1. Prior impossibility. If impossibility exists and is known when the contract is made, there is no contract, because the promise to do an impossible act is not a real consideration for the counter promise or act. If the impossibility is not known, as if the subject-matter does not exist when the contract is made, the contract is ineffective, because there is no subjectmatter upon which it can operate.

2. Subsequent impossibility. If an unforeseen difficulty arises subsequent to the formation of the contract, it will not, save in the cases enumerated, discharge the contract.

Example 1. A agrees to sell and deliver to B a quantity of beans to be raised by A. A's crop is destroyed by frost. A is liable for a breach of contract, since although he cannot deliver beans from his own land he can procure them elsewhere, and there is not, therefore, a real impossibility. If, however, it had been specified that A was to deliver the beans grown in a particular field, and the crop in that field had been destroyed, there would have been an impossibility due to the destruction of the subject-matter.

The following cases of impossibility arising subsequent to the formation of the contract will discharge the contract.

(a) Legal impossibility. If the impossibility is created by a change in the laws, or by an act of law, the promisor is discharged.

Examples: 2. A leases a wooden building to B and agrees in case it burns to rebuild it. It burns and B demands that it be rebuilt. A defends upon the ground that since the contract was made the city by ordinance has forbidden the erection of wooden buildings. The defense is good. A is not obliged to build except in wood, and the law prevents him from building in that material.

3. A agrees to work for B for three months. At the end of a month A is arrested and imprisoned. His contract is discharged since the law by constraining him has made it impossible for him to perform.

(b) Destruction of the subject-matter of the contract. Where the existence of a specific thing is essential to performance, the contract is discharged if the thing is destroyed through no fault of the parties.

Examples: 4. A agrees to let B occupy a hall for public entertainments. Before the time for occupation arrives the hall is destroyed by fire. The contract is discharged.

5. A sells B a buggy and agrees to repaint it and deliver it in thirty days. Before the work is finished the buggy is destroyed by fire. The contract is discharged. Neither party has any action against the other. (If the buggy had been in a deliverable condition, the title would have passed to B at once, and he would have been obliged to pay the agreed price although he had left the buggy in A's hands. This is more fully explained under the head of Sales.)

6. When work is to be done by A upon an article belonging to B, the destruction of the article discharges the contract, but A may recover for the work performed upon it before its destruction.

7. One may contract against loss or destruction. For example, A hires a boat and contracts that in case of loss he shall pay a specified sum. The boat is lost in a storm without A's fault. A is bound to pay as agreed.

(c) Death or disability in the case of contract for personal services. If the contract is for personal services, the death or incapacity of the one who is to perform such services will discharge the contract.

Examples: 8. A musician contracts to play at a theater. Owing to illness he is unable to do so. The theater manager sues for damages for breach. He cannot recover. The illness and consequent incapacity of the musician discharges the contract.

9. An unforeseen peril, as the prevalence of a dangerous contagious disease, may operate to discharge a contract for personal services within the infected district.

10. The death of a master or of a servant discharges the contract as between the survivor and the executor or administrator of the deceased person.

39. Discharge by breach. A contract may be indivisible or divisible and the promises may be mutually dependent or may be independent.

1. Where the promises on each side are mutually dependent and the contract is an indivisible one, a breach of performance by one party will discharge the other from performance and will give that other an action for damages against the one in default. A positive assertion by one party, prior to the time fixed for performance, that he will not perform, is an anticipatory breach and gives the other party an immediate right of action. If one party tells the other to stop performance, the latter cannot by going on add to the damages for the breach.

Example 1. A agrees to sell a horse to B for $100. A refuses to deliver the horse and receive the purchase price. B is discharged from any further obligation; he is not bound to receive the horse in case A should afterwards tender it, or to pay anything to A; and he may maintain an action for damages against A for the refusal to deliver when performance was due.

2. If, however, the contract is a divisible one, that is, made up really of a series of contracts, then the breach of one part will not discharge the other parts. The difficulty in these cases is in determining whether a contract is divisible or indivisible.

Example 2. A contracts to sell B 1200 tons of coal in twelve monthly. installments of 100 tons. The English court held this to be a divisible contract, and that a breach in performance as to one installment would not discharge the contract as to the remaining installments. The Supreme Court of the United States held such a contract to be an indivisible one for the full amount specified, that the provision as to installments was subsidiary, and that a breach as to any installment would discharge the entire contract. Generally in the United States such contracts are regarded as indivisible.

