CHAPTER XXVI NON-PERFORMANCE OF A COUNTER-PROMISE AS AN EXCUSE FOR BREACH OF PROMISE The problem suggested in this chapter is confined to bilateral contracts..... 812 813 Criticism of the general theory of Serjeant Williams' Rules.. 823 Intent of the parties controls if expressed. 824 Fictitiously imputed intentions... 825 Intention must relate to the time of the formation of the contract.. 826 827 828 Order of time of performances. Order of performances when one or both take time. When performance on one side requires an indefinite time.. Readiness and willingness... What amounts to an offer to perform... 829 830 831 832 833 Tender is not necessary in equity unless time is of the essence. 834 835 Effect of the place of performance on concurrent conditions. 836 837 Failure to perform on the part of the plaintiff owing to excusable impossibility.... 838 Ignorance of the plaintiff's breach of contract when the defendant fails to perform.... Benefit derived by the defendant from the plaintiff's part performance.. 843 Breach in limine. . . . . 844 Distinction between breach as to the time of performance and as to character of performance.. 845 Meaning of time being of the essence. 846 A breach in limine as to time is fatal in contracts of sale. 847 848 849 Time is of the essence in equity in a contract of option... 853 Time is of the essence even in equity if the property is of speculative or fluc Right temporarily to withold performance distinguished from right to refuse absolutely...... 869 Effect of part performance of a divisible contract. 870 Whether the party first in default can ever recover.. 871 Effect of stating a price for part of the performance in a contract not wholly divisible..... 872 A bilateral contract to form a future contract or sale..... 873 Distinction between performance and preparation for performance. 874 Prospective breach of promise excuses performance of the counter promise.. 875 Prospective failure of consideration where conditions are concurrent. 876 Prospective inability... 877 The seller's lack of title to specific property excuses the buyer.. Rules of damages provide for cancellation of mutual obligations to exchange performances.. 883 An accrued right of action for breach of contract may be discharged by the plaintiff's subsequent inability to perform. . . .. 884 Actual or threatened failure of consideration will discharge liability already accrued..... 885 Reviving of seller's lien upon actual or threatened failure of consideration 886 887 Aleatory contracts.... 888 When performances in bilateral contracts are in exchange for one another ... 889 § 812. The problem suggested in this chapter is confined to bilateral contracts. The promisor in a unilateral contract sufficiently insures himself against becoming liable without getting the counterperformance he seeks, for until he gets that counter-performance there is not only no right of action against him, but no contract has arisen. In a bilateral contract, however, unless a promisor qualifies his promise by a condition that the other party to the contract shall perform, or offer to perform, before his own promise becomes enforceable, he is bound to perform, if the words of the transaction are alone considered, irrespective of the non-performance of the counter-promise. Each party on this assumption will have a right of action on the promise of the other party. § 813. Various methods of dealing with the problem. As the literal tenor of the language of a contract is not necessarily conclusive, various methods may be suggested of adjusting the rights of parties who have entered into a bilateral contract consisting of counter promises each in terms unconditional. 1. The promises may be enforced according to their tenor; no effect as a defence being given in an action on one promise to the non-performance of the other. 2. It may be said that in spite of the unqualified terms of the promises, liability upon one promise is conditional or dependent on the performance of the other, in accordance with rules of construction based on the supposed or imputed, though not expressed, intention of the parties. 3. It may be said that a party materially in default himself cannot recover damages from the other party because of a doctrine which suggests both contributory negligence and a requirement of equity. One who is himself guilty of a wrong for breach of a contract it may be said should not seek to hold his co-contractor liable. A doctrine of this sort is frequently applied by courts of equity. A complainant whose own attitude is unconscientious is frequently denied relief.1 1 Thus one who violates a mutually restrictive covenant cannot complain in equity of a similar violation by another. Smith v. Spencer, 81 N. J. Eq. 389, 87 Atl. 158. 