elements of a contract exist, is binding.27 This is a correct interpretation, for the statute was enacted to make unenforceable those promises to answer for the debt "of another person." By "another person," it is obvious the legislature intended the debt or default of some one other than the promisor or promisee.

§ 46. Original and collateral "special promises." Special promises to answer for the debt of another person presuppose three parties involved: (a) the promisor, or obligor, or guarantor, as sometimes called, whose promise is secondary or collateral to that "of another person"; (b) the principal debtor, sometimes referred to as the principal, who, as the name implies, owes the primary obligation or duty, and under the statute is "another person" for whose obligation the guarantor becomes collaterally liable; (c) the obligee, or creditor, to whom the promises of both the guarantor and the principal debtor are made.

Special promises which are original are enforceable even if not written. Collateral agreements are subject to the defense of the statute of frauds. The terms original and collateral are not found in the statute itself, but distinguish between those cases to the enforcement of which the statute of frauds is a defense and those to which it is no defense.28 If the promisor says to the plaintiff, "Let A have these goods, and I will pay for them," there is no other debtor than the promisor. A was never liable for payment. The promise, therefore, is an original one. The verbal promisor is liable therefor. But if he says to the plaintiff, "Let A have these goods, and if he doesn't pay you, I will pay for them," the promisor's liability is collateral, because primarily A is liable as principal debtor.29 There is no universal interpretation given to ambiguous language, and if the promisor says "Let A have these goods, and I will see that you

27 Crim v. Fitch (1876) 53 Ind. 214; Patton v. Mills (1878) 21 Kan. 163; Alger v. Scoville (1854) 1 Gray (Mass.) 391; Hubon v. Park (1875) 116 Mass. 541; Ware v. Allen et al. (1887) 64 Miss. 545, 1 So. 738, 60 Am. Rep. 67.

28 Nelson v. Boynton (1841) 3 Met. (Mass.) 396, 400, 37 Am. Dec.

148; Barker v. Scudder (1874) 56 Mo. 272, 275.

29 Watkins v. Perkins (1697) 1 Lord Raymond 224, 91 Eng. Reports Reprint 1046; Buckmyr v. Darnall (1704) 2 Lord Raymond 1085, 92 Eng. Reports Reprint 219; Taylor v. Lee (1924) 187 N. C. 393, 121 S. E. 659. See Brandt (1905, 3d Ed.) Sec. 88.

are paid for them," his liability will depend upon whether it is found as a fact that A was primarily liable for them. If by saying "I will see you paid" is meant that the promisor will pay if A does not, then the defendant is not bound on his verbal promise, because it is collateral to A's liability to pay the same debt as principal debtor. If it is not intended that the plaintiff should look to A for his payment, then the verbal promisor is liable, because it is an original promise.30

§ 47. Credit given to promisor or beneficiary. The language employed by the promisor, the promisee, and the person for whose benefit the promise is made, is often ambiguous.31 Whether the beneficiary is also bound is not always explicitly stated. Frequently the one to whom the promisee gives credit is a determining factor. It is obvious that the mere fact of charging goods to the promisor is not conclusive, yet if the creditor charged them to the beneficiary, it would indicate that he, at least, understood the promise to be collateral. The obligee's act in carrying out what he interpreted to be the intention of the parties is at least of as much weight as his testimony regarding the expressed intent. To quote from one opinion:

"The fact that the goods are charged upon the seller's books to the third person, to whom they are furnished, and the fact that the bill for the goods is sent to such third person, are of importance in determining whether the liability of the promisor is primary or secondary; but such facts are not themselves conclusive upon the question. Undoubtedly, where the question involved is whether the promise is original or collateral, the test is whether the credit is given to the person sought to be charged, or to some one else. If plaintiff's books show that the defendant was not originally debited there, but that the goods were charged against the person receiving them, this fact, if unexplained by other circumstances, would be strong evidence going to show that credit was given to the person receiving the goods, but is not conclusive evidence of such fact.

30 Simpson v. Penton (1834) 2 Comp. & Mees 430; Lakeman v. Mountstephen (1874) L. R. 7 Eng. & Irish App. 17 with which compare Jones v. Cooper (1774) Cowper p. 227.

31 Simpson v. Penton (1834) 2 Comp. & Mees. 430; Lakeman v.

1132

Mountstephen (1874) L. R. 7 Eng. and Irish App. 17.

32 Lusk et al. v. Throop et al. (1901) 189 Ill. 127, 135, 59 N. E. 529, 531. Accord: Symons v. Burton (1925) Ind. App. 149 N. E. 460, 461.

§ 48. Novation. Suppose that C verbally agrees with B, to whom A is indebted, that he, C, will pay A's debt to B. A is a party to this agreement. Has C a defense? This is, in effect, a novation. It is a tripartite contract between debtor, creditor and a third person by which the third person is substituted for the debtor. The debt of A is extinguished. The promise represented by the line a-b (see diagram Sec. 52) is discharged. There is no principal debt to which C's special promise can be collateral. No concurrent obligation exists. When the new contract extinguishes the old one between A and B, C's undertaking is original, and, in fact, the only one. It is not to answer for the debt "of another person. 33

It must be noted, however, that there is no novation unless the three parties agree to it. If C promises B to pay A's debt to him, A not agreeing to it, B may at his pleasure revoke his agreement so far as A is concerned. A remains liable.84 It is not enforceable though the three parties agree to the substitution, if the consideration for C's promise to B moves from A to C; because, even though B gives up something to A, the consideration moves between A and C, the original debt continues, and, therefore, the verbal promise is within the statute of frauds,85

If the debtor verbally agrees to the substitution of a new creditor, the statute of frauds affords no defense to him, because

V.

