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.
If the contract between A and B is one by the terms of which B is to pay a certain sum of money to A, there is much greater unanimity of opinion among the different jurisdictions than there is in contracts for the performance of some act other than the payment of money; and while there is some dissent even here, the weight of authority for holding that B's payment of part or all of an undisputed liquidated debt, which he owes to A, is not a consideration for A's promise to induce B to make such payment, is much greater than it is in cases in which B's obligation is to do something other than paying money.1 Why such distinction should have been made by any courts where the question of the adequacy of the consideration is not involved,2 it is difficult to see; but it will be observed from a comparison of the cases cited, that in most of the jurisdictions in which B's performance of a prior contract is regarded as a consideration for A's promise to induce such performance where B's act is something other than the payment of money,3 B's payment of money in accordance with the terms of a prior valid contract is not consideration for A's promise to induce such payment where neither the existence nor the amount of the debt is in dispute.
The transaction between A and B may have resulted in any one of these several different classes of indebtedness, and the sufficiency of the payment of a part of such indebtedness as a consideration for a promise, such as a promise by the creditor to accept such payment in satisfaction of the entire indebtedness, depends upon which class of debt is involved. The transaction may result in a debt which is fixed and liquidated in amount, as to which there is no dispute either as to the existence or extent of the liability, and which is not evidenced by a negotiable instrument. In such case, the payment of part in satisfaction of the entire debt may be made in strict accordance with the terms of the original contract, except that a less amount is paid than is actually due; or the method of payment under the new agreement may vary from the method prescribed by the terms of the original contract; or when such partial payment is made, the creditor may give a sealed release of the original debt. In other cases, we find that the debt is evidenced by a negotiable instrument which is surrendered by the holder thereof to the debtor when such partial payment is made. In other cases, we find that the original indebtedness was not liquidated; or that there is a dispute between the parties as to the existence of the debt, or as to the amount of the debt, or as to both the existence and amount.
26 Merchants' Nat'l Bank v. Ryan, 67 0. S. 448, 66 N. E. 526. 1 See Sec. 589 et seq.
2 See Sec. 635 et seq. 3 See Sec. 589 et seq.
Since a creditor has a legal right to the payment of a debt which is due to him, the payment of a fixed and liquidated debt which is undisputed, and which is made by the debtor, and in strict accordance with the provisions of the original contract, according to the nature of such obligation, gives to the creditor only that to which he is entitled under such original contract, and in making such payments the debtor parts with nothing more than he was bound to pay under the terms of the original contract. If the payment is a part of the original debt, the debtor pays less than he was bound to pay, and the creditor receives less than he was entitled to receive. In either case, such payment can not be regarded as consideration for a promise which is made in consideration of such payment,4 in jurisdictions in which the term "consideration" means that the promisee has given up some legal right which he was not otherwise legally bound to give up, or that the promisor has received some legal right to which he was not otherwise entitled. It follows from an application of this principle that full payment of money due is no consideration for a promise to extend time of payment of another debt,5 or to discharge another debt,6 even if such other debt is unliquidated,7 or in dispute;8 nor is such payment consideration for a promise to release a lien,9 nor for a collateral promise;10 nor is part payment of a debt according to the terms of the obligation consideration for a promise to extend the time of payment of the rest of such debt;11 nor for a promise to pay to B or her executors a debt which was originally payable to B, only in case B survived;12 nor for a promise by a third person,13
4 England. Lynn v. Bruce, 2 H. Bl. 317.
Alabama. Abercrombie v. Goode, 187 Ala. 310, 65 So. 816.
Arizona. State v. Gregg, 18 Ariz. 121, 157 Pac. 227.
Colorado.. Weber v. Head Camp, Pacific Jurisdiction, 60 Colo. 529, 154 Pac. 728.
Florida. Jordy v. Maxwell, 62 Fla. 236, 56 So. 046.
Illinois. Phoenix Ins. Co. v. Rink, 110 I11. 538.
Indiana. Davis Stout, 126 Ind.
12, 22 Am. St. Rep. 565, 25 N. E. 862; Beaver v. Pulp, 136 Ind. 595, 36 N. E. 418; Driscoll v. Sullivan, 186 Ind. 178, 115 N. E. 331.
Iowa. Myers v. Byington, 34 Ia. 205; Works v. Hershey, 35 Ia. 340; Rea v. Owens, 37 Ia. 262; Bryan v. Brazil, 52 Ia. 350, 3 N. W.117; Early v. Burt, 68 Ia. 716, 28 N. W. 35; Barr v. Clinton Bridge Works, 179 Ia. 702, 161 N. W. 695.
