UNIVERSITY OF CALIFORNIA LOS ANGELES SCHOOL OF LAW LIBRARY WILLIAMS & ROGERS SERIES COMMERCIAL LAW BY D. CURTIS GANG, LL.M. OF THE ROCHESTER, N.Y., BAR ASSISTED BY SAMUEL C. WILLIAMS TEACHER OF COMMERCIAL LAW IN THE ROCHESTER . BUSINESS INSTITUTE NEW YORK-:- CINCINNATI-:. CHICAGO AMERICAN BOOK COMPANY T COPYRIGHT, 1904, BY L. L. WILLIAMS AND F. E. ROGERS. ENTERED AT STATIONERS' HALL, LONDON. COMMERCIAL LAW. w. P. 8 PREFACE THE author of this work has aimed to select from the exten- sive field of the law those fundamental" principles, a knowledge of which the business man will most frequently find of value to him, and which the teacher of Commercial Law will regard most useful to his classes. It is not the purpose of this volume to make lawyers of its readers, but to teach them to discern the ways that lead from litigation, and to enable them to conduct their business dealings with an intelligent idea of their legal rights and limitations. Technical terms have been avoided as far as possible, and when it has been thought advisable to use them they have been fully defined either in the text or in the glossary. The latter contains a most complete list of the legal terms ordinarily em- ployed, with concise yet sufficient definition. The subjects discussed have been arranged in the order in which it is deemed advisable for the teacher to present them. It is believed that all of the subjects with which the business man should become familiar have been included in the present volume, and are explained with sufficient detail to give the reader a correct knowledge of the law concerning them. In many instances different conclusions that have been arrived at by the courts in the several states have been pointed out in detail, that the student may understand the conflicts in the laws of the different jurisdictions. Believing that in the illustration of legal principles, actual cases decided by the courts furnish material much more valua- ble for the student than purely hypothetical cases, careful selection has been made throughout the text from the reports of cases in the different American and English courts. 3 767748 4 PREFACE The tabulations at the end of the volume give in a general way the statutes of the different states on several important topics, and may be consulted by the student in determining the law in his own state. Full sets of forms have been given in appropriate connection with the text, and they will be found a valuable guide to the student not only while using this work as a text, but also as a reference when occasion may require his use of such forms in business transactions. D. CURTIS GANG. CONTENTS PACE LAW IN GENERAL - CONTRACTS. 1. In General I2 2. Parties je 3. Infancy ,6 4. Insanity .......... 21 5. Married Women 23 6. Offer and Acceptance ..........24 7. Consideration 29 8. Reality of Consent Mistake 35 9. Reality of Consent Fraud .38 10. Subject-matter . . .........44 11. Operation of Contract ......... 50 12. Statute of Frauds 53 13. Sale of Goods Act 58 14. Discharge of Contract 60 15. Damages ............ 73 1 6. Discharge of Right of Action -74 SALES OF PERSONAL PROPERTY. 1. In General 84 2. Fixtures 86 3. Parties to a Sale ' . . .92 4. The Contract of Sale 95 5. Conditional Sale ........... 99 6. Warranties 104 7. Remedies for Breach 108 NEGOTIABLE INSTRUMENTS. 1. In General . ........... 116 2. Promissory Notes . . . . . . . . . .123 3. Bills of Exchange . 128 4. Checks 133 5. Negotiation 136 6. Defenses ............ 149 7. Discharge 153 8. Interest and Usury 154 AGENCY. 1. In General ............ 159 2. Relation of Principal and Agent ....... 160 3. Obligation of Principal to Agent ........ 165 4. Obligation of Agent to Principal ....... 166 5. Obligation of Principal to Third Party . * . . . .170 6. Liability of Principal for Torts or Wrongs of Agent . . . .'171 7. Obligation of Third Party to Principal 173 8. Obligation of Agent to Third Party 173 9. Termination of the Relation of Principal and Agent . . . .174 10. Change in Condition of the Parties . . . . . . .176 BAILMENT. 1. In General 180 2. Bailment for the Bailor's Sole Benefit 183 5 6 CONTENTS PAGE 3. Bailment for Bailee's Sole Benefit ....... 187 4. Bailment for Mutual Benefit ........ 190 5. Innkeepers ... ......... 197 6. Common Carriers .......... 200 7. Liability of Common Carriers ........ 206 8. Carriers of Passengers ......... 213 PARTNERSHIP. 1. In General ............ 221 2. Rights of Partners between themselves ...... 229 3. Liability of Partners to Third Parties ....... 234 4. Remedies against the Partnership ..... 236 5. Dissolution ............ 237 6. Joint Stock Companies ......... 242 CORPORATIONS. 1. In General ............ 247 2. Powers and Liabilities of Corporations ...... 252 3. Dissolution of a Corporation ........ 254 4. Membership in a Corporation ........ 257 5. Management of Corporations ........ 260 6. Rights of Creditors of Corporations ....... 261 INSURANCE. 1. In General ..." ...... ... 265 2. Fire Insurance . .......... 265 3. Fire Insurance Policy .......... 270 4. Life Insurance ........... 274 5. Marine Insurance .......... 280 6. Casualty Insurance .......... 283 REAL PKOPKRTY. 1. In General ........... , 290 2. Estate in Land ........ ., 2 gz 3. Estates by Marriage . . . . . . . , . 296 4. Sale and Conveyance of Real Estate ....... 299 5- Deeds ............. 3O2 6. Mortgages ............ 3 , 2 7. I-andlord and Tenant ...... ... 321 COURTS AND THEIR JURISDICTION ...... 332 PLEADING AND PRACTICE ....... ,--."* 342 APPENDIX. Limitation of Actions .... ^ei Interest Table .*.... ,. Days of Grace ...... \ Vil Statute of Frauds Married Women ..!'.! 357 Exemption Laws ..... 7cq Chattel Mortgages . . ' . . . [ \ \ [ [ ^ GLOSSARY .............. 3?I ABBREVIATIONS <>,. 35 387 COMMERCIAL LAW LAW IN GENERAL Definition. Law in its broadest sense is a rule of action. Every plant grows and every animal lives, develops, and dies according to a law; the movements of the heavenly bodies as well as the changes of the seasons are also under a like control. It follows, therefore, that law in a general sense is a very compre- hensive subject and includes all of the sciences. In a narrower sense law is the system of principles and rules which relate to the actions of men in their dealings and relations with one another. Law Classified. Law may be classified as moral, international, and municipal. Moral Law. The code of ethics which prescribes the right and wrong in the conduct of one toward another, is called the moral law. Its rules are enforced by the sentiment of the people derived from their belief in, and understanding of, right and wrong. The study of this subject belongs to the science of ethics rather than to law. It is moral laws that tell us to deal honestly, to speak truthfully, and not to take advantage of the weak. International Law. The law which regulates the intercourse of nations is international law. It consists of rules and princi- ples founded on customs, treaties, the weight of opinion as to justice, and the mutual obligations which civilized nations recog- nize as binding upon them in their dealings with other nations, each being supreme and independent. The conduct of the vessels of different nations toward one another on the high seas, which are open to all, is a question of international law, as 7 8 LAW IN GENERAL are the rights and protection of representatives of one country within the boundary of another. Municipal Law. The rules of action prescribed by the supreme power in a state, commanding what is to be done and prohibiting what is not to be done, constitute municipal law. Every state or nation must have some head or supreme power, and in a republic like ours this power rests in the people and is administered by the officers whom they elect. The laws are made by the legislators, administered by the executive depart- ment of the government, and interpreted by the courts who apply these laws to the cases that are brought before them. It is necessary in civilized nations that the conduct of man in relation with his brother man be regulated and restricted. Otherwise a resort to arms would be the only redress for a wrong. So it is that municipal law is required in order to insure justice and harmony. Because of this branch of the law contracts can be enforced, possession of real property acquired by its true owner, and crimes punished. Municipal Law Classified. Again, municipal law can be classified as constitutional law, ecclesiastical law, common law, and equity. Constitutional Law. Every nation or state has a constitu- tion, either written or unwritten, under which the nation exists and which as the basis of its power regulates, distributes, and limits its different functions and departments. The law apply- ing to these constitutions and to the establishment, powers, and limitations of the government as applicable thereto is known as constitutional law. The United States Constitution provides that no person shall be deprived of life, liberty, or property without due process of law. The law applicable to such a case is constitutional law. Ecclesiastical Law. This is the law administered in the English ecclesiastical courts and is a system restricted mainly to the affairs of the church and matters pertaining thereto. This court is not known in America. In England, among other things, the ecclesiastical law had control of questions affecting the marriage relation. LAW IN GENERAL 9 Common Law and Equity. The great body of municipal law in early English practice was known as the common law and consisted originally only of customs. These, however, because of long usage came in time to have the force of laws. As the affairs of a growing commercial country became more intricate, the hard and fast rules of common law which were firmly bound down by precedent were found inadequate for all the needs of the people, and there sprang up the chancery courts which decided controversies from an equitable standpoint and gave relief inde- pendent of precedent. This chancery or equity court still exists in a modified form, but the distinction between common law and equity has in a great measure disappeared. The distinction of to-day consists in the relief sought ; if it be merely money dam- ages, then it is a common law case ; if some extraordinary relief, as prohibiting a man from erecting a powder factory on his land which would endanger his neighbor's dwelling, or correcting a deed of land which was improperly drawn, then the case is in equity. Division of Common Law. Common law can be divided into criminal and civillaw. Criminal Law. The preservation of society demands that certain rules be laid down regulating the acts of its members toward the community in general. A violation of these laws is an offense against the state and is called a crime. The law which treats of crimes and their punishment is called criminal law. It forbids one man to steal from another, making it a crime, because such acts endanger the security of property and the safety of society, and a punishment of imprisonment for such an offense is therefore provided. Civil Law. As distinguished from the criminal law, that branch of law which looks to the establishment and recovery of private rights is called civil law. It controls the private rights and remedies of men in their relations with each other, in contrast with those that are public and affect the. community in general. As an illustration, if one man sells goods to another who does not pay for them, the seller can sue for the^price and the case is a civil action. IO LAW IN GENERAL Commercial Law. The subject which we are about to pursue, commercial law, is a branch of the civil law, and includes the laws regulating the rights and relations of persons engaged in trade or commercial pursuits, as the law of contracts, of part- nership, or of agency. Sources of Laws. Our laws may be considered as derived from three sources, the common law, the statutes, and the Con- stitution. The common law, which was derived primarily from the English law, was established in this country by the early English settlers. It is made up of the rules and customs which were in use from time immemorial and came to be recog- nized as laws. It is also termed the unwritten law, because in the early times it consisted merely of the customs of the people. Now it is embodied in the decisions of our courts, the great mass of our reports of these decisions being the common law in this way reduced to writing. The United States and also each of the several states have their law-making bodies. In the United States it is Congress, and in the states, the legislatures. These bodies from time to time pass certain laws, which are known as the statute laws, also called the written laws. These statutes may expressly change the common law, as is often the case, when the condition of the nation or the progress of the people requires it. For instance, by the common law a wife could hold no property, as at her marriage it reverted to her husband, but by the statute law in all of the states this is changed, and now in most of them she can hold property to the same extent as though unmarried. In other cases the statutes declare and put in express terms a part of what formerly existed in the common law ; as, under the com- mon law persons meeting on the highway were to turn to the right, and the same rule is now laid down in the statutes. The constitutions of the United States and of the several states are another form of the written law. In the United States the Constitution is paramount in impor- tance, and, in so far as it applies, all other laws must give way. It provides that certain subjects that come within the province of the general government shall be under the exclusive authority LAW IN GENERAL It of Congress, and that the constitutions and legislatures of the several states can not provide or make laws to the contrary. On the other hand, all subjects not expressly confided to Congress are left to the state authorities, and are under the control of the constitution and statutes of the state. Every state statute must be in conformity with the constitution of the state, as well as with the Constitution and laws of the United States. The common or unwritten laws also must be in conformity with the statutes of the state, as well as with the state constitutions and the Constitution and laws of the United States. QUESTIONS ON LAW IN GENERAL 1. Define law in its broadest sense. 