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tract is for the sale of goods to be manufactured, the buyer may repudiate or countermand the contract before the goods have been produced or appropriated to the contract by the seller, and in such a case the remedy of the seller is for damages for breach of the contract and not for the price.16 Where the article to be manufactured is out of the usual order and therefore its value is not readily ascertainable, the buyer cannot, according to the better view, by a repudiation of the contract after it has been completed, prevent a recovery of the price on due tender of delivery.17 Where before completion the buyer countermands the order a recovery on a quantum meruit cannot be had for the reasonable value of the labor theretofore expended in the manufacture.18 In such a case if the value of the materials has been enhanced by the labor, the seller, still owning the materials, has already received compensation to the extent of the increased value; and to give him damages to the full value of the labor would give him more than a compensation. If the value of the materials has been diminished, the value of the labor would not make the compensation adequate to the loss. It could be only in the single case where the materials have neither been increased nor diminished by the labor that the value of the labor would measure the damages. Such a case could seldom occur, and whether it could or not it must always be a question of fact in the case, whether the value of the materials does. remain the same, or whether it has been increased or diminished, and to what extent.19

370. Breach of Warranty and Fraud as Defense.-The buyer cannot retain the goods, and set up a breach of warranty as to their quality, as a bar to the seller's action to recover their purchase price.20 In a number of jurisdictions in this country the rule prevails that the buyer may rescind a sale for breach of warranty, and after the due exercise of such right may of course defend any action which may be thereafter brought for the price.1 In order to enable a buyer to defend an action for the price on the ground that he was induced to make the purchase by the fraud of the seller he must exercise his

16. Gibbons v. Bente, 51 Minn. 499, 53 N. W. 756, 22 L.R.A. 80; Davis v. Bronson, 2 N. D. 300, 50 N. W. 836, 33 A. S. R. 783, 16 L.R.A. 655; Lincoln v. Charles Alshuler Mfg. Co., 142 Wis. 475, 125 N. W. 908, 28 L.R.A. (N.S.) 780.

Note: 51 L.R.A. (N.S.) 758.

17. Bond v. Bourk, 54 Colo. 51, 129 Pac. 223, Ann. Cas. 1914C 581, 43 L.R.A. (N.S.) 97; Bauman V. McManus, 75 Kan. 106, 89 Pac. 15, 10 L.R.A.(N.S.) 1138.

Note: 51 L.R.A. (N.S.) 754.

18. Hosmer v. Wilson, 7 Mich. 294, 74 Am. Dec. 716; McConihe v. New York, etc., R. Co., 20 N. Y. 495, 75 Am. Dec. 420.

19. Hosmer v. Wilson, 7 Mich. 294, 74 Am. Dec. 716.

20. Eastern Granite Roofing Co. v. Chapman, 140 Ala. 440, 37 So. 199, 103 A. S. R. 58.

Note: 40 Am. Dec. 330.

1. See infra, par. 568 et seq., as to the general right of the buyer to rescind for breach of warranty.

right to rescind the contract; he cannot retain the articles sold and at the same time set up the seller's fraud in bar of the action, but if he has exercised his right of rescission and has duly offered to return the goods sold, this will constitute a defense. The buyer may as a general rule set up by way of recoupment or counterclaim the damages which he would be entitled to recover for breach of a warranty or for the fraud of the seller.

371. Set-off, Recoupment and Counterclaim Generally.-In an action for the price of goods sold, the buyer may set off independent liquidated claims which he may have against the seller. And this has been held true notwithstanding the express agreement of the buyer to pay ready money, the delivery having been made without exacting such payment. But the buyer cannot set up by way of set-off an independent claim for unliquidated damages for breach of an independent and separate contract for the sale of other goods." And where, as an independent transaction, the seller rents the buyer a building in which the goods are stored, damages for injuries to the goods by reason of a leak in the roof of the building cannot be recouped, as the claim does not arise out of the contract of sale. On the other hand it has been held that where the damages claimed for the breach of an independent contract of sale consist of the difference between the agreed price and the price which the buyer was copelled to and did pay to other parties for goods such as the seller had agreed to deliver, such damages are liquidated within the meaning of the rule that, where the amount of damages can be ascertained by computation or calculation, they are to be considered as liquidated, and therefore that such damages may be set off in an action for the price of other goods sold. And it has been held that equity will enforce against a claim of a nonresident for goods sold and delivered a set-off of a claim of the buyer against the seller for breach of warranty in

2. Harman v. Sanderson, 6 Smedes & M. (Miss.) 41, 45 An. Dec. 272; Van Epps v. Harrison, 5 Hill (N. Y.) 63, 40 Am. Dec. 314; Burton v. Stewart, 3 Wend. (N. Y.) 236, 20 Am. Dec. 692.

