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.
In contracts for the sale either of real property,1 or personal property,2 provisions are occasionally found for determining the price to be paid for such property by a valuation which is to be made by one or more third persons, who are to be appointed by the parties to the original transaction of sale. If the price is fixed by such third persons in accordance with the terms of the contract, such action on their part is conclusive if they have acted in good faith,3 both in contracts for the sale of personal property,4 and in those for the sale of real property.5 If the contract is entirely executory, and the only loss which will be suffered by either party is the loss of the bargain, the refusal of one of the parties to the contract of sale to appoint appraisers, or the refusal of the appraisers to act, prevents the determination of the price; and accordingly no action can be brought on the contract itself,6 except an action to recover damages if one of the parties has broken his covenant to appoint an appraiser.7 Only nominal damages, however, can be recovered in cases of this sort,8 since it is impossible to show what price the appraisers would have fixed if they had been appointed; and accordingly it is impossible to show the actual damages which were sustained. In jurisdictions in which a demurrer will be sustained to a declaration or petition which shows on its face that only nominal damages can be recovered, a demurrer may be sustained to a declaration or petition which sets up a contract for an appraisement, together with a refusal, to perform such covenant.9 This applies both to contracts for the sale of personalty,10 and to contracts for the sale of realty.11 If the contract has not been performed in whole or in part on either side, and if the only consequences of breach will be that the adversary party will lose the benefit of the bargain, equity will not give relief; and it will not attempt to compel either party to appoint an appraiser, nor will it attempt to fix a value upon the property or right which is involved without submitting such question to the determination of appraisers.12 If such party refuses to appoint an appraiser,13 or if he revokes the authority of the appraiser after he has appointed one,14 equity can give no relief but will leave the parties to their remedy at law.
6 Diepenbrock v. Luiz, 159 Cal. 716, L. R. A. 1915C, 234, 115 Pac. 743; Hood v. Hartshorn, 100 Mass. 117, 1 Am. Rep. 89.
7 Berrv v. Carter, 19 Kan. 135.
1 Emery v. Wase, 5 Ves. Jr. 846 (obiter, as some of the parties were married women, whose contracts were not binding, see Sec. 1658); Brown v. Bellows, 21 Mass. (4 Pick.) 179.
2 Brown v. Bellows, 21 Mass. (4 Pick.) 179; New England Trust Co. v. Abbott, 162 Mass. 148, 38 N. E. 432.
3 Emery v. Wase, 5 Ves. Jr. 846; Brown v. Bellows, 21 Mass. (4 Pick.) 179; New England Trust Co. v. Abbott, 162 Mass. 148, 38 N. E. 432.
4 Brown v. Bellows, 21 Mass. (4 Pick.) 179; New England Trust Co. v. Abbott, 162 Mass. 148, 38 N. E. 432.
5 Emery v. Wase, 5 Ves. Jr. 847;
Brown v. Bellows, 21 Mass. (4 Pick.) 179.
6 Street v. Rigby, 6 Ves. Jr. 815; Gourley v. Somerset, 19 Ves. Jr. 431 (obiter); Vickers v. Vickers, L. R. 4 Eq. 529; Elberton Hardware Co. v. Hawes, 122 Ga. 858, 50 S. E. 964; Louis Werner Sawmill Co. v. O'shee, III La. 817, 35 So. 919; Stern v. Farah, 17 N. M. 516, 133 Pac. 400.
7 Mitchell v. Harris, 2 Ves. Jr. 129 (obiter); Livingston v. Ralli, 5 El. & Bl. 132; Haggart v. Morgan, 5 N. Y. 422, 55 Am. Dec. 350.
That such action will not lie, see Tattersall v. Groote, 2 B. & P. 131.
8 Brunsdon v. Board, 1 Cab. & E. 272; Munson v. Straits of Dover S. S. Co., 99 Fed. 787 [affirmed, Munson v. Straits of Dover S. S. Co., 102 Fed. 926].
There is some recent authority, however, which has expressed a contrary view and which has held that equity will give relief in cases of this sort,15 at least where an appraiser has been appointed and where the party who appointed him has attempted to revoke his authority after appointment and when he was able to render his finding.16
9 Tattersall v. Groote, 2 B. & P. 131; Munson v. Straits of Dover S. S. Co., 99 Fed. 787 [affirmed, Munson v. Straits of Dover S. S. Co., 102 Fed. 926].
10 Vickers v. Vickers, L. R. 4 Eq. 529; Elberton Hardware Co. v. Hawes, 122 Ga. 858, 60 S. E. 964; Stern v. Farah, 17 N. M. 516, 133 Pac. 400.
