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.
In case 2, the consideration may consist of a legal right which A acquires from a third person, X, and which B does not give up to A. Whether a consideration moving from X can support a promise by A to B, is a question upon which, in obiter at least, there has long been a division of judicial authority proposition that the consideration must move from the promisee. The result in each case would have been the same if the courts had begun by laying down the opposite rule.
In the English text-books on contract law, it has frequently been laid down in varying terms that the consideration must move from the promisee.1 An examination of the authorities relied upon, as well as of the general discussion in the text, shows, however, that Chitty really had in mind an action by a beneficiary who was neither a party to the contract nor to the consideration. While the standard definition of consideration is quoted in Pollock on Contracts,2 he also adds as his own definition: "An act or forbearance of the one party, or the promise thereof, is the price for which the promise of the other is bought, and the promise thus given for value is enforceable,"3 and this definition has been regarded in a recent decision as equivalent to denying the sufficiency of a consideration which moves from a third person.4 In Leake on Contracts,5 a qualified and more rational statement of the rule is given: "It is further laid down as a rule that 'the consideration in all cases must move from the promisee.' The meaning of this rule seems to be that the matter of the consideration must be given, done or suffered by the promisee himself, or, if by a third party, at the request and by the procurement of the promisee, and as the agreed equivalent for the promise; and, with this meaning, the rule seems to import no more than is necessarily implied in the conception of a consideration as an essential part of the agreement. If the consideration moves from a third party without the request or procurement of the promisee, the contract, if any, must be made with the third party, and the promisee could acquire no right in his own person." This explanation, however, ignores the case which undoubtedly might arise where the promisor made the contract with the promisee conditioned upon the receipt of the value from a third person, and such third person, upon learning of such promise from the promisor, delivered such valuable consideration to the promisor. If we explain this case by saying that the contract is really one between the promisor and the third person, we are resorting to a fiction in order to avoid an undoubted difficulty. The English cases will be considered before the American cases as it is the statements there found, which have given currency to the theory that the consideration can move only from the promisee, and which have been repeated in the English text-books.6 An analysis of the cases in which this view has been expressed, shows that they are for the most part either (a) cases in which A made a promise to B, from whom the consideration moved, for the benefit of X, who was not at the time a party to such contract, but who seeks to enforce it subsequently on the theory that it was made for his benefit;7 or (b) cases in which there was no consideration from anyone.8 An illustration of class (a) is to be found where B agreed to make title to a house to A, and in consideration thereof, A agreed with B to pay to X seventy pounds, which B owned, to X. X was not a party to the contract originally, but subsequently he brought suit on it on the theory that it was made for his benefit. He was not allowed to maintain such action, the reason assigned being that he was a stranger to the consideration.9 Another example is found where B filed a declaration in which he alleged that X owed B thirteen pounds, that X had agreed to work for A, and that in consideration thereof, A had agreed to pay to B such thirteen pounds. The declaration did not. allege to whom A's promise was made, and it was held that B could not recover under such declaration, even with a verdict in his favor. Under the declaration he might not have been a party to the contract.10 An illustration of class (b) is found in a promise by A to B, based on A's prior legal liability to B, but leaving such prior liability still in force.11 Cases of these two classes do not really support the
1 Chitty on Contracts (Second Edition, 1834), Sec. 46 et seq. Chitty on Contracts (Seventeenth Edition), Sec. 38 et seq.
2 Pollock on Contracts (Eighth Edition). 175, quoting Currie v. Misa, L. R. 10 Ex. 153 (162).
3 Pollock on Contracts (Eighth Edition), 175.
4Dunlop Pneumatic Tyre Co., Ltd., v. Selfridge , A. C. 847.
5 Leake on Contracts (Sixth Edition), 439.
6Thomas v. Thomas, 2 Q. B. 851; Smart v. Chell, 7 Dowl. Pr. 781. "The declaration can not be supported, as it does not show any consideration for the promise moving from the plaintiff to the defendant." Price v. Easton, 4 Barn. & Ad. 433. "The consideration must move from the party entitled to sue upon the contract." Tweddle v. Atkinson, 1 B. & S. 393.
7 Tweddle v. Atkinson, 1 Best & Smith 393; M'Coulray v. Thomson, Ir.
R. 2 C. L. 226. English authorities deny B's right to enforce such promise, while the American authorities generally recognize it. See ch. LXXI1I.
8Smart v. Chell, 7 Dowl. Pr. 781.
9Crow v. Rogers, 1 Strange 592.
10 Price v. Easton, 4 B. & Ad. 433,
1 N. & M. 303. (Said here to be the same kind of a case as 1 Strange 592 supra.) For a similar case see M'Coulray v. Thomson, Ir. R. 2 C. L. 226.
11 Smart v. Chell, 7 Dowl. Pr. 781.
If, on the other hand, the contract between A and B provides that the consideration for A's promise "to B is to be furnished by X, and X assents thereto, no difficulty has been found, even by the English courts, in holding that such consideration is sufficient to support A's promise.12 Thus in a recent case A had agreed with a bank, B, that if A would give security for a thousand pounds he would be allowed to overdraw to that amount. A then made an arrangement with X, by which X was to advance a thousand pounds to A in the form of security furnished by X to B, to secure A's prospective overdrafts. B and X then agreed that X should deposit a storage receipt for sheep instead of cash. A then bought sheep and gave checks upon the bank B against such additional credit. B, however, applied the proceeds of X's deposit to a prior overdraft of A's, and dishonored A's checks. It was held that the contract between A and B was supported by a sufficient consideration. X's act in making this deposit was spoken of as an act of agency on behalf of A. The funds thus deposited were not furnished by A, however, but by X, and when X furnished. them, A became indebted to X for such amount.13 B and X dissolved partnership. B gave X a bill for the balance supposed to be due from B to X. X endorsed to A, who advanced a part of the amount of the bill. A and X then agreed to raise an additional amount upon such bill for the use of A, to whom X owed more than the entire amount of the bill. B and X then found that the bill was drawn for an excessive amount. A, B and X agreed that A should surrender the bill, that B and X should arbitrate the amount, and that B should give a bill for the true amount. The arbitrators found that the first bill was too large by some three hundred pounds. A refused to surrender the original bilL It was held that the promise to give the second bill was a benefit to X, and that a sufficient consideration for A's promise to surrender the original bill existed.14 At the prosecution of A and others as church wardens, B was excommunicated for not paying a tax for the repair of the church. B promised to pay such tax to A in consideration that the bishop would absolve B. It was held that this was sufficient consideration, but on the ground that the bishop must have absolved B at the instance of A.15