Commercial Law

Contracts-Mutual Assent

Commercial law is a general term used to cover the legal rules which relate most directly to everyday commercial transactions. It is a term of no exact boundary, but most commercial law is based in one way or another on the law of contracts, which is one of the largest subjects in the law. Bills and notes, for instance, are special forms of contracts. In order to understand business law at all, therefore, it is necessary at the outset to have some knowledge of the fundamental principles of the law of contracts.

DEFINITION OF CONTRACTS.-What is a contract? Simply a promise or set of promises which the law enforces as binding. Any promise, if it is binding, is a contract or part of a contract. So the law of contracts in their formation resolves itself into this: What promises are binding? A man may make all sorts of promises, but when has he a right legally to say "I have changed my mind, I am not going to do what I said I would," and when will he be liable in damages if he fails to do as he agreed?

CONTRACT TERMS EXPLAINED.-There are certain terms in contracts which the student will find repeatedly mentioned and with which he should be familiar at the outset. For example, contracts are spoken of as express contracts, and implied contracts. By an express contract we mean a contract the terms of which are fully set forth. Implied contracts are contracts the terms of which are not fully stated by the parties. There is a mutual agreement and promise, but the agreement and promise have not been expressly put in words. If I say to a man, "I will buy your horse, Dobbin, for $100" and he replies, "I will sell you the horse at that price," there is an express contract. I step into a taxi and simply say to the driver, "Take me to the Union Station." The driver says nothing, but takes me there. Here is an implied contract. By my conduct I impliedly agree to pay him the legal rate for the distance carried.

FORMAL AND INFORMAL CONTRACTS.-Contracts are sometimes also divided into formal contracts, and simple or parol contracts. There are three kinds of formal contracts recognized in our system of law: (1) Promises under seal. (2) Contracts of record, such as judgments and recognizances. (3) Negotiable instruments. Of the three, it may be most difficult to understand why a judgment is included as a form of contract, because a judgment is simply a judicial termination of a fact entered in the office of the county clerk, and generally a lien on the real property owned by the judgment debtor. The sole reason, apparently, for calling a judgment a contract, is that an action of debt may be brought in a court of law upon such a judgment. Sealed contracts and negotiable paper will be taken up in a later chapter. Simple, or parol contracts, are those not embraced in the three previous classifications which constitute the formal contracts. The term parol is a little ambiguous, as it is sometimes used as opposed to a written contract, meaning simply an oral one, and at other times it is used as opposed to the three previous formal contracts.

UNILATERAL AND BILATERAL CONTRACTS.-Contracts are also divided into unilateral and bilateral contracts. In a unilateral contract, the contract imposes obligations on one party only. A promissory note is an example of a unilateral contract. In a bilateral contract, obligation is imposed on both parties. John and Mary become engaged to each other. This is a bilateral contract, and either may sue the other for a breach. Most important results flow from the distinction between unilateral and bilateral contracts. This we shall consider later.

VOID, VOIDABLE AND UNENFORCEABLE CONTRACTS.-Contracts are also divided into void, voidable and unenforceable contracts. Strictly speaking, a void contract is no contract at all. Some statutes provide that no action shall be brought on certain contracts, and declare them absolutely void. A voidable contract is one which is good until the option of avoiding it is availed of by the party who has the option. For example, an infant with an income of $2000 a year contracts for the delivery of a Packard automobile on June 1. The car, being a luxury, makes the contract with the infant voidable on his part, and he may, before June 1, repudiate the contract and not be liable in a suit for breach of contract, or he may, if he choses, abide by the contract, take the car, and pay the purchase price when it is delivered. An unenforceable contract is one which in itself is perfectly good as a contract, but because of some rule of law cannot be enforced. For example, A agrees, orally, with the owner of 1 Broadway, to buy that property for $1,000,000. The terms of the contract are understood by both parties. This contract is not enforceable, because, as we shall see later, the Statute of Frauds requires every contract for the sale of real property to be in writing.

CONTRACTS UNDER SEAL.-There are two ways of making promises binding, and unless the promisor fulfils the requisites of one or the other of these two ways his promise will not be binding. The first of these ways relates to the form in which the promise is made; the second relates to the substance of the transaction, irrespective of the form. The way to make a promise binding by virtue of its form is to put it in writing and attach a seal to the writing. It is often thought that written promises are binding in any event, or that a promise that is not written is not binding in any event. Neither of these propositions, however, is true. A promise is not binding merely because it is in writing; it is necessary that something more shall be done. Not only must it be written, but a seal must be attached in order to make the promise binding by virtue of its form. Everyone is familiar with the common ending in written contracts-"witness my hand and seal," that is, my signature and seal.

WHAT IS A SEAL?-A seal may be-and was originally-made with sealing wax stamped with a crest, initial or what not. This is still a sufficient seal, but the common kind of seal is simply a wafer attached by mucilage to the writing. Another kind of seal, in use by corporations and notaries especially, consists simply of an impression made on paper without attaching any foreign substance whatever. Any of these methods of sealing a promise is good. In most States a written or printed scroll with the letters "L. S." written or printed within, or the word "Seal" written or printed may also be a seal if so intended. It may seem a ridiculous formality for the law to attach importance to this lapping a wafer and attaching it to the end of a writing. In a way it is ridiculous, but it is desirable to have some method by which a promise may be made binding. One method, as an original question, may be as good as another so long as it is an easy method, and attaching a seal is an easy method, and one which makes it possible to make a promise binding whenever you wish.

CHANGE BY STATUTE OF THE LAW AS TO SEALED CONTRACTS.-There has been in this country a certain hostility to the law of sealed instruments. It has been thought, with reason, that some of the rules governing contracts under seal have by their technicality promoted injustice. This has certainly been true of an old rule that contracts under seal could not be altered or discharged by any agreement not itself under seal. The rule, however, that a seal avoids the necessity of consideration is a desirable rule, since it is important to have some means by which those who so intend may make gratuitous promises binding. It would be better then to abolish undesirable incidents of sealed contracts by statute rather than to destroy totally the legal effect of a seal. However, in many States the distinction between sealed and unsealed contracts is totally abolished. In a number of other States the common-law rule has been changed by the enactment of statutory provisions to the effect that sealed contracts shall be presumed to have been made for a sufficient consideration, but this presumption is only prima facie, and lack of consideration may be affirmatively proved, even in the case of a sealed instrument. And under such statutes unsealed contracts remain as at common law, i. e., the burden of proving consideration rests upon the plaintiff who seeks to enforce such a contract.

REQUISITES OF SIMPLE CONTRACTS.-Sealed contracts are comparatively easy to understand. Simple contracts, which are promises made binding by virtue of their substance rather than their form, though called simple, are more difficult to understand, and more complex. They are also much more common than sealed contracts. A simple contract is a promise, or promises, to which the parties have assented, and for which a price called consideration has been paid. One may promise as much as he wishes, orally or in writing so long as he does not attach a seal to his signature, and then say he does not care to keep his promise, unless he has both been paid for the promise and there has been an assent by the promisor and promisee to the terms of the transaction. Mutual assent and consideration are, then, the requisites of simple contracts.

INTENT TO CONTRACT.-In the law of contracts, intention, as we ordinarily understand that term, plays little part. In fact, the Supreme Court of Connecticut, in the case of Davidson vs. Holden, 55 Conn. 103, said: "It is of no legal significance that the defendants did not intend to be individually liable, or that they did not know or believe that as a matter of law they would be."

It is our overt acts that count in contracts. Or shall we put it this way: In the eyes of the law overt acts manifest legal intention. A says to B: "I will sell you my watch for $25, and you may have until 9 o'clock tomorrow morning to decide." A meets B the next noon and says to him: "I am sorry you did not take the watch. It was a bargain." B replies: "Here is the price, I will take it. I intended to call you this morning but have been so busy I did not have an opportunity to do so. I told my wife last night I was going to accept your offer and I can produce five witnesses who were in the room and heard me say so." It is, nevertheless, no contract, for, as has been said, quoting from an old English case, "It is trite learning, that the thought of man is not tryable, for the devil himself knows not the thought of man." Occasionally there may be the overt act and still no contract, although the mere formalities of contract may have taken place. The facts in the case of McClurg v. Terry, 21 New Jersey Equity 225, were as follows: The plaintiff was an infant nineteen years of age, and had returned late in the evening to Jersey City, from an excursion, with the defendant and a number of young friends, among whom was a justice of the peace, and all being in good spirits, excited by the excursion, the plaintiff in jest challenged the defendant to be married to her on the spot; he in the same spirit accepted the challenge, and the justice, at their request, performed the ceremony, they making the proper responses. The ceremony was in the usual and proper form, the justice doubting whether it was in earnest or not. The defendant escorted the plaintiff to her home, and left her there as usual on occasions of such excursions; both acted and treated the matter as if no ceremony had taken place. In deciding the case, the court said: "In this case the evidence is clear that no marriage was intended by either party; that it was a mere jest got up in the exuberance of spirits to amuse the company and themselves. If this is so, there was no marriage." The overt act of the parties manifested no legal intention to be married. Should we change the facts in the following way, the court undoubtedly would have held a valid marriage: If, after the parties had gone through the marriage ceremony, as recited, they went on a two weeks' honeymoon, and on their return lived together as man and wife for a month and then suddenly decided to call the marriage off, on the ground that it was a joke and they did not intend the ceremony to be binding, regardless of what they said as to the transaction, their overt acts would be taken by the court as showing their real legal intention at the time the ceremony was entered into. One more illustration: When leaving the class tonight, there is a sudden downpour of rain, and the instructor remarks: "I will give ten dollars for an umbrella." A student offers an umbrella and claims the money. Here is an overt act, but a reasonable person would not take the words used literally. Generally speaking, agreements made jokingly and social agreements confer no contractual rights.

OFFER AND ACCEPTANCE.-The usual way that mutual assent is manifested is by an offer and an acceptance of the offer. Two persons are not likely to express at the identical minute the same proposition. It is as a practical matter, then, essential that one should make a proposition, and if a contract is to be made, that the other should assent to it. An offer may be made to one or more specified persons, or to anyone whomsoever who will do what the offer requests, as in case of an offer of a reward. An offer is itself a promise, but is a promise conditional on the payment of a consideration or return for it either by some act or some promise from the other party. According as the offer asks for an act or a promise it will fall into one or the other of the two great divisions of simple contracts; one kind is called unilateral (meaning one-sided), that is, a promise only on one side; the other is bilateral, a promise on each side.

ILLUSTRATIONS.-Let us give illustrations of these contracts. We say to John: "We will promise to give you, John, $100 if you will do a specified piece of work." That is a proposal to make an exchange of the work for the money in a sense, but more exactly it is an offer to exchange an agreement to give the money in return for the work. We are not saying to John: "If you will agree or promise to do that work we will promise to give you the money." We are saying that we will give him the money if he actually does the work. That offer requires the actual doing of the work before it is binding. Until then the price requested for the promise has not been paid. It is an offer of a unilateral contract. Again, when we say to a man: "If you will spade up our garden we will pay you $2 a day," we are making an offer for a unilateral contract. We are asking him to spade up the garden; not to promise to spade it up, but to do it, and when he does it he can hold us liable on our promise to pay him $2 a day. The promise will have become binding because we have been given the payment that we asked for in our promise. But if we say to a man: "If you will agree to work for us the next month we will pay you $100," and the man says, "All right," then we have a bilateral contract. We are asking him, as the price of our promise, not to work but to agree to work, and he has promised to do so. To say "I accept" is always sufficient acceptance in the case of a bilateral contract where a promise is requested, but if I said to you, "I will give you $5 if you will bring me a book here," it would not make a contract to say "I accept." I said I would give you $5 if you brought the book here, and nothing but bringing it here will form a contract. The offeree must always do what the offerer asks him. If an offerer asks for a promise, any form of words indicating assent would be sufficient, because they would mean, in effect: "I consent to make the promise you specify in your offer." The form of wording in simple contracts is immaterial. Any plain language is sufficient for an offer, and as for acceptance, it does not matter whether the acceptor says "all right," or "I accept your offer," or in what form he expresses his assent. The question is, does he express assent? Now, the offerer is at liberty to name any consideration in his offer that he sees fit. He can name, in other words, whatever price for his promise he chooses to ask. If the person addressed does not choose to pay that price, all he has to do is to reject the offer, but he can bind the offerer only on the terms proposed. Therefore, if the offerer asks for an act in return for his promise, that is, asks for an immediate payment, or work, or the giving of property for his promise, no contract can be made by the person addressed saying, "All right, I will do it;" that is not giving the price the offerer asked. On the other hand, should the offerer ask for a promise and not for an act, the acceptor must give the promise asked for.

OPTION WITHOUT CONSIDERATION.-A common business transaction that presents very well the principles governing the formation of simple contracts is what is called an option. Suppose the owner of a mine says: "I will sell you this mine for $50,000, and you may have thirty days to decide whether you choose to accept the offer or not." Now, it does not matter whether that statement is oral or in writing; it is merely an offer, and not binding as the matter stands as far as we have stated. However, if it were in writing and a seal attached (in a State where seals still have the force which the common law gave them) it would be a binding promise to sell the mine at that price at any time within thirty days. If there is no seal attached, as long as the offer is unaccepted and unpaid for, it is not binding. The man who makes it may say: "I withdraw my offer. It is true that I promised to keep the offer open thirty days, but you did not pay me for that promise and I am going to break the promise. I withdraw my offer." Any offer for the formation of a simple contract, while unaccepted, may be withdrawn. But, if before it was withdrawn and within the thirty days' limit, the person to whom the option was given says, "Here is the $50,000 which you said you would take for your mine," the offerer would then be bound, and would have to perform his part of the contract.

