This section is from the book "A Treatise On The Law Of Vendor And Purchaser Of Real Estate And Chattels Real", by T. Cyprian Williams. Also available from Amazon: A treatise on the law of vendor and purchaser of real estate and chattels real.
In consequence of the doctrine of the relation back of the title of a trustee in bankruptcy to the act of bankruptcy (g), if a purchaser of land have notice of an act of bankruptcy committed by the vendor, he cannot safely proceed with the contract (unless with the concurrence of the vendor's trustee in bankruptcy) during the three months for which the act of bankruptcy remains available as a ground of bankruptcy proceedings (g). For if the purchaser were to accept a conveyance from the vendor and to pay him the purchase money, then, if the vendor should afterwards be adjudged bankrupt in respect of that act of bankruptcy, the conveyance to the purchaser would be rendered ineffectual and the purchaser would be liable to pay the money over again to the trustee in bankruptcy (h). For these reasons, a vendor who has committed an act of bankruptcy is not entitled to enforce the specific performance of the contract (i). And where time is of the essence of the contract, as upon the sale of a public-house as a going concern (k), if the purchaser have notice of an act of bankruptcy by the vendor, which will be available at the time fixed for completion, he is entitled at law to treat the contract as broken, and to recover his deposit accordingly (l). Where time is not of the essence of the contract, as is usually the case on sales of land (m), it seems open to the purchaser, on receiving notice of an act of bankruptcy by the vendor, at once to object to the title, on the ground that after the act of bankruptcy the vendor can only convey an estate, which is no longer absolute but defeasible on adjudication, and cannot give a good receipt for the purchase money (n). And it is submitted that if the purchaser make this objection and at the time fixed for completion the vendor still remain unable to make a valid conveyance, either alone or with the concurrence of the trustee under an adjudication of bankruptcy against him, the purchaser, not being in default with regard to the performance of his part of the contract, will be entitled to treat the contract as broken. But if at the time fixed for completion the act of bankruptcy have ceased to be available or the vendor have been adjudged bankrupt, it appears that the vendor or his trustee in bankruptcy, as the case may be, will be entitled to enforce the contract either specifically in equity or at law. And if the purchaser do not repudiate the contract in the manner indicated above, it appears that the vendor or his trustee in bankruptcy will be entitled to enforce the same, specifically or otherwise, after the act of bankruptcy has ceased to be available or an adjudication has taken place, although the day fixed for completion is gone by (o). The vendor's trustee in bankruptcy must, however, obtain the permission of the committee of inspection before bringing any action upon the contract against the purchaser (p). If the purchaser of his own accord choose to wait after the time fixed for completion, either until the vendor is adjudged bankrupt or until the particular act of bankruptcy has ceased to be available (q), he will be able to complete the contract safely, paying the purchase money to and taking a conveyance from the trustee in the bankruptcy in the former case, and in the latter the vendor himself. Under the Bankruptcy Act, 1883, if the purchaser should have no notice of an act of bankruptcy committed by the vendor, the conveyance of the property by and the payment of the purchase money to the vendor will not be invalidated in the event of the vendor being afterwards adjudged bankrupt upon that act of bankruptcy, provided that the conveyance and payment take place before the date of any receiving order made against the vendor (r). But if in such a case the completion of the contract should not take place until after that date, the purchaser is not protected; and it appears that both the conveyance to him and the payment by him would be rendered ineffectual on a consequent adjudication of bankruptcy against the vendor (s).
Act of bankruptcy by the vendor.
Period as may be allowed by the Court, to disclaim any part of the property of the bankrupt which consists of land of any tenure burdened with onerous covenants, of shares or stock in companies, of unprofitable contracts, or of any other prop that is unsaleable or not readily saleable by reason of its binding the possessor thereof to the performance of any onerous or to the payment of any sum of money; Bee Re Cohen, 1905, 2 K. B. 704.
(b) Above, pp. 32 - 35.
{c) See note (a), p. 546.
(d) Peurce v. Bastable's 1901, 2 Ch. 1122; Be ; 1901, 2 K. B. 518; Re Taylor, 1910, 1 K. B. 562.
(c) Re Bastable, 1901, 2 K. B. stat. 46 & 47 Vict. c. 52, s. 55 (2).
(f) Stat. 46 & 47 Vict. . . 62, s. 65 (6).
(g) Stat. 46 & 47 Vict, c 52, amended by 53 & 5 4 Vict. c 71, SB. 1, 20: v. Union of London, etc. Bank 1906. 2 Ch. 444; above, p. n. (a).
35 (2)
(g) See stat. 46 & 47 Vict. c. 52, as. 6 (1) (c), 43.
(h) Expte. Rabbidgr, 8 Ch. D. 367; Powell v. Marshall, 1899, 1 Q. B. 710, 712, 713; Davis v. Petric, 1906, 2 K. B. 786; and see Re Taylor, 1910, 1 K. B. 562.
(i) Lowes v. Lush, 14 Ves. 547.
(k ) Above, p. 488,
(l) Powell v. Marshall, 1899, 1 Q. B. 710.
(m) Above, pp. 58, 59
(n) See above, pp. 168, 169; Lowes v. Lush, 14 Ves. 547, 549; Goodwin, v. Lightbody, Dan. 153; Hipwell v. Knight, 1 Y. & C. 401, 419: Sug. V.& P. 176.
(o) See Lowes v. Lush, 14 Ves. 547, 549; Dart, V. & P. 498, 995, 5th ed.; 5G8, 1114, 6th ed.; 1225, 7th ed.; Rawlins on Specific Performance, 87; above, pp. 68, 59, 168, 169
(p) Stat. 46 & 47 Vict. c. 52, s. 57 (2).
(q) Dart, V. & P. 498. 5th ed.: 5G8, 6th ed.: 1225, 7th ed.
If before completion of the contract the vendor be adjudged bankrupt and obtain an order of discharge, or a composition or scheme of arrangement with his creditors be accepted and approved by the Court, it appears that he will be released from his liability on the contract at law (t). But, as we have seen (u), the vendor's trustee in bankruptcy takes his legal estate in the land sold subject to the purchaser's equities therein; and if this estate were reconveyed to the vendor on his obtaining his discharge, he would take it subject to the same equities. Besides this, the vendor's correlative equitable liability to specific performance of the contract does not appear to be provable in bankruptcy (x); so that a vendor making a composition or scheme of arrangement with his creditors under the Bankruptcy Act, 1890, without parting with his estate in the land sold, does not appear to be discharged from his liability to perform the contract specifically at the purchaser's suit (y).
 
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