This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
12Disborne v. Denobie, 1 Roll abr. action sur case, (2) Qui avera 1'action pl. 5, pp. 30, 31; Fleming v. Bank , A. C. 577; Bailey v. Croft, 4 Taunt. 611; Seaman v. Price, 2 Bing. 437; West Yorkshire Darracq Agency, Lim. v. Coleridge , 2 K. B. 326 [citing, Slater v. Jones, L. R. 8 Ex. 186].
See for an action in use and occupation by A against B, where the benefit was received by B from A's predecessor in interest, X. Davis v. Morgan, 6 D. & R. 42, 4 B. & C. 8.
In Wilson v. Coupland, 5 Barn & Ald. 228, consideration may have moved from a third person alone. In argument of counsel this was claimed to be the case; but no discussion of the question is found in the opinion. The action was for money had and received.
13 Fleming v. Bank , A. C. 577.
No trouble has been found in upholding contracts whereby A and X, both creditors of B, agree to accept less than the amount due from B to each of them in full satisfaction of the entire debt, so as to enable B to take advantage thereof in an action by A to recover the balance due upon such debt, if B is a party to such contract, although B does not furnish any part of the consideration for such discharge.18 For the same reason a contract by which A and X, both creditors of B, agree to give him longer time for the payment of his debts, is binding upon A and X, and B may take advantage of such contract.17 The distinction between the contracts to which A, B and X are all parties, and in which X furnishes the consideration for A's promise to B, which contracts are held to be valid and enforceable by B, and the cases in which only A and X are parties to the contract, and X furnishes the consideration for A's promise to B, in which case it is held that B can not enforce such contract, is illustrated by a recent case,18 in which A and X were directors of an insolvent corporation B, and D was the official liquidator thereof; and in a contract in which A, B and X were parties, B, being represented by D, it was mutually agreed that A and X would forego all claims for the unpaid balances of their fees as directors. It was held that such contract was enforceable and that B could take advantage thereof.
In a contract of compromise the consideration may move from a third person.19 In a contract of novation, it is only necessary that the promisor in the new obligation should be released by the obligee in the original obligation. If this is done, sufficient consideration exists, even though no consideration moves from the promisee in the new obligation.20 In most of the cases, however, there is usually a consideration moving from the promisee in the new obligation to the promisee in the original obligation, cs well, as one moving from the promisee in the original obligation to the promisor in the new obligation. For a technical novation it is, of course, absolutely necessary that the original debt should be discharged.21 If the original debt remains in existence, it is necessary to find some consideration for the new promise; and, since it is a promise to pay the debt or default of another, it is necessary to find some note or memorandum in writing if the new contract is not itself in writing.
14 Bailey v. Croft, 4 Taunt. 611.
15Curtis v. Collingwood, 1 Vent. 297.
16Good v. Cheesman, 2 Barn. & Ad. 328, 4 C. & P. 513; Norman v. Thompson, 4 Exch. 755; Hawley v. Beverley, 6 M. & G. 221; Pfleger v. Brown, 28 Beav. 391. See also, Slater v. Jones, L. R. 8 Ex. 186; West Yorkshire Darracq Agency, Lim. v. Coleridge , 2 K.
B. 326 [citing, Slater v. Jones, L. R. 8 Ex. 186].
17Boothbey v. Sowden, 3 Camp. 175.
18 West Yorkshire Darracq Agency, Lim. v. Coleridge , 2 K. B. 320 [citing, Slater v. Jones, L. R. S Ex. 186].
19Punamchand v. Temple , 2 K. B. 330.
A promise by an executor personally to pay a debt of his decedent is enforceable against the executor personally, at least up to the amount of assets received by him.22 The consideration for such promise is the receipt of the assets of the decedent. A promise by an executor personally, to pay a legacy, is also enforceable against the executor personally up to the amount of assets received by him, and is supported by the receipt of such assets as a consideration.23
No trouble has been found in upholding negotiable instruments, although there may have been no consideration moving from the payee to the maker.24 While the case of the negotiable instrument may be explained away, as a case governed by the law-merchant, and, therefore, not controlled by common-law principles, the other cases can not thus be explained.
20 That the consideration must move to the promisor in the new obligation, see Cuxon v. Chadley, 3 Barn. & Cress. 591.
21 Indiana. Kelso v. Fleming, 104 Ind. 180, 3 N. E. 830.
Louisiana. Studebaker Bros. Mfg. Co. v. Endora, 51 La. Ann. 1263, 72 Am. St. Rep. 480, 26 So. 90.