OPTION WITH CONSIDERATION.-Let us change the character of the option a little. Suppose in consideration of $1000 paid down the owner of a mine promises to sell the mine for $50,000 at any time within thirty days. Here the offer, or the contract-for it is now more than an offer-has been paid for, and it is therefore binding. The person to whom the offer was made paid $1000 for the promise, therefore the promisor is bound to keep it. It was not an absolute promise to give the mine to the buyer, but it was a promise to sell it to him for $50,000 if he chose to take it within thirty days; that is a conditional promise. A conditional promise may be binding and paid for just as well as an absolute promise.

INSURANCE POLICY.-Take the case of a fire insurance policy. That is a conditional promise, a promise to pay indemnity for the destruction of a house by fire. Therefore, the performance of the insurance company's promise is conditional on the suffering by the insured of loss by fire. An insurance policy is ordinarily a unilateral contract; the premium is the consideration or price paid for the promise, and the promise is binding on the insurance company from the time when the premium is thus paid. Of course, the promise is only binding according to its terms. The insured has bought a conditional promise, a promise to pay if the house burns down. He gets that promise, but he will not become entitled to any money or any damages unless the house burns down nor unless he complies with the other conditions of his policy.

GUARANTEE.-Another kind of a promise worth referring to is a guarantee. A question arises whether a business house will sell something to a buyer on credit, and it decides it will not without a guarantee. Accordingly, John agrees, in writing, that if the business house in question will sell James a bill of goods, John will guarantee the payment of the price. That means, if James does not pay for the goods, John will. That is a unilateral contract in which the promise is conditional, and the consideration for that promise is the selling of goods to James.

PRELIMINARY NEGOTIATIONS-ADVERTISEMENTS.-An offer is sometimes difficult to distinguish from other things. Suppose the case of an advertisement. A business house advertises that it will sell goods for a certain price. Take the case of a bond list issued by a banking house. The list states that the banking house will sell specified kinds of bonds at quoted prices. John receives one of those lists, looks it over, sees something that looks good to him, and goes into the banking house and says: "I will take five of those bonds at the price named here." The banking house says: "We have sold all the bonds of that kind that we had;" or it says, "The market has changed on those bonds and there has been some advance in the price." Has John a cause of action against the banking house? He has if that bond list amounts to an offer-that is, if the list means that the banking house offers to enter into a contract with anyone receiving the list. But it has been held that that sort of advertisement does not prima facie amount to an offer, although it might be put in such clear words of agreement to sell on the part of the banking house that it would amount to an offer. Generally an advertisement of this sort, or anything that can fairly be called an advertisement of goods for sale, is held to mean simply that the advertiser has these goods for sale and names a price he is putting upon them; he invites customers to come in and deal with him in regard to them. It is an invitation to come and make a trade rather than a direct offer of a trade.

ILLUSTRATION.-Again to illustrate: You are looking at a new model of an automobile in a show-room window. You like it, enter the salesroom, and say you will take the car, tendering the price. The manager tells you that it is simply their demonstration car, that he will be glad to book your order for a car of the same model, and can make delivery in a month. You are not satisfied, and wish to sue, claiming that your tender of the price constituted an acceptance of the dealer's offer. Your position would be unsound and there would be no recovery in such a case. The placing of the demonstration car in the window is simply an invitation to the public to come in and deal with the seller. On the other hand, suppose you go into a second-hand automobile salesroom. There are fifty cars of various makes and models on the floor and each one is labeled with a different price. You pick out a 1918 Packard which is marked $1500. You tender the price to the salesman and say you will take the car. He refuses to sell. In this case your tender is an acceptance of his offer to sell. In the former instance, placing a price on the demonstration car was not a statement to the public generally that that particular car was for sale at that price, but in this case, where the cars are all second-hand cars, the reasonable interpretation of placing the price on the 1918 Packard is that that particular car is for sale. Quite likely, the dealer did not have any other Packard car in stock and would have no way of securing any of that model at that price.

ORAL AGREEMENT PRELIMINARY TO WRITTEN CONTRACT.-Another case of the same nature that comes up not infrequently is this: Parties talk over a business arrangement and then they say, "As this is an important matter let us put it down in writing; let us have a written contract containing what has been agreed upon." When it comes to drawing up the contract, however, they cannot agree. One party then says, "Well, we made a definite oral agreement any way; let us carry that out." The other replies, "Why, no, all that was dependent on our making a written agreement." The settlement of their dispute depends on how definite and absolute the oral agreement was. It is possible to make an oral agreement binding, although the parties do agree and do contemplate that it shall subsequently be reduced to writing, but generally the inference is that the oral agreement was merely a preliminary chaffering to fix the terms of the writing, and that everything is tentative until the writing is made and signed.

AUCTION SALES.-Another state of affairs involving preliminary invitations is presented by auction sales. The auctioneer puts goods up for sale, a bid is made, the auctioneer gets no other bid, and then says, "I will withdraw this from sale." Is the auctioneer liable? Has he made a contract to sell that article to the highest bidder? When the transaction is analyzed, is this what the auctioneer says in effect: "I offer to sell these goods to the highest bidder?" If this is the correct interpretation, then when the highest bidder says, in effect, "I agree to buy them," there would be a contract. On the other hand, if what the auctioneer says is in effect like what the advertiser says: "Here are some goods for sale, what do you bid, gentlemen," then the auctioneer is not making an offer himself. He is inviting offers from the people before him, and until he accepts one of those offers from the bidders before him there would be no contract; and until then the auctioneer could withdraw the goods. And that is the construction put upon the auction sale-that the auctioneer is not making an offer, but is simply inviting offers. Even if the auctioneer promises that he will accept the highest offer, that is, that he will sell to the highest bidder, his promise to accept the highest bid, not being paid for, would not be binding upon him were it not for a statute in some States which, in the sale of goods, would make an auctioneer bound to keep a promise to sell without reserve, that is, to the highest bidder, if he made such a promise.

BIDS OR TENDERS.-Somewhat similar to the case of the auctioneer is the case of tenders or bids for the construction of buildings, or for the sale of goods to a city or to a corporation. There, too, the corporation or the city is simply inviting offers. They do not say, "We offer to enter into a contract with anyone who makes the lowest bid," but rather, "We are thinking of entering into a contract, and we want to receive offers in regard to it." When the offers are made by the bids or tenders, any or none of them may be accepted, according as the receiver thinks best. It is sometimes required by law that public corporations, like cities or counties, shall accept the bid of the lowest responsible bidder, but, aside from such statutes, any or none of the bids may be accepted.

IMPLIED CONTRACTS.-An offer and acceptance are ordinarily made by words either spoken or written; but any method of communication which would convey to a reasonable man a clear meaning will serve as well as words. If A goes to his grocer and says "Send me a barrel of flour," he has in terms made no promise to pay for the flour, but the natural meaning of his words is that he agrees to pay. In this case A used words, though not words of promise; but the same result might follow where no words at all were used. Suppose A went into a shop where he was known, picked up an article from the counter, held it up so the proprietor could see what he was taking, and went out; this would be in legal effect a promise by A to pay for the article. A contract, where the promises of the parties are to be inferred not from express words of promise but from conduct or from language not in terms promissory, is called an implied promise or contract, as distinct from an express promise or contract, which is one where the undertaking is in express language. This difference between express and implied contracts relates merely to the mode of proving them. There is the same element of mutual assent in both cases, and the legal effect of the two kinds of obligations is identical. There is, however, another kind of obligation which is frequently called an implied contract, but sometimes called a quasi-contract, because it is not really a contract at all, though the obligation imposed is similar. If a husband fails to support his wife, for instance, she may bind him by purchases of goods necessary for her support. She may do this even though he directly forbids the sales to her. There is obviously no mutual assent in this case; the husband emphatically dissents and expresses his dissent, but he is bound just as if he had contracted.

TERMINATION OF OFFER BY REVOCATION OR REJECTION.-Since offers do not become binding until accepted according to their terms, up to that time they may be terminated without liability. This may happen in several ways. In the first place an offer may be revoked by the offerer. To effect a revocation he must actually notify the other party of his change of mind, before the latter has accepted. We have already stated that offers may be rejected by the person to whom they are made. For instance, we say, "We offer you one hundred shares of stock at a certain price, and you may have a week to think it over." You say, "I do not care for that offer, I reject it." You come around the next day and say, "On reflection I have concluded to accept that offer." The acceptance is within the seven days which we originally said might be used for reflection, but the offer has been terminated by the rejection. There is no longer any offer open, and consequently the acceptance amounts to nothing. A troublesome question in regard to the revocation of an offer for a unilateral contract is this: Suppose A offers B $5 for a book and B starts to get it but when he reaches the door, then A refuses to take the book. The general disposition is to try to hold that promise binding, and yet the difficulty is that the offeree has not fully done what he was asked to do, and if he chose to turn back and take the book away he could do so without liability. He could say, "I did not promise to bring the book. I brought it part way, the walk was long and I am going to take it back." If he is thus free to withdraw it seems impossible to deny that the other party is equally free. Bilateral contracts are more desirable than unilateral because in bilateral contracts the mutual promises bind the parties before they begin to perform and both parties are therefore protected while they are performing. In unilateral contracts, the contract is not completed until the act requested is fully done. Until then, therefore, either party may withdraw.

A COUNTER OFFER IS A REJECTION.-Another way in which offers may be terminated is by a counter offer on the part of the person to whom the offer was made. We say, "We will sell you stock for $100 a share, and you may have a week to think it over." You say, "I will give you $99 a share." We say, "No, we will not take it." You say, "Well, I will give you $100." You are too late; you rejected our offer of sale at $100 by saying you would give us $99. The minute you say you will give us $99, our offer is rejected. Of course, when you make the counter offer of $99, if we say we will accept your offer to buy, that would make a contract. Offers are constantly rejected by counter offers by people who really intend to enter into a contract. Suppose A says, "I will lease you my house a year for $800." You say, "All right, I will take it if you paper the dining-room." That rejects the offer. A new offer has been made by the person addressed, who offers, if the dining-room is papered, to take the house at $800.

TERMINATION OF OFFER BY DEATH OR INSANITY.-An offer is also terminated by the death or insanity of either party before acceptance. After a contract has once been formed neither subsequent death nor insanity terminates liability upon it unless the contract is of such a personal character that only performance by the contractor in person will fulfil it.

ILLUSTRATION.-In Beach v. First Methodist Episcopal Church, 96 Ill. 177, a fund was being raised to build a new church, and a subscription paper, as follows, was signed by Lorenzo Beach:

"Fairbury, Feb. 14, 1874.

"We, the undersigned, agree to pay the sum set opposite our respective names, for the purpose of erecting a new M. E. church in this place, said sums to be paid as follows: One-third to be paid when contract is let, one-third when building is enclosed, one-third when building is completed. Probable cost of said church from ten thousand dollars ($10,000) to twelve thousand dollars ($12,000)."

Mr. Beach attached and subscribed to that paper the following:

"Fairbury, 1874.

"Dr. Beach gives this subscription on the condition that the remainder of eight thousand dollars is subscribed.

"Lorenzo Beach, $2000."

In April, 1875, Dr. Beach was adjudged insane by the county court. The court held that the "subscription made by Dr. Beach was, in its nature, a mere offer to pay that amount of money to the church upon the condition therein expressed. There is nothing in the record tending to show that the church, in this case, took any action upon the faith of this subscription, until after Dr. Beach was adjudged insane, or that the church paid money or incurred any liability. His insanity, by operation of law, was a revocation of the offer." Suppose a letter for a winter's supply of coal is sent to your coal dealer and is acknowledged by him, delivery to be made before October 1. On September 15, the coal dealer dies, and his estate refuses to fulfill the contract. In such a case, if you were compelled to buy coal at a higher price from another dealer, you would have a cause of action against the estate for the damage you suffer. The coal dealer's executor or administrator could very easily carry out a contract of this character. On the other hand, suppose you are running a series of lectures during the winter, and you have engaged a noted lecturer to deliver six lectures. After he has delivered three, he dies. In this case, death would terminate the contract, as this is clearly a contract for personal services and the executor or administrator of the deceased lecturer could not perform the contract for him, as could be done in the case of the coal dealer.

TERMINATION OF OFFER BY LAPSE OF TIME.-An offer may be terminated by delay on the part of the person addressed. An answer to an offer must be sent in time, whether mail or telegraph is used, or whether the parties are dealing face to face. An offer lapses if it is not accepted within the time the offer specifies if any time is specified. If no time is specified, then within a reasonable time. One may specify any length of time in his offer, and it will remain open for that time provided it is not rejected or revoked, and neither party dies or becomes insane, in the meantime. But frequently offers contain no express limit of time; then it is a question of what is a reasonable time, and reasonableness depends upon business customs, the character of the transaction, the way the offer is communicated, and similar circumstances. An offer on the floor of a stock exchange will not last very long. A reasonable time for acceptance of such an offer is immediately, and an offer sent by telegraph will not remain in force long. The use of the telegraph indicates that the offerer deems haste of importance. An offer sent by mail will last longer. An offer relating to things which change in value rapidly will not remain open for so long a time as an offer which relates to land, or something that does not change in value rapidly.

ILLUSTRATION.-In the case of Loring v. the City of Boston, 7 Met. (Mass.) 409, the facts were that on May 26, 1837, this advertisement was published in the daily papers of Boston: "$500 reward. The above reward is offered for the apprehension and conviction of any person who shall set fire to any building within the limits of the city. May 26th, 1837. Samuel A. Eliot, Mayor." In January, 1841, there was an extensive fire on Washington Street, and Loring, after considerable effort, was able to secure the apprehension and conviction of the criminal. He then sued to recover the reward, which the city of Boston refused to pay. The ground of defense was that the advertisement "offering the reward of $500 for the apprehension and conviction of persons setting fire to buildings in the city, was issued almost four years before the time at which the plaintiff arrested Marriott and prosecuted him to conviction." The opinion of the court reads: "three years and eight months is not a reasonable time within which, or rather to the extent of which, the offer in question can be considered as a continuing offer on the part of the city. In that length of time, the exigency under which it was made having passed, it must be presumed to have been forgotten by most of the officers and citizens of the community, and cannot be presumed to have been before the public as an actuating motive to vigilance and exertion on this subject; nor could it justly and reasonably have been so understood by the plaintiff. We are, therefore, of the opinion that the offer of the city had ceased before the plaintiff accepted and acted upon it as such, and that consequently no contract existed upon which this action, founded on an alleged express promise, can be maintained."

