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given under such circumstances of (a) mistake, (b) misrepresentation, (c) absence of consideration, (d) fraud, and the like, as really to amount to no contract at all, or (6) was given for or upon a consideration which was illegal, so that there was no contract in law.

§ 800. How classified here.- Without attempting to go into all of the subjects here suggested, consideration will be given to the most important of them, as follows:

I. Rescission of the contract in accordance with the agreement of the parties.

II. Avoidance of the contract for failure of consideration.

III. Avoidance of the contract for mistake.

IV. Avoidance of the contract for innocent misrepresentation. V. Avoidance of the contract for fraud —

(a) Upon the seller.

(b) Upon the buyer.

(c) Upon the seller's creditors.

(d) Upon subsequent purchasers.

VI. Avoidance of the contract for illegality.

674

CHAPTER II.

OF AVOIDANCE OF THE CONTRACT BY CONSENT OF PARTIES.

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§ 801. In general.- Assuming that a contract of sale has been entered into, it is, in general, just as competent for the parties to it to unmake it as to make it in the first instance. That which exists by their consent may equally, in general, cease to exist by the same consent.

§ 802. The consent of the parties that their contract shall come to an end may be given either (1) after the contract is fully completed and as a new and separate agreement, or (2) there may have been incorporated in the contract itself, at the time of its formation, some term or stipulation in pursu

ance of which the contract might subsequently be terminated by either or both of the parties to it. Each of these forms requires some consideration. And as much of the matter relates to the elements of contracts, the subject may, perhaps, best be shown by using largely the language of elementary writers upon contracts. Thus

I.

TERMINATION OF CONTRACT BY SUBSEQUENT MUTUAL CONSENT.

§ 803. Contract may be discharged by agreement.-"A contract may be discharged," says Sir William Anson,1 "by agreement between the parties that it shall no longer bind them. This is a waiver or rescission of the contract." This agreement, however, like the original one, must exhibit the necessary incidents of contract. The parties must be competent, they must still retain their interest in the contract, and their agreement must be founded upon sufficient consideration. With respect of the consideration required, a distinction must be made between those contracts which remain wholly executory and those which have been executed by one or both of the parties.

§ 804. Executory contracts.- In the case of the executory agreement, "the consideration for the promise of each party is the abandonment by the other of his rights under the contract. The rule, often stated, that 'a simple contract may, before breach, be waived or discharged without a deed and without consideration,' must be understood to mean that, where the contract is executory, no further consideration is needed for an agreement to rescind than the discharge of each party by the other from his liabilities."2

1 Anson on Contract (7th ed.), p. 273. writers as to the manner in which a 2 Anson on Contract, p. 273.

In Collyer v. Moulton (1868), 9 R. I. 90, 98 Am. Dec. 370, it is said: "There is some apparent inconsistency in the language used in the reports and text

simple contract may be annulled. We think the rule is, that so long and so far as the contract remains executory and before breach, it may be annulled by agreement of all

$ 805. Executed contracts.-"There seems to be no authority," continues Sir William Anson,1 "for saying that a contract, executed upon one side, can be discharged before breach, without consideration - that where A has done all that he was bound to do and the time for X to perform his promise has not yet arrived, a bare waiver of his claim by A would be

parties; but that when it has been broken, and a right of action has accrued, the debt or damages can only be released for a consideration; and even so far as it remains executory it may be said that the agreement to annul on one side may be taken as the consideration for the agreement to annul on the other side. Dane, 5, 112; Johnson v. Reed, 9 Mass. 78, 6 Am. Dec. 36; Cummings v. Arnold, 3 Metc. (Mass.) 486-489, 37 Am. Dec. 155; Richardson v. Hooper, 13 Pick. (Mass.) 446; Blood v. Enos, 12 Vt. 625, 36 Am. Dec. 363."

