Birkmyr v. Darnell

Definition of Birkmyr V. Darnell

((1704), 1 Salkeld, 27). The defendant promised the plaintiff that in consideration of the plaintiff lending a horse to one, English, he, the defendant, would undertake that English would re-deliver the horse. It was held this was a guarantee within the Statute of Frauds, being a promise to answer for the “debt, default or miscarriage of another person” and therefore required writing. The promise must be ” collateral,” that is, such other person must himself be and remain under a liability to perform the matter in question. [1]

Suretyship and Guarantee in Europe

John Delatre Falconbridge (1920) wrote:

It is elementary that in a contract of guarantee there must always be three parties in contemplation: a principal debtor (whose liability may be actual or prospective), a creditor, and a third party who in consideration of some act or promise or forbearance on the part of the creditor promises to discharge the debtor’s liability if the debtor fails to do so. The leading case as to the necessity for the liability of a third party, i. e., the existence of a principal debtor, is Birkmyr v. Darnell, (17O4), 4 reported as follows:

“Declaration, That in consideration the plaintiff would deliver his gelding to A, the defendant promised that A should redeliver him safe; and evidence was, that the defendant undertook that A should re-deliver him safe; and this was held a collateral undertaking for another: For where the undertaker comes in aid only to procure a credit to the party, in that case there is a remedy against both, and both are answerable according to their distinct engagements; but where the whole credit is given to the undertaker, so that the other party is but as his servant, and there is no remedy against him, this is not a collateral undertaking; but it is otherwise in the principal case, for the plaintiff may maintain detinue upon the bailment, against the original hirer, as well as assumpsit upon the promise against this defendant.”

It appears from the fuller report of the case in Lord Raymond’s Reports [2] that upon the argument, Holt, C. J. with Powell and Gould, J. J. seemed to be of the opinion, against Powys, J., that the case was not within the statute, because English (to whom the horse was delivered upon the defendant’s promise that it should be re-delivered) was not liable on the contract, for if any action could be maintained against English, it must be for a subsequent wrong in detaining the horse or actually converting it to his own use, and Powell, J., said “that that rule, of what things shall be within the statute, is not confined to those cases only, where there is no remedy at all against the other, but where there is not any remedy against him on the same contract.”

“The last day of the term the Chief Justice delivered the opinion of the court. He said, that the question had been proposed at a meeting of judges, and that there had been great variety of opinions between them, because the horse was lent wholly upon the credit of the defendant; but that the judges of this court were all of opinion, that the case was within the statute. The objection that was made was, that if English did not re-deliver the horse, he was not chargeable in an action upon the promise, but in trover or detinue, which are founded upon the tort, and are for a matter subsequent to the agreement. But I answered, that English may be charged on the bailment in detinue on the original delivery, and a detinue is the adequate remedy, and upon the delivery English is liable in detinue, and consequently this promise by the defendant is collateral, and is within the reason, and the very words of the statute; and is as much so, as if, where a man was indebted, J. S., in consideration that the debtee would forbear the man, should promise to pay him the debt, such a promise is void [3] unless it be in writing.”

De Colyar properly refers to the case of Birkmyr v. Darnell as raising a doubt as to the applicability of the statute to a promise to be responsible for the future wrongful act or tort of a third person, [4] but it is not easy to follow the reasoning of his statement that “Any doubt that may have been caused by these observations of Justice Powell, or by the decision in Read v. Nash, [5] was certainly entirely removed by the case of Kirkham v. Marter.” [6] In neither of the two last mentioned cases was a promise given in respect of the future liability in tort of a third person. (…)

