§ 871. Whether the party first in default can ever recover. The statement is frequently made that the party first in default under a bilateral contract cannot recover for the subsequent failure of the other party to perform.90 Frequently a party first in default may recover the value of what he has done or given.91 But so far as concerns an action on the contract the statement is true where the first default is material and there is dependency between the performances in question. It is obviously not true of independent promises, and even in contracts where there is a general dependency a particular promise may be so far independent of a counter promise that breach of one will not excuse liability on the other. Thus in divisible contracts a situation may arise where a debt has become due for an instalment furnished and must be paid though the creditor was the first party to break a provision of the contract. It may be supposed that payment for each instalment furnished under such a contract is not to be made until the expiration of a certain period of credit. Before the period of credit for one instalment has elapsed and, therefore, before the buyer is in default, the seller may fail to perform the second instalment when due, thereby committing the first breach of the contract. He will not, on that account, be deprived of his right to sue ment. A debt arose for that 90 In Rice v. Fidelity & Deposit Co., 103 Fed. 427, 433, 43 C. C. A. 270, the court said: "He who commits the first substantial breach of a contract cannot maintain an action against the other contracting party for a subsequent failure to perform. Cresswell, etc., Cattle Co. v. Martindale, 63 Fed. 84, 89, 11 C. C. A. 33, 38, 27 U. S. App. 277, 284, 285; Norrington v. Wright, 115 U. S. 188, 204, 205, 6 Sup. Ct. 12, 29 L. Ed. 366; Filley v. Pope, 115 U. S. 213, 6 Sup. Ct. 19, 29 L. Ed. 372; Cleveland Rolling Mill v. Rhodes, 121 U. S. 255, 261, 264, 7 Sup. Ct. 882, 30 L. Ed. 920; Beck & Pauli Lith. Co. v. Colorado M. & E. Co., 52 Fed. 700, 3 C. C. A. 248, 10 U. S. App. 465, 470; King Philip Mills v. Slater, 12 R. I. for the price of the first instalprice when the instalment was 82, 34 Am. Rep. 603; Smith v. Lewis, 40 Ind. 98; Hoare v. Rennie, 5 Hurl. & N. 19; Pope v. Porter, 102 N. Y. 366, 371, 7 N. E. 304; Dwinel v. Howard, 30 Me. 258; Robson v. Bohn, 27 Minn. 333, 334, 7 N. W. 357; Reybold ɛ. Voorhees, 30 Pa. St. 116, 121; Stephenson v. Cady, 117 Mass. 6, 9; Branch . Palmer, 65 Ga. 210; Fletcher v. Cole, 23 Vt. 114, 119." See also National Surety Co. v. Long, 125 Fed. 887, 892, 60 C. C. A. 623; Forrest City Box Co. v. Sims, 208 Fed. 109, 125 C. C. A. 337; White Oak Fuel Co. v. Carter, 257 Fed. 54, 56; California &c. Agency v. Penoyar, 167 Cal. 274, 139 Pac. 671, 674. 91 See supra, §861, infra, §§ 1473 et seq. furnished, and a subsequent breach of another instalment of the contract can have no effect on this liability.92 So in a divisible contract of service a breach of contract by the employee will not deprive him of a right to recover a divisible portion of his compensation for a corresponding portion of the agreed service, which has been completely performed.93 § 872. Effect of stating a price for part of the performance in a contract not wholly divisible. In a completely divisible contract the whole performance on each side is divided into parts corresponding with parts of the counter promise. Not infrequently, however, a contract may contain a promise the performance of which is stated as the price or exchange for certain counter performance; and the contract may also contain other promises for which no special price is fixed. A common illustration is a sale of 92 This was so held in J. K. Armsby Co. v. Gray's Harbor Commercial Co., 62 Or. 173, 123 Pac. 32, 36, and the court supported its conclusion by saying: "The case of Harber Bros. Co. v. Moffat Cycle Co., 151 Ill. 84, 96, 37 N. E. 676, 679, is very much in point upon this question. The action was upon a contract for the sale of bicycles, deliveries to be made in instalments, and payment for each shipment within 30 days. Both parties were in default. The court said: 'The question here distinctly presented as the controlling one is whether a vendee who has accepted goods delivered under an express contract, but not at the time or in the quantity required by it, with knowledge of the default of the vendor in those respects, but has himself failed, without legal excuse, to pay for them according to it, can maintain an action on the contract for such a default of the vendor. We think the general rule everywhere recognized is against it. . . . Pennsylvania Coal Co. v. Ryan, 107 Ill. 226; Bradley v. King, 44 Ill. 339; Stewart v. Many, 7 Ill. App. 508. For appellant, the attempt is made to evade the force of these decisions by the claim that appellee was first in default, whereby appellant was damaged in the amount exceeding the price of the goods received, for which he failed to pay, and from that time until the suit was brought always had a just claim for damages by appellee's default exceeding the amount for which appellant was in arrears. . . . But the question is not whether, upon a fair settlement, offsetting damages against price, appellant really owed anything, but whether, accepting the machines under contract, it performed that contract on its part as to payment." Cf. California &c. Agency v. Penoyar, 167 Cal. 274, 139 Pac. 671. The contrary statement of Ray, J., in Burgie v. Hicks, 203 Fed. 340, 347, cannot be supported. See supra, § 844. 