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 A is indebted to C and C is indebted to B, a contract between the three whereby B releases C and C releases A and A agrees to pay to B the indebtedness originally owed by him to C is not infrequently made. This kind of contract is called a novation. The clause of the statute of frauds under discussion does not apply to it, as it is not primarily a promise by A to pay C's debt, but a promise by A to pay his own debt. Hence it is not a promise to pay the debt of "another," although the transaction has the effect of discharging C's debt to B. Furthermore, C's liability to B is discharged by the transaction and no liability of "another" remains in existence. Accordingly A does not undertake to answer for the liability of another.1
It is therefore necessary to bring a case within the principle of novation contracts that the original debtor should be released from liability. If he remains bound, the contract cannot be a novation and the statute of frauds applies.2 Thus, where B took C's note under such circumstances as not to extinguish his claim against C, and A agreed to discount C's note without recourse on B,3 or B has pledged C's claim and cannot release it,4 the contract is essentially one to answer for the debt of "another."
9Lamkin v. Palmer, 164 N. Y. 201; 58 N. E. 123; Bailey v. Marshall, 174 Pa. St. 602; 34 Atl. 326.
10 Tanquary v. Walker, 47 111. App. 451.
11 Joseph v. Smith, 39 Neb. 259; 42 Am. St. Rep. 571; 57 N. W. 1012.
1 Dillaby v. Wilcox, 60 Conn. 71; 25 Am. St. Rep. 299; 13 L. R. A. 643; 22 Atl. 491; Pratt's Appeal, 41 Conn. 191; Packer v. Benton, 35 Conn. 343; 95 Am. Dec. 246; Lind-ley v. Simpson, 45 111. App. 648; Hyatt v. Bonham, 19 Ind. App. 256; 49 N. E. 361; Fain v. Turner. 96 Ky. 634; 29 S. W. 628; Griffin v.
Cunningham, 183 Mass. 505; 67 N. E. 660; Trudeau v. Poutre. 165 Mass. 81; 42 N. E. 508; Eden v. Chaffee, 160 Mass. 225; 35 N. E. 675; Martin v. Curtis, 119 Mich. 169; 77 N. W. 690; Hummel's Estate, 55 Minn. 315; sub nomine, Haggenmiller v. Passavant, 56 N. W. 1064; Wilson v. Vass, 54 Mo. App. 221; Mallory v. Gillett, 21 N. Y. 412; Warren v. Smith, 24 Tex. 484; 76 Am. Dec. 115; First National Bank v. Border. 9 Tex. Civ. App. 670; 29 S. W. 659; Bates v. Sabin, 64 Vt. 511; 24 Atl. 1013; Putnam v. Farnham, 27 Wis. 187; 9 Am. Rep. 459.
The original debtor must assent to the contract to make it a novation. If he does not assent, he is not released, nor is his debtor; and the contract between A and B not only lacks consideration but is within the statute of frauds.5 Thus where the proposition was made to the original debtor when he was "too sick to talk " and he neither accepted nor rejected it, the contract between A and B was within the statute.6 The intention of the parties to effect a novation depends upon the construction of the contract as a whole. On the one hand a promise "to pay and guarantee" the debt of another was held to contemplate his discharge from liability.7 On the other an offer by a wife, with reference to her husband's note, "I will pay this note when it comes due "; accepted "I will take you, then, in your husband's place," was held from the entire contract not to contemplate the husband's discharge from liability thereon.8