in question at the time when the contract was made, but subsequently disposed of it, his conduct has a double aspect. On the one hand he is diminishing his ability to carry out the contract even if he so desires and, on the other hand, his conduct gives some evidence that he does not intend to carry it out. Regarded in either aspect, the transfer should excuse the buyer from continuing the contract.20

It has been suggested in some cases, especially in California, that since it is perfectly legal to make a contract to sell property which one does not own, and since the seller may regain the property which he has disposed of before the time for performing his contract arrives, the buyer should not be excused. 21 But it is obvious that a conveyance subsequent to the contract imposes a risk of inability which the buyer did not assume, and it is also clear that such a conveyance justifies an inference of intent not to perform which would not be warranted by a lack of title at the time the contract was originally entered into; and this distinction is now recognized by the California Supreme Court. 22

is not absolute owner of it, nor is it in his power, by the ordinary course of law or equity, to make himself so, though the owner offer to make the seller a title, yet equity will not force the buyer to take; for any seller ought to be a bona fide contractor, and it would lead to infinite mischief if an owner were permitted to speculate upon the sale of another's estate."

Of similar import are Weston v. Savage, 10 Ch. D. 736; Brewer v. Broadwood, 22 Ch. D. 105; Bellamy v. Debenham, [1891] 1 Ch. 412; Carpenter v. Holcomb, 105 Mass. 280, 285; Lawrence v. Miller, 86 N. Y. 131; Nelson v. Elevating Co., 55 N. Y. 480. See also Farrer v. Nash, 35 Beav. 167. "New Iberia Sugar Co. v. Lagarde, 130 La. 387, 58 So. 16; Fort Payne Coal & Iron Co. v. Webster, 163 Mass. 134, 39 N. E. 786; Meyers v. Markham, 90 Minn. 230, 96 N. W. 335, 787; Gruen v. Ohl, 81 N. J. L. 626, 80 Atl. 547; James v. Burchell, 82 N. Y. 108;

Brodhead v. Reinbold, 200 Pa. St. 618, 625, 50 Atl. 229, 1119, 86 Am. St. Rep. 735. See also Leonard v. Bates, 1 Blackf. 172; Russ Lumber Co. v. Muscupiabe Co., 120 Cal. 521, 52 Pac. 995, 65 Am. St. Rep. 186.

21 Garberino v. Roberts, 109 Cal. 125, 41 Pac. 857; Parkside Realty Co. v. MacDonald, 166 Cal. 426, 137 Pac. 21; Webb v. Stephenson, 11 Wash. 342, 39 Pac. 952. See also Joyce v. Shafer, 97 Cal. 335, 32 Pac. 320; Shively v. Semi-Tropic Co., 99 Cal. 259, 33 Pac. 848. These cases like those in the preceding note, relate to real estate.

22 In Brimmer v. Salisbury, 167 Cal. 522, 140 Pac. 30, 34, the court said: "Where a vendee contracts with one having none or an imperfect title, he contracts in the hope or expectation that the vendor may be able to perfect the title. Such is not the case where the vendor has title and thereafter parts with it. Of the essence of the contract is the security to the vendee,

§ 879. Encumbered or incomplete title.

Where the seller is not wholly without title to the property which he has agreed to convey but his title is encumbered or defective in such a way that the buyer need not accept it unless the encumbrance is removed, the principle governing the situation is the same as where the seller is wholly without title, but the application of the principle is not so easy. If the defect cannot be removed it is clear that the buyer need not await the time of performance but has a present excuse, 23 at least if he asserts it promptly on discovering the facts. But where the encumbrance can be removed, the question must resolve itself into one of degree and of probability. If encumbrances existed at the time when the contract was entered into and were such as could be removed before the time of performance without the assent of a third person, no such prospective inability exists as would excuse performance.24 Subsequent encumbrances put upon the property by the seller must be judged by the same principle. Do they

in his payments, of the title which the vendor has; and, if the vendor parts with that title to the impairment or destruction of that security, the vendee may be heard justly to complain, and it is, of course, no answer to say that the vendor thereafter may be able to go into the open market and repurchase the property. Common experience tells us that such an expectation is in its naure but a remote possibility, and that tuch a vendor has not the slightest insention of so doing."

