CHAPTER
XI.

Debt of a third person.

A judgment debt.

Compromise of a claim.

Moral obligation.

A subsisting debt due from a third person is a good consideration for a bill or note (p) payable at a future day; and so is a debt due from the defendant and a third person (q). If the debt of the third person is extinguished by the bill or note being taken in satisfaction, there is a good consideration, though the instrument be payable on demand.

A judgment debt is a good consideration for a note payable at a future day; for it imports an agreement on the part of the judgment creditor to suspend proceedings on the judgment till the maturity of the note (r).

The compromise of a claim, though really unfounded and believed to be so by the party against whom it is made, may be a good consideration for a promissory note (s).

A moral obligation is in general insufficient, but may, in some cases, be a consideration for a bill or note, as where

there once existed a legal liability, though it may have been barred by statute (t). "Quisque renunciare potest juri pro se introducto." Thus, for example, where a bankrupt, after his bankruptcy, gave a promissory note to the plaintiff, one of his creditors, for part of his debt, it was held that the note was given on a good consideration (u). And a note given by the purchaser of an estate to the vendor for the purchase-money, though the contract be void by the Statute of Frauds, is made on sufficient consideration (r).

Between immediate parties—that is, between the drawer and acceptor, between the payee and drawer, between the payee and maker of a note, between the indorsee and indorser, the only consideration is that which moved from the plaintiff to the defendant, and the absence or failure of this is a good defence to an action. Thus, where a bill was drawn, in the regular course of trade, and delivered to the payee's agent, before the consideration was given, and the payee's agent, who was to have paid the consideration, failed, the payee could not recover against the drawer (y). But, between remote parties-for example, between payee and acceptor, between indorsee and acceptor, between indorsee and remote indorser, two distinct considerations, at least, must come in question: first, that which the defendant received for his liability; and, secondly, that which the plaintiff gave for his title. An action between

and that they were therefore holders for a valuable consideration of all alike. London and County Bank v. London and River Plate Bank, 21 Q. B. D. 535; 57 L. J. 601.

(t) See the note to Wennall v. Adney, 3 B. & P. 249; 6 R. R. 780; Eastwood v. Kenyon, 11 Ad. & E. 438.

(u) Trueman v. Fenton, Cowp. 544 and see Brix v. Braham, 1 Bing. 281; 8 Moore, 261.

(x) Jones v. Jones, 6 M. & W. 84. Perhaps this case may be rested on another ground.

A majority of the Court of Exchequer have held that a bill given since the repeal of the usury laws to repay a debt with usurious interest contracted during the existence of the usury laws is binding. Flight v. Reed, 22 L. J., Exch. 265; 1 H. & C. 708. (y) Puget de Bras v. Forbes, 1

Esp. 117; Astley v. Johnson, 29
L. J., Exch. 161 ; 5 H. & N. 137,
where it was held that a promise
to give consideration in money
at a specified future time having
been broken, parties liable on the
bill have a right to treat the
payment of money as the con-
sideration, and not the promise to
pay it. Jeffries v. Austen, 1 Stra.
674; Jackson v. Warwick, 7 T. R.
121. In Munroe v. Bordier, 19
L. J., C. P., 133; 8 C. B. 862, it
seems to be held, that a payee
who takes a bill bona fide for
value from a person to whom the
drawer had entrusted the bill,
but who parts with it against his
instructions, acquires a title.

Indeed, a payee, when he is a
third person, seems to have the
same title as the first indorsee of
a bill payable to the drawer's
own order. Poirier v. Morris, 2
E. & B. 89.

CHAPTER

XI.

Failure of

remote parties will not fail unless there be absence or failure of both these considerations (z). And if any intermediate holder between the defendant and the plaintiff gave value for the bill, that intervening consideration will sustain the plaintiff's title (a).

