THE LIBRARY OF THE UNIVERSITY OF CALIFORNIA LOS ANGELES r ////////' /M///y/'/y/ //yY/z/yy/ ' /r/u J /0>/'' J D BRYANT & STRATTON'S COMMEECIAL LAW FOE BUSINESS MEN, INCLTTDINO MEECHANTS, FARMEES, MECHANICS, ETC. AND BOOK OF REFERENCE FOR THE LEGAL PROFESSION, ADAPTED TO ALL THE STATES OF THE UNION. TO BE USED A3 A TEXT-BOOK FOR LAW SCHOOLS AXD COMERCIAL ■COLLEGES, "VriTH A LAEQB VAEIETY OF PRACTICAL F0EM3 MOST COMMONLY EEQUIEZD IN BUSINESS TRANSACTIONS. BY AMOS DEAN, LL. D., PROIESSOR OF LAW IX TOE LAW DEPARTMEST OF THE UNIVERSITY OF ALBAXT. NEW YOEK: D. APPLETON AND COMPANY, 443 & 445 BROADWAY. LONDON: IC LITTLE BRITAIN. 18G6. EiTTEEED, according to Act of Congress, in the year 1360, By BRYANT & STEATTON, In the Clerk's Office of the District Court of the United States for the Southern District of N«w York. i» H-F' PEEFACE. The design of tliis work is to present, in a con* densed foim, tliose legal principles wMcli are of tlie most common use in the various transactions of business. ^VTiile, to tlie profession, it offers a means of easy and ready reference ; to the man of business it is presented as a guide, by tlie aid of wMch, lie can avoid those hazards of litigation that often so seriously incommode his progress. It is also in- tended to supply an educational want, which is be- coming more and more imperative, as the modes and relations of business grow more complex, intricate, and extended. * To render the work generally useftd for the pur- poses designed, it is, with few exceptions, confined to the Law Merchant^ and those princij^les of the Com- mon Laiv, the knowledge of which is indispensable to the proper conducting of business. Very little reference is made to any peculiar provisions of Stat- ute, or local law;, as that is found to vary according to the policy of different States ; while the Law Mer- chant and the Common La^v ai-e equally applicable to all except Louisiana. The experience of the writer in teaching, as well IV PREFACE. as in practice, lias convinced him tliat the mere pre- sentation of legal principles in the abstract, is of little value ; and that the only proper .method by which they can be acquired, is in connection with the facts and cu'cumstanoes out of which they arise, through wjiich they are develoj^ed, and to which they have a direct and necessary application. To point and apply a principle by its case, serving both as the means of its illustration, and the authority upon which it rests, is equally necessary, whether the object be to instruct a class, or to furnish guides to the public, or authority to judicial tribunals. As this has been generally the plan pursued, it is hoped it may commend it to the profession as a work of reference, to the scholar as the only effectual method of acquiring a knowledge of the law, and to the man of business as both affording the means of a clearer comj^rehension, and of seeming to its guidance a greater degree of safety. The forms aj)pended are ^^rith. a view both to illustrate, and to serve the common pui'poses of busi- ness. Forms are the embodiment of principles, and also the iustinunents throu2:h which the business affairs of life are transacted. To secm^e both these objects, a careful selection has been made of a few deemed the best adapted to answer the purpose of the one, and meet the wants of the other. Albany, Xov. 1, 1S60. TABLE OF CONTENTS. BOOK I. OF PROPERTY. PAGB Crr. I. — General 1 n. — Special ^ 2 1. Shipping 3 2. Good Will 5 3. Negotiable Paper 6 BOOK n. OF PERSONS. Ch. I. — Of the Sole Trader 8 II. — Partnership and Partners as Commercial Persons 10 Part I. — A Partnership, what and how formed 10 II. — Its different kinds, both as to Partnerships and Partners 12 III. — The Plights and Liabilities it confers and imposes upon each Partner as against, and in favor of, the others 15 IV. — The Rights it gives to the Partnership, and to Partners against third persons 19 V. — The Rights it gives to third persons, both against the Partnership and the Partners 21 VI. — Dissolution. Its Causes. Its Consequences. When Complete 25 Ch. m. — Corporations as Commercial Agents 30 Part I. — What they are and how created 30 II. — Their Powers and Liabilities 31 m.— Their Dissolution and Consequences 38 Vi CONTENTS. PAGE Cii. IV,— Principal akd Agext 40 Part I. — Agency what, who may be agent, and how created 40 II. — Different kinds of Agency '. . . 43 III. — Extent and Execution of Authority 44 IV. — Duties, Liabilities, and Rights of the Agent 49 V. — Liabilities and Rights of the Principal 69 VI. — Dissolution of Agency , 65 BOOK III. RIGHTS. First Division. — Eights relating to the Person. Ch. I.-^Of Contract ..^. , 69 Part I. — Contract in its Elements 69 1st Element.— Parties 70 2d Element.— Their Ability 70 3d Element.— Assent 70 4th Element. — Consideration 74 5th Element, — Thing to be done or omitted SO II. — Contract in its Construction. 92 III.— Contract in its Performancs, or the Defences that may be interposed 92 Ch. II. — Negotiable Paper 119 Part I. — Its different kinds, their forms, and parties 119 II. — Its essential Requisites 126 ni. — Its modes of Transfer 128 IV. — Duties of the Holder in Presenting for Accept- ance, and the Acceptance 144 V. — Duties of the Holder in Presenting for Payment^ and the Payment 152 VI. — Duties of the Holder in case of refusal to accept or to pay 161 Vn.— Rights and Remedies of the Holder 173 Ch. III.— Guaranty and Suretyship 177 Part I. — Nature, form, and essentials of the Contract 177 n, — Different kinds of Guaranty and manner in which it is effected by the Statute of Frauds ISO in, — Modes of extinguishing the contract of Guaranty or Suretyship 187 IV.— Rights of the Creditor against the Surety 193 CONTENTS. VU PAGB V. — Eights of the Surety against the Creditor 194 VI. — Rights of the Surety against the Principal 197 VII. — Rights of the Sureties against each other 198 Second Biyisios.-^IiiffJits relating to the Tiling. Ch. I. — Contract of Affreightment 203 Part I.— The Charter Party 204 II.— The BiU of Lading 209 III. — Carriage and Dehvery of Goods 212 IV. — Power and Authority of the Master in reference to Maritime Loans 212 v.— Duties of the Merchant. 217 VI. — General Average 217 VII.— Salvage 222 VIII. — Dissolution of the Contract of Affreightment. . . . 225 Ch. n. — Contract of Bailment 226 Part I.— Definition, Kinds of Neglects 226 IL— Deposit 229 III.— Mandate •. 234 IV. — Loan for use 240 v.— Pledge 244 VL— Hiring 252 VII. — Of the Common Carrier 264 Oh. in. — Contract of Insurance or of Indemnity for Loss 288 Marine Insurance. ■ Part I.— Nature of the Contract and Parties 289 IL — Subject matter and Insurable Interests 290 III. — The Policy including Representation and "War- ranty 296 rV. — The nature of the Perils insured against 309 V. — The Voyage embraced in the Policy 315 VI. — Proceedings in the event of Loss 318 Fire Insurance. Part I. — Insurable Interests 328 II. — The Policy, its Contents, Construction, and As- signment 330 in. — Loss and Proceedings thereupon 346 Viii CONTENTS. FAOV Life Insurance. Cn. IV. — Contract of Transfer of Property 359 First— i?y Sale 307 Part I.— TLiDg to bo Sold 368 II.— The Prico or Equivalent 371 III.— Tho Assent to tho Contract 378 IV. — Certain things essential to the completion of tho Contract 384 v.— "Warranty. 393 Second — By Assignment 398 Part I. — Assignment, by Mvhom made, its nature, manner of execution, and eflFect 398 II. — Its provisions in reference to its validity 400 III. — Delivery of Property to Assignee, and his Rights and Duties 409 BOOK IV. REMEDIES. Ch. I.— Lien 413 Part I. — ^What it is, and to whom Applicable 413 II. — Its varieties and modes of acquisition 415 III. — How Lien may be lost 424 Ch. II. — Stoppage in Transitu 430 Part I. — What it is. Its origin, and who may exercise it. 480 II. — "When, and under what circumstances, the right may be exercised, and when lost 432 III. — How exercised and its effect 439 Chapter on the Domestic Relations 441 Part I.— Infancy _ 441 II. — Marriage , 444 III.— Husband and "Wife 446 IV.— Parent and Child 456 V. — Divorce 458 Forms. — Practical Remarks 463 Index - 609 BOOK I. PROPEETY. CnAPTER I. GENERAL. § 1. This, in its largest sense, is the right which a man has in lands and chattels, and includes every species of acqui- sition in -which it is possible to have an interest. Mercantile pursuits are almost wholly limited to Personal Property, which, as contradistinguished from Peal, means that which is movable ; which passes by delivery ; which descends to the next of kin under the statute of distributions ; which is subjected to the lien of an execution, and not of a judg- ment against its owner ; and on the sale of which, by its possessor, there is .always an implied warranty of title. The division into goods, chattels, and effects, is of little conse- quence commercially. § 2. A more important division, in a mercantile point of view, is into Things or Choses in Possession, and Tilings or Choses in Action. The first embraces all the Property to which the term Personal can apply, of which one has possession ; while the second includes all such as the owner has not in possession, but in which he has a right of action ; which, being enforced, will possess him of tlie thing it- self, or its equivalent in value. An illustration of the first species of property is to be found in the merchant's stock in 1 2 OIIOSICS IN ACTION. trade, and the moneyed equivalent -wliicli he receives on its sale. The second receives a similar illustration in the charges upon his books' of account, and the Bonds, Bills, Promissory Notes, or other securities received by him from the purchaser. § 3. Glioses in Action by the Common Law are not as- signable, so as to enable the assignee to sue for and recover on them in his own name. An exception to this occurs in the case of Negotiable Paper, which if payable to bearer may be transferred by delivery, and if to order, by endorsement. In Equity all Choses in Action are assignable, so as to give the full equitable title to the assignee, and the legislation of New York has made all Choses in Action assignable at Law. § 4. All Personal Property is brought under the same general principle, and that is, that no act of man can render it inalienable. It is ever the policy of the law that it shall remain free, and subject to all the contingencies of trade and traffic. QUESTIONS. What is Property ? What Personal Property ? How distinguished from Eeal ? What is the mercantile division of Personal Property ? What property is embraced under Things or Choses in Possession ? What under Things or Choses in Action ? What illustrations of each ? Are Choses in Action assignable? What exception? How in Equity? Is Personal Property inalienable ? CHAPTER n. SPECIAL. This includes every species of Personal Property which possesses a mercantile character,, such as Shipping^ Good Will^ Negotiable Paper. Of these we have SHIPPIKG. I. SHIPPIXG, § 5. Tlie important inquiry in relation to shipping, regards the means of acquiring and transferi'ing title. The only complete mode of doing this, and one recognised by the maritime courts of all nations, is a written bill of sale. This must be executed by the owner ; as the master of the ship, unless in cases of extreme necessity, has no authority to sell. Ships are regarded as Personal Property ; and hence upon a sale in port, a delivery of possession is necessary to consummate the purchase. § 6. To give a ship an American character, and to bring it imder protection as an American vessel, it is necessary that it should be registered at the custom-house. To entitle it to this privilege, the owner, or part owner, must be a citi- zen of the United States, and ordinarily reside here, or be interested as a partner in a mercantile house having here its place of business. In case of a change of owners, a bitl of sale is necessary in order to effect a registry, and although, as between the parties, a valid sale may be made without a transfer in writing, yet in such case, the vendee would be imable to avail himself of the privileges which would other- wise attach to it as an American vessel. An unregistered ship can sail on no voyage with the privilege or protection of a national character or national papers. § 7. Tlie legislation on this subject is by Congress, under the constitutional delegation of the power to enact laws for the regulation of commerce. By an act passed in 1S50, it is rendered necessary, in order to effect any person, other than the vendor or mortgagor, his heirs and devizees, or those having actual notice, to have any bill of sale, mort- gage, hypothecation, or conveyance, recorded in the oflSce of the collector of customs, where such vessel is registered or enrolled. AVhether this will be held to control or super- cede State legislation relating to the recording or filing of mortgages of Personal Property to render them constructive, t INTEREST AJS'D EXTENT OF TOWEK. notice to third i:)ersons does not appear to liave been clearly settled. This ^vill involve the constitutionalitj of this act of Congress, and also some other considerations. § 8. To perfect the sale of a shij) while abroad, or at sea, the delivery of the bill of sale, or other documentary- evidence of title, operates as a transfer ; and if the vendee within a reasonable time after her arrival in port, takes pos- session, his title will prevail against that of a subsequent purchaser or attaching creditor ; but will be subject to all encumbrances and lawful contracts made by the master relating to the employment and hypothecation of the ship prior to notice of the transfer. § 9. The amount of interest and extent of power that can be legally exercised by a part owner of a vessel has been a question of difficult settlement. "VYhen a ship con- stitutes a part of the capital stock of a partnership, it be- comes subject to the same principles that control other part- n'fership property. Otherwise, the several part owners are remitted to the rights and remedies of tenants in common. Each can sell or encumber only the share he respec- tively owns. But in every thing relating to the repairs and necessaries of the ship one part ovnier is regarded as agent for the others, and thus entitled to act for them ; and so a master, duly appointed, where the owners are accustomed to divide the profits, can bind them all by contracts made in the course of his employment. Where, however, the creditor chooses to make his contract with one part owner, giving him alone the credit, and reserving no rights or remedies against others, he is considered as having made his election, and cannot afterwards look to the other part owners. All torts or wrongs personally committed or au- thorised, or occasioned to third persons by the negligence of one or more part owners, will, at Common Law, render each liable severally as well as jointly. But for wilful or malicious acts of injury the guilty party is alone liable. The Common Law principle which permits any one tenant in GOOD WILL. O common to seize upon the property and regulate the mode of its enjoyment to the exclusion of the rest, being account- able to them for its use, is so modified by public policy as to permit the Court of Admiralty to interfere in a case of conflict of opinion, and either decree a sale of the vessel, and distribution of the proceeds, or to place the vessel in the possession of one party to be employed in some voyage, on condition that they secure to the other its safe return or a full indeminity in case of its loss. Tliis rule seems not to be limited to cases where a majority of part owners constitute the moving party, but embraces also those in which they are equally divided in opinion, giving in such case the right to employ the vessel to the party asking it, on giving such security and indemnity to the other. In the absence of any conflict of opinion a majority of the part owners, without any resort to Courts of Admiralty, may manage the property at their discretion ; and even one part owner, under the same circumstances, may employ the vessel as he may deem most advantageous ; his acts aiid contracts in such employment boing binding upon the others. As to the party standing in the position of owner, and, as such, liable for repairs and necessaries procured on the order of the master, it is now held that a mortgagee in possession assumes this liability, but not one who is out of possession. Miln v. Spinola^ 4 JIill^ 177. n. GOOD 'WILL. § 10. The second species of Personal Property possessing a mercantile character, is " good will," a question as to the ownership of which often arises on the dissolution of a part- nership. This consists in " the probability that the old cus- tomers will resort to the old place." The question presented has been whether, on the death of a partner, the good will of the business went to the surviving partners, or whether it was a partnership) effect, and, as such, liable to be accounted G NEGOTIABLE TAPER. for by tlic survivors/ So far as concerns professional partncrsliips, there seems to be little doubt of its surviving, but in those which are mercantile, it is sometimes of great value, and in proper cases, perhaps in all cases that admit of it, the Court of Chancery will direct it to be sold, and will restrain the fonner owners from pursuing a business which would render it valueless to the j)urchasers. Dough- erty V. Van Nostrand^ 1 Hoff. Chan. R. 68. § 11. An interest somewhat analogous to good will is the right to the exclusive use of a particular name or mark upon goods and merchandise, usually known as " trade MARKS." This right can only be acquired by special appro- priation and undisturbed enjoyment. Tlie name or marks to which the right attaches must be such as designate the origin or ownership of the articles, not those merely indi- cating their name or quality. A merchant or manufacturer will not be permitted to use the name or trade mark of another, although he may be ignorant of that fact, and Honestly believe it is made use of for a merely technical purpose. In cases of violation of this right the Court of Chancery is usually applied to for an injunction to restrain all further use of the name or mark. In granting relief in such cases the Court does not require an exact similarity to be shown between the two marks. It is enough that one is so closely imitated from the other as to deceive the public and draw away customers. m. NEGOTIABLE PAPER. § 12. Tliethirdspeciesof Personal Property possessing a mercantile character is " negotiable paper." The peculiar mercantile character that serves to specialize this species of property, and to distinguish it from every other, is found in its transferable quality. The general rule applicable to all sales or transfers of Personal Property is, that the vendor transfers no greater right or title in the thing sold to the holder's eight to recover. 1 vendee than he himself possesses. But under some circum- stances negotiable paper furnishes an exception. When made payable to bearer, or to order and endorsed in blank, the title to it is transferable by mere delivery, and the vendee, or holder, receiving it before due in the ordinary course of business for a valuable consideration, and without notice, takes it discharged of all the defences to which it • TT might have been subject in the hands of a prior party. He takes it on the credit of what appears upon its face, and not upon the faith of its possessors' title, ilis title and right to recover under such circumstances is never doubted. QUESTIONS. What kinds of property are specially mercantile ? "What are the means of acquiring and transferring title to shipping? By whom is the bill of sale executed ? By -n-hat is the purchase consummated ? "What renders the ship an American vessel ? Who are competent to register ? What is the effect of sale without registry ? Where rests the power of legislation in reference to shipping, and under what authority ? What provision as to recording ? llow can the sale of a ship at sea be effected ? What is it subject to ? What are the rights of part owners of vessels? How regarded as to repairs and necessaries? How can creditor preclude himself from looking to all the part owners ? Who are liable for torts or wrongs? Who for wilful or malicious acts? When can a Court of Admiralty interfere, and with what effect ? How far does its power extend ? Where there is no conflict of opinion who may manage the property, and how, and with what effect ? Who may occupy the position of owner? What is Good Will, and when do questions concerning it arise, and what are they ? What the rule in professional partnerships? What in mercantile? How can a right to Trade Marks be acquired ? What must they be ? What is the usual remedy? What is required to be shown to secure the relief? What gives Negotiable Paper its peculiar mercantile quality ? In what doe* it specially consist ? BOOK 11, a P E E S O K S . CHAPTER I. THE SOLE TRADER. § 13. The occupation of Trader or Merchant has a character far less distinctive in this country than in England. With us every man is a Trader^ not only who carries on trade and traffic as a business, but who does any act upon which any of the rules of mercantile law operate, so far at least as that act is concerned. Even the drawing a bill of exchange makes the drawer, as to that bill, a Merchant. § 14. So vigilant is the law in guarding the rights of individuals and communities, that it will not permit a trader to divest himself of the right of carrying on anywhere his trade or occupation. Any contract, although resting upon a sufficient consideration, by which a man precludes himself either from carrying on any trade, or any particular trade any where, is void, as being against public policy. A contract in partial restraint of trade may be enforced ; but the limits within which it is to operate, must be reasonable, and such as barely serve for adequate protection to the other party. A merchant may, for a sufficient consideration, sell to another his right to carry on trade within certain defined limits ; but those hmits must be such as the purchaser reason- ALIENAGE ESTFAl^CY MAKEIAGE. 9 ablj requires for his own protection, and this must be made out by the party seeking to enforce the contract, as the \diw, prima facie, renders all such void. § 15. The sole trader may labour under such disabilities as may entirely prevent, or essentially impair, his right to carry on his trade. These are 1. Alienage. An alien friend, or subject of a power at peace with this country, is under no such restrictions, as re- gards Personal Property, that will prevent him from carry- ing on here his trade and occupation. But an alien enemy, or one whose country is at war with this, and a resident Jiere, although permitted by courtesy to sue and be sued as in time of peace, would yet find too many obstacles in the way of carrying on any trade or business. The second legal disability \^ Infancy ; but the acts and transactions of an infant trader, or one under twenty one years of age, may be ratified, and thus rendered valid after arriving at majority. The third is Marriage on the part of the wife ; in which, at common law, there not only exists the incapacity to do any act that may be legally binding, but also the further incapacity of any subsequent ratification that will have that eflfeet. In some of the States, as in that of New York, legislation has not only given the capacity of receiving and holding Personal Property, but also of trading and carrying on any branch of business. QUESTIONS. "Who is a trader ? ITow is a contract in general restraint of trade as to validity ? llow of partial ? "^'Lat necessary to render it valid ? What is the first disability ? To what kind of alien particularly applic- able ? What the second disability ? How acts done under it legalized ? What the third ? Wherein does it differ from the second ? What in some of the States have removed it, and how far ? 10 COMMTJITITY OF PEOFIT. CHAPTER II. PARTNERSHIP AND PARTNERS AS COMMERCIAL PERSONS. . PART I. A PAETNEESmP "WHAT, AND HOW POEMED. § 16. A partnership results from a contract by •which " two or more persons agree to combine their property or labor for the purpose of a common undertaking, and th^ acquisition of a common profit." The power it gives to one partner over the fortunes of all the others, renders it important to determine when that relation really exists, as the attempt is often made to realise its benefits without sub- jecting to its liabilities. This originates the inquiry as to its manner of formation, and what features in a contract are essential in its creation, § 17. The important feature is the stipulation for a community of profit. Although that oi freedom from, loss will be good as between the parties, yet it will have no efl'ect on the liability to third persons. The nature of the contribution, whether of capital stock or services, does not vary the result. Ko partnership can legally arise unless the idea of profit enter into it as an element. Thus each contributing a sum for a joint purchase after which there is to be a proportional distribution among the con- tributors is no partnership. To create that there must be a re-sale^ out of which may arise a profit. But a joint contri- bution to carry on a manufactory, with an agreement for a pro-rata division of the manufactured articles, will create a partnership without a sale, because the element of profit is there apparent. Miisier v. Trumpbour^ 5 Wend. 274. § IS. The participation in the profits to constitute a partnership must have this qualification, viz., it must be a FORMATION OF PAETlfERSHIPS. 11 sharing in tliem as a j9r^?l(?^/;aZ, and not as an agent or sei^ant. A practice among business men, not nnfrequent, is for one to furnisli all tLe necessary capital, and another his services receiving a compensation according to the amount of profits that may be realized. This often creates a difficulty in determining whether it be a partnership or an agency. The former is created wherever a I)arty has stipulated for a share in the profits, as profits, so as to entitle him to an account and specific lien, or a preference in payment over other creditors, for he is then justly regarded as a principal, and entitled to all the benefits of a partner. But if the stipulation is for a remuneration in proportion to profits, or out of profits, even though they are net profits ; without conferring any proprietary interest in the capital stock or accruing credits, or any such interest in the profits as to entitle him to demand an account, it is a mere agency. Buckle v. EckTiart^ 3 Comst. 132. § 19. To the formation of all partnerships, where no power to the contrary is contained in the articles, the mutual assent of all the partners is essential. Ilence, althougl^ one partner may form, with a third person, a sub-j)artnership, yet he cannnot introduce any such into the partnership without first obtaining the consent of all the partners. § 20. Tlie evidence upon which a partnership rests maj be three fold ; or there are three difi'erent modes of form^ ing it. 1. By articles fomially executed and delivered. 2. By a verbal agreement. 3. By the acts of the parties. In case the first mentioned are resorted to, the parties should have inserted in them all the provisions and stipula- tions they desire enforced against their co-partnei;s. But even where partnerships arc sought to be formed and evi- denced either by written articles or by a verbal contract, the acts of the partners, or the partnership, continued and sanctioned by themselves, will control the provisions of the 12 BUSINESS PAETNEESHIP8. written instrument ; for it is a familiar principle in constru- ing and giving effect to written articles, that they ard to be read, cs])ecially in equity, as containing, or not containing, all those provisions or stipulations ujion which the partners have, or have not, acted. It is, therefore, the course of action, and not original stij^ulation, that determines what is the real agreement among the partners. Such is the impor- tance given to acts, that it is entirely competent for a person, not a partner, to render himself liable, as such, to third persons, by holding himself out as such, upon the strength of which they have been induced to act. But such holding out, although creating a liability to third persons who act upon the strength of it, fails nevertheless in rendering such person a partner, as there is still wanting the element of consent upon which alone he can be received. QUESTIONS. "What is a partnership? "What important feature constitutes it? What one is essential to it? "What important qualification? "What crea^ps a partnership as contradistinguished from an agency ? "What an agency as contradistinguished from a partnership ? "What is necessary to the formation of all partnerships ? What different modes of forming it? "What controls, where there are -written articles ? How are written articles to he read ? How may a person, not a partner, render himself liable as such ? Does such liability make him a partner ? PART II. ITS DIFFEEEXT KINDS — BOTH AS TO PAETITEESniP AIH) PAETIfEES. § 21. Partnerships may be formed for the prosecution of every legal branch of business. They may be formed for a series of operations in one or more kinds of business, or they may be limited to a single adventure. The number of partners has no necessary limitation. A species of partnership quite common in this country is what are termed joint stock comtanies. These come under the same general principles as all other partnerships except that LIABILrnES OF STOCKHOLDERS. 13 the great multitude of partners compels the adoption of cer- tain peculiar regulations for tlie government of the concern. § 22. The manner in which these companies are formed ; the amount to be subscribed ; the number of shares of stock ; the mode of transfer ; all the provisions and stipulations deemed necessary, arc embraced in the articles entered into between the stockholders. These regulate the right of the members among themselves. The management of the affairs of the company is confided to the directors and their agents. They make the calls upon the unpaid shares, and these may be made to take effect infuturo. A member of the com- pany is entitled to the benefit of all its contracts, and responsible for engagements made by its agents, for jiurposes contemplated in its formation. His liability commences with the commencement of the company, and he is not responsible for contracts made before that period by its intended members or du-ectors, while any preliminaries are unaccomplished, the performance of which formed the condition upon which he agreed to join. Even the members of a provisional committee do not, by being such, authorize the other members to pledge their credit for things neces- sary to establish the company. The publication of their names as such members will not render them liable. Where, however, they have done acts in relation to the pro- posed company, a foundation is laid upon which to ground a liability. "Without a power to that effect given in the articles, one member cannot bind the others by negotiable mstruments. So, also, as the general power to contract is through the medium of directors or agents, the contract of a private member Would not bind the others, except so far as recognized and adopted by them. In the absence of any special provision, the liability of a member is determined in the same manner as that of an ordinary partner. § 23. Tlie legislation of New York and several other States has authorized the formation oi Limited Partnerships, which consist of one or more persons who arc held out to 14 NOMINAL, KEAL, AND. DOR^LANT PARTNERS. tlic world as the real ostensible partners, and who are the active business parties in its concerns, and who encounter the liability of ordinary partners, while one or more others are pcnnitted to put into the concern a certain amount of capital, and to have their liability to the partnership creditors limited to the sum actually contributed. Their names are not to ap- pear in the firm, nor are they to transact business on its ac- count. Several special provisions are prescribed by statute, all which must be strictly and literally complied with, or the limitation will cease, and all will become liable as general partners. § 24. There are three different kinds of j)artners. 1. Tlie nominal, who has no actual interest in the business or profits, and therefore is no partner as between themselves ; but as to third persons he assumes the responsibility of a partner by voluntarily suffering his name to appear as such, thus lending the partnership the sanction of his credit. 2. The real, ostensible, who is, and appears such, to the world ; and who, as such, takes all its benefits and risks. 3. The dormant or concealed, who is a* real partner as to actual participation in its benefits, but who endeavors to avoid its risks and liabilities by keeping the fact of his interest concealed. His name does not appear in the firm. In the view of the world he takes no interest in its concerns. He seeks the benefit of the Limited Partner without encountering his trouble and risk. The result of this is, that so long as he can keep perfectly concealed, he avoids all liability to the partnership creditors. But, if his name becomes disclosed, and his interest known, he becomes equally liable as the other partners, whether the creditor trusted the firm upon the strength of his membership or not. His liability in such case is groimded not on the credit given, but on the contract between him and his co- partners, by which he really becomes a member of the firm, and hence liable for its debts. EIGHTS A^TD LIABILITIES OF PARTNERS. 15 In addition to those is tlie Limited ^artnei\ who is a creature of legislation. QUESTIONS. "What branches of 'business may partnerships be formed to prose- cute ? How is the formation, stock, mode of transfer, and other pro- visions of joint stock companies, regulated ? To whom is the manage- ment of such confided? What are the members entitled and subject to ? "When does the liability commence ? For what is ho not respon- sible ? Are members of a provisional committee liable for the acts of other members ? Does the publication of their names, as such, render them liable ? Do their acts, as such ? "What power of members to bind by negotiable instruments ? What by other contracts ? How is the liability determined ? What authorizes the formation of limited partner- ships ? What do they consist of? Wherein is the limitation ? What is the risk incurred by not following strictly the statute provisions ? How many kinds of partners ? What the nominal, the ostensible, the dor- mant f What the rights and liabilities of each ? On what are the liabilities of the dormant founded? PART III. THE EIGHTS AND LIABILITIES IT CONFERS AND IMPOSES rPON EACH PART- NER AS AGAINST, AND IN FAVOR OF, THE OTHERS. § 25. The proper understanding of the law of partner- ship requires the recognition of three legal entities, and three sets of relations : these are 1. The Partners themselves, and the relations between each other, growing out of the partnership. 2. The Partner shijp, and the relations between it and the partners, and between it and third persons. 3. Third Persons, and the relations existing both be- tween them and the partnership, and between them and the partners. § 26. Tlie establishment of the partnership clothes the partners with new powers, and devolves upon them new duties, having reference both to the partnership fund, and to their duties, rights, and remedies, as against each other. To the first they bear the relations of joint tenants without 13 WnAT CONSTITUTES PAHTNEKSHIP STOCK ? right of survivorship. "While the tenant in common can only soil and convey the interest belonging to himself in the common i)roi)erty, the partner may dis})Osc not only of his proportional interest in the joint stock, but also of the interest of all his co-partners, and thus give a j^erfect title to the purchaser. § 27. The courts have experienced a difficulty in affixing a limit to what may constitute partnership stock. This has more especially occurred in regard to real estate, which differs so essentially from personal in its nature, destination, and the legal 'principles upon which its enjoyment and transfer depend. It is now considered that when purchased with partnership funds, and made use of for partnership purposes, it is, in equity, chargeable with the partnership debts, and with any balance which may be due from one partner to another, upon the winding up of the affairs of the firm. And that, as between the personal representatives and heirs at law of the deceased partner, his share of the surplus of such real estate which remains after paying the partnership debts and adjusting the equitable claims of the different members of the firm, as between themselves, is considered and treated as real estate. § 28. Another limit to what may constitute partner- ship stock is found in the nature of the partnership agree- ment, as when it embraces only the profits that may accrue from a particular business. A party who is the owner of goods enters into an agreement with another, by which they each agree to make use of their joint efforts to effect a sale or sales, and divide between them the resulting profits. Such goods continue the property of the owner, and do not form a joint stock in which each has an interest. It is a partnership merely in the profits. It is the intention of the parties that is to determine what shall be the joint stock belonging to the partnership, and in which the part- ners may have equal rights. § 29. The amount or quantity of interest each partner AGREEMENT BETWEEN PAHTNEES. 17 possesses in tlic s'tock business, and profits, is usually regu- lated by agreement. Where it fails to be so, the presump- tion is that the partners are entitled in equal proportions. § 30. The duties of partners towards each other enforce the utmost good faith. Neither can be permitted to stipu- late for any private advantage at the expense of the others ; nor can one place himself in a situation likely to give him- self an interest, or even a bias, against the discliarge of his duty. Each impliedly stipulates to devote himself to the partnership business, and hence one can neither charge the firm, nor any other partner, for any service rendered in the business of the concern, unless there is a special agi'ee- ment to that efi'ect, or such a course of conduct adopted and followed up by the parties as will lead to an inference of such an agreement. § 31. The agreement between the partners which origi- nates the partnership, generally sx:>ecifies the business to be carried on, or the thing to be done ; the time of its com- mencement ; the period of its continuance ; the amount of capital stock, and the proportions to be advanced by each ; the proportion of profits to which each shall be entitled ; the respective duties to be performed by each (although that is unnecessary) ; and not unfrequently that accounts be annually taken of the debts and effects of the partnership, and the particular mode of winding np its afiairs to be pursued upon its dissolution ; consisting either in converting the effects into money, and distributing among the partners in proportion to their respective interests, or by the transfer of one partner's share to the other at a valuation stipulated, or to be ascertained by a proceeding therein specified. Sometimes the agreement provides, that in the event of death the executor shall continue the partnership with the survivor for tlie benefit of the heirs or next of kin of the deceased partner, and in such case the executor must either renounce or comply with the provisions of the will, in 2 18 POWEB TO BKING ACTION AT LAW. which latter case lie 8iibject3 himself to all the personal liability of a partner. § 32, During the continuance of the partnership, part- ners can very seldom bring an action at law against each other. One i)artner may bring such action against another in a case of breach of covenant, or to recover money ad- vanced before the partnership and in order to its formation. So also for work done for a firm before he became a mem- ber of it. So also where there has been a settlement, balance struck, and a promise to pay. So also on transac- tions that are separated and form no part of the joint account, and on the negotiable paper of his partner, although for value received on the partnership account. But the rights and remedies of partners against each other in refer- ence to all matters growing out of, or connected with, part- nership transactions, unless in a few very special exceptions, are enforced and pursued in courts of equity, which afford superior facilities for dissolving and winding up the affairs of a partnership. QUESTIONS. "What are the legal entities and sets of relations involved in a part- nership ? How do partners stand related to the partnership fund ? What interest does a tenant in common convey ? What a partner ? Under what circumstances, and for what may real estate be chargeable as partnership stock? How considered as between personal represen- tatives and heirs at law of the deceased partner ? What limit to part- nership stock growing out of the nature of the agreement ? What does agreement regulate as to amount or quantity of interest ? What is the presumption when not so regulated ? What do the duties of partners enforce towards each other? What implied stipulation by each? When can one charge another for services rendered ? What are the general stipulations contained in a partnership agreement ? When may one partner bring an action at law against another during the continuance of the partnership agreement ? Where are the rights and remedies of partners against each other generally pursued ? PAKTNEESHIP EIGHTS. 19 TART rV. THE BIGHTS IT GIVES TO THE PARTXEKSHIP, ASD TO PAETXEES, AGAINST THIKD PEBS0N8. § 33. Tlie contract entered into between the partners creates a legal entity — the partnershij). This entity, like the corporation, has, for many purposes, a distinct legal existence separate from every other, and possessing rights recognized in courts of law and equity. It is in virtue of this that it becomes clothed with a mercantile character, and assumes duties and responsibilities, and to enforce rights much the same as a natural person. It is, therefore, impor- tant that it should have a 7ia)ne in which its books should be kept, and its business transacted. It is of little impor- tance what it is — whether it be that of one of the partners, or a combination of a part or the whole of theirs. § 34. A fact illustrating the individuality and separate entity of the partnership is found in the principle, that when a security is executed to a partnership by its firm name, as a bond of indemnity for the faithful performance of duty by a clerk, any change in the partnership and in its name, will render the security inoperative as to all events occurring subsequently to such change. § 35. A partner borrowing money of another for the partnership, although he converts it to his own use, renders the partnership a debtor to the lender. Borrowing money on his own credit, although he applies it to partnership pur- poses, renders himself, and not the iiartnership, the debtor. Borrowing it in the course of the partnership business, with- out specifying for whom, and applying it to partnership purposes, enables the lender to look to the partnership as his debtor. One partner selling the goods of the partner- ship, although he misapplies the proceeds, will be held to have given a good title to the veudee. Bnt one partner cannot apply the jjartnership property to the payment of # 20 EIGHTS agai:n'St tiiied peesons. his own separate debt without the assent of his co-partners, even although the creditor was ignorant that he was receiv- ing partnership property. It is a mere question of right, and of property, and knowledge or ignorance cannot aifect or vary the nature of the transaction. In a case within the statute of frauds, and hence required to he in writing, a guarantee given to a single partner may be available to the firm, where proof is adduced that it was given for the benefit of all. And even a guarantee without any address would enure to the benefit of those to whom, or for whose use, it was delivered. § 36. The rights of the partnership against third persons may be divested by the act of one of the partners. One partner may release a debt due to the firm. Payment to one partner of a partnership debt is a payment to all, and that even although made after dissolution, and with an agreement that another partner shall receive all the joint debts. One partner may give time to the partnership debtor, either directly, or indirectly, by taking his bill or note payable at a future day ; or he may preclude the part- nership from suiDg, by some act which would render it unconscientious in himself to do so. QUESTIONS. "WTiat does the contract between partners create ? Wliat is the entity like ? "What does it possess ? "What assnme ? What should it have ? What fact illustrates its individuality ? Under what circumstances is a debt of the partnership created ? Under what a debt of the partner ? Can a partner apply partnership property to the payment of his separate debt? How if creditor is ignorant that it is partnership property? Can a guarantee given to a partner be available to the firm ? How as to a guaratee hairing no address ? Can a partner divest the partnership of rights against third persons? How? What is a payment to one partner? Can one partner give a partnership debtor time directly? Indirectly, how ? How preclude the partnership from suing ? BINDING BY SIMPLE CONTEACT. 21 PART V. THE BIGHTS IT GIVES TO THIRD PERSONS, BOTH AGAIKST THE PAETXEE- SniP, AXD THE PAETNEES. § 37. This involves tlie inquiry as to liow far one part- ner can bind his firm, so as to give rights against it to third persons. The general rule is, that " each partner is the accredited agent of the rest, whether they he active, nominal, or dormant, and has authority as such to hind them, either hy simple contracts, respecting the goods or husiness of the firm, or hy negotiahle instruments circulated in its hchalf to any person dealing honafideP To such an extent is this rule carried, that where two firms have a common partner, and a common name, each one is competent to bind the other to the payment of negotiable securities, drawn, en- dorsed, or accepted in that common name. § 38. Tlie limitation is to the mode of hinding, ichich is hy simple contract. One partner cannot bind the firm by a deed, or in general by an instrument under seal. . But tliis rule has its exception and limitation. The release of a partnership debt under seal, which a partner may legally do, presents the exception. Tlie limitation or modification is found in the principle permitting one partner to bind the firm by an instrument under seal in its name and for its use, when done in the course of the partnership business, pro- vided the co-partners assent to the contract previously to its execution, or afterwards ratify and adojDt it, and either may be done verbally. § 39. Another important limitation embraced in the general rule is, that the contract must he respecting the pa) *- nership husiness. Tlie true construction of the rule is — that the act or assurance of one partner, made with reference to business transacted by the firm, will bind all the partners. Every man is presumed to know the extent of the partner- ship, with whose members he deals, and has therefore no 22 MAKING AJffD ISSUINO OF NEGOTIABLE PAPER. right to take a partnership engagement in a matter having no reference to the business of the firm, and not within the scope of its authority, or its regular course of dealing, with- out first obtaining the consent or authority of the firm. § 40. When these conditions are complete — the business relating to the firm — and the third person acting in good faith^ — the partnership will be bound, although the partner may have acted in fraud of his co-partners. Having held him out to the world as a partner and accredited him as such, they are compelled to abide by his acts done within the general scope of the partnershij) transactions. Ilence, if he purchase goods, such as might be used in the firm business, and then convert them to his own use, the firm must pay for the goods. § 41. The most dangerous power which a partner can exercise, in its eftect upon the safety of the other partners, is by the making and issuing of negotiable paper on behalf of the firm. It is thus in the power of a partner, within the briefest 'period of time, to realize money on negotiable paper of a solvent firm, made by him, the paper having some time to run, and readily passing into circulation, and the firm will be left liable for its payment as soon as it matiu*es. The necessities of trade and the peculiar nature of nego- tiable paper, preclude the afiixmg here of any legal limita- tions, that can be efiectual to prevent it. § 42. All such paper, however, must be in the name of the 2)artnershi]). An apparent exception to this is where a bill is drawn upon the partnership in its firm name, and accepted by one of the partners in his own name ; it will still bind the firm, the acceptance being legally understood to be according to the terms in which it is drawn. Where the firm name is that of one of the partners, a bill or note negotiated in his name j^rijnafiacie binds him individually, but extrinsic evidence may be adduced to show that it was made in the firm business, and taken as paper of the firm. § 43. Tlie rule requkes such paper to be negotiated not THIRD PEESON MUST DEAL IN GOOD FATrn. 23 only m the name^\^t also on hehalf of the firm. Ilence, ■where the business of the firm does not, in its transactions, require the agency of such paper, there is no implied au- thority to issue it, and the firm will not be bound by it. As illustrations of this, we may take partnerships entered into for farming or mining purposes, or for those that are profes- sional, as medical or law firms. But in all these cases, the presumption against the implied authority may be rebutted, by showing either that the constitution and particular pur- poses of the firm are such as to render it in their individual cases necessary ; or that, though not necessary, it is in other similar cases usual. § 44. Another limitation embraced in the rule is, that the tJurd 2J(^^"Son who deals with the partner on the behalf of his firm must deal in good faith. If he either knew that the partner was not authorised, or had good reason to doubt his authority to bind the firm, he can hold only the partner contracting, not the other members. Negotiable instruments, although given in the finii name, cannot be enforced against it by any party, who is guilty of fraud in receiving them, or who took them knowing that they had been so fraudulently received, or even without knowing it, unless he gave for them a valuable consideration. It is not usually the business of a firm to guarantee the debts of others by endorsement or otherwise ; and hence all such endorsements, although in the name of the firm, arc void, unless in the hands of a honafide holder. § 45. One partner cannot bind the firm by a submission to arbitration. But he may pledge, as well as sell, the partnership efi'ects. lie may give or receive notice for the firm. He may render it liable for fraudulent acts, if done in the prosecution, and within the scope, of its regular business. So also an acknowledgment of a debt by one partner and a promise to pay it, if donO during the con- tinuance of the partnership, is equally as effectual to take a debt out of the statute of limitations as if done by all 24 DEBTS AGAINST THE PARTNERSHIP. the firm. But in most of t]ie States tUis po'W'cr ceases with the partnership, on tlic ground that no power to create any- new riglit agamst the partnership can, after its dissolution, be exercised by any partner. Bell v. Morrison, 1 Peters, 351. Van Keuren v. Parmelee, 2 Comst. 623. § 46. The right given to third persons by the valid creation of a debt against the partnership is hoth joint and several. Not only is the partnership stock and effects liable to be applied to its payment, but each paitner is also liable to have all his own separate property applied W ttfe^samc purpose. The insolvency of the firm, or of one of the partners, may, therefore, give rise to conflicting claims between creditors. This conflict equity adjusts by applying the partnership property to the payment of the partnership debts, and the separate property of the partner to that of his individual debts. Before, therefore, a partnership creditor can reach and apply the separate prop- erty of the partner to the payment of his debt, he must first exhaust that of the partnership ; after which he is entitled to have applied towards its satisfaction any surplus of property of the partner remaining after his itidividual debts are all paid. So also in the carrying out of this princi- ple, a judgment obtained against a partner upon his indi- vidual debt, and execution issued thereon, will first be levied upon the separate property of the partner, and next a sale may be made under it of the partner's interest in the part- nership property, that interest being what remains as his share upon distribution of the partnership property after the payment of all the partnership debts. 3 Kent^s Comni. 65. * QUESTIONS. "What is the general mle as to the right of each partner to hind the firm ? How, -where two firms have each a common partner, and a com- mon name? • "What limitation as to the mode of binding? Ilo-wbydeed or seal ? "What exception ? "What limitation or modification ? "What limitation as to partnership business ? "What presumption as to those now A PARTNERSHIP MAT BE DISSOLVED. 25 dealing with the firm ? "What the rule, where partner has acted in fraud of his co-partners ? "What the illustration ? Wherein is found the most dangerous exercise of power by ou^ partner as regards the firm ? How must negotiable paper be executed to bind the firm ? What apparent exception ? What rule, where the firm name is that of one of the part- ners ? What, besides the firm name, is necessary to hqjd the firm on negotiable paper? What illustrations? How presumption rebutted? How must third person deal to hold the partnership? When is the partner, and not the partnership, holden ? When is negotiable paper in firm name not enforceable against it ? What is the firm liability on the guaranty of another's debt ? What is firm liability, on submission by partner to arbitration ? On pledge? Notice? Fraudulent ac^s ? Ac- knowledgment of debt and promise to pay ? How, after dissolution of . partnership ? What right is given to third persons by partnership debt in their favor? What may give rise to conflict between creditors? How adjusted by equity ? How partnership projjerty first applied ? How separate ? What the rights respectively of partnership and indi- vidual creditors in equity ? PART YI. DISSOLrilOX — ITS CAUSES. ITS COXSEQCENCES. WHEN COMPLETE. § 47. A partnership may be dissolved 1. By lapse of time, as agreed upon in the contract. 2. By completion of the biisiuess embraced in the con- tract. 3. If no time of continuance be agreed upon, and the business has no natural termination, being successive in its character like mercantile pursuits, it is then a partnership at will, and either one of the partners may, in a moment, dissolve it, without incurring any liability to the others. 4. By mutual consent of the parties. 5. By insolvency of the partnership and sale of its effects. 6. By insolvency of one of the partners and sale under execution of his interest in the partnership stock. 7. By a valid assignment by one partner of the partner- ship effects, or of his own separate property and interest in tlio partnership effects. 26 CONSEQUENCES OF DISSOLUTION. 8. By the dcatli of either one of the partners. 9. By the iMarriage of a, feme sole partner. 10. By the vohmtary act of either partner. It has been made a question, whether one partner, against the will of the others, can dissolve the partnership connection before the time specified in the articles has arrived. It is now very well settled that he may do so, as it may be his only means of escaping utter ruin ; but he does so at the risk of subjecting himself to the pa^mient of all the damages his co-partners may sustain as a direct consequence of the exercise of this right. 11. By a judicial decree of the court of chancery. This will only be upon sufficient cause shown, and that sufficiency must in many cases rest in the sound discretion of the court. The following are some of the causes : 1. When the business, for wliich it was created, is foimd to be impracticable, and the partnership projDerty is liable to be wasted and lost. 2. "When the whole scheme of the association is found to be visionary, or founded on erroneous principles. 3. When the insanity of a partner, or his habitual drunkenness or other vices, render it impracticable to carry on the business. 4. Where the conduct of one partner is so grossly im- proper as to amount to an exclusion of his copartners from their proper agency in the firm, or such as renders it impos- sible to carry on the business according to the stipulated terms. § 48. As between the partners, the immediate conse- quence of dissolution is the cessation of the power of one partner to bind the firm by his acts. The relations between the partners and the nature of their interest in the joint stock, are at once changed. From joint tenants they become tenants-in-common, having only an undivided interest in the partnership stock, and no power even to control that interest except subject to the partnership rights. These DISSOLUTION 'THEOUGH A PAETNEk's DEATH. 27 riglits are first to have the partnership effects applied to the payment of the partnership debts, and the balance distrib- uted among the partners, according to their respective in- terests and claims. The partnership may be said, in a quali- fied sense, to continue until its prior concerns are all wound up, but no partner has the poM'er of imposing new obliga- tions upon the firm, or of varying the form or character of those already existing. Even negotiable paper endorsed before the dissolution, cannot afterwards be put into cir- culation so as to bind the firm without the concurrence of all its members. The qualification exists solely in reference to the winding up of its concerns, and to the interest of each partner as tenant-in-common ; and is illustrated in the fact that the law permits each solvent partner to collect the outstanding debts due to the firm, adjust the unliquidated accounts, and give the necessary receipts and discharges to the debtors on payment. § 49. When the dissolution occurs through the death of one of the partners, the personal representatives of the de- ceased partner become tenauts-in-common with the survivor ; but the survivor being alone liable at law to the partnership creditors, is entitled to the possession and distribution of the assets, to enable him to meet that liability. If, however, the partnership creditor is unable to realize his debt against the surviving partner, equity will enable him to accomplish that object by proceeding against the estate of the deceased partner, if the same be solvent ; as equity regards the obli- gations of the partners as being several as well as joint. Tlie English rule even permits this resort to the estate of the deceased partner, before exhausting the remedy against the survivor, but in this country, and in New York espe- cially, this rule is repudiated. Lawrence v. Trustees^ cCr., 2 Denio^ 577. § 50. One direct consequence of the dissolution, is tlie necessity imposed by it of taking prompt and effectual steps to wind up all the partnership concerns. With this view 28 NOTICE OF DISSOLUTION. some disposition must be made of tlie partnership effects. K the partncrsliip agreement had provided that the effects on hand at its dissohition should be taken by one of the part- ners at a vahiation according to a prescribed mode, then the business might go on without any interniption ; and this, more especially in the case of manufacturing establislmients, might be a matter of great convenience. But if the agree- ment contains no such provision, and the partners can make no arrangement between themselves, neither law nor equity lias any other possible mode of disposing of the property than by a public sale to the highest bidder, and a distribu- tion of the proceeds as before indicated. § 51. The dissolution of a jiartnership, as regards its own members and the public, comes under different pi-inci- ples. So far as concerns its own members, it may be im- mediate and effectual, but in reference to the public, the element of notice comes in for consideration. The inquiry, therefore, becomes important, in what cases, and hoio, notice may be so given as to render the (Jissohdion complete, and thus prevent one partner from having the right of continu- ing to pledge the liability of the jB.rm. In several of the modes of dissolution mentioned, a firm may be bound, not- withstanding,its dissolution, by a contract made by one part- ner in the usual course of business, and in the name of the firm, with a person who contracted on the faith of the part- nership, having had no notice of its dissolution. § 52. "Wlien a single partner, other than a dormant one, retires from the firm, he must see that the requisite notice is given, or his partnership liability will still continue. The continued use of the old partnership name, with his assent, win continue his liability notwithstanding notice. But such use, without his knowledge or assent, would not render him liable, as persons dealing with the firm are bound to inquire who constitute it. A dormant partner may withdi'aw with- out giving public notice. § 53. When a partnership expires bj its own limitation, MODE OF GmXG NOTICE. 29 or is dissolved by operation of law, no public notice is necessary. It is then a fact of wLdch tbe public are bound to take notice. § 54. It was once made a question, wbetlier, in case of a dissolution occurring by the death of one of the partners, a notice is necessary to prevent the continued liability of the property of the deceased through the acts of his surviving partners. As now understood, the death itself is sufficient public notice, and no other is required. § 55. A partner, by his own act, dissolving the partner- ship, or retiring from it, to avoid partnersliip liability in the future, should immediately give notice in two different modes : 1. He should publish a notice of dissolution in one of the usual advertising newspapers of the place where the business was carried on. That is sufficient as to all those who have not had previous dealings with the firm. 2. As to all those who have had such previous dealings, actual notice should be given to them of the dissolution. By these means the dissolution may be rendered complete as to the immediate parties and also to the public. QUESTIOXS. "What are the different modes by which a partnership may be dis- solved ? "When by the voluntary act of the partner before its stipulated termination, -what risk or liability is incurred ? In what cases may it be dissolved by judicial decree ? What, as between the partners, is the consequence of dissolution ? In what sense may the partnership be said to continue after dissolution ? For what purpose may it so continue ? What may each solvent partner do after dissolution ? "What may he not do ? When the dissolution occurs by the death of a partner, what are the relations of Jiis personal representatives with the survi\-ing partner? What are the surviving partner's liabilities, and what is he entitled to ? What remedy does equity give, and why ? How may the partnership concerns be wound up ? How, if wound up by the law ? What must a rctu-ing partner do, to escape future liability ? How in case of a dor- mant partner ? What rule, when partnersliip expires by its own limita- tion ? What, when by the death of a partner ? What are the modes of giving notice when a partner retires, or by his own act dissolves the partnership ? 30 C0KP0KATI0N8 — ^WUAT, AND HOW CREATED. CHAPTER III. CORPORATIONS AS COMMERCIAL PERSONS. The immense amoiint of property now embarked in Banking, Insurance, Mannfacturing, and Kailroad Coi-pora- tions, gives an importance to this subject scarcely inferior to any other at the present day. But as corporations aggregate only possess a mercantile character, the attention will be limited entirely to them. PART I. WHAT THEY AEE, AlfD HOW OEEATED. § 56. A corporation aggregate consists of a franchise, or special right or rights, possessed by several individuals, who subsist as a body politic, under a special denomination, and are vested with the capacity of perpetual succession, and of acting in many respects as a single individual. It is peculiarly a creature of the law, existing only in legal con- templation, and deriving from its policy not only its being, but all its powers and capacities. The object contemplated is to bring vast amounts of capital, for purposes more gigantic than individual ^ enterprise could hope to ac- complish, under the dominion of an entity created and controlled by the law. It is said to be immortal, invisible, and intangible ; but its immortality means only its capa- city to take in perpetual succession so long as the corpora- tion exists. § 57. Although it may be competent for coi'porations to exist in this country by prescription, which presupposes a grant, yet almost the only mode by which they are created is by legislative act. Tlie power thus to create is possessed and exercised by both the state and federal legislatures. It is exercised by a grant, and embodied in the charter, but POWERS OF C0KP0KATI0N8. 31 this requires an acceptance in order to create a corporate body. This may, however, be inferred from the acts of the majority of the corporators — the persons receiving the charter, — thus dispensing with a written instrument, or even vote of acceptance. The charter once accepted is re- garded as a contract between the State and the corporators. Trustees of Dartmouth College v. Woodward, 4 Wheat. 518. It is from this standpoint that the rights of corporations are shaped, and their freedom from subsequent legislation derived. Iso legislation can impair the obligation of con- tracts ; and hence, unless the right is reserved in the charter, corporations, once created, are independent of the legis- lature. This has led very generally to the introduction of a provision into the act of incorporation giving the right to alter, amend, or repeal the act at pleasure. The practice is now becoming quite common in many States of passing general acts of incorporation, under which companies may organize, and thus derive all the benefits of an incorpora- tion without the necessity of special legislation. In this way all banking and manufacturing corporations are now formed in !New York. QUESTIONS. What is a corporation aggregate ? What the object contemplated in its creation ? Wliat its qualities ? What the mode of its creation ? What the instrument by which it is created ? What necessary to render the charter a valid act of incorporation ? How may acceptance be in- ferred ? How is a charter accepted regarded ? How may the legislature change charters once granted ? What the means generally resorted to that may reserve this power? How are banking and manufacturing companies formed ? PART II. THBIR POWERS AND LIABILrnES. § 58, Tlic powers possessed by corporations have been briefly summed up in the " capacity to have perpetual suc- cession, under a special denomination, and an artificial form, 32 QUASI eOKPOKATIONS. and to take and grant property, contract obligations, and sue and be sued by its corporate name, and to receive and enjoy, in common, grants of privileges and immunities." The inquiries that a business man is chiefly interested in making, concerns the organization and exercise of the power by which corporate action is directed and controlled ; the con- tracts they are capable of making and how they may be evidenced ; and the limits and extent of corporate liability. There are many kinds of corporations of which he needs to know little. The only two that will be likely to engage his attention in the way of business are those organized for governmental purposes and stock corporations. § 69. The governmental, or first mentioned, are gene- rally termed quasi coi'porations, and possess a corporate capacity only for particular, specified ends ; but whose corporate powers are perfect for all the pur[30ses of accom- plishing those ends. These are of statutory creation, and in New York their illustrations may be found in the differ- ent counties in the state, the suj^ervisors of a county, the supervisors of towns, overseers of the poor, trustees of school districts, and several others of a similar character: who may hold and transmit public property, and do many corporate acts, having corresponding corporate powers and attributes. Each one of these several bodies of men may sue and be sued in their corporate capacity. Both towns and counties generally through this country are bodies politic for certain pm-poses ; and these, and others of a similar character, possess sufficient corporate powers to answer all the purposes for which they exist, without having, in any other respect, the capacities incident to a corporation. § 60. The stock corporations, in vastness and importance, overshadow every other. Such are banking, insurance, manufactoring, turnpike, bridge, and railroad companies. All such are creatures of the legislature, and though private as to ownership and control, are nevertheless incidentally public, as affording facilities not otherways to be enjoyed. STOCK COEPOEATIONS. 33 § 61. In all corporations of tliis character the important point of inquiry is — What are the rights, powers, and lia- bilities contained in the charter? The charter is to the corporation, what the constitution is to a State — its funda- mental law. The same rule of construction is adopted in both cases, viz., that no other powers can be exercised by the legislature in the one case and the coq^orators in the other, than those which are either expressly delegated, or which are necessary to carry into effect those which are so delegated. § 62. The rule in regard to these powers is that they shall be construed strictly. A corporation is bound to show its authority for the business it assumes to do. Its powers are also confined to the jurisdiction creating it, and hence where one State authorized the erection of a bridge, one end of which extended into another State, the corporation could not collect toll of those who passed only the part of the bridge situa,ted in the other State. Middle Bridge Corporation v. MarTts, 26 Maine, 326. Tlie acts of corpo- ration agents are also subject to the same rule, and hence a deed signed by the president and cashier, and sealed with the corporate seal, was held of no effect, if affixed without the authority of the directors. Hoyt v. Thorn2)son, 1 Sdd. 321. So also corporations cannot bind themselves for pur- poses foreign to those for which they were established ; and although one created for the pui-poses of trade may exercise as incidental, the power to accept bills and issue notes, yet it may l>e well doubted whether one for a mining, or any other purpose, not of trade, possesses any such power. § 63. The power of making by-laws is incidental to a corporation. TLiey may be made either by the coi^iorators, or any lesser body to whom they may delegate the power, unless the charter contain specific directions. The charter usually vests it in the board of directors. Tlie by-law is to the cor^Doration what legislation is to the State. The rules in relation to it are — 3 34 BOARD OF DIEECTOKS. 1. It must be reasonable. ' 2. Strictly witliin the limits of the charter. 3. In subordination to the constitution and general law of the land. § 64. In cases within its chartered powers, it is the act of the majority that binds the whole ; that majority being the major part of those who are present at a regular corpo- rate meeting. "Where, however, the act is to be done by a definite body as a board of directors, a majority of the board must be present, and then the ultimate decision may rest npon a majority of the quorum. Although in joint stock corporations it is competent to remove an officer upon sufficient cause shown, yet no stockholder can be disfran- chised by any act of the corporators, without at least an express authority contained in the charter, as that would deprive him of his interest in the general fund. § 65. In all joint stock corporations the board of direc- tors, for all business purposes, is the corporation ; and hence its acts in reference to the corporate property and corporate transactions are taken as corporate acts. The stockholders, who are the corporators, elect the directors, and then the law devolves the business to be done upon the board. Tliis business cannot be done by the directors acting separately and individually. It is the board regularly assembled, and having present its quorum ; and then only can its act be that of the corporation. A conveyance exe- cuted under the hands and seals of the directors or trustees, would not convey the property of the corporation. To do that, it should be executed in the coi'porate name, and have affixed to it the corporate seal by the president or other officer authorized to do it. § G6. Another important inquiry relates to the powers of joint stock corporations in the making of contracts — the character of contract they are authorized to make, the mode or manner of making it, and how it may be evidenced. One question of great importance has been raised and POWER TO MAKE CONTKACTS. 3& settled in this country ; and tliat is, whetlier a corporation has a legal existence, for any purpose, out of the boundaries of the sovereignty by wliich it was established, and hence whether a contract made in another State was enforceable by the laws of that State. It was held that a contract thus made, was valid and enforceable, provided it was authorized by the charter, and permitted by the laws of the State in which it was made. Bank of Augusta v. Earle, 13 Peters, 519. § 67. A corporation can make no contract which will apply its funds to any other objects than those specified or plainly implied in its charter ; and hence where two Rail- road companies, without legislative authority, uniting by agreement, bought a steamer as part of the plan, giving a note as by the new company thus formed, both that and the whole contract were adjudged illegal and void. Pearce v. Madison & Indianapolis Railroad Co. &c., 21 Howard, 441. The tendency, however, has, for a long time been, and still is, to hold corporations liable for transactions and liabilities incurred beyond the powers expressly granted in the charter, provided they could, by any reasonable intend- ment, be brought within the implied powers, or those inci- dental to the express ones ; and hence the powci- to make loans and receive securities therefor, and to issue negotiable paper creating a liability thereon, has been recognized by the courts. § 68. The early common law doctrine was, that corpora- tions could contract only through their common seal, which was received as the only evidence of their assent. Progress in the mercantile world soon rendered the strict observance of tliis rule impossible, and it became so far relaxed, tliat a corporation was permitted, by a mere vote, to appoint an agent, whose acts and contracts within the limits of his authority, would be binding. At last in this country the old technical rule was entirely laid aside so far at least as related to corporations created by statute, the business of 36 BY WHAT ARE C0EP0KATI0N8 BOUND ? which was to be transacted by a board of directors. In its place was adopted the sounder and better rule, that " when- ever a corporation aggregate w^as acting within the range of the legitimate purpose of its institution, all parol or verbal contracts, made by its authorized agents, were express and binding promises of the corporation ; and all duties imposed upon them by law, and all benefits conferred at theii* request, raised implied promises, for the enforcement of which an action lay." 2 Keiifs Com. 289. Corporations may now bind themselves by implied as well as express contracts, and by such as may be deduced inferentially from corporate acts, without either vote, or seal, or deed, or writing. § 69. K^either, in the case of ordinary contracts, need the agent be appointed under seal, nor even by vote of the corporation ; but his acts, as agent, known to, and recog- nized by the board as such, will render the corporation liable to the same extent as if there had been a regular formal appointment. § TO. But in whatever way agents may be appointed, or however evidenced their appointment or acts, or con- tracts, corporations can be bound only by such as are done and made within the scope of their authority. This applies not only to the agent, but also to the powers exercised by the corporation, as the latter cannot be made liable for the acts of its agents, which are clearly not within its corporate powers, although they may be ratified by the directors. § 71. Corporations are generally held liable for the negligence and unskiKulness of then* agents in all mattera coming legitimately within the scope of their powers. But a different rule prevails where such matters are without their powers ; and hence where a bridge was so negligently constructed by the agents of a municipal corporation that it fell and injured the plaintiff, it was held that he had no remedy against the corporation, the act under which it was erected being unconstitutional. The Mayor, (Jjc, of Alhany V. Cunliff, 2 CoDist 165. LIABILITY FOB AGENt's ACTS. 37 § 72. Another limitation of tlie liability of corporations relates to the agent's acts. They are not liable for such as are wilful and intentional on the part of the agent. And this rule embraces acts of such a nature that they might, under other circumstances, come within the scope of their powers and agency, and thus admit of lawful perfonnance. The fraudulent issue of stock of a railroad corporation by its president and transfer agent, and coming by assignment into the hands of an innocent party, is void as against the corporation. Mechanics Bank v. N. Y. & N. If. R. H., 3 Kern, 699. QUESTIO!n"S. How may the powers of a corporation be summed np ? Wiat in-, quiries should a business man make ? "What two kinds of corporations are important for him to understand ? What are governmental or quasi corporations ? How created ? What illustrations ? AVhat the measure of their powers? What are instances of stock corporations? How created ? How as to being private or public ? What is here the im- portant point of inquiry ? What is the charter, and to what analo- gous ? What is the rule of construction ? How construed ? To what are its powers confined ? How with corporation agents ? What limi- tation as to purposes for which they are created ? What is a by-law, by what power made, and what are the rules that regulate it ? The act of what binds within chartered powers ? What in a board of directors ? How as to removal of officer? As to disfranchisement of member? How board of directors regarded in joint stock corporations ? How their acts ? Who are the corporators, and what do they do ? When are the acts of the board those of the corporation ? How must convey- ance be executed to bind corporation ? Is a contract made by a corpo- ration in a State other than that creating it enforceable where made, and subject to what provisos ? What is the limitation as to application of fund ? What illustration ? What is the present tendency ? How effected? What instances? What was once the only mode of con- tracting ? In what was the first relaxation of the riile ? What is the present rule in this country ? What kind of contracts may corporations now make ? How may the agent be appointed in ordinary contracts ? What limitation as to acts of agents however appointed ? What appli- cations? What liability for negligence and imskilfulness of agents? For what matters liable ? For what not liable ? What other limitation of liability ? What acts embraced ? What instance in illustration ? 38 DISSOLUTION OF COEPOEATIONS. PART III. ITS DI8S0LTTTI0N AND CONSEQUENCES. § Y3. Municipal corporations, such as towns, connties, &c., which have been created for the purposes of govern- ment, are subject to being modified or dissolved at the pleasure of the creating power. These are in no sense a contract, but are simply the acts of the sovereign power, and in this direction find their only limit in the discretion that should accompany its exercise. Such modification or dissolution, however, cannot afi'ect any vested right acquired during its continuance, unless the exercise of such right depend solely upon such continuance ; as in case of the salary of an ofiicer, which, being dependent upon the con- tinuance of the ofiice, terminates with it. § T4. As to joint stock corporations, they being contracts between the State and the corporators, cannot be modified or dissolved by a legislative act without a reservation to that efi'ect. Such corporations may be dissolved — 1. By a voluntary surrender of their franchises into the hands of government, and an acceptance by some solemn act of the government. 2. By such abuse or misuser as will justify a forfeiture, and a judgment of forfeiture consequent thereon pronounced by a competent judicial tribunal. This must be a court of law, and not of equity ; as the latter only enforces trusts, but never pronounces forfeitures. § 'TS. As to what acts constitute such abuse or misuser, courts have taken somewhat different views, and much will depend upon the particular phraseology of the statute crea- ting the corporation. It is everywhere admitted that it possesses great tenacity of life, and that it is impossible to fix any very precise limit, which shall define the line of for- feiture. The suspension, for instance, of specie payment by a bank, has been decided both that it was, and was not, CONSEQUENCES OF DISSOLTmON. 39 such a non-user, or mis-iiscr of its franchises, as to "^ork a forfeiture of its charter. Tliat it would v/ork such for- feiture see Planters Bank of Missusip2)l v- The State., 7 Smedes i& Marshall, 163. That it would not have that effect see The /State v. The Banh of South Carolina, 1 Speers, 433. And where a manufacturing company sold all its property and effects, together with its charter, to a partnership, the members of which elected themselves trus- tees of the corporation, it was held no dissolution of it. Wilde V. Jenkins, 4 Paige, 481. But where the statute provides for the personal liability of stockholders, and the trustees or directors relinquish their trust, omit the annual election, and do nothing indicating a resumption of corpo- rate functions, courts will presume a dissolution so far as creditors are concerned, and give them their remedy against the individual members. 2 Kenth Coram'., 811. ^ § YG. Tlie consequences of dissolution by the old com- mon law were — that its real estate reverts back to the original grantor and his heirs — that the debts, to and against, arc extinguished — and that all the personal estate vests in the people as succeeding to the rights of the govern- ment creating it. Since the creation of so many joint stock and money corporations, all this has become changed, and the sounder doctrine may now be stated to be — " that the capital and debts of such corporations constitute a trust fund, and pledge for the payment of creditors and stock- holders, and a court of equity will lay hold of the fund, and sec that it is fully collected and applied." 2 Kent^s Comm., ^th Ed., 375 Note a. Tlius the principle applicable to the winding up of such corporations, is essentially the same as that which applies to partnerships. QUESTIONS. How aro mnnicipal corporations modified or dissolved ? Why ? What is the limit of such modification or dissolution ? What the pos- sible exception and its illustration ? How may joint stock corporations 40 AGKNCY — WHAT 18 IT? bo dissolved ? By wlmt triltuiial ? On what dependent ? What is its tenacity of life? Wliat limit difficult to fix? What illustrations? "What the old common law conscfpiences of dissolution? What tho present doctrine, and to what is it analogous? CHAPTER IV. PRINCIPAL AND AGENT. The principles that regulate the relations of principal and agent, both as between each other, and as regards each and third persons, are among the most important in mercan- tile law. The number, extent, and variety of mercantile pursuits have called into existence this branch of the law, and moulded it to suit the requisitions, exigencies, and neces- sities of business.' , PART I. AGENCY "WHAT — WHO MAT BE AGEIIT, AND HOW CREATED. § 77. An agency is the substitution of one for another in some matter of business. It is based upon a contract, either express or imj)lied, by which one confides to the other the management of some business, to be transacted either in his name or on his account, and by which the other assumes to do the business and to render an account of it. In general whatever a man has the power to do in his own right, he may appoint an agent to do for him. The power, therefore, of appointing an agent is generally co- extensive with the capacity to do business on the part of the principal. And, if that capacity is limited, as in the infant and married woman, the power of creating an agent expe- riences a like limitation. § 78. So far as regards the person who may be appointed agent, the rule is very broad. Many of those who are in- capacitated from doing business on their own account, as MODES OF CEEATING AGENCIES. 41 infants and married women, may nevertheless be appointed agents. The act being in law tliat of tlie principal, no mere disability of the agent is attachable to it. The only limita- tion here is confined to those cases where nature herself has created the barrier — such as those of idiocy, imbecility and insanity. But in contracts requiring the exercise of dis- cretion, one person cannot be agent for both parties, as where the agent of one insurance company reinsured another, of which he was director and secretary, acting for both, the contract was held voidable m equity. J^eio York Central Insurance Company v. New York self, Walle/' v. Zacy, 8 Dowl. P. C. 563. An agent having blended a demand due to his principal with one due to himself, receives a general remittance from the debtor. It shall be applied towards the discharge of both debts pro rata. And if several notes are joined in one suit, and the execution issued on the judgment obtained therein is satis- fied only in part, a surety on some of the notes may insist on a proportional application of the money. Several prin- ciples in regard to application of payments decided in Allen V. Culver^ 3 Denio^ 284. § 227. The conclusiveness of a 'receipt given on the payment of money has often come up for settlement ; and the general rule is, that a receipt or other acknowledg- ment not being under seal, amounts to no higher than pre- sumptive evidence, that the money therein mentioned has been paid. It may be disproved on the groimd of fraud or mistake of facts ; and although some doubt as to the right to contradict its terms by parol evidence may possibly arise out of Egleston v, Knickerhocker^ 6 Barh. 458, yet since the case of Wadsworth v. Allcott, 2 Seld. 64, the right of intro- ducing parol evidence to vary and even contradict its terms cannot well be doubted. K, however, a receipt be also in the nature of a contract, it is so far within the general rule, and is not liable to be varied by parol evidence. An in- stance of this is a bill of lading having a twofold aspect, a receipt of the goods, and also a contract to carry and deliver. 2 Covku dj Il'dVs Notes to Phillips' Evidence^ 1439. § 228. The third defence that may be interposed is in legal language termed accokd and satisfaction — settlement perfected. Several questions arise here of interest both to 102 DEFENCE OF ACCORD AND SATISFACTION:. the business and professional man, and the first regards the efi'ect of accord without satisfaction. The rale liere is, that the one existing without the other is no extinguishment of a debt, no bar to an action. An accord to make satis- faction at a future day, has no effect upon the original debt, unless the satisfaction be done and accepted. An accord or agreement to render satisfaction at a future day, in order to be effecual in barring an action on the original demand, must be founded on a new consideration, and be so far binding on the debtor as to afford the creditor a fresh right of action for its non-performance. For instance, an accord with r/iutual j)romises to perform is good, although the thing be not performed at the time of the action, because, in such case, the party has a remedy to compel performance. But the test of the suflBciency of that remedy is, that the party might have taken it upon the mutual promise at the time of the agreement. Here executory agreements do not avail to discharge the debts until they are executed^ unless it is clear that thQ promise, and not the performance, is agreed to be the satisfaction. § 229. If done before breach of the original agreement, a substituted executory agreement is a good defence ; but unless performance be shown, it should not be set up as an accord and satisfaction. Good v. Cheeseman, 2 B. & Ad. 328. "Where a bond, or other specialty, is taken for or on account of a simple contract debt, unless clearly as collat- eral security, the latter becomes merged in the former, and no action can be sustained upon it. One quality of a satis- faction to render it sufficient, is that it be advantageoiis to the party agreeing to receive it. It would be adjudged inoperative, if it could not possibly afford him any equiv^ alent benefit. § 230. A release as evidence of accord and satisfaction may be either — 1. By act of the parties ; or 2. By act of the law. Technically it should be under seal, which of itself imports a consideration. A parol contract may, be- UPON WHAT RELEASE OPEEATES. 103 fore any breach, be released by parol ; but a sealed con- tract, in order to be released, requires either a sealed re- lease, or a parol release, founded upon a sufficient considei*- ation. § 231. Although the payment of part of a debt as a satisfaction of the whole is not sufficient, unless there be a release, yet it is otherwise in a composition arrangement made between a debtor and his creditors. Such an ar- rangement being made with other creditors and the debtor, the creditor, in common with the others, receiving a part of his demand as a composition or in full ; that of itself is an extinguishment without a release. It would be a fraud on the other creditors to allow him to seek to enforce the balance. § 232. A creditor receiving a part of his debt from a third person, who pays in the expectation that the debtor shall not be molested for the remainder, cannot afterwards recover the balance, although there be no release. § 233. As a general principle a sealed executory con- tract cannot be released or rescinded by a parol executory cont/ract, but after hreach of a sealed contract, a right of action may be waived or released by a new parol contract in relation to the same subject-matter, t)r by any valid parol executed contract. Delacroix v. BulTdey, 13 Wend, 71. § 234. IS'o particular form of words is necessary to con- stitute a valid release. There must exist the evident inten- tion on the part of the creditor to renounce the claim, or discharge the debtor. A covenant not to sue, without limitation as to time, is legally tantamount to a release. So also an indemnity by the creditor against all claim for or on account of the debt, operates as a release. § 235. A question not unfrequently presents itself as to the operation of a release. Upon what does a release operate ? The answer is that technically it only operates on a present interest. But a present vested right to take effect in the future, may be the subject of a release. Woods 104 EELEASE BY OPEKATION OF LAW. V. Williams, 9 Johns. 123. A release of the principal money operates as a release of the interest. § 236. A release by one of several joint creditors is a discharge of the debt. But such release by a partner, in con- sideration of a debt due from him individually, will not dis- charge the partnership debt. Gram. v. Cadwell, 5 Gowen, 489. § 237. A technical release under seal, to one of several joint debtors, is a release of the debt. And the same effect also is produced, although the obligation or agreement be several as well aa joint. But a release to the representative of a deceased joint debtor does not operate as such to the survivor, as he is no surety, but legally liable for the pay- ment of the debt. It is comj)etent, however, in a release to one of several joint contractors, so to restrain its opera- tion by the express terms of the instrument, as to limit its effect to one without discharging the others. /Solly v. Forhes, 2 Ball & Baty, 38. § 238. An instance of a release or discharge by opera- tion of law, occurs where higher security is taken ; as a specialty, or instrument under seal, for a simple contract debt. This effects a merger and extinguishment of the latter. This always occurs unless the higher security is taken simply as additional or collateral security, in which case the remedy is perfect upon both. § 239. Another instance falling within the same general principle, occurs where a material alteration has been made in it without his consent. To illustrate — where a petition describing the particular courses of a road between two termini was, after being signed, so altered as to retain the same termini, but to leave its intermediate courses to a locating committee, it was held to absolve all those pe- titioners whose private interests it might injuriously affect. Jewett v. Hogdon, 3 Greenleaf, 103. § 240. The effect of a trifling or unimportant alteration, not affecting the sense or operation of the instrument, will EFFECT OF ALTEEATION AITD TVHEN MADE. 105 depend much upon the natm-e and extent of it, the party making it, and the circumstances under "vrhich it was made. The law, as settled in the older cases, held alteration by the obligee or the party owning it, although in an immaterial part, to avoid the instrument. An alteration by a stranger in an immaterial part would never have produced that effect. In this country the principle has been very generally adopted, that an immaterial alteration will not avoid an instrument, by whomsoever it may be made. 8 jS^eio IIamj)shire, 139 ; 8 Cowen, Tl. Even a material alteration made by a stranger, has been held not to render the instrument in- operative. 10 Conn. 192 ; Bees v. Overbagh, 6 Cowen, Y46. The loss, cancellation, or destraction of an instrument occur- ring through mistake or accident, even by the party in- terested, will not now discharge the contracting party from liability, except in the case of such negotiable paper as is transferable by delivery. § 241. In the absence of all positive testimony, the question has arisen as to when any alteration shall be pre- sumed to have been made. The question is one of vast im- portance, because, if prior to execution, although material, it will not affect the validity of the instniment. The subse- quent execution of the instrument would render it subject to the alteration. If subsequent, it might avoid the instru- ment. The decisions on this point have not been uniform, but the better opinion seems now to be, that whether ^>m?' or subsequent is properly a question of fact for the jury. § 242. Another species of defence is — the pendency of ANOTHER ACTION, OT JTDGMENT BEFORE EECOVEEED FOE THE SAME CAUSE OF ACTION. 'In reference to the first, the mere pendency of an action does not operate to extinguish the contract upon which it is brought, but it will have the effect to suspend a resort to any other action until its determina- tion. But the obtaining a judgment merges in it the claim upon which the action was brought, and extinguishes it, so 106 TENDER AITD STATUTE OF LIMITATIONS. that it may be interposed as a bar to any other action brought for the. same cause. § 213. Another defence briefly to be noticed is arei- TEAMENT AND AWATJD. The rulc here is, that whenever the claim is for unliquidated damages, and an award has been made upon a submission giving mutual remedies between the parties, in case of non-performance the jjlea of arbitra- ment and award may be successfully interposed. But where the action is brought for a debt, and the award has simply asqertained its existence and amount, tlie plea must go further, and aver performance of the award. Allen v. Mtlner, 2 Crompton & Jervis, 47. Where there is a clause introduced into the agreement, that if any dispute should arise, the matter in difference should be referred to arbitra- tion, this constitutes no defence to an action. Goldstone v. Osborne, 2 Carr. c& Payne, 550. § 244. Another defence is Tendek, which to be good re- quires the actual production of the money, unless it be ex- pressly dispensed with. It must be an absolute and uncon- ditional offer to pay. It must be for the whole amount of the debt, unless there are separate and distinct sums of money due, and then it may be for any one or more of the sums, stating definitely which. The tender is only legal when made in money or in coin ; but if made in bank biUs it will be held sufiicient, unless objection is made upon that ground. § 245. Another defence which business men, as well as the profession, are much interested in understanding, is that of the Statute of Limitations. This has been termed a " statute of repose.''^ It quiets all claims after a certain period of time. It is a perfect bar to all actions which are not prosecuted within a certain limited period, after the cause of action had accrued. This period is different in different States, and in the same State varies with the dif- ferent species of demand. In the State of ]S"ew York, in aU demands arising out of contract, express or implied, the WHEN STATUTE BEGINS AISHD HOW LONG CONTINUES. 107 period is six years. It is purely a creature of statute, and hence varies in different states and nations. Without stating the particular provisions of the statute, which are so different in different States, I shall refer to some of the well-settled principles that have an application to all those provisions. § 246. This statute, in regard to its effect, is never held to discharge or extinguish the debt. It simply bars all remedy for its recovery. Hence it affects no lien that may exist in the way of security for the same debt. The right to a pledge or pawn remains perfect, although the recoveiy of the debt it was given to secure, would otherwise have been barred by the statute. § 247. The statute begins to run from the day upon which the creditor might have commenced an action for the recovery of his demand, such day being included in the computation of time. When a contract is to do a thing at a future time, the statute will commence running from the breach. In case of indemnity, the statute only runs from the time of payment under it ; and in those cases where a surety claims contribution from his co-surety, the statute does not begin to run until he has paid something beyond his own proportion of the debt. A factor who has sold consigned goods is only liable from the time demand is made upon him to account. In case of a promissory note payable on demand^ the statute runs from the date of the note, and of a special contract from the time of its breach. "Where, however, a bill or note is made payable at a particu- lar place, no cause of action arises, and hence the statute does not begin to run, until demand made at that place. In the State of New York, when a fraud has been perpetrated, which remains for some time concealed, the statute begins to run from the time the fraud was discovered. § 248. Once commenced, the statute continues running until the action is either commenced, or barred by it. If, however, the debtor is absent from the state at the time the debt falls due, the statute does not commence to run until 108 now DEBT TAXEN OUT OF THE STATUTE. his return ; and in the State of New York the time during which lie may be absent and reside out of the State, after it has SO commenced, forms no part of that period of time which is to constitute the bar. § 249. As the statute of Hmitations only lars the remedy. without extinguisJiing the deht, the moved obligation still re- mains, and hence a new promise, without any new considera- tion^ will revive the original liability. In order, however, to have this effect, there must be something besides a mere admission ; there must be an express promise to pay. This devolving so much upon the promise naturally resulted in rendering the recovery dependent upon the nature and effect of it ; and hence, if that was a conditional one, to exclude the right of recovery unless that condition was shown to be complied with. A promise, for instance, to pay when ahle, devolved upon the plaintiff the necessity of proving that ability before he could be permitted to recover. In this state the promise is required to be in writing, and signed by the debtor, in order to avoid the provisions of the statute. The promise need not specify any particular sum, as the amount due may be proved by other evidence. § 250. Tt is also a rule that a part payment of the debt will take the remainder out of the statute. In order to have this effect, the party paying must himself apply his pay- ment on the debt. A payment on account of interest will have the same effect as on that of principal. Tlie part payment may also be in goods as well as money. Indorse- ments on a promissory note, admittmg the receipt of in- terest, are presumed to have been written at the time they bear date. One partner in the State of K"ew York cannot, after dissolution of the partnership, by any promise or part payment, revive the debt as against the other partner. § 251. Another question, that, under a recent decision in the State of ISTew York, may still be regarded as doubt- ful, relates to the effect upon a joint delt of part pay- ment by one of the two or more joint debtors. Under BET-OFF iLND EECOirrMENT. 109 certain limi,tations or qualifications, it has generally been considered that such payment by one operated to revive the debt against the other or others. But in the State of New York it has been recently held in its highest court, that pay- ments upon a note by one of its joint and several makers, and indorsed upon it before the statute was a bar, did not affect the defence of the statute as to the other. Shoemaker V. Benedict^ 1 Kern., 176. . § 252. Another defence, often interposed, is a set-off. This does not consist in a reduction of the plaintiff's demand, nor of matter of defence growing out of his claim. It is an independent debt due from the plaintiff to the defendant, and one for the recovery of which a cross actioji might be maintained by the latter against the former. § 253. A set-off is a creature of the statute, not existing at common law. The defendant may interpose it as a de- fence to an action brought against him, or he may reserve it and institute himself a suit for its recovery. No debt can be the subject of set-off unless actually due and in arrear at the time of the commencement of the action. § 25'1. The debt sought to be recovered, and that proposed to be set off, need not be of the same, nature or degree, but they must be mutual, and due in the same right ; hence one of several defendants cannot set off a debt due to him alone from the plaintiff ; nor can the defendant set oft* a debt due to him from one of several plaintiffs. A defend- ant who is sued as executor or administrator cannot set off a debt due to him personally. Nor can a person who is sued for his own debt, set off a debt which accrued to him in his representative character. A mere equitable demand cannot be the subject of set-off at law. § 255. A defence somewhat analogous to that last men- tioned, and which is of comparatively recent introduction into our jurisprudence, is kecoltment. This consists in a right recognized in the defendant to set up the damages he has sustained in consequence of a violation by the plaintiff 110 WHEN DEFENDiVlTT MAT EECOUP. of some stipulation cmljraccd in the same contract or matter out of which the phiintifT's right of action arises. The de- fendant lias a right of action for the recovery of all such damages ; but he may also, if he so elects, recoup (cut off) tlie plaintiff's damages by as much as tliosc suffered by him against the plaintiff', growing out of the same transaction, .will amount to. A brings an action against B upon a promissory note. Defence — that the note was given in payment of wood purchased standing, the vendor of it agreeing to indemnify the vendees against any damage that might happen to the wood in consequence of the burning of an adjoining fallow. The fallow being afterwards burnt, the wood, which constituted the consideration of the note, was destroyed by the fire. Held that tlie vendees might recoup. Batterman v. Pierce^ 3 Hill^ 171. It was also settled — 1. That the right of recoupment was not confined to cases of fraud, but extends also to those of mere breach of contract. 