11 Gourley v. Somerset, 19 Ves. Jr. 429; Vickers v. Vickers, L R. 4 Eq. 529; Louis Werner Sawmill Co. v. O'shee, III La. 817, 35 So. 919.
12 England. Street v. Rigby, 6 Ves. Jr. 815; Price v. Williams, cited in 6 Ves. Jr. 818 [compare opinion in 1 Ves. Jr. 365]; Gourley v. Somerset, 19 Ves. Jr. 429; Agar v. Mackleu, 2 Sim. & St. 418; Vickers v. Vickers, L. R. 4 Eq. 529.
Iowa. Kennedy v. Monarch Mfg. Co., 123 Ia. 344, 98 N. W. 796.
Missouri. Hug v. Van Burkleo, 58 Mo. 202.
New Jersey. Woodruff v. Woodruff, 44 N. J. Eq. 349, 1 L. R. A. 3S0, 16 Atl. 4; Davila v. United Fruit Co., 88 N. J. Eq. 602, 103 Atl. 519.
Ohio. Conner v. Drake, 1 O. S. 166.
Wisconsin. Hopkins v. Gllman, 22 Wis. 476; Schneider v. Reed, 123 Wis. 488, 101 N. W. 682.
13Hopkins v. Gilman, 22 Wis. 476; Schneider v. Reed, 123 Wis. 488, 101 N. W. 682.
14 Vickers v. Vickers, L. R. 4 Eq. 529.
15 "The method provided in this lease for ascertaining the value of the demised premises, either for the purposes of sale or as a basis upon which the rental is to be calculated for an additional term, is one frequently resorted to in the business world. Agreements of this character are being entered into almost daily and, in the absence of fraud or mistake, there is neither justice nor common sense in permitting the parties to repudiate them. If appellants' contention is sound, the appraisal feature of a lease is unenforceable and a mere nullity It would amount to 'a mere scrap of paper.'" Martin v. Vansant, 09 Wash. 106, 168 Pac. 900.
If one of the parties has performed so far that he will suffer a serious financial loss by reason of such performance over and above the loss of his bargain, equity will give relief so as to prevent such inequitable result.17 One of the most frequent illustrations of this principle is found in cases in which a lease has been taken with a provision for renewal at a valuation to be made by appraisers or with an option to buy at a valuation to be fixed by appraisers, and in reliance upon such lease or option the lessee has made valuable and expensive improvements upon the property which is leased. In cases of this sort, equity will give relief,18 ordinarily, by ignoring the provision for an appraisement and by determining the value of the property without regard to such provision for valuation. It has, however, been said that even in cases of this sort, equity would not give specific performance,19 and that it would not undertake to make independent valuation of the property to be conveyed;20 but that it would retain the case for the purpose of determining the value of the improvements thus made, for which restitution must be given to the purchaser by the vendor.21 A special difficulty arises in cases in which the lessee has an option to buy at an appraisement and in which he wishes the appraisement to be made before he exercises his option, so that he can determine whether he will exercise such option or not. It has been held that in such cases relief will be given in equity if the lessee elects to take the property,22 but that relief will not be given in equity if the lessee has not elected to take the property and if he wishes such appraisement to be made in order to enable him to decide whether to exercise his option or not.23
16 Martin v. Vansant, 90 Wash. 106, 168 Pac. 900.
17 United States. Castle Creek Water Co. v. Aspen, 146 Fed. 8.
Indiana. Coles v. Peck, 06 Ind. 333, 40 Am. Rep. 161.
Ohio. Lowe v. Brown, 22 O. S. 463.
Pennsylvania. Kaufmann v. Liggett, 209 Pa. St. 87, 67 L. R. A. 353, 58 At'l. 129.
Rhode Island. Grosvenor v. Flint, 20 • R. I. 21, 37 Atl. 304.
Apparently to the same effect, where the lessee had, in bad faith, appointed an appraiser who would not make a fair valuation. Biddle v. Ramsey, 52 Mo. 153.
Mandamus is said to be the remedy in contracts of public utilities. St. Louis v. St. Louis Gaslight Co., 70 Mo. 69.
18 United States. Castle Creek Water Co. v. Aspen, 146 Fed. 8.
Indiana. Coles v. Peck, 06 Ind. 333, 40 Am. Rep. 161.
Ohio. Lowe v. Brown, 22 O. S. 463.
Pennsylvania. Kaufmann v. Liggett, 209 Pa. St. 87, 67 L. R. A. 353, 58 Atl 129.
Rhode Island. Grosvenor v. Flint, 20 R. I. 21, 37 Atl. 304.
19 Hopkins v. Gilman, 22 Wis. 476.
20 Hopkins v. Gilman, 22 Wis. 476.
21 Hopkins v. Gilman, 22 Wis. 476.