Haigh v. Brooks

Brief Fact Summary. Haigh (Plaintiff) sold cotton to Lees on credit. Brooks (Defendant) agreed to guarantee his debt to Plaintiff. The agreement did not satisfy the Statute of Frauds. Lee did not pay his debt on time. Plaintiff sued Defendant that denies the debt failure to follow the Statue of Frauds and lack of consideration.

Synopsis of Rule of Law. When a party to a contract does something that they do not have to do or does not do something they have the right to do, no matter how small, that act can constitute consideration and bind the other party.

Facts. Defendant appeals a judgment against him from the lower court to the Queen’s Bench.  Plaintiff sold Lees cotton on credit. Defendant guaranteed Lees’ debt to Plaintiff.  For a guarantee to be enforceable under the Statute of Frauds, there must be a written agreement stating that the party received consideration for guaranteeing the debt of another party.  The written agreement between Plaintiff and Defendant said that Defendant would guarantee Lees’ debt “in consideration for [Plaintiff’s] being in advance” to Lees for 10,000 pounds.  Then, Defendant convinced Plaintiff to give the written agreement back to him in exchange for guaranteeing three of Lees’ notes totaling 9,666 pounds. When Lees did not pay on time, Plaintiff sued Defendant.

Issue. Should Defendant’s agreement to guarantee Lees’s debt be enforced?

Held. Yes, Defendant’s agreement to guarantee Lee’s debt shall be upheld.

Although Defendant argues that “being in advanced” to Lees is not consideration because Plaintiff had already given the credit at the time of the agreement between Plaintiff and Defendant, the words, “being in advance” do not show that the agreement between Plaintiff and Lees was complete at the time of the agreement between Plaintiff and Defendant. It could very well be that Plaintiff made the agreement with Lees because Defendant agreed to guarantee Lees’ debt.

Plaintiff was entitled to keep the paper that the agreement was written on.  Since Plaintiff gave the paper to Defendant, that act provided the consideration necessary to hold Defendant to his agreement to guarantee Lees’ debts.

Discussion. The court entertained more than one theory that would hold Defendant to his agreement to guarantee Lees’ debt. First they raised the possibility that Plaintiff’s giving Lees credit was consideration for Defendant to guarantee Lees’ debt. They raised a second theory of consideration, giving up the written agreement provided the consideration necessary to hold Defendant to his agreement.