[308] LECTURE IX.
CONTRACT.- III. VOID AND VOIDABLE.
THE elements of fact necessary to call a contract into existence,
and the legal consequences of a contract when formed, have been
discussed. It remains to consider successively the cases in which
a contract is said to be void, and those in which it is said to
be voidable,--in which, that is, a contract fails to be made when
it seems to have been, or, having been made, can be rescinded by
one side or the other, and treated as if it had never been. I
take up the former class of cases first.
When a contract fails to be made, although the usual forms have
been gone through with, the ground of failure is commonly said to
be mistake, misrepresentation, or fraud. But I shall try to show
that these are merely dramatic circumstances, and that the true
ground is the absence of one or more of the primary elements,
which have been shown, or are seen at once, to be necessary to
the existence of a contract.
If a man goes through the form of making a contract with A
through B as A's agent, and B is not in fact the agent of A,
there is no contract, because there is only one party. The
promise offered to A has not been accepted by him, and no
consideration has moved from him. In such a case, although there
is generally mistake on one side and fraud on the other, it is
very clear that no special [309] doctrine need be resorted to,
because the primary elements of a contract explained in the last
Lecture are not yet present.
Take next a different case. The defendant agreed to buy, and the
plaintiff agreed to sell, a cargo of cotton, "to arrive ex
Peerless from Bombay." There were two such vessels sailing from
Bombay, one in October, the other in December. The plaintiff
meant the latter, the defendant the former. It was held that the
defendant was not bound to accept the cotton. /1/ It is commonly
said that such a contract is void, because of mutual mistake as
to the subject-matter, and because therefore the parties did not
consent to the same thing. But this way of putting it seems to me
misleading. The law has nothing to do with the actual state of
the parties' minds. In contract, as elsewhere, it must go by
externals, and judge parties by their conduct. If there had been
but one "Peerless," and the defendant had said "Peerless" by
mistake, meaning "Peri," he would have been bound. The true
ground of the decision was not that each party meant a different
thing from the other, as is implied by the explanation which has
been mentioned, but that each said a different thing. The
plaintiff offered one thing, the defendant expressed his assent
to another.
A proper name, when used in business or in pleading, /2/ means
one individual thing, and no other, as every one knows, and
therefore one to whom such a name is used must find out at his
peril what the object designated is. If there are no
circumstances which make the use deceptive on either side, each
is entitled to insist on the [310] meaning favorable to him for
the word as used by him, and neither is entitled to insist on
that meaning for the word as used by the other. So far from
mistake having been the ground of decision, as mistake, its only
bearing, as it seems to me, was to establish that neither party
knew that he was understood by the other to use the word
"Peerless "in the sense which the latter gave to it. In that
event there would perhaps have been a binding contract, because,
if a man uses a word to which he knows the other party attaches,
and understands him to attach, a certain meaning, he may be held
to that meaning, and not be allowed to give it any other. /1/
Next, suppose a case in which the offer and acceptance do not
differ, and in which both parties have used the same words in the
same sense. Suppose that A agreed to buy, and B agreed to sell,
"these barrels of mackerel," and that the barrels in question
turn out to contain salt. There is mutual mistake as to the
contents of the barrels, and no fraud on either side. I suppose
the contract would be void. /2/
It is commonly said that the failure of the contract in such a
case is due to the fact of a difference in kind between the
actual subject-matter and that to which the intention of the
parties was directed. It is perhaps more instructive to say that
the terms of the supposed contract, although seemingly
consistent, were contradictory, in matters that went to the root
of the bargain. For, by one of the essential terms, the
subject-matter of the agreement was the contents of certain
barrels, and nothing else, and, by another equally important, it
was mackerel, and nothing else; [311] while, as a matter of fact,
it could not be both, because the contents of the barrels were
salt. As neither term could be left out without forcing on the
parties a contract which they did not make, it follows that A
cannot be required to accept, nor B to deliver either these
barrels of salt, or other barrels of mackerel; and without
omitting one term, the promise is meaningless.
If there had been fraud on the seller's part, or if he had known
what the barrels really contained, the buyer might have had a
right to insist on delivery of the inferior article. Fraud would
perhaps have made the contract valid at his option. Because, when
a man qualifies sensible words with others which he knows, on
secret grounds, are insensible when so applied, he may fairly be
taken to authorize his promisee to insist on the possible part of
his promise being performed, if the promisee is willing to forego
the rest.
Take one more illustration like the last case. A policy of
insurance is issued on a certain building described in the policy
as a machine-shop. In fact the building is not a machine-shop,
but an organ factory, which is a greater risk. The contract is
void, not because of any misrepresentation, but, as before,
because two of its essential terms are repugnant, and their union
is insensible. /1/
Of course the principle of repugnancy last explained might be
stretched to apply to any inconsistency between the different
terms of a contract. It might be said, for instance, that if a
piece of gold is sold as eighteen-carat gold, and it is in fact
not so pure, or if a cow is sold as yielding an average of twelve
quarts of milk a day, and in fact she yields only six quarts,
there is no logical difference, [312] according to the
explanation which has just been offered, between those cases and
that of the barrel of salt sold for mackerel. Yet those bargains
would not be void. At the most, they would only be voidable, if
the buyer chose to throw them up.
