V- i UNIVERSITY OF CALIFORNIA LOS ANGELES SCHOOL OF LAW LIBRARY This book is DUE on the last date stamped below NOVl. 1947 JAN 9 JAN 1 2 1925 JAN 5 * J&5 1925 U Dtc i 5 1925 JAN 4 1926 JAN 3 19*1 JAN S> 19iT 2 a " .. FEB 2 1929 JIJN 2 3 193$^ DEC 5 ; j^ JAN 2 2 1937 OCT 2 1939 ^ 23 14 134S JUM .AUG 1 1947 OCT J 61948 MAR 1 7 1951 4 Business ^aw Case Method SEVEN VOLUMES Prepared under the Editorial Supervision of WILLIAM KIXMILLER, Ph.B., J.D. and WILLIAM H. SPENCER, Ph.B., J.D. i 215 ' A Systematic Non-Technical Treatment of Business Law in Story and Case Form PUBLISHED BY Commerce Clearing House 1170 PEOPLES GAS BUILDING CHICAGO T CT 1915 Copyright 1915 by WILLIAM KixMILLER Entered at Stationers Hall, London All Bights Reserved Business ^aw Case Method AUTHORS William KixMiller, Ph. B., J. D. (The University of Chicago) William H. Spencer, S. B., J. D., THE UNIVERSITY OF CHICAGO Eugene Tincher, Ph. B., J. D. - (Leland Stanford Jr. University) Paul N. Dale, A. B., LL. B. - - - - (Harvard University) Matthew L. Thurston, A. B. (Cornell University^ Arnold Baar, Ph. B., J. D. - (The University of Chicago) Howard Ellis, Ph. B. - (The University of Chicago) Royal K. Thomas, A. B. - (Kenyon College) Business Law Case Method STORY FORM RULING COURT CASES Volume 1. Contracts. Volume 2. Persons. Domestic Relations. Agency. Volume 3. Partnerships. Corporations. Volume 4. Bills, Notes and Checks. Banks, Banking and Trust Companies. Volume 5. Sales. Suretyship. Insurance. Real Property. Volume 6. Common Carriers. Bailments. Interstate Commerce. Index. Business Law-Case Method Volume 7 (a) BUSINESS LEGAL FORMS: Contracts, Bonds, Deeds, Mortgages. Trust Agreements, Corporations, Charters. By-Laws, Minutes, Partnerships. Acknowledgements, Affidavits. (b) FEDERAL BUSINESS LAWS: Federal Trade Commission Act. War Revenue Act. Clayton Anti -Trust Act. Income Tax Act. Federal Reserve Bank Act. (c) WORKMEN'S COMPENSA- TION ACT: Index. Foreword 17S/S The CASE METHOD of teaching law was intro- duced at Harvard University by Professor Langdell, and is often known as "The Harvard Case System." Professor Langdell collected ruling court cases on "Contracts." These were compiled in a large book and given to students to read. This innovation in the method of legal education was at first skeptically received, but that it has proved a marked success is well known to all those who are familiar with the history of Harvard Law School, and is attested deci- sively by its adoption in the leading universities of the country. Now there are books of ruling court cases on every branch of the law, edited for the use of uni- versity law school students, and the advantage of the CASE METHOD over the text plan is not a subject for argument. Business Law-Case Method enables other than uni- versity law school students to know principles of bus- iness law. To every man it gives access to knowledge on vital subjects pertaining to his business and life. Seven books teeming with life stories, business ven- tures and their legal consequences are open for reading interesting and of inestimable value in dollars and self-satisfaction. CONTENTS I. THE GENERAL NATURE OF A CONTRACT 1. THE ESSENTIALS OF A CONTRACT ... 1 A. There Must Be Two Parties .... 1 B. There Must Be Mutual Assent of the Parties . 3 0. There Must Be a Distinct, Common Understanding . 6 D. There Must Be a Proposal Which Results in a Promise or an Act When Accepted ... 9 E. There Must Be an Active Intention to Accept the Proposal 11 2. CONTRACT CLASSIFIED 16 A. Contract May Be Under Seal or May Be Simple . 15 (1) Sealed Contracts 16 (2) Simple Contracts 17 B. Contracts May Be Express or Implied ... 19 (1) Express Contracts 19 (2) Implied Contracts 22 C. Contracts May Be Executed or Executory . . 27 (1) Contracts Executed in Part .... 27 (2) Executory Contracts 30 D. Contracts May Be Unilateral or Bi-lateral . . 32 (1) Unilateral Contracts 32 (2) Bi-lateral Contracts 36 II. THE FORMATION OF A CONTRACT 1. THE REQUISITES OF FORM 37 A. Oral Contracts Are Generally Enforcible . . 37 B. Contracts May Be in Writing .... 40 (1) A Written Contract May Be Stipulated . . 40 (2) No Particular Form Is Necessary ... 42 (3) An Agreement May Be Partly in Writing and Partly Oral 44 (4) A Written Contract Need Not Be Signed . . 47 (6) Agreement Signed "by One Party and Acted On by the Other Is a Binding Contract . . 49 0. Contracts Required to Be in Writing Under the Statute of Frauds . 62 II CONTENTS (1) Contracts Within One Division of the Statute . 52 (2) Contracts Within the Other Division of the Statute of Frauds 55 (3) The Statute Requires the Writing to Be Signed by the Party TJnder the Obligation .... 58 (4) Failure to Comply with the Statute Makes the Con- tract Unenforcible in Court .... 61 D. Contracts May Be Under Seal .... 63 (1) The Seal Makes It Binding .... 63 (2) No Particular Device Is Necessary for a Seal . 66 2. PARTIES TO A CONTRACT . * . . . .68 A. There Must Be Two or More Competent Parties . 68 3. MUTUAL AGREEMENT 71 A. There Must Be an Offer 71 (1) Negotiations Do Not Constitute an Offer . . 71 (2) The Offer Must Be Communicated to the Offeree 74 (3) An Offer May Be Made to the Public ... 77 (4) An Offer by Telegram or Letter Is Complete When the Message Is Received 79 (5) An Offer May Be One of Four Kinds ... 82 a. An Offer of an Act for a Promise ... 82 b. An Offer of a Promise for an Act .... 83 c. An Offer of a Promise for a Promise ... 85 d. An Offer of a Promise Conditional Only on Mere As- sent of Other Party Must Be Under Seal . . 87 (6) An Offer Must Be Certain .... 90 (7) The Terms of the Offer May Not All Be Communi- cated 92 a. Unexpressed Terms .92 I). Usages and Customs of Trade .... 95 C. Terms on a Document Unread but Known to Be There by the Other Party 98 d. Terms on the Document Unknown to Be There by the Other Party 101 e. Terms Not Readily Discernible .... 103 f. Terms Issued in a General Notice . . . 105 g. Terms Stipulated After the Agreement Is Made . 108 (8) An Agreement to Hold an Offer Open Is an Option 111 (9) An Offer Terminates 113 a. By Merger Into Contract 113 CONTENTS Continued III b. By Expiration of the Time Designated . . . 116 c. If No Time Is Designated, an Offer Terminates Within a Reasonable Time 118 d. By Death 120 e. By Conditional Acceptance 122 f. By Revocation 125 B. There Must Be an Acceptance .... 127 (1) Acceptance Changes the Offer Into a Contract . 127 (2) When Offer Specifies the Time, an Acceptance After That Time Is of No Effect 129 (3) When No Time for Acceptance Is Made, a Reason- able Time to Accept Is Implied .... 131 (4) Acceptance Must Be an Overt Act . . . 134 a. Acceptance Must Be CnTnmiiTiip.at.p4 . . . 134 b. If Acceptance Is Made in Manner Required, It Is Not Material if It Is Never Received . . . .137 c. Acceptance by Post or Telegraph Complete When Posted or Telegraphed ..... 140 d. An Offer May Require Actual Receipt of Acceptance 142 (5) Silence Alone Is Not an Acceptance . . . 146 (6) Acceptance Must Be by the Person to Whom the Offer Is Made 148 (7) A General Offer May Be Restricted in Acceptance 150 (8) Acceptance May Be One of Two Kinds . . 152 a. Acceptance May Be by a Promise . . . 152 b. An Acceptance May Be an Act .... 155 (9) The Power, But Not the Right, to Withdraw an Offer, Exists After Acceptance .... 157 0. There Must Be Contractual Intention . . . 160 (1) The Parties Must Intend to Bind Each Other in a Legal Manner 160 (2) Relationship or Membership in a Family Indicates Lack of Contractual Intention .... 163 (3) An Offer Made in Jest Cannot Be Accepted in a Legal Sense 165 (4) A Proposal Made Without Intention to Contract Cannot Be Accepted in a Legal Sense . . . 167 (6) A Proposal Made Without a Contractual Intention May Be Accepted, in Case the Other Reasonably Be- lieves That It Is Made in Earnest . . . 170 (6) An Invitation to Bid Cannot Be Turned Into a Promise by an Acceptance .... 171 IV CONTENTS Continued (7) Railroad Time Tables Are Subject to Acceptance . 175 4. CONSIDERATION IN A CONTRACT . . .178 A. Consideration Is the Moving Force of a Contract . 178 B. Every Contract, Not Under Seal, Requires a Con- sideration 180 O. The Adequacy of the Consideration Is Not Material 183 D. Consideration Need Not Be in Money or Money Value 186 E. Consideration May Take One of the Following Forms: 190 (1) In a Bi-lateral Contract It Is a Promise for a Promise 190 (2) In Unilateral Contracts, It Is the Act of One Party for the Promise of Another .... 192 F. There May Be a Good Consideration . . . 195 (1) In a Compromise ...... 195 (2) In a Composition With Creditors . . . 197 (3) In the Force of a Previous Request . . . 199 G. There Is No Consideration . . . . 201 (1) In the Promise to Perform What One Is Bound to Do 201 (2) Where There Is Impossibility of Performance , 204 (3) When the Undertaking Is Gratuitous . . . 206 (4) Where the Act Has Been Previously Performed On One Side ' 208 (6) In a Moral Obligation 211 (6) In a Promise That Is Too Vague . . . 213 (7) In a Promise to Discharge the Balance of a Debt On Payment of Part 214 H. An Obligation Unenforcible by Some Rule of Law Will Be Revived by a New Promise . . . 217 III. CONSENT OF EITHER PARTY MUST BE REAL 1. THERE MAY BE LACK OF CONSENT BECAUSE OF MISTAKES 219 A. Mistake as to the Nature of the Contract . . 219 B. Mistake as to the Person With Whom the Contract Is Made 222 O. Mistake as to Thing About Which the Contract Is Made 224 (1) As to Its Existence 224 (2) Mistake as to Its Identity 226 (3) Mistake as to Quality 229 CONTENTS Continued v 2. THERE MAY BE LACK OF CONSENT BECAUSE OF MISREPRESENTATION 231 A. Misrepresentation Does Not Affect Reality of Con- sent at Law 231 B. Misrepresentation in Land Contracts . . . 234 C. When Made by One Who Stands in a Confidential Relation 238 D. When Made Carelessly, Misrepresentations Amount to Fraud 241 3. THERE MAT BE LACK OF CONSIDERATION BE- CAUSE OF FRAUD 244 A. There Are Five Characteristics Essential to Fraud . 244 (1) There Must Be a Misrepresentation of Fact . . 244 (2) There Must Be a Knowledge of the Falsity of the Wrong-doer ........ 246 (3) There Must Be Intention to Have the Party Rely on the Untruth 249 (4) There Must Be Actual Reliance On the Untruth . 251 (5) There Must Be Loss Suffered From the Deception 254 B. Fraud Gives the Injured Party Right to Avoid the Contract 257 4. THERE MAY BE LACK OF CONSENT BECAUSE OF DURESS 258 6. THERE MAY BE LACK OF CONSENT BECAUSE OF UNDUE INFLUENCE 261 IV. THE OBJECT OF THE CONTRACT MUST BE LEGAL 1. CONTRACTS MAY BE MADE ILLEGAL BY STATUTE 265 2. CONTRACT MAY BE ILLEGAL BECAUSE OF THE COMMON LAW 267 A. Contrary to Public Policy 267 B. Contrary to Rules of Common Law . . . 269 3. EFFECT OF ILLEGALITY OF THE CONTRACT . 272 A. When the Contract Is Severable .... 272 B. When the Contract Is a Unity .... 274 C. The Court's Action On an Illegal Contract . . 276 VI CONTENTS Continued V. CONTRACTS MAY BE DISCHARGED 1. BY AGREEMENT 279 A. Waiver 279 B. Substituted Agreement 282 C. By a Provision in the Contract .... 285 2. BY PERFORMANCE 287 A. Payment . 287 B. Tender 290 C. Substantial Performance ..... 293 3. BY BREACH 296 A. Renunciation Before Time for Performance . . 296 B. Renunciation in the Course of Performance . . 299 4. BY IMPOSSIBILITY SOI CONTRACTS L THE GENERAL NATURE OF A CONTRACT 1. The Essentials of a Contract A. There Must Be Two Parties STOEY CASE George Williams was the San Francisco represen- tative of Counselman and Bingham, bankers. When Counselman and Bingham placed an issue of Cali- fornia public service bonds on the market, Williams realized that the bonds were an excellent source of investment, and attempted to purchase three-fourths of the entire lot placed with him to sell. He signed and mailed the following order blank to the New York office: January 15, 1915. This day, I George Williams, have purchased of Counselman and Bingham fifty Western Hydro Elec- tric Bonds for which I agree to pay $5,500. (Signed) GEORGE WILLIAMS, Accepted : George Williams, Western Manager of Counselman and Bingham. When Counselman and Bingham received this or- der, they appreciated more fully the value of the bonds and refused to deliver them; the banking firm contended, among other reasons, that no contract ex- isted since there were not two parties to the agree- ment. Is this a good defense to a suit on contract brought by Williams? 2 , CONTRACTS RULING COURT CASE Burditt vs. Colburn, Volume 62 Vermont Reports, Page 231; Volume 13 Lawyer's Reports Annotated, Page 676. Rollins Meacham, was administrator of the estate of Angeline Gorham. A large amount of money, in- trusted to him as administrator, he used for his own personal wants and needs, instead of administering it for the benefit of the estate, as was his duty. In order to secure the estate for the amount of money he thus concerted to his own use, he made a promissory note, payable to himself as administrator, and signed by himself personally. In like manner he executed a mortgage on his home to himself as ad- ministrator, signed by himself personally. The note and mortgage were kept by Rollins Meacham, and after his decease, they were found with the other papers belonging to the estate of Angeline Gorham, deceased. After Meacham 's death, Charles Colburn, the de- fendant in this action, was appointed his administra- tor. Burditt, the plaintiff herein, was appointed to continue the administration of the estate of Angeline. Colburn turned over to Burditt the note and mortgage in question. Then Burditt sued the defendant Col- burn upon this note, and sought to have the mortgage foreclosed. It was contended by the defendant that neither the note nor the mortgage was a valid obli- gation because neither was made between two or more parties. Decision : The mortgage and the note were invalid as obligations of the deceased person. They lack a fundamental element of a binding obligation two or more contracting parties. CONTRACTS 3 Mr. Justice Tyler said in part: "The mortgage must be held invalid for want of contracting parties. A contract necessarily implies a concurrence of in- tention in two parties, one of whom promises some- thing to the other, who, on his part accepts such prom- ise. One person cannot by his promise, confer a right against himself. Until the concurrence of two minds of two parties there is no contract. So judgment was given for the defendant, Colburn. RULING LAW Story Case Answer An examination of the general nature of a contract and an attempt to discover the essential elements thereof at once reveals the fact that the most funda- mental essential is the presence of two or more con- tracting parties. Although any other supposition, at first thought may seem absurd, yet often cases arise where one who is acting as agent, or trustee, or ad- ministrator, attempts to contract with himself indi- vidually. This cannot be done because the law re- quires that, on the one hand, there be a contracting party who receives a certain right by the contract and and, on the other, a different party from whom the right is secured. Thus, in the Story Case, George "Wil- liams as an individual obtained no right under the contract, because there was only one person in the agreement. B. There Must Be Mutual Assent of the Parties STOEY CASE Mr. Judson owned a large farm in southern Illinois. He decided that he would discontinue his farming and 4 CONTEACTS move to Chicago, if he could dispose of his property. He told a neighbor, Mr. Jones, of his intention and pffered to sell him his farm for $10,000. Mr. Jones also owned a farm, but it was less valuable than the one belonging to Mr. Judson. In reply to the offer of Mr. Judson he wrote him this letter : "My dear Mr. Judson: I would like very much to own your farm, but at present I cannot accept your offer. If I am able to sell my farm for a good price in the near future. I will buy yours, unless you have sold it in the meantime. Respectfully, J. W. JONES." Some months later Mr. Jones sold his farm for a very good price; when Mr. Judson heard of the sale, he went immediately to Mr. Jones and requested him to purchase the farm according to his agreement. Mr. Jones replied that he had concluded that he would not buy another farm. Thereupon, Mr. Judson brought an action against Jones for breach of a contract. "What should the court hold in this case ? RULING COURT CASE Stagg v. Compton, Volume 81 Indiana Reports, Page 171. In this case the plaintiff Stagg had a horse which he desired to sell. When he heard that the defend- ant wished to purchase a horse, he wrote a letter, offering to sell the animal in question to the defend- ant for $200. The defendant some days later wrote the following letter in reply to the plaintiff 's letter: xl CONTRACTS 5 "I think I might purchase your horse at $200, the price you ask me. How can I get it? I de- sire it at once if it will suit me ; I am quite certain it will. Please reply at once, and oblige, Yours truly, A. B. COMPTOET." In an action brought for the price of the horse, the question was whether the foregoing constituted a writ- ten contract for the sale of the animal in question. Decision: Those two letters in themselves do not make a written contract between the parties. The offer of the plaintiff was to sell unconditionally. But the defendant did not accept absolutely. He said only that he might purchase the animal, in case it suited him. Since there was no meeting of their minds, the two letters, recited above, did not make a contract be- tween them. Therefore it was held that there was no written contract for the sale of a horse. RULING LAW Story Case Answer A contract is a relation which is voluntarily as- sumed by the parties to it. A contractual obligation, speaking of a contract in a strict sense, is never im- posed upon a person without his consent. Thus it is a fundamental essential of a contract that there be mutual assent between the contracting parties. If one party to an agreement is thinking of one thing, and the other is thinking of something else, obviously there is no contract, because their minds have never met upon a common basis. There is no mu- tual assent. 6 CONTRACTS Again, the parties may understand clearly all the terms of a proposed agreement, but one party may be unwilling at that time to give his binding consent, notwithstanding the fact that he desires to enter the agreement at a future time or makes a favorable re- mark thereto. But unless he unequivocally and un- conditionally assents, mutual assent is lacking and no contract results. In the Story Case, mutual assent is lacking because Mr. Jones does not agree to the offer made by Jud- son. In fact he clearly states that there is no accep- tance. It is obvious that Judson is not obligated to hold the farm for Jones, and that mutuality of con- tract is lacking. Therefore judgment should be given in favor of Jones. C. There Must Be a Distinct, Common Understanding STOKY CASE Mr. Brandon, a dealer in grain, had in his ware- house a large quantity of wheat, which he was attempt- ing to sell as soon as possible. He wrote a letter to the American Milling Company, in which he stated that he was willing and ready to sell 5,000 bushels of wheat at 60 cents per bushel. At the end of the let- ter he stated that the offer was to be withdrawn un- less it was accepted within one day's time. The man- ager of the American Milling Company received the letter, opened it, but before he read it, was called out of his office. A friend of the manager entered and, as he seated himself at the latter 's desk, saw the let- ter and absent mindedly inserted a zero after the "one", so that the letter read that the offer would CONTEACTS 7 be withdrawn unless it was accepted in ten days' time. The manager read the letter, and four days later wrote an answer accepting the 5,000 bushels of wheat at the stated price. Mr. Brandon had held the offer open as long as he had agreed, and had thereafter sold all the wheat he had on hand. When this was communicated to the American Milling Company, it brought suit to recover damages for a breach of con- tract, which it claimed to have made with Mr. Brandon. Was there a binding contract between the parties f EUIJNG COURT CASE Morton vs. McGavock, Volume 57 Nebraska Reports, Page 385; Volume 77 Northwestern Reporter, Page 785. The controversy in this case arose out of an alleged contract to which there were three parties. The second party, Davis, agreed to do certain pav- ing for the city of Omaha. The city of Omaha, named as the party of the first part, agreed to pay Davis for his work at a certain rate as soon as the work was completed by Davis, and approved by the city engi- neer. McGavock, who was the third party to the con- tract promised, among other things, to see to it that Davis paid the wages of the persons employed in doing the paving. McGavock 's obligation or promise was contained in the following: "And if the laborers are not paid in full by party of the second part, the party of third part agrees to pay for said, labor, or any part thereof, S CONTEACTS which shall not be paid by the second party within ten days after the money for such labor becomes due and payable." The foregoing constituted the proposed contract as it was presented to the city for their acceptance. Be- fore they accepted, however, there was inserted by the city authorities an additional clause to the effect that Davis would not be paid for his services until the city of Omaha received certain money from the Commis- sioners of Douglas County. Upon this contract, the plaintiff, one of the laborers engaged by Davis, brought this action. For the first time, when the action was begun, McGavock learned that the additional clause had been inserted in the con- tract without his consent. Decision: The agreement which the defendant signed, and the agreement accepted by the city, were entirely different. It was one thing to agree to pay wages if Davis did not settle within ten days after they fell due, when Davis was to receive money to meet his obligation when the work was done; it was quite another thing to agree to so pay when Davis was not to receive anything until the happening of an in- dependent contingency. Here there was no common understanding between the parties. The proposition made by the defendant, by signing the contract as it was tendered first, was not accepted by the city when it approved an entirely different agreement. Any change which altered the legal effect of the proposal, even if made by a stranger, would, under such cir- cumstances, prevent the concurrence of the minds es- sential to make a binding contract. Therefore judgment was given for the defendant, McGavock. CONTRACTS 9 RULING LAW Story Case Answer It has just been stated that mutual assent is a fun- damental essential of a binding contract. By way of further explanation of that principle, it may be said that the parties must have a distinct, common under- standing as to the nature and the terms of the contract. That is, if one party has one thing in mind when he makes an offer, and the person to whom the offer is made has another thing in mind when he accepts, no contract results, because there is no common under- standing. It does not matter how this misunderstanding may arise, provided it is not through the negligence of either. Neither party is bound by the contract. In the Story Case Mr. Brandon intended to give the Mill- ing Company only one day in which to accept, a de- mand within his rights. The manager of the Milling Company was mistaken as to the time, and, although this mistake was due to no negligence on the part of Brandon, yet from the mistake resulted a misunder- standing between them and the result must be that no binding contract was made by the acceptance of the Milling Company after the expiration of the one day. D. There Must Be a Proposal Which Results in a Promise or an Act When Accepted STOEY CASE Henry Nightingale in a letter to his nephew, John Nightingale, promised to pay or give him $500 on his next birthday. John received the letter and thanked his uncle for the promised gift. 10 CONTEACTS When John's birthday arrived Mr. Nightingale did not send the $500 as he had promised. A few days later John wrote him reminding him of his promise, and asking that the money be sent at once as he needed it. His uncle replied that he had decided that he was unable, as well as unwilling, to give the money which he had promised some months before. John then sued him for the money. What should the court decide under the foregoing circumstances I EULING COTTET CASE Lillie Williams vs. Forbes, Admr., Volume 114 Illi- nois Reports, Page 167. Lillie Williams who had lived for a long time with her aunt, Delilah Deeds, had won the admiration and affections of her aunt. Some time before her death, the aunt made out a promissory note in the sum of $2500 to be paid to her niece after her death. After the death of the aunt, the niece presented this note to George Forbes, the administrator of Delilah Deeds. He refused to pay it, and this action was begun on the note. The defendant contended that the note was only a gift by the aunt; that it was not supported by a con- sideration ; that it called for no act or promise on the part of the niece which would make it binding. Decision: The giving of this promissory note was but a promise to make a gift. A gift may be with- drawn at any time until it is executed, that is, the time when it is paid. Thus, this note gave the niece no legal right whatever. It was held that the plaintiff, Lillie Williams, could not recover on the note in question. CONTRACTS 11 EULINQ LAW Story Case Answer In order to create a binding agreement or contract, every promise by one person made in favor of another must be supported by a consideration moving from such person. Thus, a proposal made by one person to another, which does not call for a promise, act, or some other consideration from the person to whom it is made, does not constitute a binding contract. However, if such a promise is made under seal, in the absence of statutory changes it becomes binding, even though there is no consideration moving from the person to whom the promise is made. A sealed contract is binding without a consideration, because the presence of the seal dispenses with its necessity. In the Story Case, the promise made by Mr. Nightin- gale was without consideration ; it was a bare promise ; it did not contemplate any promise or act on the part of the nephew. Consequently it is not a binding agree- ment and the nephew could not recover from his uncle. Had the promise been in writing, signed and sealed by his uncle, then it would have been binding, even though without consideration. E. There Must Be an Active Intention to Accept the Proposal STORY CASE George Hanson conducted a poultry farm in a small suburban town near the city of Chicago. For many years he had been accustomed to deal with the Frank- lin Street Produce Company. He would ship chickens to them, which they would sell, and send him the mar- ket price therefor at the end of the month. It was 12 CONTRACTS never customary for the Produce Company to send notice to Hanson accepting each consignment. On one occasion Hanson sent in a large consignment of fowls. The Produce Company received them and had them placed in their storage plant. Several days later Hanson was in the city, and in a discussion be- tween himself and the manager of the Produce Com- pany, a disagreement arose as to the price which should be paid for that consignment. Thereupon Han- son demanded the return of his chickens. The Produce Company refused to return them. Suit was brought by Hanson. He claimed that there was no con- tract in the case as stated, because he was never noti- fied by the company that they had accepted the con- signment of chickens. Under the foregoing circumstances what should the court decide? RULING COTTRT CASE Lungstrass vs. German Insurance Company, Volume 48 Missouri Reports, Page 201; Volume 8 American Reports, Page 100. The plaintiff in this action had been appointed agent of the German Insurance Company for the town of Sedalia. While acting as agent for it, he decided to insure his own property in the defendant company. He made out and sent forward an application for in- surance on his property. When his policy was re- turned, he found that he had been charged with a premium of 2y 2 per cent. He was not satisfied with the rate and he sent it back for a reduction. It was reduced to 2 per cent and returned. The plaintiff re- ceived the policy, as reduced, on the 6th of November. CONTEACTS 13 He immediately made an entry in his account with the company, recognizing the change of rate and accept- ing the policy as changed. Early in the morning of the 7th, the plaintiff's goods were burned, and on the following day he telegraphed the company of his loss, asking for an immediate set- tlement. The company refused and this action was brought on the policy. In defense of the action the defendant contended that the plaintiff had never accepted the policy, be- cause he had sent no notice to the company of his in- tention to accept. On the part of the plaintiff it was contended, that because of the relationship between him and the company, it was unnecessary to send no- tice of an intention to accept. He contended that his act of entering the same on the books of the com- pany, concerning which he made monthly reports, con- stituted an acceptance. The opinion of the court was delivered by Mr. Jus- tice Bliss : 4 'It is true that no contract can rise from a propo- sition or offer on one side until it is accepted on the other. And it is also true that this acceptance must be evidenced by some act that binds the party accept- ing. A man's mental resolution, that can be changed, is not sufficient. The usual mode of accepting a prop- osition made by correspondence is by notice of accept- ance, and though it was formerly held that it did not ripen into a contract until receipt of the notice, yet the doctrine now is held that the contract is complete when the acceptance is forwarded, without reference to the time of its reception. But notice is not the only evidence of acceptance. Any appropriate act which accepts the terms as they 14 CONTEACTS were intended to be accepted, so as to bind the ac- ceptor, just as clearly evidences the concurrence of the parties the bringing their minds together as a for- mal letter of acceptance. Because of the relationship, and the customary course of dealing between the parties, it was held that notice of acceptance was not necessary; and that the act of the plaintiff in entering his policy on the ac- counts of the company kept by him was a sufficient act of acceptance." Accordingly, it was held that the plaintiff might recover. RULING LAW Story Case Answer In a given case there may be mutual assent between the parties to a transaction. But no contract will re- sult from that mutual assent unless in some way the assent of one is made known to the other. Therefore, it is generally necessary that a person, to whom an offer is made or communicated, should accept and manifest this acceptance by some active and affirmative act or word. Mere mental resolution, not communicated to the person making the offer, is not sufficient generally to make of their mutual assent a binding contract. But under certain circumstances, as in those where a certain relation exists between the parties, or where a long course of conduct has been carried on between them, this active acceptance may not be necessary. In the Story Case, had the shipment been the first one made by Hanson to the Produce Company, prob- ably no contract would have resulted by the mere re- ceipt of the shipment. But, because of the fact that notice of acceptance had been dispensed with in previ- CONTRACTS 15 ous transactions of exactly the same nature, a court would hold that the mere shipment and receipt thereof of the Produce Company would make a contract. 2. Contract Classified A. Contract May Be Under Seal or May Be Simple (1.) Sealed Contracts STOEY CASE Mr. Joseph Mclntosh had a nephew, Henry, of whom he was very fond. When Henry was eighteen years of age, his uncle made out and delivered to him the following note: "When my nephew, Henry Mclntosh reaches his twenty-first birthday, I promise to pay him $1,000. Signed, sealed and delivered, April 28, 1890. (Signed) Joseph Mclntosh, (Seal) Under the word ' * seal ' ' a scrawl was made with the pen. Later, and before Henry reached the age of twenty- one years, he became wild and reckless. His uncle became disappointed with his conduct and when the nephew presented the note in question on his twenty- first birthday, his uncle refused to pay it, emphatically stating that he would never satisfy it under any cir- cumstances. Thereupon Henry brought suit, to which the uncle pleaded that there was no consideration for the note, and therefore it was not a binding obligation. What should be the judgment of the court under the foregoing circumstances? 16 CONTRACTS RULING COURT CASE James Rendleman vs. Elizabeth Rendleman, Volume 156 Illinois Reports, Page 568. Jerome Rendleman and his wife executed a convey- veyance of land to Mrs. Rendleman, the wife of Dennis Rendleman. Jerome made out the deed, signed, sealed and deliv- ered it to Dennis. Subsequently Dennis gave it to his wife. At the time Jerome delivered the deed, Dennis, his son, offered him one dollar as payment therefor. The father indignantly refused to accept the money. Later he brought this bill, asking that this deed be delivered up and declared void. Among other reasons he assigned for having the deed cancelled, was, that the deed was given without consideration. The defendant replied to this, that it was unnecessary for a deed to be supported by a consideration, when the deed is sealed. Decision : At common law a sealed instrument was a solemn instrument, and, because of this, the law re- quired no consideration in order to make it binding. This does not imply that the seal imports considera- tion, but that consideration is rendered unnecessary by the solemn form of the instrument. So it was held that the plaintiff could not have the deed cancelled. RULING LAW Story Case Answer At common law contracts were either simple or sealed contracts. The latter are often referred to spec- ialties. The chief characteristic of a sealed contract at common law is that it becomes a binding obligation when sealed and delivered, even though no consider- CONTRACTS 17 ation is given for the same. The solemnity connected with the execution of a sealed contract took the place of consideration. It is often said that the presence of the seal imported consideration. This means merely that consideration was unnecessary. At common law, in early times, it was necessary that the seal should be a wax impression upon the paper. But in later times the courts no longer require this as an essential to a sealed contract. A scrawl made with the pen, or the word "seal" written after the name, are now generally held to be sufficient, if they are accompanied with an intent that the instru- ment should be sealed. In the Story Case, George Mc- Intosh may be held upon the note in question, even though no consideration was given. The scrawl made with his pen is sufficient to make it a sealed contract. (2.) Simple Contracts STOEY CASE Harry Branscomb, who owned a number of fine horses, promised to give one to his brother Frank after a few weeks. Frank insisted that the promise should be put in writing, because he feared that his brother might change his mind in the meantime and he thought that by having the promise made in writing, he could enforce it, in case his brother should change his mind. Before the time came when, according to the writing, the horse was to be delivered to Frank, Harry sold all of his horses. This action angered Frank and he de- cided to sue his brother for damages. In defense Harry contended that, because there was no consider- ation, his promise was not legally binding upon him. On the other hand it was contended by Frank that it 18 CONTRACTS was not material that there was no consideration, since the promise was made in writing. Under these facts, do you think that Harry Brans- comb is liable for damages'? EUIJNG COURT CASE Hughes vs. Rann, Volume 7 Term Reports, Note, Page 350. During the respective life-times of Mary Hughes and J. Hughes a certain dispute arose between them. They agreed to submit the matter to arbitration. The arbitrators, having made an investigation into the con- troversy, decided that Mary Hughes should pay J. Hughes the sum of 983 pounds. Thereafter she died and Eann, the present defend- ant, was appointed her executor. Although sufficiently able to have done so in her life time, Mary Hughes never paid the 983 pounds which the arbitrators found that she owed to J. Hughes. Rann, her executor after her death, agreed by a promise in writing to pay the sum in question. For his promise, however, there was no consideration. J. Hughes brought this action upon the promise made by Rann, executor of the estate of Mary Hughes, deceased. In defense, Rann contended that he was not liable upon the promise because it was not supported by a consideration. In reply to this the plaintiff contended that it was immaterial whether or not there was a con- sideration for this promise, because the promise was made in writing. Decision: The defendant, Rann, cannot be held liable upon this promise, even though in writing, be- cause it is not supported by a consideration. CONTRACTS 19 Lord Chief Baron Skynner said in part: "All con- tracts are divided into agreements by specialty and agreements by parol simple contracts. Nor is there any such third class as some of the counsel have en- deavored to maintain, as contracts in writing. If they be merely written and not sealed, they are parol simple contracts and a consideration must be proved." Accordingly, judgment was given for the defendant in this action. RULING LAW Story Case Answer As was stated in the foregoing section, all contracts are either simple or sealed contracts. A sealed instru- ment becomes a binding obligation by virtue of its form and execution, and a consideration therefor was unnecessary. On the other hand, as is illustrated more fully later, a simple contract must be supported by a consideration, before it becomes a binding obligation. Quite frequently we speak of contracts which are written and contracts which are oral. But a contract, whether oral or written, is termed a simple contract and must always contain a consideration. In the Story Case, Frank was mistaken when he thought that a written contract would be binding, when unsupported by a consideration. By having it reduced to writing, he could no more easily have it enforced than if it had been a mere oral promise. B. Contracts May Be Express or Implied (1.) Express Contracts STORY CASE Mr. "William Mason was a farmer who raised a large amount of wheat. A few weeks before the wheat 20 CONTRACTS was ripe, the Minneapolis Milling Company sent an agent down to purchase the grain for delivery when harvested. They entered into an agreement by which Mason was to sell to the Milling Company all of his grain when it was harvested and threshed. It was agreed that Mason should be paid the market price for his wheat at the time of delivery to the Company's elevator in Minneapolis. Each party gave the other a memorandum of the agreement. The Milling Company refused to pay for the wheat after it was received and Mason was compelled to sue for his money. In the trial of the case the ques- tion arose as to whether or not this was an express contract. The company maintained that if any con- tract existed it was implied, since the time of delivery and the amount were not expressed. Under the foregoing circumstances what should the court hold as to the nature of the contract, whether express or implied? RULING COURT CASE Bovell vs. Voorheis, Volume 20 Illinois Appeal Re- ports, Page 538. Lutes and his brother had been engaged for a num- ber of years in the business of selling dry goods. In 1879 they failed in business and made an assignment of all of their property for the benefit of creditors. Lutes and his brother owed a large amount of money to Voorheis, the defendant in this action. The latter purchased all of the stock in trade, formerly belonging to Lutes Brothers, and opened up a new business of the same kind. The defendant engaged him as man- ager of the new store. No written contract was en- CONTEACTS 21 tered into by and between the parties as to the com- pensation which was to be paid Lutes for his services. However, the testimony in the case showed an under- standing that he was to receive one-half the profits of the business, a half of which he was to retain, and a half of which was to be applied to the payment of the debt which Lutes owed Voorheis. For six years Lutes acted as manager of the bus- iness. At this time he died. During these six years the business had prospered and large profits had been made. But at no time had there been any settlement made between Voorheis and Lutes as to the compen- sation of the latter. After the death of Lutes, Bovell, the plaintiff, was appointed his administrator. He brought this action to recover of the defendant one-half the profits made during the time that Lutes acted as manager for the defendant. The defendant contended that, since there was no express contract, that he was liable only for a reasonable compensation for the services of Lutes, which was considerably less than one-half the profits made during that time. Decision: The testimony in the case indicated an express contract between the parties. The fact that it was not reduced to writing is immaterial. Further, the contract of employment is no less express, because the "price" or "amount" that Lutes was to receive was not agreed upon in advance, but was made to de- pend upon the uncertain result of some business ven- ture, or upon other contingencies which would in the future determine the compensation he would receive. Accordingly, it was held that the plaintiff was en- titled to recover one-half the profits made in the bus- iness during the six years that Lutes acted as manager. 22 CONTRACTS RUIJNO LAW Story Case Answer Contracts may be express or implied in respect to the manner in which they are entered into. An express contract is one where the parties ex- pressly agree upon the terms of the contract. They agree upon the time for performance, the amount to be received, or whatever the nature of the contract demands. But a contract is none the less express be- cause the parties leave some term dependant upon some future event. They have expressly agreed upon that as a determining factor. Thus, in the Story Case, there is no doubt but that the contract there entered into was an express contract; this is true notwithstanding that at the time it was made, neither knew how many bushels of grain there would be and neither knew what the market price of wheat would be at the time for delivery. (2.) Implied Contracts STORY CASE Dr. Jones was a veterinary surgeon who practiced his profession in the city of Chicago. During one summer he spent his vacation on a farm owned and managed by his brother. While there, a horse, belong- ing to his brother, became very sick. Dr. Jones was requested to try to relieve the animal. He found it in a serious condition. He worked all day in caring for the animal and by night the horse was much better. When Dr. Jones returned to his office in Chicago, he sent a bill, amounting to $25, to his brother for his professional services. CONTEACTS 23 Because Dr. Jones had paid no board during the time that he remained on the farm, his brother re- fused to pay the bill. Dr. Jones thereupon brought suit for the recovery of $25, which he claimed was a reasonable sum for his services. What should be the decision of the court in the fore- going case 1 Do you think it is significant whether or not Dr. Jones paid for his board and lodging while on the farm? Would the opinion of the court be altered had he been called to travel the entire distance from the city? EULING COTTRT CASE Hertzog vs. Hertzog, Volume 29 Pennsylvania State Reports, Page 465. John Hertzog was twenty-one years of age in the year 1825. After reaching his majority, he continued to live with his father, who was a farmer, and work for him on the farm. He spent one year in Virginia. When he returned he brought his wife with him, and again resided with, and worked for, his father. Some- time later his father put him on another farm, which was owned by the father, and two or three years later, the father and his wife, moved into the house with his son John, and there continued to live until the death of the father in 1849. This suit was brought by John to recover from the estate of his father compensation for services ren- dered to the latter during the lifetime of the father. The defendant, who was the personal representative of the father, contended that there could be no recov- ery because there was no contract by which the son was to be paid anything for his services. John, how- ever, contended that there was an implied agreement 24 CONTRACTS on the part of the father to pay for the services ren- dered. Decision by Mr. Justice Lowrie : Where one person renders services for another, a promise may be im- plied on the part of the one benefited to pay for such services. This, however, is a question of fact to be determined by the jury under all the facts of a given case. Implied contracts arise under circumstances, which, according to the ordinary course of dealings and the common understanding of men, show a mutual intention to contract. Where services have been ren- dered by one relative for another, as in this case, the fact of relationship is strong evidence that there was no agreement that such services should be compen- sated for. Under the circumstances of this case the court was of the opinion that no agreement could be implied on the part of the parent to make compensa- tion to his son for services of the latter. But if we find a son in the employment of his father, we do not infer a contract of hiring, because the principle of family affection is sufficient to account for the family association, and does not demand the inference of a contract. So it was held that John could recover noth- ing from his father's estate for the services he ren- dered to his father during the latter 's lifetime. RULING COURT CASE No. 2 Gaffney vs. Columbus Railway Company, Volume 65 Ohio State Reports, Page 104; Volume 61 Northwest- ern Reporter, Page 152. At Lancaster, Ohio, the Columbus Railway Com- pany and the Cincinnati Railway Company form a junction and pass on opposite sides of a common depot. The distance between the two roads at the depot is CONTRACTS 25 about forty feet. By virtue of a contract which each railway company had with the United States Govern- ment to carry mail between certain points, it became the duty of each to transfer the mails from one road to the other when required in the course of transit. Gaffney was under a contract with the government to carry all mails to and fro between the depot and the Lancaster post-office. For six years he carried the mail from one train to the other, a duty which, as stated above, belonged to the railway companies. He thought that this was a task imposed upon him under his contract. "When he was informed by a gov- ernment official that it was not, he ceased to transfer the mail from train to train and demanded of the two roads compensation for the time he had done so. They refused to recognize any such claim and Gaffney sued. He contended that there was an implied agreement on the part of the two companies to pay him for the work he had done. The company contended that no agreement should be implied because the circumstances of the case, that is, because Gaffney thought he was under a duty to do this, showed that Gaffney never expected to receive any compensation and that they never intended to give any compensation. Mr. Chief Justice Marshall, who delivered the opin- ion of the court, said : "Contracts that are true contracts are frequently termed 'implied contracts', as where, from the facts and circumstances, a court or jury may fairly infer as a matter of fact that a contract existed between the parties, explanatory of the relation existing be- tween them. Such implied contracts are not generally 2^ CONTRACTS different from express contracts. The difference ex- ists simply in the mode of proof. Express contracts are proved by showing that the terms are inferred as a matter of fact from the evidence offered of the cir- cumstances surrounding the parties, making it reason- able that a contract existed between them by tacit un- derstanding. In such cases no fictions are or can be indulged. The evidence must satisfy the court and jury that the parties understood that each sustained to the other a contractual relation, and that, by reason of this relation, the defendant is indebted to the plain- tiff for services performed. " Judgment was given for the Columbus Eailway Company, because the evidence offered by Gaffney failed to show that any such relation existed between them during the time that he was performing the services in question. RULING LAW Story Case Answer It has just been stated that an express contract is one in which all the terms of the contract are ex- pressly agreed upon. However, one or more terms of the contract may be contingent upon some future event, although that alone does not make it any the less express in nature. An implied contract differs from an express con- tract only in the mode of proof. In an implied con- tract there must have been mutual assent on the part of both contracting parties, although that mutual as- sent may not have been expressed in words. Suppose that I should walk into a grocery store where I have marketed many times before ; I see a basket of peaches that pleases me ; I pick it up and remark to the grocer, CONTRACTS 27 "I will take these with me." Although apparently no contract is made, it is evident that I intend to pay for them ; and certainly he expects to receive payment. In such a case, a contract will be implied in fact. Whether or not in a given case a contract is to be implied depends upon the particular facts of each case. It is a question for the jury to decide. In many cases the relationship between the parties is such that it tends to show that there was no intention to con- tract. Thus, in the Story Case, it is evident that Dr. Jones' brother was quite unaware that he would be charged for the services rendered. Since Dr. Jones was the guest of a brother, it is fair to conclude that he had no such intention at the time he did the work. It is very probable that he would be unable to collect from his brother for his services. Had Dr. Jones been paying board and room expenses while living with his brother, so that there was the relationship of business between them, or had he gone out from the city at great expense, it could readily be implied that his brother did not expect him to work gratuitiously and therefore an implied contract would exist. C. Contracts May Be Executed or Executory (1.) Contracts Executed in Part STORY CASE Mr. Milton Jenkins secured a painter to paint his house. He promised to pay him $125 for the work and material when completed. The painter proceeded to do the work. When he had finished and applied to Mr. Jenkins for his pay, it was refused. Suit was brought by the painter therefor. 28 CONTRACTS Should lie recover in the above case ! Is the contract executed or executory, or executed in part? RULING COURT CASE Brumfel vs. Vigo Agricultural Society, Volume 102 Indiana Reports, Page 146; Volume 52 American Re- ports, Page 647. The Vigo Agricultural Society was an association, organized under the laws of the state of Indiana for the purpose of conducting fairs for the exhibition of agricultural products, manufactured articles and other things. During the summer, prior to the time when a fair was to be given, the Society issued generally ad- vertisements, inviting and requesting persons to place articles on exhibition. In these advertisements it was promised that all articles placed on exhibition would be properly cared for and that the fair grounds would be efficiently policed at all times. Brumfel sent in a certain gun for exhibition. Dur- ing the continuance of the fair it was stolen. It seems that the Society had been very negligent in guarding all the buildings, and that the building in which this gun was placed was never fastened and never policed. Brumfel brought this action for damages. He claimed that, having the gun on exhibition in compli- ance with the request of the Society, that the latter assumed a contractual duty to properly care for it; and, having failed to do so, the Society is liable for the loss thereof. Decision : The advertisement of the Society was an offer to any one who wished to place property on exhi- bition. In connection with this offer, a promise was made that such property would be safe, that it would be protected. An acceptance of this offer by Brumfel CONTRACTS 29 made a binding contract. His act of sending his gun to the Society constituted an acceptance. This was a contract executed in part and executory in part. That part to be done by Brumfel was done when he sent his gun to the building of the Society. That part which was to be done by the Society was not done. The contract contemplated its caring for the gun nntil the fair was over and, having failed in doing so, it is liable for the damages resulting from its breach of contract. Judgment was given for Brumfel. RULING LAW Story Case Answer An executed contract is one wherein all obligations imposed or assumed by the contract have been per- formed. Nothing more remains to be done. If I agree to buy your horse for $100 and you agree to accept that amount, the moment I pay the $100 and receive the horse the contract is then executed. A contract may be executed in part and executory in part. Such a contract is one in which the obliga- tions of the contract have been performed in part or whole by one, but have not been performed in part or whole by the other. In the above case, had I paid the $100 to you, and you in return had promised to sell me your horse ten days later, the contract would be executed as to me, but executory as to you. This is the situation in the Story Case. The contract was executed as far as the painter was concerned but executory as to Mr. Jenkins. Therefore, the painter can compel Jenkins to satisfy his part of the contract. 