32. Municipal Corporations. a. Power to contract. b. Power to borrow money. c. Power to issue negotiable instruments. d. Power of officers to issue negotiable instruments. A. INCAPACITY OF PARTIES. 21. General statement. a. Early restriction on parties.— Bills of exchange and promissory notes were originally strictly commercial instruments, confined in their use to transactions between merchants and traders.31 But this limited use was soon extended, and bills of exchange were early recognized as binding upon all parties thereto, having power to contract, without regard to their vocation.32 And the language of the Statute of 3 & 4 Anne, chapter 9, giving negotiability to promissory notes, included all persons within its terms without reference to whether they were merchants or traders.33 b. Power to contract. The capacity to incur liability as a party to a bill or note is coextensive with capacity to contract.34 The exceptions to the capacity of natural persons to bind themselves by contract, are infancy, coverture, and insanity.35 To these may also be added the total or partial incapacity of alien enemies and bankrupts. There are many and various principles affecting the rights and obligations of parties under an incapacity which will be hereafter discussed in their proper places. There may be a total incapacity of a person to make or draw a note or bill, and 31. Story on Promissory Notes (7th ed.), § 62. It was anciently supposed that, the negotiability of bills of exchange being due to the custom of merchants, only a merchant or one engaged in some trade could be liable as the drawer of such an instrument to the indorsee thereof. Fairley v. Roch, 1 Lutw. 891; Bromwich v. Lloyd, 2 Lutw. 1685. 32. Sarsfield v. Witherly, 2 Vent. 292; Hodges v. Steward, 1 Salk. 125, 12 Mod. 36. 33. Story on Promissory Notes ed.), § 62. (7th 34. English Bills of Exchange Act, 1882, § 22. See Appendix; Chitty on Bills, p. 13. Chalmers, in his work on Bills of Exchange (5th ed.), p. 60, distinguishes between capacity and authority in the following language: "Capacity must be distinguished from authority. Ca pacity means power to contract so as to bind oneself. Authority means power to contract on behalf of another so as to bind him. Capacity to contract is the creation of law. Authority is derived from the act of the parties themselves. Want of capacity is incurable. Want of authority may be cured by ratification. Capacity or no capacity is a question of law. Authority or no authority is usually a question of fact. Again, capacity to incur liability must be distinguished from capacity to transfer. An executed contract is often valid where an executory contract cannot be enforced. An indorsement usually consists of two distinct contracts, one executed and the other executory. It transfers the property in the bill, and it also involves a contingent assumption of liability on the part of the indorser." 35. Pollock on Contracts, p. 34. yet the same person may be capable of transferring, under certain conditions, such note or bill by indorsement or delivery. Every person, regardless of his incapacity, may be the recipient of the benefits of a note or bill as payee or indorsee; although payment thereof should doubtless be made to the person legally representing such payee or indorsee. 36 It is only important to consider how far and under what conditions persons under legal or natural incapacities may bind themselves as makers or indorsers of commercial paper. § 22. Infants. a. Validity of contracts.― By the common law a contract made by an infant is generally voidable at the infant's option, such option to be exercised either upon his attaining his majority or in a reasonable time afterward.37 It has been stated that the declared rule in this country is, that contracts of an infant caused by his necessities, or manifestly for his advantage are valid and binding, while those manifestly to his hurt are void. Contracts falling between these classes are voidable.38 It is doubtful whether any contract made by an infant is absolutely void even if it is manifestly to his hurt. Many cases can be cited where the rule has been stated, but in nearly all of them the contracts in question were declared voidable, and the rule as so stated was not necessarily applied.39 The object of the law, which is the protection of 36. Parsons on Notes and Bills, v. Crandall, 4 Md. 435; Baker v. p. 66. 