93 Button v. Thompson, L. R. 4 C. P. 330; Martin v. Everett, 11 Ala. 375; Tipton v. Feitner, 20 N. Y. 423, 429; Walsh v. New York &c. Co., 88 N. Y. App. D. 477, 85 N. Y. S. 83; Peniston v. John Y. Huber Co., 196 Pa. 580, 46 Atl. 934. chattels with a collateral warranty. The price is in terms promised for the specific article purchased and if title is transferred an action for that price may be maintained without alleging or proving the fulfilment of the warranty."4 For the same reason after a sale of real estate "Even a defective title is no defence to the foreclosure of a purchase money mortgage or ground of abatement of price in the absence of fraud or eviction." 95 So, as part of a contract for the purchase of goods there may be a promise for an agency or an exclusive market or for freedom from competition. Breach of such a promise will not excuse the buyer from paying the contract price for property which he has received, or as part of a licensing contract there may be a promise to pay a royalty for each article sold. This royalty must be paid, though collateral terms of the contract are broken by the licensor, unless the royalty was promised to a material degree as payment for the performance of these terms.97 Other cases similar in principle occasionally occur.98 In such a case a 94 Parker v. Palmer, 4 B. & Ald. 387; Rogers v. Brown, 103 Me. 478, 70 Atl. 206. The buyer must recoup, counterclaim or take affirmative steps to rescind. 95 Ratkewicz v. Kara, (N. J. L. 1918), 103 Atl. 912. See also Patton v. Taylor, 7 How, 132, 159, 12 L. Ed. 637; Peters v. Bowman, 98 U. S. 56, 25 L. Ed. 91; Byrd v. Turpin, 62 Ga. 591; Douglass v. Thomas, 103 Ind. 187, 2 N. E. 562; McLelland v. A. P. Cook Co., 94 Mich. 528, 54 N. W. 298; Peabody v. Kent, 213 N. Y. 154, 107 N. E. 51; Hill v. Butler, 6 Ohio St. 207; Lessly v. Bowie, 27 S. Car. 193, 3 S. E. 199; Darling v. Osborne, 51 Vt. 148. 96 Mark v. Stuart-Howland Co., 226 Mass. 35, 115 N. E. 42; Springfield Seed Co. v. Walt, 94 Mo. App. 76, 67 S. W. 938; Tichnor v. Evans, (Vt. 1918), 102 Atl. 1031, L. R. A. 1918 C. 1025. Cf. Rosenthal Paper Co. v. National &c. Paper Co., 226 N. Y. 313, 123 N. E. 766. See also Moorman v. Parkerson, 131 La. 204, 59 So. 122, Ann. Cas. 1914 A. 1150, and cases cited supra, § 841. "See Wilfley v. New Standard Concentrator Co., 163 Fed. 421, 90 C. C. A. 543; Rosenthal Paper Co. v. National &c. Paper Co., 226 N. Y. 313, 123 N. E. 766. 98 Thus in Cadwell v. Blake, 6 Gray, 402 the defendant purchased certain machinery and a right to manufacture paper by a special process. The plaintiff sold the machinery and the right to manufacture and agreed to instruct the buyers in the art of making paper by the process in question. The defendant promised to pay "for said machinery," a fixed sum and for the right to manufacture, a share of the profits. No price was fixed for the instruction. In an action for the price of the machinery the defendant was held not liable unless the instruction had been given. In view of the fact that the price of the machinery was payable in paper manufactured by the secret debt arises for the price stated in the contract for a portion of the performance as soon as that portion is rendered, and this debt is recoverable in spite of default in the rest of the contract. It may be urged that frequently the defendant process, the decision seems right— there was a condition implied in fact. But had the price been payable in cash, it seems that the defendant while in possession of the machinery could not refuse to pay the contract price for it. In Pollak v. Brush Electric Assoc., 128 U. S. 446, 32 L. Ed. 474, 9 Sup. Ct. 119, the plaintiff sued on a contract which included a provision for the sale of certain machinery to the defendant at a fixed price and also for the payment by him of a sum of money in satisfaction of pre-existing claims and the transfer to him of certain shares of stock in the Brush Electric Light and Power Co. of Montgomery. The court said: "It is also contended that the plaintiff was not entitled to recover, except upon averment or proof that it had transferred or offered to transfer to the defendant the shares of stock held by it and by the Brush Electric Company of Cleveland, Ohio, in the Brush Electric Light and Power Company of Montgomery. This cannot be unless, as insisted, his promise to pay, in the contingency named in the third article of the agreement of November 13, 1883, the sum of $6,180, was in consideration of the plaintiff's promise to transfer, or have transferred to