Thus it is no defence to an action by an indorsee for value against an acceptor, that the acceptor received no value (). Nor, on the other hand, that though the acceptor received value, the indorsee gave none. On the same principle, if the acceptance were without consideration, and the plaintiff, the indorsee, knew it, he, as a general rule, can recover no more than he gave for the bill (c); for, suppose the bill to be for 1007. and that the indorsee gave 607. for it, if he could recover 1007. from the acceptor, the acceptor having recovered that sum of the drawer, the drawer might recover back 407. from the indorsee as money received to the drawer's use (d).

The entire failure of the consideration has the same consideration. effect as its original and total absence. A. appointed B. his executor and gave him a promissory note, payable on demand, for 1007., in consideration of the trouble he would have in the office of executor after A.'s death. B., however, died first: but his executors brought an action on the note against A. It was held, that, as the consideration for the note had totally failed, the action was not maintainable (e).

Notice of absence of

It is no defence to an action by an indorsee for value against an accommodation acceptor, who has received no consideration. consideration, that, at the time the plaintiff took the bill he knew the defendant had received no value (f); unless,

(2) Robinson V. Reynolds, 2 Q. B. 196; Thiedemann v. Goldschmidt, 1 De G., F. & J. 4. In Agra and Masterman's Bank, v. Leighton, 36 L. J., Exch. 33; L. R., 2 Exch. 56, an equitable plea stating facts amounting to a failure of both these considerations was held good.

(a) Hunter v. Wilson, 19 L. J., Exch. 8; 4 Exch. 489. Code, s. 27. (b) Collins v. Martin, 1 Bos. & Pul. 651; 4 R. R. 752.

(e) Wiffen v. Roberts, 1 Esp. 261; 5 R. R. 737.

(d) Jones v. Hibbert, 2 Stark. 304; 19 R. R. 731. These obser

vations do not apply to an accommodation acceptance, properly so called.

(e) Solly v. Hinde, 2 C. & M. 516; 6 C. & P. 316; 39 R. R. 830; Wells v. Hopkins, 5 M. & W. 7.

(f) Code, s. 28. Smith v. Knox, 3 Esp. 47; Charles v. Marsden, 1 Taunt. 224; Fentum v. Pococke, 5 Taunt. 193; 1 Marsh. 14; Bank of Ireland v. Beresford, 6 Dow, 237; 19 R. R. 50; and see Popplewell v. Wilson, Stra. 264; and Wiffen v. Roberts, 1 Esp. 261; 5 R. R. 737; and see Jewell v. Parr, 16 C. B. 684; 36 L. J., Ex. 33; L. R., 2 Ex. 56.

XI.

indeed, the plaintiff took it of a person who held it for a CHAPTER particular purpose, and was therefore guilty of a breach of duty in transferring it to the plaintiff, and the plaintiff, at the time of taking it, was cognizant of the circumstances (g).

it is.

An accommodation bill is a bill to which the accommo- Accommodadating party, be he acceptor, drawer, or indorser, has put his tion bill, what name, without consideration (h), for the purpose of benefiting or accommodating some other party, who desires to raise money on it and is to provide for the bill when due (i).

A party who procures another to lend his acceptance, thereby engages either himself to take up the bill, or else within a reasonable time before the bill becomes due to provide the accommodation acceptor with funds for so doing, or, lastly, to indemnify the accommodation acceptor against the consequences of non-payment (k). And, therefore, where the drawer of a bill, accepted for his accommodation, a week before the bill became due, handed over bank notes to the accommodation acceptor, it was held that he could not himself revoke this payment, and therefore that his bankruptcy before the bill became due did not amount to a revocation (1).

The effect of indorsing or otherwise transferring an overdue accommodation bill, will be further considered hereafter in the Chapter on TRANSFER.

Liability of

party accom

modated.

absence or failure of

consideration.