In a valuable note to Bryant v. Isburgh, 74 Am. Dec. 657, it is said: "All executory contracts may be rescinded by the parties to them, if they continue interested until the agreement to rescind is made. Johnson v. Reed, [supra]; Blood v. Enos, [supra]. It has been said that courts require as clear evidence of waiver of contract by mutual assent as of the contract itself. Carolan v. Brabazon, 3 Jo. & Lat. 200; Dial v. Crane, 10 Tex. 444; Quincy v. Tilton, 5 Greenl. 277. On the other hand, it is said that an agreement to rescind may be shown by such circumstances, or by such a course of conduct, as clearly evidences the intention of the parties that it shall so operate. Wheeden v. Fisk, 50 N. H. 125; Green v. Wells, 2 Cal. 584; Robinson v. Page, 3 Russ. 114; Murray v. Harway, 56 N. Y. 337. And Parsons says further, that 'if

either party, without right, claims to

rescind the contract, the other party need not object, and if he permits it to be rescinded it will be done by mutual consent. Nor need this purpose of rescinding be expressly declared by the one party in order to give to the other the right of consenting, and so rescinding. There may be many acts from which the opposite party has a right to infer that the party doing them would rescind.' 2 Parsons on Cont. (7th ed.) 678. At all events, mere loose conversations will not be sufficient proof of waiver of a contract by agreement (Moore v. Crofton, 3 Jo. & La T. 438); nor will negotiations for abandonment or rescission constitute a rescission, unless such was the evident intention of the parties. Robinson v. Page, 3 Russ. 114; Murray v. Harway, 56 N. Y. 337. So an offer to rescind, which is not accepted, will not have such effect. Fripp v. Fripp, Rice's Ch. 84."

1 Anson on Contract, pp. 273. 274. He quotes Parke, B., in Foster v. Dawber, 6 Exch. 839. as follows: "It is competent for both parties to an executory contract, by mutual agreement, without any satisfaction, to discharge the obligation of that contract. But an executed contract cannot be discharged except by release under seal or by performance of the obligation, as by payment, where the obligation is to be performed by payment."

an effectual discharge to X. In fact, English law knows nothing of the abandonment of such a claim, except by release under seal, or for consideration. The plea of 'waiver' under the old system of pleading was couched in the form of an agreement between the parties to waive a contract, an agreement consisting of mutual promises, the consideration for which is clearly the relinquishment of a right by each promisee. Where a discharge by waiver is alleged as a defense in an action for breach of contract, the cases tend to show that the defendant must set up, in form or substance, a mutual abandonment of claims, or else a new consideration for the waiver.”

§ 806. Substitution of a new contract. Instead of simply terminating the old contract the parties may substitute another for it, in whole or in part. This has been well stated by Professor Harriman1 as follows: "Any valid alteration of the terms of the original contract will amount to the substitution of a new contract and the discharge of the original contract. The new contract will be identical with the old, except so far as the terms have been altered. A written contract may be rescinded by a subsequent oral contract; and this though the original contract is within the statute of frauds. But if the new contract is itself within the statute of frauds, it must expressly rescind the old. If the second contract is within the statute of frauds as well as the first, and is not in substitution for the first, the first contract remains in force. The distinction between the substitution of a new contract for the old, by which the old is entirely discharged, and the substitution of a new mode of performance must be kept carefully in mind. Although the second contract may not be in substitution for the first, the performance of the second contract may be ac

1 Harriman's Elements of the Law of Contracts, p. 284.

2 Citing Taylor v. Hilary, 1 C. M. & R. 741.

3 Citing Goss v. Lord Nugent, 5 B. & Ad. 58; Cummings v. Arnold, 3 Metc. (Mass.) 486.

4 Citing Noble v. Ward, L. R. 2 Ex. 135; Moore v. Campbell, 10 Ex. 323.

5 Citing Moore v. Campbell, supra; Whittier v. Dana, 10 Allen (Mass.), 326.

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