John F. Trainor Co. v. G. Amsinck & Co.

Clarke, P. J.:

The action was brought to recover damages for breach of a contract made by a written proposition of the plaintiff to sell and deliver cotton yarn, accepted in writing by the defendant, The quantity ordered was 29,000 pounds of 8 ¡1 soft twist, that is, “a thread that measures eight times 840 yards to a pound.” The contract provided: “ This order is taken subject to discontinuance or cancellation only in case of fires, strikes, lockouts or any unforeseen casualty at your mill or that of our mill where the yarns are to be made, and in that event deliveries to be made proportionate to the running of the respective mills, you to take and we to deliver all goods made at that time or in process of manufacture. If shipments are delayed for any reason, it is understood that the order remains in force until cancelled. All understandings and verbal agreements embodied herein.” Also “ Price 65^ lb. Terms 3% 10 days from B /L f.o.b. mill. Frt. prepaid. • Deliveries — Beginning September, sooner if possible. This delivery is subject to delays over which we have no control.”

On the trial the complaint was amended. The original complaint alleged as follows:

“ Fifth. That plaintiff and defendant thereafter agreed that deliveries were to be made on the aforesaid contract in December, 1918, or early in January, 1919.

“ Sixth. That thereafter and on or about December 2nd, 1918, the defendant gave notice in writing to plaintiff that it would not accept the yarn when delivered.”

The amendment to paragraph 5th on the trial was that “ on or about August 27th plaintiff and defendant agreed that deliveries were to be made on the aforesaid contract within a reasonable time.” The proof showed that on the 30th of November, 1918, the defendant wrote: “ Referring to the contract we placed with you on May 29th, * * * we have to advise you that we regret that you have made no deliveries as yet on yarns # 32 and #81. Our order stated delivery August-September, or better. We find that owing to late delivery we are forced to cancel this contract. Our customers will not take the goods on these late dates, and there is no option before us other than to send you a formal cancellation for these two items as yet undelivered to us, and accordingly this may be regarded as a formal cancellation of the same.”

The appellant claims that, when the contract was modified by changing the time for delivery from the time fixed in the contract to a reasonable time, the absolute cancellation without previous notice of a date for delivery, considered by it to be a reasonable time, was a breach of the contract on defendant’s part and entitled appellant to a direction of a verdict in its favor for which it moved, and being denied, it excepted.

The learned trial court charged the jury as follows: “ The issue in this case, as we have finally worked it out, is exceedingly simple and is a single one: What did the parties intend by a reasonable time when, on August 27th, they changed the date of delivery as it had theretofore been, to a delivery within a reasonable time. What was such reasonable time? If the reasonable time intended by them, and as it actually was, expired on or before November 30th, then the defendant had the right to, as he calls it, cancel the contract. If on .the other hand the reasonable time extended beyond November 30th, then they had no right to cancel the contract on November 30th for a failure of delivery, because you s.ee that under those circumstances the plaintiff would have had further time to make the delivery, and the defendant, therefore, would have breached the contract by this letter of cancellation.”

So that the question is clearly presented, the court leaving “ reasonable time ” alone to the jury and refusing to consider the necessity for notice of limitation before cancellation.

In Taylor v. Ooelet (142 App. Div. 467) defendant entered into a contract for the construction of a building which provided for its completion ready for occupancy on or before July 1,1907. The building was not completed at that time but the plaintiffs continued to make regular monthly payments until February 17, 1908. On the twelfth of March defendant gave the construction company three days’ notice, pursuant to the contract, to supply a sufficiency of workmen and materials to prosecute the work with promptness and diligence, and that, upon its neglect or refusal to do so, he would take possession for the purpose of completing the work; and, pursuant to that notice, the defendant did take possession. Mr. Justice Miller said: “ It was testified on the trial, and conceded by the defendant, that the reasonable time to erect the building expired on July 1, 1907. The court ruled that, from the nature of the contract, the defendant was notified from the beginning that the building had to be erected within a reasonable time, and that no notice was necessary to put him in default; but that, as. the reasonable time expired July 1, 1907, the continued monthly payments thereafter operated to waive the default, and to extend the time of performance indefinitely, wherefore, the defendant could not be again put in default without notice, requiring performance within a" reasonable time specified. * * * We are of the opinion that, on definite time of performance having been specified in the contract, the plaintiffs could not rescind without giving the defendant a reasonable time after notice to perform. Of course, where the time of performance is not specified -in the contract, the law presumes that the parties intended performance within a reasonable time; but 'it does not follow that, in such case, one party may suddenly and without notice terminate the contract, while the other is in good faith endeavoring to perform it. * * * The law is settled in this State by a long line of authorities that, where the time of performance is indefinite, neither party can put the other in default without notice, giving a reasonable time specified to complete performance. [Citing cases.] To be sure the question has usually been raised where the definite or specified time in the contract has been extended indefinitely, i. e., for a reasonable time. But we fail to perceive any distinction between a case where the parties originally contracted for performance within a reasonable time, not specified, and one where the original contract for performance within a specified time has been modified, either by contract or by the acts of the parties amounting to the same thing, so as to .substitute a reasonable time for the specified time, or to extend the specified time for a reasonable time.”

This case was affirmed (208 N. Y. 253), the Court of Appeals saying: “ This court has held that where an executory contract fixes the time within which it is to be performed and performance within that time is waived by the parties to the agreement, neither party can thereafter rescind the contract on account of such delay without notice to the other requiring performance within a reasonable time, to be specified in the notice, or the contract will be abrogated. By the waiver time as an essential element of the contract has been removed therefrom, but it can be restored by a reasonable notice demanding performance and stating that the contract will be rescinded if the notice is not complied with. (Lawson v. Hogan, 93 N. Y. 39; Schmidt v. Reed, 132 N. Y. 108.)