Note: 40 Am. Dec. 330.

As to the buyer's duty to return the goods sold as a condition to the exereise of his right to rescind for the fraud of the seller, see infra, par. 647 et seq.

3. Elliott v. Coggshall, 4 Blackf. (Ind.) 238, 29 Am. Dec. 365.

4. See infra, par. 373.

5. Chapman v. Lathrop, 6 Cow. (N. Y.) 110, 16 Am. Dec. 433. See SETOFF AND COUNTERCLAIM generally.

6. Chapman v. Lathrop, 6 Cow. (N. Y.) 110, 16 Am. Dec. 433.

7. Higbie v. Rust, 211 Ill. 333, 71 N. E. 1010, 103 A. S. R. 204; Riddle v. Gage, 37 N. H. 519, 75 Am. Dec. 151; Godkin v. Bailey, 74 N. J. L. 655, 65 Atl. 1032, 9 L.R.A.(N.S.) 1134; Christian v. Miller, 3 Leigh (Va.) 78, 23 Am. Dec. 251.

Notes: 9 L.R.A. (N.S.) 1134; L.R.A. 1916C 447 et seq.

8. Helwig v. Lascowski, 82 Mich. 619, 46 N. W. 1033, 10 L.R.A. 378.

9. Note: 9 L.R.A.(N.S.) 1134. As to whether the buyer on failure of the seller to deliver may purchase in the market on his account and thus fix the damages, see supra, par. 336.

another transaction between them, where satisfaction of such claim cannot be secured by action without compelling the defendant to seek the courts of the state where the seller resides.10

372. Claims Arising Out of Contract of Sale Generally.-Where goods sold are to be delivered in instalments or at a future time and the price is payable before complete performance by the seller, or the buyer has given his note for the entire price or for the price of the goods delivered, the buyer may recoup in an action for the part of the price due and payable or on the note the damages he may have suffered by reason of the seller's failure to perform his contract with respect to the future deliveries.11 The buyer may also recoup his damages for the breach of collateral contracts on the part of the seller contained in the contract of sale.12 So where the acceptance of the goods after the time for delivery does not constitute a waiver of the default of the seller to deliver on time, the buyer may recoup the damages for such default in an action for the price.18 And where the contract of sale is executory, he may recoup his damages for the seller's failure to furnish goods of the quality or the like required by the contract.14 It is the general rule that where the price is payable in instalments, or where a series of notes are given for the price, and in an action for one instalment or on one of such notes the buyer sets up in defense by way of counterclaim or recoupment his claims for damages for breach of warranty or the like, his right of action for such breach is exhausted, as his claim is entire, and therefore he cannot in an action by the seller for a subsequent instalment of the price or on another note set up the same claim again in defense.15

373. Damages for Breach of Warranty; Negligence or Fraud.In case of a breach of warranty the buyer may as a general rule set up by way of recoupment or counterclaim the resulting damages in reduction of the seller's recovery for the price.16 And where a mort

10. Ewing-Merkle Electric Co. v. Lewisville Light, etc., Co., 92 Ark. 594, 124 S. W. 509, 19 Ann. Cas. 1041 and note, 30 L.R.A. (N.S.) 21 and note.

11. Burrill v. Stevens, 73 Me. 395, 40 Am. Rep. 366; Eckel v. Murphey, 15 Pa. St. 488, 53 Am. Dec. 607.

Note: 40 Am. Dec. 330.

As to when acceptance constitutes a waiver of the seller's default in making delivery in the time stipulated, see supra, par. 268.

14. McAlpin v. Lee, 12 Conn. 129, 30 Am. Dec. 609; Harrow Spring Co. v. Whipple Harrow Co., 90 Mich. 147, 51 N. W. 197, 30 A. S. R. 421. As to

12. Andre v. Morrow, 65 Miss. 315, when acceptance is a waiver of defects 3 So. 659, 7 A. S. R. 658

in quality or the like, see supra, par.

Notes: 40 Am. Dec. 329; L.R.A. 264. 1916C 447 et seq.

13. Harrow Spring Co. v. Whipple Harrow Co., 90 Mich. 147, 51 N. W. 197, 30 A. S. R. 421; Griffin v. Colver, 16 N. Y. 489, 69 Am. Dec. 718.

