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 views of many of the American courts on the question of the effect of a breach as to one instalment of an instalment contract, have been greatly affected by the different theories which have been entertained by the different English courts. The question of the effect of non-performance, as distinct from renunciation, was first presented in a case in the exchequer which involved a contract for the sale of goods, to be delivered in instalments, which was broken by the failure of the seller to deliver the quantity agreed upon for the first instalment. The breach was so great as clearly to be material; and it was held that the buyer could treat such default as a discharge of the contract, although it was said that a different rule might apply if the breach were of any instalment except the first, apparently on the theory that, after the delivery of one instalment, the remaining covenants became independent covenants.1 The question was then presented to the Queen's Bench for determination in a case in which there was a material deficiency in the amount of goods accepted by the buyer for the first instalment. It was held that damages would be sufficient compensation for such a breach, and that the seller should not be at liberty to treat the contract as discharged.2 The question then came before the court of common pleas, in a case in which the buyer had failed to pay for the first instalment, claiming a right to withhold it as compensation for the seller's possible breach in delaying delivery of the second instalment; delivery of the first instalment having been delayed, although apparently with the somewhat unwilling consent of the buyer. The seller refused to deliver the second instalment unless the first instalment was paid for, in accordance with the terms of the contract. It was held that such refusal to pay for the first instalment of the goods did not discharge the contract, although, by the terms of the contract, such payment was due before the second instalment was due. The court reached this result on the theory that the conduct of the buyer did not show a renunciation of the contract; and his failure to pay was not due to an inability to pay.3 The earlier case 4 was justified as a case in which the circumstances surrounding the breach justified the court in treating the breach as renunciation. In a similar case, in which the circumstances surrounding the default of the buyer gave to the seller reasonable ground for believing that the buyer would not be able to perform the contract at all, it was held that the seller might treat such breach as a discharge of the contract.5
5 See Sec. 2974.
6 "It is quite clear upon principle that there can be no valid distinction between the exercise of the right of rescission by the vendor for the failure of the vendee to pay for an in* etalment delivered, and the exercise of the same right by the vendee upon failure of the vendor to deliver an instalment of goods conforming to the article described in the contract. Mutuality is an essential ingredient of the law of contract, unless expressly excluded; and if this right is more valuable in one than in the other of the two above supposed circumstances, it is in the latter rather than in the former. This doctrine is applicable to failure in delivery of or payment for any instalment under the contract, whether the first or any later one; the rights of the parties being the same as to any unperformed part of the contract as if that part had been the whole contract." Enterprise Mfg. Co. v. Oppenheim, 114 Md. 368, 38 L. R. A. (N.S.) 548, 79 Atl. 1007.
7 See Sec. 3017.
8 See Sec. 3010 et seq.
9 See Sec. 3020 et seq.
1 Hoare v. Rennie, 6 Hurl. & N. 19. See Sec. 3017.
See also, Coddington v. Paleologo, L. R. 2 Ex. 193.
2 Simpson v. Crippin, L. R. 8 Q. B. Cases 14.
In this case Hoare v. Rennie (5 Hurl. & N. 19) was criticised as being difficult to understand and to reconcile with other cases, among which is mentioned Pordage v. Cole, 1 Williams' Saunders, 319, which was a case of a contract under seal, decided at a time when the courts still regarded covenants as prima facie independent. See Sec. 2944 et seq.
3 Freeth v. Burr, L. R. 9 C P. 208.
4 Hoare v. Rennie, 5 Hurl. & N. 19.
With this lack of harmony on the part of the lower courts, the question was finally presented to the House of Lords in a case6 in which the buyer refused to pay for the first instalment under a mistaken view of the law, the buyer thinking that because of the winding up of the corporation from which he had bought the goods he could not make payment so as to protect himself without leave of court. The seller thereupon treated the refusal of the purchaser to pay as discharging the seller from further liability on the contract. It was held that default alone in making payment for the first instalment did not amount to a discharge of the remaining provisions of the contract, and that the facts attending the default showed that the buyer did not intend to renounce liability under the contract. In this case the court professed to be unable to understand why the earlier case,7 in which default on the part of the seller in delivering the first instalment was treated as a discharge, should be brought forward.8