41

gation or defence going under the name of waiver is under consideration. Knowledge of the facts is not essential for the formation of a valid contract, though mutual mistake of an essential fact may be an equitable reason for avoiding it.1 A contract to surrender a right or a defence must be subject to the same rules as other contracts in this respect. If both parties made the bargain under a mistaken assumption of essential facts relating to the existence or nature of the supposed right of action or defence their bargain should be voidable; and if one knowing the facts took advantage of the other's ignorance, it would likewise be voidable; and if an agreement were made to excuse a breach of condition, facts showing that unknown to the promisor there had already been a fatal breach thereof would doubtless be so essential as to afford ground for the application of the equitable principles. But the mere circumstance that the promisor was ignorant of important collateral facts would not be an excuse. Whether the facts of which the promisor was ignorant might have been learned had reasonable diligence been exercised, may also be a material circumstance.42

§ 683. Election.

Election as a term in the law is properly applied to a case where a person has the choice of one or two alternative rights or remedies. 43 In choosing the one, he necessarily surrenders the other. This principle is not inconsistent with the general rule that the surrender of a right requires a sealed release or consideration, because the choice made by election gives the one making it an advantage which he could not otherwise have had. Though he surrenders one right he gains or keeps by so doing another and inconsistent right. Thus where a contract

41 See infra, §§ 1535 et seq.

42 See infra, § 1596. Also see §§ 690 et seq. regarding sales of goods. Whether or not acceptance of defective goods operates as a discharge of the seller's liability for damages, if the defects were discoverable on inspection, certainly the defect ceases to operate as a breach of condition.

See also similarly in regard to contracts for the sale of real estate and for work and labor, §§ 712, 713.

43 A person may also contract to perform one of two alternatives, and thus have an election between duties. See infra, § 1407, but this is immaterial to the present discussion.

is broken in the course of performance the injured party has a choice presented to him of continuing the contract or of refusing to go on. If he chooses to continue performance he has doubtless lost his right to stop performance; but in the nature of the case he could not exercise the two inconsistent rights of which he had the choice.

It is to be observed that election involves no requirement of mutual assent. Where the question is one of a substituted contract or accord and satisfaction, such mutual assent is an obvious necessity. And there is much the same requirement for a waiver based on a promissory estoppel. Such an estoppel cannot arise unless the person claiming the benefit thereof knew of the promise and showed assent thereto by acting in reliance upon it. Even a promise unsupported by either estoppel or consideration whenever such a promise is binding, may be thought to require, if not an actual manifestation of assent by the promisee for its validity, at least a presumption of assent based on the beneficial character of the promise.44 One who elects one alternative is often said to waive the other; 45 but, unless "waive" is given a very broad meaning, the expression is inexact, since he could not have both. only right was to make a choice. In some cases involving election, the party having this right of choice may take no action for an indefinite period. Only exigencies of fact rather than any rule of law compel him to act. For instance, an infant who has entered an executory contract presumably may, with

44 Mr. Justice Holmes, speaking for the Supreme Court of the United States in Bierce v. Hutchins, 205 U. S. 340, 346, 51 L. Ed. 828, 27 S. Ct. 524: "Election is simply what its name imports: a choice shown by an overt act, between two inconsistent rights, either of which may be asserted at the will of the chooser alone. Thus, 'if a man maketh a lease, rendering a rent or a robe, the lessee shall have the elcction.' Co. Litt. 145a. So a man may ratify or repudiate an unauthorized act done in his name. Metcalf v. Williams, 144 Mass. 452, 454, 11 N. E. 700. He may take the goods or

His

the price when he has been induced by fraud to sell. Dickson v. Patterson, 160 U. S. 584, 40 L. Ed. 543, 16 S. Ct. 373. He may keep in force or may avoid a contract after the breach of a condition in his favor. Oakes v. Manufacturers' F. & M. Ins. Co., 135 Mass. 248, 249. In all such cases the characteristic fact is that one party has a choice independent of the assent of anyone else."

