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.
It is hard to build up an affirmative proposition from negative precedents. Was a consideration essential to every simple executory contract, or were there some types of such contract enforceable without consideration? The controversy centered about the contract in writing, for reasons primarily growing out of the law of procedure and out of the law of pleading, and not of substantive law. The bill of exchange was governed by the law-merchant which at the outset was the custom of merchants; fact rather than law. What form of action should be used in the case of the bill of exchange was a troublesome question. In Oaste v. Taylor,1 assumpsit was resorted to in an action by the drawee against the acceptor, the only question raised being whether the declaration should not allege that defendant was a merchant at the time of the bill accepted, since he was held on his acceptance "secundum usum mercatorum.,,2 The later view tended to the theory that a special action on the case based on the custom of merchants was the proper action, at least where the action was not between parties in privity with each other, such as drawer and payee. Indebitatus assumpsit was said to lie against the drawer as being debtor by receipt of the money, but not against the acceptor for his acceptance, was a collateral engagement.3 In Browne v. London,4 plaintiff declared on a bill of exchange against the acceptor in an action upon the case upon the custom of merchants and also upon assumpsit sur indebitat. After verdict for defendant, it was moved in arrest of judgment that assumpsit sur indebitat would not lie on a bill of exchange, but only an action on the case on the custom of merchants. This motion was sustained, one of the judges hesitating, since he conceived that the custom made it a debt for him that accepted the bill, but the majority holding that the bare acceptance of a bill was no ground of assumpsit.5 Debt did not lie against the acceptor of an inland bill of exchange in favor of the
1 See Sec. 25 et seq.
2 See Sec. 26.
3 See Sec. 26 et seq.
4 Holmes's Common Law, 284, 285.
5 Y. B. 3 Hen. VI, 36 pl. 33. See Sec. 25.
6 "Quant il duist av pur le fesance." Y. B. 3 Hen. VI, 36 pl. 33.
7 Y. B. 37 Hen. VI, 8 pl. 18.
1 Cro. Jac. 306.
2 See also, Martin v. Boure, Cro. Jac. 6.
3 Hard's Case, 1 Salk. 23.
4 Brown v. London, 1 Lev. 298,1 Vent. 152, 1 Mod. 285, 2 Keb. 695, 713, 758, 822.
5 "It seems that neither debt nor indebitatus assumpsit will lie on a bill of exchange, except when there is a privity between the parties, as between the payee and the drawer, or the drawer and the acceptor (1 Mod. Ent. 312, Kyd on Bills, 114), and between the indorsee and his immediate indorser (per Lord
Mansfield, in Kepenbower v. Tims, at N. P. Easter, 22 Geo. 3, Bailey 47); but there is no privity betweeen the indorsee and the acceptor (Hard. 485, 1 Vent. 152, Comb. 294). The modern practice of proceeding on a bill of exchange is by special action on the case, founded on the custom of merchants (1 Wils. 185, 1 Ld. Ray. 21, Kyd on Bills, 115)." Note to Browne v. London, 1 Mod. 285, 286; anonymous, Hard res, 485. (Probably Milton's Case, referred to in Browne v. London, 1 Mod. 285.) payee. Assumpsit was brought successfully by the payee of a bill of exchange against the acceptor who had accepted after maturity.6
There is nothing in these cases to show that the bill of exchange was enforceable when no value had passed. In none of the cases was want of consideration suggested, and in many its presence clearly appears. To state it from a modern point of view, a bill of exchange raised a presumption of valuable consideration and it was not necessary to plead consideration in an action thereon.7 This was very far, however, from saying that a gratuitous bill of exchange could be enforced. The consideration of a promissory note, though negotiable, or of a bill of exchange, seems to have been subject to inquiry as between the immediate parties thereto at English law,8 and such an instrument seems to have been of no effect if without valuable consideration, even if intended as a gift.
