will entitle the buyer to rescind,14 and there is, as a general rule, no obligation on the part of the buyer to accept or take delivery unless it is made in accordance with the terms of the contract.15 When the subject matter of a sale is not in existence or not ascertained at the time of the contract, an undertaking that it shall, when existing or ascertained, possess certain qualities is not a mere warranty, but a condition precedent to any obligation upon the buyer to accept, because the existence of those qualities becomes essential to its identity, and the buyer cannot be obliged to receive and pay for a thing different from that for which he contracted.16 So as a general rule, if the contract calls for the delivery of the goods at a specified time, the buyer is under no obligation to accept a delivery at some other time, and may treat the failure of the seller to make delivery at the required time as a basis for the rescission of the contract,17 or may refuse a subsequent tender of delivery and still retain his right of action for damages for the failure of the seller to deliver in accordance with the terms of the contract.18 The same is held true with regard to a contract calling for the delivery of a certain amount at one time when the seller tenders only a part at the specified time.19 The fact that the article sold is to be produced or manufactured does not deprive the buyer of the right to refuse to accept delivery and rescind the contract, if the article as tendered is not such as required by the terms of the contract.20 If the buyer has exercised his right of rescission for default on the part of the seller, his surety for the payment of the price may set up such rescission in defense of his liability.1 552. Default of Buyer Generally.-The seller may treat the refusal of the buyer to take delivery in accordance with the contract as a rescission, and where delivery and payment of the price are concurrent stipulations, which is generally true where no time of payment is specified, a default in the payment of the price on a proper tender of delivery by the seller will ordinarily justify the seller in 14. Notes: 30 L.R.A. 61. 15. Filley v. Pope, 115 U. S. 213, 6 S. Ct. 19, 29 U. S. (L. ed.) 372; Columbian, etc., Dry Dock Co. v. Douglas, 84 Md. 44, 34 Atl. 1118, 57 A. S. R. 362, 33 L.R.A. 103; Enterprise Mfg. Co. v. Oppenheim, 114 Md. 368, 79 Atl. 1007, 38 L.R.A. (N.S.) 548. See supra, par. 187 et seq., as to the seller's general duty with respect to delivery. 16. Pope v. Allis, 115 U. S. 363, 6 S. Ct. 69, 29 U. S. (L. ed.) 393. See supra, par. 242. 17. Notes: 51 A. S. R. 615; R. C. L. Vol. XXIV.-18. 30 1. Stockton Sav., etc., Soc. v. Giddings, 96 Cal. 84, 30 Pac. 1016, 31 A. S. R. 181, 21 L.R.A. 406. 2. Note: 30 L.R.A. 61. rescinding the contract. Where the seller exercises his right to terminate or to refuse further to perform the contract for a default on the part of the buyer, he may in case he has made partial deliveries recover for the goods so delivered. Thus the refusal of the seller to deliver subsequent instalments after the buyer's default in payment for instalments delivered will not prevent his recovery for such instalments as have been theretofore delivered. The seller may also treat the default of the buyer as a breach terminating any obligation of further performance on his part, and entitling him to maintain an action for damages for the buyer's refusal to take and pay for the articles sold in accordance with the terms of the contract.8 An order given by the buyer to his banker not to pay a check given in payment for chattels sold to him will not itself work a rescission of the sale if such order is withdrawn and the check paid on presentation." Acquiescence on the part of the seller in the buyer's breach of the contract may constitute a waiver of his right to rescind for such breach.10 The question as to the right of the buyer to recover payments made by him towards the purchase price where the seller abrogates the contract for the subsequent default of the buyer is heretofore discussed.11 553. Credit Sales; Insolvency of Buyer.-Where the contract contemplates a future delivery and is for a sale on credit, it is held that there is an implied condition precedent to the seller's duty to deliver that the buyer will keep his credit good, and where the buyer becomes. insolvent before the time of delivery arrives the seller has a quasi right of rescission, that is, he may decline to deliver unless the buyer will pay cash.12 Though there has been such a delivery in case of a sale on credit as will pass the title as between the parties,13 and though ordinarily there is no seller's lien after delivery in case of a sale on credit,14 yet since the waiver of the seller's lien is on the implied condition that the buyer keep his credit good, if the buyer becomes insolvent before the time of payment has arrived, the seller may assert his lien if he has retained the custody of the goods or if he can regain 5. Beauchamp v. Archer, 58 Cal. 431, 41 Am. Rep. 266. Note: 30 L.R.A. 33 et seq. 61. 