a case must be sharply distinguished from one where the new promisor has received property not simply as an indemnity against possible liability but has purchased it and has assumed as part of the price the obligation of paying certain debts of the grantor.68 It is essential for the validity of an oral promise that it shall not exceed in scope the obligation which the law imposes upon the promisor irrespective of his promise. Accordingly a promise to perform immediately a duty which will rest upon the promisor only in the future is within the statute.69 But a new promise which does not go beyond the trustee's legal duty, is outside the statute. If property has been turned over to the new promisor to hold upon trust and not simply upon a revocable agency, the fact that the trust contemplates that the property shall be reduced to cash before payment is made to the creditor who is the beneficiary of the trust, should not invalidate an oral promise to make payment according to the terms of the trust even though the promise is made prior to the liquidation of the property. An oral promise to pay in any event is within the statute unless the trustee has become liable; but such a promise to pay on a particular contingency if a trust existing at the time of the promise requires that the trustee shall pay on that contingency, is unobjectionable.70

Indeed, even though the promisor has not received property of the debtor at the time he makes the promise, his undertaking

191, 194, the court said: "No case is cited, nor have I been able to find any, holding that a mere security by way of mortgage or otherwise given to indemnify one who promises to pay the debt of another in case he does pay it makes such promise an original undertaking between the creditor and promisor, so as to take the case out of the Statute of Frauds."

68 As to such cases, see infra, § 478. 69 In Belknap v. Bender, 75 N. Y. 446, 452, the court said: "Suppose a voluntary assignee of an insolvent debtor after he has taken possession of the property assigned, but before he has converted it into money, and before the duty to pay has arisen, promises without any further or new considera

tion to pay the debt of one of the preferred creditors, could such a promise be enforced? Suppose one takes a conveyance of real estate from a debtor upon the agreement with him that he will rent it, and accumulate the rent for ten years, and then pay the net amount to his creditors, and the next day without any new consideration he promises at once to pay the creditors, could such a promise be enforced?" See also to the same effect First Nat. Bank v. Chalmers, 144 N. Y. 432, 435, 39 N. E. 331.

70 Hitchcock v. Lukens, 8 Port. 333; Armstrong v. First Nat. Bank (Mo. App.), 195 S. W. 562; Phelps v. Rowe, 75 Hun, 414, 27 N. Y. S. 89; Mason v. Wilson, 84 N. C. 51, 37 Am. Rep. 612.

pert

is not within the statute, if confined to paying from property which the promisor may receive applicable to the debt in question." The matter may be summarized by saying that when performance of the promise cannot involve a payment out of the promisor's own funds or property, the promise is not within the statute, for the promisor is not in any true sense agreeing to answer for the debt of another. On the other hand, a promise to apply towards the payment of a debt of another a particular fund belonging to the promisor is as fully within the statute as an absolute promise without reference to a fund.72

§ 460. To whom the promise must be made.

Though the words of the statute are in terms applicable to a promise made to any one to pay a debt of a third person, by construction of the courts, which have had in mind the mischief aimed at, the application of the act has been confined to promises made to the creditor himself. Accordingly oral promises made to the debtor to assume and pay his debt may be enforced by him,73 as may an oral promise to lend him money with which to discharge his debts.74

71 Andrews v. Smith, 2 C. M. & R. 627. See also Woodruff v. Scaife, 83 Ala. 152, 3 So. 311; Aultman v. Fletcher, 110 Ala. 452, 18 So. 215; McKeenan v. Thissel, 33 Me. 368; Shaaber v. Bushong, 105 Pa. 514, 517; Pirie v. Granite, etc., Trust Co., 91 Vt. 304, 100 Atl. 676. See also infra, § 479.

72 Fisher v. Donovan, 57 Neb. 361, 77 N. W. 778, 44 L. R. A. 383.

73 Eastwood v. Kenyon, 11 Ad. & E. 438; Tuttle v. Armstead, 53 Conn. 175, 22 Atl. 677; Neagle v. Kelly, 146 Ill. 460, 34 N. E. 947; Tremayne v. McCaskey Register Co., 181 Ill. App. 398; Bateman v. Butler, 124 Ind. 223, 24 N. E. 989; Patton v. Mills, 21 Kans. 163; Hubon v. Park, 116 Mass. 541; Pratt v. Bates, 40 Mich. 37; Clay Lumber Co. v. Hart's Branch Coal Co., 174 Mich. 613, 140 N. W. 912; Goetz v. Foos, 14 Minn. 265, 100 Am.