23 Prenticet v. Erskina, 164 Cal. 446 129 Pac. 585 (the existence of a highway).

24 In Ziehen v. Smith, 148 N. Y. 558, 42 N. E. 1080, at the time of performance there was an outstanding lien on the property, of which neither buyer nor seller knew at the time of entering into the contract. The buyer, without demanding fulfilment of the contract, at once brought suit to recover part of the price which he had paid. The court held he could not

recover, as the encumbrance was one which was in the power of the vendor to remove, and he might have done so if requested. This decision was followed in Higgins v. Eagleton, 155 N. Y. 466, 50 N. E. 287. In the absence of any fraudulent concealment the determining question should be,-Would a reasonable man be warranted in inferring that the contract would not be carried out? See Forrer v. Nash, 35 Beav. 167; Brewer v. Broadwood, 22 Ch. D. 105; Blanton v. Kentucky &c. Warehouse Co., 120 Fed. 318, affd. 149 Fed. 31, 80 C. C. A. 343; Stierle v. Rayner, 92 Conn. 180, 102 Atl. 581; Payne v. Pomeroy, 21 D. C. 243; Lytle v. Breckenridge, 3 J. J. Marsh. 663; Caplan v. Buckner, 123 Md. 590, 91 Atl. 481; Sleeper v. Nicholson, 201 Mass. 110, 113, 87 N. E. 473; Hampton v. Speckenagle, 9 S. & R. 212, 11 Am. Dec. 704; Espy v. Anderson, 14 Pa. 308; cf. Easton v. Jones, 193 Pa. 147, 44 Atl. 264.

indicate an intent not to perform? Do they impose a greater risk upon the buyer than he should have anticipated as a natural possibility when he entered into the contract?

The purchaser may, however, elect to take the risk of waiting until performance is due in the hope that the vendor will be able then to complete his title; and if the vendor acquires title before the purchaser takes objection, the difficulty is cured.25 Indeed, it is said that the vendor when suing for specific performance may perfect his title until the time for decree.26 This, however, can be so in only three cases: (1) Where the defect in title is of so slight a character that equity would enforce the contract specifically (with compensation if necessary) at the suit of the vendor, 27 or (2) where the defect in title though it would be fatal to the enforcement of the contract if not cured, does not impose so great a risk on the purchaser as to make it unnecessary for him to await the possibility of the vendor's curing it; and time is not of the essence of the contract; or (3) where the purchaser has by silence or otherwise, manifested an election to continue the contract or to take the risk of the vendor's seasonably curing the defect in his title. Such a defect as might justify the purchaser in repudiating the contract if he manifested an immediate election to do so, may not give him the right to do so if he unreasonably delays to repudiate the contract after learning the facts. 28 It has been suggested that the purchaser's right of repudiation "must be distinguished from the common-law right of rescission, and arises out of that want of mutuality which, unless waived, is generally fatal to relief by way of specific performance." 29 But a suggestion that any different result would be reached in an action at law cannot be accepted. The purchaser's right or excuse is obviously based on the principle of prospective failure of consideration which is applicable in actions of law as well as in suits for specific performance. It cannot be admitted that a vendor whose title is so defective as to justify a purchaser in

25 Abbott v. Fellows, 116 Me. 173, 100 Atl. 657.

See supra, § 834. "See supra, § 844.

28 Halkett v. Dudley, [1907] 1 Ch. 590.

29 Ibid. 596. As to mutuality, see infra, §§ 1433 et seq.

inferring that the defect is not likely to be cured can compel the purchaser to wait until the day fixed for performance in order to see whether by any chance the vendor may be able to cure the defect, on penalty of being subject to an action for damages.

§ 880. Insolvency or bankruptcy.

If one party to a contract is insolvent or bankrupt, he probably will not be able to carry it out even if he so desires, unless his contract relates to specific property, and the solvent party has acquired a legal or equitable property right in the subject-matter of the contract which will be valid against seizure by creditors or by a trustee in bankruptcy of the insolvent contractor, 30 or unless the contract requires of the bankrupt only personal services which insolvency will not prevent him from rendering. Accordingly, the rule is general that a contractor need not trust to the credit of a co-contractor whom he finds to be insolvent, even though he has agreed to do so. As it is possible, however, that the insolvent or the representative of his creditors may find it advantageous to carry out the contract, and as they may be able to do so (since insolvency does not necessarily mean total lack of assets), the solvent party is not excused from the obligation of his contract altogether, but only from any obligation to give credit,31 unless the contract is of such a personal character

30 A contract to subscribe to the stock of a corporation is not excused by the insolvency of the corporation. Busch v. Stromberg-Carlson Telephone Mfg. Co., 217 Fed. 328, 133 C. C. A. 244.