him, the above shares. . . . "It is manifest that the covenant of the plaintiff in relation to the transfer of stock in the Brush Electric Light and Power Company is wholly independent of the agreement in relation to the machine, dial and lamps in question. The consideration for such transfer, and for the settlement and satisfaction of all claims due by Pollak & Co. and by the Brush Electric Light and Power Company to the plaintiff, was the payment by Pollak of a certain amount, part in cash on the execution of the agreement of November 13, 1883, and the balance on the 1st of January, 1884. On the other hand, the consideration for Pollak's agreement to pay, in a certain contingency, a specified sum for the machine, dial and lamps, was his becoming the absolute owner of those articles, upon the happening of that contingency. The cost of the articles was fixed by the agreement at a certain aggregate sum, without reference to the transfer of the above-mentioned stock." See also Loveland v. Epstein Drug Co., 227 Mass. 311, 116 N. E. 570. Cf. Holbart v. Lauritson, 34 So. Dak. 267, 148 N. W. 19, 20, where the court said: "It is contended by the appellant that, the defendants having received the horse and signed the note, they became bound to pay the money, and it was wholly immaterial to them whether they paid it to the bank or to Green or to some subsequent purchaser. This contention is not supported by the facts in this case. At the time the note was executed, Green had not completed his part of the transaction. He had not furnished the certificate of registration of the horse which was a part of the consideration for the note. It is clear, from the facts appearing from the record, that the defendants purchased the horse only because they thought they were getting a registered animal; that, without the certificate of registration, they did not want the horse at all; that, until such certificate was furnished, defendants were not liable on the note and had a good defence to the collection thereof." would not have agreed to pay this price except on the assumption that the other promises in the contract were to be kept. This is true and because it is true the injured party should be allowed to refuse to go on with the bargain if it is still wholly executory 99 and should be allowed to rescind it even though executed, if he can restore to the other party the performance which has been received.1 Thus for breach of warranty he should be allowed to rescind an executed sale.2 But so long as the defendant has received and retains the performance for which he promised to pay a fixed sum, it is going in the teeth of the express terms of the contract to excuse him from liability. Under such circumstances he must seek redress for non-performance of other promises in a cross-action or counter claim, and this is true even though without fault on his part, he is unable to put the other party 99 Keith v. Herschberg Optical Co., 48 Ark. 138, 2 S. W. 777. 1 Freet v. American Electrical Supply Co., 257 Ill. 248, 100 N. E. 933; Rackemann v. Riverbank Imp. Co., 167 Mass. 1, 44 N. E. 990, 57 Am. St. 427; Bride v. Riffe, 93 Neb. 355, 140 N. W. 639; Koerner v. Henn, 8 N. X. App. D. 602, 40 N. Y. S. 1021. 2 See infra, §§ 1461 et seq. In Freet v. American Electrical Supply Co., 257 Ill. 248, 100 N. E. 933, 937, the court said: "Appellant contends that the provision of the contract requiring him to sell, and appellee to purchase, 800 fire extinguishers at $1.25 each, is severable from the other provisions of the contract; that the relation of vendor and vendee was thereby created; and that under the contract appellee became liable to pay the contract price for the goods upon delivery, even though there may have been a breach by appellant of all the other provisions of the contract. . "In our judgment the provision of the contract requiring appellee to purchase from appellant 800 fire extinguishers is so connected with and dependent upon the provision allotting to appellee the State of Illinois as territory over which its agency should extend, that a breach of the latter provision by appellant would justify appellee in rescinding the contract and refusing to perform the former provision. The principal object of the contract was the appointment of appellee as appellant's agent for the State of Illinois. That, together with the salary and commissions attached thereto, was the sole inducement for the purchase of 800 fire extinguishers by appellee. The fire extinguishers purchased by appellee were not for its own use, nor was appellee to assume the risk of reselling them. It was the plain intention of the parties that the 800 fire extinguishers should constitute appellee's stock as agent, out of which orders taken in its territory could be filled, and that the so-called sale was, in fact, merely a deposit of $1,000 by appellee as security for the payment of that portion of the money derived from the sales of such stock by appellee as agent which, under the contract, appellant was entitled to receive." |