30 CONTBACTS (2.) Executory Contracts STOEY CASE Andrew Worsley, a brick dealer, and Bichard Crane, a construction contractor, entered into a written con- tract by which Worsley agreed to sell Crane ten thou- sand brick, and Crane promised to pay ten dollars a thousand for the brick upon their delivery. Worsley further agreed to deliver the brick by barge to Crane 's wharf. After this contract was agreed upon, Worsley engaged Henry Mack to load five thousand brick on each of two barges and convey them to Crane 's wharf. Instead of loading two barges, Mack attempted to de- liver all the brick on one barge. He was successful in loading them but, in the middle of the river, a leak occurred, and the boat quickly sank because of its heavy load. Worsley refused to deliver more brick and Crane brought suit, not against Worsley, but against Mack, for his negligence in causing the loss of the brick. Can Crane recover in this action ? COURT CASE McDonald vs. Hewett, Volume 15 Johnson's New York Reports, Page 349; Volume 8 American Decis- ions, Page 241. McDonald negotiated with one Nelson for the pur- chase of timber. When the terms were reached they entered into a written agreement for the sale and pur- chase of timber. By this agreement Nelson stated that he had sold to McDonald certain timber, then cut and ascertained, but as yet unmeasured. McDonald on his part agreed to pay for it, when measured in New York, at the market price of such timber at the time it was to be weighed. Nelson agreed to deliver or have it delivered in New York at a certain time for the pur- CONTRACTS 31 pose of having it measured. He engaged Hewett to convey the timber to New York. When Hewett ar- rived there with the timber, instead of measuring it and delivering it to McDonald, he measured and sold it to a third person. McDonald then sued Hewett for the conversion of the timber. He contended that the contract was ex- ecuted; and that the title to the timber had passed to him. By the defendant it was contended that the con- tract was executory and that no title passed until the measuring had been done. Decision : McDonald has no remedy against Hewett in this case; the title to this lumber remained with Nelson. The former had a contract to sell, but it was an executory contract. The timber was still to be measured and delivered; and, until the timber was measured, no title passed. Although McDonald has a remedy against Nelson, he has no remedy against Hewett, RULING LAW Where persons enter into a contract, they voluntarily assume certain duties. These duties constitute the ob- ligation of the contract. So long as these duties are not performed by the parties to the contract, the con- tract is said to remain executory. When the duties are performed, it is said to be executed in that degree. When all the duties of a contract have been performed, the contract is no longer executory, but is wholly executed. In the Story Case, the contract was entirely execu- tory. Worsley had not complied with his part in deliv- 32 CONTEACTS ering the brick to the wharf. Until that was done, the brick was still his property. Mack, therefore was not conveying property belonging to Crane and owed no duty to Crane. Hence, Crane cannot recover in this action against Mack. D. Contracts May Be Unilateral or Bilateral (1.) Unilateral Contracts STOEY CASE The Monroe Trust Company of New York sent a telegram to the Brewster Sto'ck and Bond Company of Boston, offering to buy one hundred shares of the Pennsylvania Eailroad Company stock, provided that they could be purchased at ninety-eight dollars a share, and provided delivery was made to its agent in Bos- ton on the same day. Two hours after the receipt of this telegram, the Brewster Company delivered one hundred shares to the Monroe Trust Company's agent at Boston and debited that company for $9800. The Brewster Company never directly answered the tele- gram of the Monroe Trust Company, and considered that the delivery of the stock amounted to an accept- ance. At the time the stock was delivered to the agent in Boston, it was selling on the market at ninety-seven dollars a share, having lost in value two dollars a share since the previous day. The Monroe Trust Company thereupon maintained that no contract ever existed be- tween itself and the Brewster Company to pay ninety- eight dollars a share for the stock, since the latter com- pany never expressly accepted its offer made in the telegram. The trust company held that the delivery of the stock and its acceptance by its agent amounted CONTRACTS 33 to a new contract and its liability was merely for the market price. Is this a correct contention? RULING COTJET CASE Reif vs. Paige, Volume 55 Wisconsin Reports, Page 496 ; Volume 42 American Reports, Page 731. A certain building was burning. On the fourth floor of the building was the wife of the defendant, Paige. The fire had made such progress that it seemed scarcely possible that she could be rescued. Paige said that he would give $5,000 to any person who would bring the body of his wife from the burning building, whether dead or alive. Keif heard the offer. He en- tered the building and, after a desperate struggle, lo- cated the body and brought it forth. Thereafter he demanded the $5,000 of Paige, who refused to pay it. Thereupon Reif brought this action to recover the money in question. The defendant con- tended that he was not bound by this because there was no consideration for his promise to pay the $5,000. Decision: The offer of Paige in this case was a promise to any one who was willing to risk his life in the burning building in an attempt to rescue the body of the woman. Until the act of rescue was done the offer continued a mere promise, not binding upon Paige. As soon as Reif did rescue the body, however, his promise to pay the money became a binding prom- ise. This was, therefore, a unilateral contract. In ac- cordance with the offer, by an act, Reif had performed or done all that he was required to do ; but the promise 34 CONTRACTS of Paige still continues binding upon him, as yet un- performed. Accordingly, it was held that the plaintiff, Reif might recover of the defendant, Paige, the $5,000. EtTLING LAW Story Case Answer An unilateral contract is one in which there is a promise on one side only, the consideration on the other side having already been executed. Such con- tracts are possible only where the offer is made under such circumstances that it can be accepted by an act, and thereby be converted into a binding obligation. This is usually the nature of those contracts which re- sult from the offer of a reward for the doing of an act. For instance, if A issues a statement offering $5 to the man who will find and return his watch, B could not accept the offer by promising to find the watch and return it. It can be accepted only by doing the act. Only one promise therefore ever exists in a unilateral contract. In the Story Case, the offer of the trust company was so worded that it could be accepted by the performing of an act namely, the delivery of the stock. There- fore, the trust company is liable for the price stipu- lated. Had the trust company added in its telegram "wire reply", the Brewster Company could have accepted only by making a counter promise to deliver the stock. The contention of the trust company that no contract based on their telegram existed of delivery of the stock would have been correct, and they would then have paid only the market price. CONTRACTS 35 (2.) Bilateral Contracts STORY CASE Richard Bates and Howard Sherman made a con- tract whereby Bates agreed to build a home for Sher- man within four months time. Sherman agreed to pay Bates $2,000 for the completed house. Four days after the work was started, Bates declared that he was about to discontinue the contract because he could not get brick masons to work for $4 a day as he had planned to do when he made the contract ; that brick masons would cost him $5 a day and he could not afford to pay this amount. Sherman was in haste to have the house completed within the specified time, and therefore he offered to pay one-half of the extra cost of the men, provided Bates would continue under the original contract. Bates accepted this offer, and the new understanding was put in writing. When the house was completed, Sherman paid Bates $2,000 and refused to pay any more. Bates de- manded $400 additional, since his brick masons had cost him $800 more than he originally planned to pay them, and Sherman had promised to pay one-half of this extra cost. Sherman refused to pay this on the ground that there was no counterpromise from Bates to set off the promise made by himself. There- fore, a second contract did not exist, although the un- derstanding was put in writing. Can Bates recover this additional sum in a law suit? RULING COURT CASE Howe vs. O'Mally, Volume 1 Murphy's North Caro- lina Reports, Page 287 ; Volume 3 American Decisions, Page 693. 36 CONTBACTS Howe, by a warranty deed, conveyed to 'Mally 140 acres of land. This 140 acres was a part of a much larger tract which was owned by Howe. Two years later, by another deed, Howe conveyed the remainder of the tract. The deed recited that the remaining por- tion of the tract contained about 221 acres. But it was stated in the conveyance that the intent of the owner was to pass title to the remainder whether it contained more or less than 221 acres. Sometime later a dis- pute arose between the parties as to the number of acres contained in the last tract conveyed. 'Mally contended that it contained more than 221 acres. To settle the disagreement they mutually agreed to have the land surveyed; and if it should be found to con- tain more than 221 acres, 'Mally agreed to pay Howe ten dollars an acre for the excess ; and if it was found to contain less than 221 acres, Howe agreed to pay 'Mally ten dollars per acre for the deficiency. Upon the resurvey, the tract in question was found to contain 87 more acres than the deed called for. Howe de- manded $870 of 'Mally; the latter refused to pay it and this action was brought for the recovery thereof. It was contended by 'Mally that no recovery should be permitted because there was no consider- ation for his promise to pay ten dollars an acre for the excess. Decision : Here are mutual promises ; one is made the consideration of the other, and we are of opinion, that the plaintiff's promise to refund in the event of deficiency in the number of acres is a good consider- ation to support 'Mally 's promise to pay should there be more than the number of acres named in his deed. CONTRACTS 37 This was a bilateral contract. Each had promised to do a certain thing under certain circumstances. Each was bound to the other and there was an obliga- tion on the part of each. Therefore, it was decided that Howe might recover the amount sued for. RULING LAW Story Case Answer A bilateral contract is one in which there are prom- ises on both sides. One promise is given for another, so that there is something to be done or forborne on both sides, and both sides are under legal obligation, the one to the other. If the contract is not unilateral, that is, composed of a promise and an act done in re- liance on that promise, it must be bilateral to be en- forcible. A promise without a counter promise is not enforcible. In the Story Case, the counter promise of Bates to continue building if Sherman would pay one-half the extra cost of the men was in fact not a real promise, for he was already under obligation to do this very thing. A promise to do what one is already bound to do is not a promise. Therefore, a second contract did not exist, and Sherman need not pay one-half the extra cost. II. THE FORMATION OF A CONTRACT 1. The Requisites of Form A. Oral Contracts Are Generally Enforcible STOEY CASE Henry Davis, a private banker, said to George Hale, one of his salesmen, "George, if you will work the 38 CONTRACTS balance of this year on your present salary, and sell as many bonds during the next six months as you have during the past six months, I will agree to make you a partner in the business, giving you a one-fifth interest, and I will also continue your present salary. ' ' Hale answered that this arrangement was satisfactory to him. He worked faithfully until the end of the year, and was as successful in his sales as he had been dur- ing the first six months. Davis, however, refused to do as he had promised, and stated that his promise was not enforcible because it was not in writing. Is this correct? RULING COURT CASE Austin vs. Foster, Volume 9 Pickering's Reports, Page 341. Austin was the warden of a state prison. He had under his charge and supervision many convicts. Fos- ter was a cabinet maker in the same city where the prison was located. Being in need of labor, he went to Austin to engage some convicts to do certain work for him. They came to an agreement by which Foster was to have thirty convicts for a certain period, for which he was to pay a certain sum each day for each convict taken with him, although none of the terms of their agreement were reduced to writing. In pur- suance of this contract, Foster took away with him thirty men who worked for him about two months. At the end of this time he sent them back and refused to pay anything for their services. In the state of Massachusetts there was a statute which provided that all contracts made in reference to the state prison should be made with the warden and that he, the warden, may sue and be sued upon CONTKACTS 39 such contracts. The warden, Austin, brings this ac- tion under the provisions of the statute, just referred to, to recover compensation for the use of the con- victs during the two months that they were engaged in working for Foster. Foster maintained that no action could be brought, because the contract was not in writing. Decision : At common law, in the absence of a stat- ute providing a contrary form, no contract need be in writing. Contracts made by word of mouth were as binding as contracts made in writing. This statute, which gave to the warden of the state prison the right and power to contract in reference to the state prison, did not say that such contracts should be in writing. The result is that the common law rule still prevails in such a case. Therefore, the contract is binding, even though it is not in writing. It was, therefore, held that the plaintiff, Austin, might recover the amount due for the services of the convicts. RULING LAW Story Case Answer For the most part, an oral contract is just as valid and as a contract in writing. There are a few par- ticular contracts, which as will be seen later, must be put in writing in order that they may be enforced in courts. With these few exceptions, however, contracts by the common law were not required to be reduced to writing. But an oral contract is often very difficult to prove, and for that reason, all contracts should be reduced to writing. In the Story Case, if no one were present, except the two persons, when Davis made his promise to Hale, the 40 CONTRACTS latter might have difficulty in proving the contract, if Davis denied absolutely its existence. An oral con- tract, however, is good, and is binding on Davis. If he does not deny its existence and makes as defense merely the lack of writing, Hale can collect from him for breach of contract. B. Contracts May Be in Writing (1.) A Written Contract May Be Stipulated STOEY CASE Amos Hendy, an accountant, signed a contract to work for the Northern Securities Company for one year at two hundred dollars a month. In this con- tract, which was also signed by the company, there was a clause stipulating that the company would not make extra payment for work done at night or on holi- days, unless there was a written agreement between the president of the company and the employees con- cerning the extra remuneration. After he had been engaged in his duties two months, the secretary asked Hendy to work for ten nights dur- ing a period of unusually heavy work, and promised that the company should pay him an additional sum for this extra labor. Later, the company refused to pay for this work on the ground that no agreement was made in writing and signed by the president. Can Hendy compel payment? RTTLINa COURT CASE Gotch vs. Abbott, Volume 13 Maryland, Reports, Page 314 ; Volume 21 American Decisions, Page 635. Gotch, the plaintiff in this action, contracted with Abbott to erect a mill for him. He guaranteed to CONTRACTS 41 erect a mill with the necessary boilers, elevators, and rubber, that would grind the best wheat flour. Abbot, on his part, promised to pay him five thousand dollars for the work when completed. In the contract there appeared this agreement; "No extra charges to be made unless a written agreement be made and attached to this contract." During the course of construction, Gotch put in much extra work in erecting the mill. Abbott was aware of the extra work, but nothing was said to him concerning any compensation therefor and no written agreement was made by them in reference therefor. When Gotch had finished the mill he claimed $400 for extra work necessary in the erection of the building and not provided for in the original contract. Abbott refused to pay the sum demanded, and suit was brought for it. Abbott contended that he could not be held liable for that amount as extra charges, because their contract provided that extra charges could be made only when provided for in a written agreement to be attached to the original contract. Decision: Although, as a general rule, a contract is not required to be in writing, the parties may stipu- late that a given contract, or a portion thereof, shall be reduced to writing. If they do enter into such an agreement, the agreement is binding unless both par- ties agree to rescind the same. In this case, by their original contract, it was expressly agreed that Gotch was to receive no extra charges for additional labor or material, unless there was an agreement made in writ- ing and attached to the original contract. It did not appear that they had waived such an agreement and there was no written contract for the extra charges claimed by Gotch. Therefore, the court held that Gotch could not recover. 42 CONTRACTS RULING LAW Story Case Answer Although, most contracts may be oral, nevertheless, parties may and often do, stipulate that certain con- tracts must be in writing in order to be binding. Where the parties have so agreed, obviously such an agreement will be binding upon them. But they may at any time waive the contract and consent to an oral agreement. The obligation to reduce their contracts to writing is binding only so long as both wish. As they may voluntarily agree upon such a formality, they may likewise agree to dispense with it. In the Story Case, Henry cannot compel payment of the extra remuneration because he had previously bound himself not to expect or demand any extra com- pensation, unless he possessed a written contract. (2.) No Particular Form Is Necessary STOET CASE Thomas Malley brought suit against Edward Baird upon the following document which Malley claimed was a contract. "Agreed that I will sell Baird my two white horses for $150 each. Thomas Malley Edward Baird." Malley 's suit was brought for breach of a written contract when Baird failed to purchase the horses and render the $300 payment. Baird admitted that he had signed the paper, but maintained that it contained no promise made by him and, furthermore, was not in the form of a good contract. Is this an effective de- fense ? CONTRACTS 43 RULING COURT CASE Shephard vs. Carpenter, Volume 54 Minnesota Re- ports, Page 123; Volume 55 Northwestern Reporter, Page 906. Shephard and Carpenter made out a writing, agree- ing to enter into, at some future time, a written con- tract, by which Shephard was to cut and haul timber for Carpenter. The writing, as they made it out, did not state when the final contract was to be formulated. It did not specify the amount of timber to be cut, nor the place where it was to be delivered, nor any terms which related to the price for the cutting and hauling. When Shephard thereafter demanded that Carpen- ter fulfill the terms of the contract agreed upon, he refused to act. Thereupon, this action was brought by Shephard for damages. Carpenter contended that the writing which they drew up was not binding upon him because it was not sufficient to constitute a bind- ing contract. Decision: No particular form of writing is neces- sary to constitute a written contract. A written con- tract between two persons, upon a valid consideration, that they will at some specified time in the future, at the election of one of them, enter into a particular con- tract, specifying its terms, is undoubtedly binding and, upon a breach thereof, the party having the option, may sue for loss caused by the failure of the other party to carry out the agreement. But an agreement that they will in the future make such contract as they may then agree upon amounts to nothing. The agree- ment must contain the essential terms of the contract, clearly stated, otherwise there is no written contract, for the court does not know what to enforce. The al- 44 CONTRACTS leged agreement was not incorrect as to form but does not state any enforcible promise. Accordingly, it was held that judgment should be given for Carpenter, the defendant. ETTLING LAW Story Case Answer Where parties choose to reduce contracts to writing, no particular form is necessary. However, they must clearly state in the writing all the essential terms of their agreement, else they have not a written contract. If the parties agree in advance that any contract between them must be in writing, they will be bound to put their contracts in such form as they have agreed upon. If they have agreed upon no form, no particular form is necessary. In the Story Case, the paper signed by Malley and Baird contains sufficient to show the terms of a con- tract existing between them. It is not necessary that the promise by Baird be in any certain form. It is necessary only that the writing show the intention of the parties. Baird 's defense, therefore, is not good. (3.) An Agreement May Be Partly in Writing and Partly Oral STOEY CASE George Jackson, in a letter to Henry Owens, offered to work for him as an accountant for six months, pro- vided Owen desired his services. Nothing was stated in the letter concerning his salary. Two days after the letter was sent Jackson made a personal call on Owens, who then stated to him, "All right, George, I'll have CONTRACTS 45 you begin work next week." This was all that was said on this subject at that time. On Monday of the following week, when Jackson offered his services, he was informed by Owens that his services were not needed. Thereupon Jackson brought suit for damages and breach of contract. Can he recover f RULING COURT CASE Gordon vs. Gordon, Volume 96 Indiana Reports, Page 134. The plaintiff and defendant were brothers. Their mother owned a farm. The defendant, who had charge of the farm, leased it in writing to the plaintiff. By the terms of the lease the defendant was to receive one half of the corn raised upon the farm. He, in return, agreed to pay his brother for all necessary repairs made on the farm and for boarding and caring for their mother. The plaintiff after a time refused to proceed with the contract and sued for the support of the mother and for the money he had expended in making necessary repairs. To this action, the defendant contended as a defense that the written agreement contained nothing as to how long the contract should exist, the kind and extent of the repairs that might be made, the compensation to be paid therefor, and the compensation to be paid for the care and the support of the mother. Decision : The contract was not complete as a writ- ten contract ; the contract between the parties here was partly in writing and partly oral. This is treated as an oral contract. So far as the duty to work the farm, make the repairs, and support the mother was con- 46 CONTRACTS cerned, the terms of their agreement were in writing but the manner of repairs, the manner of supporting the mother, the amount of compensation for repairs on the farm and for the support of the mother, were terms which were not in writing but which the parties had orally agreed upon. The decision held that the plaintiff might recover on this contract although all the terms of it were not in writing. RULING LAW Story Case Answer In the absence of a statute requirement that a given contract shall be in writing, the agreement may be partly in writing and partly oral. A person may agree in writing to work for another for six months from that time, and the other person may orally agree to pay him a certain compensation therefor. Such an agreement is partly in writing and partly oral, never- theless it is binding upon both of them. It is always better, however, to put into the writing every essen- tial term of the agreement, or else to have no writing whatsoever. In the Story Case, a good contract ex- isted between Jackson and Owens consisting of the let- ter to Jackson, which became a binding promise when Owens made his oral acceptance. Although no salary was stipulated, the court would infer that a reasonable wage was intended, depending upon custom, Jackson's ability and his prior wage. Jackson could recover in damages not the entire wage for six months, but the difference between what he could earn in like employ- ment elsewhere, and this wage which Owens agreed to pay. CONTRACTS 47 (4.) A Written Contract Need Not Be Signed STORY CASE Prior to January, 1914, John Herman and James Malaney were negotiating with reference to the trade of Herman's automobile for a piano belonging to Ma- laney. During the last week of December, 1914, they had orally agreed upon terms. On the last day of the year, however, Herman said he was dissatisfied and negotiations were renewed. Finally, on January 2nd, terms were agreed upon and put in writing, but this writing was not signed by either party. It was agreed that the trade should be effective on January 10th. When that day came, Malaney refused to deliver the piano on the basis outlined in the writing, and de- manded the terms originally laid down. Herman brought suit upon the writing, claiming that it was a written contract entered into by the parties, and there- fore the oral terms originally stipulated could not be shown. Malaney maintained that this was not a writ- ten contract and, therefore, the entire negotiation could be put in evidence to show what the contract actually was. Which of the contending parties is correct ? RULING COURT CASE Bracklin vs. Waggerman, Volume 52 Illinois Re- ports, Page 468. Bracklin, a building contractor, drew up a formal contract purporting to be between himself and Wag- german, by the terms of which Bracklin was to erect a building for Waggerman. Before this, however, Bracklin had furnished to Waggerman all the esti- mates for the erection of the building. After Bracklin 48 CONTEACTS had prepared the agreement in writing, he signed it and delivered the same to Waggerman. The latter took the written agreement and made many numerous and material changes therein, but never signed the same. Bracklin began work on the building and, at that time, Waggerman told him that the estimates which had been furnished would govern in the construction of the building. After Bracklin had finished the building, a disagree- ment arose between them as to the compensation to be paid therefor. Bracklin brought this action to recover what he understood was due him under their agree- ment. Waggerman then showed the written agree- ment, containing his alterations, but which was never signed by him. Bracklin argued that this agreement was not binding because it was never signed by Waggerman. Decision : This contract, as drawn up by Bracklin, showed on its face that it was to be signed by both parties. It showed that it was not to be binding upon either until signed by both. As a general rule, it is not essential that a written contract should be signed by the parties. But if there is something which shows that they intended that it should be signed, it does not become a written contract until it is so signed. The estimates first furnished to Waggerman govern, rather than this unsigned agreement, because the contract consists of the estimates furnished by Brack- lin and their oral acceptance by Waggerman when he said that these would govern in the construction of the building. CONTRACTS 49 Accordingly, it was held that Bracklin could recover upon their oral agreement, and that he was not bound by the unsigned written agreement. RULING LAW Story Case Answer Where persons reduce their contracts to writing, it may be stated as a general rule that such an agreement need not be signed. But if it appears from the agree- ment that it was contemplated that the agreement should be signed before it became binding upon either, obviously it must be signed. In the Story Case, Herman properly brought suit upon a written contract. Although the parties did not sign the document, it was evident from the docu- ment itself that this writing included all the terms, and was meant to be the contract. Malaney cannot in- troduce the prior negotiations. (5.) Agreement Signed by One Party and Acted on by the Other Is a Binding Contract STORY CASE / The Southern Construction Company acquired a con- tract to do certain street paving in the town of Mem- phis, Tennessee. Therefor the Illinois Paving Brick Company sent the construction company a printed of- fer stating terms upon which brick would be furnished for this work. The terms were agreeable to the Con- struction Company and it returned the document properly signed to the brick company. This company did not send any signed contract to the construction company, but immediately prepared to deliver brick. 50 CONTEACTS A car was loaded and a bill of lading for the car was forwarded by the railroad company to the construc- tion company. The latter refused to take the bill of lading and telegraphed to the brick company that ne- gotiations were at an end, since it had never signed any contract or sent any acceptance to the construction company. The brick company started a law suit for damages on a breach of a written contract. Can it recover? RULING COURT CASE Pekoe vs. Vogel, Volume 157 Illinois Reports, Page 339; Volume 30 Lawyer's Reports Annotated, Page 491. Pekoe was a cooper employed by Vogel, the defend- ant, to do certain work for him. The terms of their agreement were made in writing. One term of the contract was that Pekoe should not be permitted to leave the employment of Vogel without first giving ten days' notice of his intention. Pekoe entered upon the performance of the duties under the agreement. Vogel accepted the work which he did and made compensation to him in accordance with the terms of their agreement. After Pekoe had worked a while for Vogel, he left without giving any notice whatsoever. He demanded of Vogel the amount of compensation due him at the time he left. This Vogel refused to give, because Pekoe had broken his agreement. Pekoe then sued for the recovery of this amount. Vogel contended, in defense, that he could not recover because their agreement provided, in case he should leave without giving the notice, that Vogel might retain twenty-five dollars as damages. Pekoe, in CONTRACTS 51 answer to this, said that the agreement was not bind- ing, because it was signed by him only, and that Vogel had never signed it. Decision ; When parties enter into a written agree- ment, which they intend to sign, if one of the parties thereto, who does not sign, treats the contract as in ex- istence and acts upon the same, it becomes a binding contract. Although it was signed by Pekoe, but not by Vogel, the latter had recognized the existence of the contract by accepting and paying for the work done by Pekoe. His acceptance and recognition of this con- tract, although unsigned by him, was equivalent to a formal execution thereof. It was therefore decided that the contract was none the less binding upon Pekoe because it was unsigned by Vogel. RULING LAW Story Case Answer When the parties have agreed to reduce their agree- ment to writing, and contemplate that it shall be signed by both, if one signs and the other begins to act under the contract, it is a written contract, even though he may not have signed the same. His conduct, and his recognition of the existence of the binding force of the contract, is regarded as equivalent to his signature thereto. In the Story Case, the brick company can re- cover on the breach of a written contract with the con- struction company. Had the construction company stipulated that the brick company should send a signed contract, the agreement would not have been perfected until that was done. As the case stands, a contract ex- isted, based on the document signed and returned by the construction company. 52 CONTRACTS C. Contracts Required to Be in Writing Under the Statute of Frauds (1.) Contracts Within One Division of the Statute STOBY CASE Harry, the adult son of Mr. John Campbell wished to buy an airship, but was not possessed of sufficient funds. The American Airship Company refused to sell him a machine on credit unless he would give ample security. Harry persuaded his father to agree orally with the company to pay for the airship, in case of his son's failure to settle. Relying on this promise of Mr. John Campbell, the Airship Company delivered the machine to Harry. Upon the day set for payment, Harry informed the company that he was unable to settle. Mr. John Campbell also refused to satisfy the obligation. "Whereupon the American Airship Com- pany sued Mr. John Campbell for the price of the ma- chine delivered to his son. Mr. Campbell pleaded as a defense that section of the Statute of Frauds which stipulates that "no action shall be brought whereby to charge the defendant upon a promise to answer for the debt or default of another unless the agreement shall be in writing." May the Airship Company recover I ETJLTNG COUET CASE Nugent vs. Wolfe, Volume 111 Pennsylvania State Reports, Page 471; Volume 56 American Reports, Page 291. The First National Bank of Ravenna had recovered a judgment against Powers and Company. In order to prevent an execution being issued against the property of Powers and Company, Wolfe, a stockholder, orally CONTRACTS 53 promised Nugent, the plaintiff, that he would save him from any damage if he would assume the judgment against Powers and Company. Nugent did assume the judgment. Thereafter, Powers and Company became insolvent and Nugent was compelled to fulfill his agree- ment. He then sued "Wolf e upon his oral promise to in- demnify him. In defense to this action, "\Volfe contended that por- tion of the Statute of Frauds which provides: "No action shall be brought whereby to charge the defend- ant upon any special promise to answer for the debt or default of another, unless the agreement upon which such action shall be brought, or some memorandum or note thereof, shall be in writing and signed by the party to be charged therewith. ' ' Decision: The undertaking of Wolfe was to see that the debt of Powers and Company was paid, in case Powers and Company could not pay it. This was an agreement within the section of the Statute of Frauds above recited. Since this agreement was not in writing, and since there was no memorandum or note thereof, signed by the party to be charged there- with, no action can be brought on such an agreement. Mr. Justice Sterrett said in part: "If one say to another, ' deliver goods to A, I will pay you, ' the verbal promise is binding because A, though he received the goods is not responsible to the party who furnished them. But, if, instead of saying, 'I will pay you/ he says 'I will see you paid' or 'I will pay you if he does not' or words equivalent thereto, showing that the debt is in the first instance the debt of A, the undertaking is collateral and not binding unless it is in writing." 54 CONTEACTS Accordingly, it was held in this case that Wolfe was not liable to Nugent upon this oral promise. EULING LAW Story Case Answer At common law practically every contract might be oral and none the less binding for that reason. It was found, however, that oral contracts caused great trouble on account of false swearing. The parties to the agreement either forgot what they agreed upon or, knowing that there was no written evidence of their contract, would wilfully swear, contrary to their agree- ment. Because of this state of things, the Statute of Frauds was passed by the English Parliament in 1677, which required that certain contracts should be re- duced to writing and signed by the party or parties sought to be charged therewith. It was provided that any special promise to answer for the debt, default or miscarriage of another party must be in writing, signed by the party sought to be charged therewith. Accordingly, an agreement where- by one person agrees to pay for the debt of another, for which the other party is primarily liable, is not en- forcible unless it is in writing and signed by the per- son assuming this obligation. This does not apply to a case where a person agrees to be primarily liable for the debt of another. This distinction is clearly pointed out by Justice Sterrett in the Court Case of Nugent vs. Wolfe. This English Statute of Frauds has been incorpor- ated substantially in similar statutes in all of the states of the Union. In the Story Case, the Airship Company will not be allowed to recover the price of the airship from Mr. CONTRACTS 55 Campbell, because Mr. Campbell's promise was not in writing and the Statute of Frauds expressly states that no action shall be brought upon such an oral promise. If Mr. Campbell had said : ' * Deliver the airship to my son and I will pay you for it", he would then be bound to pay. Then he would not be answering for his son's default. He would, himself, be the obligor. (2.) Contracts Within the Other Division of the Statute of Frauds STOEY CASE Mr. Deever, an old English gentleman, ordered a pair of false teeth from a London dentist and agreed to pay eleven pounds for them after three months. The dentist took his measurements, made the set, delivered it, and, after three months, sued Mr. Deever for the price. Mr. Deever answered that the Statute of Frauds, which says that "no action shall be brought on a promise to pay for goods the price of ten pounds or more unless an earnest sum be given to bind the con- tract or the goods be delivered, or the promise be in writing", afforded him a good defense to the action. The dentist answered: (1) That the set of teeth, es- pecially made for Mr. Deever, was not ' ' goods ' ' within the meaning of the statute, and (2) That Mr. Deever had received the teeth. Is this defense a good one? Must Mr. Deever pay for the set of teeth! RULING COURT CASE Goddard vs. Binney, Volume 115 Massachusetts Re- ports, Page 450; Volume 15 American Reports, Page 112. 56 CONTEACTS Goddard was a carriage manufacturer, engaged in business in the city of Boston. Binney went to him, at his place of business, and directed Goddard to make for him a buggy. This order Goddard entered in his order book. Binney directed that the color of the lin- ing should be drab. He wished the seat to be made of cane ; he told him just how he desired it to be painted and requested that his monogram and initials be placed on the side of the body of the buggy. Binney promised to pay Goddard $675 for the buggy when it was completed. When Goddard had completed the work, in accordance with the directions given him, he notified Binney to come after it. Binney refused to take it ; this action was brought for the price thereof. In defense of the action, Binney pleaded that section of the Statute of Frauds which provides: "No con- tract for the sale of personal property, for the price of fifty dollars or more, shall be valid, unless the buyer accepts and receives the goods, or the contract be in writing and signed by the party to be charged there- with." The plaintiff, however, contended that this was not a contract for the sale of personal property but that it was a contract for work and labor to be performed by him for Binney and therefore the agreement was not within the Statute of Frauds, as contended by Binney. Decision: The court was of the opinion that this was not a contract for the sale of personal property but that it was an agreement for work and labor to be performed by Goddard for Binney. Such being the case, the agreement was not within the section of the Statute of Frauds mentioned, as contended by the de- fendant, Binney. CONTKACTS 57 Mr. Justice Ames, who delivered the opinion of the court, said in part: "A contract for the sale of ar- ticles then existing, or such as the vendor in the or- dinary course of his business manufactures or pro- cures for the general market, whether on hand at the time or not, is a contract for the sale of goods to which the statute applies. But on the other hand, if the goods are to be manufactured especially for the pur- chaser as in this case and upon his special order, and not for the general market, the contract is not within the statute." Accordingly, it was held that Goddard might recover the $675 of Binney. RULING LAW Story Case Answer The Statute of Frauds, adopted in all states provides substantially : "No contract for the sale of any goods, wares, or merchandise, for the price of ten pounds sterling, or upwards, shall be allowed to be good, except the buyer shall accept part of the goods so sold, and actually re- ceive the same, or give something in earnest to bind the bargain, or in part payment, or some note or memorandum in writing of the said bargain be made and signed by the parties to be charged or their agents thereunto authorized." The amount or purchase price, which will render the agreement unenforcible unless in writing, varies in the different states. It ranges from thirty-five dollars to two hundred. It is often a difficult question to determine whether a given agreement is a contract of sale or a contract for work and labor. If the agreement has to do with 58 CONTEACTS goods then existing, or snch goods as a seller usually sells, manufactures or procures for the general mar- ket, whether he has them at the time or not, the agree- ment comes within this section of the statute. But if he agrees to manufacture goods especially for a per- son, and not for the general market, the agreement is considered as one for work and labor and not for the sale of personal property, and need not be in writing in order to be enforcible. Thus, in the Story Case, a set of teeth fitted to the mouth of a single person is considered as work and labor and not as "goods, wares, and merchandise". But even considering the teeth as ' ' goods ' ' Mr. Deever must pay for them; for the statute applies only to goods not delivered and Mr. Deever had received the teeth. This fact takes the agreement out of the statute. Therefore, an action may be brought on the agreement. (3.) The Statute Requires the Writing to Be Signed by the Party Under the Obligation STORY CASE Mr. Edwards signed the f ollowing paper in consider- ation of the promise of the Electric Piano Company to deliver an electric piano. I, Jonathan Edwards, promise to pay ten dollars ($10) to the Electric Piano Company in return for the promise of the Electric Piano Company to put a piano in my home on June 1st, and to pay one dollar ($1) a week thereafter for two years when title to said piano shall pass to me. (Signed) JONATHAN EDWARDS. March 25th. CONTRACTS 59 On June 1st, the Electric Piano Company refused to put a piano in Mr. Edwards' home and gave no good reason for the refusal. On June 6th, Edwards sued the company for breach of its contract to deliver the piano and offered to produce the above writing for proof of the contract. To this the company objected, for the reason that the writing was not signed by it. The company cited the Statute of Frauds where it is stated "no action shall be brought unless in writing signed by the party to be charged." Which party wins! RULING COURT CASE Williams vs. Robinson, Volume 73 Maine Reports, Page 186 j Volume 40 American Reports, Page 352. Williams brings this written action against Robinson upon the following written contract: "Augusta, June 8, 1880. I hereby agree to furnish M. F. Williams of New Haven, eight hundred to one thousand tons of ice, de- livered on board vessels at Augusta, Maine, properly packed for a voyage to New Haven, for the sum of two dollars per ton. BOND BROOK ICE COMPANY, J. E. Robinson, Augusta, Maine." After having entered into the foregoing contract, Robinson failed and refused to deliver the ice as he had agreed to do. Thereupon Williams brought this action. By Robinson it was contended that this was not a binding contract, because the Statute of Frauds required that such a contract be in writing and signed by both parties. 60 CONTRACTS Decision: Since this was a contract for the sale of personal property for fifty dollars or more, it was not valid unless it was in writing:. However, the Statute does not require it shall be signed by both parties ; but it must be signed by the party who is sought to be charged under the contract. In this action Williams is seeking to charge Robinson who has signed the con- tract. Therefore, the fact that it was not signed by Williams makes it no less binding upon Robinson. Mr. Justice Virgin said in part: "At common law, mutual executory contracts for the sale and purchase of goods, wares and merchandise of whatever value, and however provable were binding and enforcible. The Statute of Frauds intervened and prescribed the kind of evidence by which alone they might be estab- lished, by entailing upon the parties certain specified classes of contracts, the disability of enforcing them so long as the essential terms remained in mere un- written words. The memorandum need be signed by one only of the parties the party to be charged, so that if a mutual executory contract,~^alid~at"comm6n law, be made, and one of the parties obtains from the other the "note or memorandum" thereof contemplated by the statute, but does not give a corresponding one, he may enforce it although the other cannot, the former having se- cured, while the other has not, the evidence which the statute has made indispensable to its enforcement." RULING LAW Story Case Answer The Statute of Frauds in every section requires that the note or memorandum shall be signed by the party to be charged therewith. Thus, in a given case, it may CONTRACTS 61 happen that one party is bound, where he signs, and the other is not, where he does not sign. If A makes a contract with B, which contract comes within the statute, and B signs and A does not, B may be sued on this contract, but A could not be unless he was willing to waive the benefit of the statute. So it is always wise to see that both parties sign the contract. Thus, in the Story Case, Mr. Edwards would have been liable had he refused to pay for the piano. But since the company did not sign, it can not be sued, for it may set up the statute as a defense, that is, the com- pany may contend, "No action can be brought on this agreement because it is not evidenced by a contract in writing signed by the party to be charged. " (4.) Failure to Comply With the Statute Makes the Contract Unenforcible in Court STOEY CASE Bass. & "Co., grain merchants, agreed orally to pay the plaintiff, Mr. "Weaver, $500 for his threshed wheat. Later they refused to buy his wheat and as- signed no lawful reason for the refusal. Mr. Weaver sued them for breach of contract. Instead of setting up the Statute of Frauds, which would have been a valid defense, since the price of the wheat was more than $50 (or ten pounds), the company pleaded that no such agreement had been made with Mr. Weaver. Mr. Weaver proved that such a contract had been made. Should Mr. Weaver be allowed to recover? RULING COURT CASE Britain vs. Rossiter, Volume 11 Queen's Bench Di- vision Reports, Page 123. 62 CONTRACTS Rossiter, desirous of engaging a person to work for him, conferred with Britain. They had interviews upon the subject on the 17th, 19th and 21st of April, 1877. On the 21st, which was Saturday, they came to an agreement, by which Britain was to be engaged for one year, to begin work on the following Monday, the 23rd of April. Britain, in pursuance of the terms of their oral agreement entered upon his work on the Monday as agreed upon. In this work, he continued for three months when he was discharged by Rossiter without cause. Britain then sued for wrongful dismissal. Rossiter contended that the agreement was within that section of the statute which provided that no ac- tion may be brought upon a contract, when it cannot be performed within a year, unless the agreement be re- duced to writing and signed by the party to be charged therewith. Decision : The contract was made on Saturday and, according to the contract, Britain was to commence his services on the following Monday, and to serve for a year from that day, to be paid a year from that Mon- day. Therefore, this contract was not to be performed within a year and falls within the Statute of Frauds. But such a contract is not necessarily void. It is only unenforcible in a court. Had the defendant, Ros- siter, not pleaded the Statute of Frauds it might have been enforced against him. The compliance with the statute is only necessary as a means of proving the contract. Since, however, Rossiter chose to set up the statute, Britain has no remedy against him and cannot recover. CONTRACTS 63 RULING LAW Story Case Answer The purpose of the Statute of Frauds was to supply or compel the parties to a contract to procure better evidence than their conflicting oral statements. It was not the purpose of it to make the contract absolutely void. So the fact that a contract is not reduced to writing, when it should be by the requirements of the Statute of Frauds, does not render that agreement void, but renders it unenforcible only. If the person who is being sued, does not care to take the benefit of the statute, and does not set it up as a defense to an action on an unwritten agreement, within the statute, the agreement will be enforced just as if it were in writing. In the Story Case, Mr. Weaver should be allowed to recover for the above reason. But if the contract had been illegal, the court would not have to enforce it for example, if A promises B to kill X for $25 and does not do it, and then B sues A for breach of con- tract, and A, instead of pleading the illegality, pleads that he did not promise, and B proves that A did make the agreement, nevertheless the court would not en- force the contract because of the illegality. But the court will not give defendant the benefit of the Statute of Frauds unless the defendant pleads the Statute of Frauds as a defense. D. Contracts May Be Under Seal (1.) The Seal Makes It Binding STORY CASE Lord Roaksby said to his old servant, James: " James, I promise to give you a thousand pounds next week as a gift, in addition to your regular salary. " 64 CONTEACTS But before the next week, Lord Roaksby changed his mind and refused to give the sum to James. There- upon, James sued him for breaking his promise to pay. His Lordship defended the suit on the grounds that James had given no consideration for the thousand pounds and hence that the promise was not binding. Is the defense a good one? RULING COURT CASE Page vs. Trufant, Volume 2 Massachusetts Beports, Page 159; Volume 3 American Decisions, Page 41. After Carlson Trufant and Maria Page had been married for several years, domestic unhappiness arose, and they agreed to a separation ; she returned to live with her mother, Mary Page, the plaintiff in this action. Carlson made a bond, that is, an agreement under seal, in favor of Mary Page, his wife's mother, whereby he promised to pay to her a certain sum for the support of his wife. Sometime thereafter, Carlson refused to pay the money he had promised. Suit was then begun by Mary Page upon this bond. The defense of Carlson Trufant was that the bond was given without consideration and it was therefore not binding upon him. In reply to this, Mary Page contended that it was binding, even though it was un- supported by a consideration, because the agreement was given under seal. Decision: This agreement was binding upon Carl- son Trufant, notwithstanding the fact that there was no consideration. It was under seal, and a sealed agreement is binding without any consideration. It is often said that a seal imports consideration. Strict- ly speaking, that is not true, but the presence of a seal CONTRACTS 65 renders consideration unnecessary to make the agree- ment thereunder binding. Mr. Chief Justice Parson said in part: "A bond, from the solemnity of its execution, imports a consideration, the want of which the obligor is es- topped to plead. He may avoid the bond by showing that it was obtained by fraud, or duress, or that the consideration is illegal, or against the policy of the law." It was held that the action might be maintained by Mary Page and recovery had on the bond. RULING LAW Story Case Answer It has been pointed out heretofore that contracts are classified either as simple or sealed contracts. A sim- ple contract, in this classification is either oral or writ- ten. A sealed contract is a formal agreement or instru- ment which acquires its binding force from the formality of its execution. At common law simple contracts, as will be seen later, were binding by virtue of the fact that they were supported by a consideration. However, sealed con- tracts were never required to be supported by any consideration. All that was necessary to render a sealed contract binding was that it be sealed in some appropriate manner. It is often said that the seal im- ports a consideration. This means, merely, that con- sideration is unnecessary. The promise of Lord Roaksby was not binding in the Story Case because it was neither under seal nor was there any consideration given for his promise. His defense is therefore good. But had the promise been under seal, James would have won the suit. 66 CONTRACTS (2.) No Particular Device Is Necessary for a Seal STORY CASE Gnstav Hamil habitually signed his name with a flourish. He signed a contract to work for Dass and Company for three years at the sum of $1,000 a year, in the following form: "I, Gustav Hamil, promise to work for the firm of Dass & Company for three years for the yearly salary of $1,000. (Signed) GUSTAV HAMIL." After his name was a broad stroke of the pen which may have meant to indicate a seal or which may have been only the customary flourish with which he signed. When he was sued by Dass & Co. on the written promise, Gustav defended on the grounds that Dass & Co. had paid him no consideration for the promise. To this, Dass & Co. replied that this contract was a sealed contract and that therefore no consideration was needed. Who ought to win the suit? RULING COURT CASE Osborne vs. Hubbard, Volume 20 Oregon Reports, Page 318; Volume 11 Lawyer's Reports Annotated, Page 833. A man by the name of C. C. Parker made and signed a note in this manner : "On or before October 1st, 1884, I promise to pay to the order of D. M. Osborne the sum of ninety dollars with interest. C. C. PARKER, (Seal)." CONTRACTS 67 Before the note was delivered to Osborne it was signed on the back by Hubbard, the defendant in this action. Suit was begun by Osborne on this note against Hubbard. If the foregoing instrument was negotiable, then Hubbard was only an indorser thereon, and the suit was prematurely brought against him. If the note was not negotiable then he was a joint maker of the note, and suit was not prematurely brought. A seal upon a note, otherwise negotiable, renders it non-negotiable. It was contended by the defendant, Hubbard, that this was not a sealed instrument, that the word "seal" printed after the name of Parker did not make it a sealed instrument, and therefore it was a negotiable instrument, and that he was liable on it as an indorser. Decision : "In this state, while a seal may be made by a wafer or wax attached to an instrument, it may be also made by a scroll with a pen after the signature to the instrument. Not only was there a scroll, but the word 'seal' was written on it also." Anything which purports to be a seal, if accompanied by an intent to make the instrument a sealed one, is alone sufficient. Thus it was held that this was a sealed instrument, and not negotiable, and therefore the suit was properly brought, and judgment was given for the plaintiff. RULING LAW Story Case Answer The seal is an impression upon any impressible sub- stance. In early times it was always wax ; but a wafer is as good, and so is any other tenacious substance on which an impression is made. In modern times the courts are less strict than formerly in regard to what 68 CONTRACTS constitutes a seal. A scroll, or a scrawl made with the pen is generally held sufficient. Even the word "seal" written out after the name is held to be a sufficient device to pass as a seal. In all these cases there must be an intention that it shall be a sealed instrument. The mere fact that a person makes a scroll or scrawl after his name will not make it a sealed instrument, unless the scroll or scrawl be accompanied by the intention to make the paper which he is signing, a sealed instrument. In the Story Case, the whole question turned on the intention of Gustav Hamil when he signed the contract with a flourish. If he intended the stroke of the pen as a seal, then no consideration was needed to make the contract binding. If, however, he intended nothing when he made the flourish, the contract was only a simple contract and some consideration must be found or his promise was not binding. 