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 some jurisdictions contracts for the manufacture of goods for the special needs of a customer, and not for the general market, are treated differently from executory contracts for the sale of goods which are in existence when the contract is made; and it is held that if such goods have been manufactured or prepared for the special needs of the purchaser, he can not repudiate the contract if the manufacturer has performed to this extent, and refuse payment of the contract price. On the contrary, even in jurisdictions in which the contract price ordinarily could not be recovered under like circumstances, the manufacturer of goods which are made for a special order is permitted to treat the goods as the property of the purchaser and to recover the contract price therefor.1 This result is reached on the theory that the title has passed when the article is made for such special order.2 This principle is not limited to goods which are manufactured to a special order, but it applies to any articles which have been prepared for the purchaser so that they can not be used generally; and which will, for practical purposes, be a total loss to the seller if the purchaser does not take them.3 If fruit trees have been prepared for shipment in such a way that they will be practically a total loss to the seller if the buyer does not take them, the seller has been allowed to recover the contract price.4 There is some conflict of authority upon this question, however, and it has been held in a similar case that the seller must recover for damages and that he can not maintain an action for the contract price.5 In jurisdictions which are not hampered by the doctrine or the theory of the case, the same result will be reached if the property has been so manufactured or prepared that it can not be used generally and that it will be a total loss to the seller, whichever of the theories is invoked. The seller should not be permitted to recover more than the contract price; and if the goods are a total loss to him, the contract price is a measure of recovery. If the purchaser countermands an order for goods before they have been manufactured, and at a time at which the seller can stop performance and thus mitigate damages, it is held that the seller can not proceed with performance so as to aggravate the damages and recover the contract price upon the theory of full performance.6 If the contract is renounced before the seller has begun performance, he can not perform thereafter and recover at the contract rate.7 If A agrees to make machines for B according to a model which B agrees to furnish, and B fails to furnish such model, A can not perform by constructing machines in accordance with his own model.8
(3) Although the property in the goods has not passed, if they can not readily be resold for a reasonable price, and if the provisions of section 64(4) are not applicable, the seller may offer to deliver the goods to the buyer, and, if the buyer refuses to receive them, may notify the buyer that the goods are thereafter held by the seller as bailee for the buyer. Thereafter the seller may treat the goods as the buyer's and may maintain an action for the price." - Section 63, Uniform Sale of Goods Act.
See also, Sec. 68 of the Uniform Sale of Goods Act, which provides:
"Specific Performance. - Where the seller has broken a contract to deliver specific or ascertained goods, a court having the powers of a court of equity may, if it thinks fit, on the application of the buyer, by its judgment or decree, direct that the contract shall be performed specifically, without giving the seller the option of retaining the goods on payment of damages. The judgment or decree may be unconditional, or upon such terms and conditions as to damages, payment of the price and otherwise, as to the court may seem just.'
1 United States. Kinkead v. Lynch, 132 Fed. (502.
Colorado. Bond v. Bourk, 54 Colo. 51, 43 L. R. A. (N.S.) 97, 129 Pac. 223.
Connecticut. Illustrated Postal Card & Novelty Co. v. Holt, 85 Conn. 140, 81 Atl. 1061.
Kansas. Bauman v. McManus, 75 Kan. 106, 10 L. R. A. (N.S.) 1138, 89 Pac. 15.
New Mexico. Roswell Nursery Co. v. Mielenz, 18 N. M. 417, 137 Pac. 579.
Ohio. Shawhan v. Van Nest, 25 O. S. 490, 18 Am. Rep. 313.
Oregon. Smith v. Wheeler, 7 Or. 49, 33 Am. Rep. 698.
2 "Bement v. Smith [15 Wend. (N. Y.) 493] was an action brought by the manufacturer of a carriage, made to the order of the defendant for an agreed price. There was no dissent on the part of the defendant until after the sulky had been made and delivered. Therefore, if it were an executory contract in the first instance, it had become executed before the purchaser withdraw his oiler to accept. But it was a contract tor the manufacture of an article, made to order of the buyer, and was analogous to that of a contract of a sculptor to make a statue, or a painter to make a picture, or a tailor to make a suit of clothes; in all which cases the article, when done, appears to have been intended to be the property of the person for whom it was made. It is not a contract for the manufacture of an article for sale on the market. In a practical sense, it is an agreement on the part of the manufacturer to use his material and bestow his labor and skill in the fabrication of an article for another person.
"As the passing of title is a question of intention, to be ascertained from the facts and circumstances, in the absence of an express stipulation as to when it shall pass; and it appearing that the article so specially made was intended for no person other than him who ordered ' it, not the manufacturer for his own use or for sale in the market generally, it seems clear that the intention was that the article should become that of the former on the completion thereof." Acme Food Co v Older, 64 W Va. 255, 17 L R. A. (N.S ) 807, 61 S. E. 235.
3 Roswell Nursery Co. v. Mielenz, 18 N. M 417, 137 Pac. 579.
4 Roswell Nursery Co. v. Mielenz, 18 N. M. 417, 137 Pac. 579.
5 Mayo v Latham, 159 Mich. 136, 123 N. W. 561.