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.
If the vendor has performed a contract for the sale or conveyance of realty by executing and delivering a deed therefor, failure of consideration on the part of the purchaser does not discharge the transaction at law; and it does not give to the grantor a right of action at law to avoid such conveyance.1 This result is due chiefly to the fact that the common law had no means of canceling a deed which had once taken effect; and, in the classic period, it had no means by which it could compel the grantee to reconvey to the grantor.
29 Bodwell v. Bodwell, 66 Vt 101, 28 Atl 870.
30 Ft. Wayne Electric Light Co. v. Miller, 131 Ind. 409, 14 L. R. A. 804, 30 N. E. 23.
31 Lake Shore, etc., R. R. v. Richards, 152 111. 59, 30 L. R. A. 33, 38 N. E. 773.
32 Tibbetts v. Sartwell, 67 N. H. 418, 29 Atl. 411.
33 Payne v. Loan & Guaranty Co., 54 Minn. 255, 55 X. W. 1128.
1 Contract for support. McCardle v. Kennedy, 02 Ga. 198, 44 Am. St. Rep. 85, 17 S. E. 1001.
The remedy of rescission and cancellation in equity was sufficient in cases of this sort; and if this remedy could be obtained, the grantor could recover his realty; but whether such relief would be given for breach of a contract to convey realty which had been performed by the vendor and under which a deed had been given to the purchaser, was a question upon which there was some divergence of authority. No rescission would be given in equity for partial failure of consideration,2 such as a breach of a covenant on the part of the grantee to make use of the realty in a specified manner,3 or a breach of a covenant on the part of the grantee to guarantee dividends on stock which the grantor had accepted in payment for such realty.4 If the consideration is executory and especially if it is in any way apportioned to the subject-matter, equity has granted rescission as to the part of the contract which is executory and as to which there is a failure of consideration.5 Under a statutory provision to the effect that rescission may be granted for partial failure of consideration, a grantor may have rescission if the grantee has failed to perform his covenant to sell the realty thus conveyed to him, and to divide the proceeds with the grantor after deducting the amount spent by the grantee in paying off liens.6 If a husband and wife have entered into a contract for separation, by the terms of which the husband agrees to support the wife and the wife agrees to convey certain community property, the wife may have rescission of such conveyance if the husband does not perform his covenant to support her.7
2 Alabama. Piedmont Land Improvement Co. v. Piedmont Foundry & Machine Co., 96 Ala. 389, 11 So. 332; Stacey v. Walter, 125 Ala, 291, 82 Am. St. Rep. 235, 28 So. 89.
Florida. Marks v. Baker, 20 Fla. 920.
Illinois. Jackson v. Jackson, 222 111. 46, 6 L. R. A. (N.S.) 785, 78 N. E. 19.
Iowa. Parsons v. Crocker, 128 la. 641, 105 N. W. 162.
Missouri. Haydon v. St. Louis & Santa Fe Ry., 222 Mo. 126, 121 S. W. 15.
Texas. Stitzle v. Evans, 74 Tex. 596, 12 S. W. 326; Chicago, T. & M. C. Ry. v. Titterington, 84 Tex. 218, 31 Am. St. Rep. 39, 19 S. W. 472.
Washington. Murkowski v. Mur-kowski, 61 Wash. 103, 112 Pac. 92.
Wisconsin. Forster v. Flack, 140 Wis. 48, 121 N. W. 890.
3 Piedmont Land Improvement Co. v. Piedmont Foundry & Machine Co., 96 Ala. 389, 11 So. 332; Haydon v. St. Louis & Santa Fe Ry., 222 Mo. 126, 121 S. W. 15; Chicago, T. & M. C. Ry. v. Titterington, 84 Tex. 218, 31 Am. St. Rep. 39, 19 S. W. 472.
4 Forster v. Flack, 140 Wis. 48, 121 N. W. 890.
5 Coffinberrv v. Sun Oil Co., 68 O. S. 488, 67 N. E. 1069 (rescission of gas and oil lease for refusal to continue to develop tract).
6 Campbell v. Kennedy, 177 Cal. 430, 170 Pac. 1107.
In case of a total failure of consideration, it was held in some jurisdictions that equity would not grant rescission in ordinary cases.8 In cases of this sort, equity could ordinarily enforce a vendor's lien, and it could thus give the parties substantially the benefit of full performance on each side, at least if the realty could be sold for the amount of the purchase price which was due and unpaid. It has been held that if a conveyance is made in consideration of a contract to make a devise, equity will not rescind such conveyance unless specific performance of the contract to devise proves impracticable.9 Breach of a contract to establish and operate a manufacturing business upon realty conveyed in consideration of such contract does not entitle the grantor to rescission. His remedy is an action on the contract for damages.10 If A has conveyed realty to B in consideration of B's agreement to build and operate a foundry, equity will not give rescission because of B's breach in the absence of fraud.11
In some jurisdictions, however, equity grants rescission in case of total failure of consideration.12 If the grantor has accepted the notes of a married woman as payment for the realty and such notes are void, it is said that he may have rescission of the conveyance.13 If the grantor makes conveyance to the grantee in consideration of the promise of the grantee to marry the grantor, and the grantee refuses to perform such contract, it is said that the grantor may have rescission.14 A conveyance of realty made in consideration of a reconveyance,15 or a devise thereof,16may be set aside for failure of consideration if such reconveyance or will is so defective as to be invalid. Equity will grant rescission of an oil and gas lease, or of a coal lease, because of the failure of the lessee to perform his covenants with reference to the development of such territory, in cases in which such breach on the part of the lessee will inflict irreparable injury on the lessor for which damages will not give an adequate remedy.17
7 Yeager v. Yeager, 82 Wash. 271, 144 Pac. 22.
8 Alabama. Gardner v. Knight, 124 Ala. 273, 27 So. 298.
Indiana. Lowry v. Higgins, 5 Ind.
Georgia. Thompson v. Lanfair, 127 Ga. 557, 56 S. E. 770.
9 Riley v. Allen, 54 N. J. Eq. 495, 35 Atl 654.
10 Piedmont Land Improvement Co. v. Piedmont Foundry & Machine Co., 96 Ala. 389, 11 So. 332.
11 Miller v. Sutliff, 241 111. 521, 89 N. E. 651.
12 Kentucky. Thomas v. Sweet, 111 Ky. 467, 63 S. W. 787, 65 S. W. 827.
Michigan. Barker v. Smith, 92 Mich. 336, 52 N. W. 723.
Mississippi. Foxworth v. Bullock, 44 Miss. 457 (obiter, in part).
Texas. Lanier v. Foust, 81 Tex. 186, 16 S. W. 994.
Vermont. Chapman v. Long, 66 Vt. 656, 30 Atl. 3.
West Virginia. Lambert v. Lambert, 66 W. Va. 520, 66 S. E. 689.
13 Foxworth v. Bullock, 44 Miss. 457 (obiter, in part).
14 Lambert v. Lambert, 66 W. Va, 520, 66 S. E. 689.