BOTH PARTIES MUST BE BOUND OR NEITHER.-Both parties to a simple contract must in effect be bound, and until they are, there is no contract. In a unilateral contract, before the promise becomes binding, the promisee must have actually performed what he was requested to do, that is, he must bind himself by actual performance before the offerer's promise is binding on him. In a bilateral contract, where each party makes a promise, neither promise can be binding unless and until the other one is. So that in the case of the proposed agreement to lease, as the proposed tenant might refuse to take the house if the dining-room was not papered, the proposed landlord has a similar right; that is, since one is not bound, the other is not.

CONTRACTS BY CORRESPONDENCE.-Contracts are often made by correspondence, simple contracts especially. That raises rather an important question as to how and when the contract is formed. Suppose a letter containing an offer is addressed from Boston to a man in New York. A reply is sent by him from New York accepting the offer. That reply goes astray. Is there a contract? Yes. It creates a contract by correspondence for a letter to be mailed by the acceptor provided the offerer imposes no conditions to the contrary, and impliedly authorizes the use of the mails, as he does by himself making an offer by mail. But suppose the offerer in his letter says, "If I hear from you by next Wednesday I shall consider this a contract." Then, unless the offerer receives an answer by the next Wednesday, there will be no contract. It will make no difference that an answer has been mailed, it must have been received; that is a condition of the offer. Suppose an offer is made by word of mouth, and it is accepted by sending a letter. Does the contract then become binding, irrespective of receipt of the letter? No, unless in some way the offerer has authorized the use of the mails in sending such an answer, and if the circumstances were such that the use of the mails would be customary, that would amount to an implied authorization. The use of the telegraph depends upon similar principles. If an offer is sent by telegraph, an answer may be sent by telegraph, and an acceptance started on its way will become binding although it is never received. Similarly, one may authorize a telegraphic answer to a letter containing an offer sent by mail, and if the use of the telegraph is authorized, a contract will arise at the moment that the telegram is sent.

ILLUSTRATIONS.-In the case of an option, if the acceptance was made by mail and lost in the mails, a binding contract would be formed if the use of the mail was expressly or impliedly authorized, and similarly if the option called for payment and a letter was mailed containing a draft or cash. There is a right to send a check or draft by mail if the parties had been dealing by mail. That authority would be implied. When parties are dealing by mail and there is a bargain that a check shall be sent, the check becomes the property of the person to whom it is sent as soon as it is mailed, and, therefore, when the letter with the check is put in the mail it operates as a payment on the option, and the loss of the draft is not the sender's loss, but the other man's. A lost draft, however, can be replaced and must be replaced. Authority to send actual cash by mail would not be so easily implied, especially if the amount were large, because it is contrary to good business custom; but if authority were given, the result would be the same as in the case of a check. It would, however, be a proper business precaution to register the letter if it contained cash. If the offerer, not having received the letter of acceptance and thinking none had been sent, sells the property to another person, though not morally blamable, he would get into trouble. The second purchaser would get title to the property, supposing that the property was actually transferred to him. The lost letter created a contract, but it did not actually transfer title to the property, and, therefore, when the purchaser actually got possession of the property he would become the owner of it and could not be deprived of his title if he took it innocently. If, however, the person to whom the property was transferred had notice of the prior completion of a contract, he could not keep the property. In any event the seller would be liable in damages for breach of the contract completed by mailing the lost letter. Suppose an option is given by telephone to one who, just before the option expires, tries to get a connection by phone to accept and is unable to do so, and ten minutes after the time has expired a connection is secured? There is no contract and he has no action. It is no fault of the offerer that the acceptor was unable to accept in time, and, generally speaking, one who wishes to accept an offer must at his peril keep the means of acceptance open. It may be asked why does not the same principle apply in regard to mail as to the telephone; that is, why does not starting the acceptance by telephone complete the contract? Because there is no authority to send communication by telephone to the offerer when the acceptor has no telephone connection. When one sends an offer by mail the reason that he is bound by an acceptance sent by mail is because he, in effect, asks that an acceptance properly addressed to him be started on its course. He takes his chance as to the rest, but an offerer by telephone does not authorize a reply by talking into the telephone when there is no connection.

MISTAKES IN THE USE OF LANGUAGE IN OFFER AND ACCEPTANCE.-Another question which has to do with the express mutual assent of parties relates to the meaning of language used. Suppose an offerer says, "I will sell you a cargo of goods from the ship 'Peerless,' due to arrive from India, at a certain price." The buyer assents. There are two ships named "Peerless," and the buyer thinks one is meant, but the seller thinks the other is meant. Is there a contract for the sale of the cargo of "Peerless" No. 1, or a contract for the sale of the cargo of No. 2, or no contract at all? The answer is, that language bears the meaning which a reasonable person in the position of the person to whom the offer is made is justified in attaching to it. If a reasonable person in his position would think "Peerless" No. 1 was meant, then there is a contract for the cargo of No. 1. If he was not justified in thinking that, and ought to have thought No. 2 was meant, although in fact he did not think so, there was a contract for the cargo of "Peerless" No. 2. If either meaning were as reasonable as the other, then each party has a right to insist on his own meaning, and there would be no contract. This principle often comes up in contracts made by telegraph, where the words of the telegram are, by the mistake of the telegraph company, changed. For instance, a telegram purports to be an offer to sell a large quantity of laths at $1 a bundle. The terms as actually despatched by the seller in making his offer fixed the price at $1.20. The telegraph company dropped off the words "and twenty cents." A telegram is sent back by the buyer, "I accept your telegraphic offer." Then trouble arises when buyer and seller compare notes. Well, the offerer is bound. He selected the telegraph as the means of communication, and he must take the consequences of a misunderstanding, which arose from a mistake of the agency which the offerer himself selected. The question may be asked: Would there be any right of action against the telegraph company by the offerer, the sender of the telegram? The answer is yes. The company has broken the contract it impliedly made with the sender to use reasonable diligence in despatching and delivering the message. But the trouble with that action is that on telegraph blanks there is always this in substance: that on unrepeated telegrams this company is liable for mistakes only to an amount not exceeding twice the cost of the telegram; and it has been held in many States that that limit on unrepeated telegrams is not unreasonable. The sender of the telegram has agreed to the contract on the reverse side of the telegraph blank, and he ought to have his message repeated if he desires to hold the company liable in full damages if his message does not reach the party addressed in absolutely correct form. In other States, however, this limitation of liability is held to be against public policy and the company is liable for the full damage suffered.

CONDITION IN OFFER REQUIRING RECEIPT OF ACCEPTANCE.-An offerer, as has been said, may insert in his offer any condition he sees fit. He may therefore insert a condition that an acceptance shall reach him, not merely be despatched. The condition may specify the time within which the acceptance must arrive in order to be effectual. It is a wise precaution in all business offers of importance to insert such a condition in the offer. It will not be sufficient to add to the offer such words as "subject to prompt acceptance," for prompt acceptance would be given, within the meaning of the law, by despatching the acceptance, not by the receipt of it. The condition should be in such words as "subject to prompt receipt of your acceptance," or "subject to receipt of your acceptance," by a stated day or hour.

WHEN SILENCE GIVES CONSENT.-There is one way of manifesting mutual assent, namely, by silence, of which a word should be said. There is a proverb that "Silence gives consent." Is it so in law? Suppose a man goes into an insurance broker's and tosses some policies down and says, "Renew those policies, please." Nobody says anything and he leaves the policies there and goes out. The next night his buildings burn down. Are they insured? They are, in effect, if the insurance broker has contracted to renew the policies; otherwise the buildings are not insured. Now on the bare facts, as we have stated them, they are not insured; some other facts must always exist to make silence amount to assent. If, for instance, on previous occasions, the broker kept silence when such statements were made to him, and nevertheless carried out the proposal, it is a fair inference that he means by his silence this time what he meant the preceding time. Furthermore, silence, when the offer is unknown, can never amount to assent. In the case as we have put it, we did not say that the insurance broker even heard the offer; if he did, then the question would depend on whether he had ever done anything to justify the other person in believing that silence would mean assent in such a dealing, or whether business customs justified the assumption. The offerer cannot by his own act make the silence of the other person amount to an acceptance. Suppose an offer of this sort: "We offer to sell you 100 shares of stock at $50 a share, and unless we hear from you to the contrary by next Wednesday we shall conclude that you have accepted our offer." The offerer does not get any word before next Wednesday. Nevertheless, there is no contract. The person addressed has a right to say, "Confound his impudence, I am not going to waste a postage stamp on him, but I don't accept his offer. He has no business to suppose that if he doesn't hear from me to the contrary I assent." This sort of case is not infrequently referred to: A magazine is sent through the mails on a subscription for a year, the subscription runs out, the magazine is, nevertheless, still sent. Is the person who receives it bound to pay another year's subscription? Here you have a little more than silence; you have the receiver of the magazine continuing to receive it. If he refused to receive it, undoubtedly there would be no contract, but where a man takes property which is offered to him, he is bound by the proposal which was made to him in regard to the property. He ought to let the magazine alone if he doesn't want to pay for it. You may say that the receiver does not know that the subscription has run out, and if he did he would not take the magazine. But then he ought to know. He made the subscription originally. The difficulty is merely in his own forgetfulness, and he cannot rely on that.

ILLUSTRATION.-The leading case of Hobbs v. Massasoit Whip Co., 158 Mass. 194, is a good illustration. The plaintiff in this case had been in the habit of sending eel skins to the defendant and had received pay from him in due course. The skins in the shipment for payment of which suit was brought, were alleged by the defendant to be short of the required length, and in a condition unfit for use. They were kept by the defendant some months, and were then destroyed, without notification to the plaintiff. The latter sued for the price of the skins and the court held that the silence of the defendant and failure to notify the plaintiff that it did not wish to have this particular lot of skins, amounted to an acceptance. The court said: "In such a condition of things, the plaintiff was warranted in sending the defendant skins conforming to the requirements, and even if the offer was not such that the contract was made as soon as the skins corresponding to its terms were sent, sending them would impose on the defendant a duty to act at that time; and silence on its part, coupled with a retention of the skins for an unreasonable time, might be found by the jury to warrant the plaintiff in assuming that they were accepted, and thus to amount to an acceptance."

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Contracts-Consideration and Enforceability

CONSIDERATION MAY BE ANOTHER PROMISE OR AN ACT.-The second great requisite in the formation of simple contracts is consideration. A price must be paid for a promise in order to make it binding. The price paid may be another promise, in which case the contract is bilateral, or the price paid may be some act actually done or performed, in which case the contract is unilateral.

ADEQUACY OF CONSIDERATION IMMATERIAL.-Not any act, or the promise of any act, is sufficient consideration, as will be seen. Nevertheless, in general the law does not attempt to gauge the adequacy of the consideration; that is, parties may make such bargains as they wish as far as the price is concerned. A may say that he will sell his horse, which is worth $300, for $100, or for a promise to pay $100. That will be a perfectly good contract, if accepted, in spite of the fact that the promised horse is worth more than the promised price. Such difference in the value of the promise and the value of the price may go to a great extreme. The horse may be a thousand-dollar animal, and the price promised only $100, but when you wish to push the case to an extreme you are likely to get into this difficulty: Did the parties really mean to make a bargain? If what they were doing was arranging for a gift of the horse and putting up some little alleged consideration as a blind, that will not do; but any exchange the parties really in good faith bargain for, with certain exceptions hereafter stated, is sufficient.

A SMALLER SUM OF MONEY IS NOT SUFFICIENT CONSIDERATION FOR THE PROMISE SIMULTANEOUSLY TO PAY OR DISCHARGE A LARGER LIQUIDATED SUM.-This is the principal exception, that in contracts or promises relating to a fixed sum of money, the consideration cannot be the simultaneous payment or discharge of a smaller sum of money on the other side. If A promises B $100, it will not be good consideration for B to promise in exchange $50, or even $99.99, payable at the same time and place. In other words, the law does require adequacy in exchanges or agreements to exchange money. A owes B $100 and says to him, "I can't pay it all," or "I don't want to pay it all. Will you let me off for $50?" B replies, "Yes, I will take $50." That agreement is not binding, and even if the $50 is actually paid, B may afterwards come and say, "You paid me only part of the debt you owed me. It is true I said I would call the whole thing square, but there was no consideration sufficient in law for my promise, since you paid me only part of what you were bound to." This rule of common law, though generally well established, does not exist or is much qualified in a few States, such as: Georgia, Maine, Mississippi, New Hampshire, North Carolina, Virginia.

UNLIQUIDATED CLAIMS MAY BE DISCHARGED BY ANY AGREED SUM.-The case cited in the preceding paragraph must be distinguished from another. Suppose A owes B some money for services, the price of which was never exactly fixed, but which B says are of the value of $100. Then if B agrees to take $50 in satisfaction of his claim against A, B is bound; the transaction is effectual. The difference is between what is called a liquidated and an unliquidated claim.

DEFINITION OF LIQUIDATED CLAIM.-A liquidated claim is one of an exact amount definitely fixed. Such a claim, as has been said, cannot be satisfied by partial payment or promise of partial payment. But an unliquidated or a disputed claim-a claim subject to a real bona fide dispute, not merely a dispute trumped up for the purpose of disputing a good claim-may be discharged by any payment on which the parties agree. The law does not know how much the unliquidated claim is worth, and will allow parties to bargain for the sale of the unliquidated claim, just as it will let them bargain for the sale of a horse for which they may fix such a price as they choose, and that price will not be revised.

