Story Case

Jerome Streeter and Daniel Freeman were attending an auction sale of rare tapestries. Jerome Streeter had been bidding on a very rich hanging, a relic of the seventeenth century, but the bidding was spirited, and threatened to go beyond his purse. His friend, Daniel Freeman, noting his anxiety, said to the auctioneer, "Take Mr. Streeter's bid. Knock that piece of tapestry down to him, and I'll answer for his debt." Thereupon, Streeter secured the piece. Later, he became insolvent, and the owner of the tapestry sued Mr. Freeman on his promise to guarantee Streeter's debt. Mr. Freeman defended himself by saying, "I gave no writing." Will such a defense prevail at court?

Ruling Court Case. Watkins Vs. Perkins, Volume 1 Lord Raymond Reports, Page 224

In this case, Chief Justice Halt said: "If ' A' promises 'B,' a surgeon, that if 'B' cure 'D' of a wound, he will see him paid. This is only a promise to pay if 'D' does not, and, therefore, ought to be in writing by the fourth section of the Statute of Frauds. But, if 'A' promises that he will be 'B's' paymaster, whatever he shall deserve, it is immediately the debt of * A,' and he is liable without writing."

Exiling Law. Story Case Answer

At Common Law, a contract of guaranty, whether oral or in writing, was as valid as any other contract. But the Statute of Frauds, an early English statute, generally adopted in this country, provided: "No action shall be brought, whereby to charge the defendant, upon any special promise, to answer for the debt, default, or miscarriage of another person, unless the agreement upon which such answer shall be brought, or some memorandum or note thereof shall be in writing and signed by the party to be charged therewith."

A contract of suretyship is not within the terms of the foregoing statute, because the surety promises the creditor, without condition, that he will pay the debt or perform the obligation; the creditor has a primary right to proceed against him, and is not obliged to show that the principal has defaulted, before he is able to proceed against the surety. A transaction of guaranty, however, is governed by this law in the Statute of Frauds.

Mr. Freeman, in the Story Case, had agreed to answer for the debt of his friend. Such an undertaking is a guaranty and collateral to the main promise of Jerome Streeter to pay for the tapestry and must, therefore, be evidenced by writing. Had Freeman said, "Let Streeter have the tapestry and I will pay you for it," this would have made him directly liable, and such a promise need not have been in writing.