Perkins v. Lockwood

Wells, J.

An agreement to accept, in satisfaction and discharge of a liquidated debt, a sum less than the full amount due, *250 is not valid, unless there exist some consideration to support it other than the payment or promise of the debtor to pay such less sum. Harriman v. Harrimcm, 12 Gray, 341 . The note or collateral promise of another person will support the agreement. Brooks v. White, 2 Met. 283 . For a like reason, when such an agreement forms part of a composition in which several creditors join, mutually stipulating to withdraw or withhold suits and that they will release to their common debtor a part of their claims upon payment of a certain other part, the agreement becomes binding between each creditor and the debtor. Eaton v. Lincoln, 13 Mass. 424 . Steinman v. Magnus, 11 East, 390. The reason is, that the rights and interests of other parties become involved in the arrangement, and this affords a new and legal consideration for the promise. It would be contrary to good faith for a creditor who has secured the advantage of such an arrangement to disregard its obligations by proceeding to enforce the balance of his demand; and the debtor is entitled to avail himself of this consideration in defence. Good v. Cheesman, 2 B. & Ad. 328. Boyd v. Hind, 1 H. & N. 938.

In this case, the exceptions do not show that there was any such mutual agreement between the creditors. The defence indicated by the most important ruling of the court appears to be based entirely upon the legal effect of the agreement between the plaintiff and defendant as indorsed upon the notes in suit. That agreement affects no other party. Its reference to the like settlement of other debts is merely in the nature of a condition attached to the plaintiff’s promise to discharge the notes. It does not make it any the more binding. The defendant’s undertaking, that he would not pay others more than the plaintiff, would not prevent others from enforcing their claims in full; and is not such a promise as would afford any consideration for the agreement of the plaintiff. It is neither a benefit to the plaintiff nor disadvantage to the defendant. So far as the exceptions show, the release of their claims by the other creditors bad no connection with this agreement. The agreement itself shows no legal consideration to give it effect as a contract.

As we understand the exceptions, the court below ruled that *251 the agreement indorsed upon the notes constituted of itself “ a legal and valid contract, binding on the plaintiff.” This we think was clearly wrong; and for this cause the Exceptions are sustained.