Notes on Bonds
[Before 13 May 1792]
It is certainly unnecessary here to shew that there is no distinction to be taken between debt due on bond with a condition expressed to pay principal and interest, and debts due on simple account or otherwise, whereon it was the usage to pay an interest, because there exists not in reason any difference between the two cases: for obligation results from the act of contracting, not from the evidence of the act. The condition of a bond is an evidence in writing that the debtor had contracted to pay interest. Where usage has established (as in the case of Douglas ) that a merchant in a particular line of commerce, purchasing goods from a tradesman, shall pay interest after 15. months, tho’ not a word be said about it at the moment of contracting, yet it is in the contemplation of both parties, and is as much a part of the contract as if expressly mentioned; as much so as that the principal shall be paid, tho not a word be said of that when the merchant takes the goods. The mind of each party has assented to the contract for interest equally in the case of the bond and the purchase on account, and the contract is equally real, the only difference being that the one is evidenced by writing, the other by the act of taking the goods under knolege of the custom that interest is to be paid after 15. months. The interest then is as much contracted for in the one case as in the other. In both cases too both parties have known at the time of the contract, that circumstances unforeseen might by possibility arise which would, in law, suppress the right to interest, tho it was contracted for. Such circumstances, unforeseen at the time of contracting the debt, whether by bond or account, have in fact happened: they suppress in both cases then the interest contracted for, as well that of the written as the tacit contract. That a stipulation, because committed to writing, is not therefore to controul all events, is well settled. It is the daily practice for the courts to relieve against either penalties or conditions where a compensation can be made: as in the case of Eastwoode v. Vinke. 2 P.W. ca. 192. the condition of a bond relieved against. In 1. Ca. Ch. 51. & Freem. Ch. Rep. 182. conditions against reason may be relieved, so where the breach proceeds from the act of the obligee. And if the courts will relieve, where a compensation can be made, so also where circumstances supervene which suppress the right to compensation. Accordingly in none of the courts or states has any distinction been taken between the cases of bonds and simple contracts. The allowance or disallowance of interest has never respected that circumstance; you have very properly taken no notice of any such distinction; and I note it merely to exclude the presumption of it’s being overlooked.
MS (DLC); at head of text: “not to be inserted”; docketed by TJ: “J. Madison’s Notes.” TJ’s notation regarding the insertion of these notes refers to the letter to George Hammond of 29 May 1792 that he was currently drafting.