Notes: 40 Am. Dec. 330; 10 L.R.A. 380.

15. Knorr v. Peerless Reaper Co., 23 Neb. 636, 37 N. W. 465, 8 A. S. R. 140; Case Mfg. Co. v. Moore, 144 N. C. 527, 57 S. E. 213, 119 A. S. R. 983, 10 L.R.A. (N.S.) 734.

Note: 10 L.R.A. (N.S.) 734.

16. Van Buren v. Diggs, 11 How.

gage on the chattels sold was given to secure the price, the buyer has been permitted, in an action of replevin, or claim and delivery, to recover the possession on default in payment of the price, to set up his claim for damages for breach of warranty in extinguishment or diminution of the unpaid price,17 though some cases deny that this is permissible.18 On account of the peculiarity of the issues involved in the claim for recoupment, it has been held that the buyer of machinery cannot recoup against the price the amount which he has been compelled to pay for personal injuries to a servant because the machinery did not fulfil its warranty.19 On the other hand it has been held that the loss occasioned to the buyer of a machine through negligent injury to his minor child while it is assisting the seller to repair the machine, as the contract of sale requires in case the machine fails to operate, is connected with the subject matter of an action on the purchase money notes, within the meaning of a statute permitting such matters to be set up by way of counterclaim, and therefore is a proper counterclaim in such action although it is founded on tort.20 Where the seller has been guilty of fraud in inducing the buyer to make the purchase, and the buyer does not exercise his right to rescind therefor but retains the goods, he may, according to the general view, set up by way of recoupment or in diminution of the

461, 13 U. S. (L. ed.) 771; Dushane v. Benedict, 120 U. S. 630, 7 S. Ct. 696, 30 U. S. (L. ed.) 810; Peden v. Moore, 1 Stew. & P. (Ala.) 71, 21 Am. Dec. 649; Eastern Granite Roofing Co. v. Chapman, 140 Ala. 440, 37 So. 199, 103 A. S. R. 58; Babcock v. Trice, 18 Ill. 420, 68 Am. Dec. 560; Underwood v. Wolf, 131 Ill. 425, 23 N. W. 598, 19 A. S. R. 40; Morse v. Moore, 83 Me. 473, 22 Atl. 362, 23 A. S. R. 783, 13 L.R.A. 224; Mixer v. Coburn, 11 Metc. (Mass.) 559, 45 Am. Dec. 230; Perley v. Balch, 23 Pick. (Mass.) 283, 34 Am. Dec. 56; Helwig v. Lascowski, 82 Mich. 619, 46 N. W. 1033, 10 L.R.A. 378; McKnight v. Devlin, 52 N. Y. 399, 11 Am. Rep. 715; Northwestern Cordage Co. v. Rice, 5 N. D. 432, 67 N. W. 298, 57 A. S. R. 563; Steigleman v. Jeffries, 1 Serg. & R. (Pa.) 477, 7 Am. Dec. 626; Richardson v. Carlis, 26 S. D. 202, 128 N. W. 168, Ann. Cas. 1913B 47; McCorkle v. Doby, 1 Strob. L. (S. C.) 396, 47 Am. Dec. 560; Brantley v. Thomas, 22 Tex. 270, 73 Am. Dec. 264; Best v. Flint, 58 Vt. 543, 56 Am. Rep. 570; Tacoma Coal Co. v. Bradley, 2 Wash. 600, 27

Pac. 454, 26 A. S. R. 890; Getty v. Roundtree, 2 Pin. (Wis.) 379, 2 Chand. 28, 54 Am. Dec. 138; Studebaker Corp. v. Hanson, 24 Wyo. 222, 157 Pac. 582, 160 Pac. 336, Ann. Cas. 1917E 557.

Notes: 34 Am. Dec. 59; 40 Am. Dec. 329; 10 L.R.A. 379; L.R.A.1916C 447 et seq.

17. Vallancey v. Hunt, 20 N. D. 579, 129 N. W. 455, 34 L.R.A.(N.S.) 473. Note: 34 L.R.A. (N.S.) 473.

18. Singer Mfg. Co. v. Smith, 40 S. C. 529, 19 S. E. 132, 42 A. S. R. 897.

Note: 96 A. S. R. 690.

19. Edge Moor Iron Co. v. Brown Hoisting Mach. Co., 6 Penn. (Del.) 10, 62 Atl. 1054, 4 L.R.A.(N.S.) 858. As to when the claim of a buyer for reimbursement for liability over to third persons or for personal injuries may be recovered as damages for breach of warranty, see infra, par. 539, 541.

