SUMMARY.
| The nature of personality. | |
| Persons | Natural. |
| Legal. | |
| Natural persons—living human beings. | |
| The legal status of beasts. | |
| The legal status of dead men. | |
| The legal status of unborn persons. | |
| Double personality. | |
| Legal persons. | |
| Legal personality based on personification. | |
| Personification without legal personality. | |
| Classes of Legal persons | 1. Corporations. |
| 2. Institutions. | |
| 3. Funds or Estates. | |
| Corporations—the only legal persons known to English law. | |
| Corporations aggregate and corporations sole. | |
| The fiction involved in incorporation. | |
| The beneficiaries of a corporation. | |
| The representatives of a corporation. | |
| The members of a corporation. | |
| Authority of a corporation’s agents. | |
| Liability of a corporation for wrongful acts. | |
| The purposes of incorporation: | |
| 1. Reduction of collective to individual ownership and action. | |
| 2. Limited liability. | |
| The creation and dissolution of corporations. | |
| The personality of the state. | |
CHAPTER XVI.
TITLES.
§ 120. Vestitive Facts.
We have seen in a former chapter that every right involves a title or source from which it is derived. The title is the de facto antecedent, of which the right is the de jure consequent. If the law confers a right upon one man which it does not confer upon another, the reason is that certain facts are true of him which are not true of the other, and these facts are the title of the right. Whether a right is inborn or acquired, a title is equally requisite. The title to a debt consists in a contract, or a judgment, or other such transaction; but the title to life, liberty, or reputation consists in nothing more than in being born with the nature of a human being. Some rights the law gives to a man on his first appearance in the world; the others he must acquire for himself, for the most part not without labour and difficulty. But neither in the one case nor in the other can there be any right without a basis of fact in which it has its root and from which it proceeds.
Titles are of two kinds, being either original or derivative. The former are those which create a right de novo; the latter are those which transfer an already existing right to a new owner. The catching of fish is an original title of the right of ownership, whereas the purchase of them is a derivative title. The right acquired by the fisherman is newly created; it did not formerly exist in any one. But that which is acquired by the purchaser is in legal theory identical with that which is lost by the vendor. It is an old right transferred, not a new one created. Yet in each case the fact which vests the right is equally a title, in the sense already explained. For the essence of a title is not that it determines the creation of rights de novo, but that it determines the acquisition of rights new or old.
As the facts confer rights, so they take them away. All rights are perishable and transient. Some are of feeble vitality, and easily killed by any adverse influence, the bond between them and their owners being fragile and easily severed. Others are vigorous and hardy, capable of enduring and surviving much. But there is not one of them that is exempt from possible extinction and loss. The first and greatest of all is that which a man has in his own life; yet even this the law will deny to him who has himself denied it to others.
The facts which thus cause the loss of rights may be called, after Bentham, divestitive facts. This term, indeed, has never been received into the accepted nomenclature of the law, but there seems no better substitute available. The facts which confer rights received from Bentham the corresponding name of investitive facts. The term already used by us, namely title, is commonly more convenient, however, and has the merit of being well established in the law.[[302]] As a generic term to include both investitive and divestitive facts the expression vestitive fact may be permissible.[[303]] Such a fact is one which determines, positively or negatively, the vesting of a right in its owner.
We have seen that titles are of two kinds, being either original or derivative. In like manner divestitive facts are either extinctive or alienative. The former are those which divest a right by destroying it. The latter divest a right by transferring it to some other owner. The receipt of payment is divestitive of the right of the creditor; so also is the act of the creditor in selling the debt to a third person; but in the former case the divestitive fact is extinctive, while in the latter it is alienative.
It is plain that derivative titles and alienative facts are not two different classes of facts, but are merely the same facts looked at from two different points of view.[[304]] The transfer of a right is an event which has a double aspect. It is the acquisition of a right by the transferee, and the loss of it by the transferor. The vestitive fact, if considered with reference to the transferee, is a derivative title, while from the point of view of the transferor it is an alienative fact. Purchase is a derivative title, but sale is an alienative fact; yet they are merely two different sides of the same event.
