$ 50. Sufficiency of consideration.

a. Consideration must be valuable.- Story defines a valuable consideration as follows: "It may, in general terms, be said to consist either in some right, interest, profit, or benefit, accruing to the party who makes the contract, or some forbearance, detriment, loss, responsibility, or act, or labor, or service, on the other side. And, if either of these exists, it will furnish a sufficient valuable consideration to sustain the making or indorsing of a promissory note in favor of the payee or other holder." 31 Without a valuable consideration the contract of a negotiable instrument, as between the original parties thereto, and as between their immediate successors in interest, with knowledge of the defect, cannot be enforced. Any act of the plaintiff from which the defendant derives a benefit, or from which the plaintiff may sustain any detriment or inconvenience, is a sufficient consideration to support a promise.32 It is not necessary that the promisor should be benefited by the consideration; it will be sufficient if it appear that the consideration is based upon an injury to the promisee caused by the promisor.33

b. Statutory provision as to valuable consideration. — The Negotiable Instruments Law provides that: "Value is any con31. Story on Promissory Notes, eral, either some detriment to the § 186. plaintiff, sustained for the sake or at the instance of the defendant, or some benefit to the defendant moving from the plaintiff.”

A valuable consideration, in the sense of the law, may consist either in some right, interest, profit, or benefit accruing to the one party, or 32. Holt v. Robinson, 21 Ala. 106, some forbearance, detriment, loss, or 56 Am. Dec. 240. See also Holresponsibility, given, suffered, or un- ley v. Adams, 16 vt. 206, 42 Am. Dec. dertaken by the other. Com. Dig., 508. Action on the Case, Assumpsit, B. 33. Hawxhurst v. Ritch, 6 N. Y. 1-15; Currie v. Misa, L. R., 10 Exch. Supp. 134; Matthison v. Hanks, 2 Hill 153, 162. (S. C.), 625, where it was held that Byles, in his work on Bills (16th a note given for an injury to the ed.), p. 150, says: "Valuable con- payee, caused by an assault and batsideration for a bill may be consti- tery committed by the maker, is suptuted by any consideration sufficient ported by a good and legal considerato support a simple contract; or by an antecedent debt or liability, and In the case of Wright v. McKittrick, that whether the bill be payable on 2 Kan. App. 508, it was said: "There demand or at a future time; a lien, must, of course, have been a legal and also, whether arising from contract or sufficient consideration for the first from implication of law, makes the note, but it is not necessary, a holder a holder for value pro tanto. assumed by the court in the instrucWhere value has at any time been tions, that the services should have given for a bill, the holder is a holder been rendered at the special request for value as regards the acceptor and of the maker of the note, or that any all parties to the bill prior to such special benefit should have accrued to time. It may suffice to observe here, him. Any forbearance given, or detrifor the sake of the unprofessional ment or loss suffered, by the payee, reader, that a consideration is, in gen- was sufficient."

tion; Wells v. Sutton, 85 Ind. 70.

was

34

"sideration sufficient to support a simple contract. An antecedent "or pre-existing debt constitutes value; and is deemed such "whether the instrument is payable on demand or at a future "time." This is also the rule as stated in the English Bills of Exchange Act, with the exception that it is there provided that an antecedent debt or liability is deemed a sufficient consideration. The insertion of the words " or liability" probably extend the law as it existed in England prior to the statute.36 The rule as stated in the Negotiable Instruments Law is probably a legislative declaration of an existing common-law rule.37

c. Adequacy. In the absence of fraud the inadequacy of the consideration of a negotiable instrument is not material, and will constitute no defense in an action thereon.38 It is not the province of a court of law to look closely to the adequacy or inadequacy of a consideration.39 It has been stated as a general rule that, "To support a note or other contract, it is not necessary that the consideration therefor shall be equal in pecuniary value to the amount of the obligation incurred by the note or contract. It is enough, generally, that no part of the consideration, upon which it was founded, was wanting at the time the obligation was incurred, and

34. Neg. Inst. Law (N. Y.), § 51. See Appendix for same section in stat

utes of other States.

