in instalments the right of retention is limited to an appropriate portion. 16 And in any case where the defendant has received the essential benefits of the contract he can retain only a part of his own performance by reason of a particular defect which does not seriously impair the benefit of what he has received, not, it is said, because the defence is not technically applicable, but because it would be fraudulent for the defendant to make use of it." This is not the equivalent of restricting the defendant to a counterclaim for damages, though obviously approaching it. The theory of the defence here, as generally, is based on the supposition that performance is still possible and the defendant's retention is not to be permanent but merely until the plaintiff's performance is completed.18 The defendant is, however, restricted to a counter16 André, 136; O. A. G. Darmstadt, 27 Nov. 1866, Seuff. Arch. XXI. No. 222; O. L. G. Braunschweig, 1 May, 1889, Seuff. Arch. XLVI. 358. But see as to right of withdrawing from future performances of an instalment contract, supra, § 909, n. 92.

17 André, 137. Here again the question of burden of proof comes up. Must the defendant prove how much he may retain or must the plaintiff prove the limitations of the defendant's right? André favors the latter view, p. 137. In an action in the Obertribunal, Berlin, 9 Oct. 1877, Seuff. Arch. XXXIV. 281, the plaintiff sued for rent of a mill leased by him to the defendant for a term of years. The defence was that the mill was in such bad repair that the defendant had been able to do but a part of the work he might have fairly expected to do, and that a meadow forming part of the premises contracted for had not been delivered to him but had been leased to another. The court held that the defendant could not be restricted to a counterclaim for damages, and that though plaintiff might fairly be entitled to some rental, yet as the fault was the plaintiff's the defendant could not be compelled to prove how much

the plaintiff's breach of contract had lessened the contract price; rather it was the plaintiff's duty to show what amount he was entitled to demand in view of all the circumstances, and if he Idid not do this his suit must be dismissed. See also R. G. 15 June, 1896, Seuff. Arch. LII. 144, stated, supra, § 908, n. 83.

18 This theory is brought out in a decision of the Reichsgericht, 11 June, 1881, Entsch. R. G. IV. 197, also Seuff. Arch. XXXVII. 25. The plaintiff sued for the balance unpaid on a building contract. The defendant claimed to retain it because of defects in the work. The contract price was 1606 marks; 675 marks had been paid; the defendant claimed that it would cost about 650 marks to do the work properly. It was held that the defendant was entitled to retain the balance of 931 marks, the difference between this amount and that necessary to complete the contract not being so great as to make it "dolosus" for the defendant to exercise the right of retention.

The Bürgerliches Gesetzbuch provides that "if performance has been partially rendered by one side counter performance cannot be refused, in so far as the refusal would offend against

claim for damages, when the unfulfilled promise of the plaintiff is collateral to the main object of the contract.1

§ 916. Whether the defence is applicable in case of impossibility.

In addition to these limitations of the defendant's right another very comprehensive one has been suggested and sometimes laid down by the courts. It is argued that as the defence is dilatory and has for its object forcing the plaintiff to perform, it is not appropriate where the plaintiff's performance has become impossible, whether with or without his fault. This reasoning is equally applicable whether the plaintiff has partly performed or has done nothing; but the cases where it has been applied have been cases of part performance.20

André opposes the theory. As he says, if a man contracts for the use of a carriage on the first Sunday in August and does not get it, yet is sued for the hire, it is immaterial to him whether the plaintiff would not or could not furnish the carriage. 21 Decisions of the Reichsgericht, too, have refused to limit in this way the application of the defence even in cases where the plaintiff had performed a large part of what he had agreed.22 The Civil Code, however, seems in part at least technically to have adopted the limitation. For though the general provision for the defence of unfulfilled contract is broad enough to include cases where the plaintiff's performance is not possible, 23 the later elaborate provisions for cases of

burg, 21 Feb. 1885; Seuff. Arch. XL. 288, similar language is used and the plaintiff allowed to recover on a building contract, subject to the defendant's recoupment of damages for incomplete work, since the defendant had had the work completed, making completion by the plaintiff impossible.

The same doctrine is applied by the Oberst L. G. f. Bayern, 21 Oct. 1867, Seuff. Arch. XLIII. 153, in an action for a balance of the price of an estate, which proved, contrary to the agreement, subject to an incumbrance.

21 André, 163.

22 R. G. 21 Jan. 1887, Seuff. Arch. XLII. 282. The plaintiff and the defendant entered into a contract by which the former sold and the latter bought 200 hundred-weight of wire nails at an agreed price. The plaintiff further agreed not to have a representative travel for trade through the surrounding towns. This action was for the price and the defence was that the plaintiff had allowed an agent to travel through the surrounding towns and had sold nails there. The court refused to allow recovery, holding the stipulation an essential part of the contract, and that the defendant's rights were not restricted to a counterclaim for damages. "Though the defence of unfulfilled contract is in its

nature dilatory only, yet its effect is peremptory if the seller has by his own wrongful act made it impossible to fulfil the contract. . . . Even if the plaintiff had sent an agent through the forbidden territory only after the defendant was in default in taking the goods contracted for, still the suit should be dismissed, because if the plaintiff wished to require fulfilment she must on her part be ready to fulfil."

