Story Case

Mr. Thomas Hilyard purchased of William Travers ten head of horses, promising to pay in thirty days. Mr. Travers hesitated to allow possession of the animals until he was reimbursed, but was finally persuaded to do so. After a week had passed by, and Mr. Hilyard had not been able to collect on his assets, he requested his friend, Hiram Holman, to reassure William Travers. Mr. Holman wrote to Mr. Travers, saying, "Do not distrust the integrity of Hilyard. I'll act as guarantor for his debt to you." Soon after, Mr. Hilyard became insolvent, and Mr. Travers called upon Mr. Holman to keep his promise. Mr. Holman, however, insisted that he was not liable, that he had written, merely to accommodate Thomas Hilyard, and received nothing for his promise to Mr. Travers. Will Mr. Holman escape liability?

Ruling Court Case. Stain Vs. Stareters, Vol. 5 East Reports, Page 10

One Gore, drew a bill of exchange upon Hall for £56, which was accepted by Hall. The bill was then endorsed to Stain. When it became due, Hall could not pay the amount to Stain. James Stareters, a friend of Hall's then gave to Stain the following written instrument: "Messrs. Stain and Company, I will engage to pay you by half past four this day, fifty-six pounds and expenses on bill that is due from Hall. (Signed) James Stareters." Stareters did not pay at the time stated, and this action was begun by Stain upon the foregoing writing.

Stareters claimed, among other defenses, that this was not a sufficient writing within the Statute of Frauds, because the consideration for his promise to pay was not stated in the writing.

Lord Ellenborough, Chief Justice, said: "The clause in question, in the Statute of Frauds, has the word agreement - 'Unless the agreement, upon which the action is brought, or some memorandum or note thereof, shall be in writing, etc.' - and the question is, whether that word is to be understood in the loose, incorrect sense in which it may sometimes be used, as synonymous to a promise or undertaking, or in its more proper and correct sense, as signifying a mutual contract or consideration between two or more parties. The latter appears to me to be the legal construction of the word, to which we are bound to give its proper effect"

Since the consideration for the promise was not stated in the writing, it was held that there was not a sufficient memorandum of the agreement. Judgment was given for Stareters.

Ruling Law. Story Case Answer

The Statute of Frauds, in all states, requires that the agreement shall be in writing. The question then arises as to whether the mere promise in writing is sufficient, or whether the consideration for that promise must also be reduced to writing. Most courts have decided that the statute requires not only that the promise shall be in writing, but also the consideration for the promise. The courts argue that a promise is not an agreement; that the promise does not become an agreement until there is a consideration which makes it binding; therefore, the statute requires that both the promise and the consideration shall be stated.

Hence, since no consideration for Mr. Holman's promise was stated in the Story Case, that alone is sufficient to discharge him from liability.