45 See, e. g., State Bank v. Brown, 142 Ia. 190, 198, 119 N. E. 81; First Nat. Bank v. Exchange Nat. Bank, 179 N. Y. App. D. 22, 164 N. Y. S. 1092.

out losing his right to avoid the contract, wait after he comes of age until the time when performance is due from him, or from his co-contractor. That time may come early or late, and only when it does is some action necessary. In other cases the failure to act promptly deprives the party having the right of election of any choice. For instance, though one who has been induced to enter into a contract by fraud may elect after discovering the fraud to avoid the contract, prompt action is in some cases at least essential; the mere lapse of time may destroy the election.46 The same is true of rescission for breach of contract; 47 and so where an agent has entered into an unauthorized contract with a third person, it is "the duty of the principal to act immediately after knowledge, and his passivity or silence will be construed into an acquiescence or satisfaction, so as to protect the innocent third party.' Election to take advantage of breach of condition in a contract generally need not be exercised until the time arrives when, by the terms of the contract, the party entitled to elect must render some performance. Then either performing or failing to perform will indicate an election.49 Even prior to that time, however, any conduct which under the circumstances is deceptive except on the assumption that a choice has been made, may amount to an election.

1 48

§ 684. Election does not depend on intention.

In a correct definition of waiver wherever that word is used

48 See infra, § 1526.

47 See infra, § 1469.

48 Pacific Vinegar, etc., Works v. Smith, 152 Cal. 507, 511, 93 Pac. 85; and see supra, § 278.

49 "The common expression 'waiving a forfeiture,' though sufficiently. correct for most purposes, is not strictly accurate. When a lessee commits a breach of covenant, on which the lessor has a right of re-entry, he may elect to avoid, or not to avoid the lease, and he may do so by deed or by word; if with notice, he says, under circumstances which bind him, that he will not avoid the lease, or he does

an act inconsistent with his avoiding, as distraining for rent (not under the statute of Anne), or demanding subsequent rent, he elects not to avoid the lease; but if he says he will avoid, or does an act inconsistent with its continuance, as bringing ejectment, he elects to avoid it. In strictness, therefore, the question in such cases is, has the lessor, having notice of the breach, elected not to avoid the lease? Or has he elected to avoid it? or has he made no election?" Croft v. Lumley, 6 H. L. C. 672, 705, approved in Clough v. London, etc., Co., L. R. 7 Ex. 26.

in the sense of election, the requisite of even apparent intention to surrender a right is absent. The law simply does not permit a party in the case supposed to exercise two alternative or inconsistent rights or remedies. Even though he expressly states that he intends to reserve a right, he will, nevertheless, lose it if he takes an inconsistent course. Thus one who continues to receive benefits under a contract and assert rights under it after knowledge of a breach which would justify him in refusing to go on, cannot subsequently set up this breach as an excuse for his own non-performance even though he asserted from the outset, and consistently, that he proposed to do so.50

It is indulging in a fiction which is likely to lead to confusion of thought to express this result by saying that the intention to surrender a right is necessary but that the intention will on occasion be conclusively presumed from circumstances, which do not as a matter of fact necessarily show the existence of such an intention. Expressions of this kind, however, are common enough.51 That intention is not a material fact may

Croft v. Lumley, 6 H. L. Cas. 672, 706; Davenport v. Queen, 3 App. Cas. 115. See further infra, § 687.

51 In Insurance Co. v. Wolff, 95 U. S. 326, 330, the court said: "The principle that no one shall be permitted to deny that he intended the natural consequences of his acts when he has induced others to rely upon them, is as applicable to insurance companies as it is to individuals, and will serve to solve the difficulty mentioned. This principle is one of sound morals as well as of sound law, and its enforcement tends to uphold good faith and fair dealing. If, therefore, the conduct of the company in its dealings with the assured in this case, and with others similarily situated, has been such as to induce a belief that so much of the contract as provides for a forfeiture if the premium be not paid on the day it is due, would not be enforced if payment were made within a reasonable period afterwards, the com

pany ought not, in common justice, to be permitted to allege such forfeiture against one who has acted upon the belief, and subsequently made the payment.

"The company, notwithstanding the provision in the policy that its agents were not authorized to waive forfeitures, sent to them renewal receipts signed by its secretary, to be used when countersigned by its local manager and cashier, leaving their use subject entirely to the judgment of the local agent. The propriety of their use, in the absence of any fraud in the matter, could not afterwards be questioned by the company." See also Grippo v. Davis, 92 Conn. 693, 104 Atl. 165; Fraser v. Ætna L. Ins. Co., 114 Wis. 510, 523, 90 N. W. 476.

An exceptional and, it must be added, an erroneous decision to the contrary is Block v. Taylor (Mich.), 168 N. W. 536. The defendant had

be seen also from the converse case. If a party erroneously supposing he had an election offered him actually intended to surrender a right and assert a supposed alternative which did not exist, the right which in fact he had would not be lost in the absence of circumstances of promissory estoppel.52 It should be observed that though intent to surrender a right is not essential to election, the question whether an election has