2. Recoupment is admissible, though the damages on both sides are unliquidated. 3. The defendant may elect whether he will use his claim in that way, or reserve it for a cross action. 4. When he elects to recoup, he cannot have a balance certified in his favor, as in the case of a set-off. 5. He cannot, after having been allowed part of his claim by way of recoupment, maintain a cross action for the residue. § 256. The knowledge of the law of contract is neces- sarily very imperfect without understanding something of the nature of the damages which result from its non-per- formance. The only compensation which the law has in its power to render to those who suffer from a breach of con- tract, is the award of damages. Chancery can offer other remedies. It can perpetually enjoin parties from future violations, or it can decree that contracts shall be specifi- LIQUIDATED DAMAGES AND PENALTY. Ill cally performed. Thus between both, the remedies afforded are quite complete. Neither will concede to itself but what its compensatory powers are adequate for every emergency. Ilence parties are always at liberty to break their contracts equally as to keep them, and there is no more legal morality in the one than in the other. The parties by keeping, ren- der any appeal to the law unnecessary. By breaking, it becomes necessary to make the appeal, and such compensa- tory damages are awarded, or other remedial means in chancery granted, as will place the party injured in the same situation as if the other had fully performed the con- tract. Thus damages are made to come in the place of performance, and the law considers one as exactly equivalent to the other. § 257. The first question that properly presents itself, and one productive of great difliculty in settling, is whether a certain sum specified is to be considered in the nature of a j>enalty^ or of liquidated damages. It is entirely competent for contracting parties to do either one of two things, viz. : to insert in the instrument a certain sum as a penalty to be forfeited in case of non-performance, and under which the party recovers the damages that have been actually sus- tained ; or, to providcj in anticipation, for the damages which either will sustain in case of a violation of the con- tract by the other, Tlie latter is called liquidated damages. § 258. The leaning of the courts has ever been towards regarding the sum inserted in the contract as a penalty, under which the actual damages should be recovered. Where the agreement provides that a certain sum shall be paid in the event of performance or non-performance of a certain specified act, in regard to which damages, in their nature imcertain, may arise in case of default, and there arc no words evincing an intention that the sum reserved in case of a breach shall be viewed only as a penalty, such sum may be recovered as liquidated damages. Lowe v. Peers., 4 Burr. 2225. 112 I)AMA0E8 LIQUroATED AJSTD UNDEE PENALTY. § 259. Although there are some exceptions, yet it may be stated as a general principle, that where a certain sum is agreed to be paid, in case of the non-performance of a spe- cified act, and it be reserved as a penalty by name, it cannot be viewed as liquidated damages ; the word penalty evi- dencing a contrary intention. Even where the language used was in the penal sum of $500 as and hy way of liqui- dated damages^ it was held a penalty. Davies v. Benton^ 6 Barn, d; Cress. 216. § 260. In this country in all cases where the question has arisen, the leaning has strongly been towards treating a fixed sum as a penalty, and not as liquidated damages. But wherever the clear intention of the parties proclaims that liquidated damages was the thing intended, both law and equity must give such efi'ect to the stipulation, however severe it may operate upon one of the parties. The gene- ral principles deducible from the cases may be stated to be 1. The language of the agreement is not held to be con- clusive, and the effort of the tribunal will be to get at the intent of the parties. 2. When the agreement is in the alternative, to do an act or pay a given sum of money, the court will hold the party failing, to have had his election, and will compel him to pay the money. 3. In case of an agreement to do some act, and upon failure, to pay a sum of money, the court will look into the intent of the parties ; that no particular phraseology will be beld to govern absolutely, and that although the term " liquidated damages " will not be conclusive, the phrase ^^ penalty " will generally be so. 4. If the sum be evidently fixed to evade the usury laws, or any other statutory provision, or to cloak oppression, the courts will relieve by treating it as a penalty. 5. Whenever tlie sum stipulated is to be paid ou the Lnnr of compen'SAtion. 113 non-payment of a less sum made payable by the same instru- ment, then it will always be treated as a penalty. 6. Where, independently of the stipulations the damages would be wholly uncertain and incapable of being ascer- tained, except by conjecture, there the damages will usually be considered liquidated, if they are so denominated in the instrument. Dcikin v. Williams^ 22 Wend. 201. Pearson V. Williams, 26 Wend. 630. Larajprtian v. Cochran, 16 New York liep. 275. Barjley v. Peddle, 16 New York Rep. 469. Cotheal v. Talraage, 5 Seld. 551. § 261. Li a very large class of actions, the entire claim is for damages. In these cases, as where actions are brought on negotiable paper, the contract itself furnishes the rule of damages. There is quite a large class of cases in which no other damages can be recovered, than such as are nominal. Tliis occurs wherever a right is invaded, or a cause of action comes to exist, and no actual damage is suffered. § 262. It is often a matter of great difficulty to fix the limit of compensation. The law refuses to take into consid- eration any damages remotely or consequentially residting from the act complained of. The civil law held the defend- ant liable for those damages only which both parties may fairly be supposed, at the time, to have contemplated as likely to result from the nature of the agreement. § 263. Tlie extent of liability is sometimes dependent upon the peculiar circumstances under which a man acts. A cai'penter sells timber for the express purpose of propping up a house. Tlie timber proves defective and the building falls. The carpenter is liable. But the same timber sold in good faith by a man not a carjienter, would only render him liable for the diflerence in price between the good timber and that sold. § 26-1. In cases of wrongs, torts, and wilful injuries, damages may be given by way of punishment of the wrong doer. But in cases of contract, except promises to marry, only compensatory damages are given, those alone which 114 CLASSIFICATION OF CASES. arc the natural and proximate consequence of the act com- plained of. § 265. A question wliicli lias given rise to a good deal of discussion, relates to the loss of profits consequent upon a breach of contract, — whether such loss can he given as damages. The rule is, that remote or speculative jjrofits cannot be recovered by way of damages. But all profits are not excluded as remote and speculative. Those profits, or advantages, which are the direct and immediate fruits of the contract, are recoverable as damages. They enter into and form a part of the contract itself, and are presumed to have been taken into consideration, when it was made, forming, perhaps, the chief or only inducement to the ar- rangement. Masterton v. Mayor of Brooklyn, 7th mil, 62. § 266. Another question relates to the right to recover damages that have occurred subsequent to the commence- ment of the suit. The old rule adopted and adhered to down to the time of Lord Mansfield was, that even interest on a demand could only be recovered down to the time of commencing the suit. In a case where the plaintiff recovers only nominal damages, he can give in evidence those conse- quences of the act which are immediately traceable to it, although their occurrence has been since the suit was com- menced. And so also he is entitled to recover for those direct and immediate consequences of the act complained of which are so closely connected with it, that they would not, of themselves, furnish a distinct cause of action. § 267. By a systematic arrangement of the cases that present questions of damages, three different classes have been specified : 1. Those where the contract is only for the payment of money. There the consequences of non-perfoi-mance cannot be itiquii'ed into in any way, however severe they may have been. Tlie only recoveiy by way of damages is the interest on the money due. 2. Those where the contract is to do, or" to refrain from \ MEASURE OF DAMAGES. 115 doing, some particular thing. Here the rule of the civil law is adopted, viz. : that the defaulting party shall be held liable for all losses that may fairly be considered as having been in the contemplation of the parties at the time of the agreement. 3. Those where a tort or wrong is committed, or the ac- tion is brought for a violation of right, unattended by any of those circumstances of aggravation which give the control of the matter to the jury« Tliese are, by far, the most diffi- cult to reduce to settled principles ; they can hardly be said to be included under contract. § 268. In all cases of contract the great object of the court is to ascertain the agreement of the parties, and that, once arrived at, as a general rule controls the measure of remuneration. But this principle is liable to some modifi- cations; as, 1. In the case of unconscionable bargains. Where, for instance, in shoeing a horse, the contract was to give a bar- leycorn for the first nail, two for the second, four for the third, and so on, doubling each time for thirty-two nails. The sum thus agreed to be paid would be enormous ; and the court, in the exercise of a power devolved upon it by neces- sity, would direct the giving a fair reasonable compensation. 2. The second modification or exception embraces all covenants of wari'anty on sale of real estate. In such case, the rule is different in England and in this country. In the former the ordinary principle upon which damages are given is carried out, and those recoverable consist of the actual injury sustained. But in this country the measure of damages is held to be the re-payment of the sum of money paid, together with the interest thereon, from the time of its payment. The reason of this deviation from the rule with us is, that in a country so rapidly developing as our own, no one would sell land with covenants of warranty, if in case of failure of title he was to be held responsible for all tho consequential damages. 116 MEASUKE OF DAMAGES. 3. Tho third exception eml^aces all that class of cases where tlio contract, hcirif^ performed only in part, the court undertakes to dis^jcnse with the remainder of the agreement, and to give compensation for what has been actually done. Tlie following instances will illustrate this class : A agrees to work for B for a specified time for a given sum, and quits his employment, without B's consent, before the time ex- pires. A agrees to erect a building for B according to certain specifications. The work is done, but the specifications are, in many instances, dej^arted from. In these, and such like cases, where the plaintiff is en- titled to recover, the agreement of the parties, so far as it can be followed, must always be taken to furnish the meas- ure of remuneration. § 269. If a contract be broken and the party entitled to the benefit of it can protect himself from the loss consequent on its breach, at a trifling expense, or \^dth reasonable exer- tions, it is his duty to do it ; and he can charge the delin- quent party with such damages only as with reasonable endeavors and expense he could not prevent. QUESTIONS. What is the primary object to be attained in the constmction of contracts ? "What is the first defence that may be interposed ? "What the first inquiry imder it ? What the answer ? "What the illustration ? "What rule relating to the manner of performance ? "When in the alter- native where the right to elect ? "Where in alternative, and one branch cannot be performed ? What rule, when one of two things to be done by a certain day ? How must contract be performed ? What illustra- tions ? How, when an act is to be done to enable the other party to perform the contract ? What rule as to time of performance ? What does the term month mean, and what exception ? "What is the rule when time is computable from an act done ? How can a party render himself immediately liable when an act is to be done at a future time ? What will excuse non-performance? How when a party absolutely engages to do an act ? What illustration ? How where the contracting party is alone competent to perform ? What is the rule where the con- DEFENCES TO ACTIONS. 117 tract is entire? How may a claim pro-tanto sometimes arise ? IIow where there is a condition precedent ? "Where tlicre are concurrent considerations? TThore there arc independent considerations? What will justify a party in rescinding ? "What will justify a total abandon- ment? "What is the rule where there exists the right to rescind? "What illustration ? In what party only docs the right to rescind vest ? "When is it to be exercised ? "When may the party immediately abandon the contract? What is necessary to enable a party to rescind and re- cover back money ? How may a further performance of a contract bo sometimes excused or discharged ? What illustration ? What rule to test parties' right to rescind? What to be done on rescinding contract of sale ? Wliat defence may be next interposed ? To whom may pay- ment bo safely made ? When is there a difference in the effect of part- payment made or promised for the whole debt ? What effect has the receipt of one thing in satisfaction for another ? What the acceptance of a new security ? What of part payment and release ? What the promise of part, the \»hole being due ? When may payment be pre- sumed? What illustrations? When arise questions of application of payments? What is the right of the debtor, and when to be exercised? What presumption may circumstances raise ? What instance? What is the right of the creditor, and under what circumstances? IIow, when debt is barred by statute of limitations? And with what effect? When cannot creditor make application? How, where neither debtor nor creditor makes application? What instances? When only does the doctrine of application arise? What rule when an agent has blended a demand due his principal with one due to himself? How is a receipt regarded in law, and subject to what ? IIow if in the nature of a contract ? What is accord and satisfaction ? What is the rule as to accord without satisfaction ? When is an accord to render satisfaction at a future day effectual in barring an action ? When is a substituted executory agreement a good defence ? When is there a merger ? How must satisfaction be to be sufficient ? In what two modes may a release bo given ? How should it be ? W'hen and liow may a parol contract be released? When may a contract under seal ? What effect has a com- position arrangement between debtor and creditor? Why? When cannot creditor recover balance when a part of the debt is paid ? What is the general principle as to a sealed executory contract ? What after breach ? What unneccessary to constitute release ? What must exist as to intention ? What effect of covenant not to sue ? What of in- demnity ? Upon what does release operate ? What effect of release by one of several joint debtors? What to one of several joint debtors? What to representative of deceased joint debtor? What instance of 118 . MEASURE OF DAMAGES. release or discharge by operation of law ? "Wliat effect has material alteration in instrument and by whom ? And slight alteration and by whom ? "When is alteration presumptively made ? What effect has the pendency of another action for same cause ? "What the obtaining of judgment? "What the rule in case of arbitrament and award? "What necessary to make a good tender ? "What effect has statute of limita- tions? "What does it do in reference to the debt? "When does it com- mence running? When in case the contract is to do an act at a future time ? "When in case of indemnity ? "When in case of surety ? "When in case of goods consigned to factor ? "When in case of promissory note on demand ? "What exception ? How long does statute run ? What is the rule when the debtor is absent or non-resident ? What will revive a debt barred by statute ? IIow must the promise be ? What is the recovery dependent upon ? What illustrations ? What necessary in the State of New York? What effect has part payment of debt? What necessary to have this effect? How may part payment be? "What the presumption in case of endorsement spn note? What effect upon joint debt of part payment by joint debtor? What is a set off? Is it obligatory to set it up ? What is not, and what is, necessary in order that there may be a set off? What does recoupment consist in ? "What case will illustrate ? What principles settled in relation to it ? What is the only compensation which the law can offer ? "What can chancery ? When, and under what circumstances, is a sum certain in- serted in an instrument to be considered as a penalty, and when as liquidated damages ? What is the leaning of the law ? What general principles deducible from the cases ? ■ When is the entire claim for damages ? What are nominal damages ? What rule of the civil law as to limit of compensation ? When may extent of liability depend upon peculiar circumstances, and what ? How and for -^that, are damages given in case of wrongs ? How in cases of contract ? What is the rule as to giving loss of profits by way of damages ? "When are damages occurring subsequent to commencement of suit to be given? What consequences of act complained of are recoverable ? What three classes of cases are there in which questions concerning damages may arise? What controls in all cases of contract? "What modifications of the principle ? What the rule when a party can protect himself by a slight expense ? KINDS OF NEGOTIABLE PAPEE. 119 CHAPTER II. NEGOTIABLE PAPER. Tliis is the great instrument of commerce, and the im- portance of the functions performed by it in tlie mercantile world renders it difficult to understand how it could have been possible for the ancients to have carried on their busi- ness transactions without its use. It seems to have com- menced its agency on the coasts of the Mediterranean in the fourteenth century, and from that period to the present, it has been growing in importance as the business affairs of the world have increased in number and magnitude. To the merchant and man of business it now presents a branch of the law, the accurate knowledge of which may be well deemed a necessity, Tlic origin of the principles that apply to negotiable paper shows its peculiar mercantile character. With the exception of a few legislative enactments, they are all de- rived from mercantile usage, from the custom of merchants, which in this department of the law has always been per- mitted to control, subject only to legislation. Tliis custom or usage has here given that definiteness and extreme preci- sion which is elsewhere due to legislative enactment. PART I. rra different kinds, their forms and parties. § 270. The Bill of Exchange is the original germ from which all the different kinds of negotiable paper have pro- ceeded. All the essential principles that have an application to the latter have grown out of the use and full development of this instrument. And yet there is quite an apparent difference between two at least of the fonns of this kind of paper. Li order more clearly to present tliis subject I Bhall give first the forms of the three different kinds that 120 -SVUAT IS A BILL OF EXCLLLNGE ? are the most commonly in use, viz. : the Bill of Exchange, the Promissory Note, and the Check. BILL OF EXCHANGE. Nkw Yoek, June 1, 1860. $100. At siglit, (or on demand, or at days after sight, or at days after date,) pay to James Taylor, or order, (or hearer,) one hundred dollars for value received. John Steakns. To Mr. Thomas Jones, Merchant at Buffalo, N. Y. PROMISSORY NOTE. New Yoek, June 1, 1860. $100. Two months after date, I promise to pay James Burt, or order, one hundred dollars value received. Chakles Sand. CHECK. New Yoek, June 1, 1860. Mechanics and Farmers Bank pay to L'a Shafer, or bearer, one hundi'ed dollars. $100. Le^t Waed. § 271. A hill of exchange, in its simplest form, is a written order, or open letter of request written by one merchant and directed to another, requesting him to pay a sum of money therein mentioned to a third merchant or his order or to bearer. The writer of it, John Stearns, is called the Draiver, the person to whom it is directed, Tliomas Jones, the Drawee, and the person in whose favor the bill is drawn, or to whom the money is to be paid, James Taylor, the Payee. The theory of it is that Tliomas Jones the Drawee, is in- debted to John Stearns, the drawer in the sum of $100, and PAETIES TO NEGOTIABLE PAPER. 121 Jolin Stearns, owing a similar debt to James Taylor, avails himself of this instrumentality, to pay his own creditor by transferring to him a debt due' to himself. The payee, Taylor, by taking this open letter to the drawee, Jones, receives his $100, transferring to him the bill, as his voucher for its pa}anent, and thus both debts are paid. § 272. Almost the entire transactions of the mercantile world are based upon credit, and hence the evidences of debt, when put into a negotiable fonn, perform a function among business men more important than money. It is upon this principle that the bill of exchange receives its further development, by means of which its great utility as a commercial instrument is secured. This development is commenced by the draioee^ Tliomas Jones, who, when it is drawn upon time, instead of paying, accepts it, by writing across the face of the bill " Accepted," and signing his name. We have now another party to the bill, or rather a transformation of one party into another ; for Jones, at first a drawee, has now become the acceptor. This act of accept- ance fixes his liability, and gives to him as a party on the bill the character of principal debtor. He admits his in- debtedness to the drawer by his acceptance. § 273. The bill having now a party on it who admits himself a debtor and joromises to pay his debt, is in a fitting condition to be launched into the business world, and to enter upon its mission as an instrument of commerce. James Taylor, the i)ayee, has now in his possession an agent that will either command money, or become itself a substi- tute for it. To enable it to accomplish this purpose, he writes his name across the back of the bill, and thus adds a new party, or rather transforms i\\Q payee into the indorser. He then delivers it to another party, by way of paying a debt, or purchasing goods, or procuring money upon its discount, and this last is termed the indorsee^ or more gen- erally the holder. Tliis one may do the same to another, and so on ad infinitum. These constitute all the parties to the bill. 122 riiOMISSORY KOTE EE8EMBLES BILL OF EXOllANQB. § 274. A promissory note is a promise in writing to pay a Bpeeilicd sum, at u time therein limited, or on demand, or at Bight, to a person therein named, or to his order, or hearer. Tliis has no apparent analogy to a hill of exchange, and has never heen recognized at connnon law as any thing more than a contract. An attempt was made in the time of Lord Holt, to place the promissory note on the same footing as the bill of exchange, and render it transferable by the custom of merchants, but it utterly failed. The necessity of bringing it within that custom, and thus of enabling it to fulfil the purposes of negotiable paper, led to the passage of the statute of Anne, which placed promissory notes on the same footing with bills of exchange. Tliis statute has in sul)stance been re-enacted in most of the States, but in some few of them it has not, and in all such they remain the same as before the statute of Anne, the rights and liabilities of an indorser being the same as those of the assignor of a bond. Jn a promissory note, the signer, Charles Sand, is called the maJcer, and James Burt, to whose order it is made payable, the payee. § 275. The promissory note in the hands of the payee becomes substantially the same as a bill of exchange in the hands of its payee ; the maker, by signing the former, ac- knowledging himself as the principal debtor, in the same manner that the acceptor does by accepting the latter. The latter, it is true, has the addition of the drawer, but his rights and liabilities are substantially the same as those of an indorser. The payee of a note, like that of a bill, holds it as an evidence of indebtedness by the maker, and may transfer it for the accomplishment of his various business purposes by writing his name upon the back of it, thus transforming himself from payee into indorser, and ren- dering the party to whom he delivers it the indorsee or holder. ' § 27G. Tlius, however little resemblance there may have been between the bill of exchange and the promissory note CHECK HOW ANALOGOUS TO BILL OF EXCHANGE. 123 in their original shape, yet in the hands of the payee of each, when ready to be put into circulation, they are, in principle, precisely analogous. The analogy consists in this, that the ])ayee, and each subsequent indorsee or holder of the note, by indorsing and delivering it to his immediate indorsee or holder, in effect draws a new bill upon the maker in favor of the indorsee to whom he delivers it, and who by receiving it, so indorsed, comes to occupy precisely the position of the payee in the bill of exchange. Hence both these forms of negotiable paper, in the great offices they perform in the business world, are brought under the dominion of the same general principles of law. § 277. A bank check is a written order, addressed to a bank or a person carrying on the banking business, directing the payment of a certain sum of money on presentment, to a person therein named, or to bearer. The law is less clearly settled relating to several points concerning a clieck than tlic other two forms of negotiable paper. The first conflict in decision relates to the inquiry whether a check, to he such, must necessarily be payable to bearer ; or whether it may be payable to order also. In Woodruff v. The Merchants Bank of the City of New Yorh, 25 Wend. 673, it was held that it must be payable to bearer ; that making it payable to order rendered it a bill of exchange. But in the matter of Broion, 2 Story ^ C. C. Hep. 502, Judge Story inclines to the opinion that it is not requisite to a check that it should be payable to bearer or on demand. § 278. Anotlicr and more important point of difference relates to the inquiry as to how far a check, in regard to the principles that govern it, is to be considered analogous to bills of exchange and promissory notes. In JLcrlicr v. Aii- derson, 21 Wc7id. 373, it is placed in all respects upon the same footing. In the later cases of Murray v. Judah, G Cowen, 490 ; and Little v. PJuvnix Banl', 2 Hill, 425, it is held that different principles prevail so far as the drawer is concerned, and that the want of due presentment and 124 CHECK now VAEYING FEOM BILL. notice of non-payment, will only exonerate the drawer so far as it occasioned any actual damage to him. These cases, however, liold that the indorscr is on the same footing in all the forms of negotiable paper. § 279. It will be seen that a check is very analogous in its form to a bill of exchange. Tlie differences pointed out in the matter of Brown, 2 Story , 502, are — 1. That checks are always drawn upon a bank or banker. 2. That they are payable immediately on presentment, and without days of gi-ace. 3. That they are not presentable for acceptance, but only for payment. 4. Tliat the omission to demand and give notice could only be available as a defence to the drawer so far as he had received an injury thereby. In the recent case of Bowen V. N'eiocll, 4 Seld. 190, it is held not material to constitute a check that it should be drawn upon a bank or bankers, but that it should be payable immediately on presentment. The check, like the bill of exchange, has its drawer, Levi Ward, the party upon whom it is drawn, usually a bank or banker, and the party in whose favor it is drawn, Ira Shafer, the drawee. § 280. Bills of exchange are either foreign or mland. K foreign bill is one drawn in one country and made paya- ble in another ; an inland, one drawn and made payable in the same country. A bill drawn in one State and made payable in another, is a foreign bill of exchange. Buckner v. Finley, 2 Peters, 586. § 281. There maybe two classes of parties on negotiable paper. The one embraces those who are primarily liable, who are the real debtors, and who are ahsolutely liable for the full face of the paper to the payee, indorsee, or holder, however he may have neglected to demand payment and give notice of non-payment. These are the acceptor of the bill and the maker of the note. The other includes thos9 BUSINESS AND ACCOMMODATION PAPEK. 125 "svho are secondarily liable, whose liability is contingent^ and who arc discharged entirely if the holder fails to make the proper demand of payment, and giro the required notice in case of non-payment. These are the indorser and drawer. This distinction must be kept constantly in view in order to arrive at any satisfactory understanding regarding the law of negotiable paper. § 282. There is another divsiion of negotiable paper im- portant to notice, and that is into business and accommodor Hon. That is termed husiness which is given for value, when the maker of the note and the acceptor of the bill are really indebted to the extent they profess to be by making and accepting. That is termed accommodation which is given where no debt is due, where such maker and acceptoi make and accept the paper, when they are not indebted, and when the object is to enable the party to whom it is given to sustain his credit, or to raise money for the pur- poses of his business. The first kind is regarded as evidence of a debt in the hands of the payee ; and is as available to him as to any subsequent i)arty. The second is evidence of no debt in the hands of the payee, and only becomes nego- tiable paper in the hands of the party to whom he transfers it for value, and in accordance with the purpose for which it was given. § 283. The general rule is that parties who are legally competent to contract may become liable as parties to nego- tiable paper. Tliere was formerly some difficulty as to the liability of coi-porations, but they are now regarded as com- petent in regard to all matters within the scope of their coi'porate powers. An apparent exception obtains in the case of married women, who, although competent in equity, under certain circumstances, to make contracts such as will bind them to performance and payment out of their sepa- rate i)roperty, are nevertlieless not legally competent to bind themselves by becoming parties to negotiable paj^er. Erwin v. Downs^ 15 New York licj}. 575. 12G liEQUISITES OF NEGOTIAULE I'Al'EK. QUESTIONS. "Wliat wns tlio origin of negotiable paper? "What tlio germ from wliicli the diilVrent kinds proceeded? What is a bill of exchange? "Who the din'oRJit parties to it, coniiuencing with the party drawing it? IIow may tiio drawee become the acceptor? "What character does the acceptance give to him ? IIow may the payee become indorser ? "Who the party to whom he delivers it indorsed ? "What is a promissory note? IIow is that placed on a footing with a bill of exchange ? "What is a promissory note in the hands of the payee analogous to ? "When and how does it become precisely analogous to a bill of exchange ? "What is a bank check? "What the first conflict in the cases relating to it ? "What the second point of difference ? "What the points of difference between it and a bill of exchange ? How many kinds of bills of exchange ? IIow a biU drawn in one State payable in another ? "What two classes of parties to negotiable paper ? "What the difference between the two ? "What other division of negotiable paper ? "What constiti^.tes the difference between the two ? "Who may legally be parties to negotiable paper ? Can married women be such parties ? PART XL EEQinSITES OF NEGOTIABLE PAPER. § 284. Altliougli no particular form of words is required to constitute a bill or note, yet there are certain essentials without which no instrument can be negotiable paper. There must be sufficient in it to make out an 07xJer or prom- ise to pay, and hence a mere acknowledgment of a debt has not been deemed sufficient. But a promise to deliver or to be accounteible or responsible for such a certain sum of money, has been held sufficient. It must be for the pay- ment of money alone, but whether the promise to pay " in JjanTc hills,^^ divests it of the quality of negotiable paper or not, has been a question of much difficulty. In England it has that effect. In this country the decisions are both ways, although the leaning is rather in favor of the English rule. McCoi'imck v. Trotter, 10 Serg. <£; Hawle, 94. I^ry V. I^ousscau, 3 McLean, 106. It must also be for the pay- ment of a sum certain : thus a promise to pay £13, and all EEQinSITES OF NEG0TIAJ3LE PAPER. 127 jmes according to rule, is no promissory note. Ayrey v. Fearnsides, 4: Jif. c& W. 168. The promise must be clogged by 710 conditions or contingencies. Nor must its payment depend on the sufficiency of any fund upon which it is drawn. Orders upon public functionaries, as upon the Postmaster General, are held not negotiable. Reeside v. Knox, 2 Whart. 233. A bill or note must be a " courier without luggage," and must tell its story upon its face or back. It is designed to pledge only the personal credit of the parties to it. § 285. It must be for the payment of money at all events, and hence if there be any contingency as to its payment, it is no bill or note. Eut if made payable on the happening of an event, however remote, yet if it be of certain occur- rence, the bill or note is good, as if made payable two months after the death of the maker's father. § 286. Conditions to destroy the character of a bill or note need not be on its face. An indorsement on the back of it rendering it payable upon certain conditions, and done at the time of the making of it, will have the same effect. But a contemporaneous jparol agreement can have no such effect, because, resting in parol, it is not admissible in evi- dence, nor would an indorsement which simply referred to an agreement by way of identification. § 287. A bill or note must contain some amount, which it is usual to specify in figures on the lower left hand cor- ner of the instrument as well as in writing in the body, and where there is a difference between them, it is the written words that control. A date is also usually inserted, although if omitted it dates from the day on which it was made. Tlic term month means a calendar month, except in New 1l ork by statute, for the computation of interest it is lunar ; and the times for payment are generally expressed to be on de- mand, at sight, a certain time after sight, or a certain time after date. If no time is specified, it is payable on demand. § 288, It is usual to insert the words 'calue received in a 128 TRAl^SFEK OF NEGOTIABLE PATEE. bill or note, Lut tlicy arc unnecessary. Tlie contract em- bodied in negotiable paper is unlike other contracts in re- gard to the expression of a consideration. That element is introduced into other contracts, and forms a part of them, and nmst be alleged and proved in order to their enforce- ment. But in every negotiable bill, note, acceptance, and indorsement, the consideration is implied. There is always a presumption of value received, and hence the burden of proof rests on the other party to rebut it. This exception of presumed consideration, the law makes in favor of nego- tiable paper, in order to facilitate its transfer in the com- mercial world, by giving it the character of a safe security, in the hands through which it passes. These words are not usually inserted in checks. QUESTIO:ffS. What must be made out to constitute negotiable paper ? Is promise to deliver, or be accountable or responsible, sufficient? What must it be for the payment of ? How when it is a promise to pay in bank bills ? "What rule as to payment of sum certain ? What as to conditions or contingencies ? How when drawn upon particular fund ? How with orders upon public functionaries ? How must it be made payable ? How if the event be of certain occurrence ? How is it if conditions be upon its back, and when put there ? How with contemporaneous parol agree- ment ? How usual to specify amount ? What the rule where words and figures differ ? What the rule when date is omitted ? What does term month mean ? How are times of payment generally expressed ? Are words " value received " necessary? Wherein does contract embodied in negotiable paper differ from other simple contracts ? Why the ezcep- tion in favor of negotiable paper ? PART m. TEAKSFEE OF JTEGOTIABLE PAPEE. § 289. It is in the facility by which all the rights of one party may be transferred to another, without being clogged with the defences to which it may be liable, that we find the great commercial value of negotiable paper. At com- TBANSFEK OF NEGOTIABLE PAPEK. 120 men law a written contract cannot be transferred by the original contractor to another, so as to vest that other with a right of action in his own name against the other party to the contract. Such assignee was not, however, without remedy, as he might bring his action in the name of his as- signor. But there was another difficulty, still more formid- able, and constituting a heavier clog upon the transfer of this species of property. That was found in the fact that the assignee could only take it subject to all the equities and defences that existed against its enforcement while in the hands of the assignor. It was a courier clogged with luggage, and could not be relied upon as bearing its history upon its face. These two difficulties would eflectually pre- vent the using of contracts as instruments of commerce. § 290. The law merchant steers clear of both these diffi- culties. A transfer by indorsement, or in some cases by delivery, of negotiable paper, enables the indorsee or holder to avail himself of all the remedies he may have upon it in his own name. Tliis, therefore, is the first right which the law nierchant gives to the holder of negotiable paper which is denied to the holder of other contracts. § 291. Another right, which is of still greater import- ance, is that if so transferred in the ordinary com-se of business, before it is due, to a person who takes it bona fide, for value, and without notice, he receives it free and clear of most of the defences which might have been available against it in the hands of the party from whom he received it. § 292. There is still another point of diflerence impor- tant to notice. At common law an ordinary contract is good only as between the immediate parties to it. On its assignment and transfer to another, the only immediate par- ties are the assignor and assignee, and hence the only right which the law gives to the assignee, and which he can prosecute in his own name, is against the assignor. In the case of negotiable paper, the law merchant gives to the 9 130 ESSENITAL ELEMENTS OF INDOKSEMENT. party to wliom it is properly transferred, tlic same right to proceed against all the parties to the bill or note, i)rovided all the necessary steps have been taken, as the common law in other contracts gives him against the immediate party from whom he received it. According to the law merchant, every prior party makes the same contract with every sub- sequent one, that he does with the party who immediately succeeds him. § 293. The condition upon which the law merchant con- fers these extraordinary privileges upon this species of con- tract is that it shall contain words that render it negotiable. These words are those of " order^'' and " learerP A bill, note, or check, in order to be negotiable, must be made payable to the payee named therein " or order," or to the same payee, " or bearer." In the case first mentioned it can be transferred to another only by the indorsement of the payee, while in the second it may be so transferred merely by delivery. § 294. The essential elements embraced in an indorsement are time, place, party, mode, and eflFect. In regard to time, indorsements of bills are usually made; after acceptance, and before payment. It is not until after acceptance, when the primary liability of the principal debtor is secured, that its marketable qualities become complete, and it is fitted to perform its perfect functions as a commercial agent. It is possible, however, for the indorsement to be made previous to the completion of the bill. This is done by placing the signature on a blank piece of paper, which operates as a letter of credit, and authorizes the person to whom it is confided to insert whatever sum he may choose, and to make it payable at whatever time and place he may think proper. The same general principle also applies to promis- sory notes. Jordan v. Ifeilson, 2 Wash. 164. § 295. A bill or note contiimes legally transferable by indorsement after it falls due and until its payment. But as there may be a material diff'erence relating to the efi'ect PLACE OF THE INDOKSEilENT. 131 of the indorsement, whetlier it ^vas made before or after it fell due, it is important to notice that in the absence of all proof on either side, the indorsement is presumed to be made before it falls due ; and hence if the defendant, in a suit brought by the indorsee, sets up payment to the original holder, he must show the indorsement to be made subse- quent to the payment. PinJcerton v. Bailey, 8 Wend. 600. § 296-. As the law of the Lex loci must control in the interpretation of the contract, it often becomes necessary to determine the^;Z(2C6 of the indorsement. The rule is under- stood to be that the contract embodied in the indorsement is governed by the laws of the country where it is made. The next question that occurs is, AVhere is the contract con- sidered to be made ? Is it where the name is actually written, or where the note, after being indorsed, is first negotiated ? If the indorser, at the time he indorses it, transfers it for value to th^ indorsee, that is the place of the indorsement. But if it be an accommodation indorsement, it is then considered as being made at the place where the paper is first negotiated. Tlius where such a note, although dated in Michigan, was first negotiated in the city of New York, it was held that the contract of indorsement was made in Kew York, and therefore must be governed by the laws of that State. Cooh v. Litchfield, 5 Seld. 279. § 297. An indorser may pay a bill as such, and after- wards negotiate it, for his indorsement can give no right except against himself and those whom he himself might sue. If a bill be paid at maturity, the parties to it will be discharged, although, by accident, their names should be left on the bill, and it should subsequently be re-issued, and thus get again into circulation. But if paid before it arrives at maturity, and the person so paying it allows liis name to remain on it, he runs the risk of being subsequently called upon by a hona fide holder to pay it. " Nothing," says Baron Parke, " will discharge the acceptor or the drawer, except payment accordiiig to the law merchant, that is, pay- 132 PAYEE MUST BE FIE8T INDORSEE. ment of the bill at maturity. If a party pays it before, lio purchases it, and is in the same situation as if lie bad dis- charged it." Morley v. Culverwell, 7 M. d) W. 174. § 208. Where a bill or note is payable " to order," the party Avho must indorse and put it into circulation is the payee, or person legally interested in the instrument, or his agent. It is only through this avenue that title can be transferred to the first indorsee, and hence if that fails to be properly done, neither he, nor any subsequent holder, has any remedy against the prior parties to the bill. It is en- tirely competent for the properly authorized agent of the payee so to indorse it as to transfer the title, but in such case he should expressly indorse it as agent, as A, agent for B, or in some way write the name of his principal ; otherwise the indorsement would be Inoperative. Thus, where negotiable paper is indorsed to or by a bank, its cashier is the proper officer or agent to effect the transfer by indorsement ; and where a note was indorsed " A B cash," with the intention of binding the corporation, it was held sufficient for that purpose. Banlc of Genesee v. Patchin Bank, 3 Kern. 309. And where it is known that the holder of a bill is entitled to it only as agent, no one having notice of such fact should take the same by indorsement from him without first ascertaining the extent of his authority. This is more especially the case, where by the very terms of the indorsement, as, " pay to A B, for my use," or " the within must be credited to A B," it is rendered sufficiently clear that the indorsee or holder is a mere agent. § 299. In case of the death of the payee, the right of transfer becomes vested in his personal representatives, — executors or administrators. These, however, should be careful to make the indorsement in their representative character, as it is not their title, but that of their testator or intestate, that they are to transfer. "WTiere a note or bill is made payable to two executors, as such, it requires the in- DIFTEKEITT IIGDES OF INDOESEMENT. 133 dorsement of botli to transfer title to the indorsee. Smith V. Whiting, 9 Mass. 334. § 300. "Where a note or bill is made j)ayable to a partner- ship, it is competent for one partner to indorse and transfer it in the name of the firm, and thus to give a good title, even although it be done in fraud of the partnership. And if the indorsement be not in the name of the firm by one of the partners, it will nevertheless transfer title, and be binding on the partnership, if it be proved that there has been a habit of so indorsing their bills. Faith v. Richmond, 11 Adol. <& Ellis, 339. § 301. "Where the payees consist of several persons who are not partners, the right of transfer vests in all collectively, and not in any one individually, and hence all must in- dorse it. § 302. In case of the existence of a trusteeship, or where a bill or note is made payable to " A for the use of B," the right of transfer exists only in A, as he oidy has the legal title. And if a bill or note be given to a married woman, or if the unmarried holder of a bill or note marry, the right to transfer it during the coverture, or continuance of their joint lives, devolves by the common law upon the husband, the mamage relation merging her legal existence in his. § 303. As to the mode of indorsing, it is considered sufficient if the indorsement be written in pencil. There are two modes of indorsing, one of which is termed " in- dorsement in blank," and the other " indorsement in full." The first consists merely in writing the signature of the party on the back of the bill or note. This is the signature ojf the person to whose order the bill or note is made paya- ble, and if the same be made payable to A, to the order of B, it is the latter who should indorse it for transfer. § 304. It has been made a cpiestiou what is a sufficient indorsement in blank. In Fenn v. Ilairiso/i, 3 T. li. 757, the merely putting a nuniber or any private mark on a bill was held not to be equivalent to an indorsement. In the 134 EFFECT OF THE TWO MODES OF INDOESEMENT. Merchants Banh v. Spicer^ 6 Wend. 443, the mere initials of u person's name indorsed on a elieck were lield sufficient. The extrcmest case on this point, and one that has been pronounced a very extraordinary decision, is that of Brown V. The Butchers (& Drovers Ban!:, 6 Jlill, 443, in which it was held that a party placing the figures " 1, 2, 8," in lead- pencil, on the back of a bill by way of indorsement, was sufficient, although the party possessed the ability to write. § 305. Tlic indorsement " in full," is a restrictive in- dorsement, and occurs where the paper is indorsed as made payable to the indorsee or his order, and then signed by the indorser, as " Pay James Flynn or order. Peter Dunis^." The effect of the two thus differs. After the first in- dorsement in blank by the payee, or indorsee, if made pay- able to his order, it is transferable afterwards acl infinitum by mere delivery ; but so long as the bill or note continues to be indorsed in full, it can only be transfen-ed through the indorsement of the indorsee. § 306. As a blank indorsement is held to transfer the note or bill to all the subsequent indorsees in succession, discharged of all obligations which do not appear on its face, it follows that each indorsee or holder, being the abso- lute owner of the paper, may, if he chooses, protect himself against any thing but forgery, in case of loss, by wi'iting an indorsement in full over the name of the last indorser ; thus rendering his own indorsement necessary to transfer the title to another. A bona fide holder may thus convert a blank indorsement into one in full, either before or after the com- mencement of a suit. Evans v. Gee, 11 Peters, S. C. Bep. 80. He may, if he choose, entirely stop the currency of the bill by giving a bare authority to receive the money ; such as " pay to A for my use," or to " to A B or order, for my use," or to "A B only," or for " my account." Sigournij v. Lloycl, 8 B. cJ& C. 622. But although such THE TWO OFFICES OF TUE IXDOKSEMENT. 135 holder may restrict the negotiability of the paper, or even suspend it entirely by writing over the blank indorsement an assignment to himself, yet he has no authority to wi-ite over it a guaranty or any special contract ; nothing but what the strict terms conceded by the law merchant to ne- gotiable paper will permit. But although the payee has it in his power by a special indorsement, to restrain the nego- tiable quality of the bill or note, yet no subsequent indorsee can, by such an indorsement, do more than to protect himself and the parties subsequent to him, as the holder may, if he chooses, strike out all the indorsements, except that of the payee, and then recover against him and all the prior parties. Smith v. Clarlc, Pedke^ 225. The payee may also annex a condition to his transfer, and if it be done be- fore acceptance, and the drawee afterwards accept it, the acceptance will be subject to the condition. A bill before acceptance may be indorsed for only a part of the sum for which it was drawn, and then if afterwards accepted, it is done so subject to such indorsement ; but no indorsement. after acceptance^ can be made for less than the full sum appearing due, because that would subject the acceptor to two actions, when by his acceptance he only rendered him- self liable to one. Douglass v. Wilkeson, 6 Wend. G37. § 307. In regard to the effect of an indorsement, it per- forms two distinct and independent offices, the one to trans- fer the title to the indorsee, and the other to incur a condi- tional liability on the part of the indorser. It is in theoiy precisely analogous to a new bill drawn by the indorser upon the acceptor or maker. By simply indorsing and delivering to the indorsee, a contract is made with the latter, and every subsequent holder : 1. That the instrument itself and all the preceding sig- natures are genuine. 2. Tliat his title to the bill or note he indorses is good, 3. That he is legally competent to bind himself by the bill or note as indorser. 130 INDOKSEJIENT BEFORE A^D AFPEK DUE. 4. That the acceptor or maker is competent to bind liim. self to the payment, and will, upon due presentment, pay it at maturity. 5. That if, when duly presented, it is not paid by the maker or acceptor, he will, upon due and reasonable notice given him of the dishonor, pay the same to the indorsee or other holder. § 308. No consideration need be shown to hold the in- dorser, nor can the want of consideration be set up as a defence where the holder has taken it lona fide^ before due, and for value. And even where a note is indorsed for the accommodation of the maker, and therefore without any consideration, such indorser is liable to the indorsee, al- though all the facts were known to the latter when he took the note. Brown v. Mott^ 7 John. 361. § 809. It makes a material difference, as to the effect of an indorsement, whether it was done before or after the bill or note was due. K before, the party receiving it takes it upon the credit of the paper alone, and is not bound to in- quire into any equities or defences that may be interposed by prior parties. He is unaffected by them, and hence if the bill or note were fraudulently obtained or even stolen, it is no defence as against such bona fide holder for value received before it fell due. Tlie necessities of commerce have given to such a holder rights thus perfect and complete. But if he receives it after due, the whole thing is then changed. It is then termed disgraced ; there is presump- tively some reason why it was not paid at maturity ; the fact of its being overdue is, of itself, accounted such a sus- picious circumstance, as makes it incumbent on the party receiving it to satisfy himself that it is a good one, and if he omit to do so, he takes it only on the credit of his in- dorser, and occupies precisely the position of the party hold- ing it at the time it fell due. He receives it, therefore, sub- ject to all objections relating to want of consideration, ille- gality, and all other possible objections and equities affecting - DEFENCES TO NEGOTIABLE PAPEK. 137 the instrument itself, and to which it was liable in the hands of the partjr from whom he takes it. But where it is nego- tiated in season, it may afterwards pass from one indorsee to another after it is due, and the holder will be, equally with the first indorsee, protected in his title. It follows as a consequence from this, that if a bill be presented for acceptance before it becomes due, which is refused, of which the holder neglects to give notice to the drawer and prior indorsers by which they are discharged ; yet if before it falls due he transfers it to an innocent holder for value, who is ignorant of the laches, he can recover against such di*awer and indorsers. § 310. It is, however, understood that when a party receives a bill or note overdue, he is clothed with all the advantages of the party from whom he receives it ; and hence where a party sues the acceptor, it was held that if the person who indorsed the bill to him could himself have maintained an action upon it, the defendant could not set up in defence that it was given for a debt contracted in smuggling, although it was indorsed to the plaintiff after it had become due. Chalmers v. Lanion, 1 Cam,]). 383. § 311. As regards the equities and defences with which a party receiving it after due is chargeable with notice, it is limited to such as arise out of the bill or note transaction itself ; and hence, where in a note negotiated after due, the maker sets up a claim of set-off due to him from the indorser while he held it, and claiming, that although arising out of a matter collateral to the note, it was yet admissible as a defence against the holder, it was held inadmissible. Bur- roitgh V. Moss, 10 B. & C. 558. This is the rule in force in Pennsylvania. Hughes v. Laye, 2 Ban\ 103. Also in Connecticut and New Hampshire. But in New York, by a provision in the Revised Statutes, and in ]\[assachusetts, by subsequent adjudication, the right of set-off has been greatly enlarged. § 312. The importance of the fact as to whether a note 138 DEFENCES TO NEGOTIABLE TAl^ER. is ovcrdno or not fit tlic time of its transfer has led to the inquiry "when a note payable 07i demmid is to hc^eonsidered as due ; and the rule is, that the transfer of such note is not to have attached to it the consequences of a note overdue without some proof that payment has been demanded and refused, or that a considerable time bas elapsed since its execution and delivery. The rule laid down by C. J. Shaw in Sylvester v. Crapo^ 15 Pick. 92-3, is that a note payable on demand is payable within a reasonable time ; that after the lapse of such reasonable time it is to be deemed over- due and dishonored, and that what is a reasonable time is a question of law on the facts proven. The burden of j)roof in sucb cases lies on the defendant. § 313. It must not, however, be assumed as true that a party can, under all circumstances, receive a note or bill before it falls due, and yet remain unaffected by any de- fences that may be set up against it. The rule is, that if the bill or note is taken under such circumstances as would naturally excite suspicion, and induce any reasonable man to inquire fully into sucb equities or legal defences, it admits the defence to be set up, as where an accommodation note was made to be discounted at a bank, and tbe maker having failed to get it so discounted, not being a lottery dealer, took it with the bank marks upon it to a lottery dealer, and sold it for lottery tickets, it was held in favor of the accom- modation indorser that the occupation of the maker and the bank marks upon the note were sufficient to put him on in- quiry, and hence that he took it subject to the defence of misapplication. Brown v. Taber, 5 Wencl. 566. § 314. The two functions performed by the indorsement, the one of transfer and the other of incurring liability, may, so far as the first is concerned, be separated from the other, and exist without it. Thus an infant may indorse a bill or note so as to transfer title, but incurs thereby no liability, while the rigbt of the bolder remains perfect against all the other parties. So, also, there may be a qualified indorse- mDOESEMENT HOW LONG REVOCABLE. 139 ment, wluch transfers the title without creating any liability. This is done by inserting in the indorsement itself " at his own risk," or " without recourse." Tlie effect of such an indorsement is to transfer the title so completely as to give the transferee a perfect right as against all the other parties to the paper, while the indorser remains exempt from liabil- ity by the terms of his special contract. § 315. A question has arisen as to the effect of an indorse- ment after a note becomes due ; whether such indorsement follows the nature of the original contract, or becomes, as between indorser and indorsee, a new draft on the maker for the money in his hands, and is thus, in all respects, a new contract, which may be made negotiable or otherwise, as the parties may choose. Thus Messrs. J. W. & K, Leavitt made their note for $1570.52 payable to the order of " T. Putnam & Co.," the defendants. A few days after its matu- rity the defendants thus indorsed it : " Pay the within to A. Thacher, value received, May 21, 181:8. T. Putnam & Co." Thacher indorsed without recourse to the plaintiff. It was held that the indorsement of a negotiable note is negotiable without words of negotiability, so that a subsequent holder may sue in his own name, either upon the note or indorse- ment. That such indorsement, although made after dishonor, follows the nature of the original contract, and is negotiable unless it contain express words of restriction. Leavitt v. Putnam, 3 Comst. 494. § 316. A bill or note payable " to bearer," is transferable by mere delivery without indorsement ; yet if it be in- dorsed, the indorser is liable as upon a new bill to bearer. Brush V. Reeves, 3 John. 439. An indorsement continues revocable until delivery to the indorsee ; hence the delivery is as essential as the indorsement to pass the title, and in a case where a person deceased had written his name upon a bill payable to order, and after his death the executor de- livered the bill to the plaintiff, held that no title was ac- quired ; so that indorsement of a bill payable to order, 140 EFFECT OF TAKLN^O BILL OE NOTE ON PRIOR DEBT. without delivery, or delivery •without indorsement, is insuffi- cient to pass the legal title. Clark v. S'igourny, 17 Conn. 511. § 317. A question of great interest and importance has arisen and been differently decided, regarding the effect of the note or bill of a third person indorsed and delivered over by a debtor to his creditor on account of his debt — whether, and under what circumstances, such a transfer will ex- tinguish the debt, and if not, what effect is attributable to it. In the United States Courts, and in those of several of the States, the doctrine is well settled, that such a note does not extinguish the precedent debt, unless it be paid at maturity, or unless it be so expressly agreed at the time it is received. But in some of the States, as Massachusetts, Maine, YermDnt, such transfer h prima facie to be received as payment. In cases where it does not operate as payment, it suspends the remedy upon the debt until the bill or note falls due ; and then the holder cannot proceed against the original debtor for the recovery of his debt without showing that he has used due diligence to obtain payment from the party to the bill or note, and if the defendant was also a party he must show that he had due notice of the dishonor. And if he fails to take the requisite steps (hereafter men- tioned) to fix the liability of the parties on the paper, so that his debtor loses his remedies against them, he will also lose all remedy against the debtor on his debt. In regard to its operating as pavment, it is now held to be matter of presumption^ and in the State of New York where the bill or note is received on a precedent debt, the presumption is that it was not taken in payment, and the onus of estab- hshing that it was agreed to be so taken is uj)on the debtor. But where it is received contemporaneously with the con- tracting of the debt, the presumption is that it was agreed to be taken in payment, and the burden of proving the contrary rests on the creditor. Noel v. Murray^ 3 Kern. 167. § 318. Another question, depending very much upon the- ACT OF INDOESING SQIILAK TO DEAWDfG BILL. 141 manner in which tlie last is settled, relates to the effect of such a transfer in creating the creditor such a Ijona fide holder for value as, if he took the same before due, "^vould enable him to resist successfully any equities or defences that may be interposed in defence. If the effect of the transfer do not operate as a payment or extinguishment of the debt, then there is no sufficient consideration, and he cannot occupy the position of such a honafide holder, but if it be received in satisfaction and discharge of the debt, there is then such a valuable consideration as will constitute him such a holder. Thus when a note for the makers ac- commodation is transferred by him before maturity to a judgment creditor as security for the judgment in consid- eration of the discontinuance of proceedings supplementary to execution, it was held a valuable consideration. Boyd V. Cunrmings^ 17 2^. Torlc Bc^p. 101. The doctrine that requires the note to be received in satisfaction of the debt in order to constitute a hojia fide holder, and to protect him against prior equities, is not entire- ly acquiesced in, as there is authority to the effect that a mere transfer of the note as collateral secm'ity upon a pre-existing debt, and without any other consideration, will have the like effect. Swift v. Tyson^ 16 Peters, 1. But this position is completely overturned in the State of IsTew York by two cases decided in its highest com-t. Coddington v. Bay, 20 John. 637. Stallar \^2fcDonald, 6 EiU, 93. § 319. The ^ct of indorsing is so very similar to that of drawing a bill that it draws after it all its legitimate con- sequences, and it has been held that an indorser stands in all respects in the same situation as a drawer, and that all the consequences follow which attached to the situation of the latter. Ballingalls v. Gloster, 3 Bast. 4S3. The contract of the one is so similar to that of the other, that the indorser is said to be the drawer of a new bill, and in a case in which the indorser pleaded that he did not draio the hill, it was held good in substance, the indorsee being, in contem* 14:2 DEI.lVKUif WITHOUT IJjUKMiSING. plation of law regarded as a new drawer. Allen r. Walker, 2 M. (& W. 317. § 320. The indorsement itself is always regarded as evi- dence of an undertaking to pay money upon a consideration received by the indorser. The Caywja County Bank v. ^Yarden, 2 8eld. 19. The effect of the indorsement is always to create a valid contract between the indorser and his immediate indorsee, and hence in an action by the hona fide assignee of a promissory note against the assignor, it is held no defence that the note was originally given by the maker to the defendant for an illegal consideration, the as- signment of the note being itself a contract which prima facie imports a good consideration. Johnson v. Dickson, 1 Blacks. 256. § 321. The effect of the mere delivery of a bill or note without indorsement is not to exempt the party from all obligations or responsibilities, unless by special agreement to the contrary. The party so delivering incurs the following : 1. He warrants by implication that he is a lawful holder and has a good title to the instrument, and a right to transfer it by delivery. 2. He warrants the genuineness of the instrument, that it is neither forged nor fictitious. 3. He warrants, in like manner, that he has no know- ledge of any facts, which prove the instrument, if orig- inally valid, to be worthless, either by the failure of the maker, or by its being abeady paid, or otherwise to have become void. QUESTIONS. "What two difficulties prevent tlie using of contracts as instruments of commerce ? What the difference in this respect between contracts and negotiable paper ? What the diflference in regard to equities or defences that may be set up ? What the difference in relation to par- ties to the contract? What is the condition upon which the law con- fers extraordinary privileges upon negotiable paper ? What are words of negotiability? What the difference between being payable "to order " and " to bearer " 2 What are the essential elements embraced in QUESTIONS RELATING TO INDOKSEMENT. 143 the indorsement? When are indorsements usually made? "When do the marketable qualities of negotiable paper become complete ? At what early period can an indorsement be made ? How is it then made ? How does it then operate and what does it authorize ? How long does negotiable paper continue transferable by indorsement ? When is the indorsement presumed to be made ? When is the contract of indorse- ment considered to be made ? Can an indorsee, after paying, again in- dorse and negotiate ? What is the difference between payment before and at maturity ? Who is the necessary party to indorse a bUl or note payable to order? Through what avenue is title transferred to the in- dorsee ? How should an agent indorse ? In case of death of payee who should indorse ? How should they indorse ? Where paper is made pay- able to two executors as such, how should it be indorsed ? How when payable to a partnership ? When good, if in the name of one of the partners ? How to be made if payable to several persons not partners ? How in case of trusteeship ? How if payable to A for the use of B ? How if given to a married woman ? How may a signature be written to be good ? What two modes are there of indorsing, and what called ? What does the first consist in ? What is a sufficient indorsement in blank ? What is an indorsement in full ? What is the difference be- tween the two indorsements ? What are the rights of the holder, and how may he protect himself? What is the limitation as to what he may write over the name of the indorser ? Who alone can restrain the negotiable quality of the bill or note ? What may subsequent indorsee do ? What is the right of the holder ? May a payee annex conditions and with what effect ? May a bill be indorsed for a part of the sum for which it was drawn ? Any difference in regard to that whether done before or after acceptance, and if any what ? What two offices are per- formed by indorsing ? What is it analogous to in theory ? What does the indorser contract to do by indorsing and delivery to indorsee ? And with whom is his contract made ? Is any consideration necessary to hold indorser ? Where cannot want of consideration be set up ? Any difference in effect of indorsement whether done before or after bill or note fell due ? IIow if before ? How if after ? Suppose it first negoti- ated in season, how then ? What follows by way of illustration ? With what advantages is a party clothed who receives bill or note after due ? What the rule of limitation relating to equities and defences as to party receiving it after due ? When is a bill or note payable on demand considered as due ? May negotiable paper be received before due, and yet subject holder to equities and defences ? Under what circumstances may it be so received ? What instance in illustration ? Can a bill or note be indorsed to transfer title without incurring liability ? How in 141 BILL BEFORE ACCErTAUCE. case of infam ? 1 low by a qualified indorsement ? What the effect of in- lorscincnt after note becomes due ? How is indorsement of negotiable note held ? How is j)ai)er payable to bearer transferable ? How if it be indorsed ? How long does an indorsement continue revocable ? "What is essential to pass title ? What instance in illustration ? What effect has paper of a third person transferred on account of debt ? When does it extinguish the debt ? What effect when it docs not operate as payment ? What then must holder do before he can proceed against debtor to recover his debt ? What results if he fail to take steps to fix liability of parties on the paper ? What is now the presumption where the debt is antecedent ? What, where it is contemporaneous ? In case of such transfer on account of debt when is the creditor regarded as a lona fide holder for value? When not so regarded? What conse- quences follow indorsing analogous to drawing bill ? What is indorser said to be ? How is indorsement always regarded ? What is the effect of the indorsement ? How regarded as between, the immediate parties \ What are the obligations or responsibilities incurred by simple delivery unindorsed ? PART IV. DUTIES OF THE HOLDEE IN PEESENTIXG FOE ACCEPTANCE, AND THE ACCEPTANCE. § 322. This part is confined in its subject-matter to bills of exchange. Even checks, as such, are not presentable for acceptance as distinct from payment, although the practice, which is adopted in some banks, of certifying to the good- ness of checks is, in efiiect, analogous to an acceptance. Tlie holder, who may be either the payee, or indorsee, or some party who holds it simply by delivery, is desirous of know- ing what step he is next required to take. Tlie instrument he holds has as yet on it only contingent liabilities. The drawer has drawn it presumptively upon funds of his in the hands of the drawee, to whom he has directed it. By drawing and delivering it, he is understood to contract with the payee, and every subsequent holder, that the drawee will upon presentment and demand, accept and pay the bill according to its tenor, and that if he fail to do so, and the holder gives him the notice to that effect, required by the WHEN BILL MUST BE PRESENTED FOR ACCEPTAIfCE. 145 law-merchant, he will then pay the bill himself. Each in- dorser enters into substantially the same contract. It is all wholly contingent, and the obtaining an absolute liability by procuring the acceptance of the drawee, or, in case of his refusal, the conversion of the contingent liabilities of drawer and indorsers into absolute liabilities, is to be the work of the holder. Before that is done, it may be, and is, a commercial agent, and by passing from hand to hand may purchase half the goods in a commercial metropolis ; yet it is all upon the faith and confidence that the drawee, when applied to, will accept and pay ; or if not, that the drawer and indorsers, or some one of them, will take it up upon re- ceiving notice. § 323. The first inquiry he would be likely to make, would be to discriminate, and to learn in what cases an acceptance inust be applied for, and either obtained or refused, and in what it may or may not, at his election. Where he is the holder of bills payable so many days or months " after sight " or " after demand," there the only mode of determining the time of payment, is to present for acceptance. But those are the only cases in which such presentment is necessary. In bills payable so many days or months after date, or at such a period of time in advance, it is not necessary to present for acceptance. The only thing necessary in such case is to wait the arrival of the time specified, and then present and demand payment. But in all such cases, the holder may, at any time, present and de- mand acceptance ; and as the market value of the bill is increased by having on it the absolute, primary liability of the acceptor, in most cases he will take the steps necessary to procure that liability. Should the holder stand in the position of an agent, he should lose no time in presenting for acceptance ; because if dming his delay the afiairs of the drawer should become deranged, he might be an^er- able in damages to his prmcipal. § 324. A question here presents itself of great practical 10 140 ELEMENTS OF PRESENTATION FOR ACCEPTANCE importance ; and that is, where a bill is payable so manj days or months after sight or after demand, how long is he at liberty to keep it before presenting it for acceptance — at what point of time, should he fail to procnrc the acceptance, would he lose his remedy against the drawer and prior in- dorsers. Some difference, as to time, prevails here with different kinds of bills. Foreign bills of exchange may be kept longer in circulation than inland. But they should be kept in circulation, as they cannot be locked up for any considerable period of time without hazard. MillisJi v. Rawdon^ 2 Moore & 8. 570. As to inlancl bills, a shorter period is allowed ; but as to neither can any absolute rule be laid do-svn. The only rule is that the bill must be presented for acceptance within a reasonable time ; but what that reasonable time is, must depend much upon the cir- cumstances of each particular case. A different view is taken of this question, or rather of the manner of solving it, in England and in the State of New York. In the former, it is regarded as a question of fact, to be determined by the jury, under the direction of the coui't. In the latter, as one of law, to be decided by the court. Aymar v. Beers j 7 Cow. 705. With us, reasonable7iess of ti7ne, where the facts are not in dispute, is always and properly regarded as a question of law. § 325. The elements of person^ time, and place, enter into the presentation for acceptance. The person presenting should be the rightful holder. But as possession is p>rima> facie evidence of title, and, presumj)tively, has been rightly attained, the drawee, though he accept a bill presented by a person having no title to it, is not precluded from subse- quently disputing the genuineness of the successive indorse- ments. Wliere a firm are drawees, a presentation to one member is sufficient ; but where two or more, not partners, are drawees, it must be presented t6 each, as one has no right to bind the others by an a(?ceptance. As to time, when the presentation is at a bank, it should be within the dkawee's duty on tkesentation. 147 usual banking hours ; but in other cases, it may be done during the usual hours of business, which includes the day and evening. In reference to jplace^ it should be presented at the residence or domicil of the drawee, without any refer- ence to the place where it is di-awn payable ; but if a place is specified on its face, it should be presented at such place. § 32G. On presentment for acceptance to the drawee, he, before accepting, should satisfy himself of two things, 1. Tliat the handwriting of the drawer is not a forgery, as his acceptance precludes him from denying the genuineness of the drawer's signature. 2. That he has funds of the drawer in his hands to an amount equal to the sum contained in the bill ; and he is allowed time, if desired, to investigate the state of the accounts with the view of determining this question. K he have such funds, and they are immediately payable, he is under no legal obligation to accept the bill. No action lies against him for a refusal, unless he has re- ceived the funds for the purpose, or under a promise thus to accept. If an agent be to accept, he should exhibit to the holder his authority, and it is for the latter to determine its sufficiency. One partner may accept in the name of the finn, or even an acceptance in his own name is sufficient, provided the bill is drawn on the firm. If drawn on two or more, not partners, it must be accepted by each. § 327. A great questicm has been much discussed, both in England and in this country, as to whether ^iwomisG to accept is to be considered as equivalent to an acce'ptaMce. To the production of such a result here the foUoAving cir- cumstances must concur : — 1, The paper containing the promise must describe the bill to be drawn in terms not to be mistaken, so as to iden- tify and distinguish it from all others. 2. The bill should be drawn within a reasonable time afterwards, and be received by the person taking it upon the faith of the promised acceptance. Coolidge v. Payson^ 2 WJieat. QQ. The rule is applicable only to bills payable 148 FORMS AND VAKIETIES OF ACCEPTAJSTCE. on demand, or at a fixed time after date, and in no case is a verbal promise sufficient. 8 328. Tlie law-merchant prescribes no particular form in which the acceptance shall be made. It holds expres- sions indicating an intention to pay the bill when due, suffi- cient. Every act giving credit to the bill amounts to an acceptance. It may be done by parol, or in writing. It "may be revoked at any time before it is communicated to the holder, or the accepted bill delivered to him. The ac- ceptance may be inferred from the act of the drawee in retaining the bill long in his possession. In 'Egw Tork and some other States, the mode is regulated by statute, 3 H. S. 68, 5 Ed. It must be in writing and signed by himself or liis agent. But it shall be deemed accepted if the drawee destroy the bill, or refuse to return it. § 329. The right of the holder is to have an absolute acceptance, which is an engagement to pay the bill accord- ing to its tenor. If this is declined, and any other is oficrcd, he may refuse to receive it, and protest the bill for non-acceptance. But the drawee being at liberty to accept or not, is also free to offer any kind of acceptance. He may off'er to accept for a part only of the bill, or the whole, sub- ject to some condition ; the most usual one, the receipt of funds from the drawer. He may, however, propose any variation from the tenor of the bill, as to sum, time., place, or mode of payment. Upon receiving such an ofier, the safe course for the holder to pursue, is to give immediate notice to the drawer and indorsers of the kind of acceptance ofi'ered, and await their direction whether he shall receive it or not. He has no right, without theii* consent, to vary their contract, which is that the acceptance shall be accord- ing to its tenor ; and yet aU parties may be interested in having the acceptance ofi'ered, received. § 330. "Whatever qualification is introduced into the acceptance, if received, it afiects every party to the bill alike, so that the holder's remedy against di-awer and in- EFFECT OF ACCEPTANCE. 14y dorsers is subjected to the contract embodied in the accept- ance. In case of a conditional acceptance, the holder, in order to fecover against the acceptor, or against the drawer or in- dorsers, must show perfonnance of the condition. If the acceptance be in writing, the condition, whatever it may be, must also be in writing, or it will avail nothing to the ac- ceptor. If, however, the acceptance be verbal, as the law- merchant permits, wherever it prevails, it is competent to introduce any verbal condition, as that he will pay the bill when in funds. Mendizilal v. Machado^ 3 Moore d; Scottj 841. § 331. A question hjis been raised in the States of New York and Massachusetts, as to the effect of an anticipated acceptance on a forwarder's receipt pledged with the party discounting the bill on the strength of such receipt. An owner of flour in Rochester draws on his general consignee in Albany, and taking the draft and receipt pinned to it (the latter being pledged for the former) to a bank in Roch- ester, obtains the money by discount. The Rochester Bank transmits both to their collecting agent in Albany, who presents them to the drawee, to whom the drawer was largely indebted for previous advances. The drawee retains the receipt, disposes of the flour, applies the proceeds on his previous advances, and refuses to accept the bill. The point was to whom the flour belonged, and it was held to belong to the Rochester Bank. The Baiik of Rochester v. Jones^ 4 Comst. 497, overruling decision of the Supreme Court in 4 Denio 489 ; see also Allen v. Williams, 12 Piclc. 297. § 332. The drawee, by accepting, transforms himself into the principal debtor, and precludes himself from setting up in defence, as against an innocent hona fide holder who had received the same in the ordinary course of business, and before due for value, either that he was an accommoda- tion acceptor, or one witliout consideration ; or, that the sum inserted therein is different from that inserted by the drawer ; or, that the signature of the drawer was forged. He 150 ACCErXANCE SDPKA PROTEST. is at liberty, liowcver, to deny the signature of the indorser, even tliougli the drawer and indorser be the same person ; and, as against the drawer, may set up that it was an ac- commodation acceptance. As sucli principal debtor, he can only be discharged by the bar of the statute of limitations, or "by payment, or a release ; and the two latter are no de- fence as against an innocent honafide holder who had taken the same for value before it fell due. § 333. After a general acceptance by the drawee, there can be no other acceptor. But in case of a declined accep- tance ,or an offer of conditional acceptance not received, any friend of* the drawer or of any of the indorsers, may offer his acceptance, ybr* the honor of his friend, which is termed an acceptance Supra Protest. It is so termed because it is only done after the Protest, and the object of it is to save the credit of the bill, and to prevent the parties upon it from being immediately sued. It presents an instance where the law-merchant allows what the common law does not, "viz. : that a stranger may voluntarily constitute himself the cre- ditor of another. This species of acceptance may be for the honor of the drawer, or of any one of the indorsers, and if there is no specification for whom it is made, it is consid' ered as made for the drawer. An acceptance for the honor of one of the parties to it may be followed by a similar ac- ceptance for another or others. The holder is not obliged to receive this kind of acceptance, but may, if he chooses, seek his immediate remedy upon the bill. If, however, he receives it, he must treat the bill as accepted, giving the credit it requires. This acceptance is done by wi-iting under the prote^ " accepted Supra Protest " or " accepts S. P. for the honor of ." This is really an accommodation ac- ceptance, and such an acceptor should give immediate notice to the party for whose honor he accepts, that he has so ac- cepted. The effect of it is, that it is a conditional undertak- ing, and amounts to a positive engagement to pay the bill at its maturity, provided the drawee on application to him ACCEPTANCE BUPEA PEOTEST. 151 for that purpose declines. This devolves upon the holder the liecessity, when the bill becomes due, of presenting it again to the di'awee and demanding payment ; of protesting the same for non-jjajment, and of giving due notice to the acceptor Supra Protest. Such an acceptor becomes liable as a principal debtor to all the parties to the bill who are subsequent to the one for whose honor he accepted ; and if he has given the proper notice to such party, he can look for his indemnity to him and to all the prior parties who are liable to him. QUESTION'S. Wbat contract and with whom does the drawer make by drawing and delivering the bill ? Who is to convert contingent into absolute liabilities, and how ? "What is the bill previous to this conversion ? What may it do, and upon what faith and confidence ? In what cases mxist the accejTt- ance be applied for and obtained or refused ? In what cases is this optional with the holder? What is the duty of the holder if he stands in the posi- tion of agent ? What is the rule as to presentment where bills are pay- able so many days or months after sight or demand ? What may create a diflforcnce as to time in such cases ? What is reasonableness of time a question of? What elements enter into the presentation for acceptance ? Who should be the person to present ? Suppose the person presenting has no title ? To whom presented, where a firm are the drawees ? To whom, where two or more drawees are not partners ? At what time should presentation be made ? At what place ? Of what should the drawee satisfy himself before acceptance ? Is he under any legal obligation to accept ? What, suppose an agent bo to accept ? A partner ? Two or more, not partners ? When, and under what circumstances, is a promise to accept equivalent to au acceptance ? To what kind of bills is the rule applicable ? What does the law-merchant prescribe in regard to acceptance ? And what amounts to an acceptance under it ? What are the provisions of the statute ? What is the right of the holder in regard to acceptance ? Suppose a conditional accei)tance is oflfered ? What may the holder do ? What should ho do to be safe ? Whom does a qualified acceptance aflfect ? IIow the remedies against drawer and in- dorsers ? What must holder show in case of conditional acceptance ? If acceptance be in writing, how must condition be ? How if it be ver- bal ? What effect is given to forwarder's receipt, iiledged on a discount of a bill ? What case in illustration ? What does drawee do by accept- ing? What defences preclude himself from setting up and against 162 TKESENTATION FOE I'AYMENT. whom ? Wliat defences are availal>le to him ? IIow can ho be dis- charged ? "Wliea are payment and release no defence ? What is an ac- ceptance for honor^ or Siijira Protest ? "Why so called ? What is tho object of it ? What instance does it present of variation of law-mer- chant from common law? Who may it be for the honor of ? If no speciiication, fur whose honor is it ? Can there be more than one ac- ceptance of this kind ? Is the holder obliged to receive it ? -How, if he receives it ? How is this acceptance done ? What is it and what should the acceptor do ? What is the effect of it ? Wliat does it devolve upon the holder ? To whom does such an acceptor become liable, and to whom may he look for indenmity ? PAKT V. DtTTIBS OF THE HOLDEB IN PEESENTING FOE PAYMENT, AND PATilENT. §. 334. The holder having obtained the acceptance of the drawee, cither absolute or conditional, or, in case of his refusal, that of some other, Supra Protest, has no other duties in reference to it devolving upon him until the bill falls due. Then he comes under obligations to present it for payment ; and the doctrine here again becomes applicable to promis- sory notes and checks equally as to bills, the difference being, that in the case of tho former, the demand must be upon the maker, and in the latter, upon a bank or banker, in the place of the acceptor. The same steps to be taken in each case. § 335. The first question that naturally arises relates to the duty of the holder, in order to preserve his remedy against the maker or acceptor, where the note or bill is made payable at a particular place. Does such stipulation form such a part of the contract, as to require the holder to com- ply with it or lose all remedy against the maker or acceptor ? This is the English doctrine as settled in the House of Lords. Rome V. Yoimg, 2 Bligh, 391. Also in 2 Brod. c6 Bing. 161. But in this country generally, see Wallace v. McConnell, 13 Peters, 136, the rule is now understood to be, that, under such circumstances, a neglect to demand papnent destroys no right to proceed against maker or acceptor ; but if such TIME OF PRESENTATION FOR rATilENT. 153 maker or acceptor had provided funds at such place to pay the note or bill, and it was not presented, he would be ex- onerated from the payment of all interest and cost ; and in case of the loss of such funds by the failure of the bank where they were deposited to await the presentation of the note or draft, then such maker or acceptor would be exone- rated from liability. § 336. As the failure to make the demand of payment does not impair the right as against the principal debtor, it follows that the only necessity that requires it, grows out of relations existing between drawer and indorsers and the holder. Their undertaking to pay is only contingent npon the failure to do so of the maker or acceptor, and hence that failure together with the proper notice of it, must, by the holder, be made clearly to aj)pear. Li determining this question, the elements of time, place, and person are the most important for consideration. § 337. The thne for making the demand is the day on which the note or bill falls due. This depends npon the method of computing time, and the allowance of days of grace. When the paper falls due a certain fixed period of time after date, the day of the date is excluded from the calculation. Where the term ^^months^^ is made use of, it is the calender, and not the lunar, month ; although in the computation of interest, a month means one twelfth part of a year. Days of grace are certain days, three in number, added to the time at which the paper would otherwise fall due. These, by the law-merchant, are added in all cases where the paper falls due at a certain fixed period of time. In all such cases the paper is really payable on the third day after, the day on which it would otherwise fall due being excluded. Thus if made payable on the first of the month, it is not demandablc until the fourth of the month. These days are considered as forming a pai't of the original contract, and a bill or note transferred at any time before the third day of grace is treated as negociated before due. 15J: PLACE OF PEE8ENTATI0N FOR PAYMENT. These days arc not allowable on paper payable on demand, or, where no time of payment is expressed, or, w^here it is payable iiinnediatcly on presentment. The law-merchant allows them where bills are payable at sight. In some States, as in that of New York, legislation has interfered, and taken them away on all bills or drafts payable at sight, and on all checks, bills or drafts drawn upon any bank or banker, although payable at a certain specified time after date or sight. If the third day of grace fall upon Sunday, or a gi'cat national holiday, the law-merchant makes the paper payable the day next preceding. § 338. On the last day of grace, where these are allow- able, and if not, on the day when the note or bill by its terms falls due, the payment must be demanded. A de- mand made the day previous or subsequent, and not on the very day when it is payable, destroys all remedy against di-awer and indorsers. Tlie general rule is to allow the maker or acceptor the whole of the day on which the pa- per is payable to make the payment, and hence a suit brought on that day is premature. As commercial paper is mostly made payable at banks, the course is to consider the day closed at the close of banking hours, and immedi- ately after to hand it over to the notary to protest for non- payment. § 339. The element of j9?a(?e is one of great importance. If no place is designated m the bill or note, the holder must look up the maker or acceptor, and on the day it falls due, demand of him the payment at his residence or place of business. If the maker or acceptor has absconded, that will excuse the demand. K he has removed from the State since the making of the paper, the demand should be made at his former place of residence. If he has removed, but not with- out the State, the holder should use all reasonable diligence to ascertain where his residence is and there make the de- mand. Where the bill is addressed to the drawee at a par- ticular place and accepted generally, the demand should be PRESENTATION OF LOST BILL FOK PAYMENT. 155 made at the place .to which it is directed. Tliis is usually a question of diligence on the part of the holder. Where it is made payable at a particular place, as occurs Avitli most commercial paper, all that is necessary is to have it at that place on the day it falls due, and ready to be given up on payment. No formal demand is necessary. And this, although in this country unnecessary to hold the maker or acceptor, is nevertheless indispensable to hold the drawer and indorsers. "When a note or bill is made payable in a particular city in which the maker or acceptor does not re- side, and specifies no place of payment, it may be treated as dishonored without any inquiries, as they must necessarily be useless. § 340. In case of the loss of a bill or note, the demand is done by presenting a copy or written statement of the substance of the lost instrument, at the same time making proof of its loss, and tendering to the maker or acceptor an ample indemnity against any claim or demand that might ever after be made against him for or by reason of the in- strument. § 341. There is one contingency in which, so far as con- cerns the drawer, there is no necessity of making any pre- sentation or demand, either for acceptance or payment, or givmg to him any notice in case of refusal to accept or pay ; and that is where such drawer not only had no funds in the hands of the drawee to meet the draft, but had also no rea- son to suppose it would be either accepted or paid. But although a neglect here may be practiced by tlie holder ■without losing his remedy on the drawer, yet this does not embrace the indorser. He is not affected by any such con- duct on the part of the drawer as precludes him from taking the benefit of the apparent laches of the holder. If the maker or acceptor are notoriously insolvent, that will not excuse the demand. Even in case of the accei^tance Siq)ra Protest, the demand of payment on the day the bill falls due must be made of the drawee, precisely the same as if 156 PERSON BY AJ^D TO WHOM PRESENTED. he liad become the acceptor, because by that time he may be in funds to pay it, and the acceptor Supra Protest, only undertakes tu pay in case of his refusah § 3J:2, The third element relates to the person by whom and of whom the demand of payment must be made. The person demanding should be the holder or his agent. No one is competent to make this demand who is not also legally competent to protest and give 'notice sufficient to hold drawer and indorsers in case of refusal. No mere stranger is competent to do this. But any one receiving it by a blank indorsement ; or who has a mere verbal authori- ty, if in possession of the paper ; or if it has come into his hands by accident, as by the death of an agent ; is entirely competent for all these purposes. The important feature is the possession of the paper. In case of the death of the holder, it devolves upon his personal, representative ; in case of an assignment, to the assignee ; in case of a trusteeship, to the trustee; and in case of an insane person, to his committee. § 3i3. If maker or apceptor be a firm, demand may be made of one of the members, and in case of the death of one, then of the survivor ; if there are several makers or ac- ceptors, not partners, demand must be made of each ; and in case of death, of the personal representatives. § 344. The presentation and demand of payment being made of maker or acceptor, either one of them, before com- plying, should be satisfied of two things. 1. Tliat his own, as also the signature of the first indors- er, if bill or note be in the hands of a subsequent party, is genuine. 2. That the person demanding is entitled to receive it. Li one respect, it is true both these amount to the same thing ; because if the signatm-e of the first indorser is forged, the only legitimate source of title is destroyed, and the person demanding it cannot be entitled to receive it. The indorser before paying should be further satisfied that there now ACTS OF HOLDER AFFECT INDORSEK. 157 has been no laches on the part of the holder or any other party ; because if drawer and indorsers have been thereby discharged, his unnecessary payment of it will not revive the liability of the prior parties, and thus his remedy over will be destroyed. In regard to the person to whom the pay- ment is to be made, that is settled by the right to demand. In cases free from suspicion, the mere production of the note or bill indorsed in blank by the proper person, if payable to order, is sufficient to warrant the payment. But that pro- duction in all cases of negotiable paper should be required before payment, except where there is proof of loss or destruction. § 345. Tlie payment must be made in money, and an authority to another to receive payment generally, will not authorize the taking of goods in pajonent. Even a check is regarded rather as a means of procuring the money than as absolute payment. But if produced by the debtor, having been drawr». by him and indorsed by the creditor, it is held to be evidence of payment. Efjg v. Barnet^ 3 Esp. 196. § 3-lG. An important inquiry may arise in this connec- tion regarding the kind of acts on the part of the holder that will affect his remedies against the indorser. This in- volves the inquiry how far a holder may go in making new arrangements with the principal debtor without prejudicing his rights against the indorser. Tlie maker or acceptor often desires, by giving some fresh security, or by some other means, to get some indulgence as to the time of payment, and the question important for the holder to settle is, how far he can yield to the wishes of the principal debtor with- out prejudicing or destroying his right against the drawer or indorser. Tlio general principle is that he may do whatever may tend to favor the indorser without impairing any of his rights. Tlius he may receive part payments and any additional security that may be offered. He may stand where he is and take his own time to proceed against the maker or acceptor, and if the indorser is apprehensive 158 WUAT ACTS OF HOLDEK DISCnARGE INDOKSEK. of bis failure, and tliiis of losing by delay, his remedy lies in taking up the paper himself, and then of pro- ceeding to collect it against the principal debtor. Tlie holder may even go further, and agree not to press the acceptor. He may even promise, if there is no considera- tion to sustain it, not to take any steps to enforce the collection — and all this without impairing any right against the indorscr. But he cannot make a binding contract with such maker or acceptor, by which, for an adequate consid- eration, he preludes himself, even for a day, from proceed- ing against him, without destroying all remedy he may otherwise have against drawer and indorsers. Any valid agreement by which such drawer and indorsers are effectual- ly shut out from taking up the bill or note at any time, and of proceeding immediately against the acceptor or maker, discharges them at once from all liability. And this agi-ee- ment may be made at any time either before the maturity of the paper, or after its dishonor. But all the elements of a contract must be fully established, as the mere change or addition of securities, or the acceptmg a collateral securi- ty from the acceptor or maker, without the agreement as its consideration, will have no such effect. And the entering into a valid agreement with a subsequent indorser to give him additional time for payment, will not discharge a prior indorser, or prior party to the paper, because such party can never look to the subsequent one for payment ; and hence any indulgence given to the latter, even if he be totally released, cannot in the slightest degree affect the rights of the former. So a holder may enter into any com- position with the drawer of a bill, provided he gives up no securities, without releasing the acceptor. There is one mode by which the holder can safely contract to give time to the maker or acceptor, and that is by an express reserva- tion in such contract of all the rights of all the other parties to the note or bill. § 3iT. "When a party to a bill or note pays it up, he WHEN PAYMENTS ]HAT)E CAN BE EECOVEEED BACK. 159 should be careful to do one of two things, viz.: either have the instrument delivered up to hiui to he cancelled, or have his payment or satisfaction indorsed u^jon it. Otherwise he runs the risk of being compelled to pay it to some one who was a holder before it became due. Woodroffe v. Hayne^ 1 Car. &. P. 600. § SiS. Another question of difficulty has presented it- self in 'determining under what circumstances payments made under a mistake, where there has been a forgery, may be recovered back. As the drawee and acceptor are bound to know the handwriting of the drawer, there has been no difficulty in denying the right of either to recover money paid under any such circumstances of such drawer ; but the question has arisen, and the difficulty presented, as be- tween such drawee or acceptor and an innocent holder who had taken it for value before due, and in the ordinary course of busmess. The cases in England have seemed inclined to be governed by the time at which the discovery of the for- gery and the demand of the repayment were made ; allow- ing a recovery where tliis occurred on the same day as the payment, and denying it when on the day succeeding. Wil- hinsoji V. Johnson., 3 JB. <&. C. 428. Cocks v. Masterman^ 9 B. c6. C. 902. In this country the , current of decisions has been guided by the principle of presumed knowedge of handwi'iting and of opportunities of putting that knowledge into practice ; and hence of allowing such recovery where there was no such presumed knowledge, and denying it where there was. Tlius, where one of the indorsements was a forgery, and the accej)tor paid it to an iimocent holdei', and afterwards discovered the forgery, he was allowed to recover back the money. Canal Bank v. Bank of Alhany, 1 JI'dly 287. But in Coggill v. The American Exchange Bank, 1 Comst. 113, where the payee's name had been forged by the drawer, who had himself obtained and used the money, and the drawee paid it, and afterwards brought a suit to recover back the money, it was held that he could ICO PAYMENTS MADR WITEN. EECOVEEED BACK. not recover. In The Banh of Commerce v. The Union BanU, 3 Comst. 230, there is a rule of limitation laid down in reference to presumed knowledge, and although it is ad- mitted that tlie drawee presumptively knows the hand- writing of the drawer ; and hence if he pays money on a forged draft, pays it in his own wrong ; yet the reason of the rule does not extend to the amount inserted ; and there- fore, where $105 was altered to $1005, and the last sum was paid, the court allowed a recovery back of the difference between the true and altered sum. A still further modifi- cation of this principle of presumed knowledge is found in Goddard v. The Merchants^ Banh, 4 Comst. 147, in which the plaintiff having assumed the place of the drawee, and paid the bill for the honor of the drawers, not having seen it, he was allowed (the drawer's name having been forged) to recover back the money. QUESTIONS. What is duty of holder when note falls due ? "Where note or bill is payable at particular place, what, as between holder and maker or ac- ceptor, is the consequence of failing to present it ? "What as between holder and drawer and indorser ? "What are the elements of presenta- tion and demand of payment? "What does element of time depend upon ? "When is day of date excluded from calculation ? "When term month is used, what is meant ? "What are days of grace, and how many ? "When in such case is the paper payable? "When if made payable on the first of the month ? How are days of grace considered ? "When not allowable ? How when paper is payable at sight ? What has legislation done in New York ? When payable, suppose day of grace fall upon Sun- day or some holiday ? When must payment be demanded ? Suppose made on previous or subsequent day ? When during the day may paper be paid? When is day considered closed when payable at a Bank? Where no place of payment is designated, what must holder do ? What wiU excuse the demand ? How made in case of removal from the State? How in case of removal not from the State ? How where addressed to drawer at a particular place and accepted generally ? What is this a question of? How presented, and demand made, when payable at par- ticular place ? What necessary, when payable in a particular city, where maker or acceptor does not reside? What necessary to be done where DUTIES OF HOLDER. 