Court Opinion

ID: 5267328
Source: CourtListenerOpinion
Date Created: 2022-01-06 19:03:02.611471+00
Date Added: 2024-06-11T08:28:10.163798
License: Public Domain

Hinman, J. (concurring):
I agree with the learned court below that the contract was not completed at the time, but I disagree as to the holding that the term “ close the contract ” meant the right to refuse payment for the goods, title to which had passed to the buyer before insolvency. (See 118 Misc. Rep. 31.)
Where one party sells another goods for a certain price, the contract is not completed on the delivery of the goods. Payment of the price must be made before it is completed. The fact that it is not completed in such a case gives a cause of action for the price. Mutuality is the essence of a contract.
Moreover, there was something else that was permitted the buyer in this case to be done before it could be required to pay for the oil. The buyer had the right of inspection on arrival of the oil. If the oil came up to the contract standard, nothing more on the part of the seller remained to be done. Delivery to the carrier passed title to the buyer. There was a potential per*313formance by the seller which became actual on the arrival and acceptance of the goods after inspection or on acceptance with a waiver of the right to inspect. If the goods were not up to the standard, the buyer might reject them, in which case performance by the seller would not then be even potential.
Therefore, for these two reasons, the contract was not completed. The payment of the price was essential and the right of inspection, even though title had passed, was a part of the agreement and cannot be ignored.
What was meant by “ close the contract? ” The trial court held, in effect, that it meant to assume an attitude of passivity, to consider that the contract was abrogated by the buyer’s insolvency, leaving the parties as though no contract had ever been made, and thus permitting a refusal of the shipment and of payment therefor. This is not the meaning. The provision giving the party the right to “ close the contract forthwith, any difference to be for the account of the defaulter,” has latent in it the idea of action. Something must be done; action must be taken; the matter must be immediately wound up. A “ difference ” must be charged to the account of the “ defaulter,” if there should be a difference. But before the party can take such action, the contract presumes that the insolvent shall be found to be a “ defaulter.” If the insolvent is not in default, the clause has no application. If he is in default, the buyer may protect himself by buying in the open market, and by debiting or crediting the “ difference ” between the contract and buying prices to the “ account of the defaulter.”
In this case title had passed. The goods belonged to the Hauck Food Products Corporation. If the goods came up to the standard, the seller was not in default and the buyer could not be said to be protecting itself by rejecting them, because it would be rejecting its own goods. The performance of the contract had ^progressed so far that all the buyer could do was to examine the goods and if they came up to the standard, to accept them, since the goods were its property. Then it must pay the contract price. If the goods were not up to standard, it had the right to reject the goods and to presume that the seller, being insolvent, could do nothing else by way of performance. Closing out the contract would then consist of rejecting the goods and of going into the market to buy the goods contracted for, charging the “ difference ” in price, if any, to the account of the seller.
When the Hauck Food Products Corporation refused to accept the goods, it was simply refusing to accept goods which belonged to itself and when it refused to examine the goods it refused to protect itself in the only possible way open to it. As the matter *314then stood, there was no right to “ close the contract ” within the meaning of the clause in question and the Hauck Food Products Corporation is obligated to pay the damages arising out of its own default. The counterclaim was improperly dismissed upon the merits.
I concur in the conclusion of Mr. Justice Kellogg that the judgment should be reversed and a new trial granted.