6. Note: 30 L.R.A. 33 et seq. 7. Masters v. Barreda, 18 How. 489, 15 U. S. (L. ed.) 466; Veerkamp v. Hulburd Canning, etc., Co., 58 Cal. 229, 41 Am. Rep. 265. Note: 43 L.R.A. (N.S.) 1010. See supra, par. 164 et seq., as to the entire and several nature of contracts of sale and recovery for partial performance. 8. Note: 30 L.R.A. 33 et seq. See supra, par. 383 et seq., as to the seller's action for damages for breach by buy er. 9. Seldomridge v. Farmers', etc., Bank, 87 Neb. 531, 127 N. W. 871, 130 N. W. 848, 30 L.R.A. (N.S.) 337. 10. Angel v. Bashaw, 82 Vt. 252, 73 Atl. 23, 18 Ann. Cas. 449. 11. See supra, par. 333. the custody by exercising his right of stoppage in transitu.15 This right is not strictly a right of rescission but is a right to hold the goods as security for the payment, 16 and it is held that the seller cannot eliminate any other element than that of credit; the feature as to time and place of delivery he must comply with at the peril of being himself liable for a breach of the contract; 17 and if the sale is executory, the seller cannot refuse to deliver on the terms of the contract and hold the buyer liable in damages as for a breach of the contract. In order to enable him to maintain such an action, even though the buyer has become insolvent, he must tender the goods in accordance with the terms of the contract.18 It has been held, however, that where the title has passed to the buyer, though the seller has retained possession, the latter on the insolvency of the buyer may withhold possession, and after due notice sell the goods on the buyer's account without losing his right to the balance of the unpaid price. 19 As a general rule, where a sale is on credit, the insolvency of the buyer after an actual delivery gives the seller no right to rescind the sale and reclaim possession,20 though he may do so, if the buyer has been guilty of fraudulent misrepresentations as to his financial condition.1 After such insolvency, though the seller has retained the actual possession of the goods and therefore has a lien for the price, he has no right to rescind the sale as against the general creditors of the buyer, and deprive the assignee in insolvency or bankruptcy of the buyer from paying the price and claiming the goods if their value exceeds the purchase price. 554. Entering into New Contract.-Under the general principles of implied rescission of contracts by the making of a new inconsistent agreement with respect to the subject matter of the old contract, it would seem on principle that entering into a new contract of sale with respect to the same subject matter, while the old contract is unexecuted, will constitute an implied rescission of the old contract. If, however, 15. Arnold V. Delano, 4 Cush. of a buyer who refuses to accept (Mass.) 33, 50 Am. Dec. 754; Patten's goods purchased, see supra, par. 376 Appeal, 45 Pa. St. 151, 84 Am. Dec. et seq. 479. See supra, par. 399 et seq., as to the seller's right of stoppage in transitu. 16. Patten's Appeal, 45 Pa. St. 151, 84 Am. Dec. 479. 17. Lincoln v. Charles Alshuler Mfg. Co., 142 Wis. 475, 125 N. W. 908, 28 L.R.A. (N.S.) 780. 18. Florence Min. Co. v. Brown, 124 U. S. 385, 8 S. Ct. 531, 31 U. S. (L. ed.) 424. 19. Patten's Appeal, 45 Pa. St. 151, 84 Am. Dec. 479. As to the general right of the seller to resell on account 20. J. J. Smith Lumber Co. v. Scott County Garbage Reducing, etc., Co., 149 Ia. 272, 128 N. W. 389, 30 L.R.A. (N.S.) 1184. 1. See infra, par. 580 et seq. 591, as to whether misrepresentation or concealment of financial condition constitutes fraud. 2. Arnold v. Delano, 4 Cush. (Mass.) 33, 50 Am. Dec. 754. 3. See CONTRACTS, vol. 6, p. 923. 4. Mason v. United States, 17 Wall. 67, 21 U. S. (L. ed.) 564. the new contract is invalid for noncompliance with the statute of frauds, it cannot be given the effect of rescinding the original contract. A novation whereby a third person is substituted as purchaser may operate as a rescission of the old contract so as to release the original buyer. Though the contract of sale has been broken by one party, the making of a new contract different in terms from the broken contract is a sufficient consideration on the part of the party in default for the cancellation of the old contract in so far as it is unperformed." On the other hand it is held that after the breach of an executory contract of sale, the making of a new contract with respect to the subject matter of the old contract is not necessarily a rescission of the old contract so as to defeat the right of action for damages against the party in default. It is also held that if the seller fails to deliver the goods according to the contract and thereafter the buyer urges delivery and the seller