The Indianapolis Hominy Mills agreed, by an oral contract, to buy one hundred bushels of ground corn from the Vigo Mill Company for $60. It was agreed that the hominy company should furnish the sacks in which the corn should be delivered, and that $5 should be deducted from the price of the corn for the sacks. These were delivered to the Vigo Mills, but when the corn was ready for delivery, the hominy company refused to accept it, and put in defense the Statute of Frauds. Is this defense effective?

Ruling Court Case. Howe Vs. Hayward, Volume 108 Massachusetts Reports, Page 54

Hayward verbally agreed to buy Howe's stock for $2,500. At the time this agreement was made, each of them deposited $400 in the hands of Taft. It was agreed that in case either failed or refused to perform his part of the contract, the $400 should go to the other party. Hayward refused to carry out his promise to buy the stock; Howe, thereupon, sued upon the verbal agreement.

It was contended by Hayward that the contract was unenforcible under the Statute of Frauds. But Howe insisted that the case was taken from the Statute by reason of the deposit, which, he contended, was part payment on earnest money.

Mr. Chief Justice Chapman said: "The idea 'earnest' in connection with contracts, was taken from the civil law. It is not necessary to consider its precise effect under that law. As used in the Statute of Frauds, 'earnest' is regarded as a part payment of the price. The deposit with Taft was not, therefore, equivalent to an earnest to bind the bargain, or part payment, and there was not a valid sale within the Statute of Frauds." Judgment was given for Hayward.

Ruling Law. Story Case Answer

In the cases under consideration, a written memorandum evidencing the sale may be dispensed with, if the buyer has given something to bind the bargain, or has made part payment of the purchase price. To constitute a payment or a part payment, within the meaning of the statute, there must be an actual transfer of the thing, or money agreed to be given by way of earnest money, or by way of part payment. It will be noted that, in the Ruling Court Case, the money was intended as forfeit money, and not a part payment. It is not material how small the amount may be, or that it is other than money. The furnishing of sacks, in the Story Case, amounts to part payment, and prevented the defense of the Statute.