These distinctions and divisions are exhibited in the following Table:
| Vestitive Facts | Investitive Facts or Titles. | Original Titles. | Creation of Rights. |
| Derivative Titles. } | Transfer of Rights. | ||
| Divestitive Facts. | Alienative Facts. } | ||
| Extinctive Facts. | Destruction of Rights. |
These different classes of vestitive facts correspond to the three chief events in the life history of a right, namely, its creation, its extinction, and its transfer. By an original title a right comes first into existence, being created ex nihilo; by an extinctive fact it is wholly destroyed; by derivative titles and alienative facts, on the other hand—these being, as we have seen, the same facts viewed from different sides—the existence of the right is in no way affected. The transfer of a right does not in legal theory affect its personal identity; it is the same right as before, though it has now a different owner.[[305]]
§ 121. Acts in the Law.
Vestitive facts—whether they create, transfer, or extinguish rights—are divisible into two fundamentally distinct classes, according as they operate in pursuance of the will of the persons concerned, or independently of it. That is to say, the creation, transfer, and extinction of rights are either voluntary or involuntary. In innumerable cases the law allows a man to acquire or lose his rights by a manifestation or declaration of his will and intent directed to that end. In other cases it confers rights upon him, or takes them away without regard to any purpose or consent of his at all. If he dies intestate, the law itself will dispose of his estate as it thinks fit; but if he leaves a duly executed will in which he expresses his desires in the matter, the law will act accordingly. So if he sells his property, it passes from him in accordance with his declared intent, which the law adopts as its own; but if his goods are taken in execution by a creditor, or vested in a trustee on his bankruptcy, the transfer is an involuntary one, effected in pursuance of the law’s purposes, and not of his at all.
The distinction between these two classes of vestitive facts may be variously expressed. We may make use, for example, of the contrasted expressions act of the party and act of the law. An act of the party is any expression of the will or intention of the person concerned, directed to the creation, transfer, or extinction of a right, and effective in law for that purpose; such as a contract or a deed of conveyance. An act of the law, on the other hand, is the creation, extinction, or transfer of a right by the operation of the law itself, independent of any consent thereto on the part of him concerned. The expression act of the party is one of some awkwardness, however, and it is more convenient in general to substitute for it the technical term act in the law, as contrasted with those acts of the law which we have already defined.[[306]]
Acts in the law are of two kinds, which may be distinguished as unilateral and bilateral. A unilateral act is one in which there is only one party whose will is operative; as in the case of testamentary disposition, the exercise of a power of appointment, the revocation of a settlement, the avoidance of a voidable contract, or the forfeiture of a lease for breach of covenant. A bilateral act, on the other hand, is one which involves the consenting wills of two or more distinct parties; as, for example, a contract, a conveyance, a mortgage, or a lease. Bilateral acts in the law are called agreements in the wide and generic sense of that term. There is, indeed, a narrow and specific use, in which agreement is synonymous with contract, that is to say, the creation of rights in personam by way of consent. The poverty of our legal nomenclature is such, however, that we cannot afford thus to use these two terms as synonymous. We shall therefore habitually use agreement in the wide sense, to include all bilateral acts in the law, whether they are directed to the creation, or to the transfer, or to the extinction of rights. In this sense conveyances, mortgages, leases, or releases are agreements no less than contracts are.[[307]]
Unilateral acts in the law are divisible into two kinds in respect of their relation to the other party concerned. For in some instances they are adverse to him; that is to say, they take effect not only without his consent, but notwithstanding his dissent. His will is wholly inoperative and powerless in the matter. This is so, for example, in the case of a re-entry by a landlord upon a tenant for breach of covenant; or the exercise of a power of appointment, as against the persons entitled in default of appointment; or the avoidance of a voidable contract; or the exercise by a mortgagee of his power of sale. In other cases it is not so; the operation of the unilateral act is subject to the dissent of the other party affected by it, though it does not require his consent. In the meantime, pending the expression of his will, the act has merely a provisional and contingent operation. A will, for example, involves nothing save the unilateral intent and assent of the testator. The beneficiaries need know nothing of it; they need not yet be in existence. But if they subsequently dissent, and reject the rights so transferred to them, the testament will fail of its effect. If, on the other hand, they accept the provisions made on their behalf, the operation of the will forthwith ceases to be provisional and becomes absolute. Similarly a settlement of property upon trust need not be known or consented to ab initio by the beneficiaries. It may be a purely unilateral act, subject however to repudiation and avoidance by the persons intended to be benefited by it. So I may effectually grant a mortgage or other security to a creditor who knows nothing of it.[[308]]
Where there are more than two parties concerned in any act in the law, it may be bilateral in respect of some of them and unilateral in respect of others. Thus a conveyance of property by A. to B. in trust for C. may be bilateral as to A. and B. inter se—operating by the mutual consent of these two—while it may at the same time be unilateral as between A. and B. on the one side and C. on the other—C. having no knowledge of the transaction. So the exercise of a mortgagee’s power of sale is bilateral as between mortgagee and purchaser, but unilateral so far as regards the mortgagor.[[309]]
§ 122. Agreements.
