The Common Law

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The principles governing revocation are wholly different. One to
whom an offer is made has a right to assume that it remains open
according to its terms until he has actual [307] notice to the
contrary. The effect of the communication must be destroyed by a
counter communication. But the making of a contract does not
depend on the state of the parties' minds, it depends on their
overt acts. When the sign of the counter promise is a tangible
object, the contract is completed when the dominion over that
object changes.

[308] LECTURE IX.

CONTRACT.- III. VOID AND VOIDABLE.

THE elements of fact necessary to call a contract into existence,
and the legal consequences of a contract when formed, have been
discussed. It remains to consider successively the cases in which
a contract is said to be void, and those in which it is said to
be voidable,--in which, that is, a contract fails to be made when
it seems to have been, or, having been made, can be rescinded by
one side or the other, and treated as if it had never been. I
take up the former class of cases first.

When a contract fails to be made, although the usual forms have
been gone through with, the ground of failure is commonly said to
be mistake, misrepresentation, or fraud. But I shall try to show
that these are merely dramatic circumstances, and that the true
ground is the absence of one or more of the primary elements,
which have been shown, or are seen at once, to be necessary to
the existence of a contract.

If a man goes through the form of making a contract with A
through B as A's agent, and B is not in fact the agent of A,
there is no contract, because there is only one party. The
promise offered to A has not been accepted by him, and no
consideration has moved from him. In such a case, although there
is generally mistake on one side and fraud on the other, it is
very clear that no special [309] doctrine need be resorted to,
because the primary elements of a contract explained in the last
Lecture are not yet present.

Take next a different case. The defendant agreed to buy, and the
plaintiff agreed to sell, a cargo of cotton, "to arrive ex
Peerless from Bombay." There were two such vessels sailing from
Bombay, one in October, the other in December. The plaintiff
meant the latter, the defendant the former. It was held that the
defendant was not bound to accept the cotton. /1/ It is commonly
said that such a contract is void, because of mutual mistake as
to the subject-matter, and because therefore the parties did not
consent to the same thing. But this way of putting it seems to me
misleading. The law has nothing to do with the actual state of
the parties' minds. In contract, as elsewhere, it must go by
externals, and judge parties by their conduct. If there had been
but one "Peerless," and the defendant had said "Peerless" by
mistake, meaning "Peri," he would have been bound. The true
ground of the decision was not that each party meant a different
thing from the other, as is implied by the explanation which has
been mentioned, but that each said a different thing. The
plaintiff offered one thing, the defendant expressed his assent
to another.

A proper name, when used in business or in pleading, /2/ means
one individual thing, and no other, as every one knows, and
therefore one to whom such a name is used must find out at his
peril what the object designated is. If there are no
circumstances which make the use deceptive on either side, each
is entitled to insist on the [310] meaning favorable to him for
the word as used by him, and neither is entitled to insist on
that meaning for the word as used by the other. So far from
mistake having been the ground of decision, as mistake, its only
bearing, as it seems to me, was to establish that neither party
knew that he was understood by the other to use the word
"Peerless "in the sense which the latter gave to it. In that
event there would perhaps have been a binding contract, because,
if a man uses a word to which he knows the other party attaches,
and understands him to attach, a certain meaning, he may be held
to that meaning, and not be allowed to give it any other. /1/

Next, suppose a case in which the offer and acceptance do not
differ, and in which both parties have used the same words in the
same sense. Suppose that A agreed to buy, and B agreed to sell,
"these barrels of mackerel," and that the barrels in question
turn out to contain salt. There is mutual mistake as to the
contents of the barrels, and no fraud on either side. I suppose
the contract would be void. /2/

It is commonly said that the failure of the contract in such a
case is due to the fact of a difference in kind between the
actual subject-matter and that to which the intention of the
parties was directed. It is perhaps more instructive to say that
the terms of the supposed contract, although seemingly
consistent, were contradictory, in matters that went to the root
of the bargain. For, by one of the essential terms, the
subject-matter of the agreement was the contents of certain
barrels, and nothing else, and, by another equally important, it
was mackerel, and nothing else; [311] while, as a matter of fact,
it could not be both, because the contents of the barrels were
salt. As neither term could be left out without forcing on the
parties a contract which they did not make, it follows that A
cannot be required to accept, nor B to deliver either these
barrels of salt, or other barrels of mackerel; and without
omitting one term, the promise is meaningless.

