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.
Wash. 1, 80 Pac. 202; Dishman v. Huetter, 41 Wash. 626, 84 Pac. 590; Ihrke v. Continental Life Ins. & Investment Co., 91 Wash. 342, L. R. A. 1916F, 430, 157 Pac. 866.
West Virginia. Chandler v. French, 73 W. Va. 658, L. R. A. 1915B, 561, 81 S. E. 825.
2 California. Walker v. Harbor Business Blocks Co., - Cal. -, 186 Pac. 356.
Florida. Southern Colonization Co. v. Derfler, 73 Fla. 924, L. R. A. 1917F, 744, 75 So. 790.
Iowa. Temple v. Pennell, 123 la. 729, 99 N. W. 567.
Louisiana. Queensborough Land Co. v. Cazeaux, 136 La. 724, L. R. A. 1916B, 1201, 67 So. 641.
Washington. Ihrke v. Continental Life Ins. & Investment Co., 91 Wash. 342, L. R. A. 1916F, 430, 157 Pac. 866.
3 Temple v. Pennell, 123 la. 729, 99 N. W. 567.
4 Walker v. Harbor Business Blocks Co., - Cal. -, 186 Pac, 356.
5 Monarch v. Owensboro City R. Co. (Ky.), 85 S. W. 193, 27 Ky. L. Rep. 380.
6 University Club v. Deakin, 265 111. 257, L. R. A. 1915C, 854, 106 N. E. 790.
7 Southern Colonization Co. v. Der-fler, 73 Fla. 924, L. R. A. 1917F, 744, 75 So. 790; Aurand v. Perry Town Lot & Improvement Co., 178 la. 262, 159 N. W. 779.
8 Miller v. Beck, 72 Or. 140, 142 Pac. 603.
9Tennant Land Co. v. Nordeman, 148 Ky. 361, 146 S. W. 756.
10 Ihrke v. Continental Life Ins. & Investment Co., 91 Wash. 342, L. R. A. 1916F, 430, 157 Pac. 866.
11 World's Fair Mining Co. v. Powers, 224 U. S. 173, 56 L. ed. 717.
12 Wasser v. Western Land Securities Co., 97 Minn. 460, 107 N. W. 160.
13 Campbell v. Kennedy, 177 Cal. 430, 170 Pac. 1107.
If an employer refuses to continue the employe in his service, and refuses to make further compensation to such employe, this is a breach of a vital term of the contract which discharges the employe from the remaining covenants of such contract,16 such as a covenant on his part not to compete with his employer within a certain period of time.17 Whether a covenant not to compete is a vital part of a contract for the sale of a business and of the good will thereof, so that the breach of such covenant will discharge the contract, is a question upon which there seems to be a conflict of authority; although it may be that the conflict is more apparent than real, since in some cases the restraint of competition may be a vital term of the contract and in other cases it may not. Without much discussion as to. the actual intention of the parties, it has been held that under a contract by which A leased a quarry to B for a compensation based on the amount of stone quarried by B, and A agreed not to compete with B during such term, A's covenant not to compete was a vital term of such contract, and A's breach of such covenant would operate as a discharge thereof.18 If the purchaser has obtained possession of the business and has received the good will, the seller's breach of his covenant not to compete has been held to be a defense as to that part of the contract price which was given for such covenant not to compete,19 even though the parties did not apportion the contract price between the amount paid for the business, the amount paid for the good will, and the amount paid for the covenant not to compete.20 In other jurisdictions it has been held that the covenant not to compete was a minor and subsidiary covenant, the breach of which would give rise to an action for damages but would not discharge the contract.21
14 Toellner v. McGinnis, 55 Wash. 430, 24 L. R. A. (N.S.) 1082, 104 Pac 641.
15 Chandler v. French, 73 W. Va. 658, L. R. A. 1015B, 561, 81 8. E. 825.
16 General Billposting Co. v. Atkinson , A. C. 118 [affirming (1008), 1 Ch. 537]; Measures Bros. v. Measures , 2 Ch. 248 [affirming (1910), 1 Ch. 336].
