agree for myself my hrs exs and ads that I and they shall and will at the request of the within-named (obligee) his exs, &c. make do and exte at my or their expense all such furr acts and assurances in the law as shall be requisite for the more effectually charging the sd preses with the paymt thof as shall be reasonably advised or devised by the sd (obligee) or his counsel in the law In Witness, &c.

Modes of arrangement be

tween a

debtor and

COMPOSITION.

§ 1. Creditors may enter into any arrangements with a debtor, which may best suit the convenience of the parties; and the courts will construe all composition contracts so as to give full effect to them. The mode of effecting such an arrangement, must depend upon the circumstances of the case. When a debtor wishes only for time, a simple agreement to that effect may be sufficient; but the more usual mode in this case, is to execute a deed called a Deed of Inspection, by which a debtor is enabled to carry on his business inspection. for the benefit of the creditors, under the inspection of trustees.

his cre

ditors.

Deed of

Deed of composition.

Letter of licence.

圈

Another mode of effecting an arrangement, is by the creditors agreeing to accept a composition, or a part of their respective debts, in satisfaction of the whole; and the instrument by which this is effected, is called a Deed of Composition; frequently a memorandum of an agreement to accept a composition, is drawn up at the meeting of the creditors, as a preliminary to a more formal deed. In both these deeds, it is usual to insert a covenant, called a Letter of Licence, whereby the creditors agree to give the debtor, for a certain time, liberty to pursue his affairs without the danger of being arrested or sued. Sometimes this covenant is given Assignment by a separate instrument. The last, and most frequent mode of effecting such an arrangement, is by the debtor conveying or assigning his estate to trustees, for the benefit of the creditors, which may be done by one or by separate instruments, according to the nature of the transaction. Sometimes debtors who are not traders, voluntarily adopt this mode of paying their debts, in which case, the creditors are usually not parties.

of debtor's

estate.

Agreement for a com

position by deed and parol.

2. Every agreement between a debtor and his creditors ought to be by deed; and if the instrument is to operate as a release or discharge at law of a specialty debt, it cannot be otherwise. Lowe v. Eginton, 7 Price, 604. 6 Petersd. Abridg. 2. At law, an agreement not under seal, to accept a less sum in satisfaction of a greater than is due, is not binding; Co. Litt. 212, b. Pennel's Case, 5 Co. 117; although followed by acceptance of payments, Heathcote v. Crookschanks, 2 T. R.; Fitch v. Sutton, 5 É. 230; unless there be some new and sufficient consideration, Steinman v. Magnus, 11 E. 390; but an agreement not under seal, is not of itself evidence of the consideration; 7 T. R. 350, n. (See Agreements, Pref. § 7.)

3. The assent of a creditor to a composition contract, is necessary to make it binding on him; but this assent may be either expressed or implied, Butler v. Rhodes, 1 Esp. 236; and a verbal promise to accept a composition and execute the deed, will prevent the creditor from sueing for the original cause of action; Bradley V. Gregory, 2 Campb. 383. So in equity, creditors are in general

as much bound by acting under a deed of composition, as if they had signed the deed; Ex parte Sadler, 15 Ves. 52; but a creditor is not bound by a composition deed to which he is a party, if he have been induced to sign it by any misrepresentation made to him; Cooling v. Noyes, 6 T. R. 263.

Ex

4. If the terms of the composition are not strictly complied with by the debtor, the creditor is released from his obligation; Cranley v. Hillary, 2 M. & S. 120; and a court of equity will not relieve the debtor, if he do not strictly perform the agreement. 1 Eq. Ab. 28. Rose v. Rose, Ambl. 332. Mackenzie v. Mackenzie, 16 Ves. 372. So where the creditors had agreed to take a composition, and after the first payment, the debtor became a bankrupt, it was held, that the creditors were entitled to prove under the commission for the residue. Ex parte Bennet, Atk. 528. parte Vere re Palmer; 1 Rose 281. Ex parte Peel, Ib. 434. 5. If the composition deed contain no stipulation respecting securities, a creditor may retain them, provided he deduct the sum to be recovered upon the security, and take a composition for no more than what remains due, Thomas v. Courtenay, 1 B. and A. 1. But where a creditor having received the full amount of his composition, and given the debtor his release, recovered sums on bills formerly given as a security, such sums have been considered as money received to the debtor's use, Stock v. Mawson, 1 B and P. 286. So where a creditor, after having executed a deed of composition, refused to set the amount of his debt to his name, upon the ground of his having a security, he was held to have bound himself to the extent of his then existing debt, and that he could not recover upon the security, Harrhy v. Wall, 1 B. and A. 103. S. C. 2. Stark. 195. Holmer v. Viner, 1 Esp. 131.