161 bill or note is lost ? In what contingency is no presentation and de- mand necessary as to drawer ? Has the same thing application to the indorser? "What necessary where there has been acceptance supra pro- test? "Who should the person demanding payment be ? "What should he be competent to do besides making the demand ? "What in relation to making the demand, is the important feature ? "Who makes it, in case of the death of the holder ? Who in case of an assignment ? "Who in case of trusteeship ? "Who in case of an insane person ? If maker or acceptor be a firm, of whom is demand made ? Of whom in case of the death of one ? Of whom in case of several, who are not partners ? Of what must acceptor or maker be satisfied before making payment? What is all that is essential in cases free from suspicion ? What should be required before payment ? Of what must the indorser be satisfied before payment ? And why ? What must the payment be made in ? How is a check regarded ? When evidence of payment, when produced by debtor ? What may the holder do with maker or acceptor, without discharging drawer or indorser ? "What can he not do without so releas- ing ? How and when must and may contract be made having such ef- fect ? How does agreement with subsequent indorser aflfect right against prior one ? For what reason ? How may holder safely contract to give time to maker or acceptor without releasing indorser ? What should party do who pays up bill or note ? What risk does he run if he does not ? Can drawee or acceptor who has paid a forged bOl, by mistake, recover against drawer ? AYhy ? When so paid, what is the current of decisions guided by as to such recovery against innocent holder ? In what respect has this principle received a modification ? In what re- spect a lunitation ? What are the cases in illustration ? PART VI. DTJTIE3 OF THB HOLDER IN CASE OF EEFTJSAL TO ACCEPT OR TO PAT. § 349. The duties devolving on the holder upon dis- honor of his paper, whether by refusal to accept or pay, are substantially the same. The only object accomplished by their performance, and which they are alone designed to se- cure, is the full and perfect remedy against drawer and in- dorsers. The necessity for perfonning them grows out of the distinction between the primary and secondary liabili- ties of the parties to this kind of paper. Tliose wlio are pnmarily liable continue so until they arc legally discharged 11 162 DUTIES OF NOTAKY PUBLIC. by payment or otherwise. As to them, therefore, nothing is required to he done by the liolder in reservation of his rights. But tlie liability assumed by the drawer and in- dorsers is only secondary, contingent, and conditioned upon non-payment by the principal debtor, and notice thereof given him in reasonable time. The object of this is to ena- ble the drawer to withdraw his funds from the possession of tlie drawee, and the indorser to take such immediate steps as he may deem necessary to secure himself from loss. By keeping in view the reason of the rule, we shall be the better able to understand the mode or manner in which the law requires this duty to be performed. § 350. The holder, up to this point, has been under no necessity of enlisting in his behalf any official services. He could do himself every thing that is required to be done. The custom, it is true, is very generally established and uni- versal among banks, to place all negotiable paper in the hands of the JSTotary Public to present for acceptance and payment, but for this there is no legal necessity. It is only after paper has been dishonored by a refusal to accept or pay, that the services of this official are required. And even then they are only necessary where a protest is required to be made. In bringing into view the protest, we learn one of the important distinctions between the foreign and the inland bill of exchange. The law-merchant requires the former to be protested in case of non-acceptance and non- payment, while in regard to the latter, no protest is neces- sary. AU that strictly constitutes the duty of tbe Notary is to protest, and that in case only of the foreign bill ; not to give the necessary notices to the drawer and indorsers. In practice, however, the whole business of protesting and giving tbe notices is usually done by the notary. § 351. Suppose the holder has done his last personal act, that is — demanded acceptance by the drawee, or payment by the acceptor, which has been refused ; he then places the bill in the hands of a notary public, wbo is a public office, WHAT IS INCLUDED UNDER PKOTEST. 163 recognized by the law of nations, and whose acts are attested by a notarial seal. This officer again presents the bill to the drawee or acceptor, and again demands its acceptance or payment. If, however, he has made the presentation and demand originally, he need not do it a second time. All th-at is necessary is that a notary public should do it. The same day that he makes the presentation and demand, he notes the fact, or all the facts, in writing, stating time, pres- entation, demand, reason for refusal, if any is assigned, putting his initials to the statement ; and from this he after- wards draws up the statement, which is'a formal declaration of presentment and refusal, and of the facts contained in his minutes ; and bears date of the time when the noting was done. - § 352. Two questions have arisen in regard to the term 'potest ; the one relates to what is necessary to be done in order to render the protest complete, and the other to what is ordinarily understood as being embraced imder it. There is still another as to the person legally competent to do it. The tirst has arisen on an inquiry relating to the sufficiency of the notarial certificate. Here it has been held, that in order to be sufficient, such certificate, in the case of a foreign bill of exchange, must set forth the fact specifically, that the bill was presented to the drawee, at the time when demand of payment was made, or it cannot be offered in evi- dence. Musson V. Lake, 4 Sow. S. C. B. 262. The other question has arisen as to the extent of a waiver of protest, whether that is limited to the formal declaration, or extends to, and embraces, all the steps necessary to charge an in- dorser. The indorser wrote, " Please not protest (such a note, so due), and I will waive the necessity of the protest thereof." Held, that the term protest, in its popular sense, includes all the steps necessary to charge the indorser, and hence that this was a waiver of notice as well as of presen- tation and demand. Coddlngton v. Davis, 1 Comst. 186. The certificate of protest under the notarial seal is sufficient \ 164 WHAT is' a sufficient notice. evidence of the facts therein stated. Another question as to whether the notary was obliged to do the business per- sonally, or whether he could transact it through his clerk or other agent, has been attended with considerable diffi- culty. The general impression is, that the law-merchant requires the services of the notary personally ; and in the State of 'New York, that principle, together with the word- ing of the revised statutes, has settled the law to that effect. The Onondaga County Bank v. Bates, 3 Hill, 53. § 353. The notary public is the agent of the holder in protesting the bill or note. Having presented and de- manded acceptance or payment, received a refusal, and noted the facts on the bill or note, the next thing in order which should be done, is the giving or sending notices to the drawer and indorsers. One of the most intricate branches of the law, one that has been the most refined upon, and sometimes one the most difficult to under- stand precisely what to do, is that which grows out of this necessity of notice. The most important points of inquiry are : 1. The kind of notice, and its contents. 2. By whom and on whom must the service be made ? 3. When and how must it be served ? § 354. The laio mercliant leaves the kind of notice, whether written or verbal, to the decision of the party who is to give it. It is sufficient if given in the mere verbal form, or it may be proved by circumstantial evidence. Any thing that will satisfy the jury as to the fact of its having been given. K"o particular form of it is necessary. What the law-merchant seems to consider essential is, that it must import either in express terms or by necessary implication, that the bill or note has leen dishonored. This involves two facts : 1. That the bill has been duly presented. 2. Tliat there was a refusal to pay it, or that it has not been paid. Mere notice that the bill still remains unpaid, TUE PKOPEE PABTY TO GIVE NOTICE. 165 would not be sufficient, because if it bad never been pre- sented it might remain unpaid without being dishonored. The word dishonored seems to be sufficient to support the notice. King v. BicTiley, 2 Q. B. 421. It usually states that the party to whom it is addressed is looked to for pay- ment, and this was once deemed necessary. Solarte v. Pal- oner^ 7 Biiujh. 530. But in the case above referred to of King V. BicJcky, it was held not necessary in express terms to inform the party whom it is intended to charge, that he will be looked to for payment, and that the sending notice of dishonor is sufficient for that purpose. The notice must also be sufficient to ascertain the note or bill dishonored. But inaccuracy of description, by which the party cannot be misled as to the bill intended, is immaterial. And where there is an error in the statement of the amount, in order to show that the party could not have been misled, it is com- petent to prove that there was no other note in existence to which the description given could have aj)plied. Cayuga County Bank v. Worden^ 1 Comst. 413. § 355, The notice must come from the holder or his agent, or some person entitled, or who, as party to the bill, probably will be entitled, to call for payment or reimburse- ment. That given by a mere stranger is insufficient, and one without any signature, is worthless. A party who is not, at the time, the holder, may give the notice, if he stands in a position in which he may become holder, as where he has transferred it to another as collateral security for a debt. A party to whom it is indorsed over to collect, may give the notice, and possession by a notary is evidence of his right to protest it, and his signature to the notice affords presump- tive evidence that it was done by the authority of the holder. § 356. The holder, or whoever gives the notices on his behalf, should give such notice to all the prior parties on the note or bill, except maker or acceptor, to whom he in- tends to look for payment. Tlie only one who has engaged 166 TO WHOM NOTICE SHOULD BE GIVEN. absolutely to pay, lias failed in doing so, and tlie only chance now offered to the holder to avoid the risk of loss, is to convert the contingent liabilities of the drawer and indorsers into absolute ones by the giving of notice. It is left en- tirely to him what parties he will notice. If he is satisfied with the responsibility of his immediate indorser, he may give the notice to him only, and then he, on receiving it, must, in his turn, give the notice to all such prior parties to whom he wishes to look for payment. His position, upon receiving the notice, is precisely similar to that of the holder, and he may notify all the others before him, so as to be able to look to them all, or only his immediate indorser, and he the next in order, and so on until all have successivly re- ceived notice. The rule, however, is that a notice given by the holder enures to the benefit of all who stand between that party and the person receiving it, and a notice given by one party to another, and communicated without ladies by that other to prior parties, renders them liable to him who gave the first notice. Hence it is laid down as univer- sally true, that a party entitled as holder to sue upon a bill, may avail himself of the notice given in due time by any other party to it, against any other person upon the bill, who would be liable to him, if he, the holder, had himself given him notice of the dishonor. Story on Bills, § 304. Chapman v. Keane, 3 Ad. c& Ellis, 193. Where a firm indorse, notice to one of the members is sufii- cient ; and so also is notice to a surviving partner. But where two jointly indorse, not being partners, notice must be given to each, and in case of the death of one, then to the survivor and the personal representative of the deceased. Willis V. Green, 5 Hill. 232. In case of the death of the indorser, it is the executor or administrator who is entitled to the notice. Notice to a general agent is a sufficient one to the principal. Kotice must be given to the acceptor supra protest of non-payment by the drawee, in order to hold him on such acceptance. So also to the drawer and TIME AlTD MAl^KEK OF BEEVTCE. 167 indorsers, if, on receiving bucIi notice and demand of pay- ment, he declines to pay. § 357. The time and manner of service arc among the most important things relating to notice. The question of reasonable notice is a mixed question of law and of fact. The facts are for the jury to find, while the question of reasona- hleness of time, based upon them, is for the court. It is difficult in practice for the court to control this question where there is any disj)ute about the facts. Where the parties live in the same village or city, the notice is to be served personally on the drawer or indorser, or sent to his dwelling-house or place of business. When in places remote from each other, the manner generally of serving the notice is through the post-office ; and the time at which the notice must be served or left in the one case, and mailed in the other, is substantially the same. It may be done on the demand, refusal, and protest, but it is in time to do it on the day following. It has been made a question -udiether the rule is as strict as that laid down in Lenox v. JRoberts, 2 Wheaton, 373, which requires that the notice should be put into the post-office earl]/ enough to he sent hj the mail of ths succeeding day / or whether it is sufficient to place the no- tice in the post-office on the next day, at any time of the day, so as to be ready for the first mail that goes thereafter, although it may not be in season for the mail going out the day after the default. Tlie latter is now understood to be the rule in England, and in some parts of the United States. It is not, however, entirely concuiTcd in. Beckwith v. Smith, 22 Maine, 125. Tlic question is very elaborately dis- cussed by Judge Shepley in Chick v. Pillshury, 24 Maine, 458, in which he contends for the strict rule of sending out by the mail of the next day, and this would undoubtedly be the safer rule to adopt in practice. The notice is always sufficient if left in time at the dwelling-house of the party, and if the house be closed in consequence of a temporary absence, it may still be left there. 168 MODES OF riioviNa bekvice by mail. § 358. If tlierc is no jjost, it is sufficient to use the ordi- nary metliod of conveyance, as in the case of a foreign bill to send by the first regular ship. It is not necessary to resort to the postal an-angement, or to send the notice by the ordinary conveyance. It is sufficient to send by a private conveyance, or a special messenger, and it would be deemed a sufficient notice in such a case, though it should arrive a little behind the mail, provided it were upon the same day ; but wherever the postal arrangements are estab- lished, the mode of sending notice by the mail cannot be safely omitted, unless under very peculiar circumstances. The service by mail where the parties reside in the same city or village is insufficient, except where there is a penny post arrangement, or the notice was actually received in time. Under a regular penny post arrangement, the service through the mail is sufficient, the parties residing in the same village or city. Tliis, however, must be qualified by the fact tliat the penny post goes to the quarter where the drawer or indorser lives. § 359. In all cases where the service may be made by mail, there are two modes of charging the drawer or in- dorser with notice ; the one by proving that the notice vms received in time, by whatever mode it may have been con- veyed, and the other by showing that the notice properly directed and prepaid was deposited in the post-office, to be forwarded at the proper time. In the latter case, the receipt in time is presumed, and even if it be shown never to have been received, it is, nevertheless, a sufficient notice. The holder, or his agent, has done what the law requires of him, and if the post-office fails in its transmission and delivery, it is not chargeable to him. The rule is to du-ect the notice to the post-office nearest the place of residence of the drawer or indorser, and if there are two post-offices, at each one of which he is accustomed to receive letters, it may be directed to either. Tlie question as to which of the two should be entitled to notice, the residence being where the note was DUTY WHEN RESTDENCE TTNKNOWN. 169 made payable, or tlie place of business being a distant city, came np for settlement in Van Vechten v, Pruyn, 3 Kern. 549, and it was held to be tlie place of residence. So also where the indorser received his letters and did his post-office business in the town where the note was made payable, but resided in an adjoming town, where the notice was sent by mail, it was held sufficient. Seneca County Bank v. JSTea^s, 3 Comst. 442. The authorities fail to decide at w^hat dis- tance from a post-office the party may reside, and yet have a service through the mail du'ccted to him there, a good service. The only safe way, however, is, when his residence is some distance in the countiy, to send out the notice to be served personally on him, or be left at his dwelling- house. § 360. The holder may not know where the drawer and indorsers respectively reside, and the inquiry becomes im- portant what in such case becomes his duty. This is summed up by saying that he is bound to make diligent inquiry ; to inquire of the persons by whom, and the places at which, this knowledge would be the most likely to be acquired. A delay beyond the time at which he would otherwise be required to give notice may thus be necessarily incurred before he is able to give the notice. Such delay will not destroy his right against the indorser. Bateman v. Jose2)h, 12 East. 433. His plain duty is, as soon as he ac- quires the knowledge from a competent source, to make use of it by sending the notice. And if he has thus acquired it, and thus makes use of it, he will hold the indorser, although he sent to a wrong place, and if subsequently better informed, will not be obliged to send a new notice. Lam- tert V. Ghiselin, 9 How. S. C. Bep. 552. Tlie latter part of the above proposition has not, however, been acquiesced in, and the principle has been affinned, that inability to dis- cover the residence of the indorser excuses the proper ser- vice only so long as such inability continues, and that, when the residence becomes known to the party wishing to hold 170 NOTICES now On-EN BY SUCCESSIVE rNT>0RSEE8. the indorscr, it is then his duty to he diligent in making service. Bcale v. ParruJi, 20 N. Y. Tiq). 407. The main point decided in this case is, that, although notice of non-payment given by the holder of a note to an indorser enm-cs to the benefit of the other parties to the paper, an inability to learn the proper place for giving such notice which excuses the holder, is not available to another in- dorser who possesses the necessary information. § 361. It is very well settled that a check given upon a bank payable immediately, is in time if presented the day subsequent to its receipt, and if protested on that day, and notice given the day following, gives to the holder a perfect remedy against the indorser. But the drawer of a check occupies a very different position from the drawer of a bill of exchange, and is not exonerated from liability by the want of notice of non-pa}Tnent, unless some special damage can be shown to have resulted therefrom. If the notice is given successively by each party to the one who imme- diately precedes him, then each in succession is entitled to the same time in giving his notice, as was the holder in giving it to his immediate indorser. But the holder, if he desires to look to all the preceding parties for his indemnity, should give notice at the same time to all such parties ; and it has recently been held that to entitle himself to a remedy against a remote indorser, he must give the notice within the same time required of him in order to hold his imme- diate indorser. Hoioe v. Tijyper^ 20 Eng. L. cfc Eci- 220. § 362. There are several instances in which prior parties may be held liable to the holder without receiving any no- tice. As : 1. "Where an indorser unites with the drawer in deceiving the holder, representing that a bill will be accepted when he knows it will not ; although mere knowledge that a bill will not be paid at maturity will not have that effect. 2. "When an indorser has transferred a note upon which nothing is due or collectable. WHEN NOTICE RENDERED UNNECESSARY. 171 3. No notice need be given to the drawer when he had no funds in the hands of the drawee ; or any right to expect his acceptance or payment. Bnt this does not excuse the want of notice to the indorser. 4. Where the indorser has taken from the maker an as' signmcnt of all his property, as he then must know his per- fect inability to pay it. Neither is it necessary if he takes an assignment of property amply sufficient to pay the note, as auy notice then would he unnecessary. But unless it is shown to be sufficient, the usual notice is required. Seacord V. Miller, 3 Kern. 65. This doctrine is very much naiTOwed down by Ch. Jus. Gibson in Kramer v. Sandford, 4 'Watts & Serg. 328. So, also, is it entirely competent for a drawer or indorser, by a special agreement, to waive the giving of notice, and no consideration is necessary to support such a waiver. And in the absence of such notice a subsequent promise to pay, made by the jmrty entitled to it, with full knowledge of the fact of the omission, although in ignorance of its legal effect, will be sufficient to restore his liability. And the knowledge of such fact, it seems, may be infeiTcd from the promise, in connection with the accompanying cir- cumstances of the case, without requiring affirmative proof of the knowledge. Lundie v. Boljertson, 7 East, 231. QUESTIONS. "What creates the necessity of performing the duties hero contem^ plated ? What the difference between the two liabilities ? What is the object of giving the notice ? "When are the services of a Notary Public first required ? "When are they then only necessary ? What is one of the distinctions between foreign and inland bills of exchange ? What is all that constitutes tlio strict duty of the Notary Public ? Wimt is usual in practice ? After demanding acceptance or payment, and refusal, what does the holder next do? What does tlio Notary Public do? What does ho do on tho same day he makes the presentation and demand ? What does he subsequently do, and to what time does it havo relation ? What is the first question regarding tho term protest ? What tho sec- ond? What is still ono other? How has the first arisen? What is necessary relating to presentment to drawee ? What docs the waiver 1Y2 QITESTIONS. of protest embraco? IIow is notarial certificate evidenced? What does the law-merchant require as to the doing of business by the Notary ? Wliat next should be done by tlio notary after presenting, demanding, and noting? What are the important points of inquiry regarding the notice? Who decides on the kind of notice, whether written, or ver bal? What does the law-merchant consider essential in the notice? What are involved in the term dishonor ? What is deemed sufficient to support the notice ? What is usually stated in it ? What is necessary as to ascertaining the bill or note ? How far may inaccuracy in descrip- tion go without being fatal? How may it sometimes be remedied? From whom must the notice come ? How is it when given by a stran- ger? May it be given by a party not at the time the holder, and when? To whom should the holder give notice ? To whom, if satisfied with his immediate indorser ? And how is that indorser situated on receiving the notice ? And what may he do ? What is the rule as to notice given by the holder ? And to whom is it available ? What is the rule where indorsed by a firm ? What where two indorse jointly ? What, in case of death of the indorser? What when indorser has a general agent? What when there is acceptor Supra Protest ? What are among the most important things relating to notice ? What is reasonable notice a ques- tion of? Where parties live in the same village or city, how is notice to be served ? How when living in places remote from each other ? When may notice be sent or mailed in each case ? What the rule as to deposit in time for the mail of the next day ? How sent where there is no post ? How as to necessity of sending by post where there is one ? What is the safer way where there is a postal arrangement ? Where parties live in the same city or village, when is service good by mail ? Where must penny post go to render such service good ? What modes are there of charging drawer and indorser with notice where service may be made by mail ? What may be shown to charge indorser where service is by mail ? Suppose the post-office fails to transfer and deliver ? To what post-office is notice to be directed ? How if two post-offices, at each of which indorser is accustomed to receive letters ? How when res- idence is where note is payable, and place of business elsewhere ? How where reverse of this is the fact ? What is the safe mode Avhere residence is in the country ? What is holder's duty when he is ignorant of residence of drawer and indorsers ? What effect, in such case, has delay in mak- ing inquiries ? What is his plain duty ? What effect of sending to a wrong place? What to be done when residence becomes known? When is a check payable immediately presented in time, protested, and notice given ? How is drawer of a check situated in reference to no- tice ? What time is each successive party entitled to in giving the PECULIAR EIGHTS OF THE HOLDER. 173 notice ? "What must holder do, if he desires to hold responsible to him all the parties on the bill or note ? What are the instances in Avhich prior parties may be held I'able in the absence of notice ? "What first stated, and so on ? What rule as to waiver ? What rule as to promise to pay ? PART VII. EIGHTS AXD REMEDIES OF THE HOLDEK. § 363. The neglect of the holder to perforin any of the duties just enumerated, subjects him to the loss of all reme- dies against the drawer and indorsers, and limits him to those only wh«se liability is primary and absolute. His faithful performance of them enables him to look to any and all the parties on the bill or note for his indemnity. And he can take his own time anywhere within the range of the statute of limitations for doing it. I am speaking, of course, of the right irrespective of any State legislation ; as some States have passed laws exempting the indorser from liability unless the maker is first prosecuted, and sometimes limiting the period within which that must be done to retain the remedy against the indorser. It is also competent or- dinarily to commence at the same time, and continue the prosecution to judgment and execution against all the par- ties to the bill or note ; but a satisfaction against one is a satisfaction against all ; and in many or most of the States but one full bill of costs is collectable ; and in all the other cases arising out of the same piece of negotiable paper, only the necessary disbursements. § 364. The holder of negotiable paper, as we Iiave al- ready seen, is, under certain circumstances, clothed with j^ccu- liar rights. Eeceiving it before due, in good faith, and for a valuable consideration, he is only affected by such de- fences as are created by statute, or as necessarily vitiate or destroy his title. If a statute, like that prohibiting usury in the State of New York, renders the paper void in whoso- ever hands it may be, such hona fide holder can claim no protection. So, also, if the name of the payee as first in- 174 WHEN DEFENCES TO lilLh OK NOTE INTEEPOSED. (lorscr is forged, as that indorsement is the only avenue of title, tlic holder must fail to make out any, and hence can- not succeed. The defences the most commonly sought to be intei'poscd, are: The want of consideration, total or partial. The obtaining the bill or note by duress. Tlie obtaining the same through fraud. Tlie finding it when lost by the owner. The receiving it to be applied for a certain purpose, and applying it to a different one. « Tlic obtaining it by an act of larceny. ^ § 365. In regard to all such defences, there is no difficulty in theu' being inteii^osed as between the original parties to the bill or note. The payee, when holder of the note or bill, has no other or different rights against the maker or acceptor, than has a party to any other contract against another. All defences may then be interposed the same as in other con- tracts. It is only the lona fide holder receiving the same before due for value that is protected, and the question occui'S how these defences can be made available when the note or bill is in the hands of a party other than the payee. As already seen, such party is presumptively a hona fide, holder, and hence entitled to protection. But this is a mere presumption, and capable of being rebutted. In all such cases, therefore, such holder, showing the transfer, through the proof of the handwriting of the first indorser, is jprima facie entitled to recover. This shifts the burden of proof to the defendant. He, in turn, intei-poses and makes proof of one of the defences above stated. This is held to make out a prima facie defence ; such a defence as will entitle it to jjrevail, if the proofs on both sides stop there. The effect of all this is again to shift the burden of proof from the defendant to the plaintiff. Enough is now shown on the defence to do away with the presumption under which the plamtiff had hitherto sheltered himself, and to call upon him to show the time and cii'cumstances under which he WHEN BANK EESPONSIBLE TO HOLDER. 175 received the note. Failing to do that, be is beaten. But if he then shows that he received the note before due, in good faitli, and for value ; in other words, if he transfers into fact what had previously rested in mere presumption, he has entirely disposed of the defence, and entitled himself to re- cover, Rogers v. Morton, 12 Wend. 484 ; Munroe v. Cooper, 5 Pick. 412. § 366. Tlie holder may acquire a right to bring an ac- tion against the prior parties to a bill of exchange, to enforce its collection before the time has elapsed at which it is made payable. Tliis occurs where he has presented it to the drawee for acceptance, who has declined to accept, and the proper notices have been served upon drawer and indorsers. These, by drawing and indorsing, have impliedly under- taken that the drawee, on j^reseutation to him for that purpose, should accept, and hence his declension has broken their contract, and thus rendered them immediately liable. Tlic holder, tliercforc, unless there be an acceptance supra protest which he chooses to receive, is at liberty to pursue liis remedy immediately against such drawer and indorsers. § 367. A question has arisen of great practical impor- tance, relating to the right of the holder to hold a bank responsible for the amount of the bill or note, where it has been left there for collection, and through failure to present for acceptance or payment, the drawer and indorsers have become discharged. Tlie strongest case presented, is where the bank, receiving it for that puqDOse, has turned it over to its Notary Public, or sent it to a bank with which it is in correspondence at the place where the paper is made pay- able, and by some means there has been such failure as to destroy all remedy against drawer and indorsers. Li the State of Xew York, it is clearly settled by several decisions in the highest courts, that the bank so receiving it, is liable to the holder. Allen v. The Merchants Bank, 22 Wend. 215 ; Walker v. The Bank of the State of ^lo York, 5 Seld. 582. Commercial Bank of Pennsylvania v. The 170 EEMEDT ON LOST BILL OR NOTE. Union Banh of New YorTc^ 3 Kei^n. 203. Tlie contrary doctrine seems to have been held in the Suj)reme Court of Errors in Connecticut in East Uaddam Bank v. Scovill^ 12 Conn. 303. § 368. A person who pays a bill supra jyrotcst, for the honor of an indorser, is placed legally in the same posi- tion as if he had taken from such indorser a transfer of the same, and has, therefore, a right to take advantage of any notice of which the person for whom he made the payment could have availed himself. Goodall v. Polhill 1 C. B. 233. § 369. The inquiry may properly arise as to the rights and remedies of the holder of a lost bill or note. If such holder be the payee and holds it unindorsed, his loss may not subject him to much inconvenience, as no finder or transferee can, in such case, get a title to the paper. He ought, however, immediately to give notice to the maker or acceptor and drawer. K he be an indorsee, the payee hav- ing indorsed it in blank, and it has not yet fallen due, he should not only give notice to all the parties upon it, and to the bank, if any, where it is payable ; but should also advertise in the public newspapers, and by every acces- sible means give the notice as extensively as possible. In such case it may be submitted to the jury as a question of fact whether such holder had used due diligence in apprising the public of the loss, and also whether the purchaser of the paper had, under the circumstances of the case, exercised a reasonable discretion, and acted with good faith and suffi- cient caution, in the receipt of the bill or note. Subject to the possibility of rendering the above question sufficiently clear to a jury in both its branches or aspects, the English rule is, that if a negotiable bill or note be lost at the time a party is called on to pay, the loss constitutes a good defence. In this country, in some States, a statute provides for an indemnity to the party called on to pay ; and upon its being given, allows a recovery against him. In other States, DErnanoN of guakaxty akd sueettship. 177 the courts, without a statute, require the indemnity. In others, the English rule prevails. Where, without a statute, the indemnity is required, it is properly a matter of Chan- cery jurisdiction. QUESTIONS. TVhat does neglect of the holder to perform duties enumerated sub- ject him to ? What does his performance of them enable him to do ? Within what time ? How many may holder proceed against at same time? What effect has a satisfaction against one? What peculiar rights may a holder of negotiable paper have, and under what circum- stances ? What two species of defence may still be interposed ? What are the defences the most commonly sought to be interposed ? When may any one, or all these, be interposed ? Who is the party protected against them ? How can these defences be made available ? What is the legal presumption ? What must the bolder show to make out liig case ? On whom then is the burden of proof? What may the defend- ant show to make out a prima facie defence? What is the holder then called upon to show, and what may he show to entitle himself to recov- er ? Can a holder acquire a right to bring action against parties to the bUl before it becomes due ? How may he acquire such right ? Under what circumstances may the holder hold a bank responsible where there has been a neglect in charging drawer and indorsers ? To what is a per- son who pays supra protest entitled ? What must the holder of a lost note do? What question of fact may be submitted to the jury? Sub- ject to this, what is the English rule as to recovery on a lost not«f What is the rule in the different American States ? CHAPTER III. GUARANTY AND SURETYSHIP. PART I. NATTTEE, FOBM, AXD ESSENTIALS OF THE CONTRACT. § '370. A guaranty is a promise to answer for the pay- ment of some debt, or the performance of some duty, in case of the failure of another person, who is himself, in the first instance, liable to such payment or performance. 12 178 ESSENTIALS OF GUAUAJ^TY AND SUKETTSHIP. Albany, May 1, 18G0. In consideration tliat A B furnishes to C D, goods at six months credit to an amount not exceeding one thousand dol- lars, I guarantee the payment thereof. Sam Slice. Or— Albant, May 1, 1860. In consideration that A 13 gives to C D, an additional credit of six months on his debt of one thousand dollars now due, I guarantee the payment thereof. Sam Slick. From the nature of guaranty as thus defined, and the examples given, it will be easy to gather up the essentials that enter into this species of contract. § 371. The first of these is the consideration upon which it must rest. The similarity between this species of contract and that embodied in the indorsement of negotiable paper, early led to a doubt, and even a denial, that its validity at all depended, upon any consideration appearing upon its face. Pillans v, Yan 3fierop, 3 Burr. 1663. But the point afterwards came up before the House of Lords in Rami V. Hughes, in which it was held that a consideration was indispensable. 7 Broion P. C. 27 ; Also 7 T. B. 350. Note a. The analysis of the consideration is the same here as in the case of ordinary contracts, with the marked excep- tion, tliat the advantage or benefit, instead of accruing, as in other cases, to the party promising, must accrue to the party on whose behalf the promise is made. Tlie party who guarantees, need not derive any benefit from the contract. No past or executed consideration is sufficient to support the guarantee's undertaking, unless the act or service was done at the request of the party promising. § 372. The second essential is, that there must be a 'principal debtor. The imdcrtaking of the guarantee or surety is accessonal, and must, therefore, relate to the same REQUISITES TO CONSTITUTE GUAEAIS^TY. 179 subject as the principal obligation. It must not be larger, or more onerous, than that obligation ; although, it may offer a more prompt and efficient remedy. It may pledge a judgment or mortgage, while the principal debtor encoun- ters only a personal liability. Tlic undertaking of the surety, although in form accessorial, may, under certain cir- cumstances, assume the character of a principal debtor. This occurs -where he guarantees, knowing that the contract of the principal debtor is void on account of his incapacity, as in case of minority or insanity. lie then incurs a pri- mary liability. § 373. The third requisite is the consent of the lyartij to whom the promise is given. The elements of the contract, so far as the surety is concerned, are not complete without the obtaining of that consent. A very important conse- quence follows from this, viz. : that a simple proposal or offer to guarantee, amounts to no contract that is legally binding until the party to whom it is made has signified his acceptance. Thus a party writes : " GENTLEvrEX, — Mr. France informs me that you are about publishing an arithmetic for him and another person, and I ha/D6 no objection to being answerable as far as £50." Held only a lyvoposal^ and that the party to whom it was made, if he intended to accej)t, should have communi- cated such intention to the party making it. Modey v. Finclder^ Crompt. Mees. c6 Bos. 692. The guarantor has clearly a right to know whether he is acting in that capacity or not, and the Sujireme Court of the United States have more than once decided that when a guaranty is jn-ospcctive, and to attach to future transactions, tlic guarantor is entitled to notice that it has been accepted and acted upon. Lee v. Did', 10 Peters, 482. Adams v. Jones, 12 Peters, 207. But where an absolute guaranty is given at once, as in the two forms given in § 370, no notice of acceptance is neces- 180 WAEEANTY, OUAKANTY, AND SUEETySIUP. sary ; but tlio party to wliom it is given may act on it -with- out further commumcatiou. Oxley v. Youiig^ 2 U. Black. 613. QUESTIONS. What is a guaranty ? What the form of one ? What is the first es- sential ? Wherein does its analysis snow a difference between this and other contracts ? What is the second essential ? What is the under- taking of the surety ? To what must it relate ? In what respect may it differ from the principal obligation? What is the third requisite? What consequence foUows the necessity of obtaining consent ? What illustration ? What has the guarantor a right to know ? What is the guarantor entitled to, when the guaranty is prospective ? How when it is an absolute guaranty ? PAKT II. DIFFERKyT KIXDS OF GITAEANTT, AXD MANXEB IN WHICn TT 13 AFFECTED BY THE STATUTE OF FEAroS. § 374. The terms warranty, guaranty, and suretyship, do not differ much in their essential principle, although they may, in the subject-matter to which they are applied. Tliose of warranty and guaranty have the same original derivation, and in the old law books were used as convertible terms. The former has come, by use, to have two applications, the one relating to title both to real and personal property, and the other to insurance, being certain stipulations or agree- ments on the part of the insured, which constitute the in- ducements to the insurer to enter into the contract. The suretyship and the guaranty cannot essentially differ, the former being defined as an accessory agreement, by which a person binds himself for another already bound, and promises to the creditor to satisfy the obligation, if the debtor does not. A distinction has been attempted to be drawn by considering that the surety assumes to pay for another, and makes himself directly and imconditionally, although jointly, answerable for the debt ; while the guaran- tor merely imdertakes to pay if the principal does not, thus CLASSIFICATION OF COLLATERAL C0NTEACT8. 181 leaving the contract of suretysliip unaflected by the statute of frauds, while that of guaranty is subject to it. But this does not seem to be generally adopted. The doetrin.e of suretyship is derived, in many respects, from the civil law, while that of guaranty, from its frequently dealing with negotiable paper, and other common contracts relating to business, is more mercantile in its origin and character. § 375. Tliere is no doubt of the general principle that that provision of the statute of frauds requiring any promise to answer for the debt, default, or miscarriage of another person to be in writing, expressing the consideration, and signed by the party to be charged, applies with full force to the contract of guaranty or suretyship. That is in every possible sense a collateral engagement for another. Tliere is, nevertheless, great conflict in the cases relating to its appli- cation. In the case of Leonard v. Vredejiburgh, 8 John. 29, Chancellor Kent, then Chief Justice, classifies the cases in reference to the application of the statute. lie divides them into three classes : ^ 1. Cases in which the guaranty or promise is collateral to the principal contract, but is made at the same time, and becomes an essential ground of the credit given to the prin- cipal or direct debtor. Here he remarks, Tliere is not, nor need be, any other consideration than that, moving between the creditor and original debtor. 2. Cases in which the collateral undertaking is subse- quent to the creation of the debt, and was not the induce- ment to it, though the subsisting liability is the ground of the promise, without any distinct and unconnected induce- ment. Here must be some further consideration shown, having an immediate respect to such liability, for the con- sideration for the original debt will not attach to this subse- quent promise. 3. A third class of cases is when the promise to pay the debt of another arises out of some new and original consid- 182 GUAKAI^TY UNDER STATUTE OF FEAUD8. oration of benefit or barm moving between the newly contracting parties. Tbc two first classes of cases arc included witbin the statute of frauds, wbile tbe tbird is not. No fault lias l)ecn found witb tbis classification, only witb tbe decision of tbe court in tbc case in wbicb it is made. Tbere a note in tbe ordinary fonn was made, and below tbe defendant wrote, " I guarantee tbe above," and signed it. Tbe court bold tbc guaranty sufficient witbin tbe statute, and tbe defendant liable. Tlie question wbetber a simple guaranty, as " I guarantee tbe witbin or above," or " I guarantee tbe payment of tbe witbin or above," witbout any statement of consideration, altbougb made at tbe same time, and, in fact, a part of tbe same transaction, as tbe note or instrument wbicb it guarantees, is sufficient to enable a recovery under tbe statute of frauds, is an exceedingly vexed one in our jurisprudence. Tbis sufficiently appears from tbe fact tbat tbe cases of Manroio v. Durham^ and Hall V. Farmer, tbe first reported first in 3 Hill, 684, bold- ing it not within the statute, and afterwards on appeal re- ported in 2 Comst. 533, tbe judges of tbe Com*t of Appeals being equally divided, and bence tbe decision of tbe Su- preme Com't remaining ; tbe last re^^orted first in 5 Henio, 484, tbe Supreme Court bolding imder substantially tbe same state of facts tbat tbe case was within the statute, tben again on appeal in 2 Comst. 553, in wbicb tbe judges of tbe Court of Appeals, being again equally di\'ided, tbe judgment of tbe Supreme Court stood, pro forma, affirmed. Tbe point came again up before tbe Court of Appeals in tbe case of Brewster v. Silence, 4 Selden, 207, in wbicb tbe court, witb but one dissenting voice, affirmed tbe judgment of tbe Su- preme Court, reported m 11 Barh. 144, bolding it to be a case within the statute, and bence tbat tbe consideration not being expressed, tbe plaintiff could not recover. Tbe court regarded tbe contract of guaranty as in itself distinct from tbat embodied in tbe note or instrament guaranteed, GUAEANTT OF KOTE PAYABLE TO BEAEER. 183 and hence must contain, in and of itself, sufficient to render it a valid contract. Thus we may hope this vexed point is finally settled in the jurisprudence of this State, and, per- haps, country. § 376. Another vexed question has arisen out of the following facts. A owes to B $100. B presses for pay- ment. A offers C as surety,. who is accepted. A gives to B, payable to him, or order, and not to C, a note in the following form, " Six months after date, I prom- ise to pay to the order of B, $100, value received — signed A. This, before delivery, is indorsed by C in blank. "WTiat is the liability of C ? In Vermont he is liable as joint maker. Sylvester v. Downer, 20 Yt. 355. In Louisiana as surety. McGuire v. Bosworth, 1 La. 248. In Ohio as guarantor. Robinson v. Aljell, 17 Ohio, 36. In Missouri, Massachusetts, Maine, Xcw Hampshire, South Carolina, Michigan, Indiana, and Texas, he would be 2i. joint promissor. In Alabama 2i surety. In the State of !New York, he ranks now clearly as an indorser, and hence is discharged by any such laches on the part of the holder as discharges the indorser. Hall v. Newcorab, 7 Hill, 416 ; Sjpies V. Gilmore, 1 Comst. 321. § 377. The next question tliat arises relates to tlie rights and liabilities of a party who lias, in legal form, guaranteed the payment of a promissory note which was made payable to bearer. "Would a neglect to present, demand payment, and give notice, such as would discharge the indorser, effect the discharge of such a party ? Although there is some ' conflict in tlie autliorities, yet the better opinion seems to be, that the guarantor, in sucli a case, is to be treated, not as an indorser, who makes a conditional contract, but as a guarantor, who makes an absolute agreement that the note shall be paid at maturity ; that his contract is, therefore, broken, when there is a neglect to pay ; and that it is no 184 A OUAKAKTY 18 NEGOTIABLE. part of tlie holder's agreement to give notice of non-pay- ment. Brown v. Curtis^ 2 Comst. 225. A different doc- trine, liowever, prevails in the States of Massachusetts, Maine, and Pennsylvania, in which the contract of the guarantor is regarded as conditional, and if the maker of the note, or principal debtor, is solvent when the debt falls due, the guarantor is entitled to reasonable notice of non-payment. Oxford Bank v. Uaynes^ 8 Pick. 423. Can- non V. Gihhs^ 9 Serg. & JRawle^ 202. It is conceded, how- ever, that where the guaranty is that the note is collectahle, proceedings to collect must be instituted against both maker and indorser before recourse can be had to the guarantor. Loveland v. Sliejpard^ 2 Ilill^ 139. And although in an ordinary guaranty, the guarantor, if he desires notice, should stipulate for it in his contract ; yet in view of the conflict of authorities, the safer way, in all cases, is to give it ; more especially as some of the cases lean strongly to its necessity, where the guarantor can show that he has sustained special damages from its neglect. § 378. Another question that has arisen out of the fact of guaranty, more especially in its connection with negotia- ble paper, relates to its negotiability. Is a guaranty nego- tiable either in connection with the note it guai'antees or separately ? The diJQiculty experienced is to determine whether it is to be regarded as merely a special contract between guarantor and guarantee, or whether it is transfer- able by the latter, and equally available to his transferee. It seems pretty clearly settled that where the guaranty is on negotiable paper, and is, by its terms, limited to no particu- lar person but to the payee or his order, or to bearer, it is a complete guaranty to every successive person who shall be- come the holder of the paper. Sto'ry on Bills, § 458. Mc- Laren V. Watson's executors, 26 Wend. 425. The point the most controverted is whether this is not equally true when the guaranty is on a separate instrument. In the latter case, the prevailing opinion is, that it is then to be regarded as a CONSTErCTION OF GUARANTY. 185 special contract, and hence, at common law, enforceable only by the party to it, or by bis assignee, in his name, and subject to the equities existing against him. § 379. The guaranty is to be strictly construed. The case, to warrant a recovery, must be brought within the ex- press terms of the instrument, and the liability of the surety is never to be extended by implication. "When it is specialj and addressed to a particular individual, he alone has the right to act upon and acquire rights under it. If, however, the guaranty is general, as a general letter of credit, then any one, by complying with its terms, becomes a party to the same, as if it had been special to him. Tliere must be no departure whatever from the strict terms of the contract, and if the guarantor agreed to pay drafts at sixty days' sight, he is not bound by drafts at ninety days' sight. Birckhead V. Brown, 5 Ilill, G34. So also if payment by a vendee be guaranteed on condition that the vendee will give credit until a specified time, the guarantor will not be liable if a shorter credit be given, although the vendee did not require payment until the specified time. Walrath v. Thomsoji, 2 Comst. 185. "Where A was a clerk in a bank, and it was guaranteed that he should " well and faithfully perform the duties assigned to and the trusts reposed in him," it was held to apply only to his honesty and not ability ; and that a loss through the latter was not covered by it. Union BanJc V. Clossey, 10 John. 271. § 380. Another question of great doubt and difiiculty has occurred in determining what shall, and what shall not, be held as a continuing or standing guaranty. For instance, the following guaranty is made : " I guarantee the pay- ment of all such sums, not exceeding £3,000, which shall, at any time hereafter, be advanced by the plaintifi" to A." The point to determine is, whether this is a continuing or standing guaranty to that amount, and thus that, liowever numerous the charges and credits may be, the guarantor may be held ultimately for any balance, at any futm-e time, 18G CONTINUINO, OK STANDING GUAJlANTT. lip to thfit iinioiiiit ; or whether it must be taken simply as a guaranty for advances once made to tlie extent of £3,000. It will be seen that this is a question of vast importance to the mercantile world ; one that may vary with every case presented ; and one, too, of very difficult settlement. Tliere is no other mode of settling the question, than of resolving it, in each case, into a quesiton of mtent of the parties, to be arrived at through the language they have embodied in the instrument. In the case supposed, it was held not to be a continuing guaranty. Kirby v. DiiJce of Marlborough^ 2 M. & 8. 18. A few other illustrations will, perhaps, more familiarize these species of guaranty to the minds of busi- ness men. The guaranty is " For any goods he hath or may supply "W. P. with, to the amount of £100." Held, a continuing or standing guaranty to that extent. Mason v. Pilchard^ 12 East. 227. " We consider Mr. J. V. E. good for all he may want of you, and we will indemnify the same." Held, not a continu- ing guaranty. Whitney v. Groot^ 24 Wend. 82. " I hereby agree to guarantee to you the payment of such an amount of goods, at a credit of one year, interest after six months, not exceeding $500, as you may credit to J. H. P." Held, not a continuing guaranty, but exhausted by a single purchase to the amount mentioned. Fellows v. Prentiss, 3 Pen. 512. " Sir, I will be responsible for what stock M. E. McKee ■ has had, or may want hereafter, to the amount of $500." Held, a continuing guaranty, and not exhausted by purchases of and payments for stock to the amount mentioned. Gates V. McKee, 3 Kern. 232. " I consider myself bound to you for any debt he may contract for his business as a jeweler, not exceeding one hundred pounds, after this date." Held, a continuing guaranty, not confined to one instance, but applying to debts successively renewed. Mede v. Wells, 2 Campb. -113. EXTESTGnSKMENT OF GUAKANTY. 1S7 These continuing or standing guaranties, consisting, as they do, in the power or authority given to another to con- tinue the furnishing of goods upon the credit of the guaran- tor, may at any time be revoked as to any future liabilities, by serving the proper notice upon the party guaranteed. Tliis, liowever, cannot affect any act already done under the guaranty. QUESTIONS. What three terms come under the same principle ? "What two have the same derivation ? "What applications has the term warranty ? "What is the definition of suretyship ? "What distinction has been attempted to be drawn between suretyship and guaranty ? "What provision of tho statute of frauds applies to guaranty and suretyship ? "What is the clas- sification of cases arising under the statute ? "What is understood to bo the rule finally settled as to the liability of the guarantor of negotiable paper where no consideration is expressed ? "What are the different ha- bilities of an indorscr of a note payable to the order of another, where such indorscr is proposed and accepted as a surety ? "What are the rights and liabilities of the guarantor of a note payable to bearer ? Is such to bo treated as an indorscr, and as such entitled to notice ? "What is tho character of his contract, is it conditional or absolute ? "What is neces- sary where a note is guaranteed to be collectable ? What is the safer way in regard to notice ? And why ? Is a guaranty negotiable in con- nection with the note on which it is written ? Is it so when on a sepa- rate instrument ? How is a guaranty to be construed ? How must a case be brought to warrant a recovery ? To whom is a guaranty available when addressed to an individual ? To whom when general ? "What is the rule in regard to departure from the terms of the contract ? "What illustrations? What is the difference betAveen a guaranty to be perfonned at once, and a continuing, or standing guaranty ? What is it that con- trols in tho matter, and decides in each case ? What illustrations ? How may continuing or standing guaranties be revoked ? PART III. MODES OF EXTINOmsniKO THE CONTRACT OF GUARANTY OR STJRETTSnTP, § 381. One of the modes by which the liability of tho guarantor may be terminated is by the expiration of the iiine for which it had heen assumed, and to which it was 188 EXTINOmSiniENT OF GUARANTY — COMPROMISE. limited. And if without limitation, it may be terminated ly notice. So, also, the contract may he cxtingnished by the aA)t8 of the parties ; as if the undertaking of the surety were suhjcct to a condition, which has not been performed. It may be extinguished by payincnt, either by the principal debtor or the surety. In reference to this, some difficult questions sometimes arise as to the application to l)c made of payments which have been made by the principal to a cred- itor with whom he has transactions, out of which have grown debts independent of that guaranteed by the surety. The general principles regulating the application of payments, have already been briefly considered, and the only question here is, whether the law will raise so strong an equity in favor of the surety, as to compel the application of money pay- ments in his favor ; or whether it will allow the debtor and creditor, imder the principles already mentioned, to make such api^lication, regardless of the wishes of the surety. This is a matter which the law leaves entirely to the parties, and the surety is denied all rights relating to such applica- tion. Collins V. Gwynne, 9 Bing. 644. § 382. Another method of extinguishment is by com- promise, viz. : the receiving a less amount in full satisfac- tion. A compromise between principal and creditor, dis- charges the surety, unless the latter has previously, by part payment and giving security for the balance, so made the debt his own as to enable the creditor to hold him for any balance over and above what he received from the com- promise. It is, however, entirely competent for the creditor, in compromising, to reserve all rights and remedies against the sureties, and if so, although the principal may be dis- charged, yet the sureties are still liable ; and after having been compelled to satisfy the claims of the creditor, they may then look for their indemnity to their principal, not- withstanding his compromise with the creditor. The law will not protect him if he has failed to protect them in his settlement. The effect of a compromise between the cred- EXTINGUISHMENT OF GUABANTY — BET.EASE — MEEGER. 189 iter and the surety does not discliarge the principal, although he is liable only for what the creditor has failed to realize through the surety. So a creditor may compromise with one of the sureties without impairing any right he may have against the others, except that he can recover against them only the proportion they would have paid, supposing the compromising surety had contributed his full share. § 383. Another mode of extinguishment is by release. And this may, in some cases, be a matter of inference, as where the creditor restores to his debtor the writing which contains the obligation. But the restitution of an article pledged for a debt, will raise no presumption of a release of the debt itself. A release of the piincipal discharges the sureties, but a release of the sureties will have no such effect upon the principal. But if the co-sureties were entitled to have recourse against the one discharged, then such dis- charge has the effect of liberating them from all liability for any such sum as they could have had recourse against him, had he not been discharged. § 384. There is also another mode of extinguishment, by merger, which occurs where the creditor acccj)ts from his debtor a higher security than that under which his former debt rested, as a bond for a simple contract debt. This, if not received as collateral security, merges and extinguishes the former debt. Tliis is limited to the case where the original debtor himself enters into the higher security. So, also, is it limited to the acceptance of a higher security. The receiving one of equal or inferior degree, is no extin- guishment. § 385. Another mode l)y which the surety's liability may be extuiguishcd, is by tlie creditor's fjiviixg time to the priJi- cipal, vjit/iout the surctijs consent. "Where a valid agree- ment to this effect is made, reposing upon a sufficient consid- eration, by whicli, for the time specified, no remedy can be pursued against the principal debtor, that, of itself, releases the surety. The reason of this is, that it deprives 190 EXTLNGUISIliLENT OF BUKETY6UIP FKAUD. the surety of a right wliich he would otherwise Lave, of discharging liimsell" the debt, and then of proceeding imme- diately to collect it of the principal. This will indicate the kind of contract necessary to exist between the principal and the creditor to work such a discharge. K such contract be conditional, depending upon the performance of some act by the principal which he neglects to perform, thus rendering it inoperative, it will produce no such result upon the surety. The creditor may perform some acts analogous to the giving of time, and producing the same effect ; such, for instance, as the taking out an execution against the prin- cipal, acquiring a lien upon his property, and then with- drawing it. The surety, in any of these cases, will not be discharged if he gives his consent, knowing all the facts, or if the agi-eement, by its terms, expressly reserves the right of proceeding against the surety ; because a recovery and satisfaction against him would entitle him to proceed imme- diately against the principal. § 386. Another mode by which the liability of the sm*ety may be extinguished, is by alteration of the contract upon which he is surety, by any addition, abstraction, or deviation, without his consent. Such an alteration has the effect of substituting a new contract in the place of the old, and thus of discharging the surety. § 387. Another mode of extinguishing the surety's contract, or rather of avoiding originally the formation of a legal contract, is the practice upon him of such fraud and imposition, as operates to deceive him. To have this effect, the fraud may either be practised by the creditor in relation to the obligation of the surety, or by the principal debtor, with the knowledge or assent of the creditor. So, also, if the debtor's original obligation can be avoided by fraud, the surety may avail himself of that fact in defence. The doc- trine, as laid down by Chief Justice Tindall in Stone v. Compton, 5 Bingh. iT. C. 142, is that " if, with the knowl- edge or assent of the creditor, any material part of the .EXTINGUISmiENT OF SUEETTSHIP — MISTAKE. 191 transaction between the creditor and liis debtor is misrepre- sented to the surety, the misrepresentation being such, that but for the same having taken phice, either the suretyship would not have been entered into at all, or, being entered into, the extent of the surety's liability might be thereby increased, the security so given is voidable at law on the ground of fraud." The facts which called out this doctrine, and to which it was applied, were : A was indebted to B in the sum of £500, and was desirous of obtaining a further loan. A and B agree together, that B shall advance A £1,500, and that B shall deduct from it to repay himself, the sum of £500. C is surety for A, and is ignorant of this agreement.. He becomes such sm'ety, believing that A had the full benefit of the whole £1,500, instead of the £1,000. Held, that the surety was not liable, that his agreement to become such was void on the ground of fraud. Another illustration is found in Middleton v. Lord Onslow, 1 P. Williams, 768, in which the creditors of A agree to accept a composition in discharge of their demands, upon having the composition-money secured to them by a third jiarty. One of the creditors privately prevails upon A to give him security for the residue of his debt. Held, that such secu- rity is discliarged from his liability, on the ground that the agreement is a fraud upon him, as it deprives the debtor of the benefit which the surety intended he should liave. § 388. Another thing that may modify or destroy tlic liability of ilie surety, is raistake / and this may regard either the irmicipal motive or consideration that induced the entering into the contract ; or \}i\Q, 'person, or rather char- acter sustained by the party to it ; or the subject-matter of the contract itself. Any such mutual mistake in relation to either one of these as would have led to a difibrent result, had the facts been known, will be clearly sufiicient to extin- guish the surety's obligation. § 389. Another mode of extinguishing the surety's obli- gation, is by what is technically termed confusion, wliich 192 INSTANCES OF CONFUSION OF RIGHTS. means the imion in tliosanic person of tlic rights of tlio cred- itor and the obligations of the surety or debtor, in respect of the same debt. The original debtor or surety may, for in- stance, become the heir of the creditor, or the creditor may become the heir of the debtor or surety. In the first instance, as heir, he succeeds to all the rights of the deceased, and be- comes in that character debtor for the debt of which he is creditor on liis own account. In the second, the creditor, becoming the heir of his debtor, becomes in that quality of heir, the creditor of that same debt of which he is debtor on his own account. Tlius the rights and obligations that belong to one capacity, by the transfer over to another, become so utterly confused, that a total extinguishment is the inevitable consequence. The extinguishment of the principal debt by confusion, operates as an extinguishment of the obligation of the sureties. But the extinction of the accessory obligation of the surety from the same cause, does not operate as an extinction of the principal obligation. QUESTIONS. "What is the first mode by which liability of the guarantor may be terminated ? How may it be terminated by acts of the parties ? How by payment ? By whom ? What question may arise in relation to application of payments? How is it answered? "What is another mode of extinguishment ? "What will prevent a compromise between creditor and principal from discharging surety ? How may compromise be made without that effect? "What effect of compromise between creditor and surety? "What effect of compromise between creditor and one of the sureties ? "What is another mode of extinguishment ? "When may release be a matter of inference? "What effect has re- lease of the principal ? What, release of the sureties ? What, if co- sureties, entitled to have recourse against the one discharged ? "What, another mode of extinguishment ? When does it occur ? What illus- tration of it ? What are the limitations ? What another mode of ex- tinguishment ? What is necessary to this ? What is the reason ? What does this indicate ? Suppose contract conditional and condition not per- formed ? "What act may creditor do analogous to giving time ? Suppose agreement reserves right of proceeding against the surety, what effect then? What is another mode of extinguishment? How done, and WHAT NECESSAKT FOE LIABILITY OF SUKETY. 193 with "what effect ? "What another mode ? How may fraud 1)0 practised to have this effect? Suppose origiual debtor's obligation may be avoided through fraud, what effect lias that upon the surety ? "What illustra- tions? "What another mode of extinguishment? Mistake as to what? "What is the test of sufficiency of mistake? "What another mode of extinguishment ? "What is the meaning of Itie term confusion ? "What the instances in which it may occur ? "What effect has the extinguish- ment by confusion of the principal debt ? "What of the accessory obli- gation ? PART rv. EIGHTS OF THE CEEDITOR AGAINST THE SrEETT. § 390. Tlic first tiling neccssaiy to seeiu'c tlie liability of tlie surety, is the default of \X\t, become subrogated to all the rights and securities of the creditor,* and may, in addition, proceed at once against the principal to collect the debt. ITc then stands in the place of the credi- tor, and is not only entitled to all his rights, but has also acquired a right of his own to sue and recover for money paid for his, the principal's use. It is immaterial whether the surety voluntarily paid it, or was compelled to do so by legal proceedings. Nor is it essential that he have actually 198 RIGHTS OF SURETY AGAINST CO-SUKETEES. paid the wliolc debt. If he has done that which is equiva- lent to it, and made a compromise, it is sufficient ; but he can, in no case, recover beyond the sum ctually paid, and interest thereon. If the surety lias taken from tlie principal any security, lie must, in proceeding against him, resort to the remedy adapted to the security. His right is to recover, hot only the amount paid with interest, but also all costs and charges he may have been subjected to through the acts or default of the principal. If the surety has discharged a debt due from several debtors, and then demands the entire debt from one of them, he should cede to this debtor the actions he may have in his own right against the others, and also the actions of the creditor to whom he may have pro- cured a subrogation. QUESTIONS. ■When does the right of the surety against the principal occur ? What may he do immediately upon default of the principal debtor ? In whose place does he stand ? "What right of his own has he acquired ? Is there any difference whether the payment is voluntary, or compulsory ? Is it essential that the whole debt should be paid ? How is it in case of compromise ? "What amount can he recover ? "What kind of remedy must surety adopt, if he has taken security ? "What amount can he re- cover ? Suppose the surety has discharged the debt due from several debtors, and then demands the entire debt from one, what must he do ? PAET yn. EIGHTS OF THE STTEETIES AGAIXST EACH OXnEB. § 397. The creditor, availing himself of his rights at law, collects the entire debt of one of the co-sureties, thei"t3 being several of them who have guaranteed its pay- ment. Tlie inquiiy now is : — what is the right of that surety as against his co-sureties who were equally bound with him for the payment. It will be at once perceived that the co-sureties have no contract with each other. Their contract is with the creditor only, and with him each has made the same contract. One has been compelled to pay, but it is only upon the contract between him and the credi- EIGHTS OF SUEETT AGAINST CO-SUEETIES. 199 tor. TVTiat right does tliat give him as against others \vho had entered into a similar contract, but have paid nothing ? Clearly no right based upon any privity of contract, because there is none. The next inquiry is, whether, in 'the absence of such a right, equity has any resources by which it can administer any relief. And the answer is that it has. It derives its principle of interference from the fact that pay- ment of a common debt, for which all were equally liable, having been made by one, it will equalize the burden, and compel the others to bear theii* just proportion of the loss. And this remedy in our jurisprudence is not confined to the Court of Chancery. The law, following equity, also gives the right of contribution between co-sureties, whether they are made such by the same or separate instruments. Neither is a surety any the less entitled to this contribution, because at the time he became such, he was ignorant that he had any co-sureties. § 398. This was not only originally a matter of equity cognizance, but there are several advantages in pursuing the remedy in equity. In the first place, if the surety re- quires any discovery to bo made, cither as to the persons who are his co-sureties, or the instruments by which they become such, or the amount or contents of the instruments, facilities much superior are afibrded in equity. Another instance where equity is necessary to be invoked, is where the sureties are each bound in penalties that are distinct and several. Again, the law can only recover an equal proportion from each co-surety. It can take no notice of the insolvency, or utter inability of one or more of them to pay his or their proportions. Suppose there are four sure- ties, it can enable a recovery of one-fourth against each. But two of them are insolvent, and can pay nothing. The law can still only give one-fourth against the only remaining solvent one, so that, in that case, one would have to bear only one-fourth, and the other three-fourths, of the loss. The Court of Chancery, by its f)ower of specializing, and 200 WHAT A BUEETY" CAN llECOVER AGAmST CO-SUEETIES. adiiiiiiistcnng s])ecilic remedies, can apportion the burden among tlioso who have the ability to bear it, and thus in the case proposed, woukl decree that the solvent surety, instead of paying a fourth, should pay one-half the debt. § 399. In equity, although the sureties become such by several distinct instruments, yet, if it be for the payment of the same sum of money, and one pays more than an equal share of that sum, he may comjicl contribution from his co-sureties ; but if the agreement be that each shall assume a liability for only a given portion of one sum of money, no such right of contribution among them can be enforced. And the same principle prevails when the sureties arc bound by different instruments for equal portions of a debt due from the same principal, but the suretyship of each is a separate and distinct transaction. § 400. One surety cannot resort to his co-sureties for contribution, unless he has paid more than his ratable por- tion of the debt for which they were bound in common ; and where a creditor compounds with one of four sureties, and receives a dividend upon the insolvency of another, the other two must have paid more than half of the debt before they could call upon the others for contribution. § 401. A surety is not entitled to recover fi-om his co- sureties, interest on the money paid by him, although the debt he paid was bearing interest. l!^or is he entitled to contribution for the costs of defending an action brought against him by the creditor. The reason of this must be found in the want of all privity of conti'act between the co- sureties, l^either can be said to pay money or defend a suit at the request of the others. The principle has even been carried so far as to deny the recovery of costs for de- fending an action, where the party sought to be made liable had executed to the plaintiff a bond of indemnity. GilUit V. Bijypon, 1 Moody & MalJcin, 406. § 402. Two sui'eties are requii-ed to be fm-nished for the proper performance of his duties by a public officer. A WHAT DsTDEilNrrT "WITHIN STATUTE OF FEArDS. 201 and B are such sureties, but before they become such, A agrees verbally with B, that, in consideration of his becoming a co-surety with him, he will guarantee him against all loss and damacre rcsultino; therefrom. The officer becomes a de- faulter to a large amount, and the sm-eties consequently made liable. Two questions arise here. Can B, by parol evidence, show the contract existing between* him and A, and if so, is the undertaking of A, which is thus shown, within the statute of frauds, so as to protect him from the effect of his guaranty. Both these points have recently arisen, and been decided in Barry v. Hansom, 2 Kern. 462, in which it was held that parol evidence was admissible to ascertain the relations between the sureties, and that the verbal indemnity given by one was not within the statute of frauds. The latter was deemed the more difficult ques- tion, and was so held because of the liability of the guaran- tor to pay the debt against which he indemnified. It was in truth a guaranty foimded upon his own liability. But the doctrine seems to be admitted here, as had before been settled in the Supreme Court, that where one party indemnifies another for becoming liable for the debt or default of a third party, such an indemnity is within the statute of frauds, and therefore required to be in wi'iting. Kingslcy V. Balcom, 4 Barh. 131. QUESTIONS. Upon what principle is one surety allowed to recover contribution of the co-snretics ? What does the law do in this respect ? Suppose the surety was, at the time, ignorant that he had co-sureties ? now- many advantages are there in favor of pursuing the remedy in equity rather than at law? What is the first? The second? The third? "What is the rule where there are distinct instruments but for the pay- ment of the same sum of money ? "What where cacli assumes a liability for only a given portion of the same simi of money ? What, where each is bound by difTerent instruments, each being a separate and dis- tinct transaction ? What must the surety do before he can resort to his co-sureties for contribution ? What the right of recovering of the co- 202 QUESTIONS A3 TO StJEETTSHIP. sureties interest and costs ? What in case of indemnity ? What the right to introduce parol evidence to acsertain the relations of the sureties with each otlier ? Does one surety, indemnifying another, come witliin the statute of frauds ? Does one person, indemnifying another for as- suming a liability for a third, como within the statute? "What is the difference between the two cases ? BOOK m. RIGHTS. SECOND DIVISION— RIGHTS RELATING TO THB THING. Under this division, there are four classes of rights, de- rived from four different species of contract, all having re- lation to the thing, or personal property. Of these we have, 1. The contract of affreightment, which relates to the carriage and transportation of property, and the letting or leasing of ships or vessels for that pui*posc. 2. Tlie contract of hailmeiit, which relates to its delivery to others npon certain trusts to be exercised about it. 3. Tlie contract of i7isicrance, which is an indemnity for its loss, and, 4. The contract of sale, and assignment, which makes of it an ultimate disposition. CHAPTER I. CONTRACT OF AFFREIGHTMENT. This has, for its general object, the carriage or transpor- tation of property, and incidental to this, the leasing or hiring of shijDS, or other vessels, for that pm'pose. It also embraces the carriage and delivery of goods ; the power 204 rARTIES, AND CONTENTS OF CHARTEK TAJiTY. and authority of the master ; the rights and duties of the merchant ; and the consideration of general average and salvage. It will, therefore, include every thing relating to the transportation of property, except the peculiar duties, liahilitics, and rights of the common carrier, which will be considered in the next chapter. Tlie contract of affreight- ment itself has a twofold aspect, the one relating to the vessel in which the goods are to be conveyed, and the other to the goods themselves which are the subject-matter of conveyance. The first of these gives us the charter-party, the second the lill of lading. PART I. THE CHAETEE-PAETY. § 403. The charter-party is a written contract of affreightment, by which an entire ship, or some part or portion of it, is let to a merchant for the conveyance of goods, on a particular voyage, in consideration of the pay- ment of freight. "We have here, as parties, the ship-owner, who stands responsible for the ship, and the merchant, who seeks to employ it in the transportation of his goods in con- sideration of the freight which he pays for its use. There is frequently, however, a middle man, the carrier, — who hires the ship of the owner, and receives the goods of the merchant, and who sustains, therefore, relations to both parties. So, not unfrequently, the owner of the vessel runs it himself, thus assuming all the duties of the carrier in re- lation to the goods he transports. The carrier, or merchant, who thus becomes the lessee of the vessel for the voyage, is termed the charterer. § 404. The charter-party ordinarily contains : 1st. The names of the parties, and of the ship or vessel. 2d. A de- scription of the voyage to be performed. 3d. The covenants, on the part of the owner, of the good condition and sea- worthiness of the vessel, and the promptness and dispatch MODE OF CONDUCTTJfG DfLAND COMMEECE. 205 with wliicli she sliall receive the cargo and perform the voy- age. 4th. The excepted perils, for which the shipowner does not mean to hold himself responsible, and against which he does not intend to insm-e. These are usually acts of God, or public enemies, detentions and restraints of kings, princes, rulers and republics, fire, the dangers and accidents of the seas, rivers, and navigation, and all other unavoidable dan- gers and accidents. 5th. The covenants on the part of the charterer to load and unload within a given time, usually specifying an allowance of so many lay, or running, days for loading and unloading the cargo, providing for the rate and payment of the freight, and also the rate of demurrage beyond the specified time. This latter tenn is employed to express the allowance or compensation for the delay or de- tention of the vessel ; and is often, although not necessarily, a matter of contract. The coast and inland commerce of the country which is conducted through the agency oi sloops, steam-boats, and canal boats, on our rivers, lakes, and canals, is, to a large extent, carried on under season contracts, by which the owner covenants to run, through the season, or such part of it as he may specify, his vessel between such and such ports and places ; to receive, safely transport and deliver, wherever the bills of lading may re- quire, all such goods and chattels of the merchant as are specified, or all that may be ofiered with certain exceptions ; the merchant, on his part, covenanting to lade and freight the vessel during the season, commencing at such a time, and continuing to such a time, paying as freight for the same, at the times specified, at and after the several rates, which are also particularly specified. § 405. This species of contract admits, of course, of very great variety. It is not essential to constitute it that the ship or vessel, as in the cases supposed, should be exclu- sively chartered. That occurs usually where commerce is carried on in its most extensive fonns, both foreign and inland. Besides the chartered, there is what is termed the 20C NATURE AND EXTENT OF DEMUKIiAOE. general sliip or vessel. Tliis is one wliicli is open for the use of merchants generally, in which any number, who are totally unconnected with each other, may contract upon the best terms they arc able, for the transportation of their mer- chandise. § 406. The contract, once entered into, controls the rights of the parties. Its stipulations must be strictly perforaied on both sides. One illustration of this is found in the case of Glaholm v. Hays, 2 M. (& Gran. 257, in which the phraseology " to sail on, or he/ore, a giveoi day,^'' was held equivalent to the words " conditioned to sail,^^ and hence formed a condition precedent, the omission to perform which, would have the effect of discharging the other party. The question, which, perhaps, most frequently arises, relates to the claim for demurrage which, among the great multitude of occasions for delay, often arises for adjustment. Any delay beyond the arranged period will subject the merchant, or party-chartering to its payment, although it may arise from the crowded state of the docks, or from some unforeseen impediment, not at all attributable to his fault ; or if he has not been apprised of the ship's arrival, or the bill of lading has not come to his hands, none of these furnish sufficient reason to excuse his engagement. It must, however, be a delay for the purpose of loading or unloading, and hence where the detention was occasioned by ice, which prevented her from sailing after being loaded, the demurrage was held not to be payable. Pringle v. Mollet, Q M. (& W. 80. The same principle prevails where the owners interrupted the unloading by their wrongful interference. So a delay in starting by tempestuous weather will not be chargeable upon the charterer. Where a certain number of days are allowed for unloading, they are to be reckoned from the vessel's arrival at the usual place of dis- charging its cargo, and not at the entrance of the port. "Where a certain number of days are allowed for such pur- pose, the merchant is entitled to the whole of the time. IJABILITY OF CHAETEEEE. 207 and subjects himself to no cause of action for declining a previous offer of them, provided they arc unloaded within the time. § 407. The duty of the owner is not limited to duly preparing and equipping the vessel for the voyage ; but he is also bound to keep her in good condition, and fully equipped throughout its continuance. Any considerable failure on his part would exonerate the merchant from his obligations under the contract. If either party is not ready by the time appointed for loading the ship, the other should look elsewhere for his ship or cargo, for he can only hold the defaulting party responsible for such damages as he could not, by reasonable efforts, have prevented. Where the ship is hired exclusively for the voyage, and only a part of the cargo is put on board, the charterer is liable for what the vessel could have taken, had a full cargo been furnished. • Duffie V. Harjnes^ 15 John. 327. § 408. If the charter-party is silent as to the condition of the vessel, there is always an implied warranty that the ship is sufficient for the voyage, and hence should there be a latent defect, unknown to the owner and nndiscoverable upon examination, the owner must answer for the damage which has been occasioned by it. Like the common carrier, he is regarded as an insurer against e^ery thing but the ex- cepted perils. His general liabihty is very similar to that of the common earner, as he is made answerable for all losses other than what arise from the excepted cases of tlie act of God and the public enemy. His responsibility be- gins with the delivery on board the ship. lie must see that they arc "properly stowed in a manner usual with such goods. § 400. It sometimes becomes important to determine who, imdcr the provisions of tlic charter-party, is the owner of the ship ; whether the possession of the ship passes to the merchant, so as to constitute liim, for the time, the owner ; and thus to entitle him to the lien for freight. The 208 RELATIVE RIGHTS OF CUAETERER AND OWNER. means of solving this question, mnst bo gathered from the terms of the instrument, or from its purpose and object. A cluirterer -will be considered as owner for the voyage, who not only hires tlie ship during its continuance, but has exclusively its possession, command, and navigation. But where the general owner retains the possession, command, or navigation of the ship, and contracts to carry a cargo for the voyage, the charter-party is considered as a mere affreightment sounding in covenant, and the charterer is not clothed with the character or legal responsibility of owner- ship. Jlmoe V. Groverman^ 1 Cranch^ 214. The true test is whether the charterer is responsible for the conduct of the master and mariners during the voyage. If so, he must be considered as occupying the position of owner. QUESTIONS. How many classes of rights are in this division? Derived from how many different species of contract? "What contracts, and re- lating to what ? What has the contract of affreightment for its general object? What does it embrace? "What is included under it? What double aspect has the contract of affreightment ? What is a charter- party ? Whom have we here as parties ? Who may be a middle man between the two ? Who is the lessee of the vessel termed ? WTiat does the charter-party ordinarily contain ? What is the meaning of the term demurrage ? How is commerce on our inland waters carried on ? By what species of contract ? Is it essential that the ship or vessel should be exclusively chartered ? What occurs in the case of the general ship or vessel ? How is the contract construed ? What illustration ? What question the most frequently arising ? What does a delay beyond the arranged period subject to ? What must it be a delay for the purpose of? How when occasioned by ice? WTien by tempestuous weather? When are days allowed for unloading reckoned from ? When a certain time allowed for unloading, what is the merchant entitled to ? What does the duty of the owner extend to ? What would failure on his part do ? What if either party is not ready at the time appointed for loading the ship ? AVhat is the liability of the charterer where the ship is hired for the voyage, and only a part of the cargo furnished ? When charter- party is silent as to the condition of the vessel, what is the implied warranty ? What if damage results from a latent defect ? How is the BILL OF LADING. 209 owner regarded ? What is his liability similar to ? What answerable for ? When does his responsibility begin ? What must he see to as to storage ? What question as to ownership sometimes necessary to be determined, and why ? What are the means of solving tliis question ? In which of the two cases supposed is the charterer considered thd owner, and in which not ? What is the true test of ownership ? PART n. THE BILL OF LADLXG. § 410. Shipped, in good order, by A B, merchant, in J. K. ) and upon the good ship called the , whereof No. 1. f C D is master, now being in the harbor of New York and bound for Liverpool, England, 20 bales, contain- ing 100 pieces of broadcloth, marked and numbered as per margin, and are to be delivered in the like good order and condition, at Liverpool aforesaid ; (the act of God, the public enemy, fire, and all and every other dangers and acci- dents of the seas, rivers, and navigation, of whatever nature and kind soever excepted,) unto E F, merchant there, or his assigns, he or they paying freight for the said goods, per piece, freight, with primage and average accustomed. Li witness whereof, the master or purser of the said ship, hath affirmed to three bills of lading of this tenor and date ; one of which bills being accomplished, the other two stand void. Dated at New York, the day of . The bill of lading, of wliich the above is a copy, has relation, it will be perceived, solely to the conveyance of the cargo, while the charter-party contracts for the hire of the ship. It is signed by the master as agent for the ship-owner or charterer, and answers the double purpose of a receipt of the goods, and an agreement to carry them to tlieir place of destination. As a receipt it may, as between tlie original parties, be varied and explained by parol. It will be seen that three bills of lading are made out and signed. One of 14 I 210 NEGOTIABILITY OF BILL OF LADING. these is for tlie frciglitcr, anotlicr for tlie consignee, factor, or agent ahruad, and a third nsiially kept by the master for his own use. The whole make but one contract as to the master and owners. It may happen that different parts are indorsed to ditFerent persons, and in that case a competition may arise as to the goods. Tlie rule here generally is that where the equities are equal, the property passes by the bill first indorsed, • § 411. The most peculiar feature noticeable about a bill of lading is its negotiability, or rather the form of it ; for the question as to whether it is really negotiable so as to transfer a perfect title to the indorsee in the Bame sense in which the title, and rights incident thereto, become trans- ferred to the indorsee by the indorsement by the proper party, of a bill of exchange ; or whether such indorsement operates merely as an assignment, giving to the assignee the right simply to the possession of the goods, subject to the real rights of parties, is one of the most difficult known to the law, and one that can hardly yet be deemed fully settled. Lichharrow v. Mason, 2 T. B. G3. 1 II. Black. 357. Note in Newsom v. Thornton, 6 East, IT. Chancellor Kent, 2 Kent's Com. 549, considers the understanding of the law at "Westminster Hall to be that the quality is strictly negotia- ble, and that a title free, and discharged of all equities, is transmitted to the hona fide indorsee for value. But in American editions of 1 Smithes Leading Cases, Y51, in a note to Lickharrow v. Mason, it is attempted to be shown by an analysis of the adjudged cases, that the possession of the bill of lading can clothe the holder with no greater powers than would result from the actual possession of the goods. That it does not constitute title in itself, and merely, therefore, assigns whatever interest the consignor might have in the goods. This may, under all the circumstances, still be re- garded as an open question. § 412. Tliere is no doubt, however, but that the negoti- able or assignable quality of the bill of lading will enable BILL OF LADING CONTROLS THE GOODB. 211 the consignor to control the direction which the goods shall take. And hence, if the bill provide for the delivery to " A for tlie use of B," the purpose being to secure a debt due from the consignor to B, the assent of the latter will be pre- sumed, and the property will pass at once to B, and cannot be attached for a debt of the consignor. Grove v. Brien, 8 IIoio. S. C. 429. And this power of transferring property by means of the assignable quality of the bill of lading, will remain to the consignor as long as the goods are in the hands of any agent of his, and he may alter their destina- tion while on board ; so that, if the master sign a bill of lading for the delivery of goods to A, or his assigns, and the consignor afterwards transmits a bill of lading to B, making them deliverable to him, B will be entitled to them, if nothing further had been done to vest the property in A. Mitchell V. Ede, 11 Adol. c& Ellis, 888. The consignment may also be made subject to any condition that the consignor may choose to insert, and then, if received, it must be subject to the condition. Under the bill of lading, the goods go into the possession of the master or ship-owner, who thencefor- ward becomes a common can-ier of the goods, subject to the exceptions embraced in the bill, until their delivery to the consignee. QUESTIONS. "What does a bill of lading have relation to ? "What the charter- party ? By whom is the bill of lading signed ? What purpose does it answer ? How, as a receipt, may it be varied or explained ? How many bills of lading are made out and signed ? For whom is each one ? What do the whole make out ? What is the rule when different parts are delivered to different persons ? What is the most peculiar feature noticeable about the bill of lading ? Which is it, negotiable or assigna- ble ? By what means is the consignor enabled to control the direction which the goods shall take f What illustration ? How long will the power of controlling property remain with the consignor ? What, if the consignment be made subject to a condition ? Where do the goods go under the bill of lading, and subject to what, and with what exception? 212 OCCASIONS FOE MAiHTIME LOAIIS. PART III. OAJJEIAGE AND DELIVERY OF GOODS. The last part leaves the goods in the hands of the com- mon carrier for transportation. Next, therefore, in order, follow his duties in relation to the carriage and delivery of the goods, and the heavy. responsibilities he places himself nnder. But as this forms a very important branch of the law, we shall defer it to that connection in which it gen- erally comes up for consideration. PART IV. POWER AND AtlTnOEITT OF THE MASTER, IN EEFEEENCE TO MARITIME LOANS. § 412, a. The heavy weight of responsibility under which the common carrier acts, and the many unforeseen hazards attending the movements of commerce, have led to the necessity of maritime loans, and the power and authority vested in the master in reference to them. The character of these loans, the securities upon which they rest, and the power and authority involved in their creation, as well as the mode of their enforcement, are all peculiar, and have grown out of the necessities of commerce. The master of a vessel meets with a disaster, by which an unforeseen de- mand is made upon him for money to enable him to make repairs and complete his voyage. He arrives at a port where there is money, but no knowledge on the part of any one there of the responsibility of the master or owners of the vessel. But there is the vessel, its accruing freight, and its cargo, all within the view of the capitalist. But neither of these belongs to the master, who is the mere agent of the owners, and ordinarily, according to the principles of the common law, he could give to others no rights as to either. But a higher law here interposes, and permits him, with a view to the safety of his ship and cargo, to pledge, for the SUBSTANCE OF BOTTOMKY BOND. 213 necessary funds, the vessel, and freight, and, if necessary, even the cargo. This is done upon what are termed bottom- ry and respondentia bonds. If the loan be made upon the vessel and accruing freight, it is termed bottomry, if upon the cargo, respondentia l)onds. The object, and most of the princif)les governing both, are the same. § 412, T). Tlie substance of the contract in the case of the hottomry lond is that, in consideration of a certain sum of money advanced for the use of the ship, the borrower un- dertakes to rejDay the same "with a stipulated rate of interest, provided the ship shall terminate her voyage successfully ; and for the performance of the contract, he binds or hypothe- cates the keel, or lottom of the ship, and hence the origin of the term hottomry. This may be in the form of a deed, called a bottomry bill, but more generally it is in that of a bond. But in whatever 'form, the contract should be clearly stated, — the amount loaned, the interest to be paid, usually far beyond the legal rate of interest ; the condition upon which repayment, both of principal and interest, depends ; the safe arrival of the vessel at the termination of the voyage ; and the number of days within which the same shall be paid after such arrival. It will be seen from this, that the lender takes the entire risk of the voyage. The fact that not only the interest, but the capital also, is put in jeopardy, removes it from the taint of usury, and tlms avoids all objection from that source. There are no techni- cal terms required in the formation of this contract. Tlie tersest mercantile phraseology may be employed. Tlie words " I bind myself, my ship and tackle, to pay the sum borrowed, with twelve per cent, bottomry premium, in eight days after my arrival at the port of London," were held sufficient ; the words " my arrival," being construed by the court to mean the ship's arrival. Simonds v. Hodgson, 3 B. (& Ad. 50. The bond usually specifies the risks which 214 EFFECT OF SUCCESSIVE BOTTOMEY BONDS. the lender is to run, and these are essentially the same as those against which the insurer indemnifies. § 413. The condition of repayment is the safe arrival of the vessel. Tliis suggests the question as to the character of loss which can have the cfiect of exonerating. And here there is no such thing as a constructive total loss. Nothing short of utter annihilation will discharge the borrower. K any jDortion of the vessel be saved, it continues subject to the hypothecation, and to that only can the lender look for his indemnity. The bottomry bond is really a mortgage, by which the master pledges the ship as security for the money borrowed, covering also the freight, — the shij)'s earn- ings, — during the time limited. On the safe arrival of the ship, or of any part of it, if the sum borrowed and interest be not paid within the stipulated time, the lender applies to the Court of Admiralty, in which such proceedings may be had, as that a decree of sale may be obtained, the proceeds of which are divided among tlie respective claimants as justice shall dictate. And if there are several successive bottomry bonds, the ordinary principles that govern succes- sive liens are reversed, and instead of being the first that is preferred in the payment, it is the last, and the discharge is in the inverse order in which they ai'e given. The prin- ciple which gives origin to this rule, is derived from the equity of the case. It is the last loan that enables the vessel to reach the port in safety, and but for it all the previous ones would be lost. As that, therefore, is really the means of securing the payment of the others, there is a clear equity in allowing it the precedence in payment. One condition, however, is essential to be made out, and that is, that the last loan was necessary to enable the vessel to continue and complete its course. § 414. A question may here arise as to the rights of the lender where the ship or cargo is lost through the default of the master. The loss does not then fall withiu the perils wliich are at the risk of the lender. That is not, therefore, WHAT IS ESSENTIAL TO B0TT03IKY BONDS. 215 a hazard wliich he assumes. As the loss occurs through the ignorance or misconduct of the master, the lender is enti- tled to the legal presumption, that but for that, the vessel would have reached the port in safety. Such a loss, there- fore, works a forfeiture of the bond, which must accordingly be paid, although the lender now has only the personal se- curity of tlie master and owners to rely upon. So also if the ship be lost on the voyage, and the cargo forwarded by another ship, the lender is entitled to payment, as the con- tract, in its si:>irit, has then been performed. § 415. It is essential to the very natui'e of this contract that there be risk and hazard, and also that the ground and reason of the loan should be necessity. " JVcccssity" says Lord Stowoll, " is the vital principle of hypothecation, and the Court of Admiralty will consider every circumstance, will go into the whole history of the voyage, in order to determine whether there be that necessity, without which an instrument of hypothecation is void." After the hazard has once been incurred, the condition is satisfied. Tlie voyage once commenced after the completion of the loan, although the vessel be forced back by the perils of the sea into the port of departure, and the voyage be finally aban- doned, yet is the lender entitled to his principal and interest, for the whole has been subject to hazard. The bond depends exclusively upon the security of the ship, and cannot be made to cover advances upon the personal security of the bor- rower. But it constitutes the first lien uj^on the ship ; and athough there may have been a mortgage or a prior lien of any other description upon it, yet this supersedes all others, and is to be first satisfied ; and tliis, it is obvious, must be so, or the lender could never have any safety in making his advances. § 41G. It has been made a question whether as the motive to make the loan may be supposed to have ceased upon the departure of the ship, a loan of this description can be good if made after the ship's departure, and while at sea ; but it 21G TAIiTY TO EXECUTE BOTTOMEY BONDS. secins now to bo generally understood in this country that Bucli loan is good, if made after the ship has departed, and the goods arc at risk. The lender assumes no hazard as to the application of the money. The master may wholly misapply it, without affecting the rights of the lender. Hie latter has only to convince himself of the necessity of the loan, and to take the aj^propriate risks. He has nothing to do with the use made of the money after he has loaned it. § 417. fflic master of the vessel has the undoubted power and authority to make this loan, but only under certain cir- cumstances. It must be in the absence of the owner, after the vessel has started from its port, and has reached some foreign port, where the owner does not reside. The law, however, does not render it necessary that the ship or cargo should be in a foreign port. A loan of this character, made in a j)ort of the same country where the owner resides, is good, if it arise from necessity, and there be no ready means of communication with such owner. He has no right to hypothecate for a pre-existing debt, and the neces- sity of the loan must be shown to have existed at the time it was made, and that the master had no other resource for raising the money. QUESTIONS. On what are maritimG loans, and the power and authority of the master, grounded ? What have they grown out of ? Under what cir- cumstances are they justifiable ? "What is a bottomry bond made upon ? What a respondentia? What is the substance of the contract in a bot- tomry bond ? In what form may the contract be ? What is the condi- tion upon which the repayment depends ? Who takes the risk of the voyage ? What removes the contract from the taint of usury ? What may not, and what may, be employed in the formation of the contract? What does the bond usually specify ? And what are these risks ? What kind, or extent of loss, will excuse repayment ? What, if any portion of the vessel be saved? What is the bottomry bond in substance? What does it do ? What, and where is the remedy ? What is the rule, where there are several successive bottomry bonds ? Why is the general rule reversed in this case ? What condition necessary to give lien to the last bond ? What is the rule where the loss occurs throuah default of DUTIES OF THE MEECHANT. 