So, in a case in the federal courts, the owner of a stock farm made a contract with defendant, giving him possession of the farm, and the right to one-third of the profits he should make. But the defendant sold the stock and leased the farm, retaining only the homestead, became insolvent, and unable to repay the money he had received. It was held that the owner was entitled in equity to a decree setting aside the contract and restoring the possession to him.18 So a complaint alleging a breach by defendant of a contract whereby plaintiff was to furnish lands and implements, and defendant was to devote his time to raising alfalfa and feeding cattle to be furnished by plaintiff and defendant respectively, the title to the cattle to remain in the person furnishing them, and which further alleges that defendant has placed his own brand on cattle supplied by the plaintiff, and has attempted to charge plaintiff for expenses not contemplated by the contract, and is incurring unnecessary expense and is insolvent, shows a cause of action for the rescission of the contract.1 In a case in California, the plaintiff granted to defendant the exclusive right to sell a patented machine in certain states, with a provision for the termination of the agreement in case the defendant failed faithfully to prosecute the introduction and sale of the article. But the defendant made an agreement with the proprietor of a rival machine, intending to prevent the introduction and sale of the plaintiff's machine within at least a portion of the territory covered by the plaintiff's agreement, and he denied the plaintiff's right to terminate the agreement, and threatened to obtain an injunction to prevent sales by the plaintiff in that territory. It was held that this gave the plaintiff a right to sue for the cancellation of the agreement.20 And a similar ruling was made in a case where one who had contracted with a transfer company to furnish a motor truck at an agreed price per

19

Trinity University v. McFarland, 1 White & W. Civ. Cas. Ct. App. (Tex.) § 1309.

18 Tibbatts v. Tibbatts, 6 McLean, 80, Fed. Cas. No. 14,020. 19 Hodges v. Price, 38 Wash, 1, 80 Pac. 202.

20 Bradley v. Anglo-American Gas Control Co., 102 Cal. 627, 36 Pac. 1011.

1

21

day to carry baggage to certain hotels, proceeded to collect and retain the compensation. This was held such a breach of his contract as warranted its termination by the other party. But the breach by a third person of his contract with the buyer of goods does not authorize the buyer to rescind the contract of sale. This ruling was made in a case where the buyer was selling the goods in retail lots to a third person, and the latter declined to receive any more on the ground that they were not of the stipulated quality.22

Finally, the non-performance of a contract by one of the parties may not only justify its rescission by the other, but may impose upon him a duty, in equity at least, to terminate it promptly. It is said that, because one party violates his contract, the other is not at liberty entirely to disregard his own interest, and then seek full indemnity by the recovery of damages against the defaulting party.28

§ 197. Pre-Requisites to Rescission.-Rescission of a contract is not permitted for a casual, technical, or unimportant breach or failure of performance, but only for a breach so substantial as to tend to defeat the very object of the contract. But on the other hand, the motives of the party in default or the reasons which actuated him in acting or refraining from action are not important; and it is not essential to the right of one party to rescind a contract that its violation by the other should have been willful.25 But while one may, by his own act, rescind a contract for failure of performance, and abide the consequences

21 Ingebrigt v. Seattle Taxicab & Transfer Co., 78 Wash. 433, 139 Pac. 188.

22 Bristol Mfg. Corp. v. Arkwright Mills, 213 Mass. 172, 100 N. E. 55.

23 Worth v. Edmonds, 52 Barb. (N. Y.) 40.

24 Callanan v. Keeseville, A. C. & L. R. Co., 199 N. Y. 268, 92 N. E. 747; St. Regis Paper Co. v. Santa Clara Lumber Co., 186 N. Y. 89, 78 N. E. 701; Umberg v. Neinken, 128 App. Div. 165, 112 N. Y. Supp. 618; MacCambridge v. Roth (Sup.) 144 N. Y. Supp. 626; Weintz v. Hafner, 78 Ill. 27; City of Elgin v. Joslyn, 136 Ill. 525, 26 N. E. 1090. Where a contract for the sale of land specifies what defaults shall be grounds for forfeiture, a forfeiture on other grounds not included therein will not be upheld. Cughan v. Larson, 13 N. D. 373, 100 N. W. 1088.

25 Bacon v. Green, 36 Fla. 325, 18 South. 870.

of so doing, yet if he invokes the aid of a court of equity to obtain a rescission of it, he must be able to show that he has not an adequate remedy at law.20 This may be the case, for example, where an action for damages would not be an adequate remedy for the reason that the damages resulting from the defendant's non-performance could not be ascertained with reasonable certainty." But the mere loss of additional profits by reason of a breach of contract is not sufficient ground for rescission, when the amount is comparatively small and can be recovered in an action for damages.28 On the other hand, the fact that a penalty for nonperformance is named in the contract will not operate as a bar to a suit for rescission, where the amount of the penalty is not sufficient to give adequate damages at law.29

In practically all cases of rescission, restoration of the status quo is an essential pre-requisite to the right to rescind. And rescission for non-performance is no exception to this rule. If the situation of the parties has been so changed by a partial performance of the contract, or by their making arrangements for carrying it out, or by their actions taken in reliance upon its expected execution, that they cannot be restored without loss to their former situation, as if the contract had not been made, then a rescission cannot be had, but the remedy for damages occasioned by non-performance must be sought in some other form.30

26 Lewis v. New York Life Ins. Co., 181 Fed. 433, 104 C. C. A. 181, 30 L. R. A. (N. S.) 1202; Blake v. Pine Mountain Iron & Coal Co., 76 Fed. 624, 22 C. C. A. 430; Madson v. Clark, 165 Ill. App. 228; Carmody v. Powers, 60 Mich. 26, 26 N. W. 801; Callanan v. Keeseville, A. C. & L. R. Co., 199 N. Y. 268, 92 N. E. 747; Fuller v. Hubbard, 6 Cow. (N. Y.) 13, 16 Am. Dec. 423.

