No. 1119.

Book 2, part 2, tit. 5, chap. 2, sec. 3, § 2, art. 2.

No. 1121.

1119. It may be stated as a general rule, that whatever be the form of the contract, if the intention of the parties were to make a usurious agreement, the contract will be tainted by such illegal intention. (a) But if in appearance the contract appear to be usurious, when in fact it was not intended to make it so, and such appearance was occasioned by a mistake as to a fact, it will not be usurious; as where a greater amount than that allowed by law, was charged by a mere miscalculation.(b) An error as to a matter of law, however, will not excuse.(c)

1120. When a bond or note, not made for the purpose of being discounted at a greater rate than legal interest, is offered for sale, it may be purchased at any price the parties to it may agree upon, when sold by a third party; for, in that case, the maker will not be required to pay more than he would have been bound to have paid, if it had remained in the hands of the indorser who sold it; and, again, the contract was valid when it was made, and it will not be tainted by any future usurious bargain.(d)

But when the original contract is usurious, it will remain so, although there may have been a substitution of a new contract clear of the taint.(e)

An agreement to forbear to sue, where a debt is due, upon condition that the debtor will pay usurious interest, is sufficient, and it will have the same effect as if a loan had been made. (ƒ)

Art. 2.—Of the agreement to return the principal at all events. 1121. There must be a contract for the return of

(a) Childers v. Deane, 4 Rand. 406; Smith v. Beach, 3 Day, 268. (b) Maine Bank v. Butts, 9 Mass. 49; Bank of Utica v. Smalley, 2 Cowen, 770; N. Y. Fire Ins. Co. v. Ely, 2 Cowen, 678.

(c) 9 Mass. 49.

(d) Wycoff v. Longhead, 2 Dall. 92; Musgrove v. Gibbs, 1 Dall. 216; Loyd v. Keach, 2 Conn. 175; King v. Johnson, 3 McCord, 365; Churchill v. Sutor, 4 Mass. 156: Knights v Putnam, 3 Pick. 184; 9 Pet. 103. (e) Chamberlain v. McClurg, 8 W. & S. 31: Bridge v. Hubbard, 15 Mass. 96. But see Kilbourn v. Bradley, 3 Day, 356.

(f) Carter v. Brand, Cam. & Nor. 28.

No. 1122.

Book 2, part 2, tit. 5, chap. 2, sec. 3, § 2, art. 3.

No. 1122.

the money at all events; for if the return of the principal with interest, or of the principal only, depend upon a contingency, there will be no usury; but if the contingency extend only to interest, and the principal be beyond the reach of hazard, the lender will be guilty of usury, if he receive interest beyond the amount allowed by law. In the contracts of insurance and of bottomry, the principal is put to hazard, and the parties are not therefore amenable to the laws of usury.

Art. 3.-Of the agreement to pay usury.

1122. To constitute usury there must be an agreement, express or implied, to pay unlawful interest, for when one of the parties intends and agrees to pay it, and the other does not agree to receive it, and in this respect there is a misunderstanding, the contract is not usurious. (a)

Whenever a certain gain is reserved to the lender by the agreement, besides the interest, the contract is usurious. (b) But this gain must be such as arises solely from the loan, for there are numerous instances where additional compensation has been allowed besides the lawful interest, and yet the contract has been holden not to be usurious; for example, a reasonable commission beyond legal interest, for extra incidental charges, as for agency in remitting bills for acceptance and payment.(c) But it must clearly appear that the additional compensation is not taken for interest.(d)

In order to constitute the offence of usury, there must be a loan of money or forbearance to demand the payment of money, and an agreement that for such loan or forbearance, the borrower in the one instance, and the debtor in the other, will pay usurious interest.

(a) Marsh v. Martindale, 3 Bos. & Pull. 154.

(b) Philip v. Kirkpatrick, Add. 126; Delano v. Rood, 1 Gilman, 690. (c) Huling v. Drexell, 7 Watts, 126, 129: Gray v. Brackenridge, 2 Penns. 75; Hutchinson v. Hosmar, 2 Conn. 341; De Forest v. Strong, 8 Conn. 513.

(d) Large v. Passmore, 5 S. & R. 135; Steele v. Whipple, 21 Wend. 103.

No. 1123.

Book 2, part 2, tit. 5, chap. 2, sec. 3, § 2, art. 4, 5.

No. 1124.