Of all vestitive facts, acts in the law are the most important; and among acts in the law, agreements are entitled to the chief place. Unilateral acts are comparatively infrequent and unimportant. The residue of this chapter will therefore be devoted to the consideration of the grounds, modes, and conditions of the operation of agreement as an instrument of the creation, transfer, and extinction of rights. A considerable portion of what is to be said in this connection will, however, be applicable mutatis mutandis to unilateral acts also.
The importance of agreement as a vestitive fact lies in the universality of its operation. There are few rights which cannot be acquired through the assent of the persons upon whom the correlative duties are to be imposed. There are few rights which cannot be transferred to another by the will of him in whom they are presently vested. There are few which are not extinguished when their owner no longer desires to retain them. Of that great multitude of rights and duties of which the adult member of a civilised community stands possessed, the great majority have their origin in agreements made by him with other men. By agreements of contrary intent he may strip himself almost as destitute of rights and duties, as when in the scantiest of juridical vesture he made his first appearance before the law. Invito beneficium non datur,[[310]] said the Romans.
By what reasons, then, is the law induced to allow this far-reaching operation to the fact of agreement? Why should the mere consent of the parties be permitted in this manner to stand for a title of right? Are not rights the subject-matter of justice, and is justice a mere matter of convention varying with the wills of men?
The reasons are two in number. Agreement is in the first place evidential of right, and in the second place constitutive of it. There is in general no better evidence of the justice of an arrangement than the fact that all persons whose interests are affected by it have freely and with full knowledge consented to it. Men are commonly good judges of their own interests, and in the words of Hobbes “there is not ordinarily a greater sign of the equal distribution of anything, than that every man is contented with his share.” When, therefore, all interests are satisfied, and every man is content, the law may safely presume that justice has been done, and that each has received his own. The determination of the law is needed only in default of the agreement of the parties. Hence it is, that he who agrees with another in any declaration of their respective rights and duties will not be suffered to go back from his word, and will not be heard to dispute the truth of his declaration. The exceptions to this rule are themselves defined by equally rigid rules; and he who would disclaim a duty which he has thus imposed upon himself, or reclaim a right which he has thus transferred or abandoned, must bring himself within one of those predetermined exceptions. Otherwise he will be held bound by his own words.
This conclusive presumption of the truth of consensual declarations of right is, however, only one of the foundations of the law of agreement. Consent is in many cases truly constitutive of right, instead of merely evidential of it. It is one of the leading principles of justice to guarantee to men the fulfilment of their reasonable expectations. In all matters that are otherwise indifferent, expectation is of predominant influence in the determination of the rule of right, and of all the grounds of rational expectation there is none of such general importance as mutual consent. “The human will,” says Aquinas, “is able by way of consent to make a thing just; provided that the thing is not in itself repugnant to natural justice.”[[311]]
There is an obvious analogy between agreement and legislation—the former being the private and the latter the public declaration and establishment of rights and duties. By way of legislation the state does for its subjects that which in other cases it allows them to do for themselves by way of agreement. As to the respective spheres of these two operations, the leading maxim is Modus et conventio vincunt legem. Save when the interests of the public at large demand a different rule, the autonomy of consenting parties prevails over the legislative will of the state. So far as may be, the state leaves the rule of right to be declared and constituted by the agreement of those concerned with it. So far as possible, it contents itself with executing the rules which its subjects have made for themselves. And in so doing it acts wisely. For in the first place, the administration of justice is enabled in this manner to escape in a degree not otherwise attainable the disadvantages inherent in the recognition of rigid principles of law. Such principles we must have; but if they are established pro re nata by the parties themselves, they will possess a measure of adaptability to individual cases which is unattainable by the more general legislation of the state itself. Amid the infinite diversities and complexities of human affairs the state wisely despairs of truly formulating the rules of justice. So far as possible, it leaves the task to those who by their nearness to the facts are better qualified for it. It says to its subjects: Agree among yourselves as to what is just in your individual concerns, and I shall enforce your agreement as the rule of right.