EFFECT OF RELEASES AND RECEIPTS.-If, however, the original claim were liquidated and undisputed, is there any sort of paper the debtor could get from the creditor that would release him absolutely? A receipt in full would not do it; a receipt in full is something to which business men attach more virtue than it possesses. It is merely evidence of an agreement to accept what has been received in full payment and proof may be given as to just what consideration passed for the receipt in full. As we have seen, such an agreement is not valid without consideration, and payment of part of a debt admittedly due is not sufficient consideration. The really effective instrument at common law is the release under seal. That will do the work whether the debtor paid part of the debt or not, since a sealed instrument needs no consideration. In jurisdictions where seals have been deprived of their efficacy at common law an insuperable difficulty, however, exists. In a few States-Alabama, Arkansas, Connecticut, Michigan, Mississippi, New Hampshire, New York, North Dakota, South Dakota, Tennessee-a receipt in full has been given the effect which the common law gave to a sealed instrument.

OTHER ILLUSTRATIONS.-Suppose the agreement to settle a liquidated claim were oral and suppose a witness heard the words. Such circumstances would not make any difference. It is assumed in all that has been said that the facts are proved. Suppose that neither party denied the facts. Let the creditor admit that he did receive this $50 as a full payment and did give the debtor a receipt in full. Still, he can say, "I propose to break my agreement since it was not supported by sufficient consideration, and I shall collect the balance." Another question is this: Suppose a man had a $100 bill and he wanted some change very badly, and another man had $99. Could the former take that for the $100 bill? He could. If a man wants a particular kind of money, as gold, or silver, or quarters, the principles stated do not apply; they apply only to dollars and cents as such.

PAST CONSIDERATION.-Strictly speaking, the term past consideration is a misnomer; something which is given before a promise is made cannot constitute a legal consideration. The courts have held that a warranty made after a sale has been completed is invalid. It has also been held that a guaranty after the obligation guaranteed has been entered into also is invalid unless there be new consideration. Although this is the general rule, there are several exceptions where a past consideration is recognized. Williston gives these exceptions as follows, although the boundaries between the groups are sometimes indefinite: "(1) Promises to pay a precedent debt; (2) Promises in consideration of some act previously done by the promisee at the request of the promisor; (3) Promises where past circumstances create a moral obligation on the part of the promisor to perform his promise. Under this head may be included cases of ratification and adoption of promises previously made for sufficient consideration but invalid when made for lack of authority or capacity."

PAYMENT OF PART OF A DEBT BY ONE WHO IS NOT THE DEBTOR.-Suppose a little different case: A owes B $100 for a liquidated claim. A's father says to B, "If you will let my son off, discharge him from this claim, I will pay $60, not a cent more." B agrees, and the $60 is paid. Now B never can get any more; the bargain is binding, and the reason is, that although A was bound to pay the whole $100, and could not, by paying B a part of the claim, give good consideration to B for his promise to cancel the balance. A's father was not bound to pay a cent and he may bargain for any exchange in return for a payment which he was not bound to make at all. Therefore, he may bargain that the debt shall be discharged.

PERFORMANCE OR PROMISE OF PERFORMANCE OF A LEGAL DUTY IS NOT SUFFICIENT CONSIDERATION.-In other words, the thing which will not be good consideration, whether done or promised, is the performance or partial performance of something which the man who performs or promises is under a legal duty to do anyway. If he ought to do it anyway, then it will not serve as a price for a new promise or agreement to discharge it. Another illustration of that may be given: Suppose a contractor agrees to build a house for $10,000; he gets sick of his job when he is about half through, says that it is not possible for him to make any money at that price and he is going to quit. "Well," the employer says, "if you will keep on I will give you a couple of thousand dollars more." Accordingly the builder keeps on. That won't do. The builder in keeping on building is doing no more than he was previously bound to do. If he wants to have a binding agreement for the extra $2,000 with his employer, he must secure a promise under seal, for his own promise of performance will not support the promise to pay.

FORBEARANCE AS CONSIDERATION.-Another kind of consideration that is worth calling attention to is forbearance. A has a valid claim against B. He says he is going to sue. B says if he won't sue, or won't sue for the present, B will pay him an agreed sum. That is a good contract so long as it is not open to the objection referred to a moment ago; that is, so long as A's claim is not for a liquidated sum of money and B's promise is not merely a promise to pay part of that liquidated sum. A may promise what B requests, either to forbear temporarily or to forbear perpetually. Either will be good. But suppose A has no valid claim against B, but B is reputed to be rather an easy mark in the community and A is a person of little scruple; he accordingly trumps up a claim against B with the hope of getting a compromise. Is forbearance of that claim by A good consideration for B's promise? It is not. A's claim must be a bona fide one in order to make surrender of it or the forbearance to press it, either temporarily or permanently, a good consideration for a promise of payment.

STATUTE OF LIMITATIONS.-Another case of a promise relating to a subject of very frequent importance in commercial law, and law generally, is a promise to pay a debt barred by the statute of limitations, and this occasion requires a preliminary word in regard to that statute. This statute prohibits the bringing of an action or a claim after the expiration of a certain period. It is a different period for different sorts of claims. Action on a judgment in most States may be begun within twenty years after such judgment is rendered; so in some States may an action on a contract under seal. On the other hand, ordinary contractual claims generally expire in six years. Claims in tort, that is, for injury to person or property, last even a shorter time, but the ordinary contractual statute of limitations is six years. The statute begins to run against a promissory note, or other contract, not from the time when it is made, but from the time when it is by its terms to be performed. A note made now, payable the first of January next, will not be barred until six years from the first of January, not six years from now; and if it was made payable in ten years, as a mortgage note might well be, the statute would not bar it for sixteen years.

PROMISE TO PAY BARRED DEBT.-It has been held, though the reasons are not very easy to explain, that a new promise will revive a debt so far as the statute of limitations is concerned. There need be no consideration for such a promise other than the existence of the old indebtedness; that is said to be a sufficient consideration, although, of course, it can hardly be said to be given as a price for the new promise. Take a promissory note payable January 1, 1905. If nothing happens, that is barred on January 1, 1911, but if in 1911 or 1912 the maker says, in effect, "I know I owe that old note. I have not paid is, but I will pay it," he will be liable on that new promise, and the statute will begin to run again and run for six years from the making of that new promise. It is not enough that the debtor should admit that there was a liability; he must promise to pay it in order to make himself liable. Suppose, instead of a new promise made after the statute had run in 1911 or 1912, the maker had said before the maturity of the note, we will say in the course of 1910, "Don't worry about that note, I shall pay it," that also will start the statute running afresh. In other words, the new promise may be made before the maturity of the note, or before the statute has completely run as well as after the statute has completely run. In either case the new promise will start a fresh liability and keep the note alive for six years from the time the new promise was made. Of course, if the new promise is made the day after maturity of the old obligation, the total effect will be simply to extend the time of the statute one day, because only one day of the six years had run at the time the new promise was made, and counting six years from the date of the new promise gives only one day more.

PART PAYMENT OF BARRED DEBTS.-Not only will a new promise in express terms keep the statute of limitations from barring a claim, but any part payment will have the same effect, unless at the time the part payment is made some qualification is expressly stated. A debtor may say, "I will pay you this part of my debt, but this is all," and incur no further liability; but a part payment without such a qualification starts the statute running afresh as to the balance of the debt. It is by these part payments that notes are frequently kept alive for a long series of years. Interest payments are as effectual for the purpose as payments on account of part of the principal. A new six years begins to run from each payment of interest. The debtor may, however, say, "I will pay you half this debt," or "I will pay you the debt in installments of $10 a month." Such promises are binding according to their terms, and do away with the statute of limitations to that extent, but they do not enable the creditor to recover anything more than the debtor promises. A question may be asked here which is frequently of importance regarding an outlawed note with a payment of interest thereon by the maker. Would an endorser who had waived demand and notice be liable for six years more? Yes, if the payment was made before the statute had completely run in favor of the endorser. Otherwise, no. And if the endorser had not waived demand and notice, the statute could in no case be prolonged against him by any act of the maker.

REVIVAL OF DEBTS DISCHARGED BY BANKRUPTCY OR VOIDABLE FOR INFANCY.-A somewhat similar sort of revival of an old obligation may occur where a debt is discharged in bankruptcy. If a discharged bankrupt promises to pay his indebtedness or makes a payment on account of it, it will revive his old obligation and he will be liable again. And, similarly, though one whom the law calls an infant (that is, a minor under the age of twenty-one) who incurs indebtedness prior to his majority, can avoid liability (unless the indebtedness was incurred for what are called necessaries, that is, food, clothing, shelter and things of that sort); yet if he promises after he has become of age that he will pay these debts, from which he might escape, thereafter he is liable.

CONTRACTS WHICH MUST BE IN WRITING.-There is, in some contracts, one other requisite, besides those already mentioned, necessary to make them enforceable, and that is a writing. It has already been said that writing is not, as such, essential to the validity of contracts, but there are exceptional kinds of contracts which the law has required to be in writing for many years. This is by virtue of what is known as the "Statute of Frauds." This was passed in England in the year 1676, and is known as "Chapter 3, of the Statute of 29, Charles II." This statute was passed for the purpose of preventing frauds and perjuries which were particularly prevalent at the time it was enacted. It is doubtful as to how much good the statute has accomplished. There is no question that in many cases it has caused fraud and perjury rather than prevented it. The statute, however, as passed in England, has been reenacted in practically every State in this country with slight modifications, and it is, therefore, a part of contract law to which attention must be given. Originally, the statute read as follows: "No action shall be brought (1) whereby to charge any executor or administrator upon any special promise to answer damages out of his own estate; (2) or whereby to charge the defendant upon any special promise to answer for the debt, default, or miscarriage of another person; (3) or to charge any person upon any agreement made in consideration of marriage; (4) or upon any contract or sale of lands, tenements, or hereditaments, or any interest in or concerning them; (5) or upon any agreement that is not to be performed within the space of one year from the making thereof; unless the agreement upon which such action shall be brought, or some memorandum or note thereof shall be in writing, and signed by the party to be charged therewith or some person thereunto by him lawfully authorized." A word of comment is necessary to explain the general import of these various sections.

Section 1: An executor or administrator is appointed to settle a deceased person's estate. He is not obliged to personally pay the debts of the deceased person out of his own pocket, if the estate is not sufficient. His liability is limited by the assets of the deceased, but if, in order to save the credit of the deceased or for any other reason, he chooses to promise "to answer damages out of his own estate" that promise must be in writing. This is the situation referred to by this section.

Section 2: This is a very important class and leads us to call attention to the distinction between a guaranty and a contract somewhat similar. Suppose A writes to Jordan, Marsh Company: "Please sell B six good shirts and charge the same to my account." That is not a guaranty. A is in that case a purchaser just as much as if he ordered the shirts sent to himself. Nor is it any more a guaranty if it was further agreed between A and B that B should pay A for the shirts. On the other hand, if A should write to Jordan, Marsh Company, "Let B have six shirts and if he doesn't pay, I will," then you would have a guaranty. It is of the essence of a guaranty that there should be a principal debtor and that the guarantor's liability should be only secondary. A guaranty must be in writing. To put the matter in another way, when there are three parties to a transaction like the above, the writing is necessary. Where there are two parties, no writing is necessary. Where A says to Jordan, Marsh Company, "Let B have six shirts, and if he doesn't pay, I will," we have three parties: A, the guarantor; B, the principal debtor, and Jordan, Marsh Company, the creditor. This must be in writing. Where A says to Jordan, Marsh Company orally, "Give B six shirts and charge to my account," we have simply two parties, A, the principal debtor, and Jordan, Marsh Company, the creditor. Hence no writing is necessary. In connection with this section, it must be kept in mind that some oral contracts which would be good under this section may not be enforceable under another section which we shall refer to later, because the amount involved is over a specified sum.

Section 3: The agreement referred to by this section is not the contract or promise to marry, but is for a marriage settlement such as a promise to make a payment of money or a settlement of property in consideration of a marriage actually taking place.

Section 4: Any contract for the sale of land, or any interest in or concerning land, requires a writing in order to make it binding. The commonest kind of contracts in regard to land are leases or contracts for leases. An oral lease creates what is called a "tenancy at will," that is, the agreement, in so far as it specifies a fixed term, is wholly invalid, but while the tenant occupies he must pay at the agreed rate; but he has no right to stay in; he may be turned out, even though he pays his rent promptly, on notice equal to the time between rent days; and, similarly, he has a right to go out on giving the same short notice.

Section 5: An agreement not to be performed within a year must be in writing, and this provision of the statute has been the subject of rather an odd construction by the courts. The words "not to be performed within a year" have been construed to mean "which cannot possibly be performed within a year." Suppose A hires B for a year from to-morrow and contrast with that case a promise to hire B for B's life, or for the promisor's life. Now the first of those bargains is within the statute and must be in writing, but the second, although it seems for a much longer period, being for the whole life of the promisor or promisee, is not within the statute. The man on whose death the promise depends may die within a year, so there is a possibility of performance within a year. A promise to employ B for all his life, since that may possibly be done within a year, need not be put in writing. But a promise to hire a man for a year from to-morrow cannot be performed in a year. True, he may die within a year, and then the contract cannot be enforced, but there will be no performance. What was agreed, by the parties, was service for a year from to-morrow and that cannot possibly be done earlier than a year from to-morrow.

SALE OF GOODS.-A contract for the sale of goods exceeding in value a certain amount must also be in writing unless part or all of the goods have been delivered or part or all of the price paid. The value of the goods which brings a sale within this section of the Statute of Frauds varies in different States, and local statutes, therefore, should be consulted to ascertain the law in this connection.

