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 other cases of failure of consideration, the question which is primarily presented is one of the effect of non-performance of precedent, concurrent, or subsequent covenants. Prom the standpoint of the effect of such breach, this topic must be divided into total and partial failure of consideration. Total failure of consideration, that is, complete failure to perform an executory promise, discharges the adversary party from performing the promise which he has made in consideration thereof.1
8 United States v. Harvey Steel Co., 196 U. S. 310, 40 L. ed. 492.
9 Bierce v. Stocking, 93 Mass. (11 Gray) 174; Nettograph Machine Co. v. Brown, 28 Okla. 436, 34 L. R. A. (N. S.) 737, 114 Pac. 1102; Clough v. Patrick, 37 Vt. 421.
10 Comings v. Ledy, 114 Mo. 464, 21 S. W. 804.
11 Hargraves v. A. B. Pitkin Machinery Co., 19 R. I. 426, 34 Atl. 738.
12 Dickinson v. Hall, 31 Mass. (14 Pick.) 217, 25 Am. Dec. 390; Lester v. Palmer, 86 Mass. (4 All.) 145; Rowe v. Blanchard, 18 Wis. 441, 86 Am. Dec. 783.
13 Sandage v. Studabaker Brothers Mfg. Co., 142 Ind. 148, 51 Am. St. Rep. 165, 34 L. R. A. 363, 41 N. E. 380.
14 Morrow v. Brown, 31 Ind. 378; Chemical Electric Light & Power Co. v. Howard, 150 Mass. 495, 2 L. R. A. 168; 148 Mass. 352, 23 N. E. 317, 20 N. E. 92; Earl v. Page, 6 N. H. 477, 26 Am. Dec. 711; Cowan v. Dodd, 40 Tenn. (3 Cold.) 278.
15 Dickinson v. Hall, 31 Mass. (14 Pick.) 217, 25 Am. Dec. 390.
1 England. Measures Bros. v. Measures , 2 Ch. 248 [affirming (1910), 1 Ch. 336].
United States. World's Fair Mining Co. v. Powers, 224 U. S. 173, 56 L. ed. 717.
Arkansas. Missouri Pacific Ry. v. Yarnell, 65 Ark. 320, 46 S. W. 943.
California. Russ Lumber & Mill Co. v. Muscupiabe Land & Water Co., 120
Failure of consideration avoids a promissory note if it is not in the hands of a bona fide holder.2 A note given for services to be performed thereafter, is discharged if not in the hands of a bona fide holder, if such services are not rendered.3 If A agrees to support B, and A fails to do so, A's non-performance amounts to a total failure of consideration which discharges B from his obligation to perform the covenants on his part to be performed,4 such as his covenant to make A the beneficiary of a policy of insurance on B's life.5 On the other hand, if A agrees to support B, and B in consideration of such covenant agrees to make and deliver certain notes to A, B's failure to deliver such notes discharges A from his duty to perform.6 Notes given in consideration of water to be furnished for irrigation are discharged if such water is not furnished when demanded. It is not necessary that the maker of such note should offer to release the payee from his agreement to furnish such water.7 If a note has been transferred before maturity to one who knows that the consideration therefor was an agreement by the payee to deliver coal, but who does not know that the payee will not perform such agreement, the indorsee may recover from the maker upon such note.8 Under a contract to exchange real estate, A agreeing to accept a lease back of the property conveyed by him, A's agreement to accept the lease is discharged by B's refusal to perform the contract where B falsely claims that the title to A's realty is defective.9 A agreed to release certain claims in consideration that his debtor, B, would not change a devise in a will previously executed by B. This contract is discharged by A's subsequently presenting such claims to the commissioners of B's estate, although B does not offer to refund the money received in part consideration therefor.10 A contract to pay the debt of another, in consideration of forbearance of suit, is discharged if the original debtor is subsequently sued.11 An executory agreement for credit is discharged where the notes12 given in consideration of such promise proved worthless. A contract for the sale of mining land, conditioned that the vendee shall, at a certain time, induce a corporation thereafter to be organized, to execute certain notes for the remainder of the purchase price, and a mortgage of such property to secure such notes, may be rescinded by the vendor if the notes and mortgage are not furnished.13 If A has delivered possession of a mine to B under a contract by which B is to deposit the proceeds of such mine in a certain bank to A's account, as a credit upon the purchase price, B's act in depositing such proceeds in another bank in his own name discharges A from his duty under the contract to allow B to keep possession of such mine.14 If a number of persons agree to subscribe to a fund for the purpose of securing a lease and developing a mine, the failure of one of such parties to pay such subscription into such fund discharges the adversary parties from their duty to pay to him a proportionate amount of the proceeds of such mine.15 If A agrees to secure leases from X to B which B is to have sixty days' opportunity to investigate before accepting, A's failure to secure such leases and to offer them to B discharges B from his liability under the contract.16
Cal. 521, 65 Am. St. Rep. 186, 52 Pac. 905; Cameron v. Burnham, 146 Cal. 580, 80 Pac. 020.