2. Parties to a Contract A. There Must Be Two or More Competent Parties STOKY CASE During the war with Spain, Signor Amarillo, then living in New York City, made an agreement with Cas- sidy Brothers to deliver to them 500 bales of cotton from his plantation in South Carolina. Cassidy Bros, broke this agreement without assigning any good rea- son. Amarillo sued them for breach of contract. They defended on the ground that, since Amarillo was a Spaniard not naturalized and since his country was at war with the United States, he was not a competent party and could not make a valid contract. Was this defense good? CONTKACTS 69 RULING COURT CASE Harvey vs. Hobson, Volume 53 Maine Reports, Page 451 ; Volume 89 American Decisions, Page 705. On July 27, 1835, Stephen Neal conveyed land, which he then owned, to Samuel E. Crocker. By various sub- sequent transfers the property came to Hobson, the de- fendant in this action. On December 28, 1836, Stephen Neal died, leaving his daughter Lydia Dennett, who was the wife of Oliver Dennett, his heiress. On Decem- ber 1st, 1851, Oliver Dennett died. Soon thereafter, Lydia made claim to the property which her father had conveyed, during his lifetime, to Crocker. She based this claim upon the fact that, at the time her father made the conveyance, he was insane and incapable of making a binding contract or sale ; that therefore, this sale was voidable. Since she was the next of kin she had the right and elected to avoid the transaction. She made a conveyance to the plaintiff in this action, Har- vey. Harvey then brought this action to recover the land from Hobson, w^ho was now in possession. Decision : In order to have a binding contract there must be two or more parties to every agreement, and these parties must be competent by law and nature to contract. An insane person, by nature, is regarded as unable to bind himself by a contract. Thus in this case, the transaction, in which the land was sold by Stephen Neal to Crocker, was voidable because at the time Neal was insane. Such a contract may be avoided by Tn'rn during his lifetime, or by his personal representative after his death. In this case, it was avoided by his daughter and the conveyance made by her to Harvey 70 CONTEACTS passed title to him ; lie is entitled to recover the land of Hobson, the defendant. Judgment was therefore given for Harvey in this action. RULING LAW Story Case Answer It has been established heretofore that every con- tract implies the existence of at least two parties. Not even is a contract possible between an individual in one capacity and the same individual in a different capacity. Here it is to be noted that there must not only be two or more parties to a contract, but these two parties must be naturally and legally competent to enter into a binding agreement. Natural incoinpetency to contract exists when a person has not sufficient intelligence to be aware when he has no power of consent to his acts. Such a person is an insane person. Legal incompetency exists when a person is forbid- den by law to enter into a contract, even though such person may have sufficient intelligence to do so. At common law, a married woman was never permitted to contract. Thus there must be two or more parties to every contract, qualified naturally and legally to assume con- tractual obligations. In the Story Case, Cassidy Brothers had a good de- fense. Amarillo was an alien enemy and hence was not a competent party to a contract. It was a case of legal incompetency. CONTRACTS 71 3. Mutual Agreement A. There Must Be an Offer (1.) Negotiations Do Not Constitute an Offer STOEY CASE The following advertisement appeared in the county paper for several days : "I am looking for a buyer for my family horse, Bess. She is six years old, perfectly broken, and I trust my children behind her. Will sell for a reason- able price as I am leaving for Alaska. JAMES TROPPER." On the second day he received the following letter : "I accept your offer in the county paper and I will pay $150 for Bess. (Signed) WM. J. HOWE." Mr. Tropper had previously offered the horse for sale at $100.00 but he decided to keep her until he re- turned' from Alaska. He wrote to Mr. Howe telling him of his decision and Mr. Howe immediately started suit for breach of contract. Mr. Tropper defended the suit on the grounds that he had made no offer of sale to Howe. Is the defense a valid onet RULING- COURT CASE Moulton vs. Kershaw, Volume 59 Wisconsin Re- ports, Page 316. C. J. Kershaw was a wholesale dealer in salt, doing business in the city of Milwaukee. Moulton was a re- tail dealer in the same article in La Crosse. Sometime during the year of 1882, Kershaw wrote the following letter to Moulton: 72 CONTRACTS "Milwaukee, Sept. 19, 1882. J. H. Moult on, Esq., La Crosse, Wis. Dear Sir : In consequence of a rupture in the salt trade, we are authorized to offer Michigan fine salt, in full carload lots of eighty to ninety bbls., delivered at your city, at 85c per bbl. At this price it is a bar- gain, as the price in general remains unchanged. Shall be pleased to receive your order. Yours truly, C. J. KERSHAW." On the following day, Moulton sent a telegram to Kershaw in which he requested a shipment of 2,000 barrels at the price mentioned in the letter above given. "When Kershaw received the letter he had decided not to sell the salt at that price. Moulton then brought this action for damages. He contended that the letter he received from Kershaw was an offer to sell at the price mentioned and that his acceptance made a bind- ing contract. But Kershaw argued that his letter was not an offer, but was only a method of advertising; a means of apprising the public that they were willing and ready to receive offers. Decision : It is a fundamental principle that one of the contracting parties must make an offer in some manner, which must be accepted by the other party, before a binding contract results. An offer must be an unequivocal willingness on the part of one making it that his statements are to be considered as offers. Negotiations by which he advertises his willingness to receive an offer is a different thing. In this case, Ker- shaw was merely holding out that he was in a position to receive offers; he was not making an offer at that CONTKACTS 73 time. Consequently, the acceptance of Moulton did not make a contract because there was no offer. Mr. Justice Tyler said in part: ''The language in Kershaw's letter is not such as a business man would use in making an offer to sell to an individual, a defi- nite amount of property. The word "sell" is not used. They say "We are authorized to offer Michigan fine salt, etc.," and volunteer an opinion that the terms stated constitute a bargain. They do not say we offer to sell you. They use general language proper to be addressed generally to those who were interested in the salt trade. It is clearly in the nature of an adver- tisement or business circular to attract the attention of those interested in that business to the fact that a good bargain in salt could be had by ap- plying to them, and not as an offer by which they were to be bound, if accepted for any amount the persons to whom it was addressed might see fit to order." It was therefore decided that there w T as no offer. Therefore no contract resulted and judgment was given for Kershaw, the defendant. RULING LAW Story Case Answer It is a fundamental principle of the law of contracts that the relation is one voluntary assumed. The law does not impose this relation upon parties without their consent, either express or implied. The first step in arriving at a mutual agreement between the parties to contract is the expression of a willingness on the part of one to be bound by the contract. The expres- sion of this willingness to be bound is what the law terms an "offer." Before a contract can be made one party must always take an offer, either expressly 74 CONTRACTS or by implication. He must in some way manifest his desire and willingness to assume a relation with an- other party whereby he is bound to such party. It is not always easy to determine whether a person has manifested this willingness to be bound ; or to state it otherwise, it is sometimes very difficult to tell whether a person has made an offer. Negotiations by one party with another do not al- ways constitute an offer. For example, one person may advertise his business, stating that he is engaged in selling. These statements only inform the public that he is in a position to make proposals but do not constitute an actual offer. Thus, in the Story Case, Mr. Tropper announced only that he was willing to receive offers for Bess. The fact that he put no definite price on her is almost con- clusive that he made no offer of sale. Therefore, there was no contract and his defense is good. (2.) The Offer Must Be Communicated to the Offeiee yTOBT CASE Horace Falk, a private detective, saw a face in a crowd of people which he had seen in the Rogues ' Gal- lery and had recognized as that of a man "wanted" for a bank robbery committed in 1915. He caused the man's arrest and when he later learned that a reward of $100 was offered by the Bankers' Protective As- sociation for the capture of bank robbers, he applied for the reward. The association refused to pay the $100 on the ground that, as no knowledge of the reward had reached Falk before making the arrest, there had been no offer to him, because communication of the offer is one of the essentials of an offer. CONTRACTS 75 Falk replied that he had accomplished the result de- sired and that he was therefore entitled to the reward. Should he have it f BULTNG COURT CASE Ball vs. Newton, Volume 61 Massachusetts Reports, Page 599. Horace Newton and Joseph Battles signed the fol- lowing paper: " Worcester, Jan. 19, 1847. For value received, we jointly and severally promise to pay the master 's, clerk's, messenger's and assignee's fees, respectively, in the case of Joseph Battles, an insolvent debtor; provided the same are not paid within six months. JOSEPH BATTLES. HORACE NEWTON." Shortly after the above paper was signed, Joseph Battles went into insolvency. Ebeneezer Ball was chosen as his assignee. After Ball had done every- thing necessary to close up the affairs of Battles, this paper came to his notice. He thereupon demanded of Newton compensation for his services, since he had not otherwise been paid within six months after their rendition. Newton refused to pay anything under the agreement. After his death this suit was brought against the defendant, Newton, the personal represen- tative of Horace Newton, deceased. On behalf of Newton it was urged that Ball had no rights under the signed agreement because he was not aware of its existence until after he had rendered the services in question. 76 CONTRACTS Decision : There was no contract between Ball and Newton. Although Newton offered in writing to pay for just such services, this offer was never communi- cated to Ball until he had performed the duties. If this paper had been shown to Ball, and he had accepted the offer, and had become assignee, and had performed the services upon the strength of the offer, there would have been a contract. But before an offer can be ac- cepted, it must first have been communicated to the offeree. Judgment was therefore given for the defendant, Newton. RULING LAW Story Case Answer It has been stated before, that the making of an offer is the first step by which contracting parties come to- gether. It is an expression on the part of one of a willingness and a desire to assume a contractual rela- tion. No contract will result, unless the person to whom the offer has been made, expresses his willing- ness and desire to accept the offer. It is evident that an offer cannot be accepted until it has been communi- cated to some one who may claim the benefit of the acceptance. The mere fact that a person accidentally performs some act which is in accordance with an un- known offer does not entitle that person to claim the benefit of the offer. This frequently happens in cases where a reward is offered for the apprehension of a criminal. Some person, who is not aware of the offer, captures the criminal ; but he is not legally entitled to the reward; he did not know of the offer, and could, therefore, not accept it. Hence, in the Story Case, Falk cannot obtain the reward. CONTRACTS 77 (3.) An Offer May Be Made to the Public STOEY CASE In Coyote, Montana, a handbill to the following ef- fect was posted : $500 reward for the arrest and conviction of the man or men who stole the horse of the undersigned from his stable on the night of Mar. 5. (Signed) JOHN HILUP. A stranger from New York City, Mr. Harry Dur- wand, chanced upon the sign ,and soon after he caused the arrest and conviction of the thief. When he claimed the reward, however, Hilup refused to pay, claiming that he meant the offer to apply only to inhabitants of Coyote County in which the bills were posted. Durwand immediateb 7 brought suit for the reward. Is he entitled to it? RULING COURT CASE Seymour vs. Armstrong, Volume 62 Kansas Reports, Page 720 ; Volume 64 Pacific Reports, Page 612. On February 15, 1896, Armstrong, a commission merchant in Topeka, Kansas, inserted an advertise- ment containing the following proposition or offer in a weekly newspaper : "We will pay lO^c for all fresh eggs shipped us to arrive here by February 22. Acceptance of our bid with number of cases stated to be sent by Febru- ary 20." On February 20, F. T. Seymour, a rival commission merchant of Topeka, sent the following note to Arm- strong in response to the offer of the latter: 78 CONTRACTS ( "I accept your offer in Merchants' Journal, lO^c for fresh eggs, and will ship you 450 cases fresh eggs to arrive on or before February 22. ' ' On receipt of this note, Armstrong at once notified Seymour that they would not accept the eggs if shipped. Seymour, nevertheless, sent the eggs ; Arm- strong refused to accept them. Seymour sold the eggs at such price as he could get and brought this action, claiming as damages the difference between the price offered by Armstrong, and the price for which the eggs were later sold. Armstrong contended that his advertisement was not an offer which could be made binding upon him by a particular acceptance, because it was only a general announcement to the public. Mr. Justice Johnston said in part: "A contract may originate in an advertisement addressed to the public generally, and, if the proposal be accepted by any one in good faith, without qualifications or con- ditions, the contract is complete." It was decided that this was a good offer to the pub- lic generally and that an acceptance, according to the terms of the offer, would be binding on Armstrong. RULING LAW Story Case Answer An offer may be made to one particular person, or to a certain class of persons, or it may be made to the public generally. If the offer is made to a particular person, that person only may accept it. If it be made to a class of person, any person in that class may ac- cept it. Where the offer is made to the public gener- ally any one of the public may accept it. One who CONTKACTS 79 purports to accept an offer of this kind, must have been aware of the offer when he performed the par- ticular act, which he claims was an acceptance of the offer. In the Story Case, Dnrwand should get the reward because he had knowledge of the offer when he caused the arrest and conviction of the thief. Hilup, by word- ing the bill so that it was an offer to anyone who should read it, disproved his contention concerning the limits of the reward. (4.) An Offer by Telegram or Letter Is Complete When the Message Is Received STOEY CASE Alderson Brothers, brokers in New York City, sent their Chicago representative to the firm of Barnwell & Co. in Chicago, to negotiate for some wheat which Alderson Bros, needed very badly. Barnwell & Co. did not wish to sell until the market became more firm and stable. The Alderson representative, however, persuaded them to mail an offer to Alderson Bros, for the sale of 10,000 bushels at 90y 2 c. Barnwell & Co. knew that it required 20 or 24 hours for a letter to reach New York ; hence if the markets should advance in the next 15 hours they could countermand the offer by telegraph. But the Alderson representative tele- graphed his receipt and the fact of the offer to Aider- son Bros, and Alderson Bros, immediately telegraphed acceptance. Ten hours later the market advanced to 94c and Barnwell & Co. telegraphed a revocation of the offer. This message, Alderson Bros, received be- fore the letter containing the offer. Barnwell & Co. \ 80 CONTRACTS refused to deliver the wheat on the grounds that they revoked the offer before acceptance. Alderson Bros, claim that the offer was complete when mailed and could be accepted any time after it was mailed. Barnwell & Co. claim that an offer is never completed until the letter containing the offer is received. Both parties admit that the communica- tion of the Alderson representative to Alderson Bros, was not an offer from Barnwell & Co. and could not be accepted. RULING COURT CASE Adams vs. Lindsell, Volume 1 Barnwall and Ander- son English Reports, Page 681. Lindsell was a wool dealer at St. Ives in the county of Huntington. On Tuesday the 22nd of September, Lindsell wrote the following letter to Adams, who was a woolen manufacturer in Worcestershire : "We now offer you eight hundred tods of wether fleeces, of a good fair quality of our coun- try wool, at 35s 6d per tod, receiving your answer in course of post." The letter was misdirected by Lindsell, as a result of which it did not reach Adams until Friday the 25th. Adams immediately wrote a letter of acceptance. Be- cause of the delay in receiving the offer, the acceptance did not reach Lindsell until Tuesday the 29th. A reply in course of post, had the offer been directed rightly would have reached Lindsell on Sunday or Monday, 27th or 28th respectively. On Monday, not hearing from Adams, Lindsell sold all the wool then on hand. When he did receive the letter of acceptance, he could not fill the order, and accordingly replied that it was too late. Adams then sues for damages. CONTRACTS i The defendant Lindsell contended that there was no contract because he had put a time limit upon the ex- istence of the offer. He argued that the offer was re- voked before it was accepted. Decision : An offer becomes complete when it is re- ceived by the offeree. An offer by mail or telegraph is a continuing offer which remains open until it is received by the offeree, unless in some way a revoca- tion of the offer is communicated to the offeree before he receives or accepts the offer. The court said in this case: "The defendants must be considered in law as making, during every instant of the time their letter was travelling, the same identi- cal offer to the plaintiff, and then the contract is com- plete by the acceptance of it by the latter. Then, as to the delay in notifying the acceptance, that arises en- tirely from the mistake of the defendants, and there- fore it must be taken as against them that the plain- tiff's answer was received in the course of post." Judgment was therefore given for Adams in this action. RULING LAW Story Case Answer Where a person makes an offer by mail or by a tele- gram, it is obvious that the offer is not complete until it has been received by the person to whom it is ad- dressed. For, until he receives it, he knows nothing of it, and it has just been established that a person cannot accept an offer until it has been communicated to him. In the Story Case, the offer was meant to be com- plete when the letter containing the offer was received. Hence Alderson Bros, should lose. 82 CONTRACTS (5.) An Offer May Be One of Four Kinds a. An Offer of an Act for a Promise STORY CASE Praffron Juiner, a carriage maker, said to Hertes Unow: "I'll paint your carriage for $15.00." Ilnow replied: "All right, Praffon, I'll send it around and pay when it is finished." After the carriage was painted, Unow refused to pay $15, giving as a reason that $15 was too high a price. Junier sued him for the agreed charges. Should he get it? RULING COURT CASE Day vs. Caton, Volume 119 Massachusetts Reports, Page 513 ; Volume 20 American Reports, Page 347. Day was the owner of lot 27, and Caton the owner of an adjoining lot, number 29, both located in the city of Boston. Day built a brick party wall, placing one- half of the wall on his lot and one-half on the lot be- longing to Caton. It was shown in evidence that Day and Caton had some conversation about the wall previ- ous to its erection. It was understood between them that Day was to be repaid for putting up the wall partly on the lot of Caton. When the wall was finished and used thereafter by Caton he refused to pay anything towards the expendi- tures incurred by Day in its erection. Day, thereupon, brought this action seeking to recover from Caton half the expenses by him made in the erection of the wall. Decision : The jury found, as a matter of fact, that Day offered to build this wall if Caton would promise CONTRACTS 83 to pay a part of the cost- when he should use the wall. The evidence further showed that Caton did promise to pay his share if Day would build it. Therefore, when Day built the wall, Caton 's promise to pay a portion of the expenditures became binding upon him. This was an instance where one party makes an offer of an act for a promise on the part of the other person. Judgment was given for Day in this action. RULING LAW Story Case Answer An offer may be one of four kinds. First, it may take the form of an offer of an act for a promise. That is, the offeror states that he will perform certain ser- vices, accomplish a particular task, if the offeree, the person to whom he makes the offer, will make a prom- ise in return. The Story Case is an example of this type. Junier offered an act which Ilnow accepted by a promise to pay $15 and Junier can recover this amount: b. An Offer of a Promise for an Act STORY CASE Farmer Hillhouse needed to have his orchard pruned. He made the following offer to Poncar Bus- kins, who was an experienced pruner : "If you will prune my orchard, I will pay you $3 a day for the work, as soon as you have finished it. ' ' Four days later, Buskins finished the work and de- manded $12 in payment. Hillhouse refused to pay, on the ground that Buskins had not promised to do the pruning and that he had therefore hired anothei man to do it. Is this a good answer ? 84 CONTEACTS RULING COURT CASE Babcock vs. Raymond, Volume 2 Hinton's New York Reports, Page 61. Raymond was the proprietor of the New York Daily Times, a newspaper published in the city of New York. In September of 1865, while the probability of the elec- tion of Mr. Fremont to the position of President of the United States, was a subject much discussed and commented upon in newspapers and elsewhere, Bab- cock prepared and sent to Raymond an article bearing upon the election. The subject matter of the article was drawn from an investigation made during the sum- mer of that year, in a very extensive canvass among a large number of people in various conditions. The New York Daily Times contained a certain col- umn for the publication of such articles. At the head of the column was a statement that all communication accepted and published would be paid for at certain regular rates. Although Babcock had prepared and sent his article in and it had been published, Raymond refused to give proper compensation. Relying upon this offer, Babcock thereupon sued him for the value of the article. It was contended by Raymond that he had not made an offer which had been accepted by Babcock, and therefore there was no contract. Decision : In this case, there was an offer by Ray- mond, in his paper, of a promise for an act. The paper contained the statement that certain prices would be paid for articles accepted and published. This was a standing offer which contemplated acceptance by an act on the part of the person who accepted. Thus, when Babcock prepared and sent in his article, and when it CONTRACTS 85 was accepted and published by Raymond, the contract became complete and binding upon Raymond. Thereupon it was held that Babcock might recover the usual price for such an article. RULING LAW Story Case Answer It has just been established that an offer may be in the form of an offer of an act for a promise. If the promise is made and the act is done, a binding con- tract results. On the other hand, an offer of a prom- ise may be made which contemplates acceptance by an act. So long as this promise remains unrevoked, any one, knowing of the offer of the promise, who performs the act, comes into a contractual relation with the per- son making the promise and the agreement becomes binding. This is well illustrated by cases where an offer to pay a reward to any one, who, knowing of the offer, performs the act of capturing the criminal. In the Story Case, the offer which Farmer Hillhouse made contemplated acceptance by the act of pruning the orchard and he should not have expected a promise. Buskins can clearly recover the $12. c. An Offer of a Promise for a Promise STORY CASE Silas Hightower, a farmer, said to Buskin, a laborer, "Buskin, if you will work for me for three months, I'll pay you $20 a month. You will start work next week and until that time do not hire out to anybody else because you are under 86 CONTRACTS contract with me. In return, I promise to hire yon next week." Buskin assented to this agreement but on the next day he hired out to Barrett on a year's contract, there- by disregarding his agreement with Hightower. Hightower sued Buskin for breach of the contract to work for him. Buskin defended on the ground that Hightower had given him no consideration for the promise to work, and hence that the promise was not binding. Which party should prevail? RULING COURT CASE George vs. Harris, Volume 4 New Hampshire Re- ports, Page 533 ; Volume 17 American Decisions, Page 446. Harris, one of twenty-nine men, signed his name to the following agreement: "For the purpose of providing a suitable court- house in the town of Plymouth, we, the subscrib- ers, severally promise to pay the sums set against our respective names, or so much thereof as may be necessary." Opposite the name of Harris was set the sum of one hundred dollars. But when called upon for his sub- scription, he refused to pay it or any part thereof. Suit was begun against him for the recovery of one hundred dollars. His defense consisted of the plea that his promise was made without consideration and, therefore, was not binding upon him. He contended that he made an offer of a promise, but that promise did not become CONTRACTS 87 binding upon him by the promises of others who like- wise signed the agreement. Decision: This is a case where one person makes an offer of a promise to do something, which is ac- cepted by a promise on the part of others to do the same or a similar thing. His offer of a promise was accepted by the promise of the others who signed the same agreement. Therefore, his promise is binding and recovery may be had against him. Accordingly, it was held that the one hundred dollars might be recovered from him in accordance with his agreement. IvULING LAW Story Case Answer An offer quite frequently takes the form of an offer of a promise for a promise. Where such an offer is made, it becomes binding when the promise in return is made by the person to whom the offer of the prom- ise was. first made. In the Story Case, Hightower clearly should prevail. He did give consideration for Buskin's promise to work the consideration was Hightower 's promise to hire him. A promise is valuable consideration. d. An Offer of a Promise Conditional Only on Mere Assent of Other Party Must Be Under Seal STOEY CASE Howard Engle drew up the following instrument : "In ten days I shall convey to my son-in-law, John Mitchner ten acres of land on the bank of Walnut Creek." (Signed) Howard Engle. (Seal) 88 CONTEACTS Howard Engle gave this document to John, telling him he desired to make this gift. John said that he would be glad to have the land and thanked Engle. Later Engle changed his mind and refused to convey the land. Mitchner sued him and he defended on the ground that Mitchner gave no consideration for the promise to convey, and also on the ground that there had been no offer and acceptance. Which party should win? RULING COURT CASE O'Brien vs. Boland, Volume 116 Massachusetts Re- ports, Page 481 ; Volume 44 North Eastern Reporter, Page 602. Boland was in need of money. He was making de- termined attempts to sell land which he owned. Sev- eral times he had offered it to O'Brien at various prices, but none of the offers were accepted. Although the property was reasonably worth $29,000, he made out a written agreement, in which he offered to sell the land to O'Brien for the sum of $26,000, provided he accepted the offer within ten days. This agreement was not supported by any consideration, but it was signed, sealed, and delivered to O'Brien by Boland. Before the ten days had expired, Boland notified O'Brien that he had withdrawn his offer to sell at the price above mentioned. After this notice by Boland, and before the ten days had passed, O'Brien notified him of his intention to accept the offer, and that he was ready and willing to pay the purchase price and re- ceive a conveyance therefor. But Boland refused to perform. Thereupon, O'Brien brought this bill ask- ing that Boland be compelled to convey the land in question. CONTRACTS 89 It was contended by Boland, by way of defense, that his offer to sell was not binding upon him, because it was not accepted until he had withdrawn it. Decision: As a general rule, an offer of a promise to do something is not binding upon the person mak- ing the offer, unless the offer is accepted by some act or promise in return therefor, which constitutes the consideration to support the agreement. But where an offer of a promise is made in writing, is sealed and delivered, it is binding without any act or promise in return from the offeree. It cannot be revoked or with- drawn and is binding upon the offerer if accented ac- cording to its terms. Therefore, judgment was given for O'Brien in this action. RULING LAW Story Case Answer In each of the types of offers heretofore discussed, we have seen that the offer contemplated some act or promise on the part of the offeree, the person to who the offer was made. This promise, or this act, in re- turn, constitutes the consideration which makes the agreement binding. A simple offer made by a person, in return for which no act or promise is made by way of acceptance, is not binding upon the person who makes the offer. But if he reduces his offer to writing, signs, seals, and delivers it to the offeree, it becomes binding upon him, and he cannot revoke it, except in the manner agreed upon. The presence of the seal, as has been noted, dispenses with the necessity of any consideration. In the Story Case,Engel would lose. A contract un- der seal requires no consideration to make it binding. 90 CONTEACTS (6.) An Offer Must Be Certain STOKY CASE Barford & Company, grain merchants, wrote the fol- lowing to David Ellis, a farmer : "If you will promise to sell us all the wheat you raise this year, we will promise to buy it. ' ' Ellis promised, and was preparing to deliver the wheat when Barford & Company refused to accept. Ellis sued them for breach of the contract. Barford & Company defended on the grounds that the contract was void because (1) The amount of wheat was uncer- tain and (2) The price was not fixed. "Was the contract uninforcible because of the uncer- tainty? RULING COUBT CASE Sherman vs. Kitsmiller, Volume 17 Sergeant & Rawles Pennsylvania Reports, Page 45. George Sherman promised Elizabeth Koons that he would give her a hundred acres of land if she would live with and keep house for him until she married. In reliance upon this promise, she lived with, and kept house for him until she married George S. Sherman, his nephew. Frequently, during his life, George Sher- man was requested by Elizabeth to make the convey- ance of a hundred acres to her. He persistently de- clined to commit himself about the offer he had made. After his death, Kitsmiller, his administrator refused absolutely to recognize the claim. Thereupon, George S. Sherman, on behalf of his wife Elizabeth, brought this action, seeking to have the defendant Kitsmiller, as administrator of George Sherman deceased, convey one hundred acres of land to his wife. CONTRACTS 91 The defense consisted in the fact that the offer, as made by the deceased donor, was so uncertain that it was not rendered binding by the performance of the services in question by Elizabeth. The court said in part: "If it had been a promise to give her one hundred pieces of silver, this would be too vague to support an action. For what pieces? Fifty cent pieces or dollars? What denomination? One hundred cows or sheep would be sufficiently cer- tain, because the intention would be, that they should be, at least, of middling quality ; but one hundred acres of land, without estimation of value, without relation to anything which could render it certain, does appear to me to be the most vague of all promises ; and if any contract can be void for its uncertainty, this must be. One hundred acres of Rocky Mountain or in the Con- estoga manor one hundred acres in the mountains of Hanover County, Virginia, or in the Coneqango rich lands of Adams County? One hundred acres of George Sherman's mansion place at $80 or $100 an acre or one hundred acres of his barren land at $5 an acre. ' ' The offer was so uncertain that the court held that no contract resulted from their agreement. Judgment was therefore given for Kitsmiller. LAW Story Case Answer The terms of the offer should be sufficiently certain so that the agreement can be ascertained, without hav- ing to remake the contract for the parties. The ques- tion of certainty is one of degree ; no definite rules can be laid down which will guide a person in all cases. If the offer has reference to the sale of property, the 92 CONTRACTS offer should contain a reasonable description of the property, the amount thereof, and the price which the offerer is willing to take for the same. If it has some element of time in it, the time should be definitely set, or made dependent upon some event which is rea- sonably easy to ascertain. But not every contract is void because the amount and price had not been fixed by the parties. In the Story Case, for instance, the court would enforce the contract. The amount of wheat was "all the wheat" harvested by Ellis that year; the price would be the market price of wheat at the time of delivery. Since there is no fixed market price for land, the price of land in a contract of sale must ordinarily be set by the parties. But this is not so with wheat or corn or any other commodity which is quoted in the markets. (7.) The Terms of the Offer May Not All Be Communicated a. Unexpressed Terms STOEY CASE Peters & Stone were egg dealers in Chicago. On January 5, 1915 they made the following contract with Jones & Company, commission merchants : Jan. 5, 1915. We promise to deliver to Jones and Company 5000 dozen eggs (grade "Best"), to be paid for at the price of 15c per dozen, ten days after delivery. (Signed) Peters & Sons. Peters & Sons, though often requested, refused to deliver the eggs. Jones and Company sued for breach CONTRACTS 93 of contract and Peters & Sons claimed the contract was void because no definite time was set for delivery. Is the defense a good one? RULING COURT CASE Battle Long vs. Cornelius Keedy, Volume 71 Mary- land Reports, Page 385; Volume 5 Lawyer's Reports Annotated, Page 759. Cornelius Keedy was the principal and proprietor of the Hagerstown Female Seminary. In the sum- mer of 1887, being desirous of securing a music teacher, he wrote a letter to Hattie Long, in which he said: "I desire to engage a teacher of vocal and in- strumental music. Salary is from $300 to $400 and home, according to the ability of the teacher." Miss Long immediately answered, stating "that she was a competent teacher of music, both instrumental and vocal," and was willing to accept the position on the terms stated. He then wrote to Miss Long : "After due reflection, I have concluded to offer you the posi- tion of teacher of instrumental and vocal music." In this letter he stated that, in case she was successful with her work, that she might be re-engaged for the following year at an increased salary. He also stated that her salary was to be $400 with room and board. Miss Long thereupon replied, accepting the offer as stated in his last letter. After she had served in the capacity of teacher for two months, she was discharged by Keedy without just cause. She thereupon sued for damages for the breach of contract of employment. It was contended by Keedy that it was a contract of employment which could be terminated at will, be- 94 CONTEACTS cause it was no where stated in their correspondence that she was to be engaged for the whole school year. Decision: Although, in the letters between Miss Long and Mr. Keedy, it no where appeared in express words that she was to be employed for the whole year, yet from all the facts it clearly appears that his offer was employment for the whole school year. The sal- ary he offered her was for the whole school year, and it is certain that he intended to offer her employment on the same basis. This is a reasonable interpretation as to time. Accordingly, it was held that Miss Long might re- cover damages for the wrongful breach of her contract of employment. EULINO LAW Story Case Answer It has just been pointed out that an offer should be certain. The mere fact that all the terms are not ex- pressly stated in the offer does not make it uncertain, if such terms are clearly implied.. If a stock dealer were to offer to sell one hundred shares of stock, with- out mentioning in his offer the price he wished, and this offer were accepted by the offeree, it is reasonable to suppose that it would be implied that they were to be sold at the market price of such stock. In the Story Case, the time for delivery would be im- plied as meaning within a reasonable time. Eggs may not be kept for a great length of time without depreci- ating in value, hence the time would be fairly short. The jury would determine just what a reasonable time is. The defense is not a good one. CONTKACTS 95 b. Usages and Customs of Trade STORY CASE Many establishments permit 2 per cent off for cash within thirty days. That is, if the goods sent per con- tract are paid for within thirty days, a discount of 2 per cent on the contract price is allowed. The firm of Gerald & Company, boot and shoe wholesalers, for many years had allowed such a discount to their cus- tomers. George Gregg, a shoe dealer, sent the follow- ing letter to Gerald and Company. Jan. 1, 1915. Send me a consignment of shoes as per the con- signment of last year, price to be the same, to. reach me by January 10. (Signed) George Gregg. Gerald & Co. sent the shoes immediately and they reached Gregg on January 9th. There was no stipu- lation for discount for cash in the present case or in the contract of last year. On January 19th, Gregg sent a draft for the price of the shoes minus 2 per cent. Gerald & Company re- fused to accept the draft because it was not for the en- tire amount. They claimed that, since there was no stipulation for discount, Gregg was not entitled to it. Gregg answered that he had always received the dis- count from Gerald & Co. and that, although there was no stipulation in the contract, there was a custom in the shoe business to allow the discount for cash within thirty days. Which party wins! 96 CONTEACTS RULING COURT CASE Cunningham vs. Morning star, Volume 110 Indiana Reports, Page 328; Volume 59 American Decisions f Page 211. During the season of 1879-80, Cunningham, the plaintiff in this action, was engaged in the pork-pack- ing business in Martinsville, Indiana. Cunningham of- fered to advance money to Morningstar, if the latter would purchase and deliver fat hogs at their packing house. Cunningham offered to slaughter the hogs, prepare them for market, and deliver the product up to Morningstar upon his demand. In pursuance of the terms of the agreement, Cuningham advanced about $2,500 to Morningstar; with this and other money, Morningstar purchased some 2500 hogs and delivered them to Cunningham. These were butchered and prepared for market. About this time the price of meat began to go down ; and had the meat then been sold, the proceeds would have scarcely been sufficient to repay Cunningham the money by him advanced. It was decided that Cunningham should retain the meat a while longer, and that Morningstar should give a note for the repayment of the money advanced to him. He failed to pay the note at maturity, and Cunningham brought this action upon it. Morningstar contended that he was not liable upon the note because Cunningham had not performed the contract; he contended that Cunningham had mixed his meat with all the meat contained in his packing plant ; that he had converted a part of the same, in that he had kept and used the bristles, feet, fat from the entrails and other offal. In reply to this, Cunningham showed that it was the custom among all packers to CONTRACTS 97 retain the parts referred to, as compensation for butch- ering and preparing the animals for market. Decision : Although nothing was said in their con- tract by which Cunningham was to retain any part or parts of the animals slaughtered, it is such a well es- tablished custom among packers, that it must have been understood as a term in the offer, as made by Cun- ningham. Such being the case, the facts set up by Morningstar constitute no defense to the action upon the note. The Court was, therefore, of the opinion that judg- ment upon the note should be given for Cunningham. BULING LAW Story Case Answer It frequently happens that one party to a contract or the other may set up some custom or usage of trade to add a new term to the contract, or to give a particu- lar meaning to a term, or to make clearer some term. As in the case of Cunningham vs. Morningstar, it was permitted to be shown there that a packer was entitled to mingle all meat together; and that he was entitled to retain certain parts of the slaughtered animals, al- though nothing was said in the contract in reference to such right. But where such a custom is well known to both parties, under similar circumstances, it is pre- sumed that the parties intended to adopt such cus- toms and usages as a part of their contract. In order, however, that such customs and usages may be shown to this purpose, certain requirements must be met. The custom or usage must have been established at the time the contract was made. It must have been well known custom or usage. Such custom must not be in conflict with any rule of law. 98 CONTEACTS Nor can it be in conflict with any express term of the contract. In Cunningham vs. Morning star, had it ap- peared that the parties expressly agreed that those certain parts of the animals were not to be retained by the packer, of course, the custom would have had no effect on the contract. Thus, in the Story Case, Gregg is entitled to his dis- count. Since there was a well established custom to allow the discount in question, it must be presumed that they intended that it should be a term of their contract. c. Terms on a Document Unread But Known to Be There by the Other Party STORY CASE Mr. Johnson went into the office of the Western Union Telegraph Company for the purpose of sending the following message : " J. L. Jenkins, Mobile, Alabama. Purchase all cotton possible at not over lO^c. J. W. Johnson." The agent transmitted the message, but as delivered to Jenkins, it read: "Purchase all cotton possible at not over ll^c." The latter purchased six thousand bales at ll^c, as cotton had risen rapidly in value within the previous twenty-four hours. When John- son learned what had been done and realized that he was unable now to dispose of the cotton at a profit, he brought suit against the company for damages, show- ing that he was compelled to sell the cotton in question for 103,4. CONTRACTS 99 The company made the following defense: The agent furnished Johnson with a blank which contained the word "over" at the bottom, and informed him that there were certain conditions on the back of the blank. But Johnson neglected to read them. One condition maintained : ' ' That the company will not be liable for damages to any greater amount than the price of the telegram, in case of mistakes, unless the sender directs that the message be repeated." Is that a term of their contract ? RULING COURT CASE Durgin vs. American Express Company, Volume 66 New Hampshire Reports, Page 277. On the 20th day of January, 1888, an agent of the American Express Company received from Durgin a box weighing thirty-seven pounds ; this box contained silverware, which amounted in value to $680. It was to be carried by the company to a person in New York City. Durgin had shipped goods with the American Express Company frequently before this time. He had in his possession blank receipts issued by the company for the convenience of its customers and patrons. On the back of this blank there were various stipulations one of which stated that the company would not be liable for the loss beyond the sum of $50, unless a different valuation was placed on the same by the shipper at the time of shipment. Durgin, knowing that the company based the rates upon the valuation of the property and that this stipulation was on the blank, filled it out, signed it and delivered it to the company with the goods in question. During the course of transit, the silverware was lost or stolen. The company was willing to pay only fifty dollars. 100 CONTBACTS Thereupon, Durgin sued for the full value of the prop- erty lost. The company contended that he could not recover more than $50, because the terms of their contract called only for that sum in case of loss. Durgin claimed that he was not bound by that stipulation be- cause he never assented to it, although he knew it was on the blank receipt. Decision: The Court was of the opinion that the stipulation in question, which was known to Durgin when he shipped his goods, became a part of the con- tract, even though he may not have expressly assented to it. He knew that the company charged for carriage upon the basis of the value of the property, and he knew that the rate would have been much higher had the company known the real value of the property; under these circumstances, it would be unjust to allow him to escape the effect of the stipulation. Judgment was given for Durgin for the sum of only $50. RULING LAW Story Case Answer Many companies, especially telegraph and express companies, furnish to patrons blank forms for con- tracts of service. These generally contain certain printed conditions either on the back or on the face. Persons frequently know that there are terms and con- ditions printed thereon, but neglect to read them. It becomes an important question to know just how far such conditions are binding upon people who deal with these companies. In the first place, these terms must be such that they might become a part of the contract if the parties ex- CONTRACTS 101 pressly agreed upon them. Assuming that they are of this nature, if the party knows of their existence and has read them, he will be bound by them, whether or not he expressly assented. Also, if he knows that there are terms and conditions, and does not read them, he is bound by them, because his indifference may be pre- sumed to be his assent or agreement. In the Story Case, Johnson's attention was directed to the fact that there were conditions, both by the blank form itself, as well as by the agent. Neglecting to examine them, he will be bound by them, even though he did not expressly agree to them. d. Mr. Jacob Filimore of South Bend, Indiana, intend- ing to go to Pittsburg, purchased a ticket from the Lake Central Railway Company, on the 15th of June, 1914. At the last moment, because of business matters, he was unable to go. Three days later, however, he boarded the train, with the ticket he had previously purchased. When he presented it to the conductor he refused to accept it, because it was three days old. On the back of the ticket there was the following condi- tion: "This ticket is good only on the day of issu- ance." Below this was stamped the date: "June 15, 1914. ' ' The face of the ticket contained no words, nor any indication that there was any writing on the re- verse side thereof. Mr. Filmore stated that he was not aware, moreover, that there was any such condition thereon. Is this condition a part of their contract? 102 CONTRACTS RULING COURT CASE Tichnor vs. Hart, Volume 52 Minnesota Reports, Page 407; Volume 54 North Western Reporter, Page 369. Tichnor was preparing to publish a book of "Amer- ican Biography of Eepresentative Men." Hart be- came a subscriber therefor, by a written contract. Hart promised that he would pay a certain price there- for when it was published and delivered to him. In the course of time the book was published, but Hart re- fused to accept or pay for his copy of the book. Tich- nor, thereupon, brought this action for the recovery of the price agreed upon. In defense to the action, Hart contended that the prospectus issued by Tichnor contained a promise that this work would contain able contributions of local in- terest by distinguished local scholars and scientists, and that, as a matter of fact, the work as published con- tained no such contributions. It was shown, on the other hand, that Hart did not know about this proposal at the time he made the contract, although he had a copy of the prospectus, and knew that it contained a full detailed description of the work ; and it was there that the proposal was contained upon which Hart relies as a defense. Decision : The Court held that this was no part of the contract because he knew nothing of it when he ac- cepted the offer. Only those terms of an offer, which are known to the party accepting the contract, become a part of the contract. Terms of the offer which are unknown to him are as if they never existed. Accordingly, judgment was given for Tichnor. CONTRACTS 103 BUIilNG LAW Story Case Answer We have just seen that if a party knows that a given document contains terms and conditions, whether on the back or face, he will be bound by those conditions, even though he may not know the contents of the con- ditions, and consequently has not expressly agreed to them. But it would be manifestly unfair to a person to hold him to conditions upon a document if he were un- aware of their existence, and were not negligent in not ascertaining them. Thus, when a person takes a docu- ment, which contains a complete contract on its face, he is not bound by conditions on the back thereof, un- less in some manner it is made evident to him that such conditions exist, and are intended to be and be- come part of their contract. In the Story Case, Filimore was not aware that the reverse side of his ticket contained any condition which was intended to be a part of the contract ; therefore he is not bound by the same. It is interesting to note that railroads now are careful to point out all terms on the reverse side of a ticket or document. e. Terms Not Readily Discernible STORY CASE Henry Story bought a horse from the Sioux City Horse fair, a corporation. The agent of the corpor- ation misrepresented the intrinsic worth of the animal so that Story lost $100 in the transaction. For this loss he brought an action for breach of contract against the company. The horse fair put in defense that it was not liable for the misrepresentation of agents be- cause it had expressly guarded itself against this by 104 CONTRACTS provisions in the contract. It was shown in evidence that the company had this sign posted in the auction room "Agents Eepresentations N. P. C." and that the same words and letters were also in the bill of sale. It was explained that this meant: "Agents Representa- tions Are No Part of the Contract. ' ' Story maintained that these abbreviations had no meaning to him and, therefore, were not a part of the contract. For whom should judgment be given? RULING COURT CASE Rosenfeld vs. Peoria, Decatur, & Evansville Railway Company, Volume 103 Indiana Reports, Page 121 ; Vol- ume 53 American Reports, Page 500. Rosenfeld delivered to the railway company a bar- rell of whiskey to be shipped to James O'Brien, who lived at Litchfield, Illinois. The bill of lading issued therefor, contained a statement of the name and resi- dence of the person to whom it was shipped, and a description of the article, as "1 barrel of whiskey of 400 pounds weight. " Following these statements there was a blank ; this blank was followed by certain printed stipulations, one of which read : "In the event of loss or damage under the provisions of this agree- ment, the value or cost at the point of shipment shall govern the settlement of the loss. ' ' The whiskey was lost in transit, and this action was brought to recover damages therefor. The defendant company set up the following defense: In the blank above referred to, an agent of the company had in- serted the following: "L & ex $20 R. R. Valua- tion/' This notation meant that the company did not intend to be liable for leaks and outs, and that $20 was the maximum amount of loss which they CONTKACTS 105 would indemnify. This abbreviated notation was il- legible and not easily discernible to the ordinary per- son reading it. Decision: This memorandum, as inserted by the agent of the company, does not constitute a part of the contract between the company and Rosenf eld. Al- though it was contained in the body of their agreement, it conveyed no meaning to Kosenf eld ; and he could not have assented to it. Therefore, he is not bound by the statement in the notation. Judgment was given for Rosenfeld for the full loss. RULING LAW Story Case Answer One party to a contract cannot take advantage of the other by inserting, in the contract, terms which are not readily discernable. The statements in a writing must be understood by both parties, or must be sufficiently clear to be intelligible to all parties, if an effort is made to understand them. The answer of the Sioux City Horse Fair Company, in the Story Case, is not a good defense, because the terms by which it intended to protect itself were not known to Story and the abbrevi- ations in the contract were not intelligible without ex- planation. f. Terms Issued in a General Notice STOKY CASE Hakins, an auctioneer, caused signs to be put up in his rooms which read : "Notice! Terms are Cash." Thomas bid in a horse for $200, and when he pro- posed taking the horse away, he offered to give his 106 CONTKACTS note for the amount. Hakins refused to take a note and showed the signs. Thomas answered : "Yes, I saw the signs but I never pay cash.'* Hakins asserted that he never sold for anything but cash. Whereupon, Thomas refused to take the horse. Hakins sued him for breach of contract to buy and pay cash for the horse. Thomas defends, on the grounds that the signs were made to the public, not to him personally. Is the de- fense good? RULING COURT CASE Eollister vs. Nowlen, Volume 19 Wendell's New York Reports, Page 234; Volume 32 American De- cisions, Page 455. Nowlen was the proprietor of a stage coach line run- ning between certain points in the state of New York. He caused to be printed certain notices, to the effect that all baggage would be carried at the risk of the owner. Copies of this notice were posted in the stage office, and in all public houses along the coach line. Hollister, on July 20, 1833, left Avon for Buffalo on Nowlen's coach, with his trunk fastened to the back by a rope. After proceeding about three miles, it was found that the rope had been cut and that the trunk and its contents had been stolen. Thereupon, Hollister sued to recover the value of the trunk and its contents. The defense of the defendant, Nowlen, consisted in the fact that the public notice became a term in his offer to carry the public on his coach; and that Hol- lister was bound by its provisions. Decision : Such a general notice as this, if made evi- dent to the public, might be considered a term in a CONTRACTS 107 contract in ordinary cases ; but in the case of common carrier, where an extraordinary liability exists, such a general notice does not constitute a part of the con- tract of carriage, unless it is expressly assented to by the passenger. Mr. Justice Bronson said in part: "The argument is that where a party delivers goods to be carried, af- ter seeing a notice that the carrier intends to limit his responsibility, his assent to the terms of the notice may be implied. But this argument entirely overlooks a very important consideration. Notwithstanding the notice, the owner has a right to insist that the carrier shall receive the goods subject to all the responsibility incident to his employment. If a coat be ordered from a tailor, after he has given the customer notice that he will not furnish the article at a less price than $100, the assent of the customer to pay that sum, though it be double the value, may perhaps be implied. But if the tailor .had been under a legal obligation, not only to furnish the coat, but to do so at a reasonable price, no such implication arises. He has no right to pre- scribe any other terms; and a notice can, at most, amount to a proposition for a special contract, which requires the express assent of the other party." Judgment was given for Hollister in this action. j RULING LAW Story Case Answer A term or condition may become a part of a contract when made publicly, if it can be shown that the party affected thereby, knew or should have known of its existence. In the case of Hollister vs. Nowlen the Court was of the opinion that such a notice must be 108 CONTRACTS definitely asserted to the party, in order that a com- mon carrier might limit its liability. But, in general, a public notice will be binding upon persons unless they can show that they were not informed of it, and had no means of discovering it. In the Story Case, Thomas would lose. He had notice of the requirement for cash before he bid on the horse. When the notice reached him it became part of the offer to sell to the highest bidder. Hence, by accepting the offer of sale by bidding highest, he accepted the stipulation of the offer, namely that cash was re- quired. g. Terms Stipulated After the Agreement Is Made STORY CASE Harvey & Company had entered into a contract to sell Mr. Good a consignment of hemp * ' to be delivered July 30, 1914." On July 15, 1914, Harvey & Co. real- ized that they would be unable to deliver the hemp at that date and requested an extension of time. Mr. Good said : "I am in no hurry for the hemp. If you get it to me by the first of October, it will be all right." On October 1, Harvey & Co. delivered the hemp to Mr. Good, who refused to accept and said that he intended to sue them for failure to deliver on July 30. Harvey & Co., unable to find a buyer for the hemp, on October 15, sued Good for refusing to accept the shipment. p Oood defended on the ground that, since Harvey & Co. did not deliver on July 30th, the contract was terminated and he was released from performing his CONTEACTS 109 promise. Harvey & Co. answered that he waived the delay when they made this request on July 15th. Which party should win? RULING COURT CASE Dale vs. See, Volume 51 New Jersey Law Reports, Page 378; Volume 14 American State Reports, Page 583. Dale was a manufacturer of silk braid in the city of Paterson and See w T as a silk dyer. Dale sent silk to See to be dyed. No special contract for the work was entered into, but Dale relied on the usual implied contract of dyers to use the proper degree of care and skill. The twist was received by Dale, after See had finished dyeing it, and was woven into silk braids. Sev- eral months later, Dale found that these braids were of greatly inferior quality and value; they were oily on account of the unskillful dyeing by See. Thereupon, Dale brought this action to recover damages caused by the unskillful work. See set up the defense that, with each part of the silk which was returned to Dale, a notice was sent which provided: "All claims for deficiency or dam- age must be made within three days from date ; other- wise such claims will not be allowed. ' ' Decision: This stipulation made by See was made too late to become a part of the contract; their con- tract was complete when Dale delivered the goods to him to be dyed. Consequently, a subsequent stipula- tion is not a term of the contract and is no defense to this action. Mr. Justice Depue said in part: "Upon a bailment of goods for work and labor upon them, the contract 110 CONTRACTS between the parties arises immediately upon the de- livery of the goods to the bailee, and upon the com- pletion of the work for which the bailment was made, it is the duty of the bailee to return the goods to the owner. He cannot after having received them on one agreement prescribe the conditions under which he will perform that duty. Notice by the bailee, with the return of the goods, or with his bill for the work done, qualifying his liability for defective workmanship, are terms of his own dictation. His refusal to restore the goods to the owner, except upon those terms, would be wrongful; and although the owner should accept his goods with knowledge of the terms proposed, no con- tract would arise therefrom. The transaction would lack the consideration necessary to support a contract. Accordingly, it was decided that Dale might recover his damages in this action. RULING LAW Story Case Answer When the parties to a contract have reached a final agreement, it is assumed that they have satisfied all the contingencies and conditions which they wish to consider. Thereafter, neither party has the right, with- out the consent of the other, to stipulate for new con- ditions, or impose new terms. Such a right would be very unjust to either party because neither would be certain as to the exact meaning of his contract. In the case of Dale vs. See, for instance, the contract be- tween the two parties was complete, when the silk twist was delivered. If See wished to provide that claims for damages and deficiencies were to be made within a certain time, he should have provided for that when the contract was made. He certainly had no CONTEACTS 111 right to attempt to make that condition a part of the contract, after the contract was closed. In the Story Case, the new conditions were not arbi- trarily imposed upon Good; when they were stipu- lated he was not compelled to assent to them, and had a good cause of action against Harvey and Company for failure to deliver. He did, however, voluntarily assent to the new conditions, and, thereupon, these be- came a part of the contract. Good's defense will not hold. (8) An Agreement to Hold an Offer Open Is an Option STORY CASE Henry Mock wished to buy some horses which John Armstrong desired to sell. But Mock had not entirely decided whether he should buy one or two teams. On Thursday, in a conversation with Armstrong, he said, "I do not know just what I want to do yet. Will you hold the proposition open till Saturday?" Armstrong replied, that he would not sell the teams until he heard from Mock, provided he would promise to buy at least one team. Mock promised definitely to buy the gray team and perhaps the blacks. On Fri- day, Armstrong sold the teams for a higher offer than Mock's. On Saturday, Mock told Armstrong that he had decided to buy both teams. When he learned that the teams were sold, he brought suit against Arm- strong for breaking his contract to keep the horses un- til Saturday. Armstrong replied, that the promise was only an option which is revocable at will. Is this a good de- fense? 