Besides the kinds of contracts enumerated in the English statute and which have generally been adopted in this country there are two or three other classes of contracts which in a number of States are required by statute to be in writing. Of this sort is a contract to make a will. That is not a very common sort of contract, but sometimes a man promises in consideration of certain services to make a will in another's favor. The possibility of fraud in such cases is considerable. The testator is always dead before the question comes up, and then if the alleged promisee were allowed to prove by oral statements a contract to bequeath the testator's property on terms which the promisee says were agreed upon between them, it would afford a chance to produce the same effect as if oral wills were allowed. So a contract of a real estate agent for commissions is in some States required to be in writing. A contract with an agent empowering him to sell real estate, though not regarded at common law as within the prohibition of the section of the statute for the sale of an interest in land to be in writing, is by special enactment in many States required to be in writing. A contract for a loan of money reserving a rate of interest higher than that ordinarily allowed by law is sometimes required to be in writing.

WHAT CONSTITUTES WRITING.-The writing being a matter of proof, it is not essential that it be made at the time the contract is entered into. If made at any time before an action upon the contract is begun, that is a sufficient compliance with the statute. The writing, in order to be sufficient, must show who the parties to the agreement are, if not by naming them, by such a description as points to a specific person. Thus a letter addressed simply "Sir," and signed by the party charged, but not containing the name of the person addressed, is not sufficient. It is also required that all the terms of the contract appear in the writing, such as the subject matter, price, terms of credit or any express warranty, but, as often happens, they need not all be expressed in one writing. Contracts are frequently made as the result of an extended correspondence, and in such a case the various letters can be put together and construed as one writing if they obviously refer to one another, and thus all the terms appear in writing. The statutes in some States require "subscription" of the signature, and in that case the signing must be at the end; but where there is not such requirement a signing in the body of the instrument is sufficient.

ALTERATION OF WRITTEN CONTRACT BY SPOKEN WORDS.-Failure to understand and observe the rule restricting parol evidence to vary written contracts leads to a great deal of trouble. The parol evidence rule is this: Where parties have executed a written contract purporting to state the terms of their agreement, the court will not receive evidence that they orally agreed to something less or more or different, at or before the time when the written agreement was executed. That written agreement is taken as conclusive evidence of the contract made at that time. In trying to ascertain what the writing means, however, the court will permit the surrounding circumstances to be shown, and the meaning of technical or trade terms or abbreviations may be proved. It may be shown also that the parties did not intend the written agreement to be effective until some particular event happened; but if the writing was executed as an expression of the intention of the parties at that time, the only endeavor of the court will be to ascertain the meaning of the written words and to enforce them as written. The question of oral agreements made subsequent to the writing is not so simple. We must here distinguish between (1) contracts of which the law requires written evidence because they are within the Statute of Frauds, and (2) contracts which the law does not require to be in writing, but which, nevertheless, are written. Contracts of the latter sort may be rescinded, added to or subtracted from by any subsequent agreement which conforms to the requirements of the law governing mutual consent and consideration, though of course it is very desirable, to avoid dispute, that any variation or rescission of a written contract should itself be in writing. If, however, the Statute of Frauds required the original contract to be in writing, though it may orally be rescinded, it cannot be varied by oral agreement. To permit such an oral agreement would in effect violate the Statute of Frauds by permitting an agreement partly in writing but partly oral to be enforced. Thus, if a written contract for the sale of goods (exceeding in value the amount permitted to be contracted for orally) was made, and the parties afterwards orally agreed to change the price, the time of delivery, or any other terms of the contract, the subsequent oral agreement would be invalid.

THE LIMITS OF CONTRACTUAL RELATIONS.-As a general rule a contract does not impose liabilities or confer rights on a person who is not a party to it. It follows from the very nature of a contract that a person who is not a party to it cannot be included in the rights or liabilities which it creates, so that he will be entitled to sue or render himself liable to be sued upon it. A contract is the result of a voluntary agreement entered into by the parties. Therefore, any contractual rights or liabilities existing by virtue of such voluntary agreement between Smith and Jones are no concern of White and Black. They cannot be bound by any of the provisions of the contract between Smith and Jones, nor can a breach of that contract give them any rights. There are apparent exceptions to the rule we have just mentioned. One is in the case of agency. Here one person represents another in entering into a contract. A contract, however, made by an agent can bind a principal only by force of a previous authority or a subsequent ratification, so that really the contract which binds the principal is his own contract. The other exception is where the rights and liabilities created by a contract may pass to a person other than the original party to it, either by act of the parties themselves or by operation of law. Such would be the case where Smith and Jones have performed the terms of their contract except that Smith has not paid the agreed amount to Jones. Jones assigns his right to collect this amount to White. Such an assignment is permissible, as we will learn when we consider that subject later on. Such is an assignment by act of the parties themselves. Even this exception is limited, as the obligations incurred in purely personal service contracts are not subject to assignment. Thus, if I employ artist Greene to paint my portrait, he could not assign this contract and compel me to accept a portrait painted by artist Brown.

THE RULE OF LAWRENCE v. FOX.-We shall now take up a very generally recognized exception to the principle we have just discussed. The question in its simplest form is this: If Smith and Jones make a contract for the benefit of Greene, may Greene sue on that contract? From what we have said in the preceding paragraph a negative answer might seem to be correct. However, to-day, stated in general terms, and leaving out of the question the limitations recognized in various jurisdictions, the very general rule is that a third party (Greene in our illustration) may enforce a promise made for his benefit, even though he is a stranger both to the contract and to the consideration. In other words, it is held not to be necessary that any consideration move from the third party. It is enough if there is a sufficient consideration between the parties who make the agreement for the benefit of the third party. So in the leading case of Lawrence v. Fox, 20 New York 268, where a debtor of the plaintiff had loaned money to the defendant and the defendant had promised him to pay the plaintiff, although the plaintiff was not a party to the contract, it was held that where a promise is "made to one for the benefit of another, he for whose benefit it is made may bring an action for its breach."

QUALIFICATION OF RULE.-We must call attention to one qualification quite generally recognized. Under this rule, that a beneficiary may enforce a contract, it is necessary that the contract must have been intended for the benefit of a third person. It is not sufficient that the performance may just happen to benefit a third person; it must have been intended for the benefit of a more or less definite person. Thus, where a county board had entered into a contract with a construction company which was building a bridge for it and maintaining a temporary foot bridge during the operation, by the terms of which contract the construction company assumed responsibility for all injuries suffered by pedestrians using the temporary foot bridge, it was held that a person who was injured because of the failure to light the foot bridge properly, was not such a third person as might sue under the rule of Lawrence v. Fox, on the contract made between the county board and the construction company.

APPLICATION OF RULE.-The rule in Lawrence v. Fox has been applied to contracts under seal in many jurisdictions, although there are some decisions to the contrary. A common application of this doctrine is found in the sale of real property with a mortgage upon it. The new purchaser as a part of the purchase price makes an agreement whereby he assumes the payment of the mortgagee. The question of whether the mortgagee, who is really the third party for whose benefit the contract is made, may sue the new owner, is generally answered in the affirmative.

CAPACITY OF PARTIES.-All persons are ordinarily presumed to be capable of contracting, but the law imposes upon some-in varying amounts and for their own protection-disabilities to make contracts which may be enforced against them; and, upon some, for considerations of public policy, disabilities to make enforceable contracts. These persons are (1) Infants; (2) Insane persons; (3) Drunkards; (4) Married women-to a limited extent; (5) Aliens; (6) Artificial persons or corporations.

WHO ARE INFANTS.-All persons under the age of twenty-one are considered infants, except that in some States, by statute, women attain their majority at eighteen. The law endeavors to protect those who have no experience and judgment against the loss of their property because of their inability to deal safely with others who might take an advantage of that fact. It may well be that one who has nearly attained his majority is as able in fact to protect his interests as one of full age, but the essence of the law is that it is a rule of universal application, and the law cannot measure the ability in each particular case. To do the greatest good for the greatest number, therefore, it conclusively presumes that those under twenty-one have not yet gained the ability to cope with others in the preservation of their property.

CONTRACTS OF AN INFANT.-An infant's contracts are voidable; that is, though they bind the other party to the bargain the infant himself may avoid them. If he avoids them the adult with whom he contracted is entitled to recover whatever he may have given the infant which still remains in the latter's possession; but if the infant has spent or used, or for any reason no longer has the consideration which the adult gave him, the infant may avoid his own obligation if he has not already performed it, and if he has already performed it he may reclaim what he has given. After he comes of age, but not before, the infant may ratify his contracts and they then become binding upon him. The retention after coming of age of property received by the infant during his minority amounts to a ratification. There are a few obligations of an infant which on grounds of public policy are binding upon him. This is true of a contract to perform military service. The marriage of an infant is binding though his engagement is not. It is frequently said that his contract for necessaries is binding; strictly this is not true. The infant is liable for necessaries, but his obligation does not depend upon his contract; it is an obligation imposed by law-what has been called a quasi-contract. The importance of this distinction is shown if the price agreed upon exceeded the real value of the necessaries. If the contract were binding, the infant would be bound to pay the agreed price, but in fact he is liable only for the fair value. What is necessary for an infant depends upon his station in life, upon whether he already has a sufficient supply of the necessary article in question, and upon whether he is receiving proper support from a parent or guardian. The privilege of an infant is generally held to exist even though the party dealing with him not only reasonably believed the infant of age, but had received actual representations from the infant to that effect.

INSANE PERSONS AND DRUNKARDS-The law affords protection to insane persons and, to a less extent, to drunkards, for the same reason as in the case of infants, namely, that those who are incapable of understanding what they are doing and of comprehending the effect of their contracts upon their property should be safeguarded against the designs of the more capable. This protection is given them by declaring some of their contracts void, and allowing them, or those legally representing them, to avoid all others with the exception of a few. Also, as in the case of infants, this privilege as to such contracts is for the insane person's protection only, and the other party to the contract may not avoid it by pleading that it was made with an incompetent person.

WHOM DOES THE LAW CONSIDER INSANE?-Modern science has clearly established that a person may be insane on one subject, and yet possess a clear understanding and be perfectly sound on another. If the contract deals with a subject of which the person has a clear understanding, he is not in need of protection and is given none. Those only are given the protection who do not possess the mind to understand in a reasonable manner the nature and effect of the act in which they engage.

BINDING OBLIGATIONS FOR NECESSARIES.-The insane must live as well as the sane; consequently they are bound to pay for necessaries furnished them but only the reasonable value, as has been explained in the case of infants. The rules for determining what these necessaries may be are the same as in the case of infants.

OTHER CONTRACTS.-It is often a difficult matter to know when a person is insane, much more difficult than it is to determine a person's age. One of the contracting parties may have acted in perfect good faith, being ignorant of the other's unsoundness of mind and having no judicial determination of insanity or other warning to put him on his guard. The contract even may be reasonable in its terms, and it may have been so acted upon that the parties to it cannot be restored to their original position. In such a case, while the law should protect the incompetent, it would be clear injustice to protect him to such an extent as to make the other party suffer through no fault of his own. It has been quite generally determined in this country, therefore, that where a person does not know of the other's insanity and there has been no judicial determination of such insanity to notify the world of it, and the contract is a fair one, and has been so acted upon that the parties cannot be restored to their original position, it is binding upon the lunatic as well as upon the other party.

VOID CONTRACTS.-In some States it is held, however, that all contracts of an insane person are void. In such States the rule above stated would not hold. The law of each State must be consulted to determine the law in the particular State. In some States, notably New York and Massachusetts, an insane person's deed of lands has been held to be void, without reference to whether or not the other party entered into the contract in good faith without notice, or that it has been so far acted upon that the parties cannot be restored to their original position. As in the case of infants, an insane person's power of attorney has been declared by high authority to be absolutely void.

VOIDABLE CONTRACTS.-In most jurisdictions an insane person's contracts are voidable by him or by his guardian, provided (1) that the other person knew of his insanity at the time of making the contract, or (2) he had been declared insane by some court, or (3) the parties can be restored to their original position.

RATIFICATION AND AVOIDANCE.-When the insane person's reason has been restored, if the contract is a voidable one, as explained in the foregoing rules, though he may by acts or words avoid the contract he made during his insanity, he may in like manner ratify it, or he may ratify it by not avoiding it within a reasonable time after recovering his reason while continuing to keep something capable of being returned, which he obtained under the contract.

WHAT CONSTITUTES DRUNKENNESS.-It is not ordinary drunkenness which excuses a man from his contracts, and enables him to claim the protection given generally to incapable persons. The person must have been utterly deprived of his reason and understanding, so that he could not comprehend the nature or effect of the act in which he was engaged. That he was so much under the influence of liquor that his judgment was not as good as in his normal state does not excuse him.

MARRIED WOMEN.-It is practically impossible to state in brief form the law upon the subject of married women's contracts. The difficulty arises from the diverse changes made in the plain and clear rules of the common law by statutes in the different States. The old law is wholly incompatible with the enlightened view now held in regard to women, their family, social and business standing, and the changes have been made to give them the rights to which they are justly entitled. But, inasmuch as the statutes have not been uniform in the different States, the law to-day is not wholly uniform. The statutes and decisions in each State must be consulted to determine the law on the subject as it is to-day. Through these changes the law has become very complicated, and business men should obtain legal advice before entering into important business dealings with married women.

THE OLD RULE.-Upon her marriage a woman's existence became merged in that of her husband, and the husband and wife were regarded for many purposes as one person. What tangible personal property she had became his immediately upon marriage, and he had the right to reduce her bills, notes, bonds and other debts to his possession. Her real property she retained the title to, subject to the right of the husband to have the use of it during his life, if children were born of the marriage. He was bound to supply her with necessaries, and so long as he did this her contracts for things of even ordinary use were void; but if he failed to supply the necessaries her contract for them would be valid. All her other contracts were absolutely void-not voidable. Her position, then, was worse than an infant's. She could have personal property of her own only if it was given to someone else to hold the title and pay over the income to her, and even this "separate estate," as it was called, could not be bound by her contracts.