2. Name and define the classifications of law in a narrower sense. 3. Name and define the classifications of municipal law. 4. Name and define the classifications of common law. 5. What are the three sources of our laws ? 6. When the laws from these different sources conflict, which b paramount ? CONTRACTS i. IN GENERAL Definition. A contract is defined by Blackstone to be an agreement between two or more persons, based upon sufficient consideration, to do or not to do some particular thing. Necessary Conditions. There are many elements necessary to make a legal and binding contract, but at the basis there must be an offer and an acceptance. A mere statement of intention, or an offer not accepted, does not constitute a contract. There must be parties legally capable of entering into the contractual relations, or the contract will not be binding. There must also be sufficient consideration, and the subject-matter of the contract must not be contrary to law. In some cases, by statute, it is required that the contract be in writing and under seal. Executed and Executory Contracts. Contracts may be con- sidered under the classification of executed and executory contracts. An executed contract is one in which the transaction has been performed and the terms of the agreement fulfilled. It is a contract which has been carried out. An executory contract is one in which the thing agreed upon has not been done. In some cases the contract may be executed on one side and executory on the other ; that is, one party may have performed his part of the contract, while the other party has not. An illustration of this class of contracts is found in Andreas v. Holcombe, 22 Minn. 339, 1 which was an action upon the follow- ing agreement : 1 The cases cited throughout this book arose in the state or country indicated in the title. Thus the case of Andreas v. Holcombe, 22 Minn. 339, given above, arose in the state of Minnesota and will be found in volume 22 of the reports of the 42 IN GENERAL ,, ST. PAUL, MINN., 17 June, 1874. "In consideration for causing a 12-inch view of Park Place Hotel to be printed in his atlas of the state of Minnesota, I promise to pay A. T. Andreas or his order, the sum of one hundred forty dollars ; payments to be made, one half on completion of design, draft, or sketch ; remainder when atlas is com- plete. One hundred extra views given on delivery of atlas. "E. V. HOLCOMBE." Andreas had got out the book, including the view as above specified. The defense claimed that the agreement was not binding upon both parties. It was held that while the writing did not show any consideration on the part of Andreas, it was in the nature of a request to do the things specified, and became a binding and valid contract when performed on the one side, as the performance was but complying with the request. Miller v. McKenzie, 95 N.Y. 575, was an action upon a promissory note given by McKenzie. The consideration was for board and care during illness and for future services to be rendered by plaintiff when required. Such services were rendered by plaintiff until McKenzie died. It was held that a promissory note given in consideration of future services to be rendered, becomes valid upon the performance of such services in reliance thereon, even though there was no agreement on the part of the payee at the time of receiving the note to render them. Formal and Simple Contracts. Contracts are again classi- fied as formal and simple. Supreme Court of that state at page 339. Andreas was the plaintiff in this case and Holcombe the defendant. In most of the states the plaintiff's name is given first, followed by the abbrevia- tion " v.," standing for the Latin word versus, meaning against, and this is followed by the name of the defendant. The title of the above case should be read, Andreas against Holcombe, 22 Minnesota 339. In some states the title of the case is changed when it is appealed to a higher court, and the name of the person appealing from the decision of the lower court is placed first, so if the appeal should be taken by the defendant, the title would be exactly reversed. If that were the rule in Minnesota and the defendant had been taking the appeal, the title in the above case would have been Holcombe v. Andreas, but this is not the practice in a majority of the states. Some of the reports of the courts are not known by the name of the state, but by the name of the reporter who compiled and edited the decision. In such cases the name of the state has been inserted in parenthesis. On page 22 the case of Arnold v. Richmond Iron Works, I Gray (Mass.) 434, arose in the state of Massachusetts and is reported in volume one of Gray's reports, Gray being the name of the reporter, and when he was succeeded by another, the reports then took the name of the new reporter. The practice of naming the reports after the reporter is now almost uni- formly abandoned. 14 CONTRACTS Formal contracts are also known as contracts under seal, and are required to be executed in a certain way ; that is, with a seal attached. Contracts executed in this way do not require any consideration. The seal is said to import a consideration. In Van Valkenburgh v. Smith, 60 Me. 97, the defendant, to obtain the discharge of a suit pending against a railwaycompany and in favor of plaintiff, gave a bond to plaintiff conditioned upon allowing a given time within which defendant would give certain notes indorsed to plaintiff as specified. This was not done, and the defense set up was that there was no consideration for the agreement. The court held that the bond being under seal, the law implies a consideration from the solemnity of its execution. Rutherford v. Baptist Convention, 9 Ga. 54, was an action on a written instrument given to the Baptist Convention, and recited the consideration to be " the importance of literary and religious institutions to the wellbeing of society." The instrument was sealed. The defense was, no consideration. The court said, " The seal imports a consideration, and no other consideration is necessary to give it validity." Under the English law the form of the seal was definitely prescribed. One old writer says, " It must not be on wood, leather, cloth, or the like, but only upon parchment or paper, for the writing upon them can be least vitiated, altered, or corrupted." In this early time the seal was an impression on wax, but statutes have relaxed the rigor of the rule, and now the im- pression may be on a wafer or on the document itself, and in some states a scroll or mark made with the pen, or the word " seal," printed or written, if employed as a seal, is sufficient. In Norvell v. Walker, 9 W. Va. 447, the parties entered into a written agreement which concluded with the words, " Witness the following signatures and seals." Then followed W's signature followed by the scroll, and directly under it N's signature. It was held that the one scroll was adopted as the seal of both parties and was sufficient. Farmers and Manufacturers Bank v. Haig/tt, 3 Hill (N.Y.) 493, is a case decided in New York in 1842. It was held that the seal of a private individual or of a religious corporation impressed directly upon paper without the use of wax or other tenacious substance is a nullity. [But this does not express the St. Louis Railway v. Columbus Rolling Mill, 119 U.S. 149, plaintiff asked defendant's price on iron rails. On December 8 defendant offered to sell plaintiff from 2000 to 5000 tons of iron rails at a certain price, and added, " If accepted, we shall expect to be notified prior to December 20." On December 16 plaintiff wired, "Please enter our order for 1200 tons as per your favor of the 8th." December 18 defendant wired, "We can not book your order at that price." On December 19 plaintiff OFFER AND ACCEPTANCE 2 $ wired, "Enter our order for 2000 tons as per your letter of the 8th." The defendant refused to furnish the rails ; and in an action brought for breach of contract, the court held that the telegram of the i6th was not an acceptance, as it was different in terms from the offer, and that this order amounted to a rejection of the offer and left it no longer open, so the telegram of the igth was of no effect. There must be no Qualification in the Acceptance. If A offers to sell his automobile to B for $600, and B accepts if A will take $300 down and his note for the balance at 30 days, the accept- ance is qualified and does not constitute a contract. In Baker v. Holt, 56 Wis. 100, defendant in Connecticut wrote to plaintiff in Wisconsin, offering to sell him certain land at a stated price payable at a specified time, but said nothing about the place of payment or delivery of the deed. Plaintiff replied that he would take the land upon the terms mentioned, and added, " You may make out the deed, leaving the name of the grantee blank, and forward the same to I. L. Mosher at Grand Rapids, Wis., or to your agent, if you have one here, to hand to me on the payment of $200 and the delivery of necessary security." Held, that the acceptance was not good, as it was based upon the conditions that the deed be executed in blank and that payment be made in Wisconsin. In Honeyman v. Marry att, 6 H. L. C. (Eng.) 112, an estate was adver- tised for sale on certain terms. A authorized his solicitor to make an offer. B's agent in reply wrote, "Mr. B has authorized me to accept the offer subject to the terms of a contract being arranged between his solicitor and yourself. Mr. B requires a deposit of from ^1200 to .1500 and the completion of the purchase at midsummer day next." There was no reply to this letter. Held, that the acceptance was conditional and so formed no complete contract. The Offer and Acceptance must pertain to the Same Object. A may offer to sell his bay horse for $100. B says, "I will give you that amount for your gray." There is no contract be- cause the minds of the parties have not met. The Offer must be communicated to the Party accepting it. If the offer is not communicated, it can not be said that the minds of the parties met An illustration of this is the case of a reward offered for information concerning the parties to a crime. A person gives the information without knowledge of the reward, but lays claim to it when he learns it has been offered. In the majority of such cases it is held that he can not recover. 26 CONTRACTS Fitch v. Snedaker, 38 N.Y. 248, recites that a woman was murdered in Wayne County. On October 14 the sheriff of the county offered a reward of $200 to any person or persons who would give such information as would lead to the apprehension and conviction of the murderer. Plaintiff gave information on October 11 that led to the conviction of the guilty party, but he did it without reference to any reward. He had not heard of its being offered. Held, that he could not recover. There must be present the elements of offer and consent, and there can be no consent to that of which the party never heard. When a man works for another without his request or knowl- edge, there is no contract and he can not recover. In Bartholomew v. Jackson, 20 Johns. (N.Y.) 28, Jackson owned a field in which Bartholomew had a stack of wheat and which he had promised to move in time for plowing. Notice having been given, he promised that it would be moved at 10 A.M. Relying on this promise, Jackson, shortly after 10 A.M., set fire to the stubble in a distant part of the field, but later found the stack was not removed, so did it himself to save the grain, and then sued Bartholo- mew for the work. Held, the services were rendered without request and with no promise express or implied to pay for them, and there can be no recovery. The judge said, " If a man humanely bestows his labor, and even risks his life, in voluntarily aiding to preserve his neighbor's house from destruction by fire, the law considers the services rendered as gratuitous." The Acceptance must be Communicated. Not only must the offer be communicated, as we have seen, but the acceptance must also be communicated, and whether it reaches the offerer or not, it must be something more than a mere mental assent. Stensgaardv. Smith, 43 Minn, n, was a case in which the plaintiff received from the defendant a letter or statement setting forth that in consideration of plaintiff's agreement to act as agent for the sale of certain land, defendant gave to plaintiff the exclusive right of sale of same for three months, and promised to pay a stated commission on said sales. Plaintiff, who was a real estate broker, took immediate steps to advertise and to