§ 1194. Continued. After the formation of a company, and before its shares had been fully offered to the public, H. & Co., by letter, agreed with an agent of the company to "underwrite a specified portion of the shares" at 15 per cent. discount," and "to pay the application money upon any balance of shares required to make up" the amount specified. In pursuance of this agreement, and without any further application by them, a certain smaller number of shares was allotted to them, which they declined to take. It was held, upon evidence as to the meaning of the term "underwrite " as applied to shares, that the agreement was not merely a guaranty, but was to be regarded as an application for such part of the shares specified as should not be applied for by the public, and authorized an allottment thereof to H. & Co.; that the word "discount "in the agreement was to be construed as "commission," so that the agreement was not one to issue shares at a discount; and that H. & Co. were liable as contributories in respect to the shares so allotted to them in the liquidation of the company.1

§ 1195. Continued. -The defendant, in an action for assessments, had signed, as indicated below, the following printed agreement: "We the undersigned, hereby authorize J. J. Imbrie, secretary of the Grangers' Market Company, to affix our names to the capital stock of the said company for the number of shares of said stock set opposite to our respective names.

agreement, were the This document was

Printed upon the same sheet, and above this articles of incorporation of the plaintiff company. held sufficient to authorize the secretary to subscribe for defendant for five shares of the capital stock of the corporation; but an execution of this power was not sufficiently demonstrated, so as to constitute the defendant a stockholder, by the secretary writing the name of defendant in a list headed "Stockholders," in the stock-book of the corporation, and opposite the name so entered, the words "Lena," "Umatilla Co., Oregon," "5," " $100." 2

66

1 Re Licensed Victuallers &c. A3soc., 42 Ch. Div. 1.

2 Grangers' Market Co., v. Vinson, 6 Oreg. 172. This decision is given out

of a desire not to overlook applicatory cases; but it is thought to be clearly unsound.

§ 1200. Theories as to the Consideration of the Contract. Where both parties to a contract are in esse at the time when the proposal is made, mutuality of promise constitutes a good consideration. But where the very proposal is a part of the thing required to be done in order to bring the other party to the contract into existence, a wide field is open for theorizing as to the nature of the consideration. The courts, in their search for the consideration for such a contract, have indulged in a variety of speculations more curious than useful. Nevertheless, it is proposed to follow them briefly.

§ 1201. Rights and Interest Acquired by the Subscriber. Some courts have found the consideration of the contract in the interest in the corporation thereby acquired by the subscriber,1in the right which he thereby acquires to participate in the pecuniary dividends; and it has been reasoned that where the agreement secures that to the subscribers, on the organization of the company, the objection of a want of consideration cannot be made with success. But the same must be equally true where

1 East Tennesee &c. R. Co. v. Gammon, 5 Sneed (Tenn.), 567; Kennebec &c. R. Co. v. Jarvis, 34 Me. 360.

2 Hamilton &c. Plank Road Co. 0. Rice, 7 Barb. (N. Y.) 157.

the subscription paper is silent on the subject, for all this is implied.

§ 1202. Obligation of the Company to Issue the Shares. It is merely another way of expressing the same idea to say that the obligation of the corporation to issue the shares to the subscriber that is, to admit him to a share in its management and in its profits, constitutes a good consideration for such a promise.2

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§ 1203. Franchises Granted by the Charter. vague expression of the same idea is found in another case, that the consideration of such a contract consists in the franchises granted by the charter,3-implying that those franchises inure to the benefit of the subscriber.

§ 1204. Failure of the Commissioners to Reject the Subscription. — Where the subscriptions are taken by commissioners, as was generally the case in the days of special charters," they were deemed public officers or agents for the purpose. They occupied a position somewhat analogous to that of a promoter under the English theory, except that they generally acted in the execution of a statutory power. Where they had power to reject the subscription, a species of mutuality was created by their acceptance of it; and this has been regarded as furnishing a sufficient consideration."

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§ 1205. Mutuality of Promise as among the Subscribers. Other courts have found in the act of the particular subscriber in subscribing with others, a mutuality of promise which obliges him to make good his promise to the corporation after it comes into its existence. Decisions are not wanting which either deny

• Connecticut &c. R. Co. v. Bailey, 24 Vt. 465; s. c. 58 Am. Dec. 181.

