[289] LECTURE VIII.
CONTRACT. II. ELEMENTS.
THE general method to be pursued in the analysis of contract is
the same as that already explained with regard to possession.
Wherever the law gives special rights to one, or imposes special
burdens on another, it does so on the ground that certain special
facts are true of those individuals. In all such cases,
therefore, there is a twofold task. First, to determine what are
the facts to which the special consequences are attached; second,
to ascertain the consequences. The first is the main field of
legal argument. With regard to contracts the facts are not always
the same. They may be that a certain person has signed, sealed,
and delivered a writing of a certain purport. They may be that he
has made an oral promise, and that the promisee has furnished him
a consideration.
The common element of all contracts might be said to be a
promise, although even a promise was not necessary to a liability
in debt as formerly understood. But as it will not be possible to
discuss covenants further, and as consideration formed the main
topic of the last Lecture, I will take up that first.
Furthermore, as there is an historical difference between
consideration in debt and in assumpsit, I shall confine myself to
the latter, which is the later and more philosophical form.
It is said that any benefit conferred by the promisee on the
promisor, or any detriment incurred by the promisee, [290] may be
a consideration. It is also thought that every consideration may
be reduced to a case of the latter sort, using the word
"detriment" in a somewhat broad sense.
To illustrate the general doctrine, suppose that a man is
desirous of having a cask of brandy carried from Boston to
Cambridge, and that a truckman, either out of kindness or from
some other motive, says that he will carry it, and it is
delivered to him accordingly. If he carelessly staves in the
cask, there would perhaps be no need to allege that he undertook
to carry it, and on principle, and according to the older cases,
if an undertaking was alleged, no consideration for the assumpsit
need be stated. /1/ The ground of complaint in that case would be
a wrong, irrespective of contract. But if the complaint was that
he did not carry it as agreed, the plaintiff's difficulty would
be that the truckman was not bound to do so unless there was a
consideration for his promise. Suppose, therefore, that it was
alleged that he promised to do so in consideration of the
delivery to him. Would this be a sufficient consideration? The
oldest cases, going on the notion of benefit to the promisor,
said that it could not be, for it was a trouble, not a benefit.
/2/ Then take it from the side of detriment. The delivery is a
necessary condition to the promisor's doing the kindness, and if
he does it, the delivery, so far from being a detriment to the
promisee, is a clear benefit to him.
But this argument is a fallacy. Clearly the delivery would be
sufficient consideration to enable the owner to declare in
assumpsit for the breach of those duties which [291] arose,
irrespective of contract, from the defendant's having undertaken
to deal with the thing. /1/ It would be a sufficient
consideration for any promise not involving a dealing with the
thing for its performance, for instance, to pay a thousand
dollars. /2/ And the law has not pronounced the consideration
good or bad according to the nature of the promise founded upon
it. The delivery is a sufficient consideration for any promise.
/3/
The argument on the other side leaves out of sight the point of
time at which the sufficiency of the consideration is to be
determined. This is the moment when the consideration is
furnished. At that moment the delivery of the cask is a detriment
in the strictest sense. The owner of the cask has given up a
present control over it, which he has a right to keep, and he has
got in return, not a performance for which a delivery was
necessary, but a mere promise of performance. The performance is
still future. /4/
But it will be seen that, although the delivery may be a
consideration, it will not necessarily be one. A promise to carry
might be made and accepted on the understanding that it was mere
matter of favor, without consideration, and not legally binding.
In that case the detriment of delivery would be incurred by the
promisee as before, but obviously it would be incurred for the
sole purpose of enabling the promisor to carry as agreed.
[292] It appears to me that it has not always been sufficiently
borne in mind that the same thing may be a consideration or not,
as it is dealt with by the parties. The popular explanation of
Coggs v. Bernard is, that the delivery was a consideration for a
promise to carry the casks safely. I have given what I believe to
be the true explanation, and that which I think Lord Holt had in
view, in the fifth Lecture. /1/ But whether that which I have
offered be true or not, a serious objection to the one which is
commonly accepted is that the declaration does not allege that
the delivery was the consideration.
