This section is from the book "A Treatise On The Construction Of The Statute Of Frauds", by Causten Browne. Also available from Amazon: A treatise on the construction of the Statute of frauds.
1 Couturier v. Hastie, 8 Exch. 56. See this case commented upon by Wood, V. C, in Wickham v. Wickham, 2 Kay & J. 478; Sherwood v. Stone, 14 N. Y. 267. See Sutton v. Grey, L. R. 1 Q B. D. 1894, 285.
2 Wolff v. Koppel, 5 Hill 460. See also Swan v. Nesmith, 7 Pick. (Mass.) 220; Bradley v. Richardson, 23 Vt. 720; Suman v. Inman, 6 Mo. App. 384; Guggenheim v. Rosenfeld, 9 Baxter (Tenn.) 553. These cases of del credere factors' guaranties may be regarded as analogous to cases of sales by defendant to plaintiff of a third party's obligation to the defendant, accompanied by his guaranty that the obligation shall be worth to the plaintiff what it is accepted as worth (ante, § 165). The factor undertakes that his sales purporting to be worth a certain amount shall be worth that amount to his principal.
3 Evans v. Duncan, 1 Tyrw. 283; on the authority of Senior v. Butt, Hil. T. 1827, in the King's Bench.
1 It must be confessed that this view has been recognized by the Supreme Court of the United States. In Emerson v. Slater, 22 How. 28, the plaintiff had been employed by a railroad company to build certain bridges on their line, and the company failing to make its monthly payments as agreed, the plaintiff refused to go on. The defendant was a large stockholder in the road, and had leased to the company railroad iron to the value of sixty-eight thousand dollars, and, as a security for payment, held an assignment of the proceeds of the road to that amount, with interest, which was to be paid in monthly instalments of five thousand dollars. Unless the bridges were completed there could be no proceeds, and the company could not pay for the iron. The defendant orally promised to pay the plaintiff if he would go on and complete the bridges; and, to secure him from any loss on such engagement, he took from the company securities consisting of real estate and the company's bonds secured by the mortgage on the road, to an amount deemed by the company and himself sufficient to indemnify. The company itself was insolvent. The court held, that the defendant's promise was not within the statute. They say:" Whenever the main purpose and object of the promisor is not to answer for another, but to subserve some pecuniary or business purpose of his own, involving either a benefit to himself, or damage to the other contracting party, his promise is not within the statute, although it may be in form a promise to pay the debt of another, and although the performance of it may incidentally have the effect of extinguishing that liability." And so again in Davis v. Patrick, 141 U. S. 479, where the facts were not materially different, it was held that the Statute of Frauds did not apply. The court cite and quote from Emerson v. Slater, and add, "There is a marked difference between a promise which, without any interest in the subject matter of the promise in the promisor, is purely collateral to the obligation of a third party, and that which though operating upon the debt of a third party, is also and mainly for the benefit of the promisor. The case before us is in the latter category." (See also Elkins v. Timlin, 151 Pa. St. 491, and cases cited; Walther v. Merrell, 6 Mo. App. 370.) Some expressions used by Chief Justice Shaw in the opinion on Nelson v. Boynton, 3 Met. (Mass.) 396, are frequently quoted in support of decisions holding the statute to be inapplicable where the defendant's "leading object " was to obtain an advantage to himself. (See among others Patton v. Mills, 21 Kansas 163; Kansas City Co. v. Smith, 36 Mo. App. 608.) But the contract before the court in Nelson v. Boynton was held to be within the statute; and rightly so, as the lien which the plaintiff relinquished did not enure to the defendant's benefit.
1 Williams's Saunders, 232; Birchell v. Neaster, 36 Ohio St. 331, passed." To the same effect is a very able judgment of the Supreme Court of Vermont,1 not to speak of many other well-considered cases decided earlier, and which are referred to in the text.
2 Maule v. Bucknell, 50 Pa. St. 39.
§ 214 a. It is not the motive of the promisor nor the nature of the consideration for his promise, but the substance of the transaction between him and the promisee, that must be regarded in determining whether the promise is within the statute. If the defendant come under an obligation to pay the amount of the debt, independently of any contract of guaranty, his promise to pay it, although expressed as a guaranty or an agreement to answer for the debt of another, is binding without writing.2 The substance of the transaction to pay his own debt, is not required to be in writing.1 And the cases show that the rule holds, whether the debt of the defendant to the third party was an old debt, or was incurred at the same time, and as part of the same transaction, with his agreement to pay to the plaintiff. The mere fact that the defendant has received property from the third party does not take his promise out of the statute; it must appear that he incurred a debt thereby; and not only so, but there must be an agreement that the amount of that debt shall be paid to the plaintiff; - a purchase or acquisition by defendants from plaintiff by reason of the promise of some property or benefit to themselves, such as would show the promise to be a new promise by defendants to pay a debt of their own fairly contracted in such purchase or acquisition.2
1 Fullam v. Adams, 37 Vt 391.
2 Elson v. Spraker, 100 Ind. 374; Board of Commissioners v. Cincinnati Co., 128 Ind. 240; Emerson v. Slater, 22 How. (U. S.) 28; Preston v. Young, 46 Mich. 103; Davis v. Patrick, 141 U. S. 479.
To state it more exactly, if the circumstances of the transaction, which include the defendant's undertaking to pay the third party's debt, are such as to raise an intlependent legal obligation on the part of the defendant to pay that amount to the plaintiff, the fact of debt by the third party being material to the transaction only as ascertaining the amount to be so paid by the defendant, the statute does not apply. In a late case in the New York Court of Appeals (White v. Rentoul, 108 N. Y. 222) there is a valuable discussion of New York cases since Leonard v. Vredenburgh. Brown v. Webber, 38 N. Y. 187; Mallory v. Gillett, 21 N. Y. 412; Ackley v. Parmenter, 98 N. Y. 425. The opinion, which was unanimous, declares that the rule stated in Leonard v. Vredenburgh. that any new and original consideration moving between the parties to the contract of guaranty took it out of the statute, was " dangerously broad and capable of grave misapprehension;" that succeeding cases had imposed upon it the necessary limitations; and that the result had been the establishment of the rule (which the court adopts and applies to the case before them) that "when the primary debt subsists and was antecedently contracted, the promise to pay it is original when it is founded on a new consideration moving to the promisor and beneficial to him, and such that the promisor thereby comes under an independent duty of payment irrespective of the liability of the principal debtor." This is sound doctrine, and its recognition by such high authority should tend strongly to settle the law. On the other hand, the decision of the Supreme Court of the United States in Davis v. Patrick, 141 U. S. 479, is undertaking to pay his own debt in a particular way. But where the original party remains liable, and there is no liability on the part of the guarantor or his property except such as arises from his express promise, the statute applies.1 It is not within the ability of the author to reconcile all the decisions under this most intricate head of the subject; but it is believed that the principle above stated (which is but repeated from the previous editions of this work) will, when carefully applied, be found upon the whole satisfactory.