In the second place, men are commonly better content to bear the burdens which they themselves have taken up, than those placed upon them by the will of a superior. They acquiesce easily in duties of their own imposition, and are well pleased with rights of their own creation. The law or the justice which best commends itself to them is that which they themselves have made or declared. Wherefore, instead of binding its subjects, the state does well in allowing them to bind themselves.
§ 123. The Classes of Agreements.
Agreements are divisible into three classes, for they either create rights, or transfer them, or extinguish them. Those which create rights are themselves divisible into two subclasses, distinguishable as contracts and grants. A contract is an agreement which creates an obligation or right in personam between the parties to it. A grant is an agreement which creates a right of any other description; examples being grants of leases, easements, charges, patents, franchises, powers, licences, and so forth. An agreement which transfers a right may be termed generically an assignment. One which extinguishes a right is a release, discharge, or surrender.
As already indicated, a contract is an agreement intended to create a right in personam between the contracting parties. No agreement is a contract unless its effect is to bind the parties to each other by the vinculum juris of a newly created personal right. It commonly takes the form of a promise or set of promises. That is to say, a declaration of the consenting wills of two persons that one of them shall henceforth be under an obligation to the other naturally assumes the form of an undertaking by the one with the other to fulfil the obligation so created. Not every promise, however, amounts to a contract. To constitute a contract there must be not merely a promise to do a certain act, but a promise, express or implied, to do this act as a legal duty. When I accept an invitation to dine at another man’s house, I make him a promise, but enter into no contract with him. The reason is that our wills, though consenting, are not directed to the creation of any legal right or to any alteration of our legal relations towards each other. The essential form of a contract is not: I promise this to you; but: I agree with you that henceforth you shall have a legal right to demand and receive this from me. Promises that are not reducible to this from are not contracts. Therefore the consent that is requisite for the creation of rights by way of contract is essentially the same as that required for their transfer or extinction. The essential element in each case is the express or tacit reference to the legal relations of the consenting parties.
Taking into account the two divisions of the consensual creation of rights, there are, therefore, four distinct kinds of agreements:—
1. Contracts—creating rights in personam.
2. Grants—creating rights of any other kind.
3. Assignments—transferring rights.
4. Releases—extinguishing rights.
It often happens that an agreement is of a mixed nature, and so falls within two or more of these classes at the same time. Thus the sale of a specific chattel is both a contract and an assignment, for it transfers the ownership of the chattel and at the same time creates an obligation to pay the price. So a lease is both a grant and a contract, for it creates real and personal rights at the same time. In all such cases the agreement must be classed in accordance with its chief or essential operation, its other effects being deemed subsidiary and incidental.
A frequent result of the difference between law and equity, and between legal and equitable rights and ownership, is that the same agreement has one effect in law and another in equity. In law it may be a mere contract, and in equity an assignment or a grant. Thus a written agreement for the sale of land is in law nothing more than a contract, imposing upon the seller a personal obligation to execute a conveyance under seal, but not in itself amounting to a transfer of the ownership of the land. In equity, on the other hand, such an agreement amounts to an assignment. The equitable ownership of the land passes under it to the purchaser forthwith, and the vendor holds the legal ownership in trust for him. Similarly a contract to grant a legal lease or mortgage or servitude is itself the actual grant of an equitable lease, mortgage, or servitude. For it is a maxim of Chancery that equity regards that as already done which ought to be done.
