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COMMERCIAL LAW. No. 3.

THE CONSIDERATION FOR AN AGREEMENT.

OF THE NEED OF A CONSIDERATION.

Ir is an ancient and well-established rule of the common law of England and of this country, that no promise can be enforced at law, unless it rests upon a consideration. If it do not, it is called a nudum pactum, by which words are meant a naked bargain, or, as it is sometimes called, in English words made out of the Latin, a nude pact; and the promisor, even if he admits his promise, is under no legal obligation to perform it.

There are two exceptions to this rule. One is when the promise is made by a sealed instrument, or deed; (every written instrument which is sealed is a deed.) Here the law is said to imply a consideration; the meaning of which is that it does not require that any consideration should be proved. The seal itself is said to be a consideration, or to import a consideration.

The second exception relates to negotiable paper; and is an instance in which the law-merchant has materially qualified the common law. We shall speak more fully of this exception when we treat of negotiable paper. The word "consideration," as it is used in this rule, has a peculiar and technical meaning. It denotes some substantial cause for the promise. This cause must be one of two things; either a benefit to the promisor, or else an injury or loss to the promisee sustained by him at the instance and request of the promisor. Thus, if A promises B to pay him a thousand dollars in three months, and even promises this in writing, the promise is worthless in law, if A makes it as a merely voluntary promise, without consideration. But if B, or anybody for him, gives to A to-day a thousand dollars in goods or money, and this was the ground and cause of the promise, then it is enforceable. And if A got nothing for his promise, but B, at the request of A, gave the same goods or money to C, this would be an equally good consideration, and the promise would be equally valid in law. This rule sometimes operates harshly and unjustly, and permits promisors to break their word under circumstances calling strongly for its fulfilment. Courts have been led, perhaps, by this, to moderate the rule, and to say that the consideration is sufficient if it be a substantial one, although it be not an adequate one. This is the unquestionable rule now, and it is sometimes carried very far. In one case an American court refused to inquire into the adequacy of the consideration-or whether it was equal to the promise made upon it-and said, if there was the smallest spark of consideration it was enough, if the contract was fairly made with a full understanding of all the material facts. Still, there must be some.

WHAT ARE SUFFICIENT CONSIDERATIONS.

The law detests litigation; and therefore considers anything a sufficient consideration which arrests and suspends or terminates litigation. Thus

the compromise, or forbearance, or reference to arbitration, or any similar settlement, of a suit, or of a claim, is a good consideration for a promise founded upon it. And it is no defence to a suit on this promise, to show that the claim or suit thus disposed of would probably have been found to have no foundation or substance. If the claim or suit be a mere pretence, or oppression, and have no reality whatever, and there is no rational possibility of enforcing it, then indeed it is nothing, and any settlement of it is also nothing, and a promise founded upon such settlement rests upon no consideration. But if there be any honest claim, which he who advances it believes to be well grounded, and which within a rational possibility may be so, this is enough; the court will not go on and try the validity of the claim or of the suit in order to test the validity of a promise which rests upon its settlement; for the very purpose for which it favors this settlement is the avoidance of all necessity of investigating the claim by litigation. But for reasons of public policy, no promise can be enforced of which the consideration was the discontinuance of criminal proceedings, or of any in which the public are interested.

If any work or service is rendered to one, or for one, and he requested the same, it is a good consideration for a promise of payment; and not only so, but the law will imply the promise, that is, will suppose that he has made it, and he may be sued upon it in the same way as if he had made it, and will not be permitted to deny it. The rule is the same as to goods, or property of any kind, delivered to any one at his request.

No person can make another his debtor against that other's will, by a voluntary offer of work, or service, or money, or goods. But if that other accept what is thus offered, and retain the benefit of it, the law will, generally, imply or presume that it was offered at the request of that other party, and will also imply his promise to pay for it, and will enforce the promise; unless it is apparent, or is shown, that it was offered and received as a mere gift.

A promise is a good consideration for a promise; and it is one which frequently occurs in fact. But it is said that the promises must be mutual; and sometimes questions of this sort have arisen; if A promises to live with B two years, for the purpose of learning a certain trade, but B makes no express promise to teach, and A leaves at the end of one year, it has been said that B cannot recover damages, because there was no consideration for A's promise, inasmuch as B made no promise. But we should rather say in such cases, that, if A performed his promise, he might have an action against B on his constructive or implied promise to teach; and that this constructive or implied promise to teach was a sufficient consideration for A's promise to stay with B.

