This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
Partial failure of consideration is analogous to breach of an independent covenant. A partial failure of consideration does not discharge the entire contract if compensation therefor, can be made in damages. Thus under a contract to erect a mill and maintain and operate it for five years and not to transfer it in that time, breach of the latter stipulation gives rise to an action for damages but does not entitle the adversary party to recover money paid, as a consideration for the contract.1 Under a similar contract buildings were erected by a manufacturing company under a contract to remove their business, but the removal was never made. This was held to be a breach going to the essence of the contract, and recovery could be had of money paid thereunder.2 Under a contract for operating a brickyard, breach of a provision by which one party agrees to buy all his supplies of the other does not go to the essence of the contract and does not prevent him from recovering for what he has done.3 If the party who has performed in part cannot be placed in statu quo, the contract cannot be rescinded for partial failure of consideration. Under contract whereby A was to convey to B a certain tract of land in consideration whereof B agreed to (1) relinquish her right of appeal from a certain decree, and (2) quitclaim her interest in other property, a failure of title to the realty quitclaimed by B will not be a ground for rescinding the contract after B has lost her right of appeal.4 In some states a partial failure of consideration may be used as a partial defense in an action on the contract, even if the consideration is not apportioned and the damages are unliquidated.5 Thus in an action on a single bill given for several fillies, fraud as to their pedigree constituting partial failure of consideration may be set up.6 In other states a partial failure of consideration is not available as a defense to an action on the contract, though it may be the basis of an independent action.7
1 Smart v. Gale, 62 N. H. 62.
2 Smart v. Gale, 62 N. H. 62.
3 Missouri, etc., Ry. v. Ft. Scott, 15 Kan. 435.
4 Missouri, etc., Ry. v. Ft. Scott. 15 Kan. 435.
1 Hudson v. Archer, 9 S. D. 240; 68 N. W. 541.