The same caution should be observed in construing the terms of an
agreement. It is hard to see the propriety of erecting any
detriment which an instrument may disclose or provide for, into a
consideration, unless the parties have dealt with it on that
footing. In many cases a promisee may incur a detriment without
thereby furnishing a consideration. The detriment may be nothing
but a condition precedent to performance of the promise, as where
a man promises another to pay him five hundred dollars if he
breaks his leg. /2/
The courts, however, have gone far towards obliterating this
distinction. Acts which by a fair interpretation of language
would seem to have been contemplated as only the compliance with
a condition, have been treated as the consideration of the
promise. /3/ And so have counter promises in an agreement which
expressly stated other matters as the consideration. /4/ So it
should be mentioned, subject [293] to the question whether there
may not be a special explanation for the doctrine, that it is
said that an assignment of a leasehold cannot be voluntary under
the statute of 27 Elizabeth, c. 4, because the assignee comes
into the obligations of the tenant. /1/ Yet the assignee's
incurring this detriment may not be contemplated as the
inducement of the assignment, and in many cases only amounts to a
deduction from the benefit conferred, as a right of way would be,
especially if the only obligation is to pay rent, which issues
out of the land in theory of law.
But although the courts may have sometimes gone a little far in
their anxiety to sustain agreements, there can be no doubt of the
Principle which I have laid down, that the same thing may be a
consideration or not, as it is dealt with by the parties. This
raises the question how a thing must be dealt with, in order to
make it a consideration.
It is said that consideration must not be confounded with motive.
It is true that it must not be confounded with what may be the
prevailing or chief motive in actual fact. A man may promise to
paint a picture for five hundred dollars, while his chief motive
may be a desire for fame. A consideration may be given and
accepted, in fact, solely for the purpose of making a promise
binding. But, nevertheless, it is the essence of a consideration,
that, by the terms of the agreement, it is given and accepted as
the motive or inducement of the promise. Conversely, the promise
must be made and accepted as the conventional motive or
inducement for furnishing the consideration. The root of the
whole matter is the relation of reciprocal [294] conventional
inducement, each for the other, between consideration and
promise.
A good example of the former branch of the proposition is to be
found in a Massachusetts case. The plaintiff refused to let
certain wood be removed from his land by one who had made an oral
bargain and given his note for it, unless he received additional
security. The purchaser and the plaintiff accordingly went to the
defendant, and the defendant put his name upon the note. The
plaintiff thereupon let the purchaser carry off the wood. But,
according to the testimony, the defendant signed without knowing
that the plaintiff was to alter his position in any way on the
faith of the signature, and it was held that, if that story was
believed, there was no consideration. /1/
An illustration of the other half of the rule is to be found in
those cases where a reward is offered for doing something, which
is afterwards done by a person acting in ignorance of the offer.
In such a case the reward cannot be claimed, because the alleged
consideration has not been furnished on the faith of the offer.
The tendered promise has not induced the furnishing of the
consideration. The promise cannot be set up as a conventional
motive when it was not known until after the alleged
consideration was performed. /2/
Both sides of the relation between consideration and promise, and
the conventional nature of that relation, may be illustrated by
the case of the cask. Suppose that the [295] truckman is willing
to carry the cask, and the owner to let him carry it, without any
bargain, and that each knows the other's state of mind; but that
the truckman, seeing his own advantage in the matter, says to the
owner, "In consideration of your delivering me the cask, and
letting me carry it, I promise to carry it," and that the owner
thereupon delivers it. I suppose that the promise would be
binding. The promise is offered in terms as the inducement for
the delivery, and the delivery is made in terms as the inducement
for the promise. It may be very probable that the delivery would
have been made without a promise, and that the promise would have
been made in gratuitous form if it had not been accepted upon
consideration; but this is only a guess after all. The delivery
need not have been made unless the owner chose, and having been
made as the term of a bargain, the promisor cannot set up what
might have happened to destroy the effect of what did happen. It
would seem therefore that the same transaction in substance and
spirit might be voluntary or obligatory, according to the form of
words which the parties chose to employ for the purpose of
affecting the legal consequences.
If the foregoing principles be accepted, they will be seen to
explain a doctrine which has given the courts some trouble to
establish. I mean the doctrine that an executed consideration
will not sustain a subsequent promise. It has been said, to be
sure, that such a consideration was sufficient if preceded by a
request. But the objections to the view are plain. If the request
was of such a nature, and so put, as reasonably to imply that the
other person was to have a reward, there was an express promise,
although not put in words, and that promise was made at [296] the
same time the consideration was given, and not afterwards. If, on
the other hand, the words did not warrant the understanding that
the service was to be paid for, the service was a gift, and a
past gift can no more be a consideration than any other act of
the promisee not induced by the promise.
