The Common Law
by Oliver Wendell Holmes, Jr.

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Lecture 9 - Contracts Void & Voidable (Contracts Part III)

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be voidable,--in which, that is, a contract fails to be made when it seems to have been, or, having been made, can be rescinded by one side or the other, and treated as if it had never been.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 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/[340]


Please read the Note on the Notes

309/1 Raffles v. Wichelhaus, 2 H. & C. 906. Cf. Kyle v. Kavanagh, 103 Mass. 356, 357.

309/2 Cf. Cocker v. Crompton, 1 B. & C. 489.

310/1 Smith v. Hughes, L.R. 6 Q.B.597.

310/2 See Gardner v. Lane, 12 Allen, 39; S.C. 9 Allen, 492, 98 Mass. 517.

311/1 Goddard v. Monitor Ins. Co., 108 Mass. 56.

313/1 See Cundy v. Lindsay, 3 App. Cas. 459, 469. Cf. Reg. v. Middleton, L.R. 2 C.C. 38, 55 et seq., 62 et seq.; Reg. v. Davies, Dearsly, C.C. 640; Rex v. Mucklow, 1 Moody, O.C. 160; Reg. v. Jacobs, 12 Cox, 151.

313/2 "Praesentia corporis tollit errorem nominis." Cf. Byles, J., in Way v. Hearne, 32 L. J. N.S.C.P. 34, 40. But cf. the conflicting opinions in Reg. v. Middleton, L.R. 2 C.C. 38, 45, 57. It would seem that a proper name or other identification of an object or person as specific may have the same effect as an actual identification by the senses, because it refers to such an identification, although in a less direct way.

316/1 Brown v. Foster, 113 Mass. 136.

316/2 Leake, Dig. Contr. 13, 14, 637; Hunt v. Livermore, 5 Pick. 395, 397; Langd. Contr. (2d ed.), Section 36.

316/3 Leake, Dig. Contr. 638; Braunstein v. Accidental Death Ins. Co., 1 B. & S. 782.

316/4 But cf. Langd. Contr. (2d ed.), Section 29.

318/1 Langd. Contr. (2d ed.), Section 29.

318/2 Bullen & Leake, Prec. of Plead. (3d ed.), 147, "Conditions Precedent."

319/1 Cf. Cort v. Ambergate, Nottingham & Boston & Eastern Junction Railway Co., 17 Q.B.127.

320/1 Goodman v. Pocock, 15 Q.B.576 (1850).

325/1 Fisher v. Mellen, 103 Mass. 503.

325/2 Supra, p. 136.

327/1 Langd. Contr. (2d ed.), Section 33.

328/1 See the explanation of Dimech v. Corlett, 12 Moo. P.C. 199, in Behn v. Burness, 3 B. & S. 751, 760.

329/1 Behn v. Burness, 3 B. & S. 751.

329/2 Langd. Contr. (2d ed.), Section 28, p. 1000.

329/3 See Lecture VIII.

330/1 Kennedy v. Panama, &c. Mail Co., L.R. 2 Q.B.580, 588; Lyon v. Bertram, 20 How. 149, 153. Cf. Windscheid, Pand., Section 76, nn. 6, 9.

330/2 Windscheid, Pand., Section 76(4). See, generally, Ibid., nn. 6, 7; Section 78, pp. 206, 207; Section 82, pp. 216 et seq.

331/1 Cr. Ihering, Geist d. Roem. Rechts, Section 48, III. p. 116 (Fr. transl.).

331/2 See, however, the language of Crompton, J. in S.C., I B. & S. 877. Cf. Kent, Comm. (12th ed.), 479, n. 1, A (c).

331/3 Behn v. Burness, 3 B. & S. 751, 755, 756.

334/1 Cf. Anglo-Egyptian Navigation Co. v. Rennie, L.R. 10 C.P. 271.

334/2 Ellen v. Topp, 6 Exch. 424.

335/1 Contracts (2d Ed.), Section 106, and passim.

336/1 Chanter v. Hopkins, 4 M. & W. 399, 404. Possibly Behn v. Burness, stated above, might have been dealt with in this way. The ship tendered was not a ship which had been in the port of Amsterdam at the date of the contract. It was therefore not such a ship as the contract called for.

336/2 Heyworth v. Hutchinson, L.R. 2 Q.B.447, criticised in Benj. Sales (2d ed.), pp. 742 et seq.

336/3 See Thomas v. Cadwallader, Willes, 496; Langd. Contr. (2d ed.), Sections 116, 140. This is put as a case of equivalence by Mr. Langdell (Contr., Section 116); but the above explanation is believed to be the true one. It will be noticed that this is hardly a true case of condition, but merely a limitation of the scope of the tenant's promise. So a covenant to serve as apprentice in a trade, which the other party covenants to teach, can only be performed if the other will teach, and must therefore be limited to that event. Cf. Ellen v. Topp, 6 Exch. 424.

337/1 Langdell, Contracts (2d ed.), Section 127. Cf. Roberts v. Brett, 11 H. L. C. 337.

339/1 Graves v. Legg, 9 Exch. 709. Cf. Lang. Contr. (2d ed.), Section 33, p. 1004. Mr. Langdell says that a bought note, though part of a bilateral contract, is to be treated as unilateral, and that it may be presumed that the language of the contract relied on was that of a bought note, and thus a condition in favor of the defendant, who made it. I do not quite understand how this can be assumed when the declaration states a bilateral contract, and the question arose on demurrer to a plea, which also states that the plaintiff "was by the agreement bound to declare" the names. How remote the explanation is from the actual ground of decision will be seen.

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