§ 124. Void and Voidable Agreements.
In respect of their legal efficacy agreements are of three kinds, being either valid, void, or voidable. A valid agreement is one which is fully operative in accordance with the intent of the parties. A void agreement is one which entirely fails to receive legal recognition or sanction, the declared will of the parties being wholly destitute of legal efficacy. A voidable agreement stands midway between these two cases. It is not a nullity, but its operation is conditional and not absolute. By reason of some defect in its origin it is liable to be destroyed or cancelled at the option of one of the parties to it. On the exercise of this power the agreement not only ceases to have any efficacy, but is deemed to have been void ab initio. The avoidance of it relates back to the making of it. The hypothetical or contingent efficacy which has hitherto been attributed to it wholly disappears, as if it had never existed. In other words, a voidable agreement is one which is void or valid at the election of one of the parties to it. A lease determinable on notice or on re-entry for breach of covenant is not for that reason voidable; because, when determined, it is not destroyed ab initio, but merely from then onwards.[[312]]
Void and voidable agreements may be classed together as invalid. The most important causes of invalidity are six in number, namely, (1) incapacity, (2) informality, (3) illegality, (4) error, (5) coercion, and (C) want of consideration.
1. Incapacity. Certain classes of persons are wholly or partially destitute of the power of determining their rights and liabilities by way of consent. They cannot, at least to the same extent as other persons, supersede or supplement the common law by subjecting themselves to conventional law of their own making. In the case of minors, lunatics, and convicts, for example, the common law is peremptory, and not to be derogated from or added to by their agreement. So the agreements of an incorporated company may be invalid because ultra vires, or beyond the capacity conferred upon it by law.
2. Informality. Agreements are of two kinds, which may be distinguished as simple and formal. A simple agreement is one in which nothing is required for its effective operation beyond the manifestation, in whatever fashion, of the consenting wills of the parties. A formal agreement, on the other hand, is one in which the law requires not merely that consent shall exist, but that it shall be manifested in some particular form, in default of which it is held of no account. Thus the intent of the parties may be held effective only if expressed in writing signed by them, or in writing authenticated by the more solemn form of sealing; or it must be embodied in some appointed form of words; or it must be acknowledged in the presence of witnesses, or recorded by some form of public registration; or it must be accompanied by some formal act, such as the delivery of the subject-matter of the agreement.
The leading purpose of all such forms is twofold. They are, in the first place, designed as pre-appointed evidence of the fact of consent and of its terms, to the intent that this method of determining rights and liabilities may be provided with the safeguards of permanence, certainty, and publicity. In the second place their purpose is that all agreements may by their help be the outcome of adequate reflection. Any necessary formality has the effect of drawing a sharp line between the preliminary negotiations and the actual agreement, and so prevents the parties from drifting by inadvertence into unconsidered consent.
3. Illegality. In the third place an agreement may be invalid by reason of the purposes with which it is made. To a very large extent men are free to agree together upon any matter as they please; but this autonomous liberty is not absolute. Limitations are imposed upon it, partly in the interests of the parties themselves, and partly on behalf of the public. There is much of the common law which will not suffer itself to be derogated from by any private agreement; and there are many rules which, though they in no way infringe upon the common law, cannot be added to it as supplementary. That is to say, there are many matters in which the common law will admit of no abatement, and many in which it will admit of no addition, by way of conventional law. It is true in great part that Modus et conventio vincunt legem; but over against this principle we must set the qualification, Privatorum conventio juri publico non derogat. By jus publicum is here meant that part of the law which concerns the public interest, and which for this reason the agreements of private persons cannot be allowed to infringe upon.[[313]] Agreements which in this way overpass the limits allowed by the law are said in a wide sense to be illegal, or to be void for illegality. They may or may not be illegal in a narrower sense, as amounting in their making or in their performance to a criminal or civil wrong.
