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Rule 2. No liability imposed on third persons.

of the transaction would admit (a). The Judicial Committee, however, showed a strong inclination to think that this view is not tenable, and that in such a case the evidence required by the statute would not be complete without some further writing to show who in particular had accepted the proposal. It was observed that as a matter of fact the cases on advertisements had been of such a kind that the statute did not apply to them, and it was a mere circumstance that the advertisement was in writing (b). We are not aware of the point having arisen in any later case. The opinion here expressed by the Court is worth noticing for another reason. It is an authority in favour of the view which we have adopted as the sounder one, namely that there is no anomalous contract, but a contract between ascertained which is constituted by the acceptance of the proposal. persons

2. Third Persons not Bound.

The affirmative part of our second rule, namely: The creditor can demand performance from the debtor or his representatives, is now and long has been, though it was not always, elementary (c).

The negative part of it states that the creditor cannot demand, nor can the debtor require him to accept, performance from any third person. This is subject to the explanation that the debtor or his representatives may perform the duty by an agent, which

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manner.

(c) As to the liability of personal representatives on the contracts of the testator or intestate see 1 Wms. Saund. 241-2. The old rule that an action of debt on simple contract would not lie against executors where the testator could have waged his law (though it is said the objection could be taken only by demurrer) seems to have been in truth an innovation. See the form of writ for or against executors, Fleta 1. 2, c. 62, § 9, and cp. F. N. B. 119 M. 121 O (the latter passage is curious if a man has entered

into religion his executors shall be sued for his debt, not the abbot who accepted him into religion : see p. 59, n. (a), supra), and Y. B. 30 Ed. 1 (Rolls ed.) p. 238. It is said however that "Quia executores non possunt facere legem pro defuncto, petens probabit talliam suam, vel si habeat sectam secta debet examinari:" Y. B. 20 & 21 Ed. 1, p. 456. For the conflict of opinion as to the remedy by assumpsit, see Reeves 3. 403, Y. B. Mich. 2 H. 8. 11, pl. 3, the strange dictum contra of Fitzherbert, Trin. 27 H. 8. 23, pl. 21, who said there was no remedy at all, and Norwood v. Read, in B. R., Plow. 180, followed by Pinchon's ca. in Ex. Ch. 9 Co. Rep. 86 b, where this dictum was overruled, authorities reviewed and explained, and the common law settled in substance as it now is.

again is modified by the exception of strictly personal contracts as mentioned at the end of the rules. On this we need not dwell at present.

It is obvious on principle that it is not competent to contract- Its founing parties to impose liabilities on other persons without their

consent.

Every person not subject to any legal incapacity may dispose freely of his actions and property within the limits allowed by the general law. Liability on a contract consists in a further limitation of this disposing power by a voluntary act of the party which places some definite portion of that power at the command of the other party to the contract. So much of the debtor's individual freedom is taken from him and made over to the creditor (a). When there is an obligation independent of contract, a similar result is produced without regard to the will of the party: the liability is annexed by law to the party's own wrongful act in the case of tort and in the case of quasi-contracts to another class of events which may be roughly described as involving the accession of benefit through the involuntary loss of another person but when an obligation is founded upon a true contract, the assent of the person to be bound is at the root of the matter and is indispensable.

dation in

principle.

the excep

The ordinary doctrines of agency form no real exception to Agency: this. For a contract made by an agent can bind the principal tion only only by force of a previous authority or subsequent ratification; apparent. and that authority or ratification is nothing else than the assent of the principal to be bound, and the contract which binds him is his own contract. Under certain conditions there may be a contract binding on the agent also, but with that we are not here concerned. The subject of agency will be again touched upon under Rule 3, and the rights and liabilities of principals and agents respectively on contracts made by agents will be more fully considered elsewhere (b).

in equity

Another less simple apparent exception occurs in the cases in When comwhich companies have been held liable to fulfil the agreements panies held made by their promoters before the companies had any legal to promo(a) Cp. Savigny Obl. § 2.

(b) See Appendix D to Ch. VIII.

ters' agree existence. These cases however proceed partly on the ground ments; not of a distinct obligation having either been imposed on the

ex con

tractu.

Stranger

company in its original constitution, or assumed by it after its formation (a), partly on a ground independent of contract and analogous to estoppel, namely that when any person has on certain terms assisted or abstained from hindering the promoters of a company in obtaining the constitution and the powers sought by them, the company when constituted must not exercise its powers to the prejudice of that person and in violation of those terms. The doctrine as now established probably goes as far as this, but certainly no farther ().