The distinctions of the law are founded on experience, not on
logic. It therefore does not make the dealings of men dependent
on a mathematical accuracy. Whatever is promised, a man has a
right to be paid for, if it is not given; but it does not follow
that the absence of some insignificant detail will authorize him
to throw up the contract, still less that it will prevent the
formation of a contract, which is the matter now under
consideration. The repugnant terms must both be very
important,--so important that the court thinks that, if either is
omitted, the contract would be different in substance from that
which the words of the parties seemed to express.
A term which refers directly to an identification by the senses
has always this degree of importance. If a promise is made to
sell this cow, or this mackerel, to this man, whatever else may
be stricken from the contract, it can never be enforced except
touching this object and by this man. If this barrel of salt is
fraudulently sold for a barrel of mackerel, the buyer may perhaps
elect to take this barrel of salt if he chooses, but he cannot
elect to take another barrel of mackerel. If the seller is
introduced by the name B, and the buyer supposes him to be
another person of the same name, and under that impression
delivers his written promise to buy of B, the B to whom the
writing is delivered is the contractee, if any one is, and,
notwithstanding what has been said of the use of proper names, I
should suppose [313] a contract would be made. /1/ For it is
further to be said that, so far as by one of the terms of a
contract the thing promised or the promisee is identified by
sight and hearing, that term so far preponderates over all others
that it is very rare for the failure of any other element of
description to prevent the making of a contract. /2/ The most
obvious of seeming exceptions is where the object not in fact so
identified, but only its covering or wrapper.
Of course the performance of a promise may be made conditional on
all the terms stipulated from the other side being complied with,
but conditions attaching to performance can never come into
consideration until a contract has been made, and so far the
question has been touching the existence of a contract in the
first instance.
A different case may be suggested from any yet considered.
Instead of a repugnancy between offer and assent which prevents
an agreement, or between the terms of an agreement which makes it
insensible on its fact, there may be a like repugnancy between a
term of the contract and a previous representation of fact which
is not expressly made a part of the contract. The representation
may have been the chief inducement and very foundation of the
bargain. It may be more important than any of the expressed
terms, and yet the contract may have [314] been reduced to
writing in words which cannot fairly be construed to include it.
A vendor may have stated that barrels filled with salt contain
mackerel, but the contract may be only for the barrels and their
contents. An applicant for insurance may have misstated facts
essential to the risk, yet the policy may simply insure a certain
building or a certain life. It may be asked whether these
contracts are not void also.
There might conceivably be cases in which, taking into account
the nature of the contract, the words used could be said to
embody the representation as a term by construction. For
instance, it might be said that the true and well-understood
purport of a contract of insurance is not, as the words seem to
say, to take the risk of any loss by fire or perils of the sea,
however great the risk may be, but to take a risk of a certain
magnitude, and no other, which risk has been calculated
mathematically from the statements of the party insured. The
extent of the risk taken is not specified in the policy, because
the old forms and established usage are otherwise, but the
meaning is perfectly understood.
If this reasoning were adopted, there would be an equal
repugnancy in the terms of the contract, whether the nature of
the risk were written in the policy or fixed by previous
description. But, subject to possible exceptions of this kind, it
would seem that a contract would be made, and that the most that
could be claimed would be a right to rescind. Where parties
having power to bind themselves do acts and use words which are
fit to create an obligation, I take it that an obligation arises.
If there is a mistake as to a fact not mentioned in the contract,
it goes only to the motives for making the contract. But a [315]
contract is not prevented from being made by the mere fact that
one party would not have made it if he had known the truth. In
what cases a mistake affecting motives is a ground for avoidance,
does not concern this discussion, because the subject now under
consideration is when a contract is made, and the question of
avoiding or rescinding it presupposes that it has been made.
I think that it may now be assumed that, when fraud,
misrepresentation, or mistake is said to make a contract void,
there is no new principle which comes in to set aside an
otherwise perfect obligation, but that in every such case there
is wanting one or more of the first elements which were explained
in the foregoing Lecture. Either there is no second party, or the
two parties say different things, or essential terms seemingly
consistent are really inconsistent as used.
When a contract is said to be voidable, it is assumed that a
contract has been made, but that it is subject to being unmade at
the election of one party. This must be because of the breach of
some condition attached to its existence either expressly or by
implication.
If a condition is attached to the contract's coming into being,
there is as yet no contract. Either party may withdraw, at will,
until the condition is determined. There is no obligation,
although there may be an offer or a promise, and hence there is
no relation between the parties which requires discussion here.
