CRUTCHFIELD v. DAILEY

Supreme Court of Georgia1896-05-19

98 Ga. 462

Summary · law.co

Holding. The judgment is reversed. An executory contract may be rescinded by mutual agreement of the parties without additional consideration, as each party's release of the other constitutes sufficient consideration; and evidence that a subagent received a document from another subagent or general agent is insufficient to prove the document's execution.

Crutchfield applied for life insurance through agent Dailey and signed a promissory note for the premium. The next day, Crutchfield asked Dailey to stop the application, and Dailey agreed, stating he would retrieve the note and that nothing further would happen. When the insurance company later sued on the note, Crutchfield defended by claiming the parties had mutually rescinded the contract. The trial court instructed the jury that rescission required valuable consideration, which was error.

Because the insurance contract was executory—neither party had fully performed—the parties could rescind it by mutual agreement without additional consideration. Each party's release of the other from their contractual obligations constituted sufficient consideration for the rescission. An executory contract differs from an executed one; while an executed contract requires a sealed release or accord and satisfaction, an executory contract may be discharged simply by the parties' mutual agreement to no longer be bound.

Additionally, the court erred in admitting an insurance policy into evidence based on a subagent's testimony that he had received it from another subagent or from the general agent. Such testimony was insufficient to prove the policy had been properly executed.

Summary generated by law.co from the public-domain opinion. The opinion text itself is public domain.

Key issues

Whether mutual rescission of an executory contract requires valuable consideration
The distinction between executory and executed contracts in rescission
Sufficiency of proof of a document's execution based on a subagent's testimony of receipt

Procedural posture

Crutchfield filed a special plea to defend against the insurance company's suit on a promissory note for a life insurance premium, and the trial court erroneously instructed the jury on the requirements for rescission and admitted disputed evidence.

Authorities cited

No cited authorities resolved to law.co cases yet.

Opinion · public domain

majority opinion

Simmons, Chief Justice.

1, 2. Crutchfield applied to Dailey, the agent of a life insurance company, for a policy of life insurance, and at the same time gaYe his note for the premium thereon. The morning after the application was made, he met Dailey and told him that he wished the application to stop where it was, that he did not want it to go any further. Dailey replied that he had sent the application on to Atlanta, and would write and get the note returned, and give it back to him; that “the affair will stop just where it is at; there will be nothing more of it.” He did not receive the policy and heard nothing more about the matter until just before suit was brought upon the note. To- the suit he filed a special plea setting up these facts. On the trial of the case the court charged the jury that, unless there was a valuable consideration for the rescission, he could not rescind. Under the evidence for the plaintiff, this charge was erroneous. The contract between Crutchfield and Dailey was executory and not under seal. "While it is true he had given his note for the premium on the policy of insurance, his application had not been accepted by the company. The company might have rejected it. It would not be bound until it had accepted the application and issued the policy. So the contract was not fully executed by Crutchfield giving the note. It was still executory. Under this state of facts the parties who- made the contract could by mutual consent rescind it. It was not necessary for Crutchfield to- pay Dailey any consideration for his consent to- rescind. The agreement by each party to release the other from the obligation of the contract was a sufficient consideration, and the agreement did release the insurance company from the performance of that part of the contract which the company would have been required to fulfil. “While a valid executed contract cannot be discharged by a simple agreement, but only by performance, by release under seal, or by an accord and satisfaction, one that is executory, that is, one that has not been acted upon, may be discharged by an agreement of the parties that it shall no longer bind either of them. The consideration on the part of each is the other’s renunciation.” 21 Am. & Eng. Enc. of Law, Rescission, 68, and cases cited; Bishop, Contracts, §813 et seq.; §68; McCreery v. Day, 6 N. Y. Supp. 49; same case affirmed, 119 N. Y. 1, 23 N. E. Rep. 198; Morrill v. Calhoun, 82 Ill. 626; Kelly v. Bliss, 54 Wis. 187; Lynch v. Henry, 75 Wis. 631.

3. At the trial the plaintiff sought to introduce in evidence the policy of insurance which he claimed was issued on the application of the defendant, and the defendant objected to it on the ground that there was no proof of its execution. A subagent of the company was introduced, who testified thathe received this policy fiom another subagent or from the company’s general agent; he did not remember which. Upon this testimony the court admitted the policy in evidence. "We do not think this was sufficient proof of the execution of the policy. The receipt of such a paper by one subagent from another would not prove its execution, nor would the receipt by the subagent of the paper from a general agent be sufficient, in our opinion, to prove its execution. We think, therefore, that the court erred in admitting it in evidence: Judgment reversed.