THE AMERICAN LAW REGISTER. AUGUST 1883. SPECIFIC ENFORCEMENT OF CONTRACTS TO It will be attempted in this essay to indicate with some precision and particularity, those contracts for the transfer of governmental or corporate stocks which are, and those which are not, specifically enforceable. First, of several pre-requisites to their specific enforce ment. Existence of Contract.-Consideration.—Mutuality.—There must be a valid contract. This proposition needs only to be stated to secure assent. It was practically applied in Oriental Inland Steam Co. (Limited) v. Briggs, 2 John. & Hem. 625, wherein a contract to accept shares was thought to lack mutuality and a demurrer was allowed to a bill for its specific enforcement. Briggs undertook to accept the shares, if allotted; to pay calls, and to sign the articles. He also paid the deposit. Thereupon the directors "duly allotted to him 150 of the new shares." He was informed of this by the secretary, who, however, added a condition to the allotment, by which the receipts were to be exchanged for share certificates and the articles were to be signed, in default whereof the shares were to be forfeited to the company. But the court doubted the power of the company so to forfeit the shares, and questioned whether the secretary's letter of allotment had not imposed a new condition which formed no part of the defendant's (Briggs's) offer. The contract was, therefore, held to be of doubtful validity, and specific enforcement refused. VOL. XXXI.-62 (489) Again, in Cheale v. Kenward, 3 DeG. & J. 27, it was objected that there was no valid contract by reason of a lack of consideration as well as of mutuality. Cheale owned 10 shares in a railway upon which he however had not paid anything. He sought specific performance of an agreement by Kenward to take these shares from him and relieve him from liability for them. As to the consideration given by plaintiff, Lord Chancellor CHELMSFORD: "It is said that these shares were worthless, as nothing had been paid, and the whole of the liabilities were still existing, but the shares might ultimately turn out to be worth more than the amount due upon them, and at all events the possibility of their being valuable would be sufficient to constitute an agreement to transfer them a good consideration," and the giving of something of uncertain value, was held to be a good consideration. As to the consideration given by defendant, counsel said it must be something dehors the contract, and not a mere liability flowing out of the agreement itself; to which the Lord Chancellor replied: "The consideration on the defendant's part is not the liability arising out of the transfer, but the agreement to undertake the liability on having the shares. *** The transfer imposes the liabilities impliedly. Then will not the agreement to take upon himself a legal obligation be a good consideration for defendant's promise? The defendant desired to have the shares; he was willing to pay the amount of the liabilities, from which he agreed to exonerate the plaintiff; and that appears to me a sufficient consideration." It was therefore decided that there was sufficient both of consideration and mutuality, and specific performance was decreed. See, also, Strasburg Railroad Co. v. Echternacht, 21 Penn. St. 221. Independence. The contract must be independent, or if dependent upon another contract, the latter must have been sufficiently performed to make the execution of the former possible. Burton v. Shotwell, 13 Bush 272, presents this point. In that case a contract whereby B. agreed to exchange real estate with S. for stock in a corporation which S. and B. and five others had agreed to organize, was dependent upon the execution of the contract to organize the corporation. It was decided that if the corporation was not organized, without the fault of S. or B. a specific execution of the contract between them could not be enforced nor would either be liable in damages to the other for non-com pliance. But as S. was held to have defeated the organization of the corporation by his own conduct to have put himself in a position in which he could not comply with his contract with B. by transferring the stock, a specific execution was enforced against him to the extent that he was compelled to accept a compliance on the part of B. and to be liable to him for the value of the stock, which was ascertained by the court and judgment directed therefor. But where the agreement to transfer the shares forms part of a different contract which is specifically enforceable-e. g. a contract to convey real estate-the court will decree a delivery of the stock. This is upon the principle that having acquired jurisdiction for the purpose of specifically enforcing the contract as to the realty, equity will give complete relief by compelling the transfer of the shares: Leach v. Fobes, 11 Gray 506; Bissell v. F. § M. Bank, 5 McLean 505. Fraud.