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.
1 Scotson v. Pegg, 6 Hurl. & N. 295; Shadwell v. Shadwell, 9 C. B. N. S. 159; Abbott v. Doane, 163 Mass. 433, 47 Am. St. Rep. 465, 34 L. R. A. 33, 40 N. E. 197.
2 The following cases are generally cited in support of this proposition: Bagge v. Slade, 3 Bulstr. 162; Moore v. Bray, 1 Vin. Abr. 310, pl. 31; Shadwell v. Shadwell, 9 C. B. (N.S.) 159; Scotson v. Pegg, 6 Hurl. & N. 295.
The following cases are usually cited as being contra: Westbie v. Cockaine, 1 Viner Abr. 312, pl. 36; Jones v. Waite, 5 Bing. N. C. 341.
3 Shadwell v. Shadwell, 9 C. B. (N.S.) 159.
4 Bagge v. Slade, 3 Bulstr. 162.
5 Moore v. Bray, 1 Viner Abr. 310, pl. 31.
6 Shadwell v. Shadwell, 9 C. B. (N.S.) 159.
7 Bold v. Hutchinson, 20 Beav. 260 (256).
In another English case, B had a cargo of coal which he had agreed with X to deliver to the order of X. X gave an order on B for such coal in favor of A. A and B agreed that A should discharge such coal at the rate of forty-nine tons for each working day. A did not discharge the coal at that rate, and B brought an action to recover damages for five days' delay in unloading the ship. The declaration pleaded as consideration for A's promise to unload at that rate, B's delivery of such coal to A. The plea set up the contract between B and X, and alleged that under such contract B was bound to deliver to X's order, and that A's promise to unload at that rate was accordingly without consideration. The court held the consideration sufficient, one judge saying that there might have been some dispute as to A's right to have the coals or that B might have made some claim for demurrage; the other judge saying that even without such facts B's performance of his contract with X was consideration for A's promise.10 It is the latter opinion only that justifies the general statement that this is the English rule. It might be suggested that it does not appear that the contract between B and X fixed the time for discharging the cargo; and the promise of A to discharge at a certain rate might be supported by B's promise to permit A to discharge at that rate. The English cases which are cited as holding that B's performance of his contract with X is not sufficient consideration for A's promise to B, seem to be in point. In one, B and C were bound to X jointly for C's debt. C died, leaving his widow, A. A promised B that on consideration that B would pay such debt to X, A would pay such debt to B. No other consideration appearing for such promise, it was held that there was no consideration.11 In another, A promised an annuity to B, in consideration that B would pay certain debts to X. It was held that no consideration for A's promise existed.12 The statement, so frequently made, that B's performance of his contract with X is consideration for A's promise to B at English law, seems to lack authority in the adjudicated cases.
8 Dugan v. Gittings, 3 Gill (Md.) 138; Waters v. Howard, 8 Gill (Md.) 262; De Cicco v. Schweizer, 221 N. Y. 431, L. R. A. 1918E, 1004, 117 N. E. 807; Caborne v. Godfrey, 3 Desauss. (S. Car. 514; Argenbright v. Campbell, 13,
Va. (3 Hen. & Munf.) 144; Chichester v. Vass, 15 Va. (1 Munf.) 98.
See also Arnold v. Estis, 92 N. Car. 162.
9 De Ciceo v. Schweizer, 221 N. Y. 431, 117 N. E. 807.
10Scotson v. Pegg, 6 Hurl. & N. 295.
Of the cases decided in the United States, which can be claimed to support the opposite rule,13 by far the greater number do not involve this question at all, as some substantial consideration was present over and above the performance of the contract with the third party. In some cases the contract between B and X is not enforceable, and B is not bound to perform.14 A's promise to B to pay additional compensation on consideration that B will continue performance of a construction contract with X, after X, by his default, has discharged B, is supported by sufficient consideration.15 Performance by a contractor and the city of a contract for regrad-ing & street, after it is found that the assessments levied therefor are invalid, is consideration for a promise by the property owners to pay such assessments, the contractor not being bound to perform if the assessments were invalid, and if no fund could be raised for paying him under the contract.16 B agreed with X, a contractor, to plaster a house. On learning that X was probably insolvent, B refused to perform unless A, a prospective son-in-law of the owner, promised to pay X for such work. It was held that there was consideration for A's promise.17 B's payment of taxes which were a.lien upon real property owned by B, but were not her personal debt, was consideration for a promise by A, who held a mortgage upon such realty, to relinquish a part of the mortgage debt18 In other cases, B is to do something as consideration for A's promise, which he is not bound to do under his contract with X. A.'s promise to B, who was liable as indorser upon notes given by Y to A, on some of which judgment had been rendered, and some of which were not yet due, that on consideration that B would advance one thousand dollars towards paying such notes, A would cause one thousand dollars to be raised on such judgments, and paid to B, had sufficient consideration.19 If X has employed B as attorney in certain litigation, and A, a corporation of which X is president, subsequently retains him in the same litigation to render the same services, B may recover reasonable compensation from A, A's interests being much greater than X's, and B becoming liable to a greater extent for breach of duty.20 In other cases, as between A and B, A is the person who owes performance to X primarily, though as between B and X, B is primarily liable. In such cases, A's promise to B to induce B to perform in place of A, is supported by consideration. A's promise to pay to B six hundred dollars on consideration that B would pay to X a debt for which A was liable as principal, and B as surety, is enforceable.21 A was a stockholder in the corporation Y. Y was indebted to X on a note upon which B was surety. When such note became, due, Y was unable to pay it, and A gave his own note to B, on consideration that B would pay to X the debt on which Y was primarily liable. Such note was held to have sufficient consideration. The court suggests that X and B may have been willing to delay performance and that this may be the consideration; but it concludes by holding that any performance by B of any contract with X, is consideration for A's promise.22 It was not necessary to go so far to uphold this contract. The Y company was primarily liable upon the note. B, as against Y, had a right to compel Y to pay it in the first instance, or to enforce exoneration if B were compelled to pay it. These rights B gave up apparently and agreed to wait till the maturity of A's note, though on this point the statement of facts is incomplete. While A was a different legal person from the Y Company, he was director and stockholder therein, and creditor thereof; and his promise was primarily for