But some conditions seemingly arising out of a contract already
made are conditions of this sort. Such is always the case if the
condition of a promise lies within the control of the promisor's
own will. For instance, a promise to pay for clothes if made to
the customer's satisfaction, has been held in Massachusetts to
[316] make the promisor his own final judge. /1/ So interpreted,
it appears to me to be no contract at all, until the promisor's
satisfaction is expressed. His promise is only to pay if he sees
fit, and such a promise cannot be made a contract because it
cannot impose any obligation. /2/ If the promise were construed
to mean that the clothes should be paid for provided they were
such as ought to satisfy the promisor, /3/ and thus to make the
jury the arbiter, there would be a contract, because the promisor
gives up control over the event, but it would be subject to a
condition in the sense of the present analysis.
The conditions which a contract may contain have been divided by
theorists into conditions precedent and conditions subsequent.
The distinction has even been pronounced of great importance. It
must be admitted that, if the course of pleading be taken as a
test, it is so. In some cases, the plaintiff has to state that a
condition has been performed in order to put the defendant to his
answer; in others, it is left to the defendant to set up that a
condition has been broken.
In one sense, all conditions are subsequent; in another, all are
precedent. All are subsequent to the first stage of the
obligation. /4/ Take, for instance, the case of a promise to pay
for work if done to the satisfaction of an architect. The
condition is a clear case of what is called a condition
precedent. There can be no duty to pay until the architect is
satisfied. But there can be a [317] contract before that moment,
because the determination whether the promisor shall pay or not
is no longer within his control. Hence the condition is
subsequent to the existence of the obligation.
On the other hand, every condition subsequent is precedent to the
incidence of the burden of the law. If we look at the law as it
would be regarded by one who had no scruples against doing
anything which he could do without incurring legal consequences,
it is obvious that the main consequence attached by the law to a
contract is a greater or less possibility of having to pay money.
The only question from the purely legal point of view is whether
the promisor will be compelled to pay. And the important moment
is that at which that point is settled. All conditions are
precedent to that.
But all conditions are precedent, not only in this extreme sense,
but also to the existence of the plaintiff's cause of action. As
strong a case as can be put is that of a policy of insurance
conditioned to be void if not sued upon within one year from a
failure to pay as agreed. The condition does not come into play
until a loss has occurred, the duty to pay has been neglected,
and a cause of action has arisen. Nevertheless, it is precedent
to the plaintiff's cause of action. When a man sues, the question
is not whether he has had a cause of action in the past, but
whether he has one then. He has not one then, unless the year is
still running. If it were left for the defendant to set up the
lapse of the year, that would be due to the circumstance that the
order of pleading does not require a plaintiff to meet all
possible defences, and to set out a case unanswerable except by
denial. The point at which the law calls on the defendant for an
answer varies [318] in different cases. Sometimes it would seem
to be governed simply by convenience of proof, requiring the
party who has the affirmative to plead and prove it. Sometimes
there seems to be a reference to the usual course of events, and
matters belong to the defence because they are only exceptionally
true.
The most logical distinction would be between conditions which
must be satisfied before a promise can be broken, and those
which, like the last, discharge the liability after a breach has
occurred. /1/ But this is of the slightest possible importance,
and it may be doubted whether another case like the last could be
found.
It is much more important to mark the distinction between a
stipulation which only has the effect of confining a promise to
certain cases, and a condition properly so called. Every
condition, it is true, has this effect upon the promise to which
it is attached, so that, whatever the rule of pleading may be,
/2/ a promise is as truly kept and performed by doing nothing
where the condition of the stipulated act has been broken, as it
would have been by doing the act if the condition had been
fulfilled. But if this were all, every clause in a contract which
showed what the promisor did not promise would be a condition,
and the word would be worse than useless. The characteristic
feature is quite different.
A condition properly so called is an event, the happening of
which authorizes the person in whose favor the condition is
reserved to treat the contract as if it had not been made,--to
avoid it, as is commonly said,--that is, to insist on both
parties being restored to the position in [319] which they stood
before the contract was made. When a condition operates as such,
it lets in an outside force to destroy the existing state of
things. For although its existence is due to consent of parties,
its operation depends on the choice of one of them. When a
condition is broken, the person entitled to insist on it may do
so if he chooses; but he may, if he prefers, elect to keep the
contract on foot. He gets his right to avoid it from the
agreement, but the avoidance comes from him.
Hence it is important to distinguish those stipulations which
have this extreme effect from those which only interpret the
extent of a promise, or define the events to which it applies.
And as it has just been shown that a condition need not be
insisted on as such, we must further distinguish between its
operation by way of avoidance, which is peculiar to it, and its
incidental working by way of interpretation and definition, in
common with other clauses not conditions.
This is best illustrated by taking a bilateral contract between A
and B, where A's undertaking is conditional on B's doing what he
promises to do, and where, after A has got a certain distance in
his task, B breaks his half of the bargain. For instance, A is
employed as a clerk by B, and is wrongfully dismissed in the
middle of a quarter. In favor of A, the contract is conditional
on B's keeping his agreement to employ him. Whether A insists on
the condition or not, he is not bound to do any more. /1/ So far,
the condition works simply by way of definition. It establishes
that A has not promised to act in the case which has happened.