post notices for the sale of said premises, but one month thereafter defendant sold to another. Action was brought for damages for breach of contract. Held, that there was no contract. The instrument conferred authority on plaintiff to sell, and if he did sell, prom- ised a commission. There was no mutuality of obligation. The plaintiff did not bind himself to do anything. If plaintiff, acting under this authority, had sold before revocation, the sale would have completed the contract, and the commission would have been earned. OFFER AND ACCEPTANCE 2 ; An Acceptance is binding as soon as Made. As we have seen, the offer must be communicated to the party before it is effectual, while an acceptance is binding as soon as made, even though it has not come to the knowledge of the offerer. The acceptance must be made in the way prescribed or in the way that would naturally be expected. If the offerer requires or suggests a mode of acceptance, he takes the risk of the acceptance reaching him. A common illustration of this is the case of an offer made through the post office, for in such a case it may be assumed that the acceptance is to be made in the same way unless otherwise expressly stated. When made in the required way, it is held that as soon as the acceptance is sent the contract is made. And the completion of the agreement dates from the time of mailing the letter or sending the telegram, and not from the time of receiving it. Taylor v. Merchants Fire Insurance Co., 9 How. (U.S.) 390, was a case in which, after some correspondence, the defendant insurance company wrote that they would insure plaintiff's house for $57. This letter was received on December 21, and on that day plaintiff" accepted the offer and sent his letter of acceptance with check inclosed. On December 22, and before plaintiff's letter of acceptance and check reached defendant, the house was burned down. Held, that the contract was complete when the letter of acceptance was mailed, and therefore the company was liable. In Trevor v. Wood, 36 N.Y. 307, plaintiff living in New York telegraphed defendant in New Orleans, asking the price of Mexican dollars delivered. On January 31 defendant answered by telegraph, giving price on 50,000, and on the same day plaintiff telegraphed and accepted the offer. The telegraph lines became disabled and the message was not received until defendant had wired that the dollars had been sold to other parties. Held, that the contract was closed as soon as the acceptance was sent. As the offer was by telegraph, it was sufficient to accept in the same manner, and the offerer was bound irre- spective of the time the acceptance was actually received. Acceptance must be made as Prescribed. But the preceding rule does not hold good if the offerer prescribes a particular way in which the acceptance must be made. For example, if the offer is made by mail and expressly requires that the acceptance shall be telegraphed back, it will not be sufficient to send the acceptance by mail. 28 CONTRACTS The offer may be withdrawn any time before acceptance, but the notice of withdrawal dates from the time it reaches the party to whom it is sent The offer is made irrevocable only by acceptance. In White v. Corlies, 46 N.Y. 467, plaintiff, who was a builder, received a note from the defendant which said, " Upon an agreement to finish the fitting up of offices at 57 Broadway in two weeks from date you can commence at once." No reply was sent, but plaintiff bought lumber and prepared to begin work. Next day defendant withdrew the offer. Held, that there was no agreement. The mere buying of lumber was not an act sufficient to notify defendant of the acceptance. A mere mental determination to accept is not sufficient ; the manifestation of assent must be sufficient to give notice to the defendant. In Boston becoming dissatisfied, terminated his contract and made a new one with the Citizens Ice Company. Just before April, 1875, this company sold out to plaintiff. The court found that the defendant had no notice of the change. Held, the plaintiff could not recover, as there was no meeting of the minds of these parties to this action. A man has a right to select and determine the persons with whom he will deal, and can not have others thrust upon him without his consent. REALITY OF CONSENT MISTAKE 37 There may be a mistake as to the subject-matter of the thing contracted for, as where one party contracts expecting to receive one article and the other party thinks the agreement refers to another. The parties clearly have not agreed upon the same thing and the agreement is void. Kyle v. Kavanagh, 103 Mass. 356, was an action to recover for the pur- chase price of land. It transpired that the defendant was negotiating for one piece of land and the plaintiff was selling another. It was held by the court that, as their minds did not meet on the subject-matter, they could not be said to have entered into a contract, and although there was no fraud on the part of the plaintiff, the mistake alone was a good defense. The mistake may be as to the existence of the thing con- tracted for. % In Th-wing v. Hall, 40 Minn. 184, plaintiff made a contract to sell certain timber lands to defendant, thinking they contained seven million feet of fine lumber, defendant also believing there was good lumber there. The facts were that, unknown to either party, the land had been practically stripped of good lumber. Defendant sent a man who mistook the location and reported good timber. Held, a mutual mistake, which was a sufficient cause for the court to cancel the contract. There was a mistake as to the existence of the thing contracted for. There may be a mistake by one party as to the intention of the other. In such a case it appears that if the second party knows that the first party is mistaken in his intention the contract is void. In Parrish v. Thurston, 87 Ind. 437, plaintiff sold to defendant a buggy and harness and received a promissory note signed "E. K. Parrish." There was a man by that name living near Shelbyville, the place where the sale was made, who was wealthy and was known to both parties. The note was really made by E. K. Parrish of Hamilton County, a man entirely unknown to plain- tiff. Plaintiff supposed he was getting a note signed by the man from Shelby- ville, and the defendant knew that plaintiff believed this. As soon as plaintiff learned the truth he tendered back the note and sought to rescind the contract. Held, that the contract could be rescinded, as the silence of defendant, when honesty required him to correct the mistake of plaintiff, amounted to fraud. The cases make the following distinction : If the second party knows that the first party is under a misapprehension as to what 38 CONTRACTS the first party is getting, the contract is not voided, but if the first party is under a misapprehension as to what is promised by the second party, and the second party knows of the misappre- hension, the contract is void. In Smith v. Hughes, L. R. 6 Q. B. (Eng.) 597, plaintiff offered to sell de- fendant some oats, and showed a sample. Defendant wrote the next day that he would take them at the price named. He afterwards refused to take the oats on the ground that they were new oats and he thought he was buying old oats. Nothing had been said at the time of the sale about their being old oats, but the price was high for new oats. Held, that in order to relieve the defendant from liability it was necessary to show not only that the plaintiff believed the defendant thought that he was buying old oats, but that the plaintiff believed the defendant thought the plaintiff was contracting to sell old oats. Misrepresentation. Misrepresentation is defined as an inno- cent misstatement of fact as distinguished from fraud or a willful misstatement, and as thus defined it is almost, if not entirely, identical with mistake. A party in making a misstatement, either does it willfully, which is fraud, or does it innocently, which is a mistake ; still many writers and judges make a distinction between misrepre- sentation and mistake. 9. REALITY OF CONSENT FRAUD Fraud Defined. Fraud is a false representation of fact, made either with a knowledge of its falsity or recklessly, with- out belief in its truth, with the intention of having it acted upon by the complaining party, and actually inducing him to act upon it. Aside from vitiating the contract, fraud is an action- able wrong, and the party guilty of fraud is liable for deceit Fraud may be actual. In Holmes's Appeal, 77 Pa. St. 50, a party about to purchase a farm asked the owner whether the neighborhood was sickly or not, and declined to pur- chase if it was. The owner assured him that it was free from sickness, whereas fever and ague were prevalent in the locality. The court held that the agreement to purchase could not be enforced, it having been induced by the vendor's misrepresentations. REALITY OF CONSENT FRAUD 39 Fraud may also arise where there is active or artful conceal- ment. Jones v. Edwards, i Neb. 170, was an action brought for damages because of alleged fraud in the sale of a horse. Jones bought the horse when he had a sweeney, stiffness in the neck, and other ailments. He cut the cords of his neck and doctored him up. Later Edwards came and wanted to buy a farm team. Jones said he had what he wanted, and showed him this one and another horse, saying they were sound, as far as he knew, but that he never warranted a horse. He did not say a word as to the former ailments. Held, that it was fraud on the part of Jones in not acquainting the defendant, Edwards, with conditions affecting the value of the horse, which, if known, would have prevented defendant from buying. One who conceals a fact which he ought, as a legal duty, to disclose is guilty of fraud. Smith v. &tna Life Insurance Company, 49 N.Y. 211, was an action upon a life insurance policy. The defense was fraud in obtaining it. In the phy- sician's examination it was asked whether insurer had cough, occasional or habitual expectoration, or difficulty in breathing. The answer was, " No cough ; walking fast upstairs or up hill produced difficulty in breathing." The facts were that he had raised blood for two and one-half years and that he died three months after the policy was issued. Held, that there was a fraudulent concealment and misrepresentation which would avoid the policy. The false representation may arise from the suppression of the truth, amounting to the suggestion of a falsehood. In Grigsby v. Stapleton, 94 Mo. 423, plaintiff sold defendant a herd of cattle at the ordinary market price, knowing that they had Texas fever, a disease not easily detected by one having had no experience with it. He did not disclose this to defendant. Held, that plaintiff was guilty of a fraudulent concealment, for which he was lia"ble. Caveat Emptor. In a sale of goods in which the buyer can inspect them the rule of caveat emptor is said to apply. The term means, "let the buyer beware," and its application de- notes that a vendor is under no obligation to communicate the existence of even latent defects in his wares unless, by act or implication, he represents that such defects do not exist. In Lucas v. Coulter, 104 Ind. 81, defendant leased certain premises for one year and defended an action for rent on the ground that they became unfit for his business. It appeared that the woodwork shrank and cracked the plaster, 40 CONTRACTS causing dust to fall on the musical instruments which defendant kept in stock. Plaintiff made no representations or warranties. Held, there was no implied warranty and the tenant must determine for himself, before engaging the premises, as to their safety and fitness for his business. Effect of Non-disclosure. Mere non-disclosure does not vitiate a contract unless the parties stand in a relation of confidence to each other, and one party has the means of knowing facts that are inaccessible to the other. He is then bound to tell every- thing that is likely to affect the other party's judgment. Such contracts are said to be uberrima fides contracts, that is, they require the " utmost good faith," such as contracts of fire and life insurance and for the sale of land. In King v. Knapp, 59 N.Y. 462, plaintiff purchased of defendant at an auction sale a lot in New York City, paying ten per cent down. Printed handbills were circulated containing a diagram of the lot, which represented it to be 25 x 100 feet, the handbill also stating this to be the size. Relying on the description, the plaintiff purchased the premises without inspection. As a matter of fact a building upon the adjoining lot, which had stood there lor over twenty-five years, encroached upon the premises. This was known to the defendant, but there was no mention of it in the handbills or at the sale. Plaintiff refused to complete the sale and brought this action to recover the amount paid. Held, the plaintiff had bought under the suppression of a material fact, and the contract could not be upheld. It is held also in contracts for the sale of shares of stock in a company that the utmost candor and fullness of statement are required of the promoter and of those who make statements upon the strength of which purchasers subscribe. In Brewster v. Hatch, 122 N.Y. 349, defendants acquired options on certain mining land. A prospectus was then issued describing the property and set- ting forth the terms and conditions upon which a company was to be organized. The proposed capital stock was $1,500,000, divided into shares of $ 10 each. Plaintiff and others subscribed for about 61,000 shares, and the company was organized and completed the purchase of the land. After paying the cost of purchase and other expenses, there remained on hand 58,235 shares of stock, which were divided among the defendants, as previously agreed, and for which they paid nothing. When plaintiffs subscribed they did not know that de- fendants were to receive any stock without paying for it. This was an action to recover for the benefit of the corporation the value of the shares so dis- tributed. Held, that the plaintiffs were led to believe that the defendants REALITY OF CONSENT FRAUD 4 ! were acting in the interest of all the investors and that defendants knew the plaintiffs so believed ; that the relations of the parties were those of trust and confidence, binding the defendants to the exercise of good faith and requiring them to disclose the information they possessed affecting the value of the property. The statement must be a misrepresentation of fact. A mere expression of opinion which turns out to be without foundation or a statement of intention which is not carried out will not invalidate the contract. In Gordon v. Butler, 105 U.S. 553, defendant borrowed money of plaintiff and gave as security a mortgage upon real estate containing some sandstone quarries which had not been sufficiently worked to show their value. Defend- ant furnished the certificates of two persons, saying they had lived near the place for twenty years and giving the value of the property in their best judg- ment to be an amount one hundred and fifty per cent more than the loan. Upon a sale under foreclosure the land brought one-sixth of the amount of the loan. Plaintiff sued, charging fraud. Held, he could not recover; that an action will not lie for an expression of opinion, however inaccurate, in regard to the value of property which depends upon contingencies that may never happen. The representation must be a statement of something that exists or has happened ; for instance, that a wagon cost $50 and not that the wagon is worth $50, which would be a statement of opinion ; or that if you buy this wagon you can sell it again in the spring for $50, as this is merely a prediction for the future. The law tolerates considerable prevaricating by the tradesman, in the matter of puffing his goods or wares, provided the thing bargained for is open to the inspection of the buyer. Poland v. Brownell, 131 Mass. 138, was a case in which plaintiff bought out a half interest in defendant's stock of goods and business. He looked over the stock and books and had ample opportunity to investigate. Held that he had no right to hold the seller upon his representations of the value of the goods or the amount of business he had previously done. The Judge said, ' It is everywhere understood that such .statements and commendations are to be received with great allowance and distrust." (This case is another illustration of the rule of caveat emptor.) The representation in order to render the contract void because of fraud, must be made with a knowledge of its falsity or with- out belief in its truth. 42 CONTRACTS Cowley v. Dobbins, 136 Mass. 401, was an action for fraud in that defendant represented to plaintiff that William Dobbins left an estate of $40,000 above all liabilities, whereas in truth he was insolvent. The evidence showed that defendant believed her representations to be true. Held, no action would lie against her. If a man makes a false statement, honestly believing it to be true, he is not liable for fraud. He can be held only when he knows it to be false or has no knowledge either of its truth or falsity. The false statement must be made with the intention of its being acted upon. It need not be intended that the party to whom it is made shall act upon it but that he shall lead some one to act. In Eaton v. Avery, 83 N.Y. 31, defendant made false repiesentations to a mercantile agency as to the financial responsibility of the firm of Avery & Reggins, of which he was a member. This firm asked credit of plaintiff. Plaintiff went to the mercantile agency and obtained the information given by defendant, and relying on this he extended the firm credit. In an action for fraud it was held that the purpose for which such information is given to mercantile agencies is to enable them to furnish it to their subscribers for guidance in extending credit ; and that the defendant would therefore be liable, as the case justified the finding that the false statements were made with the intent to defraud any person who might inquire of the agency. Sheldon v. Davidson, 85 Wis. 138, was an action for deceit in which it was claimed that the defendant, in order to induce plaintiff to lease certain prem- ises, concealed the fact that a barn thereon did not belong to him. But it was not shown that this concealment induced plaintiff to lease the premises and for this reason it was held that an action would not lie. The false representation therefore must actually deceive, as in the case of Eaton v. Avery. If Eaton had not been deceived by the information, he could not have succeeded in his suit. The effect of fraud on a contract is to give the injured party grounds for an action for damages for deceit. And the person who has been led into a contract by means of the fraudulent misrepresentations may either affirm the contract and compel the fulfillment of the agreement or he may avoid it, provided that he signifies his intention to do so as soon as he becomes aware of the fraud. If he accepts any benefits under the con- tract after he learns of the fraud, the contract is affirmed. REALITY OF CONSENT FRAUD 43 Crooks v. Nippolt, 44 Minn. 239, was an action brought to recover the amount paid by plaintiff on a contract to buy a certain piece of real estate, on the ground that defendant's agent in making the sale showed plaintiff another and more valuable lot instead of the one sold. It appeared that after plaintiff learned of this he applied to defendant twice for an extension of time within which to carry out his contract as to another payment. He also endeavored to have the contract acknowledged so that it might be recorded. Held that he should have rescyided upon the discovery of the fraud, and that his acts, after knowledge of the fraud, amounted to an affirmance and terminated the right to rescind. Duress. Duress is defined to be some unlawful constraint exercised upon a man whereby he is forced to do some act against his will. It is actual or threatened violence or imprison- ment. A contract entered into by a party under duress is voidable at his option. The duress must be inflicted or threatened by a party to the contract or one acting for him and with his knowl- edge, and the subject of the duress must be the contracting party himself or his wife, parent, or child. In Morrill v. Nightingale, 93 Cal. 452, plaintiff procured several promissory notes to be executed by defendant under coercion and intimidation, caused by threats of arrest, and he also had a warrant of arrest issued by a Justice of the Peace not for the purpose of punishing defendant for a crime but to compel him to pay the money or execute the notes. Held that this constituted duress and was a good defense to the action to recover on the notes. Wrongful detention of goods or damage to them does not con- stitute duress, nor does threatened arrest in lawful prosecution. Undue Influence. In the creation of a contract undue influ- ence arises where the parties are not on an equality as to knowl- edge or capacity. A promise made by a child to its parent, a client to his attorney, a patient to his physician, a ward to his guardian, or a person to his spiritual adviser, will not necessarily be set aside by the court, but such relations call for clear evidence that the party benefited did not take advantage of his position. Hallv. Perkins, 3 Wend. (N.Y.) 626, was a case in which a simple-minded, ignorant young man was induced by his uncle, a justice court lawyer, to accept a conveyance of land worth $240 in satisfaction of a claim of $500. The 44 CONTRACTS uncle was one of the executors of the estate which owed plaintiff. Held, that from the nature of the transaction, the inadequacy of the consideration, the relative character, capacity, and connection of the parties, fraud and imposi- tion might well be presumed. Bainbrigge v. Browne, 18 Ch. Div. (Eng.) 188, was an action to set aside a deed given by children, who were of age, to their father. The court held, that the father must show that the deed was executed with a full knowledge of its contents and with a free intention of giving the benefit conferred. Undue influence, like duress, renders the contract voidable at the instance of the injured party. 10. SUBJECT-MATTER The Object of a Contract must not be Illegal. Another condi- tion is necessary to the formation of a binding contract and that is that the object of the contract must not be contrary to law. Certain things are forbidden by law, and if these things are in the contemplation of the parties at the time the contract is entered into, it is not enforceable, otherwise the law would be aiding in an indirect way what it expressly forbids. Wells v. The People, 71 111. 532, was a case in which the school law provided that a teacher should have certain certificates of qualification. The school directors employed plaintiff to teach school for six months at $45 per month. He had no certificate, but obtained one after he had taught three months. He then learned that he could not collect his pay as he had not qualified, so he canceled his contract with the consent of the directors and they hired him under a new contract for the remaining three months at $90 per month. It seemed clear that the intent was to recompense him for the time already taught. Held, that the first contract was void and by the second there was an attempt to do indirectly what the directors could not do directly, which rendered the second contract void. But the plaintiff could recover reasonable pay for his services for the last three months. This principle applies only to executory contracts, for if the contract has been voluntarily executed by the parties it is bind- ing, as the law will not compel the return of anything acquired under such a contract any more than it will compel its perform- ance. The rule is that if parties have voluntarily completed a contract, illegal as to the subject-matter, the law will leave them where they are. SUBJECT-MATTER 45 Illegal Objects. The object of the contract may be illegal by express statutory enactment or because of rules of the com- mon law. The statutes declare some contracts illegal and void and impose a penalty for the making of some others without rendering the contracts void. A statute requiring a lawyer or a physician to be licensed renders a contract made without com- pliance with it void. In Gardner v. Tatum, 81 Cal. 370, plaintiff, a physician, was called by de- fendant on March 8, 1883, and continued to visit the patient until October 2, 1883. Plaintiff's application for a certificate to practice medicine was granted March 12 of the same year. Held, he could not recover any compensation for the services rendered before the procuring of the certificate upon any contract express or implied, the contract being illegal and against public policy. In Buckley v. Humason, 50 Minn. 195, the plaintiff, acting as a real estate broker in Chicago, purchased certain property for defendant. The ordinance of Chicago requires all real estate brokers to be licensed and fixes the license fee at $25, providing a penalty for its violation. Plaintiff at this time had no license. In an action for his commissions it was held that he could recover nothing for his services. Business transacted in violation of law can not be the foundation of a valid contract. A law requiring weights and measures to be sealed as a con- dition precedent to a sale of goods by a merchant, renders a contract made in violation thereof void. In Eaton v. Kegan, 114 Mass. 433, a statute provided that all oats and meal should be bargained for and sold by the bushel. Held, plaintiff could not recover the price of the meal and oats sold by the bag. Sometimes a statute simply imposes a penalty and does not invalidate the contract, as seen in the following case : Pangborn v. IVestlake, 36 Iowa 546, was an action to compel the payment of a note given in purchase of a city lot. A statute existed that provided a pen- alty of $50 for selling any lot in a town before the plat thereof was recorded. The court held that as a general rule a penalty prescribed by statute for the doing of an act implies a prohibition which will render the act void. This is not always so, however, as the court will look to the language and subject- matter of the statute and the purpose sotfght to be accomplished, and if from this it is manifest that it was not the intent to render the prohibited act void, it will be so construed. It was therefore held that the note was valid. 