$27.

52. A note given in settlement of a civil suit for damages against the maker's brother, is founded upon sufficient consideration Smith v. Richards, 29 Conn. 232 (1860).

53. When A. is indebted to B. and B. to C., and A. gives his note, in extinguishment of both debts, to C., there is sufficient consideration Outhwite v. Porter, 13 Mich. 533 (1865).

54. An agreement not to bring suit on the debt or on other liability of one person is a valid consideration for the commercial paper of another: Randolph v. Peck, 1 Hun 138 (1874); Abbott v. Fisher, 124 Mass. 414 (1878).

55. Subscriptions for stock in an incorporated company are a sufficient consideration for a note: Chetlain v. Republic Life Ins. Co. 86 Ill. 220 (1877).

56. Mere forbearance, without an agreement to forbear, is not a sufficient consideration for a note: Manter v. Churchill, 127 Mass. 31 (1879); Smith v. Bibber, 82 Me. 34 (1889).

No. 47, supra.

But see

57. The compromise of a claim, which the party putting it forward knew was unfounded and illegal, is not a sufficient consideration Ormsbee v. Horne, 54 Vt. 182 (1881).

Total failure of consideration.-Every party whose signature appears on a bill or note is presumed to have become a party to it for valuable consideration, but he may prove the contrary. If a total failure of consideration be proved, it is a good defence if the plaintiff and defendant are immediate parties, that is, if they contracted directly with each other, or even if they are remote parties, provided value has not been given for the bill. A total failure of consideration has the same effect upon the liability of the parties as an original want of consideration.

ILLUSTRATIONS.

1. A. being seized in fee of lands, made jointly with B. a lease to C. taking notes from C. for the rent. The day after the

execution of the lease A. died intestate, and then B. died and his § 27. executors sued C. on the notes. Held, that they could not recover, the consideration having wholly failed: Merwin v. Gates, U. C. E. T. 7 Wm. 4 (1837).

2. When a stockholder in a joint stock company had given notes for his stock, which he afterwards forfeited by not complying with the conditions of the association, it was held, that there was not a failure of consideration, and it was no defence to an action on the notes: Glassford v. McFaul, U. C. T. T. 3 & 4 Vict. (1841).

3. Where a note was given for logs on condition that no claim should be made for the logs, and they were revendicated, there was a total failure of consideration and the note became null: Gamsby v. Chapman, 18 L. C. R. 239 (1862).

4. Where the discharge of an insolvent was annulled by the Court, the indorsers remained liable on the composition notes, and there was not a total failure of consideration: Marchand v. Wilkes, 3 L. N. 318 (1880).

5. A. appointed B. his executor and gave him a demand note to compensate him. B. died first and his executors sued on the note. It was held that there was a total failure of consideration and the action failed: Solly v. Hinde, 6 C. & P. 316 (1834). See Wells v. Hopkins, 5 M. & W. 7 (1839).

6. A. draws a bill at three months on B. in favour of C., to be paid for in seven days. B., who is A.'s agent, accepts on his account. C. does not pay A. He cannot sue B.: Astley v. Johnson, 5 H. & N. 137 (1860).

7. When bills are given for a cargo and owing to the inability of the acceptor to meet the bills the cargo is sold by the drawer at a loss, the latter should sue for the difference in price, and not sue upon the bills which fail for want of consideration: Bevan v. Stevenson, 1 T. L. R. 587 (1885).

8. In a suit upon a renewal note total failure of consideration of the original note is available as a defence: Hooker v. Hubbard, 102 Mass. 239 (1869).

M'C.B.E.A.- -12

§ 27.

9. Total want of title constitutes a total failure of consideration: Curtis v. Clark, 183 Mass. 509 (1882).

Partial failure of consideration.-Where the consideration for a note has only partially failed, the question as to how far it may be set up as a defence, is largely a question of pleading. Formerly it would not be allowed in England or the provinces where the old English rules of pleading were followed. Now in England and Ontario it may be set up as a defence pro tanto as between the original parties, or between those who are in the same position, provided the failure be for a definite sum clearly ascertained.

Failure of consideration should not be confounded with inadequacy of consideration.

ILLUSTRATIONS.

1. Where a note was given on an exchange of horses, the maker, when sued on the note two years later, was not allowed to set up as a defence that the horse he received was not sound as warranted Hall v. Coleman, 3 U. C. O. S. 39 (1834).