If there had been fraud on the seller's part, or if he had known
what the barrels really contained, the buyer might have had a
right to insist on delivery of the inferior article. Fraud would
perhaps have made the contract valid at his option. Because, when
a man qualifies sensible words with others which he knows, on
secret grounds, are insensible when so applied, he may fairly be
taken to authorize his promisee to insist on the possible part of
his promise being performed, if the promisee is willing to forego
the rest.

Take one more illustration like the last case. A policy of
insurance is issued on a certain building described in the policy
as a machine-shop. In fact the building is not a machine-shop,
but an organ factory, which is a greater risk. The contract is
void, not because of any misrepresentation, but, as before,
because two of its essential terms are repugnant, and their union
is insensible. /1/

Of course the principle of repugnancy last explained might be
stretched to apply to any inconsistency between the different
terms of a contract. It might be said, for instance, that if a
piece of gold is sold as eighteen-carat gold, and it is in fact
not so pure, or if a cow is sold as yielding an average of twelve
quarts of milk a day, and in fact she yields only six quarts,
there is no logical difference, [312] according to the
explanation which has just been offered, between those cases and
that of the barrel of salt sold for mackerel. Yet those bargains
would not be void. At the most, they would only be voidable, if
the buyer chose to throw them up.

The distinctions of the law are founded on experience, not on
logic. It therefore does not make the dealings of men dependent
on a mathematical accuracy. Whatever is promised, a man has a
right to be paid for, if it is not given; but it does not follow
that the absence of some insignificant detail will authorize him
to throw up the contract, still less that it will prevent the
formation of a contract, which is the matter now under
consideration. The repugnant terms must both be very
important,--so important that the court thinks that, if either is
omitted, the contract would be different in substance from that
which the words of the parties seemed to express.

A term which refers directly to an identification by the senses
has always this degree of importance. If a promise is made to
sell this cow, or this mackerel, to this man, whatever else may
be stricken from the contract, it can never be enforced except
touching this object and by this man. If this barrel of salt is
fraudulently sold for a barrel of mackerel, the buyer may perhaps
elect to take this barrel of salt if he chooses, but he cannot
elect to take another barrel of mackerel. If the seller is
introduced by the name B, and the buyer supposes him to be
another person of the same name, and under that impression
delivers his written promise to buy of B, the B to whom the
writing is delivered is the contractee, if any one is, and,
notwithstanding what has been said of the use of proper names, I
should suppose [313] a contract would be made. /1/ For it is
further to be said that, so far as by one of the terms of a
contract the thing promised or the promisee is identified by
sight and hearing, that term so far preponderates over all others
that it is very rare for the failure of any other element of
description to prevent the making of a contract. /2/ The most
obvious of seeming exceptions is where the object not in fact so
identified, but only its covering or wrapper.

Of course the performance of a promise may be made conditional on
all the terms stipulated from the other side being complied with,
but conditions attaching to performance can never come into
consideration until a contract has been made, and so far the
question has been touching the existence of a contract in the
first instance.

A different case may be suggested from any yet considered.
Instead of a repugnancy between offer and assent which prevents
an agreement, or between the terms of an agreement which makes it
insensible on its fact, there may be a like repugnancy between a
term of the contract and a previous representation of fact which
is not expressly made a part of the contract. The representation
may have been the chief inducement and very foundation of the
bargain. It may be more important than any of the expressed
terms, and yet the contract may have [314] been reduced to
writing in words which cannot fairly be construed to include it.
A vendor may have stated that barrels filled with salt contain
mackerel, but the contract may be only for the barrels and their
contents. An applicant for insurance may have misstated facts
essential to the risk, yet the policy may simply insure a certain
building or a certain life. It may be asked whether these
contracts are not void also.