46 CONTRACTS In this country statutes against wagers or bets have been passed in most of the states, and all wagers are now practically declared contrary to public policy and void. In Love v. Harvey, 1 14 Mass. 80, plaintiff made a wager of $20 with defend- ant that the body of one Dr. Cahill was buried on a certain side of the main avenue in Holywood cemetery. The stakeholder, although forbidden so to do, paid the $40 left with him to defendant. Held, that all wagers are unlawful. The party receiving the money from the stakeholder after being forbidden to receive it is liable to the other for a return of the money even though he be the winner of the wager. Statutes in many states also prohibit the desecration of the Sabbath day, and any contracting done on that day contrary to the statutes is void. Handy v. St. Paul Globe Publishing Co., 41 Minn. 188, was an action brought for breach of contract. Plaintiff was employed by defendant to take charge of the real estate advertising in the daily, Sunday, and weekly editions of de- fendant's paper. A statute of the state forbade any work on Sunday except that " of necessity and charity." The court held that issuing and publishing a paper on Sunday was unlawful. The contract was for illegal work in part and was therefore void. Clough v. Goggins, 40 Iowa 325, was an action on a promissory note made on Sunday. The court held that contracts made on Sunday are void, and a promissory note made upon that day will not support an action. In some states it is illegal for one to follow his "ordinary calling " or work, in others to make any contracts, etc. The different statutes differ so materially that no general rule can be laid down as to what acts are prohibited. Aside from the contracts declared unlawful and void by statute there are contracts which are illegal at common law. The courts will not enforce an agreement to commit a crime or to do a civil wrong. White v. Kuntz, 107 N.Y. 518, held, that in a composition of a debtor with his creditors, any contract with one of them whereby he is to receive more than his pro rata share is void and any security given upon such a promise is void. Contracts against Public Policy. All contracts, which if en- forced would be contrary to the good of the public or opposed to the welfare of the community, are said to be against public SUBJECT-MATTER 47 policy and therefore void. Those contracts which tend to injure the government in its relations with other countries, those with alien enemies which involve any communication over the border line, and those in restraint of trade, are illustrations of this class of contracts. In United States v. Grossmayer, 9 Wall. (U.S.) 72, Ernstein, a resident of Macon, Ga., was indebted to Grossmayer of New York when the Civil War broke out. Through an agent Grossmayer took cotton in payment and had it stored in Savannah. The government confiscated it and Grossmayer made claim against the government. Held, that all intercourse with an enemy is unlawful, and notwithstanding that the parties sustain the relation of debtor and creditor, the plaintiff above does not present a valid claim. All agreements looking to the aid of hostile actions against a friendly state are unlawful as being contrary to public policy. A contract to raise funds to aid an insurrection in a friendly state would be such an agreement. In Kennett v. Chambers, 14 How. (U.S.) 38, a contract was made in Cin- cinnati, after Texas declared itself independent of Mexico, but before being recognized as independent by the United States, whereby plaintiff agreed to, and did, furnish money to a Texas general to enable him to raise and equip troops to fight against Mexico. Held, such a contract was void. A contract to break a law of a sister state is also against public policy. Graves v. Johnson, 156 Mass. 211, was an action for the price of intoxi- cating liquors, sold and delivered by plaintiff in Massachusetts to a Maine hotel keeper with a view of their being resold by defendant in Maine, contrary to the laws of that state. Held, that the contract had in view the breaking of the laws of Maine and could not be maintained. Agreements to prevent or hinder the course of justice are illegal ; as, to agree to conceal a crime of which one has knowl- edge, to refrain for a certain consideration from prosecuting a criminal, to agree not to testify as a witness, to influence a wit- ness's testimony, or to bribe a juror. Partridge v. Hood, 120 Mass. 403, held that a contract to deed a certain piece of property, where the real consideration was an agreement to drop a criminal prosecution against the grantor's son, was void as against public policy. 48 CONTRACTS A contract tending to injure the public service is contrary to public policy and therefore void. Such a contract is an agreement by a public officer to assign his salary to a creditor or an under- taking to influence the action of a legislature by lobbying or an agreement to hinder or prevent competition for public contracts. Agreements which tend to promote and encourage litigation are also void; that is, it is not legal to speculate in lawsuits. A may have a cause of action against B but it is not lawful for C to buy the action for the purpose of instituting suit. The rule was formerly more strict than now. The holding in most states at the present time is that an attorney can institute a suit on a " contingent fee," which means that he is to receive for his services a percentage of what he recovers. In the earlier days this was forbidden. Agreements contrary to good morals are illegal. So also are contracts which affect the freedom or security of marriage, as an agreement not to marry, and contracts made in consideration of the procuring or bringing about of a marriage, or mutual agreements to obtain a divorce. Sterling v. Sinnickson, 5 NJ.L. 756, was an action upon a written instru- ment promising to pay plaintiff $1000 provided he was not married within six months. Held, that the contract was void as against public policy. In Cross v. Cross, 58 N.H. 373, plaintiff, who was the wife of defendant, received from him certain notes secured by mortgage and in return she deeded to him the land covered by the mortgage. This transaction was part of an agreement between the parties to separate. It was further agreed that plaintiff was to obtain a divorce on certain grounds and defendant was to allow the papers in the action to be served upon him and make no defense, also that the children were to be divided between them, etc. Held, that the whole trans- action was illegal and void, and the law would not aid either party in enforcing their unlawful contract. Restraint of Trade. There is another class of agreements known as contracts in restraint of trade which are prohibited by law as against public policy. It is for the good of the com- munity and the welfare of the individual that competition in trade should exist and that every man should be free to engage in the occupation or vocation he may prefer. Still it is but fair that a man in selling out his business shall include with it the SUBJECT-MATTER 49 good will, and refrain from opening up a like business at the next door or on the same street. The rule is, therefore, that if the restraint imposed upon the one party is not greater than the protection the other party requires, the contract is valid. In Herreshoffv. Boutineau, 17 R.I. 3, plaintiff hired defendant as a teacher of languages for six months, and defendant covenanted not to teach the French and German languages anywhere within the state of Rhode Island for one year thereafter. Held, that this covenant was unreasonable and void ; the restriction extended beyond what was apparently necessary for the protection of plaintiff. In National Benefit Company v. Union Hospital Company, 45 Minn. 272, the parties thereto consisted of two companies engaged in issuing benefit certificates entitling the holders to care and medical treatment in case of sick- ness or injury. Plaintiff had acquired a good business in Minnesota. Wis- consin, and northern Michigan, and entered into a contract with defendant agreeing for a certain consideration to refrain for three years from doing business in this territory except with railway employees. Held, that the contract was valid and not void as being in restraint of trade. The question of the reasonableness of the restraint depends upon whether it is such as to afford a fair protection to the party in whose favor it is made. From the nature of the case it will be seen that a covenant to refrain from engaging in the same business within the same city might be reasonable in a grocery business, while in another business, the limitation of the whole state would be only just, as in the case of a manufacturer of heavy machinery requiring a wider territory for his sales. In Perkins v. Clay, 54 N.H. 518, defendant sold his cart and butcher busi- ness for $90 and agreed that he would not carry on the same business on the same route for two years. Held, that this agreement was reasonable and valid. In Guerand v. Dandelet, 32 Md. 561, defendant sold his dyeing and scour- ing establishment, and leased the premises to plaintiff, entering into a covenant , that he would not at any time thereafter engage in a like business in the city of Baltimore. Held, that this covenant was valid, as it was not too compre- hensive in its restriction. In Diamond Match Co. v. Roeber, 106 N.Y. 473, defendant, who was engaged in the manufacture and sale of matches throughout the United States, sold his stock of machinery and good will to plaintiff. He covenanted that he would not, at any time within ninety-nine years, engage in such business in any of the states or territories except Nevada and Montana. Held, that the covenant was valid, as the restraint was coextensive only with the interests to be protected. COM. LAW 4 5O CONTRACTS ii. OPERATION OF CONTRACT Parties acquiring Rights under Contracts. We have now considered every element necessary for a valid and binding contract, and the question arises as to the extent and limitation of the rights conferred and of the obligations incurred. As a general principle we learn that only the parties to a contract acquire any rights under it. It is clear that it can not impose liabilities upon any one not a party to it. A man can not voluntarily and without being asked to do so pay another man's debts and then seek to establish himself as a creditor. There is an apparent exception to this rule in the case of any one interfering with the contract of master and servant and inducing the servant to break his contract of employment. Some authorities hold that a party so interfering is liable for damages, and some hold that unjustifiably to induce one to break any contract is actionable. In Walker v. Cromn, 107 Mass. 555, plaintiff conducted a shoe factory and employed a large number of people. The defendant with the intent TO injure plaintiff's business induced a number of the employees to leave. The court held that plaintiff could recover damages. It is held by some of the courts that a man can not acquire rights under a contract to which he is not a party, such as for A and B to enter into a contract, the consideration being that A shall confer some benefit upon X, a third party. Does X acquire the right under such an agreement to institute an action against A if the contract is not executed ? The English courts say no. The Massachusetts and Michigan courts hold with the English courts that no action can be maintained by one not a party to the agreement for whose benefit a promise is made. In Linneman v. Moross, 98 Mich. 178, a father agreed with his son that he would revoke a provision in his will in favor of his daughter and devise the same property to the son in consideration of the son's paying the daughter $10 a month as long as she might live. The daughter was not a party to the agreement. Held, that she could not enforce it. The "New York courts in the celebrated case of Lawrence v. Fox:, 20 N.Y. 268, held that X, the third person, for whose benefit a promise was made by A, upon a consideration from B, the promisee, might maintain an action upon the OPERATION OF CONTRACT 5I promise, provided that he was the person directly intended to be benefited, and provided that B, the promisee, was at the time under an existing obligation to X, which he sought to discharge by giving X the benefit of A's promise. The facts in this case were that one Holly, at the request of defendant, loaned to de- fendant $300. Holly stated at the time that he owed that sum to the plaintiff and had agreed to pay it to him the next day. The defendant, in considera- tion of the loan, promised Holly that he would pay the sum to plaintiff on the next day. The plaintiff sued the defendant on this promise and the court held that he could recover on the promise, although he was not a party to it. This rule as applied in New York State has been very largely adopted throughout the United States. In Dean v. Walker, 107 111. 