27 Callanan v. Keeseville, A. C. & L. R. Co., 199 N. Y. 268, 92 N. E. 747.

28 Southwestern Surety Ins. Co. v. Ferguson (Tex. Civ. App.) 131 S. W. 662.

29 Wilson v. Roots, 119 Ill. 379, 10 N. E. 204; Boulware v. Crohn, 122 Mo. App. 571, 99 S. W. 796; Ochs v. Kramer, 32 Ky. Law Rep. 762, 107 S. W. 260.

30 Blake v. Pine Mountain Iron & Coal Co., 76 Fed. 624, 22 C. C. A. 430; Ragsdale v. Ragsdale, 105 La. 405, 29 South. 906. "In some cases a party may rescind without the consent of the opposite party, for non-performance by him of his covenants; but this can be done only when both parties can be restored to the condition in which

31

Thus, a sale cannot be annulled, for non-payment of a portion of the price, when the parties from their transactions have rendered it impossible to place each other in the same situation they were in before the sale was made.31 In an instructive case on this point, it appeared that a railway company contracted with the plaintiff to furnish and put down a switch or siding leading into his coal yard from the main line of the railway. Relying on this contract, the plaintiff erected sheds and incurred other expenses in preparing the premises for a coal yard, and defendant railway built the siding and delivered coal over it for a time, but afterwards, on the ground that part of the contract price had not been paid, undertook to rescind the contract and to remove the siding. But it was held that this could not be allowed, since it would destroy the plaintiff's business, and that the remedy of the company was an action on the contract for the unpaid balance of the price.32 And, to generalize the rule a little, rescission for non-performance cannot be claimed when there are circumstances in the particular case which would render such a course inequitable.

33

It is also required of a party seeking the rescission of a contract that he should act with reasonable promptness, and he cannot claim relief in this form if he has acquiesced in the existing condition of affairs for so long a time that the rights or interests of the other party would be seriously compromised by a rescission, or until the rights of third persons have intervened. This rule is applicable in the case of rescission for non-performance.34 Thus, a contract for the sale of land provided that the grantee should be entitled to a deed on making the first payment, but the deed was not then delivered, and he remained in possession of the land for eight years after making the first payment, and paid a large part of the purchase money without receiving a deed. It was held that he could not afterwards rescind

they were before the contract was made." Civ. Code Ga. 1910, § 4306.

31 Leflore v. Carson, 7 La. Ann. 65.

32 Smith v. Atlantic City R. Co., 78 N. J. Law, 708, 76 Atl. 977.

33 Lipscomb v. Fuqua, 103 Tex. 585, 131 S. W. 1061.

34 Hakes v. B. Aaron & Sons, 182 Ill. App. 100. See Miles v. Hemenway, 59 Or. 318, 111 Pac. 696, 117 Pac. 273.

the contract for the default of the grantor in not giving him a deed.35

Finally, where performance at an exact time is not of the essence of the contract, or where a provision as to the time of performance has been waived, it would not ordinarily be equitable to permit the party to terminate the contract abruptly and without any notice of his intention to do so. Hence it is usually required in such cases that he shall first put the other party in default, that is to say, by a demand for performance and by affording a reasonable opportunity for the fulfillment of the contract.36

$198. Partial or Successive Failures of Performance.A partial failure of performance of a contract will not give ground for its rescission unless it defeats the very object of the contract or renders that object impossible of attainment, or unless it concerns a matter of such prime importance that the contract would not have been made if default in that particular had been expected or contemplated. In an early and leading case it was said: "It is not every partial neglect or refusal to comply with some of the terms of the contract by one party which will entitle the other party to abandon at once the special and solemn obligation entered into by the parties, and by which they had made for themselves the law which was to control them. In order to justify an abandonment of the contract, and of the proper remedy growing out of it, the failure of the opposite party must be a total one; the object of the contract must have been defeated or rendered unattainable by his misconduct or default. For partial derelictions and non-compliances in matters not necessarily of first importance to the accomplishment of the object of the contract, the party injured must seek his remedy upon the stipulations of the contract itself." This rule is inflexible where the partial

37

35 Knickerbocker v. Harris, 1 Paige (N. Y.) 209. But see this case on appeal, 5 Wend. 638.

36 Kent v. Davis Bros. Lumber Co., 122 La. 1046, 48 South. 451. 87 Selby v. Hutchinson, 4 Gilman (9 Ill.) 319. And see Lake Shore & M. S. Ry. Co. v. Richards, 152 Ill. 59, 32 N. E. 773, 30 L. R. A. 33; Bloomington Electric Light Co. v. Radbourn, 56 Ill. App. 165; Weintz v. Hafner, 78 Ill. 27; Perry v. Quackenbush, 105 Cal. 299, 38