37. Pollock on Contracts, p. 34. And see Bozeman v. Browning, 31 Ark. 364; Strain v. Wright, 7 Ga. 568; Bryan v. Walton, 14 Ga. 185; Breckenridge's Heirs v. Ormsbee, 24 Ky. 236, 19 Am. Dec. 71; Whitney v. Dutch, 14 Mass. 457, 7 Am. Dec. 229. 38. Philpot v. Bingham, 55 Ala. 435, 438. Lovett, 6 Mass. 88, 4 Am. Dec. 88; 39. Pollock, in his work on Contracts (p. 35), says: "It is commonly said that an agreement made by an infant, if such that it cannot be for his benefit, is not merely voidWhen the court can pronounce the able, but absolutely void; though in contract to be to the infant's preju- general his contracts are only voiddice it is void, and when to his bene- able at his option. This distinction, fit, as for necessaries, it is good; and it is submitted, is in itself unreasonwhen the contract is of an uncertain able, and is supported by little or no nature, as to benefit or prejudice, it real authority, while there is conis voidable only at the election of siderable authority against it. The the infant. Keane v. Baysott, 2 H. Bl. unreasonableness of it seems hardly 511; Wheaton v. East, 5 Yerg. 41. See also Kendrick v. Neisz, 17 Colo. 506, 30 Pac. 245; Green v. Wilding, 59 Iowa, 679, 13 N. W. 761, 44 Am. Rep. 696; Fridge v. State, 3 Gill & J. (Md.) 103, 20 Am. Dec. 463; Ridgely to need any demonstration. The object of the law, which is the protection of the infant, is amply secured by not allowing the contract to be enforced against him during his infancy, and leaving it in his option to affirm the infant, is amply secured by not allowing the contract to be enforced against him during his infancy, and leaving it in his option to affirm or repudiate it at his full age. In any event the acts of an infant which have been declared by judicial authority to be absolutely void are very few, and many of the decisions on the subject have been overruled or modified by subsequent adjudications. Mr. Tyler summarizes his discussion on this subject in the following language: "The only clear and definite proposition which can be extracted from the authorities is, that all acts of an infant which are incapable of being legally ratified, that is, all such acts as cannot be for the benefit of the infant, are or repudiate it at his full age. More over the distinction is arbitrary and doubtful, for it must always be difficult to say whether a particular contract cannot possibly be beneficial to the party. As for the authorities the word void is no doubt frequently used; but then it is likewise to be found in cases where it is quite settled that the contract is in truth only voidable. The fact is, that there is a constant confusion in the books, and sometimes even in recent books, between void and voidable, so that the language of textwriters, of judges, and even of the Legislature, is no safe guide apart from actual decisions." to him by any means short of inflicting a detriment on innocent persons, it is argued that such infliction must be unnecessary and unjust. To consider any acts of an infant absolutely void might operate to his own protection, but it would in many cases seriously affect the rights of persons in no wise implicated in the infant's transactions, and might frequently be prejudicial to himself. It is thought, therefore, that it would rarely be a greater indulgence to the infant, and more for his advantage, to allow him, when he comes of age, and is capable of reconsidering what he has done, either to ratify or affirm Chancellor Kent (2 Comm. 234) says: all his deeds and contracts, or to "It is held that a negotiable note break through and avoid them; and it given by an infant, even for neces- is contended that this power should saries, is void, and his