2. In the following cases a partial failure of consideration was held to be no defence in actions on bills and notes between immediate parties: Dalton v. Lake, 4 U. C. O. S. 15 (1834); Dixon v. Paul, 4 U. C. O. S. 327 (1836); Kellogg v. Hyatt, 1 U. C. Q. B. 445 (1840); Matthewson v. Carman, 1 U. C. Q. B. 266 (1843); Brown v. Garrett, 5 U. C. Q. B. 243 (1848); Thompson v. Farr, 6 U. C. Q. B. 387 (1849); Orser v. Mounteny, 9 U. C. Q. B. 382 (1852); Spelman v. Robidoux, 1 R. C. 241 (1871); Brundige v. Delaney, 2 N. S. D. 62 (1870); Hill v. McLeod, 17 N. S. (5 R. & G.) 280 (1884); McIntosh v. McLeod, 18 N. S. (6 R. & G.) 134, 6 C. L. T. 449 (1885); Whitman v. Parker, 18 N. S. (6 R. & G.) 155, 6 C. L. T. 448 (1885); Clarke v. Ash, 5 N. B. (3 Kerr) 211 (1846); Glennie v. Imri, 3 Y. & C. 436 (1839); Warwick v. Nairn, 10 Ex. 762 (1855).

3. In the following cases it was held, that the partial failure § 27. of consideration was not sufficiently definite or clearly ascertained to be allowed as a defence in part: Coulter v. Lee, 5 U. C. C. P. 201 (1856); Henderson v. Cotter, 15 U. C. Q. B. 345 (1858); Georgian Bay L. Co. v. Thompson, 35 U. C. Q. B. 64 (1874); Kilroy v. Simkins, 26 U. C. C. P. 281 (1876); Fletcher v. Noble, 8 O. R. 122 (1885); O'Donohue v. Swain, 4 Man. L. R. 476 (1887); Day v. Nix, 9 Moore 159 (1824). In a number of the cases in this and No. 2, supra, the decision is based largely upon the technical rules of pleading that then prevailed. Under the modern Judicature Acts, it might in most cases be set up by way of counterclaim.

4. In the following cases a partial failure of consideration, where the amount was definitely ascertained, was allowed as a defence pro tanto between immediate parties: O'Brien v. Ficht, 18 U. C. Q. B. 241 (1859); Barber v. Morton, 7 Ont. A. R. 114 (1881); Star Kidney Pad Co. v. Greenwood, 5 O. R. 28 (1884); Lalonde v. Rolland, 10 L. C. J. 321 (1864); Fisher v. Archibald, 2 N. S. D. 298 (1871); Agra Bank v. Leighton, L. R. 2 Ex. 56 (1866). Also between remote parties, where the plaintiff became the holder only after maturity: Rennie v. Jarvis, 6 U. C. Q. B. 329 (1850); McGregor v. Bishop, 14 O. R. 7 (1887).

value.

2. Where value has at any time been given for Holder for a bill, the holder is deemed to be a holder for value as regards the acceptor and all parties to the bill who became parties prior to such time: Imp. Act,. s. 27 (2).

The holder of a bill is the payee or indorsee of a bill payable or endorsed to his order, who is in possession of it, or the person who is in possession of a bill payable to bearer: section 2. The holder for value may not be a holder in due course section 29; Raphael v. Bank of England, 17 C.B. at p. 174 (1855). He may have taken the bill or note after maturity and dishonor. He need not have given

§ 27. value himself, it is sufficient that some previous holder has done so, in order to enable him to recover on the bill from the prior parties: Milnes v. Dawson, 5 Ex. 948 (1850). For the rights of a holder, see section 38. Until value has been given for a bill it cannot be enforced against any of the parties even though it may have passed through the hands of a number of holders: Perry v. Rodden, 7 R. L. 477 (1873).

As to lien.

ILLUSTRATIONS.

1. An indorsee without value is entitled to recover on a bill or note if any intermediate party is a holder for value: Wood v. Ross, 8 U. C. C. P. 299 (1859); Hunter v. Wilson, 4 Ex. 489 (1849); Oulds v. Harrison, 10 Ex. 579 (1854).

2. A bill is drawn payable to the order of the drawer, and the drawee accepts for the accommodation of the drawer, but subsequently receives value from him. The drawer thereby becomes a holder for value as against the acceptor: Burdon v. Benton, 9 Q. B. 843 (1847).

3. A. drew a bill on B. to the order of C., and delivered it to D., who received value for the bill from C., but who did not pay A. C. is a holder for value and can recover on the bill from A.: Munroe v. Bordier, 8 C. B. 862 (1849).

3. Where the holder of a bill has a lien on it, arising either from contract or by implication of law, he is deemed to be a holder for value to the extent of the sum for which he has a lien. Imp. Act, s. 27 (3).

A lien is the right to retain possession of a thing belonging to another until a claim be satisfied. Where bills and notes are deposited as collateral security for a debt, the creditor acquires a lien upon them by contract: ex parte Twogood, 19 Ves. 229 (1812); ex parte Schofield,