4. Error or mistake. Error or mistake, as a ground of invalidity, is of two kinds, which are distinguishable as essential and unessential. Essential error is that which is of such a nature as to prevent the existence of any real consent and therefore of any real agreement. The parties have not in reality meant the same thing, and therefore have not in reality agreed to any thing. Their agreement exists in appearance only, and not in reality. This is the case if A. makes an offer to B. which is accepted in mistake by C.; or if A. agrees to sell land to B., but A. is thinking of one piece of land, and B. is thinking of another. The effect of error of this kind is to make the agreement wholly void, inasmuch as there is in truth no agreement at all, but only the external semblance and form of one.[[314]]
There is, however, an exception to this rule when the error is due to the negligence of one of the parties and is unknown to the other. For in such a case he who is in fault will be estopped by his own carelessness from raising the defence of essential error, and will be held bound by the agreement in the sense in which the other party understood it.[[315]]
Unessential error, on the other hand, is that which does not relate to the nature or contents of the agreement, but only to some external circumstance, serving as one of the inducements which led to the making of it; as when A. agrees to buy B.’s horse because he believes it to be sound, whereas it is in reality unsound. This is not essential error, for there is a true consensus ad idem. The parties have agreed to the same thing in the same sense, though one of them would not have made the agreement had he not been under a mistake. The general rule is that unessential error has no effect on the validity of an agreement. Neither party is in any way concerned in law with the reasons which induced the other to give his consent. That which men consent to they must abide by, whether their reasons are good or had. And this is so even though one party is well aware of the error of the other.[[316]]
This rule, however, is subject to an important exception, for even unessential error will in general make an agreement voidable at the option of the mistaken party, if it has been caused by the misrepresentation of the other party. He who is merely mistaken is none the less bound by his agreement; but he who is misled has a right to rescind the agreement so procured.[[317]]
5. Coercion. In order that consent may be justly allowed as a title of right, it must be free. It must not be the product of any form of compulsion or undue influence; otherwise the basis of its legal operation fails. Freedom, however, is a matter of degree, and it is no easy task to define the boundary line that must be recognised by a rational system of law. We can only say generally, that there must be such liberty of choice as to create a reasonable presumption that the party exercising it has chosen that which he desires, and not merely submitted to that which he cannot avoid. We cannot usefully enter here into any examination of the actual results that have been worked out in this matter by English law.
6. Want of consideration. A further condition very commonly required by English law for the existence of fully efficacious consent is that which is known by the technical name of consideration. This requirement is, however, almost wholly confined to the law of contract, other forms of agreement being generally exempt from it.
A consideration in its widest sense is the reason, motive, or inducement, by which a man is moved to bind himself by an agreement. It is not for nothing that he consents to impose an obligation upon himself, or to abandon or transfer a right. It is in consideration of such and such a fact that he agrees to bear new burdens or to forego the benefits which the law already allows him. If he sells his house, the consideration of his agreement is the receipt or promise of the purchase money. If he makes a settlement upon his wife and children, it is in consideration of the natural love and affection which he has for them. If he promises to pay a debt incurred by him before his bankruptcy, the consideration of his promise is the moral obligation which survives his legal indebtedness to his creditors. Using the term in this wide sense, it is plain that no agreement made with knowledge and freedom by a rational man can be destitute of some species of consideration. All consent must proceed from some efficient cause. What, then, is meant by saying that the law requires a consideration as a condition of the validity of an agreement? The answer is that the consideration required by the law is a consideration of a kind which the law itself regards as sufficient. It is not enough that it should be deemed sufficient by the parties, for the law has itself authoritatively declared what facts amount to a valid and sufficient consideration for consent, and what facts do not. If men are moved to agreement by considerations which the law refuses to recognise as good, so much the worse for the agreement. Ex nudo pacto non oritur actio. To bare consent, proceeding from no lawfully sanctioned source, the law allows no operation.
What considerations, then, does the law select and approve as sufficient to support a contract? Speaking generally, we may say that none are good for this purpose save those which are valuable. By a valuable consideration is meant something of value given by one party in exchange for the promise of the other. By English law no promise (unless under seal or of record) is binding unless the promisor receives a quid pro quo from the promisee. Contracts which are purely unilateral, all the obligation being on one side, and nothing either given or promised on the other, are destitute of legal operation. Every valid contract[[318]] is reducible to the form of a bargain that if I do something for you, you will do something for me.