Where a defendant can insist on a total want of con- Partial sideration as a defence, he may also set up its partial absence or failure, as an answer pro tanto. Thus in an action by the drawer of a bill for 197. 5s., payable to his own order, against the acceptor, it appearing that the bill was accepted, for value as to 107., and as an accommodation to the plaintiff as to the residue, Lord Ellenborough held, "that although with respect to third persons the amount

(g) If a message be sent comprising facts, the communication of which would impugn the title to a bill, there is no presumption that the message was delivered; its delivery must be proved. Middleton v. Barned, 4 Exch. 241. See the Chapter on TRANSFER,

(1) Code, s. 28. As to his remedy for the costs of an action brought against him, see post, Chapter on ACTION.

(i) Bills drawn specifically the one against the other, for the

same amount, are not in this
sense accommodation bills. See
the Chapter on BANKRUPTCY.
Burden v. Benton, 9 Q. B. 843;
16 L. J., Q. B. 353; see also
King v. Phillips, 12 M. & W.

705.

(k) Reynolds v. Doyle, 1 M. & G. 753; 2 Scott, N. R. 45.

(1) Yates v. Hoppe, 9 C. B. 541. Had the payment been a fraudulent preference, it would of course have been otherwise.

CHAPTER
XI.

of the bill might be 197. 5s., yet as between these parties it was an acceptance to the amount of 107. only" (m).

Formerly the money as to which the consideration fails must have been a specific ascertained amount, for the jury could not, in an action on a bill or note, assess by way of set-off the damages arising from a breach of contract, and the defendant was left to his cross action; but now unliquidated damages inay be set up in a counter-claim (n). Drawer against the acceptor of a bill: the plaintiff agreed to let a house to the defendant for twenty-one years, and in consideration of 5007., to be paid by three bills, to be drawn by the plaintiff and accepted by the defendant, agreed to execute a lease for that term. The bill in question, and two others, were drawn and accepted accordingly, and the defendant was immediately let into possession; but the plaintiff refused to execute the lease. It was argued, therefore, that the consideration had failed. But Lord Ellenborough, and afterwards the Court, on a motion for a new trial, held, that it was no defence to the action that the defendant was bound to pay the bills and might have his remedy on the agreement for non-execution of the lease (o). Where the consideration for an acceptance was goods sold, and the vendor forcibly retook possession, the consideration was held not to have failed (p). So, where a bill or note is given for goods sold, or work done, the price, amount, and quality of the goods, or work, cannot be disputed in an action on the bill (q). So, where work had been done by the plaintiff for the defendant, for which the plaintiff charged the defendant 637., and the defendant paid the plaintiff 437. in money, and gave him a bill for the remaining 207.; it is no defence to an action by the plaintiff against the defendant on the bill that the work done was not worth 431. (r).

(m) Darnell v. Williams, 2 Stark. 166; 19 R. R. 694; Barber v. Backhouse, Peake, 61; Clarkev. Lazarus, 3 M. & G. 167; 2 Scott, N. R. 391; Agra and Masterman's Bank v. Leighton, 36 L. J., Ex. 33; L. R., 2 Ex. 56.

() Ords. XIX. rr. 2 and 3. Though this may be a good defence either wholly or pro tanto between the immediate parties, it can hardly be available against a holder in due course. Code, s. 38 (2).

(0) Moggeridge v. Jones, 14 East, 486; 3 Camp. 38; Spiller v. Westlake, 2 B. & Ad. 155 ; 36 R. R.

520; Mann v. Lent, 10 B. & C. 877;
Grant v. Welchman, 16 East, 207;
Cuff v. Browne, 5 Price, 297; 19
R. R. 621.

(P) Stephens v. Wilkinson, 2 B. & Ad. 320; see also Jones v. Jones, 6 M. & W. 84; and Lomas v. Bradshaw, 19 L. J., C. P. 273; 9 C. B. 620.

(g) Morgan v. Richardson, 7 East, 482, n. ; 3 Smith, 487; 10 R. R. 624, n.; Tye v. Gwynne, 2 Camp. 346; Obbard v. Betham, 1 M. & M. 483; Warrick v. Nairn, 10 Exch. 762.

(r) Tricky v. Larne, 6 M. & W. 278.