John Knox, James Boggs, and James A. Knox were trading under the firm of Knox, Boggs & Co., when they brought a case to the Supreme Court against Peyton Smith and others. The appellants argued that their debtors had fraudulently transferred property in order to avoid paying them what was owed. The defendants maintained that the transfer of property was valid because it occurred before any legal action had been taken by the appellants against them for payment of debts due from prior transactions. In its ruling on this case, the Supreme Court held that fraudulent transfers are not protected if made with intent to defraud creditors who have already initiated legal proceedings for collection of debts due from prior transactions; however, such transfers may be considered valid if done without knowledge or suspicion on part of debtor that creditor has instituted suit or other proceeding for recovery thereof at time transfer is made.

In this case, the Supreme Court was asked to decide whether a contract between Knox, Boggs & Co. and Peyton Smith and others was valid. The majority of the court held that it was not because there had been no consideration given for its formation. However, Justice McLean dissented from this opinion on two grounds: firstly, he argued that although there may have been no monetary consideration exchanged in order to form the contract, an exchange of promises could be sufficient; secondly he argued that even if there had been no such exchange of promises then under certain circumstances a moral obligation could be considered as adequate consideration for forming a binding agreement. In conclusion Justice McLean believed that since both parties were acting in good faith when entering into their agreement they should be bound by it regardless of any lack of legal considerations being present at its formation.