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.
The fact that A has reasonable cause to believe, and does believe, that B will be unable to perform his part of the contract, does not of itself discharge A from performing his part.1 The fact that it is highly improbable that B will be able to perform the contract does not discharge A if the time for performance has not come and B has not as yet failed to perform.2 As long as the time for performance has not yet arrived, the fact that so much time has elapsed since the contract was made, and so little time is left for perform-ance that in all probability the promisor will not be able to perform, does not discharge the adversary party.3 This is especially true where time is not of the essence of the contract.4 Even if the contract reserves to A the right to "annul" the contract if in his judgment the contractor is not prosecuting the work faithfully and diligently, A's exercise of his option under such provision is proper, but it does not amount to breach on the part of B if B still has time in which performance is possible.5 If goods are sold on credit, the fact that commercial agencies give to the seller unsatisfactory reports as to the financial condition of the buyer, does not justify the seller in demanding payment from the buyer before the time fixed by the terms of the contract.6 The fact that B has not the financial means for performing the contract before such performance is due, does not justify the adversary party in treating such contract as discharged.7 A contract to build a boat is not discharged by the contractor's making a general assignment for the benefit of creditors. Neither is such assignment a breach. Accordingly, if the party for whom the boat is to be built takes possession of it before the time within which it was to be completed, this is a breach on his part and he can not have damages for non-performance.8 The fact that A doubts B's solvency does not justify A's breaking the contract.9
3 See ch. LXXXVI.
4 Central Trust Co. v. Chicago Auditorium Association, 240 U. S. 581, L. R. A. 1917B, 580, 60 L. ed. 811.
5 In re Mullings Clothing Co., 238 Fed. 58, 151 C. C. A. 134, L. R. A. 1918A, 539.
1 See Sec. 2688.
2 See Sec. 2689.
3 See Sec. 2690.
4 0gdens v. Telford , A. C. 109 [affirming (1904), 2 K. B. 410, which affirmed (1903), 2 K. B. 2871.
1 Michigan. Kavanaugh Mfg. Co. v. Rosen, 132 Mich. 44, 102 Am. St. Rep. 378, 92 N. W. 788.
New Jersey. Holt v. United Security Life Ins. & Trust Co., 76 N. J. L. 585, 21 L. R. A. (N.S.) 691, 72 Atl. 301. CONTRACTS - VOL. V - 22
North Dakota. Plummer v. Kelly, 7 N. D. 88, 73 N. W. 70.
Oklahoma. Clements v. Jackson County Oil & Gas Co, - Okla. - , L. R. A. 1917C, 437, 161 Pac. 216; Elwood Oil & Gas Co. v. McCoy, - Okla. - , 179 Pac. 2.
Tennessee. Brady v. Oliver, 125 Tenn. 595, 41 L. R. A. (N.S.) 60, 147 S W. 1135.
Vermont. Hathaway v. Sabin, 63 Vt. 527, 22 Atl. 633; Morgan v. Tucker, 78 Vt. 56, 61 Atl 863.
2 United States v. O'Brien, 220 U. S. 321, 55 L. ed. 481; Vandegrift v. Cowlea Engineering Co., 161 N. Y. 435, 48 L. R. A. 685, 55 N. E 941; Brady v Oliver, 125 Tenn. 595, 41 L. R. A. (N. S.) 60. 117 S. W. 1135; Morgan v. Tucker. 78 Vt 56, 61 Atl. 863.
If the contract is one which provides for delivery and payment in instalments, and the purchaser is in default for one instalment, it is said that if the buyer has reason to believe that he will be unable to perform, the buyer may treat such contract as discharged as to future instalments.10 In many jurisdictions, however, such default on the part of the buyer operates as a discharge of the contract with reference to the future instalments without regard to the apparent inability of the buyer to perform.11
3 United States v. O'Brien, 220 U. 8. 321, 55 L. ed. 481; Vandergrift V. Cowles Engineering Co., 161 N. Y. 435, 48 L. R. A. 685, 55 N. E. 941; Brady v. Oliver, 125 Tenn. 595, 41 L. R. A. (N. S.) 60, 147 S. W. 1135; Morgan v. Tucker, 78 Vt. 56, 61 Atl 863.
4 Holt v. United Security L. Ins. & T. Co., 76 N. J. L. 686, 21 L. R. A. (N. S.) 691, 72 Atl 301.
5 United States v. O'Brien, 220 U. S. 321, 55 L. ed. 481.
6 Kavanaugh Mfg. Co. v. Rosen, 132 Mich. 44, 102 Am. St. Rep. 378, 02 N. W. 788.
7 Clements v. Jackson County Oil & Gas Co., - Okla. - , L. R. A. 1917C, 437, 161 Pac, 216; Elwood Oil & Gas Co. v. McCoy, - Okla. - , 170 Pac. 2.
8 Vandergrift v. Cowles Engineering Co., 161 N. Y. 435, 48 L. R. A. 685, 65 N. E. 941.
9 Jewett Publishing Co. v. Butler, 169 Mass. 517, 22 L. R. A. 253, 34 N. E. 1087; Kavanaugh Mfg. Co. v. Rosen, 132 Mich. 44, 102 Am. St. Rep. 378, 92 N. W. 788; Southern Lumber Co. v. Supply Co., 89 Mo. App. 141; Clements v. Jackson County Oil & Gas Co., - Okla. - , L. R. A. 1917C, 437, 161 Pac. 216.
The fact that a party to an executory contract can not perform under conditions as they exist when the contract is made, and that he must enter into transactions with a third person in order to acquire the property which he has agreed to transfer, does not of itself show that he will be unable to perform; and the adversary party can not treat such condition of affairs as a breach.12 The fact that A sells property to B which A does not own at the time that he enters into such contract, does not amount to a breach on A's part,13 nor does the fact that the title is not perfect when the contract is made.14