31 Ex parte Chalmers, L. R. 8 Ch. 289; Bloomer v. Bernstein, L. R. 9 C. P. 588; Morgan v. Bain, L. R. 10 C. P. 15; Mess v. Duffus, 6 Comm. Cas. 165; Re Phoenix Bessemer Steel Co., 4 Ch. D. 108; Watson v. Merrill, 136 Fed. 359, 69 C. C. A. 185; Robertson v. Davenport, 27 Ala. 574; Brassel v. Troxel, 68 Ill. App. 131; Rappleye v. Racine Seeder Co., 79 Iowa, 220, 44 N. W. 363, 7 L. R. A. 139; Hobbs v.

Columbia Falls Co., 157 Mass. 109, 31 N. E. 756; Lennox v. Murphy, 171 Mass. 370, 373, 50 N. E. 644; Pardee v. Kanady, 100 N. Y. 121, 2 N. E. 885; Vandegrift v. Cowles Engineering Co., 161 N. Y. 435, 55 N. E. 941, 48 L. R. A. 685; Diem v. Koblitz, 49 Ohio St. 41, 29 N. E. 1124, 34 Am. St. Rep. 531; Dougherty Bros. v. Central Bank, 93 Pa. St. 227, 39 Am. Rep. 750; Lancaster Bank v. Huver, 114 Pa. St. 216, 6 Atl. 141; Lincoln v. Charles Ashuler Mfg. Co., 142 Wis. 475, 125 N. W. 908, 28 L. R. A. (N. S.) 780. See also Sale of Goods Act, §§ 18, 41. Compare Ex parte Pollard, 2 Low. 411; Stokes v. Baars, 18 Fla. 656;

that an assignee could not carry it out.32 Mere doubts of the solvency of the other party, even though reasonable, afford no defence. 33

It has even been held that the solvent party must perform any precedent act which the contract requires of him (such as shipping the goods to the point where a sale was to be made) or be liable if it turns out that the insolvent or his representatives desire to perform the contract, and are able to do so.34 But the contracts of insolvents and of bankrupts are not usually carried out, and the solvent contractor should be justified in assuming that they will not be carried out unless some indication is made to him that they will be. To require him to make expensive preparations or part performance which will be futile if the contract is not carried out, is an unreasonable hardship. The Supreme Court of the United States has held that bankruptcy is an immediate anticipatory breach of contract 35 and though this mode of statement seems to go too far 36 since, if the contract is not one of a personal character, the trustee in bankruptcy may assume it and carry it on, the decision at least shows an indisposition to require a tender by the solvent party.37 If the contract

Chemical Nat. Bank v. World's Columbian Exposition, 170 Ill. 82, 48 N. E. 331; Jewett Pub. Co. v. Butler, 159 Mass. 517, 34 N. E. 1087; Bank Commissioners v. New Hampshire Trust Co., 69 N. H. 621, 44 Atl. 130. In all these cases the seller's performance was first due, but there can be no difference in result when the buyer's performance is first due.

32 Mess v. Duffus, 6 Comm. Cas. 165; Ex parte Pollard, 2 Low. 411; Chemical Nat. Bank v. World's Fair Exposition, 170 Ill. 82, 48 N. E. 331; Bank Comm. v. New Hampshire Trust Co., 69 N. H. 621, 44 Atl. 130.

33 C. F. Jewett Publishing Co. v. Butler, 159 Mass. 517, 34 N. E. 1087, 22 L. R. A. 253. See also on the point that generally the test of the right to refuse to go on with a contract is objective and not the subjective one of

reasonable belief, Jefferson v. Paskell, [1916] 1 K. B. 57.

34 Gibson v. Carruthers, 8 M. & W. 321; cf. Ex parte Tondeur, L. R. 5 Eq. 160; Ex parte Agra Bank, L. R. 9 Eq. 725; New England Iron Co. v. Gilbert R. Co., 91 N. Y. 153; Pardee v. Kanady, 100 N. Y. 121, 2 N. E. 885; Vandegrift v. Cowles Engineering Co., 161 N. Y. 435, 55 N. E. 941, 48 L. R. A. 685; Diem v. Koblitz, 49 Oh. St. 41, 29 N. E. 1124, 34 Am. St. Rep. 531.

35 Central Trust Co. v. Chicago Auditorium, 240 U. S. 581, 60 L. Ed. 811, 36 Sup. Ct. Rep. 412. See also Kamps &c. Drug. Co. v. United Drug Co., 164 Wis. 412, 160 N. W. 271.

36 See infra, § 1327.

37 So in Hanna v. Florence Iron Co., 222 N. Y. 290, 118 N. E. 629, 630, the court said: "It is undoubtedly the law as claimed by plaintiffs that mere