“ The plaintiffs do not dispute this rule of law, but contend that it does not apply when time is not of the essence of the contract as originally made. No such distinction appears in the decisions of the courts. [Citing cases.]

“ The basis of the rule requiring notice of intention to rescind is to be found in the reluctance of the courts to enforce penalties and forfeitures in matters of contract. * * * Courts do not allow a rescission of the contract for mere delay in performance unless the parties have made time of the essence of the contract. * * * The rule would seem to apply as aptly to contracts which when made leave indefinite the time of performance as to contracts from which time as an essential element has been removed by acquiescence of the parties.

“ Time is not of the essence of a contract which is to be performed within a reasonable time, but either party can make it so whenever he desires by simply giving notice to that effect. If notice is not given the contract continues in force. It may be sued on as an existing contract and damages for its breach recovered. But it cannot be treated as at an end and a forfeiture enforced. * * * The rule is a just one and is necessary to protect the unwary.

“ It is to be understood, however, that the notice of intention to rescind is only necessary when the party to the contract proceeded against has merely delayed performance, not where he has abandoned the contract, or treated it as terminated, or where he has refused to perform.”

Pierson & Co. v. American .Steel Export Co. (194 App. Div. 555) was an action brought to recover damages for an anticipatory breach of contract. Plaintiff had agreed to sell and defendant to buy a quantity of checkered steel plates, shipments to be made during June and July, 1917. The plates had not been rolled. After considerable delay and correspondence the defendant undertook to rescind. Mr. Justice Greenbaum, writing for a unanimous court, said: “ There can be no doubt whatever that there had been a waiver of the time of delivery provided for in the contract. The defendant waived delivery of these contracts in its earlier letters upon plaintiff’s inability to deliver in June and July and thereafter owing to the alleged embargo by the United States government and the difficulties on the part of defendant to procure licenses, the time for delivery was extended from time to time by consent of both parties.

“ The rule is well settled that where time of performance is waived ‘ neither party can thereafter rescind the contract on account of such delay without notice to the other requiring performance within a reasonable time, to be specified in the notice, or the contract will be abrogated.’ (Taylor v. Goelet, 208 N.. Y. 253.) No such notice was here given by the defendant. It follows, therefore, that its rescission was not warranted in law and that its act of cancellation constituted anticipatory breach of the contract which entitled the plaintiff to recover damages therefor.”

In Miller v. Ungerer & Co., No. 1 (188 App. Div. 655) —sale of benzyl chloride — the court said: “ The inference is reasonable that the defendant, having learned that plaintiffs then had not the goods, made the tender for the purpose of putting plaintiffs in default. The purpose was not achieved, for the plaintiffs, in the circumstances, had a reasonable time for compliance, and the demand without notice was ineffective. (Myers v. DeMier, 52 N. Y. 647; Taylor v. Goelet, 208 id. 253.)”

In Sturges & Burn Manufacturing Co. v. American Separator Co. (158 App. Div. 63) the contract was for the manufacture and purchase of certain goods. The court said: “ We cannot agree with the conclusion of the learned trial court that the defendant had the right to rescind the March contract because of unreasonable delay of the plaintiff in performing the same. Where an act is to be performed within a reasonable time, time is not of the essence of the contract, and, unless it be made so by the subsequent acts of either of the parties, the delay of the plaintiff in furnishing an article contracted for furnishes no defense to an action brought to recover the contract price therefor. Courts do not allow a rescission of the contract for mere delay in performance unless the parties have made time of the essence of the contract.

(Taylor v. Goelet, 208 N. Y. 253.)”

In Chemung Iron & Steel Co. v, Horn (114 Misc. Rep. 380) Mr. Justice Lehman, writing for the Appellate Term, undertook to limit the effect of Taylor v. Goelet, stating: “ It would not, however, seem to have any application to an executory contract of sale of goods not to be specially manufactured by the seller and where the seller was required merely to perform the one act of delivering the goods to the buyer; ” but the Appellate Term in Brenner v. Greenberg & Greenberg, Inc. (183 N. Y. Supp. 22) held that the refusal of the trial judge to charge that “ it being an admitted fact in this case that the plaintiffs had waived the time of delivery as fixed by the agreement, they could not thereafter put the defendant in default, except upon giving notice fixing a reasonable time thereafter within which defendant may make performance ” was error.

I do not think that it is a sound construction of the rule established in Taylor v. Goelet, that it is not to be applied to executory contracts for the manufacture and sale of goods. (See cases supra.) It seems to me that the rule is based upon the principle of fair play. “ Notice in such circumstances is the plain requirement of good faith; and the requirement is one that the law has not ignored.” (Cardozo, J., in Brede v. Rosedale Terrace Co., 216 N. Y. 246.) Hence where time has ceased to be the essence of the contract by mutual waiver, substituting for a fixed date reasonable time for performance, neither party can rescind without a previous notice re-establishing a time limit. It is clear from the testimony in the case at bar that both parties were thoroughly aware of the extraordinary conditions created by the war and the demands of the government made upon the mills and, recognizing that, extended the time of performance. It is equally clear that the sudden attempted rescission of the contract was due to the sudden cessation of the war and the coincident break in prices. I think the attempted rescission was ineffective and that the judgment and order appealed from should be reversed and a new trial ordered, with costs to appellant to abide the event.

Dowling and Greenbaum, JJ., concur; Smith and Page, JJ., dissent.