11 Westbie v. Cockaine, 1 Viner Abr. 312, pl. 36.
12Jones v. Waite, 5 Bing. N. C. 341.
13 Abbott v. Doane, 163 Mass. 433, 47 Am. St. Rep. 465, 34 L. R. A. 33, 40 N. E. 197; Wilhelm v. Voss, 118 Mich. 106, 76 N. W. 308; Grant v. Du-luth, Missabe & N. Ry., 61 Minn. 395, 63 N. W. 1026; Green v. Kelley, 64 Vt. 309, 24 Atl. 133.
14 Grant v. Duluth Missabe & N. Ry. Co., 61 Minn. 395, 63 N. W. 1026; Gerard v. Seattle, 73 Wash. 519, 132 Pac. 227.
15 Grant v. Duluth, Missabe & N. Ry. Co., 61 Minn. 395, 63 N. W. 1026.
16Gerard v. Seattle, 73 Wash. 519, 132 Pac. 227.
17Wilhelm v. Voss, 118 Mich. 106, 76 N. W. 308.
18Day v. Gardner, 42 N. J. Eq. 199, 7 Atl. 365.
19L'Amoreux v. Gould, 7 N. Y. 349.
20 Humes v. Decatur Land Imp. & Furnace Co., 98 Ala. 461, 13 So. 368.
21 Green v. Kelley, 64 Vt. 309, 24 Atl. 133.
22 Abbott v. Doane, 163 Mass. 433, 47 Am. St. Rep. 465, 34 L. R. A. 33, 40 N. E. 197, the purpose of protecting the Y Company and not merely to secure the performance of B's obligation to X.
Defective statements of fact make it difficult to see whether some of the cases which appear to involve this question really do so. A promise by A to sell to his employe, B, a certain number of shares of stock in the business, to be paid for out of the profits of the business, A reserving the right to repurchase such stock if B should leave such employment, has been held to be valid, and to rest "upon the adequate consideration of services to be rendered in the future."23
There is, however, some authority which supports the rule that B's performance of his contract with X is a consideration for A's promise to B. B had agreed to sell goods to X on credit. B refused to deliver them unless A and D would guarantee the payment of the purchase price. A and D guaranteed such payment on consideration that B would deliver such goods to X. It was held that A's and D's guaranty was supported by sufficient consideration.24
Whatever the rule between the parties to the original contract, if they both acquiesce in the refusal to perform as a final discharge, a third party who becomes security thereafter for one party, to induce the adversary party to perform, can not allege that no consideration exists.25 X had borrowed money of B for four months, under a written contract giving to X the right of renewal for a period not to exceed fifteen months. At the end of four months, C, the agent of X, offered to B, X's renewal note. B claimed that the written contract gave him the right to demand additional security, and refused to renew unless such additional security were furnished. C was ignorant of the contents of the written contract, and to obtain a renewal of the note C requested A to sign as surety. A did so to induce B to renew. It was held that consideration for A's promise existed on the theory that X had, by his subsequent ratification of C's unauthorized act, waived the obligation of the former contract.26 The only trouble in applying the theory of rescission to this case is that the voluntary rescission by X and B is purely fictitious, and that X obtains as a result of A's promise just what he was entitled to under his original contract with B.
24Hirsch v. Chicago Carpet Co., 82 III. App. 234. (In this case X was a corporation and A and D were its chief officers. Considerable stress was laid on this point. Four years later the Supreme Court of Illinois decided the .same general question the other way without referring to Hirsch v. Chicago Carpet Co., 82 111. App. 234. See Havana Press Drill Co. v. Ashhurst, 148 111. 115, 35 N. E. 8735)
25Bank v. Ryan, 67 0. S. 448, 66 N, E. 526.