4. It may be said that in a bilateral contract not only are the promises consideration for one another but that the parties contemplate that the performance also shall be exchanged one for the other; in other words, that in a bilateral contract a double exchange is contemplated, first of promises and later of performances; and that just as a failure to give a promise on one side would entail invalidity of the counter promise, so a failure to give performance on one side should on this view deprive the party in default of a right to enforce performance on the other side. This view is, it seems, the best supported by reason and is that which best explains the decisions of the courts, for although the second theory is that more often stated in terms in judicial opinions, some of the actual results reached cannot be well explained by it, and not a few recent decisions emphasize the fourth view. Even where the words "failure 2 In Ward v. Textile Commission Co., 139 N. Y. App. Div. 109, 112, 123 N. Y. S. 918: "The law is now well settled that a promise or agreement by one party to a contract, not under seal, to do or refrain from doing some act or thing before the other party to the contract is to be obligated to perform is the consideration for the contract, and may be shown by parol, and that failure to fulfill the promise or to perform the agreement constitutes a failure of consideration, and relieves the other party from performing. Bookstaver v. Jayne, 60 N. Y. 146." See also extracts from Acme Food Co. v. Older, 64 W. Va. 255, 61 S. E. 235, 17 L. R. A. (N. S.) 807, infra, § 840, n. In Bray v. Lowery, 163 Cal. 256, 260, 124 Pac. 1004, similarly the court said: "This case therefore comes within the rule stated in Richter v. Union Land & Stock Co., 129 Cal. 372, 62 Pac. 40, as follows: 'In all executory contracts the several obligations of the parties constitute to each, reciprocally, the consideration of the contract; and a failure to perform con stitutes a failure of considerationeither partial or total, as the case may be-within the meaning of section 1689 of the Civil Code.' See, also, Sterling v. Gregory, 149 Cal. 121, 85 Pac. 305, and Cleary v. Folger, 84 Cal. 316, 24 Pac. 280, 18 Am. St. Rep. 187." Grotheer v. Panama-Pacific Land Co., (Cal. App. 1919), 181 Pac. 667. In Fullam v. Wright & Colton Wire Cloth Co., 196 Mass. 474, 478, 82 N. E. 711, Braley, J., said: "The failure of the plaintiffs to meet this requirement of [the contract in regard to] delivery resulted in a total failure of consideration which justified the defendant in a complete repudiation of the sale." In Poussard v. Spiers, 1 Q. B. D. 410, Blackburn, J., said, in speaking of the effect of a failure by the plaintiff to keep a promise that his wife should sing in opera, "the damage to the defendants and the consequent failure of consideration is just as great as if it had been occasioned by the plaintiff's fault, instead of by his wife's misfortune." See also Rosenthal Paper Co. v. National &c. Paper Co., 175 of consideration" are not used the fundamental idea implied therein is often expressed. In adopting this view, it is not necessary to reject the second in every case. When A and B promise respectively to buy and sell stock in a corporation on May 1, the natural meaning of such language in the year 1500 may have been that the promises were independent. Four hundred years later that is not the natural construction. The customary methods of doing business of the kind by concurrently conditional performances are understood by the parties, and, therefore, determine the meaning of their language. But whether or not it is possible to imply a condition as matter of fact by ordinary rules of construction, the general and far-reaching principle of justice should also be observed that performance on one side should not be required, if the other party is materially in default in the performance which he was to give in exchange. § 814. Meaning of failure of consideration. 4 It has been said that: "Strictly speaking, there can be no such thing as a' failure of consideration.' Either the promisor receives the consideration he has bargained for, or he does not. If he does not receive the consideration, there is no contract; if he does receive the consideration there can be no 'failure of consideration thereafter." Though the expression thus criticised may be sometimes loosely used, it is not inaccurate. It is used not infrequently where mistake or fraud excuses the performance of a promise, as where a purchaser promises to pay for a supposed patent which is in fact void, or for a horse which, unknown to the parties or at least to the buyer, is not in existence at the time of the bargain. But the fact that there is fraud or mistake will not prevent it from also being true N. Y. App. D. 606, 162 N. Y. S. 814, 818. 3 "It does not turn upon any question of condition precedent. The only question is, whether if a man who is bound to perform his part of a contract does not do so, he can enforce the contract against the other party." Pollock, C. B., Hoare v. Rennie, 5 H. & N. 19. "His persistent refusal to 5 deliver the consideration [i. e., to perform his promise] may be treated at law as well as in equity as a justification for non-performance by the defendants." Bryne v. Dorey, 221 Mass. 399, 404, 109 N. E. 146. Harriman on Contracts (2d ed.), § 524. Copied in 9 Cyc. 369. 5 See supra, § 137. |