The thing thus given by way of consideration must be of some value. That is to say, it must be material to the interests of one or other or both of the parties. It must either involve some gain or benefit to the promisor by way of recompense for the burden of his promise, or it must involve some loss or disadvantage to the promisee for which the benefit of the promise is a recompense. Commonly it possesses both of these qualities at once, but either of them is sufficient by itself. Thus if I promise gratuitously to take care of property which the owner deposits with me, I am bound by that promise, although I receive no benefit in recompense for it, because there is a sufficient consideration for it in the detriment incurred by the promisee in entrusting his property to my guardianship. But if the thing given by way of consideration is of no value at all, being completely indifferent to both parties, it is insufficient, and the contract is invalid; as, for example, the doing of something which one is already bound to the other party to do, or the surrender of a claim which is known to be unfounded.
In certain exceptional cases, however, considerations which are not valuable are nevertheless accepted as good and sufficient by the law. Thus the existence of a legal obligation may be a sufficient consideration for a promise to fulfil it; as in the case of a promissory note or other negotiable instrument given for the amount of an existing debt. At one time it was supposed to be the law that a merely moral obligation was in the same manner a sufficient basis for a promise of performance, and though this is no longer true as a general proposition, certain particular applications of the principle still survive, while others have but recently been abolished by statute. Thus a promise made by a discharged bankrupt to pay a creditor in full was until recently a binding contract, because made in consideration of the moral obligation which survives the legal indebtedness of an insolvent. For the same reason, a promise made after majority to pay debts incurred during infancy was binding, until the law was altered in this respect by recent legislation. Similarly a promise to pay a debt barred by prescription is legally valid even yet, the consideration being the moral (and imperfect legal) obligation which survives the period of prescription.
With respect to the rational basis of this doctrine, it is to be noticed that the requirement of consideration is not absolute, but conditional on the absence of a certain formality, namely that of a sealed writing. Form and consideration are two alternative conditions of the validity of contracts and of certain other kinds of agreements. It may be surmised, therefore, that they are founded on the same reasons and fulfil the same functions. They are intended as a precaution against the risk of giving legal efficacy to unconsidered promises and to the levities of speech. The law selects certain reasons and inducements, which are normally sufficient for reasoned and deliberate consent, and holds valid all agreements made on these grounds, even though informal. In all other cases it demands the guarantee of solemn form. There can be little doubt, however, that our law has shown itself too scrupulous in this matter; in other legal systems no such precaution is known, and its absence seems to lead to no ill results.
Although the doctrine of consideration, in the form received by English law, is unknown elsewhere, it is simply a modification of a doctrine known to the civil law and to several modern systems, more especially to that of France. Article 1131 of the French Civil Code provides that: “L’obligation sans cause, ou sur une fausse cause, ou sur une cause illicite, ne peut avoir aucun effet.”[[319]] This cause or causa is a synonym for consideration, and we find the terms used interchangeably in the earlier English authorities.[[320]] There is, however, an essential difference between the English and the Continental principle. Unlike the former, the latter never rejects any cause or consideration as insufficient. Whatever motive or inducement is enough to satisfy the contracting parties is enough to satisfy the law, even though it is nothing more than the causa liberalitatis of a voluntary gift. By an obligation sans cause, or contract without consideration, French law does not mean a contract made without any motive or inducement (for there are none such), nor a contract made from an inadequate motive or inducement (for the law makes no such distinctions), but a contract made for a consideration which has failed—causa non secuta, as the Romans called it. The second ground of invalidity mentioned in the Article cited is the falsity of the consideration (falsa causa). A consideration may be based on a mistake, so that it is imaginary and not real; as when I agree to buy a horse which, unknown to me, is already dead, or a ship which has been already wrecked, or give a promissory note for a debt which is not truly owing. Finally a causa turpis, or illegal consideration, is as fatal to a contract in French and Roman law as in English.
In English law the failure of consideration (causa non secuta) and its unreality due to error (causa falsa) are grounds of invalidity, only when the absence of such failure or error is expressly or impliedly made a condition of the contract. In a contract for the sale of a chattel, for example, the present existence of the chattel is an implied condition of the validity of the sale.[[321]]