The source of the error can be traced partially, at least, in
history. Some suggestions touching the matter were made in the
last Lecture. A few words should be added here. In the old cases
of debt, where there was some question whether the plaintiff had
showed enough to maintain his action, a "contract precedent" was
spoken of several times as raising the duty. Thus, where a man
had granted that he would be bound in one hundred shillings to
pay his servant on a certain day for his services, and for
payments made by the servant on his account, it was argued that
there was no contract precedent, and that by parol the party is
not obliged; and, further, that, so far as appeared, the payments
were made by the servant out of his own head and at no request,
from which no duty could commence. /1/
So when debt was brought on a deed to pay the plaintiff ten
marks, if he would take the defendant's daughter to wife, and it
was objected that the action should have been covenant, it was
answered that the plaintiff had a contract precedent which gave
him debt. /2/
The first case in assumpsit /3/ only meant to adopt this long
familiar thought. A man went bail for his friend's servant, who
had been arrested. Afterwards the master [297] promised to
indemnify the bail, and on his failure to do so was sued by him
in assumpsit. It was held that there was no consideration
wherefore the defendant should be charged unless the master had
first promised to indemnify the plaintiff before the servant was
bailed; "for the master did never make request to the plaintiff
for his servant to do so much, but he did it of his own head."
This is perfectly plain sailing, and means no more than the case
in the Year Books. The report, however, also states a case in
which it was held that a subsequent promise, in consideration
that the plaintiff at the special instance of the defendant had
married the defendant's cousin, was binding, and that the
marriage was "good cause ... because [it] ensued the request of
the defendant." Whether this was intended to establish a general
principle, or was decided with reference to the peculiar
consideration of marriage, /1/ it was soon interpreted in the
broader sense, as was shown in the last Lecture. It was several
times adjudged that a past and executed matter was a sufficient
consideration for a promise at a later day, if only the matter
relied on had been done or furnished at the request of the
promisor. /2/
It is now time to analyze the nature of a promise, which is the
second and most conspicuous element in a simple contract. The
Indian Contract Act, 1872, Section 2,8 says:--
"(a.) When one person signifies to another his willingness [298]
to do or to abstain from doing anything, with a view to obtaining
the assent of that other to such act or abstinence, he is said to
make a proposal:
"(b.) When the person to whom the proposal is made signifies his
assent thereto, the proposal is said to be accepted. A proposal
when accepted becomes a promise."
According to this definition the scope of promises is confined to
conduct on the part of the promisor. If this only meant that the
promisor alone must bear the legal burden which his promise may
create, it would be true. But this is not the meaning. For the
definition is of a promise, not of a legally binding promise. We
are not seeking for the legal effects of a contract, but for the
possible contents of a promise which the law may or may not
enforce. We must therefore only consider the question what can
possibly be promised in a legal sense, not what will be the
secondary consequence of a promise binding, but not performed.
An assurance that it shall rain to-morrow, /1/ or that a third
person shall paint a picture, may as well be a promise as one
that the promisee shall receive from some source one hundred
bales of cotton, or that the promisor will pay the promisee one
hundred dollars. What is the difference in the cases? It is only
in the degree of power possessed by the promisor over the event.
He has none in the first case. He has equally little legal
authority to make a man paint a picture, although he may have
larger means of persuasion. He probably will be able to make sure
that the promisee has the cotton. Being a rich man, he is certain
[299] to be able to pay the one hundred dollars, except in the
event of some most improbable accident.
But the law does not inquire, as a general thing, how far the
accomplishment of an assurance touching the future is within the
power of the promisor. In the moral world it may be that the
obligation of a promise is confined to what lies within reach of
the will of the promisor (except so far as the limit is unknown
on one side, and misrepresented on the other). But unless some
consideration of public policy intervenes, I take it that a man
may bind himself at law that any future event shall happen. He
can therefore promise it in a legal sense. It may be said that
when a man covenants that it shall rain to-morrow, or that A
shall paint a picture, he only says, in a short form, I will pay
if it does not rain, or if A does not paint a picture. But that
is not necessarily so. A promise could easily be framed which
would be broken by the happening of fair weather, or by A not
painting. A promise, then, is simply an accepted assurance that a
certain event or state of things shall come to pass.
But if this be true, it has more important bearings than simply
to enlarge the definition of the word promise. It concerns the
theory of contract. The consequences of a binding promise at
common law are not affected by the degree of power which the
promisor possesses over the promised event. If the promised event
does not come to pass, the plaintiff's property is sold to
satisfy the damages, within certain limits, which the promisee
has suffered by the failure. The consequences are the same in
kind whether the promise is that it shall rain, or that another
man shall paint a picture, or that the promisor will deliver a
bale of cotton.