35. Eng. Bills of Exch. Act, 1882, § 27 (r.).

36. Chalmers on Bills of Exchange (5th ed.), p. 81.

37. Brooklyn City, etc., R. R. Co. v. Nat. Bank, 102 U. S. 14.

38. In New York the following cases may be cited as sustaining the principle of the text: Cowee v. Cornell, 75 N. Y. 91, 99, 31 Am. Rep. 428, where the court says: "Assuming, then, as I think we must, that there was no error as matter of law in the finding of the referee that this note was given for a valuable consideration, and that the inadequacy of that consideration is something with which we have no concern if the parties dealt on equal terms, the only point remaining to consider is the relations existing between the parties at the date of the note;" Worth v. Case, 42 N. Y. 362, 369. Mere inadequacy of consideration, except as a circumstance bearing upon the question of fraud or undue influence, is not a defense to a promissory note. Earl v. Peck, 64 N. Ý. 596; Miller v.

McKenzie, 95 N. Y. 575, 47 Am. Rep. 85; Johnson v. Titus, 2 Hill (N. Y.), 606; Velie v. Titus, 60 Hun (N. Y.), 405, 15 N. Y. Supp. 467; Root v. Strang, 77 Hun (N. Y.), 14, 28 N. Y. Supp. 273; In re Flagg's Estate, 27 Misc. (N. Y.) 401, 59 N. Y. Supp. 167.

See also the following cases in other States:

United States.- Boggs v. Wann, 58 Fed. 68.

Georgia.-Anstel v. Rice, 5 Ga. 472. Illinois.-Forbes v. Williams, 15 Ill. App. 305.

Indiana.- Walford v. Powers, 85 Ind. 294, 44 Am. Rep. 16; Wheelock v. Barney, 27 Ind. 462.

Louisiana.- Righter v. Aleman, 4 Rob. 45.

Massachusetts.- Dean v. Carruth, 108 Mass. 242.

New Jersey.- Petty v. Young, 43 N. J. Eq. 654, 12 Atl. 392; Beninger v. Corwin, 24 N. J. L. 257.

Vermont.-Giddings v. Giddings, 51 Vt. 227, 31 Am. Rep. 682.

Virginia.- Loftus v. Maloney, 89 Va. 576, 16 S. E. 749; Jones v. Degge, 84 Va. 685, 5 S. E. 799.

39. Anstel v. Rice, 5 Ga. 472.

that no part of it has subsequently failed. And, as to all consider ations founded upon specific articles of property, parted with by the obligee to the obligor, and which have not a specific, fixed, and certain pecuniary value, the court, upon the question of consideration, will not inquire into their actual pecuniary value, but will leave the parties to such estimates thereof as they have formed in

making their contract." 40 As an example, where upon an exchange of horses, one person gave to the other his note for what was considered the difference in value, the maker of the note cannot set up as a defense that as a matter of fact the horses were equal in value." While inadequacy of consideration is no defense, it is evidence of mala fides, and if there is gross inadequacy it may, in some cases, be deemed conclusive evidence of fraud.42

d. Where rights, interests, or property are valueless.— In the absence of an express warranty or of fraud the fact that goods given as a consideration of a promissory note are worthless will not affect the validity of such note.43 But where the consideration consists of an alleged title or interest in a chattel which is proved defective and invalid, the consideration fails, and no recovery can be had upon the instrument based thereon." As where a note

40. Worth v. Case, 42 N. Y. 362, 369. 41. Beninger v. Corwin, 24 N. J. L.

257.

42. Forbes v. Williams, 15 Ill. App. 305; Green v. Lowry, 38 Ga. 548; Abbe v. Newton, 19 Conn. 20.

The rule is well settled by the weight of modern authorities, both in this country and England, that where fraud or illegality in the inception of the note is shown by the maker, the burden of proof is then cast upon the indorsee to show that he is an innocent holder. Jordan v. Grover, 99 Cal. 194, 33 Pac. 889.

sented by the seller to be of great value, when in fact it was of no value, is without consideration and void. Sill v. Rood, 15 Johns. (N. Y.) 230.

In the absence of any showing of fraud or of warranty, it was held that it was no defense in an action on a note for the price of a cow, that she was worthless at the time of the sale. Bryant v. Pember, 45 Vt. 487.