540, X sold certain real property to defendant, the property being mortgaged to plaintiff. As a part of the purchase price defendant agreed with X to assume the mortgage and pay the amount named therein to plaintiff. Held, that plaintiff, who was not a party to this agreement, could claim the benefits thereof and maintain an action to recover the amount of the mortgage from defendant. Assignment of Rights. Having now determined upon whom the rights and liabilities fall, we must ascertain how and when other -persons may take their places and succeed to their rights, if at all. It is well established that the promisor can not assign his liabilities under the contract ; that is, the promisee can not be compelled to accept performance from any but the promisor. This is only just, for if A contracts with B to have him do a cer- tain thing for him, A is entitled to know with whom he is dealing, as he may have taken into consideration B's particular adapta- bility to the work. This rule is qualified in the case of B undertaking to do cer- tain work for A in which no particular knowledge or skill is required. He can then have the work done by another, but still B is responsible for the work being well done. In LaRue v. Groezinger, 84 Cal. 281, one H agreed to sell to defendant all the grapes he might raise in a certain vineyard during a period of ten years, and defendant agreed to pay therefor $25 per ton. At the end of five years H sold the vineyard and assigned the contract to plaintiff. Defendant refused to accept grapes from plaintiff, saying he had no contract with him. Held, that the contract could be assigned, as it was not for services of a personal nature. The ice case on page 36 seems almost in conflict with this decision, and in most cases the holding seems to be that the 52 CONTRACTS promisor can not assign his liability unless the agreement con- templates that some one else is to do the work or aid in it. This is true in the case of a contractor agreeing to build a house, as it is plainly within the contemplation of the parties that he will employ men to do part or all of the work. As to the rights of parties under the contract, we find that at common law the only way such rights can be transferred to a third party is by a new agreement between all of the parties. The equity courts, however, permit an assignment in many cases, under which the assignee can enforce the contract, but the party liable must be given notice of the assignment. In such cases the assignee takes no better title than his assignor has; the assignment carries with it all of its defenses. Rights under con- tracts are assignable by statute in most of the states, and the assignee can enforce them in his own name. The above rule does not apply to negotiable instruments, which will be treated in another chapter. Aside from the assignment of the rights under a contract by the voluntary acts of the parties, they may also be transferred by operation of law. In the assignment of a lease of land, cer- tain covenants in the lease, which are said to concern the demised premises, pass to the assignee, such as covenants to repair, to pay rent, etc. In Salisbury v. Shirley, 66 Cal. 223, it was held that the person who takes an assignment of a lease is liable on the covenants to pay rent and taxes the same as the original lessee. By the death of the person all of his rights under his con- tracts pass to his executor if he leaves a will, or to his adminis- trator if he dies without one. This is not the rule if the contract depends upon his performing some acts of personal service or skill. In such cases the contract dies with the party. In Lacy v. Getman, 119 N.Y. 109, plaintiff contracted with M to work upon his farm as an ordinary farm laborer for one year from March I . In July M died. Held, that his death terminated the contract. By the bankruptcy of a party all of his property as well as his rights under his contracts pass to the trustee. STATUTE OF FRAUDS 53 12. STATUTE OF FRAUDS Outline. In the year 1676, a law was passed in England, entitled "An act for the prevention of frauds and perjuries." This statute required that written evidence should be supplied in proving certain contracts. The statute commonly called "the fourth section of the statute of frauds " provides as follows : " No action shall be brought whereby to charge any executor or administrator upon any special promise to answer damages out of his own estate ; or whereby to charge the defendant upon any special promise to answer for the debt, default, or miscarriage of another person ; or to charge any person upon any agreement made in consider- ation of marriage ; or upon any contract for sale of lands, tene- ments, or hereditaments or any interest in or concerning them ; or upon any agreement that is not to be performed within the space of one year from the making tnereof ; unless the agree- ment upon which such action shall be brought or some memo- randum or note thereof, shall be in writing and signed by the party to be charged therewith or some person thereunto by him lawfully authorized." Object. The object of this statute was to lessen the perjury in the testimony of witnesses, especially in the important cases included therein, and it therefore required that these contracts be evidenced in writing. In nearly all of the states of the Union this statute has been reenacted in somewhat the same form, although the language of the different statutes varies. This statute does not render oral contracts void, but says that no action shall be brought on them. It takes away the remedy. When action is brought in court upon such contracts, it is neces- sary to show the written agreement. The oral agreement is valid, and after it is made, a sufficient writing may be given. Bird v. Milnroe, 66 Me. 337, was a case in which a verbal contract was made. The contract belonged to the class required by the statute of frauds to be in writing. It was broken, and the parties afterwards entered into a written agreement containing the terms of the oral contract. After the writing was signed an action was brought for a breach of the contract which occurred before the written agreement was executed. Held, that the contract was suf- 54 CONTRACTS ficient to satisfy the statute. The writing was not the contract itself, but the evidence necessary to prove it. The statute of frauds is a defense, solely, and the party avail- ing himself of it must set it up, otherwise it is waived. When Memorandum is Sufficient. The writing need not be a formal contract. A memorandum or note containing the terms of the agreement, if signed by the party to be charged or his authorized agent, is sufficient. Hurley v. Brown, 98 Mass. 545, was an action to compel defendants to perform their part of the following contract and to convey the land to plaintiff. $50 "LYNN, April 14, 1866. " Received of John and Michael Hurley the sum of fifty dollars in part pay- ment of a house and lot of land situated on Amity Street, Lynn, Mass. The full amount is $1700. This bargain is to be closed within ten days of the date hereof." This was signed by the parties. The defense claimed that the writing was not sufficient, as there were several houses and lots on the street. It was shown that defendant owned no other house and lot on the same street. The court held that the writing was sufficient, and that evidence could be given as to the particular house meant. The memorandum or note required to be in writing need merely contain the agreement and may consist of several writ- ings or a number of letters and memorandums. It is often the case that the terms are contained in a series of letters that have passed between the parties and which, considered together, con- stitute a writing sufficient to satisfy the statute. Promise of an Executor or Administrator. The promise of an executor or administrator to answer damages out of his own estate, that is, to render him personally liable for the debts of the deceased, must be in writing. But the writing does not import any consideration, and there must be a consideration to this as to any contract. In Smithwick v. Shepherd, 4 Jones (N.C.) 196, Shepherd, who owed plaintiff for board, died. Defendant, his administrator, in a conversation with plaintiff stated that "he would see it paid 11 or, "it should be paid." Held, that the promise was not enforceable because it was not in writing. Promise to answer for the Debts of Another. In the case of a promise to answer for the debt, default, or miscarriage of another, there must be three parties; the debtor, the creditor, and the STATUTE OF FRAUDS 55 person who guarantees the debtor's account. To bring the case under the rule requiring a writing there must not be an absolute promise to pay, but a promise to pay if the other defaults. To illustrate, A goes to a grocery with B and says, " Give B a bill of groceries, and if he fails to pay for them, I will." Such a promise is under the statute and must be in writing, but if A says, " Give B the bill of goods and I will pay for them," or, " I will see that you are paid," this is an independent promise, making A the principal debtor, and is not within the statute. In Boston v. Farr, 148 Pa. St. 220, plaintiff, a physician, brought suit to recover for services rendered defendant's stepson. Defendant said to plaintiff, " Go and get a surgeon and do all you can for the boy ; I will see that you get your pay." Held, the jury were justified in finding that it was an original promise on the part of defendant by which he charged himself with the bill, and did not come within the statute. Richardson v. Rabbins, 124 Mass. 105, was a case in which B agreed to pay a mortgage to plaintiff, and the defendant agreed orally to pay the plaintiff such portions of the mortgage and notes as B should fail to pay. Held, that defendant's promise was within the statute and should have been in writing. The test seems to be whether the party for whose debt the promise is made continues to be liable; if so, the promise is within the statutes. Agreements in Consideration of Marriage. The agreement here meant is not the promise to marry, but the promise to settle property or to make a payment of money in consideration of, or conditioned upon, a marriage. In McAnnulty v. McAnnulty, 120 111. 26, it was held that a verbal agreement made by the woman before marriage, whereby she released and renounced all interest in her proposed husband's estate after his death, was void under the statute of frauds. Contracts for the Sale of Lands or Hereditaments, or any Interest in or Concerning Them. This section does not apply to the deed of conveyance of land, as that must be written and sealed without statutory requirement. But the statute here refers to any agreement to buy or sell land or to any interest in or con- cerning lands, as a grant of a right of way over one's land, which is an interest concerning the realty and within the statute. Here a nice question often arises as to whether or not trees, 56 CONTRACTS crops, grass, and ore are real or personal property. If the former, all contracts concerning them are within the statute. The distinction seems to be that before they are severed from the land the natural products, such as trees, grass, etc., which grow without cultivation and the labor of man are parts of the realty, and if sold standing, the buyer to cut them, the contract is within the statute. Powers v. Clarkson, 17 Kan. 218, held that wild grass growing on unculti- vated land is a part of the realty, and an attempted transfer of such grass by parol is void. Harrell v. Miller, 35 Miss. 700, held that the term "land" embraces not only the soil, but its natural products growing upon and affixed to it. Therefore a sale of growing timber is within the statute of frauds, and void unless in writing. But if the owner of the land is to cut them, the sale is not completed until they are severed, therefore it is not a sale of a part of the realty and so not within the statute. In Killntore v. Hewlett, 48 N.Y. 569, defendant, an owner of some wood- land, entered into a parol agreement with plaintiff by which defendant agreed to cut cordwood and deliver the same to plaintiff at Syracuse for $5 per cord. Defendant performed part of the agreement, and then as the price of wood went up refused to deliver more, claiming the contract was void under the statute of frauds, as being for the sale of an interest in real estate. Held, that as it was a sale of the trees when severed, and as the plaintiff was not to have any property in the trees until they were severed, the contract was not for a sale of an interest in real estate, and so not within the statute. The same rule applies to coal and ore. Riddle v. Brown, 20 Ala. 412, holds that a contract granting the right to dig and carry away ore from a mine is for the sale of an interest in real estate and must be in writing. But if the products are growing crops which are harvested annually, and planted and cared for by the labor of man, the general rule is that they are personal property, even when attached to the soil. Marshall v. Ferguson, 23 Cal. 65, was an action upon an oral contract for the sale of wheat and barley which was not yet cut. The defense was that since it was an interest in real estate the agreement must be in writing. Held, that as it was a sale of a growing crop, the product of periodical planting and cultivation, it did not come within the provisions of the statute, and was valid if made orally. STATUTE OF FRAUDS 57 Agreements not to be performed within the Space of One Year. The mere fact that the contract may or may not be completed within one year is not sufficient to bring it within the statute. It must be the plain intent and purpose of the contract that it is not to be performed within that time, to bring it within the statute. If its performance depends upon a contingency that may or may not happen within the year, no writing is necessary. Kent v. Kent, 62 N.Y. 560, was an action on a contract whereby plaintiff agreed to work upon K's farm and to receive his pay after K's death. Plain- tiff entered upon such employment and K died five years thereafter. Held, that the contract of employment was not within the statute, as the time was uncertain, and might have been less than one year, depending as it did upon the length of K's Hfe. Wahlv. Barnum, 116 N.Y. 87, held that a contract of partnership to con- tinue for three years was void under the statute of frauds unless in writing. An agreement to support a person during his lifetime is not within the statute as he may die within the year. In McCormick v. Drummett, 9 Neb. 384, Z, a stepfather, gave D, his step- son, the use of his farm during Z's lifetime in consideration of D's supporting Z and his wife during their lives. Held, that such an agreement is not within the statute. But a contract for a year's service to be entered upon in the future, even the next day, must be in writing under the statute. In Oddy v. James, 48 N.Y. 685, about the middle of March the parties thereto entered into a verbal agreement by which defendant employed plain- tiff to superintend his cement works for one year from April i next. Plain- tiff worked until August 3, when defendant discharged him. Plaintiff sued, and defendant set up that the agreement was void under the statute of frauds. Held, for the defendant. The contract was not to be performed within one year, so must be in writing. A lease of land in New York State is expressly regulated by statute and is an exception to the above rule. A lease for one year or less need not be in writing, and this is true although the lease is not to commence until a future date. In other states all leases are required by statute to be in writing. By the common law it was not required that any lease be written, but this was changed in England as well as in the different states by the statute of frauds. 