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less than the full amount claimed by the creditor supported by a good consideration? Is the acceptance and retention of a check an acceptance of the terms on which it is sent, notwithstanding protests to the contrary?

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MR. CHIEF JUSTICE CARTWRIGHT delivered the opinion The law is that where the of the Court: amount due a creditor is ascertained and not in dispute the payment by the debtor and acceptance by the creditor of a less sum will not operate as a satisfaction of the demand, but if the amount due is unliquidated or there is a bona fide dispute as to how much is due, a payment of the amount claimed by the debtor to be due, in full settlement, if accepted by the creditor is a satisfaction of the claim. It is not necessary that the debtor shall pay more in that case than he admits to be due, and if a check for such sum is offered in payment of a disputed account, it must be accepted by the creditor upon the terms upon which it is offered or must be rejected. If a check is offered in full payment of the demand, an acceptance will satisfy the demand although the creditor protests at the time that it is not all that is due him or that he does not accept it in full satisfaction of his claim.

99

Question 97: (1) If a check for a lesser amount than that which is claimed is sent in full payment can the creditor retain the check and claim the balance of his original claim? Would it make any difference in your answer whether the claim was "liquidated" or "unliquidated"? Why? What is an unliquidated claim?

(2) A claims that B owes him $750. B admits a liability but in good faith claims that he owes $500. He pays A $500 under an agreement that A will release the entire debt. A sues for $250, and claims that as to the $500 the amount was liquidated because conceded. Is the settlement a bar to the entire claim or would it be necessary to have the settlement reach into the disputed territory?

(Note to Case 97. An unliquidated claim is one the amount it is of which is not a mere matter of calculation, that is to say,

a claim in which the amount is reducible to exactness only by agreement of the parties or the verdict of a jury or finding of a court. It may be a claim arising out of contract or commission of tort. Generally speaking, claims for damages for breach of contract are unliquidated, and all claims for damages arising out of commission of tort are unliquidated. Where an amount otherwise certain, that is liquidated, is subject to bona fide dispute, as in the reported case, the claim becomes unliquidated. A settlement of an unliquidated claim is binding. A settlement of a liquidated claim for a less amount than the amount due is not binding, as we have seen in the foregoing cases, unless some additional disadvantage to debtor, or advantage to creditor exists, and in that case the additional advantage, although slight, will take the case out of the rule.

A check for a lesser amount sent in payment of a liquidated claim, may therefore safely be retained, for although retained on the condition on which sent, there is no consideration; but if the amount is unliquidated, the acceptance of the check will bar future recovery of the balance.

In answer to Q. 97 (2), there is a difference of opinion. Does the sum accepted have to pass into the disputed territory in order to amount to satisfaction? Logically, yes; for that amount is liquidated; but equitably and justly, no. The rule itself being one of such doubtful wisdom, the exceptions to it ought to be made as numerous as possible even if they are illogical. And the court so holds in the above case. But in Whittaker Chain Tread v. Standard Auto Supply Co., the court held that where the debtor claimed that only $30.01 was due, but the creditor claimed $80.03, settlement in full for $30.01 was without consideration.

. (d) Composition by Debtor with Creditors.

Case 98. Bell v. Baxter, 86 N. Y. 195.

Facts: The debtor agreed with all his creditors, and they with each other, to accept a certain per cent in settlement of their claims.

Point Involved: Whether an agreement by a debtor with his creditors, and they with him and with each other, to accept a part of their debts in full settlement, is binding.

EARL, J.: An agreement to discharge the whole of a debt upon receiving payment of a portion is nudum pactum and not binding. But to this general rule there are some exceptions, one of which is a composition agreement, where the creditors agree to take a portion of their debts in satisfaction of the whole. In such a case the agreement of each creditor is said to furnish a consideration for the agreement of every other creditor who becomes a party to the composition agreement. Each creditor enters into a new agreement with the debtor, the consideration of which is the forbearance by all the other creditors who become parties to the composition to insist upon their claims in full.

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Question 98: What is a composition by a debtor with his creditors? How does it differ from the case of a debtor settling with one creditor or settling with various creditors independently of each other? Is a composition legally effective? Does it make any difference whether the debts are liquidated or unliquidated? Why, in such a case where not so in settlement with one debtor?