44. Sale of free man as slave.Cases have arisen where men were sold as slaves and a note given for the purchase price, and it was invariably held that there was an entire failure of consideration, and the payee Where the parties are competent to could not recover. Crawford v. Beard, contract, relief will not be decreed on 4 J. J. Marsh. (Ky.) 187. The court the ground of inadequacy of considsaid: "But the sale of a free man eration, unless the inequality be so for a slave, vests in the purchaser no gross as to shock the conscience, and right, legal, equitable, or moral. of itself amount to proof of fraud. vests in him no right to the person, Jones v. Degge, 84 Va. 685, 5 S. E. nor to his services. Every claim of proprietorship, which he prefers to 43. O'Neal v. Bacon, 1 Houst. (Del.) him, s an unauthorized degradation 215; Knowles v. Parker, 7 Metc. of his legal equality. Every exertion (Mass.) 30; Lester v. Webb, 5 Allen of the authority of a master over him, (Mass.), 45. A note given for the is a trespass on his rights as a free sale of a chattel fraudulently repre- man. If any advantage should be de

799.

It

was given for a lease which was illegal, null, and void, it was held that there was an entire failure of consideration.45 And where a note, payable in installments, was given for a premium on an insurance policy, which provided that the policy should not be in force and should be wholly void during any default in the payment of any of such installments, it was held that such note was not enforceable because of a want of consideration.46 Where the consideration of a negotiable instrument consists of real or personal property sold to the obligor, the title of which is not in the obligee, there is such a failure of consideration as will defeat an action upon the instrument. But it is no defense to an action on a note that it was given as part consideration of land sold by the payee, which he covenanted was free from incumbrance, but was subject to a mortgage executed by him for more than the amount of the note.48

47

rived from his constrained service, the purchaser is under a clear moral obligation to reward him for it, and is under no sort of obligation to the vendor. Instead of benefiting the vendor, he injures his vendee by selling to him a free man. * * * If, in such a case, there be not a total failure of consideration, it would be difficult to find a case in which it could be admitted that the consideration had failed entirely." See also Bailey v. Cromwell, 4 Ill. (3 Scam.) 71; Richardson v. McFadden, 13 Tex. 278; Livingston v. Bain, 10 Wend. (N. Y.) 384.

Sale and delivery of personal property is a good consideration although the seller had no title. Linton v. Porter, 31 Ill. 107. But see Bliss v. Clark, 3 Allen (Mass.), 342.

45. Kinzie v. City of Chicago, 3 Ill. (2 Scam.) 187.

46. Yost v. American Ins. Co., 39 Mich. 531. But see Marskey v. Turner, 81 Mich. 62, 45 N. W. 644.

The issuing of a policy of insurance by an insolvent insurance company is a good consideration for a promissory note given for the premium, if the insolvency of the company was not known by its officers or agents at the time. Lester v. Webb, 5 Allen (Mass.), 569.

47. Stark v. Henderson, 30 Ala. 438; French v. Carr, 7 Ill. 664; Davis v. McVickers, 11 Ill. 327, in which

the note was given for the purchase price of land which the payee agreed to convey to the maker. The court said: "The agreement to execute a deed was not the real consideration of the notes; the true consideration was the estate agreed to be conveyed. If it is not in the power of the plaintiff to make a good title to the estate, the defendant is not bound to pay the purchase money. He cannot be compelled to pay the notes, unless he can obtain that for which they are given. If he cannot acquire the title to the estate purchased, there is a failure of consideration, which may be set up to defeat a recovery of the notes." Vickroy v. Platt, 7 Kan. 238; Durment v. Tuttle, 50 Minn. 426, 52 N. W. 909; Jones v. Shaver, 6 Mo. 642; Wellman v. Dismukes, 42 Mo. 101; Chaffee v. Garrett, 6 Ohio, 421; Stewart v. Insall, 9 Tex. 397; Roehl v. Pleasants, 31 Tex. 45, 98 Am. Dec. 514; Garrison v. King, 35 Tex. 183; Earnest v. Moline Power Co., 8 Tex. Civ. App. 159, 27 S. W. 734. But see Lough v. Bragg, 18 Minn. 121.