Illinois. Ptacek v. Pisa, 231 111. 522, 14 L. R. A. (N.S.) 537, 83 N. E. 221.
Indian Territory. Sellers v. Catron, 5 Ind. Terr. 263, 82 S. W. 742.
Massachusetts. Jewett v. Brooks, 134 Mass. 505; Lowe v. Harwood, 130 Mass. 133, 20 N. E. 538; Holt v. Silver, 160 Mass. 435, 48 N. E. 837; Cook v.' Sawyer, 188 Mass. 163, 74 N. E. 356; Parrot v. Mexican Central Railway, 207 Mass. 184. 03 N. E. 500; Neal v. Jefferson, 212 Mass. 517, 00 N. E. 334; Bryne v. Dorey, 221 Mass. 390, 100 N. E. 146; Paika v. Perry, 225 Mass. 563, 114 N. E. 830.
Michigan. Fink v. Chambers, 05 Mich. 508. 55 N. W. 375.
North Carolina. Farrington v. McNeill, 174 N. Car. 420, 03 S. E. 057.
South Carolina. Wait v. Williams, 107 S. Car. 32, 91 S. E. 060.
West Virginia. Acme Food Co. v. Older, 64 W. Va. 255, 17 L. R. A. (N. S.) 807, 61 S. E. 235.
2 California. Flood v. Petry, 165 Cal. 300, 46 L. R. A. (N.S.) 861, 132 Pac. 256.
Iowa, Sigworth v. Holcomb (la.), 70 N. W. 364; Todd v. State Bank, 182 la. 276, 3 A. L. R. 971, 165 N. W. 503.
Michigan. Fink v. Chambers, 05 Mich. 508, 55 N. W. 375.
North Carolina. Farrington v. McNeill, 174 N. Car. 420, 03 S. E. 057.
West Virginia. Acme Food Co. ▼. Older, 64 W. Va. 255, 17 L. R. A. (N. S.) 807, 61 S. E. 235.
3 Hays v. Plummer, 126 CaL 107, 77 Am. St. Rep. 153, 58 Pac. 447; Ray v. Moore, 24 Ind. App. 480, 56 N. E. 037.
4 Ptacek v. Pisa, 231 111. 522, 14 L. R. A. (N.S.) 537, 83 N. E. 221.
5 Ptacek v. Pisa, 231 111. 522, 14 L. R. A. (N.S.) 537, 83 N. E. 221.
6 Bryne v. Dorey, 221 Mass. 300, 100 N. E. 146.
7 Russ Lumber & Mill Co. v. Muscu-piabe Land & Water Co., 120 CaL 521, 65 Am. St. Rep. 186, 52 Pac. 005.
8 Tradesmen National Bank v. Curtis, 167 N. Y. 194, 52 L. R. A. 430, 60 N. E. 429.
9Scannell v. Soda Fountain Co., 161 Mo. 606, 61 S. W. 889.
10 White v. White, 68 Vt. 161, 34 Atl. 425.
11 Clark v. Russell, 3 Watts (Pa.) 213, 27 Am. Dec. 348.
12 Sheldon Axle Co. v. Scofield, 85 Mich. 177, 48 N. W. 511.
13 Tyler v. Cote, 29 Or. 515, 45 Pac. 800.
14 World's Fair Mining Co. v. Powers, 224 U. S. 173, 56 L. ed. 717.
15 Cameron v. Burnham, 146 Cal. 580, 80 Pac. 929.
The doctrine of failure of consideration has been applied to discharge a party who has refused to accept performance from notes which he has given in advance,17 so that in such case he will be liable for damages for breach, but he will not be liable upon such notes if they are not in the hands of a bona fide holder.18