17General Bill & Posting Co. v. Atkinson , A. C. 118 [affirming (1908), 1 Ch. 537]; Measures Bros. v. Measures , 2 Ch. 248 [affirming (1910), 1 Ch. 336],
18 Dishman v. Huetter, 41 Wash. 626, 84 Pac. 590.
19 Ferris v. Pett, - R. I. -, 2 A. L. R. 768, 105 Atl. 369.
20 Ferris v. Pett, - R. I. -, 2 A. L. R. 768, 105 Atl. 369.
If A and B on the one side, and C on the other, have entered into a contract to arbitrate, the act of A in bringing an action in violation of such provision may operate as a discharge of the entire contract, so that C may bring an action against B, notwithstanding such agreement.24 Under a contract for installing an apparatus which requires the use of water from the city mains, a violation of a covenant as to the change of pressure caused by such apparatus is vital if, as a result thereof, the city refuses to allow water to be taken from its mains for use therein.25 Under a contract for the sale of goods, which provides that the seller shall declare the name of the vessel to the buyer, such covenant is vital if such goods are bought for the purpose of resale and if the buyer is unable to resell such goods unless the name of the vessel has been declared.26 If a water company agrees to furnish water to a city and to construct a reservoir, the quality of the water is material; and if such water company furnishes water which is polluted by sewage and does not construct such reservoir, the city may treat such contract as discharged because of the breach of vital terms therein.27 A contract whereby a city leases its waterworks to A, who has to operate it and keep the machinery in order, is discharged if A becomes habitually intoxicated and ruins the machinery. The city may rescind such contract, although it contains no forfeiture clause.28 An agreement whereby a wife relinquishes all her rights in her husband's property, in consideration of her having the care and custody of her minor son, is discharged where her husband in his lifetime took such son from her by stealth, detained him during the husband's life, and sued his wife for a divorce, praying for the custody of such son. The wife can, therefore, assert her rights in her husband's estate upon his death.29 An electric light company made a contract with the citizens of a city to move their plant there, and to make an invoice with a guaranty that the invoice would show three hundred thousand dollars surplus above liabilities. In consideration of this, the light plant was to receive certain land and a bonus. The bonus was paid, and with it the company erected buildings upon the land, but the invoice was never made. This was held to be such failure of consideration as to entitle the parties who had paid the bonus to recover it.30 A owned a patent for a method of transferring wheat from one car to another and weighing it. He made a contract with a railroad company, whereby he was to erect his scales at a given point and transfer grain for the company, and they were to pay him therefor one half of the saving over the old system. After performance of the contract had begun, A gave information as to the weight of the corn to other parties, to the injury of the railroad. This was held to be sufficient breach to justify the railroad in treating the contract as discharged.31 A contract to sell a hotel, furniture and fixtures at a certain appraisement, the party refusing to accept the appraisement to forfeit a certain deposit, is discharged if the vendor prevents the vendee from being present at or taking any part in such appraisement. The vendee may therefore recover the amount deposited.32 A note and mortgage given in consideration of money to B, loaned thereafter, may be canceled upon repayment of the amount actually loaned, where the lender refuses to advance the entire amount agreed upon.33
21 Bradford v. Montgomery Furniture Co., 115 Tenn. 610, 9 L. R. A. (N. S.) 979, 92 S. W. 1104.
22 See Sec. 2103 et seq.
23 Campbell v. Kennedy, 177 Cal. 430, 170 Pac. 1107; Seventh St. Planing Mill Co. v. Schaefer (Ky.), 99 S. W. 341.
24 Alachua Phosphate Co. v. Anglo-
Continental Guano Works, 51 Fla. 143, 40 So. 71.
25J. W. Reedy Elevator Mfg. Co. v. Peck, 149 Mich. 657, 113 N. W. 300.
26 Graves v. Legg, 9 Exch. 709.
27 Columbus v. Mercantile Trust & Deposit Co., 218 U. S. 645, 54 L. ed. 1193.
28 Mahon v. Columbus, 58 Miss. 310, 38 Am. Rep. 327.