Belton Compress v. Saunders, 70 Tex. 699; 8. c. 19 Am. & Eng. Corp. Cas. 284; 6 S. W. Rep. 134; West v. Crawford, 80 Cal. 19; s. c. 21 Pac. Rep. 1123; 26 Am. & Eng. Corp. Cas. 85; Trustees v. Stetson, 5 Pick. (Mass.)

this principle or hold it to be inapplicable; but they seem, on examination, to be cases where no payee is named or designated, or where the one designated is either incapable of acting, or does not assume and is not bound to act. With reference to this question it has been observed: "So far as the question of consideration goes, the general rule is that mere promises of gifts, even to public uses, made without consideration, cannot be enforced as contracts. But it is also a rule in cases of simple contract that, if one person makes a promise to another, for the benefit of a third, the third may maintain an action upon it, though the consideration does not move from him. The mutual promises of the several subscribers in this case constitute a sufficient consideration, and, that the promise is to pay a third party, is not a tenable objection; and the promise is binding, though the corporation to which the payment is to be made is not then in esse, but to be formed thereafter."2 The governing principle has been brought out with great clearness by a decision of the House of Lords, where it is held that if a number of persons, meaning to join in a common undertaking, raise a common fund, eventually to be increased, but commencing by a deposit, and they put these deposits for a common object into the hands of a committee, with directions to them to do certain acts, it is not competent for any one or more of the subscribers, against the will of the others, to withdraw and say, "I think, or we think, you ought not to go any further." Any one subscriber who is not of that opinion has a right to say, "I gave my money upon the faith that we all embarked in one common undertaking, and till that has been done, which we agreed should be done, none have a right to withdraw and say you shall not go any further."*

506; Watkins v. Eames, 9 Cush. (Mass.) 537; George v. Harris, 4 N. H. 533; Congregational Society v. Perry, 6 N. H. 164; Troy Academy v. Nelson, 24 Vt. 189; Amherst Academy v. Cowls, 6 Pick. (Mass.) 427. Compare New York &c. Co. v. Martin, 13 Minn. 417.

1 Boutell v. Cowdin, 9 Mass. 254; Phillips Academy v. Davis, 11 Mass. 118; s. c. 6 Am. Dec. 162. Compare

Farmington Academy v. Allen, 14
Mass. 172.

2 New Lindell Hotel Co. v. Smith, 13 Mo. App. 7, 14; opinion by Bakewell, J.

Baird v. Ross, 2 Macqueen, 61. See also Burnes v. Pennell, 2 H. L. C. 497. Compare Kent v. Jackson, 14 Beav. 367; s. c. 2 De G. Mac. & G. 49. As to the right of scrip holders to have the money subscribed by them applied

"It follows from this," says Sir N. Lindley, "that no subscriber to a projected company can recover back his money on the ground that the consideration for his subscription has failed, until the formation of the company, upon the terms assented to by him,1 has been abandoned, or has become impracticable." "

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§ 1206. Labor or Money Expended on the Faith of the Promise. If a subscription contains a request, express or implied, for the expenditure of labor or money to carry out the object for which it is made, and such labor or money are expended, it will constitute a good consideration for the promise.3 Speaking with reference to this question it has been said: "At first view it would seem that, when a person signs his name to a promise to pay money or to convey property to an institution of learning, the public advantage and the fact that others have been induced by their reliance upon his co-operation to give their money and property to the same object, ought to be a sufficient consideration; but the courts, acting upon the principle that every promise, to be enforced, must have a good or valuable consideration to uphold it, have held that something more than the naked promise to give is necessary, and that the public advantage is not of itself a sufficient consideration, to support a promise. Yet, while the courts, rather than violate an old and

to the purposes for which they subscribed it, see Bagshaw v. The Eastern Rail. Co., 7 Hare, 114; s. c. 2 Mac. & G. 389.

1 Citing Johnson v. Goslett, 18 C. B. (N. s.) 569, and see also Wilson v. Church, 13 Ch. Div. 1, and s. c. under the name of National Bolivian Nav. Co. v. Wilson, 5 App. Cas. 176.

2 Lind. Comp. L., 5th ed., pp. 29, 30. 3 "A subscription, like any other promise or offer, requires a consideration to support it, either of profit to the party promising or of loss to the other party. If a subscription be acceeded to on the terms in which it is made, and labor or money is expended on the faith thereof, the party making the subscription is bound thereby." Galt v. Swain, 9 Gratt. (Va.) 633; s. c.

60 Am. Dec. 311. Where work is done or expense incurred under a promise, the liability is not disputed by any authority. Underwood v. Waldron, 12 Mich. 73, 89, opinion by Campbell, J. Labor performed and money spent to secure the location of a railroad depot are sufficient consideration to support a promise contained in a subscription to pay money for that object. Workman v. Campbell, 46 Mo. 305. See also Koch v. Lay, 38 Mo. 147; Farmington Academy v. Allen, 14 Mass. 172; s. c. 7 Am. Dec. 201; Cook v. McNaughton, 128 Ind. 410; s. c. 24 N. E. Rep. 361.

Citing Trustees v. Stewart, 1 N. Y. 681; Howard v. Williams, 2 Piek. (Mass.) 80.