Armstrong v. Toler (1826)
Armstrong v. Toler (1826) 24 U.S. 258, was a case where goods had been consigned to Toler, belonging to Armstrong and others.
The goods were shipped during the war with Great Britain in violation of the law. The goods were delivered to Toler as agent of Armstrong on a stipulation to abide the event of the suit, Toler becoming liable for the appraised value.
Armstrong's goods were afterwards delivered to him on his promise to pay Toler his proportion for which Toler might be liable should the goods be condemned, and, the goods having been condemned, Toler paid their appraised value, and brought suit to recover from Armstrong.
Armstrong resisted the demand on the ground that the contract was made upon an illegal consideration. The headnotes of that case give the rule as follows:
"But, if the promise be entirely disconnected with the illegal act, and is founded on a new consideration, it is not affected by the act, although it was known to the party to whom the promise was made, and although he was the contriver and conductor of the illegal act."
Chief Justice Marshall said in the course of the opinion, after discussing several cases: "So Toler's knowledge of the illegal transactions of Armstrong, and that his money was advanced to procure the delivery of goods which had been illegally imported, could not vitiate a contract to repay that money."
Chief Justice Marshall approved the opinion of the lower court, which was to the effect `that a new contract, founded on a new consideration, although in relation to property respecting which there had been unlawful transactions between the parties, is not itself unlawful.' And Toler was allowed to recover of Armstrong money which he had paid for Armstrong on account of goods known by both parties to have been imported contrary to law. Chief Justice Marshall also, said:
"Questions upon illegal contracts have arisen very often, both in England and in this country; and no principle is better settled, than that no action can be maintained on a contract, the consideration of which is either wicked in itself, or prohibited by law."
It was decided that if a promise is entirely disconnected with the illegal act and is founded on a new consideration, it is not affected by the act, although it was known to the party to whom the promise was made, and although he was the contriver and conductor of the illegal act.