Story Case

The Eastern General Supply Company entered into a contract with the Riverside Fruit Canning Company for the purchase of a carload of canned peaches. The terms of the contract required that the peaches should be of "A-l" quality, properly sealed, labeled, and packed for shipment, and further stated, that the purchasing agent of the Eastern General Supply Company "is hereby given power to inspect the fruit so shipped and to determine whether the fruit is of the quality required by this contract." The carload of fruit was shipped, but upon examination, large quantities were found to be of an inferior quality. The Eastern General Supply Company notified the Riverside Fruit Canning Company that the car was not as per contract and that it would not accept it. The Riverside Fruit Canning Company telegraphed its acknowledgment and stated that a new carload would be sent forward at once. Before the new car arrived, the Eastern Supply Company sold the first carload to the Red Star Grocery Company at a greatly reduced price. The Riverside Fruit Canning Company now sues the Eastern General Supply Company for conversion. Did the Eastern General Supply Company hold legal title to the carload of fruit when it was sold to the Red Star Grocery Company?

Ruling Court Case. James Bay Vs. John L. Thompson, Volume 12, Cashing Reports, Massachusetts, Page 281

James Ray desired to sell his horse to John Thompson. Thompson agreed to purchase the horse, and to return him if, after a trial of a few weeks, the horse did not prove satisfactory. Kay accepted this offer, and the animal was sold on the foregoing conditions. Thompson greatly abused the horse during the time specified, and at the end of the period, returned him, claiming that the horse was not satisfactory. Ray refused to accept the horse, because of his badly damaged condition. Ray then brought this suit to recover the price agreed on. It was contended by Thompson that, by the terms of the contract, he was under no obligation to accept the horse, unless he proved satisfactory.

The court, in its opinion, said: "The sale was on a condition subsequent; that is, on condition that he did not elect to keep the horse, to return him within the time specified. Being on a condition subsequent, the property vested in the vendee, defesible only on the performance of the condition. If the defendant, in the meantime, disabled himself from performing the condition, and - if the horse was substantially injured by the defendant by such abuse, he would be so disabled - then the sale becomes absolute, the obligation to pay the price becomes unconditional, and the plaintiff is entitled to recover." Judgment was, therefore, given for James Ray.

Ruling Law. Story Case Answer

It has been pointed out that in a sale upon a condition precedent, the passing of title depends upon the happening or non-happening of some specified event or condition. A sale on a condition subsequent is one in which title has passed, but not absolutely; it has passed and will continue in the buyer, provided some event or condition does or does not happen. For instance, A says to B: "I will buy your horse, but will reserve the right to return him if he does not suit me." Here title to the horse will pass, but in case the horse does not suit him, by their agreement, the title will revert to the seller. The happening of this event, subsequent to the transaction, revests the title in the seller and relieves the buyer of any further obligation.

In the Story Case, the Eastern Supply Company, by virtue of the contract, held title to the carload of peaches with power to pass the title back to the River-side Fruit Canning Company, if certain conditions of the contract were not fulfilled. The non-fulfillment of these conditions was the condition subsequent which would revest title in the Riverside Fruit Canning Company, upon its election. Therefore, by giving notice to the Riverside Fruit Canning Company of the failure of the conditions, the Eastern Supply Company availed itself of the condition subsequent and, thereby, passed the title back to the Riverside Fruit Canning Company. The sale to the Red Star Grocery Company was a wrongful act on the part of the Eastern General Supply Company, and the action for conversion will be upheld.