3. Sometimes promises are not mutually dependent, and in such a case a failure of performance on one side may not discharge a promise on the other.

Example 3. A agrees to pay a certain rent for B's house and B agrees to allow A to occupy the house for one year and to give A the option to renew the lease for a second year. A falls in arrears upon his rent and B refuses to renew the lease. It is held that the covenant to renew is independent of the promise to pay the rent, and therefore B is not discharged from the promise to renew because of A's breach of the promise to pay. These cases are not very common, and the construction is so technical as to be chiefly the business of lawyers.

4. A warranty is a subsidiary promise attached commonly to a contract of sale. The breach of the warranty gives rise to an action for damages but does not generally discharge the main contract.

Example 4. A sells B a horse and innocently warrants it to be sound. After B has taken the horse he discovers that it is unsound and attempts to compel A to take it back and repay the purchase money. Many courts hold that this cannot be done and that B's only remedy is an action for damages for the breach of the warranty; but in Massachusetts and some other states B is allowed to rescind (see sec. 57 post).

40. Remedies for breach of contract. In case a contract is broken by one party to it these results follow:

(1) the other party is exonerated from further performance on his part;

(2) he has an action for breach of the contract in which he may recover as damages the contract price of whatever he has delivered or done, and also for any loss sustained by being prevented from completing the contract; or

(3) by treating the contract as entirely abandoned, he may, if he chooses, recover the value of whatever he may have himself already performed, that is, he may proceed upon an implied promise to pay a reasonable price or compensation.

Examples: 1. A sells 10,000 feet of lumber to B at $20 a thousand feet. A delivers 4000 feet, when B refuses to receive the remainder. A is not bound to deliver or tender any more. A may sue for breach of contract and recover $80 (the contract price of that delivered) plus the profit he would have made upon the remaining 6000 feet, which, assuming the lumber cost A $15 a thousand and is now worth in the market only $15 a thousand, would be $30.

2. Or, if A chooses to disregard the express contract, he may sue as upon an implied contract and recover the market value of the lumber actually delivered. Assuming this is $25 a thousand, A could recover $100, but he could not recover for any loss of profits upon the portion undelivered. In case A has contracted to sell this lumber to B at too low a price, this alternative would be preferable.

3. A buys a quantity of turnip seed of B, who represents the seed to be of a particular variety suitable to grow turnips for early market. A plants the seed, and the turnips raised from them are of a late variety, fit only for cattle. A may recover as damages the difference between the market value of the crop he raised and that of the crop he might have raised had the seed been as represented.

In certain classes of cases, where damages would be an inadequate remedy, the injured party may obtain from an equity court an order that the other party specifically perform his promise. Contracts for the conveyance of land are thus specifically enforced, and contracts for the transfer of chattels may be specifically enforced if the chattel is one, like a patented article, which cannot be procured elsewhere than of the vendor.

Actions for the breach of contracts must be brought within the time fixed by the Statute of Limitations. In case of simple

contracts this is usually from three to six years, and in the case of sealed contracts from ten to twenty years. The statutes differ somewhat in the different states. When more than the prescribed time has elapsed since the breach, the contract or right of action upon it is said to be "outlawed," that is, it is barred by the statute. But a debt may be revived by a new promise to pay it after it is barred by the Statute of Limitations, although nearly all the states now require such a promise to be in writing. A part payment after the debt is barred will also revive the whole claim.

IV. DISCHARGE IN BANKRUPTCY

41. Insolvency laws not discharging debtor. At common law debtors could be imprisoned for debt, and such imprisonment might be of indefinite duration. It was not until 1759 that Parliament passed a general and comprehensive act for their relief. This act provided that prisoners in custody for debts under £100 (afterwards extended to £200) might secure their release by making an assignment of all their property, with some trifling exceptions, for the benefit of their creditors; the debtor, however, was not discharged from civil liability for the unpaid portion of his debts. This was the origin of insolvency laws under which, after the abolition of imprisonment for debt, insolvent debtors continued to make assignments for the benefit of creditors in order that all might share pro rata in the available assets. These laws were extended in England and in some of our states so as to enable creditors to compel an insolvent to make an assignment of his property for their benefit and to give the debtor a discharge from further liability. When they reach this point they are indistinguishable from bankruptcy laws.

42. Bankruptcy laws discharging debtor. Bankruptcy laws are older than insolvency laws but were originally applied only to traders or persons in mercantile pursuits. They were framed to enable creditors to compel a bankrupt trader to turn over his property for their benefit. They were extended for the benefit of the trader, so that upon turning over all his property