Conveyance of interest.-A note given in consideration of a conveyance by the payee of all his interest in a certain tract of land, is not rendered invalid by the fact that the payee had no interest in the land. Perkins v. Bumford, 3 N. H. 522.

48. Lattin v. Vail, 17 Wend. (N. Y.)

188.

e. Exchange of commercial paper. It is a well-established rule that a promissory note given by the maker, in exchange for a promissory note given by the payee, is for a valuable consideration, and is in no sense an accommodation paper, although made for the mutual accommodation of the parties.49 And this is so though the note given in exchange is worthless.50 And it has been held that an indorsement of C.'s note by A. to B. is a good consideration for a note from B. to A., and it is no defense to B.'s note that he failed to recover against C. on the note indorsed to him by A.51 But a note given in consideration of the sale of another note, void for usury, is without consideration and therefore not enforceable.52

f. Love and affection. A consideration founded on love and affection, as that naturally existing between husband and wife, father and son, etc., or upon gratitude, is known as a good consideration, as distinguished from a valuable consideration; and is not of itself sufficient to support the obligation of a bill or note."

53

49. Whittier v. Eager, 1 Allen son against the executor of his father, (Mass.), 499; Higginson v. Gray, 6 to recover the amount of the note, it Metc. (Mass.) 212; Backus v. Spalding, 116 Mass. 418; Dockray v. Dunn, 37 Me. 442; Williams v. Banks, 11 Md. 198; Savage v. Ball, 17 N. J. Eq. 142; Mississippi R. Co. v. Scott, 8 Miss. 79; Farber v. National Forge Co., 140 Ind. 54, 39 N. E. 249.

was held that the action could not be maintained, for it was not a donatio causa mortis, nor a valid gift of so much money, but a mere promise to give; and blood or natural affection is not a sufficient consideration to support a simple executory contract. See also Phelps v. Phelps, 28 Barb. (N. Y.) 121; Hadley v. Reed, 58 Hun (N. Y.), 608, 12 N. Y. Supp. 163. See also Head v. Baldwin, 83 Ala. 132, 3 South. Raymond v. Sellick, 10 Conn. Pennington v. Gittings, 2 Gill (Md.) 208; In re Campbell's Es7 Pa. St. 100, 47 Am. Dec.

New York cases. See Odell v. Greenly, 4 Duer, 358; Cohn v. Hussen, 57 N. Y. Super. Ct. 238, 6 N. Y. Supp. 897; Elwell v. Chamberlain, 17 N. Y. Super. Ct. (4 Bosw.) 320, affd. in 293; 31 N. Y. 611; Newman v. Frost, 52 480; N. Y. 422; Rice v. Grange, 131 N. Y. & J. 149, 30 N. E. 46, affg. 60 Hun, 583, 14 N. Y. Supp. 911; Mutual Loan Assn. v. Brandt, 34 Misc. 400, 69 N. Y. Supp. 652, revd. in 71 N. Y. Supp. 770.

50. Rice v. Grange, 131 N. Y. 149, 30 N. E. 46.

51. Luke v. Fisher, 10 Cush. (Mass.) 271.

52. Sweet v. Spence, 35 Barb. (N. Y.) 44.

tate,

503.

In the case of Kern's Estate, 171 Pa. St. 55, 62, 33 Atl. 129, the court said: "Natural love and affection are a good consideration for an executed contract or gift, and in this State a moral obligation is a good consideration for an express promise, but natural love and affection are not a moral obligation in such sense as will support 53. The leading New York case even an express promise to make a this subject is that of Fink v. gift." See also In re Kline's Estate, Cox, 18 Johns. (N. Y.) 145, 9 9 Pa. Dist. 386. Am. Dec. 191, where it appeared In the case of West v. Cavins, 74 that a father, from affection, merely, Ind. 265, it was held that, while nagave to his son a promissory note tural love and affection is a good confor $1,000, payable to him or or- sideration for a deed or an executed der, sixty days after date. In an contract as between the parties thereto, action of assumpsit, brought by the it is not so for an executory contract;

on