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ey after the vendee is in default in regard to it, while it will of course deprive the vendor of any right to cancel the contract for such condoned default, does not amount to a waiver of prompt payment of the subsequent installments, though perhaps, as an evidence of indulgence, it may oblige the vendor to make a demand and give notice before acting on any subsequent default.327

§ 441. Rights and Duties of Parties on Rescission.-One who has a right to rescind a contract to which he is a party generally has a choice or option as to whether or not he will exercise that right, and his election cannot be controlled by the other party. Hence where a vendor of land, on delivering a deed with general warranty, executed another instrument stipulating that, if the title should fail, the vendee should not recover more than $2,000, which was the price paid, and the vendee went into possession, it was held that the vendor could not, by confessing the title defective, compel the purchaser by suit to accept the $2,000 and reconvey the land, but that the purchaser could retain the possession, and, on eviction by an adverse claimant, recover from the vendor the sum stipulated, or he could buy out the adverse claimant.328 But where the vendor, in an agreement to execute a warranty deed, stipulates that the contract of sale shall be void if his title turns out to be defective, he need not convey if the title proves defective, unless the vendee so requests and will relieve him from his warranty as to the defects.329 Where neither possession nor a deed has been delivered, resistance by the vendee to a suit or claim for payment of the purchase money, for want of title in the vendor, is substantially equivalent to a rescission of the contract on that ground.330 But if the purchaser is in possession under a deed, and there is a want or failure of title, his proper course is to rescind the sale

327 Jones v. Hert (Ala.) 68 South. 259; True v. Northern Pac. Ry. Co., 126 Minn. 72, 147 N. W. 948; Cooper v. Rutland, 99 S. C. 83, 82 S. E. 994.

328 Trevino v. Cantu, 61 Tex. 88. And see Hale v. Cravener, 128 Ill. 408, 21 N. E. 534.

329 Terte v. Maynard, 48 Mo. App. 463.

330 Milby v. Hester (Tex. Civ. App.) 94 S. W. 178. See Ogden v. Walker's Heirs, 6 Dana (Ky.) 420.

formally, offer to restore the possession, tender a reconveyance, and demand the return of any payments he may have made under the contract or the restoration to him of notes given for the purchase money, claiming also the value of permanent improvements made, and being chargeable with the rental value of the premises during his occupancy.331 Instead of a reconveyance, however, the same result may in some cases be accomplished by a cancellation of the deed of the vendor.332 As to compensation for improvements made by the rescinding purchaser, it may be proper to decree that the value thereof shall be a lien on the land and that it may be sold for the satisfaction of such lien.338 But if the rescission is effected at the instance of the vendor and on account of the vendee's default, the latter is not entitled to compensation for a building erected on the land.

And as to the rental value of the premises, if the vendor, after letting the vendee into possession, breaches his contract and conveys the land to a third person, he cannot compel the vendee to account to him for rents and profits during the time he did not hold the title, on a subsequent rescission of the sale,335

§ 442. Exchange of Properties.-The general principles set forth in the foregoing sections of this chapter are equally applicable to the case of an exchange of land for land, or of land for personalty, as to a sale of realty for a cash consideration. Thus, a party to an exchange may rescind it on account of fraud, false representations, or fraudulent concealment of material facts practised upon him by the other party.336 For instance, a false representation that

331 Garvey v. Lashells, 151 Cal. 526, 91 Pac. 498; Loring v. Oxford, 18 Tex. Civ. App. 415, 45 S. W. 395.

332 Lewis v. Mote, 140 Iowa, 698, 119 N. W. 152.

333 Donovan v. Dickson, 28 N. D. 229, 148 N. W. 537.

334 Gray v. Western Townsite Co., 34 S. D. 422, 148 N. W. 853.

835 Strater v. Flynn (N. J. Ch.) 91 Atl. 591.

336 Whitcanack v. Wagoner (Iowa) 115 N. W. 475; Fulton v. Fisher, 151 Iowa, 429, 131 N. W. 662; Pratt v. Philbrook, 41 Me. 132; Tifel v. Jenkins, 93 Md. 744, 49 Atl. 840; Skinner v. Brigham, 126 Mass. 132; Green v. Hayes, 120 Minn. 201, 139 N. W. 139; Burger v. Boardman, 254 Mo. 238, 162 S. W. 197; Baker v. Robertson, 138 Mo. App. 163, 119 S. W. 987; Manning v. McClure, 168 Mo. App. 533, 154 S. W. 803; Sneve v. Schwartz, 25 N. D. 287, 141 N. W.

a mortgage on the property given in exchange for complainant's property is payable in the future and bears interest at a certain rate, whereas it is already overdue and the rate of interest is higher than stated, justifies a rescission.337 So, where the same agent represented both of the parties to the trade, of which one of them was unaware, that party will be entitled to a rescission upon offering to do equity. 338 So also, if there is a mutual mistake as to the quantity, situation, or value of one of the tracts of land embraced in the exchange, the party placed at a disadvantage thereby may rescind.339 Want of title to the property to be transferred by one of the parties, or substantial defects in his title, will likewise justify a rescission by the other,340 or a material deficiency in the quantity of the land to be conveyed, though not a trifling and unimportant failure of performance which may easily be compensated in money. 32 Again, if one of the parties to an agreement for exchange, acting in good faith, tenders full and satisfactory performance on his own part, with a demand for like performance on the other side, which is unequivocally refused, it is cause for rescission.343 And the equivalent of such a refusal may be found in a distinct and continuous abandonment of his rights under the contract by one of the parties to it. But the intervening rights of third parties are also to be considered, and it is held that the rescission of an exchange of lands may be prevented by the creation of a lien upon one of the properties by the giving of a mortgage on