112 CONTEACTS RULING COUKT CASE Ide vs. Leiser, Volume 10 Montanta Reports, Page 5; Volume 24 American State Reporter, Page 17. Leiser was the owner of certain land. On September 24, 1889, he agreed in writing to give Ide the sole right to purchase that land for $1,000, if the latter chose to exercise the right within ten days from the date of the agreement. This agreement recited that Ide had paid Leiser $1 for this right to buy within the ten days, as mentioned above. Ide did not exercise the right within the ten days from the date of the agreement. By a subsequent memorandum noted on the original agreement, Leiser stated: "I hereby ex- tend the above option for a period of ten days. ' ' Be- fore the ten days had passed, Leiser withdrew his offer. Ide at once attempted to accept the offer under the terms of the option, but Leiser refused to comply and to make the conveyance. Thereupon, Ide brought this suit. The defense of Leiser consisted in the fact that the agreement to extend the time, within which Ide might purchase the land, was without consideration and not binding upon him; therefore, no damages can be re- covered for his failure to convey the land. Decision : An offer may be withdrawn at any time before it is accepted. But if the offerer agrees for a consideration to hold an offer open for a given length of time, he may not withdraw it before that time. Such an agreement to hold an offer open is an option. But if the agreement is not supported by a consideration, the offerer may withdraw it, notwithstanding his promise, and the person to whom he made the offer has no right to damages for its withdrawal. In this case, the agree- CONTRACTS 113 ment to extend the time within which it might be ac- cepted, was unsupported by any consideration, and might be withdrawn at any time by the offerer. Hav- ing been withdrawn before the offer was accepted, Ide cannot claim any damages. Therefore, judgment was given for the defendant, Leiser. RULING LAW Story Case Answer If one person gives a consideration to another for his promise to hold an offer open, the relationship amounts to a completed contract at that moment, called an option. The contract consists of terms whereby one party agrees to enter into another contract if the other party chooses to do so at a subsequent date. In the Story Case, Mock, by promising to buy the gray team, gave a consideration in return for Arm- strong's promise or option to hold the proposition open. Therefore, Armstrong could not legally with- draw his option until Saturday. An option is not re- vocable at will when the other party gives a considera- tion for it. Therefore, the defense in the Story Case is ineffective. (9) An Offer Terminates a. By Merger Into Contract STORY CASE Whelpley and Keefe Brothers were negotiating by mail for the sale of a carload of brick. On February 3, 1915, Keefe Brothers made the following offer to Whelpley by mail : 114 CONTRACTS "We will sell yon the carload for $17.50 per thousand." This reached Whelpley on the 4th and he immediate- ly mailed an acceptance. On the evening of the 4th, Keefe Brothers telegraphed a revocation of the offer which was not received until after the acceptance was mailed. The acceptance reached Keefe Brothers in due course on the 5th. Keefe Bros, refused to deliver the bricks, on the ground that they revoked the offer before it was ac- cepted. Whelpley sued, however, claiming that the offer was accepted upon the mailing of the letter of ac- ceptance ; and that, as soon as an offer is accepted, it becomes a contract and then can be terminated only by mutual consent. Which should win? EUUNG COURT CASE The Boston & Maine Railway Company vs. Bartlett, Volume 3 Gushing' s Massachusetts Reports, Page 224. Bartlett was the owner of certain land, located in the city of Boston. On the first day of April, 1844, Bart- lett, in writing, agreed to convey the land to the Boston & Maine Eailway Company for the sum of $20,000, if the latter so desired and requested within thirty days from the date of the agreement. This agreement was extended thirty days from the first of May, under a similar offer. On the 29th day of May, while this offer was in force and unrevoked, the company elected to purchase the land at the price named. They notified Bartlett of their desire and offered him the money therefore. Bartlett, thereupon, stated that he had de- cided not to convey the land for that price, and refused to consider the offer. The company brought this action. CONTRACTS 115 Bartlett contended that there was no consideration for his offer ; and that an acceptance by the company, even before it was withdrawn, did not make a binding contract. Decision : Although an offer, unsupported by a con- sideration, may be withdrawn by the person making it, at any time before it has been accepted ; nevertheless, if it is accepted before it is withdrawn, the offer dis- appears and there results a binding contract between the parties. In this case, the offer was so accepted, and a binding contract resulted. Mr. Justice Fletcher, in the course of his opinion, said : "In the present case, though the writing signed by the defendant was but an offer, and an offer which might be revoked, yet while it remained in force and unrevoked, it was a continuing offer during the time limited for acceptance ; and, during the whole of that time, it was an offer every instant ; but as soon as it was accepted, it ceased to be an offer merely and then ripened into a contract. When the offer was accepted, the minds of the parties met, and the contract was com- plete. There was then the meeting of the minds of the parties, which constitutes and is the definition of a contract. ' ' Accordingly, judgment was given for the Boston & Maine Railway Company. EUIJNG LAW Story Case Answer An offer may terminate in several ways. It will terminate when the offeree accepts it ; it then becomes merged into the contract. The offer and acceptance make the contract. If, then, the offer disappears when 116 CONTRACTS accepted, it follows, of course, that the offerer cannot thereafter revoke the offer. Thus, in the Story Case, an acceptance of the offer of Keefe Brothers was made before he attempted to revoke it. Immediately upon acceptance, the offer merged into the contract, and therefore, could not be withdrawn by Keefe Brothers. b. By Expiration of the Time Designated STORY CASE Hays owned a fine racing horse which he wished to sell at once. He made this offer to Brown by mail : "I will sell 'Bess' to you for $1,000 if you will apprise me of your decision by tomorrow." Two days later Brown sent this telegram : ''Will take Bess. Was away when your offer arrived. ' ' But when Hays received this telegram he had al- ready sold the horse. Brown sued him, alleging that there was a contract between Hays and himself, and that he had accepted the offer as soon as circumstances admitted. Do you think that Brown should win? RULING COURT CASE Home vs. Niver, Volume 168 Massachusetts Reports, Page 4. Niver, who was a dealer in coal, doing business in Salem, on July 17, 1895, wrote a letter to Home, of- fering "A very low figure on a small lot of our Colum- bia coal from Salem." The letter continued: "We beg to quote you $2.50 on cars at that place, and should CONTEACTS 117 you deem it wise to favor us with an order of five to six hundred tons, kindly wire us at our expense on receipt of this." On July 19, Home replied, ordering four hun- dred tons. In the meantime, Niver had sold the small lot of coal which he had offered at this price. There- upon, Home sued for damages. The defense set up by Niver consisted in the fact that the acceptance of the offer came too late. Decision: When a person makes an offer and sets no time in which it must be accepted, the offer will ex- pire within a reasonable time. But, if he states in his offer that it must be accepted, if at all, within a certain date, unless it is accepted within the time stipulated, the offer expires when that time has elapsed. Thus, in this case, Niver stated that it must be accepted on re- ceipt of the offer. But Home delayed a day or more before he decided to accept ; the result was that, when he did accept, the offer was no longer open to him and his acceptance of no effect. Therefore, judgment was given for Home in this case. RULING LAW Story Case Answer It is the right and privilege of the offeror to contract on terms and conditions suitable to himself. Thus, he may expressly state that he is willing to enter into a contractual relation only in case the offeree is willing to accept his offer within any given period of time. If he so designates the time, the offeree must accept with- in that time, or the offer is gone, and he cannot there- after accept. The mere fact that the offeree is away from home when the offer comes is not material ; that 118 CONTEACTS is his misfortune; the offer terminates at the time specified, nevertheless. Thus, in the Story Case, the acceptance of Brown was too late. It was his misfortune that he was away from home when the offer arrived. c. If No Time Is Designated, an Offer Terminates Within a Reasonable Time STORY CASE Thomas Platt made the following offer to the ship- pers firm of Thiom and Co. : "Oct. 5, 1914. I will sell you the brig ' Nancy ' for $300,000. (Signed) THOMAS PLATT." Thiom & Co. made no reply to this offer until Febru- ary 13 of the following year ; then they wrote accept- ing the offer. Platt immediately answered that he had waited for their acceptance for some time and that he had then sold the vessel. Thiom & Co. sued Platt for breach of contract to sell them the " Nancy" and Platt defends, on the grounds that his offer terminated after a reasonable time, without express revocation on his part. Do you think that his defense is good? RULING COURT CASE Park vs. Whitney, Volume 148, Massachusetts Re- ports, Page 278. William Park was the owner of stock in the Equit- able Water Meter Company. On May 16, 1884, Henry Whitney wrote a letter to Park, which contained the CONTRACTS 119 following offer : ' ' As your possible losses on the meter business are a source of anxiety to you, I will give you my guaranty to take the meter stock from you at cost, without interest, at any time after January 1, 1886, if at that time you desire me to do so." To this offer, Park sent the following letter in reply : "July 8, 1886. Dear Sir: As I desire to dispose of my interest in tlin Equitable Water Meter Company, I hereby accept your proposal of May 16, 1884, to take it from me at cost, without interest. Respectfully, WILLIAM PARK." Whitney refused to buy the stock; Park thereupon brought this action for damages. Whitney defended that the offer was not accepted within a reasonable time. Mr. Justice Allen delivered the opinion of the court, in which he said : "In the first place, considering the nature of the offer, and the circumstances as shown in the letter, the plaintiff must have known his acceptance by January 1, 1886. The words 'at that time' mean the same as 'at that date.' But if that is not the true construction, at least the offer must be accepted within a reasonable time after that date. Plainly the offer was not to continue forever. The words' "at that time" do not import perpetuity; and if not, then the plaintiff was entitled to a reasonable time ; and, there being no facts in dispute, this was to be determined by the court. There was no acceptance within a reason- able time." Therefore, judgment was given for Whitney. 120 CONTRACTS EULING LAW Story Case Answer Suppose that a person makes an offer and makes no provision concerning the time within which an accept- ance is expected or must be made. Does such an offer continue until it has been revoked by the one making it! Unless it is accepted within a reasonable time after it is made, it lapses ; it is no longer of any force and effect as an offer. What constitutes a reasonable time must be determined by the circumstances of each case. If a person offers to sell a farm; to say that the offer continued for six months thereafter might not be unreasonable. But if it was an offer to sell perish- able fruit; five days might well be considered as an unreasonable time. In the Story Case, the Court would hold that the offer had lapsed at the time it was at- tempted to be accepted. d. By Death STORY CASE Colonel Watergin, a native of North Carolina, of- fered his slave "Jonah" to Mr. George Therfad for $400, before the Civil war. On the next day, the Colonel was killed in a duel. Mr. Therfad, not knowing of his death, sent a letter to him accepting the offer, but the heir and executor of Colonel Watergin refused to re- linquish "Jonah." Mr. Therfad sued him for breach of the contract to sell him the slave. To this suit, the heir and executor advanced the de- fense that the offer made by the Colonel expired with his death. Is this a good defense? CONTRACTS 121 RULING COURT CASE Townsend vs. Wallace, Volume 43 Ohio State Re- ports, Page 537; Volume 54 American Reports, Page 829. A certain railroad company, represented by Town- send in this action, had proposed to build a road over a designated route to the Ohio River, opposite the City of Wheeling, provided that persons along the route would subscribe to the capital stock of the railroad company. Wallace, knowing of this, and being de- sirous of promoting the scheme, caused a public meet- ing to be held, and appointed a committee to solicit subscriptions to the capital stock of the company. Wal- lace himself signed the list, which was an offer on his part to take a certain number of shares of stock in the company. Before this list was delivered to the com- pany, Wallace died ; and, after the work was completed, this action was begun against the defendant Wallace, as the personal representative of Wallace deceased. The action was for damages for the failure to take stock in the Company. The defense of Wallace, the defendant, consisted in the plea that no contract was made between Wallace, deceased, and the company, because he died before the company knew of his offer, and at his death, the offer terminated and could not thereafter be accepted. Mr. Justice Owen said in part: "Here was an un- accepted conditional subscription by Wallace to the capital stock of the company. Indeed, looking to its substance and plain intent, rather than its form, we find it to be no more than an offer to subscribe to stock upon certain named conditions. It was not a subscrip- tion to stock in the ordinary sense of that term. The 122 CONTRACTS company was not a party to it, and was under no obli- gation to accept it at any time during the life of Wal- lace. It was at best an unaccepted proposal. Before its acceptance, and indeed before the party to whom it was made had notice of it, the proposer died. It was a proposal, capable of revocation at any time before acceptance, and death worked a complete revocation. ' ' Therefore, it was decided that Townsend could re- cover nothing in this action. RULING LAW Story Case Answer It is the general rule that an offer is revoked by the death of the person who makes it. An examination into the situation reveals this theory : That each mo- ment during the continuance of the offer, the offerer is regarded as continually making a new offer. If he dies, of course, he can make no new offer ; and the offer he has made is past; thus, it follows that there is nothing to accept, when the offerer has died before ac- ceptance. Thus, in the Story Case, the offer of the Col- onel ceased when he died; therefore, Therfad had no claim against the executor for the slave or for damages. e. By Conditional Acceptance STOEY CASE Silas Defor offered his fast trotting horse to Hohn Hostetter for $250. Hostetter was a notorious horse trader and tried to secure a better bargain. Defor said: "I won't take a cent less than $225." CONTRACTS 123 Then Hostetter said : ' 'I'll give you $215." Defor refused to take this price and prepared to leave. Hostetter then said : "All right, I'll give you $225." But Defor would not then accept that price and re- fused to negotiate with Hostetter further. Hostetter brought suit on the ground that Defor broke his prom- ise to sell for $225. Defor defended the suit on the ground that the offer of $225 was terminated by the counter offer of $215 which Hostetter made. Do you think that the defense is sufficient? RULING COURT CASE Hyde vs. Wrench, Volume 3 Beavan's English Re- ports, Page 334. Wrench, desirous of disposing of an estate by him owned, offered to sell it to Hyde for 1,200 pounds. Hyde -declined to accept the offer, claiming the price asked for the estate was too high. Thereupon, "Wrench stated by letter that he would make one more offer, from which he would not withdraw ; that this offer was to sell the estate for 1,000 pounds ; and he demanded a return reply. When he received this offer, Hyde sent back the proposition that he would give 950 for the estate. Wrench refused absolutely to accept 950 pounds. Then Hyde wrote that he would accept the offer at 1,000 pounds; this, Wrench refused to con- sider. In the meantime, he sold the estate to another person. Hyde, thereupon, brought this action for damages. Wrench contended that no contract ever resulted; that when he made his offer of 1,000 pounds, and 124 CONTRACTS Hyde replied that he would give 950 pounds, this was a new offer, and his original offer was gone. The Master of the Rolls said in part : ' ' Under the circumstances stated, I think there exists no valid binding contract between the parties for the purchase of property. Wrench offered to sell it for 1,000 pounds, and if that had been at once unconditionally accepted, there would have been a perfect binding con- tract ; instead of that, Hyde makes an offer of his own, to purchase the property for 950 pounds, and he there- by rejected the offer previously made by Wrench. I think that it was not afterwards competent for him to revive the proposal of Wrench by tendering an ac- ceptance of it; and, that, therefore, there exists no obligation of any sort between the parties/' Accordingly, judgment was given for the defendant, Wrench. RULING LAW Story Case Answer A conditional acceptance operates as a rejection of the offer. It is well to analyze a case and see what the reason for this result is. Suppose that A says to B : "I will sell you my watch for $50." To this B re- plies: "I will give you $40." B has not expressly rejected the offer made by A, but by implication he has. He virtually says: "I reject your offer of $50, and will make you an offer of $40." Thus, a so- called conditional offer is two things: It is, in the first place, a rejection of the offer made; and in the second place, is the making of a new offer on different terms. This is what happened in the Story Case; Defor made an offer to sell for $225; Hostetter ap- parently rejected that offer, and made a new offer of CONTRACTS 125 $215. Of course, this new offer does not impose any obligation upon Defor unless he accepts it. Thus, the defense of Defor is good and sufficient. f. By Revocation STOET CASE Pat O'Keefe decided to sell the piano that he had purchased for his little daughter, and inserted the fol- lowing offer of sale in the daily paper : "I will sell my Jones upright piano for $175. PAT O'KEEFE. " His wife saw the advertisement and, after talking the matter over with her, he decided not to sell. He at once phoned the office of the paper to withdraw the notice, and to insert another one to the effect that the offer was withdrawn. This was done, and for three days, the notice of withdrawal was run in the paper. Mr. Dugan, who did not subscribe for the paper, chanced to see the offer of sale, although he did not see the notice of withdrawal. On the second day after the notice of withdrawal had been inserted, he saw Pat on the street and said that he accepted the offer. Pat informed him that the offer had been revoked. Dugan replied that he had not seen the notice and would hold Pat to his offer. Dugan immediately started suit against O'Keefe. Was his case a good one? RULING COURT CASE Eskridge vs. Glover, Tennessee Reports. Eskridge, the plaintiff in this case, was making a horseback journey to Tennessee. His horse became 126 CONTRACTS sick and he stopped at the home of Glover, the de- fendant. After some negotiations, Glover offered to give a horse, which he owned, and fifty dollars in ad- dition, for Eskridge 's horse, provided Eskridge was willing to accept, after having ridden the horse ten miles. Eskridge agreed to take the horse and give him a trial ; if he liked him at the end of the ten miles, he would keep him ; if he did not like the horse he was to return him. He had gone only two or three miles when Glover pursued and overtook him, and demanded the return of his horse, because the horse left with him was dying. Eskridge returned the horse, but claimed that Glover had broken his contract. Thereafter, he sued for damages. Glover contended that he was not liable because no contract existed between them; he argued that he re- voked the offer before it was accepted by Eskridge and, therefore, no contract could result. Decision: An offer is the mere expression on the part of the offeror to contract; unless this offer is under seal, or supported by a consideration, it may be withdrawn by the offeror at any time before it is ac- cepted. In this case, Glover made an offer, and agreed that it should continue open until Eskridge had ridden the horse ten miles. Before he had ridden the distance, and before he had accepted, Glover overtook him and withdrew his offer. Thereafter, there was nothing for Eskridge to accept, and no contract could be made be- tween the parties. Therefore, judgment was given for Glover, the de- fendant. CONTRACTS 127 RULING LAW Story Case Answer The revocation of the offer must be communicated to the person to whom it was made. An offer made directly to a person can be revoked only by notice to that person of its revocation. An offer made to the public, as in a newspaper, or by a public notice, may be revoked in the same manner. In the Story Case, the offer was sufficiently revoked by the notice of with- drawal in the paper in which the offer had been pub- lished. Therefore, Dugan has no case against 'Keef e. B. There Must Be an Acceptance (1) Acceptance Changes the Offer Into a Contract STOEY CASE David Humphry offered his Jersey cow to Mr. Rowan for $85 and stipulated that the offer was to be open for only three days. On the very next day, Mr. Rowan, stated to Humphry that he accepted the offer and tendered the price. Humphry refused to accept the money and said: "The offer was to remain open for three days. Now in that space of time you could buy or not buy and I had the like privilege. I have decided not to sell the Jersey/' Mr Rowan immediately brought suit on the breach of promise, and Humphry defended on the above ground. Is the defense valid. RULING COURT CASE Prescott vs. Jones, Volume 69 New Hampshire Re- ports, Page 305; Volume 41 Atlantic Reporter, Page 352. 128 CONTRACTS Jones was an insurance agent; in the course of his business he insured Prescott's buildings in the Man- chester Fire Insurance Company until February 1, 1897. On January 23, 1897, Jones notified Prescott that he would renew the policy, and insure his build- ings for a further term of one year, from February 1, 1897, in the sum of $500, unless notified to the con- trary. Prescott made no reply whatsoever to this of- fer. On the 1st of March, 1897, the buildings in ques- tion were destroyed by fire. Prescott demanded pay- ment of his loss from the agent, Jones. Jones refused to make good the loss; Prescott, thereupon, brought this action. Jones contended that no contract was ever made be- tween them, because Prescott did not accept his offer. Decision : When a person communicates his willing- ness to contract, in order to make of this willingness a legal obligation, the offeree, or the person to whom the offer is made, must in some way communicate to that person his willingness and desire to accept an obligation from him. An acceptance is necessary in order to create a binding obligation or contract be- tween the offerer and offeree. In this case, Prescott did not endeavor in any way to indicate his willingness and desire to accept the obligation of Jones. It fol- lows, therefore, that no contract was ever made be- tween them. Therefore, judgment was given for Jones, the de- fendant. EULING LAW Story Case Answer Acceptance is an expression on the part of the sec- ond person of his willingness to be bound to the first CONTRACTS 129 party. Until the second party has done this, he gets no contractual rights against the other. As soon as an acceptance is made, the offer ceases and the contract begins. In the Story Case, Humphry made an offer ; he expressed a willingness to sell his cow for a certain sum; before he had withdrawn that offer, the person to whom it was made, expressed his willingness to buy the cow at that price ; thereupon, the offer ceased and from the offer and acceptance a contract resulted. Therefore, the defense of Mr. Humphry is not good. (2) When Offer Specifies the Time, an Acceptance After That Time Is of No Effect STORY CASE The Turkish government wished to buy some cannon from the Hupps. The latter made the Turkish repre- sentative an offer for some new style cannon, but the representative was compelled to get permission from his government before he could accept the offer. The parties made the following arrangement: It would require approximately twenty-four hours for the offer to be telegraphed to Turkey and for the reply to be telegraphed back. Therefore, the Hupps agreed to keep the offer open until noon of the following day and the Turkish representative gave them 100 marks for the option. Because of some delay in the transmission of the telegrams, the message of acceptance from Turkey did not reach the Hupps until fifteen minutes past noon of the next day. The Hupps refused to be bound by the acceptance, because of the delay. The Turkish repre- rentative insisted that the delay was so slight that it could not cause any injury and that, therefore, the ac- 130 CONTEACTS ceptance was binding. The Turkish representative brought suit and the Hupps defended on the ground that the offer terminated at noon of the next day. Will the Hupps lose the suit? RULING COURT CASE Maclay vs. Harvey, Volume 90 Illinois Reports, Page 525 ; Volume 32 American Reports, Page 35. Harvey, the defendant in this action, desired to se- cure a milliner for the spring season. He wrote a letter to Miss Maclay, the plaintiff in this action, in which he offered to engage her on certain terms for the season. In the letter, in which he made the offer, he requested a reply by return mail. Miss Maclay re- ceived the letter on the 22nd of March; the following day she wrote a card in which she accepted the offer ; she handed it to a boy to mail; he neglected to post it until the 25th of March. Harvey, failing to hear from her by return mail, secured the services of an- other young lady for the season in question, and re- fused to consider the application of Miss Maclay for employment. Thereupon, she brought this action, claiming damages for the breach of her alleged contract. Harvey, however, claimed that there was no con- tract, because she had not accepted within the time limit which he had proposed. Decision : It is the privilege of one making an offer to set a limit upon the time within which it way be accepted. Unless the offeree complies with the terms of the offer, by accepting within that time limit, the offer automatically expires. Here Harvey expressly requested a reply by return mail; although Miss Maclay believed she was accepting by return mail, her CONTRACTS 131 own agent, the boy, was responsible for the delay and it was her misfortune that the letter was not posted. Since the acceptance was too late, no contract resulted. Therefore, judgment was given for the defendant, Harvey. RULING LAW Story Case Answer We have seen that an offer may be made for a cer- tain time only; that it will lapse after a reasonable time ; or that it may be revoked at any time before ac- ceptance, unless the offer is made under seal or sup- ported by a consideration; or it may be revoked by death of the person making it ; or a conditional accept- ance operates as a rejection of the offer. If the offer terminates for any of the foregoing reasons, the situa- tion of the parties is exactly as if no offer had ever been made. Consequently, an acceptance under any of the foregoing circumstances imposes no obligation upon the person who made the offer ; and confers no right upon the person who made the offer ; and confers no right upon the person who seeks to accept the offer now terminated. In the Story Case, the Hupps ex- pressly stated the time within which the offer was to be accepted; since it was not accepted within the time stated, the offer terminated ; and the attempt to accept thereafter, by the Turkish representative was of no effect and they can recover nothing from the Hupps. (3) When No Time for Acceptance Is Made, a Reasonable Time to Accept Is Implied 8TOEY CASE The Good Strawberry Company made the following offer to Friend Brothers, commission merchants : 132 CONTRACTS ''February 1,1915. We will sell you a carload of ripe Florida straw- berries for the current market price, to be de- livered in crates at our expense. (Signed) GOOD STKAWBEERY Co." This letter reached Friend Bros, on the evening of February 1, and they sent their acceptance on Febru- ary 4. The strawberry company had sold the berries on February 2. Friend Bros, sued the strawberry company for breach of their contract to sell and deliver the carload of berries as per the agreement. The strawberry com- pany defends on the ground that, since strawberries are perishable, the offer terminated on the 2nd. They claim that an offer will terminate in a reasonable time when no definite termination is specified and that a reasonable time for the termination of an offer of sale of ripe strawberries is immediately. Which party will win the suit 1 ? RULING COURT CASE Cohn vs. Kemper, Volume 47 Arkansaw Reports, Page 519 ; Volume 58 American Reports, Page 775. Mr. Kemper, on January 30, 1885, wrote the follow- ing letter to Mr. Cohn : "Hot Springs. M. M. Cohn, Little Bock, Ark.: Dear Sir : Yours of the 28th received and con- tents noted. In reply, will say, in regard to the lot by me owned, I will sell to you for $10,000; $5,000 in cash, and for $5,000 give your note with ten per cent interest. If this is satisfactory, send CONTRACTS 133 the deed and I will return it properly acknowl- edged. J. KEMPER." On Febmary 7, 1885, Cohn replied, accepting the offer. In the meantime, Kemper altered his plans and refused to sell the lot, although he had not withdrawn his offer. Thereupon, Cohn brought this suit for damages. Kemper contended that his offer was not accepted within a reasonable time, and therefore, the acceptance was too late, and no contract resulted. Decision : A contract by letter is complete the mo- ment the letter of acceptance is mailed, provided it is done with reasonable promptness and before the offer is withdrawn. What constitutes a reasonable time is a question of fact, depending upon the circumstances of each case. If the offer was to sell articles which fluctuated in value from day to day, as stock, or if the offer- was to sell perishable goods, like fresh fruit, three days might be an unreasonable length of time to delay an acceptance ; but a longer time may be permit- ted, not unreasonably, for the acceptance of an offer to sell land, where no special circumstances exist. In this case, the court was of the opinion that the accept- ance was within a reasonable time. Such being the case, a contract resulted, and Cohn is entitled to dam- ages for the refusal of Kemper to perform it. Judgment, therefore, w T as given for Cohn in this action. RULING LAW Story Case Answer It has been stated in a foregoing section that an offer terminates unless it is accepted within a reasonable 134 CONTRACTS time after it is made. The converse of that proposi- tion is equally true ; that an acceptance must be made within a reasonable time in order to create a binding contract between the parties. As was said there, what constitutes a reasonable time will depend upon the facts and circumstances of each case; no definite rule can be formulated. In the Court Case of Cohn vs. Kemper, the Court held that an acceptance made over a month after the offer was communicated was made within a reasonable time. But the subject of the con- tract was land, the value of which does not change rapidly. If the offer had been to sell stock which fluc- tuated in value from day to day, the Court undoubtedly would have held that a month was an unreasonable de- lay made by the offeree before accepting. In the Story Case, the Court will decide that the acceptance was too late; the subject matter was fresh fruit which would have perished before the acceptance was made. There- fore, judgment should be given for the Good Straw- berry Company. (4) Acceptance Must Be an Overt Act a. Acceptance Must Be Communicated STOET CASE Mr. Radnitz circulated handbills with the following notice : "I offer my threshing machine for sale for the price of $500. (Signed) JOSEPH RADNITZ." The next day, Gerhart drove to Radnitz' residence for the purpose of accepting the offer, but Radnitz was CONTRACTS 135 not at home. It also chanced that the machine was sold on the same day. Gerhart, however, protested to Radnitz that he had accepted the offer of sale before the machine was sold and that he would sue him for breach of contract. Radnitz defends on the ground that he had no notice of the uncommunicated acceptance and that he was not bound by it. Do you think that the defense is a good one? RULING COUET CASE White vs. Corlies, Volume 46 New York Reports, Page 467. Samuel P. White was a builder with his place of business in 40th Street, in the City of New York. Cor- lies and Tift, the defendants in this action, were mer- chants with an office at 32 Day Street in the same city. In September, 1865, Corlies furnished White with specifications for fitting up a suite of offices at 57 Broadway, and requested him to make an estimate of the cost of the work. On September 28, White left his estimate with Corlies to be considered. After a day or two spent in considering the estimate, the following note was sent to White: "Upon an agreement to finish the fitting up of offices, 57 Broadway in two weeks from date, you may begin at once. J. W. CORLIES." No reply was ever made by White to this note ; but when he received it, he began buying lumber to be used in the work. The day after the note was delivered to White, Corlies notified him that he had changed his decision about the work and that he need not consider 136 CONTRACTS further procedure. White claimed that he had a con- tract, and that this notice was a breach; and, there- fore, brought this action for damages. Corlies contended, however, that the contract was not complete, because he had received no notice of his acceptance ; and that, therefore, he was not liable for damages. Decision: Before an offer can be turned into a binding contract, there must be an acceptance; and this acceptance must be communicated by some word or appropriate act, showing an acceptance. The pur- chase of lumber by White was not an appropriate act which sufficiently indicated his intention of accepting, because the lumber might have been purchased for any other work which he might have been doing. There- fore, there was no contract, and Corlies is not liable in this action. Mr. Justice Folger said in part: "Where an offer is made by one party to another when they are not to- gether, the acceptance of it by that other must be mani- fested by some appropriate act. It does not need that the acceptance shall come to the knowledge of the one making the offer before he shall be bound. But though the manifestation need not be brought to his knowledge before he becomes bound, if that manifestation is not put in a proper way to be in the usual course of events, in some reasonable time, communicated to him, he is not bound. Thus, a letter received by mail, containing a proposal, may be answered by letter, containing the acceptance. And in general, as soon as the answering letter is mailed, the contract is concluded. Though one party does not know of the acceptance, the manifesta- tion thereof is put in the proper way of reaching him. CONTRACTS 137 In the case at hand, White determined to accept. But a mental determination, not indicated by speech or put in course of indication by act to the other party, is not an acceptance which will bind the other. ' ' Therefore, judgment was given for Corlies, the de- fendant in this action. RULING LAW Story Case Answer An acceptance must be actually communicated to the person making the offer ; or the person accepting must perform some appropriate act, manifesting his inten- tion and willingness to enter into the contractual re- lation. The secret intention of Mr. Gerhart in the Story Case is insufficient ; it would be very unfair and incon- venient to permit a person to accept by mere intention without some manifestation of the intention. A much more difficult question is presented by the case of White vs. Corlies. There, White did not actually com- municate his acceptance to Corlies, but he contended that the purchase of his material was an appropriate act which indicated his willingness to accept. But the Court was of opinion that this was not an appropriate act, because buying of lumber was something which he did constantly and was no special indication that he had determined to accept the proposition of Mr. Corlies. b. If Acceptance Is Made in Manner Required, It Is Not Material If It Is Never Received STOEY CASE In the Kentucky mountains there was formerly no United States mail, so James Tullifer, who had some corn for sale, wrote to the miller, Hobes : 138 CONTRACTS December 16, 1845. Dear Sir: I have for sale 50 bushels of corn which I will sell to yon at the same rate I made you last year. If you want this corn, leave a note for me under the stone at the Cross Roads. (Signed) JAMES TULLIFER." Hobes left a note under the stone for Tullifer but some children destroyed it. Tullifer did not find a note for him and sold the corn to another miller. Hobes, thinking that Tullifer would deliver the corn, incurred a great expense in preparing to grind it. He now sued Tullifer for the damage it caused him to be deprived of the corn and for breach of the contract to sell. Tullifer defended on the ground that he did not receive the acceptance and, therefore, was not bound. Which party won? EULING COUET CASE Phebe Howard vs. August Daly, Volume 61 New York Reports, Page 362 ; Volume 19 American Reports, Page 285. August Daly was the manager and proprietor of the Fifth Avenue Theater in the City of New York. Phebe Howard applied to him for employment as an actress. The evidence showed that an offer in writing was made by Daly to Phebe Howard for the engagement of her services for one year at ten dollars per week. He sent with this proposal a duplicate copy which was to be signed and returned by her as her acceptance. She signed the duplicate and placed it in the letter box of Daly at his theater. He admitted this box was used as CONTEACTS 139 a place for deposit of the duplicates of contracts made between him and actors and actresses. When the sea- son opened, Phebe reported for duty but August Daly refused to employ her or to recognize any contractual relation between them. She sued him for damages. His defense consisted in the fact that he never re- ceived the duplicate from her by which she accepted the employment, and, therefore, no contract ever resulted. Decision : Where acceptance of an offer is author- ized in a certain manner, or where such offer has been customarily accepted in that manner, compliance with the authority or custom is all that is necessary to con- stitute a binding contract. In this case, it was shown to be customary for acceptances of offers to be put in Daly's letter box. When Phebe satisfied this demand, a contractual relation was established between herself and Daly, and it is his misfortune if he never received the acceptance. It was said in the opinion by the Court : "It is true that he (Daly) testified, that he never received the papers which Phebe asserts that she placed in his box. This, however, is immaterial. The minds of the parties met when she complied with the usual, or even the oc- casional practice, and left the acceptance in a place of deposit, recognized as such by Daly." Judgment was given for Phebe Howard for damages. EULTNG LAW Story Case Answer An acceptance made in the manner authorized by the offerer is good, even though he may never actually know of the acceptance. In the Story Case, Tullifer authorized an acceptance in a rather unusual manner, 140 CONTRACTS and he must assume the consequences of any accident which arises in reference to the acceptance. When Hobes placed the note of acceptance at the place speci- fied, the contract was complete; therefore, he is en- titled to recover damages from Tullifer caused by the failure of the latter to deliver the corn. The same problem was considered in the Court Case of Howard vs. Daly. The court there held that an acceptance made in the authorized or customary way was sufficient even though Mr. Daly never in fact received the ac- ceptance. c. Acceptance by Post or Telegraph Complete When Posted or Telegraphed STOET CASE Harry Mills wrote to Frank Jones and offered some posts for sale at the market price. As soon as Jones received the offer, he wrote a letter of acceptance. This letter was lost in transmission and Mills, thinking that Jones did not want the posts, sold them elsewhere. After waiting for three weeks for the shipment of posts, Jones learned of the sale and immediately sued Mills for breach of contract. Mills defended on the ground that he never received the acceptance and that he was, therefore, not bound. Should Jones or Mills win the suit? RULING COURT CASE Trevor vs. Wood, Volume 3 New York Reports, Page 307; Volume 93 American Decisions, Page 511. On January 30, Trevor of New York telegraphed to John Wood of New Orleans, asking his price for one hundred thousand Mexican dollars. The following day, CONTRACTS 141 January 31, Wood replied by telegram, offering to de- liver fifty thousand Mexican dollars at seven and one- quarter. On the same day, Trevor sent the following telegram : "To John Wood: Your offer of fifty thousand Mexican dollars accepted. TREVOR. ' ' This telegram did not reach Wood until February the 4th ; in the meantime, on February 3, Wood sent the following message by telegraph: "No answer to our dispatch. The dollars are sold. JOHN WOOD." When Trevor learned that Wood had sold the dollars and refused to get any more, he brought suit for dam- ages for his failure to comply with the terms of their contract. Wood contended, that he had revoked his offer be- fore he had received an acceptance, and that, therefore, no contract was ever made between them. Decision : It is the general rule that when an offer is made by letter, it may be accepted in the same man- ner ; and the posting of the letter of acceptance is re- garded as an immediate acceptance; and it is not material that it never reaches the other party. The same is true in regard to an offer and acceptance by telegraph. So here Trevor sent his telegram before he had any notice of a revocation. As soon as he did so the contract was complete, and no subsequent act by 142 CONTRACTS the other party could deprive him of his right there- under. Therefore, judgment was given for Trevor in this action. RULING LAW Story Case Answer These instances of acceptance by letter or telegram are also illustrations of an acceptance by an appropri- ate act. When the person writes a letter, making an offer, he impliedly authorizes the person to whom the offer is made to accept in the same manner. If, there- fore, the offeree accepts by letter, the contract is com- plete the moment that he posts his letter, and the cre- ation of the contract does not depend upon the actual receipt of the letter by the person who made the offer. It is evident that the offerer cannot revoke the offer after the letter of acceptance is posted, even though he has not yet received it. The attempted revocation in the Court Case of Trevor vs. Wood, was held inef- fective. In the Story Case, there was a contract, not- withstanding the fact that the letter of acceptance never reached Mills. Therefore, judgment should be given for Jones. d. An Offer May Require Actual Receipt of Acceptance STOEY CASE Lester Bonham wrote the following letter to the Farnam Buggy Company: "Feb. 18, 1910. Gentlemen : I have for sale a new carriage of my own make which I will sell to you at the same price as the last one. If I do not receive your let- CONTEACTS 143 ter of acceptance by the 30th I shall sell it else- where. (Signed) LESTER BONHAM." On the 20th, the Farnam Buggy Co. mailed an ac- ceptance of the offer, which should have reached Bon- ham by the 22nd. But there was a wreck on the rail- road and the letter of acceptance was lost. On the 1st of March, Bonham sold the buggy to an- other company. The Farnam Buggy Co. sued Bonham for his failure to sell the buggy to them and claim that he (Bonham) made the United States mails his agent to deliver the letter to him and that therefore he is bound. Should the buggy company have wont RULING COURT CASE Helen Lewis vs. Matthew Browning, Volume 130 Massachusetts Reports, Page 173. Matthew Browning, previous to the year 1878, had leased certain premises from Helen Lewis, who, with her husband, was living in California. Dr. Lewis, who acted as agent for his wife, Helen, wrote a letter to Browning in which he asked Browning to make him an offer for a new lease of the premises in question. Browning answered, making a new offer by a letter dated July 8, 1878. In the reply received by Browning on July 8, Dr. Lewis accepted Browning's offer with certain modifications. The letter concluded with the following statement: "If you agree to this plan, and will telegraph me on receipt of this, I will forward power of attorney to have the lease executed. Tele- graph me 'yes* or 'no'. If I do not hear from you by 144 CONTRACTS the 18th or 20th, I shall conclude 'no'. On July 17th, Browning replied : 'yes'. The message, however, never reached Dr. Lewis. This suit was thereafter brought on the old lease. Browning contended that he was no longer bound by the old lease ; that the dispatch of his telegram was an acceptance of the offer of Dr. Lewis, even though it never reached Dr. Lewis. Decision : The general rule is that an offer made by a letter or telegram may be accepted in the same man- ner. In either case, the posting of the letter or the dis- patch of the telegram is regarded as the act of accept- ance, and it is not material that the acceptance is lost in transmission. However, it is always the privilege of the one making the offer, to require an actual receipt of the acceptance before the contract is complete. If he does this, then it is the misfortune of the acceptor that his message of acceptance is lost. Thus, in this case, no contract for a new lease was ever made, be- cause an actual receipt of the acceptance was specified, and the requirement was never met by Browning. Mr. Chief Justice Gray said : ' ' A person making an offer may always, if he chooses, make the formation of the contract, which he proposes, dependent upon the actual communication to himself of the acceptance. ' ' The court held that the suit was properly brought upon the old lease, and that judgment must be given for Helen Lewis. BTTLING LAW Story Case Answer When the law discussed in the previous section is first considered, it seems harsh and unfair to the per- son making the offer. But when taken in connection CONTRACTS 145 with the law in this section the injustice is more ap- parent than real, because it is always within the power of the person making the offer to require actual re- ceipt of the acceptance. It has been observed hereto- fore, that the person making the offer, may make it on such terms as please him; consequently, he may stipulate that there will be no contract unless the ac- ceptance is actually received. If he does this, the con- tract is not complete until he in fact receives the letter or telegram, of acceptance. Furthermore, if the letter or telegram is lost, then no contract results. Thus, in the Story Case, Bonham made such a stipulation. The letter was lost through no fault of either party. Never- theless, no contract resulted ; and on the 30th, Bonham was at liberty to dispose of the buggy as he pleased. Judgment, therefore, should be given for Bonham. (5) Silence Alone Is Not an Acceptance STORY CASE The Ferry Monthly Magazine sent the following of- fer to Lopert : ' ' July 18, 1913. My Dear Sir : Tour subscription to our maga- zine has expired and, unless we hear to the con- trary from you, we shall renew it at last year's rate. Yours truly, (Signed) FERRY MAG. Co." Lopert did not send an answer to this communica- tion, but he did not want the magazine and refused to receive it from the postman. 