Thus, the bringing of a suit by the lessee of land against his lessor, in which the plaintiff claims to be the equitable owner of part of the land and seeks specifically to enforce an alleged contract of sale, is a renunciation or abandonment of the lease.27 But where the purchaser in a contract for the sale of land buys in an incumbrance on the property, has the property sold by the sheriff, and buys it himself, it is held that this does not constitute an abandonment of the contract on his part.28

§ 7. Rescission and Forfeiture Distinguished. While a court of equity, in a proper case, will declare a rescission of a contract for a violation of the covenants contained in it, because it would be against conscience to permit one party to violate the contract on his part, and still hold the other party to a compliance with it, yet this is very different from a forfeiture, such as is meant when it is said that a court of equity does not favor forfeitures and will not lend its aid to declare or enforce them.20 So a provision in a contract for the sale of land, to the effect that it shall be canceled and the earnest money returned if a third person shall decide that the title is defective, is not a provision for forfeiture, such as the statute requires to be declared on notice, but one for rescission.30

§ 8. Rescission by Substitution of New Contract.Since it is always in the power of the parties to a contract to rescind or abrogate it by their mutual consent, they may accomplish this result by the substitution of a new contract, implying a mutual discharge from reciprocal obligations under the original contract and the restoration of the status quo or compensation for altered conditions,31 provided that the new contract shall be complete and binding in itself,32

27 Snyder v. Harding, 34 Wash. 286, 75 Pac. 812.

28 Crouse's Appeal, 28 Pa. 139.

29 Lincoln Trust Co. v. Nathan, 175 Mo. 32, 74 S. W. 1007.

30 Vittengl v. Vittengl, 156 Iowa, 41, 135 N. W. 63.

31 McCreery v. Day, 119 N. Y. 1, 23 N. E. 198, 6 L. R. A. 503, 16 Am. St. Rep. 793; Judson v. Romaine, 8 Ind. App. 390, 35 N. E. 912; Caples v. Port Huron Engine & Thresher Co. (Tex. Civ. App.) 131 S. W. 303.

82 Banewur v. Levenson, 171 Mass. 1, 50 N. E. 10.

and shall embrace each and all of the parties to the original contract.33 Often the effect of thus making a new contract depends on the intention of the parties with respect to the abrogation of the old contract, and this is a question to be determined by the jury upon the evidence.84

37

36

Where articles purchased are found unsatisfactory or unsuited to their purpose and are returned to the vendor, and others furnished in their place and accepted, this effects a rescission of the original contract of sale, so that no claims for damages can be founded on it.35 Such is also the case where an article is returned to the seller and another substituted for it at a higher price, or where the new contract includes additional articles and a change in the price, or even a new contract for the purchase and sale of the same articles, when fully executed, may be a satisfaction of the former agreement as to such sale.38 There is also a rescission where the new contract changes a conditional sale into an absolute sale, or where a sale of property is changed to a bailment with an option to purchase. And so, where parties to a contract which requires their procedure in a financial enterprise in a particular manner adopt and pursue without the consent of the other contracting parties an entirely different mode of procedure, a rescission is effected as against the parties so departing from the terms of the contract.41

39

40

The important matter to be noticed in this connection is that if a contract is rescinded by the making of a new agreement, all rights under the original contract are gone, and no claims can be founded upon it, either in respect to compensation for breach of the new contract or for injuries sus

33 Bade v. Hibberd, 50 Or. 501, 93 Pac. 364.

34 Priest v. Wheeler, 101 Mass. 479; Hogan v. Peterson, 8 Wyo. 549, 59 Pac. 162. And see Gilmer v. Ware, 19 Ala. 252.

35 Holbrook v. Electric Appliance Co., 90 Ill. App. 86.

36 Fitzsimons v. Richardson, 86 Vt. 229, 84 Atl. 811.

37 Keeney v. Mason, 49 Barb. (N. Y.) 254.

38 Poland Paper Co. v. Foote & Davies Co., 118 Ga. 458, 45 S. E. 374.

39 Quinn v. Parke & Lacy Machinery Co., 9 Wash. 136, 37 Pac. 288.

40 In re Naylor Mfg. Co. (D. C.) 135 Fed. 206.

41 Gray v. Bloomington & N. Ry. Co., 120 Ill. App. 159.

tained under the old. For example, where a sale of goods, after having been executed on the part of the seller, is canceled by the parties, and a new contract as to the payment is substituted, the seller cannot rescind the sale and claim the goods, by reason of a fraudulent intent on the part of the purchaser not to pay for the goods, existing only at the time of the original contract; and his mere failure to perform the new contract is not sufficient to show that the fraudulent intent continued in respect to the new contract.42

§ 9. Modification or Alteration of Contract Distinguished.—While, as just stated, a contract may be abrogated or rescinded by the substitution of an entirely new contract, it does not follow that a contract as a whole is done away with by a departure from or a modification or alteration of some of its terms. It is true that a party is not bound to submit to any change in the terms or conditions of his contract, and if this is attempted, with a refusal to perform according to the original terms, it may give him a right of rescission. But if the contract is modified by the mutual consent of the parties, and particularly if one asks and obtains a modification, it does not justify either in treating the contract as rescinded (so as to effect a change in their relative rights or duties) unless the changes are so fundamental and material as really to create a new contract.* Thus, a contract is not rescinded by an agreement changing the total price to be paid under it, or the amount of rent to be paid for leased premises, 48 or granting an extension of the time for payment, or changing the mode of payment