In Birkmyr v. Darnell the liability which was the subject of the promise was merely contemplated when the promise was made, but the court found it possible to regard it as a liability arising out of contract. It is interesting to note, however, in connection with Birkmyr v. Darnell, that whether or not the action of detinue is technically an action founded on contract, it has been held in modern times that where a person is sued in detinue for holding goods to which another person is entitled, the real cause of action in fact is a wrongful act, and not a breach of contract, because it may arise when there is no contract, and the remedy sought is not a remedy which arises upon a breach of contract. (Bryant v. Herbert, (1878) 3 C. P. D. 389, C. A., reversing 3 C. P. D. 189). The question what was the nature of the action of detinue had been an open question for several centuries. See Pollock & Maitland, Hist. Eng. Law, 2nd ed., vol. 2, p. I8o. Anson (Contract, I4th ed. 1917, p. 62, 3rd Am. ed. 1919, p. 74) adds: “Detinue is in fact founded in bailment, but the contract of bailment imposes general common law duties the breach of which may be treated, and should be treated, as a wrong. The judgment of Collins, L. J., in Turner v. Stallibras (1898) I Q. B. 59, states this clearly.” (…)

In the same sense in Birkmyr v. Darnell it had been already pointed out that “where the whole credit is given to the undertaker, so that the other party is but as his servant, and there is no remedy against him, this is not a collateral undertaking,” and the report in Salkeld closes with the following illustration: “Et per cur. If two come to a shop, and one buys, and the other, to gain him credit, promises the seller, If he does not pay you, I will, this is a collateral undertaking, and void without writing, by the Statute of Frauds. But if he says, let him have the goods, I will be your paymaster, or I will see you paid, this is an undertaking as for himself, and he shall be intended to be the very buyer, and the other to act but as his servant.”

From a comparison of the last illustration given in Birkmyr v. Darnell with the words of the undertaking in Matson v. Wharam, it results that the form of words used is only prima facie a test of the nature of the promise. (…)

If the promise sued on embodies the only liability arising out of the transaction in respect of which the promise is made, the promisor’s liability is necessarily original, and the statute does not apply. Street (in Foundations of Legal liability (19o6) vol. 2, pp. I85-6) refers to the illustrations given in Birkmyr v. Darnell, and adds, “This rule has been reduced to greater certainty, though possibly not without some violence to principle, by holding that the credit must be extended solely to the promisor in order to keep the statute from applying. Therefore, if any credit at all is given to the purchaser, the promise must be in writing.37 In cases of this kind, where one party is said to come in aid to procure credit for another, it is possible for the tradesman to give credit to them both jointly. If this be done, both are liable as debtors and no writing is necessary.” [7]

Contract of Indemnity

In Birkmyr V Darnell (1704 91 ER 27 1 Salk, 27 & 28) it was laid down by the Court of King’s Bench that the following were distinguished as contracts of indemnity and contracts of guarantee. When A person says to a shopkeeper,“give your goods to a certain person and I will pay you,” it is a contract of indemnity, and when a person goes with another to a shop and tell the shop keeper: “If my friend does not pay for the goods you are giving him I will pay for it,” it becomes a contract of guarantee.

A contract of indemnity may be express, or implied.

Justice M.C. Chagla said that ‘Sees. 124 and 125 of the Contract Act are not exhaustive of the law of indemnity and the Courts here would apply the same equitable principles that the Courts in England do.” [Ganjanan Moreshwar v. Moreshwar Madan]. The English Law has offered a comprehensive concept: “A promise to save another harmless from loss caused as a result of a transaction entered into at the instance of the promisor.”

Function and Contract of Guarantee

The function of a contract of guarantee is to enable a person to get a loan, or goods on credit, or an employment. Some person comes forward and tells the lender, or the supplier or the employer that he (the person in need) may be trusted and in case of any default,”I undertake the responsibility”. For example in the old case of Birkmyr v Darnell the court said: “If two come to a shop one buys and the other to give him credit, promises the seller, ‘If he does not pay you, I will’.”

This type of collateral undertaking to be liable for the default of another is called a “Contract of guarantee”. In English law a guarantee is defined as “a promise to answer for the debt, default or miscarriage of another .” It is collateral engagement to be liable for the debt of another in case of his default. “Guarantee are usually taken to provide a second pocket to pay if the first should be empty.”