3

33 Bird Gammon (1837) Bingham (N. C.) 883, 132 Eng. Reports Reprint 650; Butcher V. Steuart (1843) 11 M. & W. 857, 152 Eng. Reports Reprint 1052; Packer et al. v. Benton (1868) 35 Conn. 343, 95 Am. Dec. 246; Whittemore v. Wentworth (1884) 76 Me. 20; Langdon v. Hughes (1871) 107 Mass. 272; Mulcrone et al. v. The American Lumber Co. (1885) 55 Mich. 622, 22 N. W. 67; Martin v. Curtis (1899) 119 Mich. 169, 77 N. W. 690.

34 Ellison V. Wisehart et al. (1867) 29 Ind. 32, 34. In Goodman et al. v. Chase (1818) 1 Barnewall and Alderson 297, 106 Eng. Reports Reprint 110, it appears the principal debtor was present and acquiesced in his discharge, even if he did not expressly assent to it.

85 Furbish et al. V. Goodnow (1867) 98 Mass. 296. See (1926) 14 California Law Rev. p. 408, to the effect that an invalid agreement for novation may discharge a prior written agreement.

the debtor has promised to pay his own debt to a particular person.36

But an agreement between a third person and the creditor that he will pay the principal's debt, in consideration that the creditor will not attach the principal's property so it might be removed from the state, does not constitute a novation. The principal is not a party to the agreement, and he remains liable on his debt. Therefore, the promise of the third person is within the statute.37 An agreement that the defendant will pay the debt of another in consideration that the promisee will discontinue a pending suit for its recovery, is within the statute if the original debt is not extinguished.88

§ 49. Executed contracts and the statute of frauds. The statute of frauds did not make verbal contracts invalid; it merely prevented action to recover upon them. Its object was to afford a defense to executory contracts. But if the promisor performs, he cannot recover his money on the ground that he was not compellable to perform. After a verbal contract is executed, it is as effectual as if it had been written. Rights acquired by the performance of such verbal promise then become vested. The statute, therefore, affords a defense to executory contracts, but not to executed contracts.39

But if the verbal promisor gives to his agent the money for the purpose of discharging the principal's debt, and the agent fails to pay it, the contract is not executed, and the promisee will be unable to enforce the promise.40

§ 50. Debt or assumpsit. The proper form of action at common law was an important consideration for the plaintiff. If the promise was original, debt would lie; if the defendant's

86 Aultman and Co. v. Fletcher (1895) 110 Ala. 452, 18 So. 215; Gallagher v. Nichols (1875) 60

N. Y. 438.

37 Murto v. McKnight (1888) 28 Ill: App. 238. Distinguish Bunting v. Darbyshire (1874) 75 Ill. 408. 38 Duffy v. Wunsch (1870)

42

N. Y. 243; Miller v. Lynch (1888) 17 Oregon 61, 19 Pac. 845.

39 Webster et al. v. LeCompte (1891) 74 Md. 249, 22 Atl. 232. See Smart v. Smart (1885) 97 N. Y. 559.

40 Richardson v. Williams (1861) 49 Me. 558.

promise was collateral to that of another person, and in writing, assumpsit was the proper form. After a careful analysis of the cases, the late Dean Ames said:

"But it is an indispensable condition of the defendant's liability in Debt in cases where another person received the actual benefit, that this other person should not himself be liable to the plaintiff for the benefit received. For in that event the third person would be the debtor, and one quid pro quo cannot give rise to two distinct debts. Accordingly where the plaintiff declared in Debt against A for money lent to B at A's request, his declaration was adjudged bad; for a loan to B necessarily implied that B was the debtor. If B was, in truth, the debtor, the plaintiff should have declared in Special Assumpsit against A on the collateral promise. If B was not the debtor, the count against A should have been for money paid to B at A's request. By the same reasoning it would be improper to count against A for goods sold to B at A's request. If B was really the buyer, A should charge him in Debt, and A in Special Assumpsit on the collateral promise. If B was not the buyer, the count against A should be for goods delivered to B at A's request. The same distinction holds good as to services rendered to B at A's request. If B is a debtor A is not, but only collaterally liable in assumpsit."

"The distinction between Debt and Special Assumpsit, as illustrated in the cases mentioned in the preceding paragraph, is of practical value in determining whether a promise is in certain cases within the Statute of Frauds relating to guaranties. If B gets the enjoyment of the benefit furnished by the plaintiff at A's request, but A is the only party liable to the plaintiff, A's promise is not within the statute. If, on the other hand, B is liable to the plaintiff for the benefit received, that is, is a debtor, A's promise is clearly a guaranty and within the statute.

41

§ 51. Promise to pay out of the debtor's funds in the possession of the promisor. Although the principal obligor remains bound, a verbal promise to the creditor to pay out of the princi

41Parol Contracts Prior to Assumpsit" (1894) 8 Harvard Law Review 252, 263-264.

See Randall v. Rigby (1838) 4 Meeson & Welsby 130, 150 Eng. Reports Reprint 1372.