217 the master ? What effect does such a loss work upon the bond ? How- is it if ship be lost, and cargo forwarded by another ? What is the ground of all risk and hazard ? When is the condition satisfied ? How is it if the vessel is forced back, and voyage abandoned ? What does the bond depend upon ? What kind of lien does it constitute ? Is a maritime loan good, if made at sea ? Does the lender assume any hazard as to application of the money ? Suppose the master misappKes it ? Of ■what has the lender to convince himself? Under what circumstances has the master power and authority to make this loan ? How as to presence of owner ? Can it be made in a port other than a foreign one ? What must be shown at the tune to justify the loan ? PART V. DUTIES OF THE MEBCIIAXT. § 418. The duties of the merchant relate to the full and perfect performance of what he has undertaken by his con- tract. He must lade the ship within the stipulated time, and if no time be stipulated, within a reasonable time. It must be with the stipulated cargo ; and he must put on board no contraband goods, or those of any description that will work a forfeiture. A failure in any of these respects will subject him to the damages incurred, lie must also pay the charges due on his commodities. Of these, by far the most important is the payment of freight ; but this will be more appropriately considered in connection with the law of common carriers. PART VI. GENERAL AVEEAGE. § 419. Independent of the freight, there are some other charges of small amount which the merchant is called upon to pay, and which are usually provided for in the bill of lading. Such is iwimage^ which is a small customary pay- ment to the master for his care and trouble. So also de- murrage^ which has already been considered ; and average^ by which is meant several petty charges, such as towage, bea- conage, &c. But another charge, of much more importance 218 -WHAT GIVES EISE TO GEl^EAL AVEEAGE. to consider, and which, like contracts of Lottormy and respondentia, grows out of the peculiarity of commercial navigation, is what is termed general average. This means the contribution which the property saved is called upon to make, in order to ]3ay for the loss of other property which has been voluntarily sacrificed in order to save the re- mainder. The simplest case is that of a storm at sea too severe for a heavily laden vessel to weather. The obvious resource of the captain, or the master in command, is to lighten the vessel by throwing overboard the less expensive and more ponderous merchandise, and by that means to enable it to outride the tempest, with as large a part of her cargo as possible. The owners of that portion of the cargo which was sacrificed to secure the safety of the rest, had an equal right with the others to have it transported to its place of destination, and there to realize its proceeds. There is therefore no reason why they should be called upon to suffer the entire loss, while the others, whose property was saved at its expense, should suffer nothing. There arises, therefore, from the very nature of the case, an obvious equity, out of which has grown the legal rule, that all the property saved, shall contribute to all losses voluntarily in- curred to save it from a like destruction. § 420. The first inquiry that naturally presents itself here, is to ascertain the cases in which the law will enforce general average. And here, although the principle is a plain one, and, it should seem, ought to present no real diffi- culties, yet many do occur in its application. In the first place, it is limited to such voluntary sacrifices as secure the safety of ship or cargo, or a portion of it, and has no appli- cation where any loss of life has been prevented by the sacrifice. It is the voluntary sacrifice of property, to save other property, that can alone bring it within the principle. § 421. But the cases in which property has been sacrificed to save other property, seem somewhat conflicting as to whether they do, or do not, come within the principle. A WHAT EMBKACED TJNDEE GENEEAL AVEEAGE. 219 sliip is injured by a peril of the seas, and compelled to go into port to refit. Are tlio wages and provisions of tbe crevr, during the detention, such losses as require contribution by general average ? In ISTew York and Massachusetts they are ; in England they are not. So it has been held that the wages and provisions of the crew, during capture and de- tention for adjudication, are a proper subject for general average ; while in the case of a vessel detained by an em- bargo, they are not so subject, but arc chargeable exclu- sively upon the freight. The cost of repairs which benefit the ship alone, and would have been unnecessary in the port in which they were made, do not come within the prin- ciple ; but if they are incurred for the benefit of the cargo, and to save that, they come within the principle. § 422. The principle embraces every voluntary saciifice or surrender to save property. Where a part of the cargo is voluntarily delivered up to a pirate or an enemy, as a ran- som or contribution to save the vessel and residue of the goods, that which is saved must contribute to such loss. So also masts, cables, and other equipments which are cut away to save the vessel in a case of extremity, are to be contributed for by general average ; but if the masts and sails are destroyed as a consequence of carrying an unusual press of canvass, they are not the subjects of such contribu- tion, although they were cut away and abandoned for the preservation of the ship, Tliis principle does not limit to the actual loss or injury of the subject-matter, as to which the contribution is claimed, but embraces also such expenses as are incurred in and about it for the common good, as the unloading the cargo in order to repair the ship. The volun- tary stranding of the ship to escape tempests, or the pursuit of an enemy, has always been held to entitle to general ave- rage where the ship was subsequently recovered, and per- formed her voyage. But there has been a conflict as to such right when the ship was lost. In this country, however, the preservation of the cargo in such case entitles to con- 220 PROPEETY SUBJECT TO GENERAL AVEKAQE. tribution. Columbian Ins. Company v. Ashhy, 13 Peters^ 331. § 423. Tlie loss which it is thus proposed to compensate must not have been accidental, or the result of natural causes. The casting overboard and loss must have pro- ceeded from no such sudden impulse as to exclude the exer- cise of judgment and will. In all cases where it is possible, a consultation should be had. Wlierc the peril is imminent, that may not be possible, but a deliberate act of the will is still rendered necessary. This is evidenced, and required to be so, by the kind and character of the property sacrificed. Tlie first abandoned must be those things that are the least necessary, the heaviest, and of the lowest value. The ap- proach must be gradual, and only as the necessity increases, to the abandonment of articles of great value. § 424. This suggests another subject of inquiiy, and that is, what goods are liable to contribution, and in what pro- pol*tions. The general rule is that all merchandise of every description is thus liable. As the safety obtained thereby is the ground of the contribution, bullion and jewels, which are on board as merchandise, are not exempt. The rule subjects to contribution those articles that pay freight, and limits it to freight-paying, making articles contribute ac- cording to their value, and not their weight. Instru- ments of defence and provisions, as they are necessary to all, do not ordinarily contribute ; but if they are sacrificed for the common safety, they are to be paid for by contribu- tion. The wages of seamen contribute only to the ransom of the ship. The principle of voluntary loss for the purpose of saving, applies also to the case where a part of the cargo is sold for the necessities of the ship ; as this is a sacrifice for a similar purpose as the case of an abandonment ; and if the ship be afterwards lost, the goods saved must contri- bute towards the loss of the goods sold, the same as if they had been thrown overboard. . § 425. One more inquiry under this head remains, and now GENEEAL AVERAGE AEEIVED AT. 221 that relates to the mode of adjusting the average. What property is to contribute, and at what price ? The practice is to make and state an account of the articles that are to contribute, in which the property sacrificed is also included, because otherwise its owners would receive its full value without paying any thing towards the loss. Another ac- count is then made of the losses which are to be replaced. The valuation adopted in both these accounts is the clear net price which they would have yielded, after deducting freight, at the j)ort of discharge. The average is commonly adjusted by the brokers, and if insured, is paid by the in- surers of the different parties chargeable. Tlie ship owners contribute according to her value at the end of the voyage, and according to the net amount of the freight and earnings. When the vessel is lost, and is to be replaced by conti'ibu- tion, her value is estimated at her port of departure, allow- ing for the wear and tear up to the time of the loss. It is the duty of the master to have an adjustment made at the port of destination upon arrival, and he has a lien upon the cargo to enforce the payment of the contribution. Strong V. The New York Firemen Insurance Comjpany^ 11 John. 323. QUESTIONS. "WTiat do the duties of the merchant relate to ? "What must he do ? What does a failure subject him to ? "What must he pay ? "What besides freight ? "What is meant by general average f "What is the simplest case presented ? What is the equitable rule arising from it ? To what cases is the rule requiring general average limited ? What is it that brings a case within the principle ? Are the wages and provisions of the crew, while refitting, subject to average ? Are they so subject while captured and detained for adjudication ? What the rule while detained for an embargo? How is it with the cost of repairs? When do they, and when do they not, come within the principle ? What does the principle embrace ? What the rule, where a part of the cargo is voluntarily given up to a pirate or enemy as a ransom ? What, when masts, cables, «&c., are cut away to save the vessel ? What, when destroyed by carrying too much canvass? Does the principle extend beyond loss or injury to sub- ject-matter? And embraces what besides ? What rule where the ship 222 WHAT IS SALVAGE AND WUO ARE SALVOES. is voluntarily stranded without Ijcing lost?* "What, -where stranded and lost ? What must not the loss be occasioned by ? What, if it proceed from sudden impulse excluding judgment and will? When should con- sultation he iirst had? What is necessary ? By what is this evidenced, and required to be so ? What species of property first abandoned ? How must the approach be to articles of value ? What goods are liable to contribution ? What is the ground of contribution ? When do bullion and jew^cls contribute ? What kind of articles are subject to contribu- tion ? What limitation is there ? Do instruments of defence and pro- visions contribute ? How, if sacrificed for the common safety ? To what do seamen's Avages contribute ? What is the rule where a part of the cargo is sold for the necessities of the ship ? And how if ship be afterwards lost? What proceedings in adjusting the general average? What is included in the statement of the property that is to contribute ? What other account is necessary ? What valuation is to be adopted ? By whom is the average adjusted, and by whom paid ? What valuation is attached to ship ? What is the duty of the master ? And liis right ? PART vn. SALVAGE. § 426. Anotlier peculiarity which has grown out of commercial pursuits, is the law of salvage. This term ex- presses the compensation to be made by the ship owner or merchant, to other persons by whose assistance the ship or its lading may be saved from impending peril, or recovered after actual loss. This applies equally to rescues, whether they be of ship or cargo from the perils of the sea, or from the hands of enemies. In cases of goods derelict at sea, or captured, the ship or cargo, one or both must be in immi- nent peril. The salvors, a class of men often devoted to that kind of business, volunteer their efforts to rescue the property. If unsuccessful, they receive no compensation, as the rendition of their service is without request, and hence imposes on no one the obligation of payment. But if suc- cessful, the policy of the law permits him to look for his indemnity to the property rescued, or to its owners who re- ceive the benefit, and who would have sustained the loss if their efforts had not intervened to prevent it. When the AMOUNT OF SALVAGE, AND WHO MAY BE SALVOES. 223 salvage occurs of goods wrecked, that is thrown hj the sea upon the land, the rights of the salvors and the proceedings in the State of New York, and in some of the other States, are regulated by statute ; but when the peril occurs at sea, and the goods are what is termed derelict^ it is then a matter of admii-alty or maritime jurisdiction, and is subject to maritime law. Tliat jurisdiction, however, embraces all rivers navigable from the ocean, as far as then* waters are affected by the tidal movements. And hence, where a part of the contents of a canal boat sunk in the channel of the Hudson Eiver, where the tide ebbed and flowed, was res- cued by salvors who claimed a lien upon it for their services, it was held that this came under the general principle of goods derelict at sea, and that the salvor had a lien for his salvage. Baker v. Hoag^ 3 Seld. 555. § 427. Tlie amount of the salvage, where it is not regu- lated by statute, is left to the discretion of the Court of Admiralty under the circumstances of the case. Tlie amount varies according to the labor and peril incurred by the salvors ; their meritorious conduct ; the value of the ship and cargo, and the peril from which they were rescued. The most usual rate of allowance has been one-third of the property ; but sometimes one-fourth, and then again one- half the gross or net proceeds of the projierty saved have been adjudged to the salvor. The object is not only to reward meritorious service, but also to incite to strong efforts in such cases. § 428. In regard to the persons who are entitled to be- come salvors : the rule of exclusion is that so long as a person, whether seaman, officer, pilot, or other person, is acting within the line of his duty in the given case, he can have no valid claim for salvage remuneration. lie is then hired and paid for liis services, and tlicrc is no consideration for any thing extra he can render. A salvor, therefore, is a person, who, witliout any particular relation to the ship or cargo saved, tenders useful service, and renders it without 224 WHO MAY AND MAY NOT BE SALVOES. any pre-existing contract making sucli service a duty. This would exclude the master, pilot, passengers, seamen, and all Buch, whose services rendered may be fairly considered as due to the service in which they are employed. But a pas- senger, or an officer, acting as such, for extraordinary exer- tions beyond what his duty demands, may become entitled to salvage. But such an abandonment of the ship as will discharge the seaman from his contract, leaves him at liberty to proffer his services as salvor, and any contribution he may subsequently render to the preservation of the ship or cargo, will entitle him to salvage. And even though such contract be not dissolved by shipwreck, yet for the rendition of peculiar services in preserving the wreck and fragments of the ship and cargo, which are without the line of his regular employment, he may be entitled to salvage And as the duty of the seaman ceases by capture, any services they may subsequently and successfully render to recover the captured ship, will entitle them to salvage. QUESTIONS. "WTiat is meant by salvage ? What does it apply to ? Wiio is tlie salvor ? What is the rule, in case he is nnsuccessful ? How if success- ful ? To whom may he look for remuneration ? When is the wreck or loss, a matter of State, and when of Admiralty jurisdiction? What does the Admiralty jurisdiction embrace ? How far does it extend upon inland waters ? How is the amount of salvage regulated ? Upon what principle is it made to vary ? What is the usual rate of allowance ? What the limit of its variation ? What the object ? Who are excluded from being salvors ? Who must a salvor be ? Who does this exclude ? Under what conditions may a passenger or officer become a salvor ? What effect in regard to salvage does abandonment of ship, and dis- charge of seamen have ? How, suppose snch contract be not discharged by shipwreck, and the services rendered be peculiar ? How as to ser- vices rendered in recapturing the vessel ? MODES OF DISSOLVING CONTRACT OF AFFREIGHTMENT. 225 PART YIII. DlSaOLrTION OF THE COKTEACT OF AFFEEIGnTMENT. § 429. The peculiarities wliicli seem incidental to thia contract continue throughout, and constitute some of the modes of its termination. Its dissolution before completion, may occur, not onlj by the act of the parties, but also by the act of the law under the following circumstance?. 1. Sliould the voyage become unlawful ; or 2. Of impossible performance ; or 3. Broken up, either before or after :"ts actual commence- ment ; and this may occur by war, or the interdiction of commerce with the place of destination. And it is imma- terial in this latter respect whether the interdiction be com- plete, preventing the entry of the vessel ; or partial, relating only to the merchandise on board, and preventing it from being landed. The blockade of the port of destination, thus preventing the landing, discharge, and taking in the return cargo, is sufficient to dissolve the contract. So, also, if the shipper cannot demand the delivery of the goods, by reason of their being exposed to seizure by landing. So, if thero be a capture on the passage, thus breaking wp the voyage so as to cause a complete defeasance of the under- taking, although there may be a subsequent recapture. § 430. But a mere temporary impediment in the way of the voyage, such as an embargo, although for an indefinite period of time, operating merely as a temporary restraint, does not work a dissolution of the contract. A blockade of the port of departure has also the same effect, merely suspending, not dissolving, the contract. To have the latter effect, the voyage must be broken up, or the completion of it become unlawful. Even capture docs not, of itself, destroy the contract. It suspends it during the prize pro- ceedings, and it re-attaches in case of recapture. In all such cases, the parties must wait until those obstacles which 15 226 DEFINITION OF BAILMENT. merely retard its execution, are removed. If the cargo can endure delay, iiutliing but occurrences wliicli absolutely prevent the execution of the contract, will discharge it. QUESTIONS. What are tlie modes by which the contract of affreightment, hefore its completion, may be terminated by act of the law? Is it necessary that interdiction be complete? May it be sufficient if partial? And applied to what, and how ? When is a blockade, and of what, sufficient? When is inability to demand delivery of goods, and for what reason, sufficient ? What effect has a capture on their passage ? What effect, in this respect, has a mere temporary impediment to the voyage ? What illustration of it ? What effect has blockade of port of departure ? What necessary to work dissolution of the contract ? What effect, in this respect, has capture ? What must parties do in case of obstacles ? What sort of occurrences are required to discharge the contract ? CHAPTER II. CONTRACT OF BAILMENT. PART I. DEFINITION. KINDS. NEGLECTS. § 431. A bailment is a delivery of goods in trust upon a contract, express or implied, that the trust shall be faith- fully executed on the part of the bailee. Tlie party deliver- ing is the bailor ; the party undertaking the trust, the bailee. The subject-matter — the goods delivered, and in relation to which the trust is undertaken, are either personal property, or the services of those who are hired. It will be perceived, the definition states no consideration to support the undertaking to perform the trust. This is rendered uimecessary by means of the delivery. That act on the part of the bailor, and the acceptance charged with the trust to be performed on the part of the bailee, is held to constitute a sufficient consideration, and thus give the bailor a legal right to require the execution of the trust. DIFFERENCE BETAVEEX SALE AND BAILilENT. 227 § 432. The point around -u-liich gatliers the most interest, which is the most important for Inisiness men to understand, and which has created no small difficulty in the courts, is to discriminate clearly, and distinguish the exact difi'erence between a bailment and a sale, so as to be at no loss in de- tennining which belongs to one, and which to the other. A miller gives an agreement to a merchant or faraier, containing the following language : " I agree to take of tlic plaintiffs all the wheat they have at their store-house of a good merchantable quality, and to give them one barrel of first-rate, superfine flour, for every four and f f bushels of wheat." Another gives an agreement in the following language : " We, the plaintiffs, agree to deliver to the defendant, a miller, a quantity of good, merchantable wheat, be the same more or less, to be manufactured into flour. For every four bushels and 15 pounds of wheat, is to be delivered one hundred and ninety-six pounds of superfine flour." The rights and liabilities of the parties arc entirely different under these two agreements. The first is a contract of sale, in which so much wheat is agreed to be sold for so much flour. The title to tiie wheat passes on delivery, and if the mill containing the wheat were destroyed by fire, the loss would fall upon the miller. lie must still perform his con- tract to furnish the flour. Tlie last is a contract of bailment in which the wheat is delivered for a given purpose, viz. : to be manufactured into flour. The title to the wheat does not pass by delivery, but remains in tlie bailor. In case of its accidental destruction, without the fault of the bailee, the loss would fall entirely on the bailor, and the bailee would be absolved from his trust. The line of distinction running througli the cases will be found to be this. Where the thing to be delivered is capal)le of identification throughout, or where its proceeds, or the forms into which it may be changed, are to be kept distinct, and to be treated as the thing itself, it is a case of 228 KINDS OF BAILMENT AND NEGLECT. bailment. Otherwise it is one of sale. Illustrations. Ncyr^ ton V. Woodruff, 2 Comst. 153. Mallory v. Willis, 4 Comst. Y6. Wachworth v. Alcott, 2 Seld. C4. Foster v. Pettihone, 3 /&^c?. 433. A different conclusion has been arrived at in Virginia in the recent case of Slaughter v. Green, decided in tlie Com-t of Appeals of that State, 1 Band. 3, in which wheat had been delivered at a mill to be ground, on an agreement that the miller should return to the farmer a given quantity of fiourfm' so many hushels of wheat. The wheat being consumed by a fire, it was held a case of hail- ment, and the miller not accountable for the loss. This is in direct conflict with the New York decisions, and may, perhaps, have the effect to leave the question an open one in general jurisprudence. § 433. There are five different kinds of bailment. The deposit, the mandate, the loan for. iise, the pledge, and the hiring, which is of several different kinds. All these sev- eral kinds, however, are brought under the dominion of three different principles. , 1. Those in which the execution of the trust is for the exclusive benefit of the bailor, or of some person other than the bailee. 2. "Where that execution is exclusively for the benefit of the bailee. 3. "Where such execution is for the benefit of both par- ties ; or of one of them, and a third party. § 434. There are three diflerent kinds of neglect, for which the different kinds of bailees may render themselves liable. 1. Ordinary neglect, which is defined to be the omission of that care, which every man of common prudence, and capable of governing^ a family, takes of his own concerns. 2. Gross neglect, which is the want of that care which every man of common sense, how inattentive soever, takes of his own property. 3. Slight neglect, which is the omission of that diligence OBLIGATION OF TUE DEPOSITARY. 2 2 'J Trhicli very circumspect and tliouglitful persons use in secur- ing their own goods and cliattels. QUESTIONS. "What is bailment ? "Who are parties, and what called ? TVhat is the Eubject-matter, or thing bailed ? "What stands as the equivalent for the consideration ? What is a form of contract creating a sale ? What effect upon the rights of the parties, in case of loss ? "What form of contract creating a bailment ? What effect upon rights of parties in case of loss ? What is the criterion distinguishing a bailment from a sale ? WTiat are the different kinds of bailment ? What three different princi- ples hold dominion over these different kinds? How many different kinds of neglect are there ? Specify and define each one. PART II. DEPOSITS. § 435. A deposit is a mere naked bailment of goods to be kept for the bailor, without reward, and to be returned when so required. We have here two parties — depositor, or party depositing, and depositary, or party taking charge of the deposit. It must be a trust volimtarily undertaken, and without recompense. Where the bailee is ignorant that he is a depositary, he is not answerable. § 436. The depositary assumes the obligation of keeping the deposit with reasonable care. Tliis binds him on 1^^ to slight diligence, and renders him answerable only for gross neglect. As both diligence and negligence have many gra- dations, with no clearly defined margins, there is always a difficulty in any case that presents itself, in fixing the limit of liability. This limit is not a fixed one, but varies with the nature, value, and quality of the deposit ; the circum- stances under which it is made; and sometimes upon the character, confidence, and particular dealings of the parties. It has been said that the depositary must take the same care of the goods deposited as he takes of his o"wn. But this, if adopted as a rule, would in each case necessitate the inquiry what care the depositary was in the habit of taking of his 230 TO KEEP, AND TO KEEP SAFELY. own property. The slight diligence to which the depositaiy is held, means that degree of it which persons of less than common prudence, or indeed, of any prudence at all, take of their own concerns. § 437. Much doubt relating to the nature and effect of acceptance was created, and long remained, arising out of an inference drawn by Lord Coke in Co. Litt. 89 a. h., from Southcoie's case, Cro. Elis. 815 ; viz. : that there was no dif- ference between a general acceptance to Iceep, and a special acceptance to heep safely, and hence that if a depositary de- sired to be exonerated from loss by theft, he must make a special acceptance to keep the goods as he would his own. This doctrine would throw upon the general depositary a far greater amount of liability than the law devolves upon him. Inasmuch as the delivery and acceptance constitute the con- sideration upon which the trust is enforceable, and there can be no delivery without an acceptance, as the trust must be voluntarily undertaken, it is clearly the right of the deposi- tary to make such a special acceptance as he may deem proper, and when so made, it qualifies his liability. It is, therefore, in the power of the depositary, if he accept the trust at all, to accept it subject to just the grade or degree of liability he may choose. The inference drawn by Lord Coke, was distinctly overruled in Coggs v. Bernard, 2 Ld. Raymond, 909. The acceptance may be subject to a par- ticular place of deposit, as on the deck of a ship, and when the de230sitor intrusts his goods, knowing how and where the depositary will keep them, he must be held as assenting to such a mode of keeping them and hence cannot complain of their loss by the ordinary perils to which they are there- by subjected. Knoioles v. A. & St. L. Railroad Co. 38 Maine, 55. But a general acceptance subjects only to the lowest degree of liability. It impliedly stipulates that some degree of care shall be taken of the deposit, but it approxi- mates gross negligence, on which the line of liability runs, so very near to bad faith and actual fraud, that there seems USE OP DEPOSIT. 2<5l to be but little distiiiction between tliem. Foster v. The Essex BanJc^ 17 Mass. 479. The degree of care and diligence which ouo-ht to be required accordmg to this case, is to be measured by the carefulness which the depositary uses to- wards his own property of a similar kind. Although the fact that this same degree of care was taken by the depositary is always admissible in evidence, yet, if it be fully proven, it is not necessarily a conclusive answer, as it is competent not- withstanding to show that the loss was owing to gross negli- gence. Doorman v. Jenkins., 2 Ad. (& El. 256. Li ordinary cases, however, that proof would be sufficient ; for as gross neghgence implies little if any thing short of bad faith, the fact that he keeps the goods deposited with the same care that he does his own, is at least evidence of his honesty. If his character was dissolute, careless, and reckless, the depo- sitor should not have deposited with him his goods, without some compensation, which would have enabled him to have exacted a higher degree of care and diligence. § 438. A question will often arise, as to how far the depositary is at liberty to use the thing deposited ? And the rule here is well ex]3ressed in the French code, that the depositary has no right to use the deposit without the express or presumed permission of the depositor. The express per- mission is, of course, always sufficient. The permission may be 'presumed whenever the use would obviously benefit the thing itself, without exposing it to extraordinary perils. A horse, for instance, may be exercised, and a milch cow milked, to preserve the health of each. But jewels deposited should not be worn, for although the use might not injure, yet it would subject them to greater risk of loss. § 439. Another question relates to the extent or amount of interest or property which the depositor should have in the thing deposited ; and also what special property, if any, passes to the depositary in virtue of the deposit. In regard to the first, it is licld that no absolute title is necessary ; that a mere special property is all that is essential ; and even 232 OBLIGATION TO EETUKN, AND WHAT WILL EXCUSE IT. that a bare possession of the personal chattel is sufficient to enable him to dej^oslt it, and to give him the ordinary rights against the depositary. As to the second, although the general doctrine has been asserted that all bailees have a special property in the thing bailed, yet, as now understood, the depositary has no special property in the deposit, and yet, in virtue of his possession, and of his liabilities over to the owner, he has undoubtedly a right of action against a mere wrong doer who deprives him of that possession. As his possession is a rightful one, the law gives him adequate power to protect it, and also sufficient to enable him to answer to the depositor. § 440. Another obligation devolved upon the depositary is to return the deposit whenever required to do so, Tliis return must be of the individual thing deposited, and in the same condition in which it was received. It is not limited to the thing itself, but embraces also all increase or profits which may have been realized from it, K the deposit is of a perishable nature, it may be sold, and the proceeds re- turned in its place. In either one of the following instances, a return Avill be excused. 1. "Where it is destroyed by an accident. 2. "Where it perishes by its own inherent defects. 3. "Where its destruction is owing to its own perishable quality. 4. "Where the loss is owing to the slight, or even ordi- nary neglect of the depositary. § 441. A question has arisen whether the innocent bailee is responsible to any other person than to his bailor or his personal representative. He stands upon the strength of his bailor's title, and has engaged to make restitution to him. Hence it was once supposed that to him he was only liable. But it is now considered that he is liable to the true owner ; that he can never be in a better situation than his bailor ; and that the owner ought always to be entitled to reclaim his property wherever he can find it. The de- OBLIGATION IN CASE OF JOINT BAILMENT. 233 positary, however, is charged -^-ith no duty in the ascertain- ment of title, and hence if he deliver to the bailor in good faith, not knowing the claim of the true owner, he cannot be made liable to the latter. Nelson v. Jonson^ 11 Ala. 216. !N"o liability attaches to the depositary until he is guilty of some default, some conversion, or some act of gross negligence productive of loss ; and unless the deposi- tor or owner relies upon j^i'oving some such, he should not bring an action without first demanding the property and obtaining a refusal to surrender it, which is always held equivalent to a conversion. § 442. A difficulty may arise as to whom the delivery is to be made where there has been a joint bailment. In such a case, the delivery must be made to all the bailors together, or to one with the consent of all. When there are joint depositaries, each is liable for the restitution of the whole deposit. The place of restoration, if not agreed upon, should be where it is found, or where it ought to be kept. The demand may be made wherever the depositary may happen to be, but tlie offer to deliver at the place where the property is, or at his dwelling-house, or place of business, will be sufficient. § 443. Although it is of the very essence of this species of bailment that no compensation shall be allowed the bailee, yet he is entitled to reimbursement for all necessary expenses, and for all such expenditures as he may have been called upon to make, which were necessary to the preserva- tion of the deposit. The request to assume the duties inci- dent to the bailment, is a sufficient authority on the part of the bailor to expend such moneys out of wliich a sufficient promise can be extracted for their reimbursement. QUESTIONS. "What is a deposit ? Who the parties ? ITow must the trust be ? What ohligation docs the depositary assume ? What docs this bind him to? What render liim answerable for? What difficulty is there iu fixing tlic limit of liability ? How is this limit made to vary ? What is 234: MANDATE AND 6UBJECT-MATTEE OF IT. objcctioiifihlo in the rule that the depositary must take tijc same care of the goods dei)0.sited as of liis own? What docs slight diligence mean? Is tlio depositary at liberty to make any special acceptance lie may choose ? What is the effect of a special acceptance ? What, if it bo subject to a particular place of deposit ? What does a general accept- ance subject to ? What does it impliedly stipulate ? To what does it nearly approximate gross negligence ? Is the fact that similar care has been exercised as of one's own property admissible in evidence ? Can there be a recovery notwithstanding ? What is such fact evidence of? If character is dissolute, careless, and reckless, who sustains loss, and Avho should sustain it ? What is the rule as to depositary's using the things deposited? When may the permission be presumed? What illustrations? Must depositor have absolute title in thing deposited? What is essential to enable him to deposit ? Has depositary special property in deposit ? What are his rights as against wrong doers, and on what founded ? What is another obligation devolved on the de- positary ? What must the return be ? And in what condition ? What must it embrace ? What if the deposit be of a perishable nature ? In what instances may a return be excused ? Is innocent bailee responsible to any other than his bailor? To what other may he be responsible? On what principle ? Suppose he delivers deposit in good faith to bailee when it belongs to another ? When docs liability first attach to deposi- tary ? What should depositor or owner do before bringing suit ? To whom is delivery made in case of joint bailment ? How when there are joint depositaries? What is the place of restoration? Is depositary entitled to be reimbursed for expenses and expenditures? On what prhiciple ? PART III. MANDATE. § 444. A mandate is when one undertakes, without re- compense, to do some act for another, in respect to the thmg bailed. The person employing is called the mandator ; the person employed the mandatary. Tliere are three things necessary to create a mandate : 1. The subject-matter of the contract, or some act or business to be done in relation to it. And the thing to be done — the labor and services — are here regarded as the principal object of the parties, while the thing in or about which they are to be rendered is merely accessorial. NON-FEASANCE AND MIS-FEASANCE. 235 2. "Whatever is stipulated to be done must be gratuitous. 3. Tlie parties must voluntarily intend to enter into tho contract. Tlie act to be done must have some qualities, as : 1. It must be something to be done in the future. 2. It must have respect to something that is certain, otherwise no contract can arise. 3. It must be of such a nature that it may be deemed the mandator's act through the mandatary's insti-umen- tality. 4. It must be of a nature capable of being done, and not an impossibility. § 4:4:5. A mandatary, no more than a depositary, can be said to have any special property in the thing, any further than his expenses incurred about it may give him a lien. He has his possessory title, and that, together with his lia- bility over, enables him to bring an action for any tort or wrong done to the thing vrhile in his possession. § 44G. There has been a difference of opinion as to the legal validity of a mandate contract, that is, of a contract to assume the trusts of a mandatary. Sir. William Jones, following the civil law, insists that damages can be recovered for breaking such a contract, while by the principles of the common law, there being no consideration, there is no bind- ing contract between the i)arties. In other words the mere non-feasance — the neglect to do that which a party, without any consideration, undertakes, subjects to no legal lia- bility. Of this the common law leaves no room for doubt. But where tlie thing is delivered to the mandatary, who ac- (;cpts it under the trusts imposed, and enters upon the per- formance of what he has undertaken, that creates a valid and binding contract which the mandatary is bound properly to perform. Here is a delivery and receipt fur a specific pur- pose ; here are elements of trust and confidence ; here are acts upon one side in consideration of ujidertakings upon the other \ and in case these arc not performed, there occurs a 236 NON-FEASANCE AND MIS-FEASANCE. legal liability. In other words, the inis-fcasanoe — the neg- ligcnt performance of that which is undertaken by which damage occurs — subjects to liability. Illustration of non- feasance. A and B are joint owners of a vessel. A volun- tarily undertakes to get the vessel insured, but neglects to do so, and the vessel is lost. An action is brought by B against A to recover for the loss. K"o action could be sus- tained. Thome v. Deas^ 4 John. 84. Blustration of mis- feasance. B voluntarily undertakes to carry several hogs- heads of brandy from one cellar, and deposit them in another. He receives the hogsheads, and enters upon his undertaking ; but performs it so negligently and improperly that one of the casks is staved in, and the brandy lost. Here, although the imdertaking was gratuitous, and B no common carrier, yet the court held that the plaintiff should recover. Coggs V. Bernard, 2 Ld. Raymond, 909. This principle is very widely applied. A surgeon is retained, and undertakes the performance of a surgical operation. A person receives a letter to deliver, or money to pay, or a note to collect, and by negligence omits to perform the trust. Tlie retainer and entering upon the operation ; the delivery and receipt of the letter, money, or note, creates a sufficient consideration to support the contract, and is a part execution of it, so that the party retained and receiving — the mandatary — although acting gratuitously, becomes responsible for all damages re- sulting]: from negligence. § 447. In reference to the care and diligence requhed, the mandatary should occupy the same position as the de- positary. They both come under the first of the three principles stated, viz. : that the bailment is exclusively for the benefit of the bailor, or for some person other than the bailee. The mandataiy, therefore, like the depositary, should be bound only to slight diligence, and responsible only for gross neglect. But there is this difi'erence between the two, which necessarily leads to the creation of some distinctions in the one which do not obtain in the other. The LIABILITT OF MA]ST)ATAEY. 237 mere keeping of the deposit, demands no particular skill or knowledge, whereas the undertaking of the mandatary, Leing to do something, to render some service often in some special capacity, may not unfrcquently require the possession and exercise of such knowledge and skill, as is not possessed by men generally. The same general principle or ride, has here been proposed, and with tlie same result as in the case of the depositary, viz. : that where the mandatary renders the same kind of service, and bestows the samo care and attention upon the subject-matter of the bailment as upon his own property of the like kind, that is jprima foAiie sufficient to repel the presumption of gross negligence. § -i-lS. Subject to the rule last mentioned, are some dis- tinctions growing out of the situation or occupation of the mandatary, and the nature or character of the service to be rendered. And the first is, that a mandatary who acts gi'atuitously in a matter where neither his situation, occupa- tion, or employment, implies any particular knowledge, or professional skill, is responsible only for bad faith, or gross negligence. A merchant undertakes, gratuitously, to enter a parcel of goods for another, together with a parcel of his own of the same sort, at the custom-house for exportation, and made an entry under a wrong denomination, in conse- quence of which, both parcels were seized. Ileld that he was not liable for the loss, as he took the same care of the goods bailed as of his own, and was not of such a profession or employment as necessarily implied skill in what he im- dertook. Shields v. Blackhurne, 1 H. Black. 158. But if, in this case, the undertaking had been by some clerk or employee in the custom-house, or some one who, by his employment, was led to bo familiar with the manner of doing business there, and he had entered upon the service, and committed such a mistake, he would have been liable. This latter affords the illustration of another rule, viz. : that if his situation or employment does imply ordinary skill, or knowledge adequate to the undertaking, he will be responsi- 238 CONVERSION BY MANDATARY. ble for any losses or injuries resulting from the want of the exercise of such knowledge or skill. In a case where the per- son employed is known to possess no particular knowledge or skill, and yet undertakes to do the Lest he can under the circumstances, all that can fairly be required of him is the exercise, to the best of his ability, of the judgment, knowl- edge, and cap|city he possesses. In all cases, the general test of liability is considered to be — whether the mandatary has omitted that care and diligence which bailees, without hire, or other mandataries of common prudence, are accus- tomed to take of property of a like character or descrip- tion. § 449. The depositary who refuses to deliver up the de- posit on the demand of the depositor, and the mandatary whose^ misuser of the subject-matter is such as to afford evidence of conversion, both place themselves under very different liabilities by such acts, because their possession is then wrongful, and they take upon themselves the respon- sibility for all losses. Thus, where a master of a ship had gratuitously received a box containing doubloons belonging to a passenger accidentally left behind, and who during the voyage opened the box, and, finding the contents valuable, took them out, and lodged them in a bag in his own chest in his cabin, where his own valuables were kept, and the bag was lost ; it was held that he was responsible for the loss, on the ground that he had imposed upon himself the duty of carefully guarding against all peiils to which the property was exposed in consequence of the alteration of the place of custody. Nelson v. Macintosh^ 1 Starlc. 237. This would certainly be carrying the liability of the man- datary to a very great length, more especially if no question of good faith was raised in the change of custody. The safe ground would be to submit to the jnry the question whether such change was in bad faith, or was intended as a conver- sion, and if so, then to hold him responsible. § 450. The mandatary is also imder an imphed obliga- MODES OF DISSOLVING MANDATE. 239 tion to render, upon request, a full account of his proceed- ings ; showing that his trust has been faithfully performed ; or, if badly performed, what reason or excuse there may be for it. He is bound, also, to restore the thing itself with all its increments, earnings, and gains. He is entitled to be reimbursed all expenses and charges reasonably incuiTcd in the execution of the mandate, and to be indemnified from liability upon all contracts he has entered into with others, in the proper discharge of the duties he had undertaken. § 451. There are various modes of dissolving the contract of mandate. It may be dissolved by either party before entry upon it. And after entry, as it is based on personal confidence, it is dissolved by the death of the mandatary. If, however, the mandate has been so far performed before the death of the mandataiy as that nothing remains involv- ing the exercise of any discretion to complete it, (as if the commission were to purchase books, and send them to the mandator, and they were purchased, but not sent,) it will be the duty of the personal representative of the mandatary to complete the mandate. The death of the mandator also dissolves the contract ; but if the mandate is in part exe- cuted, the personal representative of the mandator will be bound to keep the mandatary indemnified from all damages he may suffer in consequence. A change in the state of the parties, as the marriage of a femme sole, the insanity of either one of the parties, may operate a dissolution. So, also, the authority given may be revoked by operation of law, as where the power of the mandator over the subject-matter ceases, or by the act of the mandator revoking such au- thority. QUESTIOIs^S. What is a mandate ? "Who the parties to it ? IIow many things necessary to the creation of a mandate ? "What are they ? What must be the qualities of tlie act to bo done ? What interest, jjroperty, or title, has the mandatary in the subject-matter ? What is non-feasance^ and what rights, if any, does it give at law ? What is a mis-fcasancc^ and 24:0 LOAN FOE USE. what riglits, if any, docs it give? Wliat illustrations of non-feasance and mis-fcasanco ? What position as to care and diligence does the mandatary occui)y ? Under wJiat principle do Lotli the mandatary and tho depositary come ? What is the mandatary bound to, and responsible for? What, the point of difference between the depositary and the mandatary ? What is the rule of liability derived from his care of his own property ? What is his liability where his situation, occupation, or employment, imply no particular knowledge or professional skill ? What illustration? What contrary illustration? What rule derivable from it ? What where the person employed is known to possess no particular knowledge or skill ? What is the test of liability considered to be ? What is the position of the depositary and the mandatary who convert to their own use the property ? For what are they liable and why ? What illustration ? What would be the safe ground upon which to place it ? What else is the mandatary under obligation to do, and upon what ? What must he show ? What must he restore ? What is he entitled to be reimbursed? Against what indemnified? Who may dissolve the contract of mandate before it is entered upon ? After entry upon it, what may dissolve it ? And why ? Suppose the mandate almost com- pleted, what is the rule ? How otherways may the contract be dis- solved ? PART IV. XOAN FOR rSE. § 452. This is defined to be a bailment or loan of an article, for a certain time, to be used by the borrower witb- ont paying for the use. The wi'iters on bailment have given tliis a prominent place among tlie difi'erent kinds, of wliicb they enumerate five. Tliey seem to take for granted that a contract based upon the above definition would be valid, and enforceable at law. That it would be so under the civil law, there can be no question. But is it so under the common ? A brings his action against B to recover a span of horses, which he complains that B wrongfully withholds from him, having made demand and been refused. B sets up, as a defence, that he borrowed of A the span of horses for the space of five days to plough a certain piece of land. That by vii'tue of this loan, he became possessed of the horses, NO CONSroEKATION IN LOAN FOK USE. 241 and was employing thein in tlie ploughing of the said piece of land, which was not yet completed, and that the action was brought by A within the five days. Is the defence per- fect at law against the action by A ? If so, then this third kind of bailment is entitled to its position and rank in the list of bailments ; if not, tlien it should be stricken from that list, and there are but four instead of five difierent kinds of bailment. The difficulty is with the consideration. Is there any ? and if so, what is it ? Who is the promisor, and who the promisee ? The only promise made by B is to use the horses for a certain purj^ose, and at the end of a certain time to return them. Tliis he has not broken. It may be said that A is the promisor, and that his promise is that B shall have the horses for the purpose and time speci- fied. Granted. And then what binds this promise? Is there any benefit to the promisor? None whatever. Is there any injury or disadvantage resulting from the perform- ance of the promise to the promisee ? On the contrary, all the benefit is to the promisee. His injury, if any, is de- rived from the breach, not from the performance of the promise. Mr. Edwards^ see Edwards on Bailment^ 156, is inclined to think there is a contract between the parties, embracing mutual lyromises^ expressed or implied from the circumstances. But what promise is there on the part of B in which A has any possible interest, or such an interest as amounts to a consideration ? And if there is a promise on the part of A to B, as there must be to defeat the action, what is the consideration that binds him to its jierform- ance ? Tliere does not appear to be any, and I am unable to perceive upon what legal princij^lcs the defence can be sustained. It may be said that the same objection lies to the kind of bailment termed deposits ; and so iar as tliere lacks the elements of a contract that will enable tlie depositary to resist an action by the depositor to recover the deposit, hav- ing first made demand of it and been refused, it is entirely true. But that simply seeks to ascertain what arc the mu- 16 242 OBLIGATION OF BOEKOWEE. tual ri}2;lit3 and obligations of the parties, while the relations continue between them ; those relations being at any time terminable by the depositor. It may not, therefore, be im- proper here to inquire very briefly as to the obligations of this kind of bailee while the loan for use continues in force. § 453. Tliis comes under a different principle from either one of the preceding. It ranks under the second general principle stated, and is a bailment where the execu- tion of the trust is exclusively for the benefit of the bailee. Hence such bailee is held responsible for slight neglect. The extraordinary diligence to which he is bound is not satisfied with that degree of care which he would naturally exercise over his own property. He must bring to it all possible care. The use made of the thing borrowed must be strictly confined to that for which it was obtained. It must be also limited to the person obtaining it. Thus, where to an action of trespass the plea inter[)osed was, that the horse was lent to him by the plaintiff, and license given him to ride, in virtue of which the defendant and his servants had alternately ridden the animal, held, that the license was annexed to the person of the defendant, and could not be communicated to another. Bringloe v. Morrice^ 1 Mod. 210. § 454. A great difficulty here occurs in settling what shall be deemed slight neglect. It must, of course, depend much upon the circumstances of each particular case. There is no liability for losses by inevitable accident, or by casualties occurring without any fault of the borrower. The same also where the loss occurs from robbery or the exertion of supe- rior force. The return of it must be at a proper time, and in a proper condition, together with all its increments and offspring. If not so returned, the borrower wiU be held liable for aU losses and injuries to which it may be sub- jected. Tlie return must be to the dwelling-house of the lender, unless the thing properly belongs elsewhere. And hence where the defendant borrowed the plaintiff's horse LIABILITY OF BORKO"\VEE. 243 and carriage, which, at the time, were at a livery stable, the parties residing in the same city ; it was held the return should be at the plaintiff's residence. Esmay v. Fanning^ 9 Barl). 176. Kestoration to the true owner, doing no injury or injus- tice to thelender, is held to be sufficient. "Where the loan has been to several persons jointly, each is liable in solido for its return. The borrower is never liable for any loss or injuiy occasioned simply by its use. 'The risk of that is taken by the lender. But if any loss or injury occurs tlirough the negligence of the borrower, he may be made liable in an action for the damages. Tlie borrower has no special property in the thing loaned, though his possession is suffi- cient for him to protect it by an action of trespass against a wrong doer. And in all cases of simple bailment, without reward, an action may be maintained either by the bailor or bailee for any wrong done to the bailee's possession. Tlie bailor can bring it by virtue of his general property in the thing bailed, and the bailee because of his possession and liability over to the bailor. But a judgment and satisfaction by one is a bar to an action by the other. QUESTION'S. What is a loan for use ? Does this species of bailment embrace a contract valid and enforceable at law ? What principle does this species of bailment come under ? What is the bailee here held responsible for ? What is the extraordinary diligence hero required not satisfied by? What must he bring to it? To what must the use of the thing bor- rowed be confined ? To what must it be limited as to person ? What illustration ? What does slight neglect depend upon ? What is the lia- biUty in case of loss by inevitable accident? Or by casualties? How as to robbery, or superior force ? ITow must the return be ? Wliat with ? What if not so returned ? Where must the return bo ? What illustration? To whom should the return be made? What liability where loan made to several jointly ? For wliat is borrower not liable ? Who takes risk of such ? To what liable, when loss occurs tlirough negligence? Has borrower any special property ? Who may bring action when wrong is done to possession ? What eflfcct has recovery and satisfaction by cither ? 244 WHAT MAY BE PLEDGED. •■ PART V. PLEDGE. § 455. Tlie pledge or pawn is a bailment of personal property as a security for some debt or engagement. The first inquiry here is as to the property that is susceptible of being pledged. A debtor may pledge any of his personal property down to, and including, his necessaries. There is nothing exempt except the pay and emoluments of officers and soldiers. One essential to the creation of the jjledge is the delivery of the article pledged to the pledgee. Tliis necessity serves as a limitation of the subject-matter of the pledge, confining it to personal property in actual existence, and susceptible of delivery. The great convenience of pledging, and the frequency with which it is resorted to, have induced the efi'ort to escape from both the last men- tioned limitations. There could be no question but the subject-matter of the pledge-covered property beyond what is usually styled efi'ects ; that it embraced also things in ac- tion, such as negotiable paper, and other evidences of debt — in other words, that it would go as far as there was a thing susceptible of delivery. But a very large proportion of the capital of the country is invested in stocks of incorporated companies, such as bank, raili'oad, insurance, 6zc., in which the owner holds merely the scrip or certificate of the com- pany that he is owner of the number of shares stated. The question is, how can this stock be pledged so as to be a valid security to the pledgee. The method is to deliver the scrip, or company's certificate, to the lender, accompanied by a power of attorney to such lender, authorizing the actual transfer on the books of the company. This actual transfer is frequently postponed, or entirely omitted, but actual no- tice of the transfer, as such security, should be immediately given to the company, or otherwise a honafide purchase and transfer on the company's books might embarrass, if not DIFFEEENCE BETWEEN MOKTGAGE AND PLEDGE 245 endanger, the security. The limitation to property in actiiul existence precludes the pledging of that which is to be ac- quired infuturo, but the law permits an hypothecation in such case, which answers very effectually the pui-pose of a pledge. A brickmaker stipulates with the lessee of a brick- yard in which he manufactures bricks, that they should retain the bricks to be made there, as security for their advances to him. Held that this operated as a hypotheca- tion, and that the bricks became pledged under the contract as fast as they were manufactured. Macomler v. ParTcer, U Pick. 497, 505. § 456. It becomes of great importance in considering the doctrine of pledge to understand the points of diiference between a mortgage of goods, and a i^Udge or ^j*^^-;?^ of them. In a mortgage the entire legal title passes, conditionally, to the mortgagee, and if the goods are not redeemed at the time stipulated, the title becomes absolute at law, although equity will interfere to allow a redemption. In the pawn or pledge, a special property only passes to the pawnee or pledgee, the general property still remaining in the pawnor or pledgor. Again, in the mortgage^ inasmuch as the right of property passes by the conveyance to the mortgagee, the possession is not essential to create or support the title. Hence that possession may remain in the mortgagor at common law, and yet the mortgage be valid ; because the title transferred enables the mortgagee to possess himself of the property. But in a xyledge, the right of the pledgee is not consummated except by possession ; and when that is relinquished, the right of the pledgee is extinguished or waived. Although the above distinctions will be admitted to be correct, yet there may be a pledge although the legal title passes to the pledgee. An illustration of this would be where a promissory note is given, secured by stocks, depos- ited with the creditor by the debtor as collateral security 'for the amount contained in the note. Ilere the legal title must pass to the creditor, and the principle is so ftir modified as 240 INTEREST OF PLEDGOR IN PLEDGE. to declare that the transfer of the legal title is not in any case inconsistent with a pledge, if the debtor has a right to the restoration of t]ie property, on payment of the debt at any time, although after it falls due. Wilson v. Little, 2 Comst. 443. § 457. The next inquiry relates to the amount of interest or property which it is necessary for the pledgor to have in the pledge in order that he may make such a disposition of it. "We can only inquire as between pledgor and pledgee, and as between them this inquiry can very seldom arise. The pledgor, however weak or deficient his title, has always his* right to redeem as against the pledgee, and the latter has no right to interpose the title of a third person, unless that third person enforces against him his own superior right of property. But where the pledgor has only a limited title in the thing pledged, as an estate for life, or for years, the security he gives to his creditor is limited to the extent of his interest, and when that expires the pledgee must surren- der it up to the person who succeeds to the ownership. § 458. This kind of bailment comes under the third principle stated, viz. : where the execution of the trust is for the benefit of both parties, or of one of them, and a third party. The benefit to the pledgee is that he is ren- dered secure in the payment of his debt, while the pledgor is thereby enabled to procure an extension of credit. This binds the pledgee to take ordinary care, and renders him answerable only for ordinary neglect. It is essential to the being of a pledge that it should be delivered as security for some debt or engagement. It may be for any kind of engagement ; so also the debt may be one to be incurred in the future. § 459. The pledge carries with it, as accessorial, all its natural increase. Its security for a debt alone depends upon its remaining in the possession of the pledgee. Hence its loss, or re-delivery to the pledgor, or its voluntary waiver, will deprive the pledgee of his security. EIGHTS OF THE PLEDGEE. 247 § 460. The pledgee, unlike every previous bailee, has a special property iii the pledge. This entitles him to the ex- clusive possession of it, during the tune, and for the objects for which it was pledged, not only as against strangers, but also the pledgor himself. But his rights grow out of, and are strictly defined by, the contract into which the two par- ties have entered. If two debts at the time, or subsequently, become due to the pledgee, he can retain the pledge only as security for the one it was given to secure. A new debt clearly shown to have been contracted upon the credit of the pledge, may enable the pledgee to retain it until pay- ment ; but this is a fact the creditor is bound to make out. It is never to be extended by mere intendment. It has an application, however, not merely to the debt or engagement, but also to the interest, and to all incidental charges and expenses. § 461. But the right of retainer alone would never ena- ble him to realize his debt. He has a further right of sell- ing the pledge, and of applying its proceeds towards the payment of his debt, if the jjledgor fails in his engagement to redeem it. This is on the sujjposition that some time is fixed upon for such payment and redemption. There may be no time fixed, and in such case the j)ledgce may insist upon a prompt fulfilment of the engagement ; and if the pledgor neglects or refuses, he may, upon due demand and notice to him the pledgor, require a sale of it. The eft'ect of the debts' falling due, and remaining unpaid, is not to transfer the absolute property in the pledge to the pledgee. It is not, therefore, any more his property after the falling due of the debt than it was before. What further right then has he consequent upon that fact ? His rights are twofold. He may proceed personally against the debtor and collect his debt out of his property, and that would operate to redeem the pledge, or he may proceed against the pledge, which is a pro- ceeding m rem^ and take the necessary steps to ajiply it on his debt. To do this, the first thing incumbent upon him is to 248 REMEDIES OF THE PLEDGEE. demand the payment of the del)t, and this he must do, al- thoni:;h tlio debt is payable presently without demand, and although by the terms of tlie pledge, he was authorized to sell at public or private sale without notice to the debtor. Wilson V. Ziitle, 2 Comst. 443. This requires much caution in pro- ceeding, because if the pledge has been improperly sold, the pledgor may maintain an action for its value without making a tender of the debt for which the property was pledged. Having properly made the demand and been refused, he has an election of either one of two modes of proceeding against the pledge. He may file his bill in equity, asking a decree of sale, and thus foreclose the equity of redemption of the pledgor ; or he may adopt the more summary method of selling without judicial process, upon merely gi^'ing reason- able notice to the debtor to redeem. Tlie notice, however, is indisj)ensable. DeLide v. Priestman, 1 Broimi's Penn. Bep, 176. There is, however, one exception to the right to sell in case of non-payment, and that is wdien the pledge consists of negotiable paper. Then it is held that in the absence of any special power authorizing a sale, the pledgee has no right to sell the securities either at public or private sale, but must hold on, collect, and apply as the paper falls due. Wheelei' v. Newbold^ 16 New York Rep. 392. § 462. "Where the pledge for one debt consists of several things, each one is liable for the whole, and if one or more should perish without default of the pledgee, he may look to all the others for his indemnity. Any surplus remaining, after paying the debt, belongs to the pledgor, and he is responsible for making up any deficiency it may fall short of paying. § 463. The rights of the pledgee do not go far enough to enable him to appropriate the pledge to the payment of his debt. His only remedy is to sell it. !N^or can he become the purchaser of it on a sale. Should it be of greater value than the debt, and hence lead the pledgee to decline selling, thus in the end practically appropriatmg it to the debt, the LIABILITY OF PLEDGEE FOK LOSS. 249 pledgor could undoubtedly have relief in equity, -wliicli would decree a sale and payment over of any surplus to tlie pledgor. § 4:64:. In regard to the extent to -which the pledgee may rightfully use the pledge, the following rules are applicahle. If the use is essential to its preservation it is then not only his right, but his duty to use it. If it is positively injurious to the pledge, as in the case of clothes, then such right is interdicted. If the keeping be a charge to the pledgee, as in the case of a cow or horse, then it may be used by way of recompense for the keeping. As the pledgee is bound to account for all income, profit, or advantage, derivable from the pledge, he may be allowed first to deduct all neces- sary charges and expenses. And so also all extraordinary expenses incurred by him in its preservation. § 465. Some diversity of opinion has prevailed relating to the rule of liability in case the pledge sustains injury or loss. It seems to be clearly conceded that in case of loss by casualty, or by unavoidable accident, or by superior force, such as robbery, or where it perishes from intrmsic defect or infirmity ; the pledgee will not be held responsible, without the pledgor's showing, in connection with the loss, and conducing to it, some act or omission in violation of his duty. Tlie difference of opinion has been as to whether the mere fact of its being stolen should subject to liability, the civil law taking the afiirmative, and the common, as ex- pounded by Lord Coke, 1 Cokeys Inst. 80 a, the negative. A compromise has finally been cfi'ected by not considering tlie mere fact of stealing as evidence of negligence or the want of it ; but to go into an examination of the circum- stances under which it occuiTcd, and to determine from them, whether the negligence was such as should, or should not, subject to liability. This is undoubtedly the cquitablo rule, as the larceny may have occurred under circumstances of entire innocence on the part of the pledgee, or it may have grown out of a culpable negligence in exposing it. This 250 EIGHTS OF THE PLEDGOK. doctrine only applies while the relations growing ont of thig peculiar coutr,act continue. These relations may cease when the pledgee does anything clearly inconsistent with his duty, or in neglect of it, or when, on being tendered the debt, interest and expenses, if any, he refuses to redeliver the pledge. His special property in it then ceases. He be- comes a "UTong doer, and the pledge remains at his sole risk. Subject to liability for loss the pledgee has the power of as> signing it over to another for safe keeping, or he may dis- pose of his qualified j^roperty in it by way of sale or assign^ ment as collateral security for a debt. § 4:66. The most important right of the pledgor, is that of redeeming his pledge. The difi'erence in this respect, between a pledge and a mortgage is, that in the latter the title becomes absolute on non-payment of the debt, and nothing but the equity of redemption remains. But in the former, the pledgor, having never parted with the general property, may redeem at law, although he has not, by pay- ment on the"" day, strictly complied with the conditions of his contract. This right of redemption is so inherent in the very nature of the pledge that the law makes it inalienable, and renders void all contracts stipulating that the pledge shall be irredeemable. In case of the death either of the pledgor or the pledgee, the rights and obligations belonging to each descend to, and rest in, the personal representatives. § 467. A point of much doubt and difficulty has arisen regarding the right of a sheriflf, under an execution against the pledgor, to take the pledge out of the possession of the pledgee, and sell his right and interest in it. In the State of Kew York the cjuestion came up in Stief v. Jlarf, in which the charge of the court raising the question was, that the sheriff, holding an execution against the pledgor, may, by virtue thereof, take the property pledged out of the hands of the pledgee into his own possession, and sell the right and interest of the pledgor therein. The Supreme Coui't affirmed this doctrine, and in the Court of Appeals 1 Comst. MODES OF EXTrnGUISHING PLEDGE. 251 20, the judges being equally divided, the judgment of the Supreme Court stood affirmed. This, in a recent case, is still regarded as an open question. § 468. Tliere are several modes of extinguishing the contract of pledge, as : 1. Bj payment or discharge of the debt. 2. By taking a higher or difterent security with no agreement to retain the pledge for that also. 3. By extinc- tion of the debt by operation of law. 4. By destruction of the thing pledged. And 5. By any act of the pledgee amounting to a release or waiver of the pledge. QUESTIONS. "Wliat is a pledge ? What the first inquiry ? TTliat may a debtor pledge ? What only is exempt ? What is essential to the creation of a pledge ? Whjjt is the limitation of a pledge ? What has been the effort in regard to this limitation ? What beyond effects may be pledged ? How far does it go ? How is stock held ? What, the evidence of its ownership ? What is the method of pledging stock ? What should be given to the company ? For what reason ? How can the purpose of a pledge be answered as to future property ? What instance in illustra- tion ? What is the important point of difference between a mortgage and a pledge of property ? What, the difference between the two as to the point of possession ? For what reason may there be a pledge where the legal title passes to the pledgee ? What instance in illustration ? What amount of interest or property is it necessary for the pledgor to have in the pledge ? When can the pledgee interpose the title of a third per- son against the claims of the pledgor ? How is it when the pledgor has only a limited title to the pledge ? What principle does this species of bailment com^ under ? What, and with whom, is the benefit in this kind of bailment ? What kind of care and neglect are here devolved upon the pledgee ? What is essential to the being of a pledge ? What does the pledge carry with it ? What does its security for a debt depend upon ? How may a i)ledgeo be deprived of his security ? How does the pledgee stand related to the pledge ? What does his special property entitle him to? What do his rights grow out of, and by what defined! What the rule where there are two debts contracted at the time, or one Bubscqucntly ? What the rule when a new debt is contracted on the strength of the pledge ? What is the creditor to make out ? What further right to the pledgee besides that of retainer ? How is it where there is no time fixed for the payment of the debt ? What effect has 252 CONTKAOT OF HDJINO. the debt's fulling dno being unpaid and the pledge remaining in th« liands of the jjledgcc ? What then are the rightrf of the pledgee ? What is the first thing done in proceeding against the pledge? After demand and refusal what next ? What course must be take when the pledge consists of negotiable paper? What his rights when several things are pledged for one debt ? What becomes of any surplus remaining ? How in case of deficiency ? Can the pledgee appropriate the pledge in pay- ment of his debt ? What is his only remedy ? Can he become a pur- chaser on its sale ? Suppose it is of greater value than the debt, and he omits or declines soiling it ? What are the rules relative to the use of the pledge by the pledgee ? What may be deducted from the income, ])rofit, and advantage? In case the pledge sustains loss or injury, what is the rule of liability ? When is the pledgee clearly exonerated from liability 1 Uow is it when it is stolen ? What then the rule of the civil, the common law, and the compromise ? When does this doctrine only apply ? When the relations between pledgor and pledgee cease, and how may they be made to, what is the rule ? AVhat may the pledgee do subject to his liability for loss ? What is the i^ortant right of the pledgor ? What the difference in this respect between a mortgage and a pledge ? How strictly is the right of redemption guarded ? WTiat occurs in case of the death of either pledgor or pledgee ? What is the right of a sheriff under an execution against the pledgor ? What are the several modes of extinguishing the contract of pledge ? PART YI. CONTEAOT OF HIEING. § 469. This is a bailment of a personal chattel wliere a compensation is to be given for its use, or for labor or ser- vices about it. Or it may be called a loan for hire, or a hiring or letting of goods, or of labor and services for a reward. This is designed to cover all the possible kinds of hh-mg, whether it applies to the thing hired, or the labor and services hired about it, or to labor and services hired generally. Including, as it is made to do, the duties and responsibilities of the innkeeper, and the common carrier, it is by far the most important and extensive of all the different kinds of bailment. § 470. In the hire of things, we have two parties, the letter to hire^ and the hirer. It is a contract by which tho OBLIGATIONS OF LETTER TO IXIRE. hirer, for a compensation, eitlicr expressly stipulated, or left to be legally ascertained, as to amount, obtains from the letter to hire, a certain chattel, usually for a certain purpose. The rights, duties, and liabilities of each party flow natur- ally from the terms of the contract. In the first place, there is the tiling which is the subject-matter. And this it is obvious must be in existence, and capable of being let to hire. Tliere must be some time during which the bailment is to continue, and some purpose, either express or implied, to which the thing is to be put. It must be adapted to this purpose, and as susceptible of accomplishing it as other thmgs of the like kind ordinarily are. The hirer must have the perfect right to its use and enjoyment during the time, and for the pui-pose, for which it is hired. To secure him this, one thing is necessary which forms no part of the loan for use, and that is the element of price, or compensation for the use. This should be made certain and determinate by the stipulation of the parties, or it should bo capable of being reduced to certainty by legal means. Both the thing itself, and the purpose to which it is to be used, must be such as the law sanctions and sustains. Tools and instni- ments are let by a locksmith to thieves for the pui-pose of burglariously entering houses and stealing goods from them. Such a bailment would, of course, be illegal and void. § 471. The obligations of the letter to hire relate princi- pally to his duties in reference to the thing itself. He is not only bound to deliver it to the hirer in a fit order and condition, but also is to keep it in suitable repair, and to warrant it against those faults and defects which would prevent the due enjoyment and use of it. If any such are known to exist, they subject him to an action as for a de- ceit ; if not, they deprive him of all remedy on the contract. lie is also to do no act that will disturb or interrupt the hirer in its free use and enjoyment. Tlie principle upon which the rejniirs and warranty against defect should be governed is, that the thuig should be kept by the letter to 254: OBLIGATIONS AND DUTIES OF THE DIREK. hire diirinc^ tlic entire period of the bailment, in sucli a state and condition as at all times to subserve tlie purpose for which it is employed. Otherwise the consideration, or price of the hire, would fail, and the contract be broken. § 472. The hirer has several obligations to perfonn on bis part. During the continuance of the contract, and while using it for the purposes contemplated in the bailment, he has a special property in the thing sufficient not only to enable him to protect himself against a wrong doer, but also against the owner himself. He has purchased the right to its ex- clusive use and enjoyment during the period of the bail- ment. § 473. The hirer is bound to put and keep the thing employed in the use, and for the purpose, contemplated in the bailment. The diversion of it to a different use or pur- pose will not only render him liable for damages for a breach of contract, but will also subject him to a different grade of liability for loss. If such loss occurs during the mis- user, in order to sustain an action of trover for its value, it must be shown on the part of the bailor that the misuser occasioned the loss. Harvey v. Epes, 12 Gratt. 153. § 474. Another source of duties is derived from the care and diligence the hirer is bound to exercise in reference to the thing he hires. This species of bailment being for the mutual benefit of both parties, the hirer is bound only to the exercise of ordinary care, and answerable for ordinary neglect. Inevitable casualty or superior force will always exonerate. And there will be no liability if there has been no omission of reasonable diligence. Slaves hired of the owner run away from the hii-er in a foreign port and are lost. They might have been confined and the loss prevented. Held, that if the hirer acted in good faith and with reason- able care he would not be responsible. Beverley v. Brook, 2 Vnieat. 100. The proof of sufficient negligence to charge the hirer must be made by the letter to hire. § 475. The hirer must also restore the thing at the HIKING OF LABOE AND SEEVICES. 255 close of the contract in as good a condition as wlien re- ceived, except the effect upon it of natural ■vrear, the act of God, or any unavoidable accident, lie must pay the hire or recompense. This contract may be terminated either by efflux of time, by accomplishing the object for which it was hired, by the destruction of the thing hired without the fault of the hirer, by a voluntary dissolution of the contract, or, by operation of law, as in case the hirer becomes the owner of the thing hired. § 476. Another species of hiring is wliere the labor and services of others about the thing are the subject-matter of the hiring. This properly only applies where the stock and materials belong to the bailor or employer, and are entnisted to the bailee, who employs the labor and services of others to be expended upon them. There are, however, many different ways in which questions come up imder this species of bailment. Not unfrequently, the thing about which the labor and services are to be performed, and while they are in the act of being so, perishes by its own inlierent defect, or by some means is destroyed ; and then arises the question as to loss, and as to compensation for services. The risk of loss in such case usually follows the ownership of the materials. The workman who has merely added his labor to the prop- erty, without, in any way, conducing to the loss, ought not to be the sufferer by it. But if he has made his contract in such a way that he is to complete the work for a specific sum before payment, and the work being nearly completed, the thing is destroyed by an accidental fire, he can recover nothing ; as the performance being a condition precedent, tlien devolves upon him the whole risk. And so if the workman has furnished the materials, the loss will fall upon him. And he will also take the risk of loss when it has in any way resulted from his own unskilfuluess in the per- formance of his labor and services. § 4TT. This contract being for the mutual benefit of both parties, all that the law, ujion its own prmciples, should 25G DEGKEE OF SKILL EEQUIRED. require, is ordinary diligence. But the occasions here are very frequent where something beyond ordinary care and diligence is required. This is always the case where the clement of skill is necessary to the performance. Wherever this is required and the party employed professes to possess all that is essential to the business, and undertakes to do it for hire, he will be held responsible for the exercise of such an amount of it as is necessary for the accomplishment of his undertaking. A person employs a mechanic or artisan to erect a stove in a shop, and lay a tube under the floor for the pui-pose of carrying off the smoke, and the plan fails. The workman is entitled to no compensation, and if damages are sustained will be liable for them. Duncan v. JBlundell, 3 Starlc. G. The degree of skill and diligence required is by no means always the same. It rises in proportion to the value, delicacy, and difficulty, of the operation. Nothing, however, can be legally demanded beyond the ordinary skill in the particular business or employment to which the person employed belongs. This has been the most fre- quently illustrated in questions arising out of surgical oper- ations. The rule here is, that the physician or sm-geon must apply, without mistake, what is settled in his profes- sion. The standard of ordinary skill required is : " that degree and amount of knowledge and science, which the leading authorities have pronounced as the result of their researches and experience, up to the time, or within a rea- sonable time, before the issue or question to be determined is made." Leighton v. Sargent., 7 Foster., 460. A different rule however prevails where the bailee, or person employed, does not profess, and is known not to possess, the skill and knowledge required for an operation ; but, nevertheless, is employed on some sudden emergency. All he is responsible for is the reasonable exercise of the skill and knowledge he may actually possess. § 478. Tlie question still remains as to the rights of the bailee, or person employed, where the work has failed of CASE WHEEE PERFORTVrAXCE IS CONDITION PKECEDEXT. 257 completion through his own neglect. These depend upon the nature of the contract into which he has entered. If that is to work by the day, he will be entitled to recover wliat his work is fairly w^orth, after deducting all damages occasioned by his default. But if his work is done under an entire contract, special in its provisions, he will have to abide by its precise terms. A builder enters into a contract to erect a building upon the land of another. The per- formance is to precede pajTuent, and is a condition thereof. The builder substantially fails to perform on his part, but performs so far that the owner and employer occupies and enjoys the erection. Held, that the bailee can recover nothing for. his labor and materials. Tliat the bailor, or employer, in such a case, may retain without compensation, the benefits of a partial performance, when fsom the nature of the contract, he must receive such benefits in advance of a full performance, and is, by the contract, imder no obhga- tion to pay until the completion of the performance. Smith V. Brady, 17 l^eio York Itep. 173. Wliere work is done imder a special contract at estimated prices, and there is a deviation from the original plan by the consent of the parties, the estimate is to control so far as it extends, and for the extra labor the bailee is to receive what it is shown to be worth. Dubois v. Delavxire and Hudson Canal Com- 'pany, 4 Wend. 2S5. Tlie same principles prevail here as in the deposit and mandate in regard to the return of the identical thing on which the labor and services have been performed. Tliese must guide throughout, and distinguish, every where, cases of bailment from those of sale. § 479. There is another division under this species of bailment tenned deposit for hi?\', embracing warehouscmeriy forwarding merchants, wharfingers, &c., in which the con- tract is also for the mutual benefit of both parties, requiring ordinary care and diligence, and rendering responsible for ordinary neglect. These require no special consideration here. But there is another class extensive and peculiar from 17 258 INNKEErEK, GUEST, AND BOAKDEK. any liitlierto considered as to tlic liabilities involved, which require more consideration. Tliis is the class of Innkeepers, whose liabilities, from motives of public policy, are far more severe than any other bailees except common carriers. § 480. An innkeeper is defined to be the keeper of a common inn for the lodging and entertainment of travellers and passengers, their horses and attendants, for a reasonable compensation. Tlie inn which he keeps is defined to be a house, where the traveller is furnished with every thing he has occasion for whilst on his way. An innkeeper differs from the keeper of a boarding-house, in that the former holds himself out to the public as ready and willing to re- ceive all travellers or wayfarers that desire accommodations for such a compensation as shall be just and reasonable ; while the latter keeps only select persons, usually making with each a special contract. In the State of !New York, and in most other States of the Union, there are statute regulations applying to inns and taverns. In order to con- stitute them such, they must be licensed by the commis- sioners of excise ; and the special privileges thus conferred constitute the keeping a public house a kind of j)ersonal trust, which is not susceptible of assignment, so as to convey any rights and privileges to another. § 481. There is also a corresponding dift'erence between the guest of an inn, and the boarder or lodger of a board- ing-house. Tlie former is a traveller, passenger, wayfaring man, not a friend or neighbor. The length of time he re- mains there, whether an hour or a month, has no effect in determining his character. K he takes lodging leaving his horse there, and then goes elsewhere to lodge, he is still a guest. The boarder or lodger becomes such by the contract made with the keeper of the boarding-house, and if he comes to an inn under a special contract to board and so- journ there, he is simply a boarder, and not a guest. A guest is not created by simply leaving goods at an inn for which no compensation is paid. Gelley v. Clarice^ Cro. Jac. LIABILITY OF INNKEEPER. 259 188. Tlie rights, duties, responsibilities, and remedies ap- plying to the innkeeper and his guest, and to the boarding- house keeper and his boarder, are wholly different in their origin, nature, and character. Tlie latter are mainly gov- erned by the contract into which the parties enter, while the former are left to the principles of the common law. § 482. As the innkeeper makes a standing offer to the public to accommodate all who call upon him for that pur- pose, he is bound to receive as guest, and to entertain, as far as his accommodations extend, all such ordinary travel- lers as may desire to avail themselves of his offer. By improperly refusing, he may subject himself to an action. He is not, however, obliged to receive or retain a guest who conducts himself disorderly, nor any one having an infec- tious disease, nor any one who would endanger the safety of his guests. The principal contract with the innkeeper relates to the accommodations of his guests ; but as acces- sorial to that, is also included the receiving and safe keeping of the baggage ; this he is, also, bound to receive, and cannot refuse to take charge of, because of suspected persons in the inn for whose conduct he is not willing to be respon- sible, lie is under no obligation to entertain such persons at the inn. § 483. The liability of the innkeeper was early estab- lished. In Calye^s case., 8 Coke, 63, it was said that by the custom of the realm, innkeepers are obliged to keep the goods and chattels of their guests, which are within their inns, without subtraction or loss, day and night, so that no damage, in any manner shall thereby come to their guests, from the negligence of the innkeeper or his servants. It was held in this case, that if a guest come to an inn and direct that his horse be put to pasture, and tlie horse be stolen, the innkeeper is not responsible. But it was agi'ced that if the owner had not directed that the horse be put to pasture, and the innkeeper had done it of his own accord, he would be responsible. In a more recent case, the travel- 2G0 LIABILITY OF INNKEEPER ler directed his horse to be put into tlic etable, and himself and some goods was received into the inn. His gig was placed by the innkeeper in an open street, without the yard, and where he was often accustomed to place gigs. It was stolen, and the innkeeper was held liable, although it was stated that this was on the extreme limit. Jones v. Tyler^ 1 Adol. <& Ellis, 522. See also JlallenhaJce v. Fish, 8 Wend. 647, in which a horse was delivered to the ostler at an inn to be fed, and the ostler took off the saddle and bridle, and left them in a barn belonging to the inn, and they were stolen. The innkeeper was held responsible. Also Clute V. Wiggins, 14 John. 175. In Bennct v. Mellor, 5 Term. Hep. 274, a servant of the plaintiff came to deposit some goods at the inn, which the innkeeper de- clined receiving. Tlie servant sat down in the inn as a guest with the goods behind him, and they were stolen. Held, the innkeeper was responsible. § 484. It is not necessary to show a delivery to the inn- keeper in order to charge him. Goods stolen from Ij^e chamber of the guest in the inn, the innkeeper having had no notice of them, will nevertheless render him liable. IsTor would it divest of liability if the guest had himself the key of the chamber in which he lodged, and left the door open. But if the guest be required to put his goods in a particular chamber under lock and key, otherwise their safety would not be warranted, and it is not done, and they are stolen, the innkeeper is not responsible. The responsi- bility of the innkeeper extends also to his servants and domestics, and to those who are sojourning at the inn. The innkeeper ceases to be responsible if the guest takes upon himself exclusively the custody of his own goods, or if he has, by his own neglect, exposed them to the peril that re- sults in their loss. Thus if he deposits them in a room, making use of it as a warehouse, having the exclusive pos- session of it, and they are stolen, the innkeeper is not re- sponsible. Famworth v. PacTcioood, 1 StarTc. 249. Or if. LIABILITY OF CJNEEEPEE. 261 instead of confiding tlie goods to an innkeeper, he commits tliem exclusively to tlie custody of another person who is living at the inn ; the innkeeper is not liable in case of loss. Sneider v. Geu^, 1 Yeates, 34:. § 485. Tlie extent of the innkeeper's responsibility for the goods of his guest is not yet entirely settled. He is not liable for trespasses committed upon the person of the guest, and was formerly held exonerated from losses occasioned by inevitable casualty, or by superior force, as by robbery. But the policy of the law has been steadily holding to a stricter degree of responsibihty, imtil at the present time they are placed substantially upon the footing of common carriers, and held to be insurers of the goods of their guests except in case of loss by the act of God, and the public enemy. Eichinond v. Smith, 8 Barn. <& Cress. 9 Mason v. Thompson, 9 Pick. 280. Tlio authority of this last case, however, is overruled in Grinnel v. Coolc, 3 Hill, 485, so far as it holds the innkeeper responsible for the goods of a per- son who was not at the inn, and not, therefore, a guest. The character of guests must always be first established before the innkeeper can be held responsible for his prop- erty. § 486. Another point of interest and difficulty has arisen, and that is to determine what character of goods this extra- ordinary extent of liability shall attach to. Shall it be limited simply to the baggage a traveller ordinarily carries with him, or shall it embrace all goods he may have in his custody ? There is a conflict in the cases upon this pomt. The Berkshire Woollen Company v. Proctor, 7 Cush. 417, holds, that the liability of the innkeeper for loss by his guest extends to all th(? movable goods and money which are placed within the inn, and is not restricted to such things and sums only, as are necessary for ordinary travel- ling convenience and expenses. But in Simon v. Miller, 7 Louis. 360, it is hold that an iimkeeper is responsible only for usual and ordinary baggage, and not for unknown treas- 262 ON WHOM IS TUE BUEDEN OF TKOOF. . ure belonging to tlie traveller. Tliis may, therefore, still bo regarded, to some extent, as an open question. § 487. One more topic only remains under this head, and that is the inquiry as to the burden of proof. The guest makes out his case by proving the defendant to be tho keeper of a public inn, that he was there in the character of a guest, and that while there in such character, his goods, being baggage, were lost. The burden of proof is then upon the defendant, the fact of loss being itself presumptive evidence of negligence on the part of the iiinkeej)er or of his domestics. He may show that the loss came within the excepted cases of the act of God or the public enemy ; or that the guest was robbed by his own servant ; or by one who came to the inn as his companion ; or that the loss oc- curred through his own negligence. QUESTIONS. How is the contract of hiring defined ? "What does it cover ? What does it include ? Who are parties in the hire of things ? What is the contract ? What quahfications to the thing hired ? What in regard to time and purpose ? What must the thing be adapted to ? What must be the right of the hirer ? What is there to secure him this ? What are the qualities of price ? What essential as to the purpose for which the thing is to be used ? What are the duties of the letter to hire ? What the difference whether defects are known or unknown to hkn ? What is the principle that governs repairs, and warranty against de- fects ? What interest has the hirer in the thing ? What has he pur- chased ? What his duty as to employment of the thing ? What the consequences of putting it to a different use or purpose ? For whose benefit is this species of bailment ? What is the hirer bound for ? What will exonerate ? When is there no liability ? What illustration ? What the rule as to restoration ? And in what condition ? How may this contract be terminated ? What is another species of hiring ? Where does this properly apply? What questions arise when the thing perishes or is destroyed 1 What does the risk of loss usually follow ? How may the workman, by his contract, assume the risk of loss ? How otherways may he assume such risk ? For whose benefit is this contract ? What should the law require? When is something beyond ordinary care and diligence required? What is the rule where the party professes the QUESTIONS. 263 skill, and undertakes for Lire ? What illnstration ? How does the skill and diligence required vary ? What is the limit of requirement ? What illustrated in ? What is the rule of liability in surgical operations ? What the standard of skill ? What the rule when the person employed does not profess, and is known not to possess, the necessary skill and knowledge ? When the work has failed through neglect of the bailee, what do his rights depend upon ? What the rule if work is to be done by the day ? What if done under an entire contract having special provisions ? What illustration ? What the principle extracted ? What the principle as to the return of the identical thing? How is an innkeeper defined ? How is an inn defined ? What is the difference between an innkeeper and a boarding-house keeper ? How, in most of the States, are inns and taverns regulated ? What docs the license convey? How is it regarded? What not susceptible of? What is the difference between the guest at the inn, and the boarder at a boarding-house? Does length of time make any difference? How does a boarder or lodger "become such ? Does a guest become such by leaving goods at an inn ? Are the innkeeper and boarding-house keeper alike as to rights, duties, &c. ? What are those of boarding-house keeper governed by ? What the duty of the innkeeper as to receiving and entertaining guests? What the result of improperly refusing? Who may he refuse to receive ? To what does the principal contract with the innkeeper relate ? What does it draw after it as accessorial ? Will suspected persons at the inn justify him in refusing to take charge of baggage ? Why ? What was the principle settled in Calye's case ? What in the more recent case of Jones v. Tyler ? And in Bennet v. Mellor ? Is it necessary to show delivery to the innkeeper to charge him ? How when goods are stolen from chamber of guest ? How if guest have the key ? How can innkeeper render himself irresponsible ? What docs responsibility of innkeeper extend to ? When docs the inn- keeper cease to be responsible ? What illustrations ? For what is an innkeeper not liable ? What has been the policy of the law ? On what footing is an innkeeper now placed, and how held ? What is necessary before innkeeper can be held for goods ? What is the limit of liability — is it limited to baggage or does it extend to money and goods? What must the guest prove to make out his case ? Where is next the burden of proof? What is the fact of loss presumptive evidence of? What may the innkeeper show in defence ? 2G4 WIIAT AUB WUO AKE COMMON CAEKIEKS. PART vn. OF THE COMMON CABEIEE. § 488. A common carrier is one who undertakes, for hire, to transport the goods of such as choose to employ him, from place to place. Two necessary elements enter into the comiDosition of the earner. 1. He makes a continual offer to the public to carry all goods confided to him for that purpose, that come within his proj^osed line of business. It is this that renders him the comrnoii carrier. In this resj)ect he difi'ers from those who carry only when they make special contracts, and who do not offer themselves to the public to carry for all indiscrimi- nately who choose to employ them. 2. He charges a reasonable compensation for the risks incurred, and the labor and services performed in the car- riage of goods. § 489. There are, in this country, a great many different kinds of common carriers. But what serves to define them all, and set them apart from every other body of men, is, that they all carry for hire without entering into a special contract for that purpose. All truckmen, teamsters, cart- men, who make it their regular busmess and employment to carry goods from one part of a city or town to another, for the public generally, for a compensation, are common carriers. So, also, are the proprietors of stage-coaches, who carry goods for hire, holding themselves out to the public as ready to carry for all persons indifferently. The same principle applies also to the proprietors of railroad cars. Nor is it limited to land carriage. The canal-hoat, carrying for the public, for hu*e, comes under the same principle. So, also, is the steamloat^ when employed in the transporta- tion of goods as well as persons for liire. But if employed solely in the transportation of passengers, it is otherwise. An interesting question has arisen in this coimtry in regard HOW FAK COMMON CAEEIER LIABLE. 265 to the liability of a steamboat while employed in the towing of a freight vessel, and it was held that it was not a com- mon carrier. Eato7i v. Eumney, 13 Wend. 387 ; Wells v. Steam Navigation Co.^ 2 Comst. 20'1. The point was for some time nndecided whether merchant vessels employed in the transportation of goods beyond sea, were to be regarded as common carriers, imtil finally, after much consideration, it was, held that they were, in Morse v. Slue^ 1 Ventns^ 190. The same doctrine is now understood to apply equally to vessels plying from port to port in carrying on the coast- ing trade, and also to bargemen and hoymcn on a navigable river. § 490. Questions have frequently arisen in this country in cases where there are successive companies of carriers over a continuous line of travel, and no partnership relation existing between them. The point of difficulty to decide has been whether the carrier who receives the goods is liable for their loss in the course of their transit by another company. A package of goods marked for Chicago is de- livered in New York to the Hudson Eiver Tow-boat Com- pany, who deliver it in good order to the New York Central Railroad, and while being carried from Albany to Buflfalo, it is lost. Are the Hudson River Tow-boat Company liable ? In England they would be liable. Muscliamp v. Lancaster & Preston Railway Comimny., 8 Mecs. <& Welsh. 421. Tlic early decisions in the State of New York adopted the English rule. Weed v. Schenectady cO Saixitoga Rail- road Co., 19 Wend. 534. At length St. John v. Van Sanf- ford, which was carried to the Court of Errors of the State of New York, and is reported in G Jlill, 158, reversed the doctrine, and established the principle, that common carriers receiving goods to transport to a certain place, and at that place transferring them in the ordinary course of business to a responsible common carrier bound for or towards the place of destination of the goods, and they are lost after being so transferred, the first receivers are not responsible for 2G6 LIAUILITY OF CAKKIEE FOK BAGGAGE. the loss. Ill the State of New York a statute passed in the case of railway carriers make the receiving company respon- sible, but gives it' a remedy over against the company by whom the loss occurred. 