[300] If the legal consequence is the same in all cases, it seems
proper that all contracts should be considered from the same
legal point of view. In the case of a binding promise that it
shall rain to-morrow, the immediate legal effect of what the
promisor does is, that he takes the risk of the event, within
certain defined limits, as between himself and the promisee. He
does no more when he promises to deliver a bale of cotton.
If it be proper to state the common-law meaning of promise and
contract in this way, it has the advantage of freeing the subject
from the superfluous theory that contract is a qualified
subjection of one will to another, a kind of limited slavery. It
might be so regarded if the law compelled men to perform their
contracts, or if it allowed promisees to exercise such
compulsion. If, when a man promised to labor for another, the law
made him do it, his relation to his promisee might be called a
servitude ad hoc with some truth. But that is what the law never
does. It never interferes until a promise has been broken, and
therefore cannot possibly be performed according to its tenor. It
is true that in some instances equity does what is called
compelling specific performance. But, in the first place, I am
speaking of the common law, and, in the next, this only means
that equity compels the performance of certain elements of the
total promise which are still capable of performance. For
instance, take a promise to convey land within a certain time, a
court of equity is not in the habit of interfering until the time
has gone by, so that the promise cannot be performed as made. But
if the conveyance is more important than the time, and the
promisee prefers to have it late rather than never, the law may
compel the performance of [301] that. Not literally compel even
in that case, however, but put the promisor in prison unless he
will convey. This remedy is an exceptional one. The only
universal consequence of a legally binding promise is, that the
law makes the promisor pay damages if the promised event does not
come to pass. In every case it leaves him free from interference
until the time for fulfilment has gone by, and therefore free to
break his contract if he chooses.
A more practical advantage in looking at a contract as the taking
of a risk is to be found in the light which it throws upon the
measure of damages. If a breach of contract were regarded in the
same light as a tort, it would seem that if, in the course of
performance of the contract the promisor should be notified of
any particular consequence which would result from its not being
performed, he should be held liable for that consequence in the
event of non-performance. Such a suggestion has been made. /1/
But it has not been accepted as the law. On the contrary,
according to the opinion of a very able judge, which seems to be
generally followed, notice, even at the time of making the
contract, of special circumstances out of which special damages
would arise in case of breach, is not sufficient unless the
assumption of that risk is to be taken as having fairly entered
into the contract. /2/ If a carrier should undertake to carry the
machinery of a saw-mill from Liverpool to Vancouver's Island, and
should fail [302] to do so, he probably would not be held liable
for the rate of hire of such machinery during the necessary
delay, although he might know that it could not be replaced
without sending to England, unless he was fairly understood to
accept "the contract with the special condition attached to it."
/1/
It is true that, when people make contracts, they usually
contemplate the performance rather than the breach. The express
language used does not generally go further than to define what
will happen if the contract is fulfilled. A statutory requirement
of a memorandum in writing would be satisfied by a written
statement of the promise as made, because to require more would
be to run counter to the ordinary habits of mankind, as well as
because the statement that the effect of a contract is the
assumption of the risk of a future event does not mean that there
is a second subsidiary promise to assume that risk, but that the
assumption follows as a consequence directly enforced by the law,
without the promisor's co-operation. So parol evidence would be
admissible, no doubt, to enlarge or diminish the extent of the
liability assumed for nonperformance, where it would be
inadmissible to affect the scope of the promise.
But these concessions do not affect the view here taken. As the
relation of contractor and contractee is voluntary, the
consequences attaching to the relation must be voluntary. What
the event contemplated by the promise is, or in other words what
will amount to a breach of contract, is a matter of
interpretation and construction. What consequences of the breach
are assumed is more remotely, in like manner, a matter of
construction, having regard [303] to the circumstances under
which the contract is made. Knowledge of what is dependent upon
performance is one of those circumstances. It is not necessarily
conclusive, but it may have the effect of enlarging the risk
assumed.
The very office of construction is to work out, from what is
expressly said and done, what would have been said with regard to
events not definitely before the minds of the parties, if those
events had been considered. The price paid in mercantile
contracts generally excludes the construction that exceptional
risks were intended to be assumed. The foregoing analysis is
believed to show that the result which has been reached by the
courts on grounds of practical good sense, falls in with the true
theory of contract under the common law.