acceptance of be extended, as well to those acts a bill of exchange is void; and a bond which may turn out to the infant's with a penalty, though given for neces- disadvantage, as to those which are saries, is void. It must be admitted, apparently beneficial. The giving inhowever, that the tendency of the mod- fants such power in general over all ern decisions is in favor of a very their acts will sufficiently secure them liberal extension of the rule, that the against the danger of being overacts and contracts of infants should reached by others; for when the power be deemed voidable only, and subject is general, and all persons who deal to their election, when they become of with an infant know they are to be age, either to affirm or disallow them. at his mercy, this will take off from If their contracts were absolutely the temptation of imposing on him; void, it would follow as a consequence yet, since the infant is at liberty to that the contract could have no effect, rescue himself by avoiding the inand the party contracting with the jurious contract, it seems no possible infant would be equally discharged." mischief could arise by suffering it in 40. Bingham, in his work on In the meantime to hang in equilibrio, fancy (13-16), maintains that few of and deferring to pronounce any senthe acts of an infant were absolutely tence upon it, since that would curvoid upon the ground, among others, tail the infant's privilege, and take that it is a principle of the law off from his freedom of judging at to protect the infant against his all." This reasoning of Mr. Bingham own weakness; "and if this pro- has the approval of Mr. Tyler, in his tection can be effectually secured work on Infancy and Coverture, § 10. absolutely void, and these at the present day are reduced to a very small number." 41 b. Obligation of persons dealing with infants.- Persons dealing with an infant are bound, at their peril, to inquire and ascertain the real circumstances of the infant, and whether he is in a situation to bind himself by his contract, even for necessaries.42 And even where the infant has falsely represented his age, and thereby induced another to enter into a contract with him, he is not estopped from pleading his infancy and avoiding the contract; the obligation would seem to rest, in every case, upon the person dealing with a probable or possible infant to satisfy himself as to the legal capacity of such infant.43 The doctrine above expressed has not gone without refutation; there are many cases holding that in equity an infant, who falsely and fraudulently represented himself to be of full age, was bound to pay the obligation entered into on the faith of his representation.** 41. Tyler on Infancy, § 13. 42. Story v. Pery, 4 Car. & P. 526, 19 Eng. C. L. 508; Cook v. Deaton, 3 Car. & P. 114, 14 Eng. C. L. 232; Perrin v. Wilson, 10 Mo. 451; Kline v. L'Amoureux, 2 Paige (N. Y.), 419. Persons are affected with constructive notice of the incapacity of infants to convey. Gray v. Turley, 110 Ind. 254, 11 N. E. 410. 43. Wieland v. Kobick, 110 Ill. 16, 51 Am. Rep. 676; Price v. Jennings, 62 Ind. 111; Carpenter v. Carpenter, 45 Ind. 142; Bush v. Linthicum, 59 Md. 344; Merriam v. Cunningham, 11 Cush. (Mass.) 40; Baker v. Stone, 136 Mass. 405; Slayton v. Barry, 175 Mass. 513, 56 N. E. 574; Conrad. Lane, 26 Minn. 389, 4 N. W. 695, 37 Am. Rep. 412; Ferguson v. Bobo, 54 Miss. 121; Burley v. Russell, 10 N. H. 184, 34 Am. Dec. 146; Studwell v. Shafter, 54 N. Y. 249; Whitcomb v. Joslyn, 51 Vt. 79, 31 Am. Rep. 678. In the case of Slayton v. Barry, supra, it was held that an infant cannot be held liable in tort for deceit or conversion the proof of which requires the plaintiff to show that a contract, which by the infant's false representations relative to his age he was induced to make and perform, was part and parcel of the fraudulent transac tion. 44. Ex parte Unity, etc., Assn., 3 De Gex & J. (Eng.) 63. In the case of Rice v. Boyer, 108 Ind. 472, 9 N. E. 420, 422, the court says: "Our judgment, however, is that, where the infant