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 a number of groups of cases promises have been enforced although the consideration did not move from the promisee and it did not move to the promisor. In accommodation paper no consideration moves from the payee or to the maker, and yet the maker is liable to the holder for value, even though the holder knew that it was accommodation paper when he acquired it.1 Outside of negotiable instruments, contracts of this sort are rare. A possible illustration of a case in which the consideration moved neither from nor to a party to the contract can be found in a case in which settlement and dismissal of litigation between X and Y was held to be consideration for a promise by A to B, who was X's attorney, to pay B's fees in the event of such settlement.2 A conveyance by A to B is a sufficient consideration for a promise by B's father, X, to pay a specified amount to A's child, Y.3
In subscription contracts the promise of each subscriber may be supported by the promises of the other subscribers. If the promise is made directly to the payee, the consideration, therefore, is one which does not move from the promisee and which does not inure to the promisor.4 In some of these cases the contract was probably entered into between the subscribers, and the beneficiary was not a party thereto. Cases of all these classes fall outside of the most liberal definition of consideration known to the common law.
2 Savage v. Cauthorn, 109 Va. 694, 64 S. E. 1052.
1 England. Charles v. Marsden, 1 Taunt. 224; Smith v. Knox, 3 Esp. 46.
United States. Yeaton v. Bank, 9 U. S. (5 Cranch) 49, 3 L. ed. 33.
Illinois. Huston v. Newgaas, 234 111. 285, 84 N. E. 910.
Iowa. German American Savings Bank v. Hanna, 124 la. 374, 100 N. W. 57.
New York. Davis v. Bly, 164 N. Y. 527, 79 Am. St. Rep. 670, 58 N. E. 648.
Tennessee. Tradesmen's National Bank v. Looney, 99 Tenn. 278, 63 Am. St. Rep. 830, 38 L. R. A. 837, 42 S. W. 149.
The accommodation maker is of course liable if the purchaser acquires such instrument without notice that it is an accommodation instrument. Car-ruthers v. West, 11 Q. B. 143; Meh-linger v. Harriman, 185 Mass. 245, 70 N. E. 51.
2 Van Winkle v. King, 145 Ky. 691, 141 S. W. 46. (The court finds the consideration in this case to be B's granting permission to A to go to B's clients directly to settle the case and surrendering his right to prosecute the suit.)
3 Faust v. Faust, 144 N. Car. 383, 57 S. E. 22.
4 Arizona. Hurley v. Young Men's Christian Association, 16 Ariz. 26, 52 L. R. A. (N.S.) 220, 140 Pac. 816.