In one case of a suit in equity for specific performance of an held bound award a third person interested in the subject-matter was made by award in equity: a party: and Sir L. Shadwell held that he was bound by the sed qu. award, though he had not been a party to the reference and had in no way assented to it, but simply knew of it and remained passive (c). This decision does not appear to have been much considered, and does appear quite contrary to principle. Moreover it cannot stand with Lord Cottenham's decision in Tasker v. Small (d) that in a suit for the specific performance of a contract third persons claiming an interest in the subject-matter are not even proper parties and even without this it is surely obvious (unless and until a court of final appeal shall think otherwise) that A. and B. have no business to submit C.'s rights to the arbitration of D. It is apprehended accordingly that this exception may be treated as non-existent.

Novation.

Another branch of the same general doctrine, which on principle is scarcely less obvious, is that the debtor cannot be allowed to substitute another person's liability for his own without the creditor's assent. Some authorities which illustrate this are referred to in a subsequent chapter where we consider from another point of view the rule that a contract cannot be made

(a) Lindley 1. 409, 411.
(b) Lindley 1. 412-417.

(c) Govett v. Richmond, 7 Sim. 1.
The case of Taylor v. Parry, 1 Man.
& Gr. 604, seems at first sight to
make the same way; but there the

Court relied on positive acts of the parties as showing that they adopted the reference and were substantially parties to it.

(d) 3 My. & Cr. 63, followed in De Hoghton v. Money, 2 Ch. 164.

except with the person with whom one intends to contract («). When a creditor assents at the debtor's request to accept another person as his debtor in the place of the first, this is called a novation. Whether there has been a novation in any particular case is a question of fact. Such questions are especially important in ascertaining who is liable for the partnership debts of a firm when there has been a change in the members of the firm, or on contracts made in a business which has been handed over by one firm (whether carried on by a single person, a partnership, or a company) to another. A series of recent cases of this kind arose out of successive amalgamations of life insurance companies.

The question may be resolved into two parts: Did the new firm assume the debts and liabilities of the old? and did the creditor, knowing this, consent to accept the liability of the new firm and discharge the original debtor (6) It would be beyond our scope to enter at large on this subject, for an exposition of which the reader is referred to Mr. Justice Lindley's work on Partnership (c).

come under

Rule 4.

There exist however exceptions to the general rule. In cer- Realexcep tain cases a new liability may without novation be created in tions to substitution for or in addition to an existing liability, but where the possibility exists of such an exceptional transfer of liabilities it is bound up with the correlated possibility of an exceptional transfer of rights, and cannot be considered alone. For this reason the exceptions in question will come naturally to our notice under Rule 4, when we deal with the peculiar modes in which rights arising out of certain classes of contracts are transferred.

We are not aware of any express authority to show whether i it is or is not generally competent to the creditor to bind himself once for all by the original contract to accept a substituted liability at the debtor's option. Such an arrangement is in the nature of things unlikely, though perhaps not impossible; but,

(a) Robson v. Drummond, 2 B. & Ad. 303; infra, Ch. VIII.

(b) See Rolfe v. Flower, L. R. 1 P. C. 27, 44.

(c) 1. 450-465, 479-481 and as

:

to the general principle of novation
see Wilson v. Lloyd, 16 Eq. 60, 74;
for a later instance, Erens' claim, ib.
354.

Rule 3. No rights conferred on third per

sons.

Exceptions. Agency:

there does not appear to be any reason why it should not be binding (in equity at all events) on a creditor who chose to make it.

3. No third person can become entitled by the contract itself to demand the performance of any duty under the contract.

Before we consider the possibility of creating arbitrary exceptions to this rule in any particular cases, there are some extensive classes of contracts and transactions analogous to contract which call for attention as offering real or apparent anomalies.

a. Contracts made by agents. Here the exception is only apparent. The principal acquires rights under a contract which apparent he did not make in person. But the agent is only his instruonly. ment to make the contract within the limits of the authority given to him, however extensive that authority may be and from the beginning to the end of the transaction the real contracting party is the principal.

Degrees of agency.

Agent contracting personally.

Consider the following series of steps from mere service to full discretionary powers:

1. A messenger is charged to convey a proposal, or the acceptance or refusal of one, to a specified person.

2. He is authorized to vary the terms of the proposal, or to endeavour to obtain a variation of the other party's proposal (ie. to make the best bargain he can with the particular person), within certain limits.

3. He is not confined to one person, but is authorized to conclude the contract with any one of several specified persons, or generally with any one from whom he can get the best terms.

4. He is not confined to one particular contract, but is authorized generally to make such contracts in a specified line of business or for specified purposes as he may judge best for the principal's interest (a).

The fact that in many cases an agent contracts for himself as well as for his principal, and the modifications which are introduced into the relations between the principal and the other

(a) Cp. Savigny Obl. 2. 57-60.

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