CHANGES MADE BY STATUTE.-The law of married women's contracts has been greatly changed by legislative enactments, to give married women the rights which the more enlightened view of the present time accords to them. The first changes aimed quite generally to give her greater rights over her "separate estate," giving her power to make binding contracts with reference to it, or to make binding contracts if she were carrying on a trade or business of her own. But the earlier statutes frequently did not give her power to contract with her husband, or to make binding contracts if she had no separate estate, or was not carrying on a separate business. Later enactments have largely corrected these defects, but the old rule still stands except as it has been changed by statute, and, therefore, the statutes of each State and the decisions interpreting them must be consulted to determine accurately the law in each State. It may, however, be said that generally a married woman may now contract except with her husband, and except as surety for him. In many States she can even make contracts of these excepted classes.

ALIENS.-An alien is one born out of the jurisdiction of the United States, of a father not a citizen of this country, and who has not been naturalized. In times of peace, aliens may hold property and make contracts and seek the protection of our courts as freely as citizens. When war breaks out between this country and another the making of contracts between citizens of the two countries is prohibited. If such contracts are made during a state of war, they are illegal and void, and the courts of this country will not lend their aid to enforce them, either during the war or after its termination. Contracts made before the war breaks out are good, but cannot be enforced, nor can remedies for their breach be obtained, while the war is in progress. When the war ceases, however, the courts will lend their aid to the enforcement of such contracts.

CORPORATIONS.-A corporation may contract as freely as an individual so long as its contracts are within the business powers and scope of the business which its charter authorizes it to conduct. And even if a corporation has made a contract outside of the scope of its business, and the contract has been acted upon so that either party has had the benefit of the contract, an action will lie in favor of the other for the benefits so conferred. But a contract outside of the business which its charter permits the corporation to engage in, and which is wholly executory, the courts will not enforce. Such contracts are said to be ultra vires. Contracts with a corporation may be in the same form as contracts between individuals, and the corporation need use its seal only where an ordinary person is required to use one. The officer or officers making the contract on behalf of a corporation must, however, be authorized so to do either by the directors or by the general powers attached to such officers. In law corporations are deemed to be artificial persons subject in a general way to provisions governing natural persons.

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Contracts-Performance and Termination

PRIMARY RULE.-After a contract has been formed, it does not make much difference whether it is under seal or whether it is a simple contract; the rules governing the contract, subsequent to its formation, are very much the same though there are a few distinctions. The primary rule running through the law, governing obligations to perform contracts, is that if a man has once formed a good contract he must do as he agreed, and if he fails substantially (not merely slightly) to do so the other party may refuse to perform on his part. If you remember that fundamental principle you cannot generally go far wrong.

CONDITIONAL CONTRACTS-INSURANCE.-What one agrees to often depends on the conditions which he includes as part of his promise. Take the insurance policy previously alluded to. An insurance company promises to pay $5,000, but it does not promise to pay in any event; the condition "if the house burns down" is obviously a qualification of the promise. But there are other conditions in the insurance policy. The insurance company says that it will not be liable if gasoline is kept in the house beyond a small quantity necessary for cleaning. That, too, is a condition of its promise to pay $5,000; so that "if the house burns down," "if gasoline is not kept in the house," "if the house is not unoccupied more than three months," and "if mechanics are not allowed in possession of the property for more than a certain length of time," are all conditions, and the company's main promise need only be kept if the conditions are complied with. That is why an insurance policy is not always quite as good as it seems-because there is a large promise in large print; but there are a good many qualifications in smaller print which are really part of the promise and must be taken into account.

CONDITIONS IN BUILDING CONTRACTS.-Another kind of conditional promise often occurs in building contracts. The employer agrees to pay the builder or contractor on the production of an architect's certificate. Now it doesn't do the builder any good to build that house unless he gets the architect's certificate, for he has been promised pay only on condition that he produce it. That is the promise between the parties. That is the only promise.

WHEN PERFORMANCE OF CONDITIONS IS EXCUSED.-It is obvious that these conditions in promises may be sometimes used to defeat the ends of justice, and undoubtedly at times they are so used. A person who draws a contract cleverly will put in a great many conditions qualifying his own liability, and will try to make the promise on the other side as unconditional as possible. The law cannot wholly do away with these conditions, because in general, so long as parties do not make illegal bargains, they have a right to make such bargains as suit themselves. The court cannot make their agreement for them, but it is held that if a condition will lead to a real forfeiture by an innocent promisee, the law will relieve the promisee. Thus, in the architect's certificate case, if the house was properly built and it was merely ill temper on the part of the architect that caused him to withhold giving the certificate, the court would allow the builder to recover, and even if the architect had some good reason for refusing the certificate, the court would not allow the builder to be permanently prevented from recovering anything on the contract, providing the builder had substantially though not entirely performed his contract and had acted in good faith. If, however, his default was wilful, if he had tried to beat the specifications, and the architect had found him out and therefore refused the certificate, the only thing the builder could do would be to go at it again, tear out his faulty construction and build as he had agreed.

IN CONTRACTS OF EMPLOYMENT, WORK MUST BE PERFORMED BEFORE PAYMENT IS DUE.-There are other matters which qualify the obligation of a promisor to perform besides express conditions such as those we have alluded to. Take this case: John promises to work for the A. B. Company; the A. B. Company promises to employ him and to pay him a salary of $1,000 a year. John comes to work the first day and works a while, and then he says he would like his thousand dollars. The A. B. Company says, "Well, you have got to do your work first." John says, "Why should I work first and trust you for pay, rather than you pay first and trust me for the work? I will keep on working, but I want the pay now." Of course, the employer is right in refusing to pay until the work has been done, even though the promise of the employer is not expressly qualified by the statement that after the work has been done he will pay $1,000. It has been dictated by custom, rather than by anything else, that where work is to be performed on one side and money to be paid on the other, in the absence of any statement in the contract to the contrary, the work must be done before the pay is given. The result is this: that John must work anyway, his promise to work being absolute; but the employer's promise to pay the money is, in effect, conditional. It is subject to an implied condition, as it is called, that John shall have done the work he agreed to do. The promise of the employer is, in effect, "I will pay if you previously have done the work." But John's promise is absolute: "I will work." He has to trust for the pay.

PERFORMANCE FIRST DUE UNDER A CONTRACT MUST BE GIVEN BEFORE PERFORMANCE SUBSEQUENTLY DUE FROM THE OTHER PARTY CAN BE DEMANDED.-And that case is an illustration of a broader principle which may be stated in this way: where the performance promised one party to a contract is to precede in time the performance by the other side, the party who is to perform first is bound absolutely to perform; whereas the party who is to perform subsequently may refuse to perform unless and until the other party performs. In the cases thus far alluded to, the promises of the two parties could not be performed at the same time. You cannot work for a year and pay $1,000 simultaneously. One performance takes a whole year and the other performance takes only a moment.

PERFORMANCES CONCURRENTLY DUE.-But frequently there arise cases where both promises can take place at the same time. The commonest illustration of that is a contract to buy and sell. You can pay the price and hand over the goods simultaneously, and when a contract is of this character, that is, where both performances can be rendered at the same time, the rule is that in the absence of agreement to the contrary, they must be performed simultaneously. John agrees to buy James' horse and pay $200 for it, and James agrees to sell the horse for $200; that is a bilateral contract of purchase and sale. Now suppose neither party does anything, has each party broken his promise? It might seem so, for John has not bought the horse or paid for it as he agreed, nor has James sold the horse. But where each party is bound to perform simultaneously with the other, if either wants to acquire any rights under the contract he must do what is called putting the other party in default, that is, he must offer to perform himself. John, therefore, must go to James, offer $200 and demand the horse if he wants to assert that James has broken his contract. And James, on the other hand, if he wishes to enforce the contract, must go with the horse to John and say, "Here is the horse which I will hand over to you on receiving simultaneously the $200 which you promised me for it." The obligation of the two promises when they can be performed simultaneously is called concurrently conditional, that is, each party has a concurrent right to performance by the other, and has a right to refuse performance until he receives, concurrently with his own performance, performance by the other party.

INSTALLMENT CONTRACTS.-Sometimes contracts are more complicated than those which we have stated, such as contracts of service and contracts to buy and sell. This, for instance, is a type of a very common sort of contract in business: a leather manufacturer uses large quantities of tanning extract in his tannery. He makes a contract for a regular supply, so many barrels each week for a year, for which he agrees to pay a specified price a barrel on delivery. For a time the extract promised him is sent just as agreed. We will suppose, then, that perhaps the extract manufacturer is slow in sending what he promised; there is a delay; perhaps the extract that is furnished is not as good as it was or as the contract called for. What can the leather manufacturer do about it? Of course, he can keep on with the contract, taking what the extract manufacturer sends him, getting as much performance as he can, and then sue for such damages as he may suffer because of the failure to give what was promised completely. But he does not always want to do that. Suppose it is necessary for his business that he should get tanning extract and get it regularly. He does not want to wait and take chances on the extract manufacturer's delays in delivery and inferiorities in quality. He wants to make a contract with somebody else and get out of his bargain with the first extract manufacturer altogether. May he do so? No question in contracts comes up in business more often than that. And the answer to the question is this: it depends on the materiality of the breach, taking into consideration the terms of the contract and the extent of the default. Is the breach so serious as to make it fair and just in a business sense to call the contract wholly off; or will justice be better obtained by making the injured party keep on with the contract and seek redress in damages for any minor default?

BREACH IN CONTRACTS OF EMPLOYMENT.-The same thing comes up very often in contracts of employment. Suppose an employer hires an employee for a year, and in the course of the year the employee at some time or other fails to fulfill his contractual duty as an employee. He is negligent and in some respect fails to comply with his contract to render good and efficient service. Can the employer discharge him? We must ask how serious is the breach. A merely negligent breach of duty is not so serious as one which is wilful. Or the breach might be on the other side of the contract. Suppose the employer has promised to pay a certain sum each month as salary during the year, and does not pay promptly. Has the employee a right to say, "You pay my salary on the first day of the month as you agreed, or I leave"? No, he does not have a right to speak so positively as that. A single day's delay in the payment of one month's installment of salary would not justify throwing up a year's contract. On the other hand, if the delay ran along for any considerable time, it would justify the employee in refusing to continue. You will see that this principle of materiality of the breach on one side, as justifying a refusal to perform on the other, is rather an indefinite one. It involves questions of degree. That is so in the nature of the case. The indefiniteness of the rule, therefore, cannot very well be helped.

ILLUSTRATIONS AND DISTINCTIONS.-A few concrete illustrations may help to bring out the points under discussion. Suppose an agreement for the sale of real estate, and, for instance, the buyer is unable to be on hand the day the sale is to be completed, and the owner is present, and, finding the buyer absent, immediately sells the land to another. Now is there any action against the owner, or might he justly refuse to go on with the contract because of the momentary breach of contract? No, he cannot refuse to go on in the case of a contract of that sort to sell real estate, unless the contract very expressly provided that the transaction must be carried through at the specified time and place or not at all. The case would be governed otherwise by the principle of materiality of the breach, to which we have alluded. A brief delay would not be a sufficiently material breach to justify the seller in refusing to go on, but a long delay, of course, would be sufficient. In sales of personal property time is regarded by the law as more important than in sales of land. In contracts to sell stocks varying rapidly in value, time is a very important element. Suppose now that an option for a piece of land was given by the owner. May he dispose of the land to another a few minutes after the time specified in the option for the acceptance of the offer? That is different from the case previously put. The option is in effect an offer to make a sale, and the offer is by its terms to expire, we will say, at 12 o'clock, noon, October 23. It will expire at that time, and an acceptance a minute later will be too late. The difference is in the terms of the promise made by the different parties. In the case put first, there is an unqualified contract to buy and sell. In the case now put there is a promise to sell only if the price is tendered or if acceptance is made prior to 12 o'clock, noon, October 23. The terms of the option, assuming in its favor that it was given for consideration or was under seal and therefore not merely a revocable offer, were expressly conditional. The vital thing in contracts is to be sure of the terms of your promise. The term option indicates a right which exists up to a certain point; beyond that point there is no right.

PROSPECTIVE INABILITY OF ONE PARTY EXCUSES THE OTHER.-There is one other thing besides actual breach by his co-contractor, which justifies one party to a contract in refusing to go on with the contract, and that may be called prospective inability to perform on the part of the other side.

INSOLVENCY OR BANKRUPTCY.-Let us give one or two illustrations of that. You have entered into a contract to sell a merchant 100 barrels of flour on thirty days' credit. The time has come for the delivery of the flour, but the merchant is insolvent. He says to you, "I want you to deliver that flour; the agreed day has come." You say, "But you cannot pay for the flour." "Well," he replies, "it is not time to pay for it. You agreed to give me thirty days' credit: perhaps I shall be able to pay all right then. I have not broken my promise yet, and as long as I am not in default in my promise you have no right to break yours." You have a right to refuse to deliver the flour because, though the buyer has not yet broken his contract, the prospect of his being able to keep it, in view of his insolvency, is so slight that his prospective inability to perform in the future, when the time comes, excuses you from going on now. Insolvency or bankruptcy of one party to a contract will always excuse the other party from giving credit or going on with an executory contract, unless concurrent performance is made by the insolvent party or security given for future performance.

REPUDIATION.-Repudiation of a contract by one party is also a good excuse. Repudiation means a wrongful assertion by one party to a contract that he is not going to perform in the future what he agreed. After such repudiation the other party may say, "I am not going to perform now what I agreed to perform, since you have said you will not perform in the future what you agreed. I shall not go ahead and trust you, even though I did by the contract agree to give you credit, in view of the fact that you have now repudiated your agreement by saying that you are not going to do what you agreed." Repudiation may be indicated by acts as well as by words, and often is indicated partly by words and partly by acts.

TRANSFER OF PROPERTY TO WHICH THE CONTRACT RELATES.-Still another illustration of prospective inability arises where a contract relates to specific property, as a certain piece of land, and before the time for performance comes, the owner of the land, who had agreed to sell it we will suppose, transfers it to somebody else or mortgages it. The man who had agreed to buy that piece of land may withdraw from the contract. He may say, "You might get the land back at the time you agreed to perform, but I am not going to take any chances on that. I am off the bargain altogether."

