ACCORD AND SATISFACTION THE PAYMENT OF A LESSER SUM THAN THE WHOLE IN SATISFACTION OF A DEBT.

One of the severest rules that has come down to us from the common law is that the

payment in money at the time and place stipulated, of a lesser sum than the whole of a liquidated demand, will not discharge the debt, though accepted in full payment. The common-law rule may be stated as follows: The payment of a less sum at the time and place where a greater liquidated and undisputed demand is due is not a satisfaction of the debt, though paid and accepted as such, and after receipt in full given, action for the balance may be maintained by the creditor.1 The origin of the rule is charged to Lord Coke as having been established by his opinion in Pinnel's Case, and, although in that case the rule was but a dictum of the court of common pleas, it has since been almost univervally recognized by courts in England and America and by law writers as well.

2

The reason of such a holding, if it may be said to be supported by reason at all, or at any rate, the consideration which appears to have been the foundation of Coke's conclusion, is that where part payment of a liquidated and undisputed debt is accepted in full, no consideration exists for this promise of the creditor to release the remainder of his debt. The Supreme Court of Vermont, following the principle, in the case of Hard v. Burton, says: "A man is not injured by paying his own debt, nor by paying a part of it on promise of his creditor to release the remainder, etc.," especially where it does not

3

1 United States v. Bostwick, 94 U. S. 53, 24 L. Ed. 55; Fire Ins. Ass'n v. Wickham, 141 U. S. 564, 35 L. Ed. 860; Pinnel's Case, 5 Coke, 117; Cumber v. Wane, 1 Stra. 426, 1 Smith Lead. Cas., 8th Am. Ed. 633; Fitch v. Sutton, 5 East. 230; Foakes v. Beer, 54 L. J. Q. B. Div. 130, L. R. 9 App. Cas. 605; Curran v. Rummell, 118 Mass. 482; Tuttle v. Tuttle, 12 Met. (Mass.) 554, 46 Am. Dec. 701; Makepeace v. Harvard College, 10 Pick. (Mass.) 298; Watkinson v. Inglesby, 5 Johns. (N. Y.) 386: Allen v. Roosevelt, 14 Wend. (N. Y.) 100; Bunge v. Koop, 48 N. Y. 225; Martin v. Frautz, 127 Pa. St. 389, 14 Am. St. Rep. 859; Bowdon v. Robinson, 4 Tex. Civ. App. 626; Fuller v. Kemp, 138 N. Y. 231. See also note 20 L. R. A. 785; and the countless cases cited in those above mentioned from practically every state.

25 Coke, 117.

3 62 Vt. 314.

appear that by payment of the part on such agreement of his creditor, he is placed in no worse plight than before.

The exact point being considered does not appear to have been involved in the Pinnel Case, supra, Coke's opinion indicating that his determination of the case was upon a question of insufficient pleading. Some eminent lawyers, in fact, take issue with the great weight of authority, and deny that it

4

was ever the intention of Lord Coke to establish such law. Among these is Chief Justice Woods of the Supreme Court of Mississippi, who, in Clayton v. Clark, declares: "That the question was not only not decided, but it was impossible that it should have been." And Lord Blackburn in his most entertaining discussion of the origin of this rule, in the case of Foakes v. Beer, supra, appears to believe that Coke was mistaken as to fact as well as law. He says: "What principally weighs with me in thinking that Lord Coke made a mistake of fact is my conviction that all men of business, whether merchants or tradesmen, do, every day, recognize and act on the ground that prompt payment of a part of their demand may be more beneficial to them than it would be to insist on their rights and enforce payment of the whole. Even where the debtor is perfectly solvent and sure to pay at last, this is often so. Where the credit of the debtor is doubtful, it must be more so."

a

But however this may be, it must be admitted that whether as mere dictum or not, the rule is laid down in the Pinnel Case, as a reading of it will show, and while exceptions have been announced and adverse criticism from bench and bar passed, it has for these three hundred years or more, obtained as the rule of the common law, and been recognized as such by courts of highest dignity. And Cumber v. Wane, supra, later case, which shares with Pinnel's the distinction of having originated this rule, again announces the doctrine clearly, citing the Coke opinion. In this latter case the defendant pleads that he had given a note for five pounds in satisfaction of a note for fifteen pounds, and Lord Chief Justice Pratt in his opinion says: "Even the actual payment of five pounds would not do because it is a less sum." In Fitch v. Sutton, supra, Lord 4 74 Miss. 499, 60 Am. St. Rep. 321.

he says:

ation for the relinquishment of the residue, something collateral to show the possibility of benefit to the party relinquishing his further claim otherwise the agreement is nudum pactum The author

ity of Cumber v. Wane, is directly supported by Pinnel's Case, which never appears to have been questioned."

v.

