpose of equitable remedies, 290. Executed consideration : contracts arising from, 20, 108-110. promise implied from, 21, no, 114. Executed contract : meaning of term, 20, 299. Execution : of a deed, 64. upon judgment, 62, 63, 343. Executor : his duties and liabilities, 73, 278, 279. his promise to answer damages out of his own estate, 73. Expectant heir : protected from undue influence, 200. P. Factor : his rights and liabilities, 371, 372 . Failure of consideration : a torm of discharge, 327. confused with mistake, 145, 146, 347. money paid for consideration which has failed is recoverable, 327, 391. Forbearance : of a right as consideration for a promise, 97, 98, 102, 103. Foreign Principal: liability of agent for, 374, 377. Foreign State : non-liability of its sovereign, 122. or his representatives, 122, 344. agreements hostile to, 218, 219. its bonds negotiable, 265. Form : its importance in legal history, 55-57. contracts valid by reason of, 61-65. when merely evidentiary, 7 1. of agreement for discharge, 305. Fraud : a flaw in contract, 144. also a civil wrong, 162, 217. definition of, 1 84. consistent with honest motive, 162, 163, 191. with uncertainty of falsehood, 163, 187. but not with honest belief, 187, 188. legal and equitable fraud, 170, 189, 190. representation an essential element, 185. 400 INDEX Fraud : muat be intended to be acted upon by plaintiff, 192, 193. and must deceive him, 193. its effects on contract, 195, 196. how different from undue influence, 197, 198. burden of proof lies on him who asserts fraud, 267. affects limitations of actions, 344, 345. Fraudulent preference : an illegal consideration, 218. money so paid, where recoverable, 238, 239- Fructus industrials : not an interest in land under 29 Car. II. c. 3- 4-, 77- O. Gift: requires assent of donee, 19. when suggestive of undue influence, 198, 202. Goods : see Sale. what are, under 56 & 57 Viet. c. 71. 4., 77, 85. Gratuitous promise : void unless made under seal, 19, 67, 69, 88. not enforceable specifically in Equity, 68, 198, 338. Guarantee : under 29 Car. II. c. 3. 4., 73. consideration for, need not appear in writing, 76. iiberrima jWe, how far required, 179. H. Heir: made liable for debts of ancestor, 66. expectant, contracts with, 194. Husband and Wife : tee Marriage. I. Ignorance of Law : its effect in case of mistake, 153. Illegality : a flaw in contract, 204. by statute, 205. by rules of common law, 216. agreements to commit offences or wrongs, 216. agreements against public policy, 217. contracts affecting foreign relations of State, 218. injurious to public service, 219. affecting course of justice, 220. encouraging improper litigation, 221. contrary to good morals, 223. affecting marriage or parental duty, 223. in restraint of trade, 224. Illegality : its effect on contract, 224-244. when parties are not in pari delicto, 238. when there is a locus poenitentiae, 239. where contract lawful by lex loci, 242. Immoral purpose : its effect upon contract, 223, 230. Implied promise : arising from conduct, 21, 22. of sea-worthiness in contract of marine insurance, 288, 330 w. of indemnity in contract of employment, 109,111,112,357,365,385. of quality in executory sale of goods, 326, 327. of title, 330 n. of possibility, supposed, 330 . of authority, 181, 330 n., 375, 385, 386. Impossibility : on face of the contract, 95, 347. antecedent, a form of mistake, 152, 347. created by act of one party, a form of breach, 317, 318. subsequent, when a discharge, 347-351. Imprisonment : a form of duress, 196. Inadequacy of consideration : how regarded in Equity, 91, 198. Indebitatus counts : their history, 389, 390. their object, 312, 313, 389. as applied to special contract, 313, 314. Indemnity : distinct from guarantee, 74. from damages, 181. marine and fire insurance are contracts of, 215. Indenture : as distinct from deed poll, 65. Independent promises : what are independent promises, 322. absolute promises, 322, 323. promises divisible in respect of perform- ance, 323-325. subsidiary promises, 328. warranty a subsidiary promise, 330. Indorsee : rights of, 236, 267, 269. Indorsement : special, and in blank, 267. each gives additional security, 267. of bill of lading, 272. Infant : his contract voidable at Common Law, 123. when binding, 124, 126, 131. must disclaim continuing contract, 124. when void by Infants' Relief Act, 1 26 ratification at Common Law, 123. when implied, 124, 130, 131. as affected by Lord