344

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348; Patterson v. McMinn (Tex. Civ. App.) 152 S. W. 223; Stelter V. Fowler, 62 Wash. 345, 113 Pac. 1096, 114 Pac. 879.

837 Trowbridge v. Addoms, 23 Colo. 518, 48 Pac. 535. See Knowlton v. Amy, 47 Mich. 204, 10 N. W. 201.

338 Neuman v. Friedman, 156 Mo. App. 142, 136 S. W. 251.

339 Shuttlefield v. Neil, 163 Iowa, 470, 145 N. W. 1; McDonald v. Benge, 138 Iowa, 591, 116 N. W. 602.

340 Thornton Bros. Co. v. Thomas H. Tully Const. Co., 160 App. Div. 171, 145 N. Y. Supp. 156; Wilson v. Wilson, 115 Mo. App. 641, 92 S. W. 145; Schroeder v. Turpin, 253 Mo. 258, 161 S. W. 716.

341 Harland v. Harpold, 182 Ill. 227, 55 N. E. 376.

342 McConnell v. Newell, 133 Iowa, 736, 111 N. W. 17.

343 Dikeman v. Arnold, 78 Mich. 455, 44 N. W. 407; Gibson v. Brown, 214 Ill. 330, 73 N. E. 578.

344 See Jermyn v. McClure, 195 Pa. 245, 45 Atl. 938.

it to a stranger occupying the position of a purchaser in good faith.345 But where the owner of a farm, induced by fraud to exchange it for other property, accounted for the income received from the other property, and promptly sought a rescission on discovering the fraud, it was held that the mere fact that the adverse party (guilty of the fraud) had placed a mortgage on the farm would not defeat a rescission.346 But on the other hand, if the party who has been defrauded mortgages the land which he has received in the exchange, after discovering the fraud, he will be estopped from demanding a rescission.347 It should be added that an exchange of property made by a person of mind so unsound that his want of mental capacity is apparent to any one of ordinary prudence and observation conversing with him, is invalid,348 and that an exchange of property between an adult and an infant is voidable at the instance of the infant.349

Since the rescission of any contract involves the restoration of the parties to their former situation, one seeking the rescission of an exchange of lands must restore or offer to restore the opposite party to his original possession,850 and offer to do equity by turning over all rents or profits received from the property while it was in his hands.351 And on the making of a decree for rescission, the complainant is entitled to a judgment for the land which he conveyed in the trade, or for its value if it has passed into the hands of third persons.352 But if the land conveyed by the complaining party was subject to incumbrances, and these have been paid

345 Richardson v. Wren, 11 Ariz. 395, 95 Pac. 124, 16 L. R. A. (N. S.) 190.

346 Rafferty v. Heath, 115 Va. 195, 78 S. E. 641.

347 Trauzettel v. Kjellman (Tex. Civ. App.) 163 S. W. 689.

348 Halley v. Troester, 72 Mo. 73. On the general subject of insanity and mental weakness as a ground for the rescission of contract, see, supra, §§ 254-277.

349 Williams v. Brown, 34 Me. 594. And see, supra, § 285.

850 Paul v. Chenault (Tex. Civ. App.) 44 S. W. 682.

351 Chase v. Wolgamot, 137 Iowa, 128, 114 N. W. 614. But the mere failure to offer to return an insurance policy on a building taken in exchange for other property is not enough to defeat a rescission of the exchange on the ground of fraud. Idem.

352 Campbell v. Moorehouse, 141 Iowa, 568, 120 N. W. 79.

off by the other party, he cannot have relief by rescission without an offer to repay the amount so expended.353 It is also a general rule that, on the rescission of an exchange, each of the parties is entitled to compensation for any improvements made by him up to the date of the rescission, to the extent that they have increased the value of the premises, and each is chargeable with rent estimated on the value of the property in that condition in which he received it; but if either party makes improvements after the judgment for rescission, he cannot have compensation therefor, except as an offset to rent, and in that case the rent will be estimated on the increased value of the land in its improved condition.354 But in making these and similar computations the basis is not the trading value put on the properties by their respective owners in the agreement for exchange, but their actual value.355

353 Adams v. Hill (Tex. Civ. App.) 149 S. W. 349.

354 McMurtry v. Vowells, 6 Ky. Law Rep. 719; Morgan v. Combs, 33 Ky. Law Rep. 817, 111 S. W. 294; Austin v. Evans (Ky.) 128 S. W. 1088.

355 Norton v. Hinecker, 137 Iowa, 750, 115 N. W. 612, 15 Ann. Cas. 474.

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