IMPORTANCE OF EXACT PROVISIONS IN CONTRACTS.-So much for the rather difficult subject of the mutual duties of parties to a contract in the performance of it. The best way to avoid doubt or uncertainty in such matters is to provide very exactly in the contract what the rights of the parties shall be in certain contingencies. The law always respects the intention of the parties when it is manifested, and it is only when they have said nothing about their intention that the rules which we have considered become important.

FRAUD.-The next question in regard to contracts arises out of certain grounds of defense that may come up and the most important of these is fraud. Fraud is deception; it is inducing the other party to believe something which is not true, and, by inducing him to believe that, influencing his action. The ordinary way in which fraud is manifested is by misrepresentations. A purchase or sale of stock or of goods may be induced by fraud. A loan may be obtained from a bank by fraud, that is, by misrepresentation of material facts which influence the other side to act.

MISSTATEMENTS OF OPINION ARE NOT FRAUDULENT.-Now what kind of misrepresentation amounts to fraud? There must be misrepresentation of a fact. Merely misrepresentation of opinion is insufficient and what is opinion and what is fact has been the basis of a good many lawsuits. John offers his horse to James for sale at $300. He says that it is the best horse in town. Well, it is not the best horse in town by a good deal, but that sort of statement cannot be the basis of an allegation of fraud. That a thing is "good," or "the best in the market," or similar general statements, all of which ought to be known to the hearer to be simply expressions of opinion, are not statements of positive fact. Take these two statements in regard to the horse. "He can trot very fast." That is a mere statement of opinion. To some minds eight miles an hour is very fast; to more enterprising persons fifteen miles an hour is necessary in order to make travel seem fast. Those are matters of opinion. But a statement that the horse can trot twelve miles an hour, or has trotted one mile in three minutes on the track, are statements of fact, and if untrue are fraudulent. A statement of value is a statement of opinion and cannot be the basis of fraud. A statement that the horse is worth $300, or is worth twice as much as the owner is asking for him, cannot be relied upon; but a statement that $300 was paid for this horse, or was offered for him, is an assertion of fact, and if untrue would be the basis of an allegation of fraud.

PROMISES ARE NOT FRAUDULENT BECAUSE BROKEN.-A promise is not a statement of fact. A man may promise to do something and fail to carry out the promise, and in consequence the person he was dealing with may regret the bargain he entered into, but his only remedy is to sue for damages for breach of the promise if it was part of a contract. He cannot assert that merely because the promise was not kept the transaction was fraudulent. But if a man makes a promise knowing when he makes it that he cannot keep it, he is committing a fraud. The commonest illustration of this is where a man buys goods on credit, having at the time an intention not to pay for them, or well knowing that he cannot pay for them.

STATEMENTS MUST HAVE BEEN CALCULATED TO INDUCE ACTION.-Generally speaking, the statement relied on as fraudulent must have been made with the purpose of inducing action. For instance, suppose John likes to tell large stories. He tells James things about his neighbor's horse. John does not do this for any purpose except to brag about living near a man who has such a splendid horse, but James suddenly takes the notion he would like to have that horse and he goes and buys it. Now it was not legal fraud on John's part to tell those lies about the horse, even though they did induce James to go and buy it, unless John, as a reasonable man, ought to have known that James was likely to buy the horse, as might have been the case if James had been talking about buying him. Then it would be fraud, and it would not make any difference in regard to its being fraudulent that John had nothing to gain by telling these lies, that he was simply doing it for the fun of the thing.

REMEDIES FOR FRAUD.-What remedy has the defrauded person? The law gives him two remedies of which he may take his choice; he cannot have both, but he can have either. One is to sue the fraudulent person for such damages as have been suffered, and the other is to rescind the transaction, to get back what has been given, or to refuse to go on with the contract at all if it is still wholly executory.

DURESS AND UNDUE INFLUENCE.-There are certain defences similar to fraud; duress, or undue influence, is one of them. However, this is comparatively rare. It is compelling a person to do what he does not want to do, making him agree to a bargain that he would not agree to accept under compulsion, as by fear of personal violence or imprisonment; and a bargain made under these circumstances can be rescinded or set aside. Merely threatening to enforce your legal rights by suit against another is not duress, though it may in fact induce him to agree to what he would not otherwise have agreed; but to threaten criminal prosecution as a means of extorting money or inducing an agreement is illegal and in many jurisdictions is itself a crime.

MISTAKE OF FACT.-In certain cases, also, a mutual mistake of a vital fact is ground for setting aside a contract, but these cases are not very common. Mistakes generally do not prevent the enforcement of contracts. Usually where there is a mistake, it is of a character for which one party or the other is to blame. If the mistake arises out of deception it is fraud. If the mistake arises simply because the mistaken party has failed to inform himself of the facts, as he might have done, then it is no defence at all. But if both parties were acting under the mutual assumption that some vital fact was true in making a bargain, either one of them may avoid or rescind the bargain when it appears they were both mistaken.

IMPOSSIBILITY.-Impossibility is sometimes a defence to the performance of a contract. Perhaps the simplest illustration of this arises in a contract for personal services of any kind. Illness or death of the person who promises the services excuses performance. Death does not usually terminate a contract or serve as a defence to it. If a man contracts to sell 100 bushels of grain and dies the next day his estate is liable on the contract just as if he continued alive; but if he agreed to hire a man as an employee for a year, his death or the employee's death within the year would terminate the obligation of both. Unexpected difficulty is not impossibility. For instance, take a building contract: the builder agrees to put up a building within a certain time; he is prevented by strikes. Nevertheless, he is liable for not doing as he agreed. He should have put a condition in his promise, qualifying his agreement to build, that if strikes prevented, he would not be liable. So, if the foundation gave way and the building tumbled down before it was finished, the builder must put it up again. Also, if lightning struck it, he must put it up again.

ILLEGAL CONTRACTS.-One other matter to be considered in connection with contracts and defences to them is illegality. Some kinds of illegal contracts are so obviously illegal that it is not necessary to say anything about them. Anybody would know that they were illegal and that they could not be enforced for that reason. A contract to steal or murder or take part in any crime is a good example. But other kinds of illegal contracts are not so obviously wicked as to make it clear that they are unenforceable. It may be worth while to mention a few of these kinds of illegality.

CONTRACTS IN RESTRAINT OF TRADE.-One class of contracts which has become very important in late years in business is the contract in restraint of trade, so called. The original contracts in restraint of trade were contracts by which one man agreed that he would not thereafter exercise his trade or profession, the object generally being that the promisee should be freed from the competition of the man who had promised to refrain from exercising his trade; and the law became settled a good many years ago that if the promise was general not to exercise the trade or profession anywhere, or at any time, it was illegal, but that if it was only for a reasonably limited space of time it would not be illegal. That old law still exists, but there has grown up further a much more important class of cases where contracts are made to further an attempted monopoly, and one may say pretty broadly that all such attempts are illegal. It does not matter how much business reason there is for it; any attempt to combine in order to get a monopoly, or in order to put up prices, is bad. Moreover, if the attempted restraint of trade or monopoly concerns interstate commerce, the agreement is a Federal crime under the Sherman law.

GAMBLING CONTRACTS.-Another kind of illegal contract is a gambling contract. This seems obvious in agreements for the more extreme kinds of gambling, but in certain business transactions where the matter becomes important, the dividing line is not so clear; especially in dealings on stock exchanges and exchanges for sales of staple products, such as grain, cotton and coffee. The stock exchanges and other exchanges are made the means of a great deal of speculation, which is virtually gambling. Now, in what cases does the law regard these transactions as gambling and, therefore unenforceable, and in what cases are they legal? The answer is, if an actual delivery of the stock, or commodity bought, is contemplated, then the transaction is not gambling in the legal sense; but if a settlement merely of the differences in buying and selling prices is contemplated, as the only performance of the bargain, then the transaction is gambling. The difference is between a stock-exchange business and a bucket-shop business. If you give an order to a stock-exchange house to buy stock, even though you put up but a small margin and could put up but a small margin, and the stock-exchange house knows you could put up but a small margin, nevertheless, the stock-exchange house actually buys that stock, and it is delivered to it. The stock-exchange house would then have a right to demand of you that you pay for that stock in full and take delivery of it, and could sue you for the price if you failed to comply with the demand. However, as a matter of fact, it does not ordinarily do that. If it wants to get the price which you promised to pay, and you fail on demand to take up the stock, it sells the stock which it has been holding as security. The bucket-shop, on the other hand, though it takes your order to buy, does not actually buy the stock; it simply settles with you when you want to settle, or when it wants to settle, because the margin is not sufficiently kept good, by calculating the difference between the price at which the stock was supposedly bought and the price at which it is supposedly sold, those prices being fixed by the ruling market quotations at the time. It would be perfectly possible to make a gambling transaction out of the stock-exchange transaction by a very slight change. If a stock-exchange house should agree, for instance, that the customer should not be compelled to take delivery of the stock, then that added agreement would make the transaction between broker and customer a gambling transaction, even though the broker actually bought the stock on the exchange, and, as between himself and the other broker on the exchange with whom he dealt, there was a perfectly valid sale of the stock. In some jurisdictions, by statute, speculative contracts which are not gambling contracts at common law are made illegal.

BREACH OF FIDUCIARY DUTIES.-Another very important class of illegal transactions arises from breach of fiduciary duties. A fiduciary is rather hard to define. He is somebody that owes a duty higher than a mere contractual obligation, a duty involving something of trust and confidence. A trustee is a fiduciary, so is an agent. A director or officer of a corporation is a fiduciary, and any dealing in which a fiduciary violates his duty to the person for whom he is fiduciary is illegal, and any agreement for such a violation is an illegal contract. It is illegal for a trustee to bargain for any advantage from his trust other than his regular compensation. It would be illegal for a trustee to bargain with a bank to give the bank a trust account in return for some personal advantage, as a loan to be made to the trustee personally. It would be a breach of fiduciary duty for a corporation officer and director to bargain for any personal advantage by virtue of his official action.

KNOWLEDGE OF ANOTHER'S ILLEGAL PURPOSE.-The knowledge of another's illegal purpose will not make the person who knows of it himself guilty of illegality; but if one not only knows but in any way promotes the illegal purpose of another, he will be considered a party to the illegality. A may sell goods to B, knowing that B is going to use them illegally, and A's sale will not be illegal; but if A does anything to help B in using them illegally, or if the goods are of such a character that they can be used only illegally, then A would be guilty of illegality himself.

MEANING OF ASSIGNMENTS.-Much of the difficulty regarding assignment of contracts is due to different meanings which may be attached to the word assignment. When property is assigned the assignee becomes the owner in every sense, if the person from whom he took the assignment had a valid title. This is not true of the assignment of contracts. By the common law, contract rights or "choses in action," as they are termed in law, were not assignable, the reason being that one who contracted with A, cannot without his consent become bound to B.

POWER OF ATTORNEY TO COLLECT A CLAIM.-Though when a man had a contract right he could not by common law make B in a complete sense the owner of the claim, he could give B a power to collect the claim as his, A's, agent, and authorize him to keep the proceeds when the claim was collected. It long ago became established that when an owner of a claim purported to make an assignment of a claim he thereby gave the assignee the power to enforce the claim in his stead, and this power given the assignee is irrevocable.

EFFECT OF ASSIGNMENT OF RIGHTS.-It may be supposed that the effect of an assignment of a right, though the result may be worked out by treating the assignee as an agent or attorney of the assignor, is the same as if the assignee were fully substituted in the position of the assignor as owner of the claim, but this is not quite true. Assuming that the claim is not represented by negotiable paper, the legal owner of the claim is still the assignor. This is shown by the fact that if the debtor pays the assignor in ignorance of the assignment, the debt is discharged and the assignee can only go against his assignor for the latter's fraudulent conduct in collecting the claim after having assigned it. So, too, if the assignor makes a subsequent assignment, this subsequent assignee also has a power of attorney to collect the claim and keep the proceeds; so that if the second assignee in good faith collects the claim in ignorance of the prior assignment, he can keep what he has collected; nor is the debtor liable to the first assignee who must as before seek redress from his assignor. It is, therefore, always important for the assignee of a non-negotiable chose in action to give immediate notice of his assignment to the debtor. If after such notice the debtor should pay the assignor or a subsequent assignee, such payment would not discharge the debtor, and the first assignee could collect the claim from him.

NON-ASSIGNABLE RIGHTS.-Rights cannot be assigned which are personal in their nature. The one who has contracted to paint a picture cannot delegate the duty to another, no matter how skillful. One who has a right to the personal services of an employee cannot assign that right to another. A publisher who has a right to publish all books written by a certain author cannot assign his right to another publisher.

ASSIGNMENT OF DUTIES.-The duties under a contract are not assignable under any circumstances. That is, one who owes money or is bound to any performance can not by any act of his own or by any act in agreement with any other person except his creditor, divest himself of liability and substitute the liability of another. This is sufficiently obvious when attention is called to it; for otherwise debtors would find an easy practical way of escaping from their debts by assigning the duty to pay to irresponsible persons. But the principle is not always recognized. A person who is subject to a duty, though he cannot escape liability, may delegate the performance of his obligation provided the duty is of such a character that performance by an agent will be substantially the same thing as performance by the obligor himself. Thus if a contractor engages to build a house, he may delegate the actual building to another, but he cannot escape responsibility for the work. One who owes a mortgage may delegate the payment of the mortgage to a purchaser of the land who assumes and agrees to pay the debt. If the purchaser of the land actually pays, the debt is discharged; but if he fails to do so, the mortgagee may sue the original mortgagor and the latter will be obliged to bring another action against the purchaser who promised to pay the debt and failed to do so. So where a partnership is changed and a new firm formed, it is very common for the new firm to assume the obligations of the old firm.