So, if A says to B, "If you will deliver goods to C, I will pay for them," although there is no obligation upon B to deliver the goods, and therefore no mutuality in the contract, yet, if he does deliver them, he furnishes a consideration for the agreement, and may enforce it against A. There is also an exception to this requirement of mutuality in the case of contracts between infants and persons of full age. For though the infant may avoid his contract, the adult is bound, as we said in speaking of infants.

An agreement by two or more parties to refer disputes or claims between them to arbitration, is not binding upon any of the parties unless all have entered into it.

This principle, that a promise is a good consideration for a promise, has

been sometimes applied to subscription papers; all who sign them being held on the ground that the promise of each is a good consideration for the promises of the rest. But they are not often promises to each other; being generally the promises of all the subscribers to some third party, who makes no promise. The law on the subject of these subscription papers, and of all voluntary promises of contribution, is as yet somewhat unsettled, the cases not being reconcilable. The prevailing rule, we think, however, is this: no such promises are binding, unless something is paid for them, or unless some party for whose benefit they are made-and this party may be one or more of the subscribers-at the request, express or implied, of the promisors, and on the faith of the subscriptions, incurs actual expense or loss, or enters into valid contracts with other parties which will occasion expense or loss. As the objection to these promises is the want of consideration, it may perhaps be cured by a seal to each name, or by one seal which all the parties agree to consider the seal of each.

It is to be regretted that the law does not regard a merely moral consideration as a sufficient legal consideration; but so it is. Thus, it has been held in this country, that a note given by a father to a party who had given needful medicines, food, and shelter to his sick son, who was of full age, was void in law, because there was no legal consideration. And the same doctrine was applied where a son made a similar promise for food and support to his aged father. If, in either case, the promise had been made before the food or other articles were supplied, or even a request made before the supply by the party promising afterwards, then the supply of the food and support would have been a good consideration. But they had all been supplied before any request or promise, and nothing was left but the moral obligation of a father to compensate one who had supported his son, or of a son to support his father; and this the law does not deem sufficient to make even an express promise enforceable at law.

OF ILLEGAL CONSIDERATIONS.

If the whole of a consideration, or if any part of the consideration of an entire and indivisible promise, be illegal, the promise founded upon it is void. Thus, where a note was given in part for the compounding of penalties and suppressing of criminal prosecutions, it was held to be wholly void and uncollectable. And where a part of the consideration of a note was spirituous liquors, sold by the payee in violation of the statute, such note was held to be wholly void. But if the consideration consists of separable parts, and the promise consists of corresponding separable parts, which can be apportioned and applied, part to part, then each illegality will affect only the promise resting on it; for in fact there are many considerations and many promises.

If the consideration be entire and wholly legal, and the promise consists of separable parts, one legal and the other illegal, the promisee can enforce that part which is legal.

When a law provides a penalty for an act, that act is held to be illegal, although it is not expressly prohibited.

OF IMPOSSIBLE CONSIDERATIONS.

No contract or promise can be enforced by him who knew that the performance of it was wholly impossible; and therefore a consideration which

is obviously and certainly impossible is not sufficient in law to sustain a promise. But if one makes a promise, he cannot always defend himself when sued for non-performance by showing that performance was impossible; for it may be his own fault, or his personal misfortune, that he cannot perform it. He had no right to make such a promise, and must respond in damages; or if he had a right to make it in the expectation of performance, and this has become impossible subsequently-as by loss of property, for example-this is his misfortune, and no answer to a suit on the promise. There are, however, obviously, promises or contracts, which, from their very nature, must be construed as if the promisor had said, "I will do so and so, if I can." For example, if A promises to work for B one year, at $20 a month, and at the end of six months is wholly disabled by sickness, he is not liable to an action by B for breach of his contract; and there is authority and good reason for saying that he can recover his pay for the time that he has spent in B's service. A mere want of money, or a pecuniary impossibility, is not regarded by the law as an impossibility.

OF FAILURE OF CONSIDERATION.