Tenterden's Act, 1 26. by Infants' Relief Act, 2., 131. INDEX 401 Infant : liabilities for necessaries, 132, 133. for contract of service, 128. for wrong, 134. for wrong in connexion with contract, 134. refused specific performance, 130, 237. infancy affects limitation of action, 344- Injunction : when granted, 12, 13, 338-340. Insanity : see Lunatic. Insurance : how dealt with by 14 Geo. III. c. 48., 214. Fire insurance how affected by non-disclosure of mate- rial fact, 175, 176. Life insurance disclosure of material fact required, 177. is a form of wager, 208. not a contract of indemnity, 215. policy of, assignable, 264. Marine insurance must be in the form of a policy, 72. form of, 394. disclosure of material fact required, 175- is a form of wager, 207, 215. need of insurable interest, 214. dealt with by 19 Geo. II. c. 37., 214. differs from life insurance, 215. policy of, assignable, 264. contains implied warranty of sea- worthiness, 288, 289. Intention : distinctness of, necessary to agreement, 2. communication of, 3, 23. statement of, as distinct from offer, 5, 52- representation of intention and of fact, 1 86. how it affects unlawful purpose, 232- 234- of the parties to be gathered from con- struction of entire contract, 291, 292, 329. 33. governs the construction of the contract, 329, 33- Interest : insurable, when requisite, 214. on debt, when it may be given by way of damages, 334. interest coupled with authority, 378, 379- J. Judgment : a form of contract of record, 8. its nature and characteristics, 62, 63. Judgment : a discharge of right of action, 340, 342. its operation by way of estoppel, 342. its operation by way of merger, 343. how discharged, 341, 342. creates a debt, 390. Judicature Act: see Statute. L. Land: interest in, under Stat. Frauds, 4., 76. iiberrima fides in contract for sale of, 178. assignment of obligations on transfer of interest in, 274-277. specific performance of contracts for sale of, 337- Lay Days: or running days for loading and unloading ship, 233, 316, 317, 392. Lease : assignment of, passes covenants running with land or reversion, 274, 275. Lex fori: determines procedure, 82. Lex loci : determines validity of contract, 82. License : to break contract, a bad plea, 299. Lien : of auctioneer, 371. of factor, 371. Limitation of Actions : in case of specialty, 66, 343, 345. of simple contract, 343, 345. barred debt a consideration for promise to repay, 118. disability to sue, effect of, 345. modes of reviving barred debt, 345, 346. form of acknowledgment, 72, 345. Liquidated damages: differ from penalty, 295, 296, 335. Loan: to infants, 127, 237. for illegal object not recoverable, 230, 231. Locus poenitentiae : in case of illegal contracts, 239. limitations of rule, 239-242. Loss of written instrument : wherein it affects rights, 352-354. Lunatic : his contracts when valid, 137-138. limitation of actions brought by, 344. revocation of authority given by, 386. Maintenance : what it is, 221, 222. unimportant in law of contract, 221. 402 INDEX Marriage : a form of agreement differing from con- tract, 4. agreement in consideration of, 76. agreements affecting freedom of choice in marriage, 233. agreements for separation, 224. effect of marriage on wife's antenuptial contracts, 277. Married "Woman : her contract void at Common Law, 138. Common Law exceptions, 138. statutory exceptions, 138, 139. doctrine of separate estate, 139. separate estate under Acts of 1870 and 1874, 139. under Acts of 1882 and 1893, 140-143. can be agent for her husband of necessity, 360. by authority express or implied, 359, 384- Master and Servant: liability for inducing servant to break contract, 248. contract terminable on notice, 305. Memorandum of association : of company, 136, 251. Merchants, Custom of: as to foreign principal, 374. as creating negotiability, 265, 268, 269. Merger : of lesser security in a greater, 62, 65. a discharge of contract, 352. a discharge of right of action arising from contract, 342, 343. Misrepresentation : relates to formation of contract, 144, 160. how different from fraud, 162, 163, 164. relation to non-disclosure, 164, 165, 185. how regarded at Common Law, 168, 170. in Equity, 170, 171. effect of Judicature Act, 172-174. gives no right to damages, 181, 189. exceptions, 181, 375. may give a right to indemnity, 181. not actionable though negligent, 190. of law, if fraudulent, may be actionable, 187. Mistake : affects formation of contract, 144, 