Dec. 218; Ware v. Allen, 64 Miss. 545, 1 So. 738; Grace v. Floyd, 103 Miss. 201, 61 So. 694; Howard v. Coshow, 33 Mo. 118; Dent v. Arthur, 156 Mo. App. 472, 137 S. W. 285; Patrick v. Barker, 78 Neb. 823, 112 N. W. 358; Fiske v. McGregory, 34 N. H. 414; Smart v. Smart, 97 N. Y. 559; Rice v. Carter, 11 Ired. 298; Van Gilder v. Bullen, 159 N. C. 291, 74 S. E. 1059; Staver Carriage Co. v. Jones, 32 Okla. 713, 123 Pac. 148; Brown v. Brown (Tex. Civ. App.), 155 S. W. 551; Hawkins v. Western Nat. Bank (Tex. Civ. App.), 145 S. W. 722; Randall v. Kelsey, 46 Vt. 158; Bicknell v. Henry, 69 Wash. 408, 125 Pac. 156; Handsaker v. Pedersen, 71 Wash. 218, 128 Pac. 230. See also Murphy v. Hanna, 37 N. Dak. 156, 164 N. W. 32. In Sharp v. Levan, 236 Pa. 374, 84 Atl. 915, however, the court held a promise by one

74 Murphy v. Hanna, 37 N. Dak. 156, 164 N. W. 32.

A situation arises in the United States, where in many jurisdictions a creditor is allowed to sue on a promise to pay his claim made to the debtor, which has not arisen in England, where only the promisee is ever allowed to sue on a contract.

Where it is held, whether reasonably or not, that a promise to the debtor creates a new and direct right in favor of the creditor, it would seem that in legal effect the promise is dealt with as if made directly to the creditor. Of the jurisdictions which hold that such a direct right arises, a few hold that the right of the creditor under such a promise is based on an assumed novation offered by the promisor and promisee and accepted by the creditor.75 On such an assumption, evidently the promise is not within the statute, since the original obligation is extinguished by the later promise; and whenever this is the case, a new promise is not within the statute.76

Where the promise to the debtor is held to give the creditor a direct right against the new promisor without destroying his right against the original debtor, the case is identical in legal effect and should be regarded as identical for purposes of the statute with a case where the promise is made directly to the creditor in return for consideration furnished by the debtor, and where the liability of the original debtor still persists.76

§ 461. Promises made prior to the creation of the principal debt.

Mr. Justice Story said in a leading case: 766 "Whether by the true intent of the statute, it was to extend to cases where the collateral promise (so-called) was a part of the original agree

shareholder of a bank to another that if the latter would sign an agreement to contribute to a reorganization fund and pay an assessment the former would make the necessary payments on his behalf, was within the statute because the promisor had no greater personal interest than other shareholders in the matter. No authorities were cited in support of the conclusion, and the decision must be regarded as wrong.

75 See supra, § 393.

76 See infra, § 478. This reasoning was followed, and such a promise to the debtor held not within the statute in Aldrich v. Carpenter, 160 Mass. 166, 170, 35 N. E. 456 (applying R. I. law); Lang v. Henry, 54 N. H. 57; Wood v. Moriarity, 15 R. I. 518, 9 Atl. 427, 16 R. I. 201, 14 Atl. 855.

78a See infra, § 478.

78b D'Wolf v. Rabaud, 1 Pet. 476, 479, 7 L. Ed. 672.

ment, and founded on the same consideration moving at the same time between the parties, or whether it was confined to cases where there was already a subsisting debt and demand, and the promise was merely founded upon a subsequent and distinct undertaking, might, if the point were entirely new, deserve very grave deliberation." But, as the learned Justice remarked, the question has now been closed, for though once it was thought that unless a guarantor's promise to pay was made after the obligation of the principal debtor had been incurred, the statute was not applicable," it is now settled that a "special promise" within the Statute may be made prior to or simultaneously with the creation of the principal obligation, and may be offered as an inducement to the creditor to enter into a contract with the principal debtor.78

§ 462. Different tests proposed to distinguish promises within the statute.