does fraudulently and falsely represent that he is of full age, he is liable in an action ex delicto for the injury resulting from the tort. This result does not involve a violation of the principle that an infant is not liable where the consequence would be an indirect enforcement of his contract; for the recovery is not upon the contract, as that is treated of no effect, nor is he made to pay the contract price of the article purchased by him, as he is only held to answer for the actual loss caused by his fraud. In holding him responsible for the consequences of his wrong, an equitable conclusion is reached, and one which strictly harmonizes with the general doctrine that an infant is liable for his torts. Nor does our conclusion invalidate the doctrine that an infant has no power to deny his disability; for it concedes this, but affirms that he must answer for his positive fraud." c. Contracts for necessaries. An exception exists as to infants' contracts for necessaries. An infant is liable upon his contracts. for necessaries for himself, or his family, if he have one, suitable to his or their condition.45 It must appear in all cases that the things furnished were actually necessary, of reasonable prices, and suitable to the infant's degree and estate, considerations which regularly must be left to the jury. When an infant is at home under the care of his father, and supported by him, he cannot be made liable for necessaries.47 It must appear that the infant has no other means of obtaining such necessaries, except by the pledge of his own personal credit.48 If the necessaries were furnished on lon v. Burnham, 43 Kan. 77, 22 Pac. 1016; Cobbey v. Buchanan, 48 Neb. 391, 67 N. W. 176; Eaton v. Hill, 50 N. H. 235; Hall v. Butterfield, 59 N. H. 354; Pemberton Building & Loan Assn. v. Adams, 53 N. J. Eq. 258, 31 Atl. 28; Eckstein v. Frank, 1 Daly (N. Y.), 334. 45. Indiana.- Hobbs v. Godlove, 17 Ind. 359; Wright v. McLarinan, 92 Ind. 103; Fruchey v. Eagleson, 15 Ind. App. 88, 43 N. E. 146. Iowa.- Green v. Wilding, 59 Iowa, 679, 13 N. W. 76, 44 Am. Rep. 696. Kentucky.- Bonney v. Reardin, 69 Ky. 34. Maryland.- Levering v. Heighe, 2 Md. Ch. 81; Anderson v. Smith, 33 Md. 465. Massachusetts.- Stone v. Dennison, 13 Pick. 1, 23 Am. Dec. 654. Michigan.- Squier V. Hydliff, 9 Mich. 274. New York.- Gay v. Ballou, 4 Wend. 403, 21 Am. Dec. 158. Pennsylvania.- Rundel v. Keeler, 7 Watts, 237; Watson v. Hensel, 7 Watts, 344; Appeal of Werner, 91 Pa. St. 222. Tennessee.- McMinn v. Richmonds, 6 Yerg. 9; McGan v. Marshall, 7 Humph. 121. The reason for the rule. It has been stated by Parsons (Contracts [3d 46 Tyler quotes from Matthew Bacon who lays it down that infants are absolutely bound by their contracts in benignity to themselves, "for if they were not allowed to bind themselves for necessaries, no person would trust them, in which case they would be in worse circumstances than persons of full age." Tyler on Infancy, § 57. 46. Ive v. Chester, Cro. Jac. (Eng.) 560; Jordan v. Coffield, 70 N. Y. 110; Rivers v. Gregg, 5 Rich. Eq. (S. C.) 274. Question for jury. The following cases are to the effect that the question as to whether certain articles are suitable to the condition and estate of the infant is for the determination of the jury. Stanton v. Willson, 3 Day (Conn.), 37, 3 Am. Dec. 255; Henderson v. Fox, 5 Ind. 489; Garr v. Haskett, 86 Ind. 373; Bonney v. Reardin, 6 Bush (Ky.), 34; Swift v. Bennett, 10 Cush. (Mass.) 436; Merriam v. Cunningham, 11 Cush. (Mass.) 40; Davis V. Caldwell, 12 Cush. (Mass.) V. 512; Lynel Johnson, 109 Mich. 640, 67 N. W. 908; Ducell v. Lewenthal, 57 Miss. 331, 34 Am. Rep. 449; Cobbey v. Buchanan, 48 Neb. 391, 67 N. W. 176; Johnson v. Lines, Watts (Pa.), 80, 40 Am. Dec. 542; Glover v. Ott's Admr., 1 McCord (S. C.), 572; Bent v. Manning, 10 Vt. 225. 47. Perrin v. Willson, 10 Mo. 451; Angel v. McLellan, 16 Mass. 28, 8 Am. Dec. 118; Smith v. Young, 19 N. C. 26; Hyman v. Cain, 48 N. C. 111. 48. Tyler on Infancy, etc., § 58; Bradley v. Pratt, 23 Vt. 378; Brent v. Williams, 79 Miss. 355, 30 South. 713. |