Story Case

The Buckeye Laundry Company had an agent in the town of Jefferson who transacted a large amount of business for them. Several hundred dollars were often in his possession each month and his wages were deducted from this monthly account.

In May, 1914, the agent, William Dutcher, sent in a check to the laundry for $175.85 "in full payment." The laundry refused to receive the check in full payment, claiming the balance due was $201. There was some correspondence between the laundry and Dutcher and, finally, the parties agreed to compromise the controversy at the sum of $190. After this compromise had been agreed upon, Dutcher found receipts which would have proven that the amount due was really $175.85. Whereupon, he refused to pay the laundry $190.

The laundry sued him for $190. He defended on the grounds that the real balance due was $175.85. Is this defense valid?

Ruling Court Case. Russell Vs. Cook, Volume 3 Hill Reports (New York), Page 504

Cook was the owner of a canal boat, and with it was engaged in carrying freight for hire between certain points. Palmer had shipped some barley in this boat from his store in Onondago County to a man living in Albany. While making this trip, the boat of Cook collided with another boat, and went down, losing all its cargo. Since it was a doubtful question whether the collision was caused by negligence of Cook, or by the negligence of the other boat, a controversy occurred between Cook and Palmer as to whether Cook should stand the whole loss. But it was finally settled that Palmer would agree to release half his claim, if Cook would agree to pay the other half. In accordance with this agreement, Cook gave a note to Palmer, or order, in the sum of $6,834. The note fell due on July 1,1837, but was not paid at that time. Palmer then transferred the note to Russell, who brought this action on it.

The defense of Cook was that the note was not binding, because it was not supported by a consideration.

Decision

Between Cook and Palmer there was a bona fide controversy as to whether Cook was liable for the whole loss. Palmer, instead of using his legal right to sue for it, agreed to release his claim for the full loss in consideration of a promise on the part of Cook to pay half. The release of his right to sue for the whole claim was a thing which he was under no legal duty to do. Thus, it was a valuable consideration, sufficient to support the promise of Cook to pay half the claim. Therefore, Palmer, and his assignee, Russell, are entitled to recover the amount promised.

Therefore judgment was given for Russell, the plaintiff in this action.

Ruling Law. Story Case Answer

It is a legal right of every person to sue when he believes that he has a claim against another, even though it may seem that his belief in the claim is unreasonable or ungrounded. If, therefore, the person against whom he believes he has this right agrees to pay a certain sum, even though it may be more than the sum actually due as shown later, in consideration that the claimant will forbear to sue, his agreement or promise not to insist upon this right will constitute a good consideration for the promise of the other to pay a higher sum than is actually due. This is called a compromise; the compromise of one not to sue on the doubtful claim is a consideration for the promise of the other to pay a higher sum even than is actually due. The claimant must act in good faith; and he must in honor believe that he has such a claim to the extent that he demands, or his promise to forbear is not a consideration. In the Story Case, the promise of the laundry company not to sue for $201 was a good consideration for the promise of Dutcher to pay $190, even though it was thereafter shown that the sum actually due was only $175.85. The laundry company may recover the $190.