Michigan. Fuller & Rice Lumber & Manufacturing Co. v. Houseman, 117 Mich. 553, 76 N. W. 77; Wierman v. Bay City, Michigan, Sugar Co., 142 Mich. 422, 106 N. W. 75.
Minnesota. Johnson v. Rumsey, 28 Minn, 531, 11 N. W. 69; Cornwell v. Megins, 39 Minn. 407, 40 N. W. 610; Nelson v. Larson, 57 Minn. 133, 58 N. W. 687; Hanson v. Kelson, 82 Minn. 220, 84 N. W. 742.
Oregon. Miles v. Bowers, 40 Or. 429, 90 Pac. 905.
Texas. Scott v. Atchison, 36 Tex. 76.
Virginia. State Bank v. Domestic 6ewing Machine Co., 99 Va. 411, 86 Am. St. Rep. 891, 39 S. E. 141.
22 Trewinian v. Howell, Cro. Eliz. 91. See also Ridout v. Bristow, 1 Tyrwh. 84, 1 Cr. & J. 231. In 1 Viner Abr. 310 (pl. 82), the marginal note is in accord with this statement, but the text is contra.
23 Atkins v. Hill, 1 Cowp. 284; Hawkes v. Saunders, 1 Cowp. 289. A promise by an heir to pay an obligation of his ancestors was held to be without consideration if no assets descended to the heir. Lord Gray's case, cited in Monning v. Knopp, 1 Viner Abr. 316 (pl. 57).
The existence of this rule has been assumed in order to show that it did not apply in the particular case. A written guaranty recited a payment as consideration without showing by whom such payment was made, it was held that it would be assumed that it was paid by the promisee.25 It seems to have meant merely that the consideration must be that contemplated in the contract between the promisor and the promisee; that a benefit received by the promisor from a third person, not provided for by such contract, can not be used as a consideration to support the promise; and that in England the beneficiary can not sue on a contract to which he is not a party.
The rule that the consideration must move from the promisee is, therefore, even in England, supported by more dicta than decisions. Few of the cases that lay the rule down really need it as the basis of decision; while the strict application of the rule would necessitate the reversal of some well-settled lines of cases.
As is so often the case, there have been two lines of authorities, each of which, without discussing the other, has laid down its own rule, avoiding, by silence, the difficulty of distinguishing or reconciling its rule with the other rule on the same subject.
Recently, however, the rule that the consideration must move from the promisee has been taken literally and applied seriously.26 In a recent case, A sold goods to B under a contract by which B agreed to require all purchasers from him to enter into a contract to retail such goods at a certain fixed price. 8 sold such goods to X under such contract as to retail price. X sold such goods at less than the retail price and A brought an action against X upon the contract to recover the amount agreed upon as a penalty in case of default. It was held that even if the contract could be regarded as a contract which X made with A through B as A's agent, such contract could not be enforced, since there was no consideration from A to X to support such covenant.27 This decision was based on the express ground that if the contract was between B and X, A was not a party thereto, and could not sue; while if it was a contract between A and X, B and not A had furnished the consideration. Since the result that was reached was that in spite of the actual agreement upon a valuable consideration which X received from B, A had no right of any kind, it is not to be wondered that part of the court expressed a disgust for the entire doctrine of consideration.28 The unwelcome result was reached by the literal application of an oft-repeated rule which did no harm and which led to no unjust results as long as it was confined to obiter, but which resulted disastrously as soon as it was taken seriously.
24 Scott v. Lifford, 1 Camp. 246; In re Overend, L. R. 6 Eq. 344; Sturtevant v. Ford, 4 M. & G. 101; Carruthers v. West, 11 Q. B. 143.
25 Dutchman v. Tooth, 5 Bing. N. C. 577.
26"My Lords, in the law of England certain principles are fundamental. One is that only a person who is a party to a contract can sue on it. Our law knows nothing of a jus quaesitum tertio arising by way of contract. Such a right may be conferred by way of property, as, for example, under a trust, but it can not be conferred on a stranger to a contract as a right to enforce the contract in personam. A second principle is that if a person with whom a contract not under seal has been made is to be able to enforce it consideration must have been given by him to the promisor or to some other person at the promisor's request. These two principles are not recognized in the same fashion by the jurisprudence of certain continental countries or of Scotland, but here they are well established." Dunlop Pneumatic Tyre Go. v. Selfridge , A. C. 847.