The discussion of the nature of a promise has led me to analyze
contract and the consequences of contract somewhat in advance of
their place. I must say a word more concerning the facts which
constitute a promise. It is laid down, with theoretical truth,
that, besides the assurance or offer on the one side, there must
be an acceptance on the other. But I find it hard to think of a
case where a simple contract fails to be made, which could not be
accounted for on other grounds, generally by the want of relation
between assurance or offer and consideration as reciprocal
inducements each of the other. Acceptance of an offer usually
follows by mere implication from the furnishing of the
consideration; and inasmuch as by our law an accepted offer, or
promise, until the consideration is furnished, stands on no
different footing from an offer not yet accepted, each being
subject to revocation until that time, and each continuing [304]
until then unless it has expired or has been revoked, the
question of acceptance is rarely of practical importance.
Assuming that the general nature of consideration and promise is
understood, some questions peculiar to bilateral contracts remain
to be considered. These concern the sufficiency of the
consideration and the moment when the contract is made.
A promise may be a consideration for a promise, although not
every promise for every other. It may be doubted whether a
promise to make a gift of one hundred dollars would be supported
by a promise to accept it. But in a case of mutual promises
respectively to transfer and to accept unpaid shares in a railway
company, it has been held that a binding contract was made. Here
one party agrees to part with something which may prove valuable,
and the other to assume a liability which may prove onerous. /1/
But now suppose that there is no element of uncertainty except in
the minds of the parties. Take, for instance, a wager on a past
horse-race. It has been thought that this would amount to an
absolute promise on one side, and no promise at all on the other.
/2/ But this does not seem to me sound. Contracts are dealings
between men, by which they make arrangements for the future. In
making such arrangements the important thing is, not what is
objectively true, but what the parties know. Any present fact
which is unknown to the parties is just as uncertain for the
purposes of making an arrangement at this moment, as any future
fact. It is therefore a detriment to undertake to be ready to pay
if the event turns out not [305] to have been as expected. This
seems to be the true explanation why forbearance to sue upon a
claim believed the plaintiff to be good is a sufficient
consideration, although the claim was bad in fact, and known by
the defendant to be bad. /1/ Were this view unsound, it is hard
to see how wagers on any future event, except a miracle, could be
sustained. For if the happening or not happening of the event is
subject to the law of causation, the only uncertainty about it is
in our foresight, not in its happening.
The question when a contract is made arises for the most part
with regard to bilateral contracts by letter, the doubt being
whether the contract is complete at the moment when the return
promise is put into the post, or at the moment when it is
received. If convenience preponderates in favor of either view,
that is a sufficient reason for its adoption. So far as merely
logical grounds go, the most ingenious argument in favor of the
later moment is Professor Langdell's. According to him the
conclusion follows from the fact that the consideration which
makes the offer binding is itself a promise. Every promise, he
says, is an offer before it is a promise, and the essence of an
offer is that it should be communicated. /2/ But this reasoning
seems unsound. When, as in the case supposed, the consideration
for the return promise has been put into the power of the offeree
and the return promise has been accepted in advance, there is not
an instant, either in time or logic, when the return promise is
an offer. It is a promise and a term of a binding contract as
soon as it is anything. An offer is a revocable and unaccepted
communication of willingness to promise. [306] When an offer of a
certain bilateral contract has been made, the same contract
cannot be offered by the other side. The so-called offer would
neither be revocable nor unaccepted. It would complete the
contract as soon as made.
If it be said that it is of the essence of a promise to be
communicated, whether it goes through the stage of offer or not,
meaning by communicated brought to the actual knowledge of the
promisee, the law is believed to be otherwise. A covenant is
binding when it is delivered and accepted, whether it is read or
not. On the same principle, it is believed that, whenever the
obligation is to be entered into by a tangible sign, as, in the
case supposed, by letter containing the return promise, and the
consideration for and assent to the promise are already given,
the only question is when the tangible sign is sufficiently put
into the power of the promisee. I cannot believe that, if the
letter had been delivered to the promisee and was then snatched
from his hands before he had read it, there would be no contract.
/1/ If I am right, it appears of little importance whether the
post-office be regarded as agent or bailee for the offerer, or as
a mere box to which he has access. The offeree, when he drops the
letter containing the counter-promise into the letter-box, does
an overt act, which by general understanding renounces control
over the letter, and puts it into a third hand for the benefit of
the offerer, with liberty to the latter at any moment thereafter
to take it.
The principles governing revocation are wholly different. One to
whom an offer is made has a right to assume that it remains open
according to its terms until he has actual [307] notice to the
contrary. The effect of the communication must be destroyed by a
counter communication. But the making of a contract does not
depend on the state of the parties' minds, it depends on their
overt acts. When the sign of the counter promise is a tangible
object, the contract is completed when the dominion over that
object changes.