When a man is indebted to another in a sum of money, payable at a future time, and he is desirous to pay his debt by anticipation, it has been questioned whether he could in foro conscientiæ, deduct a greater sum from his debt than the legal interest for the time the term has to run,(a) but there can be no question that he may, both at law and in equity, take a greater discount than simple interest. (b)

The agreement to pay the usurious interest must be positive, for if it be merely conditional and relievable in equity, it will not make the contract usurious, as an agreement to pay a larger sum at a future day, upon the non-payment of the sum agreed upon at a prior day.(c)

Art. 4.-Of the intention to violate the law.

1123. The whole of the three constituent principles of usury must concur in the contract, that is, there must be a loan of money, or forbearance to demand money due; an agreement that the principal shall be secured at all events, and an agreement to pay usury, or the payment of it. But although these may all concur, yet the usury is not complete when there was no intention to commit it, and unless they intended to violate the usury laws, the contract will not be usurious.(d)

Art. 5.-Of the effect of a usurious contract.

1124. In some states the simple making of a usurious contract renders it void, and subjects the offending parties to the penalty imposed by the statute; in some others the contract is not void, but it cannot be enforced beyond the recovery of the principal sum lent, and the lawful interest on it; and until the money

(a) Poth. De l'Usure, n. 128, 129.

(b) Barclay v. Walmsley, 4 East, 55: S. C. 5 Esp. 11.

(c) Groves v. Graves, 1 Wash. 1; Winslow v. Dawson, 1 Wash. 119. (d) Chiders v. Dean, 4 Rand. 406; Smith v. Roach, 3 Day, 268; Duvall v. Farmers' Bank, 7 Gill & John. 44.

No. 1125.

Book 2, part 2, tit. 5, chap. 2, sec. 4.

No. 1126.

has been paid back, with the unlawful interest, the borrower has no remedy against the lender. In some states the remedy is by an action qui tam to recover the penalty, and in others the proceedings may be by indictment.

SECTION 4.-OF THE QUASI CONTRACT CALLED PROMUTUUM.

1125. Before closing the examination of that class of bailments which are wholly for the benefit of the bailee, it will be proper to take a short view of the contract, which in the civil law is called promutuum, so called because it has much resemblance to a mutuum.

Promutuum is a quasi contract, by which he who receives a certain sum of money, or a certain quantity of things fungible, which have been paid to him by mistake, contracts toward him who so paid by mistake, the obligation to return him as much.

1126. The principal resemblance between promutuum and mutuum are the following:

1. In both there must be a delivery of a certain sum of money, or of a certain quantity of things fungible.

2. The property in the thing must be transferred to the bailee, or the bailee must have consumed it, in order to make the contract like mutuum.

3. There is a perfect resemblance in the obligations which arise from both contracts, the bailee must return as much as he has received.

It is in general by a wrongful payment that the quasi contract of promutuum arises. And, in this, the contracts differ essentially from each other. Mutuum is a contract to which both parties must have assented and intended to fulfil, when the engagement was formed; a promutuum, on the contrary, was not intended by either of the parties to form any contract whatever, for when Peter pays Paul the amount of a debt, they both intend, one to pay and the other to

No. 1127.

Book 2, part 2, tit. 5, chap. 3.

No. 1129.

receive, only what is justly due; and do not intend to enter into any obligations.

1127. In the common law a rule has been adopted which, although it seems to be at variance with the facts, appears to answer an excellent purpose. It is true, that though generally speaking, there is no contract between the parties when one pays a debt to another by mistake, that the latter will return to the former any part of what is so paid, yet the common law presumes that no one desires to enrich himself at the expense of another, and therefore raises an implied assumpsit by which the receiver is presumed to have assumed to return such surplus, and in an action of assumpsit for money had and received, such money, paid by mistake, may be recovered. (a)

1128. Here terminate our labors on the law of bailment. It must have been perceived that the common law has drawn from that inexhaustible source of sound legal learning, the civil law, all the principal rules which govern the subject, and some may have been introduced which are not to be supported by American or English decisions, and yet, if the common law deserves to be called a science, it could scarcely repudiate them.

CHAPTER III.-OF BILLS OF EXCHANGE.

1129. This is one of the most important instruments used in commerce, both on account of the amount of property which passes by it, and with regard to its general convenience in transferring property from one place to another. A bill of exchange is defined to be an open letter of request from, and order by one or more persons on one or more others, to pay to some third person or persons, a sum of money

(a) Bogart v. Nevins, 6 S. & R. 369; Irvine v. Hanlon, 10 S. & R. 219; Morris v. Tarin, 1 Dall. 148; Wright v. Butler, 6 Wend. 290; Eddy v. Smith, 13 Wend. 488; Ogden v. Saunders, 12 Wheat. 341. Vide ante, n. 907, note.