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.
"The language in reference to the consideration in the policy in question is not contractual, but merely by way of recit-
This principle has been enacted in some jurisdictions in statutory form with reference to certain classes of contracts, such as insurance contracts.22 Under such a statute the insurer may show that the premium was not in fact paid for the purpose of recovering the premium, but he can not show that it was not in fact paid for the purpose of showing that the contract of insurance had not yet taken effect.23 al. In consideration of the warranties and agreements in the application and of $25,' is no part of the written contract, in the sense that it embodies any of the engagements or agreements of the parties. It is a mere recital of a consideration, which is always open to contradiction by parol. The recital of a given consideration is not a promise to pay it. If it were, parol evidence could not be received to contradict the recital. It has been held in many cases in this state, and is the settled law, that a recital of a given consideration may be contradicted by parol evidence for all purposes except to destroy the legal effect of the instrument. (Illinois Central Ins. Co. v. Wolf, 37 111. 354; Morris v. Tillson, 81 id. 607; Koch v. Roth, 150 id. 212.) The effect, and the only effect, of the recital in the policy is to show that the company acknowledged a valuable consideration, which is so far binding as to preclude either party from destroying the legal effect of the policy by showing that no consideration was, in fact, given. Certainly a mere recital such as the one in this policy falls far short of an expressed stipulation that the application is made a part of the policy, which, under the law, is necessary before it can be so treated. The application itself can not be considered in determining the preliminary question whether it is a part of the policy. This fact must affirmatively appear from the policy itself. It is only after it is determined, from a consideration of the language of the policy, that the two papers constitute the contract that the application can be resorted to. The application not being a part of the contract, any statements contained therein are mere representations, and not warranties. (May on Insurance, section 158.) As such, they may avoid the policy if found to be false and material within the legal meaning of these terms. The materiality of a representation is sometimes a question of law, where the statement is made in response to a direct inquiry or where by the contract the parties have settled the materiality by agreement." Spence v. Central Accident Ins. Co., 236 111. 444, 19 L. R. A. (N.S.) 88, 86 N. E. 104.
Contra, Equitable Fire & Accident Office v. Ching Wo Hong , A. C. 96; Christopherson v. Metropolitan Life Insurance Co., 199 Mich. 634, 165 N. W. 793; Sheldon v. Atlantic Fire & Marine Insurance Co., 26 N. Y. 460, 84 Am. Dec. 213.
22 Harrington v. Mutual Life Insurance Co., 21 N. D. 447, 34 L. R. A. (N.S.) 373, 131 N. W. 246; Donahue v. Mutual Life Insurance Co., 37 N. D. 203, L. R. A. 1918A, 300, 164 N. W. 50.
23 Palmer v. Continental Insurance Co., 132 Cal. 68, 64 Pac. 97; Peever Mercantile Co. v. State Mutual Fire Association, 23 S. D. 1, 19 Am. & Eng. Ann. Cas. 1236, 119 N. W. 1008 [same result on rehearing, 25 S. D. 406, 127 N. W. 559]; Harrington v. Mutual Life Insurance Co., 21 N. D. 447, 34 L. R. A. (N.S.) 373, 131 N. W. 246; Donahue v. Mutual Life Insurance Co., 37 N. D. 203, L. R. A. 1918A, 300, 164 N. W. 50.
If a simple executory contract contains the recital of a consideration as a fact, and the parties did not intend that such consideration should be paid, but inserted such recital for the purpose of making a gratuitous promise operative in law if possible, the weight of authority is that such recital of a consideration may be contradicted for the purpose of showing that such apparent contract was in reality a gratuitous, unenforceable promise.24 Such a recital as "for value received,"25 or "one dollar,"26 or "one dollar and other valuable considerations," 27 may be contradicted for the purpose of showing that the promise was without consideration, although it is said that such evidence should be clear and convincing, inasmuch as the writing itself imports a consideration.28 The recital of a consideration, such as one dollar in an option to purchase realty, may be contradicted for the purpose of showing that such offer was not for value.29 A recital of a consideration such as "one dollar and other valuable considerations." in a contract of guaranty, may be contradicted for the purpose of showing that such promise was gratuitous.30 A recital of a valuable consideration in a negotiable instrument may be contradicted for the purpose of showing that the promise was without valuable consideration,31 as long as such negotiable instrument has not been transferred to a bona fide holder,32 or to one who has paid value therefor in reliance upon the obligation of an accommodation party. The recital of a valuable consideration in a negotiable instrument may be contradicted for the purpose of showing a partial want of consideration.33 An indorsement may be shown to have been without valuable consideration.34 A recital of consideration in a note and mortgage may be contradicted.35 A recital that A owns an interest in certain realty which B agrees to purchase, may be contradicted by showing that A did not own such an interest and that the real transaction contemplated a gift.36