But besides this, for which a condition [320] was not necessary,
A may take his choice between two courses. In the first place, he
may elect to avoid the contract. In that case the parties stand
as if no contract had been made, and A, having done work for B
which was understood not to be gratuitous, and for which no rate
of compensation has been fixed, can recover what the jury think
his services were reasonably worth. The contract no longer
determines the quid pro quo. But as an alternative course A may
stand by the contract if he prefers to do so, and sue B for
breaking it. In that case he can recover as part of his damages
pay at the contract rate for what he had done, as well as
compensation for his loss of opportunity to finish it. But the
points which are material for the present discussion are, that
these two remedies are mutually exclusive, /1/ one supposing the
contract to be relied on, the other that it is set aside, but
that A's stopping work and doing no more after B's breach is
equally consistent with either choice, and has in fact nothing to
do with the matter.
One word should be added to avoid misapprehension. When it is
said that A has done all that he promised to do in the case which
has happened, it is not meant that he is necessarily entitled to
the same compensation as if he had done the larger amount of
work. B's promise in the case supposed was to pay so much a
quarter for services; and although the consideration of the
promise was the promise by A to perform them, the scope of it was
limited to the case of their being performed in fact. Hence A
could not simply wait till the end of his term, and then recover
the full amount which he would have had if the employment had
continued. Nor is he any more entitled to do so from [321] the
fact that it was B's fault that the services were not rendered.
B's answer to any such claim is perfect. He is only liable upon a
promise, and he in his turn only promised to pay in a case which
has not happened. He did promise to employ, however, and for not
doing that he is liable in damages.
One or two more illustrations will be useful. A promises to
deliver, and B promises to accept and pay for, certain goods at a
certain time and place. When the time comes, neither party is on
hand. Neither would be liable to an action, and, according to
what has been said, each has done all that he promised to do in
the event which has happened, to wit, nothing. It might be
objected that, if A has done all that he is bound to do, he ought
to be able to sue B, since performance or readiness to perform
was all that was necessary to give him that right, and conversely
the same might be said of B. On the other hand, considering
either B or A as defendant, the same facts would be a complete
defence. The puzzle is largely one of words.
A and B have, it is true, each performed all that they promised
to do at the present stage, because they each only promised to
act in the event of the other being ready and willing to act at
the same time. But the readiness and willingness, although not
necessary to the performance of either promise, and therefore not
a duty, was necessary in order to present a case to which the
promise of action on the other side would apply. Hence, although
A and B have each performed their own promise, they have not
performed the condition to their right of demanding more from the
other side. The performance of that condition is purely optional
until one side has brought it within the [322] scope of the
other's undertaking by performing it himself. But it is
performance in the latter sense, that is, the satisfying of all
conditions, as well as the keeping of his own promises, which is
necessary to give A or B a right of action.
Conditions may be created by the very words of a contract. Of
such cases there is nothing to be said, for parties may agree to
what they choose. But they may also be held to arise by
construction, where no provision is made in terms for rescinding
or avoiding the contract in any case. The nature of the
conditions which the law thus reads in needs explanation. It may
be said, in a general way, that they are directed to the
existence of the manifest grounds for making the bargain on the
side of the rescinding party, or the accomplishment of its
manifest objects. But that is not enough. Generally speaking, the
disappointment must be caused by the wrong-doing of the person on
the other side; and the most obvious cases of such wrong-doing
are fraud and misrepresentation, or failure to perform his own
part of the contract.
Fraud and misrepresentation thus need to be considered once more
in this connection. I take the latter first. In dealing with it
the first question which arises is whether the representation is,
or is not, part of the contract. If the contract is in writing
and the representation is set out on the face of the paper, it
may be material or immaterial, but the effect of its untruth will
be determined on much the same principles as govern the failure
to perform a promise on the same side. If the contract is made by
word of mouth, there may be a large latitude in connecting words
of representation with later words of promise; but when they are
determined to be a part of the contract [323], the same
principles apply as if the whole were in writing.
The question now before us is the effect of a misrepresentation
which leads to, but is not a part of, the contract. Suppose that
the contract is in writing, but does not contain it, does such a
previous misrepresentation authorize rescission in any case? and
if so, does it in any case except where it goes to the height of
fraud? The promisor might say, It does not matter to me whether
you knew that your representation was false or not; the only
thing I am concerned with is its truth. If it is untrue, I suffer
equally whether you knew it to be so or not. But it has been
shown, in an earlier Lecture, that the law does not go on the
principle that a man is answerable for all the consequences of
all his acts. An act is indifferent in itself. It receives its
character from the concomitant facts known to the actor at the
time. If a man states a thing reasonably believing that he is
speaking from knowledge, it is contrary to the analogies of the
law to throw the peril of the truth upon him unless he agrees to
assume that peril, and he did not do so in the case supposed, as
the representation was not made part of the contract.