There might conceivably be cases in which, taking into account
the nature of the contract, the words used could be said to
embody the representation as a term by construction. For
instance, it might be said that the true and well-understood
purport of a contract of insurance is not, as the words seem to
say, to take the risk of any loss by fire or perils of the sea,
however great the risk may be, but to take a risk of a certain
magnitude, and no other, which risk has been calculated
mathematically from the statements of the party insured. The
extent of the risk taken is not specified in the policy, because
the old forms and established usage are otherwise, but the
meaning is perfectly understood.

If this reasoning were adopted, there would be an equal
repugnancy in the terms of the contract, whether the nature of
the risk were written in the policy or fixed by previous
description. But, subject to possible exceptions of this kind, it
would seem that a contract would be made, and that the most that
could be claimed would be a right to rescind. Where parties
having power to bind themselves do acts and use words which are
fit to create an obligation, I take it that an obligation arises.
If there is a mistake as to a fact not mentioned in the contract,
it goes only to the motives for making the contract. But a [315]
contract is not prevented from being made by the mere fact that
one party would not have made it if he had known the truth. In
what cases a mistake affecting motives is a ground for avoidance,
does not concern this discussion, because the subject now under
consideration is when a contract is made, and the question of
avoiding or rescinding it presupposes that it has been made.

I think that it may now be assumed that, when fraud,
misrepresentation, or mistake is said to make a contract void,
there is no new principle which comes in to set aside an
otherwise perfect obligation, but that in every such case there
is wanting one or more of the first elements which were explained
in the foregoing Lecture. Either there is no second party, or the
two parties say different things, or essential terms seemingly
consistent are really inconsistent as used.

When a contract is said to be voidable, it is assumed that a
contract has been made, but that it is subject to being unmade at
the election of one party. This must be because of the breach of
some condition attached to its existence either expressly or by
implication.

If a condition is attached to the contract's coming into being,
there is as yet no contract. Either party may withdraw, at will,
until the condition is determined. There is no obligation,
although there may be an offer or a promise, and hence there is
no relation between the parties which requires discussion here.
But some conditions seemingly arising out of a contract already
made are conditions of this sort. Such is always the case if the
condition of a promise lies within the control of the promisor's
own will. For instance, a promise to pay for clothes if made to
the customer's satisfaction, has been held in Massachusetts to
[316] make the promisor his own final judge. /1/ So interpreted,
it appears to me to be no contract at all, until the promisor's
satisfaction is expressed. His promise is only to pay if he sees
fit, and such a promise cannot be made a contract because it
cannot impose any obligation. /2/ If the promise were construed
to mean that the clothes should be paid for provided they were
such as ought to satisfy the promisor, /3/ and thus to make the
jury the arbiter, there would be a contract, because the promisor
gives up control over the event, but it would be subject to a
condition in the sense of the present analysis.

The conditions which a contract may contain have been divided by
theorists into conditions precedent and conditions subsequent.
The distinction has even been pronounced of great importance. It
must be admitted that, if the course of pleading be taken as a
test, it is so. In some cases, the plaintiff has to state that a
condition has been performed in order to put the defendant to his
answer; in others, it is left to the defendant to set up that a
condition has been broken.

In one sense, all conditions are subsequent; in another, all are
precedent. All are subsequent to the first stage of the
obligation. /4/ Take, for instance, the case of a promise to pay
for work if done to the satisfaction of an architect. The
condition is a clear case of what is called a condition
precedent. There can be no duty to pay until the architect is
satisfied. But there can be a [317] contract before that moment,
because the determination whether the promisor shall pay or not
is no longer within his control. Hence the condition is
subsequent to the existence of the obligation.