2 R. S. G93, § G7, 5th Ed. But it is cntii-ely competent for a number of different railroad lines running a continuous route, although different com- panies, and chartered by different States, to enter into an arrangement between themselves, by which, at either tenni- nus, passage tickets are sold and baggage checked over all the roads, and any passenger receiving such check for the entire route, may, in case of loss, recover of the company of* whom the ticket was purchased, and a company's agent selling a through ticket would render his company respon- sible in case of loss. And the validity of such contract will not be affected by the fact that it requires in its performance the action of other railroad companies incorporated by the acts of other States. Gary v. The Cleveland & Toledo Railroad Co.., 29 Barh. 35. § 491. A carrier of money may be equally liable for its loss as one of goods, if that be the common usage of the business in which he is engaged, and it is known to be his practice to take charge of it for conveyance. Thus the proprietors of a stage-coach acting as common carriers, and making a profit by the carriage of bank bills, that being within the scope of their business, were held liable for loss as common carriers. Dioight v. Brewster., 1 Pich. 50. § 492. Another point in regard to which there has been some diversity of decision relates to the carrier's liability for the usual baggage taken by travellers on board stage- coaches, railroad cars, and steam-boats. The early decisions were adverse to holding the common carrier responsible unless a distinct price was paid for it. Middleton v. Fowler, 1 Salh. 2S2. But the custody of the baggage finally came to be regarded as accessory to the principal contract, viz. the carriage of the passenger ; and thus the liability of the car- rier, as carrier for it's safe carriage and delivery was clearly COiEMENCEiCEXT OF CAEEIEE's LIABILITY. 267 established. Hawkins v. Hoffman^ 6 Hill, 5SG. Powell v. Myers, 26 Wend. 591. This liabilitj, however, is limited to ordinary baggage, such as travellers usually carry with them for their pleasure and personal convenience. A large sum of money carried in a trunk and lost, cannot be recovered under the terra baggage. Orange County Bank v. Brown^ 9 Wend. 85. There is also another hmitation, and that is, the baggage must be placed under the charge of the carrier, for if it remains in the exclusive custody and possession of the passenger, the carrier is not responsible. Cohen v. Frost, 2 Duer, 335. § 493. The carrier, by reason of his employment, and the standing offer he is continually making to the pubhc, to receive and carry all goods committed to him for that pur- pose, places himself under obligation, if his vehicle is not full, to act upon every acceptance of his offer, and thus to receive, for the purpose of transportation, all goods of the nature of those embraced in his line of business, which are tendered to him for that purpose. If he declines doing so, except because of his inability to carry them, or of their being a different kind of goods from those he is accustomed to carry, he renders himself liable to an action for damages. But the owner of the goods, when offered to the carrier, should be careful to tender, at the same time, the price of trans- portation ; because the carrier is not legally bound to re- ceive them without prepayment of his hire. § 494. The carrier's liability commences from that point at which there is a full and complete delivery of the goods to him to be carried ; and where he directs them sent to a particular booking office, he becomes liable from the time of their arrival and receipt at the office. Camden d; Am- Ooy Railroad and Transportation Co. v. Belknap, 21 Wend. 354. The carrier's liability is fixed by the acceptance of the goods for the purpose of transportation, wherever that may be, but some kind of acceptance is indispensable, and hence when a passenger having placed his overcoat on the 2G8 EXTENT OF CAERTEr's LIABILITY. 6cat of the car on wliicli he sat, left it there, and it was afterwards stolen, it was held the carrier was not liable. Tower v. TJtica & Schenectady Railroad Co.^ 7 Hill, 47. It is a sufficient delivery to a canal-boat carrier to leave the goods by or near the boat, according to the usage of busi- ness, provided express notice thereof be given to the master. Tlie delivery to an authorized servant or agent who is in the habit of receiving packages is sufficient. Evidence of a constant usage by the carrier to receive goods left at a cer- tain 2)lace, will be sufficient to render him responsible for goods left at such place. § 495. Having determined who are common carriers, what are their obligations as to receiving goods to carry, and what acceptance charges them with the goods, the next point of inquiry relates to the liabilities they place them- selves under, in the transportation and delivery of the property. Tlie general principle may be stated to be : that the common law makes the common carrier liable as an in- surer of the goods he transports against all loss and damage except what is caused by the act of God and the public enemy. " This," says Lord Holt, " is a politic establishment, contrived by the policy of the law, for the safety of all persons, the necessity of whose affairs obliges them to trust these sorts of persons, that they may be safe in then* deal- ings. For else these carriers might have an opportunity of undoing all persons, that had any dealings with them, by combining with thieves, &c., and yet doing it in such a clandestine manner, as would not be possible to be dis- covered." Tliis severe rule of liability has had its many cases of individual hardship, and many and strenuous have been the efforts under some form or pretence to escape from its pressure. § 496. The first point of inquiry that properly arises here, relates to the Aieaning of the phrase, " act of God." Wliat is to be regarded strictly as " an act of God." It is held not to be identical with " inevitable accident," but has WHAT IS AN "act OF GOD." 2G9 been styled a " natural necessity," such as storms, winds, &c. The clearest idea may probably be got of it in its legal sense, as applying to common carriers, by considering it as meaning sometJiing tVi opposition to the act of man. And in all cases of loss wliere the agent of destruction has clearly been something that no human po^ver has produced, or set in motion, it is then to be attributed to the " act of God." Some illustrations will point the application of this proposition. There is a sudden failure of the wind by means of which a vessel tacking is unable to change her tack, and so is driven ashore. Held, an " act of God." Colt v. McMahcn, 6 John. 160. Goods are burnt in a booth, the fire having originated one hundred yards' distance, and no negligence proved against the defendant. Held, that the fire arose from an act of man, and the carrier was liable. Forward v. Piitard,, 1 Term. Bep. 27. Destruction by lightning, and the freezing of canals and rivers, are regarded as " acts of God." The rule is to render the carrier liable wherever the act of man is traceahle, and hence where an injury was done to a cargo by the steam which escaped through a crack in the steam boiler occa- sioned by the frost, the can-ier was held liable. § 497. The phrase " perils of the seas," often occurs and is used as synonymous with " acts of God." It includes losses by pirates, and by collision of vessels where no blame is imputable to the injured ship. The phrase " dangers of the river," has also come up, and has been considered by some as embracing the same as " perils of the seas," while by others it has been regarded as more extensive, covermg losses occasioned by hidden obstructions, newly placed there, and of a character such that human skill or foresight could not have discovered or avoided. Gordon v. Buchanan^ 5 Yerg. 71. § 498. A common carrier may become liable for an injury caused by an " act of God," if he voluntarily and improperly encounters the mischief ; as where a barge mas- 270 WUO IS A PUBLIC ENEMY. ter rashly shoots a bridge -when the bent of the weather is tempestuous, and a loss occurs in consequence. Araies v. Stevens, 1 Strange, 128. So a loss occurring in conse^ quence of a deviation from the regular course of a voyage at sea will subject to liability ; as -where the navigation of Long Island Sound, being obstructed by ice, the car- rier vessel, instead of going through it, performed her voyage in the open, sea, on the south side of Long Island. This was held a deviation which rendered the carrier liable for a loss occasioned by the perils of the sea ; but the court distinguishes between this and the case of a vessel already on her voyage, and while in transitu is compelled by a like obstruction to deviate from her course. Crosby v. Fitch, 12 Conn. 410. So, also, a railroad corporation is held respon- sible for damages resulting from a delay to transport freight in the usual time which was caused by a great number of its servants suddenly and wrongfully refusing to work. As where a large proportion of the engineers on a railroad, sud- denly and by concert abandon their engines for the purpose of compelling the company to rescind a reasonable regula- tion. Blackstock v. The New York & Erie Railroad Co., 20 New York Rep. 481. And so also where there was a failure to transport a passenger with proper despatch, owing to the wilful act of the conductor in charge of the train ; it being held wholly immaterial whether a breach of contract results from the negligence or the wilfulness of the earner's agent if his act is within the scope of his emplyment and authority. Weed V. The Panama Railroad Co., 17 Neio York Rep. 362. § 499. The other exception is that of the " public enemy," which is restricted to enemies with whicb the State is at war, and to pirates on the high seas ; these latter being considered the enem-ies of all mankind. It does not apply to losses occasioned by thieves, rioters, robbers, armed mobs, or insurgents. The carrier is in all cases liable unless the loss has arisen through the operation of one of these two LIABILITY m THE DAMAGE OF AXIMALS. 271 causes, tlie proof of wliicli in exoneration always lies upon the carrier. The merchant or owner shows the delivery to him to carry, and that they never reached the consignee, or even stopping with the delivery will charge the carrier with the goods, and devolve upon him the necessity of showing something in discharge. If a loss occurred through either of the causes specified he is bound to show it, or, if he does not, to stand the loss. K the loss must have happened to goods on board a vessel without the misconduct by which it was occasioned, the common carrier would not be held liable. As where goods were improperly stowed on the deck of a sliip, and are washed away by the storm. The owner of the ship held liable for the loss, although caused by the perils of the sea, unless the danger were such, as would equally have occasioned the loss, if the goods had been safely stowed under deck. Crane v. The Mebecca, 6 Am. Jurist. 1. § 500. A question has been raised as to the liability of the carrier when he enters upon the carriage of animals, and a loss occurs. He was formerly held responsible in the same manner as a carrier of merchandise. Stuart v. Craw- ler/, 2 Stark. 323. The point has recently come up in the Com-t of Appeals of the State of Kew York in the case of Clarice v. The Rochester <& Syracuse Railroad Co. 4 Kern, 570, in which it was held that the liability of a common carrier of animals is not, in all respects, the same as that of a carrier of inanimate property. But the liability of a railroad company, engaged as a common carrier of animals, is not limited to the careful and safe conveyance of the car containing thena. The company is responsible for any in- jury which can be prevented by foresight, vigilance, and care, although arising from the conduct of the animals. But he is not an insurer against injuries arising from the nature and properties of the animals, and which diligent care can- not prevent. § 501. The strictness, extent, and severity of the com- 272 EIGHT OF EESTKICTmO LIABILITY. inon carrier's liability has led to frequent attempts on his part, to limit, restrict, qualify, or restrain it, whicli have generally been ultimately successful. It seems to have been early conceded in England that the right was possessed of making special acceptances in limitation of liability. In this country the point has several times been presented, gene- rally in the form of a notice given to the passenger that " all baggage was at the risk of the owner," and in such cases the law was very clearly settled that the carrier's lia- bility was not thereby restricted. Jlollister v. Nolen, 19 Wend. 23tJl:. Cole v. Goodwin, 19 Wend. 251. Gould v. Hill, 2 Hill, 623. At the same time several dicta of the judges went to the extent of denying that, upon grounds of public policy, the common carrier could, ly any means whatever, limit a responsibility which the law, for wise rea- sons, had cast upon him. The question finally went to the Court of Appeals of the State of New York in Dorr v. The New Jersey Steam Navigation Company, 1 Kern. 485, in which it was held that although a notice brought home to the other party would not have the effect of restricting liability, yet that it was competent for the coinmon earner, hy entering into a special contract, to limit it within nar- rower bounds than those prescribed by the law. The power of limiting by a special contract, stands now, therefore, ad- mitted, but that by notice, though brought to the knowledge of the owner, denied. But ought not the latter to be evidence of such a special acceptance as, under the English decisions, would amount to a limitation ? In States other than New York, the decision has, in many instances, been adverse to the right of the carrier to limit his common law liability. Jones V. Vo&rhees, 10 Ohio, 145. Fish v. Boss, 2 Kelly {Georgia), 349. Bennett v. Button, 10 N. Hampshire, 481. The question seems never to have caused any difficulty, ex- cept as it related to carriers by land. Carriage by water has been accompanied by a bill of lading, specifying the risks from which the carrier chose to exempt himself, and this has EIGHT OF EESTEICTING BY NOTICE. 273 been held to be a special contract, and to afford protection. Swindler v. Millcml, 2 Bich. {S. C.) 286. § 502. Tlicre are, however, cases in which the carrier may limit his liability by a general notice. Tlie ordinary run or character of the goods he is accustomed to carry, is generally known in the community among whom his business is carried on, and he may give a general notice that he will not be answerable for goods of a different description, and higher value, such as money and jewelry ; or that if he undertakes the carriage of them, he shall be paid a higher compensation. Thus the courts say : " that if the carrier has given general notice that he will not be liable over a certain amount, unless the value is made known to him at the time of delivery, and a premium for insurance paid, such notice, if brought home to the knowledge of the owner, is as effectual in qualifying the acceptance of the goods, as a special agreement, and the owner, at his peril, must dis- close the value, and pay the premium." Orange County Bank v. Brown, 9 Wend. 85-115. § 603. But while the carrier is held to this extreme lia- bility, the owner of goods is very properly placed by the law under obligations not to practice upon him any misrep- resentation, fraud, or concealment of any kind. He must do or say nothing tending in any way to mislead. The adopting any disguise for his box, the labelling it as contain- ing articles of a different nature and inferior value from its real contents, will prevent a recovery in case of loss. A traveller's trunk is lost containing $11,250 in money. It was sought to be recovered as haggage. Held, that it did not fall within the commonly received import of the term " haggage,''^ and that an attempt to Iiavc it carried free of reward, imdor cover of " haggage,^'' was an imposition upon the carrier ; that he was thereby deprived of his just c^-'* pcnsation, besides being subjected to unkno-"" Orange County Banh v. Brown, .lU,- and of all disguifio § 504. In the absent'" IP 274 IIOAV FAR PKOTECTED BY NOTICE. or concealment, the question lias arisen whether it devolvea upon the owner to disclose the superior value contained in a trunk or box, or whether it is the business and duty of the carrier to inquire, or to be chargeable for the full value if he does not. The latter may be regarded as the correct doctrine. Walker v. Jackson^ 10 Mees. (& Welsb. 161. The further question has also been presented, whether the giving of notice has the effect of preventing the necessity of making inquiries on the part of the carrier, thus shifting the respon- sibility to the owner, and devolving upon him the obligation to disclose in accordance with the notice he has received, or whether the carrier is still bound to inquire ; and the rule is settled in accordance with the doctrine first mentioned. Brook V. Pickwick^ 4 Bing. 218. Orange County Bank v. Broion^ 9 Wend. 85-115. § 505. Another inquiry here arising relates to the lia- bility of the carrier, supposing he has protected himself by notice brought home to the owner. In other words, against what is the notice a protection ? The answer is that it pro- tects him only against his extraordinary liability as a carrier. The owner of lost goods may still aver and prove that the loss was caused by negligence^ and that even of the ordinary character ; and the carrier will be liable, for proof of negligence is held to be an answer to proof of notice. Neither will the notice protect the carrier from a misfea- sance^ as the delivery of goods at a wi'ong place, or to a wrong person ; or the sending of them by a different con- veyance from that stipulated, by means of which they are lost. Neither will a notice dispense with the performance on the part of the carrier of any implied duty, and hence if a loss were to occur in consequence of the vessel not being reasonably stout, strong, and well equipped for the voyage, the carrier will be held liable notwithstanding the notice. , "" , P, these cases, however, the giving of notice shifts the who must then'sfe^ *^^ ^^^'^■i"' ^^ *^^^ ^^^^ °^ ^^^ ^^°^'' -'^n-lio;eiice or misfeasance, or non- DISCHARGE BY DELIVEET TO CONSIGNEE. 275 performance of duty, upon tlio strength of -svliicli lie still claims to recover. § 506. Ilaving seen how the common carrier of goods is charged by their delivery and acceptance ; what are his common law liabilities ; how he may vary, modify, or re- strict them ; and what residuum of lialnlity still remains, notwithstanding such modification or restriction ; it will be next in order to inquire how he can entirely discharge him- self from all liability. This is accomplished by the delivery of the goods to the consignee. This raises the mquuy, what is necessary to constitute a complete delivery, such as will detennine tho transit ? And first in regard to time. The rule is that when no time is fixed upon for the transit, a reasonable time is implied, and that the carrier is bound to make a proper delivery with reasonahle expedition. "What that is, must be governed by the circumstances of each par- ticular case. Another question relates to the damages to which the carrier is liable if he fail to deliver within a reasonable time. An account good when delivered to the earner is barred by the statute of limitations when delivered to the consignee. Held, the carrier was liable. Tavor v. Philhrick, 1 iV. Hamp. 326. The omission to deliver within a reasonable time does not render the carrier liable for the value of the article. He is only liable for damages caused by such omission Scovill v. Griffith,^ 2 Kern. 509. Where there is no express agreement in relation to time of trans- portation, the carrier is not responsible for delays occurring without his default. Wibert v. The New York cC* EHe Eailroad Co., 2 Kern. 245. The consignee is under no obligation to receive goods tendered late in the day, and after he has dismissed his hands ; and if a subsequent loss occm's, the canier will be responsible. Eacjle v. White^ 6 Wliart. {Penn.) 505. § 507. The earner's contract to deliver may be suspended by some temporary unavoidable obstacle, and yet, if he has used a reasonable degree of exertion and diligence in the 276 MANNER OF DELIVERT TO CONSIGNEE. transportation, lie will bo excused. A carrier on the canal is prevented by reason of ice, from accomplishing, without serious detention, the whole voyage. He is only bound to deliver at the place appointed, upon the canal again becom- ing naviga])le. Parsons v. Ilardy, 14 Wend. 215. So, also, the delay occasioned by the disordered condition of a lock, would have the same effect. But where there is an express contract to deliver within a certain prescribed time, no temporary obstruction will be any defence, but he is held strictly to the performance of his contract. The occurrence of inevitable necessity in such case will constitute no excuse. § 508. As to person and place of delivery, when the carriage is by land, in the absence of any special contract or established usage to the contrary, the goods must be carried to the residence of the consignee. To serve as a perffect protection to the carrier, the tender of delivery should be to the individual consignee at his residence or place of business, and hence where the goods were delivered to a porter at the inn, it was held insufficient. Hyde v. Trent i& Mersey Navigation Company, 5 Term. Bep. 389. The delivery of the goods according to the label upon them will always discharge the carrier. The consignee may take pos- session before they arrive at their place of destination, and that will discharge the carrier. But although the delivery should be to the consignee at his residence or place of busi- ness, yet the carrier may, in exoneration, prove that his uniform usage and course of business is to leave goods at his usual stopping places in the towns to which the goods are directed, without notice to the consignees, provided such usage be shown of so long continuance, uniformity, and notoriety, as to justify a jury in finding it was known to the owner. Gibson v. Culver, 17 Wend. 305. The delivery of money at the banking office to a person usually employed as a porter at the bank is insufficient unless authorized by the bank, and such authority may be either express or im- plied. Sweet V. Barney, 24: Barl. 533. WHAT WILL EXCUSE NON-DELIYEKT. 277 § 509. The question of sufficiency of delivery has come up, perhaps, the most frequently in cases of carriage by water. Here, although usage may be urged in defence of it, a delivery by placing goods on the wharf, without any notice to the consignee, is held insufficient. To render the delivery complete, notice should be given to the consignee, and after that, the carrier still continues liable until the consignee has had a reasonable time to remove the goods. Moses V. B. & M. R. R. Co., 32 iV". Ramx?. 523. § 510. The question arises what becomes the duty of the carrier, in case the consignee is dead, or absent, or refuses to receive the goods. He is still charged with them, and will not Ke justified in leaving them on the wharf unpro- tected, or in abandoning them in any other way. He may, in such case, relieve himself of them, by placing them in store with a responsible person in the same business as the consignee, at the place of their consignment ; and the person so receiving them, becomes the agent or bailee of the owner of the property. Fish v. Newton, 1 Denio, 45. § 511. This branch of the subject is very properly closed by inquiring what will excuse a non-delivery of goods hy the caffi^r. He is excused where the loss occurs — 1. From an act of God. 2. From that of a public enemy. 3. Where the goods have been necessarily thrown over- board to preserve the lives of the crew and passengers. 4. "Where the loss has been occasioned by the illegal act of the shipper. 5. Where, by agreement, there is a discharge from fur- ther responsibility. G. Tlicir delivery at the place of their original destina- tion is excused by receiving subsequent directions as to the place of delivery. Or they may be accepted short of their original place of destination. 7. AVhere the owner accompanies them, having their exclusive custody. 278 cakkier's eight to compensation. 8. Wlicn they arc stopped in transitu by the act of tho vendor, or consignor. § 612. The carrier's right should be co-extensiyc "with his severe liabilities. lie has a special property in the goods he transjjorts. This enables him to sustain an action against any person disturbing his possession. This is grounded upon two reasons : One the interest he has in the transportation, the other his responsibility to the owner for their injury or loss. But he enjoys no absolute right of projDerty in the goods, and hence is unable to give any title in them to another either by way of sale, pledge, or mort- gage. A carrier having jrarchased a boat, deposited, as security for its price, a part of his load of salt with the vendor. Held, the latter acquired no right against the owner of the salt. Kitchell v. Yanador, 1 Black. 356. The right of giving bottomry and respondentia bonds, grows, as we have seen, out of necessity, and the peculiar circum- stances of the case. § 513. The carrier's right is to his compensation, and to resort to all the legal means by which he may become pos- sessed of it. These means are two-fold — the one by enforc- ing his lien upon the goods, the other by proceeding per- sonally against the owner. The first will be considered in the next book. The last is an action brought in a court of law to recover his freight, or price of hu'e, of the owner or employer. This only becomes necessary when he has volun- tarily relinquished the possession of the goods, for until then, his right of lien gives him a perfect remedy. The car- rier may, if he chooses, demand the payment of his freight in advance. But if he waives that right, he must fully earn it before he can resort to other means to possess himself of it. The contract which gives him the right to claim it is an entire one and indivisible, and must, therefore, be wholly performed, before any thing can be recovered. It is the price of carriage^ and not simply of receiving goods to he carried. Even the arrival of the goods at their place of caeeier's eight to freight. 279 destination did not entitle the carrier to Ms freight. They must, in addition, be delivered, or be in a condition to be. But if the delivery is prevented by the act of the owner, or even by the act of the government, the freight will be con- sidered as earned. The carrier loses his freight by the cap- ture of his vessel, but in case of re-capture, performance of the voyage and delivery, or offer to do so, his right becomes perfect. This is upon the principle that he ought not to lose his freight in consequence of an interruption of the voyage without any fault of his ; and so if the goods be thrown overboard for the ship's preservation, the owner of the goods must pay freight, and seek his repayment by a general aver- age. § 614. As to the person to whom the carrier looks for his freight where he is obliged to recover it by action, it is ordinarily the party with whom he made the contract to carry the goods. When, however, the goods are to be de- livered to the consignee on payment of freight ; or, if by the bill of lading, the goods are to be delivered to A, or his assigns, he or they paying freight, and the goods are received under it, that constitutes an implied undertaking, and the carrier can look to him or them for the freight. But if, upon the face of the bill, it is apparent that the consignee is a mere agent, his receipt of them will subject him to no personal liability. And if there is a mere receipt of goods mider a bill of lading, the law, it seems, will not inij^ly a promise from an indorser to pay the freight, although a jury are at liberty from such fact to find such a promise ; unless the charter-party contains an express conti'act by the char- terer to pay freight, which is referred to in the bill of lading. It is held requisite that the ship break ground, to give in- ception to fruiglit ; and hence, if the ship be laden and cap- tured before breaking" ground, and afterwards re-captured, but the voyage broken up, no freight is earned. But after breaking ground, a temporary restraint, such as an embargo, which suspends, for a time, the performanco of the voyage, llSO I'KtlGIir lOli TKANSrOETATION OF ANIMALS. leaves the riglits of tlie parties unaffected. The same prin- ciple applies to a blockade or hostile investment of the port of departure. Tlie earner, in such case, may wait until the obstacle is removed, (the same as if navigation had been obstructed by ice,) and then j^roceed in the prosecution of his voyage. Palmer v. Lorillard, IG Johi. 348. § 515. A question has been raised, whether, in case the cargo becomes greatly deteriorated during the voyage, the consignee is obliged to receive it ; or whether it may be abandoned in discharge of the freight. The gi'ound upon which the right thus to abandon is claimed, is, that the cargo is the only proper fund and pledge for the freight. It is now, however, well settled, that no such right exists ; that when the carrier has completed the carriage of his cargo, and is ready to deliver it, he has performed all the con- ditions upon which his right to his freight depends, and that upon no principle can it be claimed that he is an insurer of the soundness of the cargo, as against the perils of the sea, or its own inherent decay. Griswold v. The New Yorh Insurance Com/pany, 3 John. 321. § 516. Another cjuestion often presenting itself, regards the rights of the carrier to recover freight for the transpor- tation of animals that have died on their passage without his fault or negligence. Tliis question is settled by referring to the nature and terms of the agreement. If the agreement be to pay freight for the lading of the animals, that is ac- complished by receiving them on board, and their death on the passage cannot deprive the carrier of his freight. If it be for the transportation of them, that is not performed until their arrival at the place of destination ; and if they die in transit, the freight is not earned. But if neither of these, or any corresponding terms are used, and there is no express agreement respecting the payment of freight, the general rule is that freight is recoverable whether they live or die during the voyage. § 517. Another question has arisen out of the foreign EIGHT TO FEEIGHT PKO EATA. 281 marine law, wliicli allows freight paid in advance to be re- covered back, if the goods are not carried, nor the voyage performed, by reason of any event not imj)utable to the shipper. This is obviously the equitable doctrine, as the consideration for payment, which was the carriage of the goods, has utterly failed. But the rule settled in reference to it in England and in this country is entirely ditferent. The English rule is that if the charter-party is silent, the law will require a performance of the voyage before the freight becomes due, but that the parties may stipulate that part of the freight be paid in anticipation, and be made free from subsequent contingency of loss, by reason of abandon- ment of the subsequent voyage. Tliat to enable a recoveiy back of any freight thus paid in advance, a stipulation to tliat effect between the parties is necessary. De Silvale v. Kendall^ -i Maule & Selw. 37. Our rule is directly the reverse ; requiring a stipulation that the freight paid in ad- vance is not to he returned if the voyage be not performed, otherwise the shipper may recover it hack. Pitman v. Hooper^ 3 Sum. 50. § 518. Another question relates to part-pajTnent, or the right to ratable freight, which may arise in two cases — one, where the ship has performed the whole voyage, having brought only a part of her cargo to the place of destination, and the other where she has not performed her whole voyage, the owner having received his goods at some port short of that of delivery. The first occurs in»the case of a general ship, or one chartered for freight, to be paid accord- ing to the quantity of goods. Freight is then due only for what the ship delivers. But suppose the ship is chartered at a specific sum for the voyage, and a part of her cargo is lost by a peril of the sea, and hence a part only is delivered, can there, in such case, be an apportionment of the freight? The contract is then regarded as entire, and the delivery of the whole cargo a condition precedent to the recovery of freight. It is the whole or nothing. This, however, presents 282 ArrOKTIONMENT OF FKEIGHT. a case of f^reat liardshij), and if any circumstances were apparent, from wliicli a new contract to pay freight ^ro rata might be inferred, such, for instance, as an acceptance by the freighter of the remaining portion of the cargo, relief would proljably be afforded. § 619. An interesting case presents itself where the car- rier vessel is forced into a port short of its destination, and is unable to finish the voyage. Then, if reasonable time is allowed to repair, or for the carrier to proceed in another ship, he will be entitled to the whole freight. But if the owner of the cargo consents, and the carrier refuses to go on, he is not entitled to freight, because he refuses to earn it. But the carrier, in order to entitle himself to freight, ought to repair his vessel, or obtain another one and proceed, or offer to do so, and if so he proceeds through the remainder of the voyage the samO as if no suspension of it had oc- cui-red. But the merchant or owner may, if he choose, re- ceive the cargo at the port of necessity, and in that case there occurs what is termed on apportionment of freight^ that is, freight ascertained from a calculation of the propor- tion of the voyage performed. The conditions of this ap- j)ortionment are : 1st, that the ship and cargo be forced into a port short of its ultimate destination by necessity, and be unable to prosecute the voyage, and 2d, that the cargo be there voluntarily accepted by the owner. Luk^^ v. Lyde, 2 Burr. 882. § 520. Tlie common earner is not held to the same severe liability for injuiies that occm' to passengers, as for damage and loss to property, as he cannot exercise the same con- trol over persons as he can over inanimate objects. He is under legal obligations to receive all persons applying for a passage, provided he have sufficient room, and the passenger pay or tender the fare. The passenger carrier is also bound to provide means and vehicles of carriage reasonably strong, and entirely adequate for the jDurpose intended. If there is any defect in the original construction of a stage-coach or LIABILITY FOE CAEEIAGE OF PASSENGEE3. 283 railroad car, although out of sight, yet if it be discoverable on the most minute examination, and any damage is thereby occasioned to the passenger, the carrier will be answerable. He is bound to adopt all practicable improvements tending to insure the safety of passengers, and, if he fail to do so, he is Hable. And hence, where a passenger in a railroad car was injured by the breaking of one of the axles in con- sequence of a latent defect which could not be discovered by the most vigilant external examination, and yet the manufacturer by resorting to the test of bending the iron after the axle was formed, and before its connection with the wheel, might have discovered the defect, tlie company were held liable ; the doctrme established being, that the passen- ger carrier is liable, although the defect be latent and not discoverable by the most vigilant external examination, pi'ovided it le ascertainable hy any known test whether it he such as is applied hy the manufacturer or the carrier. Hege- man v. The Western Railroad Corporation, 3 Kern. 9. § 521. The passenger carrier is bound to carry his pas- sengers safely owdijyToperly, and is liable for all consequences resulting from the want of such care as the person, under the cu'cumstances of the case, may require. Ilis liability is much the same as that of a special carrier of goods for hire. He is answerable for the want of due care, diligence, and skill ; and hence where an injury occurs to the person of a passenger l)y mere accident, without any fault on his part, he is not responsible. Bennett v. Dutton, 10 iV. Uamp. 481. § 522. It is the right of the passenger carrier to prescribe all reasonable rules and regulations which are proper, and which are essential to aid him in the performance of his undertaking ; and hence wlicre a railroad company made a regulation requiring the passengers, soon after entering the cars, to give up their tickets, receiving checks in exchange, and a passenger, on demand, refuses to deliver up liis ticket, it was held that the conductor might demand the i)aymcnt of 284 LIMITATION OF LIABILITY FOE PASSENGEE8. liis fare, and on refusal, eject liim from the cars. Northern Railroad Co. v. Page^ 22 Barb. 130. And so, also, a regu- lation requiring passengers to exhibit their tickets whenever required by the conductor, and directing the ejection from their cars of those who should refuse to do so, has been held a reasonable and proper regulation, and one that the pas- sengers must obey, or forfeit the right to their further car- riage. Hibhard v. The New Yorh i& Erie Railroad Co.^ 15 New YorTc Rep. 455. § 523. The question has arisen how far it was competent for the passenger carrier to limit his liability for injuries to the person, and it has been held that he may, by positive stipulation, relieve himself to a limited extent, from the con- sequences of his own negligence or of that of Jiis servants. But that, in order to accomplish this object, the contract must be clear and explicit in its terms, and plainly covering such a case. Hence a drover's pass containing a provision that " the persons riding free, to take charge of the stock, do so at their own risk of personal injury, from whatever cause," does not exempt the earner from liability for gross negligence, or for the want of ordinary care. That he is still liable for what would be regarded as a fault or misconduct on his part, independent of any peculiar responsibility at- tached to his calling or employment ; and that he is bound to observe reasonable care and precaution, employ persons of requisite skill, and possess vehicles fit for use, and adapted to the nature of the service requii*ed. Smith v. The New YorTc Central Railroad Co., 29 Barh. 132. § 524. The passenger carrier, if a stage-coach proprietor, will be liable for any injury occasioned by the racmg of the driver against other coaches, and the upsetting of the coach is taken to be sufficient irrima facie evidence of negligence to shift upon the carrier the bm*den of proof to show cir- cumstances such as negative all negligence on his part. Peck and wife v. Niel, 3 McLean, 22. And his liability will be the same although the injmy result from the passen- WHEN NEGLIGENCE WILL PBEVENT EECOVEET. 285 ger's own act, as by leaping from the vehicle, provided the state of peril will justify it. StoTces v. Saltenstall, 13 Peters^ 181. In the case of collision between two carriages, the employer of the driver, by whose negligence or misconduct it occurred, must be responsible for the consequences. But the rule is that if the plaintiflf's negligence in any wmj con- curred in causing the damage, he is not entitled to recover. He must not appeal to the law for redress when he is him- self at fault; and hence where one was injured by an ob- struction in a highway against which he fell, it was held that he could not maintain an action if it appeared that he was riding with great violence and want of ordinary care, without which he might have seen and avoided it. Butter- field V. Forester^ 11 East. 60. But although there may have been negligence on the part of tlie plaintiff, yet the rule is understood to be, that he is entitled to recover unless he might, by the exercise of ordinary care, have avoided the consequences of the defend- ant's negligence. The burden of proof is here devolved upon the carrier, and he is bound to show that there has been no disregard of his duties, and that the damage has resulted from a cause which human care and foresight could not prevent. QUESTIONS. Who is a common carrier ? What two elefnents enter into his com- position ? What serves to define the different kinds of carriers ? Enu- merate them. Where there are successive companies over a continuous line of travel and no partnership, what is the liability and duty of tho receiving carrier? What illustration? What the statutory provision? What can be made matter of agreement as to carrying through the entira route ? When is a carrier liable for loss of money ? What is a carrier's liability for baggage ? On what principle is he liable ? Wliat is the limitation ? Under whose charge must the baggage be ? What is tho carrier's duty as to receiving goods? When can he decline? What must the owner do, when offering them for carriage ? Wliat the carrier's liability if he declines receiving them ? When docs tlie carrier's liability commence ? By what is it fixed ? What is indispensable to render him 280 ' QUESTIONS. liable? What is a sufficient delivery to a canal-boat carrier? What instance of usage as to jilace ? What is the carrier's liability ? IIow does the law regard hira ? For what reason ? What is an act of God ? IIow as to its equivalency with " inevitable accident ? " ' How with " natural necessity ? " When is it clearly an act of God, and to what is it in opposition ? What illustration ? IIow is the phrase " perils of tho seas," used? What does it include? IIow is " dangers of the river" considered ? Can a common carrier become liable for an injury caused by an act of God ? In what manner ? What other instance ? What case of liability from delay ? What from failure to transport passenger, arising from wilful act of conductor ? How is a public enemy defined ? What does it include ? What does it exclude ? Where is the burden of proof? What does the owner show to make out his case ? What then devolves upon the carrier ? What if the loss must have happened with- out the misconduct which' occasioned it ? What illustf ation ? What is the limitation to the carrier's responsibility in the transportation of ani- mals ? Can a common carrier restrict his common law liability ? How ? Can restriction be accomplished by notice? Are there any cases in which a common carrier can limit his liability by a general notice? Under what circumstances? Under what obligation is the owner of the goods ? What will prevent a recovery in case of loss ? What illus- tration ? Where there is no notice and no concealment, on whom does it devolve to inquire ? What effect does the giving of notice have on the carrier as to his duty of inquiring ? Against what is the notice a protection ? May the owner of lost goods stQl recover, and in what cases ? Does a notice dispense with any implied duty ? What effect has the giving of notice in shifting the burden of proof? How does the carrier discharge himself from aU liability ? When no time is fixed for the transit, what time is implied ? When must the carrier make deliv- ery ? What does the omission of the carrier to deliver within a rea- sonable time, subject him to ? When not responsible for delays occur- ring without his default ? When is consignee under no obligation to receive goods ? How may carrier's contract to deliver be suspended ? And when may he be excused ? What illustration in case of carrier on the canal ? What bound to do ? What delay otherwise, and how occa- sioned will have same effect ? How is it, where there is an express contract to deliver ? To whom must the delivery be made ? And at what place? In what manner delivered when labelled? When may consignee take possession ? How may the usage and course of business of the carrier justify a delivery ? And what kind of usage ? What illus- tration as to delivery of money ? How are goods carried by water dehv- ered ? What is the carrier to do, when he finds the consignee dead, absent, QUESTIONS. 287 or refusing to receive ? THien is the carrier excused for not deliver- ing ? Uus the carrier any property, and what, in tho goods he trans- ports ? "What does this enable him to do ? What grounded upon ? Can he give any title to the goods he carries to another ? "What illustration ? "What is the carrier's right ? "What moans has he of enforcing it ? "When only does an action become necessary to recover his freight ? "What may the carrier do ? "What, supposing ho waives that right ? "What is tho character of his contract ? "What necessary as to performance ? "What is freight the price of? "What is necessary beyond carriage of goods ? "Wliat if delivery bo prevented by act of the owner or of the Government ? "What the rule in case of capture ? "What of recapture, performance, and delivery ? How if goods be thrown overboard ? To whom does the carrier look for his freight ? How when goods are deliv- ered to consignee on payment of freight ? How where to bo delivered to A or assigns, paying freight ? How where it is apparent that con- signee is a mere agent? How where there is mere receipt of goods under bill of lading ? "What is necessary to give inception to freight ? "What result of this ? After breaking ground, what the effect of re- straint, such as embargo or blockade ? Can tho cargo be abandoned in payment of freight ? How is it with claim for freight of animals that have died on their passage ? "What the different rules on this subject ? Under what circumstances can freight paid in advance, be recovered back ? "Wliat is tho English rule on this subject ? "What the American? "Wliat is tlie first instance mentioned in which freight pro rata can bo paid ? "What the second ? In what case does the first occur ? "What the rule where ship is chartered at a specific sum for the voyage, and a part of her cargo lost by a peril of the sea ? "What circumstance might prevent this ? "What occurs where carrier vessel is forced into a port by necessity and is unable to finish the voyage ? How may carrier tlicn lose his right to freight ? "What must carrier then do, to entitle himself to freight ? When, and what, is apportionment of freight ? What aro its conditions? Is carrier's liability for injury to passengers tho same as for loss of property ? What his obligations as to receiving passen- gers ? What is he bound to provide ? What if there be defect in con- struction of stage-coach or railroad car ? Wliat is lie bound to adopt as to improvements? Is he ever answerable where defect is not discovera- ble ? When, and under what circumstances ? How is passenger carrier bound to carry his passengers ? What is he liable for ? What docs his liability resemble ? What answerable for ? "Under what circumstances not responsible ? What the right of passenger carrier as to prescribing rules and regulations? What illustrations? Can a passenger carrier limit his liability for injuries? By what means? How must contract 288 MOTIVE CONDrCTVE TO INSUEANCE. be to have such effect ? What ilhistration ? What hmitation to his right of restraint ? What is ho still liable for, notwithstanding the limita- tion ? What is he bound to observe, whom to employ, and what to possess ? What act of driver is stage-coach proprietor liable for ? What is upsetting of coacli prima facie evidence of? AVhere is the burden of proof? IIow if injury resulted from passenger's own act ? Who liable in case of collision of carriages ? What is the rule where the plaintiff is guilty of negligence ? What illustration ? When is plaintiff entitled to recover, although negligent ? Where is the burden of proof? CHAPTER III. CONTKACT OF INSURANCE OR OF INDEMNITY FOR LOSS. The conviction of the safety of material acquisitions constitutes an element both of enjoyment to the man, and of credit to the merchant. As the agents of destruction are numerous, complicated, and ever active, it can excite no surprise that men of prudent, cautious habits, should seek an indenmity against the losses they must necessarily occa- sion. Tliis they have found in contracting with the msurer, who, after a wide survey of the causes of damage and loss as affecting both property and life, has been enabled to de- duce from what was apparently the play of chance, a suffi- cient degree of certainty ; and from the laws of disorder, a profounder law dispensing order ; and is therefore willing, for a sufficient consideration, to take upon himself aU the risks to which either property or life may be subjected. Whether in process of time the knowledge of facts, and the deductions of science, may not annihilate what now seems to be chance, and render so well known to every mind the causes and occasions of loss, and the means of avoidance, as to dispense entirely with this great department of the law, is among the imsolved problems of the future. At present, however, it must be admitted that it occupies a very important position in the body of commercial law. CONTRACT ASTD PARTIES TO MAEDTE INSUEANCE. 289 There are three kinds of insurance, ma Runs, ftee, and LIFE, to eacli one of which some consideration mnst be de- voted. All these, however, are gromided and bottomed upon the same principle, viz. : that of indemnitt — the agree- ment in advance to make good a possible loss. I. MARINE INSURANCE. PAKT I. NATUEE OF COXTEACT, AND PAETIE3. § 525. Marine Insurance is expressed by a contract in which one party, for a stipulated consideration, agrees to indemnify the other against certain perils to which his ship, freight, cargo, and profits, or some of them, may be exposed, during a certain voyage, or a fixed period of time. In this, as in the other branches of insurance, the party insuring is called the insurer, or very commonly in marine insurance, the underioriter. The party indemnified is termed the in- sured or assured. The instrument embodying the contract is termed the policy of insurance. Tliis contract is strictly one of indemnity. The insurer imdertakes, in the event of loss, to pay the assured either such value of the property insured as may be stipulated in the policy, or, if not so stipu- lated, such as may be legally ascertained. It is entirely competent to make an agreement for an insurance, to be afterwards carried out by the execution of a policy ; and whenever this is done, a refusal to execute will give a Court of Equity jurisdiction to decree specific performance, or even a remedy at law to recover in case of loss. § 526. In regard to parties, the common law rule is, that individuals, and partnerships or companies, may become in- surers; altliough practically the amount of capital required for that purpose, and some other considerations, has resulted in rendering companies mostly insurers in all the risks taken. And those companies are corporations either specially cre- 19 290 BUBJECT-MATTEK OF MARINE INSURANCE. ated by the legislature, or wlio have Lecome such under a general act passed for that purpose. In regard to the party- insured, tlic question has arisen whether the insurance of an enemy's property is legal, and, in case of loss, enforceable at law. It may now be considered settled both in England and in this country, that no such insurances can be sus- tained. Bristow V. Towers, 6 Term Hep. 35. Grisviold V. Waddington, 16 John. 438. With that exception, any person, whether American or alien, may be insured. Prac- tically subscriptions to policies are usually procured through a hroher, to whom the insurer looks for his premium, and who occupies the position of a middleman between the un- derwriter and the assured. QUESTIONS. "What is Marine Insurance ? What the names of the parties to the contract ? What the name of the instrument ? What is this contract one of? What is the effect of an agreement for an insurance ? How is such enforceable ? Who may be insurers ? Who are generally insurers, and why ? Whence derive their existence and capacity ? Is insurance of an enemy's property legal ? What other parties may be insured ? Who, practically, is the party through whom insurances are effected ? PART II. STIBJEOT-MATTER A]ST) INSUEABLE INTEEESTS. § 527. The subject-matter insured must distinctly appear in the policy, and, as a general thing, is limited to what is therein stated. If a ship is specified, it becomes a part of the contract, and admits no substitution of anothei* without necessity. But a cargo, being of less easy identification, may be shifted from one ship to another, and the insurer, if done for a sufficient reason, will still be liable. Tlie body of the ship being insured will include all its appurtenances. It covers all the legal interest in the vessel. A cargo may be legally insured without naming the ship ; as when the insurance is upon goods on board any shij) or ships. But SUBJECT-MATTER OF MAEINE INSTIRAKCE. 291 this is a loose mode of insuring, and in case of loss, some- times subjects to great inconvenience in discriminating be- tween goods covered by different policies. § 528. The words lost or not lost, as applied to the snb- ject-mattet" insured, are generally contained in a policy. Tliis phrase is inserted to cover any loss of the property insured which may have happened at or before the time of entering into the contract, and of which the parties were at the time ignorant. The phrase, however, is not deemed necessary for that purpose, as without it all losses then existing, of which the parties were ignorant, would be covered by the in- surance. § 529. A voyage from abroad may be insured with very little of the specific in description, and yet be sufiicient. Tliis often happens from necessity. The jmrty washing to insure may be ignorant of the name of the ship, or master, or port of discharge, or consignee, or of the nature or species of the cargo, and may not be able, therefore, to specify any of these ; and in such case the insurance will be good for the amount, if effects be laden in any ship, to any port, and to any consignee. But the cargo must be of the same form and species as that insured, as an insurance upon a cargo of dry goods would not cover a cargo of wheat. § 530. Tlic subject-matter insured, whether a voyage or a cargo, must be legal ; and if there is any illegality in the commencement of a voyage, it will render the whole illegal ; but if the voyage, as originally insured, be lawful, a subse- quent illegality will not affect it, provided the loss have no connection with it. A question that has been very exten- sively discussed, and in England remained for a long time undetermined, relates to the legality of making and enforc- ing, in one country, insurance upon a trade which is illegal by the laws of another. An insurance, for instance, is made in one country in fraud of the revenue laws of another. A loss occurs. Is the insurance valid ? Tliis was so held by Lord Mansfield in Planche v. Fletcher^ 1 Doug. 251, upon 292 BUBJECT-MATTEE OF MAEINE INSUEANCE. the ground that one nation docs not take notice of the reve- nue laws of another. And altliough the morality of the principle has been a good deal doubted, yet it may now be regarded as settled in the jurisprudence of England and this country that such insurances arc valid and enforceable, pro- vided the insurer knew, at the time, the nature and precise character of the risks he was taking. § 531. Another kind of merchandise which has presented some questions of difficulty consists of contraband goods. These arc commodities particularly useful in war, such as arms, ammunition, horses, timber for ship-building, naval stores, and in some cases provisions, especially if in a manu- factured state. The great question here presented is, whether a trade in goods contraband of war carried on by a neutral, can be deemed legal, and insurances thereon enforced in the courts of the neutral country. It is admitted that sucli goods, by the law of nations, are legally liable to seizure and condemnation by the belligerent powers. But. are these rights under this law, of a character to control the jurispru- dence of the neutral country ? This question came up in Massachusetts in the case of Richardson v. Mairie Insurance Company, 6 Mass. 102, in which the court decided that in- surance on goods contraband of war against capture and condemnation on that account, if the facts are known to the underwriter, and the risks are not excepted in the policy, is good, and may be enforced in case of seizure and con- demnation. Some early cases in the State of IS^ew York are to the same effect. But as right and duty are correla- tive terms, and the rights between nations at peace never conflict, it is difficult to understand why a right given by the law of nations in time. of war, should fail to be recog- nized among all nations which are the subjects of that law. The point is stOl regarded as open in England and in this country. § 532. The wages of seamen cannot be legally insured. The maxim is that freight is the mother of wages, and that ■WHAT MAY CONSTITUTE INSURABLE INTEEEST. 293 public policy, will preclude every thing tending to diminish the strength of motive to earn freight. If the seaman could insure the receipt of his wages at all events, it would weaken or destroy the motive to earn them, and hence the law pre- cludes this kind of insurance. § 533. The same principle that precludes seamen's wages from being a subject of insurance, in some parts of conti- nental Europe operates the same upon freight which is not yet earned, and renders it uninsurable. By freight is here meant the remuneration to be paid to the shipowner for the hire of his ship. In England and in this country a party having an interest in the subject-matter from which the freight is to arise, may insure the freight, provided the ship has actually begun to earn it. An inchoate right to it is an insurable interest, and even an agreement that advances shall be paid by bills drawn by the captain against freight, gives the parties making such advances an insurable interest in the freight. Wilson v. Marim, 3-i iLng. L. c£* Eq. \^^i. Under this term may also be insured the benefit an owner would derive from carrying his own goods in his own vessel ; but he must show that, had not the peril insured against inter- vened, some freight would have been earned ; that cither some goods were put on board, or that there was a contract for doing so- § 534. As i-egards the person insuring, the rule is, tliat any one having an interest in the subject-matter of insur- ance, may get himself insured to the extent of that interest ; and further, that any person may be said to have an interest, who may be injured by the risks to which that subject-mat- ter is exposed. Such an interest need not amount to prop- eriy in the subject of insurance. One holding goods merely as agent, may insure. Tlie mortgagor and mortgagee both have an insurable interest in the property mortgaged, the latter, liowcver, only to tlie amount of liis claim. Insurance by the former does not enure to the benefit of the latter except in case of assignment ; and if assigned as collateral 29^1: AVUAT MAY CONSTITUTE INSUKABLE INTEKEST. security, and upon tlic destruction of tlic property mort- gaged the insurers puy the sum insured to the mortgagee, it is to be applied as so far a satisfaction of the mortgage debt. Jioherts v. Trader's Ins. Co., 17 Wend. 631. § 535. An insurable interest is termed one sui generis, and peculiar in its texture and operation. It covers inchoate rights, provided they are founded on subsistmg titles, imless they are prohibited by the policy of tlie law. Thus there exists the right to insure expected or contingent profits, but in such case the insured must have a real interest in the subject-matter out of which they are expected to arise. In such case, no recovery can be had without showing that some profit would have been realized from the adventure if the loss had not occurred. So, also, in a case quite analo- gous, commissions which are expected to arise from the sale of consigned property constitute an insurable interest in the property by the consignee. § 536. The interest which is acquired by the insurer in the safety of what he insures, constitutes of itself an insur- able interest in certain cases. This is termed re-assurance^ and the contract in which it is embraced is wholly distinct from that of the original insurance ; and hence the re-insured is held to j)rove the loading and value of the goods, as also the existence and extent of the loss, as in the case of the original insurance. In this, the insurer seeks to indemnify himself against the heavy amount of risk he has undertaken, and his profit, if any, lies in the smaller sum for which he can get the same risks again insured. § 537* Tlie insured has also sufficient interest in the sol- vency of his insm'er to procure an insurance upon that from a second insurer, but the contract he enters into is a new contract, the new insurer not becoming strictly a surety for the first one. This is not often done, as by multiplying the charges, it lessens the profits of the voyage. So, also, the insured may make a double insurance, in which CAse there are two insurances on the same risk, and both in virtue of LIABILITY m CASE OF DOLTJLE INSURANCE. 295 tlie same interest. But in such case, the law will not per- mit the receipt of a double satisfaction in the event of loss. Each underwriter is bound to contribute ratably his pro- portion of it. It is the rate of subscription, and not the order of time, that must govern ; and if the insured pro- ceeds, as he has a right to do, to collect the whole loss out of one of the insurers, the latter can recover against the others their ratable contribution. It is competent for par- ties to introduce into their policy a clause preventing the rule of contribution, and rendering the insurers liable ac- cording to the order of dates of their policies ; and what is termed the American clause to that effect, reads thus : that " in case of any subsequent insurance, the insurer shall, nev- ertheless, be answerable for the full extent of the sum sub- scribed by him, without right to claim contribution from subsequent assurers." It is held that such a clause bars all claims for contribution from subsequent insurers upon the same cargo, although there was aliment for all the policies at the time of subscription. The American Insurance Company v. Griswold, l-i Wend. 390. QUESTIONS. Where must subject-matter appear, and how ? To what is policy lird- ited ? How does ship become, if specified ? "WTiat in relation to car- go ? What included where body of ship is insured ? What does it cover ? How may cargo be insured ? What the inconvenience attend- ing it ? What the effect in a policy of words lost or not lost ? Wliat the necessity of their introduction ? Voyage from abroad, how insured ? Wliy upon such imperfect description ? What necessary in regard to cargo ? How must subject-matter be ? How if illegality in commence- ment of voyage ? How, in case of subsequent illegality ? Can insurance be valid in one country upon a trade illegal in another ? Wliat are goods contraband of war ? Is insurance upon such goods valid in a neutral state, and under what circumstances? Are the wages of seamen insur- able ? For wliat reason ? Is freight, yet to bo earned, insurable ? What is meant by freight ? Under what circumstances may freight be insured ? How where owner carries his own goods in his own vessel ? What must he then show in order to recover ? What must person have 296 VALIDITY OF WAGEK POLICIES. in subject-matter to be insured? When may person be said to have an interest ? Must such interest amount to property ? "What is right of insurance of mortgagor and mortgagee ? "What application when in- surance assigned to mortgagee and loss and jiayment ? AVhat does insur- ablo interest cover ? Under what circumstances are expected or con- tingent profits insurable ? What, in such case, mnst be shown to recover? By whom are expected commissions on sales insurable? What is re-assurance? What interest supports it? Between what parties, what the natui'e of the contract ? What is the re-assured held to prove ? What does the insurer here seek to do ? Wherein lies his profit ? What right does the interest of the insured in the solvency of the insurer give ? What the nature of the contract he enters into ? Does the new insurer become a surety ? What is double insurance ? Can there be, in such case, in the event of loss, a double satisfaction ? What, in such case, is the duty of each insurer ? Which governs, rate of subscription or order of time ? What, if insured collects the whole out of one of the insurers ? What is it competent for parties to intro- duce into their policy ? What is the American clause ? What the legal effect of it ? PART III. THE POLICY, liSrcLrDEsra eepeesextation axd waera^ttt. § 538. The policy is designed to express the contract en- tered into between the insurer and the insured. According to uniform usage and practice, it must be in writing. Printed forms are very generally used. These are of early origin, arc awkward in their expression, but from long use have, to a great extent, acquired a fixed meaning from judicial decisions and the usage of trade. Tlie first inquiry that presents itself, relates to the eflect of mere wager policies, and is embraced in the question : Is a mere hope or expectation, without any interest in the subject-matter, sufiicient to sustain a contract of insurance ? In England it is rendered void by statute. In the State of ISTew York, a mere wager policy, such as that a ship, in which neither have an interest, would arrive safe at such a day, has been assumed good at common law. Tlie doctrine has this limitation, that the thing wa- gered or insm-ed must be perfectly innocent, because if OPEN AND VALUED POLICIES. 297 against public policy, or contrary to public morals, or if it injuriously affect the interests or feelings of third persons, it is void. But all such are now rendered void by statute. In many other States, as in Pennsylvania and Massachusetts, such policies are deemed void at law. § 539. A distinction is to be taken between policies that are open and those that are valued. The first is where the value of the thing insured is not inserted in the policy ; the second, where such value is settled by agreement between the parties, and inserted in the policy, as : " the said ship, &:c., goods and merchandise, &c., for so much as concerns the assured by agreement between the assured and assurers in this policy, are and shall be valued at £ ." In all cases of of>cn policies, if a loss happen, the value of it is to be ascertained at the trial. It is often a matter of very great convenience to the assured, especially if the subject- matter be profits, which are extremely diflicult of proof, to have them valued in the policy, and in Mumford v. JIallctty 1 John. Hep. 433, the court assume that every policy on profits must, of necessity, be a valued one on account of the almost impossibility of making proof of their value. Tlie value inserted in the policy should be the prime cost of the goods, including incidental expenses previous to shipment, together with the premium of insurance. It should cover the whole amount of the insurable interest, and when agreed upon and inserted in the policy, it is, in the absence of all fraud or mistake, conclusive between the parties, leaving to the assured on-ly to prove the insurance, the loss, and some interest in the property. This is equally applicable to total and partial losses. The fact of valuation, however, is to be limited entirely to what it proposes to be — an agreement as to value. It leaves open the question whctlier all, or what part of the property valued, has been at risk. Whether the insurance be upon freight or cargo, the question what was put on board and subjected to risk, is an open one. And so, also, where a cargo is composed of valued articles 298 POLICIES FOR WnOM IT MAT CONCEEN. some of wliich arc lost, and others arrive in safety, tlie claim of the insured will be reduced in the proportion to which the articles lost bear to the valuation of the whole at the time the risk commences. § 540. The policy should contain the names of the par- ties, both insurer and assured. So far as regards the latter, the insurance is often made, m this species of policy, on ac- count of A, or of whom it may concern / and an insurance thus made by a partner, will cover partnership goods, al- though it will not have that effect if made in the name of an individual partner. The person whose name is inserted, or the A above mentioned, is usually the person who effects the insurance ; and who is often an agent, and by adding for whom it may concern^ he lays a foundation upon which the interest of the real party may be averred and shown. But the meaning of the phrase is not that it will cover the interest of anybody who may happen to have an interest in the property insm-ed, but only that of the person who was in the contemplation of the parties to the contract. It is the person ordering the policy, although he was at the time unknown to the insurer, and even to the agent or broker procurmg the policy. It will apply to the person who is intended to be insured, even if he gave no authority to effect the insurance. It is sufficient if he afterwards adopt it, which he may do either previously or subsequently to the occurrence of the loss. § 541. If [the insurance be on a ship, the name of it should be correctly stated in the policy, as a variance from its right name might discharge the insurer. To avoid this, it is a usual practice to insert in the policy " or by whatever other name or names the ship may be called," thiis laying a foimdation sufficiently broad to enable the owner to prove the identity of the ship, which wiU be all that may be ne- cessary on this point to hold the insurer. § 542. Another thing, which for the last century it has been usual to insert in the policy, is what is termed a mem- EFFECT OF MEMOEAIHJIIM. 299 orandum, which is intended to qualify or restrict the risks. Without this, the insurer would be liable for every loss coming within the risks insured against, however trifling or insignificant it might be. This was often more trouljlesome to arrive at than to pay. The following is the form of the memorandum : " N. B. — Com, fish, salt, fruit, flour, and seed are warranted free from average unless general, or the ship be stranded. Sugar, tobacco, hemp, flax, hides, and skins arc M'arranted free from average under five per cent. ; and all other goods, also the ship and freight, are warranted free from average under thi-ee per cent., unless general, or the shij) be stranded." The legal eficct of this is to protect the insurer from liability to small averages, that is, to par- tial losses ; and in regard to the class of articles first above specified, it protects him from making good any partial loss whatever, and under the second class, any loss under fivQ per cent., unless, in either case, the loss happens in conse- quence of a general average, or a stranding of the ship. It is unfortunate that the word average here made use of, has more than ojie meaning when employed in reference to sea losses. Its meaning here is " a partial loss hy sea damage.'''' " Free from average unless general," therefore, as first stip- ulated, means that the insurer is not to be liable for any loss which is not a total one on any of the articles stipulated ; and the second stipulation exempts him from all liability as to articles there enumerated for any loss under five per cent, of their previous cost or insured value. In both cases, if there be a total loss, the insurer pays the full amount. § 543. One of the questions which has arisen under the memorandum clause relates to the kind of destruction which will subject the insurer to the payment for a partial loss on memorandum articles. Does it require an aljsolute destruc- tion of the articles, or is it sufiicient if the articles still exist in specie, their value being destroyed ? Tlie decisions in England have been somewhat fluctuating, but in this coun- try the rule is, that to charge the insurer, the memorandum 300 LOSS ON MEMOKANDrM ARTICLES. articles must be specially and pliysicallj destroyed, and must not exist in specie. 3 KctvCs Coram. 295-G. So, also, it has been held that at a port intermediate the destination of the vessel, the loss is total when the goods are so much damaged as to be incapable of reaching the port of destina- tion, in specie, or if they are in such a state that the health of the mariners and the safety of the vessel will not admit of their further transportation. Ilugg v. Augusta Ins. Co. 1 How. U. S. 595. The same point substantially came up more recently and with the same result in the State of New York, in De Peyster v. Sun Mutual Insurance Company^ 19 Neu) York, 272. § 54:4:. Another question has arisen where a part of the memorandum articles have been totally destroyed, while the residue have been partially damaged. Can a recovery be had against the insurer for the part so totally lost ? This question has been decided both ways in England, but in this country it is held that the policy is to be considered upon so much of the cargo, as an integral subject, and that the assured could not recover for each article totally lost, as there was neither a general average, nor a total destruction of the subject insured. Guerlain v. The Columbian Insu- rance Company, 7 John. 527. Wadsioorth v. Pacific Ins. Co. 4 Wend. 33. In regard to the second provision, exoner- ating the insurer from liability under a certain per cent, of ' loss, as five per cent., it is held that if the total amount of losses during the voyage, although they may happen at several different times, amount in the agregate to five per cent., the insurer will be liable. Donnell v. Col. Ins. Co. 3 Sumn. 366. § 545. It may become important to detemime what, in a legal sense, is a stranding of a vessel. Tlie rule laid down by Lord Tenterden in Wells v. Hopwood, 3 Barn. c& Adol. 20, was, " that where a ship takes the groimd in the ordinary and usual course of navigation and management, in a tide river or harbor, upon the ebbing of the tide or WHAT IS KEPKESENTATION ? 301 from natural deficiency of -water, so that slie may float again upon tlie flow of the tide, or increase of water ; such an event is not to be considered a stranding within the sense of the memorandum. But where the ground is taken under any extraordinary circumstances of time or place, by reason of some unusual or accidental occurrence, such an event shall be considered a stranding within the meaning of the memorandum." § 546. The next inquiry connected with the policy relates to EEPKESENTATioN and wAEEANTT. It is important to un- derstand the nature and character of each, and the efiect each has upon the rights of the parties. The first does not necessarily form a part of the policy by being inserted in it. It is not usually found in the policy. It relates to facts ex- trinsic to it, and is defined to be " a collateral statement, either by writing not inserted in the policy, or by parol, of such facts or circumstances relative to the proposed ad- venture, as are necessary to be communicated to the under- writers, to enable them to form a just estimate of the risk.'' It may, however, have insertion in the policy, and yet retain the efiect of a representation. This occurs when the state- ment is not of facts, but siinply relates to information, ex- pectation, or belief; or the parties may, at the time, ex- pressly declare that the statement is to be regarded, or to have the eff'ect merely of a representation. A representa- tion wliich is positive in its character, and on a point that is material, is deemed essentially a part of the contract ; and if it be a misrepresentation, or a concealment of a fact material to the risk, it will avoid tlie policy. And it will have this effect in the absence of fraudulent intention, and although it occurred througli mistake, neglect, or accident. Nor will the case be varied though the loss were to arise from a cause unconnected with such misrepresentation or concealment. And a fraudulent representation relating to a fact not material to the risk, will avoid the policy, if, in the insurer's judgment, it bo material in respect to his in- 302 WHAT MI8KEPKE6ENTATION MUST RELATJO TO. (luccmonts to undertake it. Vatten v. The J^ational Fund Life Assurance Co., 20 New York Jt&p. 32. Tliere is this dili*ereiicc l>ctwcen fraiidideiit misrepresentation and one originating in mere mistake ; the one avoids the policy witliout showing its materiality. It is enough if it be in- tentionallj false, without being material. But in the other case, the materiality of the misrepresentation must be shown, or it will not affect the policy. And then it affects it not on the ground of fraud, but because the insurer has com- puted the risk upon circumstances which did not exist. § 547. Such misrepresentation, in order to be effectual in defeating an action on the policy in case of loss, must have relation to a fact, and not be a mere statement of opinion, exjyectation, or helief. Such a statement, if made in good faith, will not affect the policy. But if made in bad faith, and with a fraudulent intent, it will have that effect. Tlie misrepresentation must also relate to a fact then existing or not existing, and must not be in the nature of a promise of doing something in the future ; and hence where the insured, at the time the insurance was obtained, made a verbal promise to the insurers, that if they accepted the risk, he would discontinue the use of a fireplace in the basement, and in the place of it use a stove ; but after having ob- tained the policy, he neglected to perform that promise, in consequence of which the building was burned, it was held that the action on the policy was nevertheless sustainable ; that such a statement, having no relation to a past or exist- ing fact, material to the risk, could not be regarded as a misrepresentation ; and having reference to the future, in order to bind, it must be inserted in the policy, and thus become a warranty. Alston v. The Mechanics Mutual In- suroMce Compaiiy in tJie City of Troy, 4 Hill, 329. Al- though this principle may be regarded as settled in the juris- prudence of New York, yet it is not entirely acquiesced in, as Mr. Duer, in his work on Insurance, insists that sucli WHAT IS MATTER OF REPRESENTATION. 303 promissory representation, •when positive and false, equally as any other, will defeat a policy. § 548. A representation to the first insurer is sufficient, and extends to all the subsequent underwTiters upon the same policy, and affects them erpially as the first. The reason assigned is, tliat all such subserpient underwriters en- tered into the insurance upon the strengtli of their confi- dence in the first one's judgment and knowledge, and are hence entitled to avail themselves of all the conditions upon which lie suhscril)ed. But it does not cft'ect a subsequent underwriter upon a different policy, although upon the same subject-matter and against the same risks. Elt'mcj v. Scott^ 2 John. 157. The materiality of the representation, as well as the necessity of its communication, is a question of fact for the jury. § 549. As to what must and what may not, be matters of representation, the governing principle that should guide the insured, is, to communicate all the knowledge he posses- ses in reference to the subject-matter insured, and the risks against which it is insured, wliich may affect the mind of tlic insurer, eitlicr as to the f\tct of insuring, or as to the premium or price he will charge for it. He is not bound to communicate matters of news or general intelligence ; nor loose rumors which may be afloat ; but if he has any par- ticular information not generally known or accessible to the public, he must communicate it to the insurer. Tlie latter is bound to know all matters aftecting the nature and gen- eral course of trade, and every thing of a general character relating to the voyage. The general rule is, that those facts which are material to the risk, and which are known t«) one party and not to the other, must be communicated at the time of eftccting the policy. Altliough tlic assured is not lield responsible for acquiring all the accessible information material to tlic risk that may l)o had down to tlie period at whicli it is taken ; yet if lie acquires knowledge of a mate- rial fact, after- having given instructions for cftecting a 304 WUAT IS THE EFFECT OF WjLEEANTY ? policy, lie must cither communicate it to the insurer, or withdraw his instructions. If the insurance is effected on the ajjplication of an agent, the assured takes the responsi- bility of all the agent's communications at the time of ob- taining it. So, also, if he adopts the information given, and thus makes it the basis of his contract of insurance, he be- comes equally responsible for any concealment that may have been practised by the agent, the same as if it had been practised by himself. § 550. Another important matter to be considered in connection with the policy is the subject of warranty. This is either express or implied. The former is an express stipulation entered into by the parties at the time of effect- ing the insurance, which is in writing, and on some part of the policy, either in the body of it, or on the margin, or at the bottom, or in some writing referred to and thus made a part of it. Whatever is thus made a part of a policy in the form of a warranty, is held to dispense with all representa- tion in relation to it, as in such case it is made expressly a part of the contract of insurance itself. It differs from a representation in another important respect besides being in writing and a part of the contract. It is in the nature of a condition precedent, and requii'es to be performed, or there is no contract. But not only is performance required ; it must be a strictly literal one. And that, too, whether the thing warranted be material or not. And so, also, whether the loss happened by reason of a breach of the warranty, or did not, is immaterial. A breach of it is equivalent to an announcement that there never was a contract. All condi- tions precedent require strict performance in order to give a right of action. But while a warranty is bound down by this great strictness of construction, all that is necessary in regard to a representation is — substantial compliance. The assured will, therefore, be cautious what he consents to have put into the policy under the form of a warranty, while the insm-er will seek to introduce all that is possible under that WHAT IS MATTER OF WAEKA^TT ? 305 form. It is, of course, competent for tlie parties to make whatever fact they choose the su])ject of a warranty. The most usual are the following. 1. That the ship shall sail on a particular day, and under such a warranty the ship must not only have its cargo on board, but must be completely unmoored, and, in good faith, set sail on the voyage. The raising of anchor, getting under sail, and moving onwards, is not sufficient, unless it is all done with the view of com- mencing the -voyage, every thing being in readiness for that purpose. 2. To depart with convoy, for protection, if in time of war. 3. That the ship was safe on a particular day, which is sometimes inserted to restrain the force of the ex- pression " lost or not lost,''^ and if the ship be safe at any time during that day, the warranty is complied with. 4. That the subject-matter of insurance is neutral jyroperty ', that is, neutral at the commencement of the risk ; that she belongs to the subject of a neutral State, and shall be navi- gated according to the law of nations, and in accordance with treaties between the country to which she belongs and the belligerents. 5. " That the insurers shall not be liable for any charge, damage, or loss which may arise in conse- quence of seizure or detention for or on account of illicit trade, or trade in articles contraband of war." § 551. Of the implied warranties, one of the most im- portant is sea-worthiness of the vessel at the time the policy attaches. Tliis extends beyond the mere competency of the vessel to resist the ordinary attacks of wind and weather. It embraces every essential element calculated to insure safety to the vessel, such as a master possessed of competent skill and ability, a sufficient crew, and all the necessary and proper equipments of sails, anchors, &c. This being an implied warranty, it follows that any breach of the condition of sea-worthiness at the commencement of the risk, dis- charges the cntu-e responsibility of the insurer, whether the loss incurred be in any way the consequence of such special defect of sea- worthiness or not. But when the contract once 20 306 IMPLIED WARRANTY OF SEA- WORTHINESS. attaches, it lias no further obligation. Any defect of sea- worthincsg which may arise afterwards from bad faith, or want of ordinary prudence or diligence in the owner or his agents, discharges the underwriter from liability for any loss occasioned by, or the consequence of, such want of faith, prudence, or diligence, but from no others. It does not affect the contract as to any other risk or loss covered by the insurance, and not caused or increased by such par- ticular defect. The American Insurance Company v. Og- den, 20 Wend. 287. § 552. It seems conceded that there may be different kinds of sea- worthiness ; that it may be one thing in a port and another for a whole voyage ; that it is very much the creature of circumstances, and must be construed in ref- erence, and receive such a construction, as the peculiar cir- cumstances at the time require. A rule admitting of no exception is, that the vessel must be seaworthy at the com- mencement of the risk, whatever it may be, in order to make the policy attach and render it a charge upon the insurer. A question has occurred of this character : K the ship be unseaworthy at the commencement of the risk, and the defect be cured before a loss, can a subsequent loss be re- covered under the policy ? In Weir v. Aberdeen, 2 Barn, db Aid. 320, it was held that it could. But in this country, much doubt has been thrown over it by the case of McLa- nahan v. The Universal Insurance Company, 1 Peters, ITO. § 553. There is also an implied warranty that the insured will exercise reasonable diligence in guarding against the risks covered by the policy, so that no loss shall happen through his own default and negligence. One of the most common applications of this principle relates to the procur- ing sufficient documents to maintain the national character of the ship. As every ship asserts and maintains its na- tional character by means of the documents it possesses, if a loss should happen through the default of the insured in not providing himself with those documents required by the WAEEANTY OF DOCTMENTATION. 307 t law of nations, or by particnlar treaties, the insurer would not be liable ; and hence, if a ship carry simulated papers, which is contrary to the law of nations, and be condemned upon tliat ground, the " the icarranty of docununtatlan " is infringed, and the underwriters are not liable. Oswell v. Vi(jnc, 15 £ast, 70. But disobedience to the mere export ordinance of a foreign State will not vitiate a poli(^. The difierence between an express and an implied warranty of this kind is, that a breach of the former at the time of sail- ing, discharges the insurers, while a breach of the latter docs not have that effect unless a loss occurs as a conse- quence of it. QUESTIONS. What does the policy express ? What do usage and practice require in relation to it ? What the objections and advantage of printed forms? What are wager pohcies ? How regarded in England ? How in New York? What limitation in New York? How are they by statute? How in Pennsylvania and Massachusetts at law ? What is an open pol- icy ? What a valued one ? Wlien is value ascertained in open policies? What convenience, and to whom, in valued policies ? When is it essen- tial that it should be valued ? And why ? What should value inserted in policy he ? What should it cover ? What effect between the parties? What does it leave the assured to prove ? What is it equally applicable to ? What does it leave still as open questions to be proven ? What effect when cargo composed of valued articles, some lost and others safe ? What should policy contain as to names of parties ? How may it be general ? Who, in such case, generally effects insurance ? What effect by adding, for whom it may concern ? What is the real meaning of the phrase ? Who is then the real party ? What necessary as to stating name of ship ? What effect of variance ? What the practice to insert in policy ? What the object of it ? What is the use of the memorandum? What, without this, would the insurer be liable for? What is the legal effect of the memortmdum ? What is the meaning of average as here made use of? What does free from average unless gene- ral, mean ? What kind of destruction will subject insurer to partial loss on memorandum articles? What is required in this country as to loss? What is the rule where part of memorandum articles are totally destroyed, and residue partially damaged ? What the rule where insurer is exonerated from liability under certain percentage of loss ? What, in a legal sense, is a stranding of a vessel ? Does a representation form a 308 QUESTIONS. part of the policy ? Is it generally found in the policy ? What does it relate to ? What is it defined to be ? May it be inserted in policy and yet bo representation ? When does this occur ? IIow may parties make it so ? What is a positive material representation deemed ? How, if a misrepresentation or concealment ? What if it occurred through mis- take, neglect, or accident ? What if loss arises from some cause uncon- nected with misrepresentation or concealment ? When will fraudulent representation avoid policy ? What is the difference between fraudulent misrepresentation and one originating in mistake ? On what ground, in latter case, does it affect it ? What must misrepresentation relate to ? What kind of statement and how made, will not affect the policy f How, if made in bad faith, and with fraudulent intent ? What must misrepre- sentation relatO' to ? How, if in the nature of a promise ? A represen- tation to whom, is suflScient ? To whom does it extend ? And whom aftect"? What the reason ? How subsequent underwriter upon a differ- ent policy ? Who decides upon materiality and necessity of representa- tion? What must insured communicate to insurer? What is he not bound to communicate? What, if he have particular information? What is insurer bound to know ? What is the general rule ? How, if assured acquires knowledge of material fact after giving instructions, and before insurance ? How, if insurance effected on application of agent ? How does assured become responsible for representation or concealment by agent ? How many kinds of warranty ? What is the express ? What does warranty dispense with ? How differ from representation ? What in the nature of ? What require ? How must performance be ? What is breach equivalent to ? What required by all conditions precedent ? What is necessary in regard to a representation ? What is competent for parties ? What is the first common subject of warranty ? What necessary imder such a warranty ? What the second subject ? What the third ? What the object of that ? What the fourth ? Neutral at what time ? What the fifth ? What is the first implied warranty men- tioned ? What does this embrace ? What effect of breach of this at commencement of risk ? How with defect of sea-worthiness arising afterwards from bad faith, or want of prudence ? How affect contract as to other risk or loss ? Are there different kinds of sea-worthiness ? What are they ? What construed in reference to ? What is the rule admitting of no exception ? What if ship be unseaworthy at commence- ment, and defect be cured before loss ? What another instance of implied warranty? What application of this principle? What must insured provide himself with, to assert national character ? What the conse- quence of omission? What difference between express and implied warranty of documentation? THE PERILS INSURED AGAINST. 309 f PAET IV. THE XATUKE OF THE PEBILS IK8TTEKD AGAINST. § 554. "We here find the undertaking of the insurer, that which forms, on his part, the consideration for his receii)t of the premium. The nature and extent of these perils depend upon the agreement of the parties. The assured may legally protect himself against all losses except those which are repugnant to public policy, or positive prohibi- tion, or which are occasioned by his own wilful misconduct or fraud. Tlie perils insured against are all expressed or comprehended in the policy. They are enumerated as those " of the seas, men-of-war, fire, enemies, pirates, rovers, thieves, jettisons, letters of marque and counter marque, surprisals, takings at sea, arrests, restraints, and detainments of all kings, princes, and people, of what nation, condition, or quality soever ; barratry of the master and mariners, and all other perils, losses, and misfortmies, that have, or shall, come to the hurt or deti'iment, or damage of the said or any part thereof." This is the clause generally made use of to cover the perils insured against. Tlie latter part of it " and all other perils," &c., has not the effect to cover all losses that may occur from whatever cause, but it is re- stricted to losses of a similar nature, and arising from simi- lar causes to those which are enumerated. Its use, therefore, is to generalize those enumerated, so that all causes or occa- sions of loss should be enumerated or referred to in the policy. § 555. The term iKrils of the sea, include all losses occa- sioned strictly by sea damage, such as stress of weather, winds and waves, lightning and tempest, rocks, sands, &c. It is meant, however, only to guard against extraordinary perils, and not those to which a ship is ordinarily exposed ; for if a loss occur from the latter, it will be from unseawor- thiness of the vessel, or from such culjiable neglect or mis- conduct of master or crew as should not render the insurer 310 OKDINAKY AND EXTEAOEDINAKY PERILS. responsible. It does not cover losses flowing from tlie ship's ordincary employment, or the inherent infirmity of the arti- cle, and hence in a policy on a cargo of slaves, the insurer was not held liable for a loss occasioned by their insurrection, a loss from that cause being adjudged to be one arising from the inherent vice of the subject insured. McCargo v. Mer- chants Ins. Co. 10 Robertson {La.) Rep. 202-334. So, also, all losses arising from the wear and tear of the ship or its equipments, her destruction by worms, or loss of anchors by fi'iction of the rocks, are none of them covered by insurance. A loss occasioned by rats is more difficult of determination, and has occasioned some diversity of decision. The general opinion seems to be, that this is a loss for which the insurer is not liable, although a difierent principle is adopted in Pennsylvania. Garrigues v. Coxe., 1 Binn. 692. § 556. The dividing line between ordinary and extraor- dinary perils is very difficult of ascertainment in many cases. If the ship be run down, or a loss be occasioned by her taking the ground on the uneven bed of a dry harbor, it is reckoned a peril of the sea. So, also, if there occurs a loss of animals, killed by the agitation of the ship in a storm. To avoid as much difficulty as possible upon this point, the courts have, with great unanimity, adopted the rule, that the peril, whatever it may be, upon which the policy attaches, must be the proximate and not the remote cause of the loss, thus adoj)ting the maxim causa proxima no7i remota spectatur.) and the reason for it given by Lord Bacon, that " it were infinite for the law to consider the causes of causes, and their impulsions one of another ; therefore, it contenteth itself with the immediate cause." Tliis point has been several times tested by the fact of a collision between two vessels by which one was injured, and the colliding vessel having been compelled by a judicial sentence or decree to pay the damages, its owners have sought to make the insurer liable for the payment of such, damages. The liability here, has been a question exten- WHEN MISSING VESSEL PRESUMED DESTROYED. 311 sjvelj discussed, both in the United States Court, and in several of the. State courts. The decision has very uni- formly been that although the collision is a peril within the policy, and any loss occasioned by it is therefore a loss for wliicli the insurer is liable, yet the sentence or decree awarding damages is not, and as that is the proximate cause of loss, the insurer is not liable. General Mutual Insurance Company v. Shencood, l^Hmo. S. C. Rep. 351. 2faitheics V. The llovmrd Insurance Company^ 1 Kern. 9. The point was decided directly the reverse in Massachusetts in Nelson V. The Suffolk Insurance Company^ 8 Ciish. 477, but unfor- tunately this case placed much reliance upon the two last- mentioned cases, the decisions in both of which were subse- quently reversed, the one in the highest court of the Union, the other in that of the State^of ]S'ew York. Another illustration of the same rule or principle occurs where a ship is driven ashore by the wind, and then cajDtured by an enemy. The loss is imputable to the capture, the proximate cause, and not to the stranding. Another still, is found in a case where a partial loss is followed by a total one. It is the latter that is alone regarded by the law, the fonner being entirely merged in it. § 557. The question is very likely to arise when a miss- ing vessel shall be presumed to have perished by a peril of the sea. Tliis question must necessarily depend upon such an infinite variety of circumstances, that no 23recise time is fixed upon by the English law. Each case must be governed by its own circumstances, but after a sufficient length of time has elapsed to adjudge the missing vessel lost, " that loss is j^resumed to have happened immediately after the date of the last news ; so that if an insurance be for three mouths, and the vessel not being heard from, a further in- surance is made for a year, and the vessel is never heard from, in that case the first insurer pays the loss." § 558. One of the perils usually insured against, hjire., and it is not material what occasioned it. It may result 312 BARRATKY AS A PERIL INSURED AGAINST. from accident, or liglitning, or any act done in the perform- ance of duty. It has even been held, hut after a very long discussion, that the insurer is liable where the fire which oc- casions the loss occurs through the negligence of the master and mariners. Bmh v. Royal Exchange Assurance Cmn- pany^ 2 Bam. cfe Aid. Y3. See also, in this country, Patapsco Ins. Comixiny v. Coulter, 3 Peters' s U. S. Rep. 222. But if goods, when put on board, arc in such a damaged state that they are liable to efiervesce, and thus in fact generate the fire by which they are consumed, the insurers are not liable for the loss. § 559. Another of those perils is 'barratry by the master and mariners. This includes every species of fraud or in- tentional breach of duty on the part of the master, in his character of master, oi' o# the mariners, concerning either the ship or cargo. It embraces every breach of trust by either one of these, which is committed with dishonest views. As these are all agents or employees of the assured, and subject to his control, it is singular that their vicious acts should ever have become a subject-matter of insurance, and among some of the continental powers of Em'ope this is not a risk insured against. The following are instances of bar- ratry. A wilful deviation in the voyage, committed in fraud of the owner ; smuggling, running away with the ship, sinking or deserting her, defeating or delaying the voyage with a criminal intent, dropping an anchor with a fraudulent intent, sailing out of port in violation of an embargo, or without paying the port duties, are all acts of barratry, being wilful breaches of duty by the master. Tliis can only be committed by some one, not the owner, who is in charge of the ship ; and it cannot arise through ignorance or inattention, as it must originate in a vicious motive, although whether that be to benefit himself or to injure the owner, is entirely immaterial. !N^or is it essential that the loss should be contemporaneous with the barratry. But it must occur during the voyage insured, and hence OF THE PERILS mSUKED AGAINST. 313 •srhen a barratry Tvas committed by smuggling, for •which, the ship was seized, but not until after she had been moored twenty-four hours in safety at her destined port, the insurer was held not liable. Lockyer v. Ojjiey, 1 Term. Bep. 251. The point has been presented whether a loss was chargeable upon the insurer which was occasioned remotely by the negligence or misconduct of the master, not amounting to barratry, but immediately by some other peril in the policy operating directly upon the property. Although it was held so chargeable in Fulton y. The Lancaster Ohio Insur- ance Company^ 7 Ohio Rep. part 2, 1-25, yet the nile that the proximate, and not the remote cause is to govern, may now be regarded as the settled policy of both English and American law. Walter v. Maitland^ 5 Barn, cfc Aid. 171. See cases refeiTcd to in § 556. § 560. Other perils insured a^inst are pirates, rovers, and thieves. Under the latter term, wlien insured against hy name, the elementary writers understand that it is limited to that theft which is accompanied by violence, and docs not extend to simple theft, and it is so laid down by Chan- cellor Kent, see 3 Kenfs Comm. 303. But the point came expressly up in the Court of En-ors in the State of New York in The American Insurance Company of Neio York V. Bryan, 26 Wend. 563, and, after much discussion, it was decided that the V7ord.'thieves in a policy, covers a loss occa- sioned by a simple larceny, unaccompanied by open force or violence, by persons other than the master or crew of the ship in which the goods were transported. § 561. Another large class of risks is included under Takings at sea, Arrests, liestraints and Detainments of all Kings, Pnnces, and People. Tliese refer to acts of govern- ment, the term people signifying the niling power of a country, whatever it may be. One of the most usual of this kind of detainments is an emhargo, which is aiL aiTCst laid on ships or merchandise by public authority, or State prohibition ; and whether of one's own or a foreign govern- 314 OF THE TEKILS INSUEED AGAINST. ment is immaterial. A question has arisen licrc, "wlietlier a foreigner could claim against a British underwriter in a matter founded on the act of his owti State, upon the ground that he is to be deemed a party to the acts of his own gov- ermnent. But in Bassett x. Meyer, 5 Taunt. 824, it was held no objection to the insured's right of recovery that the loss happened by the act of the government of his country, though he and the insurer were subjects of different States. The same principle has been fully sustained in this country, and the doctrine affirmed that a subject was not to be deemed a party to the legislative, and much less to the judicial acts* of his own country, so as to deprive him of remedy on a . policy by a foreign insurance office, by reason of any acts or judgments of his own country. Francis v. Ocean In- stance Company, 6 Cowen, 404, and affirmed on error in 2 Wend. 64. Whether a hlochacle is a sufficient restraint of trade has been a matter of doubt, on the ground that the peril producing the loss must act immediately upon the subject insured, and that the mere fear of capture, although just, is not sufficient. But the prevailing opinion now is, that a blockade of the port of destination, interdicting all commerce with it, is a sufficient peril within the policy. Smidt V. The United Insurance Company, 1 Jolin. Hep. 249. QUESTIONS. "What do Ihe perils insured against depend upon? Against what mav the assured legally protect liimself ? "Where are the perils insured against to be found ? "What are they ? "What effect does insertion of "all other perils," &c. have? "What do perils of the sea include? "What perils are meant ? "What does it not cover ? Ho-^v is it with loss occasioned by rats? "What are some instances of perUs of the sea? "What the rule adopted as to peril being proximate or remote cause of loss ? "What the maxim governed by, and reason of it ? How has this point been tested ? How has the decision very uniformly been ? "What other illustration of the same rule or principle ? What other still ? "When is a missing vessel presumed to have perished by a peril of the sea ? "When is the loss presumed to have happened ? "When a fire causes 2oss, is it material what occasioned it ? "What may it result from ? Is DESCRIPTION OF VOYAGE IN POLICY. 