And in the United States as well the doctrine has to this day obtained, being upheld by the Supreme Court in the cases of Fire Association Wickham and United States v. Bostwick, supra, as well as by practically all of the state courts, as the liberal citation of authorities above will demonstrate. In the case of Fire Association v. Wickham the Supreme Court of the United States cites with approval the Pinnel Case, and among other things says, Justice Brown rendering the opinion: "The rule is well established that where the facts show clearly a certain sum to be due from one person to another a release of the entire sum upon payment of a part is without consideration, and the creditior may still sue and recover the residue." And again in United States v. Bostwick, cited above, the same court says: "Payment by a debtor of a part of his debt, is not a satisfaction of the whole, except it be made and accepted upon some new consideration."

These holdings, however, have been with great reluctance and much adverse criticism on the part of the courts, expressed in almost every case in which the question has been presented.

impossible.

The rule is an anachronism brought down by adherence to ancient customs and theories, the open extermination of which has been already too long delayed. In the present age of commercial affairs and financial activity, it is out of all harmony with reason, and its enforcement detrimental to all the best principles of the modern law merchant. It is in recognition of just this fact that the courts have grown more and more loath to enforce the rule, and in some instances at least, have openly declined to observe it; and those who have not yet had the boldness to overrule the doctrine, have nevertheless admitted its pernicious effect and in consequence, hedged it about with so many technical exceptions as

Foremost of the former, is the Supreme Court of Mississippi, who in Clayton v. Clark, supra, openly declares the rule to be absurd and unreasonable, and with severe denunciation and caustic criticism, expressly sets it aside. Chief Justice Woods in his vigorous yet most logical opinion in that case says: "However it may have seemed three hundred years ago in England when trade and commerce had not yet burst their swaddling bands, at this day and in this country where almost every man is in some way or other engaged in trade or commerce, it is as ridiculous as it is untrue to say that the payment of a lesser part of an originally greater debt, cash in hand, without vexation, cost and delay, or the hazards of litigation in an effort to collect all, is not often- nay generally-greatly to the benefit of the

creditor.

* And a rule of law which declares that under no circumstances however favorable and beneficial to the creditor, or however hard and full of sacrifice to the debtor, can the payment of a less sum of money at the time and place stipulated in the original obligation, or afterwards, for a greater sum, though accepted by the creditor in full satisfaction of the whole debt, ever amount in law to a satisfaction of the original debt, is absurd, irrational, unsupported by reason and not founded in authority, as has been declared by courts of the highest respectability and of last resort, even when yielding reluctant assent to it. We decline to adopt or follow it." And they overrule in express terms anything to the contrary in the cases of Jones v. Perkins, Pulliam v. Taylor and Burrus v. Gordon, theretofore decided by the Mississippi courts.

A great majority of the courts however, have not so far taken this decisive step, but have rather, as this learned judge observes, while admitting the absurdity of the rule, reluctantly sustained it, except where the case under consideration could be brought within one of the many technical exceptions which their very desire to escape from it has created. These exceptions are very numerous, and coeval with the rule itself, for even Lord Coke himself agrees, as do all the English and American authorities, that if any consideration exists, however slight, for the promise

to release the residue of the debt upon the payment of a part, then the agreement is binding and the whole is discharged. And as increasing commerce has rendered what may be called this rule in Pinnel's Case harsher and more obnoxious to mercantile affairs, the courts, in their endeavor to render the doctrine ineffectual, have gradually enlarged the scope of these exceptions. In fact the courts will take advantage of the slightest and most trivial excuse to vitiate the rule, their distinctions in some instances being so close and so technical as to become, to the mind of the layman at least, absolutely absurd. The whole history of judicial decisions upon the subject has shown a constant effort to escape from its absurdity.