58 CONTRACTS 13. SALE OF GOODS ACT Conditions. Section seventeen of the English statute; of frauds provided : " No contract for the sale of goods, wares, and merchandise, for the price of ten pounds sterling or upwards, shall be allowed to be good except the buyer shall accept part of the goods so sold, and actually receive the same, or give some- thing in earnest to bind the bargain, or in part of payment, or that some note or memorandum in writing of the said bargain be made and signed by the parties to be charged by such contract or their agents thereunto lawfully authorized." This section is reenacted in most of the states. The amount involved necessary to bring the contract within the statute varies in the different states. In New York, Massachusetts, Connecti- cut, Michigan, Minnesota, Mississippi, Indiana, Nebraska, Ne- vada, and others, it is $50 ; in Maine, Arkansas, Missouri, and New Jersey, it is $30; in New Hampshire, $33; in Vermont, $40 ; in California and Montana, $200 ; in Utah, $300 ; and in Florida the provision extends to all sales (see p. 357). As will be seen, the statute includes most of the articles regarded as per- sonal property under the terms, "goods, wares, and merchandise." A close question comes up when the goods are in process of manu- facture. If it is held that it is a sale of labor, and of material to be made up, it is not a sale of goods, wares, and merchandise, but a contract for "work, labor, and services," and does not come within the statute. In England the test is that if at the time of delivery the subject-matter of the transaction is a sale of goods, wares, and merchandise, it is within the statute, and the rule has been followed in Minnesota, Missouri, and other states. Brown v. Sanborn, 21 Minn. 402, held that an agreement to purchase at $5 per ton the flax straw to be raised from 45 bushels of flaxseed, it appear- ing that from 20 to 50 tons were raised, was within the statute of frauds as a contract for the sale of goods and chattels. The court said, "It is essen- tially a contract for straw and not for labor and skill in producing the straw.". In Burrell v. Highleyman, 33 Mo. App. 183, the agreement was for three pieces of furniture, which were to be finished up and covered according to defendant's express order. The consideration of the transaction was over $50. SALE OF GOODS ACT eg Held, that when the subject-matter of a contract is a chattel to be afterwards delivered, it is a sale of goods and not a contract for work, labor, and services, although work is to be done on such chattel before delivery. In New York. In New York the rule is that if the article is in existence at the time of the agreement, it is within the statute, although some work is to be done upon it before delivery, but it is not within the statute if the article is not in existence at the time of the formation of the contract, as flour to be ground from the wheat or nails to be made from the iron. Parsons v. Loucks, 48 N.Y. 17, was an action to recover damages for a breach of contract. It was a parol contract that the defendants should manu- facture and deliver to plaintiff at New York City ten tons of book paper of a certain quality, plaintiff to pay thirteen cents a pound therefor. Held, that the contract was valid, and not within the statute. The court said the distinction was between the sale of goods in existence, at the time of making the contract, which was within the statute, and an agreement to manufacture goods, which was for work and labor, and not within the statute. In Massachusetts. In Massachusetts a still different rule is followed, which is, if the contract is for articles in existence or the kind the vendor makes in the ordinary course of his business, even though not at the time in existence, it is within the statute ; but if the articles are to be manufactured especially for the pur- chaser and not for the general market, it is not. In Goddard v. Binney, 115 Mass. 450, defendant went to plaintiff's shop and gave his verbal order for a buggy to be made for him according to specific directions and marked with his monogram. The price was $675. After the buggy was finished and the bill had been presented several times, plaintiffs shop burned and the buggy was destroyed. Held, that the contract was not within the statute applying to the sale of goods and the title to the buggy was in defendant, as this article was manufactured especially for the purchaser and upon his special order and not for the general market. It was not in existence at the time of the contract, nor was it such an article as the plaintiff in the ordinary course of his business manufactured for the general market. One of Three Conditions Necessary. Of those contracts which are within the statutes the law requires one of the three following conditions : that there be a part payment on account (to bind the bargain, as is often said), or a receipt and acceptance by the buyer of at least part of the goods, or, if neither of the above 6O CONTRACTS provisions is complied with, a written note or memorandum of the contract signed by the party to be charged. This memoran- dum must contain all the essential terms of the sale. Stone v. Browning, 68 N.Y. 598, held that a writing simply acknowledging the purchase of goods, without stating the price or terms of the contract of sale, is not a sufficient memorandum of the contract to satisfy the statute of frauds. All of the essential parts of the contract must be evidenced by the writing. 14. DISCHARGE OF CONTRACT Discharge by Agreement. As the contract is created by the agreement of the parties, so the parties may, if they choose, terminate and discharge it in a like manner. This may be termed a waiver or rescission of the contract. If the contract is executory, each party may waive his rights under it, and the waiver of the rights of one is the consideration for the waiver of the rights of the other. It is virtually a new contract, the sub- ject-matter of which is the waiver of the old contract, and all of the elements of a contract are necessary to constitute a valid waiver. If one party has performed his part of the contract, there must be some consideration for his release of the other party. In Collyer v. Moulton, 9 R.I. 90, Moulton and Bromley, copartners, entered into a contract with plaintiff who agreed to build them a wire bending machine. Moulton and Bromley dissolved and Moulton withdrew from the firm, after which plaintiff agreed to release him from the agreement and look to Bromley. Held, that this release of Moulton was not binding, as it was without consideration. If Bromley had agreed to pay plaintiff the full amount if plaintiff would release Moulton, this promise would have been a valuable consideration for the release. A waiver may be effected by the substitution of a new con- tract which so changes the terms of the old one that it either expressly or impliedly waives the old agreement, but the inten- tion to discharge the old contract must be clear. The contract may by express terms provide for its own discharge, as, for instance, a stipulation that one party may terminate it upon giving certain notice or performing certain conditions. DISCHARGE OF CON 1R ACT C,i Moore v. Phoenix Insurance Co., 62 N.H. 240, was an action on a policy of insurance. The policy provided that if the premises should become vacant and remain unoccupied for a period of more than ten days, without the assent of the company indorsed upon the policy, the policy should become void. The premises became vacant and remained so for over three months. They were then occupied and thereafter burned. Held, that by the terms of the policy it was terminated and discharged by the vacancy, and subsequent occupation did not revive it. Discharge by Performance. This is the termination of the contract contemplated by the parties when it is made. The terms having been carried out and the conditions performed, the contract is satisfied and dispharged. This of course requires performance upon both sides. If but one party has performed, he alone is discharged and not the contract, for it remains in force until all of its provisions are carried out. If the contract is for the sale of a horse for $100, the contract is discharged when the horse is delivered and the money paid. If the horse is delivered but payment not made, it is discharged as to the seller but not as to the purchaser. To constitute a performance the terms of the contract must be carried out as to time, place, and conditions. Although a substantial performance is held good, the party will be liable for the damages caused by his deviation from the exact terms of the contract. Nolan v. Whitney, 88 N.Y. 648, was an action to recover on a contract for building defendant a house. The court found that he had endeavored to live up to the agreement and, acting in good faith, had substantially performed his part. He could therefore recover, notwithstanding some slight defects in the plastering for which compensation would be made to the defendant. Gillespie Tool Co. v. Wilson, 123 Pa. St. 19, was an action to recover the contract price for drilling a gas well. The contract called for a certain depth and diameter. Plaintiff had drilled the required depth, but the diameter of part of it was less than the contract specified. The only excuse for this was the saving of time and expense. Held, that this was not a substantial com- pliance and he could not recover, although the well answered every purpose a larger one would. When the contract calls for the payment of money, the party to whom it is to be paid need not accept a note or check. But if it is accepted, the question arises as to whether or not this 62 CONTRACTS discharges the original contract, or whether the note or check is to be regarded as a conditional payment. If it is but a condi- tional payment, it does not discharge the contract until it is paid. It is the intent of the parties that governs here, but in the absence of any proof of intent to the contrary the presumption is, in most of the states, that it is taken conditionally. Stone &* Gravel Co. v. Gates Iron Works, 124 111. 