On the other hand, every condition subsequent is precedent to the
incidence of the burden of the law. If we look at the law as it
would be regarded by one who had no scruples against doing
anything which he could do without incurring legal consequences,
it is obvious that the main consequence attached by the law to a
contract is a greater or less possibility of having to pay money.
The only question from the purely legal point of view is whether
the promisor will be compelled to pay. And the important moment
is that at which that point is settled. All conditions are
precedent to that.

But all conditions are precedent, not only in this extreme sense,
but also to the existence of the plaintiff's cause of action. As
strong a case as can be put is that of a policy of insurance
conditioned to be void if not sued upon within one year from a
failure to pay as agreed. The condition does not come into play
until a loss has occurred, the duty to pay has been neglected,
and a cause of action has arisen. Nevertheless, it is precedent
to the plaintiff's cause of action. When a man sues, the question
is not whether he has had a cause of action in the past, but
whether he has one then. He has not one then, unless the year is
still running. If it were left for the defendant to set up the
lapse of the year, that would be due to the circumstance that the
order of pleading does not require a plaintiff to meet all
possible defences, and to set out a case unanswerable except by
denial. The point at which the law calls on the defendant for an
answer varies [318] in different cases. Sometimes it would seem
to be governed simply by convenience of proof, requiring the
party who has the affirmative to plead and prove it. Sometimes
there seems to be a reference to the usual course of events, and
matters belong to the defence because they are only exceptionally
true.

The most logical distinction would be between conditions which
must be satisfied before a promise can be broken, and those
which, like the last, discharge the liability after a breach has
occurred. /1/ But this is of the slightest possible importance,
and it may be doubted whether another case like the last could be
found.

It is much more important to mark the distinction between a
stipulation which only has the effect of confining a promise to
certain cases, and a condition properly so called. Every
condition, it is true, has this effect upon the promise to which
it is attached, so that, whatever the rule of pleading may be,
/2/ a promise is as truly kept and performed by doing nothing
where the condition of the stipulated act has been broken, as it
would have been by doing the act if the condition had been
fulfilled. But if this were all, every clause in a contract which
showed what the promisor did not promise would be a condition,
and the word would be worse than useless. The characteristic
feature is quite different.

A condition properly so called is an event, the happening of
which authorizes the person in whose favor the condition is
reserved to treat the contract as if it had not been made,--to
avoid it, as is commonly said,--that is, to insist on both
parties being restored to the position in [319] which they stood
before the contract was made. When a condition operates as such,
it lets in an outside force to destroy the existing state of
things. For although its existence is due to consent of parties,
its operation depends on the choice of one of them. When a
condition is broken, the person entitled to insist on it may do
so if he chooses; but he may, if he prefers, elect to keep the
contract on foot. He gets his right to avoid it from the
agreement, but the avoidance comes from him.

Hence it is important to distinguish those stipulations which
have this extreme effect from those which only interpret the
extent of a promise, or define the events to which it applies.
And as it has just been shown that a condition need not be
insisted on as such, we must further distinguish between its
operation by way of avoidance, which is peculiar to it, and its
incidental working by way of interpretation and definition, in
common with other clauses not conditions.