146 CONTEACTS At the end of the year the magazine company sued him for the subscription price, claiming that his re- fusal to answer their offer was an acceptance. Lopert claims that the company could not impose upon him the duty to refuse an offer and that there was no ac- ceptance. Which party won? EULING COURT CASE Paul Felthouse vs. John Felthouse, Volume 11 Com- mon Bench Reports, New Series, Pags 868. Paul Felthouse was a builder residing in London. John Felthouse, his nephew, determined to sell out all his farming stock. In a conversation between John and Paul in regard to the sale of a certain horse, John offered him the horse for 30 guineas. Paul replied that he would give 30 pounds. John mistakenly thought he accepted his offer, and replied that the contract was made. He was later informed of the mistake which had been made, and wrote to Paul that he had not in- tended to sell the horse for less than 30 guineas, and that he would not sell her for less. To this letter his uncle wrote the following in reply: "Dear Nephew: Your price, I admit, was 30 guineas. I offered 30 pounds, never more, and you said the horse was mine. However, as there may be a mistake about it, I will split the difference, 30 pounds 15 shillings. If I hear no more about it, I consider the horse mine at 30 pounds 15 shillings. PAUL FELTHOUSE." John Felthouse did not make any reply to this let- ter; an express acceptance was not made to this new CONTKACTS 147 offer. Bindley, the auctioneer, was told by John not to sell this particular horse. However, when the sale was in progress, Bindley forgot this instruction and sold the horse. Suit was brought against John by Paul Felthouse for having sold his horse. John Felthouse contended that he was not liable be- cause no contract was ever made between them; he contended that one person cannot force another to speak or make his silence an acceptance of a contract. Decision: The general rule is, that, silence on the part of an offeree is not assent to a contract. An of- f eror cannot impose the duty upon the offeree to refuse a contract in order to prevent its becoming binding upon him. Thus, in this case, no contract was ever made between John and Paul for the sale and purchase of this horse. Therefore the sale of this horse made by John was no wrong as against Paul; therefore, John is not liable to Paul. Therefore, judgment was given for John Felthouse, the defendant. RULING LAW Story Case Answer As a general rule, silence alone on the part of a person to whom an offer is made is not an acceptance of the offer, even though the person making the offer may state that silence shall constitute an acceptance. The offeror has no right to impose upon the offeree any such duty; and the law will not permit it. The law says that a person cannot be put under a duty to speak, to prevent his being bound to a contract against his will. In the Story Case, Lopert was under no duty to write to the magazine company that he did not accept its offer. Consequently, there 148 CONTRACTS was no contract between them. In such a case, how- ever, Lopert should not receive the magazines from the postman or the postoffice. He should direct the postal authorities to return the magazines to the company. (6) Acceptance Must Be by the Person to Whom the Offer Is Made STORY CASE A crowd of farmers was congregated around a country store and Farmer Hikey said to John Smalley : "If you need a binder, I will sell one to you for $40. " Wilson Hight heard the offer and, when he saw Farmer Hikey a short time later he said : "I accept your offer to sell your binder for $40." Hikey refused to sell to Hight, because he disap- proved of the slovenly manner in which Hight kept his fences. He admitted that Eight's credit was su- perior to that of Smalley but he persistently refused to negotiate with him. Hight sued Hikey for refusing to sell the binder to him and Hikey defended, on the ground that the offer was not made to Hight. Is this defense valid? RULING COURT CASE Boston Ice Company vs. Potter, Volume 123 Massa- chusetts Reports, Page 28; Volume 25 American Re- ports, Page 9. During, and previous to, the year of 1873, the Bos- ton Ice Company furnished Patten with ice, daily. Pot- ter became dissatisfied with the ice and service of the company, and refused to deal with it longer. He made a contract with the Citizen's Ice Company. Be- CONTRACTS 149 fore April, 1874, the latter company sold its business to the Boston Ice Company with the right to supply ice to its customers. No notice of this change was ever made or communicated to Potter. During the whole of that year, ice was supplied to Potter daily and was used by his servants. When he discovered the fact that it was being furnished by the Boston Ice Company he notified it to furnish no more, and re- fused to pay anything for the ice which had been fur- nished during the preceding year. The defense of Potter was that he never made a con- tract with the Boston Ice Company ; he had offered to pay so much for ice daily, but he made that offer solely to the Citizen's Ice Company, and not to the Boston Ice Company. Decision : When a person makes an offer to a par- ticular person or corporation for services or property, that person, and that person alone may accept the offer. .In this case, Potter had offered to pay one com- pany so much daily for ice ; another company, without his knowledge and consent, accepts his offer and fur- nishes the ice. But this acceptance does not make a contract between them. Therefore, Potter was under no contractual obligation to pay the Boston Ice Com- pany for the ice in question. Mr. Justice Endicott, who delivered the opinion of the Court, said: "A party has the right to select and determine with whom he will contract, and cannot have another person thrust upon him without his con- sent. It may be of importance to him who performs the contract, as when he contracts with another to paint a picture, or write a book, or furnish articles of a particular kind, or when he relies upon the character 150 CONTKACTS or qualities of an individual, or has, as in this case, reasons why he does not wish to deal with a particular party. In all these cases, as he may contract with whom he pleases, the sufficiency of his reasons for so doing, cannot be inquired into. ' ' Therefore, it was decided that the Boston Ice Com- pany could not recover from Potter. RULING LAW Story Case Answer An offer made to one person does not constitute an offer to any other person. Obviously, therefore, only the person to whom the invitation has been extended can, in reliance on the offer, complete a binding con- tract. Hikey's defense to the Story Case is effective. (7) A General Offer May Be Restricted in Acceptance STOEY CASE The Baily Mills Company inserted the following ad- vertisement in the county newspaper : "In order to get our name before the people, we are offering to the farmers of Fayette County, seed corn at the nominal price of 25c a bushel. The Baily Mills Co." Morgan Lindsey, a farmer, who lived just over the Fayette County line in Ross County, saw the advertise- ment and ordered 50 bushels of the corn. The mills company refused to deliver it, claiming that the offer had not been made to him. Lindsey claimed that the offer was made to whomever should read the paper. Which party should win the case when Lindsey sued for breach of contract? CONTRACTS 151 RULING COURT CASE Ryer vs. Stockwell, Volume 14 California Reports, Page 134 ; Volume 73 American Decisions, Page 634. On the morning of June 18, 1856, Stockwell 's house in the city of Stockton was burned. He suspected that it was the act of an incendiary. Accordingly, he pub- lished in a newspaper the offer of a reward for any in- formation which would lead to the arrest and convic- tion of the person or persons who did the act. Eyer saw and read the offer and immediately made plans to discover the information necessary to lead to the arrest and conviction of the guilty party. After some efforts he did procure evidence which resulted in the arrest and conviction of the person who had set fire to the house, but Stockwell, although requested, refused to pay the offered reward to Eyer. Thereupon, Eyer sued him for the money. The defense of Stockwell consisted in the fact that he had never made any offer to Eyer. Decision : An offer which is published generally, is an offer to any and every one who has read or knows of the existence of the same; no restrictions exist. Eyer read the offer in a newspaper, and in reliance thereon, performed all the conditions necessary to en- title him to the reward. This was an acceptance on his part, and, thereupon, Stockwell became legally bound to pay to him the offered reward. Had Stockwell chosen, he could have originally restricted his offer. Mr. Justice Baldwin, in the opinion of the Court quoted from a Massachusetts case, as governing this case: "There is now no question of the correctness of the legal principle on which this action is founded. The offer of a reward for the detection of an offender, 152 CONTRACTS the recovery of property, and the like, is an offer or proposal on the part of the person making it, to all persons, which any one, capable of performing the ser- vice, may accept at any time before it is revoked, and perform the service; and such offer on one side, and acceptance and performance of the service on the other, is a valid contract, made on good consideration, which the law will enforce. ' ' Judgment, therefore, was given for Byer in this ac- tion. RULING LAW Story Case Answer Offers of rewards for the capture and return of criminals are examples of general offers. Any one who performs the act desired, in reliance upon the offer, is entitled to the reward. In the Story Case, how- ever, the offer was not to the whole public, but to the public of Fayette County. Any resident of the county was entitled to accept the offer, but it did not extend to any one living out of the boundary. Consequently, the acceptance of Lindsey was of no effect. Judgment should be given for the Baily Mills Company. (8) Acceptance May Be One of Two Kinds a. Acceptance May Be by a Promise STOET CASE Jen & Company, dealers in school books, was nego- tiating for its season's supply of books when the Ply- mouth Press wrote it the following letter: CONTRACTS 153 1 'January 1,1915. We offer to furnish you for the season of Jan- uary, February, and March all the books you may want of our manufacture for fifty cents a book, in return for your promise to pay cash. (Signed) The Plymouth Press." Jen & Company answered: "We hereby accept the offer made by The Ply- mouth Press on January 1, for the season of January, February and March. (Signed) Jen & Company." On February 10, 1915, The Plymouth Press wrote to Jen & Company notifying them that the price of books was sixty cents per copy wholesale for future delivery. Thereupon, Jen & Company ordered two hundred books, demanding that the Plymouth Press sell them under the price of fifty cents per copy as per contract. The Plymouth Press contended that no contract existed, since there was a lack of a promise from Jen & Company to buy any books; that therefore, only an offer existed from the Plymouth Press which it could withdraw at any time before ac- ceptance. Is this a good defense? EUUNQ COURT CASE Muscatine Water Company vs. Muscatine Lumber Company, Volume 85 loiva Reports, Page 112 ; Volume 39 American State Reports, Page 284. The Muscatine Lumber Company owned and oper- ated a saw mill on the outer limits of the city of Mus- catine. They were so located that they were without fire protection. Negotiations were had with the Mus- 154 CONTBACTS catine Water Company by which the latter extended its mains to the plant of the lumber company upon its promise to pay the sum of $250 annually for ten years from that date. The lumber company agreed to this condition and the main was extended. In pursuance of the terms of their agreement, the lumber company paid the sum stipulated for a period of four years, .when its mill and other buildings were destroyed by fire. It did not rebuild, and accordingly, refused to continue to pay the annual sum agreed upon. The water company thereupon brought this action to re- cover it. It was contended by the lumber company that there was no contract, for they had never accepted the offer of the water company. Decision: There was a binding contract between the parties to the agreement. The promise of the lumber company to pay a certain annual sum consti- tuted an acceptance of the offer by the water com- pany to extend the main. Each party promised to do a particular act and this resulted in a binding contract between the two parties. Therefore, judgment was given for the water com- pany in this action. RULING LAW Story Case Answer A person may make an offer which contemplates ac- ceptance by a promise. When such an offer is made, and the person to whom it is made gives the promise, this constitutes an acceptance, and completes the con- tract. This is true, provided the offer is made in such a manner that the acceptance by a promise is definite CONTRACTS 155 and certain, obligating the acceptor to do something in the future. This is determined by the test of mutu- ality; we ask, can the offeror under the alleged con- tract hold the acceptor to account in a law suit ! If he cannot, a contract does not exist. In the Story Case, had the Plymouth Press attempted to hold Jen & Com- pany to the original contract or apparent contract, the Court would have said: No contract exists, because Jen & Company merely promised to buy all the books it might want; it was under no obligation by its promise to buy any books at all. Therefore, since there was a lack of mutuality of promises, Jen & Company cannot hold the Plymouth Press to the order for two hundred books. The defense of the Plymouth Press is effective. b. An Acceptance May Be an Act STORY CASE K. L. McFadden lost his pedigreed bull dog. He in- serted the following advertisement in the daily paper : 50 DOLLARS REWARD I will pay $50 to the person who returns my bull dog before the expiration of thirty days. (Signed) K. L. McFadden." Henry Greenup saw the notice and asserted to Mc- Fadden that he was determined to search for and find the dog. After hunting for twenty-six days, just when certain clues seemed to augur success, he saw this in the paper: "I have found that my dog was not pedigreed and I, therefore, withdraw my offer of reward. (Signed) K. L. McFadden." 156 CONTKACTS Greenup went to McFadden and told him that he had spent twenty-six days looking for the dog and was en- titled to some remuneration, because he would prob- ably have found the dog before the expiration of the thirty days. McFadden refused to pay him any- thing, on the ground that the dog was not returned. Greenup brought suit against McFadden and alleged that he accepted McFadden 's offer of reward by prom- ising to find the dog. Which should win the suit ? EUUNG COURT CASE Des Moines Valley Railway Company vs. Graff, Vol- ume 27 Iowa Reports, Page 99; Volume 1 American Reports, Page 256. In April of 1864, Graff, among other citizens of Pella, agreed "to obtain and to secure subscriptions to the capital stock of the Des Moines Valley Eailway Company, in accordance with blank forms furnished by the company, to an amount of at least ten thousand dollars, provided that said company runs its tracks through Pella, as heretofore surveyed." About $10,000 in subscriptions was obtained on these promissory notes, and the railroad company con- structed its road along the route originally surveyed through Pella. When they had finished the work, Graff refused to deliver these notes which had been procured for the benefit of the road. The company, thereupon, brought this suit to recover them. The defense of Graff consisted in the fact that the offer of the citizens of Pella was never accepted, and that, therefore, no contract was ever made and com- pleted between them. Decision : The offer of the citizens of Pella was to furnish at least $10,000, evidenced by notes, if the com- CONTRACTS 157 pany would build its road through Pella. The comple- tion of the building of the road by the company, in re- liance upon the notes to be obtained, was an acceptance of the offer of the citizens. This made a binding con- tract between, and the company is entitled to the notes. Mr. Justice Wright said in part: ''Then as to the want of mutuality and a consideration, it is plain that, if A promise to pay B a sum of money if he will do a particular act, and B does that act, A is liable though B did not at the time engage to do the act ; for, upon performance of the condition by the promisee, the con- tract is clothed with a valid consideration, which re- lates back, and the promise at once becomes binding. ' ' Therefore, judgment was given for the railroad company. RTTLTNG LAW Story Case Answer An offer may be made, which contemplates accept- ance, by an act. In such a case, nothing less than the doing of the act will ever amount to an acceptance of the offer. When the act contemplated has been done, the contract becomes complete, and the rights of the party thereunder become fixed at that time. In the Story Case, the offer made, contemplated accept- ance by the return of the dog. Consequently, the promise of Greenup to find the dog did not constitute an acceptance of the offer. Judgment should be given for McFadden. (9) The Power, But Not the Right, to Withdraw an Offer, Exists After Acceptance STORY CASE Deebe Fraser said to his nephew : 158 CONTRACTS "If you will make a trip to the Mardi Gras Festival in New Orleans, I will pay your expen- ses. ' ' The nephew, John Fraser, said that he would make the trip and he started to prepare himself. He pur- chased a new suit of clothes that he would not other- wise have bought ; he applied for and received a vaca- tion; he purchased his ticket and sleeper to New Or- leans. Then his Uncle said : "I have changed my mind. If you want to go to the Festival you must finance the trip your- self." John Fraser insisted that Deebe pay for the ex- penses he had already incurred in preparation for the trip and Deebe refused to do so. John thought that it was fair that Deebe pay for the damage that had accrued to him because of Deebe 's change of mind and he brought suit for breach of contract. Deebe de- fended, on the ground that his offer had not been ac- cepted before withdrawal. Is this defense good f RULING COURT CASE Fisher vs. Seltzer, Volume 23 Pennsylvania State Reports, Page 308; Volume 62 American Decisions, Page 335. Fisher was sheriff and, in the performance of his duties, was preparing to auction off certain property under an execution sale. Before the sale began, the sheriff prescribed certain rules or conditions to govern the sale; one of these was that "no person shall re- tract his or her bid.'* At the sale Seltzer bid $7,000 for the land in question, under the belief that it was to be sold free of a certain mortgage on it for $6,000. CONTRACTS 159 When he discovered his mistake, he retracted his bid before the auctioneer, the sheriff, had declared him to be the highest bidder. The sheriff refused to recognize his right to withdraw his offer, and declared him the highest and last bidder, and demanded the money therefor. Unable to get it, he brought suit. Seltzer insisted that no contract was made between them, because his bid was only an offer, which might be withdrawn at any time before it was accepted. Decision: The bid of Seltzer was only an offer to buy the property at that price. Until his offer was ac- cepted by the sheriff, it remained a simple offer, which might be revoked. Before it was accepted, he did re- voke it, and no contract resulted. This is true, even though the sheriff expressly stated that no bids might be withdrawn ; he had no right to bind the bidders by such a rule. Before acceptance, there is both the right and the power to withdraw an offer. This is distin- guished from the relationship after acceptance when the right to withdraw is gone. Mr. Justice Lewis said : * ' Mutuality is so essential to the validity of contracts not under seal that they cannot exist without it. A bid at an auction, before the hammer falls, is like an offer before acceptance. In such a case, there is no contract and the bid may be withdrawn by right without liability or injury to any one, if done before the hammer falls." Judgment was, therefore, given for Seltzer in this action. RULING LAW Story Case Answer The maker of an offer has the right to withdraw the offer before it is accepted. After it is accepted and 160 CONTRACTS the contract is completed, the right to withdraw is gone. But the power to withdraw still exists, just as one has the power to injure another, although not the right. In the Story Case, there was an acceptance by Frazer in his statement that he would make the trip. Thereafter, Deebe Frazer had not the right to with- draw. But although he had not the right to break his contract, he has still power- to do so and became liable for the damages incurred by the other to that time, in reliance on the contract. Therefore, John Fraser can recover for the losses incurred to the time when Deebe changed his mind. C. There Must Be Contractual Intention (1) The Parties Must Intend to Bind Each Other in a Legal Manner STORY CASE Harry Arlington, a club man in Chicago, invited his friend, Bagby Smith, to a reception to be given by Ar- lington in his exclusive club. Smith had no evening clothes but, in view of the invitation, he purchased a suit. He knew that he would have no more use for it, since he was leaving for the South Sea Islands im- mediately after the reception. On the day preceding the social event, Smith and Arlington had a misunderstanding which resulted in a serious quarrel. Arlington then angrily withdrew his invitation to the reception and warned Smith not to impose his presence upon him socially, on the fol- lowing evening. Smith replied, by demanding a recom- pense for the dress suit he had been under expense to purchase. Arlington refused to consider it. CONTRACTS 161 Smith, immediately, brought suit for breach of con- tract. Should he be allowed to recover ? RULING COURT CASE Charles Bruce vs. James Bishop, Volume 43 Ver- mont Reports, Page 161. James Bishop and one Sleeper traded cows. Sleeper, feeling that he was cheated in the transaction, sued Bishop for damages. While this suit was pend- ing in the Court, Charles Bruce, employed by Sleeper, met Bishop, and the conversation turned to the recent cow transaction. Bruce remarked that both cows to- gether were not worth $35. This statement angered Bishop, who then said that the one cow which he traded to Sleeper was worth at least $35. Bruce laughed at this sally; Bishop thereupon boasted: "I will give you $40 for the cow if you will deliver her to me in as good condition as when I traded her to Sleeper/' Bruce went away, expressing his intention to get the cow arid bring her to Bishop. Accordingly, he pur- chased the animal from Sleeper for $15 and drove her to Bishop's home. The latter refused to take her, although it appeared that she was in just as good con- dition as when she was traded to Sleeper. Thereupon, Bruce brought this action for damages, alleging that Bishop had made a contract with him and that he re- fused to perform it. The defense of Bishop consisted in the fact that he did not intend to make any such contract, and that Bruce knew that he was merely boasting, under the sting of the other's raillery. Decision : Although parties may fulfill the form of making a contract, unless they have the intention to 162 CONTEACTS enter into a legally binding contract, the form has no effect. In this case, the circumstances show that Bishop never really intended to repurchase the cow; and Bruce himself was only bantering, and he knew that Bishop did not really intend to enter into such a contract. Mr. Justice "Wheeler said: " Bishop and Sleeper were in litigation about the cow, and Bruce was in the employment of Sleeper at the time when the parties met. Their conversation commenced in the way of bantering between them about the importance of that litigation, and not in the way of making a trade in the usual course of business. We think that the circum- stances and testimony tended to show that Bishop's offer was not in earnest and so understood by Bruce." Judgment was, therefore, given for Bishop in this case. RULING LAW Story Case Answer It is essential to the validity of an agreement that there be a contractual intention. The parties must intend to bind each other in a legal manner. When a person invites another to dinner, and the invitation is accepted, it is obvious that neither intended that such a transaction should be considered a legally bind- ing one. This is true in the Story Case ; it is quite evi- dent that it was never intended that Arlington should be legally bound to have Smith at his reception. Therefore, Smith is not entitled to recover any dam- ages. The lack of contractual intention may also be apparent from the conduct of the parties. Words are generally indicative of a person's intention; but if back of the words, we see a lack of contractual inten- CONTEACTS 163 tion, the words are not material, if they have not mis- led either party. In the Court Case of Bruce vs. Bishop, the words would seem to indicate contractual intention. But the circumstances and conduct of both parties clearly showed that there was no contractual intention. (2) Relationship or Membership in a Family Indicates Lack of Contractual Intention STORY CASE When Harold Bingham, a young man of twenty-two years returned from college in June, 1914, his father said: "Well, Harold try yourself with the plow; let us see whether school has been worth while for you." Harold worked at the plow throughout the summer, and lived at his father's house. When the autumn came, and he was ready to return to school, he asked his father for $200 to spend during the year. The father answered: "Well, son, you earned your way through college last year, and I think it is best for you to do this again. Try it." The son was incensed at his father's refusal to pay the money and brought suit on contract for the reasonable value of his ser- vices rendered during the summer. Can he recover! EULING COURT CASE Disbrow vs. Durand, Volume 54 New Jersey Law Reports, Page 343; Volume 33 American State Re- ports, Page 678. Sarah Disbrow and her brother resided together with their mother on a farm, as one family. After the mother's death, the brother and sister continued to reside together until his decease. During his lifetime, 164 CONTRACTS he tilled the farm, and the sister kept the house, having no other means of support except to work for strang- ers. No express contract existed upon the part of the brother to remunerate the sister for her services in the household, nor was the subject of compensation ever discussed or contemplated by either of them. After his death she sued Durand, the personal repre- sentative of her brother, for services which she had rendered during his lifetime. It was insisted, on behalf of Durand, that no con- tract, either express or implied, existed, because the re- lationship which existed between the two indicated that there was no intention that she should be paid. The Chancellor said : ' ' Ordinarily, where services are rendered and voluntarily accepted, the law will im- ply a promise upon the part of the recipient to pay for them; but where the services are rendered by mem- bers of a family, living as one household, to each other, there will be no implication from the mere rendition and acceptance of the services. In order to recover for the services, the plaintiff must show, either that an express contract for the remuneration existed, or that the circumstances under which the services were ren- dered were such as exhibit a reasonable and proper expectation that there would be compensation." In accordance with the opinion, the Court decided that the sister could recover nothing for the services which she rendered to her brother during his lifetime. RULING LAW Story Case Answer When a person performs services at the request of another, and nothing is said about compensation, the law implies an intention on the part of the recipient of CONTRACTS 165 such services to pay the reasonable value thereof to the one who performs them. But when a person per- forms such services for a person closely related to him, the fact of the existing relationship is evidence that there was no contractual intention to pay for the ser- vices. This relationship is, in fact, evidence of an in- tentipn that the services shall be gratuitous. If a stranger should ask me to spade his garden, the law would imply an intention on his part to pay for the services. But if my father asks me to do the same act, the law does not imply any such promise on the part of my father. The relationship, which exists, shows that there was no intention that the act should be the basis of a legally binding contract. In the Story Case, Harold cannot recover. (3) An Offer Made in Jest Cannot Be Accepted in a Legal Sense STOBY CASE As Wright Shannon walked along the street one day in December, some practical joker knocked off his hat with a snowball. Shannon became very angry, but when he learned that it had been done by the son of a neighbor, he decided to frighten the boy thoroughly. He went to the neighbor's house, and signing to the father of his purpose, said in the boy's presence: "Some one knocked my hat off with a snow ball this morning. I offer $15 for the name of the person, for I want to put him in jail." Mr. New, the boy's father did not take the offer in the spirit in which it was given, but said to Shannon, "I accept your offer. My son, James New, threw that 166 CONTRACTS snowball. Please pay the fifteen dollars/' Shannon refused to pay anything and New brought suit to re- cover. "What will the court do I RULING COURT CASE Keller vs. Holderman, Volume 11 Michigan Reports, Page 248 ; Volume 83 American Decisions, Page 737. Keller and Holderman were jesting with each other one day, and Holderman offered to Keller $300 for a watch owned by the latter. He never really intended to buy the watch, for it was worth only about $15. Keller understood that it was only a joke and treated the offer as such. However, he agreed to sell the watch for that price, and gave it over to Holderman. Holderman wrote out a note promising to pay to Kel- ler or order the sum of $300. Several months passed, and no more was said about the transaction. Then Keller presented the note and demanded pay- ment. Holderman refused to pay it. Thereupon, Kel- ler sued him on the note. Holderman contended that he was not liable upon the note because he had made the offer in a jesting manner, and there was never any intention on his part to enter into such a contract, and that Keller knew that he was merely jesting. Decision: In order to constitute a legally binding contract between parties, they must have the necessary contractual intention. Thus an offer made by one in jest and accepted by another, who knows that it was made in jest, does not result in a binding contract. All the circumstances of this case show that Holderman had not the least intention of giving $300 for a $15 watch and Keller, when he accepted the offer CONTRACTS 167 and received the note in question, knew that Holder- man was not in earnest. It follows that no contract was made. Therefore, the Court gave judgment for the defend- ant, Holderman. RULING LAW Story Case Answer "Where words are viewed in the light of the surround- ing circiunstances and in the light of the conduct of the parties, and indicate mere idle talk or jest, and are so understood by both persons, they cannot become the basis of a contract. In the Court Case of Keller- man vs. Holderman, from the circumstances, it is per- fectly apparent that neither person intended to enter into such a contract as was sought to be enforced ; and it is clear that both parties understood that there was no intention that a legally binding contract was to re- sult from their jesting transaction. The same may be said of the Story Case; both parties understood that their talk was mere jest and banter ; thus, no contract resulted therefrom. Consequently, Mr. New can re- cover nothing from Mr. Shannon. (4) A Proposal Made Without Intention to Contract Cannot Be Accepted in a Legal Sense STORY CASE Bernard Buck had planted in his back yard some sweet peas, of which he was very fond. One morning he found that some unprincipled person had torn them up. He became very angry and shouted : 1 'I'd give $500 to know who did this." 168 CONTRACTS A neighbor heard the statement, and immediately be- gan to search for the person. Five days later, the neighbor found the guilty person and demanded his reward. This Buck refused to pay. The neighbor brought suit for breach of contract. May he recover I RULING COURT CASE Temper vs. Stamper, Volume 6 Humphrey's Ten- nessee Reports, Page 113 ; Volume 44 American Decis- ions, Page 296. The son of Stamper was killed, and he himself was severely wounded by two men. On the evening after the unfortunate affray, there was great confusion in his home; the knowledge of the son's death had pros- trated his wife and daughter; keen bodily pain from wounds, and his unbearable mental anguish made Stamper himself almost unaccountable ; many friends and curious people added to the great disturbance by assembling in the house and about the yard to discuss the arrest of the fugitive. When this uproar was at its height, Stamper walked into the yard with difficulty and entered into conversation with the group there, by saying that he would give two hundred dollars to any person who would apprehend the two men in question. To this remark, one of the company replied: "Mr. Stamper, I do not want your money." To this, Mr. Stamper said ' ' Gentlemen, I did not mean it for you. ' ' Nothing further was said concerning the offer that night. A few days later, Temple, who was present that evening, was instrumental in having the criminal ar- rested. He demanded the reward and Stamper re- fused to pay it. Stamper insisted that he did not actually intend those remarks of his that night as an offer of a re- CONTRACTS 169 ward in a legal sense ; he claimed that it was a mere expression of strong feeling on his part. Mr. Justice Turley, who delivered the opinion of the Court said: "We are constrained to believe that what is called an offered reward of $200, was nothing but a strong expression of his feelings of anxiety for the arrest of those who had so severely injured him, and this greatly increased by the distracted state of his own mind, and that of his family; as we frequently hear persons exclaim: 'Oh, I would give a thousand dollars if such an event were to happen, or vice versa. ' No contract can be made out of such expressions ; they are evidence of strong excitement, but not of a con- tracting intention." Therefore, the Court was of opinion that judgment should be given to Stamper in this action. RULING LAW Story Case Answer An offer made by a person, who has no intention to contract, cannot be accepted by a person in a legal sense, provided the latter was not misled by the offer. In the Court Case of Temper vs. Stamper, it is clear that every one who heard the offer, under the circum- stances, understood that it was the mere utterance of a man highly excited, and was not actuated by a legal intention to contract. In the Story Case, the words would seem to indicate that Buck really intended to make an offer, but when taken in connection with the circumstances, it is perfectly apparent that the words were prompted, not by a contractual intention, but by strong feelings of anger over a slight matter. 170 CONTRACTS (5) A Proposal Made Without Contractual Intention May Be Accepted, in Case the Other Reasonably Believes That It Is Made in Earnest STORY CASE Someone had entered the First National Bank and had scattered papers over the floor and spilled ink. The directors learned that the mischievous son of the president had done it, and, with the consent of the president, and with the purpose of scaring the boy, they inserted the following in the daily newspaper : "We will pay anyone $50 if he will tell us the name of the desperate robber who broke into the bank last Monday and destroyed valuable papers there. (Signed) The Directors." The Pinkerton Agency sent a man to investigate the case. After several days, he discovered that it was the son of the president and so informed the directors. They refused to pay him the reward, on the grounds that the offer was a joke. The Pinkertons sued the bank for $50. May they recover? RULING COURT CASE McClure vs. Wilson, Volume 50 Illinois Reports, Page 366. At a public meeting, during the Civil War, Wilson declared that he would give four hundred dollars to any man who could promise for his sons a relief from the government draft for soldiers. In reliance upon this offer, McClure was instrumental in securing substi- tutes, but when he demanded this money, Wilson re- fused to pay. Justice Breen gave the opinion of the court : CONTRACTS 171 "It was reasonable for McClure to believe that Wil- son made an offer which he intended shall bind him upon acceptance by a third party." Said the court : l * If I have valuable property in im- minent danger and I make a proclamation that I will give fifty dollars to save it, and a stranger undertakes the labor and does save it, on what principle of law or justice is it that I should not pay?" Judgment is given for McClure for the amount promised. RULING LAW Story Case Answer If one person makes an offer without contractual intention, but it is accepted by another who reasonably believes that an offer was intended in a legal manner, a contract will result. The law will not permit a man to say one thing and mean another as against a per- son who reasonably relies upon the statements as they were uttered and had no knowledge of his secret in- tention.' In the Story Case, the Pinkerton Detective Agency reasonably believe that the offer of the Direct- ors was real, and intended for a serious purpose. Thus, when it performed the act or services contem- plated, it became entitled to the reward, and the Di- rectors, having misled it, cannot say now that they were only jesting. Judgment should be given for the Pinkerton Agency. (6) An Invitation to Bid Cannot Be Turned Into a Promise by an Acceptance STORY CASE S. B. Somerby was about to put up a fireproof barn of the latest design and he inserted in the leading 172 CONTEACTS architectural magazines that bids would be now con- sidered. The Portland Cement Company sent in a bid and blue prints, which so exactly suited Somerby that he mentioned to several people that he could not have been better satisfied. This bid was also the low- est received. Before Somerby wrote to the cement company to begin building, he decided to invest in some Colorado land. This decision delayed his first plan. The com- pany insisted that he allow them to build the barn since its bid was the lowest and since the specifications suited him. Somerby refused to begin the work and said that he had changed his mind as to building. The cement company began suit for breach of contract. They contended that a contract existed, consisting of an offer by Somerby through the magazines and an acceptance on their part. Is this the case? RULING COURT CASE No. 1 Spencer vs. Harding, Law Reports, Volume 5 Com- mon Pleas, Page 561. Harding, by an agent, issued to Spencer and other persons engaged in the wholesale trade, a circular let- ter which read as follows : "We are instructed to offer to the wholesale trade for sale by tender the stock in trade of Messrs. Eilback & Co., amounting to 2503 pounds, and which will be sold at a discount in one lot, payment to be made in cash, at 12 o'clock noon precisely ; the tenders will be received and opened at our offices." CONTRACTS 173 Spencer made a tender which proved to be the high- est bid for the stock in question. But it was rejected by Harding and the stock in trade was sold to another person. Suit was then brought by Spencer to recover damages. He claimed that this circular sent out by Harding was an offer, and that his highest bid was an acceptance. In defense, it was contended by Harding that the circular was only an advertisement ; a way of acquaint- ing the public with the fact that the goods were for sale, and that offers from the public would be enter- tained and considered. Mr. Justice Willes delivered the opinion of the court: "If the circular had gone on: 'We undertake to sell to the highest bidder', the reward cases would have applied and there would have been a good con- tract. But the question is, whether there is here any offer, or whether the circular amounted to anything more than a mere proclamation that Harding is ready to chaffer for the sale of the goods, and to receive of- fers for the purchase of them. Here, there is a total absence of any words to intimate that the highest bid- der is to be the purchaser. It is a mere attempt to as- certain whether an offer can be obtained within such a margin as the sellers are willing to adopt." The court decided that judgment should be given to Harding. RULING COURT CASE No. 2 Anderson vs. The Board of Directors, Volume 122 Missouri Reports, Page 61; Volume 26 Laiuyer's Re- ports Annotated, Page 707. Anderson was engaged in the business of building; the Board of Directors was a corporation having 174 CONTRACTS charge and control of the public school property in the City of St. Louis. They had a well known rule in re- gard to buildings, by which it was provided that all new buildings should be ' ' let by contract to the lowest and best bidder." The Board of Directors, being de- sirous of erecting a new high school building, adver- tised for bids. The advertisement contained the pro- vision that the board reserved the right to reject any and all bids. Anderson made a bid for the building. It developed that his bid was the lowest and best of all the bids which had been turned in ; but the contract was not given to him, but to another. Thereupon, An- derson brought this action, claiming damages. It was contended by the board that he had no right to sue because no contract had ever been made with him ; this advertisement was a mere invitation to those who wished to bid; their bids constituted offers; and they were free to choose any bid they saw fit. Mr. Justice Barclay said: "It is, indeed, asserted that the Board rejected Anderson's bid without cause, arbitrarily and capriciously, through favoritism and bias. But if the board had the absolute right to re- ject any and all bids, no cause of action would arise to Anderson because of the motive which led to the re- jection of his bid. The right to reject was uncondi- tional. The board was entitled to exercise that right for any cause it might have deemed necessary, or even without any assignable cause. That advertisement was not an offer of a contract, but an offer to reject proposals for a contract." Judgment was given for the Board of Directors in accordance with the opinion of the Court. CONTRACTS 175 RULING LAW Story Case Answer It frequently happens that a person will make a pro- posal to the public for bids or offers. Such an invita- tion to bid cannot be made the basis of a contract. In the Court Case of Spencer vs. Harding, Harding ad- vertised that he was in a position to make or receive offers, but did not unconditionally state that he offered to sell anything ; such a statement is not an offer, and cannot be accepted as such. Thus, in the Story Case, Somerby did not make an offer to accept the lowest bid ; he merely advertised for bids to be made to him, which he might accept if he chose. Judgment should be given for Somerby. (7) Railroad Time Tables Are Subject to Acceptance STOEY CASE The Y. L. & "W. Railroad Company announced in its recent time table that the fare from Jonesboro to Kellesburg would be $5.78. But when Adam Board- man went to purchase his ticket, the agent refused to sell it to him at that price. Boardman showed the agent the quotation from the time table and insisted that he sell the ticket for the announced price. The agent, however, refused to do this and Boardman was compelled to pay the additional amount. As soon as Boardman could consult an attorney, he brought suit against the railroad company for breach of contract. The company defended on the ground that the price stated in the time table was not an offer but only an invitation to deal. Is this true? 176 CONTRACTS RULING COURT CASE Sears vs. The Eastern Railway Company, Volume 14 Allen's Massachusetts Reports, Page 433 ; Volume 92 American Decisions, Page 780. The Eastern Eailway Company was a common car- rier of passengers between certain points in Massa- chusetts. It published a daily advertisement in the Boston Daily Advertiser, Post, and Courier, announc- ing that a train would leave Boston for Lynn at 9 :30 P. M. every day except Wednesday and Saturday. Sears, who had consulted these advertisements, pur- chased a package of five tickets, between Boston and Lynn, which were good for any trip during that year. One Friday, Sears went to Boston on a forenoon train ; when he returned shortly after 9 :30 to the station, ex- pecting to take the 9:30 train, he was informed that it had been postponed for that night until 11:15 to permit certain persons to attend some theater in Bos- ton. Sears engaged a buggy and horse and drove out to Lynn. He brought this action for damages. He contended that their time tables, published daily in the paper, constituted offers that the trains would be run in that manner. By buying tickets, he had accepted their offer before it had been revoked. The railway company admitted that the time tables contained offers in that regard, as claimed by Sears, but contended that they had withdrawn the offer for that particular day, because they had spread posters throughout the station that day, that the train would be postponed until 11:15 that evening. Sears contended that he did not see the posters. Mr. Justice Chapman said: "If this action can be maintained, it must be for the breach of the contract CONTRACTS 177 with the company, made with Sears. He had purchased a package of tickets, entitling him to a passage in their cars from Boston to Lynn. This constituted a con- tract between the parties. The principal question is, What are the terms of the contract? The ticket does not express them all. The time tables published by the company and relied upon by the public in accepting their offers constitutes a part of this contract." These time tables, however, were offers which could be revoked at will by the company before an accept- ance had been made. In this case, they were not re- voked, said the Court, because the same publicity should have been given to the revocation as to the pub- lication. They were published daily in a newspaper, but were revoked, only by hand bills. The Court held that the railroad company was liable for the damages suffered by Sears due to the postpon- ing of the train. RULING LAW Story Case Answer When a man purchases a ticket from a railroad com- pany, he thereby makes a contract with the company. But the ticket itself does not contain all the terms of the contract. The time tables, and schedule showing rates and charges also constitute a part of the offer of the company. When a person, then, purchases a ticket he accepts the offer of the railroad company to carry him safely, in accordance with its published time tables and rates. These time tables and published rates are merely offers, however, and may be withdrawn by the railroad at any time. But, like any other offer, reasonable publication of their withdrawal must be made. If they are published 178 CONTRACTS by placards in the station, revocation in the same man- ner is sufficient. If the company publishes them in a newspaper, it is generally held that revocation must be made in the same manner. In the Story Case, the company had published certain rates; and this pub- lished rate was a part of the offer made to the public ; Boardman tendered money for a ticket and thereby accepted the offer. The company could not relieve itself of liability on such a contract by saying that it was a mere invitation to bid. Judgment should be given for Boardman. It should be added here that railroad companies usually protect themselves now by stipulation in the time tables governing the manner of withdrawal of trains and changes of time. 4. Consideration in a Contract A. Consideration Is the Moving Force of a Contract STOET CASE Hilery DeFort, an old gentleman who was closely allied with some of the best families of England, promised, in writing and in the presence of witnesses, that he would give his nephew, Geoffrey DeFort, 10,000 when Geoffrey reached the age of twenty-one. He (Hilery) told several people of his promise and everyone knew that the old gentleman's promise was to be relied upon. Hilery DeFort died when Geoffrey was past twenty but not yet twenty-one. On his death bed, he expressed satisfaction that Geoffrey was pro- vided for upon his twenty-first birthday. Hilery made no will and all of his property went to his son and heir. The heir refused to pay Geoffrey, CONTRACTS 179 when the latter reached twenty-one, and Geoffrey sued him for the money. He defends on the grounds that Geoffrey gave no consideration for Hilery's promise. Which party should win? RULING COURT CASE Louisa Hamer vs. Franklin Sidway, Volume 124 New York Reports, Page 528. William E. Story, now deceased, during his lifetime agreed with his nephew, William E. Story, that if the nephew would refrain from drinking liquor, using to- bacco, swearing, and playing cards or billiards for money until he should become twenty-one years of age, that he, the uncle, would give to him $5,000 at that time. The nephew accepted the offer. From that time until he reached full age he never again indulged in any of the habits above enumerated. In the meantime, his uncle had died. His personal representative, Frank Sidway refused to pay the nephew the $5,000 and this action was brought to recover the same. Sidway contended that there was no contract be- tween the nephew and the uncle, because there was no consideration for the agreement of the uncle to make the gift. Decision : A consideration is necessary to make any agreement legally binding, unless the agreement is un- der seal. Without a consideration, the agreement is without force or effect. It may be morally binding upon the promisor, but the agreement cannot be en- forced by the promisee in any court. But, if the promisee relinquished any right, or does anything, however invaluable to him or to the promisor, the re- liriquishment of the right, or, the act, will constitute 180 CONTRACTS a good consideration for the promise of the other. In this case, the nephew gave up his right to indulge in certain habits, and this was a valuable consideration, even though it may have been to his benefit, and con- ferred no benefit on the uncle. Accordingly, it was decided that judgment should be given for Louisa Hamer, who was suing for the nephew. RULING LAW Story Case Answer Every simple contract presupposes the existence of a valuable consideration. In general, the doing of any- thing by one, which he is not legally bound to do, or the surrender of any legal right, which he may legally withhold, constitutes a valuable consideration. Con- sideration is the moving force of a contract and that which gives it life. In the Story Case, there was no consideration for the promise of Hilery DeFort to pay his nephew the sum of ten thousand pounds ; therefore Geoffrey can recover nothing in an action against the heir of DeFort. B. Every Contract, Not Under Seal, Requires a Consideration STORY CASE Beyle Brothers sent the following offer to Herdly & Co.: "Jan. 3, 1915. Gentlemen: We offer you a price of $1.02 for a carload of wheat. This offer to remain open till noon of January 6th. Respectfully, (Signed) BEYLE BEOS." CONTRACTS 181 Herdly & Co. intended to accept this offer on the morning of January 6th, but on that morning they re- ceived the f ollowing telegram : "We revoke our offer of the 3rd. (Signed) BEYLE BEOS." Herdly & Co. admitted that they did not accept the offer but they claim that they would have accepted upon receipt of the offer if Beyle Bros, had not stated that the offer would remain open till noon of the 6th. They sued Beyle Bros, for breach of the promise to keep the offer open until noon of the 6th. Beyle Bros, defend on the ground that no consider- ation was given for the promise to keep the offer open, and, therefore, that the promise was not binding. What is your decision? RULING COURT CASE Bradley vs. Cook, Volume 7 Connecticut Reports, Page 57; Volume 18 American Decisions, Page 78. Jonathan Clark, an old man, was in indigent cir- cumstances, and unable to provide for himself. Brad- ley, the plaintiff in this action, furnished him neces- sities which were reasonably worth the sum of sixty dollars. When Henry Cook, the wealthy and only son of Jonathan, was informed by Bradley of what had been done, he signed and delivered to the latter a writ- ing, in which he acknowledged the debt due by his father to Bradley to be for necessities, and promised to pay for them, provided his father was unable, dur- ing his lifetime. Jonathan died, without having paid the debt or any part thereof. Then this action was brought by Bradley against Henry Cook upon his writ- 182 CONTRACTS ten promise to pay the amount, in case his father did not. Henry Cook insisted that his promise was useless, so far as its binding effect at law was concerned, be- cause it was not supported by a consideration. Decision : A son is under no legal duty to pay debts previously contracted by an indigent parent for the latter 's necessary support; and his written promise to pay such debts is without consideration. Therefore, it has no binding effect upon the son. Mr. Justice Doggett said in part : ' ' The contract is not a specialty, though in writing; nor is it governed by the law merchant, applicable to negotiable paper. Were it of the first description, that is, a sealed in- strument, by the rules of the common law, the con- sideration would be locked up and could not be inquired into. A mere written contract is upon the footing of a parol contract and a consideration must be proved. This is an inflexible rule of law, and the Court is not at liberty, if it had the disposition, to subvert it. ' ' Accordingly, judgment was given for Henry Cook, the defendant in this action. EULING LAW Story Case Answer Every contract, not under seal, must be supported by a consideration. Unsealed written contracts are of the same class as oral contracts. They must be sup- ported by a consideration, or they are not legally bind- ing. In Bradley vs. Cook, the Court Case, there was no consideration for the promise of Henry Cook to pay for necessities furnished his father ; at least, there was no present consideration; consequently, his CONTRACTS 183 promise was without a consideration from the other party and is not enforcible against him. In the Story Case, the offer of Beyle Brothers to sell wheat, and the promise to keep the offer open for three days, was without consideration; and he was entitled to with- draw his offer at any time before acceptance. Judg- ment would therefore be given for Beyle Brothers. C. The Adequacy of the Consideration Is Not Material STOET CASE John Waters found a stone he thought might be of some value, although he neglected to ascertain its exact worth. He went to Islam & Abraham, dealers in pre- cious stones, and offered the stone to them for $100; Islam & Abraham refused to buy it until all efforts had been made to find the person who had lost it. Adver- tisements were inserted in all the newspapers, and after a year had gone by, Waters repeated the offer. Isham & Abraham knew that the stone was a dia- mond of great worth, probably about $10,000, but since Waters had not asked them the value, they did not in- form him. They accepted the offer. As Waters returned to get the stone, he met a friend who wanted to see it. Then Waters learned that the stone was a diamond worth a hundred times what he had offered it for. He refused to sell it to Islam & Abraham, alleging that the consideration was so small in comparison with the true value of the stone, that he could not be held to his bargain. Islam & Abraham sued him for the stone and for breach of his promise to sell it to them. Who should have won! 184 CONTKACTS RULING COURT CASE John B. Nell vs. Zucharias Schnell, Volume 17 Indi- ana Reports, Page 29. Theresa Schnell, the deceased wife of the defendant, Zacharias Schnell, before her death, made a will in which she attempted to leave property to John B. Nell, among others. But all her property had become that of her husband upon their marriage, so that, by will, Nell and the others received nothing. Zacharias Schnell was a just man and wished to see that these persons should be taken care of. So, by instrument in writing, Zacharias Schnell agreed to give John B. Nell the sum of $200, in consideration of love and af- fection and one cent by John B. Nell paid to Zacharias Schnell. This agreement was signed by both parties. Thereafter, however, Zacharias Schnell changed his mind, and refused to pay the sum promised. John B. Nell brought this action to recover the $200. The defense of Schnell was that his promise was not legally binding, because it was unsupported by a val- uable consideration. Decision: The general rule is that any considera- tion, however inadequate, is sufficient to make binding an agreement otherwise binding. It is not at all nec- essary that the consideration should be of the same value as that which moves from the other party. But it is said that where money is exchanged, that a less sum can never be a consideration for a larger sum. Mr. Justice Perkins, who delivered the opinion of the Court, said: "The consideration of one cent will not support the promise of Schnell. It is true, that as a general rule, inadequacy of consideration will not viti- ate an agreement. But this doctrine does not apply CONTRACTS 185 to a mere exchange of sums of money, of coins, whose value is definitely fixed, but to the exchange of some- thing of, in itself, indeterminate value, for money, or, perhaps, for some other thing of indeterminate value. In this case, had ':he one cent mentioned been some particular one cent, a family piece, or ancient, remark- able coin, possessing an indeterminate value, extrinsic from its simple money value, a different view might be taken." Judgment was, therefore, given for Schnell in this action. RULING LAW Story Case Answer The law does not require that consideration shall be adequate. If it is shown that there is a considera- tion, the law goes no further as a general rule. It as- sumes that the parties know better than any one else what they want ; and if they get what they want, it is beyond the business of the court to make their con- tracts for them. But where it appears that the agree- ment is mere exchange of money, the law does require that the consideration shall be adequate. In the Couil Case of Schnell vs. Nell, the Court was of the opinion that one cent could not be a consideration for $200. Had the one cent been a unique coin, or a family piece, the Court would not, then, have inquired into its value as a consideration. But given as a piece of money in exchange for a much larger sum, according to the Court, certainly was not a consideration. In the Story Case, assuming that Islam and Abraham were not in any way fraudulent, the inadequacy of the considera- tion is not material. Islam and Abraham may recover damages from Waters for his failure to sell the stone. 