R. G. 28 May, 1888, stated by Schall, in Arch. f. Civ. Praxis LXXIII. 429. The plaintiff sued for royalties promised annually for twelve years by the defendant in a contract by which the plaintiff on his part agreed (1) to teach the defendant a secret process, (2) to give him an exclusive license under a patent. The plaintiff taught the process, gave the license and received the royalties for some years, but before the expiration of twelve years the patent was declared void and as the defendant refused to pay further royalties, this action was brought. It was held that the plaintiff, though not liable in damages, and though the royalties were payment for something besides the license, could recover nothing, as there was no way to apportion the payments.

23 Art. 320.

impossibility are presumably exclusive; 24 and only in case of total accidental impossibility is it stated that counter performance may be refused. 25 Injustice to the defendant has been avoided as far as possible by enlarging and defining the right of the defendant to treat the contract as dissolved in this class of cases. 26 He is allowed to do so in any case where the plaintiff has not performed at all or where his performance is of no value to the defendant." But in case of partial accidental impossibility of performance by one party, apparently the exclusive right of the other is a reduction in price.

§ 917. Defence excluded by tender or prevention.

The defence of unfulfilled contract is applicable to all bilateral contracts.28 A proper offer of performance, though not accepted, excludes the defence of unfulfilled contract.29 It is customary to distinguish between "verbal" and "real" offers, and it is said that a bare oral offer is insufficient. There

24 Arts. 323, 325.

25 See Art. 323.

26 Where there has been no performance the difference between this affirmative right if allowed and the right of the exceptio non adimpleti contractus, is that the defendant must prove nonperformance in the first case, while the burden is upon the plaintiff in the second. Where there has been part performance a dissolution of the contract involves a return of whatever has been given by either party. In the case of the exceptio non adimpleti contractus such a return must be obtained, if at all, by independent proceedings. Besides these differences, the measure of damages in such a case as the first cited in supra, note 20, would be different. If the contract were dissolved any recovery would be based on unjust enrichment, not on the contract price.

B. G. §§ 323, 325. See supra, § 910. Dernburg II. § 21. It is not necessary that the stipulated performances are intended as an equivalent ex

change. In Entsch. R. O. H. G. VIII.
423, 25 Jan. 1873, the buyer was al-
lowed to retain the price of goods
delivered because of the seller's failure
to deliver all the goods, though the
price was not a lump sum.
But in a
decision of the O. L. G. Hamburg, 2
Oct. 1891, Seuff. Arch. XLVII. 257, the
principle was limited. The plaintiff
had sold his business to the defendant,
the latter agreeing among other things
to pay annually for some years 2% of
the amount of gross business, and to
make statements of the business. The
plaintiff sued for one of the promised
statements. The defendant set up in
defence that certain money was due
him on the transaction. It was held
that though this would have been a
defence if the plaintiff had been suing
for the 2%, it was not a defence to the
merely "preparatory suit" for the
statement.

29 Because it would be fraudulent to make use of the defence under such circumstances. The offer is technically matter for replication.

are no fixed rules, however, as to what is necessary beyond that. The formality required by the French law for putting in default does not obtain, but the party offering to perform must be so prepared for performance that the other party has but to receive it, and this must be made manifest.30 It is immaterial whether refusal of the offer is due to wilful default or to impossibility from subjective causes. One who because of illness cannot use a room engaged in an inn, one who is prevented from taking a music lesson because of a lame hand, must none the less pay the stipulated price, less any saving made by the other party from being freed from performing.31

Preventing performance by the other party has the same effect as refusing to accept proffered performance. Indeed, the boundaries between an unconditional refusal to accept performance, that is, to coöperate in carrying out the contract, and a prevention of performance, are not always definite.32

§ 918. Acceptance of defective performance.

As in the French law, mere receipt of performance does not necessarily imply such an approval of it as will prevent subsequent objection. Defects not apparent on ordinary examination, at least, are not thereby excused.33 Approval of performance also may indicate not an intention to treat the performance as full compliance with the contract, but merely to accept the performance as a partial or incomplete fulfilment

But the Handelsgesetzbuch (Art. 347) requires in the case of goods sent from another place, that the buyer shall make prompt examination and give immediate notice of any defects, and in case of failure to do so shall be regarded as having approved the goods, so far as concerns defects which would have been discovered by ordinary examination. Latent defects must be notified to the seller as soon as discovered, or will be regarded as waived. § 377 of the new Handelsgesetzbuch repeats these provisions, and extends them to sales in the same place.