6. A fair and equal composition contract, without fraud or contrivance, will be established both at law and in equity; but any secret agreement between a debtor and a creditor, to secure to the latter payment of a sum beyond that secured to the others, is not only voidable but absolutely void at law, Cochshott v. Bennett, 2 T. R.763; Jackson v. Lomas, 4 TR. 166; Feise v. Randall, 1 Esp. 224; and courts of equity will not enforce any agreement securing to some creditors who had executed a deed of composition a greater advantage than the other creditors would have under the deed, and without their knowledge; Child v. Danbridge, 2 Vern. 72; Middleton v. Onslow, 1 P. Wms. 708; Mawson v. Stock, 6 Ves. 300; Cecil v. Plaistow, i Anst. 202; Fawcett v. Gee, 3 Anst. 910: yet any advantage which a creditor may obtain, not in fraud of the other creditors, has been held to be good; Feize v. Randall, 6 T. R. 146: and a preference may be rendered valid in equity by the agreement being notified to the other creditors and sureties; Jackman v. Mitchell, 13 Ves. 586, By the 6 G. IV. c. 16, s. 133, it is provided, that where, at two successive meetings of creditors, after due notice given, nine-tenths in number and value of those present agree to accept a composition, the Lord Chancellor may supersede the commission.

Terms of

the contract to be strictly complied with by debtor.

When securities can he retained.

Composition contracts must be fair.

7. A covenant not to sue the debtor at all, is a release, and the Covenant covenant may be pleaded in bar of an action; but a covenant not to not to sue. sue within a given time, is not a release, but a covenant, and remedy may be had on the covenant; Carivil v. Edwards, 1 Show. 330; Lacy v. Kinaston, 1 Ld Raym. 690. S. C. Holt's Rep. 178, S. C.. 1 Salk. 575; Dean v. Newhali, 8 T. R. 168. A condition not to. sue a debtor within a named time under a penalty, does not extend to the executors, unless they are named in the deed, 1 Show. 331.

8. A release of partnership debts executed by one partner con- Release. cludes the firm, contrary to the general rule, that one copartner cannot bind another by deed, Aston v. Booth, 4 B. Moore, 192. If a release is to be given to only one out of two or more joint

Assignment of a person's property in

trust when

valid.

debtors, it must be expressly so stated, otherwise it will operate as a discharge to both, Solly v. Forbes, 2 Bing. and Brod. 38. (As to releases, see further, Release.)

9. An assignment by a person not a trader, or not subject to the bankrupt laws, of all his property for the benefit of creditors, is valid, although a preference be given to some creditors above others, Estwick v. Caillaud, 5 T. R. 424; and it be made to defeat a creditor of his execution, Pickstock v. Lyster, 3 M. and S. 371. Before the 6 G. IV. c. 16, an assignment by a trader of all his estate and effects, was held to be an act of bankruptcy, and also fraudulent and void, unless it was done with the concurrence of all the creditors, Rush v. Cooper, Cowp. 29; Law v. Skinner, 2 Bl. 996; Eckhardt v. Wilson, 8 T. R. 140; but, by s. 4 of that statute, such an assignment executed by all the trustees, within fifteen days after its execution by the trader, provided it be duly advertised and a commission do not issue within six calendar months after its execution by the trader, shall not be deemed an act of bankruptcy. But where the assignment is conditional, and the condition is not performed by the debtor, the creditors may avoid the deed, Wiglesworth v. White, 1 Stark. 218. If creditors are to execute a deed of assignment by a stated time, or the deed to be void if it be not executed within the time, it will be void at law; but it is good in equity, if it be afterwards executed by all the creditors, although not until subsequently to the death of the debtor; Spottiswoode v. Stockdale, Cooper, 105. No prefer- 10. Under a provision in a trust deed for the payment of debts of ence in the various descriptions, no preference is implied; which if intended must payment of be clearly shewn, otherwise the Court favours equal payments, debts under Wadeson v. Richardson, 1 V. and B. 103; but a trust deed for the payment of debts extends only to debts contracted at the time, Purefoy v. Purefoy, 1 Vern. 28. As to trusts, see further, Conveyance in Trust for Creditors and Trust Deed.

a trust deed.

Stamp.

Recital of debts.

Meeting of creditors.

11. A composition deed, or other instrument of composition between a debtor and his creditors, requires a stamp of 17. 15s., and the further progressive duty of 17. 5s. for every entire number of 1080 words over and above the first 1080; but although signed by each creditor separately, yet being one whole transaction, requires but one stamp, Bowen v. Ashley, 1 N. R. 278.

Articles of Agreement between a Debtor and his Creditors, where Inspectors are appointed to superintend the Insolvent's Affairs.

Obs. As to the nature of this deed, see Composition, Pref. § 1;. and as to the Stamp, see Pref. § 11.