186 CONTKACTS D. Consideration Need Not Be in Money or Money Value STORY CASE Fairy Shoen wanted his nephew, who was attending college, to refrain from playing football and made him the following offer: "Oct. 1, 1914. If my nephew, Kermit Shoen, will promise to refrain from playing football I will defray his ex- penses to the San Francisco "World's Fair in 1915. (Signed) FARRY SHOEN." Kermit refrained from playing football in accord- ance with his promise. On January 1, Kermit in- herited a large fortune, and his uncle refused to pay the expense of the World's Fair trip on the ground that the contract was void for lack of consideration. The nephew brought suit to recover damages for breach of contract. Can he recover? RULING COURT CASE No. 1 Talbott vs. Stemmons, Volume 89 Kentucky Reports, Page 222; Volume 25 American State Reports, Page 531. Mrs. Sallie D. Stemmons was the step-grandmother of Albert Talbott, who is the plaintiff in this action. Albert was addicted to the smoking habit. This habit troubled his grandmother very much, and after several fruitless attempts to persuade him to abandon it, she made the following written agreement with him : " April 26, 1880. I do promise and bind myself to give my grand- son, Albert Talbott, five hundred dollars at my death, if he will never take another chew of to- CONTRACTS 187 bacco, or smoke another cigar during my life, from this date up to my death; and if he breaks this pledge, he is to refund double the amount to his mother. ALBERT TALBOTT, SAT.T.TE D. STEMMONS." Albert refrained from the use of tobacco in any form during the life of his grandmother ; and after her death demanded the five hundred dollars from her represen- tative; the latter refused to pay the money. There- upon, Albert brought this action to recover the amount. It was contended by Stemmons, the defendant, that the promise of the grandmother never became legally binding, because it was not supported by a valuable consideration. Decision : It is not necessary that the consideration of a contract shall be money ; nor is it necessary that the consideration shall be such that it may be meas- ured in 1 money's worth. Any right, relinquished by the promisee, constitutes a valuable consideration, whether it was beneficial to him or not, and it makes binding the promise of his grandmother, made before her death. Mr. Justice Pryor said in part : * * The right to enjoy the use of tobacco was a right that belonged to the grandson, and not forbidden by law. The abandon- ment of its use may have saved him money or con- tributed to his health; nevertheless, the surrender of that right caused the promise, and having the right to contract with reference to the subject matter, the abandonment of the use was a sufficient consideration to uphold the promise of grandmother. ' ' 188 CONTRACTS Therefore, judgment was given for Albert Talbott in this action. RULING COURT CASE No. 2 John Devecmon vs. Alexander Shaw, Volume 69 Maryland Reports, Page 199; Volume 9 American State Reports, Page 422. John Devecmon, a nephew of John Combs, deceased, had lived with his uncle, and worked for him as a clerk in his business. In the early part of the year 1878, the uncle, who was very fond of the boy, offered to pay all the expenses if the nephew would take a trip through Europe. The trip was purely recreational, and had no connection whatsoever with the business of the uncle. The nephew, relying upon the promise that he should be reimbursed for the expenses incurred while abroad, made ready and started on the journey. While abroad, his uncle died. When he returned, he demanded of Shaw, the personal representative of his uncle, money sufficient to cover his expenses incurred while abroad, in accordance with the promise of his uncle. The request was denied by Shaw. Thereupon, John Devecmon brought this action to recover the same. It was insisted by Shaw that the promise of the uncle was not binding, because there was no consideration; the travels of the nephew were not necessarily a detri- ment to him ; very likely they were an advantage ; and certainly, insisted Shaw, the trip conferred no benefit upon the uncle. Decision : Any act performed by one person, wheth- er or not it is detrimental to him, will constitute a val- uable consideration for the promise of another, pro- vided it was the right of the person to perform or with- CONTRACTS 189 hold the performance of the act, as he chose. In this case, the nephew was under no obligation to go to Europe, although the trip very likely benefited him. Nevertheless, the act constitutes a valuable considera- tion for the promise of the uncle. Therefore, that promise is legally binding, and the nephew is entitled to recover from Shaw, money sufficient to cover his ex- penses incurred in making the trip. Accordingly, judgment was given for John Devec- mon in this action. RULING LAW Story Case Answer The law does not designate the kind of consideration which is necessary. It is evident, therefore, that the consideration need not be in money, nor need it be something which may be measured in terms of money. The doing of any act, which the doer is not legally bound to do, or the refraining from doing of any act, which the doer might legally do, constitutes a consid- eration sufficient to create a legally binding contract. This is well illustrated by the Court Case of Talbott vs. Stemmons; there, the grandson was under no legal duty to refrain from using tobacco, even though its discontinuance might, as a matter of fact, confer a benefit upon him ; he was entitled to use tobacco if he desired, and his abstinence was a sufficient considera- tion to make binding the promise of his grandmother to pay him $500. The same thing is true in the Story Case Kermit was under no legal obligation to refrain from playing football. In fact, his sacrifice of the game may have been beneficial to him. But his promise to refrain, was a sufficient consideration to make binding the agreement of his uncle to pay the 190 CONTRACTS expense of the World's Fair trip and the nephew is entitled to recover. E. Consideration May Take One of the Following Forms : (1) In a Bi-lateral Contract It Is a Promise for a Promise STORY CASE Welton, Baker & Company, wholesale coal dealers, wrote the following letter to The Cherry Eed Brick Company : "January 2, 1915. Gentlemen : We offer yon steam lump coal at $3 per ton, if you agree to buy all the coal you may need from us for this year. (Signed) WELTON, BAKEE & COMPANY." On January 3, 1915, The Cherry Eed Brick Com- pany replied with the following letter : * ' Gentlemen : We accept your offer of the 2nd to furnish us all the steam lump coal we may need for this year at $3 per ton. (Signed) THE CHEERY EED BRICK COMPANY." Sereral orders were filled in accordance with this understanding. On April 1, 1915, a national miners' strike was called and the market price of all coal in- creased. Welton, Baker & Company wrote The Cherry Bed Brick Company the following letter : "Gentlemen: Upon advice from our attorneys, we have elected to cancel our arrangement with you on the ground that a binding contract never existed between us. We made you an offer which remained merely a standing offer subject to our withdrawal at any CONTRACTS 191 time, since it was not supported by a promise from you, changing it into a binding contract. In other words, since you merely promised to buy all the coal you might need and you might not need any we could not hold you to buy any, and for that reason you cannot hold us now. (Signed) WELTON, BAKER & COMPANY." The Cherry Bed Brick Company started suit upon the alleged contract. Is the defense of the coal com- pany effective ? EULING COITET CASE Worthy vs. Rice, Volume 8 Richardson Reports (South Carolina), Page 416. Bice was a cotton planter and had many slaves on his plantation. After his cotton was all picked by the slaves, he was desirous of hiring them out, so that they would earn revenue for him. Worthy was engaged in carrying cotton up and down the river in boats for planters. Just before all the produce was ready for market, Bice agreed with Worthy to ship all his cotton with him, if he would promise to hire two slaves from the Bice plantation as boat hands. Worthy, eager to get as much cotton to carry as possible, promised to engage the men. A few days later, Bice sold all his cotton, without acquainting Worthy of his intention. When the latter learned that Bice had no cotton re- maining, he brought this action to recover damages for the breach of the contract. It was insisted by Bice that he was not liable, be- cause there was no consideration for his promise. Decision : The promise of the parties in this case was mutual and simultaneous; each was the induce- ment for the other. An agreement, consisting of mutual 192 CONTRACTS promises, is legally binding, because the promise of each is a consideration for the promise of the other. Thus, Worthy is entitled to recover from Eice such damages as he suffered by the loss of the carrying privilege. Therefore, judgment was for Worthy, the plaintiff, in this action. RULING LAW Story Case Answer Where two parties make mutual and simultaneous promises to each other, a bi-lateral relationship exists, so-called because each party is under obligation to the other to the extent of his promise. Here, the consider- ation does not consist of the doing of any act by either party, but consists in the promise of each. In the Story Case, a good contract existed, consist- ing of the promises of both sides. Apparently, the reasoning of the coal company, upon which it bases the conclusion that a contract does not exist, is correct because, as stated, the brick company might not need any coal. Yet, it has agreed to buy all the coal it might need from the Welton, Baker Company, and therefore, has obligated itself not to buy any coal elsewhere. This is a sufficient promise to support a counter-promise and the contract is good. (2) In Unilateral Contracts, It Is the Act of One Party for the Promise of the Other STORY CASE Frank Johnson said to Eph Kilkot: "I'll give you five dollars when you dig the two post holes for the CONTRACTS 193 new gate I 'm putting np. ' ' Eph responded, ' ' All right, I will dig them. ' ' The next day Johnson hired another man to dig the holes and Kilkot found the work already finished when he brought his tools; he sued Johnson for breach of promise. Johnson defended on the ground that his of- fer contemplated an act, that is, digging the post holes, as acceptance; and that he made no promise that he would allow Kilkot to dig the holes. Is this defense good? RULING COURT CASE Barnes vs. Ferine, Volume 9 Barbour Reports (New York), Page 202. Barnes, as trustee of the First Presbyterian Church, brought this action against Ferine on a subscription paper, which was in the following words : "We, the subscribers hereto, agree to pay the sums set opposite our respective names, for the purpose of building a Presbyterian Church." Perine subscribed $150. The church was erected with the knowledge and approval of Perine. When it had been completed anri Perine was requested to pay the amount which he had promised, he refused to settle. Thereupon, this action was instituted against him for the recovery of the $150. He defended that his promise to pay the $150 was without consideration; that the church did not accept his offer by a promise ; and that the authorities of the church were never bound under any obligation to build. Decision : In this case, when Perine made his prom- ise, it might have been without consideration in that 194 CONTRACTS the church authorities were under no obligation to pro- ceed with the erection of the church. His promise to pay, however, contemplated that it might be accepted by an act on the part of the authorities ; that is, the act of building the church. This was done, and the erec- tion is now a valuable consideration for, and makes binding the promise of Ferine. Mr. Justice Paige said in part : * ' It is not necessary that a consideration should exist at the time a promise is made. Thus, if A promise B to pay him a sum of money if he will do a particular thing or act, and B does the act before the revocation of the promise, the promise thereupon becomes binding, although B does not at the time of the promise engage to do the act. Intermediate between the promise and the perform- ance of the act, the obligation of the promise is sus- pended. " Judgment was, therefore, given for Barnes. RULING LAW Story Case Answer If one party promises to pay another a certain sum, provided that the other will do a certain act, until that act is done there is no contract. When the act is done, a unilateral contract exists, that is, one in which only one person is under obligation, the per- son who made the offer. The consideration consists of two parts, one a promise, the other an act. In the Story Case, the promise of Johnson contem- plated that it should be accepted by an act by Kilkot ; until that act was performed, the promise of Johnson was without consideration, and he had the right to withdraw it at any time he chose. Therefore, after his withdrawal, he is not liable to Kilkot. CONTRACTS 195 F. There May Be a Good Consideration (1) In a Compromise STORY CASE The Buckeye Laundry Company had an agent in the town of Jefferson who transacted a large amount of business for them. Several hundred dollars were often in his possession each month and his wages were deducted from this monthly account. In May, 1914, the agent, William Dutcher, sent in a check to the laundry for $175.85 "in full payment." The laundry refused to receive the check in full pay- ment, claiming the balance due was $201. There was some correspondence between the laundry and Dutcher and, finally, the parties agreed to compromise the controversy at the sum of $190. After this com- promise had been agreed upon, Dutcher found receipts which would have proven that the amount due was really $175.85. Whereupon, he refused to pay the laundry $190. The laundry sued him for $190. He defended on the grounds that the real balance due was $175.85. Is this defense valid? RULING COUBT CASE Russell vs. Cook, Volume 3 Hill Reports (New York), Page 504, Cook was the owner of a canal boat, and with it was engaged in carrying freight for hire between certain points. Palmer had shipped some barley in this boat from his store in Onondago County to a man living in Albany. While making this trip, the boat of Cook col- lided with another boat, and went down, losing all its cargo. Since it was a doubtful question whether the 196 CONTRACTS collision was caused by negligence of Cook, or by the negligence of the other boat, a controversy occurred between Cook and Palmer as to whether Cook should stand the whole loss. But it was finally settled that Palmer would agree to release half his claim, if Cook would agree to pay the other half. In accordance with this agreement, Cook gave a note to Palmer, or order, in the sum of $6,834. The note fell due on July 1, 1837, but was not paid at that time. Palmer then trans- ferred the note to Russell, who brought this action on it The defense of Cook was that the note was not bind- ing, because it was not supported by a consideration. Decision: Between Cook and Palmer there was a bona fide controversy as to whether Cook was liable for the whole loss. Palmer, instead of using his legal right to sue for it, agreed to release his claim for the full loss in consideration of a promise on the part of Cook to pay half. The release of his right to sue for the whole claim was a thing which he was under no legal duty to do. Thus, it was a valuable consideration, suf- ficient to support the promise of Cook to pay half the claim. Therefore, Palmer, and his assignee, Russell, are entitled to recover the amount promised. Therefore judgment was given for Russell, the plain- tiff in this action. RULING LAW Story Case Answer It is a legal right of every person to sue when he believes that he has a claim against another, even though it may seem that his belief in the claim is un- reasonable or ungrounded. If, therefore, the person against whom he believes he has this right agrees to CONTRACTS 197 pay a certain sum, even though it may be more than the sum actually due as shown later, in consideration that the claimant will forbear to sue, his agreement or promise not to insist upon this right will constitute a good consideration for the promise of the other to pay a higher sum than is actually due. This is called a compromise ; the compromise of one not to sue on the doubtful claim is a consideration for the promise of the other to pay a higher sum even than is actually due. The claimant must act in good faith; and he must in honor believe that he has such a claim to the extent that he demands, or his promise to forbear is not a consideration. In the Story Case, the promise of the laundry company not to sue for $201 was a good consideration for the promise of Dutcher to pay $190, even though it was thereafter shown that the sum act- ually due was only $175.85. The laundry company may recover the $190. (2) In a Composition With Creditors STOEY CASE The Middlesex Grocery Company was financially embarrassed, and there was a possibility that the firm would be compelled to go into bankruptcy. To prevent this, the creditors assembled and agreed to take in payment of their claims 90 cents on the dollar. Later, Levy & Co., who were among these creditors, decided to sue for their entire claim, instead of taking 90 cents on the dollar. They brought suit against The Middle- sex Grocery Company for $1,000, the balance due to them. The Middlesex Company defended on the ground that Levy & Co. had agreed to take 90 cents on the dol- 198 CONTEACTS lar and hence, that the claim was only $900. Levy & Co. answered this defense, by saying that the promise to take $900 was not supported by any consideration. To this, the Middlesex Co. replied that the promise of each creditor was consideration for the promise of every other creditor. What is your decision? RULING COURT CASE Langston vs. Stewart Brothers, Volume 103 Georgia Reports, Page 290. Stewart Brothers were partners conducting a retail grocery store. The firm owed Langston $158 for goods delivered, upon an open account. In 1895, Stewart Brothers became involved financially and could not satisfy their obligations. The firm's creditors, there- upon agreed among themselves with Stewart Brothers to accept fifty per cent of their claims in full settlement of all obligations. Under such an arrangement entered into with all the creditors, Stewart Brothers were able to secure money to pay the debts in this proportion. Langston became a party to this written contract. When the money was tendered to Langston under this contract, he refused to accept, insisting that the contract was without consideration. Thereupon, he started this suit for the full amount. Stewart Brothers entered the composition contract as a defense. Justice Lewis gave the opinion of the Court : "It is well established that a contract is binding when it forms a part of a composition in which several credit- ors join, mutually agreeing, on account of the embar- rassed or insolvent condition of their common debtor, to forbear pressing their claims to the full amount. CONTRACTS 199 The new consideration which enters into and supports such an agreement is the undertaking of the other creditors to give up a portion of their demands. To allow a creditor, who has entered into such an agree- ment, upon which all the others had acted, to repudi- ate his contract and sue for the entire amount of his original debt, would be sanctioning the perpetration of a fraud." Judgment is given for Charles D. and John L. Stewart. RULING LAW Story Case Answer A composition with creditors rests upon an intrinsic consideration, namely, the mutual agreement of the creditors to forego their legal rights and to accept what is offered for their common benefit. The promise of each creditor is the consideration for that of the others. Each creditor enters into a new agreement with the- debtor, the consideration of which is the for- bearance of all the other creditors who became parties to the composition to insist upon their claims in full. In the Story Case, the defense of the Middlesex Gro- cery Company is effective. (3) In the Force of a Previous Request STORY CASE Phillips Ward and Thomas Byron, a painter, had some negotiations regarding the painting of Ward's fence. Before terms were agreed upon, Byron was certain that he could please Ward. He brought his paint and brushes and started work. When Ward was 200 CONTRACTS leaving his house, he saw Byron and said, "Well, that is a pretty red you are using. ' ' After working for a week, Byron completed the task and demanded pay for his work. Ward refused to pay, on the ground that a contract never existed. Is this correct? EUUNG COURT CASE Hicks vs. BurJians, Volume 10 Jolinson Reports (New York), Page 213. Certain persons had swindled Burhans and others, and then had fled. Hicks, although it was not his of- ficial duty, began a pursuit of the fugitives. Burhans and others, who were the victims, assembled and signed a certain paper, reciting that, since Hicks, previous to the making of the paper, had incurred large expenses in pursuit of the swindlers, that they promised to pay Hicks all the expenses he had, and might thereafter in- cur in this pursuit. Thereafter, Hicks drew up his account, amounting to $138. Burhans and the others, when shown this account, made no objection to it. But when it was presented to them for payment, they refused to settle. Thereupon, Hicks brought this action against Burhans for his share of the amount. The defense of Burhans consisted in the fact that there was no present consideration for the services which Hicks had performed; that he had performed the services before they expressly promised to pay therefor. By the Court: "The written promise to pay, if founded on a past consideration, may be good, if the past services be laid to have been done upon request ; and if not so laid, a request may be implied from the CONTRACTS 201 beneficial nature of the consideration, and the circum- stances of the transaction." Because of the beneficial nature of the services, the court was of opinion that the promise to pay for the past obligation was a valuable consideration therefor; and that a request might be implied. Accordingly, judgment was given for Hicks. RULING LAW Story Case Answer If a person requests another to perform some act or service for him, and there is no mention made about compensation therefor, when the act or service is per- formed, it is generally held that in the request there was an implied promise to pay for the services. The consideration is the performance of the act or service for the implied promise to pay. Sometimes, a request is implied from the circum- stances surrounding the doing of the act, as in the Court Case of Hicks vs. BurJians. The circumstances, however, must clearly indicate knowledge on the part of the obligor at the time the act was done; also an acquiescence on his part indicated by a failure to ob- ject, and finally by an acceptance of the benefits, result- ing from the service. Ward can recover, in the Story Case, the reasonable value of his services. G. There Is No Consideration (1) In the Promise to Perform What One Is Bound to Do STORY CASE Charles Abbott, a bridge builder, made a contract with Frank Bates, to build a bridge. Abbott agreed to complete the work within four months, and Bates 202 CONTRACTS agreed to pay him $5,000. At the end of one month, Abbott declared that he was about to discontinue the work, because he could not employ men at $4 a day, as he had planned. Bates was in haste to have the bridge completed, and, therefore, agreed in writing with Abbott to pay one-half the extra cost of the men if Abbott would continue the work. With this under- standing Abbott employed ten men at $6 a day and completed the bridge on time. Thereupon, Bates re- fused to pay Abbott anything above the $5,000 first agreed upon, on the ground that his second promise was not binding. Abbott brought suit to recover one- half the extra cost of the men, in accordance with the second contract. Will the action be sustained! RULING COURT CASE Lingenfelder vs. The Wainwright Brewing Com- pany, Volume 103 Missouri Reports, Page 578. Lingenfelder was employed by Wainwright to draw plans for and to superintend the construction of brew- ery buildings. He was to receive a commission of five per cent on the cost of the buildings, but not on the placing of any machinery. Wainwright awarded the contract for a refrigerator plant to be installed in one of the buildings to De La Vergne Ice Company. Now Lingenfelder was the president of, and interested in, a rival company engaged in the same line of business ; angry because his company had not been given the contract for the plant, he took away his plans, recalled his superintendent, and declared that he had aban- doned the project. Wainwright was in haste to com- plete the brewery, but was unable to secure anyone to take Lingenfelder 's place without the loss of much CONTRACTS 203 time. Wainwright offered to allow Lingenfelder a five per cent commission on the cost of installing the re- frigerator plant, if he would complete his contract. He agreed, and when the building was finished and he de- manded his extra commission, it was refused by Wain- wright. This suit was then brought by the executors of Lingenfelder for the extra commission. Mr. Justice Gantt delivered the opinion of the court : "The plaintiff was not entitled to recover because there was no consideration for the promise of the de- fendant to allow the architect the extra commission. The original contract here was not modified in any way; Lingenfelder promised to do for the extra five per cent just what he had already bound himself to do by the original contract. He gave nothing new and promised nothing new. A promise to do what one is already bound to do is in law no consideration for the promise of the other party. "Lingenfelder was bound by his contract to design and superintend the erection of this building. Under the new promise he was not to do anything more or different. What benefit was to accure to Wainwright I He was to receive the same service from Lingenfelder under the new contract that Lingenfelder was bound to tender under the original contract. What loss, trouble or inconvenience could result to Lingenfelder, that he had not already assumed? " 'When a party merely does what he has already obligated himself to do, he cannot demand an addi- tional compensation therefor, and although by taking advantage of the necessities of his adversary he ob- tains a promise for more, the law will regard it as 204 CONTEACTS nudum pactum, and will not lend its process to aid in the wrong.' Judgment was given for the defendant, The Wain- wright Brewing Company. EULING LAW Story Case Answer A promise to do that which one is already bound to do, is not sufficient to support a counter promise. In the Story Case, Bates received nothing more in return for his promise than he was entitled to receive, and Abbott has suffered nothing, for he was already bound to build the house. Of course, it is always possible for the parties to re- scind or change their old agreement. If, in the above case, Bates had informed Abbott that he wished his bridge finished a month earlier than the contract stipu- lated, and was willing to pay one-half the extra cost of the men, if Abbott would double his force, and Ab- bott acted in reliance on this offer, obviously there is a new mutual consideration for a new agreement. As the case stands, however, Abbott did not promise to add anything new in exchange for the promise of Bates; hence, there is no consideration coming from Abbott and he cannot recover. (2) Where There Is Impossibility of Performance STOKY CASE Having been arrested for confidence game alleged to have been played upon a stranger in the town, James Howell employed Simon Sawyer, a friend, to defend him in court. Howell agreed to pay Sawyer $100 in return for Sawyer's promise to conduct the defense in CONTRACTS 205 court. Howell, however, knew at the time of making the contract that Sawyer was not a lawyer and in no way qualified to act. When Sawyer failed to comply with his contract, HoAvell brought suit for its breach. Sawyer put in defense that Howell knew at the time of making the contract, that he, Sawyer, was not a lawyer. Is this a good defense ? EULING COUBT CASE Kelley vs. The Mutual Life Insurance Company, Vol- ume 109 ; Federal Reporter, Page 56. Edward Kelley made application to the Mutual Life Insurance Company to have his life insured; and a policy was granted to him. By the contract made be- tween them, if all the premiums were paid, the Com- pany agreed to pay Mrs. Kelley the amount of the policy at the death of Edward Kelley. In the policy there was the statement made by Kelley : * * I will not die by my own hand, sane or insane." Thereafter, however,. Kelley became insane, and committed sui- cide. His wife, Mrs. Kelley, brought this action to re- cover the amount of the policy. The defense of the company was that Kelley had promised not to die by his own act, sane or insane; and having done so, the policy was void. But she con- tended that this promise was not binding because it was impossible of performance. The Court said: "When Kelley agreed not to com- mit suicide while insane, he was agreeing to do that which was impossible to observe. He knew this when he so agreed and the company knew it equally well. It was an impossible contract, impossible to observe ; and an impossibility known by both parties when they so 206 CONTEACTS agreed. A learned text writer says: *A mutual un- derstanding between parties to do what both know to be impossible, is vain and idle, lacking the elements of a contract. ' Accordingly, it was held that Mrs. Kelley might recover. ETJLING LAW Story Case Answer A promise to do some act which is legally or physi- cally impossible does not constitute a good considera- tion necessary to create a legally binding contract. This impossibility must be known, however, to both parties. A promise by one person to sell me land not belonging to him, when I am aware that he does not own it, does not create a contract between us. Here, there is a legal impossibility. A promise by one to go from New York to London in one day, in consideration of a certain sum of money, is a physical impossibility and creates no contract between the parties. The defense of Sawyer, in the Story Case, is effec- tive, since Howell knew at the time the alleged contract was made, that Sawyer could not perform. (3) When the Undertaking Is Gratuitous STOEY CASE H. L. Ailing was running for the office of sheriff of Ross County. He had been campaigning extensively in the southern end of the county when one of his friends came to him and said, "Ailing, you ought to have some- one in the northern end of the county to make some speeches for you. I know that you are busy here. If CONTRACTS 207 yon desire, I will do some campaigning up there for you. ' ' Ailing replied, "That is splendid, Henry. I was in- tending to hire a man to work in that part of the county, but this relieves me. When can you begin ? ' ' To this, Henry Marx answered, "I promise to be there within three days and will campaign the entire end of the county." Ailing did not send anyone else to the northern end of the county because he thought that Marx was cov- ering the territory. After he lost the election by five votes, he learned that Marx had been working for his opponent. He immediately brought suit for Marx's breach of contract to campaign for him. Marx defended on the ground that his promise to work for Ailing was without consideration and was in- tended to be gratuitous ; hence, he claimed it was not binding. Is this true! RULING COURT CASE Thome, vs. Deas, Volume 4 Johnson (New York) Re- ports, Page 84. Thorne and Deas were co-owners of a certain vessel, which was being prepared to sail from a point in Amer- ica to Europe. In a conversation as to the advisability of insuring the vessel on the trip, they decided in favor of the plan. Deas, thereupon, promised Thorne that he would immediately procure insurance on the ves- sel for the coming voyage. But he neglected to secure the policy. While out at sea the vessel met with a storm, and went down. Thorne then brought this ac- tion against Deas for damages. He claimed that he had suffered damages from the failure of Deas to do as he promised. 208 CONTRACTS Deas insisted that he was not liable for failing in his promise, because there was no consideration; he contended that his offer to procure insurance on the vessel was purely gratuitous, and that failure to carry out a gratuitous undertaking does not render one li- able as a breach of a contract. Decision: The promise of Deas to procure insur- ance upon the vessel in question was a purely gratui- tous offer on his part, it was unsupported by any con- sideration whatsoever moving from Thome; such be- ing the case, there was no contract between the parties ; and the failure of Deas to procure the insurance did not render him liable for the damages which resulted from his neglect. Therefore, judgment was given for Deas in this action. RULING LAW Story Case Answer It is very apparent from what has been said hereto- fore, that a purely gratuitous undertaking or promise by a person does not legally obligate him to carry out the undertaking or perform the promise. In the Story Case, the conduct of Henry Marx was morally repre- hensible, but his promise to assist his friend in his election campaign imposed no legal obligation upon him, and his failure to perform what he promised, con- ferred no right upon Ailing for damages against him. (4) Where the Act Has Been Previously Performed on One Side STORY CASE Edward Latham lost all his wealth in a speculation and was forced to accept the charity of his friends. CONTEACTS 209 A certain Dr. Hargis promised Latham that he would be responsible for Ms living expenses, until he could become located again. For three months, Latham lived with Hargis and was made very comfortable. Then Latham came into a large fortune upon the decease of his rich uncle. Latham said to Hargis, " Doctor, I am indebted to you for your kindnesses to me and I shall repay you $150 for the expense you have incurred. Your prom- ise to take care of me has been generously kept. For this promise, I promise to repay you. I'll send you the check within the week." But several weeks passed, and no check was received by Hargis. Then he mentioned the fact to Latham who said, "I have decided not to pay you. I have con- sulted my attorneys and they inform me that my prom- ise to repay you was not supported by any consider- ation given by you." Hargis sued for the $150, alleging, as a consider- ation, the. promise which he had made to Latham to keep him while he was without money. Should the court allow him to recover? RULING COURT CASE Josephine Moore vs. Nelson Elmer, Volume 180 Massachusetts Reports, Page 15. Williard Elmer held a mortgage upon certain prop- erty which was owned by Josephine Moore, the plain- tiff in this action. Josephine Moore pretended to be a prophet and a clairvoyant. Williard Elmer, during his lifetime, had been to see her several times, and had had her make a so-called reading of his future. He executed a writing to her on one occasion, by which 210 CONTRACTS he promised to give her the mortgage which he held upon her land, in consideration of the sittings which he had had. After the death of Williard Elmer, Nel- son Elmer was made his personal representative. In clearing up the estate of Williard, Nelson was pro- ceeding to foreclose this mortgage against Josephine Moore. She resisted the foreclosure on the ground that Williard had agreed to release the mortgage to her. She brought this bill to restrain the personal rep- resentative, Nelson Elmer, from making preparations towards a foreclosure. Nelson insisted, that the written agreement executed by Williard during his lifetime, was not binding, be- cause it was not supported by a consideration. The sittings, which had been given him, had been given be- fore any promise was made to pay her therefor. Such a consideration is past, and cannot support a present promise. Decision: A promise to pay for services already rendered is without consideration and is not legally en- forcible. Such a consideration is said to be a past or executed consideration^ In this case, the services which Josephine Moore seeks to establish as a consideration for the promise of Williard Elmer to release the mort- gage, were performed before the promise was made. When the services were rendered there was no promise made to pay for them. A subsequent promise to pay for them is not binding, for the reason that it is with- out a consideration. Accordingly, judgment was given for Nelson Elmer in this suit, and he was not restrained from proceed- ing to foreclose the mortgage. CONTRACTS 211 RULING LAW Story Case Answer When a person performs some service or act for an- other, without the knowledge of the latter, usually this imposes no legal liability upon the former to pay for the services. Nor will such past services rendered without request or implied request, operate as a suffi- cient consideration to make binding a present promise to pay for them. When it is reasonable to conclude that the services were rendered as a charity, a request to pay cannot be implied. Any subsequent promise to pay is without consideration, and not binding. Thus, in the Story Case, the services which Dr. Hargis per- formed for Latham do not constitute a sufficient con- sideration to support the promise subsequently made by Latham to pay for them. (5) In a Moral Obligation STORY CASE Abel Davis risked his life, and suffered severe in- juries, in rescuing James Tilloson 's daughter from his burning home during Tilloson 's absence from the city. When Tilloson returned, he visited Davis at the hos- pital and there promised to give him two thousand dollars for his brave deed. Later, when Davis recov- ered, Tilloson refused to pay the money, although he could well afford to carry out his promise. Davis brought suit on contract to recover two thousand dol- lars. Can he recover ? RULING COURT CASE Allen vs. Bryson, Volume 67 Iowa Reports, Page 591 ; Volume 56 American Reports, Page 358. 212 CONTRACTS Allen and Bryson were brothers-in-law; they were both engaged in the practice of law, not as partners, but each independently. It seems, that occasionally they would assist each other in special work or special cases. Allen, on one occasion, did considerable work for Bryson in a certain case. At the time the work was done, neither discussed or contemplated that compen- sation should be made for the services thus rendered. But afterwards, Bryson promised to pay for the ser- vices. Later he changed his mind, and refused to pay for them. Thereupon, Allen instituted this action to recover therefor. Bryson insisted that he was not liable upon his promise to pay for the services in question, because his promise was made without any consideration from Allen. But it was contended by Allen that he was at least tinder a moral obligation to pay for his services which had been rendered, and a subsequent promise to pay for them created a binding obligation. Decision: A moral obligation standing alone can- not be made the consideration for a subsequent prom- ise to perform that obligation. In this case, assuming that Bryson was under a moral obligation to compen- sate Allen for his services, it does not render a sub- sequent promise to pay for the services legally binding. Therefore, judgment was given for Bryson in this action. ETJLING LAW Story Case Answer It was stated that past services will not constitute a sufficient consideration to support a subsequent promise to pay for such services. This is true, though the person benefited is under a moral obligation to re- CONTRACTS 213 ciprocate for them. Davis, in the Story Case, cannot recover. (6) In a Promise That Is Too Vague STOEY CASE The Style-No-Better Haberdasher Store, owned by Lawrence Dunlap was for sale. George Ulman de- sired to purchase it but he and Dunlap could meet on no definite terms. However, as each of them was anxious to consummate the transaction, they made the following writing : "November 5, 1914. In consideration of the promise of George Ul- man to pay at a future date, I promise to sell him some of my stock of neckware, etc., and to deliver the same at a future date. (Signed) Lawrence Dunlap George Ulman." But they were later unable to agree as to the amount to be paid, the amount of stock to be delivered, and the time of payment and the time of delivery. Ulman claimed that Dunlap was unreasonable, because he no longer wanted to sell and not because of any valid objection to the terms. This Dunlap admitted. Should the suit which Ulman brought against Dun- lap for breach of the contract of sale be decided in favor of Ulman? RULING COURT CASE Marble vs. Standard Oil Company, Volume 169 Mas- sachusetts Reports, Page 559. 214 CONTRACTS Marble* brought suit upon contract against the Standard Oil Company for failure to sell him oil, and for failure to make him exclusive agent in his terri- tory. The evidence did not show any specific con- tract, only an arrangement by which the Standard Oil Company agreed to protect Marble in his trade; that is, to deal with him on favorable terms, so that he could compete successfully with other parties selling in the same territory. There was no evidence that the arrangement was to continue for any particular time, or that Marble was bound to buy any oil. Justice Knowlton gave the opinion of the Court: "The agreement was too indefinite and too general to contain a consideration and be enforcible as a con- tract." Judgment was given for the Standard Oil Company. RULING LAW Story Case Answer A promise may be too vague and uncertain to sus- tain a consideration and be enforcible as a contract. The parties must make their own agreement and not expect the Court to construct one for them. If an agreement is so uncertain and ambiguous that a Court cannot determine what the parties intended, it will say there is no obligation and therefore no contract. For this reason there is no contract in the Story Case. (7) In a Promise to Discharge the Balance of a Debt on Payment of Part STORY CASE Leland Culhan owed George Getz the sum of $60. The day of payment was long past and still Culhan was CONTRACTS 215 unable to pay. Finally Getz came to Culhan and said, "Culhan, you are in mighty bad luck. I don't want to press you for the little debt you owe me but I need the money. I'll make this agreement with you. If you pay me what you get from the sale of any personal property you might own, I'll call our debt square." Culhan, thereupon, sold a cow and turned the money, thirty-two dollars, over to Getz. Two days later Getz sued Culhan for the rest of the money. Culhan de- fends with the above agreement. How do you decide? RULING COURT CASE Bender vs. Been, Volume 78 Iowa Reports, Page 283 ; Volume 5 Lawyers' Reports Annotated, Page 596. Been signed a promissory note for $220, made pay- able to Bender. He was not able to make payment thereof when it fell due; he went to Bender and ex- plained that he was unable to pay the note and asked for an extension of time or some other settlement of the note. After some negotiations, Bender decided to accept part payment in satisfaction of the whole amount due. The following agreement was made in writing and signed by them : " Received of Charles Been the snm of $40, and the same credited on a note given for $220, signed by Charles Been. The consideration of payment of the above $40 is that said Charles Been is to be released on said note." Thereafter, however, Bender sued on the note for the balance of the amount called for therein. It was contended by Been that, by their agreement, he was no longer liable upon the note. By Bender it was insisted that the agreement was not binding upon 216 CONTKACTS him, because there was no consideration in mere part payment of a larger sum then due. Mr. Justice Beck delivered the opinion of the Court, in which it is said : * ' It is a familiar rule of the law that a payment of a part of a note or a debt existing in any different form, in discharge of the whole, will not bar the recovery of the balance unpaid. The rule is based upon the principle that there is no consider- ation for the promise of discharge ; the sum paid being in fact due from the payee on the debt, he rendered no consideration to the payee for his promise to re- lease the balance of the debt. ' ' Accordingly, judgment was given for Bender in this action. RULING LAW Story Case Answer Where a person owes a certain sum of money to an- other, an agreement between them whereby the cred- itor releases the debtor, in consideration of a smaller sum paid is not a binding contract upon them so as to prevent the creditor from recovering the balance due. In such a case, it is apparent that there is no consid- eration for the agreement, because the debtor is under obligation to pay; and the creditor is entitled to call for the full amount. A promise to accept less than the full amount is not supported by a consideration. This case should be clearly distinguished from a com- position with creditors, where creditors agree together. Also, this applies only where the debt is presently due. If, for example, the debt is not due for thirty days, an agreement between them whereby the creditor accepts in the present a less sum is binding ; here a good and CONTRACTS 217 sufficient consideration is found in the debtor's sur- rendering his right to wait thirty days before paying. It follows from what has been said that there was no consideration for the promise of Getz, in the Story Case, to accept less than the full amount of his debt. Judgment must be given for Getz. H. An Obligation Unenforcible by Some Rule of Law Will Be Revived by a New Promise STORY CASE On June 1, 1907, Reeve Hammon made a note pay- able to John Patch in one year. "When the year was up, the note was not renewed nor did Hammon pay it. On June 3, 1914, Patch recalled that the money was due him and requested Hammon for it. Hammon said: "I suppose that you are aware that I am not com- pelled to pay this money, because the Statute of Limit- ations says that a claim that has not been renewed or judgment demanded in six years is void? But I want to do the honest thing, so I will pay you the money within the week." At the end of the next week Patch sued Hammon for the money. Hammon defended on the ground of the Statute of Limitations. Patch replied that after the Statute had run, Hammon agreed to pay the amount. Hammon answered that this promise was gratutious without consideration and therefore not enforcible. Which has the better case? RULING COURT CASE Duseribury vs. Hoyt, Volume 53 New York Reports, Page 521. Hoyt, the defendant in this case, executed a promis- sory note payable to the order of Dusenbury, the plain- 218 CONTRACTS tiff. Before the note was dne, Hoyt was declared a bankrupt by judicial proceedings. The effect of this proceeding was to cancel all the debts which Hoyt had previously owed. But after he had received his dis- charge, he promised Dusenbury that he would pay the note, nevertheless. But when the note was presented for payment he changed his mind again and refused to settle it. Dusenbury then instituted this action against him for the recovery of the amount due under the note. It was insisted by Hoyt that he was not liable be- cause the new promise to pay the note was without any consideration. Decision: In this case the effect of the decree in bankruptcy was to prevent any action from being brought against Hoyt on debts owed by him, previous to the decree. It did not entirely destroy the obliga- tion to pay, but it gave him a defense to an action thereon ; or, in other words, it deprived the creditor of the right to sue. But, after receiving his discharge, and then making a new promise to pay, the protection of the law was removed ; he no longer had the defense and the creditor was reinvested with full right to sue on the note. Mr. Justice Andrews said in part: "The 34th sec- tion of the bankrupt law declares that a discharge in bankruptcy releases the bankrupt from all debts prov- able under the act, and that it may be pleaded as a full and complete bar to all suits brought thereon. The legal obligation of the bankrupt is by force of positive law, discharged, and the remedy of the creditor exist- ing at the time the discharge was granted to recover his debt by suit is barred. But the debt is not paid by CONTRACTS 219 the discharge. The moral obligation of the bankrupt to pay it remains. It is due in conscience, although discharged in law, and this moral obligation, uniting with a subsequent promise by the bankrupt to pay the debt, gives a right of action." Accordingly, judgment was given for Dusenbury in tliis action. ETJLI NG LAW Story Case Answer Under certain circumstances a person may be adju- dicated a bankrupt. All his assets are used in paying his debts ratably; if the assets are insufficient to pay all his debts, those unpaid, or the parts remaining un- paid, are said to be discharged. Also, if a creditor does not sue his debtor on a claim within a certain time, us- ually six years, the claim is said to be barred by the Statute of Limitations. In both cases, the debt is still morally due the creditor; but for reasons of policy the law says that an action may not be brought there- on ; the remedy alone is barred, without extinguishing the debt. The debtor may if he chooses, waive this protection given to him by the statutes. If he makes any promise stating that he will pay the obligation, this amounts to a waiver and he may thereafter be compelled to pay the obligation. In the Story Case, Patch can recover on the note. III. CONSENT OF EITHER PARTY MUST BE REAL 1. There May Be Lack of Consent Because of Mistakes A. Mistake as to the Nature of the Contract STOKY CASE Mr. Joshua Jacobs was a very old man and could not see very well. One day, Mr. Vassermann called 220 CONTEACTS upon him and asked him if he wished to purchase shares of stock in a corporation which he, Vassermann, was promoting. After some discussion Mr. Jacobs de- cided that he would make the purchase. Mr. Vasser- mann handed him a paper and told him to sign it. As Mr. Jacobs did not have his glasses with him and could not read the paper, he asked Vassermann to tell him of its contents. The latter replied that it was merely an agreement to purchase ten shares of stock in the corporation at $100 each. Mr. Jacobs signed his name to the instrument. However, it subsequently ap- peared that the paper signed was an agreement by Mr. Jacobs to sell his farm to Vassermann for ten thousand dollars. Of course, Mr. Jacobs refused to sell his farm for that price. He was sued, thereupon, on this alleged agreement. What should be the decis- ion of the Court in this case? RULING COURT CASE Walker vs. Ebert, Volume 29 Wisconsin Reports, Page 194. Ebert, the defendant in this action, was a German by birth and education, and was unable to read or write the English language. Certain persons, who were the owners of a certain patented machine, came to Ebert and offered to sell him an interest in their patent rights and to give him an agency to sell the man- ufactured articles. Ebert thought well of the proposi- tion and accepted it. Ebert was then handed a paper by these persons to sign. Being unable to read, he asked what the paper was. They replied that it was the contract, and contained the terms of the agreement, which they had just made. Ebert, believing this, and CONTRACTS 221 relying upon their statements, signed his name to the paper. The paper, as a matter of fact, had nothing to do with the contract which they had made, but was in form a promissory note, by which Ebert agreed to pay to them a large sum of money. These persons immedi- ately transferred the note to Walker, the plaintiff in this action. He demanded payment and Ebert refused to pay it. Walker then sued him. Ebert contended that he was not liable on the note, because there was a mistake as to the nature of the instrument he had signed. He had intended to sign a contract for the sale of an interest in a patent, and for an agency to sell, and he had never intended to sign any note of this kind. Mr. Chief Justice Dixon, who delivered the opinion of the Court, said: "The party whose signature to such paper is obtained by fraudulent representations as to the character of the paper itself, and who is ignorant of such character, and has no intention of signing it, and who is guilty of no negligence in affixing his signature or in ascertaining the character of the instrument, is no more bound by it than if it were a total forgery, the signature in- cluded. " In accordance with the opinion, the Court decided that judgment should be given for Ebert in this action. RULING LAW Story Case Answer Earlier in this work, it was stated that a mutual agreement must exist between the parties concerned, as the basis of a legally binding contract between them. Heretofore we have assumed in each case that the con- sent of the parties to contract was real. We now come to examine in some detail what constitutes reality of 222 CONTRACTS consent, in order that the contract may be legally bind- ing. In the first place, it is said that the consent of one of the parties may not be real because it is given under some mistake of fact. If one of the parties is mistaken as to the nature of the contract he makes and the mis- take is not due to any negligence on his part, his con- sent to that contract is not real and he may not be held upon it. If he thinks that he is signing a con- tract of guaranty he may not be held if the contract turns out to be a bill of exchange. In practically all such cases, however, there is an additional element, to- 7 * wit, fraud on the part of the other party. In the Story Case, the conduct of Mr. Vassermann was fraudulent. Nevertheless, aside from the fraud, the consent of Mr. Jacobs was not real, because he was mistaken as to the nature of the contract ; and the mistake was not caused by any negligence on his part. Therefore, the contract is not binding upon him. B. Mistake as to the Person With Whom the Contract Is Made RULING LAW Story Case Answer In New York City, there were a number of persons by the name of Walter Jones. It chanced that two persons of that name had offices in the same building. Will Davis, of Buffalo, wrote to Walter Jones (No. 1) and instructed him to invest $9,000 for him. The letter went to Walter Jones (No. 2) who was also in the in- vesting business. Jones (No. 2) secured the investment in good faith and communicated the fact to Davis. I CONTRACTS 223 Davis had, however, learned of the mistake and re- fused to deal with Jones (No. 2). Jones (No. 2) sued him for breach of the contract to furnish $9,000 for the investment. Should he win the suit? RULING COURT CASE Boulton vs. Jones, Volume 2 Hurlstone & Norman, English Reports, Page 564. Boulton had been foreman and manager to one Brocklehurst, a pipe hose manufacturer. Jones, the defendant in this case, had dealt frequently with Brocklehurst and he had an account with him. On the morning of the 13th of January, 1857, Boulton bought Brocklehurst 's stock, fixtures and business and paid for them. In the afternoon of the same day, Jones sent a written order, addressed to Brocklehurst for three hundred and fifty feet of hose. It was furnished by Boulton, who, later, sent a bill to Jones for the same. When Jones found out that Brocklehurst had sold out the morning before he made this order, and that Boulton had furnished it instead, he refused to pay for it. Thereupon, Boulton brought this action to recover for the hose. Jones contended that he was not liable, since he had never made any contract with Boulton ; he thought that he was making a purchase from Brocklehurst and that he never intended to make one from Boulton. Mr. Pollock, C. B., said: "It is a rule of law, that if a person intends to contract with A, B cannot give himself any rights thereunder." Accordingly, judgment was given for Jones, the de- fendant in this action. 224 CONTKACTS RULING LAW Story Case Answer Heretofore, it has been stated as a rule of law that only the person to whom an offer has been made may accept it. It follows from this rule that if an offer is made to Mr. Brown, Mr. Jones may not accept it. It is equally true that an offer to one Mr. Brown may not be accepted by another Mr. Brown. In such a case, there is no real consent on the part of the offerer to deal or contract with the second Mr. Brown. It follows that the second Mr. Jones, in the Story Case, has no contract with Mr. Davis, and judgment should be given for Davis in the suit. C. Mistake as to Thing About Which the Contract Is Made (1) As to Its Existence STORY CASE Mr. Gerald Candler, who lived in Chicago, owned a farm in the state of Indiana. He was the owner of a fine racing horse, which he kept on his farm. Mr. Max- well, a friend of Mr. Candler, had often requested Mr. Candler to sell the horse to him. At length, Mr. Cand- ler agreed to sell the horse. On September 28 he notified Mr. Maxwell that he would sell him the horse for a certain price, if the latter still wished to purchase at that price. The following day, Mr. Maxwell agreed to purchase the horse and to pay for him within thirty days from that date. It appeared that the horse had died on the 27th and notice of this fact did not reach Mr. Chandler until the 1st of October. Mr. Maxwell then sued Mr. Candler for breach of his contract to sell the horse. What should be the decision in the case ? CONTRACTS 225 RULING COURT CASE Gibson vs. Pelkie, Volume 37 Michigan Reports, Page 380. Pelkie had recovered a judgment against a certain person, but was unable to collect the same. He, there- fore, entered into an agreement with Gibson, by the terms of which Gibson was to have half of the judg- ment, in case he could collect it. Gibson then set out to collect the judgment. Before he had made any progress the Court, which rendered the judgment, declared that it was void. Gibson then sued Pelkie for damages for a breach of the contract for failure to furnish the judgment. Pelkie contended : That he was not liable, because there was a mutual mistake as to the existence of the thing concerning which they had contracted; that he thought that he had a valid judgment, and had good reason to believe that he had; but since he had not, there was no real consent between the parties. Mr. Justice Graves said in the course of his opinion : "If then there was a proceeding which was meant to be a judgment, but which was void, there was nothing to which the actual bargaining could attach. There was no subject matter. The parties supposed there was a judgment, and negotiated and agreed on that basis, but there was none. Where they assumed there was substance, there was no substance. They made no contract because the thing they supposed to exist, and the existence of which was indispensable to the institution of the contract, had no existence." Judgment was, therefore, given for Pelkie in this action. 226 CONTEACTS RULING LAW Story Case Answer If parties contract in reference to subject matter, which they believe exists, but which in fact does not exist, or if the subject matter in the meantime has been destroyed without knowledge to either, no contract re- sults. It is said that there is here a lack of mutual consent. But a better explanation is that the parties contracted in reference to a certain subject matter, and it is impliedly agreed that the contract is binding only in case that subject matter does exist. In the Story Case, the parties contracted in reference to a specific horse. They both believed that the horse was in ex- istence when they entered into the contract. However, about the existence of the horse they were mistaken. Consequently, no contract resulted, and Mr. Maxwell cannot recover anything from Mr. Candler. (2) Mistake as to Its Identity STORY CASE McCormik, a dealer in sailing boats, had two sloops named " Queen." One was an old one and the other was a new one of the latest model. He sold the old one to H. C. Coar. Several days later, F. I. Merill advertised in the paper for a good sloop. Coar answered the advertise- ment saying that he would sell the sloop " Queen", which he had recently purchased from McCormik. He offered her for sale at a slightly advanced price. Merill knew of the new sloop "Queen" owned by McCormik but he did not know of the old one. Conse- quently, he accepted the offer immediately. When he CONTRACTS 227 found out that it was not the one he had in mind he refused to take the old boat; Coar started suit for breach of contract. Merill defended on the ground of mistake. Is the defense good? RULING COURT CASE Kyle vs. Kavanagh, Volume 103 Massachusetts Re- ports, Page 356; Volume 4 American Reports, Page 560. At the trial of this case, it appeared that Kyle exe- cuted and gave to Kavanagh the following written agreement : "I hereby agree to sell E. Kavanagh, four lots of land in Waltham, on Prospect Street, so called, for 50 shares of Mitchell granite stock, 9,000 shares of Eevenue Gold stock, also $150 in law- ful money for said land." Kavanagh looked at the lots which he supposed were included in this offer, and accepted the same. There- after, Kyle tendered the deed to four lots on Prospect Street, in the city of Waltham. It was then discovered that there were two Prospect Streets in Waltham. Kyle was thinking of one street where he owned the lots and Kavanagh had in mind lots on the other street, on which Kyle owned no lots. Under the circum- stances, Kavanagh refused to accept the deeds or transfer the stock and pay the money as agreed. Thereupon, Kyle brought this action for damages. Kavanagh contended that no contract was ever made between them, because one was thinking of one thing, and the other of another. Their minds never really met on the same subject matter. 