Story 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 Company sued Mr. John Campbell for the price of the machine 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?

Ruling Court 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 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 agreement. He then sued Wolfe upon his oral promise to indemnify him.

In defense to this action, Wolfe contended that portion of the Statute of Frauds which provides: "No action shall be brought whereby to charge the defendant 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 therewith, 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".

Accordingly, it was held in this case that Wolfe was not liable to Nugent upon this oral promise.

Ruling 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 agreement. 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 reduced 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 whereby 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 person 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 incorporated 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. 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.