It is very different when there is fraud. Fraud may as well lead
to the making of a contract by a statement outside the contract
as by one contained in it. But the law would hold the contract
not less conditional on good faith in one case than in the other.
To illustrate, we may take a somewhat extreme case. A says to B,
I have not opened these barrels myself, but they contain No. 1
mackerel: I paid so much for them to so and so, naming a
well-known dealer. Afterwards A writes B, I will sell the barrels
which you saw, and their [324] contents, for so much; and B
accepts. The barrels turn out to contain salt. I suppose the
contract would be binding if the statements touching the contents
were honest, and voidable if they were fraudulent.
Fraudulent representations outside a contract can never, it would
seem, go to anything except the motives for making it. If outside
the contract, they cannot often affect its interpretation. A
promise in certain words has a definite meaning, which the
promisor is presumed to understand. If A says to B, I promise you
to buy this barrel and its contents, his words designate a person
and thing identified by the senses, and they signify nothing
more. There is no repugnancy, and if that person is ready to
deliver that thing, the purchaser cannot say that any term in the
contract itself is not complied with. He may have been
fraudulently induced to believe that B was another B, and that
the barrel contained mackerel; but however much his belief on
those points may have affected his willingness to make the
promise, it would be somewhat extravagant to give his words a
different meaning on that account. "You" means the person before
the speaker, whatever his name, and "contents" applies to salt,
as well as to mackerel.
It is no doubt only by reason of a condition construed into the
contract that fraud is a ground of rescission. Parties could
agree, if they chose, that a contract should be binding without
regard to truth or falsehood outside of it on either part.
But, as has been said before in these Lectures, although the law
starts from the distinctions and uses the language of morality,
it necessarily ends in external standards not dependent on the
actual consciousness of the individual. [325] So it has happened
with fraud. If a man makes a representation, knowing facts which
by the average standard of the community are sufficient to give
him warning that it is probably untrue, and it is untrue, he is
guilty of fraud in theory of law whether he believes his
statement or not. The courts of Massachusetts, at least, go much
further. They seem to hold that any material statement made by a
man as of his own knowledge, or in such a way as fairly to be
understood as made of his own knowledge, is fraudulent if untrue,
irrespective of the reasons he may have had for believing it and
for believing that he knew it. /1/ It is clear, therefore, that a
representation may be morally innocent, and yet fraudulent in
theory of law. Indeed, the Massachusetts rule seems to stop
little short of the principle laid down by the English courts of
equity, which has been criticised in an earlier Lecture, /2/
since most positive affirmations of facts would at least warrant
a jury in finding that they were reasonably understood to be made
as of the party's own knowledge, and might therefore warrant a
rescission if they turned out to be untrue. The moral phraseology
has ceased to be apposite, and an external standard of
responsibility has been reached. But the starting-point is
nevertheless fraud, and except on the ground of fraud, as defined
by law, I do not think that misrepresentations before the
contract affect its validity, although they lead directly to its
making. But neither the contract nor the implied condition calls
for the existence of the facts as to which the false
representations were made. They call only for the absence of
certain false representations. The condition is not that the
promisee shall be a certain other B, or that the contents of the
barrel shall be mackerel, [326] but that the promisee has not
lied to him about material facts.
Then the question arises, How do you determine what facts are
material? As the facts are not required by the contract, the only
way in which they can be material is that a belief in their being
true is likely to have led to the making of the contract.
It is not then true, as it is sometimes said, that the law does
not concern itself with the motives for making contracts. On the
contrary, the whole scope of fraud outside the contract is the
creation of false motives and the removal of true ones. And this
consideration will afford a reasonable test of the cases in which
fraud will warrant rescission. It is said that a fraudulent
representation must be material to have that effect. But how are
we to decide whether it is material or not? If the above argument
is correct, it must be by an appeal to ordinary experience to
decide whether a belief that the fact was as represented would
naturally have led to, or a contrary belief would naturally have
prevented, the making of the contract.
If the belief would not naturally have had such an effect, either
in general or under the known circumstances of the particular
case, the fraud is immaterial. If a man is induced to contract
with another by a fraudulent representation of the latter that he
is a great-grandson of Thomas Jefferson, I do not suppose that
the contract would be voidable unless the contractee knew that,
for special reasons, his lie would tend to bring the contract
about.
The conditions or grounds for avoiding a contract which have been
dealt with thus far are conditions concerning the conduct of the
parties outside of the itself. [327] Still confining myself to
conditions arising by construction of law,--that is to say, not
directly and in terms attached to a promise by the literal
meaning of the words in which it is expressed,--I now come to
those which concern facts to which the contract does in some way
refer.
Such conditions may be found in contracts where the promise is
only on one side. It has been said that where the contract is
unilateral, and its language therefore is all that of the
promisor, clauses in his favor will be construed as conditions
more readily than the same words in a bilateral contract; indeed,
that they must be so construed, because, if they do not create a
condition, they do him no good, since ex hypothesi they are not
promises by the other party. /1/ How far this ingenious
suggestion has had a practical effect on doctrine may perhaps be
doubted.
