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been definitely ascertained that one of the parties to a contract is unable or incompetent to carry out his part of the agreement, the other party will be justified in rescinding the agreement. 16: In one of the illustrative cases it appeared that the plaintiff, who was a sales agent or commission broker, contracted to procure the consignment to defendant of the product of certain silk mills, and defendant agreed to pay commissions on the sale of the product consigned. But after a time the company which owned the mills refused to consign any of its product to the defendant so long as the plaintiff should be retained as sales agent. And thereupon it was held that, as the plaintiff was unable to continue procuring the consignment of the goods, the defendant was justified in canceling the contract for the future.164 So, a liquor dealer, who has failed to pay the tax and file the bond required by law, is not in a condition to perform a contract by which he accepts the sole agency for the sale in a certain locality of the beer manufactured by a brewing company, and the company, on ascertaining such inability, may rescind the contract. 165 And it appears that when a building contractor fails to prosecute the work under his contract, and informs the owner that the reason is his inability to get mechanics, the owner may rescind.160 And the case is the same where one who has contracted to sell his share in a certain mine has parted with his interest in the property to a corporation which is insolvent.167 But the inability to perform must be clearly and definitely established. In a case where the defendant had attempted to cancel or abandon a contract by which the plaintiff had undertaken to handle and sell defendant's manufactures, it was held that the latter was not justified in such a course, because it had shown only an action on the part of the plaintiff which amounted at most to a determination to ascertain at what price its business could be sold for, and which did not war

163 Lawrence v. Simons, 4 Barb. (N. Y.) 354; Sugg v. Blow, 17 Mo. 359; Thomas v. Todd, 3 Litt. (Ky.) 337.

164 Napier v. Spielmann, 127 App. Div. 711, 111 N. Y. Supp. 1009. 165 Niagara Falls Brewing Co. v. Wall, 98 Mich. 158, 57 N. W. 99. 166 McGonigle v. Klein, 6 Colo. App. 306, 40 Pac. 465.

167 Burbank v. Pierce, 26 La. Ann. 295.

rant the inference that it was unable to carry on its business, or its intention to sell out.168 So, equity will not cancel a conveyance of the grantor's property in consideration of the grantee's undertaking to support and maintain the grantor and not to part with the property, merely because it is shown that the grantee is a poor man, when it also appears that the grantor is eighty-six years old, and that the agreement is unbroken up to the time of suit and is sustained by an offer of continued performance.109 And even where a definite and positive inability to perform is established, while this will give a right of rescission to the other party, it does not follow that the party so disabled will equally be entitled to abandon the contract. It is said, for instance, that equity will not relieve a party to a contract which is fair and reasonable in its terms, because he has placed himself in a predicament by agreeing to convey more than he had a right to, when there were no misrepresentations, overreaching, mental incompetence, or undue influence.170 And so, the fact that the vendee in an executed contract is without means with which to pay for the land, without selling or mortgaging it, and is unable to raise money in that way on account of defects in the title, furnishes no ground for rescinding the contract.171

§ 207. Insolvency of Purchaser.-Within the meaning of the rule just stated, it is clear that the insolvency of a party to a contract which requires him to pay money may constitute (or evidence) such an "inability to perform" as will give a right of rescission to the other party. And it has been held in several of the cases that the vendor of real or personal property is justified in treating the contract as abandoned when the insolvency of the purchaser, or his total inability to pay the price, has been definitely established.172 But in a few states it is held that one selling land

168 John Hetherington & Sons v. William Firth Co., 210 Mass. 8, 95 N. E. 961.

169 Hetrick's Appeal, 58 Pa. 477.

170 Roche v. Osborne (N. J. Ch.) 69 Atl. 176.

171 Buford's Adm'r v. Guthrie, 14 Bush (Ky.) 677.

172 Stratton v. California Land & Timber Co., 86 Cal. 353, 24 Pac. 1065; Abney v. Brownlee, 1 A. K. Marsh. (Ky.) 240; Tiernan v.

and taking notes for the purchase money, which are not paid at maturity, is not entitled to a cancellation and recovery, on the sole ground of the purchaser's insolvency, without showing that the same occurred after the contract was made,1 ,178 and that it is no cause for the rescission of a contract for the sale of goods that the purchaser becomes insolvent, and is unable to pay for those delivered, in the absence of fraud.174 Aside from these exceptions, the rule has sometimes been applied in cases other than those involving sales. Thus, where a note was given as the price of a scholarship in an incorporated academy, and the academy became insolvent and ceased to impart instruction, it was held that a case was made for the cancellation of the contract and the surrender of the note.175 And in another case, it was thought that a subcontractor might have been entitled to disaffirm a contract to furnish building material on account of the insolvency of the general contractor, but that his failure to repudiate after acquiring knowledge of the facts, and his acts in calling on the owner for aid in collecting the money due him and in filing a mechanic's lien, constituted a ratification of the contract.17 But in the case of contracts involving reciprocal performance of obligations on both sides, other than the payment of money, and especially where there has been a partial performance and the restoration of the status quo would be difficult or impossible, a party who undertakes to rescind on account of the other's insolvency and personal inability to continue stands on perilous ground. For, as it has been pointed out by a federal court, "as a legal proposition, insolvency or bankruptcy alone does not, in a contract of this kind, constitute either a breach or authorize its rescission or abandonment, for it may be finally and fully performed by oth

Roland, 15 Pa. 429; Todd v. Caldwell, 10 Tex. 236. The insolvency of a purchaser of goods on credit, coupled with a secret intention on his part not to pay for them, constitutes such fraud as will justify rescission and the reclamation of the goods. See, supra, § 31. 178 Jordan v. Beal, 51 Ga. 602.