The next question raised was whether a promissory note would support an action on the case, based upon custom, without alleging consideration. In Bromwich v. Loyd,9 an action of trespass on the case on the custom of London upon a promissory note, was allowed as against the objection that the custom was unreasonable as dispensing with proof of how the amount named became due.10 In a later case, however, Holt said that "it amounted to the setting up of a new sort of specialty, unknown to the common law, and invented in Lombard Street, which attempted in these matters * * * to give laws to "Westminster Hall."11 This is usually explained as a case in which Holt was denying the negotiability of promissory notes; but the action was between the immediate parties to the note and in the count upon the note no consideration was pleaded, although from the other count in the declaration it appears that the note was given for money lent. Without any presumption of consideration in such a case, the count must have been insufficient; and such presumption was not indulged in."
6Jackson v. Pigot, 12 Mod. 212, 1 Salk. 127, Carth. 459, 1 Ld. Raym. 364.
7 See Sec. 651.
8Jefferies v. Austin, 1 Strange 674; Guichard v. Roberts, 1 W. Black. 445; Puget de Bras v. Forbes, 1 Esp. 117; Tate v. Hilbert, 2 Ves. Jr. 111; Holli-day v. Atkinson, 5 Barn & Cress. 501.
9 Bromwich v. Lloyd, 2 Lutw. 1582 (appendix). Such actions had been permitted without question. Hill v. Lewis,
1 Salk. 132; Williams v. Williams, Carth. 269. See also, Pickncy v. Hall, 1 Ld. Raym. 175.
10 Clerk v. Martin, 1 Salk. 129, 2 Ld. Raym. 757.
11 See opinion in Clerke v. Martin, 2 Ld. Raym. 757, 758. .
12Pottet v. Pearson, Holt K. B. 33, 1 Salk. 129, 2 Ld. Raym. 759 [quoting "ex niedo pacto non oritur actio"].
The fact that the real objection was the lack of consideration is best shown by the next case that arose, involving this question. It was thereupon attempted to distinguish from the earlier cases the cases where the note was given in London, and it was shown that, by the custom of London, if a merchant signed a note, promising to pay J. S. or his order, he became bound to pay it. Holt, however, held that "this custom to oblige one to pay by note, without consideration, is against law, and void."13 Evidently the court had never heard of any principle which would make written contracts enforceable without consideration. On the other hand, the delivery by A to B of a note signed by C, is sufficient consideration for B's promise to A without A's showing in his action against B that C's note was given upon consideration, since B, by his promise to A, admitted the consideration.14 The last case could be distinguished from the others by the fact that the promisor in the last case had actually received the very thing bargained for, whether it was a good financial investment or not; while in the other cases the promisor might have received nothing as far as the declaration showed. Here, again, to state the problem from our point of view, there was no presumption of consideration in a promissory note if Holt was correct in holding that it was not an instrument governed by the law-merchant. A promise by A to pay on account of his mother B, was said not to be within the Statute of Anne; and hence, no consideration for such promise is implied.15
With the law in this condition, with lack of certainty as to the proper form of action on negotiable instruments, but without any suggestion that as between the parties gratuitous negotiable instruments were enforceable, we find a statement by Blackstone to the effect that a written contract did not need a consideration.16 This statement rested upon a case17 which did not support the text, since the case did not arise between the original parties to the instrument while the text applies to the original maker; and upon several obiter by Mansfield, Wilmot, Yates and Aston, in a case in which the question was not presented, but in which it was, nevertheless, decided.18 In this case the statement that a consideration was unnecessary in a, written contract was pure obiter, since a consideration clearly existed. X had borrowed money from B, agreeing to furnish A as collateral security. B, on making the loan, wrote to A to inquire if he would accept X's bill drawn on A. A replied in the affirmative, but refused to accept the bill when it was presented, X having become insolvent in the meantime.19
14 Meredith v. Chute, 2 Ld. Raym. 759 [sub nomine, Meredith v. Short, 1 Salk. 25].
15Garnet v. Clarke, 11 Mod. 226.
16"And as this' rule (requiring consideration) was principally established to avoid the inconvenience that would arise from setting up mere verbal promises, for which no good reason could be assigned, it therefore does not hold in some cases where such promise is authentically proved by written documents. For if a man enters into a voluntary bond, or gives a promissory note, he shall not be allowed to aver the want of a consideration in order to evade the payment; for every bond from the solemnity of the instrument and every note from the subscription of the drawer, carries with it an internal evidence of a good consideration." Bl. Com. II, 445, 446 [citing Meredith v. Chute, 2 Ld. Raym. 759, supra].