But it will be enough for the purposes of this general survey to
deal with bilateral contracts, where there are undertakings on
both sides, and where the condition implied in favor of one party
is that the other shall make good what he on his part has
undertaken.
The undertakings of a contract may be for the existence of a fact
in the present or in the future. They can be promises only in the
latter case; but in the former, they be equally essential terms
in the bargain.
Here again we come on the law of representations, but in a new
phase. Being a part of the contract, it is always possible that
their truth should make a condition of the contract wholly
irrespective of any question of fraud. And it often is so in
fact. It is not, however, every representation embodied in the
words used on one side which will [328] make a condition in favor
of the other party. Suppose A agrees to sell, and B agrees to
buy, "A's seven-year-old sorrel horse Eclipse, now in the
possession of B on trial," and in fact the horse is
chestnut-colored, not sorrel. I do not suppose that B could
refuse to pay for the horse on that ground. If the law were so
foolish as to aim at merely formal consistency, it might indeed
be said that there was as absolute a repugnancy between the
different terms of this contract as in the ease of an agreement
to sell certain barrels of mackerel, where the barrels turned out
to contain salt. If this view were adopted, there would not be a
contract subject to a condition, there would be no contract at
all. But in truth there is a contract, and there is not even a
condition. As has been said already, it is not every repugnancy
that makes a contract void, and it is not every failure in the
terms of the counter undertaking that makes it voidable. Here it
plainly appears that the buyer knows exactly what he is going to
get, and therefore that the mistake of color has no bearing on
the bargain. /1/
If, on the other hand, a contract contained a representation
which was fraudulent, and which misled the party to whom it was
made, the contract would be voidable on the same principles as if
the representation had been made beforehand. But words of
description in a contract are very frequently held to amount to
what is sometimes called a warranty, irrespective of fraud.
Whether they do so or not is a question to be determined by the
court on grounds of common sense, looking to the meaning of the
words, the importance in the transaction of the facts [329] which
the words convey, and so forth. But when words of description are
determined to be a warranty, the meaning of the decision is not
merely that the party using them binds himself to answer for
their truth, but that their truth is a condition of the contract.
For instance, in a leading case /1/ the agreement was that the
plaintiff's ship, then in the port of Amsterdam, should, with all
possible despatch, proceed direct to Newport, England, and there
load a cargo of coals for Hong Kong. At the date of the
charter-party the vessel was not in Amsterdam, but she arrived
there four days later. The plaintiff had notice that the
defendant considered time important. It was held that the
presence of the vessel in the port of Amsterdam at the date of
the contract was a condition, the breach of which entitled the
defendant to refuse to load, and to rescind the contract. If the
view were adopted that a condition must be a future event, and
that a promise purporting to be conditional on a past or present
event is either absolute or no promise at all, it would follow
that in this case the defendant had never made a promise. /2/ He
had only promised if circumstances existed which did not exist. I
have already stated my objections to this way of looking at such
cases, /2/ and will only add that the courts, so far as I am
aware, do not sanction it, and certainly did not in this
instance.
There is another ground for holding the charter-party void and no
contract, instead of regarding it as only voidable, which is
equally against authority, which nevertheless I have never been
able to answer wholly to my satisfaction. In the case put, the
representation of the lessor of the vessel [330] concerned the
vessel itself, and therefore entered into the description of the
thing the lessee agreed to take. I do not quite see why there is
not as fatal a repugnancy between the different terms of this
contract as was found in that for the sale of the barrels of salt
described as containing mackerel. Why is the repugnancy between
the two terms,--first, that the thing sold is the contents of
these barrels, and, second, that it is mackerel--fatal to the
existence of a contract? It is because each of those terms goes
to the very root and essence of the contract, /1/--because to
compel the buyer to take something answering to one, but not to
the other requirement, would be holding him to do a substantially
different thing from what he promised, and because a promise to
take one and the same thing answering to both requirements is
therefore contradictory in a substantial matter. It has been seen
that the law does not go on any merely logical ground, and does
not hold that every slight repugnancy will make a contract even
voidable. But, on the other hand, when the repugnancy is between
terms which are both essential, it is fatal to the very existence
of the contract. How then do we decide whether a given term is
essential? Surely the best way of finding out is by seeing how
the parties have dealt with it. For want of any expression on
their part we may refer to the speech and dealings of every day,
/2/ and say that, if its absence would make the subject-matter a
different thing, its presence is essential to the existence of
the agreement. But the parties may agree that anything, however
trifling, shall be essential, as well [331] as that anything,
however important, shall not be; and if that essential is part of
the contract description of a specific thing which is also
identified by reference to the senses, how can there be a
contract in its absence any more than if the thing is in popular
speech different in kind from its description? The qualities that
make sameness or difference of kind for the purposes of a
contract are not determined by Agassiz or Darwin, or by the
public at large, but by the will of the parties, which decides
that for their purposes the characteristics insisted on are such
and such. /1/1 Now, if this be true, what evidence can there be
that a certain requirement is essential, that without it the
subject-matter will be different in kind from the description,
better than that one party has required and the other given a
warranty of its presence? Yet the contract description of the
specific vessel as now in the port of Amsterdam, although held to
be an implied warranty, does not seem to have been regarded as
making the contract repugnant and void, but only as giving the
defendant the option of avoiding it. /2/ Even an express warranty
of quality in sales does not have this effect, and in England,
indeed, it does not allow the purchaser to rescind in case of
breach. On this last point the law of Massachusetts is different.