45

49

47

42 Sparks v. Leavy, 19 Abb. Prac. (N. Y.) 364. 43 Meyer v. Hallock, 25 N. Y. Super. Ct. 284.

44 Schuchardt v. Allen, 1 Wall. 359, 17 L. Ed. 642; Beckwith v. Kouns, 6 B. Mon. (Ky.) 222.

45 Hills v. McMunn, 232 III. 488, 83 N. E. 963.

46 Cooney v. McKinney, 25 Utah, 329, 71 Pac. 485; Webb v. Hanley, 206 Mass. 299, 92 N. E. 429.

47 Drucklieb v. Universal Tobacco Co., 106 App. Div. 470, 94 N. Y. Supp. 777.

48 Haines v. Elfman, 235 Pa. 341, 84 Atl. 349.

49 Smith v. Sackett, 15 Ill. 528; Miles v. Hemenway, 59 Or. 318, 111 Pac. 696, 117 Pac. 273.

as to installments or otherwise.50 And so also as to a modification in respect to the time for performance.1 And this is also true of any modifications of the contract with respect to the method of performing the work to be done under it.52 Thus, if a contract for the construction of a building is altered with the consent of the parties, such alterations do not amount to a rescission of the contract so as to permit the contractor to recover the reasonable value of his work, but the contract price controls, so far as the work is done under the contract." 53 And the re-execution of a contract for the sale of land, merely to correct a mistake in the name of the vendor, does not consummate a new contract.54

§ 10. Effect of Novation.-If an agreement for novation leaves the subject of the contract unchanged, but introduces a new or substituted party to it, it operates as a rescission of the original contract, so far as to release the retiring party from all further responsibility under it, but not as to enforcement of the original terms against the remaining original party and the new party. If, on the other hand, the novation affects the subject of the contract, but leaves the parties unchanged, it operates to rescind the contract only in case the change is so radical as to give rise to a presumption that the parties intended entirely to abrogate the existing contract and form a new contract.5°

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§ 11. Rescission and Reformation Distinguished.—The importance of distinguishing between the reformation of a written contract and its rescission chiefly arises in cases where a mistake is alleged. Reformation is a proper remedy where the parties have reached a definite and explicit

50 Greenwood v. Beeler, 152 Cal. 415, 93 Pac. 98; Sanders v. Stokes, 30 Ala. 432; Zwicky v. Morris, 146 Ill. App. 69.

51 Bangs v. Barret, 16 R. I. 615, 18 Atl. 250; General Electric Co. v. National Contracting Co., 178 N. Y. 369, 70 N. E. 928. 52 Lewman v. United States, 41 Ct. Cl. 470.

53 Garver v. Daubenspeck, 22 Ind. 238; Gray v. Jones, 47 Or. 40, 81 Pac. 813.

54 Wellington Realty Co. v. Gilbert, 24 Colo. App. 118, 131 Pac. 803. 55 Douglass v. Roberts, 1 City Ct. R. (N. Y.) 454; Bridgeford's Ex'rs v. Miller, 13 Ky. Law Rep. 927. See Downs v. Marsh, 29 Conn. 409; Morris v. Persing, 76 Neb. 80, 107 N. W. 218.

56 Supra, §§ 8, 9.

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agreement, understood in the same sense by both, but, by their mutual or common mistake, the written contract fails to express this agreement. Rescission is the proper remedy where the contract embodies what the parties nominally agreed on, but, in consequence of one party's ignorance of material facts, known to the other, or his mistake or misapprehension, not shared by the other, there has been no real meeting of their minds, and hence no valid contract. To warrant the reformation of a written instrument, "the mistake must be mutual and common to both parties to the instrument. It must appear that both have done what neither intended. A mistake on one side may be a ground for rescinding, but not for reforming, a contract. Where the minds of the parties have not met, there is no contract, and hence none to be rectified." It follows, therefore, that where one party demands the rescission of a contract on the ground of mistake, the other may insist, if the facts warrant it, that it shall be reformed instead of rescinded. Where the defendant in an action for rescission succeeds in showing that there was an actual and definite agreement, and that the only mistake occurred in reducing it to its final form, and that such mistake was common, then, in the absence of fraud, it will be proper for the court to refuse the prayer for rescission, and instead to order the reformation of the instrument and its enforcement as reformed.58 And even if the variance between the written contract and the oral agreement of the parties was brought about by fraud on the one side, inducing the mistake on the other, still, if there is no doubt as to what the agreement actually was, it may be a proper case for reformation instead of rescis

57 Hearne v. Marine Ins. Co., 20 Wall. 488, 22 L. Ed. 395; Frazier v. State Bank of Decatur, 101 Ark. 135, 141 S. W. 941. So also, "equity will not reform a written contract unless the mistake is shown to be the mistake of both parties; but it may rescind and cancel upon the ground of mistake of fact, material to the contract, of one party only." Civ. Code Ga., 1910, § 4579.

58 Bindseil v. Federal Union Surety Co., 130 App. Div. 775, 115 N. Y. Supp. 447; Davy v. Davy, 98 App. Div. 630, 90 N. Y. Supp. 242; Schelling v. Bischoff, 61 N. Y. Super. Ct. 68, 18 N. Y. Supp. 859; Matteson v. Johnston, 139 App. Div. 859, 124 N. Y. Supp. 185; Van Donge v. Van Donge, 23 Mich. 321. And see Fitzkee v. Hoeflin, 187 Ill. App. 514.