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 claim is asserted by one who is acting in good faith the question of the sufficiency of such good faith alone or the necessity of some elements of apparent merit in the claim is occasionally raised. In most of the cases the dispute is one in which each party is acting in good faith and in which the position which is taken by each party is one which a reasonable man might take. The difficulty which is sometimes here involved is one which is rarely presented to the court for actual adjudication and upon which the obiters are frequently inconsistent. The dispute may be one in which one of the parties is acting in good faith and actually believes that the claim which he is asserting is a righteous one and yet his belief may be one which a reasonable and prudent man would not entertain under the circumstances. The question of the precise degree of doubt or uncertainty necessary to authorize the application of the principles of compromise has given the courts a great deal of trouble, especially in their attempts to state such degree in abstract terms. It has been held that an averment that a claim was "in dispute" is insufficient. The averment should be that the claim was "doubtful,"1 and such averment is sufficient.2 It has been said to be sufficient if the claim is doubtful, without indicating always to whom it must appear doubtful.3 It has, again, been said to be sufficient if the parties consider it doubtful.4 This form of the rule is practically the same as the rule that it is sufficient if a bona fide dispute exists.
5 Singleton v. Thomas, 73 Ala. 205; Norton v. Clayton Hardware Co., 149 Ala. 248, 43 So. 185.
6 Pomeroy v. Prescott, 106 Me. 401, 76 Atl. 898.
7 Moore v. Maryland Casualty Co., 150 N. Car. 153, 24 L. R. A. (N.S.) 211, 63 S. E. 675.
8 Nicholson v. Neary, 77 Wash. 294, 137 Pac. 492.
9 See Sec. 596.
See also, Decker v. Smith, 88 N. J. L. 630, 96 Atl. 915.
10 Gaar, Scott & Co. v. Vanhook, 162 Ky. 332, 172 S. W. 680.
In some jurisdictions it has been said that the good faith of the parties to a contract of compromise is the sole test, and that if a claim is asserted in good faith, a compromise of such claim is supported by a sufficient consideration.5 It is said that if the claim is not frivolous and vexatious, the compromise of such claim is a sufficient consideration.6 The fact that one of these claims is not really doubtful,7 or that there is no solid foundation for the assertion of such claim,8 does not render the compromise invalid.
1 Emmittsburg R. R. v. Donoghue, 67 Md. 383, 1 Am. St. Rep. 396, 10 Atl. 233.
2Sellars v. Jones, 164 Ky. 458, 175 S. W. 1002.
3Hutchinson v. Mt. Vernon Water & Power Co., 49 Wash. 469, 95 Pac. 1023.
4 Belt v. Lazenby, 126 Ga. 767, 56 S. E. 81; Gering v. School District, 76 Neb. 219, 107 N. W. 250.
5 Ripy Bros. Distilling Co. v. Lillard, 149 Ky. 726, 149 S. W. 1009; Prout v. Pittsfield Fire District, 154 Mass. 450, 28 N. E. 679 [distinguishing, Palfrey v. Portland S. & P. Ry., 86 Mass. (4 All.) 55, as a case in which no claim existed]; Blount v. Wheeler, 199 Mass. 330, 85 N. E. 477 [sub nomine, Blount v. Dillaway, 17 L. R. A. (N.S.) 1036]; Bellows v. Sowles, 55 Vt. 391, 45 Am. Rep. 621. (The question of his good faith and of the existence of reasonable grounds seem to be regarded as identical.)
6 Miles v. New Zealand Alford Estate Co., L. R. 32 Ch. Div. 266; Cook v. Wright, 1 Best & S. 559; Callisher v. Bischoffaheim, L. R. 5 Q. B. 449; Prout v. Pittsfield Fire District, 154 Mass. 450, 28 N. E. 679 [distinguishing, Palfrey v. Portland S. & P. Ry., 86 Mass. (4 All.) 55]; Kennedy v. Welch, 196 Mass. 592, 83 N. E. 11; Blount v. Wheeler, 199 Maes. 330, 85 N. E. 477 [sub nomine, Blount V. Dillaway, 17 L. R. A. (N.S.) 1036].