It is well for the owner of any property to inform himself as to the practice of the courts in regard to the cancelling of contracts. In the case of a time sale secured by mortgage, the deed to the purchaser and the mortgage given by him to the vendor are, of course, both recorded, and the agreement can be cancelled only by legal proceedings, or by the purchaser giving to the original vendor - voluntarily or for a consideration - something in the nature of a quitclaim deed to the property. The case may be somewhat different with time sales under contract. It frequently happens that such contracts are not acknowledged, and therefore cannot be placed on record; or, in case they are acknowledged and could be recorded, the purchaser may not care to avail himself of this right. In such instances there is nothing on record to show that the sale has been made. In this connection it may be contended that the contract in itself is sufficient evidence of the purchase; yet it is true in many instances that a contract, if properly recorded, is a stronger guarantee than a contract which has not gone through this formality.
The effect of recording varies in different states, and nothing more can be said here beyond the suggestion that those interested should acquaint themselves with the laws prevailing in their particular state.
Probably the original reason for calling such contracts "leases" was the hope that, in case of a delinquent purchaser, resort might be had to something in the nature of a delinquent tenant act, and that the tenant could be evicted by the simple proceedings applicable to an ordinary tenant who has not paid his rent.
As a general rule, however, the courts have held that under such agreements, when the purchaser has made payments he has acquired an equity of redemption of which he cannot be deprived without legal proceedings similar to those required for the foreclosure of a mortgage. This condition prevails generally, despite the many efforts of able lawyers to draw up an agreement which would enable the owner to regain possession of his property without expense or delay.
In practice this fact is frequently disregarded. In a large number of contract sales, the property sold is unimproved and the purchaser does not take possession of it, does not fence it, or take any other steps to show that he has an interest in it. He may make a few payments at the beginning of the contract and then get tired of the transaction. Very frequently he does not attempt to exercise any rights he may have, and, after a reasonable time, say a few months, the owner may regard the contract as closed without taking any legal proceedings. In many instances he merely notifies the purchaser that the contract will be or has been cancelled, closes out the purchase account on his books, and replaces the lot on his selling list. It is astonishing to discover how frequently this is done and in how few instances any trouble arises to the vendor through such action.
In the process of cancelling a contract through legal proceedings, a condition may arise which, though somewhat peculiar and not infrequently overlooked, has a direct bearing upon the form of contract and the form of the account. It becomes of importance only in instances where the purchaser places every possible obstacle in the way of the owner who endeavors to obtain his rights, and it is therefore necessary for him to take advantage of every point in his favor. The point is that, time being the essence of such contracts, if a purchaser fail to make his payments as called for by the terms of the contract, the entire principal sum (and not merely those payments which are in arrears) becomes due and payable.
Under such circumstances, it is sometimes wise for the owner to enter suit for the entire purchase price, and by so doing place upon the purchaser the burden of proving each and every payment he has made - thus adding very materially to the difficulty of the defense. In some states such a procedure would not be allowable, and the suit must be brought for the balance of the purchase price, the amount being verified under oath. In any event it is important carefully to consider the exact terms of each contract in which the concern is interested, whether a buying or a selling contract.