If a promise be made upon a consideration which is apparently valuable and sufficient, but which turns out to be nothing; or if the consideration was originally good, but becomes wholly valueless before part performance on either side, there is an end of the contract, as the promise cannot be enforced. And if money were paid on such a consideration, it can be recovered back. But only the sum paid can be so recovered, without any increase or addition as compensation for the plaintiff's loss and disappointment, if there were no fraud or oppression.

If the failure of consideration be partial only, leaving a substantial, though far less valuable, consideration behind, this may still be a sufficient foundation for the promise, if that be entire. The promisor may then be sued on the promise; but he will then be entitled, by deduction, set off, or in some other proper way, to due allowance or indemnity for whatever loss he may sustain as to the other parts of the bargain, or as to the whole transaction, from the partial failure of the consideration. Thus, if he promised so much money for work done in such a way, or as the price of a thing to be made and sold to him, if no work is done, or the thing is not made or sold, there is an end of the promise, because the consideration has failed. But if the work was done, but not as it should have been, or the thing made and sold, but not what it should have been, and the promisor accepted the work or the thing, he may now show that the consideration for his promise has partially failed, and may have a proportionate reduction in his promise, or in the amount he must pay. And if the promise be itself separable into parts, and a distinct part or proportion of the consideration failed, to which part some distinct part or proportion of the promise could be applied, that part cannot be enforced, although the residue of the promise may be.

If A agrees with B to work for him one year, or any stated time, for so much a month, or so much for the whole time, and, after working a part of the time, leaves B without good cause, the question arises whether A can recover anything from B for the service he has rendered; and at this time the question must be considered as somewhat unsettled at law. It is universally conceded that he cannot on the contract, because that is entire, and is broken by A, and therefore A has no claim under i. And it is the an

cient and still prevailing rule, that A can recover nothing in any form or way. It has, however, been held in New Hampshire, that A can still recover whatever his services are worth, B having the right to set off or deduct the amount of any damage he may have sustained from A's breach of the contract. We think this view just and reasonable, although it has not been supported by adjudication in other States. If A agrees to sell to B five hundred barrels of flour at a certain price, and, after delivering onehalf, refuses to deliver any more, B can certainly return that half, and pay A nothing. But if B chooses to retain that half, or if he has so disposed of or lost it that he cannot return it, he must, generally at least, pay what it is worth, deducting all that he loses by the breach of the contract. And this case we think analogous to that of a broken contract of service; but B's liability to pay, even in the case supposed as to goods, has been denied in New York.

A difficulty sometimes arises where A, at the request of B, undertakes to do something for B, for which he is to be paid a certain price; and in doing it he departs materially from the directions of B and from his own undertaking. What are now the rights of the parties? This question arises most frequently in building-contracts, in which there is perhaps usually some departure from the original undertaking. The general rules are these. If B assent to the alteration, it is the same thing as if it were a part of the original contract. He may assent expressly, by word or in writing; or constructively, by seeing the work, and approving it as it goes on, or being silent; for silence under such circumstances would generally be equivalent to an approval. But if the change be one which B had a right, either from the nature of the change, or the appearance of it, or A's language respecting it, to suppose would add nothing to the cost, then no promise to pay an increased price would be inferred from either an express or tacit approval. Generally, as we have seen, if A does or makes what B did not order or request, B can refuse to accept it, and, if he refuses, will not then be held to pay for it. But if he accepts it, he must pay for it. This consequence results, however, only from a voluntary acceptance. For if A choose, without any request from B, to add something to B's house, or make some alteration in it, which being done cannot be undone or taken away without detriment to the house, B may hold it, and yet not be liable to pay for it; and A has no right to take it away, unless he can do so without inflicting any injury whatever on B. This rule would apply whether the addition or alteration were larger or smaller.

It is sometimes provided in building-contracts that B shall pay for no alteration or addition, unless previously ordered by him in writing. But if there be such provision, B would be liable for any alteration or addition he ordered in any way, or voluntarily accepted.

So it is sometimes agreed that any additions or alterations shall be paid for at the same rate as the work contracted for. But we think that the law would imply this agreement if the parties did not make it expressly, although this point is not well settled.

OF THE RIGHTS OF ONE WHO IS A STRANGER TO THE CONSIDERATION.

Formerly it was held that no one who was a stranger to the consideration could enforce a promise resting upon it. But this rule has been considerably relaxed, at least in this country. Thus, if A pays to B a con

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