Articles, &c. Betn (debtor) of, &c. of the 1st pt. (inspectors) of, &c. being respive crs of the sd (D) of the second pt and (creditors) the sevl or. persons whose names and seals are hereunto subscribed and affixed being also respive crs agts or atties of crs of the sd (D) of the third pt Whas the sd (D) stands justly indebted to the sevl psns pties hereto of the second and third pts or their respive ptners or constituents in several sums of money And whas at a meeting of the crs of the sd (D) on, &c. the said (D) having represented to the sd crs then present that in regard there were large sums of money due to him from psns resident in his Maj.

plantations and elsewhere abroad and of divers adven- Deed of tures being outstanding he was unable to proceed in Inspec carrying on his trade and immediately satisfy his sd crs tion. their respive debts and the sd crs having duly weighed and considered the same and being satisfied that the stock and effects in trade of the sd (D) are fully sufficient to pay and satisfy his respive debts did resolve and Agreement agree that it would be most advantageous to the crs of pointment the sd (D) that the sd (D) should be permitted to col- of inspeclect and dispose of his este and effects under the inspec- tors. tion of the said (I) who were then unanimously chosen for that purpe for the term of two yrs from, &c. last

for and ap

Now these Prests witness That in pursuance of the sd agt Testatum. and for carrying the same into full effect and in conson of the covts hraftr contd on the pt of the sd (I)) They the sd (I) and the sevl or. psns pties hereto as crs or atties or agts of crs Have and each of them Hath given and granted and by these prests Do and each of them Doth (so far as they respively may and Ifully can) give Letter of and grant unto the sd (D) full free and absolute liberty, licence. and licence according to his own free will and pleasure to go come pass repass abide and continue to from and at all or any place or places where the nature of his affairs may require and to manage collect get in and dispose of all his este debts and effects under the inspection and control of the sd (I) or some three or more of them and in such manner as they shall judge to be most conducive to the bent of the sd crs from the day of the date of these prests until, &c. which will be in the year of, &c. And the sd (I) and the sevl psns, &é. do hby for themselves resply and for their sevl and respive hrs exs ads ptnrs and constituents but not any of them for the or. or ors of them or for the heirs exs ads acts or deeds of any or. or ors of them but each of them for his own hrs exs ads acts and deeds only covt promise and agree with and to the sd (D) his hrs exs and ads that they the sd creditors and the several psns, &c. their exs ads ptners or agents or any or. psn or psns for them or by the order authority assent consent or procurement of them resply shall not nor will (a) sue arrest (b) prosecute molest attach detain take in custody or exon imprison or orwise impede or incumber him the sd (D) or his este cr effects in any manner howsr And furr That if any of them the sd (I) or the sd or. crs or any of their exs, &c. or constituents shall so do contrary to the true intent

(a) As to the effect of this covenant, see Pref. § 7.

(b) It is presumed that the Bill now pending before Parliament, in regard to imprisonment for debt, will not affect the private arrangements between debtor and creditor.

Covenant

not to arrest

debtor.

Deed of Inspection.

and meaning of these prests this present letter of licence shall operate to all intents and purps and may be pleaded in bar to the sd respive debts and to any prosecution suit or action that shall or may be brt agst the sd (D's) psn goods or chattels as afd within the time afd as effectually as if he had a general release under the hands and seals Debtor co- of such crs resply for that purpe And the sd (D) doth hby in furr pursuance of the sd agrt and in conson of the ed licence hnbefe given unto him as afd for himself his hrs exs and ads covt, &c. with and to the sd (I) and all or. the crs or ptners atties and agts of crs of him the sd (D) and also with and to each and every of them in manner following that is to say That the sd (D) shall To state his and will as soon as may be draw out and state a true

venants.

accounts.

To verify them on oath.

structions.

To use his best endea

vours in managing his estate.

To deposit monies with bankers.

and exact acct in writing of all his este and effects as well real as psl and of the several chas outgoings and incumbs now affecting the same and bring the sd este to a balance and shall and will thereupon deliver such acct after being signed by him unto the sd (I) And also shall and will if thereunto required by them the sd (I) or either of them verify the truth of such accts on oath before one of the Masters of the High Court of To obey in- Chancery And furr that he the sd (D) shall and will from time to time and at all times observe perform and exte the orders instructions and advice of them the sd (1) And also shall and will use his best endeavours in and about the management and collecting receiving settling and converting into money all the este and effects of him the sd (D) And also shall and will when and so often as there shall be monies in hand arising from the sd este and effects pay and deposit the same into the hands of such banker and bankers as the sd (I) shall direct To the end that the same may be distributed among the sevl crs in the manner hnfr mentd And furr that he the sd (D) shall not nor will at any time during the sd term (unless he shall before that time have paid unto the sd crs the whole of his debts) convey alienate dispose of pledge or encumber any of his real or psl este Nor uuder- And also shall not nor will by himself or with any or. take any psn become engaged in or undertake any new trade or commercial transaction orwise than as such shall be by Nor give and with the consent of the sd (1) And shall not nor preference will do or suffer to be done any act deed matter or thing whatsr whby any of the ers of him the sd (D) shall or may obtain secty or secties for his or their debt or debts or any preference or priority of payment thf or of any pt thf contrary to the true intent and meaning of these prests And shall not nor will release any debt or debts nor bring any action or suit for recovering any such

Not to dispose of his

estate with

out consent.

other trade:

to any creditors.

Nor release

debts, &c.