Novelty Advertising Co. v. Farmers Mutual Tobacco Warehouse Co.

Stacy, J., after stating the case: The decisions in this jurisdiction are to the effect that when an executory contract for the sale of goods, not presently in existence and ready for delivery, but to be thereafter manufactured, is rescinded before the. work is completed, the vendor will not be allowed to increase his damages by continuing to manufacture the goods after notice of rescission, but his damages in such cases are to be measured as of the time of the breach of the contract by the vendee. Clothing Co. v. Stadiem, 149 N. C., 6; Heiser v. Mears, 120 N. C., 443. The theory upon which this conclusion is reached is not that the buyer or the party in default has a right to pay damages as an alternative performance of his contractual obligation, but rather upon the theory -that it is the duty of the seller to do nothing, after notice of rescission, to increase his damages. Advertising Co. v. Wilson, 186 Mo. App., 492; 172 S. W., 394; Catalogue, Co. v. Foundry Co., 97 S. W., 231; International Text-Book v. Jones, 166 Mich., 86. *199 In Mfg. Co. v. Cutlery Co., 127 S. W., 666, tbe power as distinguished from tbe right of a party to repudiate an executory contract, in tbe face of a stipulation against cancellation, is stated a's follows: “One party to an executory contract has tbe power to repudiate it, and tbe remedy of tbe other party is an action for damages caused by tbe breach of tbe contract. He cannot thereafter himself perform and recover on tbe contract. And a contracting party who has certain things to do under bis contract has no right to proceed to execute it after be has been notified that tbe other party will not stand by tbe contract, and when be receives notice from tbe other party repudiating tbe contract, be is not justified in allowing anything further to be done.” See, also, Bishop on Contracts, secs. 837 and 841. Tbe different methods employed and used by tbe courts in working out tbe rights of tbe parties under such circumstances have not been uniform; and this has resulted in a sharp conflict of authorities elsewhere on tbe subject. Hart-Parr Co. v. Finley, 31 N. Dak., 130; Ann. Cas. 1917 E, 706, and note; Page on Contracts (6th Ed.), sec. 3224. For example, in several jurisdictions it is held that where tbe contract is for tbe sale óf a commodity not in existence at tbe time and which tbe seller is thereafter to manufacture, or put in a condition to be delivered (especially if it be of a kind different from that ordinarily made by tbe seller),- upon repudiation by tbe purchaser, tbe contract is to be considered as one for work and labor, and not one of sale. Flynn v. Dougherty, 91 Cal., 669; Atwater v. Hough, 29 Conn., 508; Goddard v. Binney, 115 Mass., 450; Turner v. Mason, 65 Mich., 662; Bennett v. Nye, 4 Greene (Ia.), 410; Bagby v. Walker, 78 Md., 239; Deal v. Maxwell, 51 N. Y., 652; Mattison v. Wescott, 13 Vt., 258. When a party breaches bis contract, without any valid excuse, the courts are not inclined to permit him to prescribe tbe rights of tbe innocent party, but their chief concern is in making tbe plaintiff whole and securing to him bis rights under tbe contract. Register Co. v. Hill, 136 N. C., 277; Smith v. Lumber Co., 142 N. C., 26. Nevertheless, we think it is more in keeping with a just regard for tbe rights of both parties to bold that when a buyer countermands an order for goods before they have been manufactured and at a time when tbe seller can stop tbe work and thus mitigate bis damages, tbe vendor should not be allowed to proceed with tbe work so as to aggravate tbe damages and recover tbe contract price upon tbe theory of full performance. Butler v. Butler, 77 N. Y., 472; Danforth v. Walker, 37 Vt., 239; Fireworks Co. v. Polites, 130 Pa. St., 536; Collins v. Dalaporte, 115 Mass., 159; Elliot on Contracts, Vol. 3, sec. 2035; 13 C. J., 655; Scale Co. v. Beed, 52 Iowa, 307. *200 In 6 R. C. L., 1029, this rule is stated as follows: “While a contract is executory a party has the power to stop performance on the other side by an explicit direction to that effect, subjecting himself to such damages as will compensate the other party for being stopped in the performance on his, part at that stage in the execution of the contract. The party thus forbidden cannot afterwards go on, and thereby increase the damages, and then recover such damages from the other party. The legal right of either party to violate, abandon, or renounce his contract, on th# usual terms of compensation to the other for the damages which the law recognizes and allows — subject to the jurisdiction of equity to decree specific performance in proper cases — is universally recognized and acted upon.” Applying these principles to the facts of the instant case, we think the plaintiff’s recovery should be limited to such damages as were sustained prior to the receipt of the defendant’s letter of 16 December, 1920.- This letter contained, for the first time in the correspondence between the parties, what amounted to a definite repudiation of the contract. If the work had not been completed at that time, the plaintiff would only be entitled to recover an amount sufficient to compensate it for the labor expended and expense incurred in the part performance of the contract, prior to its repudiation, plus the profit that would have accrued had full performance not been prevented by the defendant. Catalogue Co. v. Foundry Co., supra. While the difference between the contract price and the amount of damages sustained up to the receipt of the defendant’s letter of renunciation may have been slight, yet this was a question for the jury, and we think his Honor erred in his peremptory instruction. New trial.