145. may be of intention or of expression, 145. as to nature of transaction, 147-150. as to party to contract, 150-152. as to subject-matter of contract, 152. concerning its identity, 152. concerning its existence, 152, 153, 347, 348. where subject-matter is a right, 153. concerning its quality, 154-157. treatment in Equity, 157-159. its effect upon contract, 159. Mistake : confused with failure of consideration, 145-347. Money-lenders : see Statute. Money paid : under mistake, recoverable, 159. for an illegal object, when recoverable, 239-241. to the use of another, when a cause of action, 390, 391. Money received : to the use of another, what is, 391. Moral obligation : no consideration for a promise, 93, 94, 118, 119. Motive : of acceptance, immaterial, 23, 51. is no consideration for a promise, 93. its effect in determining illegality of contract, 233, 234. Mutual promises : are consideration for one another, 92. performance of one does not discharge contract, 307. N. Necessaries : for an infant, 123, 126, 132. grounds of liability for, 127. province of judge and jury in deciding what are necessaries, 133. Necessity : agent by, 360. Negligence : mistake due to, 148. in statement, not actionable, 190. Negotiable instrument : see Bill of Exchange. of corporation may be under seal, 135, 268. as security for payment due on illegal or void contract, 210-212, 236-238, 268. how distinct from assignable contract, 267. negotiability by custom and statute, 255, 268, 269. position of bona fide holder for value, 268. effect of giving as payment, 308. ordinary rule of consideration does not apply to, 90, 271. Non-disclosure : contracts voidable on ground of, 175. how different from fraud, 185. by agent, 381, 382. Notice : of acceptance of offer, 28, 29, 53. of assignment of contract, 260, 26 1, 279. of covenants binding land, 276, 277. Nudum pactum : meaning of term in English law, 89. INDEX 403 O. Obligation : its definition, 5-7, 50. distinguished from duty, 6, 248. sources of, 7-9. limits of, 246, 247. Offer: must be communicated, 23-28. must contemplate legal relations, 45. how it may lapse, 35-37. how far revocable, 28, 37-45. to unascertained persons, 54. Offer and acceptance : all agreement originates in, 17, 18. expressed in question and answer, 1 7. its various forms, 18, 19. in formation of agency, 357, 358. Office : sale of, 219. Operation of Law : discharge of contract by, 352-354. Opinion : statement of, not a representation, 174. cannot amount to fraud, 187. P. Par delictum : in cases of illegal contract, 238, 239. Parental Duty : agreements affecting due discharge of, 223. Parol : see Evidence, Simple Contract. Part Performance : of contract under Statute of Frauds, 82-87. Parties : see Assignment. in contracts within 29 Car. II. c. 3. 4., their names must appear in writing, 72, 73- . only parties to a contract are liable under it, 245-249. who entitled at Common Law, 249-251. who entitled in Equity, 251-254. third parties cannot sue, 252. parties with common interest may sue by representative, 253. change of, a mode of discharge, 301, 302. Partner : infant partner, his rights, 125. change of partners, its effects on contracts made with partnership, 301, 302. Partnership : how far a contract iiberrimae fidei, 1 80. creates agency as between partners, 181, 359, 36o. Patent Ambiguity : may not be corrected by parol evidence, -> 289. Payment : of a smaller sum fora greater, 102. a form of discharge, 307, 308. negotiable instrument as, 308, 309. Dd Penalty : rules of Law and Equity as to, 294. penalty and liquidated damages, 295, 29 6 > 335- Pension : assignment of, 220. Performance : see Payment, Tender, postponement of, at request of one party, 300, 301. discharge of one party by, 307. Personal contract : does not pass to representatives of de- ceased or bankrupt, 278, 279. Physician : his professional status, 123. Principal and Agent : their relation a form of employment, 2 53. 