9

merely void. Where the transaction is strictly illegal, the promise is void whether under seal or not, unless it is in the form of a negotiable instrument when it may be enforced only by purchasers for value in good faith without knowledge of its illegal taint.10 This rule is well established and appears to be a reasonable one, but statutes in some states forbid this exception from being made. Those states apparently are not desirous of having any one possess rights founded on a violation of the law, even if he be an innocent holder of negotiable paper.

Where the transaction is merely void, the promise is invalid. If it is under seal, it will be enforced, for in such an event no consideration is necessary. But in a simple contract a promise to pay an unlawful debt is not a consideration which the law will recognize. Hence, the simple agreement must fail. Thus, where A and B have illicitly cohabited, a promise based on such past cohabitation would have no consideration. But if the promise is under seal, the specialty will be enforced. These rules do not apply to those states where the seal has been abolished.1

11

113. Effect of intention.—Ordinarily, the intention of the parties is immaterial since if a contract is illegal, it is so whether the parties knew it or not. But if the contract admits of being performed in a legal way not contemplated, it will be enforced.12 Where one of the parties does not know that the other is violating the law, he may enforce the con

9 Luetchford v. Lord, 132 N. Y. 465. 10 Sondheim v. Gilbert, 117 Ind. 71. 11 Drennan v. Douglas, 102 Ill. 341. 12 Fox v. Rogers, 171 Mass. 546.

tract. Although ignorance of the law excuses no one, ignorance of fact does. For instance, an actor who does not know that his producer is operating without a license, may recover for breach of his contract, even if the producer may not have known that a license was required.13

The object of the contract may be innocent, but if the intention of the parties is unlawful, the agreement is void unless the unlawful transaction has taken place.14 The law, then, is not concerned with preventing the carrying out of the unlawful intention. Where only one of the parties has an unlawful intention, the fact that the other knows of the one's intention, does not render the agreement illegal unless the other does some act in furtherance of the unlawful design.15 An exception exists where the unlawful intention amounts to a felony or is of a heinous nature.16 If A is ignorant of B's unlawful intention, A is entitled to full benefit of the agreement or he may rescind it.

114. Partial illegality.-If the agreement is good in part, that part will be enforced if it is separable.1 That is, if a promise is made along with other promises but it has a separate consideration and may be enforced by itself, the law will enforce it. But the

13 Roys v. Johnson, 7 Gray 162 (Mass.); Miller v. Hirschberg, 37 Pac. 85 (Ore.).

14 Sherman v. Wilder, 106 Mass. 537; Armstrong v. Bank, 133 U. S. 433. 15 Bryson v. Haley, 68 N. H. 337; Corbin et al. v. Houlehan, 100 Me. 246, LEADING ILLUSTRATIVE CASES. The English rule considers knowledge of the other's unlawful intention sufficient to avoid the contract. See Pearce v. Brookes, L. R. 1 Exch. 213 (Eng.).

16 Hanauer v. Doane, 12 Wall. 342 (U. S.).

17 Rand v. Mather, 11 Cush. 1 (Mass.).

law will not sustain a promise based on a consideration partly bad and partly valid.18

115. Effect on illegality of change of time or place. A contract valid in one state is valid everywhere unless injurious to the state in which it is sought to be enforced, or to the citizens thereof. So contracts against good morals, or tending to promote vice or crime, or against the settled public policy of the state will not be enforced, although they may be valid by the law of the place where made.19 If a contract is invalid in one state, it is invalid everywhere. There is a clause in the Constitution of the United States which requires that each state give full faith and credit to the laws of every other state. Under this provision each state is compelled to recognize the statutes of its sister states.20

A contract illegal when made, may not be made legal by subsequent legislation.21 Nor may changes in the law make a contract illegal if legal when made; although they may operate as a discharge by making performance impossible.22

18 Ricketts v. Harvey, 106 Ind. 564.

19 Swann v. Swann, 21 Fed. 299; Corbin et al. v. Houlehan, 100 Me. 246, LEADING ILLUSTRATIVE CASES.

20 See subject, CONFLICT OF Laws.

21 Hughes v. Boone, 102 N. C. 137.

22 Richardson v. Campbell, 34 Nebr. 181.

THE OPERATION OF

CONTRACT

CHAPTER IX.

LIMITS OF CONTRACTUAL OBLIGATION.

116. Scope of contractual obligation.-After a contract has been created, it is necessary to determine to whom the obligation extends. The purpose of Part Three of this treatise is to ascertain who have rights and liabilities under a contract. In general, it may be said that no one but the parties to a contract can be bound by it or be entitled to rights under it. But under certain circumstances the rights and liabilities created by a contract may pass to a person or to persons other than the original parties, either by the act of the parties themselves, or by rules of law operating in certain events.23 A discussion of these general principles will be the subject of the present chapter.

117. A contract may not impose liability on a third party.—A contract acts upon the parties, and is founded upon their assent to its terms. It follows that one not a party, and not assenting to its terms, may not be made to assume its obligation. So it is

23 Anson, Contracts (Huffcut's 2d ed.), § 276.

said that "a man cannot, of his own will, pay another man's debt without his consent, and thereby convert himself into a creditor."' 24

Where A contracts with B to furnish him services, although A may under some circumstances procure C to do the work, A may not confer upon C the right to require payment of B. Nor will the law impose an obligation upon B because of the acceptance of the services, where there was no intention on B's part to enter into legal relations with C.

Thus, A took ice from the B company. Disgusted with B's service, A took ice from the C company. Later, without notice to A, B bought out C, and continued to furnish A with ice. When A learned of this fact he refused to pay for the ice. The court held that he need not pay, because B was making itself A's creditor without his consent.25

118. Same subject-Apparent exceptions.-Although one person may not, as a rule, by contract, impose liabilities on a third person, not a party, the doctrines of agency seem to violate this rule. The acts of an agent are done on behalf and usually in the name of his principal. But a contract by an agent binds the principal by force of a previous authority or subsequent ratification, which is really the assent of the principal to be bound. Wherefore, the contract which binds the principal is practically his contract. Thus, the liabilities are not imposed upon the principal.26

24 Durnford v. Messiter, 5 M. & S. 446 (Eng.); Borden v. Boardman, 157 Mass. 410, LEADING ILLUSTRATIVE CASES.

25 Boston Ice Co. v. Potter, 123 Mass. 28, LEADING ILLUSTRATIVE CASES. 26 See subject, AGENCY; see also subject, TRUSTS.