This is best illustrated by taking a bilateral contract between A
and B, where A's undertaking is conditional on B's doing what he
promises to do, and where, after A has got a certain distance in
his task, B breaks his half of the bargain. For instance, A is
employed as a clerk by B, and is wrongfully dismissed in the
middle of a quarter. In favor of A, the contract is conditional
on B's keeping his agreement to employ him. Whether A insists on
the condition or not, he is not bound to do any more. /1/ So far,
the condition works simply by way of definition. It establishes
that A has not promised to act in the case which has happened.
But besides this, for which a condition [320] was not necessary,
A may take his choice between two courses. In the first place, he
may elect to avoid the contract. In that case the parties stand
as if no contract had been made, and A, having done work for B
which was understood not to be gratuitous, and for which no rate
of compensation has been fixed, can recover what the jury think
his services were reasonably worth. The contract no longer
determines the quid pro quo. But as an alternative course A may
stand by the contract if he prefers to do so, and sue B for
breaking it. In that case he can recover as part of his damages
pay at the contract rate for what he had done, as well as
compensation for his loss of opportunity to finish it. But the
points which are material for the present discussion are, that
these two remedies are mutually exclusive, /1/ one supposing the
contract to be relied on, the other that it is set aside, but
that A's stopping work and doing no more after B's breach is
equally consistent with either choice, and has in fact nothing to
do with the matter.

One word should be added to avoid misapprehension. When it is
said that A has done all that he promised to do in the case which
has happened, it is not meant that he is necessarily entitled to
the same compensation as if he had done the larger amount of
work. B's promise in the case supposed was to pay so much a
quarter for services; and although the consideration of the
promise was the promise by A to perform them, the scope of it was
limited to the case of their being performed in fact. Hence A
could not simply wait till the end of his term, and then recover
the full amount which he would have had if the employment had
continued. Nor is he any more entitled to do so from [321] the
fact that it was B's fault that the services were not rendered.
B's answer to any such claim is perfect. He is only liable upon a
promise, and he in his turn only promised to pay in a case which
has not happened. He did promise to employ, however, and for not
doing that he is liable in damages.

One or two more illustrations will be useful. A promises to
deliver, and B promises to accept and pay for, certain goods at a
certain time and place. When the time comes, neither party is on
hand. Neither would be liable to an action, and, according to
what has been said, each has done all that he promised to do in
the event which has happened, to wit, nothing. It might be
objected that, if A has done all that he is bound to do, he ought
to be able to sue B, since performance or readiness to perform
was all that was necessary to give him that right, and conversely
the same might be said of B. On the other hand, considering
either B or A as defendant, the same facts would be a complete
defence. The puzzle is largely one of words.

A and B have, it is true, each performed all that they promised
to do at the present stage, because they each only promised to
act in the event of the other being ready and willing to act at
the same time. But the readiness and willingness, although not
necessary to the performance of either promise, and therefore not
a duty, was necessary in order to present a case to which the
promise of action on the other side would apply. Hence, although
A and B have each performed their own promise, they have not
performed the condition to their right of demanding more from the
other side. The performance of that condition is purely optional
until one side has brought it within the [322] scope of the
other's undertaking by performing it himself. But it is
performance in the latter sense, that is, the satisfying of all
conditions, as well as the keeping of his own promises, which is
necessary to give A or B a right of action.

Conditions may be created by the very words of a contract. Of
such cases there is nothing to be said, for parties may agree to
what they choose. But they may also be held to arise by
construction, where no provision is made in terms for rescinding
or avoiding the contract in any case. The nature of the
conditions which the law thus reads in needs explanation. It may
be said, in a general way, that they are directed to the
existence of the manifest grounds for making the bargain on the
side of the rescinding party, or the accomplishment of its
manifest objects. But that is not enough. Generally speaking, the
disappointment must be caused by the wrong-doing of the person on
the other side; and the most obvious cases of such wrong-doing
are fraud and misrepresentation, or failure to perform his own
part of the contract.

Fraud and misrepresentation thus need to be considered once more
in this connection. I take the latter first. In dealing with it
the first question which arises is whether the representation is,
or is not, part of the contract. If the contract is in writing
and the representation is set out on the face of the paper, it
may be material or immaterial, but the effect of its untruth will
be determined on much the same principles as govern the failure
to perform a promise on the same side. If the contract is made by
word of mouth, there may be a large latitude in connecting words
of representation with later words of promise; but when they are
determined to be a part of the contract [323], the same
principles apply as if the whole were in writing.

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