Strong v. Sheffield

New York Court of Appeals · 1895 · Contracts

Contractsconsiderationforbearancepromissory noteindorsementsuretyshipantecedent debtdemand note

Facts

The plaintiff sued on a demand note made by the defendant's husband and indorsed by the defendant at her husband's request. The note was delivered to the plaintiff as security for the husband's antecedent, already overdue debt. The only claimed consideration for the wife's indorsement was the plaintiff's alleged agreement to forbear collection, together with his actual forbearance for about two years. The plaintiff testified that he agreed only that he would keep the note until he wanted his money and would then make demand for it.

Issue

Whether the defendant wife's indorsement of her husband's demand note, given as security for an overdue debt, was supported by consideration where the creditor promised only to forbear collection until such time as he chose to demand payment.

Rule

A third person's promise to pay or secure another's debt may be supported by consideration if the creditor agrees to forbear collection for a definite time or for a reasonable time, or if the creditor is requested to forbear and in reliance actually forbears for a reasonable time. But where the parties make mutual promises and the creditor's promise is only to forbear until he elects to demand payment, there is no consideration, because the creditor remains free to sue immediately. Consideration is tested by the agreement itself, not by subsequent forbearance in fact.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Columbus, Nina Mercer owed Prairie Ledger Supply $18,000 on an overdue account. Her brother, Owen Mercer, signed a written guaranty after Prairie Ledger promised in writing that it would not sue Nina for 90 days.

If Prairie Ledger sues Owen on the guaranty after Nina defaults, is Owen's promise supported by consideration?

Explanation. A creditor's agreement to forbear collection of a presently due debt for a definite time is sufficient consideration for a third person's promise to pay or secure that debt. The fact that the debt was antecedent or overdue does not defeat consideration if the creditor bound itself to delay collection for a fixed period. Actual delay beyond the promised period is unnecessary because the consideration is supplied by the binding agreement itself. (Derived from Strong v. Sheffield (1895).)