AN ORDER MAY BE CANCELED ONLY WHEN BUYER BECOMES INSOLVENT.
Question.—A buyer places an order with a mill for five cars of lumber, deliveries to be one car a month. At the time of the purchase the buyer is in good financial standing and signed copies of the contract are exchanged between the buyer and seller. After three deliveries have been made information reaches the seller that the financial standing of the buyer has changed for the worse; that is, he has committed no act of bankruptcy, but a commercial agency has reduced his capital and credit rating. The seller requests the buyer to anticipate the payment of some of the previous shipments before he will agree to make further shipments. The buyer refuses to comply with this request and asks for the delivery of the balance. The seller thereupon makes no further deliveries, but when the bills for the goods delivered become due, demands payment. The buyer refuses on the ground that the seller has not carried out his part of the contract. On these facts please tell us what the law in this case would be.
Reply: One who has sold goods on credit is not justified in refusing delivery simply because the buyer’s financial standing changes for the worse between the time of sale and the time of delivery. In the case here put, for example, there is nothing to show that the buyer is not now amply able to pay for the goods, or that the contract would have been declined by the seller if the buyer’s rating at the time had been what it is now. The seller is entitled to refuse delivery only if the buyer, before delivery is made, commits any act of insolvency. He need not become a bankrupt or make an assignment for creditors. He is insolvent, within the meaning of this rule, if he fails to pay any just and admittedly proper debt promptly upon its due date. As long as he is paying his bills whenever they fall due the seller has no ground upon which to declare that he is not “keeping his credit good,” if the buyer in this case is not solvent, as the word is here defined, the seller need not continue the deliveries. If the buyer is solvent the seller is not justified in his position. In that case the buyer need not pay for the goods already delivered until the time named in the contract for payment arrives, and he has a valid claim for damages arising out of the seller’s failure to make the other deliveries in strict accordance with the contract.
Opinion No. 91.