20. Advance Thresher Co. v. Klein, 28 S. D. 177, 133 N. W. 51, L.R.A. 1916C 514.

price the damages which would be recoverable for the fraud;1 and this rule has been applied in the case of a sale by an executor. Where the buyer sets up in recoupment his claim for damages for breach of warranty or fraud on the part of the seller he must make out such a case as would warrant a recovery in an action therefor.

374. Right of Recoupment as Affected by Giving Note for Price.Though there are cases to the contrary, it is the general rule that the damages for fraud or breach of warranty or other collateral agreement on the part of the seller may be set up in recoupment though the action is brought on a note given for the price and not on the special contract of sale. This defense of recoupment is available against the transferee of the note if he is not entitled to protection under the law merchant, but of course it is not available if the note is negotiable and has been transferred by indorsement in due course and for value. At a time when special consideration was given to sealed instruments, it was held that where a bond is given including therein the price of goods to be delivered in the future, the failure to make such delivery gives the buyer merely the right to maintain a separate action for damages, and does not entitle him to set up such

1. Withers v. Green, 9 How. 213, 13 U. S. (L. ed.) 109; Dushane v. Benedict, 120 U. S. 630, 7 S. Ct. 587, 30 U. S. (L. ed.) 810; Peden v. Moore, 1 Stew. & P. (Ala.) 71, 21 Am. Dec. 649; Williamson v.. Walker, 24 Ga. 257, 71 Am. Dec. 119; Perley v. Balch, 23 Pick. (Mass.) 283, 34 Am. Dec. 56; Harman v. Sanderson, 6 Smedes & M. (Miss.) 41, 45 Am. Dec. 272; Cecil v. Spurger, 32 Mo. 462, 82 Am. Dec. 140; Van Epps v. Harrison, 5 Hill (N. Y.) 63, 40 Am. Dec. 314; Burton v. Stewart, 3 Wend. (N. Y.) 236, 20 Am. Dec. 692; Price v. Lewis, 17 Pa. St. 51, 55 Am. Dec. 536; Weimer v. Clement, 37 Pa. St. 147, 78 Am. Dec. 411; McCorkle v. Doby, 1 Strob. L. (S. C.) 396, 47 Am. Dec. 560. But see Allison v. Noble, 1 Litt. (Ky.) 279, 13 Am. Dec. 230.

Notes: 34 Am. Dec. 59; L.R.A.1916C 447 et seq.

2. Williamson v. Walker, 24 Ga. 257, 71 Am. Dec. 119. As to whether an estate is liable for the torts of the executor or administrator, see EXECUTORS AND ADMINISTRATORS, vol. 11, p. 172.

3. Mixer V. Coburn, 11 Metc.

(Mass.) 559, 45 Am. Dec. 230; Tacoma Coal Co. v. Bradley, 2 Wash. 600, 27 Pac. 454, 26 A. S. R. 890.

4. Notes: 40 Am. Dec. 328; 28 L.R.A. (N.S.) 268.

5. Peden v. Moore, 1 Stew. & P. (Ala.) 71, 21 Am. Dec. 649; McAlpin v. Lee, 12 Conn. 129, 30 Am. Dec. 609; Pryor v. Ludden, etc., Southern Music House, 134 Ga. 288, 67 S. E. 654, 28 L.R.A. (N.S.) 267; Andre v. Morrow, 65 Miss. 315, 3 So. 659, 7 A. S. R. 658; McKnight v. Devlin, 52 N. Y. 399, 11 Am. Rep. 715; Eckel v. Murphey, 15 Pa. St. 488, 53 Am. Dec. 607; Price v. Lewis, 17 Pa. St. 51, 55 Am. Dec. 536; Falconer v. Smith, 18 Pa. St. 130, 55 Am. Dec. 611; Brantley v. Thomas, 22 Tex. 270, 73 Am. Dec. 264.

Notes: 40 Am. Dec. 329; 28 L.R.A. (N.S.) 267.

6. Withers v. Greene, 9 How. 213, 13 U. S. (L. ed.) 109; Stockton, etc., Soc. v. Giddings, 96 Cal. 84, 30 Pac. 1016, 31 A. S. R. 181, 21 L.R.A. 406; McKnight v. Devlin, 52 N. Y. 399, 11 Am. Rep. 715.

7. See BILLS AND NOTES, vol. 3, p. 997 et seq.

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