315 insurer liable when the loss occurs through the negligence of the master and mariners ? How, when goods effervesce, and generate fire ? "What does barratry include ? What embraced within it ? What are some instances of barratry ? By whom must this be committed, and in what originate ? When may loss occur ? What illustration ? Are losses by thieves limited to cases accompanied with violence ? Does it embrace simple larceny unaccompanied by violence ? What do restraints, ar- rests, and detainment by kings, princes, and people refer to ? What does the term people signify ? What is one of the most common detain- ments ? What is an embargo ? Can a foreigner claim a right founded on the act of his own State ? Is a tlocTcade a sufficient restraint of trade to be a peril insured against ? How is it, Avhen of port of destination ? PART V. THE VOYAGE EMBEACED IN THE POLICT. § 562. An insurance may be on time, or on a ship for a particular voyage. Wlien a slii^) or cargo is insured for a term of time, tlie termini of risk are the day and hour speci- fied at which the insurance commences and terminates. The place either of departure or of destination is then im- material, and no questions relating to deviation can arise. In this kind of policy a clause is often inserted, providing that if the vessel be at sea at the expiration of the time, the policy shall contmue in force until she arrives at her port of destination. § 563. Li the other kind, or policy on a ship for a partic- ular voyage, great nicety is required in accurately de- scribing the voyage. This includes not only a statement of the times and places at which the risk is to begin and end, but also usually the intermediate places at which the vessel may be allowed to call. A ship may be insured on a voyage out, or in, or out and in / or for any part of the voyage, specifying particularly what part, or from 2>ort to port. A ship insured at and from a certain port, will cover all risks while taking in its cargo at the port ; but if insured from such a port, it must break ground before the risk com- mences. The insurance at imdifrorn implies either that the 316 rOLICY ON OUTWAKD A2^D HOMEWAED VOYAGE. sliip is at the place named at the time of tlie insurance, or that she will arrive there in good condition. § 564. There are often distinct policies on the outward and homeward voyage, and in such case if the ship were to l^erish in a foreign port with portions of her outgoing and return cargo on board, there might be a conflict between the policies ; but it is presumed that each policy would j)rotect such portions of each cargo as were on board at the time of the disaster. The risk on the cargo is generally limited to continue imtil it shall be discharged and safely landed. But in such case there should be no unnecessary delay, and as policies are construed according to long-con- tinued and well-settled usage and custom, if it be the usual course to carry goods from the ship to the shore in a lighter or smaller vessel, and they are injured while in such transit, the insurer must make good the loss. But if the assured take charge of them, sending them in his own lighter, or in one specially employed by him, the insurer would be dis- charged. The insurance is always designed to protect the cargo while actually on board the ship, but if it be tempo- rarily landed from necessity during the voyage, it is still protected by the policy. § 565. "Where the insurance is upon the outward cargo and upon a return cargo, the latter to he derived from, the proceeds of, the former^ it has been made a question what kind of return cargo may come under the protection of the policy. It is clear that the same goods returned in the same vessel would not come within its protection, but if the re- turn cargo be procured by the sale or exchange of the out- ward cargo, or even by a deposit of the outward cargo and a credit raised upon it, the insurer would be liable in case of loss. Hamn v. Oray^ 12 Mass. Yl. § 566. Tlie policy usually protects the vessel until she has been anchored twenty-four hom-s in safety, and this has been held even to protect against a seizure made after that time, although for an act of smuggling committed during NATUBE AND EFFECT OF DEVIATION. 317 the voyage. Lockyer v. Offiey^ 1 Term. Bep. 252. If the voyage insured be to a country generally, the risk termi- nates at the first port made for the purpose of unloading. If it be insured to several diflerent places, as A, B, and C, it means to aU or any of them, -with the qualification that if the vessel go to more than one, she must visit them in the order in which they are mentioned in the policy. If the voyage be to or fi*om a district containing several ports, with liberty to stop at any, they must be visited in their geographical order. § 567. The nature and effect of deviation from the pre- scribed course often comes up for consideration under marine insurance. It is a departm-e of the vessel voluntarily, and without necessity, from the usual course of the voyage, and the effect of it is to discharge the insurer, as it is the substi- tution of a new voyage in the place of the one the risks of which he had assumed. The exemption of the insurer grows out of the violation of his contract by the assured, and so strictly is the doctrine maintained, that where a vessel sailing down the Frith of Forth, and having liberty to touch at one place, touched at another in its stead, equally in her way, it was held to be a fatal deviation. Elliot V. Wilson, i Bro. P. C. 459. § 568. A deviation from necessity will not discharge the insurer. But it must be limited to the necessity that pro- duced it, and if so, it will be justified, although on account of a peril not insured against. Instances of this are, when done from stress of weather, or to procure necessary repairs, or to avoid capture or detention. It is a point not yet en- tirely settled whether, or how far, a deviation may be held justifiable, the object of which is to relieve a vessel in dis- tress, or to save the goods, or even lives of those on board ; but the prevailing opinion now is, that if done for the for- mer, it would discharge the insurer, but if for the latter, it would leave him liable. Wherever a ship is compelled by necessity to deviate from the course laid down in the policy, 318 PKOCEEDINGS IN EVENT OF LOSS. tlie whole remainder of the voyage must be under the con- N trol of necessity, and must be pursued in the most direct course, and within the shortest time, or it will amount to a deviation, and discharge the insurer. Lavdbre v. Wilson^ Doug. 284. The grounds upon which deviations are claimed not to discharge the insurer are usage, necessity, and the true construction of the policy. Usage, however, can never be claimed to justify it when in conflict with the clear and positive terms of the policy. QUESTIONS. What two kinds of insurance ? When on time, what are the termini of the risk ? Are place and deviations considered in such insurance ? What clause is often inserted ? What is required in policy on a ship for a voyage ? What does this statement include ? How may a ship be insured ? What does insurance at and from cover ? When does insur- ance /rom commence ? What does insurance at and from imply ? What are there often distinct policies on ? What conflict does this sometimes lead to ? How settled ? What is risk on cargo limited to ? How are policies construed ? Who bears loss sustained when goods are carried from vessel to shore in lighters ? When does insurance protect cargo ? How, if temporarily landed from necessity ? When insurance is on return cargo as proceeds of outward cargo, to what does it not, and to ■what does it have application ? How long does policy usually protect vessel ? What illustration ? If voyage be insured to a country gen- erally, when does risk terminate ? How, when insured to several differ- ent places? What is a deviation? What the effect of it? Why? WhAt does exemption of insurer grow out of? What instance in illus- triftion? What effect of deviation from necessity? To what is it limited ? What instances ? What rule where deviation is to save goods or life ? What are the grounds upon which deviations are claimed not to discharge insurer ? How in regard to the claim of usage ? PART VI. PBOCEEDIXGS IN THE EVENT OF L0S3. § 569. No difficulty ordinarily occurs in the case of in- surance except in the event of loss, and then the first point to be settled is whether it be a total or a partial one. As the whole of insurance is summed up in indemnity, it is im- WHEN INSUEED MAY ABANDON. 319 possible to apply any remedy -without first ascertaining the character and extent of the loss. A total loss may be of two kinds. It is either total per se, in which the thing insured is utterly destroyed, or wholly lost to the assured, or it is such as may be rendered total by abandonment, in which the subject-matter of insurance is destroyed or lost to the assured, to such^n extent as to justify a relinquishment of whatever may be saved, to the insurer. Instances of th^ former are where the ship insured is destroyed by fire, or by perils of the sea, or by any other means ceases to exist in specie, and so also where the assured is deprived of it by capture. § 570. The first question of importance that arises here, relates to the circumstances under which the assured may exercise the right to abandon to the insurer. The rule is, that if the ship or goods insured be damaged to more than half the value, by any of the perils insured against, the as- sured may abandon and recover as for a total loss. Tlierc may be a separate abandonment of part of the cargo in- sured where a part only of it is lost or damaged above a moiety in value, provided the insurance was originally upon each article separately, but not if it be upon difierent kinds of goods indiscriminately, or as one entire parcel. The value here meant is the market value at the time of the disaster which occasioned the loss. Tlie amount of the injury done to the ship is determined by the expense of tiic repairs at the port of necessity, including that of getting the ship afloat if stranded. § 571. In order to know what to abandon, it is necessary to have clearly settled what is the subject-matter insured ; and in reference to this no difliculty has occurred except where a shfj? is injured for a voyage / and in that case much difliculty has been experienced in determining wliich is insured, the ship or the voyaye. In Pole v. Fit2gei\dd, decided in the House of' Lords, 5 Bro. P. C. 137-142, it was held that the insurance was of the ship, and not of the 320 INSURANCE ON SHIP AND ON CARGO. voyage, Jiiid hence if the ship arrived safe, there could be no abandonment althongh'the voyage was lost. But the King's Bench, under the lead of Lord Mansfield, aftenvards established the contrary doctrine, that where a ship was in- . sured for a specified voyage, a loss of either the ship or the voyage, was the same thing, and justified an abandonment. Tlie principle settled in Pole v. Fitzgerald having been men- tioned approvingly in Goold v. Shaw, 1 John, cases 293-309, and adopted in England in Uadkinson v. JRobinson, 3 Bos. <& Pid. 388, and in 2 Maule <& Selwin, 239, may now prob- ably be considered as generally adopted. A loss of the voyage as to the cargo is not so as to the ship, for a policy on a ship is an insurance upon that for the voyage, and not one on the ship and the voyage. And if an insured ship be so injured by a peril insured against, as to prevent her proceeding, and thus the Voyage be lost, it is a total loss of ship, freight, and cargo. § 572. Care must be taken to distinguish the difference between an insurance on the ship and one on the cargo. A total loss of the latter may arise not only out of its destruc- tion, but also out of the total incapacity of the ship to per- form the voyage. But a temporary loss or retardation of the voyage will not amount to a total loss of the cargo unless it be of a perishable nature. It must not, therefore, be assumed that if the voyage is lost, there can be an aban- donment of the cargo. Neither is the latter necessarily connected with the ship ; but where the ship was forced back by stress of weather, and the cargo was found in such a damaged condition that it could not be sent on with safety, an abandonment was held good. Gernon v. Royal Exchange Assurance, 6 Taunt. 383. § 573. There is no little amount of difficulty experienced in settling, in a contested case, whether the right to abandon exists or not. It is said that a loss to a greater extent than a moiety will justify an abandonment. But what will justify the conclusion that there is such a loss ? Is it the iolbrma- %VTTAT GIYES THE EIGHT TO ABADTDON. 321 tion of the assured to that efiect, or must it be the actual facts existing at the time ? Is it strong probabiHties upon which the assured is at liberty to act, or must he go further, and anchor his convictions only within the empire of cer- tainty ? Tlie former is very clearly the English rule. In this country there is a strong disposition, and the tendency seems to be to adopt the latter. From an examination of the English and American cases, Mr. Justice Story, in PeeU v. Merchants Insurance Company, 3 Mason, 27-36, says : " K there be any general principle that pervades and governs them, it seems to be this, that the right to abandon exists, •whenever, from the circumstances of the case, the ship, for all the useful purposes of a ship for the voyage, is, for the present, gone from the control of the owner, and the time when she will be restored to him in a state to resume the voyage is uncertain or unreasonably distant, or the risk and expense are disproportioned to the expected benefit and ob- ject of the voyage. In such case, the law deems the ship, though having a physical existence, as ceasing to exist for purposes of utility, and therefore subjects her to be treated as lost." § 574. That there now is, or eventually will be, a real difference between the English and American doctrine, in accordance with the questions asked in the last section, is rendered jJretty clear from the difference of doctrine between the two now held in reference to the character of the aban- donment itself. Tlie English construction of this is — that if an abandonment be rightfully made, it is not absolute, but may be controlled by subsequent events ; so that if the loss has ceased to be total at any time before action brought, the abandonment becomes inoperative. Tliis is carrying out logically the principle of allowing the assm'cd to act upon the highest probabilities in nuiking the abandonment. The American rule, on the contrary, is that " an abandonment once rightfully made, is binding and conclusive between the parties, and that the rights flowing from it become vested 21 322 PROCEEDINGS AS TO ABANDONMENT. riglits, not to be divested by any subsequent events ; " thus carrying out logically the principle of requiring the as- sured to base his action, in making the abandonment, only upon actual facts and certainties. The English rule, how- ever, has been a good deal shaken, having been doubted in the House of Lords by Lord Eldon in Smith v. Robertson^ 2 Bow's Bep. 4Y4, and still more in Holdsworth v. Wise^ in 7 Barn, da Cress. Y94. § 575. The first thing the assured is called upon to do after the occurrence of the disaster is to examine the sub- ject-matter insured to ascertain the extent of the injury, and, if the case be a proper one, to determine whether he will or will not abandon. As the American rule requires his action to be based only on actual facts and certainties, and not upon mere opinions and probabilities, it is necessary for him to make a very thorough examination, and to come to such a conclusion as the facts will fully sustain. If his conclusion be to abandon, the next thing is to give prompt notice to the insurer of such his determination, and a failure to do this will be considered as waiving his right to aban- don, and limit him to recover only for a partial loss. His omission, however, will not be construed into an admission that the loss is less than a moiety of the value, but he will be at liberty to recover on all, except memorandum articles, what he can show to have been the actual injury. The in- surer, upon receiving notice of the loss and abandonment, must decide promptly upon his reception or rejection of it, and if he rejects it, must give immediate notice to the as- sured. § 576. The abandonment must be of the whole or noth- ing. It must be an unconditional cession or surrender of the subject-matter insured, and all the rights of tlie assm*ed in relation to it to the insurer. It may be by parol or by a written notice, but in either case should state the ground upon which it is made, describe the disaster which occa- sioned it, and disclose truly the nature and extent of the EFFECT OF ABAJSTDONMENT. 323 injury. All inquiries made by the insurer relating to the peril insured against, which produced the loss, and to the nature and extent of the injury, the assured is bound faith- fully and fully to answer. § 577. The effect of an abandonment made and accepted is to divest the property of the assured in the subject-mat- ter, and to vest it wholly in the insurer. The former can subsequently act only as the agent of the latter. A question of some difficulty has arisen as to the party entitled to freight where there has been an abandonment of the vessel short of the place of destination, and by means of repairs the insurer has been enabled to complete the voyage, and deliver the cargo. The question here presented will be the same whether the freight and ship have been separately in- sured or not. The only difference that would make would be in the parties, the insurer of the freight, in case of its insurance and abandonment, possessing the rights and standing in the place of the insured. Does the entire freight, in case of the abandonment of the vessel and acceptance by the insurer, the same, then being in the process of earning, but not completely earned, belong to the insurer, or must it be distributed between him and the assured, in the propor- tions in which they have respectively performed the voyage ? This question involves a great and very imjDortant principle, and has been settled differently in this country and in Eng- land. In the State of 'New York it was decided by a divi- ded court in The United Insurance Co. v. Lenox., 1 John, cas. 377, and affirmed by a majority of the Court of Errors in 2 John. cas. 443, that in case of abandonment and accept- ance of the ship, and the voyage is subsequently performed, and the freight earned, the insurer is only entitled to that proportion of the freight earned subsequently to the aban- donment, the other portion belonging to tlic assured. This decision was carried against the opinion of Chancellor Kent. The question has more recently come up in England in Case V. Davidson, 5 Maule <& Selwin., 79, and affirmed in 2 Brad. 324 MODE OF AEKIVING AT PAETIAL LOSS. d; Bin(j. 379, in wliicli there were two separate insurauces, one of freiglit, and another of the ship, and accepted aban- donment of each, and it was held that " an ahandonment of the sld]) transferred the freight as an incident to the ship^ and that an ahandonment was equivalent to a sale of the ship to the ohandoneeP This must certainly commend itself as the sound legal doctrine^ although the equitable may be found in the view taken by the New York Courts. § 578. K partial loss is where a part only of the subject- matter of insurance meets with an injury. Under some circumstances that which was once total may become par- tial, as where a ship is captured and subsequently escapes or is recaptured. The escape or recapture converts that which was once total, into a partial loss. Under our rules, however, if, while captured, there was an accepted aban- donment, that would effect a transfer of the property, and prevent a total loss from ever becoming partial. § 579. The point the most difficult to arrive at in case of partial loss, is the amount of the injury, the sum to be paid. There are several questions to settle in order to get at this. The first is the true value of the subject put at risk ; the estimated value in a valued policy may not be conclusive upon the parties in a case of loss. In determin- ing this question, which shall be taken as the true test — ^the sum at which the goods insured would have been sold had they reached the place of destination, thus making good to the insured his profits as well as outlay of capital ; or the mar- ket value of the goods at the time and place at which the risk was commenced, and the expenses then incurred ? This latter would replace the assured in the same position he oc- cupied before undertaking the adventure. Although the first is not without its advocates, yet the last, upon the prin- ciple that insurance is a mere indemnity and nothing more, is now the settled rule in England and in this country. When the invoice price of the goods is equivalent to the market value at the time and place where the risk is under- AMOUNT OF LOSS HOW ASCEETAINED. 325 taken, tliat is the valuation adopted. The invoice price, prime cost, and market vahie, are in most cases equivalent terms, and in Le Roy v. United Insurance Comjyamj^ 7 John. 343, the court adopted the prime cost of the goods as being the best rule to test this value in reference to insur- ance. To this should be added the premium of insurance and commission, and all other expenses then necessarily or usually incurred. The value of the goods thus ascertained, is the important element in arriving at the lesser value to which they are reduced by the injury sustained. § 580. Tlie goods, after being damaged, may be earned forward to their place of destination, and then the question may arise how the amount of loss shall be ascertained. The amount payable by the insurer is then arrived at by ascertaining the sum at which the goods would have sold if they had been uninjured, and the market value of them in their damaged state, and deducting the latter from the former. This does not afford a perfect indemnity, because we have here another disturbing element, and that is freight. The carrier has now earned the price of carriage, and that is payable the same whether the goods are damaged or not. This, although treated somewhat as an open question, seems generally understood to be not recoverable of the insurer ; and to remedy this, the true way for the owner is to insure the sum to be paid on the freight and charges at the port of delivery. § 581. Unless there is a stipulation to the contrary con- tained in the policy, all adjustments of a general average in foreign ports, are conclusive both upon the insurer and the assured. In settling the amount of losses upon memoran- dum articles, if the limitation in the policy is five per cent., the great point is to determine whether the amount of injury comes up to, or falls below the point of limitation. If the partial loss comes up to that point, the insurer pays it, to- gether with all the expenses in arriving at it. K it falls below it, he pays nothing, the assured losmg not only the 326 IN WIIAT CASES PEEMITJM EETUKNED. amount of damage, but also all the expenses of the investi- gation. § 582. The adjustment of loss is only final between the parties upon the supposition that all the facts bearing upon it have been fully disclosed, that the parties are laboring under no mistake, and that no fraud has been practised by either party. If either one of these proves not to have been true, a re-adjustment may be had of the matter. In the case of injury to a vessel insured, the old materials are ap- plied towards the payment of the new, as far as they will go, and by deducting their value from the gross amount of the repairs, and allowing the deduction of one-thii-d new for old upon the balance, the amount due from the insm-er wiU be ascertained. In regard to the latter deduction, no differ- ence is made in this country if the vessel injured be new, although in England it is not allowed in such case to be made. Where a peril insured against forces a vessel into port to be repaii*ed, all the expenses attending the repair- ing are borne by the insurer. § 583. As payment in advance of the premium is usu- ally required as the condition of insurance, the cases are not unfrequent in which the assured may enforce its return. This may occur in the following cases : 1. AYliere the contract of insurance turns out to have been void db initio. 2. Where, for any reason, the risk has never commenced. 3. Where the assured turns out to have had no intei'est in the subject-matter insured 4. Where the vessel never sailed on the voyage insm-ed, or the policy became void by the failure of the warranty. 5. If the insurance cover a larger interest than the as- sured possessed, there may be a ratable return of the pre- mium. But the premium will not be returned if the risk once commences, or if there be any fraud on the part of the insured, or if the trade be, in any respect, illegal. QUESTIONS. 327 QUESTIONS. "WTiat is the first point to be settled in case of loss ? T\Tiat mnst be first ascertained ? How many kinds of total loss ? TThat are the two kinds ? "What are the instances named, and of which kind ? "What is the rule in relation to the right to abandon ? "When can there be a sep- arate abandonment of part of the cargo? "What is the value here meant ? How is the amount of the injury done to the ship determined ? When a ship is insured for a voyage, which is insured, the ship or the voyage ? What results, if insured ship is so injured as to lose the voy- age ? Why is it necessary to distinguish between insurance on- ship and one on cargo ? Is the cargo so connected with the ship that a loss of one necessarily leads to that of the other ? What will justify the con- clusions that goods or ship are damaged to the extent of a moiety ? Is it information or actual facts? Strong probabilities or certainties? What is the English rule ? What the American ? What is the English rule relating to abandonment ? What the American ? What does each logically carry out ? What is the first thing the assured is called upon to do after the disaster ? If his conclusion is to abandon, what is the next thing he is to do ? What is the consequence of failure to do this ? Is his failure regarded as any admisssion ? What will he be at liberty to recover on ? What must the insurer do upon receiving notice of abandonment ? What if he rejects it ? What must the abandonment be of? What must it be? How may it be done? Wliat should the notice state ? What should it describe ? What disclose ? What the duty of the assured in relation to answering questions ? What is the eflfect of an abandonment made and accepted ? In what capacity does the as- sured subsequently act? Where, after abandonment and acceptance, the remainder of the voyage is performed, who is entitled to the freight ? What is the American rule ? What the English ? What is a partial loss ? Can that which is total ever become partial ? How ? How is it under our rule ? What is the most difiicult point in case of partial loss ? What is the first question to be settled ? Is the estimated value conclu- sive ? What is the true test taken to arrive at value ? At what place and time is the value to be determined ? And what value ? What must be added to value ? What would the effect of this be ? When the in- voice price and market value are the same, what is the valuation adopted ? What, in tliis respect, are generally equivalent terms ? What, in such case, does the court adopt ? What should be added ? What next to the value is to bo arrived at ? Suppose damaged goods are car- ried forward to the place of destination, what question then arises? How is the amount payable by the insurer then arrived at ? Why does not this aflford a perfect indemnity ? How may this difiiculty bo reme- 328 NECESSITY OF INSURABLE ENTEEEST died? What effect have adjustments of general average in foreign ports ? IIow are losses upon memorandum articles settled ? At wLose expense? Upon what supposition are adjustments upon loss between parties final ? When may a readjustment be had ? "What may be done in case of injury to a vessel ? How loss ascertained ? Where vessel is forced into port to be repaired, who bears the exjjenses of repairing ? What aro the cases in wliich a return of the premium may be enforced by the assured ? What, if insurano cover a larger interest than insured possessed ? When will premium not be returned ? II. FIRE INSURANCE. This IS a contract by "vrliicli the insurer, in consideration of the premium, undertakes to indemnify the insured against all loss or damage ^vliich may occur to his houses, buildings, furniture, stock, goods or merchandise by means of acciden- tal fire happening Avithin a prescribed period. PAET I. INSUEABLE INTEEESTS. § 584. The law will enforce no wager policies against fire. Tlie party insured must have some interest in the subject-matter not only at the time of the insurance, but also at the time of the loss. But as the law allows different persons to have different and distinct interests in the same property, so it will permit each to protect his interest by means of insurance. One familiar instance illustrating this is the case of mortgagor and mortgagee. Each has an in- sm-able interest in the same property, as has also the assignee of a mortgagee, who is in the occupancy of the premises. The question has arisen whether the mortgagee had any in- surable interest remaining after a sale by a master in chan- cery under a decree of foreclosure, a fire having destroyed the building insured between the time of sale and the en- rolment of the decree and execution and delivery of the deed ; and it was held that he had not, the deed when given IN5UBABLE DTTEKEST OF C0XTEACT3 TO PUECHASE. 329 relating back to and having legal effect given to it from the time of the sale. McLaren v. The Hartford Fire Insurance Com^Omy^'^SeM. 151. Another instance of double insur- ance upon the same property occurs in the case of commis- sion merchants, who, by virtue of their interest in their commissions, are entitled to insure, while the principal or consignor, being the owner, has also a right to insure. The commission merchant, in such case, may insure even to the full value of the goods. De Forest v. Fulton Fire In- surance Com2?any, 1 Hall., iT. 1^. Rejp. 84. § 585. A question has arisen as to the insurable interest of a party occupying premises under an agi-eement to pur- chase, and having therefore merely an equitable, but no legal interest, and it has been held that such a party could insure, and, in case of loss, recover the full value of the building to the extent of the insurance, although the vendor had insured the same building in his own name. TheJEtna Fire Insurance Comjpany v. Tyler, 16 Wend. 385. And in the Columbia Insurance Co. v. Lawrence, 2 Peters, 25, it was held that such a party had an insurable interest, although his vendor had a power under the contract to treat the sale as rescinded. Where a person is merely interested in the rent of buildings, he may insure that from loss by fire within the prescribed period. QUESTIONS. "What is fire insurance ? Can ■wager contracts be here enforced ? "What must party insured have? And •when? Can different parties have interests in the same thing? "What does the law allow about the right to insure ? What instance in illustration ? Has mortgagee any in- surable interest after sale by master, and before decree enrolled and deed given? "What does deed relate back to? "Who may insure in case of commission merchants? To what extent may commission merchants insure ? "What instance of equitable estate -will give interest sufficient to insure ? Can the owner of premises contracted to be sold, insure ? Is equitable interest sufficient -where vendor can treat sale as a nullity ? Can an interest in the rent of buildings bo insured ? 330 FACTS STATED IN APPLICATION TO mSUEE. TART II. THE rOLICT, ITS CONTENTS, CONSTEUOTION, AND ASSIGNMENT. § 586. The inception of the policy is found in the appli- cation of the party for insurance. This application sliould bo in writing, and signed by the aj^plicant, or if communi cated yerbally to the insurer should be by him reduced to writing, and then signed by the party. It should contain a statement of all the facts relating to the subject-matter sought to be insured, which the applicant deems material to the risk, and in addition the answers made by him to all such questions relating to such subject-matter as may be put to him by the insurer. The facts tlie most usually stated and in- quired about, relate to the material of the building, the means of heating and ligliting it, material of which the roof is com2)osed, the title or interest of applicant in it, and the liens, if any, that may exist upon it, to what use the build- ing is put, what are its surroundings, the distance from it to any other building or buildings, the material of which other surrounding buildings are composed, the nature and value of the property or effects proposed to be insured, the man- ner in which they are disposed of, the uatm-e, character, situation, and materials of the building in which they are contained, and whether any other, and what, insurances have been effected and are existing upon the same property. Upon the ascertainment of all the facts, the insurer causes, or liimself draws out, a survey of the building, which should exhibit its size, division into rooms, and sometimes situation relative to other buildings. § 587. The materials are now obtained for the policy, which is a printed form having blanks to be filled up with the special matter obtained as above stated. The aj^plica- tion and the sm-vey, more especially the former, are usually referred to in the policy and made a part of it. Such ex- press reference makes it as much a part of the policy as if it KEPEESENTATION AS CONITECTED WITH INSURANCE. 331 had been actually incorporated in it, and renders all it? statements relative to the situation and uses of the premises express warranties having the same effect as stated in marine insurance. Jennings v. The Chenango Mutual Insurance Company^ 2 Denio, 75. § 588. A representation, in a fire insurance policy, no more than in a marine, is not to be taken as a part of the contract, but is collateral to it, has none of the qualities of a warranty, and requires to be only substantially correct. And there is a material difference between simply rcfemng to an application and survey in the policy, and referring to it as forming a part of the policy. In the first case, it has simply the effect of a representation, and if substantially correct, the policy "will be valid, although a condition an- nexed to the policy was that if the assured should make any misrepresentation, it should avoid the policy. The Farmers Insurance cfc Loan Comjpany v. Sjiyder, IG Wend. 481. But in the latter case it is made a part of the policy so as to change what Avould otherwise be a re])rcsentatiou into a warranty. Burr'itt v. The Saratoga Mutual Fire Insur- ance Company^ 5 Ilill^ 188. § 589. Tlic fire policy is always one strictly on time, and hence the commencement and termination of the risk must be stated with precision. As the property proposed for in- surance is always open to the investigation of the insurer or his agent, less reliance is usually placed upon the communi- cations of the assured ; still the insurer has a right to rely on the representations contained in the application or in the answers to his own questions, and hence if not substantially true, the policy which is based upon them could never be enforced. It is important for the insurer to ascertain the extent of the interest, as his insurance is made in the confi- dence that the assured will resort to all reasonable precau- tions to avoid the calamity insured against ; and for this he relies principally upon the motive which urges the assured to protect his own property. lie is therefore entitled to a 332 CONDITIONS A TAUT OF THE POLICY. true statement of the amount of interest of the assured ; and hence wliere the aj^plication M'as to insure a stone mill, belonging to the applicants, describing it as their stone mill, and the insurance was made accordingly, and it afterwards turned out that they were in possession under an executory contract of sale, it was held, that although that was an in- surahle interest yet it was not the interest represented, and that if this misrepresentation was material to the risk, the policy was void. The court say that a precarious title de- pending for its continuance on events which might or might not happen, is not such a title as is described in the offer for insurance. Columbian Insurance Company of Alexandria V. Lawrence^ 2 Peters^ 25. The reverse of this principle, however, has been decided in the State of New York in the case of Tyler v. The jEtna Fire Insurance Company^ re- ported first in 12 Wend. 507, and affinned on error in 16 Wend. 385, in which it was held that a party in possession under a contract of pm-chase, obtaining insurance on an application representing the house as Ms^ and the description of it in the policy is as his dwelling-house^ is not guilty of such a misrepresentation as will avoid the policy. The pre- vailing opinion now is, that the assured need not state that his interest in the subject-matter insured "is a qualified or a conditional one, unless special inquiries are made of him in reference to it ; but if any such are put, or if he volunteers to make any such representation, his statement must be true, or the policy will be void. If any facts are known to the assured which threaten any impending danger, they must be stated to the insurer, or the policy will be void, al- though there was no intentional fraud. § 590. The policies are usually found clogged with con- ditions, which, by their tenns, are expressly made to consti- tute a part of the instrument, and in such case they are construed as so many distinct warranties, and hence their literal performance by the assured are so many conditions precedent to a right of recovery. Even a paper which CONDITIONS IN POLICIES OF INSUKANCE. 333 purports to be conditions of insurance, if annexed to, and delivered with a fire policy, altliougli not expressly referred to by it, is nevertheless to be deemed pn7na facie a part of it. Murdock v. The Chenango Mutual Insurance Com- pany, 2 Comst. 210. In this case one of the conditions .was, that if the risk shall be increased by any means within the control of the assured, the insurance shall be void; and under this it was held that the assui-ed had no right to erect other buildings on his own premises so as to increase the hazard, and that if he does so, it avoids the policy. This case also settles the effect of a promise of something in the futui'e, when introduced into the application. In the de- scription was " one stove-pipe passes through the window at the side of the building. There will, however, he a stone chimney huilt, and the j^ipe will pass into it at the side. This was regarded as a warranty that the chimney should be built within a reasonable time, and that a violation of the en- gagement would avoid the policy. Tliis, we have already seen, has no such effect when presenting itself in the shape of a mere verbal promise. Alstoii v. The Mechanics Mutual Insurance Company in the City of Troy, 4 Uill, 329. But where there is no provision in the policy to the contrary, the applicant may, at the time of his application, contem- plate the erection of a new building nearly adjoining the one insured, and afterwards may proceed to erect it, giving no notice to the insurers, without invalidating the policy. Gates V. The Madison County Mutual Insurance Com- pany, 1 Seld. 469. § 591. A very common provision found in a fire policy is a prohibition of the use of camphene in the building in- sured, and whenever this condition is inserted, its prohibi- tion forms a part of the contract, and partakes of the nature of warranty, and this, if violated, whctlicr its breach afiects the risk or not, avoids the policy. It even has this effect altliougli its use is discontinued for some time before the oc- currence of the fire. The position taken in the j m*isprudence 334 CONDITIONS IN POLICIES OF INSURANCE. of New York, is " that tlic only safe rule is to hold the con- tract of insurance at an end the moment the warranty is broken, and that it cannot be revived again without the consent of both parties, unless the insurer has, by some act or line of conduct, waived the breach or violation of the warranty." Mead v. Tlte North-western Insurance Com- pany, 3 Seld. 530. This is very important doctrine, and cannot be stated as universally acquiesced in. Indeed a principle directly the reverse is established in English juris- prudence, as Chief Justice Abbot in Weir y. Aberdeen, 2 Barn. <& Aid. 320, with the concurrence of the other judges, held that if there be unseaworthiness at the commencement of the voyage, and the defect is cured before loss, a subse- quent loss may be recovered under the policy. Thus, on this point, English and American jurisprudence are directly at issue. Li a very recent case, it has been held that a pro- hibition of camphene relates only to its use as a lighting material, and hence that the use of it in a printing establish- ment for cleaning type, which, is customary among printers, does not render void a policy of insurance upon printing and book materials, stock, paper, &c., contained in certain buildings occupied for a printing office, bindery, and book store, in the city of New York. Harper v. The Albany Mutual Insurance Company, 17 New Yorh Hep. 194. § 692. Another condition usually inserted in policies provides that if the insured has procm'ed any other insur- ance upon the same property, and has not notified, and had the same indorsed upon, the one then insured, the same should be void. The object of this is to prevent the accu- mulation of insurances, thus not only taking away the motive to preserve the property from loss, but also furnishing a strong one for its destruction. Under this condition two questions have arisen. First, what is the meaning of " any other insurance upon the same property ? " and the second, what kind of notice is a compliance with the condition ? In regard to the first, it is held, that where persons are th^ CONDITIONS IN POLICIES OF INSUKANCE. 335 owners of different interests in tlie subject of insurance, each one may insure his own without giving notice that another and distinct interest has been insui-ed by another. And so far has this principle been earned, that where the provision was " of any other insurance made on their belialf on the same," it was held limited to any other effected at the instance, and upon the authority of the assured ; and hence that an insurance made on his account by another without his knowledge, authority, or subsequent recognition, was not one made within the clause. Franklin Insurance Company v. Drake, 2 B. Monroe, 47. But a more difficult question has arisen respecting the construction to be put upon an insurance obtained by a mortgagor, and assigned by consent of the company to the mortgagee. The questions here are, whose interest is covered by such a ]X)licy, that of the mortgagor or of the mortgagee ? And if that of the former, is it such an insurance of the interest of the mort- gagor as requires him to give the notice required in the condition when he obtains a second insiu'ance ? The con- stmction to be put upon such an insurance has come up for consideration in Cariyentcr v. The Providence Washington Insurance Company, 16 Peters, 495, and in Robert v. The Traders^ Insurance Company, lY Wend. 631, 636-7, reversing the decision of the Supreme Court as reported in 9 Wend. 404, and both substantially holding that it was the interest of the mortgagor, and not of the mortgagee, that was thus insured, and that a failure by the former to give notice of such a policy on obtaining a second insurance avoided the policy obtained on such insurance. Tlie ques- tion relating to the kind of notice required, also came up for consideration in the case reported in the 16 Peters, 386, and it was held that a parol notice was not sufficient, but that it was necessary in case of any prior policy that the same should not only be notified to the company, but should be mentioned in, or indorsed upon the policy, otherwise tlie second insurance would be of no effect. Where, however, 336 CONDITIONS IN POLICIES OF INSUKANCE. the provision was of any other insurance, not notified to the corporation^ a verbal notice was held sulHcient. McEwen V. The Montgoinery County Mutual Insurance Company, 5 mil, 101. § 503. Another condition generally introduced, relates to future insurances, and requires that if any such shall be made, reasonable notice shall be given, and the same shall be indorsed on the policy, or otherwise acknowledged or approved in writing. One question arising here, relates to the sufficiency of the approval, and it has been held that where a reasonable notice was given, and a letter from the secretary of the company received in reply, saying ^'' I have received your notice of additional insurance,^^ and containing no expression of disapproval, was a sufficient acTcnowledg- ment and approval in ivritiny to satisfy the terms of the policy. Potter v. The Ontario <& Livingston Mutual Insur- ance Company, 5 Hill, 14Y. The doctrine here established is, that the making further insurance did not work a forfeit- ure of the policy, unless the plaintiff neglected to give notice with all reasonable diligence ; that on receiving no- tice, it was for the defendants to say whether the contract should tenninate or not ; and that until they made the election, the policy continued in force. It seems now gen- erally to be understood that a parol notice is always suffi- cient, provided nothing is said in the policy as to the manner of notification, and it should also be added, no provision that it shall be indorsed on the policy. A very interesting and vastly important question arising out of double insur- ance, is this : A policy is effected in one office containing the usual clause to protect against double insm*ance, and afterwards one is effected in another office, containing the same clause, and no notice is given to either company. Has the assured any remedy upon either policy, and if so, which ? This question has twice arisen in Massachusetts, first in Jackson v. Massachusetts Mutual Fire Insurance Company, 23 Piclc. 418, and second in ClarTc v. The Nev) England CONDITIONS IN POLICIES OF INSIJEAIfCE. 337 Mutual Fire Insurance Comjpany^ 6 Cusli. 342, in both which cases the doctrine was settled to be that the second policy being utterly void, and the same as if no policy had ever been effected, can have no effect upon the first, and hence that the only remedy of the assured is upon the first, which is perfect. This doctrine may now probably be regarded as the settled doctrine, notwithstanding the doubt thi-o'wn upon it in CarjKnter v. The Providence Washington Insurance Comjpany^ 16 Peters^ 386. As upon the point whether the second policy is voidable or void, Mr. Justice Story, in the last-mentioned Massachusetts case, is shown to have promulgated a different doctrine from what he had himself declared in 1 Storifs Pep. 57. § 594. Tliere is still another condition growing out of the possibility of double insurances that is often inserted in policies, and that is a clause providing that if another in- surance is effected, and a loss occiu-s, the insured shall not receive on this policy any greater proportion of the damage sustained than the amount then insured shall bear to the whole amount insured upon the same property. The law, in such case, is laid down in The Howard Insurance Comr ^any of New Yorh v. Scribner, 5 mil, 298-301 : " A may insure the same subject against fire in several offices, to any amount, due notice being given to each, and the fact noted on the respective policies. Tlie effect is, that each office then stands in the relation of co-surety with the other, ac- cording to the several amounts for which they undci-took, just as if they had all under^\'l'itten the same policy. Tlio several policies are considered as one. Stoj^ping here, there- fore, the insured may sue and recover on one or more of them, to the extent of his entire loss, if the sum subscribed will cover it ; and those who pay the loss may compel con- tribution for the payment from the others, in the proportion that each of the sums subscribed by them bears to the whole amount of subscriptions. To avoid this circuity, the clause in question was introduced. By this, the double 22 338 CONDITIONS IN POLICIES OF INBTJEANCE. office of recovery and contribution is performed in a single action ; the defendant being allowed to recoup tlie same amount wliich lie must formerly have recovered over against those who stood by his side. Tlic clause in question was probably intended to substitute proportional abatement for contribution, in all those cases in which the latter would otherwise have been required by the common law." The limitation in this case, however, is to the same identical property, and hence where $1,000 were insured on fixtures, and $3,000 on stoch, and another policy was obtained insur- ing $5,000 on the stock and fixtures, as one parcel, it was held not a case of double insurance, and that each company was held to the full amount of its insurance. See also Ha/rris v. Oliio Insurance Company, 5 Ohio, 461. § 595. Other conditional clauses frequently introduced, classify the goods to be insured, denominating one class as not hazardous, another as hazardous, and another still as extra hazardous, and the two last are also often applied to certain trades and occupations. The condition may be that the building to be insured shall not be used for the carrying on of certain trades, or the storing of certain goods tenned hazardous or extra hazardous, without the consent of the insurer, or an extra per cent, of premium. One effect of the classification into hazardous and extra hazardous is to throw all those which are not enumerated into the class of not hazardous on the principle of expressio unius est exclusio altcrius. The prohibition contained in a condition against " storing and keeping hazardous articles " is not broken by a mere casual deposit of the articles. Hynds v. The Schenec- tady County Mutual Insurance Company, 1 Kern. 551. !Neith(ii' is the temporary introduction of hazardous articles for the purpose of repairs, a breach of a condition which prohibits trading in or storing such articles ; the object of the prohibition being held simply to prevent the building from being habitually used for the prohibited trade or pur- pose, and the habitual deposit in store of the prohibited ar- QUESTIONS HOW FUXLY TO BE ANSY?XKED. 339 tides, and not their occasional introduction for the purpose of repairs and painting, G'Neil v. The Buffalo Fire In- surance Company^ 3 Comst. 122. In the same case it is also held that a warranty may be either affirmative or promissory, but that in an application in which the premises were de- scribed as occupied hy a certain individual as a private residence, that did not amount to a warranty of the continu- ance of the occupation during the risk, and hence the insurers were liable, although during a portion of the time insured the premises were unoccupied. § 596. In respect to the fulness and fidelity of answer required to questions proposed, the doctrine is, that whether the inquiry, in its fullest sense, does or does not call for more than the answer gives, yet if the applicant answered as he understood it, and the insurers, without objection, ac- cept the application and issue the policy, they mil not be permitted, after a loss, to resist the payment on the ground that the answer was not full. And hence when the ques- tion was. How bounded, and distance from other buildings, if less than ten rods, and for what purpose occupied, and by whom? and the answer stated the nearest buildings on the several sides of the insured premises, but did not state all the buildings within ten rods ; the answer was held not to be a warranty that there were no other buildings within that distance than those mentioned. Gates v. The Madison County Mutual Insurance Company, 2 Comst. 43. Same case, 1 Seld. 469. § 597. The policy sometimes contains a provision that the insurers would be liable for fire by lightning, and then the question may arise : When are all the conditions so com- plete that the insurer is liable ? The insurance in such case is held to be against fire in the popular meaning of the term — actual ignition or burning, and not against the me- chanical cficcts of lightning ; and hence where sucli a pro- vision was contained in the policy, and the building was struck by lightning, prostrated, and destroyed, but no igni- 340 0ON8TEU0TION OF WAKEAJSTTIES AND CONDITIONS. tion or combustion took place, tlic insurers were not held liable for the loss. Bahcock v. The Montgomery County Mutual Insurance Compa7iy, 4 Comst. 326. A condition will 2^rotect the insurer, although the loss be not directly owing to the cause specified in the policy. It is sufficient if it can be traced directly to the cause ; as where the policy contained a condition that the insurer would not be liable for any loss occasioned by the explosion of a steam-boiler ; and there occurred an explosion in the building where the property was situated, by means of which a fire was brought in contact with the insured property and consumed it. Held the loss was fairly within the exception created by the con- dition, and the insurer could not be held liable. St. John v. The American Mutual Fire & Marine Insurance Company , 1 Kern. 516. And where the clause iii the policy insures against loss or damage by fire, a loss which results partly from the explosion, and partly from the combustion of gunpowder, is within the protection of the clause. Scripture V. Lowell Mutual Fire Insurance Company, 10 Cush. 356. § 598. All warranties and conditions have applied to them a strict rule of construction, and provided they appear upon the policy, it is entirely immaterial how, whether they are written upon the face of it, or in the margin, or transr versely, or even on a subjoined paper refeiTcd to in the policy. The rule of construction, however, is always made to accom- modate itself to the peculiar circumstances of the case, and hence where a condition was inserted prohibiting the use of the building for storing therein goods denominated hazard- ous, the keeping such goods as oil, or spiritous liquors, by a grocer, in ordinary quantities, for his ordinary common re- tail, was held not to be a storing them within the policy. Langdon v. JN'eio Yorh Equitable Insurance Company., 1 Hall., 226. The English rule of construing qualifying clauses inserted in the policy has been far more strict and severe than the American, holding in Stolies v. Cox, 37 Eng. Law & Eg. 561, that a change in the condition of the prop- MATEEIALITY OF KEPKESENTATIONS. 34:1 erty as described at the date of the policy, though not in terms forbidden, -would yet avoid the policy, whether it in- creased the risk or not. Tlie American doctrine is much less strict in this respect, and changes which are not ex- pressly forbidden, will not have the efiect to vitiate the policy, unless they are either fraudulent or occasion the loss. The cjuestion as to whether there has been any material in- crease of risk by addition or alteration of building, when that is provided for in the policy, is regarded as one of fact, and hence to be submitted to a jury. Grant v. The Hoioard Insurance Company of New Yorh^ 5 Hill. 10. § 599. All representations made by the insured to the insurer which are material to the risk, and arc false and fraudulent, vacate the policy at the election of the insurer. But the point still remained for decision, as to the effect upon a policy, of fraudulent representations made by the assured to the insurer upon his application for it, though not mate- rial to the risk, yet material in the judgment of the insurer, and which induced him to take the risk. That question has only recently been presented, and it was held that such representations did avoid the policy. Valton v. The Na- tional Fund Life Assurance Company., 20 New York Rep. 32. A question has also recently been presented, testing the eiFect of an omission in a statement, where the applicant described the building to be insured as a stone dwellmg- house, but omitted to state the further fact that a wooden kitchen was attached to it. Held, that this omission was fatal to the validity of the policy. Chase v. The Hamilton Insurance Company^ 20 New YorTc Rep. 52. § 600- Clauses are usually contained in the policy, ren- dering it void in case the assured parts with his interest in the property covered by it, and also in case of his assign- ment of the policy without consent of the insurer. The first is unnecessary, as the interest of the assured in the subject of the insurance is essential to support the policy, and when, therefore, he parts with it, the policy itself be- 342 ASSIGNMENT OF TOLICY AND SUBJECT INSUEED. comes a dead letter. Hence, if the assured sells the subject of insurance and retains the policy, the risk of the insurer terminates, and he is liable to no one in case of loss. Under these prohibitory clauses it has sometimes become necessary to determine what is, or what is not, a sale ; and in a case where the charter prohibited an alienation hy sale or other- wise^ it was held that a mortgage was not a sale. Conover V. The Mutual Insurance Comjjany of Albany, 1 Comst. 290. Folsom v. Belknap County Mtitual Fire Insurance Coonpany, 10 Fast. 231. The points of difficulty generally presenting themselves relate to the assignment of the policy. In reference to this, the question is clearly settled that where the prohibition against assigning is found in the policy, it is only operative during the continuance of the risk, and that an assignment after a loss, and the accruing of a cause of ac- tion against the insurer, is in reality no more than the assign- ment of a debt, and transfers all the right of the assured to the assignee. Mellen v. The Hamilton Fire Insurance Company, IT Wew Yorh Bep. 609. The assignment of the policy, to be any benefit to the assignee, must be accompa- nied with a transfer of some kind of interest in the subject of insurance to the assignee, and hence when the purchaser, on execution of the property insured, applied to the insurer, and, without stating his purchase, requested an assignment of the policy, that of itself was held suflficient notice that he had acquired, or was about to acquire, some interest in the goods. Hooper v. The Hudson Biver Fire Insiirance Company, 17 New TorJc, 42-1. "Without the prohibitory clause, policies are assignable in equity, but the assignee would derive no benefit from it without acquiring some in- terest in the property against the damage or loss of which it afi'ords an indemnity. It is entirely competent, however, for parties so to word the prohibition against assignment as to destroy all right of transfer without consent of the in- surer, as in the following instance : " The interest of the assured in this policy is not assignable without the consent ASSIGKMEN'T OF POLICY WHEN SUFFICIENT. 3i3 of the said company in writing ; and in case of any transfer or termination of the interest of the assured, either by sale or otherwise, without such consent, this policy shall thence- forth be void and of no eftect." Ileld, the assignment with- out consent, avoided the policy. Smith v. TIiq Saratoga County Mutual Fire Insurance Comjpany^ 1 IIlll^ 497. § 601. Tlie question may arise as to what will be con- sidered a sufficient assignment where the usual prohibition against it is found in the policy, " unless by the consent of the com^^iany manifested in writing," and it is held that where the secretary, on application to him at the office of the company, endorsed upon the policy and subscribed a consent, it was proof of sufficient authority to do so, where there was no contrary evidence. And that the fact of his being sole agent of the company, transacting its business at their office, and habitually giving such consent in writing, and entering the same in the books of the company without objection or repudiation, would be evidence sufficient with- out showing an ai)pointment by a formal resolution of the Board of Directors. Conover v. The Mutual Insurance Company of Albany^ 1 Comst. 290. § 602. A question growing out of valid assignments of policies much more important than any yet considered, re- lates to the nature and effect of the assignment, and the manner and extent to which the subsequent acts of the as- signor can affect tlie assignee. Tlie facts giving origin to this question are generally these. The owner of property insured mortgages it to another, and, having obtained the written consent of the insurer, duly assigns the policy to the mortgagee. Subsequent to the assignment he obtains another policy of insurance, omitting to give notice to the insurer, or does or omits some other act, which, as to him, would render void the insurance. What effect has such act upon the rights of the assignee ? Until the year 1858, the course of judicial decision in the State of Kew York had been uniform, that no act of the assignor done or omitted 3-14 EFFECT OF ASSIGNMENT ON EIGHTS. subsequent to an assignment "U'itli the -written consent of the insurer, could impair or destroy any right of the assignee under the assignment. The principle assumed was, that the assignment of the policy ^vith the assent of the insurer, creates new and mutual relations and rights between the assignee and the insurer, which cannot be changed or im- paired by the acts of a third person, over whom the insured party has no control. Tliis principle had been directly affirmed in Robert r. The Trader i Insurance Company ^ 9 Wend. 404. The same case afterwards went to the Court of Errors, see 17 Wend. 631, but upon a different point. It had been approved, although not discussed, in Conover v. The Mutual Insurance Company of Albany, 1 Comst. 290- 293 ; and again in Murdoch y. The Chenango County Mu- tual Insurance Company^ 2 Comst. 218-219 ; and again di- rectly decided in what appears to hare been the unanimous opinion of the Court of Appeals, in Tillou v. The Kingston Mutual Insurance Company, 1 Seld. 405. In 1858, during the same term of the Court of Appeals, this question was presented in two cases, viz. : Grosvenor v. The Atlantic Fire Insurance Company of BrooMyn, 17 Nevj Yorh Rejp. 391, and in The Buffalo Steam Engine Works v. The Sun Mutual Iisurajice Company., 17 New Yorh Itep. 401, in which the doctrine theretofore settled, after a good deal of consideration was overturned ; ihe assignment, with the assent of the insurer, was denied the effect of a new contract between the assignee and the insurer ; and, as a resulting consequence, the assignee was held chargeable with all the acts and omissions of his assignor, as affecting his remedy against the insurer. This doctrine was settled by a divided court, five to three, in both cases reversing the decision of the Supreme Court. "Whether this radical change in the view taken of the nature and effect of assignments of policies of insurance, resting, as it really does, upon the conclusions arrived at by one of the judges of the Court of QUESTIONS. 34:0 Appeals, \rill continue to be acquiesced in, and th.us rendered permament, remains yet to be seen. QUESTIONS. Where is found tlie inception of the policy ? How should the ap- plication be ? How signed ? "What should it contain ? What in addi- tion ? "What are the facts the most generally inquired about ? What next, upon ascertainment of the facts ? What is the policy ? "What are made parts of it ? And how ? What is the effect of express reference ? How is a representation taken and what required in relation to it ? Is there any difference, and what, between referring to an ap- plication and refering to it as a part of the policy ? What is a fire policy as to time, and what necessary to be stated ? What has the insurer a right to rely upon as to representations and answers ? Why should the insurer ascertain the extent of interest of the insured ? "What is he en- titled to in relation to it ? What illustrations ? When is applicant only bound to state his interest ? How must he answer inquiries, or make voluntary statements ? What duty in relation to facts that threaten im- pending danger ? What are fire pohcies usually clogged with ? What a part of ? How construed? How performed by the assured? How regarded? How paper containing conditions made a part of a fire policy ? What illustration ? What the effect of a promise in the fu- ture ? What illustration ? Any difference whether same be verbal or in writing ? What effect of provision prohibiting use of camphene in building insured ? What effect, if use be discontinued some time before fire ? What the principle settled ? What the doubt in relation to it ? What does a prohibition of camphene relate to ? "What instance in iEustration ? What the provision usually inserted relative to other in- surances and notice ? What the object of it ? What questions have arisen ? What is held in regard to the first ? How far has this principle been carried ? What illustration ? What construction to be put on effect of assignment of policy by mortgagor to mortgagee with consent of company? Does mortgagor, in such case, retain any insurable interest ? What necessary in case of subsequent insurance by mort- gagor? What kind of notice necessary? What provision in rela- tion to future insurances ? What is here a sufficient approval ? What illustration ? When is a parol notice sufficient ? What important ques- tion arises out of double insurance ? Upon which policy has the assured a remedy ? What provision as to ai)portioning insurance moneys is some- times inserted in policies ? What the law where there is such provi- sion ? What the limitation ? What clauses introduced as to classifying hazards? Into wh.it classes classified? "What the applications some- 346 PEOYISION AS TO LOSS. times made? TThat the provisions sometimes ia regard to lightningl "What dues fire by lightning mean ? What exchided f "\Vill ^jrovision protect insurer if hjss be not directly owing to the cause specified in the policy? What illustration? What constructions applied to warranties and conditions ? What must they appear upon ? How may they be ■written ? What does the rule of construction accommodate itself to ? What illustration ? What difierence of construction between English and American jurisprudence? What kinds of representations vacate pohcy, and at whose election ? What is the effect upon a policy of fraudulent representations not material, but which are so in the judg- ment of the insurer ? What clauses avoid policy by reason of parting with interest in subject insured, or of assigning policy ? What necessity of first provision ? What result if assured sells subject-matter, and re- tains policy ? What are the points of greatest difficulty ? When is pro- hibition against assigning policy only operative ? Can there be assign- ment after loss, and on what principle ? What must assignment of pol- icy be accompanied by to be of any benefit ? What is application for assignment of policy notice of? When are policies assignable in equity ? What must assignee possess himself of, to derive any benefit from it ? Can parties so word prohibition as to avoid policy in case of assignment, and how? What is sufficient assignment of -poWcj prima facie, where there is the usual prohibition ? What facts are sufficient evidence with- out showing formal appointment by board ? What facts originate inquiry into efl['ect of assignment and manner in which subsequent acts of as- signor aflfect the assignee ? What was the law in the State of Few York previous to 1858 ? What was the principle then assumed ? What was the doctrine declared in 1858 ? What was the effect denied to the as- signment ? What the resulting consequence ? PART m. LOSS, AIvD PROCEEDINGS THEEETJPOH'. § 603. In the loss and its adjustment are involved several verj important questions. The first relates to the extent of liability of the insm-er. The fire policy is generally an open one. It usually provides that the insurers are to make good the loss or damage, to be estimated according to the true and actual value of the property at the time the loss hapj)ens. This, it has been held, is the true measure of damages, al- though at the time of the loss, the goods were subject to HOW TO AliEIYE AT AMOUNT OF LOSS. 3i7 duties ■whicli had neither beeu paid nor secured. 'Wolfe t. The Hoioard Insurance Company, 3 Seld. 683. This provi- sion in the policy, or, in its absence, the legal nile, where there is no sj^ecial valuation in the policy, will comj)el the insurer to pay to the assured by way of indemnity, the true and actual value of the property at the time of the loss ; and by this is meant its intrinsic value, divested of any special or adventitious circumstances that might tend to increase or diminish its relative value or importance to the assured. If its loss to the assured should, under the pecu- liar cii'cumstances of the case, occasion him inconvenience and damage far beyond its actual value, still the latter would be all the insm-er could be called upon to pay. It is, however, competent for the parties to fix a valuation upon the property at the time of the insurance, and whenever that has been done, the parties, in the event of an absolute loss, are bound by such valuation. As in a case where 3S0 kegs of tobacco were insured, and on the back of the poKcy they were stated as worth $9,600, and 157 kegs were burned : It was held, the insurer was bound to pay for the loss of the 157 kegs according to the valuation which the parties them- selves had put upon the whole number. Harris v. The Eagle Fire Corajyany of Iseiu YorJc, 5 John. 368. The same principle was also decided in Massachusetts, although the sum stated in the policy exceeded the value of the interest of the assured. Borden v. The Hingharn Mutual Fire Insxirance CoTupany, 18 Pick. 523. § 604. There is, in fire insurance, no such thing as total abandonment to the insurer, or any deducting from expenses of one-third new for old, nor in general any such thing as general average, although there may be a general average for a sacrifice made by the insured for the common good, in a case of necessity. The loss by fire is seldom a total loss, and the sum or valuation inserted in the policy is regarded as fixing the maximum sum beyond which the insurer will not be held liable. lie will consent, and does, by the execution 34S DIFFERENCE BETWEEN FIKE AND MARINE TOLICIES. and delivery of his policy, to insure so much npon the property. It is all the risk he is willing to run, and if the assured desires a further indemnity, he must seek it of some other insurer. "No prudent company will ever take too many heavy risks in the same immediate neighborhood, but will prefer to scatter them about in localities separate from each other. Tlie distinction as to adjustment of loss be- tween fire and marine insurances is well laid down by C. J. Shaw, in Trull v. The Roxbury Mutual Fire Insurance ComxMny, 3 Ckish. 263, 267-8. " In fire policies the assured recover the whole loss, if within the amount insured, with- out regard to the proportion between the amount insured, and the value of the property at risk ; whereas, in marine policies, the insurer pays only such a proportion of the ac- tual loss as the sum insured bears to the value of the prop- erty at risk. For instance, on fire policies, if the sum insured be $2,000 on property worth $10,000, and the assured sus- tains an actual loss on the whole, he recovers the whole $2,000. But in a like case, on a marine policy, he would recover one-fifth only, or $400 ; being the proportion which the sum insured bears to the value at risk ; the assured himself bearing the other fom*-fifths of the risk. The result is, that every settlement of a loss by fire is in the nature of an adjustment of a partial loss, although it may amount to the whole sum insured. It is the payment of the whole actual loss sustained, on the whole property at risk, not exceeding the sum insured, without, regard to any apportionment between the sum insured and the property at risk, or to any aban- donment, or technical or constructive total loss, or salvage." § 605. A question of great interest and importance here arises out of the insurance efi'ected by a mortgagee upon the property mortgaged. In case of loss before the payment of his debt, secured by the mortgage, what are the relative rights of mortgagee, insurer, and mortgagor ? There is no doubt but that such mortgagee possesses an insurable in- terest, and that that interest extends to the amoun-i of his EULE WHEN MOETGAGEE INSUEES. 349 debt. All are agreed further that in case of loss, tlie debt and mortgage still being unpaid and outstanding, the insurer is bound to pay the amount insured to the mortgagee if it docs not exceed the debt. Tlie next step brings us to a controverted point. How does the mortgagee hold this money, and to whom belongs the debt due from the mort- gagor ? Does he hold it in his own right, still owning the debt, or does he hold it as trustee for the insurer in case of subsequent payment to him of the debt, and is the insurer then entitled to be subrogated to his rights as to receiving or enforcing the payment of the debt ? Li other words, does the insurer indemnify him against the loss of the debt, or of the property insured ? Mr. Phillips, in 2 Phillijps on Insurance^ '2d Ed. 419, lays down the rule to be that the insurer by payment of the loss entitles himself to a propor- tional interest in the debt secured by the mortgage, and that doctrine is explicitly laid down by Judge Story, in Carjpenter V. Providence Washington Insurance Company^ 16 Peters.^ 495. It is also put forth as correct doctrine by Chancellor "Walworth, in Tyler v. ^tna Insurance Company, 16 We7id. 385. The question, however, did not directly arise, and was not necessary to be decided in either one of these cases, es- pecially the latter. On the other hand, the point was pre- sented and extensively discussed in Massachusetts by C. J. Shaw, in King v. The State Mutual Fire Insurance Com- pany, 7 Cush. 1, in which he strongly enforces the other view of the question, holding in express terms, " that when a mortgagee causes insurance to be made for his own benefit, paying the premium from his own funds, in case a loss occurs ])efore his debt is paid, he has a right to receive the total loss for his own benefit ; that he is not bound to account to the mortgagor for any part of the money so recovered, as a part of the mortgage debt ; that it is not a payment in whole or in part, but that he has still a right to recover his whole debt of the mortgagor, and that when the debt is thus paid by the debtor, the money is not, in law or equity, the money 350 EULE WHEN ASSU14ED HAS QUALIFIED PEOPERTY. of the insurer, wlio lias tlins paid tlie loss, or money paid to liis use." A case presenting substantially the same point under a diflerent form has arisen in England, and is found in Dobson v. Land, 8 Hare, 216, in which Vice Chancellor Wigram holds the same doctrine as the Supreme Court of Massachusetts. This latter case is strongly criticized by an article in 13 Law Reporter, 24:7. The very recent case of Kernoehan v. The New York Bowery Fire Lnsurance Com- pany, 17 Weiu Torh Rep. 428, decides that in the case of insurance of mortgaged property by the mortgagee, the in- surer undertakes to indemnify against the loss of the prop- erty, and, not of the debt, and although this question is mentioned, yet it was not necessarily involved in the decision which the facts of the. case required, nor did the court un- dertake to adjudicate upon it. In view of all these conflict- ing opinions, it may perhaps be safe to assume that this question, so important to the business world, is yet an open one in general jurisprudence. § 606. Another question of some difficulty, but involving not so much contrariety of decision, relates to the amount of loss the assured is entitled to receive, in case he has only a qualified property in the subject-matter of the insurance. "Where, for instance, a commission merchant, or a bailee, having only a qualified property in the goods to be sold, or the thing bailed, insures them on his own account, by virtue of his insurable interest ; the question is, whether in case of loss he is entitled to receive the whole amount insured, which may perhaps be the entire value of the property, or is he limited to such sum as would indemnify him for the extent of his interest in the property ; or may he receive the whole amount, holding all beyond what is necessary for his indemnity as trustee for the absolute owner ? A portion of the same reasoning which, in this case, would carry the whole insurance money to the assm-ed as his own, would sustain the position taken by the Supreme Court of Massa- chusetts on the question presented in the last section. This PKOCEEDIKGS DT CASE OF LOSS. 351 question has twice arisen in the State of New York, and once in England, and it is held that the party insuring, al- though he may have but a qualified property in the thing insured, is nevertheless entitled, in the event of loss, to re- ceive the entire amount specified in the policy. Stillwell v. Staples^ 19 N'ew York Rep. 401. Waters v. The Monarch Fire & Life Assurance Comjyany^ 5 El. S Black. 870. § 607. Tlie policy generally contains provisions pre- scribing what proceedings must take place on the part of the assured in the event of loss. These require the notice of loss to be immediately communicated to the insurer ; and within a reasonable time afterwards, generally specifying what that shall be, preliminary proof, relating to the nature and cause of the loss, stating the- extent of it, and the man- ner in which it occurred, the same to be verified either by affidavit or certificate of the nearest magistrate, one or both, is to be furnished to the insurer. These provisions are thus made a part of the contract, and are to be as faithfully and circumstantially pursued as the nature of the case and situation of the party will permit. The courts, when called upon, have adopted diiferent principles of. construction in relation to these provisions. The Court of Iving's Bench, in Worsley v. Wood, 6 T. R. 710, adopted a very strict and rigid princij^le of construction, holding that the procuring the certificate was a condition precedent to the recovery, and that even where the party who was to sign it ^vrongfully refused to do so. In Leadhetter v. The jEtna Insurance, 13 Maine, 265, the court adopt the same principle, holding that where the certificate of the nearest magistrate was required, and the certificates of neither one of the two nearest could be obtained, and that of the third, who was the next nearest, was ; the assured was denied all remedy, as the production of the certificate of the nearest magistrate was a condition precedent. In the State of ISTew York, the courts have adopted a diiferent principle, construing such provisions with great liberality ; requiring only reasonable infonnation 352 WAIVER A3 TO PRELIMINAPwT PROOFS. to be given, to' enable tlie company to form some estimate of their rights and duties before they are obliged to pay. The account of loss was deemed sufficient, although in a very general form. McLmtgJdin v. The Washington County Mutual Insurance Company, 23 Wend. 525. So where the provision in the policy required the certificate of a magistrate or notary the most contiguous to the place of the fire, C. J. Nelson declined going into a nice calcula- tion of distances to settle the j^oint upon the laws of mensu- ration ; insisting that the spirit of the condition required no such mathematical precision, and that its object is com- pletely secured by the proximity of the certifying magis- trate. Turley v. The North American Fire Insurance Company, 25 Wend. 374. • And so in a recent case, where, under a similar provision, the assm-ed produced the certifi- cate of a magistrate residing near but not nearest to the place, and the insurers objected to paying the loss, hut not on that ground, it was held that the objection was waived ; that if it was to be insisted on, the insurers should have pointed it out, so that a new one could have been supplied. G^Neil V. The Buffalo Fire Insurance Company, 3 Comst. 122. § 608. Another question that has frequently been pre- sented to the courts, relates to the circumstances under which the insurers will be taken to have waived all objection to the insufiiciency of the preliminary proofs, and hence to have precluded themselves from taking any advantage of their defects. In one case, where the mortgagee insured the mortgaged premises in his own name, and for his own bene- fit and that of the mortgagor, the latter paying the pre- mium, and the notice and preliminary proofs were furnished in the name of the mortgagor, and no objection was taken until after suit brought ; held, the insurers could not object that they were not in the name of the assured. Kernoehan V. TheNexo YorTi, Bowery Fire Insurance Company, Vjlfeio York Rep. 428. In another case it was held that all formal DIFFKKENT KUTDS OF INSUEANCE COMPANIES. 353 defects in the preliminaiy proofs are waived, if the insurers, without noticing them, put their refusal to pay upon some other ground. McMasters v. The North, American Fire Insurance Company^ 23 Wend. 43. So in a more recent case, where the company declined paying, but neglected spe- cifically to object to the form or time of service of the proofs, any defects that might exist were held to be waived. Bum- stead V. The Dividend Mutual Insurance Company, 2 Kern. 81. So where the insurers received preliminary proofs that were insufiicient, but gave no notice to the assured of their de- fects, but, without any further notice to the latter, procured themselves, within the time specified, the necessary affida- vits, it was held that this was a sufficient compliance with the provision by the assured. Sexton v. The Montgomery County Mutual Insurance Company., 9 Barh. 191. So, also, partial payment of the loss, by the insurer, is a waiver of the preliminary proofs. Westlake v. The St. lawrence County Mutual Insurance Company, 14 Barh. 206. § 609. To do the work, and meet promptly the liabilities of the insurer, requires large amounts of capital in such a shape as to be readily accessible. Tliis is seldom under- taken except by incorporated companies, and of these there are two kinds. The one, and much the elder of the two, are stocTc companies., in which the capital stock is created and defined by the charter, and the corporators become such by purchase and ownership of the shares. The sale and pay- ment for the shares gives the corporation the capital required in their operations. A sufficient amount of tliis is kept on hand for current expenses and payments in case of loss, while investments may be made of such portions as are not immediately required. The profits realized arc distributed by way of dividends to the stockholders. These incorpo- rated companies have nothing peculiar to themselves, and are governed by the general principles of law applicable to corporations. § 610. More recently, and within the last half century, 23 354 MUTUAL mSUKANCE COMPANIES. another kind of insurance companies have appeared, called Mutual Insurance Comjpanies, whose organization is entirely different from the stock companies, and out of which has grown a good deal of litigation. The principle of their construction is simple, although when their machinery be- comes deranged in its operation, quite a degree of complica- tion is experienced. The principle is a common contribution of credit, in which is to be found the means of indemnity against individual losses. Upon the organization of the company, the most generally for the effecting of marine or fire insurances, risks are solicited. The party who gets hia property insured becomes a member of the company during the period of time for which he insures. He pays down a small sum sufficient to cover the actual expenses of the sur- vey, policy, (fee, and executes and delivers to the company a premium note for such amount as they require for the premium of insurance, receiving in return the policy. Thi^ is in the usual form of other policies, containing generally the same provisions and conditions, and in addition often making the by-laws of the company a part of it. The pre- mium note pledges the personal liability of the assured to contribute his proportion towards the payment of all losses which the company may be called upon to make good while he continues a member of it, that is, dm-ing the period of his insurance. When the losses require it. the company make assessments upon their premium notes, the pa^nnent of which, when required, is usually made a condition to the continuance of membership in the company so far as regards their liability for future losses. § 611. It will thus be perceived that the capital, at the commencement of business, must consist of the loan or pledge of the credit of those who are insured in the company ; and as it is impossible to secure in the outset a sufficient number of small premium notes to make any considerable aggregate amount of capital, it is usual for those the most instrumental in getting up the company, and who are confident of its sue- irUTUAL INSUEANCE COMPANIES. 355 cess, to loan their individual credit in mueli larger sums, either with the expectation of taking out policies in the fu- ture, or to enable the company to gain credit with the com- munity. Tlie act of incorporation sometimes makes provi- sion that the company may be authoi-ized to receive notes for premiums in advance, of persons intending to receive its policies, and to negotiate such notes in the course of its business. This is the effect of the provision contained in section 5 of the general act authorizing the formation of mutual insurance companies passed by the Legislature of the State of 'New York in 1849. Tlie ultimate capital stock of these companies is the accumulation of earnings above the losses. § 612. The questions arising between the company and the assured in the event of loss, are similar to those arising in all other cases of insurance, except in those respects in which the peculiar organization of the company may requu'C the application of a different principle. One instance of this arises out of the facts of giving the premium note, subsequent forfeiture of the policy, and assessment by the company on the note with a knowledge of the facts causing the forfeiture. What effect has this upon the policy ? Are the policies and premium notes independent contracts, each caj)able of subsisting without the other ; or are they so inti- mately connected that they can only co-exist, and that hence if the company choose to treat the premium note as a valid subsisting one, by making and receiving assessments upon it, with a knowledge of the facts that have caused a forfeit- ure of the policy, is that of itself a waiver of the forfeiture, and revival of their liability in case of loss ? Of this ques- tion courts have taken different views, and as one of gen- eral jurisprudence, it may, perhaps, still be considered ojjcn. See sustaining their independence, JVcw Eiujland Fire In- surance Company v. Butter^ 34 Maine ^ 451, and Swanscot Machine Company v. Partridge, 5 Fost. 3G9. And on the other side sustainincr their co-existence, and mutual ueccs- 356 MFTUAL INSURANCE COMPAlHES. sity to cacli other, Viall v. Genesee Mutual Insurance Company, 19 Barb. 440, and Wilson v. Trumhull Mutual Fire Insurance Company, 19 Penn. 372. Frost v. The Saratoga Mutual Insurance Corrvpany, 5 Denio, 154, and Smith V. The Saratoga County Mutual Insurance Company, 3 Hill, 508 ; in whicli the court held that where the company, with a knowledge of the facts constituting a forfeiture of the policy, had assessed the premium note for losses which had occurred before the forfeit/are, the policy was not thereby revived. § 613. The anxiety to ohtain risks, and the zeal of agents paid generally by a percentage on the risks they can procure, or the permium notes or amounts of cash they can secure for the company, has occasioned the transacting of business in so reckless and improvident a manner, as often to result in the utter failures and insolvencies of these companies ; and whenever this occurs, and the effects go into the hands of receivers to wind up their affairs, questions of difficulty often arise between them and their former members, growing out of the notes given on the taking out of policies, or in the expectation of it. Are such notes given upon sufficient consideration as between the company and the makers, and ■ to what extent are they enforceable ? In these cases, in some instances, the charter of the company has authorized it to receive premium notes in advance of persons intending to take out policies, and also to negotiate them in the course of its business, paying to the makers a compensation not exceeding five per cent, per annum on so much of the notes as exceeded the premiums on policies actually taken. A note given under .such circumstances has been held valid and enforceable for the sum due on its face, although the pre- mium on insurances received by the maker, amounted to only a part of it. It was held that there was sufficient con- sideration. Deraismes v. The Merchants Mutual Insur- ance Company, 1 Comst. 371. In Brown v. Crooke cfe Towks, 4 Comst. 51, the court reaffirm the same principle, LIABILITIES OF MEMBEKS OF MrXUAL INS. COS. • 357 and apply it, althougli the makers of the notes had given them to the company, stipulating that they " were to he in advance for premiums on policies of insurance, which they agreed to take thereafter, and after giving the same, they had taken out no policies. In WJiite v. Ilaight, IG New York Rep. 310, it was held that a note given upon the same principle was not held by the company as a guaranty, and recoverable only to the extent of a just proportion of the losses and expenses, but that it was payable absolutely, and that there was no occasion for an assessment ; for, the cor- poration being insolvent, the receiver, — the plaintiff in the action, — was entitled to enforce all the securities belonging to it for the purpose of paying its debt. It was also held to be no defence that the losses, to which the money if col- lected, would be applied, occun-ed subsequent to the period for which the maker of the note was insured, or that in re- spect to such losses no assessment had been made u^ion other notes given to the company. The principle is here broadly asserted, that all notes of this character are intended to be actual securities for the money mentioned in them, that they may be collected at maturity, and the amount, if not required for immediate expenditure, should be invested in more safe and 2)ermancnt securities. In Savage v. Medhury, 19 I^ew York Rep. 32, it was held that where a note was not one of those given at the formation of the company, under section 5 of the general act, (as was the fact in White v. Ilaight,) an assessment is a necessary condition to the maintenance of an action, by the receiver of a mutual insurance company, against the maker of it, and that the receiver stands in the place of the company, and can recover only when, and to the extent, that the company itself could have done. Li Bangs v. Gray, 2 Kern. 477, it was held that a member of a mutual insurance company, not, however, incorporated under the general act, is liable to be assessed upon his de- posit note for losses in the proportion which the amount of his note bears to the aggregate of deposit notes which are 358 - QUESTIONS. collectable and subject to assessment for siicli losses ; that if other mombers, legally assessable, are unable to pay the amounts assessed, those -who are able are liable to be assessed ' to make up all such deficiencies. QUESTIONS. Is a fire policy open or valued ? What docs it nsnally provide ? "What is the iusurer to pay in case of loss ? "What is meant by the rule? Das the assured any claim beyond actual value ? Can parties fix a valuation so as to be bound by it ? "When to be affixed ? What illustra- tion ? What is there wanting in fire insurance that is found in marine? How is the sum or valuation regarded in the policy ? What is the differ- ence as to adjustment of loss between fire and marine insurances ? Has a mortgagee an insurable interest, and to what exent, and when does it terminate? Suppose a loss, and the insurance money paid, to whom does it belong ? To the assured absolutely or conditionally subject to payment of the debt ? And what, if any, are the rights of the insurer in reference to the debt ? What is the assured entitled to receive when he has only a qualified property in the thing insured ? The whole amount of the insurance, or to the extent of his interest ? What provisions in the policy prescribing proceedings in the event of loss ? How are these provisions to be regarded, and how pursued ? What principles of con- struction adopted by the courts of England, and some in this country ? What adopted by the courts of the State of New York ? What illus- trations ? When, and under what circumstances, are defects in prelimi- nary proofs waived by the insurers? What cases in illustration? How is the capital stock of stock companies created ? How do corporators become such ? What gives the corporation its available capital ? How are the profits distributed ? What is the principle upon which mutual insurance companies are organized ? What does the party getting his property insured become ? And for what period ? What does he pay down ? What does he execute and deliver ? WTiat receive ? What is in the policy additional to other policies ? What is the effect of the premium note ? What do the company do in the event of losses ? What does the capital stock consist of at the commencement of business ? What beyond small premium notes is it necessary to obtain ? What is it usual for those getting up the company to do ? What does the act of incorporation make provision for ? Wiiat is the ultimate capital stock ? In what respect are questions, as here arising between the company and the assured, different from those arising in other cases of insurance ? Suppose a premium note assessed subsequent to a known forfeiture of the policy, DEFnmTON A^T) OBJECTS OF LIFE INSUEANCE. 359 Is that a waiver of the forfeiture ? Docs it revive the liability of tho company ? "What eflfect if made on losses previous to forfeiture ? "What do difficulties between the company and its members usually grow out of? Are such notes given upon sufficient consideration ? Under what authority are they commonly given ? "When given at the organization of a company under the general act, how are they regarded, what their character, when, and to what extent enforceable ? When given subse- quent to formation of company, what necessary before action can be brought and maintained ? In companies not incorporated under general act, in what proportion is premium note hable to assessment, and what deficiencies to be made up, and how ? III. LIFE INSURANCE. § 614. Life insurance is a contract by wliicli tlio insurer, in consideration of a certain premium, consisting either of a gross sum or of certain annual payments, undertakes to pay to the person for whose beneiit the insurance is made, a certain sum of money or aimuity, on the death of the person whose life is insured, or on the happening of an event depending on such life. The engagement may be cither to pay a certain sum upon the death of the party whose life is insured, or to insure at a certain sum the continuance of the life for a certain number of years. In either case, the consideration to the insurer may be cither a gross sum paid down at once, or the annual payment of a certain sum during the continuance of the insm-ance. The objects generally sought to be attained are the following : 1. In case of marriage, investments arc sometimes re- quired to be made as a provision for a wife and children in case of their survivorship. Tlie securing a certain sum to be paid for their benefit in the event of death, answers as a substitute, allowing the husband, in the mean time, the use of the capital. 2. The husband and father of a family, by means of a 3G0 THE INTEREST KEQUIEED IN THE LIFE INSURED. small annual payment, can thus provide for his wife and children in case of his removal by death. 3. Any one unmarried can make a similar provision for friends or relatives. 4. A creditor can, by insuring the life of his debtor, create an additional security for the payment of his debt. 5. A man may strengthen his own credit by procuring his life to be insured a certain number of years, assigning the policy to his creditors. Thus life insurance can be ren- dered available in a variety of different ways. "With slight exception, however, it is only in England and America that the desu'e of providing for the future has originated and carried into effect this species of insurance. § 615. The law will not permit this, more than any other kind of insurance, to be a mere gambling contract. Hence it requires an interest in the life insured to effect a valid in- surance. The first inquiry that arises relates to what consti- tutes a sufficient interest. Any one is held to have a sufficient interest in his own life to make it the subj ect of legal insurance. So a creditor has such an interest in the life of his debtor as to enable him to insure it upon his own account to the extent of his debt ; and a partnership creditor may, upon the same principle, insure the life of either partner. At the time of the creation of the debt it is often made a part of the security that the life of the debtor shall be insured, and the policy assigned to the creditor. It is not, however, every interest in the life of another that is insurable. A person has not, simply in the character of husband and father, an insurable interest in the life of his wife or child. To be sufficient it must be a direct, pecuniary interest. The child has an insurable interest in the life of his father where he is dependent for support upon a fund which ceases at his father's death. A single woman who is dependent on her brother for her support and education, has a sufficient interest in his life to entitle her to insm-e it. In !N"ew York and several of the States, by statute, a married woman may insm-e in her STATEMENTS ON "WHICH POLICY IS ISSUED. 361 own name, or in that of another, Tvith his assent, the life of her husband, and in the event of his death, will be entitled to the proceeds of the policy in preference to his creditors. § 616. The policy is issued upon the strength of state- ments contained in answers to questions by the assured, his friend, his medical adviser, and usually the report of the physician of the company. Tlie questions to which answers are the most commonly required arc, the name, residence, and occupation, place, and date of birth ; whether he has, at any time, been afflicted with gout, rupture, insanity, liver complaint, fits, or convulsions, and whether he has had symptoms of consumption, spitting of blood, asthma, or any disease of lungs or chest ; whether he ordinarily enjoys good health, and is aware of any disorder or circum- stances tending to shorten life, or to make an assurance more than usually hazardous. If these statements, or any of them, are incorporated into the policy, or recited, and thus incorporated by reference, they so far become part of it, and thus partake of the nature of a warranty, requiring a literal compliance with the statement, whether the party is, or is not, apprised of its untruth. These statements are" not, however, ordinarily spread out upon the policy, but they are frequently so referred to as to be made a part of it. When they are not thus incoi-porated or made a part of it, they are not regarded as warranties, but simply as represen- tations. In this latter case it is sufficient, if they arc made and given in good faith, and are true in substance. If these partake of the nature of a representation merely, they should be material in order to avoid the policy. But if immaterial and fraudulently made, they will still avoid the policy if the insurer, at the time, deemed them material to the risk. Valton V. The National Fund Life Assurance Company, 20 Neio York liep. 32. § 617. Much of the litigation that has occurred in actions brought upon these policies, has arisen out of defences inter- posed to their enforcement, growing out of alleged violations 362 EISKS ASSUMED ET TIIE INSUEEE. of warranty or untruthfulness in representation. The rulo is, if there be no warranty, or representation, or fraud, the insurer takes the risk of the goodness of the life he under- takes to insure. If he desires any knowledge beyond what is apparent, he is at liberty to question ; and all relevant questions devolve upon the applicant the duty of answering faithfully and truthfully. The answer, however, must be full to the question, and hence in a case where the represen- tations were to be considered a part of the policy, if in the making of those on the strength of which the insurance was effected, a material fact is untruly stated or concealed, the policy will be void, although no specific questions are asked respecting such fact, provided a general question is put which would include, and was calculated to elicit, that fact ; and this, although the omission results rather from accident or negligence than froin design. Yose v. The Eagle Life and Health Insurance Company^ 6 Cush. 42. § 618. In the absence of any warranty or condition on the part of the assured, the insurer takes all risks, imless he can show a fraudulent concealment or misrepresentation, or a non-communication of material facts known to the assured ; and either one of these will avoid the policy. In this kind of insurance much reliance is necessarily placed upon the communications of the insm-ed, especially in relation to his past history, and the diseases or difficulties with which he may have been afiiicted, and those which may be considered hereditary in his family. His application for insurauce binds him to disclose all material facts within his knowl- edge ; and if he supposes any fact relevant to the matter, he must take the responsibility of its turning out to be imma- terial, and hence an innocent concealment ; because it is the province of the jury to decide on the materiality of facts, and his own belief, therefore, relating to its materiality or the reverse, is of little or no importance. If he commmii- cates every fact within his knowledge fairly bearing on the question, he has done all the law requires of him, but if he COimUNICATIONS FEOM THE ASSUKED. SC3 chooses to speculate on what he can safely communicate and what withhold, he must take the responsibility of the con- clusions to which he arrives and upon which he acts. And although it is expressly stipulated that the policy shall be void on untrue answers being given to certain written in- quiries, thus creating a seeming exclusion as to those which are verlal, yet it was held that a verhal misrepresentation vitiates the policy. Wainwright v. Bland, 1 Mee. d? Wels. 32. In Swete v. Fairlie, 6 Carr. cfi P. 1, a question of great interest was presented as to the effect of the omission to communicate the fact that some years j^reviously the life insured was afflicted with a disorder tending to shorten life, but of a character such as to deprive the individual of all consciousness during its continuance, such as insanity, and it was held the omission was not fatal to the policy. Under the earlier forms of insurance in which the warranty of good health at the time of the contract was the principal warranty rehed upon, questions arose as to the effect of former dis- eases, or of wounds formerly received, as in lioss v. Brad- shaio, 1 Wm. Black. 312, where the statement of them was omitted, and the disease causing death was wholly uncon- nected with them. Tlie general conclusion was that they did not avoid the policy. At the present time, however, the questions put are of such a searching character, and the in- vestigations so thorough, as rarely to leave questions of that kind open to litigation. Under the clause that the " assured has no disorder tending to shorten life," some curious ques- tions have occasionally been presented, as in Watson v. Mainioaring, 4 Taunt. 