Different tests have been suggested by the courts to determine when a promise is within the statute. The lack of one single universally recognized test is itself a clear indication of the unsatisfactory nature of most of those which have been proposed; and shows what is also true, that no test which can

"See Jones v. Cooper, Cowp. 227; Perley v. Spring, 12 Mass. 297, 299; Rogers v. Kneeland, 13 Wend. 114, 121; Matthews v. Milton, 4 Yerg. 576, 26 Am. Dec. 247; Mead v. Watson, 57 Vt. 426.

78 Parsons v. Walter, 3 Doug. 14 n. (c.); Peckham v. Faria, 3 Doug. 13; Matson v. Wharam, 2 T. R. 80; Anderson v. Hayman, 1 H. Bl. 120; Keate v. Temple, 1 Bos. & P. 158; Webb v. Hawkins Co., 101 Ala. 630, 14 So. 407; Harris v. Frank, 81 Cal. 280, 22 Pac. 856; Southern Coal Co. v. Randall, 141 Ga. 48, 80 S. E. 285; Ruggles v. Gatton, 50 Ill. 412; Wills v. Ross, 77 Ind. 1; Langdon v. Richardson, 58 Ia. 610, 12 N. W. 622; Blake v. Parlin, 22 Me. 395; Moses v. Norton, 36 Me. 113, 58 Am. Dec. 738; Conolly

v. Kettlewell, 1 Gill, 260; Norris v. Graham, 33 Md. 56; Cahill v. Bigelow, 18 Pick. 369; Bugbee v. Kendricken, 130 Mass. 437; Welch v. Marvin, 36 Mich. 59; Hagadorn v. Stronach Co., 81 Mich. 56, 45 N. W. 650; Cole v. Hutchinson, 34 Minn. 410, 26 N. W. 319; Maurin v. Fogelberg, 37 Minn. 23, 32 N. W. 858, 5 Am. St. Rep. 814; Gill v. Reed, 55 Mo. App. 246; Walker v. Richards, 39 N. H. 259; Cowdin v. Gottgetreu, 55 N. Y. 650; Whitehurst v. Pidgett, 157 N. C. 424, 73 S. E. 240; Leland v. Creyon, 1 McC. 100, 10 Am. Dec. 654; Taylor v. Drake, 4 Strob. 431, 53 Am. Dec. 680; Matthews v. Milton, 4 Yerg. 576, 26 Am. Dec. 247; Mead v. Watson, 57 Vt. 426; Cutler v. Hinton, 6 Rand. 509; Ware v. Stephenson, 10 Leigh, 155.

be proposed will harmonize all the decisions. The most commonly suggested tests are:

(1) A promise which is in form a guaranty performable only on default by a principal debtor is within the statute. A promise not in this form is not within the statute.

(2) A promise which is in terms to pay a debt of another for which that other continues liable, is within the statute; otherwise it is not.

(3) The governing distinction is the purpose of the promisor whether to gain an advantage for himself or to secure it for another.

(4) A promise which amounts in substance to a promise to pay the debtor's own debt is said to be within the statute; but otherwise if the promise is to pay the debt of another.

(5) Whether a new and beneficial consideration has been received by a new promisor is made vital.

(6) A test quoted in recent English cases with approval is laid down in a note to Williams' Saunders Reports,80 making the applicability of the statute depend "not on the consideration for the promise but on the fact of the original party remaining liable, coupled with the absence of any liability on the part of the defendant or his property, except such as arises from his express promise."

(7) The test which it is submitted is the accurate one, is whether a promisor is, to the actual or presumed knowledge of the creditor, a surety; if so, his promise is within the statute.

These tests obviously overlap one another, but they are not identical. Some of them are expressly confined to the situation which arises where the defendant's promise was made after a debt on the part of another had previously come into existence. It is only such cases which give rise to any considerable difficulty in determining whether on given facts the statute is applicable. It is desirable, therefore, before considering in detail the validity of the tests suggested, to consider the sim

79 Green v. Cresswell, 10 A. & E. 453; Fitzgerald v. Dressler, 7 C. B. (N. S.) 374; Davys v. Buswell, [1913] 2 K. B. 47.

80 The passage is quoted from Vol. I,

Williams' Notes to Saunders' Reports, p. 233, but the substance of it is contained in the earlier editions of Williams' notes to Forth v. Stanton, 1 Williams' Saunders, 210.