If defective or part performance is accepted, with knowledge of the breach, such acceptance, when voluntary, usually operates to waive the breach, especially if the breach consists merely in not doing something provided for the other's benefit, but not preventing substantial performance. If the circumstances show no intention to waive damages in the acceptance of a part or delayed performance, then such damages may be recovered; but if acceptance is forced upon one, he may aver breach as an entire defense if sued on the contract. Some courts, however, allow a reasonable compensation even in that case.
Where there is a breach which one might insist upon but does not do so, and accepts performance notwithstanding the breach, this usually operates as a waiver of the breach. Thus, suppose that one has a suit of clothes made which does not conform to the order, yet he nevertheless accepts it; this precludes him from insisting that the contract was broken. Or suppose that an employer continues in his employment a clerk who does his work in such an incompetent or negligent manner that he could have been discharged therefor; this is a waiver of the breach and the clerk could collect the salary agreed upon. Or suppose that one having a house built is entitled to an architect's certificate before he accepts, yet accepts without such certificate, he cannot aver that there has been any breach.174
If at the time one accepts he does not know of the breach, he will not be considered as having waived it. Thus, if the employer was absent during the rendition of his clerk's incompetent and negligent service, and the breach was material, he might have a good defense to a suit for the salary agreed upon. Or suppose he accepts goods which are not as warranted, yet this defect is not at the time of the acceptance discoverable upon ordinary inspection, as, for instance, where canned goods contain a deleterious substance that soon destroys them, or a piece of machinery will not do the work agreed upon, there is no waiver.
Sometimes the circumstances practically force one to accept, as where a building not even in substantial compliance with the contract is put on one's land. In such case one may insist upon the breach unless the circumstances show that he waived it.175
Where there is a waiver of the breach, there may or may not also be a waiver of the right to insist upon damages. If one accepts under protest and in order to save himself or the other party from greater damages, he does not necessarily waive his right to have his damages, although it might be said that he has waived the breach in the sense that he did accept what was offered. Thus, if one orders ice from a distance and a poorer quality than that ordered is received, he may in order to stop further waste or loss accept the ice, but have his damages. So where performance is delayed, one may still accept but have damages for the delay unless the circumstances show that he waived prompt performance. The same may be said of partial performance.
174. Smith v. Aiker, 108 N. Y. 87.
175. Eldridge v. Rowe, 7 111. 71.
Where one has no option but to accept, as in the case of the improvement of one's land, or the acceptance of services from one who afterwards breaks his contract, if there has been a performance whose benefit without compensation would amount to an unjust enrichment at another's expense, the courts often allow a reimbursement entirely independent of the terms of the contract. In such a case, one could not plead and assert his express contract, but out of the justice of the matter, and on a quasi-contractual basis, compensation is allowed, if, from the facts, justice demands it. However, there is a division of authority on this point. Thus, in an Illinois case where one was employed for a certain time and unjustifiably quit before that time, the court said he could have nothing.176
To substantiate an averment of breach one party must show that he has done all that the contract required him to do before he could require performance by the other, or that he has made a tender where the performances were to have been concurrent.
176. Eldridge v. Rowe, 7 111. 71.
Where one party is alleging breach by another, it is to be inquired whether he has himself progressed far enough in the performance of a contract to charge the other. Thus, if one was bound by his contract of sale to deliver goods to a certain place, he could not charge the other with breach, so long as he had not delivered them at that place. In a great majority of cases one does not have to fully perform his contract before he can charge the other with non-performance. How far he must go depends on his undertaking by the terms of his agreement. Then if he does not go that far he has no right to charge the other party, but on the contrary has himself committed a breach. But where one was not to perform in whole or in part except as the other also performed, he need only tender performance. If one agrees to sell goods for cash, he need not deliver those goods in order to charge the other party; he need only tender them at the proper time and place.
Tender of performance need not be kept good, except where it consists in payment of a debt. Thus, one who is to sell goods need only make tender when the time comes, and then his obligation is gone; but it is otherwise with the payment of money; a tender thereof does not discharge a debt, although it may stop the running of interest and accrual of damages.
A severable contract is really a number of independent contracts embraced in one agreement. A breach of one of the parts thereof is not a breach of the other parts thereof because each is independent of the other. But if a contract is entire, a breach of any part of it is a breach of all of it. It is often difficult to tell whether contracts are severable or entire.
If A has contract No. 1, and contract No. 2, with B, his breach of No. 1 will not be a breach of No. 2. B cannot refuse to go on with No. 2 because No. 1 was broken. Each is independent of the other. Now suppose that contract No. 1 and contract No. 2 were both made at one time and in the same transaction and, indeed, both in the same paper. Then would the result be changed? It would depend on the intention of the parties, whether they were making one entire contract, or really several contracts in one agreement. This is often a very hard matter to say. The usual contract is of course entire. The question arises most frequently in installment contracts. Suppose one hundred tons of coal are to be delivered each month for twelve months; is this really twelve several contracts, or one entire? If A fails to deliver the first installment, can B refuse to receive the other deliveries? It is well settled that the mere fact that a contract is performable in installments does not prevent it from being an entire contract. But aside from this, the courts differ as to rules to apply and as to the application of rules of them.177
Whether a contract is entire or severable rests on the evident interdependence of the parts. If A agrees to build B three houses at a stated price for each house, and the three undertakings are independent, each of the others, there would be a severable contract. But if A were to agree to paint the walls of one house for a certain price and the floor for another price and the ceiling for yet another, this would seem to be an entire contract, and a breach of any one of the undertakings would discharge the contract. So the contract in respect to the three houses could be made entire. This subject is very confusing and cannot be fully explained here.
177. See subject "Sales" in this series.
Where one makes a performance equally applicable to one of several contracts he has a right to direct its application, but where he does not direct it the other party has a right to apply the performance to whichever contract he desires.
The rule now under discussion relates chiefly to a payment made by one to another to whom he owes several debts. Suppose A owes B $500 and the debt is unsecured. He also owes B $500, secured by chattel mortgage. A pays B $100. Naturally B would much prefer to apply this to the unsecured debt. But if A in making the payment made no direction, B may apply it as he pleases. But A may direct the application.
If one announces definitely before time of performance that he will not perform, or voluntarily does an act which makes it impossible for him to perform, the other party may treat the contract as broken and sue at once. But this applies only to bilateral contracts. If one does not act upon this anticipatory breach, he keeps the contract open for the benefit of both parties, and the other party may change his mind and perform the contract.
One may break his contract by anticipation. He may do this by definitely announcing that he will not perform when the time comes, or by doing something which puts it out of his power to perform. This gives the other party the right to sue at once.178 But if this anticipatory breach is not acted upon, the party who declared his intention to break the agreement may change his mind and perform it. Or if anything occurs to discharge him of his performance, he can depend on that ground notwithstanding prior to that time he has said that he would not perform, when the other party did not prior to such cause of discharge accept and act upon the breach. The reasoning under this section does not apply to a unilateral contract. Thus, an announcement that one would not pay a note when due would give no immediate right of suit upon it.
178. Hochster v. De La Tour, 2 El. & Bl. 678 (Contract of employment to begin June 1, 1852. May 11, 1852, defendant wrote he could not perform and suit was brought at once. Plaintiff was allowed damages). Kadish v. Young, 108 Illinois Reports, 170.