ORIGINAL DEBTOR NOT DISCHARGED UNLESS THERE IS A NOVATION.-Though a creditor cannot be deprived of his right against his original debtor without his consent, he may consent. If he does thus consent to take in lieu of the obligation of his original debtor that of the person who assumed the debt, what is called a novation is created. That frequently happens where a new firm succeeds an old one. The new firm goes on dealing with the old creditors, and they impliedly, if not expressly, assent to taking the new firm instead of the old firm as a debtor. But in order to make out a novation you have got to find as a fact that the creditor agreed to give up his right against the old debtor. If the creditor does not assent to a novation then the situation is that the creditor retains his claim against the old debtor, but the person who has assumed the debt has contracted to pay that debt. If he keeps his contract he will pay it and the debt will be cancelled. If he does not keep his contract the creditor will sue the original debtor and the original debtor will sue the man who assumed the debt.

ASSIGNMENT OF BILATERAL CONTRACTS.-In bilateral contracts each party is under a duty to perform his promise, and also has a right to the performance of the other party. If an attempt is made to assign such a contract the effect is this: the assignor delegates to the assignee the duty of performing the assignor's promise, but the assignor himself still remains liable if his agent, the assignee, fails to carry out the duty. Further, the assignor authorizes the assignee to receive the payment or performance due from the other party to the contract and to keep it for himself.

WHAT AMOUNTS TO AN ASSIGNMENT.-No particular words are necessary to constitute an assignment. Any words which show an intention that another shall be the owner of a right are sufficient to constitute the latter an assignee. Especially it should be observed that an order directed to a debtor of the drawer ordering him to pay the debt to a named payee, is an assignment of the debt when delivered to the payee. This case must be sharply distinguished from a bill of exchange or check. A bill of exchange or check is an order to pay a certain amount unconditionally, irrespective of the existence of any particular fund. It is only an order to pay from a particular fund, that is, an order which is conditional expressly or impliedly on the existence of that fund, which constitutes an assignment.

PARTIAL ASSIGNMENT.-A creditor may not only assign his whole claim to an assignee, but he may assign part of it. Such a partial assignment authorizes the assignee to collect the portion of the claim assigned and keep it for himself. But the debtor is not bound to pay the claim piecemeal; he may insist on making but a single payment unless his contract with his creditor provides otherwise. A bank in accepting a deposit contracts to pay that deposit in such amounts as the depositor may indicate on the checks drawn by him, but an ordinary debtor who owes $100 cannot be required to pay in such amounts as his creditor may see fit to demand. For this reason a few courts hold that even if the debtor has notice of a partial assignment, he may pay the whole debt to the original creditor though that results in defrauding the partial assignee. Most courts hold, however, that the debtor when notified of the facts cannot do this, and if he objects to paying fractional parts of his indebtedness he must pay the whole sum into court to be distributed by it among the parties entitled. So, on a question of this character, the local statute should be examined.

ASSIGNMENT OF FUTURE CLAIMS.-Assignments of future claims, as well as of existing claims, may be made, but there are in many States some special provisions of statute law in regard to assigning future wages. Such assignments must often be recorded, and there are certain other special statutory provisions in regard to them. The assignment of future debts is also subject to this qualification: The law does not allow the assignment of a future claim unless the contract or employment out of which the claim is expected to arise has already been made or is already in existence.

DISCHARGE OF CONTRACTS.-Contracts are discharged in much the same way as they are made. The simplest way of discharging a contract is by performing it. When both parties do exactly what they agreed to do the contract is discharged by performance. Where seals still retain their common law effect, it may be discharged without performance by agreement under seal that it shall be discharged, just as a contract may be made by an agreement under seal. The agreement under seal to discharge a contract is called a release. You may release any right that you have-a right for money, a right to have work done or any right. Just as contracts may be made either under seal or by an agreement with consideration, so they may be discharged not only by a release under seal but by an agreement for rescission of the contract. But this agreement must have consideration.

ILLUSTRATIONS.-Suppose A has promised to build a house and B has promised to pay $10,000 for it. Before anything has been done, A and B agree to call that contract off. This is a valid agreement for rescission, because each party agrees to give up something-one party to give up his right to have the house built, the other party to give up the right to get $10,000 pay. So an agreement between employer and employee that a contract shall be terminated before the time originally agreed has sufficient consideration-the employer gives up his right to the employee's services, the employee gives up his right for future pay. But compare with these this case: A owes B a thousand dollars; it is simply a debt. A and B agree to call that square. That agreement is of no validity, for here only one party agrees to give up anything. The creditor agrees to give up his thousand dollars, and he does not get any promised amount in return for it. But that obligation, that debt, could be satisfied if valid consideration were given for the surrender of the claim; and anything agreed upon, as a horse, or ten shares of stock, or anything else the parties agreed to, would be good consideration for the agreement to surrender the claim, so long as one did not get into the difficulty alluded to under the heading of consideration, of trying to surrender a right to a larger liquidated sum in consideration of the payment of a smaller sum of money.

SENDING A CHECK AS FULL PAYMENT.-It is very common for a debtor in making payment by check of his debt to seek to make the check operate as a receipt in full of all claims by the creditor against him. He may do this by writing on the check itself that it is "in full of all demands" or "in full payment" of a certain bill; or he may by a letter accompanying the check state that the check is sent as full satisfaction. The acceptance by the creditor of the check under either of these circumstances is an assent by him to the proposition stated on the check or in the accompanying letter, that the check is in full payment. Such an assent, however, does not necessarily prove that the debtor is discharged; consideration as well as mutual assent is essential to the validity of any agreement which is not under seal. Accordingly if the debt was a liquidated and undisputed one, and the check was for less than the amount due, the agreement of the creditor to take it in full satisfaction is not supported by sufficient consideration under principles previously considered. On the other hand, if the debt was an unliquidated one, or there was an honest dispute in regard to the amount due, the creditor's claim is fully satisfied.

RECEIPT IN FULL.-It may be said generally that though a receipt in full is often thought by business men to be a discharge irrespective of consideration, like a release, this is not true in most States. A receipt in full is good evidence, if payment has been made in full, that it has been so made; but where payment has not been made in full a receipt will not be effectual without consideration, as a release under seal would be.

RENUNCIATION OF OBLIGATION ON NEGOTIABLE INSTRUMENT.-There is one case where the law allows a party who has a right to surrender it without consideration. This is by virtue of the Negotiable Instruments Law, which provides that the holder of a note may discharge any party to it by a written renunciation of his claim. No particular form of words is necessary, but the renunciation must be in writing. No consideration is necessary.

ALTERATION OF WRITTEN CONTRACTS.-The alteration of a written contract in a material particular with fraudulent intent by a promisee in effect discharges the contract so far as he is concerned. He cannot enforce it either in its original form or its altered form, though the other party to the contract may enforce it against him. If the alteration is not material, the contract may be enforced even by the party who altered it whatever the motive of the alteration may have been. If the alteration is material but not fraudulently intended, that party is generally allowed to enforce the contract in its original form. No alteration by a third person affects the rights of a party to a contract. By material alteration is meant one which if given effect would alter the legal obligations of the parties to the contract. The rule of the Negotiable Instruments Law in regard to alteration of negotiable instruments, it should be observed, is somewhat more severe than that generally prevailing in regard to other contracts.

SUGGESTIONS FOR DRAFTING CONTRACTS.-While it is unwise to attempt the drafting of any contract at all complicated, without the services of an attorney, there are certain times when it may be necessary to act suddenly, and a few fundamental facts should be kept in mind. If you are called upon to draft a contract for two other people, the first requisite is to obtain as full information as possible from both parties as to the plans they have in mind. After obtaining this, the details should be arranged in writing, gone over carefully by the draftsman, and submitted to the parties for their approval. A most common mistake made by laymen is to fail to cover contingencies which are more or less likely to happen. For example, what effect would the death of either party have on the contract? This should be provided for. The careful draftsman, whether he be a layman or a lawyer, should draw contracts with the idea of making them so plain that litigation will not result. Contracts should always be drawn in duplicate, so that each party may have a copy, and it is well, if you are the draftsman, to keep a copy for yourself. It is not necessary to appear before a notary public unless you are dealing with a deed, or a similar formal document. If there is good consideration for the contract, no seal is necessary, but under some statutes, a sealed contract is good for a longer period of time, so that there is an added advantage in having the contract under seal.

QUASI CONTRACTS.-The term quasi contract is one which has appeared within the last thirty years. The law in this branch of contracts is still in the process of development and the field of quasi contracts is still not one of settled limits. For our purposes we confine ourselves to those obligations arising from "unjust enrichment," that is, the receipt by one person from another of a benefit, the retention of which is unjust. The term "enrichment" has recently been criticized by one of the ablest writers on this topic, as there are many cases where it is sufficient to show that the defendant has received something which he desired, although the question whether he is thereby enriched, is immaterial. In Vickery v. Ritchie, 202 Mass. 247, we find that where A renders services, and furnishes materials and supplies for the erection of a building for B under a supposed contract and the contract itself is invalid, B is under a supposed quasi contractual obligation to pay A for the services he has rendered and the material he has furnished, regardless of whether B's property is increased in value. We may state the point to be emphasized in quasi contract is the fact that the retention of the benefit received by the defendant would be unjust rather than "enrichment."

DISTINGUISHING CHARACTERISTICS.-There are four characteristics which distinguish quasi-contracts: 1. The obligations of quasi contracts are imposed by law without reference to the assent of the obligor. 2. They are imposed because of a special state of facts and in favor of a particular person and do not rest upon one at all times and in favor of all persons. 3. Although equitable in their origin they are enforced by a common law court. 4. They require that the obligee shall be compensated for the benefit which he has conferred upon the obligor and not for any loss suffered by the obligee.

APPLICATION OF THE PRINCIPLE.-The following are the more common illustrations of the application of the principles of quasi contracts. Where there has been a mistake, and hence the minds of the parties never really met, yet benefit has really been conferred; or, where the attempted contract cannot be enforced as a contract, because it did not comply with the statute, or was illegal, and yet one of the parties has received a benefit; or, where a benefit has been conferred under compulsion or duress.

MISTAKE.-Where parties have attempted to make a contract and a mistake of fact occurs, no contract results. The minds of the parties never really meet. Yet if benefits have been conferred, justice requires that the benefit should be returned, or compensation given, and this, in fact, is just what the law seeks to do when there has been such a mistake that upon the attempted contract itself no suit can be brought. The essentials of mistake, and the way in which a mistake usually arises, are:

(1) It would not be a mistake if a party had paid money when he had any reason to suppose it was not due. A recovery of money under such circumstances cannot be allowed.

(2) The payment must have been induced by mistake in order to allow the recovery. This rule prevents the recovery of money paid in settlement of a disputed matter; but it must be assumed that it was to the party's interest to make the payment. However, suppose that a compromise settlement has been made in the belief that certain facts were different from what they really were. Here the mistake would have induced the payment, and, hence, in such a situation a recovery will be allowed.

(3) The fact regarding which a mistake has been made must also be a material fact, and the fact must have been a part of the transaction itself, not collateral to it in any way. A mistake as to the value of an article purchased, for instance, is not a material fact.

(4) Ordinarily, money paid under mistake of law cannot be recovered, although it is against conscience for the defendant to retain it. A mistake as to the law of another State, however, is a mistake of fact, and money paid under such a mistake can be recovered.

(5) Where the party who mistakenly parted with the money did so because of his own negligence, and to allow a recovery would throw a loss on the other party, he cannot recover what he parted with. One party cannot make another suffer because of his own negligence. Where a party paid money under mistake, and the payee was negligent, the party paying may recover.

(6) When parties suppose they have made a contract, and money has been paid, or services rendered, under that supposed contract, but in fact there was no valid contract at all, or there was a mutual mistake as to a term, this money, or the value of the services, may be recovered.

(7) When money has been paid for the transfer of something by defendant, whether recovery will be allowed in case it should turn out that the defendant had no title, depends on the nature of transaction. If the defendant made a warranty that he had title, a recovery may be had. If, however, the defendant simply sold what he had, whether that was something or nothing, a recovery cannot be allowed unless, as is the law in some States, a vendor impliedly warrants his title by the fact of having possession.

(8) In the case of parties mistaking the existence of a subject matter of sale, if the understanding was that A was purchasing an existing thing, then he can recover the money paid if it should turn out that the thing was not in existence. But if he bought simply a chance, he cannot recover.

BENEFITS CONFERRED UNDER COLOR OF CONTRACT.-Aside from the cases of mistake, there are other grounds for allowing recovery under the principle of quasi contract. A group of these is made up of cases where there cannot be a recovery upon the contract itself, although the parties have come together and agreed without any mistake or misunderstanding, because of the absence of some essential necessary to create an enforceable contract obligation; yet a benefit has been conferred upon the one party who, but for the lack of that essential, would have been liable in an action upon the contract itself. Such cases arise largely where there has been a partial performance of an illegal contract, or of a contract unenforceable because of non-compliance with the statute of frauds, or where full performance is excused by impossibility. Some States also allow recovery on the theory of benefits conferred, where, after partial performance, a party defaults under circumstances not excusing default.

BENEFITS CONFERRED WITHOUT CONTRACT.-We next take up that class of relations where there has been an absence of distinct offer and acceptance, and yet a benefit has been conferred resulting in an unjust enrichment of the other party. If A confers benefit on B, though at B's request, it may be merely a gift. A cannot afterward change his mind and recover for that, as if there had been a contract. A may have paid B's debt in order to prevent a sale of his own property. He may then recover the amount so paid. For example, A left his property with B to have some repairs made. A third party recovered a judgment against B, and A's property was seized on an execution. A paid the judgment in order to release his own property. It was held that he might recover the money so paid from B, who should have paid the judgment. Or A may have paid B's debt because he was surety for B. He then may recover from B the amount so paid; or, if B had two sureties, A and C, and A paid the whole or more than his share, he could recover the share of such payment which C should have paid, on the principle of contribution that equality is equity. But A must have actually made the payment of more than his proportionate share.

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