228 CONTKACTS Decision: No contract results from an agreement where the parties are laboring under a mutual mis- take as to the identity of the subject matter, concern- ing which they attempt to contract. In this case, if the contention of Kavanagh is true, he was thinking of lots in one place, and Kyle was offering to sell him lots in another place. Both thought that each had in mind the same lots. Since they did not, then their minds never met, and no contract was made. Mr. Justice Morton said: "The instructions given were correct in substance, that : If the defendant was negotiating for one thing and the plaintiff was selling another thing, and their minds did not agree as to the subject matter of the sale, there would be no contract by which the defendant would be bound, though there was no fraud on the part of the plaintiff. This ruling is in accordance with the elementary principles of the law of contracts." Judgment was given for Kavanagh. RULING LAW Story Case Answer When one of the contracting parties thinks that he is contracting in reference to one thing, and the other is contracting in reference to another thing, obviously, the parties have not agreed upon anything whatever. As it is said, their minds have not met upon a common basis. There is lack of real consent to the most im- portant element of the contract, the subject matter. When such a mutual mistake exists between the par- ties as' to the identity of the thing, concerning which they attempt to contract, no binding contract results. In the Story Case, there was a mutual mistake of the CONTRACTS 229 contracting parties as to the subject matter. Because of this mutual mistake, there was no real consent, and equally there was no contract. Consequently, the de- fense of Merill is good. (3) Mistake as to Quality STORY CASE Howard Cameron had a cargo of mahogany for sale. He thought the mahogany was of the very best grade and he priced it according to this assumption, although he did not tell any prospective buyer that it was of the best grade. Ingersoll Bros, inspected the cargo, and concluded that it was the best. There were some negotiations in regard to the price and, finally, Inger- soll Bros, bought the cargo at a price which clearly indicated that they thought the mahogany was the best. After the contract of sale had been completed, but before the price had been paid, Ingersoll Bros, discov- ered that the mahogany was not only not the best but that it was not even a good grade. They refused to pay the agreed price and, when sued for it by Cam- eron, set up the mistake as to quality as a defense. Is this a good defense? RULING COURT CASE Wood vs. Boyton, Volume 64 Wisconsin Reports, Page 265 ; Volume 54 American Reports, Page 610, The plaintiff in this action, Wood, found a small stone. As she was ignorant of its value, she carried it to a jewelry shop, owned and managed by Boyton, the defendant, to ascertain its actual worth. The 230 CONTRACTS jeweler was unable to determine immediately the value of the stone, but offered her a dollar for it. This, she refused and carried the stone away with her. Some weeks later she returned and said that she was willing to sell it for a dollar. He paid her the dollar and took the stone. Upon further investigation, the stone was found to be an uncut diamond and worth at least $700. When Wood learned of this, she immediately demanded the return of the stone, and offered to return the dollar to Boynton. He refused to accept this offer. She then brought suit to recover the stone or its value. Wood contended that there was a mistake as to the value of the stone ; and, but for this mistake, she would never have sold it. By Boyton it was insisted that since the mistake was mutual, both as to the nature of the stone and the quality or value of it, the mistake did not affect the reality of their consent to the agree- ment. Decision i Where the parties to an agreement make a mutual mistake as to the quality of the subject mat- ter, this mistake does not render their consent unreal. It is true that one of the parties, or even both might not make the same contract, had they known all the facts, but if the agreement is entered into fairly, it is binding, even though they are seriously mistaken as to the value or the quality of the thing concerning which they contract. In this case, it appears that Boyton was just as ignorant of the quality and value of this stone as was Wood. Consequently, the contract is binding and Wood is not entitled to recover the stone or its value from Boyton. Judgment was given for Boyton. CONTRACTS 231 RULING LAW Story Case Answer A mutual mistake of the parties as to the quality of the subject matter concerning which they contract, does not affect their consent. The consent is real, not- withstanding the fact that they are mistaken. If one person contracts to sell something to another, the value of which is unknown to him, and the other, who is like- wise mistaken as to its value, contracts to purchase the same, a binding contract results. It seems some- what unfair in some cases that one of the parties should be benefited by such a transaction. This ap- parent unfairness is very conspicuous in the Court Case of Wood vs. Boyton. On the other hand, when both parties are mistaken and the contract is fairly entered into, both are taking chances. It is as likely that one as the other will suffer a loss. Because of this, the Courts seem to think it the better rule to hold that the contract is binding. In the Story Case, it ap- pears that both parties were mistaken as to the quality of the mahogany. Such being the case, the contract is binding, notwithstanding their mistake as to its value. Therefore, Cameron may recover and the de- fense of Ingersoll Brothers is not good. 2. There May Be Lack of Consent Because of Misrepresentation A. Misrepresentation Does Not Affect Reality of Consent at Law STOET CASE John Dixon was a cotton grower in southeastern Georgia. After he had had his cotton ginned and baled, he found that he had approximately a thousand 232 CONTEACTS pounds of unginned cotton left. As this was scarcely sufficient to make a bale of ginned cotton, he decided to sell it, if possible, to a neighbor. He offered it to Mr. Cross for three cents a pound. Mr. Cross inquired whether any of this cotton had been picked after frost. Mr. Dixon replied that it had all been picked before frost. He was mistaken, however; for, un- known to him, his laborers had picked about a hundred pounds after frost. When Mr. Cross discovered this, he refused to accept the cotton. Mr. Dixon sued for the purchase price agreed upon, alleging that he was innocent of any misrepresentation. What should be the decision of the court? RULING COURT CASE Bannerman vs. White, Volume 10 Common Bench Reports, New Series, Page 860. Bannerman, a grower of hops, offered to sell his whole crop of a certain year to White. Before White really considered the offer, he asked Bannerman if any sulphur had been used upon the growing crop, saying that if such were the case, he would not even consider the purchase. White replied that no sulphur had been used. It appeared, however, that sulphur had been used as an experiment on five acres out of three hun- dred acres, which constituted his crop. The hops from that five acres had been harvested and mixed with the hops from the remaining number of acres. When he was asked the foregoing question, Bannerman had either forgotten about this, or did not think that it was sufficiently important to mention. When White discovered that sulphur had been used on five acres, and the hops from this tract had been mixed with the remainder, he refused to accept the hops. It appeared CONTRACTS 233 that Bannerman made this representation innocently and without any intention to defraud White. So he brought this action to recover the price agreed upon for the hops. White contended that he was not liable, because the representation, though innocently made, was really a condition of the contract, and not having been per- formed or fulfilled, he was discharged from any obli- gation under their agreement. Decision : As a general rule, an innocent misrepre- sentation does not affect the reality of consent of the contracting parties. But, if the fact misrepresented is very material or important, it may be considered as a condition upon which the parties contracted; and un- less that condition is complied with, the injured party is entitled to be discharged from his contract. In this case, the Court came to the conclusion that the fact that no sulphur had been used was a condition upon which the parties contracted. Since it appeared that sulphur had been used, White was discharged from any obli- gation under the contract. Mr. Chief Justice Erie, who delivered the opinion of the Court, said in part : "We avoid the term warranty because it is used in two senses, and the term condition because the question is whether that term is applicable. Then the effect is that the defendant, White, required, and that the plain- tiff, Bannerman, gave, his assurance that no sulphur had been used. This assurance was a preliminary stipulation ; and, if it had not been given, the defend- ant would not have gone on with the treaty which re- sulted in the sale. In this sense, it was the condition upon which the defendant contracted, and it would be 234 CONTRACTS contrary to the intention expressed by this stipulation that the contract should remain valid if sulphur had been used. ' ' Judgment was given for White. RULING LAW Story Case Answer The general rule is that an innocent misrepresenta- tion does not effect the reality of the consent of the parties to a contract. But a representation may be- come a part of the contract as a condition or warranty. If the latter is the case, and the condition is not per- formed, or the warranty is broken, then the other party is discharged from any obligation under the contract. It is in every case of this kind a matter of construction to say whether the representation is a part of the contract as a condition. If it is concluded that it is not a condition, forming a part of the con- tract, then it has no effect at all. If, on the other hand, it is found that it was a condition, forming a material part of the contract, the contract may be avoided. In the Story Case, Mr. Cross expressly requested inform- ation whether the cotton in question had been picked before frost. A reasonable conclusion would be that he intended to contract only on that condition. Some of the cotton, in fact, having been picked after frost, he is relieved of any liability upon the contract. B. Misrepresentation in Land Contracts STORY CASE Mr. Lyle owned a tract of land known as Blackacre. Upon the marriage of his son, James, he made a con- veyance of this tract to him. At that time he told his CONTKACTS 235 son that Blackacre contained 276 acres of land. James lived upon the tract for several years, but took no steps to ascertain just how many acres the tract contained. He then moved to the city. After working there for several years, he decided to go in business for him- self. In order to raise the necessary capital he ad- vertised Blackacre for sale. Mr. Shull saw the ad- vertisement and interviewed James Lyle. Lyle said that the tract contained 276 acres, and that he was will- ing to take $3,000 for the whole of it. An agreement was made in writing, by which James Lyle agreed to sell, and Mr. Shull agreed to buy Blackacre on the terms just mentioned. After the deed was made and delivered and the part of the purchase price had been paid, Mr. Shull directed a surveyor to ascertain the number of acres in the tract. It was found that the tract contained only two hundred and forty acres. Mr. Shull then filed a bill, asking that the transaction be set aside because of this misrepresentation. James Lyle contended that it should not be set aside, because the misrepresentation was innocently made. Should the transaction be set aside I RULING COURT CASE Norman Burr vs. Caleb Benedict, Volume 99 Massa- chusetts Reports, Page 463. Caleb Benedict was the owner of certain land, con- cerning which he apparently knew very little. He of- fered to sell it to Norman Burr. The latter was un- able to make a visit to the land, but desired some in- formation concerning it. Benedict then gave him "in- formation", such as it was. Benedict represented that the land was in the town of Sheffield. As a matter of 236 CONTKACTS fact, it was in the town of Great Barrington. He fur- ther informed Burr that it was all dry land, and almost all of it accessible to teams and that it could cut from fifteen to eighteen cords of wood to the acre. All the statements were inaccurate. The land included a very large swamp ; very little of the land was accessible by teams ; and the average number of cords which could be cut from the land was about twelve. He also stated that six acres of the land was cleared, and ready for cultivation and faced a public road. He, himself, thought this was true, but this six acre tract of cleared land, which faced the road, did not belong to him. Norman Burr relied upon these statements and pur- chased the land. When he investigated, he found the situation to be as stated above. He, thereupon, brought a bill in equity to have the transaction set aside. Benedict contended that Burrs' prayer for cancella- tion of the contract should be denied. He admitted that he had seriously misrepresented the situation, but contended that, since he was innocent in doing so, there was no ground for cancellation of the contract. Decision: Misrepresentation of a material char- acter made by one person to another in entering into a contract, renders the contract voidable, however in- nocently the misrepresentations were made. In such a case, it cannot be said that the other party ever really consented to such an agreement. In this case, no doubt Benedict had no intention of misinforming Burr as to the land ; but his statements did mislead him as to very material facts. The consent of Burr to such a con- tract can in no wise be said to be real. Therefore, a Court of Equity will cancel such an agreement. CONTRACTS 237 Mr. Justice Foster very clearly states the principles involved : ' * There can be no doubt of the full equity jurisdiction of this Court to set aside a conveyance of land on the grounds of mistake, where the vendor has undertaken to sell something which he did not own, and the estate embraced in the deed, although owned by him, is not that which the vendee intended to buy and supposed that he was obtaining by the conveyance. In such a case, the equity for a rescission of the tran- saction does not depend upon intentional fraud on the part of the grantor ; and it is by no means limited to cases in which an action for deceit would lie at com- mon law. Belief is granted upon the ground that it would be inconscientious to oblige a man, who has not been himself negligent or in fault, to adhere to his bar- gain, and to retain property where he was induced by a misapprehension as to the material and essential circumstances, which he was led into by the conduct of the other party/' Accordingly, judgment was given for Norman Burr. RULING LAW Story Case Answer It has just been stated that, as a general rule, an in- nocent misrepresentation does not affect the validity of a contract. But it was also seen that the fact rep- resented might become a condition upon which the parties contract. If this be the case no contract is ever made. However, there are certain contracts in which it is held that every innocent misrepresentation does affect the validity of a contract, and entitles the injured party to have the contract cancelled or set aside in a court of equity. Every representation is said to be material. This is true of contracts to sell 238 CONTRACTS land. In such a case, if one party, however, innocently, makes a misrepresentation as to the land, this will give the other the right to have the transaction set aside. In the Story Case, the statement by James Lyle that the land contained 276 acres was a material fact in the agreement, and although it was innocently made, it entitles Mr. Shull to have the transaction set aside. C. When Made by One Who Stands in a Confidential Relation STORY CASE Jacob Wise was the guardian of Edward Hilton, who had a substantial inheritance. After Hilton be- came twenty-one and while Wise was still acting as guardian, Hilton offered to purchase a riding horse belonging to Wise. The latter was not eager to sell, but nevertheless, negotiated with his ward ; finally, an agreement was reached, and Hilton received posses- sion of the horse. During the negotiation, Hilton inquired of Wise as to the age of the animal, and Wise answered in good faith, that it was five years old. Hilton replied to this, "Well, five or six years is a good age." Two weeks after the sale, when Wise demanded his purchase money, Hilton refused to pay on the ground that the horse was six years old, and not five as Wise represented. Wise contended that this was an imma- terial representation made in good faith, and there- fore not a good defense. Is this correct f RULING COURT CASE Miles vs. Erwin, Volume 1 McCord's Chancery Re- ports (South Carolina), Page 524. CONTRACTS 239 Lyle Harper and others claimed an interest in some land owned, as a matter of fact, by Miles. Harper, relying upon his claim, was trespassing upon the property ; Miles went to Erwin, his lawyer, related the facts in the matter, and asked him to proceed in any way necessary to free his land from these claims. Er- win investigated, and then told Miles that the claim of Harper was without any foundation, but that he was uncertain as to the claims of the other parties. He brought a bill in court and eliminated the claim of Harper. Harper took an appeal, and while it was pend- ing, one Corless applied to Erwin, the lawyer, with a view of purchasing the land from his client. He told Erwin that the land might be procured for a very rea- sonable sum if he ''would throw cold water on Miles' title. ' ' Thereupon, Erwin told Miles that his title was very doubtful because of the claims of these other per- sons. Because of this Miles sold the land to Corless for the sum of $300. Later, Corless sold it again for $2,500 and gave Erwin $900. This was a suit brought by Miles .to recover this money from his lawyer, Er- win, on the ground that Erwin had made false repre- sentations. Erwin claimed that the representations were not false. He insisted that he did really believe that Miles' title was doubtful. Miles, however, contended that he should have been told all the facts, especially as to the desire of Corless to purchase the property. Decision : The relation between an attorney and his client is a highly confidential one ; and the law demands of the attorney the highest degree of faith in his deal- ings with the client. It is true that the title of Miles was doubtful ; but the statements of Erwin, under the 240 CONTRACTS circumstances, were deceptive ; he should have told him that Corless, notwithstanding the doubtful title, was willing to purchase the land for a far higher price than he actually paid for it. Mr. Justice Johnson said in part: "The policy of the law is clearly opposed to contracts between client and attorney in relation to property in litigation and of which the latter has charge. The value of the prop- erty, we know, depends almost exclusively on the cer- tainty of title ; and from the nature of his profession, the attorney is supposed to be more competent to judge of it than the client. To discharge the duties which that relation imposes, he must acquaint his client with all the information he possesses on the subject mat- ter." Because the utmost good faith must be exercised by one in confidential relation with another, the law will not permit the fiduciary to gain at the expense of his ward or client. If the trusted one does gain, the law will presume that he has acted in bad faith and will compel him to reimburse the one who has trusted him. Judgment was given for Miles. RULING LAW Story Case Answer Errors in contracts made between persons standing in a confidential relation illustrate another exception to the general rule that an innocent misrepresentation does not affect the validity of a contract. A confiden- tial relation exists, where one person has a legal or a natural right to control another, and is under a legal or natural duty to look after the interests of that other. Instances of this kind are : the relation between prin- cipal and agent; the relation between guardian and CONTKACTS 241 ward; the relation between father and son, or parent and child. In these relations, the parties do not stand on an equal basis. The one who has control and is under a duty to look after the interests of the other has a decided advantage, and can easily benefit by the other's more or less helpless, and dependent condi- tion. Because of this, the law wisely says that the person having this legal or natural advantage must exercise the highest degree of faith in dealing with the other. Consequently, any misrepresentation, however innocent, or a non-disclosure of material facts, will give the dependent party the right to set aside the contract, be it a contract concerning land or concerning personal property, or any other kind of contract. It follows from w r hat has been said, that Edward Hilton, in the Story Case, has a good defense and is entitled to have the contract set aside. Of course in this case, Wise can demand a return of the horse. D. When Made Carelessly, Misrepresentations Amount to Fraud STORY CASE The Hepp Hardware Co. sold a binder to F. E. Small, a farmer. The company said that it w^ould bind over 50 acres per day. On the faith of this representa- tion Small purchased the binder. Before paying for it, he discovered that the Hepp Company, although act- ing in good faith, were mistaken and that the binder could at most work not more than 40 acres a day. He refused to accept and pay for the binder and was sued for the price by the company. He defends on the ground that the company misrep- resented the capacity of the binder and, if it had not 242 CONTKACTS been for the misrepresentation, he would not have con- tracted to buy it. The company answered, that the statement was made in good faith. He replied that the company should have known better and that, with a little investigation, the company could have learned that the capacity was much less than represented. Which party has the better case ? RULING COURT CASE Henry Peck vs William Derby, Law Reports, Vol- ume 14 Appeal Cases (English), Page 337. By the English Parliament, a special act was passed incorporating a tram company. This act provided that the vehicles might be moved by animal power, and, with the consent of the Board of Trade, steam power might be used. William Derby, a director of the com- pany, issued a prospectus of the company containing a statement that by a special act of parliament the company had the right to use steam power instead of horses. Henry Peck bought shares in the company, in reliance upon the statement that steam power was to be used. The Board of Trade afterwards, when ap- plied to for the privilege provided in the act, refused to grant it to the company. The company, therefore, was unsuccessful and was dissolved. Thereupon, Henry Peck brought this action for damages. He claimed that the statement of the director, William Derby, was so carelessly made, that it amounted to fraud. Derby contended that it was not fraudulent, because it was an innocent misrepresentation. Decision : A false representation amounts to fraud when it is made by one in a reckless manner without CONTRACTS 243 regard to the truth or untruth of the statement. In this case, the representation was partially false, but it was not shown that Derby made it in such a reckless manner that it amounted to fraud. Lord Bramwell said : ' ' Cotton, L. J., says the law is, that where a man makes a statement to be acted on by others which is false, and which is known by him to be false, or is made by him recklessly, or without care whether it is true or false, that is, without any reason- able ground for believing it to be true, he is liable for deceit. " A man who makes a statement without care and re- gard for its truth or falsity commits a fraud. It is not proven that this is the situation in this case. Judgment was given for William Derby. RULING LAW Story Case Answer Hereafter, it will be seen that the consequences which follow fr.om fraudulent misrepresentation are differ- ent from the consequences which arise out of more innocent misrepresentations. It may be stated that when a representation is made by a person, without regard for its truthfulness or untruthfulness, or is made recklessly by that person, without care for its truth or falsity the misrepresentation becomes fraud- ulent. In the Story Case, whether the misrepresenta- tion made by Hepp Hardware Company was fraud- ulent, depends upon whether it was made recklessly without regard to its truth or falsity ; if it was so made, it amounts to fraud. The fact that slight investiga- tion on their part would have revealed to them the incapacity of the machine to do the work they claimed 244 CONTRACTS for it, probably amounts to a disregard of the truth or a falsity of their statements. Judgment should be given for Small on this theory. 3. There May Be Lack of Consideration Because of Fraud A. There Are Five Characteristics Essential to Fraud (1) There Must Be a Misrepresentation of Fact STORY CASE J. Swan, a promoter, in inducing Frank Black to in- vest in some Florida land, said that the investment in his opinion would surely make one hundred per cent in a couple of years. At the end of three years the land had decreased in value and it was certain that it would never be worth one-half of what was paid. Black then claimed that the contract was induced by fraud and sued Swan for $2,000, the amount that Black had invested. Swan defended on the ground that no fact was mis- represented to Black. The statement that the invest- ment would make great profit was only a statement of opinion. Do you think that the defense is good? RULING COURT CASE Gordon vs. Parmelee, Volume 2 Allen Reports (Mas- sachusetts), Page 212. Parmelee visited Gordon with a view to buying his land, in case it was suited to his purpose. He stated to Gordon that he desired to buy land which was suit- able for stock-raising. Gordon assured him that the land which he owned was most excellent for that pur- pose. Parmelee was unable to tell much about the land because it was winter time, and the ground was covered CONTRACTS 245 with snow. Relying on the statements of Gordon, how- ever, he purchased the land, and gave his note for the payment. The following year, Parmelee learned that the land was not at all suitable for stock raising be- cause the soil was too poor. He refused to pay the note when it became due. Gordon then brought this suit on the note. Parmelee contended that the note was not binding upon him because his consent was gained to the trans- action by false representations as to material facts. But it was insisted by Gordon that his statements were not of fact but of his opinion. Mr. Chief Justice Bigelow delivered the opinion of the court: "The alleged false statements concerning the productivity of the soil and its capacity to furnish support for cattle constitute no defense to the notes. They fall within that class of affirmations, which al- though known by the party making them to be false, do not as between vendor and vendee afford any ground for a claim for damages. Affirmations con- cerning the value of land, or its adaptability to a par- ticular mode of culture, or the capacity of the soil to produce crops or support cattle, are, after all, only expressions of opinion or estimates founded on judg- ment about which the best of men might differ ma- terially." Accordingly, judgment was given for Gordon in this action. RULING LAW Story Case Answer If a person's consent to a contract is procured by fraud or fraudulent means, it is clear that the consent of such person is not real. It now becomes necessary 246 CONTRACTS to see just what constitutes fraud which renders con- tractual consent unreal. In the first place, it is nec- essary that there should be a false representation of an existing or a past fact. A representation of one's opinion, belief, hope or expectation, cannot be made the basis of fraud. In the Court Case of Gordon vs. Parmelee, Gordon stated that the land was suited for a certain purpose. This was a mere expression of opinion on his part; and, although his opinion might have been ungrounded, nevertheless, it cannot be made the basis of fraud. Thus, in the Story Case, the statement of Swan that the value of the land would increase rapidly in value, was a mere expression of opinion or expectation, and did not constitute a fraud. Consequently, judgment in that case should be given for Swan. (2) There Must Be a Knowledge of the Falsity of the Wrong-doer STOET CASE On January 4, 1915, the five directors of the Springfield First Trust Bank, including Herbert Keene, met in annual directors' meeting to consider the affairs of the bank, and to sign official reports. The president of the bank, Frank Jarman, had prepared a statement, showing the status of the bank. He re- quested the directors to sign this for the purpose of printing in a prospectus. It was their intention to circulate this among persons who were interested in buying the stock of the bank. Keene asked the presi- dent, Mr. Jarman, this question, "Well, Jarman, if this report is true, we will sign it without looking into it. We will take your word for it. Is it right?" Jar- CONTRACTS 247 man answered that the report was true, and the di- rectors signed it. The report was printed, and in re- liance thereon, Emory Gray purchased a block of the stock. Subsequently, it was learned that the president, Jarman, was in default with the bank and that the report was not true. As a result, Gray lost his invest- ment. He brought suit against the directors person- ally, on the ground that they had committed fraud in signing the statement. The directors put in defense that fraud did not exist on their part because they did not have knowledge of the false statement of facts. Is this a good defense! KUUNO COTTRT CASE Helps vs. Stimson, Volume 9 Colorado Reports. Page 33. William Stimson was the owner of mining land. He was applied to by Helps for a lease of this land. Stim- son represented that the boundary lines of his mining claim extended to certain points. Helps, thereupon, agreed to take a lease of the land for a period of four years. He immediately set to work to put the land in readiness for mining. After he had worked for several weeks in a certain part of the claim, he was notified by the Marshall Coal Mining Company to cease work at that point, because he was on its land. Helps, thereupon, brought this action against Stimson for damages. Stimson contended that he should not be held liable, since it was not shown that he knowingly made these misrepresentations. Mr. Justice Elbert said in part: "The law holds a contracting party liable as for a fraud on his express 248 CONTRACTS representation concerning facts material to the trans- astion the truth of which he assumes to know, and the truth of which is not known to the other contract- ing party when the representations were false, and the other party relying upon them, has been misled to his injury." It is not necessary, in order to constitute a fraud, that the party who makes a false representation should know it to be false. He who makes a representation as of his own knowledge, not knowing whether it is true or false and it is in fact untrue, is guilty of fraud as much as if he knew it to be untrue. Judgment was given for Helps in this action. RTJLINO LAW Story Case Answer When a person makes a false representation, which he knows to be false, a basis for fraud is clearly con- stituted; this renders the consent of the other party to the contract, unreal. If a party makes a representa- tion recklessly, in that he does not know whether it is true or false and does not care, such a statement like- wise is fraudulent. Furthermore, if a person makes a false representation of a fact, which could be verified by investigation, it is fraudulent, although he honestly believed that it was true. The fraud here consists in making a false statement concerning his own knowl- edge. In the Story Case, the directors committed fraud. When the statement was issued, they affirmed the fact that they had looked into the affairs of the Trust Bank and found them as stated to their own knowledge and belief. It was not true that they had investigated or had any knowledge of their own. Therefore, their defense is not good. CONTKACTS 249 (3) There Must Be Intention to Have the Party Rely on the Untruth STORY CASE Zeke Gilpin tried to sell his standing lumber to the Willis Mills. He intentionally represented that there were 500 acres of walnut timber, knowing all the time that there were only 375 acres. The Willis Mills were unable to accept the offer but they told the Wayfield Lumber Company of the proposition, and repeated that there were 500 acres of walnut. On the next day the Wayfield Lumber Company ap- proached Gilpin and, on the strength of his represen- tation to the Willis Mills, offered him a price which was estimated on the belief that there were 500 acres of walnut. A contract was closed, but before paying the price, the Wayfield Lumber Company learned that the land and timber were not as represented, and they refused to pay the purchase price, alleging fraud on the part of Gilpin. Gilpin defended, on the ground that the representa- tion which he made to the Willis Mills was not one upon which the Wayfield Company had any right to rely. Is this true? RULING COURT CASE Stevens vs. Ludlum, Volume 46 Minnesota Reports, Page 417; Volume 13 Lawyers' Reports, Annotated, Page 270. John Ludlum was investigated by various com- mercial agencies as to his property, so that the agencies coulcj make some estimate of his credit. To all of these agencies he stated that he was the sole proprietor of the New York Pie Com- 250 CONTKACTS pany. This information was conveyed by one of these commercial agencies to J. W. Stevens, who, in reliance thereon, extended credit to John Ludlum. Ludlum never paid the accounts. It developed, as a matter of fact, that he was not the owner of the New York Pie Company, as he had represented. It seems that he had no interest whatsoever in it. Suit was brought against him for damages, caused by the false representations as to the property which he claimed to own. His defense consisted in the fact that he had never made these representations to Stevens, and, therefore, Stevens had no right to rely upon them. Decision: A person who makes representation falsely is liable only to those to whom they were made, and to such persons as might reasonably suppose that they had the right to rely upon the representations. It is not necessary that the statements should be made directly to the person who relies upon them. If they are made to one person who is to communicate them to others, the person who causes them to be made is as liable as if he had made them directly to the person in- jured. In this case, Ludlum made the misrepresenta- tions to commercial agencies, knowing that they would be communicated to various persons in various parts of the country. He is liable, therefore, to any such person. Mr. Justice Gilfillan said: "Representations need not be made directly to the party acting on them. It is enough if they were made to another and intended or expected to be communicated by the representatives of the party making them to the party acting on them, for him to rely and act on. The representative may be intended for a particular individual alone, or sev- CONTRACTS 251 eral, or for the public, or for any one of a particular class, or it may be made to A to be communicated to B. Anyone, so intended by the party making the rep- resentation, will be entitled to redress against him by acting upon the representation to his damage. If one acts on a representation, not made to, or intended for, him, he will do so at his risk. " Judgment was given for Stevens in this action. EUIJNG LAW Story Case Answer There must be an intention upon the part of the person making the false statement of fact that it shall be relied upon by a given person or a given class of persons. If another person relies upon the statement and is injured, he cannot recover for the fraud. In the Story Case, the statement was not made to Wayfield Lumber Company; and so far as appears, Gilpin did not intend that Willis Mills should repeat his statements to the "Wayfield Lumber Company. Such being the case, the lumber company had no right to rely upon the statements and they may be held for the purchase price. (4) There Must Be Actual Reliance on the Untruth STORY CASE The Ideal Studios, in New York City, had for sale paintings by old masters. They had a Titian which they wished very much to sell, because it kept a large amount of money invested. John Schell, a millionaire art collector, came to the studio in search for a Raphael. The manager rep- resented that the Titian was a Raphael. Schell 252 CONTEACTS was a good judge of paintings. He thought that the picture was not a Raphael but he expressed no opinion. He promised that he would return the next day and give his decision. In the afternoon of the same day, Schell consulted an expert and learned that the picture was a Titian but worth as much as was asked for it. The next day he purchased it. Later, he regretted the purchase, and in two months told the manager that he wanted his money returned, because the picture was not a Raphael as had been represented to him. The manager replied, that Schell had consulted an expert before paying for the picture ; that he knew all the time that he was not purchasing a Raphael and that therefore, he had no right to claim fraud. Schell thought that the fact that he had not relied on the false representation was immaterial and that he could get his money. He brought suit. Can he recover ? RULING COURT CASE Mary Wagner vs. National Life Insurance Company, Volume 90 Federal Reporter, Page 395. The husband of Mary Wagner, who is the plaintiff in this action, had taken out insurance on his life in the National Life Insurance Company, the defendant here- in. Being in need of money, the deceased husband had determined to surrender his policy, secure the cash surrender value, and take out a new policy. With this purpose in view, he had made a visit to the local agent of the company. When he told his desire and intention, the agent called in the company physician, who made a physical ex- amination of Wagner. The examination revealed the CONTEACTS 253 fact that "Wagner was then in a perilous condition. His heart was very weak, and the doctor knew that he would live only a few days. This he communicated to the agent. The agent then refused to grant Wagner a new policy, stating that, though his condition was not dangerous and that death would not result imme- diately, yet his condition was such that the company could not afford to write him any insurance. He also advised Wagner not to surrender the policy he then had. But the deceased had insisted and so it was done. He died within ten days after the policy was surren- dered. This was an action brought by Mary Wagner, seeking to have the surrender set aside, on the ground that the false representations of the agent as to time of death had been the cause of the surrender. She contended that if her husband had been told the truth he would not have surrendered the policy. On the part of the company it was insisted, that he did not rely upon the representations made by the agent. For, if the agent had said nothing and he was under no duty to speak the deceased would have surrendered the policy even more quickly. It was in- sisted for the company that if Wagner had relied upon their representations, he would not have surrendered the policy. Decision: Unless the deceived person relies upon the misrepresentations he has no right to complain of his action. In this case, the deceased put no reliance in the untruth told to him by the agent of the company. Consequently, Mary Wagner cannot complain of the fact that the policy was surrendered. Mr. Justice Taft said: ''Again, the untrue state- ments did not cause the surrender of the policy. It is 254 CONTEACTS apparent that Wagner would have insisted upon sur- render if nothing had been said, and what was said, was said only to prevent surrender, and that, though the physical condition of Wagner was misrepresented, Wagner's action would have been the same if the mis- statements had been omitted. Therefore, they did not cause the surrender and cannot be made the ground for setting it aside. ' ' Therefore, judgment was given for the company. RULING LAW Story Case Answer The representations, however false, do not constitute fraud unless they actually deceive the person who is intended to be misled by them. If a person knows of the false representations and pays no attention to them, or puts no reliance in them, obviously he has not been deceived ; and he has not been defrauded. Thus, in the Story Case, Schell can recover nothing. Before he purchased the picture in question he was well aware that it was not the picture that it was represented to be. Accordingly, he cannot now set up the claim that he has been defrauded. Judgment, therefore, should be given against him. (5) There Must Be Loss Suffered From the Deception STOEY CASE On November 15, 1914, George Craft, the presi- dent of the Western Car Corporation, represented to George Knight that the stock of that corporation was worth $75 a share, because of certain contracts for automobiles then in possession of the com- CONTRACTS 255 pany. In reliance on this statement, Knight agreed to buy one hundred shares and pay for them on Jan- uary 1, 1915. As a matter of fact, the corporation did not have the automobile contracts at the time Knight agreed to purchase stock, and the stock had been sold as low as fifty dollars a share the day after his purchase. During the month of December, 1914, the Western Car Corporation received an order for one thousand war trucks from the English Govern- ment and the company's stock immediately quickened in value and became worth as much as Knight agreed to pay for it. But he learned how Craft had deceived him into the purchase of the stock, and on January 1, 1915, refused to pay for his shares, claiming fraud on the part of Craft. The latter contended there was no fraud since Knight had lost nothing. Is this correct? RULING COURT CASE Rosser vs. Bomar, Volume 131 Alabama Reports, Page 215 ; Volume 31 Southern Reporter, Page 430. D. E. Eosser held a certain patented article. He was attempting to sell interests therein so that he could raise money for the purpose of putting the patent on the market. He offered to sell an interest to E. E. Bomar. To induce him to buy, he represented that Joe Cathron had taken a share, and that Bob Smith was going to do the same. Both men were well known and influential. Bomar, relying upon this statement of Eosser, agreed to buy an interest, and gave his note in payment. When the note became due, he refused to pay it. He claimed that he was not liable on the note because neither of the men mentioned had taken, nor did they 256 CONTEACTS intend to take, a share in the patent. On the other hand, Rosser showed that men of equal prominence and influ- ence had taken shares, and that the representation, al- though false, had caused no damage whatsoever to Bomar. Decision: Even though a person may rely upon misrepresentations made by another, unless he suffers some damage by his reliance thereon, he cannot re- cover anything from the wrong-doer. It is morally wrong to deceive another but, unless the deceived per- son suffers damage therefrom, it is not a legal wrong. In this case, Bomar was deceived as to the men who would be interested in the patent; but it was not shown that he had or would suffer any damage from the deception. Therefore, he had no right to complain, and Rosser is entitled to recover on the note. Mr. Justice Tyson said: "Injury or damage must be shown to have resulted from the fraud, if practiced. 'Falsehood and deceit are always subject to moral con- demnation, but it is not appointed to human tribunals to sit in judgment upon mere moral delinquencies or abstract wrongs affecting only the conscience. Such tribunals take cognizance of delinquencies and wrongs only where another has been induced by them to do some act to his own injury. ' Accordingly, judgment was given for Rosser on this note. RULING LAW Story Case Answer Even though a person has been deceived, if the de- ception has caused him no damage, he cannot complain. Deception is no legal wrong, unless some injury results from the deception, however reprehensible it may be CONTRACTS 257 from a moral standpoint. In the Story Case, Craft is correct and Knight cannot plead fraud in refusing to pay, in accordance witn his contract. B. Fraud Gives the Injured Party Right to Avoid the Contract BTOET CASE Floyd Huffcut, a stock and bond salesman, repre- sented to Joseph Mechem that the Idaho Electric Com- pany owned franchises to furnish light for ten towns. In reliance on this statement, Mechem purchased stock of the company, paying $100 a share. He learned, sub- sequently, that the company owned but three fran- chises and that its stock was worth but $30 a share. What can Mecham do? EUUNQ COURT CASE B elding vs. Frankland, Volume 8 Lea (Tennessee) Reports, Page 67. Leomson & Brothers, merchants at Nashville, or- dered goods, on November 3, from Belding Brothers at Cincinnati. The goods were shipped on November 4 and, on the 7th, Leomson Brothers made an assign- ment of their stock to J. Frankland, as trustee for the benefit of creditors. Belding Brothers maintain that Leomson Brothers committed fraud in making the pur- chase by asserting that they were solvent, when, as a matter of fact, they were insolvent; that, therefore, Belding Brothers could rescind the contract and take back their property. Justice Cooper gave the o- ^lion of the Court : "Si- lence is not fraud when there is no duty to speak. But when a purchaser is insolvent at the time of purchase, 258 CONTRACTS there is the duty on his part to state his financial cir- cumstances, and concealment of insolvency is a mis- representation of fact. Therefore, the vendor may rescind the contract, disaffirm the sale, and take back his goods." Judgment was in favor of Belding Brothers. RULING LAW Story Case Answer When a person has been induced to enter into a con- tract by false representation, he has several remedies. He can affirm the contract, keep what he has received, and merely sue for the damage he has suffered; i. e. the difference between the value of what he has re- ceived, and the value of what he bargained for as represented to him. He may entirely rescind the con- tract and recover the money he has paid on the prop- erty he has given, in pursuance of the contract. He cannot, however, do this if the property has come into the hands of a bona fide purchaser for value, without notice of the fraud. In the Story Case, Mechem can sue to recover the difference between the actual value of the stock and the amount he had paid. Or he can rescind the con- tract, offer to return the stock, and demand all his purchase money. 4. There May Be Lack of Consent Because of Duress STORY CASE Dan McGrew was the owner of a large tract of land near the Micaba Eiver. But Holborn K. Axf ord owned the land between the land of McGrew and the river. For many years, McGrew had sought to purchase the CONTRACTS 259 land from Axford. The latter, however, refused to entertain any offers for the land. McGrew caused the young son of Axford to be seized and carried away. He then informed Axford that the safety of his son depended upon whether he was willing to agree to sell the land. Axford knew that McGrew was a dangerous and desperate man, and greatly feared for the safety of his son. Consequently, he signed a writing, in which he promised to convey the land in question to McGrew for the sum of $6,500. His son was restored to him in safety. Thereafter, McGrew demanded a convey- ance of the land, in accordance with the terms of the agreement above recited. Axford refused to make the conveyance. McGrew then sued for a conveyance of the land. Axford contended that his consent to the agreement was procured by duress, and that the con- tract was not binding upon him. "What should be the decision of the court under the foregoing circion. stances ? RULING COURT CASE Galusha vs. Sherman, Volume 105 Wisconsin Re- ports, Page 263 ; Volume 47 Law Reports, Annotated, Page 417. Galusha had sold some foodstuff to Sherman. The latter claimed that it was unfit for food, and that he had been poisoned by what he had eaten of it. He en- gaged a lawyer, Sutherland, to direct the course he should pursue. An action was brought against Galusha for damages. After this, he was requested to come to the office of Sutherland. Locked in the room alone with the lawyer, he was told that he had better settle the civil action, or immediate steps would be taken to prosecute him criminally, and that the punishment 260 CONTEACTS would be by imprisonment from three to fifteen years. Being overcome by fear, he signed a note for $1,000, executed a mortgage on his home as security for the note, in settlement of the action which was then pend- ing against him. When the note fell due he refused to pay it, and suit was brought upon it. His defense was the fact that the note was procured by duress ; that because of the threats made to him by Sutherland, his will power was overcome and he signed the note, when he would never have done so otherwise. Decision: Contractual consent is never acquired where one person is forced to enter into the agreement against his will. When a person is threatened with physical violence, or imprisonment, and his will is overcome, an agreement entered into under such cir- cumstances lacks contractual consent, and cannot be enforced against that person. Thus, in this case, the consent of Galusha was procured by unfair means. He was forced into signing the note, because he was threat- ened with imprisonment. Consequently, the note is not enforcible against him. Mr. Justice Marshall said : * ' The making of a con- tract requires the free exercise of the will power of the contracting parties, and the full meeting and blend- ing of their minds. In the absence of that, the essential of a contract is wanting; and if such absence be pro- duced by the wrongful conduct of one party to the tran- saction, or conduct for which he is responsible, where- by the other party, for the time being, through fear is bereft of his free will power, for the purpose of ob- taining the contract, and it is thereby obtained, such contract may be avoided on the ground of duress." Judgment was therefore given for Galusha. CONTRACTS 261 ETTLING LAW Story Case Answer When the consent of one of the contracting parties has been procured through duress, his consent is not real and he is not compelled to fulfill the contract, un- less he wishes to do so. He may, as it is said, avoid the contract at his election, and the other party has no way of enforcing it against him. Duress consists in forcing a person to agree to a contract, or to give his consent thereto, by means of threats of violence, or threats of imprisonment, or by actual violence or im- prisonment. Duress exists, not only when the violence or imprisonment, actual or threatened, is directed against the contracting party, but exists also when it is directed against the wife, husband, child or other near relative of the contracting party. The violence or imprisonment whether actual or threatened must have been such as to overcome the will of the party. It must, moreover, have been the cause of his entering into the contract. Now, in the Story Case, there is no doubt but that the threats of violence to the child of Axford was sufficient to overcome his will, and was the cause of his entering into the contract. This, therefore, consti- tuted duress. The contract is voidable on his part, and having decided to repudiate the contract, nothing can be recovered thereon. 5. There May Be Lack of Consent Because of Undue Influence STOEY CASE Henry Harper was supporting his uncle, Major Hik- ens, because the uncle was a very old man and was reputed to be worth considerable money. To his dis- 262 CONTEACTS appointment, Harper learned that the old man had only $5,000 and he had willed that to a charitable insti- tution. Thereupon, Harper attempted to secure con- trol over the money during his lifetime. He informed his uncle of a splendid business venture needing $5,000 and urged the Major to let him make the investment. The uncle, however, refused to deliver any money to his nephew. Harper persisted, and constantly urged upon the Major the fact that much had been done for him. Fin- ally, Harper persuaded his wife not to speak to the uncle, and this hurt the old man severely. When Harper threatened to put him out of his home, he con- sented and signed a contract to deliver the money on the first of the following month. Harper agreed at the same time to give the uncle one-fourth of the profits that might accrue from the investment. Major Hikens died before the contract was carried out and his executors refused to deliver, on the ground that the nephew had used undue influence in making the contract. Is this correct I RULING COURT CASE Perkins vs. Hall, Volume 3 Wendell Reports (New York), Page 626. At the age of nine years, Perkins, who is the plain- tiff in this action, was placed by his father as an ap- prentice with Rowland Hall, his maternal grandfather, to learn the business of farming. He was to remain with his grandfather until he reached the age of twen- ty-one. It was agreed by Hall that he would pay Per- kins $500, if the latter continued in his employment un- til he reached that age. He faithfully served his grand- CONTEACTS 263 father on the farm, until lie reached his majorty. In the meantime, his father had died. And, in the last year, his grandfather died, not having paid him the $500 before his death. An uncle of Perkins was made the personal representative of the deceased grandfather. Instead of settling with Per- kins, by paying him the $500, he persuaded Perkins, much against his will, to accept 40 acres of land in pay- ment of the claim. The uncle, at the time, stated that the land was worth about $500 ; but it afterwards was shown that it was worth only about $6.00 per acre. Thereafter, Perkins brought this action to have the transaction set aside. He contended that his consent to the transaction was gained by undue influence exercised over him by his uncle. It was shown that Perkins, when he made this settlement was just an ignorant country boy, with little idea of the value of land, and with no one left to rely upon, save his uncle who persuaded him to enter into the transaction. Decision: Undue influence was exercised over the will of Perkins by his uncle, in procuring his consent to this agreement. When one person, because of his in- fluence by relation of blood or otherwise, persuades a person under his influence to enter into an agreement, such agreement is not binding, unless it can be shown that it was entirely fair and just. The facts of this case show clearly that undue influence was exercised by the uncle. Furthermore, the transaction was very unfair and harsh. Perkins was persuaded to give up a bona fide claim for $500 for an interest in land which was scarcely worth $250. Such an agreement is not binding upon him. 264 CONTRACTS Mr. Chief Justice Savage said: "In this contract, on the one side, a simple, uneducated boy, who knew only how to work on a farm ; on the other side, a man who had been justice of the peace, and may therefore be presumed to have some knowledge of law. The in- adequacy then consists : 1. In conveying 40 acres of mountain rocks, worth about $240, in satisfaction of a debt of $500 and interest. 2. One of the contracting parties arrived at mature age, perfectly acquainted with the value of property, and from his very 'voca- tion' in the habit of taking every advantage which the law would permit; the other an ignorant, simple, un- suspecting boy, unacquainted with property and with the arts and intrigues which too often attend advanced age. 3. On the one side the uncle and on the other the nephew." Accordingly, it was decided that the transaction should be set aside. BUUNG LAW Story Case Answer Where one party to a contract has procured the con- sent of the other by means of undue influence, the con- sent of the latter is said to be unreal. Consequently, the contract is not binding upon such person and it may be avoided at his election. Duress may arise in several ways. For example, it may arise where one, by virtue of his relation of confidence to another, uses that relation to procure the consent of the other to a contract. This is illustrated by the contracts of a guardian with his ward. Duress may arise where a party takes advantage of another person of weak mind to procure the consent of that person to a contract. This is illustrated by a contract made by a person with CONTRACTS 265 one partially insane, or with an imbecile. It may arise where a person takes unfair advantage of the neces- sities or distress of another person. This is illustrated by the Story Case. There Henry Harper procured the consent of his uncle to the contract in question by threatening to turn him out without food and clothing. The contract was not, therefore, binding upon the uncle, and the executor is not compelled to pay the money over to Henry Harper. IV. THE OBJECT OF THE CONTRACT MUST BE LEGAL 1. Contracts May Be Made Illegal by Statute STOEY CASE While Maine was a "dry" state King Bainter made the following contract with William L. Tate : "In consideration of $35 to be given, I, King Bainter, promise to sell to William L. Tate in the city of Bangor, one barrel of the whiskey which I have now in ny house in said city of Bangor. (Signed) KING BAINTEB." After receiving the money, Bainter refused to de- liver the whiskey. He alleged, as a reason, that the sale of liquor in Maine was unlawful. Tate, however, sued him for breach of contract to deliver the whiskey. He argued that the plea of illegality was not open to Bain- ter, since Bainter knew when he made the contract that it was illegal. Which party should win? RULING COURT CASE Buckly vs. Humason, Volume 50 Minnesota Reports, Page 195. 266 CONTBACTS Humason was the owner of property in the city of Chicago. He went to Buddy, who was in the real es- tate business in Chicago, and requested him to find a purchaser for his Chicago property. Humason prom- ised to pay him a certain per cent commission if a sale of the property was made. Buckly, in the course of a few weeks, sold the property and demanded his commission. This, Humason refused to pay. Suit was then brought by Buckly upon the agreement to pay him compensation for his services. Humason defended on the ground that the contract was illegal by virtue of a statute in the State of Illinois, in pursuance of which the City of Chicago had passed the following ordinance: "It shall be unlawful for any person to exercise within the City of Chicago the busi- ness of real estate broker without a license." Buckly had no license, and, therefore, the contract was illegal. Decision : Business transactions, in violation of law, cannot be made the foundation of a valid contract ; and the general rule is that where a statute makes a par- ticular business unlawful generally, or for unlicensed persons, any contract made in such business by any one not authorized is void. So here Buckly, not hav- ing a license, was engaged in an unlawful undertaking when he made the contract to sell the property and a court of law will give him no assistance whatsoever in his attempt to collect from the person to whom he rendered the services." Judgment was given for Humason in this action. RULING LAW Story Case Answer If the object of an agreement is illegal, no contract results. A contract may be illegal because it violates CONTRACTS 267 some positive rule of law, or because the effect of such a contract is evil, and, therefore, contrary to public policy. Where a statute forbids certain kind of con- tracts, any agreement made in violation of such a stat- ute is void. Thus, in the Story Case, there was a statute which prohibited the making of contracts for the sale of liquor. In consequence, any agreement which con- flicted with that statute was void. Therefore, judg- ment should be given against Tate. In case of an il- legal contract, the law will assist neither party to en- force any rights under the contract. 