Kentucky. Watts v. Parks (Ky.), 78 S. W. 1125; Roberts v. Barnum, 80 Ky. 28.
Massachusetts. Warren v. Hodge, 121 Mass. 106.
Michigan. Leeson v. Anderson, 99 Mich. 247, 41 Am. St. Rep. 597, 58 X. W. 72.
Minnesota. Foster County State Bank v. Lammers, 117 Minn. 94, 134 N. W. 501.
Missouri. Walz v. Parker, 134 Mo. 458, 35 S. W. 11497
Nebraska. Baldwin Investment Co. v. Bailey, 45 Neb. 580, 63 N. W. 847; Sherman County v. Nichols, 65 Neb. 250, 91 N. W. 198.
hew Jersey. Isham v. Therasson, 53 N. J. Eq. 10, 30 Atl. 969; Snyder v. Ins. Co., 59 N. J. L. 69, 34 Atl. 945.
Oklahoma. Sherman v. Pacific Coast Pipe Co. (Okla.), L. R. A. 1917A, 716, 159 Pac. 333.
Oregon. Schumacher v. Moffitt, 71 Or. 79, 142 Pac. 353.
Pennsylvania. Tustin v. Phila. & Reading Coal & Iron Co., 250 Pa. St. 425, 95 Atl. 595.
South Carolina. Parker v. Mayes, 85 S. Car. 419, 137 Am. St. Rep. 912, 67 S. E. 559.
Tennessee. Sully v. Childress, 106 Tenn. 109, 82 Am. St. Rep. 875, 60 S. W. 499.
Utah. Smoot v. Checketts, 41 Utah 211, Ann. Cas. 1915C, 1113, 125 Pac. 412.
Washington. Sanford v. Ins. Co., 11 Wash. 653, 40 Pac. 609.
5 Minnesota. Thysell v. Holm, 124 Minn. 541, 145 N. W. 164.
Missouri. Walz v. Parker, 134 Mo. 458, 35 S. W. 1149.
Nebraska. Baldwin Investment Co. v. Bailey, 45 Neb. 580, 63 N. W. 847.
Texas. Helms v. Crane, 4 Tex. Civ. App. 89, 23 S. W. 392; Krueger v. Klinger, 10 Tex. Civ. App. 576, 30 S. W. 1087.
Vermont Pomeroy v. Slade, 16 Vt. 220.
6 Driscoll v. Sullivan, 186 Ind. 178, 115 N. E. 331; Barr v. Clinton Bridge Works, 179 la. 702, 161 N. W. 695.
7 Driscoll v. Sullivan, 186 Ind. 178, 115 N. E. 331.
8Barr v. Clinton Bridge Works, 179 Ia. 709, 161 N. W. 695.
9 Watts v. Parker (Ky.), 78 S. W. 1125.
10 Tucker v. Bartle, 85 Mo. 114.
11 Indiana. Davis v. Stout, 126 Ind. 12, 22 Am. St. Rep. 565, 25 N. E. 862.
Iowa. O. S. Kelly Co. v. Chinn (Ia.), 75 N. W. 315.
New York. Parmelee v. Thompson, 45 N. Y. 58, 6 Am. Rep. 33.
Ohio. Turnbull v. Brock, 31 O. S. 649.
Oklahoma. Maker v. Taft, 41 Okla. 663, 52 L. R. A. (N.S.) 328, 139 Pac. 970.
Texas. Henderson v. Brooks (Tex. Civ. App.), 54 S. W. 305.
12 Bedford v. Chandler, 81 Vt. 270, 17 L. R. A. (N.S.) 1239, 130 Am. St. Rep. 1057, 69 Atl. 874.
13 Trustees v. Stewart, 1 N. Y. 581; Sherwin v. Brigham, 39 O. S. 137; Johnson v. University, 41 O. S. 527.
as for a promise by a third person to pay such sum to" the debtor in consideration of the debtor's paying such debt to his creditor;14 nor for a promise by the creditor to pay a debt due from his debtor to a third person;15 nor is a promise to pay costs due from one person to another a consideration for a release of other liabil-ities by the payee.16 If an assignment is valid, payment to an assignee is no consideration for a promise by such assignee or by the assignor.17 If the directors of a corporation have entered into a valid contract between themselves, to pay the debts of the corporation in certain proportions, a subsequent contract whereby one of such directors agrees to pay an amount less than that due under the original contract, while another director, in consideration thereof, is to pay an amount larger than the amount due from him under such original contract, is unenforceable as lacking consideration.18