355- capacity of parties, 357. authority how given, 358-363. ratification of agent's act, 360, 363. duties of principal, 364. of agent, 364-366. special and general agency, 370. commission agency, 373. forms of professional agency, 371-373. restriction of authority, 370, 383. delegation of authority, 368, 369. revocation of authority, 383-387. agent for named principal, 369-376. when liable on contract, 374. when liable otherwise, 375, 376. for unnamed principal, 376-378. for undisclosed principal, 378-380. principal when liable for agent's fraud, 380-382. for agent's non-disclosure, 381. effect of principal's change of status, or death, 385, 386. Procedure : remedies available to contracting parties, 12. Promise : essential to contract, 4. implied: see Implied promise and Warranty. under seal : see Contract under Seal. Promissory note : consideration for it presumed until the contrary is shown, 90, 267. negotiable by statute, 265. rights of payee and indorsee, 266, 267. Public policy : contracts contrary to it illegal, 204, 217, 218. possible origin of rules respecting, 217. its application will not be extended, 218. kind of contract affected by it, 218-227. Q. Quantum meruit : when it may be sued upon, 313, 314. 2 404 INDEX Quasi-Contract : a source of obligation , 8. assimilated to contract in pleading, 389, 39- R. Railway company : nature of its offer to carry, 54. how far liable on its time table, 54, 330. and for passenger's luggage, 330. Ratification : of infant's contract, 117, 130-132. by suffering judgment, 131. of agent's act, 360-363. Real estate : liability for debt, 66. assignment for contracts respecting, 2 74- 277. liability for obligations attaching to, 277. Recognizance : a form of contract of record, 63. Rectification : of written instrument, 12, 158, 291,292. Release : discharges right of action, 341. Renunciation of Contract : before performance, 315-317. during performance, 317. Representation : a statement in a contract, 164-168. or inducing a contract, 166. its effect at Common Law, 164-170. in Equity, 170, 171. of intention, 5, 52. of opinion, 186, 188. when actionable if false, 182, 183, 187, 192. not actionable if negligent, 1 90. of principal by agent, 246, 253, 254. of co-plaintiffs or defendants by one of their number, 253. of estate of deceased person, 73, 278, 279. of bankrupt by trustee, 379, 354. Request : when it implies a promise, 111-115, 357. Rescission : see Agreement as a form of discharge, Avoidance. right of, in case of misrepresentation, 171-174, 184. in case of fraud, 195. in case of undue influence, 202. Restraint of trade : must be reasonable, 67, 225, 226. rules respecting, 224-227. Reversion : sale of, how regarded in Equity, 199. Revocation : of offer, when possible, 35, 37-45. of acceptance, impossible in English law, *8, 32, 34- not so by Indian Contract Act, 35 //. of agent's authority, 383. S. Sale : nee Statute : Sale of Goods Act. of goods, 85, 87. executed and executory, 20, 87, 88, 3 2 6, 327- how affected by mistake as to party contracted with, 15, 150, 151. how affected by fraud, 196. rule of caveat emptor, 154, 155, 185. agreement for sale of land a contract uberrimae fidei, 178. specific performance of, 337. Sample : sale of good's by, 154, 326. Satisfaction : see Accord, payment of a smaller sum for a larger, 102-104. what satisfaction amounts to a discharge of right of action, 341. Sea-worthiness : implied warranty of, in contract of marine insurance, 288, 289, 331. Seal : see Contract under Seal. of corporation, why necessary to its con- tracts, 69. Separate estate : of married woman under 33 & 34 Viet. c. 93-, 139- of married woman in Equity, 1 39. under Acts of 1882 and 1893, 140, 141. Separation : agreement between husband and wife to separate, 139. when valid, 224. Shares : transfer of, form required, 72, 264. in railway company, not an interest in land under 29 Car. II. c. 3. 4., 76. infant shareholder, 124, 125. contract for allotment of, is uberrimae JifJei, 179, 1 80. Ship, British : transfer of British ship, 69. alien cannot acquire property in, 122. Signature : to contract under seal, 64. of party charged under 29 Car. II. c. 3. 4-8i. Simple Contract, or Farol Contract : always requires consideration, 61, 71, 88. when required to be in writing, 71, 72. Solicitor and Client : a relation which may suggest undue in- fluence, 200. Specialty : see Contract under Seal. Specific performance : general rules, 12, 336, 340. of gratuitous promise under seal, 68, 338. of infant's promise, 130, 338. of part-performed contract under 29 Car. II. c. 3. 4., 82, 83. INDEX 405 Specific performance : of contract made under mistake, 155, 290. or under misrepresentation, 170, 171. of contract obtained by fraud, 195. of sale of goods, 337. of contracts concerning land, 337. of contracts for personal service, 339. Stakeholder : liability for money in his hands, 212,213, 241. Statute : Arbitration : 52 & 53 Viet. c. 49., 221. Bankruptcy : 46 & 47 Viet. c. 52., 279, 354. 