In speaking of this in Harper v. Graham, a case in which a most trivial technicality was indulged to relieve a debtor from further payment after receipt in full by the creditor, the court says: "We see then that the payment of a less sum than is due the day before the debt falls due will discharge it; payment at another place than is stipulated will do so; the delivery of a collateral article of any value will do so; the acceptance of the debtor's note with security, the note of a third person, or even the negotiable note of the debtor himself will do so; and yet the payment of as much money in hand as is called for by the note will have no such effect although it is demonstrable that the utmost a creditor can get from such note cannot exceed in amount that which he gets in hand in the other case without trouble, delay or expense. It may seem to some persons not having a great veneration for these institutions of antiquity for which no reasons can be given that a rule so effectually undermined and having neither rhyme nor reason to support it, ought to be at once overruled and the whole matter placed upon the footing of reason and common sense, especially as the exigencies of modern commerce frequently compel the most deserving men with the aid of friends to compromise their debts for less than the amount due an operation mutually beneficial to both debtor and creditor, as the creditor gets a part where otherwise he would lose the whole, and the debtor, is left free to commence again with the hope of better suc

5 20 Ohio, 105,

cess. These considerations will necessarily arise whenever it becomes necessary to decide the general question. In this case we aspire to nothing higher than to follow in the foot-steps of the sages of the law, and hold this one of the cases 'taken out' of the rule, because the money, by the original obligation was payable in Ohio, whereas the lesser sum of money was paid at another place, to wit, in Arkansas."

This opinion expresses the general position of the courts in reference to the rule; their antipathy to it is marked and expressed, yet they have ordinarily, with Ohio's court, "followed in the foot-steps of the sages of the law" and reluctantly declared it to be the law.

The case last referred to also points out many of the exceptions. Generally stated it may be said that any consideration whatever, however slight, beyond the mere payment of a part will be sufficient to support the promise to release the residue. 6

Some of these exceptions to which the courts have given validity may be considered as follows.

If the demand be unliquidated or disputed, a release of the whole on partial payment will be sustained.7

If partial payment be made before maturity of demand, promise to release the whole will be sustained.8

This was held at the very inception of the rule, in Pinnel's Case, for says Lord Coke : "Peradventure parcel of it before the day (of maturity) would be more beneficial to him (the creditor) than the whole at the day."

Payment of a part at a different place from that stipulated in the original obligation is sufficient to support the promise."

6 See very full note by Hare and Wallace to Cumber v. Wane, supra, in the edition of Smith's Lead. Cases, referred to.

7 Fire Ins. Ass'n v. Wickham, supra; Longridge v. Dorville, 5 B. & Ald. 117; Webster v. Weyser, 1 Stew. (Ala.) 184; Coles v. Soulsby, 21 Cal. 47; Hayes v. Ins. Co., 125 Ill. 626: Works v. Hershy, 35 Iowa, 340; Tuttle v. Tuttle, 12 Met. (Mass.) 551, 46 Am. Dec. 701; Booth v. Smith, 3 Wend. (N. Y.) 66; Fuller v. Kemp, and full note, supra.

8 Pinnel's Case, supra; Ricketts v. Hall, 2 Bush. (Ky.) 249; Barry v. Goodrich, 98 Mass. 335; Jones v. Perkins, 29 Miss. 141; Smith v. Brown, 3 Hawks (N. Car.), 580; Schweider v. Lang, 29 Minn. 254, 43 Am. Rep. 202. And many others cited.

Harper v. Graham, supra; Jones v. Perkins, 29 Miss. 141, 64 Am. Dec. 136; Jones v. Nullitt, 2 Litt.

Payment in anything of value, other than money, is sufficient, and this is true however slight the value of the thing given provided the thing itself and not its value, be accepted in satisfaction, for it will be presumed that the thing given was of greater benefit to the creditor than the obligation held.10

In this same Pinnel's Case, supra, it is quaintly observed that the gift of a horse, hawk or robe in satisfaction is good. For it shall be intended that a horse, hawk or robe might be more beneficial to the plaintiff than the money in respect to some peculiar circumstance, or otherwise the plaintiff would not have accepted of it in satisfaction. And in the report of commissioners of Civil Code of New York (1865), 219, it is said: "This rule of the common law is not founded on natural justice nor can it be supported on any other than technical grounds.

An agreement to accept a barrel of flour in satisfaction of a debt of one thousand dollars is valid, and if the flour be delivered the debt is satisfied. But an agreement to accept nine hundred and ninety nine dollars in satisfaction of the debt is unavailing and the obligation to pay the remaining dollar is unimpaired."