According to the Encyclopedia Britannica (Volume 10, Part 2):

“A contract of guarantee must be distinguished from a contract of indemnity. If A says to B, who is about to sell goods to C, “Let C have the goods; if he does not pay you, I will,” this is an offer of a guarantee on the part of A. But if A says to B, “Let C have the goods ; I will see you paid,” A’s promise to pay is an original liability to indemnify B against any loss which he may incur in letting C have the goods, and not a promise to answer for C’s debt. (Birkmyr v. Darnell, 1704, I Sm. L.C. 12th ed. p. 335) So “if a man says to another, `If you will at my re quest put your name to a bill of exchange, I will save you harm less’, that is a contract of indemnity. It is not a responsibility for the debt of another. It amounts to a contract by one that, if the other will put himself in a certain situation, the first will indemnify him against the consequences” (per Pollock, C.B. in Batson v. King, 18J9, 4 H. & N. at p. 740). The distinction is important, for a contract of guarantee is not enforceable unless it is evidenced by some note or memorandum in writing, whereas no written note or memorandum of the agreement is required in the case of a contract of indemnity.

The common law requisites of a contract of guarantee in no way differ from those essential to the formation of any other contract. That is to say, they comprise the mutual consent of the parties, competency to contract, and, unless the guarantee be under seal, valuable consideration. The consideration may consist of, some advantage given to, or conferred on, the principal debtor by the creditor at the surety’s request, e.g., an advance of money to the principal debtor. Or it may take the form of a for bearance on the part of the creditor at the surety’s request to sue the principal debtor. In some guarantees the consideration is given once for all, as where a third person guarantees that, in consideration of a lessor granting a lease, he will be answerable for the lessee paying the ent and performing the covenants; in other cases it is supplied from time to time, as where a guarantee is given to secure the balance of a running account at a banker’s, or a balance of a running account for goods supplied. (See the judgment of Lush, L. J. in Lloyd’s v. Harper, 1881, 16 Ch. D. at pp. 32o).

The statutory requisites of a contract of guarantee are prescribed by s. 4 of the Statute of Frauds 1689 (29 Car. II. c. 3), which provides that “no action shall be brought whereby to charge the defendant upon any special promise to answer for the debt, default, or miscarriage of another person . . . unless the agreement upon which such action shall be brought, or some memo randum or note thereof, shall be in writing and signed by the party to be charged therewith, or by some other person there unto lawfully authorized.” A promise to give a guarantee is as much within the statute as the guarantee itself. But a promise to procure another person to sign a guarantee for the debt of another is not within the statute, though the guarantee would be. The statute does not invalidate a verbal contract of guarantee, but only renders it unenforceable by action. It may, therefore, be available in support of a defence to an action, and money paid under it cannot be recovered.”

Resources

Notes

  1. Definition of Birkmyr V. Darnell is from A Concise Law Dictionary (1927).
  2. Lord Raym. xo85, Ames’ Cases on Suretyship, 12, sub noam. Birkmyr v. Darnall.
  3. Strictly speaking, “void” should be “unenforceable.” The mistake is not uncommon in the older cases.
  4. Because the court was at such pains to find a liability in contract.
  5. (1751), 1 Wils. 3o5, Ames’ Cases on Suretyship, 25.
  6. (I8ig), 2 B. & Ald. 613, Ames’ Cases on Suretyship, 23.
  7. 19 (x874) L. R. 7 H. L. 17, Ames’ Cases on Suretyship 14, affirming the decision of the Court of Exchequer Chamber, L. R. 7 Q. B. 196, which had reversed the judgment of the Court of Queen’s Bench, L. R. 5 Q. B. 613 (Mountstephen v. Lakeman).

See Also

  • Indemnity
  • Guarantee
  • Contract law
  • Guarantee Agreements
  • Unjust Enrichment
  • Contract

Further Reading

  • The Statute of Frauds Section Four, James Williams (2013)
  • A General Abridgement of Law and Equity: Alphabetically Digested, Charles Viner (1791)
  • Unjust Enrichment and Contract, Tariq Baloch – 2009 – ‎Law
  • A Selection Of Cases on The English Law Of Contract

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