763, where the point arose whether dispepsia was a disease tending to shorten life. And the court held tliat it was not, " that all disorders have, more or less, a tendency to shorten life, even the most trilling ; that if dispepsia was a disorder that tended to shorten life, within this exception, the lives of half the members of the profession of the law, would be uninsural)le." § 619. Life policies are now carefully guarded by condi- 364 LITE POLICIES ASSIGNAJiLE. tions which rccjuire a strict observance to prevent their for- feiture. They frequently contain a condition, that the policy shall be void if the insured shall die upon the high seas or the great lakes ; or shall pass beyond the settled limits of the United States, and of the British provinces ; or, if he live in the IS^orthern States, south of the States of Yirginia and Kentucky. And also if he enter in the military or naval service, or if he die by suicide or in a duel, or by the hands of justice. The question whether death by suicide, when the result of insanity, is such a violation of the condition as to defeat the policy, has arisen and been differently decided by the English and American Courts. In the former, in Clift V. Schwdble^ 3 Manning, Granger & Scott, 437, the broad ground was taken that the terms of the condition in- cluded all acts of voluntary self-destruction, and that whether he was, or was not, a responsible moral agent, was immaterial. In Breasted v. The Farni-eri Loan and Trust Company, reported first in 4 Hill, 73, and affirmed in 4 Seld. 299, it was held that if the insured died of suicide, while insane, the case is not within the exception. § 620. It has never been doubted but that policies of life insurance were assignable. There is no statute re- straining it in this country, and nothing tending to qualify it unless the statute against gaming and wagering has that effect. But the doctrine is now clearly settled by the case of Ashley v. Ashley, 3 Simons, 149, in England, and St. John V. The American Mutual Life Lnsuranee Company, 3 Kern. 31, in this country. A policy valid in its inception is a chose in action, and governed by the same principles applicable to other agreements involving pecuniary obliga- tions. "Whatever may be the consideration of the assign- ment, the assignee is entitled to recover against the insurers the whole face of the policy. Nor is it essential that the assignee should have an insurable interest in the life of the insured to entitle him to recover. It is sufficient if ho proves a valid assignment of a policy legal in its inception. CHAEACTEE AND COMMENCEMENT OF EISK. 3G5 § 621. Another question wliicli may b6 considered as in- volved in the last as broadly decided in the case referred to, relates to the point whether a life policy embraces a contract merely of indemnity, or one which is to be executed accord- ing to its terms. The English courts at first regarded it in the light of an indemnity only, and in Godtall v. Boldero, 9 East. 72, held that where a creditor insured the life of his debtor, he obtained only an indemnity against the loss of his debt, and that its payment by the debtor barred all re- covery upon the policy. But that doctrine has since been reversed in Dolby v. The India and London Life Assurance Company^ 15 Common Bench Bejp. 365, also in 80 Engl. Com. Law Bep. 364, in which it was denied that the con- tract of life insurance was one of indemnity, holding that where a party had an interest in the life insured at the time the policy was efiected, the fact of his interest ceasing in such life, before the death, did not invalidate the policy. Tlie same principle affirmed in this country in St. John v. The American Mutual Life Insurance Company, 3 Kern. 31. § 622. The commencement of the risk dates from the unconditional acceptance of the proposition to insure, and hence where the insurers by letter had made known the terms upon which they would insure, and the insured had in reply mailed a letter properly directed, containing an acceptance of the proposition, together with the premium, it was held to constitute a sufficient contract of insurance. Tayioe v. The Merchants Fire Insurance Company^ 7 How. TJ. S. Bep. 390. Tlie loss must occur within the period of insurance, and hence it was said by Willes J., in Locl'yer v. OJley, 1 T. B. 260, that if the party receives a mortal wound within the period, and dies after it has expired, the insurer is discharged. The risk incurred is the termination of the life insured, and this is to be shown by the party averring it. The time of its occurrence is a fact to be found by the juiy. It must sometimes necessarily rest upon presumption, and the general rule here is, that any one who has not been 3G6 rRESUMPTION OF STJEVIYOKSniP. licard of for the space of seven years, may, for all legal and equitable puri)o.ses, 1)C presumed to be dead. Tilly v. Tilly y 2 Bland, 445. Questions of great difficulty and embaiTass- ment have sometimes grown out of the necessity of deter- mininir who was the survivor, where two or more have perished by a common accident, as a shipwreck ; and in their settlement the civil law and the Code Napoleon have adopted presumptions derived from physiological principles, such as the relative ages, health, and physical condition of the parties, as affording indications of the amount of endur- ance eacli could suffer before dying, and hence the relative length of time each would be able to hold out. The com- mon law has rejected these refined distinctions, and adopted the principle, that where two or more have perished by a common disaster, and there is no evidence as to which sur- vived the other, th'ey shall be presumed to have died to- gether ; but if there is evidence tending to show which died first, that will control, and in case of great inequality in age, health, and physical condition, it may be given in evidence, and aid in the conclusion. § 623. Where a policy provides for yearly payment of premiums, there is generally a condition annexed, that in case of the non-payment of the premium at the specified time, or within a certain number of days thereafter, the policy shall cease and be void. In such a case a neglect to pay at the time specified would result in the termination of the contract of insurance. But a policy forfeited by non- compliance of the assured witli its precise terms, may be re- vived by an imconditional acceptance on the part of the in- surers of their premiums. Wing v. Harvey, 2T Eng. L. and Eq. 140. QUESTIONS. "WJbat is life insurance ? What may the engagement be ? What may the consideration be ? What are the objects songht by the insurance ? What does the law require to render legal the insurance ? Has any one a right to insure his own life ? What may a creditor insure, and why, ^VIIAT IS A BALE OR EXCHANGE. 367 and to what extent ? What is often done at the time of the creation of the debt? What instances in wliich the hfe of others cannot be in- sured? What kind of interest must it be to justify insurance? When tan a child insure its father's life ? When a single woman that of her brother ? When, how, and under what, a married woman that of her husband ? And what, and in exclusion of whom, entitled to on his death? What is the policy issued upon the strength of ? What the questions to wliich answers are the most commonly required ? What the result, if the statements made are incorporated into the policy or made a part of it ? WTiat if not incorporated ? If representations, how must they be made to avoid the policy ? When will they avoid it if immaterial and fraudulently made ? What is the rule where there is no warranty, representation, or fraud ? Wliat should the insurer do to ob- tain knowledge ? What the duty of the assured as to relevant ques- tions ? How must the answer be ? Under what circumstances may a policy be rendered void where no specific questions are asked ? Where there is no warranty or condition, what risks does the insurer take ? In regard to what does the insurer generally rely upon the insured ? What does the insured's application bind him to disclose ? Wlio takes the risk of a fact being immaterial ? WTio decides on the materiality of facts ? When has the insured done all the law requires of him ? What if he chooses to speculate ? What instances in illustration ? Is dispepsia a disease tending to shorten life ? What conditions are now frequently contained in policies? If suicide results from insanity, is it a violation of the condition ? Are life policies assignable ? How are they now regarded? WTiat the assignee entitled to recover? Must he have an insurable interest ? Is a life policy a contract of indemnity or one to be executed according to its terms ? What instances in illustration ? When does risk commence ? When terminate ? By whom latter to be shown ? What a question for ? When presumed dead ? What rule as to presump- tion of survivorship ? How may policy be forfeited, and how forfeiture waived ? CHAPTER IV. CONTRACT OF TRANSFER OF PROPERTY. FIKST. BY SALE. § G24. A sale, or an exchange, is a transfer of title in the tiling sold or exchanged to another, in consideration of some price or recompense received from the pm*chaser. This will 368 CHAEACTEK OF THINa TO BE BOLD. sufficiently define the contract of sale, although not all the possible modes by which title can be transferred from one to another. One mode is by operation of law ; as, where personal property is wrongfully converted by one to his own use, and the owner brings an action against him, and re- covers judgment for its value. Either the perfecting of the judgment, or the satisfaction of the execution issued there- on, (and which of the two is still an open question,) operates a transfer of title in the property converted to the judg- ment or execution debtor. "With the view of including this and all other possible modes of transferring title in prop- erty for a consideration, sale has been defined to be " a transmutation of property from one man to another in con- sideration of a money price." Barter is the exchanging of one commodity for another. It is older than sale, prevailing in the infancy of society. The general principles that regu- late both are essentially the same. PART I. THING TO BE SOLD. I § 625. Parties competent to contract are necessary here as in all other kinds of contracts. A new element is here introduced, viz., the thing which is the subject of sale. This is essential to this species of contract, as the essence of it is found in the transfer of title. The thing sold must have either an actual or a potential existence, at the time of the sale. It may be in the hands of an agent, or in the course of consignment on its way to the consignee, and a sale will be valid ; but if one sells to another a piece of property, both parties believing it to be in existence at the time, and it turns out that they were mutually mistaken, the article having been previously destroyed, no contract of sale can arise. A horse is sold which both parties believe to be alive, but which was in fact dead ; the contract is void. EFFECT OF TOTAL AKD PAETIAI. FAILTJKE OF TITLE. 869 § 626. Although there is no difficulty where the thing Bought to be sold is totally destroyed, or never had an exist- ence ; yet much contrariety of opinion has grown out of a partial destruction, or non-existence of the thing sold, in its effect upon the sale. An executory agreement is entered into for the sale of an estate consisting of several lots of land, and the title to a part of them fails. AVhat are the rights and duties of the purchaser ? Can he abandon the purchase, or be compelled to perfect it? The cases of OJley V. Shallovss, 4 Madd. Chan. jRep. 227, and Judson V. WasSy 11 John. 525, hold that in such case the pur- chaser may abandon his purchase ; but a very judicious modification is laid down by Lord Brougham in Casamajor V. Strode, 1 Cooper's Sel. Ca. 510, to the effect that the pur- chaser, in such case, was not to be let off from his contract for one lot, on the ground that the title to the other was bad, unless it appeared from the circumstances that the two lots were so connected that the purchaser would not have bought, except in the expectation of possessing both lots. Where a purchase has been perfected and no fraud has en- tered into the transaction, the pm-chaser being in possession, he cannot set up a partial failure of title as a defence against securities for the purchase money, as he may resort to his remedy at law on his covenants of warranty. But where there is a total failure of title, and no possession given upon the sale, or where, after the giving of possession, there occurs an eviction, the purchaser has an undoubted right, in the absence of all fraud, to rescind the purchase. This comes under the principle first laid down. There has been in reality nothing sold, and no rights of any possible value transferred lo the purchaser. But the case is varied where possession is given and maintained ; and hence in sales of chattels, in cases free from fraud, the purchaser cannot resist payment while the contract continues open, and he retains possession. In the jurisprudence of New York the dam- ages sustained on a partial failure of title to that which 24 370 EXISTENCE OF SUBJECT OF SALE. the vendor has sold under a warranty, may l3C set up by way of recoupment by the purchaser, to an action brought to re- cover the price. But the question still remains as to the purchaser's right where the main inducement to the pur- chase has failed ; and here the rule laid down by Chancellor Kent, in 2 Kenfs Comm. 476, as collected from Pothier, Lord Erskine, and Lord Kenyon, is undoubtedly the correct one, viz. : "Jf the defect of title, whether of lands or chat- tels, be so great as to render the thing sold unfit for the use intended, and not within the inducement to the purchase, the purchaser ought not to be held to the contract, but be left at liberty to rescind it altogether." § 627. Another question that has been difierently decided by the courts, relates to the legality of the sale when the thing sold is not at the time owned by the vendor, although it may be in existence, and the property of another. Lord Tenterden held in Bryan v. Lewis, Ryan <& Moody, 386, that if goods be sold deliverable at a future day, and the vendor neither has the goods nor any contract for them, nor any reasonable expectation of receiving them by con- signment, but intends to go into the market and buy them, it was no valid contract, being merely a wager on the price of the commodity. This doctrine, however, was completely overruled in HibhleioMle v. IfcMorine, 5 Mee. <& Wels. 462. A statute was formerly in force in the State of New York, to prevent stock-jobbing, which affirmed the doctrine of Bryan v. Lewis, but that has since been repealed, so that the contrary doctrine now prevails. § 628. The subject of sale need not have an actual exist- ence. It is sufficient if it exist potentially. It is competent to sell the expected produce of that which has an actual existence. Tlie grain expected to grow on a field owned by the vendor, the milk that a cow may yield during the coming year, the future young of sheep owned by the vendor, or the future wool that may grow uj^on them, are all subjects of sale. Even an expectation founded upon mere chance, as PKICE AS AN ELEMENT OF SALE. 371 the product of a net to be cast by fishermen, may be the sub- ject of sale. But a mere possibility or contingency, depend- ing upon nothing in actual existence, cannot be sold. In- stances of this would be, the future wool of sheep which the vendor did not own, the mere expectancy of succeeding to an estate ; although if such expectancy is founded upon a right, as where a reversionary interest is founded on a settle- ment or entailment, it may be the subject of sale. QUESTIONS. "What is a sale or exchange ? Is there any mode of transferring title by operation of law ? Under what circumstances may this be done ? How, in reference to this, may a pale be defined? "What is barter? "Which is the older, sale or exchange? Any difference in the general principles applying to each ? "What new element is introduced into the contract of sale ? "What is the essence of this contract found in ? "What kind of existence must the thing sold have ? How if in the hands of an agent, or in the course of consignment ? How if article sold be at the time destroyed ? "What is the rule where several lots are purchased, and the title to some of them fails ? "What is a purchaser in possession pre- cluded from doing when action is brought against him for purchase money ? How, where there is total failure of title and no possession ? How, in case of purchase of personal chattels when he remains in pos- session ? "What is the remedy in New York under recoupment ? "What the rule where main inducement to purchase has failed in consequence of defect in title ? Suppose the thing sold in existence, and not at the time owned by the vendor, can he give title by a sale ? Has there been any conflict and what, in the rule on this subject ? "What, besides an ac- tual existence of the thing sold will enable an owner to sell ? "What ca* he sell the expected produce of? What cases put in illustration ? Can a mere possibility be sold ? Can an expectation founded upon chance ? "When is a reversionary interest the subject of sale ? PART II. THE PRICE OR EQITIVALEXT. § 629." The priee is the equivalent rendered by the pur- chaser for the thing sold. It is essential to constitute a con- tract of sale, as without it the transfer would be a mere gift. In a salCf as contradistinguished from exchange, it 372 PEIOE AS AN ELEMENT OF SALE. must bo money, and a certain definite sum, or susceptible of calculation. The inilo is, that the contract should either name the price, or the means by which it may be arrived at, or leave open the means of ascertainment. If specified in the contract, that, in the absence of fraud or mistake, is binding upon the parties. The contract may provide ex- press means, as that a third person, naming him, shall afiix the price, adopting in advance whatever sum he may name. In such case the contract remains incomplete until the price is affixbd according to its terms, and if such third person dies, or refuses to act, all binding obligation ceases. The only means provided for ascertaining an essential element have utterly failed, and the contract itself must necessarily ter- minate. So also the parties may provide that the price shall be the same as that charged by others for a similar article, or that it shall be its fair market value, or what it is rea- sonably worth ; or there may be no provision in reference to it, and then, if the sale be perfected by delivery, it will be construed as being what the article is worth in the market, the sum in all these cases to be ascertained by a jury. § 630. The common law allows parties to make their own contracts, and aflax their own prices to ai^ticles sold. It will enforce the contract, if legal, however inadequate the price, provided every part of the agreement is entered into in good faith, and in the absence of all fraud or mistake. If the price agreed upon be far below the market value, it may be claimed as a badge of fraud, and with the aid of other circumstances may make out a sufficient defence. It may, if grossly inadequate, constitute a sufficient reason why a court of equity will refuse to decree a specific per- formance of a contract. It must be a sum agreed upon as the actual price or equivalent for the thing sold, and must not be a real loan of money under the name of a sale. § 631. The effect of a contract of sale perfected, is to transfer the title to the goods to the vendee and the price to the vendor. If the price is not immediately paid, a debt is ENTESE Am) SEVEKABLE CONTKACTS. 373 created, the vendor standing in the relation of creditor and the vendee as debtor. If no such debt is created on the sale by the giving of credit, the vendee or purchaser, cannot en- title himself to the goods without paying or tendering the full price. But if a credit forms a part of the contract, the vendee may immediately demand possession of the goods. By the terms of a sale, the price is to be paid in the notes of a third person, whom both parties suppose to be solvent. Before the notes are executed he becomes insolvent. Can the vendee, on tendering the notes, entitle hhnsclf to the goods ? He cannot. Benedict v. Field, 16 New YorTc Bcp. 595. § 632. The rights and remedies of the parties depend much upon whether the contract be entire or severalle. Oneness or separateness of price is the usual test of an entire or severable contract of sale. If a single sum is agreed upon as one price for several commodities, it is obvious the contract furnishes no means of apportioning that sum among the different commodities. This makes it an entire contract, and renders it necessary that one party should perform, or offer to perform, all his part of it, before he can call upon the other. The sale either of one certain thing, or of seve- ral certain things for one certain price, constitutes an entire contract. In one that is severable the consideration, by the terms employed, may be apportioned in such a manner as to conform to the unascertained consideration on the other side. A party agrees to buy as much grain as corresponds to a sample, at a certain price per bushel. Here is no entire quantity, and no entire price, but only a certain relation be- tween the two ; and that relation furnishes the means of as- certaining one side when the other is completed. § 633. Tliere is a species of severable contract differing from that last mentioned. That was indefinite, undeter- mined on both sides until the completion of one, and that furnished the means of completing the other. In this spe- cies, one side is definite, limited, a certain number or quan- 374 EXECUTOKY CONTEACT OF BALE. tity of tilings being on one side, and made the subject of sale or purchase, the price being fixed cither by a certain rate agreed upon, or by the single article or measure, or by a particular valuation to each thing, if the things be of difi\;rent kinds. A certain farm, and dead stock, and grow- ing wheat arc all sold together in one contract, but a sepa- rate price is affixed to each. Tliis contract is only entire as to each item. Tlie whole contract is in fact severable into three contracts, and a failure to comply in one particular does not invalidate the sale or give the vendee a right to reject the whole contract. Mayjield v. Wadsley^ 3 Barn. (& Cress. 357. In this manner it is competent for the par- ties, by agreement with each other, so to apportion the con- sideration to the subject-matters of the sale, as to transform what would otherwise be an entire contract into a severable one, and the consent, so to transform, will be implied in all eases where an act is done which is inconsistent with the recognition of the entirety of the contract. A orders three parcels of goods for a certain price. He may refuse to ac- cept of one without the others. But if one of them be sent and he accept it, he cannot refuse the second merely because the third is not sent ; since by his acceptance of one, he has consented to treat the contract as several for each of the parcels. Champio7i v. Sho7% 1 CamiJ. 53. § 634. Either the price, or the thing to be sold, one or both, may be thrown into the future, and thus be made executory upon one or both sides. A merchant contracts to sell all the goods of a particular description which his foreign agent may ship in a certain vessel, or within a certain time. This is an executory contract of sale. Boyd v. Skiffldn, 2 Camp. 326. § 635. Another kind of executory contract of sale, or rather an agreement to make a sale, occurs when the article purchased has no existence at the time of the contract, but is yet to be manufactured by the vendor. This strictly is not a contract of sale, as no title passes to the pm'chaser EXECUTOKY AND CONDITIONAL SALES. 375 until the completion of the thing, and its actnal delivery or appropriation by the purchaser, or its being set apart for, and accepted by him. It follows as a consequence of this, that the vendor, or manufacturer, is under no obligation to deliver the article originally intended, but if he chooses he may dispose of that, and furnish another that will comply with his contract. The agreement sometimes provides that the work shall be done in successive stages, and that the price shall be apportioned to each stage, and be paid as each becomes completed. A contracts to build for 13, a vessel of certain specified dimensions, and deliver it to him com- plete by a certain day for the price of $5,000. Of this sum $3,000 is to be paid at different stages of the work, and $2,000, when it is completed and delivered. B's agent is to inspect and approve as the work progresses. Tlic important question here is, whether the title to the difierent parts of the vessel, as they arc successively completed and paid for, passes to, and vests in, the purchaser, so that in case of destniction, the loss would be his ; or is there no transfer and vesting of title imtil the comjjlction and delivery of the entire vessel ? The former is the doctrine settled in the English law. Clar'k v. Spcncei\ 4 Adol. cfc Ellis. 448. The latter is that prevailing at present in this country. Andrew V. Durante 1 Kern. 35. Also same case, 18 New York Rep. 49G. § G36. If the goods which are the subject of sale are, at the time, existing, the vendee, by advancing the price, may procure an immediate transfer of the title to himself, and thus become entitled to recover them of the vendor, or of any other person who may have come into possession of them. But the goods "svill remain at the nsk and hazard of the vendor, so long as any thing remains to be done by him which is either required by the contract, or by the custom of trade. § G37. There arc also conditional sales, in which the fact of sale, or the payment of the price, is made dependent 37G CIIARACTOR OF CONDITIONAL BALES. upon a coiulltion. Tlic difBcult fjucstion to determine here is, whether the title has passed so as to vest in the vendee or not. K the condition be precedent, no title passes until its performance. An agreement is made to sell 150 tons of pig-iron, of a certain quality, " on board the ship L," which was then at sea. This was held to be conditioned upon the iron's arrival in port, and no sale until its arrival. Shilds v. Pettie, 4 Comst. 122. Sales are not unfrequently made on trials and when any particular time is specified within which the trial is to be had, the article must be returned within that time, or the contract becomes binding. But the party taking on trial is entitled to the whole of the time specified to make up his mind ; and within that period he may change it as many times as he pleases, and even communicate such changes to the other party, without in the least impairing his right to come to such ultimate conclusion as he may, under all the circumstances, elect. He must not, however, return the goods, or allow the matters in negotiation to be closed. § 638. It is competent to imply conditions from the cir- cumstances of the case, where none are expressly attached. Certain rules of which the vendee has notice are posted up at the place where goods are sold, stating the conditions of sale. These will be implied in every sale made there, al- though no express reference be made to them in the contract of sale. Byicater v. Richardson^ 3 Nei). & Man. TiS. § 639. If the vendor doubts the ability of the vendee to pay the stipulated price, the contract of sale may be condi- tioned upon such payment. The goods may be delivered to the purchaser, and the right he acquires is that of using them until the time of payment arrives, and then if he makes default in that, his right ceases. Such a conditional pur- chaser acquires no right which can be the subject of levy and sale under an execution against him. Herring v. II02)- pacJc, 15 JVew TorJc Rep. 409. § 640. The parties may, if they choose, waive all condi- CONDITIONAL SALES. 377 tions that are attached to a sale. Goods are sold conditioned to be paid for on delivery by notes, and the goods are deliv- ered without the notes being given or demanded. A pre- sumption arises that the condition is waived, and a complete title, therefore, vests in the purchaser. But this rests en- tirely in presumption. It is only lyrima facie., and it is competent to introduce rebutting proof of the acts and declarations of the parties at the time, and which go to show a different intention. "Where the delivery is complete, the establishment of the condition rests upon the vendor, and in such case, whether conditional or not as between the par- ties, a hona fide purchaser from the vendee will get a good title. Smith v. Lynes., 1 Seld. 41. QUESTIONS. "WTiat is price ? To what is it essential, and -why ? WLat is it in case of sale ? "What must the contract do in relation to price ? What effect of specifying it in the contract ? How may contract provide for price in the future ? What will create a failure and annul the contract ? "What if no jirovision bo made in reference to the price ? Suppose the price is inadequate, what is the rule ? "What may it be claimed to es- tablish ? If grossly inadequate, what is the rule in equity ? "What the rule as to its being actual ? What is the effect of a contract of sale per- fected ? What if the price is not immediately paid ? If debt be created, what must purchaser do to entitle himself to goods ? What if credit form a part of the contract? What if notes of a third person are to be given, and the maker becomes insolvent, can vendee, by tendering notes, entitle himself to the goods? What is the test of entire or severable contract of sale ? What constitutes an entire contract ? What one that is severable ? What illustration ? What other species of severable con- tract is there ? What illustration ? What may parties do in case of en- tiro contract ? What implication may arise, and from what ? Wliat illustration ? When may a contract of sale be rendered executory ? And how may it be done? What illustration? What is another species of executory sale, or agreement to make a sale? Does any title pass by such agreement ? Must the manufacturer furnish the article originally intended ? Suppose work is to be done in successive stages, as payments are made, what effect has this in transferring title ? What illustration ? What tho dilTcrenco between the English and American rule ? IIow may purchaser procure an immediate transfer of tho title to himscK ? How 378 THE ASSENT KEQtJIEED TO COMPLETE CONTEACT. long will goods rciflain at risk and hazard of vendor ? When are sales conditional ? What is the difficult question here ? What if condition bo precedent ? What illustration ? What the rule when sales are made on trial ? When must article be returned ? How long may vendee take to determine ? May conditions ever bo implied ? What illustration ? What if sale be conditioned upon payment ? What right does purchaser then acquire ? Can there be waiver of condition ? What illustration ? Can presumption be rebutted ? How ? How is it where delivery is com- plete ? How in such case is it with 'bona fide purchaser from vendee ? PART III. THE ASSENT TO THE CONTEACT. § 641. This contract, like every other, requires the assent of both parties to be freely and intelligently given. The prop- osition may proceed from either one, and be withdrawn at any time before its acceptance. Thus a proposition is made by A to B to exchange horses with him, and to give him a specific sum as the difierence. B had the privilege of reserv- ing his determination until a certain day. Before the arrival of that day, A gives notice that he revokes his proposition. The contract of exchange of horses is at an end. Eskridge V. Glover^ 5 Stew. S Port. 264. The acceptance of a prop- osition may always be implied, where, by the terms of the oflfer it is incumbent on the other party to express his dissent, or where his acts afibrd an unequivocal presumption of as- sent. § 642. A compliance with a proposition made has the same effect as an acceptance. An order for certain descrip- tions of merchandise is sent by one merchant to another. The one to whom it is sent, instead of formally accepting the proposition, complies with it, and sends the goods agree- able to the order. If these latter are forwarded before any telegraphic dispatch countermanding the order, or any re- traction of it is received, the contract must be considered as completed, and the goods are the property of the party who orders them. So also if forwarded after the retraction is ASSENT NECESSARY TO DIVEST TITLE. 379 written, but before tlie receipt of it, the result is still the same. To annul the contract, or rather to prevent the form- ing of one, the notice of revocation of the order must be brought home to the party upon whom it is made, before there is any compliance with it by forwarding the goods. If the proposition is accompanied by any conditions or limitations, the acceptance, or comj)liance, must correspond precisely to it, for any variation will have the eflfect of a new proposition, which will itself require acceptance by the other party, § 6-13. Tlie rule is inflexible at common law which re- quires the assent of the owner of property either express or implied, to legalize any disposition that may be made of it. His right, title, and interest in the property he owns, can never be divested, except by his own assent, fully and freely given, or by due process of law to which his assent is im- pliedly given. This principle in our jurisprudence is now very fully settled. In England there are markets overt, which arc held in certain places on certain days of the week, at which the sale and delivery of property will transfer a good title. Tlie owner of lost goods, if he desires to protect himself, must resort there and give notice of his o\\'nership, forbidding the sale, or he is bound by it. Li this country there are no markets overt, and hence no opportunity afforded the owner to assert his claim. Tlie law will not here allow any property to be acquired by another in goods or chattels without the assent of the owner. Several cases of great hardship have occurred, in which property has been disposed of to hona fide, purchasers for its full value, who have nevertheless been held responsible to the true owner. Tlie sale of stolen goods by tlie thief, or any one deriving title through him, can, in this country, in no case, be valid. Even a hona fide purchaser of such goods, who subsequently, without any notice that they are stolen, sells them as liis own, is liable to tlie owner, in an action of trover, for their full value. His purchase and sale of them is considered a 380 BALES AT Wnicn TITLE PASSES. conversion. Goods are stolen from tlic plaintiff in New York, forwarded to Baltimore, and there sold at auction. Tlie proceeds, without notice, had been paid over to the thief in the ordinary course of business. And yet the auctioneers were held liable to the owner for the value of the goods. Hoffman v. Carow, 22 Wend. 285. So, also, where goods were shipped at New Orleans under a bill of lading to de- liver to consignees at New York ; and at Norfolk, where the vessel had arrived in distress, a part of the goods were sold, and the rest shipped on another vessel, a bill of lading being taken for their delivery to the master's order in New York, by which means they were delivered not to the original consignees, but to another mercantile house, from whom the defendants purchased them in good faith, at their full value, without notice ; and yet, although they purchased them for a fair price, in the usual course of trade, from persons hold- ing a bill of lading indorsed to them, (the usual evidence of such property,) and who were in actual possession of the goods, they were nevertheless held responsible to the New Orleans owners for their value. Saltus v. Everett^ 20 Wend. 267. This principle of protection has its limitation. It does not embrace 1. Negotiable paper taken honajide, for a valuable con- sideration, and before due. 2. Sales made by agents, who have been held out by the principal as having authority to sell, and by that means have been enabled to deceive the vendee. 3. Judicial sales, to which many of the rules applicable to market overts have an application, and, 4. "Where the owner has been, through the practice of fraud, induced to assent to a sale, and the fraudulent vendee, before any movement on the part of the vendor to avoid the sale, has transferred them to a lona fide purchaser for value, without notice. § 644. The assent can never be sufficiently perfect to re* MISTAKE AND IGNORANCE AFFECTING SALES. 381 suit in a contract, where tlie parties are laboring under a mistake in relation to any material point connected with the sale. It must be a mistake of fact, and not of law, as every citizen is bound to know the latter. Clarke v. Dutehcr, 9 Cow. 674. This doctrine is not universally acquiesced in. A different rule is established in Connecticut, where money paid under a mistake of fact or laio is allowed to be recovered back where there was no legal or moral obligation to pay. Northiip V. Graves, 19 Conn. 548. The same doctrine has also been established in Kentucky. Hay v. Bank of Ken- tucky, 3 B. Monroe, 510. The contrary prevails in New Hampshire, PeteTsl)orough v. Lancaster, 14 N. Ilamp. 382. The general conclusion that has been arrived at, however, is, " that the contracts and acts of competent parties, when free from fraud of every kind, and made or done with full knowl- edge of all the facts, ought not to be disturbed on the alle- gation of ignorance of the law." Where a party voluntarily chooses to remain in ignorance when oi^portuuitics of infor- mation are aflbrded him, his ignorance will not avail him ; but he is held responsible for the knowledge which his neg- lected opportunities would have afforded him. K, however, money has been paid under a honafide forgetfulncss of facts, which disentitled the defendant to receive it, it may be re- covered back. Kelly v. Solair, 9 Mees. & Welsh. 54. A distinction has also been taken between ignorance and mis- take of the law ; allowing a party who has contracted under a clear mistake of his legal rights, especially where such rights were of a doubtful character, to be relieved in equity, but denying all such relief in case of ignorance of the law. Lawrence v. Beaubein, 2 Bailey^s S. C. Bep. 623. § 645. Another element which may, on the application of the party defrauded, render void all contracts into which it enters, is that of fraud. The party who is cheated into the giving of his assent has, as between himself and the other party, a right at any time to withdraw it, and thus 382 DUTY OF MUTUAL DISCLOSURES. avoid tliG contract. Fraud has been classified hj a learned judge into four classes. 1. That -u'hich is actual, arising from facts and circum- stances of imposition. 2. It may he apparent from the intrinsic value and subject of the bargain itself — such as no man in his senses, and not under delusion, would mabe, on the one hand, and as no honest and fair man would accept on the other. 3. It may be inferred from the circumstances and condi- tion of the parties ; for it is as much against conscience to take advantage of a man's weakness, or necessity, as his ig- norance. 4. It may be collected from the nature and circumstances of the transaction, as being an imposition on third persons. Lord HardwicTcm. Chesterfieldv^Janson, 2 Vesey Sr. 125, 155. § Q-^Q. What concerns business men more especially to understand, regards the duty of making to each other mutual disclosures of certain facts. The facts in relation to which this obligation exists must be material, and not open and naked, and such as are apparent to observation. One remaining qualifi.cation is necessary to render the obligation perfect, and that is, that the party to communicate possess the knowledge that the other is ignorant of them. The moral law requires the vendor to disclose all defects within his knowledge. The common law adopts this prmciple with some modifications. It does not requu-e a disclosure of such defects as are equally open to the observation of both par- ties. But in regard even to these, the vendor must neither say nor do any thing that will divert attention, or render less perfect the observation of the vendee. It permits each party to avail himself of the benefit of his own superior knowledge, provided the means of obtaining it are equally open to each, and one exercises no wrongful influence upon the other in diverting or diminishing the amount of obser- vation which he would otherwise expend. By the Enghsh nile, if the representation be false to the knowledge of the DUTY OF MAKHTG DISCLOSUEES. 383 party making it, it will be conclusive evidence of fraud, but if made honestly, and believed to be true by sucli party, although not true in fact, yet it does not amount to fraud, or create a cause of action. The rule in this country is differ- ent, as in Smith v. Richards^ 13 Peters.^ 26, it was held, that a party selling property must be presumed to know whether the representation he makes of it is true or false. If he knows it to be false, that is fraud of the most positive kind ; but if he does not know it, then it can only be from gross negli- gence ; and in contemplation of a court of equity, represen- tations founded on a mistake resulting from such negligence is fraud. Tlie rule, however, is more rigid in equity than at law. A grantor having falsely affirmed that a farm had been valued by two persons, at a certam price, and this having induced a purchaser to contract for it ; the misrepre- sentation was deemed sufficient by Lord Hardwick to with- hold a decree for specific perfoiTaance. Buxton v. Lister, 3 Atk. 386. § 647. It is extremely difficult to fix a limit, or decide in what cases a party having superior knowledge, is boimd to communicate to the other. Thus in the case put by Lord Thurlow in Fox v. Maclvreth, 2 Brovm, 420, he held that a party negotiating for the purchase of an estate, was not bound to disclose to the owner his knowledge of the existence of a mine on the land, of which he knew him to be ignorant, on the ground that there was no fraud in the case, and that nice rules of honor could not be incorporated into the law. But here the Court of Chancery was asked to set aside a sale. When its aid is invoked to carry a contract into execution by the enforcement of its specific perfonnance, it will then yield its homage to higher principles of ethic?, and refuse to enforce a contract where, in its formation, there had been such a reservation of superior knowledge. Parher v. Chant, 1 John. Chan. Eep. 630. 384 THE DELIVERY THAT COMPLETES THE CONTEACT. QUESTIONS. "What is required in this contract as to assent ? What illustration ? "When is the acce^jtance of a x^rojiosition implied ? "What illustration ? What is required to prevent the forming of a contract ? What if propo- sition ho accompanied hy any conditions or limitations ? What is re- quired at common law to legalize any disposition that may be made of property ? What are there in England which furnish means of giving good title to property sold ? Are any such here ? Can stolen goods be sold here except by owner so as to give a good title ? Suppose honafde purchaser, without notice, subsequently sells them, can he be made liable ? What illustrations ? What are the instances not embraced within this principle of protection ? What effect on a contract of sale has laboring under a mistake ? What must it be a mistake of? Is this doc- trine universally acquiesced in ? What is the general conclusion ? What tho rule where a party voluntarily chooses to remain in ignorance ? What^ is the effect of forgetfulness of the law ? Any distinction, and what, between ignorance and mistake of the law ? What is the effect of fraud upon the contract of sale ? Who may set it up ? Into how many classes may fraud be classified? What are they? What kind of facts require mutual disclosures to be made ? What must be the charac- ter of such facts ? What does the moral law require ? What the com- mon law ? What does it permit to each party ? What does the English rule require ? What is the rule in this country ? When does a court of equity require superior knowledge by one party to be communicated to the other in order to the granting of relief, and when wiU it refuse relief although not communicated ? PART IV. CEETAIN THINGS ESSENTIAL TO THE COMPLETION OF THE CONTEAOT. § 648. Under tMs part come up tvro things for consid- eration. 1. The statute of frauds^ as affecting the contract of sale, and, 2. The delivery necessary to complete the contract. As to the first, the legislation in this country has copied after the English statute, the influence of which has pervaded oui' whole system of jurisprudence. That requires in order t WHAT C0NTEACT3 COME WrniLM STATUTE OF FRAUDS 385 to tlie completion of a contract of sale, that the jjurchaser ^hoiild either 1. Accept part of the goods, and actually receive the same ; or, 2. Give something in earnest or in part j^ajment ; in the New York statute something in part payment ; or, 3. That some note or memorandum, in writing, of the hargain be made, and signed, or subscribed by the parties to be charged. § G-19. The first question that arises here relates to the kind of contract that comes within the statute. It embraces all contracts in which there is nothing wanting for comple- tion but the transfer of the commodity and price ; and all those which are executory, where the articles sold are, at the time of the sale, existing in the same shape in which they are to be delivered. But it has no application to any executory contract for the future manufacture and delivery of goods, or the changing their condition by work and la- bor to be expended upon them. A contract is made for the sale of a boat load of wheat, to be delivered at a subsequent day. It is within the statute, and not binding, except by a compliance with the statute. But a contract to deliver wheat at a future day, the same being at the time unthreshed. is not within the statute, and valid, without such compliance. Jackson v. Covert, 5 Wend. 139. Tliis doctrine is based essentially upon an older case, viz., that of Clayton v. An- drews^ 4 Burr. 2101 ; but the doctrine in the extent to which those cases carry it is very much shaken by tlic recent case of Garhutt v. Watson, 5 Barn. <& Aid. G13, holding that where sacks of flour were not prepared when they were sold, but were to be got ready for delivery in a few weeks, and although the flour was not ground at tlie time, yet it was still a contract for the sale of goods, and was within the statute. So that the doctrine may now probably be stated to be, that if the article sold had an actual existence at the time, and was capable of delivery, the contract is within 25 386 NATURE OF DELTVEKY KEQUIRED BY STATUTE. the statute of frauds ; hut if it is to he afterwards manufac- tured, or prepared hy work and lahor for delivery, then the contract is not within the statute. § 650. The dehvery required to satisfy the statute has some peculiarities. Although it he only of a part of the goods sold, yet it must he with an intention of vesting the right of possession of the whole in the vendee ; and the lat- ter must actually accept the same with an intention of tak- ing possession as owner. The acceptance must he unequiv- ocal, final, and complete, on the part of the vendee or his agent. The carrier, imless the authorized agent of the ven- dee, cannot make such an acceptance. The vendor's order on the warehouseman having the custody of the goods is insufficient, unless the warehouseman accept the order, and aerree to hold the ffoods on account of the vendee. The acts of the parties may imply such a final and unequivocal ap- propriation of the article, as to he a sufficient compliance with the statute. Thus where, after some negotiation be- tween a livery stable keeper and a horse dealer, and a pro- posed purchaser, a bargain was struck, and the latter re- quested the former to keep them at livery for him, upon which they were removed out of the sale stable into another stable, this was held to he a sufficient delivery under the statute. Elmore v. Stone, 1 Taunt. 458. This case has been justly censured as carrying the docti'ine of constructive de- livery to the utmost verge of safety. A stricter doctrine has been generally adhered to, and that case could now be hardly deemed as fm-nishing a safe precedent to follow. But if acts are solely relied upon, they must be imequivocal in their character, and if the vendor still retains possession, it must be under circumstances showing that he retains it not in his own right, but only as agent or bailee of the vendee. Thus where a horse was verbally sold, but was to remain with the vendor twenty days without charge, and at the exph-ation of that time was sent to grass as one of the vendor's horses ; it was held that there was here no sufficient delivery and ESSENTIALS OF DELIVEKY REQUIRED BY STATUTE. 387 acceptance. Carter v. Touissant, 5 Barn. & Aid. 855. In the case of a column of granite of such weight and magni- tude, as not to be susceptible of any other delivery, the Ro- man law allowed possession to be taken by the eyes and the declared intention ; but our law rcfjuircs some act of accept- ance to satisfy the statute, and holds that a mere naked agreement, though the property was designated by the par- ties at the time, to be not a sufficient delivery and accej^t- ance. Shindler v. Houston, 1 Comst. 261. Where there is an entire contract, and nothing remains for the vendor to do, a delivery of a part is a sufficient delivery of the whole within the statute ; as where goods were purchased at auc- tion in several parcels, upon distinct and separate bids, to be paid for in a note at a future day, it was held that the whole constitutes but one contract, and the delivery of some of the parcels is sufficient to take the case as to the residue out of the operation of the statute. Mills v. Hunt, 20 Wend. 431. § 651. The delivery and acceptance, in order to comply with the statute, must, it is said, be so perfect and comj^lete as to negative four things, viz. : 1. Tlic vendor's right of lien. 2. The vendor's right of stoppage in transitu. 3. The right of either party to cancel the contract. 4. The right of the vendee to reject the articles on tlic score of deficiency either in quantity or quality. Tliis has long been received as undoubted law, and acquiesced in as such, but in a recent case in England, Morton v. Tibhit, 15 Q. B. 428, Lord Chief Justice Campbell wholly dissents from the doctrine contained in the two last jiropositions, and holds that an acceptance may be sufficient to satisfy tlie stat- ute, although the purchaser has a right to object to the quantity or quality of the article, and to ro]>udiate tlie sale. It is obvious that there can be no actual receipt while the goods are subject to the vendor's lien or right of stoppage in transitu, and lience that merely marking and setting aside the goods sold, at the vendee's request, and with a view to 388 THE DIFFEKENT KINDS OF DELIVERY. their appropriation by liim, is an insufficient delivery under the statute. And in case of the delivery of a sample of the goods sold, there is no sufficient compliance with the statute unless the sample is considered by both parties as a part of the commodity itself, and hence as diminishing by so much, the bulk thereof to be finally delivered. § 652. As regards the written memorandum required by the statute, it must contain a distinct and clear statement of the terms of the agreement, together with the names of the parties. The terms need not be all upon the same paper. They may be collected from the correspondence of the par- ties, or from any two papers referring to each other, or to the same contract. An auctioneer or broker is the agent "of both parties sufficient to bind them by the memorandum, and under the wording of the statute of this State, it must be subscribed^ or the signature must be placed at the end of it, although it is sufficient if it be done by the party to be charged. Bams v. Shields, 24 Wend. 322, and reversed in 26 Wend. 341. § 653. Delivery may be of three difi'erent kinds : that which will satisfy the statute, that which will destroy the lien of the vendor, and that which will pass the title to the thing sold. The general rule here is, that no title can pass to the vendee so long as any thing yet remains to be done between the vendor and the vendee, in relation to the goods, and which is necessary to give the latter a perfect control over them. This usually applies to marking, weighing, and numbering them, so that they may be separated, distin- guished, and indentified from every other. Thus where goods were sold while lying at a warehouse, at such a price per hundred weight, but the exact weight not being known, was afterwards to be ascertained. Held, no property passed to the vendee. Hanson v. Meyer, 6 East. 614. If, however, every thing material has been done, and only some trifling act remains, the property will pass. As where trees were sold by the cubic foot, and the number in each was ascer- WHEN TITLE PASSES WITHOUT DELR^EEY. 389 taincd, but there liad Lecn no adding up, and thus ascer- taining the aggregate number. Held, this did not prevent the title from passing. Tansley v. Turner, 2 Bing. If. C. 151. It is not, hovrever, essential to the transfer of title that the separation should be prior to the delivery, and hence where there was a delivery of the whole to the pm-chaser of a part, it was held to carry with it the right of selection, and was a sufficient delivery to pass the title. Crofoot v. Ben- nett, 2 Comst. 258. And when the vendor has done all that can be required in relation to a portion of the property sold, the title to that part passes, as where a stack of bark was sold at a certain price per ton, and a certain part was weighed and delivered ; the vendee was held to have ac- quired title only in that part that was weighed. Simmons V. Swift, 5 Barn. c& Cress. 857. And in the recent case of Kimberley v. Patcliin, 19 Ifev) York Rep. 330, it was held that where a specified quantity of grain was sold, its separa- tion from a mass indistinguishable in quality or value, within which it was included, is not absolutely necessary to pass the title ; and hence, where the owner of a large quantity of wheat which was lying in a mass at his warehouse, sold 60,000 bushels of it for a specified price, and gave to the vendee a receipt acknowledging himself to hold the wheat subject to the purchaser's order, it was held that the title passed. § 65-1. I^either delivery nor payment are absolutely es- sential to pass the title to the thing sold. Tlic rule is, that " if nothing remains to be done on the part of the seller, as between him and the buyer, before the goods ])urchased are to be delivered, the property in the goods immediately passes to the buyer, and that in the price to the seller." The rea- son of this is, that the right of property docs not depend upon tlie actual possession, as the vendor may still retain his right of lien for the unpaid price, and yet the goods may belong to the vendee, and devolve upon him the risk of loss. So by agreement the thing sold may remain with the 390 DIFFEKENT KINDS OF DELIVEKT. vendor for storage, and yet bo at the risk of the vendee. Lansing v. Turner, 2 John. 13. But it has been held that when the purchaser of a thing sold has acquired, as against the seller, a right to demand it, the sale is not complete as to third persons, until the payment of the price and delivery of the article ; and if neither of these be done, a sale in good faith to a third person followed by payment, and de livery, will transfer the title to him, the first purchaser hav- ing no other remedy except his action for damages against the seller. Lafon v. De Armas, 12 Bob. Louisiana Rep, 598. § 655. There are many things relating to delivery im- portant to notice. It may be remarked in the first place, that a delivery which is sufiicient to destroy the vendor's right of lien, and to comply with the requisitions of the statute, is always sufficient to pass the title to the vendee. The only proper object of inquiry here, therefore, is, what are the fewest conditions, what the smallest number of facts, that will constitute a delivery sufficient for this purpose. A delivery to the purchaser's agent, or to a common carrier to be carried, is sufficient. So, also, is a delivery on board a ship chartered by the purchaser. But in the case of prop- erty consigned, if no agreement exists between the parties, the consignment will be at the risk of the consignor, until the consignee has done some act recognizing the appropria- tion of it to a particulai' specified purpose. § 656. A symbolical delivery is sufficient when that is the best which the nature of the ease admits of. A store of goods may be delivered by handing over the key. The receipt of a storekeeper in possession of the goods may be sufficient. So a transfer of them on the warehouseman's or wharfinger's book to the name of the buyer. The cutting off the spills of wine casks, and marking upon them the ini- tials of the purchaser's name, is sufficient. Delivery of a sample has been held sufficient to transfer title, when some obstacle presents to a complete delivery, and the sample is PLACE OF DELIYEKY, 391 taken as part of the quantity purchased, and as tlio best de- livery the circumstances will admit of. The sale of goods at sea is accomplished by the delivery of the documentary evidence of title. So, also, where the property at the time of sale, from its situation, is incapable of deliver}^, that of the bill of sale or other evidence of title, is sufficient to tranjer the property and the possession. It is sufficient to take a bill of parcels and order from the vendor on the ware- houseman, and there marking the goods with the mitials of one's name ; or in lieu of the latter, paying the price. Tlie selecting and marking of sheep in the possession of B, who is desired to retain possession of them for the vendee, has been held to be a sufficient delivery to complete the sale and pass the property. § 657. Where nothing but the delivery and acceptance is wanting to complete fully the contract of sale, the vendee cannot, by refusing to accept, throw the risk of loss upon the vendor. The course usually pursued in case of neglect or refusal by the former to pay for and take the goods, is for the latter to sell them at 2)ublic sale, and charge the vendee with any deficiency in the amount of the sales. In the State of ISTew York it is not held necessary to dispose of them at public sale. They may be sold in the ordinary manner upon giving notice to the other uarty. Crooks v. Moore, 1 8andf. 297. § 658. As to the place of delivery, the general rule is, that if no place is designated by the contract, the articles are to be delivered at the place where they were at the time of the sale. But where the sale is to pay a debt by the de- livery of specific articles, the balance of authority is, that the property must be delivered at the creditor's place of residence. In some of the l^ew England States, especially Yermont, the practice has formerly been very general of giving notes payable in cattle, grain, and other portable ar- ticles, and where no place of payment is designated, the delivery is to be at the creditor's place of residence at the 392 PLACE OF DELIVEKY. time the note was given. Where the articles are ponde- rous and bulky, the rule has been held to be that the debtor must seek out the creditor, or get him to name a place,. and if he declines or names an unreasonable one, then the debtor may tender a delivery at a place suitable for the purpose, and presumptively in the contemplation of the parties. Tlie effect of a valid tender of specific articles is to discharge the debtor from his contract, and to transfer the right of property in the article to the creditor. QUESTIONS. "What two things essential for the completion of the contract ? "What the essential provisions of the statute of frauds ? "What kind of contracts come within the statute ? "What class do not come within the statute ? "What is a peculiarity of delivery which is necessary to comply with the statute ? "What the character of the acceptance ? "What illustrations as to carrier and order of vendor ? "What may acts of the parties imply ? "What illustration ? How must acts he in order to be relied upon ? "When is a delivery of a part a suflBcient delivery of the whole within the statute? What four things must a delivery and acceptance negative in order to comply with the statute ? "What modification in a recent case ? What must the written memorandum contain to comply with the statute ? What allowable as to number of papers ? "Where must signature be placed, and of what party ? How many different kinds of delivery are there ? What is the general rule as to the passing of title to the vendee ? What does this usually apply to ? What illustration ? How if every material thing has been done, and only some trifling act remains ? What illustration ? Is it essential that separation should be prior to delivery ? How is it with delivery of a portion as to passing title in the whole ? What illustration ? What is the rule as to transfer of title where there is no payment or delivery ? What the reason of it ? How as to third persons stands a sale until payment and delivery ? Which of the three kinds of delivery may be the slightest, and yet be sufficient ? How is it with delivery to agent ? How on shipboard ? What neces- sary in case of consignment ? When is symbolical delivery suflBcient ? What are some instances of symbolical delivery ? When is delivery by sample suflBcient ? "When delivery of goods sold while at . sea ? "Wlaat are some other modes of delivery ? What is the course to be pursued in case of neglect or refusal to receive the goods ? What is the general rule as to place of delivery ? "What, when sale is made to pay a debt ? DIFFEKENT KINDS OF WAEKANTT. 393 "What the practice in the New England States ? "Where is the delivery to be ? How, and where, in case the articles are ponderous and bulky ? What i3 the effect of a valid tender of specific articles ? PART V. WARRANTY. § 659. Tliere are two kinds of waiTanty essential to be understood in connection with sales of personal property. These are the iinpUed^ and the express. Of the implied^ that the most universally conceded is tlie "warranty of title. A person in actual possession of personal property, sells it to another, and delivers over the possession to the vendee. He is held to deliver with it an implied warranty that his title to the article is perfect, and that hence if another claims and dispossesses the vendee of the article or its value, as having the superior title, such vendee has his remedy against his vendor for its value upon this implied warranty. Tliis rule has one limitation, and tliat is, that the vendor must be in possession of the property he sells. McCoy v. Artcher, 3 Barh. S. C. liej). 323. Tlie rule, however, extends to, and embraces negotiable paper, and hence where the holder of a note which was usurious, and uncollectable in his hands, transferred it without indorsement or notice to the vendee, who was defeated in liis attempt to collect it ; it was held that the party so accepting the transfer, was at liberty to act upon the implied assertion of the validity of the paper, and, if defeated in his attempt to collect it, had liis remedy over against his vendor upon this implied warranty. Ddaicarc Bank v. Jarvis^ 20 New York Rep. 226. § 660. By the ci\'il law there is a further imi)lied war- ranty that a sale for a sound price implies a warranty of soundness against all faults and defects. This is also the present rule in Louisiana and South Caroluia, although its permanence in the latter State is a matter of much doubt. The maxim of the comfnon law, as to quality, is caveat emp- 394 WIIEN TIIEKE IS IMPLIED WAEKANTY. tor, tlie pTircliascr must himself assume all the risk. lie may throw it upon the vendor by requiring an express "war- ranty. And so, also, tlie law gives him a remedy in case of fraud or deceit. But in the absence of both these the rule is, that the buyer who examines the article himself, must abide by all losses arising from latent defects, equally unknown to both parties. Sioett v. Colgate, 20 John. 196. The doctrine that in the sale of an article there is an implied wan-anty that it is merchantable, or fit for the purpose intended, has received much countenance, especially in England ; but when fully investigated it seems to be the usage of trade, the tnamifactured goods, or the specific purpose, that raises the implied warranty. Jones v. Bowden, 4 Taimt. 8-17. Laing V. Fidgeon, 6 Taunt. 108. Grag v. Cox, 4 Barn. & Cress. 108. Some disposition has been manifested towards the adoj^tion of that doctrine in this country. Tlius in the sale of provisions for immediate domestic use, it has been held there was an implied warranty that they were whole- some, but otherwise if sold as merchandise. But the old rule of the common law that there is no such hnplied war- ranty, is sustained in Sart v. Wright, 17 Wend. 267 ; same case, 18 Wend. 449. Waring v. Mason, 18 Wend. 425. Mc- Farland v. Newman, 9 Watts, 55. This may now probably be considered the settled doctrine applicable to executed contracts of sale. In those which are executory, where an article is to be delivered at a future day, or to be manufac- tured and delivered, there is an implied warranty that the article shall be at least of a medium quality or goodness. In such case, if it comes short of being merchantable, the vendee is at liberty to return it. This is a very reasonable rule, as the delivery in such case offers to the vendee the first opportunity of examining the article. But the right to return it ought to be exercised as soon as the defect is dis- covered, as the retaining it for any length of time would raise a presumption of acquiescence in its quality. 661. The practice of any deception by the vendor gives WHAT AN EXPRESS WAEEANTY AND ITS OBJECT. 395 the vendee a clioice of two remedies : He may either affirm the contract, and recover damages for the fraud peqjetrated upon him ; or he may rescind the contract, retm-n the tiling purchased, and recover Lack what he may have paid for it. Campbell v. Fleming, 1 Adolpli. cG Ell. 40. Quite an im- j)ortant question has been made, whether tlie purchaser's omission to disclose his insolvency to the vendor at the time of the purchase, constitutes such a fraud as will enable the latter to avoid the sale. And it has been held that when the vendor makes no inquiries, and the vendee resorts to no fraud or artifice to mislead, he may remain silent as to his j)ecuniary circumstances ; but the suggestion was made that a failure to disclose a marked and sudden change in his cir- cumstances for the worse, and which he had every reason to suppose was unknown to the vendor, might be such a fraud as would avoid the sale. Wichols v. Pinnei\ 18 New York Rep. 295. § G62. An express wan^anty may consist of any positive affirmation made by the vendor at the time of the sale, in relation to the goods sold, and which is intended to have that effect. It is then essentially a contract, and we must look to its terms, to its own limitations and restrictions, to determine what are the rights of the parties. It is to have applied to it a strict rule of construction, the vendor laying himself under obligations to make good his warranty to the letter, whether the quality he has warranted be material or not. And wherever there is an express waiTanty as to any single point, the law will im2:)ly none beyond its express terms. § 663. The object of a general wai'ranty is to protect against defects which may not be apparent to the vendee. He seeks by it to save the necessity of any very strict scru- tiny, and to throw upon the vendor the risk of all defects which are not open to the common observer. As to all those which are patent, and apparent upon the most careless in- spection, they are not covered by the warranty, as they arc 396 WHAT AMOUNTS TO A WAEKANTT. not supposed to have entered into the mind of the parties when it was required and given ; as where on the sale of a race-horse the purchaser was told that he was a crib-hiter, and had a splint, all which was apparent, it was held that a warranty tliat the liorse was sound wind and . limb, at the time of the sale, did not extend to those defects. Marget- S071 V, Wright, 5 Moore & Payne, 606. But to exonerate the vendor from liability in such a case, the circumstances must furnish an irresistible presumption that the vendee had full knowledge of the defect. In regard to all such as are not clearly obvious, the vendee has a right to rely upon his warranty. It is essential that the warranty should be made either at the time of the sale, or previously, and with ex- press reference to it. If subsequently, it can form no in- ducement to the contract, which must, therefore, be wholly without consideration, § Q'6'^. A question has been raised regarding what may be considered as amounting to a warranty ; whether mere words of clescri2)tion which are contained in a bill of par- cels, a receipt, or any other written memorandum of sale, should be held to constitute an express warranty. "Where an express warranty and a written description are contained within the same instrument, a defect which prevents the ar- ticle from answering the description, but does not violate the warranty, will give no right of recovery to the vendee as upon a breach of warranty. As where upon the sale of a horse a receipt was given " Received of A B £10 for a grey fom'-year old colt, warranted sound in every respect," it was held that so far as concerns the descriptive portion of the receij)t, the vendee could not recover without proving a wilful misrepresentation, as that was not covered by the warranty. Biidd V. Fairmaner, 8 Bing. 48. Where there is no express warranty contained in the instrument, the description, if clear in its terms, and amounting to an affirmation that the goods sold correspond thereto, will have the effect of a warranty. § 665. In the case of a sale by sample, there may be a WHEN SALE BY SAMPLE IMPLIES WAEKANTT. 397 "wan'anty that the bulk corresponds to the sample. The most that can here be claimed is, that the whole quantity of goods sold answers to the sample, and if there proves to be any latent defect in that, as well as in the bulk, the ven- dor will not. be responsible, as an opportimity is presented him of fully examining the sample. J3ut it is not every sale where a sample is exhibited that will create a warranty. A mere sale by sample does not have that effect. The rule is, that where the goods in their bulk are fully exposed to the purchaser's examination, he is bound to make it, and cannot claim damages without showing an express warranty. That the mere exhibition of the sample at the time of the sale can never raise an implied warranty as to the nature or quality of the bulk of the commodity, but that other evidence is re- quired to show that both parties mutually imderstood that they were dealing with the sample, upon an agreement by the vendor that the bulk of the commodity corresjjonded with it. And that even where a personal examination was not practicable, that of itself furnishes no sufficient ground to say that the sale was by sample. Hargous v. Stone, 1 Seld. 73. Beirne v. Dord, 1 Seld, 95. QUESTIONS. Ho-w many kinds of -warranty on sales of personal property ? "What are they ? "What instance of implied warranty ? What the limitation ? "What embraced within the rule ? "What further implied warranty by the civil law ? Within what States does it prevail ? What is the maxim of the common law ? On whom may the vendee throw the risk, and how ? How, in case of fraud or deceit ? In absence of both, what is the rule ? What is the rule in case of executory contracts ? What the reason of it? When must the right to return articles be exercised? What remedies does the practice of deception give to the vendee? What may an express warranty consist of? What the rule of construc- tion applied to it ? What is the object of a general warranty ? What defects are not covered by the warranty ? What illustration ? What, in such case, must circumstances furnish ? To what defects does the warranty apply ? When must the warranty be made ? How, if made subsequently ? And why ? Do mere words of description contained in 398 EIGHT OF COPAKTNER TO ASSIGN. an instrument embracing a warranty amount to one ? What illustra- tion ? IIow, wliere there is no express warranty contained in the instru- ment ? AV]iat may there be when the sale is by sample ? What is the most that can here be claimed ? Does a mere sale by sample create a warranty ? What is the rule in such sales ? Does a mere exhibition of a sample raise an implied warranty ? What other evidence is required to have that effect ? Will the fact that personal examination is not practicable afford presumption that sale was by sample ? CHAPTER V. CONTRACT OF TRANSFER OF PROPERTY. SECOND. — BY ASSIGNMENT. PART I. ASSIGNMENT. BY WHOM MADE, ITS NATTTEE, MANNER OF EXECUTION, AND EFFECT. § 666. The assignment here intended is that which is voluntarily made by a debtor on the eve of insolvency. The frequency of its occurrence in this country renders some knowledge of it essential to business men. It is mainly the growth of less than half a century, and yet it comprises a large body of law. The general rule is, that all natm'al persons who are competent to enter into contracts, are also competent to make voluntary assignments. § 667. A question of much difficulty has presented itself regarding the right of one copartner to make a valid assign- ment of the copartnership effects, either without the concur- rence, or against the will of the other or others. The right of partners to unite in such disposition of their partnership effects for the payment of partnership debts has never been doubted. Kor would the execution by one in the partnership name, and with the concurrence of the other, leave any doubt of its valid- ity. In the State of ITew York it has been held that one part- DIFFICULTIES IN THE WAT OF ASSIGNMENT. 399 ner, without the consent of his copartners, may make a valid assignment in the name of the firm, of all or any part of the partnership effects, directly, to a firm creditor in payment of a partnership debt, but that there was no implied author- ity derived from the partnership relation, that could em- power one, without the consent of the others, to make a general assignment of the partnership effects to a trustee, for the benefit of creditors, and giving preferences to one class of them over another. Ecjberts v. TFoocZ, 3 Paige, 517. Ha- vens V. Hiossey, 5 Paige, 30. Li some other States the right is fully conceded to assign to trustees in the ordinary manner. Robinson v. Cr.owder, 4 McCoirl, 519. Mills v. Barber, 4 I>ay, 428. § 668. Corporations have, also, at common law, the same right to assign their corporate property in trust for the bene- fit of their creditors. Catlin v. Eagle Bank, 6 Conn. 231. § 669. Tlic nature and effect of the assignment is to vest all the assignor's property and rights of property in the as- signee, to be disposed of upon the trusts stated in the instru- ment. The assignee occupies the position of a trustee, and the creditors are those beneficially interested in the execu- tion of the trust. Tlie first difiiculty presenting itself in the way of voluntary assignments is the provision in 13 Eliz. and substantially the same in 2 P. 8. 137, § 1, and which is declared by Lord Mansfield in Cadogan v. Kcnnett, Cowp. 432-434, to be a principle of the common law, viz., that all conveyances made to delays hinder, and defraud creditors shall he absohdely void. Tliis difficulty, however, is over- come in Brashear v. West, 7 Peters, 608, holding that such assignment is not per se fraudulent, and that the right to make it results from the absolute ownership wliich every man claims over tliat which is his own. Tlie pressure of the difiiculty has, however, been felt not so much in allowing insolvent debtors to assign their property to pay their debts pro rata, because bankrupt and insolvent laws accomplish the same thing, but in permitting them to assign, and so 400 OBJECTS OF THE DEBTOR IN MAKING ASSIGNMENT. shape the trusts in tlic instrument, as to give preferences in tlic distribution of their property to some creditors over otliers. That doctrine, however, is now clearly established. Mackic v. Cairns, 5 Cowen, 647. § G70. Tlie assignment being the act of the assignor alone it has been made something of a question whether the assent of the creditors should not also be required. That of the preferred creditors will always be presumed. So, also, as to all those who are benefited by it. Assent may be given at any time, and receiving any thing under it always presumes it. Li the State of New York it is not held necessary that a creditor should be a party to it, or signify his assent, but the assignee must consent to receive it and to enter upon the performance of the trusts created by it. His receipt of it without objection or qualification would be sufficient. QUESTIONS. What assignment is here intended ? Who may execute such assign- ment ? What is the rule in relation to partners ? What assignment can one make in New York without the concurrence of the others ? What the rule in some other States? What the rule as to corporations? What the nature and effect of an assignment ? What is the position of the assignee ? What is the diflficulty which an assignment had to con- tend with ? On what principle overcome ? PART n. ITS PE0VISI0X9 IX EEFEEEXCE TO ITS VALIDITY. § 671. Tlie provisions contained in voluntary assignments by insolvent debtors, have proved a very fruitful source of litigation. The object of the debtor has been twofold : first, to reserve as much property, or power over property, or means of subsisting upon it, as was possible ; and second, to make use of the assignment as a coercive force, to compel all those who derive any benefit under it, into a release of all their claims against the assignor, as the condition upon which they can receive such benefit. In these two directions PE0VISI0N8 EENDEEmO VOID THE ASSIGNMENT. 401 will be found the lines of decision, effectually meeting and restraining all efforts for the accomplishment of this twofold object. § 672. The first question arising relates to the right of the assignor to reserve a portion of his property fi-om pass- ing under the assignment, and yet leave the validity of the instrument undisturbed. lie should except from its opera- tion all those articles of household property which are not liable to seizure and sale under execution, ffhe reservation of other j^roperty would not affect the validity of the assign- ment, but it would not then be a general one, and the object of the assignor in removing all his property from seizure and sale under executions, with the view of directing, him- self, its application, ^ould fail to be accomj)lished. The part not assigned would be open to application imder judgments and executions. Carpenter v. JJndervjood, 19 Ifew York, 520. § 673. But it 13 quite another question whether the as- signor can be permitted to secure, in the assigned property, any right or interest, or whether he can make the assignee his trustee, for the purpose of enabling him to enjoy the property, or any part of its income. The law can concede to him no such right, and any siich provisions in the assign- ment would render the whole instrument void. Mackie v. Cairns, Ilojiklns, 373, and same case in 5 Cowcn, 547. Neither can the assignor be permitted to insert in his assign- ment a doubtful claim of his wife, giving that a preference in payment, or a fictitious claim, with a view of himself reaping the full benefit of it. An assignment which should embrace any such attempts to secure accruing benefits to the assignor would render utterly void the assignment. § 674. The assignor is generally very desirous of selecting his own assignee, as he may hope to receive many favors from his friendly disposition. Tliis he may do witliin certain limits. The usual course is to assign to the creditor who is the most deeply interested in the assigned property. The 26 402 PROVISIONS RENDEKINO VOID THE ASSIGNMENT. only restriction wliicli the law interposes in this respect is, that the assignee shall not be insolvent to the knowledge of the assignor. lie shall not knowingly place his property in the hands of a man who is utterly incapable of responding to creditors for any damages they may suffer growing out of any system of ftivoritism of which he may have received the benefit. Reed v. Emery ^ 8 Paige^ 41Y. Browning v. Hart^ 6 Barh. 91-95. The question has further been pre- sented, whethef in case the assignee appointed should wish to resign, a right can be reserved in the assignment, by vir- tue of which the assignor can exercise the power of aj)point- ing another to act as a substitute, and it is held that no such right can be reserved. Plmik v. ScTiermerhom^ 3 Barb. Chan. 644. § 675. In the earlier period of assignments, and before the law had come to settle clearly their provisions, it was a common custom to introduce a provision, authoming the assignee to sell the assigned property upon credit. There was not wanting judicial authority to sanction this custom. Bogers v. Be Forest^ 7 Paige, 272. Such a provision is now regarded as vesting a discretion in the assignee by the in- strument itself, and which he might greatly abuse, and yet point to the assignment as his authority ; and although he may undoubtedly take upon himself the responsibility of exercising a discretion in that respect, yet it must be upon his own responsibility, and if given in the instniment will render it void. Nicholson v. Leavitt, 2 Seld. 510. So far in this direction have the courts gone, that where the provi- sion was that the assignee should convert the assigned prop- erty into money or available means, it was held that the conversion into available means was equivalent to an au- thority to sell on credit, and hence rendered void the assign- ment. Brigham v. Tillinghast, 3 Kern. 215. So on the directly reverse side of the question the point has been pre- sented, whether a restriction contained in the assignment to sell /or cash only, rendered the instrument void, and it was PEOVTSIONS KEXDEEING YOID TIIE ASSIGNMENT. 408 held tliat it did not. Carpenter v. . Underwood, 19 Nevj York, 620. Upon tlie same principle it is incompetent to provide in tlie assignment for a delay of sale until higher prices may be obtained. Hart v. Crane, Y Paige, 37. § 676. As these instruments are often required to be exe- cuted with very little delay, the assignpr may not unfrc- quently desire to execute and deliver the assignment, thus placing his property beyond the reach of being applied on executions, and at the same time to reser\^ to himself tlie right of makuig such future i)references as he may, upon more mature reflection, deem advisable. This the law will not permit him to do. Averill v. Loucke, 6 Barh. 470. Neither can he be permitted to vest in his assignees the power to give preferences after the assignment has been executed and delivered. Boardman v. Halliday, 10 Paige, 223. § 677. Another question in relation to which there has been a diversity of decision, relates to the insertion of a provision in the assignment authorizing the assignee to compound with the creditors of the assignor. Such a provi- sion in Illinois renders void the assignment. Hudson v. Maze, 3 Scamm. 578. And although in the State of New York, in one or two cases, its effect has been considered questionable, yet the point has been presented in a late case, that of Bow V. Plainer, 16 N'ew Yorlc, 562, and it was lield that such a provision did not render void the assignment. An assignment once made should be irrevocable, and no right exists to reserve in or by it a power of revocation. Biggs V. Murray, 2 John. Chan. 565. Same case, 15 John. 571. § 678. Another question in which the judicial policy of the State of New Yorlc, as proclaimed in its higlicst courts, has experienced a change, relates to what kind of assignment can be made by a manufacturer who is compelled to make one while his factory is in full operation, and his stock is in all the different stages of manufacture, from the raw mate- 404 PROVISIONS KENDEKING VOID THE ASSIGNMENT. rial wp to the comj)leted article. The point here is, whether he must make the assignment directing an immediate sale of all his effects, including the stock in its then condition, when very little would be likely to be realized from it ; or whether he may authorize the assignee to work up the stock on hand, and if necessary to make purchases of any mate- rials necessary for that purpose, and to reimburse all ex- penses thus incurred, from the avails of the assigned prop- erty. This question arose in Connecticut in Kendall v. The New England Carpet Comjmny, 13 Conn. 383, in which it was held that such an authority, under such circumstances contained in an assignment, did not render it void. The same doctrine was affirmed in the Court of Errors in the State of New York, in the case of Cun- ningham V. Freeborn^ 11 Wend. 240. But in the late case of Dunham v. Waterman, 17 J^eio York Rep. 9, this doctrine is overruled, and such a provision declared to have the effect of rendering the assignment fraudulent and void, simply in virtue of this provision. The tendency for some time has been to pronounce such assignments void where any discretion is given to the assignee by the instrument. It is not denied but what the assignee himself may, if the case justifies it, exercise such a power, and be protected by the court, but if so he must do it upon his own responsibil- ity, and not refer to the assignment as his authority. The principle as now settled is, " that a debtor who makes a voluntary assignment for the benefit of his creditors, may direct, in general terms, a sale of the property and collection of the dues assigned, and may also direct upon what debts and in what order the proceeds shall be applied, but beyond this, he can prescribe no conditions whatever as to the management or disposition of the assigned property. Li all other respects, the assignee must be left to act under the or- dinary rules and principles which apply to trustees in anal- ogous cases." § 679. It is usual in the making of assignments to attach PKOVISIONS EENDEEmO VOID THE ASSIGNMENT. -105 to them an inventory, containing a specification of the prop- erty assigned, describing it with sufficient accuracy, and also schedules containing lists of debtors and creditors, and stating the amounts due from and to each respectively. Tlie preferences in the distribution of the assigned property are generally made by means of classifying creditors in the schedules thus affixed. Two questions have here arisen, the jirst^ whether such inventory or schedule must be affixed to give validity to the assignment, and the second^ whether, in case such inventory is affixed, the assignment can convey any property not specified in it. The first is answered by the case of Keycs v. Brushy 2 Paige, 311, deciding that an absolute assignment of all the assignor's property and choses iii action, containing a provision that such assignor would, with all convenient speed, make out an inventory of such property and choses in action, and which, when so made out, VMS to he considered a part of the assignment, had the effect to convey a present interest to the assignee, and that the making out and attaching or delivery of the inventory was unnecessary to give validity to the assignment. It "was a mere matter of evidence, which, if not done, might be sup- plied in some other way. Tlie second is answered by the case of Piatt v. Lott, 17 ^ew York Pej). 478, holding that where there is an assignment, professing, on its face, to be of all the debtor's property, and within it was contained the statement that said property was to be " more fully and par- ticularly enumerated and described in a schedule annexed," passed all the property of the assignor, whether contained in the schedule or not. § 680. The extent to which a debtor can legally go in distributing his property to pay debts has been tested in the case of Murray v. Judson, 5 Seld. 73, in which the point of in(piry was, whether a debtor could, in his assignment, direct the payment of a debt which was both usurious in its inception, and also embraced in a judgment irregularly en- tered up. It was held that there was no legal obligation 406 TKOVISIONS EENDEKING VOID THE ASSIGNMENT. upon tlio debtor to avail himself of the statutes against usu- ry to avoid the payment of a debt which was otherwise justly due ; and as to the irregularity in the entering up of the judgment, that being a defect which the party to it could only take the advantage of, and one, therefore, which it was in his power to waive, that could present no obstacle to his directing its payment. § 681. The inquiry may be made as to the effect on the whole assignment of the introduction of a single fraudulent provision into it, and the answer is that it avoids it wholly, and that no interest passes under it to the assignees as against any creditor not assenting to it. Goodrich v. Downs, 6 mil. 438. § 682. Another question which is one of vast importancej and which has led to much diversity in decisions, relates to the right or . power of the assignor to assign his property under such restrictions, limitations, and conditions as that, if received at all by the creditors, it shall be in full of thek demands, they severally executing releases of their debts. Unless such provision is introduced, and can be legally sus- tained, the effect of an assignment is merely to transfer property to pay debts, in the order in which it is directed, and to the extent to which it will go. And so far as it goes, it operates to extinguish the debts, leaving any balance re- maining still good against the debtor and his future earnings. Tlie question here presented is, how far can such debtor be permitted to coerce his creditors into the giving of releases as a condition upon which they are permitted to receive any of the property assigned. The point has several times been presented for adjudication. In South Carolina, Niolan. v. Douglas, 2 EilVs Chan. Bep. 443, a debtor in failing circum- stances executed an assignment of his whole property to trustees in trust for the, benefit of all such creditors as should, within six months, establish their demands, accept dividends, and give releases in full, and excluding others who should refuse to comply. A bill was filed by a creditor, who refused PROVISIONS EENDEEING VOID THE ASSIGNMENT. 407 to accept, to set aside the deed of assignment as fraudulent and void. It was held valid. The same general principle will be found sustained in Liiypencott v. Barker^ 2 Binney, 174. Halsey v. Whitjiey^ 4 Mason, 206, and Brashear v. West, 7 Peters, 608. The latter case holds that to be the doctrine in Pennsylvania. But a different judicial policy is adopted, holding that the introduction of such a coercive provision will avoid the assignment in the States of Connec- ticut and New York. In the former, see the case of Lujror ham V. Wheeler, 6 Conn. 277. In the latter, the question has come up in several cases, and finally went to the Court of Errors in the case of Walceman v. Grover, 11 Wend. 187. In the latter State, however, it is held entirely competent for the assignee to make a personal agreement to procure the debtor's discharge without its vitiating the assignment. Hastings v. Belknap, 1 Den. 190. And so, also, where there is an exchange of notes, a provision in the assignment directing the payment of one note provided the other is given up, will not invalidate, as both are viewed in the light of one transaction and one debt. Oliver Lee Bank v. Talcott, 19 Neio York Rep. 146. § 683. In the State of New Tork, an assignment may safely be pronounced fraudulent and void, where it either reserves some portion of the assigned property, or a part of the interest or income thereof, to the use of the debtor or his family ; or directs the surplus, after jmying certain specified creditors, to be returned to the assignor, leaving other debts unsatisfied, as in Barney v. Griffin, 2 Comst. 365 ; or where it imposes terms upon the creditors as conditions upon which they are to participate in the distribution of the assigned property, or creates any trust which is to operate by way of coercing the creditors into a release of their claims ; or where it reserves to the assignor the right to appoint tho uses to which the property is to be applied in the future ; or where it postpones to a future period the sale of the trust property or the distribution of its proceeds ; or where it 408 PKOVISIONS KENDEKING VOID THE ASSIGNMENT. exempts tlic assignee from responsibility for all losses sus- tained by the trust property not occasioned by liis gross negligence, or wilful misfeasance, as in Litchfield v. White, 3 Seld. 438. To sustain an assignment preferring creditors, in this State, it must be absolute and unconditional, must devote tlie assignor's property to the immediate and unqual- ified payment of his debts ; must contain no reservations or conditions for the benefit of the assignor ; and must be free from all provisions calculated to extort from the fears of the creditor, a compromise, discharge, or other favor. QUESTIONS. "What are the objects of the debtor in making voluntary assignments ? In what direction are found the lines of decision ? Can the assignor re- serve from passing under the assignment a portion of his property with- out destroying its validity ? What would be the effect of such reserva- tion ? Can the assignor secure in the assigned property any right or interest, or make the assignee his trustee for any purpose ? Can he insert in the assignment a doubtful claim, of his wife, or a fictitious claim, giving it the preference ? Can the assignor select his own assignee, and within what limits, and subject to what, can he make such selection ? Can he reserve the right to make such appointment in case of resigna- tion? Can assignor authorize assignee to sell assigned property on credit ? Can he authorize assignee to convert assigned property into money or available means ? Can he restrict assignee to sell for cash only ? Can he direct delay until higher prices can be obtained ? Can he reserve the right to make future preferences ? Can he vest in his as- signees the power to give preferences after completion of the assign- ment ? Can the asssignee be authorized to compound with creditors of assignor ? Can a manufacturer make assignment and direct manufactory carried on by assignee with assigned property ? "What is the rule at present as to prescribing conditions in regard to management or disposi- tion of assigned property ? Must assignor attach inventory of assigned effects to the assignment, or schedules containing lists of debtors and erditors ? By what means are creditors generally classified with a view to making preferences ? Suppose inventory aflBsed, can assignment con- vey any property not specified in it ? Can assignor direct in his assignment, the payment of a usurious debt ? Can he du-ect the payment of a judgment irregularly entered up ? "What effect on the whole assignment has a single fraudulent provision that enters into it ? Can the assignor annex such EFFECT OF POSSESSION OP PEOPEETT ON CEEDIT. 409 conditions to the assignment as \nll compel his creditors, if they receive any benefit from it, to execute a release of their debts ? "What effect if assignee make a personal agreement to procure the debtor's dis- charge ? What effect if, in case of an exchange of notes, assignor directs the payment of one only on condition that the other will be given up ? "What are the provisions any one of which in the State of New York be- ing introduced into an assignment will render it void ? What in the State of New York is necessary to sustain an assignment preferring creditors ? PART ni. DELIVEET OF PROPERTY TO ASSIGNEE, AND HIS RIGHTS AND DmES. § 684. The law always regards the possession of personal property as 'prima facie evidence of title. A man being tlic presumed owner of the personal effects in his possession, is held out to the commimity as entitled to credit to the extent of such property as he may thus be in possession of. The question then comes up how far the law will permit a man, really insolvent, to make a valid disposition of personal property either by sale or assignment, and yet continue to retain such property in his own possession ; and thus by holding himself out to the community as its owner, be ena- bled to obtain a credit upon the strength of it, and then, when payment is sought to be enforced, defeat his creditor through the superior title of the party to whom he had sold it. Will the law sanction such a sale or assignment under such circumstances ? The principle was settled in the Star Chamber as early as the reign of Elizabeth, that among other indicia of fraud was the remaining in possession, and exercising acts of ownership over goods after the execution of a bill of sale of the same for a valuable consideration. Twynes' case, 3 Coke, 80. § 685. It has never been doubted but that such attempted sale or assignment was a badge of fraud, and might afford sufficient ^>r2W« facie evidence of it to avoid the sale, and thus render the property liable to the payment of those debts presumptively incurred upon the strength of it. But 410 EFFECT OF POSSESSION OIT VAUDITY OF ASSIGNMENT. tlie difRculty lias been to determine, how far such evidence should be j^ermitted to go ; whether it should be conclusive, and thus stop the parties frbm denying the existence of such fraudulent intent as would render void the attempted trans- fer ; or whether it should rest in prwia facie presumption, allowing the parties implicated to disprove the fraudulent intent, thus opening the whole transaction for investigation, and rendering it a question of fact for the decision of a jurj. The latter is the view that has been taken of it in England. Eastwood v. Brown, 1 Ryan & Moody, 312. In this country the Federal Judiciary, and the courts of Yir- ginia, Kentucky, and Pennsylvania, are inclined to take the view first mentioned. In Massachusetts, Connecticut, Maine, and some other States, such possession is held strong 'prima facie evidence of fraud, but susceptible, nevertheless, of an explanation consistent with good faith. In the State of New York there has been some diversity of decision, but there is now a statutory provision. 2 ^. /& 136, § 5. The general doc- trine is now understood to be. That a sale or assignment of goods by a failing debtor, to be valid as against creditors, must be accompanied by an actual and continued, as well as a nomi- nal and constructive change of possession. Butler v. Stod- dard, 7 Paige, 163. Tlie only safe course to be pursued is for the assignee to take immediate possession, either by him- self or his agents, and to retain such possession until the efi^ects are ultimately disposed of. The employment of the assignor merely as agent, where in the exercise of such agency iie would have devolved upon him the possession and control of the assigned effects, could not be done with- out the hazard of defeating the assignment. § 686. An assignment is only fraudulent and void as to those creditors who choose to question its validity. In re- gard to its immediate parties, the assignor and assignee, where the latter" has accepted the trust, and also to all such creditors as choose to take advantage of its provisions, the assignment, however fraudulent it may really be, is a valid DTTTT AND PEOTECTION OF THE ASSIGNEE. 411 and binding instrument. Neither one of these parties arc at liberty to question it. The only party who enjoys this liberty, and has also sufficient interest to enable him to do so, is the creditor who refuses to acquiesce in, or receive any thing under the assignment. Ames v. Blunt, 5 Paige, 13. § 687. It follows as a result from this doctrine, that the assignment, however defective, is a good and valid instru- ment until its validity is called in question by the proper party. Tliis may never be done, and hence the possibility that all the assignor's property may be disposed of, and its avails distributed, under an assignment so very defective as not for one moment to stand before a judicial tribimal. Tlie fact that the instrument is good and valid until questioned, not only authorizes, but renders it the duty of the assignee, to take immediate possession of the assigned property, and to proceed with as little delay as possible in selling and converting the same into money, and disposing of the latter as directed by the instrument. He has even been held guilty of a breach of trust if he delays a sale for the pm-pose of retailing the goods. Hay^t v. Crane, 7 Paige, 398. § 688. Such being the plain duty of the assignee, the law will protect him in all his acts done in good faith under the assignment. As the instrument is deemed valid until a creditor, by filing his bill, calls it in question, the assignee has the benefit of that validity, and cannot be charged with the proceeds of any assigned property which ho may have sold and converted into money, and distributed among pre- ferred creditors, prior to the exhibiting, by the creditor, of his bill, to avoid the assignment. Averill v. Zoucks, 6 JBarh. 470. § 689. A creditor who designs to question an assignment, is in no condition to do so, until the validity of his claim is legally settled by a judgment. Tliis being obtained at law, and, together with the execution issued thereon, being a lien upon the real and personal estate of the debtor, entitles him to go into equity, and ask to have any fraudulent assign- 412 QUESTIONS. ment under which the debtor's property is claimed, set aside, so that the obstruction may be removed, and he left at liberty to enforce the lieu under his judgment and execu- tion. Moliaiok Bank v. AtwateVj 2 Paige, 54. QUESTIONS. IIo-w does the law regard possession of personal property ? IIow is a man in possession of effects held out to the community ? "Will the law permit an insolvent debtor to make a valid disposition by sale or assign- ment of personal property, and yet retain the possession ? What has never been doubted as to such attempted sale ? What has been the diflBculty ? What two views have been taken- as to the effect of such an attempted transfer of property ? How regulated in the State of New York ? What is the general doctrine now understood to be ? What is the only safe course for the assignee to pursue? Can he, with any safety, employ the assignor ? Against whom is an assignment only frau- dulent and void ? How is it as to its immediate parties, assignor and assignee, and to such creditors as choose to take advantage of its provi- sions ? Who is the only party who is at liberty to question it ? How long is an assignment a good and valid instrument ? May it possibly never be called in question ? What does the fact of its being good and valid until questioned, require and render the duty of the assignee ? Wherein has he been guilty of a breach of trust ? In what will the law protect the assignee ? When cannot an assignee be charged with the avails of assigned property distributed under the assignment ? What must a creditor do before he can go into equity and question an assign- ment ? What does the judgment and esecution issued thereon entitle him to do ? • BOOK IV. EEMEDIES. CHAPTER I. LIEN. PART I. WHAT IT 13, ASH TO WHOil APPLICABLE. § 690. Lien consists in the right to detain property until the price, or some charge which is due on it, is paid. Thus defined, it imj^lies that the property i» relation to which the right is to be exercised, is in the possession of the party claiming its exercise. This is true universally as to all liens at common law. But in maritime law there are liens exist- ing independently of possession, either actual or construc- tive. Thus bottomry bonds give liens upon foreign ships not in the possession of the holder. But in such case there is no .vested lien, nothing but what is inchoate, conditional, and im- perfect, until the vessel has completed its voyage. So, also, liens exist in equity independent of possession. Tlie vendor, for instance, has a lien upon the land he has sold for the unpaid purchase money. So, also, an equitable lien may be created for a thing not at the time in existence, but which is soon ex- pected to come into it, as where articles arc to be manufactured, 414 WHO AHE ENTITLED TO LIEN. and liens given in advance upon them. In siicli case also tlicro is no j)rescnt vested right, but the liens take effect and become perfected when the articles come to exist. The rij^e in equity is stated as a clear result from all the authorities, " that whenever the parties, by their contract, intend to create a positive lien or charge, either upon real or upon personal prop- erty, whether then owned by the assignor or contractor, or not, or if personal property, whether it is then in use or not, it attaches in equity as a lien or charge upon the particular property, as soon as the assignor or contractor acquires a title thereto against the latter, and all persons asserting a claim thereto, under him, either voluntarily, or with notice, or in bankruptcy." Mitchell v. Winslow, 2 Story, 630, 638, 64. All liens are at best but qualified rights. They are not founded on property, but always suppose the property to be in some other person, and not in him who sets up the right. § 691. The existence of the lien does not prevent the party entitled to it from pursuing his remedy at law, and collecting the debt or charge out of which the right is de- rived. When goods subject to a particular lien are in part delivered, the question may arise as to the right of the party in possession to retain the part undelivered, and whether for the whole, or what portion of the debt or charge. The rule is, that all the articles undelivered may be retained, and held to secure the payment for all the labor, skill, or expense laid out upon the whole, under the same contract, between the same parties, thus constituting one debt. MoFarland v. Wheeler , 26 Wend. 467, 480. § 692. Tlie following classes of persons may be entitled to their right of lien. 1. Bailees, who perform labor and services upon the thing bailed, at the request of the bailor. 