The explanation has been offered of the English doctrine with
regard to sales, that, when the title has passed, the purchaser
has already had some benefit from the contract, and therefore
cannot wholly replace the seller in statu quo, as must be done
when a contract is rescinded. /3/ This reasoning [332] seems
doubtful, even to show that the contract is not voidable, but has
no bearing on the argument that it is void. For if the contract
is void, the title does not pass.
It might be said that there is no repugnancy in the charterer's
promise, because he only promises to load a certain ship, and
that the words "now in the port of Amsterdam" are merely matter
of history when the time for loading comes, and no part of the
description of the vessel which he promised to load. But the
moment those words are decided to be essential they become part
of the description, and the promise is to load a certain vessel
which is named the Martaban, and which was in the port of
Amsterdam at the date of the contract. So interpreted, it is
repugnant.
Probably the true solution is to be found in practical
considerations. At any rate, the fact is that the law has
established three degrees in the effect of repugnancy. If one of
the repugnant terms is wholly insignificant, it is simply
disregarded, or at most will only found a claim for damages. The
law would be loath to hold a contract void for repugnancy in
present terms, when if the same terms were only promised a
failure of one of them would not warrant a refusal to perform on
the other side. If, on the other hand, both are of the extremest
importance, so that to enforce the rest of the promise or bargain
without one of them would not merely deprive one party of a
stipulated incident, but would force a substantially different
bargain on him, the promise will be void. There is an
intermediate class of cases where it is left to the disappointed
party to decide. But as the lines between the three are of this
vague kind, it is not surprising that they have been differently
drawn in different jurisdictions.
[333] The examples which have been given of undertakings for a
present state of facts have been confined to those touching the
present condition of the subject-matter of the contract. Of
course there is no such limit to the scope of their employment. A
contract may warrant the existence of other facts as well, and
examples of this kind probably might be found or imagined where
it would be clear that the only effect of the warranty was to
attach a condition to the contract, in favor of the other side,
and where the question would be avoided whether there was not
something more than a condition,--a repugnancy which prevented
the formation of any contract at all. But the preceding
illustrations are enough for the present purpose.
We may now pass from undertakings that certain facts are true at
the time of making the contract, to undertakings that certain
facts shall be true at some later time,--that is, to promises
properly so called. The question is when performance of the
promise on one side is a condition to the obligation of the
contract on the other. In practice, this question is apt to be
treated as identical with another, which, as has been shown
earlier, is a distinct point; namely, when performance on one
side is a condition of the right to call for performance on the
other. It is of course conceivable that a promise should be
limited to the case of performance of the things promised on the
other side, and yet that a failure of the latter should not
warrant a rescission of the contract. Wherever one party has
already received a substantial benefit under a contract of a kind
which cannot be restored, it is too late to rescind, however
important a breach may be committed later by the other side. Yet
he may be [334] excused from going farther. Suppose a contract is
made for a month's labor, ten dollars to be paid down, not to be
recovered except in case of rescission for the laborer's fault,
and thirty dollars at the end of the month. If the laborer should
wrongfully stop work at the end of a fortnight, I do not suppose
that the contract could be rescinded, and that the ten dollars
could be recovered as money had and received; /1/ but, on the
other hand, the employer would not be bound to pay the thirty
dollars, and of course he could sue for damages on the contract.
/2/
But, for the most part, a breach of promise which discharges the
promisee from further performance on his side will also warrant
rescission, so that no great harm is done by the popular
confusion of the two questions. Where the promise to perform on
one side is limited to the case of performance on the other, the
contract is generally conditioned on it also. In what follows, I
shall take up the cases which I wish to notice without stopping
to consider whether the contract was in a strict sense
conditioned on performance of the promise on one side, or whether
the true construction was merely that the promise on the other
side was limited to that event.
Now, how do we settle whether such a condition exists? It is easy
to err by seeking too eagerly for simplicity, and by striving too
hard to reduce all cases to artificial presumptions, which are
less obvious than the decisions which they are supposed to
explain. The foundation of the whole matter is, after all, good
sense, as the courts have often said. The law means to carry out
the intention of the parties, and, so far as they have not
provided [335] for the event which has happened, it has to say
what they naturally would have intended if their minds had been
turned to the point. It will be found that decisions based on the
direct implications of the language used, and others based upon a
remoter inference of what the parties must have meant, or would
have said if they had spoken, shade into each other by
imperceptible degrees.