53 & 54 Viet. c. 71., 279, 354. Betting and Loans (Infants) Act. 1892, 55 & 56 Viet. c. 4., 237. Bills of Exchange, 45 & 46 Viet., c. 61., 71, 72, 265, 270, 300. Bills of Lading, 18 & 19 Viet., c. in., 265, 273. Common Law Procedure Act, 15 & 1 6 Viet. c. 76 : as to pleading, 389. Companies, 63 & 64 Viet. c. 48. 10., 182. Debtors' Act, 32 & 33 Viet. c. 62., 142. Directors' Liability, 53 & 54 Viet. c. 64., 182. Divorce and Matrimonial Causes Act, 20 & 21 Viet. c. 85., 139. Evidence and Practice in Criminal Cases, 28 & 29 Viet. c. 18., 283. Factors, 52 & 53 Viet. c. 45., 372. Frauds, Statute of, 29 Car. H. c. 3 : contracts specified in 4., 72-77. form required by 4., 77-82. effect of non-compliance with 4., 82-84. repeal of 17., 84 n. connexion of documents, how to be shown under 4., 80, 81, 284. contracts under 4., how discharged by agreement, 304-306. Gaming: 1 6 Car. II. c. 7., 210. 9 Anne, c. 14., 211. 7 Geo. II. c. 8., 231. 12 Geo. II. c. 28., 230. 5 & 6 Will. IV. c. 41., 210. 8 & 9 Viet. c. 109., an, 237. 55 Viet. 0.9., an, 231. Infants' Relief, 37 & 38 Viet. c. 62., 117, 126-131. Insurance, 19 Geo. II. c. 37., 314; 14 Geo. III. c. 48., 214, 215. Judicature Act, 36 & 37 Viet. c. 66 : as to equitable rights and remedies, 172. Statute : Judicature Act, 36 & 37 Viet. c. 66: as to right of parties interested in one action to sue or be sued in name of one, 253. as to assignment of contract, 262. as to admission of documents, 283 n. as to rectification of documents, 292. as to provisions regarding time, 294, 295- as to specific performance of contracts for sale of land and leases, 340. as to pleading, 312, 313, 390. Land Transfer Act, 60 & 61 Viet. c. 65., 67, 278. Limitation, Statutes of, 21 Jac. I. c. 16 ; 3 & 4 Will. IV. c. 42 : as to extinction of remedy, 343, 344- as to revival of claim, 118, 345. Lodgers' Protection Act, 34 & 35 Viet. c - 79-> 39 1 Lord Tenterden's Act, 2 Geo. IV. c. 14 : as to executory contract of sale, 84 . as to ratification of infant's contract, 126. as to acknowledgment of barred debt, 72, 345- Married Women's Property Acts, 33 & 34 Viet. c. 93 ; 37 & 38 Viet. c. 50., 140; 45 & 46 Viet. c. 75., 140-143, 274; 5 6 & 57 Vi ct. c. 63., 140-143, 359 Medical Act, 49 & 50 Viet. c. 48., 123. Mercantile Law Amendment Act, 19 & 20 Viet. c. 97 : as to consideration for guarantee, 76, 81. as to limitation of actions, 343, 344, 345- Moneylenders Act, 1900, 63 & 64 Viet. c. 51., 199. Partnership Act, 53 & 54 Viet. c. 39., 3d, 359- Sale of Goods Act, 56 & 57 Viet. c. 71 : as to requirements for contract of sale, 84, 85, 86, 87. nature of contract, 85, 86. mistake as to existence of goods, 152- title to goods obtained by false pretence, 191. stipulations as to time, 295. implied conditions, 326, 327. condition and warranty, 321, 322. specific performance, when granted, 33 1 - destruction of goods by faultof neither party, 153 n. Stock- jobbing, 7 Geo. II. c. 8, Sir J. Bar- nard's Act, 213, 231. 30 & 31 Viet. c. 29, Leeman's Act, 232 406 INDEX Stoppage in Transitu: vendor's rights, 272, 273. Subrogation : in case of loan to infant to buy neces- saries, 128. of insurer into rights of insured, 215 n. T. Tender : a form of performance, 309. of goods, 309. of money, 310. Time: of the essence of the contract at Common Law, 294. rules of Equity as to, 294, 295. rules of Judicature Act, 294. Title : of assignee of contract, 261. of assignee of negotiable instrument, 267. See Parties. Trespass on the Case : provides remedy for breach of executory contracts, 58. Trust: how distinct from contract, 5, 9, 246, 247. declaration of, may confer rights on third parties, 252. U. Uberrima fides : its meaning, 175. in what contracts required, 175-181. Ultra vires : contracts are so because of want of capacity of parties, 136, 228. cannot be ratified, 362. Uncertainty : in offer or acceptance, 46. of consideration avoids promise, 96. Undue influence : prevents reality of consent, 144. how distinct from fraud, 197, 198. when it may be presumed, 198-202. right to rescind contracts obtained by it, 202. Unenforceable : meaning of, as applied to contract, 15, 82. Usage : evidence of, when admissible, 289, 290. Usury laws : promise after their repeal, to repay money lent at usury, 118. Usury laws : their place supplied by doctrine of undue influence and Moneylenders Act, 199. V. Void and Voidable : meaning of the terms, 14-16. W. 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