2. Innkeepers have a lien upon the] baggage, for the accommodations of the guest. 3. Common carriers have a lien upon the goods carried for the amount of then- freight. DUTEEENT KESTDS OF LIEN. 415 4. Vendors may, under some circmnstances, have a lien upon the goods sold for tlio payment of the price. 5. Agents or factors have a lien upon the goods of their principals, for advancements made for their benefit. "Whoever may be the party who is entitled to exercise this right, the character of the lien is always essentially the same. . QUESTIONS. "WTiat does a lien consist in ? "What does it imply ? Cf what class of liens is this universally true ? What liens may exist independent of possession ? What instance ? How do liens exist in equity ? What in- stance ? What are instances of equitable lien ? When do such liens take effect? What are all liens? Are they founded on property? What do they suppose ? What is not prevented by the existence of lien ? When goods subject to a particular lien are in part delivered, what is the right of the party in possession as to the part undelivered ? What classes of persons are entitled to the right of lien ? Is the character of the lien always essentially the same ? PAET n. * ITS VAEIETIES AND MODES OF ACQUISITION'. § 693. Liens in whatever way acquired, are of two kinds, particular or special, and general. Tlie first give only a right to retain the particular thing in relation to which the lien exists. The bailee may retain the article upon which his labor was expended, the common carrier the goods he has transported, and the vendor the articles of property he has sold. This kind of lien is favored by the law, and con- strued liberally. Its existence is not aifccted 1»y the efflux of time since the debt or charge giving it came into existence. Such debt or charge may be barred by the statute of limita- tions, and yet the lien remain perfect. Tlie thing itself, being m the possession of the party claimmg the right, will eficctually secure its continuance until payment of the debt or charge. So, also, will the law protect it not only against the o-svner, but also his creditors, and will not permit it to be seized and sold under executions issued on judgments 416 OEIGIN OF PAHTICITLAB LIENS. oLtaincd by tlie latter against the former, except subject to tlie lien. The general liens are those that are claimed in respect of a general balance of accounts. These belong more to factors or agents than to any other class, being claimed by them on a general balance of account against their prin- cipals. These are not favored by the law, and are, there- fore, always subject to strict rules of construction. § 694. From the origin of the common law, there have always existed classes of persons, who were compelled by its policy to receive goods for certain purposes, and to render to them, or their owner, certain services. The innkeeper and the common carrier both afford illustrations of this class. Both these offering to the public to perform the services appropriate to each, are bound by acceptances of their offer, so far as their means and accommodations extend. The law could not well devolve upon them this obligation of receiv- ing and rendering service, without, at the same time, giving them»extraordinary remedies. This is done by the gift of lien ; the carrier being entitled to retain the goods he had transported until paid his freight, and the innkeeper the baggage and goods of his guest, until paid for his accommo- dations. This was probably the origin of all particular . liens, and will now serve to explain some apparently anoma- lous cases, otherwise difficult of explanation. The lien of an 'innkeeper, on property intrusted to his charge, only exists where the party owning the property was a guest ; and where horses are sent to an inn, to be kept for a person not a guest, the innkeeper has no lien on them for his charge of keejDing. Grinnel v. Cook^ 3 Hill^ 485. He is in this re- spect on the same footing as a livery stable keeper. § 695. A distinction has also been taken of this descrip- tion, that where a party has bestowed labor and skill upon an article, and by these means essentially changed its prop- erties and its character, he has a lien on it for his charge. An instance of this would be a trainer of a race-horse, in which, by his instruction, he works a marked imj^rovement OEIGIN OF PAETICULAE LIENS. 417 in the cliaracter and capabilities of the animal. But the rule stops with this change of properties and character, and does not extend to the expenditure of labor and money on the article claimed to be retained, but "which produces no alteration in it. Thus a livery stable keeper has no lien on the horse for its keep. The distinction here is pointed out in the two cases of Wallace v. Woodgate^ Ryan cfc Moody^ 293, and Bevan v. Waters^ Moody <& Malkin, 236, the one allowing the right of lien, the other denying it. That is, " that in the case of the livery stable keeper, Avho does noth- ing to the horse except supplying him with hay and oats, there is no lien, but where work is done by training a horse, there is a right of lien. In case of a livery-stable keeper who dressed a horse, if the claim for dressing could be sepa- rated in that respect, there might be some right of lien, but if an entire claim, compounded of feeding and dressing, is set up, it must attach to both ; the trainer probably claimed for nothing but training, and so his claim was allowed." The two principles, therefore, upon which the common law right of lien may reasonably rest, are twofold. 1. Where the party to whom it is given is compellable to receive the property either for the purpose of carriage or safe custody, or for any other legal purpose, and, 2. When such party has, by his own capital or labor, changed the quality or properties of the thing at the instance or request of the owner. In such case his own labor has entered into, and so combined with, the thing itself, as to give him an interest in it. § 696. Tlie question has several times arisen as to the rights of an innkeeper and common carrier to retain prop- erty, as against the owner, which had been confided to them by a thief to keep, or to transport, in the course of their business. Tlie elementary writers or some of them may be found asserting that where a common can-ier, without any knowledge or suspicion of wrong, receives goods from a thief to transport, and carries them accordingly, he is enti- 27 418 WUEN OWNER OBLIGED TO DISCHAiiGE LIEX. tied to retain them for the price of carnage against the claim of the true owner. Tliis assertion rests mainly or entirely on the authority of a nisi prius case which has never been reported, but is referred to by Lord Holt in YorTce r. Greenough, 2 Ld. Raymond^ 866, as the case of the Exeter carrier^ in which such right was recognized on tlie alleged ground that the carrier was obliged to receive the goods, and should therefore be entitled to his lien. The right of demanding his pay in advance, as a compensation for the obligation to receive, seems to have been overlooked. Tlie same doctrine was incidentally recognized in King v. Richards^ 6 Wliart. 418. But the general understanding of the law now is, that no such right exists in the carrier, and in this country that point has been several times so decided. Fitch V. Newbury^ 1 Doug. 1. BusMrlc v. Perrin, 2 Hall.) 561. Robinson v. JBaker, 5 Gush. 137. But in the case of an innkeeper a different result has been amved at. He has been held entitled to his lien, as against the claim of the owner, if the horse was brought to the inn by a thief, and he had kept it without any knowledge or suspicion of wrong. Blaclc V. Brennan, 5 Dana, 312. 3 Hill, 490. The two cases arc distinguishable in this, that it is clearly for the benefit of the owner to have the horse kept by the innkeep- er, as it preserves the horse in life for his future use, and hence he is here held liable to pay. But it is not for his interest to have his property transported by the carrier into a distant part of the country-, and he is not, therefore, com- pelled to pay for its carriage before recovering it of the carrier. § 697. No lien can exist in favor of the vendor or bailee without the existence of a present debt or charge, and any suspension of the right to demand immediate payment, de- stroys the lien. The giving of credit to the vendee, the taking of a promissory note on time, or an agreement that the goods may be taken immediately, each constitutes such a suspension, as, for the present, to destroy the lien. There LIEN OF FACTOK OR AGENT. 419 is, then, no debt due until the expiration of the credit, or maturity of the note. If, in the mean time, the vendor retain the possession, and the goods remain with him until the credit expires, or the note falls due, and the price still re- mains unpaid, the right of lien revives, the same as origi- nally possessed. Equity will under certain circumstances create a lien where none existed at law ; as when by jnistake of the attorney a judgment was not docketed in a county, so as to make it legally a lien upon the real estate lying therein, but such real estate was afterwards sold, and the judgment debtor and the purchaser both supposing the judgment to be a valid lien, the latter undertook to pay it, making it a part of the consideration of the purchase. The debtor became insolvent, and the judgment turned out to be for a larger amount than had been represented to the pur- chaser at the time of the purchase. Finding it had not been made a legal lien, and was for a larger amount, he declined paying it, but the court decreed its payment. IlaverUy v. Becker^ 4 Comst. 1G9. § 698. The factor or agent has a general lien, which gives him a riglit to continue possession, not only for demands specifically arising out of the thing retained, but also for the general balance of accounts in respect of all dealings of the like nature. Tliis not only covers charges upon the particular goods, but includes also all advances made, and responsibilities incurred, in the execution of his agency. All moneys actually disbursed on account of the goods of his principal, and all acceptances paid, or even outstanding, and not yet due, come under this principle. One question here arises relating to what extent this lien can be specifically exercised ; whether it extends over all the principal's prop- erty in the hands of tlie agent, so that he would be entitled to hold tlic wliolc for that purpose ; or whctlier he is bound to restrict it to just what will secure him on liis general balance, leaving the rest at liberty to be disposed of. In Jolly V. Blanchard, 1 Wash. 252. "Washington, Justice, says, 420 LIEN BY AGREEMENT OF PARTIES. he might have retained such part of the goods as would have been sufficient to secure him, or have consigned the whole to his friend here, to deliver them up on being paid what was due. Such a lien is not limited to the goods, but ex- tends, also, and covers the proceeds and securities received, in the regular course of business, upon their sale. Their avails come to occupy the place, and be subjected to the same lien or charge, as the goods themselves. § 699. There are other sources of lien besides the com- mon law. One of these is to be found in the agreement of the parties. As parties have the control of then- own prop- erty, and their own business, they can, by agreement with each other, either avoid or create a lien just as they may prefer. For the establishment of such a lien, a positive agreement is not always required. A mere notice brought home to the other party may be sufficient. Thus where at a public meeting of a number of dyers, pressors, &c., an agreement was entered into that they would not receive any more goods to be dyed, except upon condition that they should have respectively a lien on those goods for their gen- eral balance. It was held good, and that any one who, after notice, delivers goods to either of these persons, must be considered as having assented to those terms, and hence de- livers them subject to such lien. Kirkman v. Shawcross, 6 T. H. 14. It was formerly thought, that where parties had made with each other a special contract, providing therein for the payment of a fixed sum, all right of lien was im- pliedly abandoned. But this doctrine, on a more thorough examination, in Chase v. Westinore, 5 M. d: Selw. 180, and in Pinney v. Wells, 10 Conn. 104, was entirely repudiated, and the rule declared to be, that a lien may exist although there is a special contract. The mere fact, therefore, that there is a special contract, will not destroy the right of lien, unless there is some provision in it inconsistent with such right. An agreement which stipulates for payment in a LIEN EXISTING BY TSAGE. 421 particular manner, and out of a particular fund, might be held inconsistent with the right of lien. § 700. So, also, liens may be created by usage. Tliese re- pose upon an implied contract. Tlie usage out of which they grow is either the common usage of trade, or that of the parties themselves in their previous dealings with each other. An attorney or solicitor has a lien for the general balance of his account arising out of his professional busi- ness, and this lien attaches, not only to all moneys he may have collected for his client, but also to all papers of his, which he may have in possession. Stevenson v. Blakdock^ 1 M. & S. 535. Another instance is presented in forwarding merchants, who have made advances for charges on goods consigned to them for transportation and delivery to the ultimate consignee or owner. Advances so made give them a lien upon the goods, and the right to recover against a third person to whom the carrier has wrongfully delivered them. Fitzhugh v. Wiman, 5 Selcl. 559. So also bankers, having advanced money to customers, have a lien upon all securities belonging to such customers, that come into their hands, for their general balance. But where a security is pledged for a specific sum, they cannot apply that to a general balance. The rule is, that where money is advanced by them to a customer upon general account, they have a lien for the amount of any balance, upon all securities in their possession, belonging to such customer ; but if the banker make an advance upon the specific security of any particular bill, he thereby elects to abandon his general lien, and to resort to that security alone, and therefore cannot be justified in retaining any other securities to provide for the possible event of that one bill being dishonored. Bosan- quet V. Dudman^ 1 Starli. 1. Bank of Mctrojyolls v. Kew England BanJc, 6 How. 212. Tlie law, however, in relation to some instances of this species of lien, cannot be considered as entirely settled, whether it is to depend upon general or special usage and custom ; as, in regard to wharfingers, a 4:22 KO LIEJSr FOK UNLIQUIDATED DAMAGES. court lias remarked that tlierc may be a usage in one place varying from that wliich prevails in another. Jlolderness V. Collinson, ^ B. & G. 212. In many cases, therefore, a party who seeks to hold goods for a general balance, should be prepared to prove a special usage to that effect, applica- ble to his case. But this lia^ no application to agents or factors, whose lien for a general balance rests upon general custom. But such agent or factor cannot enforce a lien for debts wdiicli accrued before his character, as such, com- menced. Tlie lien of the common earner is particular or special, upon tbe goods he carries for their carriage. It has been of late years a good deal discussed wbether they have not also, by the usage of trade, a general lien, or a lien for the general balance of their account against the owner. The enforcement of their special lien, in all cases, would leave no occasion for the exercise of a general lien. It is gene- rally considered, that to entitle himself to a general lien, be must prove a usage, so general, and prevailing to such an extent, as that all parties contracting may be supposed to know it, and to contract in reference to it, and then it may fairly be said to form a part of the contract. § YOl. A lien cannot be claimed to secure the payment of unliquidated damages, arising from the breach of a con- tract ; and hence when the freighter of a ship covenanted that if she should not be fully laden, he would not only pay for the goods,- but for so much also in addition as the ship would have carried, for which he had before stipulated to pay freight according to the dijfferent rates for three descrip- tions of goods ; it was held that the ship oT^mer had no lieu upon the goods actually on board for the amount of dead freight, or, in other words, for the compensation in damages, to which he was entitled for the freighter's breach of con- tract in not putting a full lading on board, the same being unlicpiidated. Pliili]) v. Hodie, 15 East. 547. § 703, The debt in reference to which the. lien is claimed must be due to such claimant in his own right, and not as QUESTIONS. 423 the agent or representative of another. The master of a ship has no lien upon it for money expended in the payment of demands for repairs, either at home or abroad. But he may hypothecate the ship for such repairs, in the course of a foreign voyage, and tlius give a lien to another, although he cannot, by payment, transfer it to himself. QUESTIONS. How many kinds of lien? What are they? "What rights given by each ? What cliaracteristics of the particular or special lien ? What of the general? To whom does the latter belong? What classes of per- sons are compelled to receive goods ? What does the law give them in the way of compensation ? What is the rule where a party has be- stowed labor and skill upon an article, and changed its properties and character? What the difference, in this respect, between an innkeeper and a livery stable keeper ? What are the two principles upon which the common law right of lien rests ? What are the rights of an inn- keeper and a common carrier to retain property in their possession, as against the owner, which they have received and kept and carried for a thief? What is the reason of the diflferenco of the rule as between the two ? What is essential to a lien in favor of vendor or bailee ? What effect has suspension of payment? What the giving of credit or taking a note on time? What result after term of credit expires? What kind of lien has the factor or agent ? What does this cover ? How far can this lien be specifically exercised ? Does it cover the whole property, or only a part ? What other sources of lien besides the common law ? What can establish it by agreement of parties? How established by notice? What illustration ? What effect has special contract in destroying lien ? AVhat kind of special contract would have that effect ? How is lion created by usage ? On what does it repose ? What lion has an attorney and solicitor, and on what, and for what ? What lien have bankers, and on what, and for what ? How, where security is pledged for special sum ? How does that affect general balance ? What the general rule stated ? What is the safe course for parties claiming to hold for general balance to pursue ? What is the lien of the common carrier ? What must he do to entitle himself to a general lien ? Can lion bo claimed to secure unliquidated damages arising from breach of contract? What illustration ? To whom must debt bo duo when lien is claimed ? Does master of a ship have lien for repairs ? How can he give lien for such repairs to another ? 424 now LIEN MAY BE LOST. PART III. now LIEN MAT BE LOST. § 703. The general principle here is, that the lien ceases when the possession is voluntarily relinquished. As the exercise of the right depends on the possession, it follows that any voluntary surrender destroys the right. The sur- render, however, must be voluntary and free from fraud, and lience where a common carrier was induced to deliver goods to the consignee, by a false and fraudulent promise made by the latter, that he would pay the freight as soon as the goods were received, and then refused to do so ; it was held that he might recover them of the consignee by action of replevin. Bigelow v. Heaton, 6 Ilill^ 43. But any change of the character in which the party claiming holds them, if voluntarily made, results in the loss of the right. Thus a party having a lien on goods, causes them to betaken in execution at his own suit, and purchases them in on the sale. In such case, although the goods may never have left the premises, yet the nature of the possession, and tJie character of his claim, are so altered by this voluntary act, that liis former right of lien is gone. Jacobs v. Laiour, 5 Bingh. 130. Having, in such case, voluntarily destroyed his right of lien, he would be powerless in protecting the goods against a lien acquired by another which was prior to his own execution, but subsequent to his own original right. S Y04. "Where a ris-ht of lien exists, and is intended to be relied upon by the party owning it, he should distinctly assert it, whenever he intends to rely upon it. If, when the goods are demanded of him, he claims to retain them on some other ground, never mentioning his lien, he is con- sidered as having waived it, and the owner of the goods may sue him and recover, without having first tendered to him the amount of his lien. Saltus v. Everett, 20 We7id. 267. If, however, there be a mere omission to assert his lien, that WHEN EQUITABLE SUPEEIOK TO JUDGMENT LIEN. 425 would not probably amount to a waiver. Somctliing is re- quired beyond this, that is, the resting of liis claim dis- tinctly upon some other ground. WJdte v. Garner^ 2 Bimjh. 23. Tliere is, also, a good deal of question whether he is not bound to assert the precise lien, and if he claims one of too large a description, he may peril his entire right, although he may really possess one of a narrower character. Saunderson v. Bell^ 2 C. c& If. 304. But this principle is not uniformly acquiesced in. Scarf e v. Morgan^ 4 M. & TF. 270. § 705. Tlierc sometimes occurs a conflict between the lien which exists under a judgment, and the equitable rights which ma;^ previously have been acquired by a purchaser ; as where he has previously made a contract to purchase the property which is subsequently bound by the judgment. In such a conflict the lien of the judgment must yield to the equitable rights of the purchaser, and the docketing of it is held to be no notice to him, nor docs it invalidate his subse- quent payments on the contract to the judgment debtor, made in good faith, and without actual notice of the judg- ment. Meyer v. Ilhwian^ 3 Kern. 1S6. But the rule is different where an equitable lien is agreed to be given to se- cure an antecedent indebtedness ; as where A is the holder of a mortgage, and the premises being about to be sold under his decree of foreclosure, he agrees with his creditor B to execute to him a mortgage on the land within ten days after he should so acquire the title, and the agreehient thus made was carried into execution. But anotlicr creditor of A had obtained and docketed a judgment against him be- fore the agreement was made. The latter was adjudged to have the prior lien. Dwight v. Neiocll,, 3 Comst. 185. § 70n. A vendor of real estate has an cquita1)le lien for the purchase-money upon the property sokl. The limita- tion of that lien is that it only exists when he has no other security. Tlie taking of any security from the purchaser annihilates it. Even when such vendor takes security from a third person for the purchase-money, the equitable lien is 42 G RIGHT OF LIEN MAT BE WAIVED. gone. Vail v. Foster, 4 Comst. 312. Tliis principle Las u more extcndod application, and embraces all cases where secm'ity is taken for a debt, sucli security being payable at a distant day. The lien is inevitably gone. Small v. Moats^ 9 Binrjli. 574. A question has arisen whether the assignee of a bond and mortgage, who holds the same as security for a loan, can have his lien extinguished by a settlement be- tween the mortgagor and mortgagee, in good faith on the part of the latter, who executes to the former a discharge of the bond and mortgage. The principle settled is, that the land so conveyed continues subject to the mortgage in the hands of the assignee, that the non-producfion of the bond and mortgage on the settlement, should have been deemed, by the mortgagee, a circumstance sufficiently sus- picious to put the mortgagor upon inquiry, and thus to charge him with notice of the actual state of the case, and consesequently of the rights of the assignee. Broion v. Blyde7iburgh, 3 Seld. 140. § 707. A question whether a lien exists or not, may arise in a case where goods are sold to be paid for on delivery, by notes which are then to be delivered to the purchaser. But the goods are delivered without the notes being either given or demanded. This is held to be presumptively a waiver of all right to the notes, and of all lien upon the goods, a com- plete title vesting in the purchaser. And although, as between the vendor and vendee, it is competent to show an intention that the delivery should not be considered complete until per- formance of the condition, yet the burden of proof, in such case, is on the vendor, and a lo7iafide purchaser from the ven- dee, after actual delivery of the property, will hold it free and discharged from all lien or conditional sale. Smith v. Lynes, 1 Sdd. 41. § 708. A lien is a species of property delicate and of difficult preservation. The possessor must exercise extreme care, or it will slip from his grasp. . If a debt is already se- cured by a lien upon property, and the parties come to a LIEN INCONSISTENT WlTU CEEDIT. 427 new arrangement with cacli other, agreeing that the debt shall be paid in a particular manner, the lien is gone. But it will continue to exist although there may be a right of set-off, upon the other side, to an amount ecpal to the debt secured by the lien ; because, in such case, the parties are viewed only as having mutual claims on each other, and this ought not to affect any securities wliich either nuiy have on his claim against the other. Pinnock v. Harrison^ 3 J/, dO W. 532. § 709. A lien is always totally inconsistent M-itli a deal- ing on credit, and can only subsist where payment is to be made in ready money, or there is a bargain that security shall be given the moment the work is complt'ted ; and hence where a solicitor took the notes of an executor of his employer, payable in tliree years, it was held, tliat by neces- sary implication, he agreed to give up the papers, and to rely upon the security. Itaiti v. Mitchell 4 Campb. 140. And so no right of lien can exist in favor of the owner of the ship, when it appears by the terms of the charter-party that he had trusted to the pci'sonal responsibility of the merchant, by fixing on a specific time of payment cither before or after delivery. And in reference to the credit given, it is of no consequence as to its effect upon the lien, whether it is secured by agreement, or arises out of the us^ge of trade ; as in a case where goods were landed upon a wharf in October, and by well-established usage, wharfage was not payable until Christmas. It was held there could be no lien. CravAhay v, Jliuvfray, 4 B. <£• Aid. 50. § 710. The lien, when all its conditions are complete, will continue in force until the debtor, by complying with the tenns of liis contract, pays or tenders the debt, and thus releases the property ; or until tlie holder of the lien volun- tarily and utterly resigns the possession of the property, and all right of further detention. It sometimes becomes neces- sary to deterniijie how fur a man may go witho\it losing his lien. A mere marking and setting aside of pai'ticular goods 428 rossEssiON the true test of lien. for a purcliascr, will not destroy it, if he still retains Lis power over them. The retaining and storing them in his own store-house, will not deprive him of the right, although the vendee pay the rent for their storage. Tlic mere giving a delivery order in such case, will not destroy the right. But if the goods are stored in the warehouse of a third per- son, and an absolute delivery order is given by the vendor which is presented to, and accepted by, such third person, the lien will be terminated. But if such delivery order be conditional, the acceptance of it by the third person would not be sufficient until performance of the condition. The true test of the existence of the right of lien is the continu- ance of the actual possession of the vendor, lie may have performed acts which o, also, if the injured party, suLsequent to the adultery, cohabits with, or is reconciled to, the other, after just grounds of belief in the fact, it will constitute a bar to the divorce. The husband will also be precluded from obtaining the di- vorce if the adultery occur through his active procurement, or passive and conscious toleration of his wife's guilty con- duct. § Y58. The limited or qualified divorces, a mema et thoro, prevail in most of the States, usually as an incident to the remedial powers exercised by the courts of chancery. They also prevail in England. In England either party may ap- ply for them, but in this country the wife is usually the only applicant. Their efiect is to suspend, either indefinitely, or for a limited time, the marital relations, and to decree a separation from bed and board, generally with a provision for the wife's support. Tlie most usual causes upon which the decree is granted, are cruel and inhuman treatment on the part of the husband. There has been some difficulty in determining how far this must go to justify the interference of the court in disturbing such important relations. It need not go to the extent of cruelty, but may be granted for such conduct, on tlie part of the husband, as renders it unsafe and improper for the wife to cohabit with him, and be under his dominion and control. The word unsafe may mean reasonable apprehensions of bodily hurt, l^ut the danger nmst be serious, and no mere austerity of temper, petulcnce of manners, rudeness of language, or even sallies of passion, which threaten no bodily harm, can be sufticicnt. Tlie children begotten and bom dm-ing such sejiaration, arc deemed illegitimate, and hence incai)able of inheriting property. » § Y59. Tlie most difficult and complicated questions con- nected with this subject arise out of the cft'ect to be given to foreign divorces. The principle is not doubted but that 460 MAKRIAGE IN ONE STATE AND DIVOECE IN ANOTHER. divorces regularly obtained in the courts of the State or country where the jjarties were regularly married and do- miciled, are valid everywhere." There is just as little doubt but that a party domiciled in one State, and going into another and there obtaining a divorce in fraud of the laws of the State of his domicil, would be unable to avail himself of it as a valid divorce in the latter State. Tliis question has frequently been presented. Divorces are much more easily obtained in some States than in others. One of the married parties removes into another State, where divorces are easily obtained, for the sole and express purpose of pro- curing one ; and having done so, returns to the State he left single, and a candidate for the formation of new ties. How is such a divorce regarded in the State to which he returns ? As having been obtained iikfraud of its laws, and hence a mere nullity. Hanomr v. Turner^ 14 Mass. 227. Borden v. Fitch, 15 John. 121. § 760. But a question of great difficulty is presented in the case where parties married in one State, procure a di- vorce in another, after submitting to its jurisdiction, and after a full and fair investigation of the merits of the ques- tions involved. Is such a divorce valid in the State where the parties had their former home ? The question has seve- ral times arisen in Scotland, where parties, one or both, having had their homes in England, either with or without acquiring a domicile in Scotland, apply for a divorce under the laws of Scotland. In Utterton v. Tewsh, Fergusson^s jRejp. 23, English parties domiciled in England, and having acquired no domicile in Scotland, one of them applied for a divorce under the Scottish law. The Consistorial Court in Scotland refused to grant it. But that decision was reversed on appeal, and the divorce dn-ected to be granted. In Fd- mondstone v. Lockhart, Fergusson, 209, parties originally English, and married in England, had domiciled in Scotland, where a divorce was applied for, and the question was whether the lex loci contractus or the lex domicilii was to QUESTIONS. 4G1 govern. The court of review decided in favor of the latter. The question finally came before the Iloiise of Lords in England in the case of Tovey v. Lindsay^ 1 Dows Bcp. 117, in which, although the case was remitted back for re- view without any final decision, yet the view taken of the question was, that the lex loci contractus must govern in all such cases, and that the Scottish tribunals could only pro- nounce%the divorce according to English, and not to Scottish law. The question has, however, been before the House of Lords in a more recent case, that of Warrendcr v. Warren- der^ 9 Bligh, 89, in which, under the lead of Lord Chan- cellor Broughara^ the Scotch decision in Edmondston^ v. Loclcliartf was confirmed, and the lex domicilii declared to be the law which the court should apply to such cases. The principle of this decision would enable the judicial tribu- nals of the State where the x^arties were domiciled, to grant divorces valid under their own laws, in whatever State the man-iage may have been entered into. But this question may not, perhaps, be considered as entirely settled, espec- ially in the jurisprudence of this country. QUESTIONS. What effect has the marriage tie onco entered into ? How may a divorce be obtained ? How many different species of divorce ? What are they ? How created ? "What are canonical disabilities ? What are civil disabilities? What is the whole matter generally regulated by? What are the causes for divorce in New York? What causes existing before marrioge? What of subsequent occurrence? What will prevent a party from obtaining a divorce for adultery ? What are limited di- vorces incident to ? Which party here applies for them ? Wliat is their effect when granted ? What are the most usual causes? What kind of conduct will justify such divorce? What gives rise to the most serious questions ? What principle is not doubted ? What otlier is also clear ? What state of facts illustrates it? In a case where the marriage takes place in one State or country, and a divorce is applied for in another, where the parties are domiciled, which is the law applied, the lex loci contractus or the lex domicilii f What cases in illustration ? APPENDIX. FOKMS. The following forms have been selected as those of the most common use in business transactions. The principles that apply to, and govern the most of these, will be found stated in the course of this work. There is, however, an exception in the case of Deeds, Mortgages and Wills, and hence a few remarks upon those topics may not be inappropriate. Deeds in the State of New York must be under seal, and in order to be available against a subsequent purchaser or incum- brances, must be duly acknowledged and recorded in the County Clerk's Office, A deed, to be effectual, must not only be executed under seal, and in the presence of at least one witness, but must also be delivered either directly to the grantee, or, as an escrow, to some third person, to take effect upon the performance of some condition. A deed may be a simple quit-claim, or oite with covenants of warranty. In the former case, although it purports to convey one's right of expectancy, or possibiUty of inheritance, it will neverthe- less convey only the title which the grantor actually possessed at the time of its execution and delivery. Any subsequently accruing title will remain unaffected by it. 4G4 APPENDIX. A deed admits of no implied covenants, and hence the grantor can be held to no act or thing not expressly covenanted in the conveyance. In a common warrantee deed, containing simply cov- enants of warranty and for quiet enjoyment, the grantee must have suffered an eviction from the premises, before he can be en- titled to recover against his grantor. But in case a full covenant deed is given, or one containing a covenant of seizin, that is broken, and allows an action to be brought immediately on the ex- ecution and delivery of the deed, if the grantor has no title. The deed cannot convey any greater estate or interest than the grantor himself possessed at the time of its delivery, or could then lawfully convey ; but it may always be set up as conclusive against the grantor, and all such as claim from him by descent. No deed can be available to the grantee, if at the time of its execution and delivery, the premises sought to be conveyed, are in the actual possession of a person claiming under a title adverse to that of the grantor, except as against such grantor and his heirs. No title passes to the grantee. A mortgage, however, may be exe- cuted under such circumstances, which may be good from the time of the recovery of possession imder it. In the State of New York it is unnecessary to insert the term " heirs," or other words of inheritance, in order to create a con- veyance in fee ; as every grant of real estate will be held to pass all the interest of the grantor therein, unless it is apparent, by its terms, that a less estate was intended to be granted. A consideration is necessary to sustain a deed, although the amount of it is immaterial, and in the description of the premises conveyed, known and fixed monuments on the land, whether nat- ural or artificial, will be held to control in preference to courses and distances, and the former wiU be held to include all the lands within them, although they are found to vary from the quantity expressed in the deed. APPKNT)EX;. 4Go A mortgage, altliougli for some purposes deemed a conditional sale, is nevertheless merely a lien, and is regarded simply as a se- curity for a debt, and vests no title in the mortgagee. It is a mere chattel interest, and as such, on the death of the mortgagee, goes to his personal representative, and not to his heir at law. It does not, of itself, imply any covenant to pay the sum intended to be secured by it ;^nd hence in the absence of any such covenant, and of any bond or other similar instrument accompanying the mort- gage, the mortgagee will have no remedies beyond the lands de- scribed in the instrument. A mortgage given by the grantee on the purchase, and for the purchase-money, will be good without being executed by the wife of the mortgagor ; as the seizin in him of the land is subject to his mortgage ; but in all other cases the wife must unite, in the same manner as in a deed, or her right of dower in the premises conveyed will not be barred. Where large quantities of land are covered by a mortgage, no part can be sold by the mortgagor except subject to its lien ; but in case of such sale, equity will interpose, and direct that the part unsold be first applied in payment of the mortgage debt, and if any thing still remains due thereon, that then the portions sold shall be applied on the said mortgage debt in the inverse order of their alienation ; that is, that the part last sold sliall be first ap- plied on said debt, and so on until the said debt is paid, or all the mortgaged premises applied towards its payment. A mortgage, like a deed, must be duly executed in the presence of a witness, or ofiicer taking the acknowledgment ; must be duly acknowledged and properly recorded in order to protect the mort- gagee against subsequent purchasers and incumbrances. All the mortgagee's interest in it may pass by assignment to the assignee, and this latter need not be acknowledged nor recorded, as the re- cording of the mortgage will be a sufficient protection not only to the 30 4:6Q APPEITOIX. mortgagee, but to all his assigns. The recordiBg of such assign- ment is not held to be such notice to the mortgagor as will invali- date a payment made by him to the assignor subsequent to the as- signment. The assignee, to protect himself against such a contin- gency, should give to the mortgagor actual notice of the assign- ment. The acknowledgment and recording of the assignment would have the effect of enabling the assignee, upon payment of the mortgage, to acknowledge satisfaction, so as to have the same discharged of record. Otherwise the original mortgagee will be the proper party to acknowledge the satisfaction. The remedies upon non-payment of the mortgage are twofold, either to proceed upon the personal liability of the mortgagor, where a note, bond,- or other obligation exists, the collection of which would discharge the lien of the mortgage ; or to proceed against the mortgaged premises, and to apply them, as far as their proceeds will go, in part or entire satisfaction of the mortgage. If any balance still remains due, the mortgagor will be personally liable to pay it, and if the property brings more than sufficient to pay, then he will be entitled to any such balance as may remain after payment of the debt. The foreclosure may either be in the Court of Chancery, or by a proceeding under the statute, by virtue of the power of sale contained in the mortgage. In the case of a chattel mortgage, the more common course is for the mortgagee, if he desires to close it up, to give the mortgagor notice of sale, and also to give reasonable public notice of the time and place of sale, and then to proceed at such time and place to sell the property, and apply the proceeds upon the debt secured, A WILL is the legal declaration of a man's intentions of what he wills to be performed after his death. The parties competent to make, or take under it, and the manner of its execution, are mat- ters of statute regulation. In the State of New York all persons except idiots, persons of unsound mind, married women, and in- APPENDIX. 4G7 fants, may devise their real estate, and such devise may be made to any person capable by law of holding real estate ; but no de\-ise to a corporation shall be valid, unless such corporation be expressly authorized by its charter, or by statute, to take by devise. All de- vises to aliens are declared void. It was always competent for married women to devise their separate property under a power re- served for that purpose, and now, since the act of 1849, they are declared competent to convey or devise their separate property. As to personal property, every male person of the age of eight- een years or upwards, and every female, not being a married -wo- man, of the age of sixteen years or upwards, of sound mind and memory, may dispose of such property by will. In the State of New York every last wiU and testament of real or personal property, or both, must be executed and attested, in the following manner : 1. It must be subscribed by the testator at the end of the will. (This is held to mean at the end of the will proper, and where a map of lots is attached to it, and identified in the body of it, it need not be signed.) • 2. Such subscription must be made by the testator, in the pres- ence of each of the attesting witnesses, or acknowledged by bim to have been so made to each of the attesting witnesses. 3. The testator, at the time of making such subscription, or at the time of acknowledging the same, must declare the instrument so subscribed to be his last w^ill and testament. 4. There must be at least two attesting witnesses, each of whom must sign his name as a witness, at the end of the will, at the request of the testator. (Two witnesses are required not only in Xew York, l)ut also in Pennsylvania, Delaware, Virginia, Ohio, Illinois, Indiana, Missouri, Tennessee, North Carolina and Kentucky, while to a wUl de\-ising real estate, three are required in Vermont, New Hampshire, Maine, 468 APPENDIX. Massachusetts, Ehode Island, Connecticut, New Jersey, Maryland, South Carolina, Georgia, Alabama, IMississippi, Michigan, Wis- consin and Iowa.) 5. The witnesses to any will must write opposite to their names their respective places of residence ; and every person who may sign the testator's name to any will, by his direction, must wcite his own name as a witness to the will. And whoever neglects to comply with either of the foregoing provisions, will forfeit fifty dol- lars, to be recovered by any person interested in the property de- vised or bequeathed, who may sue for the same. Sucb omission will not affect the validity of any will ; nor will any person liable to the penalty aforesaid, be excused or incapacited, on that ac- count, from testifying respecting the execution of such will. A codicil is an addition or supplement to a will, and must be executed with the same solemnities. It is regarded as a part of the will, the two instruments making together but one will. The statute prescribing the manner of execution has a very strict construction given to it, both as to the will and codicil. The testator must, in the prgsence of two witnesses, declare the instru- ment to be his last will and testament. The declaration to one, and signing it in the presence of two, who subscribe it as wit- nesses at his request, is insufficient. And so also where the tes- tator did not subscribe the instrument in their presence, and the only acknowledgment was " I declare the zoithin to be my toill and deed, it was held iusufficient. Wills devising real estate must be executed according to the formalities prescribed by the laws of the place where the real es- tate is situated, but a wiU of personal property executed according to the laws of the place of the testator's domicil, will pass all the personal property of the testator wherever the same may be situ- ated. The term " heirs," or other words of inheritance, need not ba APPENDIX. 4G9 inserted in a will designed to convey an estate in fee. If it be tbo intention to devise a less estate, appropriate words must be made use of for that purpose. A will continues ambulatory, or subject to any cbanges, the testator may see fit to make in it during bis life. Or, he may, if he choose, cancel and destroy it, and leave his property to be dis- tributed as the law prescribes. And if be makes a will, and leaves any portion of his property undisposed of under' it, his heirs or next of kin will be legally entitled to it. No technical words are required in a will, and the intention of the testator is to be gath- ered from a full consideration of the whole instrument. No pro- vision in a will, however ample, will prevent the wife's claiming, in addition, her right of dower, or life estate in one-third of all the lands of which the husband was seized during the coverture. To prevent both, the will must expressly declare that the devise or bequest is made in lieu of dower, and then the wife will be at lib- erty to elect which of the two she will receive. ASSIGNMENTS. 1. Assignment of Judgment. Supreme Court. — Judgment for $500. Horace j\r. Hastings to Samuel Wood. Cost taxed at $lo. Docketed June 2, 18G0. Transcript filed in Albany County Clerk's Office, June 3, 18G0. In consideration of dollars to mo paid by Thomas Simons, of the city of Albany, I hereby assign, sell and transfer the above-mentioned Judgment to him, his heirs and assigns for- ever, authorizing him to collect and enforce payment of the same in my name or otherwise, but at his own costs and charges, and covenanting that the sum of dollars, besides interest, is now due on the same. Executed this tenth day of August, A. D. 18G0, HORACE M. HASTINGS, [l. s.] 470 APPENDIX. 2. Assignment of Mortgage. Endorsed Thereon. In consideration of dollars to me in hand paid by George W. Palmer, of , I do hereby sell, assign, transfer, and set over unto the said George W. Palmer the within indenture of mortgage, together with the bond accompanying the same, for his use and benefit, hereby authorizing him to collect the money due on the same in my name or otherwise, but at his own costs and charges, covenanting that the sum of dollars, besides in- terest, is now due on the same. Executed this day of 1860. PETER D. LUDINGTON, [l. s.] ' 3. Voluntary Assignment hy an Insolvent Debtw\ This Indenture made this day of , in the year , between Elihu J. Granger, of , of the first part, and Allen B. Durant, of , of the second part. Whereas the said Elihu J. Granger is justly indebted in sundry large sums of money, and is unable to pay and discharge the same with punctuality, and in full, and he is desirous of making a fair and equitable distribution of his property and effects among his creditors, Now, therefore, this Indenture witnesseth, that the said Elihu J. Granger, in consideration of the premises, and of the sum of one dollar to him in hand paid, by the party of the second part, the receipt whereof is hereby acknowledged, hath granted, bargained, sold, assigned, transferred, and set over ; and by these presents doth grant, bargain and sell, assign, transfer and set over, unto the said party of the second part, his heirs and assigns forever, all and singular, his lands, tenements and real estate, a more particu- lar description of which is hereto annexed, and all his goods, chat- tels, effects, and things in action, of every name, nature and de- scription, of which he is now lawfully possessed, and to which he may be entitled, saving and excepting, from the effect of this assignment, all such articles of household furniture, and other ef- fects as are exempt by law from seizure and sale under execution, to have and to hold the same unto the said party of the second part, his heirs and personal representatives. APPESTDIX. 471 In trust, however, and upon the following uses and trusts, that is to say. The said party of the second part shall take immediate possession of all the property and effects herehy assigned, and as fast as he conveniently can, he shall sell and dispose of the same, and convert the same into money, and with the proceeds thereof, shall first pay off and discharge all the reasonable costs, charges and expenses of carrying into eflFect this assignment ; and all rents, taxes, assessments and interest on mortgages that may be neces- sary to keep and protect from sacrifice the assigned property, and with the residue the said party of the second part shall First, pay and discharge in full the several and respective debts, bonds, notes, and sums of money due, or to grow due, from the party of the first part, which are designated and stated in Sched- ule A hereto annexed ; and if the assigned effects are insufficient to pay all such sums in full, then to pay the same pro-rata as far as said assigned effiscts will go. [^The assignor reiay^ in this manner^ maTce as many classes of preferred creditors as 7ie pleases, including tliem in so many schedules attached to and forming apart of this assignment.] Second. By and with the residue and remainder of the said net proceeds and avails, if any there shall be,^ the said party of the second part shall pay and discharge all the other debts, dues and liabilities of the said party of the first part, provided such remain- der shall be sufficient for that purpose, and, if insufficient, then to apply the same pro-rata so far as the same will go. . [7/* the assignment is ly a firm or co-imrtnership., the direction is to apply all the co-partnership effects to the payment of co-partnership debts, and if any lalance remains, to apply it to the payment of the in- dividual debts of each co-partner. And if the individual effects of each co-partner are also assigned, they are directed to be ajjplied first to the payment of the individual debts of each partner respectively, and any balance remaining should he applied to the 2)ctyment of tlie co-partnership debts pro-rata, so far as the same will go.] Lastly. The said party of the second part shall return the surplus of the said net proceeds and avails, if any there shall be, to the party of the first part, his executors, administrators, or as- signs. And for the better execution of these presents, and of the trusts 472 ^ APPENDIX. hereby reposed, the said party of the first part hereby makes, con- stitutes and appoints the party of the second part, his true and lawful attorney, irrevocable, with full power and authority to do and transact all matters and things necessary in the premises, as fully and completely as the said party of the first part might or could do, were these presents not executed, and attorneys, one or more, under him to make, constitute, and appoint, with full power of sub- stitution and revocation, hereby ratifying and confirming all mat- ters and things whatsoever that my said attorney shall lawfully do, or cause to be done, in the premises. In testimony of all which, the party of the first part has here- unto set his hand and seal, the day and year above written. ELIHU J. GRANGER, [l. s.] Sealed and delivered in presence of AKBITEATIOK. 4. Form of Submission to Arhitration. Know all men by these presents, that whereas a controversy is now existing between Henry C. Marvin, of , and Her- bert B. Turner, of , touching an alleged indebtedness of the latter to the former. Now, therefore, we the said Henry C. Marvin and Herbert B. Turner, do hereby submit the said controversy to the decision and arbitration of Isaac Bronson, John T. Pingree and John B. Ad- ams, all of , or to any two of them ; and do cove- nant each with the other, that we will in all things faithfully keep, observe, and abide by, the decision and award that they, or any two of them, may make in writing, in the premises, under their hands, ready to be delivered on or before the first day of January next. And it is further agreed by the parties hereto, that the party that shall fail to keep, abide by, and observe the decision and award to be made according to the foregoing submission, shall pay to the other the sum of three hundred dollars, as fixed liquidated damages, and not as a penalty. APPENDIX. 473 Executed mutually by the parties to this submission this day of , one thousand eight hundred and sLxty, IIEx\RY C. x^IARVIN, [l. s.] nERBERT B. TURNER, [l. s.] In presence of 5. Award of Arhitrat(yrs. To all whom these presents may concern, We, Isaac Bronson, John T. Pingree, and John B. Adams, to whose arbitration and award was submitted the matters in controversy existing between Henry C. Marvin and Herbert B. Turner, of , as ap- pears more fully by their written submission bearing date the day of , one thousand eight hundred and sixty. Now, therefore, know ye, that we the said arbitrators, having been first duly sworn according to law, and having heard the proofs and allegations of the parties, and examined the matters in contro- versy by them submitted, do make, publish and declare this our award in writing, that is to say, we find that Herbert B. Turner is indebted to Henry C. Marvin in the just and full sum of one hun- dred dollars, and we direct and award that Herbert B. Turner, within ten days after service upon him of notice of this award, pay to the said Henry C. Marvin the said sum of one hundred dollars, together with the costs of this arbitration. In witness whereof we have hereunto subscribed these presents this day of , A. D. 18G0. ISAAC BROXSOX, [l. s.] JOHN T. PIXGREE,[l. s.] JOHN B. ADAMS, [l. s.] In presence of BILL OF EXCHANGE. 6, Form of one of a set of Foreign Bills of Exchange. No. 500. Exchange for $5,000. Alhanv, Juhj 9, 1860, Twenty days after sight of this First of Exchange (Second and Third unpaid), pay to the order of John H. Camp five thousand 474: APPENDIX. V dollars, value received, and charge the same without further advice, to account of Your ob't serv't, DEAN SAGE. To Edwaed M. Greenly, London, England. [ The other two, that, together with this, compose the set, are in t?ie same form, only varying the numbers first, second, and third.'] v. Foi^m of Inland Bill or Draft. $500. Albany, Aug. 1, 1860. Fifteen days after sight, pay to the order of Alonzo J. Handley, five hundred dollars, value received, and charge the same to ac- count of Yours, &c., THADDEUS GRAVES, Albany, N. Y. To Levi Eobinson, Iowa City, Iowa. 8. Form of a Clieck on a Bank. Ho. 40. Albany, Aug. 1, 1860. Mechanics' & Farmers' Bank, pay to M. G. Bright, or bearer, five hundred dollars. JESSE BRIGHT. KOTES. 9. Form of Note Negotiable hy Indorsement. $100. Albany, Aug. 1, 1860. Three months after date, I promise to pay to the order of Na- thaniel Dean one hundred dollars, value received. CHARLES K. LARD. APPENDIX. 475 10. Note Negotiable witlwut Indorsement. eioo. Albaxt, Ang. 1, 18C0. Three months after date, I promise to pay to Theodore C. Sears, or bearer, one hundred dollars, value received. EDWARD WADE. 11. Note not Negotialle. $500. Albaxv, Aug. 1, ISCO. Three months after date, I promise to pay Martin I. Townsend five hundred dollars, value received. GEORGE WOLFORD. 12. Note Payalle at a Baal'. 8300. Albaxt, June 1, 1860. Three months after date, for value received, I promise to pay Elial F. Ilall, or order, three hundred dollars at the Mechanics' ear ; the agreement being that each copartner shall share equally in all the profits and losses that may arise out of, or occur in the prosecution of, the said copartnership operations. 4. That each of the parties hereto, shall diligently employ himself in the business of the said copartnersliip, and be faithful to the other in all transactions relating to the same, and give, whenever required, a true account of all business transactions arising out of, or connected with, the conducting of the copartner- ship, and that neither one of these parties will either by himself, or with any other person or persons, directly, or indirectly, engage in 'the business of [that of the copartnership], or in any business except that of the said copartnership, and upon account thereof, and that neither will, without the written consent of tho 500 APPENDIX. other, employ either the capital or credit of the copartnership in any other than copartnership business. 5. That books of account shall be kept by the said partners, and proper entries made therein of all the moneys, goods, effects, debts, sales, purchases, receipts, payments, and all other trans- actions of the said partnership ; and that said books of account, together with all bonds, notes, bills, assurances, letters, and other writings belonging to the said partnership, shall be kept where the business of the copartnership shall be carried on, and shall be at all times open to the examination of each copartner. 6. Neither one of the partners, during the continuance of this copartnership, shall assume any liability for another or others by means of indorsement or of becoming guarantor or surety, without first obtaining the consent of the other thereto. 7. At the expiration of each and every year, from the com- mencement of this copartnership, an account of stock, effects, credits, debts, and all copartnership transactions shall be taken, and the true condition of the copartnership, as far as possible, arrived at, and each partner agrees to lend his aid and services the more .completely to effect this object. And in case of the determination of this copartnership from whatever cause, the parties hereto agree to and with each other, that they will make a true, just, and final account of all things relating to their said business, and in all things truly adjust the same. And after all the affairs of the copartnership are adjusted, and its debts paid off and discharged, then all the stock and stocks as well as the gains and increase thereof which shall appear to be remaining, either in money, goods, wares, fixtures, debts, or otherwise, shall be divided ecLually between them. In testimony whereof the parties to these presents have hereunto set their hands and seals the day and year first above written, JABEZ HAMMOND, [l. s.] SEVIER WILSON, [l. s.J In presence of 39. Form of Notice specified in foregoing Articlee. To Mk. Jabez Hammond : SiK : — In pursuance of the liberty reserved under the first pro- APPENDIX. 501 vision of our articles of copartnership, I hereby give you due written notice that the copartnership heretofore existing between us under the copartnership name, style, and firm of Hammond 0 What a creature of, and its qualities, 56 How created, and power how exercised, 57 Acceptance necessary, 57 520 INDEX. CORPORATION AGGREGATE (continued) Its powers enumerated, 58 Governmental. How created, and instances of, 59 CORPORATION STOCK, Instances of, bow created, 60 Bound by act of majority, 6i "" Is its board in joint stock companies, 65 Limitation of its power in making contracts, 67 When held liable beyond powers expressly granted, 67 When, and how, acting through agents, 68 t What acts and contracts capable of making, 70 When liable, and not liable, for negligence and imskilfuhiess of agents, 70 Not Hable for wilful and intentional act of agent, 72 Dissolution of, 73, 74, 75 Consequences of its dissolution, 76 CREDIT, Existing either by agreement or usage, destroys right of lien, 709 CREDITOR, When in condition to question validity of voluntary assignment, 689 What securities entitled to, of principal debtor and surety, 391 Entitled pro-rata in case of assignment by principal debtor, 392 May limit himself to one part owner of a ship, 9 Of partnership, and of individual partner, how reahze their respective debts, 49 DAIVIAGES, What they are, and come in lieu of, 256 Can be agreed upon in advance and liquidated, 257 When sum may be recovered as liquidated, 258 When recoverable under penalty, 259 General principle as to -whether liquidated or penalty, 260 Where entire claim is for, 261 ' Where only nominal, 261 Rule of civil law in relation to, 262 Sometimes dependent upon circumstances, 263 When as punishment, and when compensatory, 264 What profits included under, 265 ■When recoverable after suit commenced, 266 How classified and arranged, 267 When not controlled by agreement of parties, 268 Party required to protect himself from, 269 DANGERS OF THE RIYER, How compared with perils of the seas, 497 DAYS OF GRACE, "WTiat, when allowable, effect of, 337 INDEX. 521 DEBT, EfiPect of transfer of negotiable paper upon, 317 ■\VTicn taken in payment of, 317 Must be extinguished to make creditor bona fido holder of paper for value 318 Against partnership, both joint and several, 4G DEBTOR PRINCIPAL, Default of, before surety liable, 3'JO DECEPTION, When practised, what remedies it gives, CGI DEED, Exception and limitation as to binding partnership, 38 DEFENCES AND EQUITIES, To -which, party takes note after it falls due, 311 Under what circumstances subject to, when taken before due, 313 The most commonly interposed to negotiable paper, 304 When and how interposed, and when available, 3G5 DEFINITION OF COMMON CARRIER, 488 DELIVERY, Of goods to carrier necessary to fix his liability, 494 What sufHcient to a canal boat carrier, 494 WTien to servant *r agent of carrier Sufficient, 494 To consignee discharges carrier, 50G When to be made to consignee within reasonable time, 506 AVhat the consequence of not making in reasonable time, 50G By carrier, where and to whom to be made, 608 When may be made at stopping places without notice, 508 Of goods carried by water, when sufficient, 509 What will excuse the carrier from, 511 Of note, what obligations it creates, 321 Kind of, required by statute of frauds, C50 Acceptance, what sufficient under the statute, G51 Its different kinds, and what necessary to transfer title, C54 \Yiicn sufficient to vest title in vendee, G55 Symbolical, and diflferent kinds of, G5G When that alone is wanting, vendee cannot refuse to receive goods, 057 Place of, in contract of sale and piijTuent of debt, G5S DEMURRAGE, What it is, 40G DEPOSIT, In bailment how defined, 435 When it may be used by depositar}', 438 Obligations of depositary to rctuni, what embraced in it, and when ex- cused, 440 ' May always be returned to true owner, 441 522 . INDEX. DEPOSIT (continued), How restored in case of joint bailment, and its place of restoration, 442 DEPOSITARY, AVTiat obligations under, 436 When only liable, 441 Mandatary, bow liabilities may be changed, 449 DEPOSITAKIES JOINT, How liable, 442 To what entitled to reimbursement, 443 DEPOSITARIES P'OR HIRE, Wlio they are, and what liabiUties assume, 479 DEVIATION, What it is, and effect of, 567 From necessity, what effect, 568 ^^Tien justifiable, and when not, 568 Carrier liable for loss occasioned by, 498 DIRECTORS OF A CORPORATION Can only act when assembled as a board, 65 DISABILITIES, What, 15 Canonical and civil, what, and how they affect divorce, 757 DISCUSSION, , What, and under what law surety entitled to, 393 How far permitted by our jurisprudence, 394 DISPEPSIA, ' . Not a disease tending to shorten life, 618 DISSOLUTION OF PARTNT:RSHIP, Modes of, 47 Immediate consequence of, 48 When occurring through death of partner, what result, 49 One direct consequence of, 50 ^ Effects of, how disposed of, 50 DIVORCE, Different kinds of, and how created, 757 Causes for which it will be granted, 757 A mensa et thoro, effect of, and causes for granting same, 758 Foreign, when legal and valid, and when illegal and invalid, 759 Where parties married in one State, regularly apply for it in another, which prevails, the lex loci or lex domicilii, 760 DORMANT OR CONCEALED PARTNER, ^Vhat, 24 DOUBLE INSURANCE, What, and what rights it gives, 537 DRA^^TIE, What must be satisfied of, before accepting, 326 INDEX. 533 DRAWEE (continued), May offer any acceptance he chooses, 329 What the effect of his acceptance, 332 DRAWER OF CHECK, "When exonerated by want of notice of non-payment, 361 EFFECTS OF PARTNERSHIP, How disposed of, on dissolution, 50 EJffiARGO, ■What, as a peril insured against, 5C1 ENTITIES LEG^yL, How many, and what they are, 25 EQUITABLE LIEN, What, 690 EQUITIES, BALANCE OF, Curious case suggested by Lord Hard wick, 110 EQUITY, How it distributes partnership, and individual funds, in payment of debts, 46,49 EXCEPTIONS TO RULE, Requiring mutuality of assent and obligation, 153 EXTRINSIC CIRCUMSTANCES, Rule in relation to, 183 FACTOR, When he may legally control consignment, 100 FALSE AND FRAUDULENT REPRESENTATIONS, How affecting contract, 182 FIRE, A peril insured against, how occasioned, 558 FIRE INSURANCE, When insured must have interest in, 584 "When double insurance may be effected upon snmo sulioi-t mattrr, 'M FORBEARANCE, As a consideration, 163 FRAUD, ■\\Tiat, and how affecting contracts, 178 AVhat the effect of, wlicn perpetrated by agent, 179 Renders contract voidable, 180 Who can take advantage of, 180 When constructive or legal, 181 Upon third persons, when occurring, 185 When avoiding contract of salo, 645 Classification of, by Lord Hardwick, 645 Practice of, does not destroy lien, 703 624: INDEX. FRAUD (continued), And imposition, as a mode of extinguishing guaranty, 387 FRAUDS, STATUTE OF, What, and what included under, 1 70 \Vliat the tests of contracts coming under, 171, 173 What writing must state when under statute, 174 FREIGHT, May be demanded by carrier in advance, 513 Consequence of not so demanding, 513 What it is, and when considered earned, 513 What gives to it inception, 514 Wlio liable for to carrier, 514 Cannot be discharged by abandonment of cargo, 515 Of animals dying on passage, when carrier can recover for, 516 When paid in advance, tmder what circumstances recoverable back, 517 Eatable, right to, in what cases arising, 518 AVlicn, and under what conditions, apportioned, 519 Under what circumstances insurable, 532 Difference between English and American rule in case of abandonment, 577 FUNDS OF PARTNERSHIP, AND OF INDIVIDUAL PARTNER, How applied in payment of debts, 4G GENERAL AVERAGE, What it is, and under what circumstances arising, 419 WTiat limited to, 420 What may be included under, 421 What the principle of, and what it embraces, 422 What the character of loss covered by it, 423 Wliat the character of the goods that contribute to it, 424 Mode of adj ustment of, 425 Adjustments of, conclusive, 581 GENERAL LIEN, What, 693 GOOD WILL, What it consists in, and when questions relating to, arise, 10 When it survives, and when it does not, and its ownership, 10 GUARANTOR, Liability of, when on note payable to bearer, and in such case how entitled to notice, 377 GUAR.\NTY, What it is, 370 Consideration in, necessary, and analysis of, 371 Undertaking accessorial, when assumes character of principal debtor, 372 Consent of party to whom promise given necessarj-, consequence thereof, 373 Warranty and suretj-ship, how agree, and how differ, from each other, 374 INDEX. 525 GUARANTY (contlnnod), Is collateral engagement for another, and within statute of fraods, 375 Classification of cases in rcforenco to statute of fraud*, 375 Not enforceable without consideration expressed, 375 "NVhen negotiable, and when not, 378 How to be construed, 379 "When continuing or standing, 380 Or suretyship, modes of terminating, 881, 382, 383, 384, 385, 386, 387, 388, 389 To one partner, when available to firm, 35 GUEST, ^^'hat constitutes a person such, 481 And boarder, differenco between, 481 HIRE OF THINGS, What essential to, 470 HIRER, His property in, and right to, the thing hired, 472 His obligation as to use of thing hired, 473 The care and diligence ho is boimd to exercise, 474 His duties as to restoring, and the modea hy which contract may bo termi- nated, 475 HIRING, Contract of, how defined, and extent of, 409 Of labor and services, where it applies, and who takes risk of lou, 4 70 HOLDER OF BILL, ^\^lat right to, as to acceptance, 329 What to do if conditional acceptance offered, 329 When to present for pa^inent, 334 Duty of, when bill or note is payable at particular place, 335 "NVhat arrangements ho may, and may not^ make with acceptor or maker, without discharging indorscr, 34G Why necessary to take steps on dishonor of paper, 349 What must do in caso of foreign bills of exchange, 350 What, after demand and refusal of acceptance, 351 Who is such, suflicient to give notice, 855 ■\Vliat to do when ignorant of residence of drawer or indorscr*, 3C0 What enables him to look to all parties on paper, 303 How to pursue remedies against such parties, 8C3 Bona fide when not protected, 304 When and how affected by defences intcrposcl, 305 Wlien may bring action before bill falls due, 3CG HOLDER OF LOST lULL OR NOTE, What course to pursue, 309 ^Vhat his position, diflicultics and rights, 309 526 INDEX. HUSBAND, What property marriage gives him in the real estate, chattels real, and per- sonal property of the wife, 739 HUSBAND AND WIFE, Principle lying at the foundation of the relation, 738 What becomes of wife's choses in action upon marriage, 740 When former may be required to make provision for latter out of her prop- erty, 741 Relief of latter in courts of equity, 745 Circumstances imder which latter controls her personal property, 746 When latter can contract obligations to others, and how enforced-, 746 How liability of latter for her own debts affected by marriage, 747 Power of disposition of latter, by what means restrained, 748 How latter contracts with former, and mode of conveying real estate, 749 Latter not liable on covenants entered into during marriage, 749 When and how latter may dispose of property by -wall, and by executing re- served power, 750 When marriage settlements in favor of latter valid and enforceable, 751 Cannot be witnesses for, or against, each other, 753 How far declarations of latter affect former, 752 Eights of latter by legislation in New York, 753 HUSBAND'S Liabilities for debts of wife at time of marriage, and how released from them, 742 Obligation to the wife and to third persons, 743 Liability to others for her tortious acts, 743 HYPOTHECATION, When analogous to pledge, 455 IMMORALITY, What contracts void for, 176 INDIVIDUAL DEBTS OF PARTNER, Out of what fund paid in equity, 40 INDORSEMENT, What the essential elements in, 294 When presumptively made, 295 Place where made, 296 How made in case of death of payee, 299 Wlien payable to partnership, 300 When payable to several not partners, 301 By whom, in case of trusteeship, 302 By whom, in case of married women, 303 What two modes of, 303 What sufficient in blank, 304 In full— when, how, and what effect of, 305 DTDEX. 507 INDORSEMENT (contmue.l), In full, who may write it, for what purpose, and with what effect, 30C What two ofiices it performs, 307 ■\Vlmt contract is made by it, and with whom, 307 Effect of, whether done before or after paper falU due, 309 How made to transfer without liability, 314 Follows nature of original contract, 315 How long continues revocable, 31G Similar to drawing bill, and has same conscquoncos, 313 "What evidence, and effect of, 320 INDORSEE, What should be satisfied of before paying, 34-t ^Vhat arrangements holder can make with acceptor or maker viihout di*- charging, 346 INFANCY, *■ Acts of, how ratified and when, 15 INFANT, Who is such, 728 What contracts botmd by, 729 ■^Tiat are necessaries, how and when bound for them, 729 What valid acts ho may do, 731 What acts are good, voidable, and void, 732 How may avoid deeds, writings, and contracts, 733 When sale of chattels and real estate, 733 What safest course as to afBrmancc or disaffirmance, 733 How liable for torts or wrongs, and what, 730 INJURY, To insured vessel, mode of adjustment of, 582 INN, How defined, how regulated, special trust not assignable, 480 INN-KEErER, Who he is, and how differing from boarding-house keeper, 480 Whom bound to receive, and whom may reject, liability' of for baggage, 4t'2 Responsibility of, for guest and baggage, 483 Extent of liability of, for baggage, 484 Liability of, same as common carrier, 485 When burden of proof devolves upon him, and what to Ehow ia exonera- tion, 487 Right of lien when stolen property is confided to liim, COG INSOLVENT LAW, Contracts intervening, void, 177 mSUR-ABLE INTEREST, ^\'hat it may cover, 535 Of party occupying under agreement to purchase, 5?5 528 INDEX. INSURANCE, How made upon a trade illegal by the laws of another country, 530 Legality of, on goods contraband of war, 531 Under what circumstances made relating to insurable interest, 534 Marine, what may bo on, 5G2 What the consequences of, when on time, 562 When on ship for voyage, what required, 563 How it may be on ship, 563 Stock companies as insurers, 609 Mutual Insurance companies as insurers, 610, 611 When agent in possession of property, boimd to make, 107 When agent bound to make, how far liable in case of omission, 108 INSUEANCE, MARINE, How defined, and what a contract of, 525 Agreement for, hS%?- enforced, 525 Of enemies' property, illegal, 526 Through what agency usually procured, 526 Of voyage from abroad, what a sufficient description of, 529 How affected by illegality of subject matter before and after commence- ment of voyage, 530 INSURED, Obligations of, to communicate in case of Life Insurance, 618 INSURER, What he undertakes in event of loss, 525 INTEREST, Required in case of Life Insurance, 615 Quantity of, in partnership, how regulated, 29 Compound, not usury, 195 WTien must be reserved to constitute usury, 200 INTRINSIC CIRCUMSTANCES, Rule in relation to, 184 INVENTORY AND SCHEDULES, Form no necessary part in voluntary assignments, 679 JOINT STOCK COMPANIES, Under what principles come, 21 How formed, 22 To whom management confided, 22 To what members entitled to, 22 When hability commences, 22 What will, and will not, render members of provisional committee liable, 23 Through whom power to contract exercised, 2? JUDGMENT, Effect of on contract, 242 JUSTICE PUBLIC, Contracts impeding, void, 177 nn)EY. 529 LEGISLATION, By Congress on tlic subject of sluppmg, 7 LETTER, Negotiations by, when completed, 15 1 LETTER TO HIRE, What his duties and obligations, 471 Of labor and services, wLat degree of diligence required, and what the mlo ■where skill is necessary, 477 Liability of, where work fails through hia own neglect, 47^ UABILITIES, Of the common carrier, 493 UES, "What it is, and what it implies, COO What in maritime law, what in equity, 690 When part of goods are delivered, G91 Particular, or special, probable origin of, 094 Common law, foundations on which it vests, C95 Right of, when property is stolen, and confided to inn-keeper, and common carrier, 696 Difference in such cases between inn-keeper and common carrier, 69G What essential to it as to debt or charge, 697 What may suspend the right of, 697 When right may revive, 697 In what case equity will create, 697 Of agent or factor, what, 698 What is covered by it, 698 Agreement of the parties a source of, and what will establish it, 699 Not destroyed by special contract, 699 Created by usage, what uistances of, 700 By what usage created, 700 , Of attorney, solictor, and banker, what, 700 Cannot be claimed for unliquidated damages, 701 Character of debt in relation to which it may exist, 702 In what manner lost, 703 How destroyed by change of character, 703 When necessary for protection, toast bo distinctly asserted, or is doem«d waived, 704 How endangered by claiming too much, 704 Under what circumstances equitable may, or may not bo, superior to judgment, 705 Equitable, for purchase money on land sold, and when and how same is destroyed, 706 How destroyed generally by same means, 706 Or conditional sale, when and how waived, 707 34 630 ' IKDEX. LIEN (contlnned), How easily lost, 708 Not aflfectcd by set oflf on each side, 708 Wlien only can subsist, 709 Destroyed by credit existing by agreement or usage, 709 Once complete, how long it continues, 710 How far one may go without losing it, 710 True test of the existence of, 710 How far deHvery may be made, and right of, remain, 710 May exist without personal, actual, possession, 711 Not destroyed by voluntary surrender for a special purpose, 711 LIFE INSURANCE, What it is, and objects contemplated in entering into it, 614 Interest required in, 615 Policies, conditions often inserted in, 619 Their assignabihty, 620 May be revived by accepting premiums, 623 LIGHTNING, r Losses by, when insurer liable for, 597 LIMITATIONS, STATUTE OF, Effect and period of, 245, 246 When commences running, 247 How long continues to run, 248 What will take case from under, 249, 250 Effect of part payment by one of joint and several debtors, on the others, 251 LIMITED PARTNERSHIPS, What they consist of, 23 By what created, 23 How formed, 23 LOAN, How sometimes concealed, 192 and 193 ^Vhat must be for, to make usury, 194 LOAN FOR USE, How defined, 452 Not a contract legally enforceable, 452 Under whai principle comes, and what degree of diligence required, 453 LOSS, What the value in case of, 603 Effect of, when ascertained by agreement, 603 Effect of insertion of sum in fire poHcy, 604 Difference in adjustment between fire and marine, 604 Amount of, which insured is entitled to receive, if he has only qualified property in the thing, 606 INDEX. 631 LOSS (continued), Amount of, how ascertained, 580 Adjustment of, Tvhen final between parties, 582 Partial, what it is, when total may become so, 578 How sum to be paid arrived at, 570 How when goods carried to place of destination, 580 LOSS, TOTAL, Its different kinds, 509 WTiether of ship, cargo, or voyage, 572 LOST BILL OR NOTE, "What course holder to pursue in case of, 3G9 MANDATARY, Only possessory title. Rights which he po=?c=?es, 445 How liable as to diligence and negligence, 447 Difference between and depositary, 447 Difference in liability of, how arising, 448 And depositary, how liabilities may be changed, 449 Under what implied obh'galion, what bound to do, and to what entitled, 450 iL^NDATE, MANDATOR, JLINDATARY, How defined, 444 AMiat tlu"ee things necessaiy to create, 444 What its essential qualities, 444 JL^NDATE CONTRACT, Modes of dissolution of, 451 MANUFACTURER, Cannot in assignment direct the manufacture of his stock, C78 MARDTE INSURiVNCE, How defimed, 525 MARITIME LOANS, Bottomry and respondentia bonds under what circumstances made, 412» l^IARRIAGE,' Who may enter into, 734 Wlio may not enter into, 734 As to which party voidable, 734 Degrees of relationship within which prohibited, 735 How viewed by the law, and what necossary to it, 73G How to be regarded when made in other StJites, and ia fraud of iLc laWB 0< the State where parties reside, 737 Settlements, then valid and enforceable, 751 Contracts in restraint of, void, 1 77 Brokerage contract, what and void, 177 532 mDEX. MARRIAGE, (continued), Disability of, 15 MASTERS OF SHIPS, When liable on contract for repairs, 118 May bind owners, 9 Cannot create lien in their favor, 702 MEMORANDUM, What it is, and its legal effect, 542 What kind of destruction will subject insurer to payment On memorandom articles, 543 Effect of, when pa'rt of articles destroyed, 644 In writing, required by Statute of Frauds, what, 652 MERCHANT, Duties of, imder contract of affreightment, 418 Vessels common carriers, 489 MERGER, As a mode of extinguishing guaranty, 384 MISFEASANCE, Difference between and nonfeasance, 446 Will render party liable, 446 MISREPRESENTATION, Difference between fraudulent and not, 546 What must relate to, 547 Promissory what, and how rendered effectual, 547 MISTAKE, How preventing contract of sale, 644 And ignorance, how differing, 644 Of law and of fact, 644 As a mode of extinguishing guaranty, 388 MONEY, When recoverable back on rescinding contract, 219 Paid by agent for principal, how long liable for, 118 Paid by agent, when recoverable back by principal, 141 MONTH, Whether calendar or lunar, 211, 337 MORAL OBLIGATION, Pre-existing, sufficient consideration, 162 MORTGAGE, Points in which it differs from pledge, 456 MORTGAGEE, Insuring property, what his rights in case of loss, 605 MORTGAGOR, Insuring property and assigning to mortgagee, effect of, 592 MUTUAL INSURANCE COMPANIES, How got up and organized, 610, 611 INDEX. 583 NECESSARIES, What they are, who liable, and when, 72J For the wife, when husband liable for, 743 NEGLECT, Ordinary, gross, slight, what, 434 NEGLECTS, Different kinds of, in bailment, 434 NEGLIGENCE, In the plaintiff prevents his recovery against defendant for an Injtiry, 624 NEGOTIAELE PAPER, What gives it mercantile character, 12 Should be in firm namo to bind it, 42 To bind firm must be negotiated on its behalf, 43 When pledged cannot be sold, 4G1 What parties primarily and secondarily liable, 281 What business, and what accommodation, 282 What its requisites, 284, 285, 287, 288 . , How transferred, and with what effect, 290, 291 Difference in effect of transfer, 292 What gives it this quality, 293 Payable to order, who must indorse, 298 Payable to trustee, or married woman, by whom indorsed, 302 What two modes of indorsing some, 303 What sufficient indorsement in blank, 304 When, how, and what effect of indorsement in full, 303 Who may indorse in full, and for what purpose, 30G What two offices indorsement performs, 307 What contract is made by it, and with whom, 307 Difference in effect of indorsement of, before and after due, 309 Subject to what defences, &c., taken after due, 311 Payable on demand, when due, 312 Under what circumstances subject to defences when taken before due, 313 How transferable without incurring liability, 314 Indorsement of, follows nature of original contract, 315 Indorsement of, how long revocable, 316 Effect of, when transferred on prcvteus debt, 317 , Under what circumstances received in pajTnont, 317 Indorsement of, has same consequences ns drawing, 319 Indorsement of, what evidence and effect of, 320 When transferred by delivery, what obligation created, 821 WTien it must, and may, and may not, be presented for nccoptanrc, 323 When to be presented for acceptance, when paynblo oo long aAcr sight or demand, 324 What elements enter into acceptance of, 325 What drawee must bo satisfied of, before accepting, 82G 534 INDEX. NEGOTIABLE PAPER (continned), Wlieri promise to accept equivalent to acceptance, 327 ■\\Tiat different acceptances may be offered, 329 "WTien payable at particular place, duty of holder, 335 WTien pajTuent of demandable, 338 Place where demand of pajTnent to be made, 339 ■\^Tien lost, how demand of pajTuent made, 340 When necessary to be protested, 350 ■\^Tiat mcluded under term protest of, 352 By whom notice 6f dishonor of to be given, 355 To whom notice of dishonor of given, and by whom, 356 "What the tune and manner of sei-vice of notice of dishonor of, 357 Manner of serving notice of dishonor of, 358 When prior parties to, held hable without notice of dishonor, 362 What enables holder to look to all parties on, 3G3 When parties to, may be sued before bill falls due, 366 , When bank liable for not protesting same, 367 When lost, what course holder to pursue, 369 In case of loss, what holder's position, difficulties, and rights, 369 NOMINAL PARTNER, What, 24: NONFEASANCE, Will not render party liable, 446 NON-PERFORI\IANCE OF CONTRACT, What excuses, 212, 213 NOTARIAL CERTIFICATE, ■What it must contain, 352 NOTARY PUBLIC, When services first necessary, and what constitutes his duty, 350 What to do on receiving bill, 351 Must perform his service personally, 352 Who the agent of, and what to do after the demand and refusal, 353 NOTES, Exchange of, how affecting usury, 206 NOTICE, By whom to be given, 355 What the essentials of, 354 NOTICE GENERAL, When, and how, carrier can limit his liability by, 502 Against what it does not protect carrier, 505 NOTICE OF DEMAND AND REFUSAL, What the principal points, 353 NOTICE OF DISHONOR, Different manners of servmg, 358, 359 What necessary as to time of giving, 357 INDEX. 535 NOTICE OF DISHONOR (continued), "When prior parties held liable without receiving, 3G2 NOTICE OF DISSOLUTION OF PARTNERSUIP, ■ftTien necessaiy, and for what purpose, 51 WTiat single or dormant partner must do, 62 When not necessary, 53 Not in case of partner's death, 54 Two different modes of giving, 58 NOTICE TO AGENT, TVTien it affects the principal, 135 Sufficiency of, 135 OBLIGATIONS, To make mutual disclosures, what, 646 OWNER OF GOODS, How bound to deal with the carrier, 503 • PARENT AND CHILD, What the obligations of the former, and his rights as to his minor children, 754 Power of former to discipline latter, and to whom courts giro custody d latter, 755 PARTICLTAR OR SPECIAL LIEN, A\Tiat, 693 PARTIES INSURERS, Who they are, 526 To bill of exchange, 271, 272, 273 , Who primarily and secondarily liable on negotiable paper, 281 PARTNER, Of what he has power of disposition, 26 Effect of holding one's self out as such, 20 Borrowmg money, when an individual, and when a partnership debt, 36 Selling goods gives title, though proceeds misapplied, 35 Cannot apply partnership property on his own account, 35 Powers of, in all co-partnership matters, 36 Power of, to ruin through negotiable paper, 4 1 Cannot, after dissolution of firm, revive debt against it, 45 Dissolving or retiring, how to give notice, 55 PARTNERS, Right of one, to make a voluntary assignment, 667 Their different kinds, 24 WTiat they owe towards each other, 30 Cannot charge partnership for services, 30 When they can brmg action at law against each other, 32 Remedies against each other where enforceable, 32 Rights of, on dissolution of partnership, 48 536 INDEX. PARTNERSHIP, Wliat it results from, IG What constitutes its important feature, 17 ^Vbat stipulation, as to profits, -will create, 18 What necessary to create, as to assent, 19 Different modes by which formed, 20 For what formed, 21 Limited, what consist of, 22 Limited, by what created, and how formed, 22 ' Fund, relations of partners to, 2G When it embraces real estate, 27 Stock. Limitation of, when embracing profits only, 28 Agreement, what it generally specifies, 31 * What it is, with what clothed, 33 Power of partner to bind, 37 Mode of binding by partner, 38 Limitation as to power of partner to bind, 39 Bound only when third person acts in good faith, 44 Effects, how applied by equity inpayment of debts, 46 Modes of dissolution of, and consequences, 47, 48 PART OWNERS OF SHIP, Are agents for each other, 9 Power over vessel and when hable for each others' torts and wrongs, 9 PART PAYMENT, Effect of, on statute of limitations, 250 Effect of, in case of joint debt, 251 #ARTY, Entitled to question assignment, 686 Paying supra protest, to what rights entitled, 368 Paying bill or note, what should do, 347 Difference in receiving note before or after due, 309 Receives it clothed with advantages of party giving it, 310 Subject to what defences and equities receives it after due, 311 PAYEE, Who and when must indorse, 298 In case of death of, who indorses, 299 When a partnership indorses, and how, 300 When of several not partners, who mdorses, 309 PAYMENT, Persons to whom it can be made, 222 Of part, in satisfaction of contract, 223 Under what circumstances presumed, 224 ( Modes in which it may be made, 224 Effect of receipt given on, 227 Demand of. Elements composing, 336 INDEX. 537 PAYMENT (continued), Time for making, and how compnted, 337 How made in case of lost bill, 840 '\\Tien notice of unnecessary to drawer, 3i I Of whom made, 343 A\Tiat acceptor or maker should be satiified of, before makijig, IW-4 In what made, and when check evidcuco of, 345 Made of bill or note, when recoverable back, 348 By agent discharges principal, 13G How affected if agent pcrmitt».d to deal as principal, 137 Principles that govern application of, 225 Effect of, where several accounts treated aa one, 220 As a mode of extinguishing guaranty, 381 PENALTY, "When viewed as such, and not as liquidated damages, 259 PERFORMANCE OF CONTIUCT, "V\Tio the party to, 208 'What the manner of, 209 How to be done, 210 Rule of, as to time, 211 "WTien condition precedent and covenant consideration, 21-t PERIL, Must bo proximate cause of loss, 55G PERILS OF THE SEA, What do and do not include, 555 Insured against, what and where found, 554 PERSON, Competent to demand pajTncnt and what must have, 343 PERSONAL LIABILITY, Under what circumstances agent may assume, IIG "WTien incurred by agent, 117 PERS0N.4X PROPERTY, Characteristics of, as distinguished from real, 1 Inalienable, 4 PLACE OF DELHTRY, In contract of sale and paj-ment of debt, whore, C58 Wliero demand of payment to bo mode, 339 PLEDGE, What it is, what property may bo plodg.- 1, what c!«««ntial to it, 455 In what respects differing from jnortgngo, 4.'>(J Under what principle it comes, 458 Wiut is carried witli it, andVhal its security dcjKiwU upon, 45D Wiat debt or debts only it will cover, 400 Wlicn consisting of negotiable pajHsr cannot b« lold at publie or prirau sale. 4G1 638 INDEX. PLEDGE (continued), When consisting of several things, each liable for whole, 402 By what means contract of extinguished, 4G8 PLEDGEE, What bound to, and answerable for, 458 "What his interest or property in pledge, 460 PJghts of, as against pledge and debtor, 461 Cannot appropriate or purchase pledge, 463 Under what circumstances may compel sale, 463 Under what circumstances may use pledge, 464 PLEDGOR, "When liable for injury or loss of pledge, 468 Eight to redeem pledge, 466 Right in pledge when sold under execution, 467 PLEDGOR AND PLEDGEE, Extent of interest or property of each in pledge, 457 POLICIES, On outward and home voyage, 564 POLICIES AND PREMIUM NOTES, Whether constituting the same or different contracts, 612 POLICY OF INSURANCE, What its design, 538 POLICY WAGER, How regarded in England and in this country, 538 Open and valued what, 539 When valued what questions are open, 539 What it should contain as to names of parties, 540 "When on a ship, what necessary, 541 How long it protects vessel, 506 For fire insurance, what made part of, 587 POSSESSION OF PERSONAL PROPERTY, What prima facie evidence of, 684 "Whether prima facie or conclusive evidence of fraud, 685 POWER, Of one partner to bind firm, and where he cannot, 45 i Of corporations limited in making contracts, 67 POWERS OF CORPORATIONS, Enumerated, 68 How confined, 62 PRELIMINARY PROOFS, In insurance how waived, 608 PREMIUM NOTES, How held and enforceable against makers by the company, 613 la what cases return may be enforced, 583 INDEX. 639 PEICE, What it Is, and essential to what, C29 Inadequacy of, what eflfect as to enforcement of contract, C30 ^Mien not paid down, effect of, 03 1 PRIiL^GE, ■\Vhat it is, 419 PRINCIPAL, When may become agent for his agent, 110 When Uable for negligence and unskihulness of agent, 12G Not liable for acts of sub-agents, 127 Not for wilful act of agent, 128 When liable for a wrong done by agent, 129 Liability of, for frauds, torts, &c., committed by agents, 129 His knowledge, that of the agent, 130 Not Uable for injuries done one agent through carelessness of another, 131 Not criminally liable for acts of agent, 132 When chargeable with declarations of agent, 134 ■WTien affected by notice to agent, 135 LiabiHty for purchases made by agent, 136 How affected by acts of agent, 139 WTiea may recover back money paid by agent, 141 Giving time to, as a mode of extinguishing guaranty, 333 To be repaid to constitute usiu-j', 198 PPvOFITS, Commimity of, essential to partnership, 1 7 Participation in, what qualification neccssarj', 18 Partnership in, what effect it has on partnership stock, 23 Under what circumstances insurable, 535 Loss of, what recoverable under damages, 2G5 PROmSE, On each side must be concurrent and obligatory, 147 As consideration for a promise, IGl Not enforceable founded upon no consideration, 104 Express, when supported by executed considcratimi, 103 What must be to take case out of Statute of Umitatjou5, 219 WTien contained in fire policy may amount to a wurantj-, 690 "Wlien to accept equivalent to acceptance, 327 PKOJILSSORY NOTE, Form of, 270 Definition of, 274 When it assimilates to bill of exchange, 275 In what analogy consists between it nnd bill, 270 PROPERTY, In thing deposited ncccssaiy to depositor and depoMtary, 439 640 INDEX. PROPOSITION, Its agency in the formation of contract, 145 When verbal when to he accepted, 149 PROTEST, When necessary, 350 "What is included under the term, 352 PROVISIONS, What prescribing proceedings in case of loss, 607 PUBLIC POLICY, "What contracts void as against, 177 Enemy, who it is, 499 Common carrier not liable to loss by act of, 495 PURCHASES, Made by agent, how affecting principal, 136 QUALIFIED ACCEPTANCES OF NEGOTIABLE PAPER, What parties they affect, 330 QUESTIONS, To which answers are required in applications for life insurance, 616 RAILROAD COMPANY, When liable for servants refusing to work on road, 498 Liable upon failure through wilful act of agent, 498 REAL, Ostensible partner, what, 24 Estate, when it becomes partnership effects, 27 RE-ASSURANCE, What, and what insurer to prove, 536 RECEIPT, Effect of, how construed, 227 When pledged on discount of bill to be accepted, hinds property, 331 RECOUPMENT, What it is, and principles settled in it, 255 REDEMPTION, Right of in pledge, inalienable, 466 REFUSAL QUESTION, ^Vhat it is, and how probably settled, 150 REGISTERING, When done, effect of, and what necessary in case of change of owners, 6 RELEASE, Different modes of, 230 When settlement between creditors and debtor good without, 231, 282 Before and after breach of sealed executory contract, 233 AVhat necessary and equivalent to, 234 INDEX. 541 RELEASE (continued), Upon what operates, 235 By one of several joint creditors, 236 To joint debtors, 237 "When hy operation of law, 238, 239 As a mode of extinguishing guaranty, 383 REPRESENTATION, WTiere found, what relates to, what, 546 What effect when fraudulent and not fraudulent, 546 What effect of, to first insurer, 548 VTha.t is matter of, 549 When it is, and is not, made part of fire-insurance policy, 688 In whose judgment material, 599 False and fraudulent, how affecting contract, 182 REQUISITES, Of negotiable paper, what, 284 RESCETO CONTRACT, When party may and may Jot, 215, 216 Who may do it, 218 When party may do it and recover back money, 219 Test as to right to, 221 RESCESTDING CONTRACT, How if at all, 217 RIGHTS OF THE CARRIER, What they are, 512 Of corporations, shaped from contract, 57 RISK IN LH^E POLICIES, WTien commencing from, and how long continues, 622 RULES ANT) REGULATIONS, May be prescribed by passenger carriers, 522 Relating to by-laws, 63 SALE, Of property as distinguished from bailment, 432 Or exchange, what it is, 624 Of goods not in possession of vendor, effect of, 627 Contract of, when entire and when severable, 632 Particular species of, severable, 633 When executory, 634 WTien article to be manufacturctl, 635 How vendee may entitle himself to title, 636 When conditional, and effect of, and on trial, what, and what righta, and duties, of vendee, 637 542 itTOEx. SALE (continued), Implied conditions of, 638 Conditioned on payment of price, 639 Conditional, when implied waiver of, 640 Limit of communication of superior knowledge, 647 ' Contract of, what mutual disclosures of facts essential to, 646 SALES BY AUCTION, How affected by by-bidders or puffers, 186 How rendered void by agreements not to bid at, 186 SALVAGE, What expressed by this term, and what applied to, 426 Amount of, how ascertained, what principles governed by, what usual rat* of, 427 What expressed by the term, and what applied to, 426 SALVOR, Who he is, who entitled to become such, 428 Out of what to receive compensation, 426 SAMPLE, Sale by, when amounts to warranty, 665 SATISFACTION, Quahty of, 229 SEAMEN'S WAGES, Not insurable, 532 SEAWORTHINESS, What embraced in, warranty of, and different kindi? of, 651 SECURITIES, How affected by usury, 201 Originally valid cannot subsequently be affected by usury, 205 SET-OFF, On each side, wiU not destroy lien, 708 How affected by dealings between principal and agent, 138 What it is, 252 What a creature of, and what necessary to constitute, 253 What the debts need not, and what they must, amount to, 254 SHIP, Who owner of, and what the test of ownership, 409 Owners of, duties relative to voyage, 407 Under what implied warranty, and what liable for, 408 Sale of, how perfected when abroad, 8 How considered when belonging to partnership, 9 In what manner title acquired to, 5 SHIPS, How Americanized, and who owner must be, 6 SIGNATURE OF PARTY ON BACK OF NOTE, When not payable to his order, what liability created by, 37S INDEX. 543 SILENCE, When it Is, and is not, equivalent to misrepresentation, 184 STATUTE, How may make void a contract, 190 STATUTE OF FRAUDS, "What, and what included under, 170 What the tests of contracts commg within, 1?1, 173 Classification of cases in reference to, 375 Provisions of English statute, G-t8 What contracts within, and what not, 649 Kind of delivery required by, 650 What writing must state, 17'4 STATUTE OF LIMITATIONS. Effect and period of, 245, 246 "ftTien commences running, 247 How long continues to run, 248 What will take case out of, 249, 250 STEAMBOAT, When common carrier, and when not, 489 STEP-FATHER, ^ What his relations and rights as to children of wife by former husband, 75G STOCK, Insurance companies, what, 609 STOCKS, Of incorporated companies, how pledged, 455 STOCKHOLDER OF STOCK CORPORATION, Not disfranchisable, 64 STOPPAGE IN TRANSITU, Wliat it is, on what conditions depends, 712 Whence derived, 713 Who the parties, to what extends, 714 What its necessary condition, 715 How destroyed, 716 Effect of constructive delivery, 717 When goods in transit, 718 When transit at an end, 719 When goods in constructive possession, 720 Insolvency of vender and evidence of it, 721 What acts of vendee destroy right, 722 Effect of delivery order, 723 How destroyed by assigning bill of lading, 734 How right to be exercised, 725 To whom notice to bo given, 726 Effect of exercise of right, 727 644 INDEX. SUBJECT MATTER ES^SURED, Where to appear, 527 Effect and necessity of phrase " lost or not lost," 528 SUBROGATION What, and how far, surety entitled to, 395 SUPPRESSION OF JMATERIAL FACT, How affecting contract, 183 SUPRA-PROTEST, "When done, how, and what effect of, 332 Party paying under, to what rights entitled, 368 SURETIES, Relations between, and how shown, 402 Rights of, as against each other, 397, 398, 399, 400, 401, 402 SURETY, Rights of, against the principal, 396 Not liable till default of principal, 390 Rights of, against creditor, 393, 394, 395 When only can resort to surety for contribution, 400 What he cannot recover against another, 401 SURGICAL OPERATIONS, What the rule of liability in, 477 TENDER, Defence of, what it requires to be good, 244 Effect of, made by or to agent, 94 TEST, First one as to whether contract is collateral or original, 171 Second one as to same thing, 173 As to right to rescind contract, 221 THEFT, As peril insured against, what it means, 560 THING TO BE HIRED, Its nature, quality, essentials, 470 THING TO BE SOLD, What to have at time of sale, 625 THINGS, Which may be subject of sale, 628 In possession and in action, what in each, 2 TIME, At which delivery to be made by carrier, 506 At which indorsement is made, 294 What the essentials of, in giving notice of dishonor, 357 Of performing contract, what, 211 TITLE, How acquired and transferred in shipping, 5 INDEX. 545 TITLE (continued), To personal property, how transferred by operation of law, G:>4 Partial failure of, effect as to rescinding contract, Cl'G To things sold, wLeu implied warrantee of, Co'J TRADE, Contracts in general, and partial restraint of, 177 TEADE MARKS, "Wbat analogous to, 11 How right to acquired, what name or marks, whoa merehant not to ojc, and what the remedy, 1 1 TRADER, "Who he is, 13 TRANSFER OF NEGOTIABLE PAPER, How made without incurring liability, 314 By delivering what obligations it creates, 321 UNREGISTERED SHIP, Its disabilities, G USAGE, What necessary to create lien, 700 USAGE OF CARRIER, To receive goods at certain places, sufficient, 494 USAGE OF TRADE, How affects express and implied contracts, 15G USURY, ^Vhat, and what inquiries arise under it, 191 What the first essential to, 102 WTiat loan must be for, to make, 1 94 Not by taking compound interest, 195 Not by charge for expenses, 196 Not by taking interest in advance, 197 ^Tiat essential as to repayment of principal, 19S Effect where party can discharge liimsclf from pa}-ing any inMreu, 190 When interest to be reserved to constitute, 200 How affecting remote securities, 201 How affects new agreement in consideration of forboaraixw, 202 How may be rescn-cd, 203 "Who only can set it up, 204 When note originally valid cannot bo subsequently allbctod by, 805 How affected by exchange of notes, 20G VENDEE, May intercept goods in transit, and destroy right of atoftpag* la te«c situ, 722 35 546 INDEX. VESSEL, VTiat in a legal sense is stranding of, 545 When presumed to have perished at sea, 657 WAIVER OF PROTEST, How construed, 352 Of right of lien, how done, 704 Of conditional sale, when implied, 640 la case of insufficiency of preliminary proofs in insurance, 608 WARRANTY, RELATING TO INSURANCE, Wiat, how introduced, how differs from representation, 650 Implied, what the most important, 551 Implied of documentation, 553 Its different kinds, impUed of title, 659 Not implied as to quality, 660 WARRANTY EXPRESS, What it may consist of, and the rule of construction, 662 General object of it, when to be made, and what defects are covered by, 663 What may amount to, 664 When sale by sample amounts to, 665 WIFE, To whom her choses in possession go upon marriage,, 739 To whom her choses in action go in event of marriage, 740 Ability of, to contract and acquire property and rights, 744 Declarations of, when affecting husband, 752 Liability of, for her separate debts how affected by marriage, 747 How to contract with her husband, and to convey interest in real es- tate, 749 How to dispose of property by will, 750 WTien settlements in favor of, enforcable, 751 Power of disposition over her separate property, by what means re- strained, 748 Necessaries, when husband is, and is not, liable for, 743 Relief of, in courts of equity, 745 Property, when court of equity wUl secure for her benefit, 741 Power of^ over her separate property, obligations to others, and how en- forced, 746 Eights of, by legislation ia the State of New York, 753 INDEX TO PRACTICAL llEMARKS ^VND FOKMS, With Reference to the Page. tkan ARBITRATION, form of Submission to 473 ASSIGNIIENT, of Judgment, form of 4C0 OfMortgage, 470 Voluntary, by Insolvent Debtor, form of 470 AWARD OF ARBITRATORS, form of 473 BILL OF EXCHANGE, foreign 473 Inland 474 BILL OF LADING, form of 49G BILL OF SALE 481 BOND, Bottomry 479 Common Money ......... 478 Of Indemnity 479 CERTIFICATE, of Acknowledgment of Execution of Deed, or Mortg«g« 49(5 CHATTEL MORTGAGE, form of ....... 4&4 Schedule referred to in . . . . 49C CHECK ON A BANIv, form of .474 CODICIL TO A\TLL, how executed and regarded ... 4C8 Form of CO6 CONTRACT, general form of, with mutnol coTcnant^ 4t"3 For sale of shares of Stock 4.*3 For s-ale of Land 481 DEED, -what essential to as to Bcaling and delivery 4GS Different kinds of 4CS Common Warranty, what ncccssoiy befors action apminrt Grantor 4'*>l What amount of interest and estate conveys. ccn moM thorough." — yew Yoik rajur. 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