Payment by the negotiable note of the debtor, although, for a less amount than the whole has been held valid.11

Payment by note of a third person for less than the whole is good accord and satisfaction if given and received as such.12

Part payment by check if negotiable, is sufficient, 13

Payment by a stranger of a less amount

(Ky.) 49; Rockwell v. Taylor, 41 Conn. 55; Grant v. Hughes, 96 N. Car. 177; Rose v. Hall, 26 Conn. 392, 68 Am. Dec. 402; Schweider v. Lang, 29 Minn. 254.

10 Pinnel's Case, supra; Brooks v. White, 2 Met. (Mass.) 285, 37 Am. Dec. 95; Strang v. Holmes, 7 Cow. (N. Y.) 224; Neal v. Handley, 116 Ill. 418, 56 Am. Rep. 784; Bull v. Bull, 43 Conn. 455; Dimmick v. Sexton, 125 Pa. 334; Jones v. Bullitt, 2 Litt. (Ky.) 49.

11 Pulliam v. Taylor, 50 Miss. 251; Sibree v. Tripp, 15 M. & W. 23; Foakes v. Beer, supra. Doubted, however, in Commonwealth Bank v. Letcher, 3 J. J. Marsh. (Ky.) 196. See also Bidder v. Bridges, 37 Ch. Div. 406.

12 Lee v. Oppenheimer, 32 Me. 253; Goodnow v. Smith, 35 Mass. 414, 29 Am. Dec. 600; Brooks v. White, 43 Mass. (2 Met.) 283, 37 Am. Dec. 95; Howard v. Norton, 65 Barb. (N. Y.) 161; Boyd v. Hitchcock, 20 Johns. (N. Y.) 76, 11 Am. Dec. 247; Webb v. Goldsmith, 9 N. Y. Sup. Ct. (2 Duer) 413.

13 Goddard v. O'Brien, L. R. 9 Q. B. Div. 37; Guild v. Butler, 127 Mass. 386.

than the whole if accepted as such is a good accord and satisfaction. 14

However where the debtor furnishes money to a third party to obtain the judgment and afterwards release the defendant therefrom it is insufficient, and the original holder may recover the residue. 15

Payment of a less amount than the whole, under a composition agreement with creditors and where release of residue is granted is sufficient, for here it is held that the mutual promises of creditors among themselves (a necessary element in a composition) is a sufficient consideration to support the release. 16

An agreement by a debtor not to go into bankruptcy and thereby be discharged from his debts, furnishes a sufficient consideration to support a contract by the creditor to accept less for his debt than the full amount thereof. 17

Nor are these all of the exceptions which have at one time or another been sustained. In fact, the courts will take hold on any possible consideration to support and give validity to the contract to release the residue on payment of part.

In many of the states statutes in one form and another have been enacted in reference to this question. In North Carolina the statute is very explicit. It is there provided by sec. 574: "In all claims or money demands of whatever kind and howsoever due, where an agreement shall have been made or shall be made and accepted for a less amount than that demanded or claimed to be due, in satisfaction thereof, the payment of such less amount according to any such agreement in compromise of the whole, shall be a full and complete discharge of the same." And in

14 Marshall v. Bullard, 54 L. R. A. 862; Gordon v. Moore, 44 Ark. 349, 51 Am. Rep. 606; Fowler v. Smith, 153 Pa. 639, 25 Atl Rep. 744; Clark v. Abbott, 53 Minn. 88, 55 N. W. Rep. 542.

15 Shaw v. Clark, 6 Vt. 507, 27 Am. Dec. 578. See also Bunge v. Koop, 48 N. Y. 225, 8 Am. Rep. 546, and Harriman v. Harriman, 12 Gray (Mass.), 341.

16 White v. Kuntze, 107 N. Y. 518; Williams v. Carrington, 1 Hilt (N. Y.), 515; Bean v. Amsinck, 10 Blatchf. (U. S.) 361; Montgomery Bank v. Ohio Buggy Co., 110 Ala. 360; Brown v. Neally, 161 Mass. 3; Hanover Nat. Bank v. Blake, 142 N. Y. 404; Way v. Langley, 15 Ohio St. 392; Warren v. Skinner, 20 Conn. 559.

17 Dawson v. Beall, 68 Ga. 328; Hinckley v. Arey, 27 Me. 362.

some of the other states legislation to similar effect has been enacted.

It is easily apparent that the rule is rapidly obsolescent, and the express reluctance of the courts to uphold it, and their eagerness upon the most trivial excuse to escape its effect, indicate that the doctrine will very shortly, either by judicial decision or statutory enactment, be avoided in all of the states.