Mr. Langdell has called attention to a very important principle,
and one which, no doubt, throws light on many decisions. /1/ This
is, that, where you have a bilateral contract, while the
consideration of each promise is the counter promise, yet prima
facie the payment for performance of one is performance of the
other. The performance of the other party is what each means to
have in return for his own. If A promises a barrel of flour to B,
and B promises him ten dollars for it, A means to have the ten
dollars for his flour, and B means to have the flour for his ten
dollars. If no time is set for either act, neither can call on
the other to perform without being ready at the same time
himself.
But this principle of equivalency is not the only principle to be
drawn even from the form of contracts, without considering their
subject-matter, and of course it is not offered as such in Mr.
Langdell's work.
Another very clear one is found in contracts for the sale or
lease of a thing, and the like. Here the qualities or
characteristics which the owner promises that the thing furnished
shall possess, go to describe the thing which the buyer promises
to accept. If any of the promised traits are wanting in the thing
tendered, the buyer may refuse to accept, not merely on the
ground that he has not [336] been offered the equivalent for
keeping his promise, but also on the ground that he never
promised to accept what is offered him. /1/ It has been seen
that, where the contract contains a statement touching the
condition of the thing at an earlier time than the moment for its
acceptance, the past condition may not always be held to enter
into the description of the thing to be accepted. But no such
escape is possible here. Nevertheless there are limits to the
right of refusal even in the present class of cases. If the thing
promised is specific, the preponderance of that part of the
description which identifies the object by reference to the
senses is sometimes strikingly illustrated. One case has gone so
far as to hold that performance of an executory contract to
purchase a specific thing cannot be refused because it fails to
come up to the warranted quality. /2/
Another principle of dependency to be drawn from the form of the
contract itself is, that performance of the promise on one side
may be manifestly intended to furnish the means for performing
the promise on the other. If a tenant should promise to make
repairs, and the landlord should promise to furnish him wood for
the purpose, it is believed that at the present day, whatever may
have been the old decisions, the tenant's duty to repair would be
dependent upon the landlord's furnishing the material when
required. /3/
[337] Another case of a somewhat exceptional kind is where a
party to a bilateral contract agrees to do certain things and to
give security for his performance. Here it is manifest good-sense
to hold giving the security a condition of performance on the
other side, if it be possible. For the requirement of security
shows that the party requiring it was not content to rely on the
simple promise of the other side, which he would be compelled to
do if he had to perform before the security was given, and thus
the very object of requiring it would be defeated. /1/
This last case suggests what is very forcibly impressed on any
one who studies the cases,--that, after all, the most important
element of decision is not any technical, or even any general
principle of contracts, but a consideration of the nature of the
particular transaction as a practical matter. A promises B to do
a day's work for two dollars, and B promises A to pay two
dollars for a day's work. There the two promises cannot be
performed at the same time. The work will take all day, the
payment half a minute. How are you to decide which is to be done
first, that is to say, which promise is dependent upon
performance on the other side? It is only by reference to the
habits of the community and to convenience. It is not enough to
say that on the principle of equivalency a man is not presumed
to intend to pay for a thing until he has it. The work is
payment for the money, as much as the [338] money for the work,
and one must be paid in advance. The question is, why, if one
man is not presumed to intend to pay money until he has money's
worth, the other is presumed to intend to give money's worth
before he has money. An answer cannot be obtained from any
general theory. The fact that employers, as a class, can be
trusted for wages more safely than the employed for their labor,
that the employers have had the power and have been the law-
makers, or other considerations, it matters not what, have
determined that the work is to be done first. But the grounds of
decision are purely practical, and can never be elicited from
grammar or from logic.
A reference to practical considerations will be found to run all
through the subject. Take another instance. The plaintiff
declared on a mutual agreement between himself and the defendant
that he would sell, and the defendant would buy, certain Donskoy
wool, to be shipped by the plaintiff at Odessa, and delivered in
England. Among the stipulations of the contract was one, that the
names of the vessels should be declared as soon as the wools were
shipped. The defence was, that the wool was bought, with the
knowledge of both parties, for the purpose of reselling it in the
course of the defendant's business; that it was an article of
fluctuating value, and not salable until the names of the vessels
in which it was shipped should have been declared according to
the contract, but that the plaintiff did not declare the names of
the vessels as agreed. The decision of the court was given by one
of the greatest technical lawyers that ever lived, Baron Parke;
yet he did not dream of giving any technical or merely logical
reason for the decision, but, after stating in the above words
the facts which were deemed material to the question [339]
whether declaring the names of the vessels was a condition to the
duty to accept, stated the ground of decision thus: "Looking at
the nature of the contract, and the great importance of it to the
object with which the contract was entered into with the
knowledge of both parties, we think it was a condition
precedent." /1/