Insolvent vendor when discharged from liability on the contract.

Where the vendor is an undischarged bankrupt at the time when the contract of sale was made, he cannot give a good title to or convey the land sold, if it were vested in him before his bankruptcy (z), or being freehold or other real estate (whether legal or equitable) had been acquired by or devolved upon him since the commencement of the bankruptcy (a). If, however, the property sold be held for a term of years, and were acquired by or devolved upon the vendor since the commencement of the bankruptcy, he can make a valid disposition thereof to anyone dealing with him in good faith and for value, either with or without notice of the bankruptcy, before the trustee intervenes, and will therefore be entitled to enforce the contract against the purchaser in proceedings either for specific performance or damages (b). And this doctrine has been extended to real estate purchased by undischarged bankrupts for partnership purposes and so converted into their personal property (c). If a bankrupt's assets be more than sufficient to satisfy his liabilities, he can make a valid disposition of his equitable interest in the surplus assets or any particular portion thereof, subject to the rights of the trustee and of his creditors (d). Where a tenant for life has a power to consent to the exercise by trustees of a power given to them to sell the settled land and becomes bankrupt, the concurrence of the trustee in the bankruptcy is necessary to enable his power of consent to be effectually exercised (c). The effect of the bankruptcy of a tenant for life on his capacity to exercise the power of sale given to him by the Settled Land Acts has been already discussed (f).

Vendor an undischarg-ed bankrupt at the time of the contract.

(r) Stat. 46 & 47 Vict. c. 52, s. 49.

(s) Expte. Rabbidge, 8 Ch. D. 367, decided on the Bankruptcy Act, 1869; and see Powell v. Marshall, 1899, 1 Q. B. 710, 713, 714; Re Taylor, 1910, 1 K. B. 562.

(t) Above, p. 54.').

(u) Above, p. 546.

(x) Above, p. 545.

(y) See Levy v. Stogdon, 1898, 1 Ch. 478, 1899, 1 Ch. 5, where, however, the purchaser was barred by his delay from enforcing the specific performance of the contract, but was held to be entitled to a lien for the amount of his deposit.

Bankruptcy of tenant for life empowered to consent to a sale.

(z) Above, p. 546, nn. (n),(x).

(a) Stat. 46 & 47 Vict. c. 52, s. 44; Be Nine Land, etc. Assn. and Gray, 1892, 2 Ch. 138; Bird v. Philpott, L900, 1 Ch. 822; Official Receiver v. Cooke, 1906, 2Ch. 661.

(b) Re Clayton and Barclay't Contract, 1895, 2 Ch. 212.

(c) Be Kent, etc. Coke Co., Ltd., 1909, 2 Ch. 195; see above, pp. 465, 466.

(d) Bird v. Philpott, 1900, 1 Ch.

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(c) Re Bedingfield and Herring's Contract, 1893, 2 Ch." 332; Williams on Settlements, 43 - 45, 322, 323.

(f) Above, pp. 325 - 327.

If the purchaser be adjudged bankrupt pending completion, his rights under the contract vest in his trustee in bankruptcy (g), who will be entitled to enforce the same against the vendor by action brought with the permission of the committee of inspection (It) either for damages at law or for specific performance in equity (i). The trustee in bankruptcy of the purchaser is, however, at liberty to disclaim the contract as unprofitable (k), and so long as it remains open to him to exercise his option of disclaiming the contract (l), the vendor cannot, without his consent, maintain an action against him for specific performance of the contract (m). If the purchaser's trustee in bankruptcy disclaim the contract, this will operate to determine the liabilities of the bankrupt in respect thereof (n); the vendor will be entitled to retain the deposit, if any (o), and he may prove for any injury sustained by him in consequence of the disclaimer as a debt under the bankruptcy (p).

Bankruptcy of the purchaser.

If the vendor have notice of an act of bankruptcy committed by the purchaser, he cannot safely proceed with the contract so long as the act of bankruptcy remains available; for any money subsequently paid to him by the purchaser might be recovered back by the trustee under a consequent adjudication of bankruptcy against the purchaser (q). For this reason, a purchaser who has committed an act of bankruptcy remaining available against him cannot enforce the specific performance of the contract by the vendor (r). And it appears that if time be of the essence of the contract, and on the day fixed for completion the purchaser's act of bankruptcy still remain available against him, the vendor will be entitled to treat the contract as broken and to claim the deposit as forfeited (s). And if time be not of the essence of the contract, it seems that the vendor receiving notice of an act of bankruptcy by the purchaser may at once take the objection that the purchaser is not and will not at the time fixed for completion be capable of making a valid payment of the purchase money, and may repudiate the contract on this ground (t). But, as in the case of an act of bankruptcy by the vendor, when an act of bankruptcy by the purchaser has not been followed by any bankruptcy proceedings, and has ceased to be available against him, it is thought that he will be entitled to enforce the contract specifically or otherwise, unless in the meantime the vendor has become entitled to repudiate the contract, and, in the case of a sale where time is not of the essence of the contract, has repudiated the same (u). And in such case the vendor may safely complete the contract with the purchaser (x). Where the vendor has no notice of an act of bankruptcy committed by the purchaser, and the contract is executed by payment of the purchase money before the date of any receiving order against the purchaser, the transaction is expressly protected, and the trustee under an adjudication founded on that act of bankruptcy cannot recover the money back (y). And even if in such case the contract be completed after that date, and the vendor, without notice of the act of bankruptcy, receive from the purchaser any money or negotiable securities in payment of the price, he will obtain a perfectly valid title thereto under the general law (z).