174 Holland v. Cincinnati Desiccating Co., 97 Ky. 454, 30 S. W. 972.

175 Mary Washington Female College v. McIntosh, 37 Miss. 671. 170 University of Virginia v. Snyder, 100 Va. 567, 42 S. E. 337.

ers who may be acting, for instance, as trustees or as successors or purchasers of the bankrupt's property and rights involved therein or affected thereby." 177 But in any event, if insolvency may constitute a ground for rescission, it must be definite and complete. Thus, one who has contracted to purchase land cannot repudiate his contract on the ground that the vendor is financially embarrassed and is indebted to various persons whose claims (not being liens on the property) are not provided for in the trust deed under which the sale is made.178

Insolvency followed by an adjudication of bankruptcy may in some cases be regarded as the equivalent of disenablement to perform a contract and a repudiation of it, or as an anticipatory breach of the contract.179 Thus, when a purchaser of goods sold on credit becomes bankrupt before the vendor has parted with the possession of the goods, the latter, in case the trustee in bankruptcy does not elect to complete the contract by paying the price within a reasonable time, may treat the contract as broken and resell the goods.180

§ 208. Impossibility of Performance.-When performance of a contract by one of the parties is inherently impossible, or has become impossible in consequence of events occurring after the making of the contract, it is generally the right of the other party to rescind.181 For instance, where a contract is for the sale of 2,000 acres of "first-rate" land, to be chosen by the purchaser out of various tracts

177 In re Morgantown Tin Plate Co. (D. C.) 184 Fed. 109, 113.
178 Jacobs v. Morrison, 136 N. Y. 101, 32 N. E. 552.
179 Black, Bankruptcy, § 495. And see, infra, § 327.
180 Ex parte Stapleton, 10 Ch. Div. 586.

181 Williams v. Smith, 2 Root (Conn.) 464; Milligan v. Poole, 35 Ind. 64; Johnson County Sav. Bank v. Mendell, 36 App. D. C. 413; Earnshaw v. Whittemore, 194 Mass. 187, 80 N. E. 520. In a case in Georgia, it is said that the possibility or probability of the performance of many contracts is dependent upon so many contingencies, that it is only in an extreme case that a given contract can be said as a matter of law to be so incapable of performance as to evidence a purpose to defraud. Equitable Loan & Security Co. v. Waring, 117 Ga. 599, 44 S. E. 320, 62 L. R. A. 93, 97 Am. St. Rep. 177. Justification for the abandonment of a contract may be found in the imposition of terms by the other party which are impossible of performance. See Rhinevault v. Barrett, 185 Ill. App. 423.

owned or claimed by the vendor, the purchaser may have the contract vacated on showing that the vendor does not own any land of that description and therefore is unable to comply with his contract.182 So, where persons contracting to sell goods to arrive by a designated vessel knew that the goods were not on board the vessel, the purchaser may recover in an action of deceit whatever damages he has sustained.183 Sometimes also the person who is prevented by an unexpected difficulty from fulfilling his contract may claim the right of rescinding. This was held in a case where a contract was made for a conveyance of real estate and the assignment of a mortgage which was owned by a third person. The vendor being unable to obtain a voluntary assignment of the mortgage, it was held that he might rescind and tender a return of the money paid, although he could have obtained an equitable assignment by paying off the mortgage.184 And again, where one of the essential considerations of a lease was the adding of two stories to the building by the lessee, without which he could not afford to pay the stipulated rent, and both parties honestly believed that the building would support the addition, but plans were drawn after the execution of the lease and it was then discovered that this could not be done, it was held that the lessee was entitled in equity to a rescission of the contract.185 And it should be observed that a provision in a contract that a partial payment made thereon shall be returned in a certain contingency does not preclude its recovery by the party making it, on the happening of another contingency, not provided for, which prevents performance of the contract by the other party.186 But there are cases in which the person promising performance must be held to have taken the risk of anything which may render performance impossible. This was ruled, for instance, in a case where a coal mine was leased for a term of years, the rent to be paid in the form of a royalty which should amount

182 Lynch v. Johnson, 2 Litt. (Ky.) 98.

183 Heller v. Herbst, 1 City Ct. R. Supp. (N. Y.) 72.

184 Allen v. Alden, 109 Me. 516, S5 Atl. 3.

185 Hoops v. Fitzgerald, 204 Ill. 325, 68 N. E. 430.

180 Seibel v. Purchase (C. C.) 134 Fed. 484.

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