§ 88. (Contracts, Sec. 56.) Compromise of disputed claim.

A

Case 99. McKinley v. Watkins, 13 Ill. 140. Facts: McKinley and Watkins traded horses. month or two after the trade the horse which Watkins got died from an unsoundness that existed when the trade took place. It did not appear that McKinley was guilty of any deceit or that he made any warranty with respect to the horse being sound. Watkins complained to McKinley, and McKinley promised to give him $50 or a $50 horse if he would not sue. This suit was brought to recover such $50. The trial court instructed the jury, "If the jury believe from the evidence that there was a horse trade between Watkins and McKinley, out of which a difficulty had grown, and that Watkins was threatening to sue McKinley, and not deceiving him by any misrepresentations, and that McKinley rather than be sued promised Watkins that he would pay him $50, then said

promise is binding, and this regardless of the question as to whether McKinley would or would not have been liable in the suit which Watkins was threatening to bring against him." The jury found for Watkins, and McKinley appeals.

Point Involved: Was the above instruction a good statement of the law?

TRUMBULL, JUSTICE:

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The only question in the case is as to the propriety of this instruction, and in one point of view it is clearly erroneous. It assumes that the defendant would be bound by his promise, whether assented to by the plaintiff or not. Unless the plaintiff were bound on his part not to do the act which formed the consideration of the promise of the defendant, the agreement was void for want of mutuality. The promise of defendant to pay $50 if plaintiff would not sue him was incomplete till accepted by the plaintiff. Chitty on Contracts, 13.

"A mere offer, not assented to, constitutes no contract; for there must be not only a proposal, but an acceptance thereof. Story on Contracts, Par. 377, 378. "The instruction in other respects is very nearly, if not quite, correct. It assumes that, in order to support the promise, there must have been a horse trade between the parties, out of which a difficulty had arisen, and the plaintiff was threatening to sue the defendant, and not deceiving him by any misrepresentations. If by this is to be understood that the plaintiff must in good faith have supposed that he had a good cause of action against the defendant, growing out of the horse trade, the instruction is strictly proper. It is immaterial whether the plaintiff could have recovered in such action or not. If he honestly supposed that he had a good cause of action, the compromise of such right was a sufficient consideration to uphold a contract fairly entered into between the parties, irrespective of the question as to who was in the right. It has often been decided that the compromise of a doubtful right is a sufficient con

sideration for a promise; and it is immaterial on whose side the right ultimately turns out to be, as it must always be on one side or the other, because there can be but one good right to the same thing. Taylor v. Patrick, 1 Bibb, 168; Russel v. Cook, 3 Hill, 504; Moore v. Fitzwater, 2 Rand. 442; O'Keson v. Barclay, 2 Penn. Rep. 531.

"If the plaintiff was threatening to sue on a claim which he knew was wholly unfounded, and which he was setting up as a mere pretense to extort money from the defendant, a contract founded on a promise not to sue in such a case would be utterly void. In order to support the promise there must be such a claim as to lay a reasonable ground for the defendant's making the promise, and then it is immaterial on which side the right, may ultimately prove to be. Edwards v. Baugh, 11 Mees. & Wels. Rep. 641; Perkins v. Gay, 3 Serg. & Rawle, 331.

"The judgment of the circuit court is reversed, and the cause remanded for new trial."

Question 99: What was lacking in the instruction of the court that made it an erroneous statement of the law? If that element had been supplied would the agreement have been binding? In a compromise of a claim is the question whether the claim would have been successful in a law suit, of any consequence? Suppose the claimant makes a claim as a mere pretense to extort money, knowing there is no foundation for it, is a compromise of such a claim valid?

§ 89.

(Contracts, Sec. 57.) Forbearance of suit as good consideration.

(Note: A promise to forbear suit, for a definite period is a good consideration, as there is a right to sue at once, regardless of merits of the case if the claim is in good faith. Generally held also that an agreement to forbear without any statement as to time is a good consideration as a reasonable time will be implied; although some authorities are contra, holding the time of forbearance must be definite.)