-The contract must not be unconscionable or fraudulent. Thus a court of equity will not decree the delivery of a large quantity of the stock of a bankrupt railway company to one who purchases for a merely nominal sum, in the case in point $50."The court," said Mr. Justice BRADLEY, "is not bound to shut its eyes to the evident character of the transaction. It will never lend its aid to carry out an unconscionable bargain, but will leave the party to his remedy at law." M. & M. Railroad Co. v. Cromwell, 91 U. S. 645. But where a company was by its articles of association prohibited from issuing shares below par without the sanction of a general meeting, and one Mendel agreed to purchase 2000 shares in the company at par; and on the same day the board of directors agreed to pay him 40007. in consideration of his services, it was held, on an action brought by the company against Mendel for specific performance of his agreement, that Mendel could not set up the second agreement as part of the first for the purpose of showing that he had been a party to a collusive arrangement by which shares should be issued to him below par, in defiance of the articles of the association, and that, where parts of an agreement are separated, the court will grant piecemeal performance if that appears to have been the intention of the parties. Concerning the collusive arrangement FRY, J., said: "I am asked to hold the two agree ments *** to be parts of one and the same transaction, in order that Mr. Mendel may say that they are beyond the power of the directors to enter into. I decline to do that. I think that where a transaction, taking it in its entirety would be bad, but where the agent of one of the parties to it has colluded with the other party for the purpose of putting the agreement into such a form that the valid part shall be separated from the invalid part, that that which is intra vires may be separated from that which is ultra vires; in other words that that which is honest and true may be separated from that which is dishonest and false. The principal may say to the other party whom he sues; you have agreed that that which was originally commenced as one negotiation shall result in two separate agreements, and having so agreed I will now take you at your word and I will enforce so much of the agreement as is contained in the valid separate document upon which I sue, and I will leave the other part of the agreement alone:" Odessa Tram. Co. v. Mendel, 37 L. T. N. S. 275. Possibility of enforcement.-Performance and enforcement thereof must be possible. It is well settled that a court of equity will not make a simply nugatory decree, or one which is impossible of performance or enforcement. This principle has been unsuccessfully relied upon by subscribers sought to be compelled to accept shares in joint stock companies. For example. In New Brunswick, &c., Co. v. Muggeridge, 4 Drew. 686, it was objected that by subscribing for shares the defendant had only agreed to become a partner and that equity would not decree specific performance of a contract to enter a firm. Lord ELDON, was quoted as saying, in Herey v. Birch, 9 Ves. 357, that "no one ever heard of this court executing an agreement for a partnership when the parties might dissolve immediately afterwards." But while admitting that a man might withdraw at any moment from a firm and leave it in the same condition as if he had never been a member, and also that the consequence of this would be to render nugatory a decree of the court requiring him to enter the firm, the court denied that a subscriber for shares could so withdraw from a joint stock company. "But supposing," said the Vice-chancellor "he had signed the written acceptance of shares, what does he mean by saying that he could retire at any moment at his pleasure? He could not by retiring put an end to his shares. He must either retain the shares or find some other person to become a shareholder in respect of his shares. Assuming that he may transfer them without the leave of the company still the company get the benefit of the shares being held either by the defendant or by his transferree. The effect of decreeing him to perform his agreement would be that the company would obtain the benefit of having some one liable to it for calls on so many shares, and that is a benefit of which it is not in the power of the defendant to deprive the company by retiring from the concern. The fallacy of the defendant's argument is that he calls a joint stock company a partnership, and assumes, because in an ordinary partnership, where no term is fixed for its duration, any partner may put an end to the whole business at once and so retire from it, that, therefore, the shareholders in a joint stock company are in the same position, forgetting that it is precisely in this respect that a joint stock company differs from an ordinary partnership. A shareholder in a joint stock company cannot, as an ordinary partner may do, where no term of partnership is fixed, dissolve the partnership and put an end to it; he can only retire from it by transferring his shares to some other person who shall stand as a partner in his place. Therefore, to make a decree enforcing the contract to accept shares would not be a nugatory decree, and the principle on which the defendant relies does not apply to this case; for that principle is founded on the supposition that the plaintiffs would derive no benefit from a decree for specific performance." This case appears to conflict with Sheffield Gas Co. v. Harrison, 17 Beav. 294, wherein specific performance of an agreement to take shares in a joint stock company was refused on the ground that a decree so to do would be nugatory, since it would be virtually a decree that defendant enter a partnership. But here, according to the terms of the deed of settlement, the subscriber could cease to be a partner within fourteen days. So, also, in cases where, besides the issuance or transfer of stock, other things are to be done, performance of which the court will not undertake to enforce, a specific decree will be refused. Contracts by which railways are to be constructed to be paid for in stock and bonds, illustrate this proposition: Ross v. U. P. Railroad Co., 1 Woolw. 26; Danforth v. P. & C., M., &c., Railroad Co., 30 N. J. Eq. 12; Fallon v. Railroad Co., 1 Dill. 121. Especially will specific performance be refused if it is rendered |