Story Case

The Lowenthal Shoe Company agreed to deliver a consignment of shoes to Gilbert Shaw in return for his promise to pay for the same. Delivery was to be made on the 18th of September. On the 1st of September, the Lowenthal Company saw that it would be unable to make the delivery and it so informed Shaw. He said:

"It doesn't make much difference. Just so you have them here by the last of the month, it will be all right".

On the 20th of September, Shaw brought suit for breach of the promise to deliver on the 18th. The Lowenthal Company defended with the agreement to waive delivery on that date. Is the defense good?

Ruling Court Case. Collyer & Company Vs. Moulton, Volume 9 Rhode Island Reports, Page 90; Volume 98 American Decisions, Page 370

Moulton and another were partners, engaged in the business of building machines. Collyer made a verbal contract with the partners, by which they were to build a certain machine for Collyer and Company. After a small part of the work was done, the firm was dissolved. On the same day Moulton notified Collyer of the dissolution of the Company, and stated that he could no longer be responsible for the contract. Collyer and Company then promised to release Moulton, and look to his partner alone for the performance of the contract. However, Moulton thereafter was sued by Collyer and Company for breach of this contract.

Moulton defended on the ground that he had been released by the promise of Collyer and Company to look to his partner.

Mr. Justice Potter said: "There is some apparent inconsistency in the language used in the reports and texts as to the manner in which a simple contract may be annulled. We think the rule is, that so long and so far as the contract remains executionary, and before breach, it may be annulled by agreement of all parties; but that when it has been broken, and a right of action has accrued, the debt or damage can only be released for a consideration; and even so far as it remains executory, it may be said that the agreement to annul on one side may be taken as consideration to annul on the other side".

The Court was of the opinion that notice to Collyer and Company and their declaration to look to the partner amounted to a waiver of the contract, so far as it remained unperformed, and released Moulton as to that part.

Accordingly judgment was given for Moulton in this action.

Ruling Law. Story Case Answer

By discharge of a contract is meant that all the rights and obligations arising from the contract are gone. There are no longer any rights which can be established, or duties which can be enforced. It is generally said that a contract may be discharged by waiver. "Waiver really amounts to nothing more than the making of a new contract. It must be supported by a consideration and in other respects comply with the rules governing the validity of any other contract. So long as the contract remains executory, it may be discharged by a waiver. In such case, a sufficient consideration is to be found in the parties giving up their mutual rights under the contract. A agrees to sell a horse to B in thirty days. A has a right to force B to take the horse or pay damages. B has a right to force A to sell the horse or pay damages.

So long as this contract remains executory or unperformed it may be discharged by a simple waiver, and a sufficient consideration is found in the agreement of A to give up his right in consideration that B will give up his right. But if the contract has been executed on one side, or there is the duty to perform, it may not be discharged by waiver without a new consideration. In the above case suppose that A had delivered the horse but B had not paid the price, A alone now has a right under the contract; B has acquired his right, i.e., the right to buy the horse. In order to waive the duty of B to pay for the horse, there must be a new consideration. If in the Story Case, the Lowenthal Shoe Company had waited until September 20 to inform Shaw of its inability to deliver, and he had given the same answer, he could nevertheless sue at once, because there was a breach of contract on September 18. After this date any promise by Shaw requires a new consideration. But as the agreement stands, there was no breach since a waiver was made before September 18. The defense was good.