BEN KENDAll.

CONSTITUTIONAL LAW MINIMUM WAGE LAW.

STREET V. VARNEY ELECTRICAL SUPPLY CO. Supreme Court of Indiana, April 1, 1903.

The minimum wage law (Acts March 9, 1901; Acts 1901, p. 282, ch. 122; Burn's Rev. St. 1901, §§ 7055a, 7055b) enacts that unskilled labor employed on any public work of the state, counties, cities, and towns shall receive not less 20 cents an hour, which may be enforced in a proper action, and that any contractor whose duty it is to pay the unskilled labor, and who shall violate the statute, shall be guilty of a misdemeanor, etc. Held that the statute is invalid, as the power to confiscate the property of taxpayers by forcing them to pay an arbitrary price for labor on public works is not one of the powers of the legislature over municipal corporations, etc., as agencies of the state.

The statute is obnoxious to the objection that through its operation a citizen may be deprived of his property without due process of law.

Inasmuch as the statute merely attempts to fix a minimum rate of wages to be paid "unskilled labor," it is an unnatural classification, rendering the statute invalid as class legislation.

DOWLING, J.: The only question for decision on this appeal is the constitutionality of the act of March 9, 1901 (Acts 1901, p. 282, eh. 122, sections 7055a, 7055b, Burns' Rev. St. 1901), commonly called the "Minimum Wage Law." It is raised by demurrer to the complaint for want of facts, and the ruling of the court sustaining the same. The material averments of the complaint are these: The appellee, the Varney Electrical Supply Company, is a private domestic corporation. The city of Richmond is a municipal corporation organized under the general laws of this state. Between October 1, 1901, and January 16, 1902, the appellee was engaged in constructing, as one of the public works of said city an electric light plant, to be used in lighting the public streets, highways, and other public places of said city. The said work was done under a contract between the Varney Electrical Supply Company and the said city of Richmond. The appellant during said period performed work and labor as an unskilled laborer at the request of the appellee, the Varney Electrical Supply Company, by digging holes in which to place the poles of the electric light plant, and in shaving poles. He so labored for 540 hours, and

was entitled to receive 20 cents per hour for such labor. The Varney Electrical Supply Company refused to pay him 20 cents per hour, on the ground that the statute fixing the minimum wages for such labor at that rate was unconstitutional, and the appellant was paid 15 cents an hour for his said labor. Upon these facts, the appellant demands judgment for $54, the penalty given by the statute, and $300 for his attorney's fees.

The statute upon which the action is founded is as follows:

"Section 1. Be it enacted," etc.,"that from and after the passage of this act, unskilled labor employed upon any public work of the state. counties, cities, and towns, shall receive not less than twenty cents an hour for said labor, which may be enforced in a proper action, and in case a suit shall be necessary for the recovery of the compensation herein provided for, and where the compensation is recovered, the person suing shall recover also a reasonable attorney's fee, together with a penalty not exceeding double the amount of wages duc: provided, that boards of commissioners, common councils of towns or cities, are prohibited from making contracts with such laborers by the week, or any definite length of time, wherein a price is agreed upon at a rate less than as provided herein.

"Sec. 2. Any contractor or other person in charge of public work of the state, counties, cities or towns, whose duty it is contract with, employ and pay the unskilled labor on such public work, who shall violate the provisions of section one of this act shall be deemed guilty of a misdemeanor and, upon conviction thereof, shall be fined in any sum not exceeding ten dollars, to which may be added imprisonment in the county jail not exceeding thirty days.

"Sec. 3. All laws and parts of laws in conflict with this act are hereby repealed. '

Some of the objections taken to the statute by the appellee are that it unlawfully abridges the privileges and immunities of the citizen, that it deprives persons of liberty and property without due process of law, that it denies to a large class of citizens the equal protection of the law, that it grants to a class of citizens privileges and immunities which upon the same terms do not equally belong to all citizens, and that it impairs the obligations of contracts. All these objections are founded upon the provisions of the federal and state constitutions, and it is insisted by the appellee that the act is therefore unconstitutional and void. These propositions are denied by the appellant. He claims that the statute does not restrict the liberty of contract, and that its enactment was a legitimate exercise of the police power of the state.

The provisions of the constitution of the United States alleged to be violated by the statute are those contained in article 14, which prohibits the state from making or enforcing any law which shall abridge the privileges or immunities of citizens of the United States, and from depriving