2. Contract May Be Illegal Because of the Common Law A. Contrary to Public Policy STOEY CASE Elizabeth Hills, a woman of approximately thirty- five years, agreed with George G. Johnson, an old man of seventy-one, that she would keep house for him, never marry, and take care of him as he became older, in return for his promise to give her one-hun- dred acres of land, by his will. This agreement was put in writing, and was effective in so far as the for- malities were concerned. Several months later, Elizabeth Hills married and left the employ of Johnson. He brought suit against her for breach of her contract. Should he be allowed to recover? RULING COURT CASE Jerome vs. Bigelow, Volume 66 Illinois Reports, Page 452 ; Volume 16 American Reports, Page 597. Jerome and Bigelow were both physicians, and were practicing their profession as specialists in the City of Chicago. In May, 1870, they entered into an agree- ment by which Bigelow was to retire from practice, and 268 CONTRACTS his practice was to be taken over by Jerome. It was agreed that Jerome should be permitted to practice in the name of Bigelow, to personate him, to pass among strangers as Bigelow. For this, Jerome agreed to pay Bigelow the sum of $10,000 a year for ten years, Bige- low, on his part, agreeing never to enter the practice in the city again, nor to interfere with Jerome's use of his name. A few years passed and he returned, be- ginning practice in the same vicinity. This was a suit by Jerome to have Bigelow restrained from so doing. Bigelow entered the defense that the contract was void, as against public policy, and, therefore, the Court would not give aid to either in enforcing the contract. Decision: The practice of medicine is such a vital and important profession, that every person who must call upon the profession is entitled to know with whom he deals, and to know who looks after his physical wel- fare. So, any agreement by which the public is barred from this important information is against public policy and void. Mr. Justice Scott said in part : * 'It may be that Jer- ome is as good a physician as Bigelow, and quite as skillful in the treatment of diseases. But that is not the question. Persons in need of medical aid are en- titled to the physician of their choice, and he who per- sonates another in that regard and thus imposes on that unfortunate class of persons, commits a great wrong. A contract that licenses and permits such practices is absolutely vicious, and a court will never enforce it. ' ' Accordingly it was held that the contract would not be enforced. CONTRACTS 269 RULING LAW Story Case Answer An agreement contrary to public policy is void and nnenforcible. An agreement is said to be con- trary to public policy when the result of such an agree- ment is evil or immoral in its nature, even though the acts contemplated are not expressly forbidden by any statute or rule of the common law. An agreement which tends to corrupt men in public office, an agree- ment which tends to perversion of justice, an agree- ment which tends to encourage litigation, an agreement which tends to increase immorality, an agreement in unreasonable restraint of trade, an agreement which restrains marriage, are all examples of contracts void because they are contrary to public policy. In the Story Case, the agreement was in restraint of marri- age. The public is interested in having all marriage- able persons to marry; and, although tlTere is no way to compel them to do so, any agreement preventing the free exercise of this important relation is evil in its tendency, and, therefore, void. B. Contrary to Rules of Common Law STORY CASE In the days when the "gold brick" fraud was often practiced on the unwary, Katz and Lamb agreed to split the proceeds of all the money they could fleece from victims. It was agreed that Katz should work into the grace of prospective purchasers, and Lamb should sell the fake brick. They carried on a remun- erative "business" for several years, and had a fair sized bank account in the name of Lamb. Then Lamb 270 CONTRACTS refused to share with Katz. Katz tried in every way to get his part of the illgotten gains, and finally brought suit for it. Should he be allowed to recover? RULING COURT CASE Atkins vs. Johnson, Volume 43 Vermont Reports, Page 78 ; Volume 5 American Reports, Page 260. Atkins, who is the plaintiff in this action, was the editor and proprietor of a weekly newspaper, pub- lished in Vermont. Johnson came to him one day, and asked him if he would publish an article, entitled "A Jack At All Trades Exposed." The article was basely false, and highly defamatory of one Gregory, concern- ing whom it was written. At first, Atkins was reluc- tant to publish it, but Johnson assured him that the whole article was true, and that a perfect defense could be made to any suit that might be brought by Gregory. With this assurance, Atkins published the article, promising Johnson not to reveal his authorship. After it was published, Gregory visited Atkins and de- manded to know the author. Atkins refused to tell him until he had consulted Johnson again. John- son then agreed that he would pay any and all expenses incurred by Atkins in defending any suit, if Atkins would promise not to reveal his name as author. At- kins so agreed. Gregory brought suit against Atkins and recovered judgment, which Atkins was compelled to pay. Atkins then demanded reimbursement from Johnson, which Johnson refused. This suit was then brought to recover the expenses incurred by Atkins. Johnson contended that the object of the contract was illegal in that it was an agreement to publish a libel, and such being the case no recovery could be had on the agreement CONTRACTS 271 Mr. Chief Justice Pierpont delivered the opinion of the Court : * * In this case, these persons in the outset conspired to do a wrong to one of their neighbors, by publishing a libel upon his character. The publication of a libel is an illegal act upon its face. This, both parties are presumed to have known. The publication, not only subjects the party publishing to a prosecution by the person injured for damages, but also to public prosecution by indictment/' "Both these parties knew that they were arranging for and consummating an illegal act, one that subjects them to legal liability, hoping, to be sure, that they might defeat it; but Atkins, fearing that they migkt not be able to do so, sought to protect himself from the consequences by taking a contract of indemnity from Johnson. This being so, the law will not interfere in aid of either. It will not inquire which of the two is the more in wrong, but will leave them as it finds them." Judgment was, therefore, given for Johnson. RULING LAW Story Case Answer Any agreement which contemplates the commission of a crime or civil wrong is void and unenf orcible. The commission of crimes and civil wrongs were forbidden by the Common Law. Consequently, any agreement which contemplated the commission of such was void. At Common Law it was both a civil and criminal of- fense to publish a libel whereby the public peace might be disturbed, and the reputation of a person injured. So, any agreement which contemplated the publication of a libel was void. This is illustrated by the Court 272 CONTRACTS Case of Atkins vs. Johnson. Likewise, any agreement to divide the profits of a fraudulent transaction is void and unenforcible. In the Story Case, Katz has no remedy. In such a case, the Court will not condescend to settle differences between thieves and scoundrels. 3. Effect of Illegality of the Contract A. When the Contract Is Severable STORY CASE J. F. Gooderl, a druggist, sold a box of Havana cigars and a bottle of whiskey to Martin Cox; charg- ing $4 for the cigars and $0.75 for the whiskey. Owing to the local option liquor law, the sale of the whiskey was illegal. Cox refused to pay for either the cigars or the whiskey "and Gooderl sued him for the price of both. Cox defended on the ground thaf the whole transaction was tainted with the illegality of the liquor sale, and that, as a result, neither the price of the whiskey nor of the cigars was recoverable. Do you agree with this ? RULING COUBT CASE Union Locomotive Company vs. Erie Railway Com- pany, Volume 35 New Jersey Law Reports, Page 240. The Union Locomotive Company was engaged in the business of manufacturing locomotives for sale. It entered into an agreement with the Erie Railway Com- pany, the principal terms of which are as follows : The Erie Railway Company agreed to furnish motive power to the locomotive company for transporting its engines at a certain rate; the locomotive com- pany agreed to furnish its own cars, on which the engines were to be transported, and to bear the expense CONTEACTS 273 of loading and unloading the locomotives. The Erie company also agreed that it would not carry the en- gines of any other company than the Union Locomotive Company. But afterwards the Erie Railway Company refused to furnish the motive power to the Union Loco- motive Company and this action was brought for dam- ages. The Erie Railway Company entered the defense that it was an illegal agreement, because it had promised not to transport a certain kind of freight for any other company. This, it claimed, was illegal because the company was a public service company, and bound to give service to all alike who applied for it. But the Union Locomotive Company insisted, that, even as- suming this contention to be correct, the contract was severable, and might be enforced in part; and that it was entitled to have the contract enforced so far as it related to the furnishing of motive power. Decision: Where the whole object of a contract is illegal, .the contract is utterly void and incapable of be- ing enforced. If a part of the contract only is illegal, but that which is illegal is so completely tied up with that which is legal that they cannot be separated, the whole contract fails. But if the contract is severable, and that which is legal can be separated from that which is illegal, then that part which is legal will be enforced. In this case the Erie Railway Company promised to do two things : To furnish motive power, and to transport engines for the Locomotive Company only. These two things are easily separated, and the Court was of the opinion that the fact that the latter promise was illegal did not render the contract wholly void. 274 CONTEACTS Judgment was given for the Union Locomotive Com- pany. RULING LAW Story Case Answei We have just learned that a contract which is illegal is unenf orcible. But now suppose that a part of the con- tract is legal and a part is illegal, what then will the court do with such a contract 1 It is generally held that if that part which is legal can be separated from that part which is illegal, the legal part will be enforced and the illegal part will not be. Stated in other words, if that part of the contract, which is not tainted with fraud, can be readily separated from that part which is tainted with fraud, the untainted part will be en- forced. This is illustrated by the Court Case of the Un- ion Locomotive Company vs. Erie Railway Company. In this case the contract contemplated the doing of two things ; one of the things was illegal, and the other was legal. They were readily separable and the court enforced that part which was legal. The same may be said of the Story Case. The sale of liquor though il- legal, did not affect the sale of the cigars and therefore that part which related to the sale of the cigars may be enforced. B. When the Contract Is a Unity STORY CASE A. D. Fernald, a druggist, made a contract of sale of whiskey and playing cards to H. K. Clark. He had no license to sell the liquor and this was known to Clark. Both these men had often carried out the same kind of transaction, and Fernald made a special price CONTEACTS 275 of $5 for a quart of whiskey, and a dozen packs of cards. Ordinarily, he sold the cards for $3 and the whiskey for $3. Finally Fernald and Clark disagreed, and Fernald refused to deliver the articles. Clark sued him for breach of promise. Fernald defended on the grounds that the whole contract was illegal. Is this a good de- fense? RULING COURT CASE Handle vs. Edwards, Volume 63 Arkansas Reports, Page 318, Volume 58 American State Reports, Page 108. Edwards was the postmaster at Gurdon, Arkansas. On the 1st day of December, 1892, he agreed to sell to Eandle, for the sum of $200, all his post office fixtures ; he agreed to resign and recommend Handle as his successor. He resigned at that time, and the $200 was paid to him by Randle. But afterwards Edwards failed, and refused to deliver to Randle the furniture, as agreed. Then Randle brought this action to recover his two hundred dollars. Edwards contended that the contract was void, be- cause it was made to create a vacancy in a public office, and recommend a successor. Randle, however, insisted that the contract was severable, in that Edwards prom- ised two things : to resign and recommend him as suc- cessor, and to sell his furniture. Although the former is illegal, the latter is legal and should be enforced. Mr. Chief Justice Bunn delivered the opinion of the court : ' * The contract, as explained by the pleadings and testimony, is an indivisible one ; that is to say, the lawful and the unlawful parts cannot be separated, so as to enforce the one and annul the other. Looking at 276 CONTRACTS the transaction in the most favorable light, it is in con- travention of public policy, simply because it is an ef- fort to create a vacancy in a public office, and to fill that vacancy by and through methods that the law can- not tolerate. The contract is, therefore, null and void throughout. " Judgment was given for Edwards. RULING LAW Story Case Answer If a contract consists of something which is legal and something which is illegal, and these things are so closely related that the legal cannot be separated from the illegal, the Court will treat the contract as if it were completely illegal, and refuse to have anything to do with the contract. In the Court Case of Eandle vs. Ed- wards, the contract contemplated the doing of two things; the creation of a vacancy of a public office, which was illegal ; and the sale of office furniture, which was legal. To bind the contract, $200 was paid. The Court was of opinion that it would be impossible to de- termine how much money was paid by way of purchase of the furniture, and how much was paid as a consider- ation for the vacancy of the public office. This being the case, the Court refused to deal with the contract. It considered the agreement as if it had been wholly illegal. This is true of the sale in the Story Case, and Clark cannot recover anything. C. The Court's Action on an Illegal Contract STOET CASE The Western and Indiana Railroad Company paid William Anson, an attorney, $10,000 under an agree- CONTRACTS 277 ment whereby he promised to use this money to im- properly influence the passing of a law at Springfield, the state capital. After Anson acquired this money, he refused to carry out his contract and use the money as stipulated. The railway company brought suit to re- cover for its loss. Can it recover? Bernard vs. Taylor, Volume 23 Oregon Reports, Page 416, Volume 18 Lawyers' Reports Annotated, Page 859. Taylor and others had arranged for a foot race to be run by and between Anderson and Grant at an agreed time. Having made the arrangement, bets upon the two contestants were solicited. Bernard decided that he would like to wager some money on the race. So he deposited $500 in gold with Taylor on a bet that Grant would win the race. Before the time set for the event, Bernard became suspicious. He feared from what he had heard, after he put up his money, that the race was " fixed" and that it was not to be a fair and just contest. He went immediately to Taylor and demanded the return of his money. Taylor re- fused to give it to him. Thereupon, Bernard brought this action to recover his money. Taylor contended that, since it was a wagering con- tract, the Courts should give relief to neither. Decision: Wagers are inconsistent with the estab- lished interests of society and are in conflict with the morals of the age. They are, therefore, void on the ground of public policy. "While such a contract is still executory, however, either party may rescind the con- tract and recover any property he may have put up; 278 CONTRACTS but if the contract is executed, nothing paid or deliv- ered under the agreement can be recovered. In this case the wager was not executed at the time Bernard demanded the return of his money. He repented in time and is entitled to recover his money. Mr. Chief Justice Lord said in part: "The general rule is, that the law will not interfere in favor of either party in pari delicto in equal wrong but will leave them in the condition in which they are found, from motives of public policy. There is no doubt, where money has been paid on an illegal contract which has been executed, and both parties are in pari delicto, the courts will not compel the return of the money so paid. But the cases show an important dis- tinction is made between executory illegal contracts and executed illegal contracts. While the contract is executory, the law will neither enforce it, nor award damages, but the party, paying the money or putting up the property, may rescind the contract and recover the money or the property. If the contract is already executed, nothing paid or delivered can be received back. This arises out of the distinction between an action in affirmance or an illegal contract, and one in disaffirmance of it. In the former, such an action can- not be maintained, but in the latter, an action may be maintained for money had and received. The reason is that the plaintiff's claim is not to enforce but to re- pudiate an illegal transaction/' Judgment was given for Bernard. RULING LAW Story Case Answer The general rule, undoubtedly, is that the Courts will assist neither party in enforcing an illegal agreement. CONTKACTS 279 The policy of the law is to discourage the making of such agreements. The policy is best effectuated by leaving the parties without any court remedy. If one party has paid money under an illegal agreement, the general rule is that he may not recover it, even though the other does not perform his part of the contract. Also, if one party performs his part of the contract which is illegal, the other party may not be compelled to perform his part. A distinction is taken between contracts which are illegal, because of the nature of the transaction, contracts termed bad in them- selves, and contracts which are illegal merely because they are prohibited. In the latter case, if the illegal contract is still executory, it is said that, if one of the parties repents of the transaction before it is executed, he may recover what he has paid under the contract. Thus, in the Court Case, gambling con- tracts were not generally held void at Common Law, but are now generally forbidden by statute. Bernard repented before the race was run, and the Court held that he was entitled to recover the money he had placed as a bet upon the outcome of the race. In the Story Case, the railroad cannot recover be- cause the contract is illegal by nature, bad in itself, be- cause it was against public welfare. V. CONTRACTS MAY BE DISCHARGED 1. By Agreement A. Waiver STOET CASE The Lowenthal Shoe Company agreed to deliver a consignment of shoes to Gilbert Shaw in return for his 280 CONTEACTS promise to pay for the same. Delivery was to be made on the 18th of September. On the 1st of September, the Lowenthal Company saw that it would be unable to make the delivery and it so informed Shaw. He said: "It doesn't make much difference. Just so you have them here by the last of the month, it will be all right." On the 20th of September, Shaw brought suit for breach of the promise to deliver on the 18th. The Low- enthal Company defended with the agreement to waive delivery on that date. Is the defense good? RULING COURT CASE Collyer & Company vs. Moulton, Volume 9 Rhode Island Reports, Page 90; Volume 98 American Deci- sions, Page 370. Moulton and another were partners, engaged in the business of building machines. Collyer made a verbal contract with the partners, by which they were to build a certain machine for Collyer and Company. After a small part of the work was done, the firm was dis- solved. On the same day Moulton notified Collyer of the dissolution of the Company, and stated that he could no longer be responsible for the contract. Collyer and Company then promised to release Moulton, and look to his partner alone for the performance of the contract. However, Moulton thereafter was sued by Collyer and Company for breach of this contract. Moulton defended on the ground that he had been re- leased by the promise of Collyer and Company to look to his partner. Mr. Justice Potter said: "There is some apparent inconsistency in the language used in the reports and CONTRACTS 281 texts as to the manner in which a simple contract may be annulled. We think the rule is, that so long and so far as the contract remains executionary, and before breach, it may be annulled by agreement of all parties ; but that when it has been broken, and a right of action has accrued, the debt or damage can only be released for a consideration ; and even so far as it remains ex- ecutory, it may be said that the agreement to annul on one side may be taken as consideration to annul on the other side. ' ' The Court was of the opinion that notice to Collyer and Company and their declaration to look to the part- ner amounted to a waiver of the contract, so far as it remained unperformed, and released Moulton as to that part. Accordingly judgment was given for Moulton in this action. RULING LAW Story Case Answer By discharge of a contract is meant that all the rights and obligations arising from the contract are gone. There are no longer any rights which can be established, or duties which can be enforced. It is generally said that a contract may be discharged by waiver. "Waiver really amounts to nothing more than the making of a new contract. It must be supported by a consideration and in other respects comply with the rules governing the validity of any other contract. So long as the contract remains executory, it may be discharged by a waiver. In such case, a sufficient con- sideration is to be found in the parties giving up their mutual rights under the contract. A agrees to sell 282 CONTKACTS a horse to B in thirty days. A has a right to force B to take the horse or pay damages. B has a right to force A to sell the horse or pay damages. So long as this contract remains executory or unper- formed it may be discharged by a simple waiver, and a sufficient consideration is found in the agreement of A to give up his right in consideration that B will give up his right. But if the contract has been executed on one side, or there is the duty to perform, it may not be discharged by waiver without a new consideration. In the above case suppose that A had delivered the horse but B had not paid the price, A alone now has a right under the contract ; B has acquired his right, i. e., the right to buy the horse. In order to waive the duty of B to pay for the horse, there must be a new considera- tion. If in the Story Case, the Lowenthal Shoe Com- pany had waited until September 20 to inform Shaw of its inability to deliver, and he had given the same answer, he could nevertheless sue at once, because there was a breach of contract on September 18. After this date any promise by Shaw requires a new consideration. But as the agreement stands, there was no breach since a waiver was made before September 18. The defense was good. B. Substituted Agreement STOEY CASE Strother Eastman promised to sell his typewriter to H. E. Gunn for $50. Later, Gunn decided that he did not want the machine, although he said that he would take it if Eastman insisted. Eastman then made the following statement : CONTRACTS 288 "I am not anxious to sell it. So, if you will agree to pay the same price for my set of carpenter's tools, I '11 let you out." Gunn agreed to this proposition. Several days later, Gunn secured a position as stenographer and wanted the typewriter. Eastman refused to deliver it and Gunn sued him. Should he recover? RULING COURT CASE Goss vs. Lord Nugent, Volume 5 Barnewell & Adol- pJius Reports, Page 58. By an agreement in writing, Goss contracted to sell Lord Nugent several lots of land and to make a good title to all of them. Lord Nugent paid a deposit upon the purchase price. It was afterwards discovered that a good title could not be made by Goss to one of the lots. Lord Nugent and Goss then agreed, verbally, to waive the defective title as to that lot. Goss then de- livered possession of all the lots to Lord Nugent, which he accepted. Lord Nugent, thereafter, refused to pay the full purchase price. This suit was brought to re- cover the same. Lord Nugent contended that he was not obliged to pay the full price, because title had not been made out to all the lots. Goss insisted that Nugent had waived this as to the lot in question, and was, therefore, liable. Decision : As a general rule the parties may at any time substitute any new agreement, which they may choose, for the old one. In this case, there was a new agreement which was substituted for the old, and under ordinary circumstances would have taken the place of the old ; but the Statute of Frauds requires that all agreements relating to the sale of land shall be evi- 284 CONTRACTS denced by an agreement in writing, signed by the party sought to be charged. Mr. Chief Justice Denman said: "After an agree- ment has been reduced to writing, it is competent to the parties, at any time, before breach of it by a new contract, in writing or not in writing, either altogether to waive, or dissolve, or annul the former agreement, or in any manner to add to, or subtract from, or vary, or qualify the terms of it, and thus to make a new con- tract, which is to be proved, partly by the written agreement, and partly by the subsequent verbal terms engrafted upon what will be thus left of the written agreement." But this does not apply to contracts in reference to the sale of land ; they must be in writing. And had the agreement here been in writing, it would have been good. Accordingly it was decided that judgment should be given for Lord Nugent. KULINa LAW Story Case Answer A contract may also be discharged by a new or sub- stituted agreement. This applies whether the original contract was executory in whole or executed in part. Such an agreement must also conform to all the rules which govern the validity of any other contract. There- fore, it is necessary that the new agreement should be supported by a consideration. But this consideration may be found in the parties giving up the old rights and assuming new duties. In the Story Case, the con- tract to sell the typewriter was discharged by the sub- stituted agreement for the sale and purchase of the carpenter's tools. Judgment should be given against Gunn in that case. CONTRACTS 285 C. By a Provision in the Contract STORY CASE Franklin Griswold, a famous portrait painter, agreed to paint a picture of the dead child of Eaton L. Walker. It was agreed that Walker would not have to take the picture of the child unless it was "to his satis- faction. ' ' After the portrait was finished, Walker was not pleased with it. He refused to accept and pay for it. Griswold sued him for the price of the work. At the trial, Griswold showed that the picture was a mas- terpiece and any reasonable man would be satisfied with it. Walker defended on the grounds that the portrait was not a good likeness ; that he was not satisfied with the work, and that the contract w^as so made that he could refuse to take the portrait, if he pleased. Which party should win f RULING COURT CASE Geipel vs. Smith, Law Reports Volume 7, Queen's Bench Court, Page 404. Smith was the owner of a certain vessel. It was agreed between him and Geipel that he, Smith, should with all convenient speed, sail to a coal spout as di- rected by Geipel and there load a full cargo of coal. It was further agreed that Geipel should then proceed to Hamburg and there deliver the coal to certain per- sons. Their agreement contained the provision that the contract should be subject to the * * restraint of princes and rulers. " Just as Smith was preparing to set out to get this cargo of coal, the war of 1870, between France and Germany broke out. The port of Ham- burg was closed, and Smith abandoned his contract. Suit was brought against him for damages. 286 CONTRACTS He defended on the ground that he was excused from further performing by the very terms of his con- tract, in that it was provided that the performance was subject to the " restraint of princes and rulers." Decision : It is always competent for the parties to stipulate in their agreement when the contract shall come to an end. They may agree that upon the hap- pening or non-happening of a given event, the contract shall come to an end. In case the event happens, or does not happen, as the case may be, the contract auto- matically comes to an end. In this case, it was provided that the performance of the contract was to be subject to the restraint of princes and rulers; the closing of the port of Hamburg was just such an act, and by that act Smith was excused from further performance of the contract. Judgment was given for Smith in this case. RULING LAW Story Case Answer A contract may be discharged by a provision in the original contract. That is, if the parties agree that the contract shall come to an end upon the happening or non-happening of some event, then the happening or non-happening of that event, as the case may be, will discharge the contract. In the Court Case of Geipel vs. Smith, the parties agreed .that the contract should come to an end in case the performance of the contract was hindered by international difficulties. These in- ternational difficulties having intervened, the contract was discharged. In the Story Case, the picture must be made to Walker's satisfaction. The court will not determine CONTRACTS 287 whether he is acting unreasonably in refusing his sat- isfaction, and the painter cannot recover. 2. By Performance A. Payment STOEY CASE W. L. Grubb, of Rochelle, Illinois, ordered a suit of clothes from a Chicago clothing company. The com- pany made the suit in accordance with measurements taken, forwarded the suit to Mr. Grubb for his ap- proval, and directed him to remit the purchase price immediately. It was also stated, in its letter, that payment should be made by certified check or New York exchange. Mr. Grubb did not care to go to the trouble and expense of preparing either form of pay- ment requested, and inserted two ten dollar bills in a posted letter by way of payment for the suit. The let- ter was never received by the clothing company, and it sued him for the price of the suit. He pleaded that his obligation was discharged because he had made one payment. What should be the decision of the court in this case? RULING COTJBT CASE Union Biscuit Co. vs. Springfield Grocer Co., Volume 143 Missouri Appeal Reports, Page 300. The Springfield Grocer Company had bought about $212.46 worth of goods from the Union Biscuit Com- pany during the year 1904. The Union Biscuit Com- pany admitted payment of the account, except as to the sum of $86.48. It appeared that the grocer company drew a draft upon the National Bank of Exchange of 288 CONTRACTS Springfield, Missouri, to its own order for this sum of $86.48. This draft was endorsed to the Union Bis- cuit Company and mailed to it. One H. E. Bixby was at that time in the employ of the Union Biscuit Company as a bookkeeper and by some means ob- tained possession of this draft. He erased the name " Union Biscuit Co." in the endorsement, inserted his own in its place, and cashed the draft as and for his own. The draft was paid in due course by the National Bank of Exchange. When the Union Biscuit Company discovered what had been done, it, nevertheless, de- manded payment from the grocer company. The latter refused to pay. This suit was then brought for the $86.48. The grocer company contended that it had paid the amount and that the Union Biscuit Company should not be permitted to recover. Decision : Payment of money due under a contract discharges the contract. But it is not an easy ques- tion to determine what constitutes payment. When the creditor accepts the payment made by his debtor, and agrees that the debt shall thereby be discharged, it is discharged. Payment of money and acceptance by the creditor constitute a discharge of the contract. When negotiable paper, such as checks, drafts, bills or notes, are given in payment of a debt, the debt is not actually discharged until such negotiable paper is actually paid, unless the parties expressly agree that it shall operate as an immediate discharge. So, in this case, there was no payment, because the draft was never actually paid to the Union Biscuit Company; it may recover this amount from Springfield Grocer Com- pany. This does not mean, however, that the grocer CONTRACTS 289 company is the loser. The endorsement was forged and the bank must repay the grocer company for pay- ing out this money upon a forged instrument, to a per- son not entitled to it. Mr. Justice Nixon said: "In order to constitute a payment, as that word is used in law, there must be (1) a delivery, (2) by the debtor or his representa- tives; (3) to the creditor or his representatives; (4) of money or something accepted by the creditor as the equivalent thereof; (5) with the intention on the part of the debtor to pay the debt in whole or in part ; and (6) accepted as payment by the creditor. "The taking of a check, bill of exchange, or note for a debt is not payment of the debt, unless the creditor expressly agrees to take it as such ; it is not payment until the money is received on it." Judgment was given for Union Biscuit Company. ETJUNQ LAW Story Case Answer Where the obligation of a contract consists in the payment of money, the payment of that sum in the manner authorized in legal tender obviously discharges the contractual obligation. Payment in counterfeit money, accepted by the other party and believed at the time by both to be good money, is not a payment discharging the contract. When the person receiv- ing the payment discovers that the money is false, he is entitled to another payment in good money, provided he is not negligent in notifying the other party of the fact that the money was counterfeit. Unless expressly agreed upon, the acceptance of a negotiable instrument, as a bill, note or check is not absolute, but only condi- 290 CONTEACTS tional payment. The obligation is not absolutely dis- charged until the instrument is actually paid in money to the person to whom the debt is owed. In the Story Case, the payment was not made in the manner authorized, and, consequently, there was no payment. If the clothing company had said that pay- ment might be made by sending money through the mail in an unregistered letter, the posting of the letter, containing the money, would have been a payment. Otherwise it is not a payment. Judgment should be given in the case for the clothing company. B. Tender STORY CASE Mr. Van Kevel and Mr. Millikan owned summer homes near Lake Geneva. Mr. Millikan owned a small sail boat, which he desired to sell. He offered it to Mr. Van Eevel for $950. The latter replied that he would purchase it, if Mr. Millikan would paint it, put on new sails, and deliver it within ten days. Mr. Millikan caused the desired improvements to be made. Seven days later, he sailed the boat up to Mr. Van Eevel 's landing and told him that the boat was ready. Mr. Van Eevel found no complaint with the work done, but said that he had decided that he would not pur- chase a boat. Mr. Millikan, however, refused to accept his repudiation of the contract. He anchored the boat at the landing with the remark: "I have done all I am legally bound to do ; the boat is now yours. " That night the boat was wrecked in a storm. Whose loss was it? CONTRACTS 291 RULING COURT CASE Barney vs. Bliss, Volume 1 D. Chipman Reports, Page 399 ; Same Case, Volume 12 American Decisions, Page 696. Bliss executed a contract to Barney, by which he promised to deliver to the latter ten thousand good, merchantable pine boards, on October 1, at the saw mill of the former. It was shown by Bliss that, on the 1st of October, the boards were sawed and ready to deliver at his saw mill. He showed also that he remained there from early morning until sundown of that day, ready and willing to deliver the boards to Barney, but that Barney did not appear. Thereafter, Bliss refused to deliver, and Barney brought this action for damages. Bliss contended that his readiness and willingness, on the day and at the place, to deliver the boards, was a good tender, and that thereafter his obligation on the contract was at an end. Decision : A tender is an offer on the part of a per- son, wfro is under an obligation to perform that obliga- tion. Where the obligation, as in this case, is the de- livery of personal property, a good and sufficient ten- der discharges the obligation under the contract. If there is a good tender, the property becomes the prop- erty of the other contracting party, although it con- tinues to remain in the possession of the seller. The Court, however, was of the opinion that in this case there was not a sufficient tender, although the seller was ready and willing during the whole of the day agreed upon and at the place stipulated, to deliver the property. He should have taken some actual steps manifesting his intention to deliver. He should have taken reasonable steps to notify Barney that the prop- 292 CONTRACTS erty was ready for delivery. Failing in this the ten- der was not good. Mr. Chief Justice Skinner said: "It may be laid down as a general rule, that when contracts are made for the delivery of goods, or any article other than money, a tender of the thing contracted for according to the contract, though refused to be accepted by the promisee, absolutely discharges the contract." Judgment was given for Barney because a sufficient tender was not shown. RULING LAW Story Case Answer We have seen that when the obligation of a contract is to pay money, payment in legal tender, or in the manner authorized, is a discharge of the obligation. But a tender of money due, although refused, does not constitute a discharge of the contract. Its only effect is to stop the running of interest, and, in case suit is brought for the money due, the party refusing the ten- der must bear the cost of suing thereafter. But when the obligation of a contract is not for the payment of money, the obligation of a contract is discharged by a good tender. A tender consists in offering to perform at the stipulated time and place of performance. The law requires that the person making the tender shall take actual steps to make the tender. Mere passivity at the time and place of performance is not a good ten- der, although the person is ready and willing to per- form. In the Story Case, Mr. Millikan's acts consti- tuted a good and sufficient tender. Thereafter his obligation on the contract was at an end. The boat became the property of Mr. Van Revel, and the loss of the boat was his. CONTEACTS 293 C. Substantial Performance STOEY CASE Mr. J. H. Alverson prepared the specifications for building a barn, and submitted them to George McDonald, a carpenter. After looking them over, the latter agreed to build the barn for the sum of $350. He at once set to work and soon finished the building. When Mr. Alverson inspected the barn, he found that there were defects in the building. It was found that the doors all opened inward, when the specifications directed that they should open outward. However, it appeared that this defect could easily be remedied for a very small sum. After the first rain, it was seen that there were two leaks in the roof. These could also be remedied at slight cost. Because of these minor defects, Mr. Alverson refused to pay McDonald anything for his work. He claimed that strict com- pliance with all the specifications was a condition pre- cedent to McDonald's right to recover. The latter brought suit, and claimed that he was entitled to the contract price, less any damage which the defects caused. What should be the decision of the Court ? EUUNG COUBT CASE Woodward vs. Fuller, Volume 80 New York Reports, Page 312. Woodward, who was a carpenter, contracted with Mrs. Fuller to alter and repair a house, which she owned and occupied. He finished the work, but several minor defects appeared therein. It was shown that the roof and chimneys were not well supported; that certain folding doors were not well hung; and that one door did not fit its casings, so that the door would 294 CONTRACTS f not close easily. With the exception of these defects, the work was performed in a workmanlike manner and fully in accord with the terms of their contract. These were not substantial defects and could easily be rem- edied at small expense and little inconvenience to Mrs. Fuller. Notwithstanding this, because of these defects, Mrs. Fuller refused to pay Woodward for any of his work. He, thereupon, brought suit upon the contract for the compensation agreed upon, less the amount of damages caused by these defects. Mrs. Fuller contended that strict performance was a condition to his right to recover upon the contract; and that his substantial performance was, therefore, immaterial so far as his right to recover upon the con- tract was concerned. Decision : A contract, of course, is discharged when it can be shown that it has been performed strictly in accordance with the terms of the contract. Such per- formance entitles the one performing to the compensa- tion agreed upon in the contract. Furthermore, if he has substantially performed his part of the contract, he is entitled to recover upon the contract the compen- sation agreed upon, less the damages caused by the in- substantial defects of his performance. In this case Woodward did substantially perform the contract, and is entitled to recover the amount of compensation, less the damages caused by the defects. By the Court: "As to the principal contract, the plaintiff (Woodward) did not fully perform it. As the defendant (Mrs. Fuller) was not bound to pay the con- tract price, so far as it was to be paid in money, until the contract was fully performed by the plaintiff, full performance by him was a condition precedent to his CONTRACTS 295 right to have payment, unless she has accepted the work, or waived such a performance. There is no finding that she waived such a perform- ance, or that she accepted the work as complying with the contract. If the plaintiff is to be held strictly to the terms of his contract, he must fail to recover there- on, and that he should be, is the effect of the earlier cases in this state. But there has been a relaxation of that rule, and now, on such a contract, there may be a recovery without a literal or exact performance of it. It is now the rule that, where a builder has in good faith intended to comply with the contract, and has substan- tially complied with it, although there may be slight de- fects caused by inadvertence or unintentional omis- sions, he may recover the contract price, less the dam- ages on account of such defects. The defects must not run through the whole, nor be so essential as that the object of the parties to have a specified amount of work done in a particular way is not accomplished." Judgment was given for Woodward, less the dam- ages, amounting to $100. RULING LAW Story Case Answer As a general rule the obligation of a contract must be fully performed before any right to recover on the contract arises in favor of the person upon whom this obligation rests. It is said that a compliance with all conditions of the contract is a condition precedent to the right to recover on the contract. This, in general, seems just. For a person is entitled to have just what he contracts for. Yet, on the other hand, if the obliga- tion has been substantially performed, it is not just that he should be permitted to repudiate the contract 296 CONTRACTS because of some slight defect which may easily be remedied. This applies especially to building con- tracts. When one person builds on the land of another, immediately the materials placed upon the land be- come the property of the owner of the land. If he were permitted to repudiate the contract because of such slight defects, it would be unjust to the other per- son. Therefore, it is generally held in reference to building contract that substantial performance will en- title the performer to his right to recover the contract price, less the amount of damages the defects have caused. However: The defects must be slight; they must not run through the whole contract ; they must be easily remedied. In the Story Case, the performance by McDonald was substantial. Consequently he should be entitled to recover on the contract for the compen- sation agreed upon, less any damages caused by the defects in construction. 3. By Breach A. Renunciation Before Time for Performance STORY OA3E Mr. Julius L. Rink was the owner of a department store in Bloomington, Illinois. He had always man- aged the business himself. But in January, 1915, he decided that he would retire from active management of the business and procure a good man to look after it for him. He conferred with M. W. Daly, who was then manager of a department store in the same city, with a view of procuring the services of the latter. At this time, Daly was receiving a salary of $1,500 per year. Mr. Rink offered him $1,800, if he would ac- CONTKACTS 297 cept the management of his store. After some further negotiations, Mr. Daly agreed to accept. A written contract was drawn up, by which Mr. Daly agreed to act as manager of Mr. Rink's department store for a period of three years, at a salary of $1,800 per year, beginning on the 1st day of June, 1915. In February, 1915, Mr. Rink received an attractive offer for his busi- ness, and sold it at once. Three days later, Daly started suit against Rink for damages for breach of contract of employment. Rink contended that the suit was pre- maturely brought. He insisted that this suit could not be brought until the end of the three years, when the period of employment would have ended; or at least not until June, when the period of service would begin. What should be the decision of the court ? i RULING COURT CASE Eochster vs. De La Tour, Volume 2 Ellis & Blade- burn Reports, Page 678. On the trial of this case, it appeared that Hochster was a courier, who, in April, was engaged by De La Tour to accompany him upon a European tour. By the terms of the agreement, the tour was to begin on June 1 of that year and continue for three months. De La Tour agreed to pay Hochster ten pounds a month for his services in this capacity. On the llth day of May, De La Tour wrote Hochster that he had changed his mind and declined his services. He refused to pay Hochster anything by way of compensation for the preparation he had made. This action was begun to recover damages for the breach of the contract. It was begun on the 22nd day of May, before the time set for performance had come. 298 CONTEACTS De La Tour claimed that the action was prematurely brought. He contended that the action should not have been brought until after the full time for performance had elapsed. Decision : Where a person repudiates a contract be- fore the time set for performance, the other party may do one of two things. He may refuse to recognize the breach, and wait until time for performance has come and passed, and then sue for damages resulting there- from. Or he may accept the breach immediately and bring suit for the damages which he will probably suffer therefrom. The person responsible for the breach has no right to complain if the suit is thus brought. Lord Campbell, Chief Justice, said : "The man who wrongfully renounces a contract, into which he has de- liberately entered, cannot justly complain if he is im- mediately sued for a compensation in damages by the man whom he had injured ; and it seems reasonable to allow an option to the injured party, either to sue im- mediately, or to wait till the time when the act was to be done, still holding it prospectively binding; for the exercise of this option may be advantageous to the innocent party and be allowed to be prejudicial to the wrongdoer. ' ' The Court gave judgment for Hochster. RULING LAW Story Case Answer When a contract is entered into, the obligation\ of which contemplates some future acts, the per- son upon whom this obligation rests must usually be prepared at the time, when the acts are to be done, CONTRACTS 299 to do them. His readiness and willingness at this time is generally a condition precedent to his right to re- cover anything under the contract. If in the mean- time, the other party announces that he repudiates the contract, the courts permit the performer one of sev- eral remedies. He is under no duty to accept the re- pudiation and may present himself at the time of per- formance. If, at that time, he is not permitted to pro- ceed, he may then bring suit for the damages he may suffer. Or he may still treat the contract in existence, wait until the period of employment ends and sue on the contract for what he has suffered. But he is under no obligation to do either. He may accept the repudiation at once, and immediately bring suit for the damages which he will suffer, even though the time has net arrived when he is to begin performing under the contract. So, in the Story Case, the suit was not prematurely brought. Judgment should, therefore, be given for Daly. B. Renunciation in the Course of Performance STORY CASE Mr. J. W. Stevens, owner and proprietor of a mov- ing picture theater, engaged Miss Myrtle McElroy to play a pipe organ in his theater. He engaged her for one year, and agreed to pay her the weekly sum of $30. After about three months, he notified her that he would not need her services any more; that the patronage at his theater did not justify him in paying so large a sum for some one to play the organ. She thereupon began suit for damages. She claimed dam- ages, not only for the time intervening her dismissal and the bringing of the action, but for the remainder 300 CONTRACTS of the year. Stevens contended that she could only re- cover for the damages to the time when the suit was brought, and that for subsequent damages she would have to wait until such damages had accrued. May she recover full damages in this action? RULING COURT CASE Isaac Parker vs. Electa Russell, Volume 133 ; Mas- sachusetts Reports, Page 74. Isaac Parker conveyed real estate to Electa Russell. In consideration of this conveyance, Russell promised and agreed to support and maintain Isaac Parker, fur- nishing him with all things necessary and convenient in sickness and in health, during the natural life of Parker. This agreement was entered into in the year 1873. Russell did support Parker from that time until some time in 1878, when her house burned. From that time until the bringing of this action, she had failed and refused to support Parker. He brought this action asking for damages for breach of the entire contract. She contended that an action could not be maintained for entire damages. She insisted that he could recover damages merely for the past unperformed part of the contract, but that, as to the future unperformed part, an action would have to be brought, thereafter, for damages. Decision: Where one commits a breach of a con- tract during the performance of the contract, the in- jured party may bring an action at once to recover en- tire damages. The contract is at an end, and the injured party is under no obligation to wait until the time for full performance has elapsed before suing for damages. CONTEACTS 301 Mr. Justice Field said: "In an action for a breach of a contract to support the plaintiff during his life, if the contract is regarded as still subsisting, the dam- ages are assessed to the date of the suit, and not to the time when the verdict is rendered. But if the breach has been such that the plaintiff has the right to treat the contract as absolutely and finally broken by the defendant and he elects so to treat it, the dam- ages are assessed as of a total breach of an entire contract. ' ' Judgment was given for Parker for entire damages. RULING LAW Story Case Answer When one of the parties to a contract, during its per- formance, refuses to permit the other to continue with the contract, the injured person may do one of two things. He may wait until the end of the period of his employment and sue for all damages, accrued to him, or he may bring suit at once and recover all past dam- ages and damages likely to accrue in the future. In the Story Case, therefore, Miss McElroy was within her rights in suing at once and was entitled to recover, not only for past damages, but for prospective dam- ages as well. 4. By Impossibility STOET CASE The Kewanee Brewery Company, in January of 1914, contracted to furnish W. E. Murphy, a local saloon proprietor, all the beer that he should need in his busi- ness for the year 1914, at a certain price. In June 302 CONTEACTS 1914, in accordance with a law passed by the state legislature, the people of Kewanee voted to make the sale of any intoxicating drinks in Kewanee illegal. Ac- cordingly, the brewery company refused to furnish any more beer to Murphy, who intended to resell it secretly in violation of the law. He, thereupon, brought an action against the company for damages. The company contended that the contract was discharged because performance had been made impossible by law. What should be the decision of the court? RTTUNG COTTRT CASE Spalding vs. Rosa, Volume 71 New York Reports, Page4Q. Spalding was the owner and manager of the Olympia Theater in the city of St. Louis. He made a con- tract with Bosa, who was a booking agency in New York, by which the latter agreed to furnish the Wachtel Opera Company to give four performances per week at the St. Louis thteater, for two weeks. Wachtel was the leading singer of the company. In fact, it appeared that he was the only one worth while as a singer. Im- mediately preceding the opening performance, Wachtel became ill, and the engagement for the whole series of performances had to be cancelled, because his place in the company could not be filled by any substitute. This action was brought by Spalding for damages. It was insisted by Eosa that the performance of the contract was excused because of the sickness of Wach- tel, making performance impossible. Decision: The performance of a contract of per- sonal services will be excused when the person who was to render the services dies, or becomes sick in the CONTRACTS 303 meantime so that he cannot perform. In this case, since Wachtel was the main attraction of the com- pany, and since the performance could not be given without him, his intervening sickness excuses the per- formance of the contract. Mr. Justice Allen, who delivered the opinion of the Court, said in part: "The sickness and inability of Wachtel occurring without the fault of the defendants constitutes a valid excuse for the non-performance of the contract. Contracts of this character, for the per- sonal services, whether of the contracting party or oi a third person, requiring skill and which can only be performed by the particular individual named, are not in their nature absolute obligations under all circum- stances. Both parties must be supposed to contem- plate the continuance of the ability of the person whose skilled services are the subject of the contract, as one of the conditions of the contract. Contracts for per- sonal services are subject to this implied condition, that the person shall be able at the time appointed to perform* them ; and if he dies, or without fault on the part of the convenantor, becomes disabled, the obliga- tion to perform is extinguished. ' ' Judgment was given for Rosa. RULING LAW Story Case Answer If a contract is made in reference to some subject matter, the continued existence of which must have been a condition of the parties' agreement, it is held that the destruction of the matter will discharge the contract, if it is destroyed without the fault of the one under obligation to perform. Also, when one contracts 304 CONTRACTS to perform some personal services which no one but himself can perform, his sickness or physical inability, without any fault on his part, discharges the contract. That was the situation in the Court Case of Spalding vs. Rosa. Impossibility arising by operation of law will also discharge a contract. Thus, in the Story Case, the obligation of the brewery company to con- tinue to furnish beer during the remainder of that year was discharged, because of impossibility created by law. c\ LAW LIBRARY UNIVERSITY OF CALIFORNIA LOS ANGELES LOS ANGELES STATE NORMAL SCHOOL