promises to make it but fails to do so, this does not work a rescission of the contract or extension of the time of delivery so as to prevent the buyer from recovering on the basis of the original breach. It has also been held that if after a breach by the buyer by his wrongful refusal to accept the seller resells to him for a less price, this is not a rescission of the old contract so as to defeat the seller's right to recover as damages for the wrongful refusal to accept the difference between the original price and the price paid on the resale; and, in such a case, it has been held immaterial that no notice was given by the seller to the buyer of his intention to hold the buyer for this difference.10 If a seller, after selling a quantity of grain so as to pass title thereto without actual delivery, resells it to another person, and executes to each buyer a bill of sale for one half of the grain, the first buyer, by accepting the bill of sale and waiving his right to one half of the grain first sold to him, does not affect his title to the other half thereof.11 555. Effect of Mutual Rescission.-The mutual rescission of an executory contract of sale puts an end to any obligation of the parties further to perform or liability for the nonperformance of the 5. Noble v. Ward, L. R. 21 Exch. 135, 15 W. R. 520, 36 L. J. Exch. 91, 6 Eng. Rul. Cas. 563 and note. See generally, STATUTE OF FRAuds. 6. Michigan Store Co. v. Walker, 150 Ia. 363, 130 N. W. 130, Ann. Cas. 1912D 505. As to parties to sales by substitution or novation, see supra, par. 91. As to novation generally, see NOVATION, Vol. 20, p. 359 et seq. 7. Dreifus v. Columbian Exposition Salvage Co., 194 Pa. St. 475, 45 Atl. 370, 75 A. S. R. 704. 8. Arkansas, etc., Grain Co. V. Young, etc., Grain Co., 79 Ark. 603, 9. Hardwood L. Co. v. Adam, 134 Ga. 821, 68 S. E. 725, 32 L.R.A. (N.S.) 192. 10. Arkansas, etc., Co. v. Young, etc., Grain Co., 79 Ark. 603, 96 S. W. 142, 116 A. S. R. 99. 11. Seldomridge v. Farmers, etc., Bank, 87 Neb. 531, 127 N. W. 871, 30 L.R.A. (N.S.) 337. contract. 12 And though the sale is executed so as to pass title, a mutual rescission and return of the property to the seller releases the buyer from any liability for the price.18 A mutual cancellation, the seller taking back the subject matter, and the buyer taking back notes given for the price, will, as between the parties, as effectually revest the title in the seller as would the most formal transfer.14 Where there is a mutual rescission of an executory contract of sale under which the buyer has made part payments, the view has been taken that, in the absence of any express or implied agreement to the contrary, the buyer is entitled to the return of the payments made.15 Contracts for Delivery and Payment in Instalments 556. In General.-There seems to be no question arising out of contracts of sale on which the authorities are in more hopeless discord than that involving the right of one party to a contract, providing for the delivery of the commodity sold in instalments and payment therefor as delivered, to rescind or treat the contract at an end for a default of the other party with respect to one instalment. The English Sale of Goods Act 1893 (section 31, subd. 2) 16 has sought to settle the question in a general way by providing that "where there is a contract for the sale of goods to be delivered by stated instalments, which are to be separately paid for, and the seller makes defective deliveries in respect of one or more instalments, or the buyer neglects or refuses to take delivery of or pay for one or more instalments, it is a question in each case depending on the terms of the contract, and the circumstances of the case, whether the breach of contract is a repudiation of the whole contract, or whether it is a severable breach giving rise to a claim for compensation, but not to a right to treat the whole contract as repudiated." 17 And a somewhat similar provision is included in the uniform sale of goods act enacted in a number of jurisdictions in the country. Some of the acts in this country, however, differ from the English act in that the latter makes the intention to repudiate instead of the materiality of the breach the basis 12. Dreifus v. Columbian Exposition Salvage Co., 194 Pa. St. 475, 45 Atl. 370, 75 A. S. R. 704. Note: 6 L.R.A. 503. As (N.S.) 785; Johnson v. Jennings, 10 13. Thorton v. Wynn, 12 Wheat. supra, par. 333. 183, 6 U. S. (L. ed.) 595. 16. Note: 23 Eng. Rul. Cas. 525. 14. Tomlinson v. Roberts, 25 Conn. 17. This is true, for instance, as to 477, 68 Am. Dec. 367. As to the re- the New York act which makes the. vesting of title in the seller generally, materiality of the breach and the sevsee supra, par. 311. 15. Pierce v. Staub, 78 Conn. 459, 62 Atl. 760, 112 A. S. R. 163, 3 L.R.A. erability of the contract the criterion for determining the right of the injured party to rescind. |