623, held that the taking of a note for a preexisting debt was no payment unless the creditor expressly agreed to take the note as payment and to run the risk of its being paid. The giving of a receipt for the amount is not enough to establish such a positive agreement. In some states, the courts hold exactly the contrary view as to the taking of notes. Dodge v. Emerson, 131 Mass. 467, held, that the giving and acceptance of a promissory note for a preexisting debt is presumptive evidence of payment. A contract in which the performance of one party is to be satisfactory to the other gives rise to a nice question and we are confronted with the inquiry, can the whims and personal taste of the party for whom the work is done prevent the fulfillment of the agreement when the performance is to all intents and purposes well accomplished ? The answer seems to be that if it is a matter of personal taste, as a contract for painting a portrait or a contract for the sale of goods where the parties can be put in statu quo (i.e. the same condition in which they originally stood), the agreement will be strictly construed and the buyer will be the sole judge. In Brown v. Foster, 113 Mass. 136, plaintiff expressly agreed to make a suit of clothes for defendant that would be satisfactory to him. The clothes were made and delivered, but defendant declined to accept them. Plaintiff proved that they could easily be altered and made to fit. But the court held that under the agreement it was for the defendant alone to decide whether or not he would accept the clothes. It was the plaintiff's fault if he entered into a contract that made his compensation dependent upon the judgment and caprice of another. But if it is a contract for work or labor which does not involve the question of personal taste, as for machinery or mason work, DISCHARGE OF CONTRACT 63 the courts hold that the party for whom the work is performed must be satisfied when in justice and reason he ought to be satisfied. In Hawkins v. Graham, 149 Mass. 284, plaintiff agreed with defendant in writing to furnish and setup a heating system in defendant's mill according to certain specifications, and he was to be paid upon its satisfactory completion. If the system was not satisfactory, he was to remove it at his own expense. Held, that the question as to whether the system was satisfactory was to be determined, not by the particular taste and liking of the mill owner, but by the judgment of a reasonable man. Legal Tender. The payment of money must be made in what is termed legal tender, unless the creditor consents to accept something else. Legal tender is money which Congress has declared must be accepted if offered in payment of debt. All gold coins and silver dollars are legal tender for any amount. Silver coins of denominations less than the dollar are legal tender in amounts not exceeding ten dollars. Minor coins such as nickel and copper pieces are legal tender in amounts not exceeding twenty-five cents. Gold and silver certificates are not legal tender. United States Treasury notes are legal tender in any amount. United States notes or "greenbacks" are legal tender in any amount, except for duties on imports and interest on the public debt. National bank notes are not legal tender, but are accepted by the United States government for all debts except duties on imports. In actual practice the national bank notes and the gold and silver certificates are taken without question and pass as freely as any other kind of money, and their acceptance constitutes good payment. The receipt of counterfeit money does not constitute payment, and it can be returned within a reasonable time and good money demanded in its place. Tender. The creditor may refuse to accept the money which the debtor claims is due him. In such a case if the debtor makes a sufficient tender of the amount he will be relieved from paying any costs in a suit against him for the debt. To consti- tute a sufficient tender the exact amount of money must be pro- duced and offered, and the offer must be made unconditionally, 64 CONTRACTS that is, it rnust be made without any reservation. Even the offer to pay upon condition that the creditor give a receipt for the money is not a good legal tender. Unless the contract provides a place of payment, the tender must be made to the creditor personally if he is within the state. Impossibility of Performance. We have seen on page 34 that when the act to be performed is an impossibility on the face of it, no contract exists, as such an act is not a valid consideration. But the question comes up when the impossibility arises after the formation of the contract, and the rule then is that it does not excuse performance. In Anderson v. May, 50 Minn. 280, plaintiff contracted in March to raise and deliver to defendant 591 bushels of beans. Plaintiff delivered only 152 bushels because most of his crop was destroyed by early and unusual frost. Held, that this did not excuse his non-performance. When such causes may intervene they should be guarded against in the contract. But if the promisor makes his promise conditional upon an event, the happening of which makes the performance impos- sible, this of course excuses him, as where a clause is inserted providing for the contingency of fire, or strikes, or floods. If the promise is made unconditionally, the promisor takes all risk. There are contingencies which may arise, however, which the courts hold are sufficient excuse for not fulfilling the contract. Among these are impossibilities arising from a change in the law of one's own country. In Cordes v. Miller, 39 Mich. 581, Miller leased from Cordes, a wooden build- ing in Grand Rapids, Mich., for ten years. The lease contained this covenant, "If said building burns down during this lease, said Cordes agrees to, rebuild the same in a suitable time, for said Miller." Miller occupied the premises for two years, when it was destroyed by fire. About the time of the fire an ordi- nance was passed prohibiting the erection of wooden buildings within certain limits which embraced this site. Held, that the covenant was released by the ordinance making its fulfillment unlawful. Another contingency which will excuse the failure to fulfill is where the continued existence of a specific thing is necessary to the performance of the contract. The destruction of that thing through no fault of either party discharges the contract. DISCHARGE OF CONTRACT gt Walker v. Tucker, 70 III. 527, was a case in which the lessee of a coal mine covenanted in his lease to work the same during the continuance of his lease in a good and workmanlike manner. The court held he was excused from further performance when the coal mine became exhausted. Cleary v. Sohier, 120 Mass. 210, was a case in which plaintiff entered into a contract with the defendant to lath and plaster a certain building. After he had partially completed his part of the contract the building burned. Held, that the plaintiff was excused thereby from fulfilling the remainder of his con- tract, and could recover a reasonable amount for the work already done. A contract for the rendering of personal services is discharged by the death or illness of the promisor. In Spalding v. Rosa, 71 N.Y. 40, defendants contracted with plaintiffs, who were proprietors of a theater, to furnish an opera troupe to give a certain number of performances. The leader and chief attraction of the company became ill and unable to sing, and the defendants did not appear. In an action to recover damages for the breach it was held that as the illness of the chief singer made it practically undesirable and impossible to appear without him, and as it was caused by circumstances beyond his control, it constituted a valid excuse for non-performance. Discharge by Operation of Law. Where security of a higher nature is substituted for inferior security a merger of the less into the higher takes place. The common illustration of this rule is the case of a judgment taken on a simple contract, the amount owing on the contract being merged in the judgment. Another illustration is the case of a contract under seal made by the same parties and containing the same subject-matter as a simple contract then existing. The simple contract is merged in the specialty. Clifton v.Jackson Iron Co., 74 Mich. 183, was a case in which the owner of land on contracting for its sale, reserved the timber, with the right of removal for a specified time. Before the expiration of this time he conveyed the land to the purchaser by warranty deed under seal without any such reser- vation. Held that the contract became merged into the deed and discharged by it, and the timber passed to the purchaser. Discharge by Alteration of a Written Instrument If a written instrument is altered or erased in a material part by a party to the contract, or by a stranger while the instrument is in the possession of the party to it, and with said party's consent and without the consent of the other party to the instrument, the COM. LAW 5 66 CONTRACTS contract will be discharged. If the alteration is made with an intent to defraud there can be no recovery on the original consideration. Wood v. Steele, 6 Wall. (U.S.) 80, was an action on a promissory note dated October 1 1, 1858, and made by Steele and Newson, payable to their own order one year from date. It was indorsed by them to Wood, the plaintiff. '' September " had been stricken out and " October " put in as the date. The change was made after Steele had signed the note as surety and without his knowledge or consent. Held, that it was a material alteration and extin- guished Steele's liability. But if the alteration be made without intention to defraud, there can be a recovery on the original contract. In Owen v. Hall, 70 Md. 97, at the maturity of a joint promissory note a renewal note was given which was invalidated as to one of the makers on account of a material alteration made after he signed. The alteration was the insertion of the words "with interest" without his knowledge or consent. Held, that a recovery could be had against him on the original cause of action, as there was no fraudulent intent in the alteration. Discharge by Bankruptcy In 1867 there was enacted by Congress a United States bankruptcy law. This enactment was repealed in 1878, and from that time down to 1898 there was no national bankruptcy law, although in several of the states bankruptcy laws were enacted. They proved inefficient, however, and in 1898 a new national bankruptcy law went into effect. Voluntary and Involuntary Bankruptcy. This act provides that "Any person owing debts, except a corporation, shall be entitled to file a voluntary petition in bankruptcy." "Any natural person, except a wage earner, or a person engaged chiefly in farming or the tillage of the soil, any unin- corporated company, and any corporation engaged principally in manufacturing, trading, printing, publishing, mining, or mer- cantile pursuits, owing debts to the amount of one thousand dollars or over, may be adjudged an involuntary bankrupt upon default or an impartial trial, and shall be subject to the pro- visions and entitled to the benefits of this act. Private bankers, but not national banks or banks incorporated under state or territorial laws, may be adjudged involuntary bankrupts." DISCHARGE OF CONTRACT 67 Duties of Bankrupt As soon as the voluntary petition is filed, or after the hearing upon the involuntary petition, if allowed, the party is a bankrupt, and it is then his duty to attend the first meeting of his creditors, if directed by the court or a judge of the court, and also the hearing upon the application for his discharge. He must also comply with the lawful orders of the court ; examine the proofs of claims filed against his estate ; execute such papers as shall be ordered by the court ; execute to his trustee a transfer of all his property in foreign countries ; inform his trustee of any attempts of his creditors to evade the provisions of the bankruptcy law, coming to his knowledge, or of any attempt on the part of creditors to prove false claims ; prepare, make oath to, and file in court within ten days, unless further time is granted, after the adjudication, if an involuntary bankrupt, and with the petition if a voluntary bankrupt, a schedule of his property, showing the amount and kind of property, the location thereof, its money value in detail, and a list of his creditors, showing their residences, if known (if unknown, that fact to be stated), the amounts due each of them, the consideration thereof, the security held by them, if any, and a claim for such exemptions as he may be entitled to, all in triplicate, one copy of each for the clerk, one for the referee, and one for the trustee; and when present at the first meeting of his creditors and at such other times as the court shall order, submit to an examination concerning the conduct of his business, the cause of his bankruptcy/ his dealings with his creditors and other persons, the amount, kind, and where- abouts of his property, and, in addition, all matters which may affect the administration and settlement of his estate ; but no testimony given by him shall be offered in evidence against him in any criminal proceeding. The bankrupt is entitled to the same exemptions as are allowed any debtor by the laws of the state in which he resides. Acts of Bankruptcy. Certain acts of a person are called acts of bankruptcy and render him liable to be adjudged an involun- tary bankrupt upon the petition of his creditors. The law pro- vides that these acts of bankruptcy by a person " shall consist of his having conveyed, transferred, concealed, or removed, or per- 68 CONTRACTS milted to be concealed or removed, part of his property with in- tent to hinder, delay, or defraud his creditors, or any of them ; or transferred, while insolvent, any portion of his property to one or more of his creditors with intent to prefer such creditors over his other creditors; or suffered or permitted, while insolvent, any creditor to obtain a preference through legal proceedings, and not having at least five days before a sale or final disposition of any property affected by such preference vacated or discharged such preference ; or made a general assignment for the benefit of his creditors, or, being insolvent, applied for a receiver or trustee for his property, or because of insolvency a receiver or trustee has been put in charge of his property under the laws ot a state, or a territory, or of the United States ; or admitted in writing his inability to pay his debts and his willingness to be adjudged a bankrupt on that ground." The petition can be filed any time within four months after the act of bankruptcy has been committed. Trustee and Creditors. As soon as a person is adjudged a bankrupt a meeting of his creditors is called, at which time they can examine the bankrupt, elect a trustee, and do any other busi- ness proper at the time. As soon as the trustee is elected and has filed his bond, he becomes vested by operation of law with the title of the bankrupt to all of his property except that exempt by law, to all property transferred in fraud of creditors and to all rights arising upon his contracts and agreements. It is then the duty of the trustee to collect the assets, which he divides among the creditors whose claims have been accepted. Discharge in Bankruptcy. The bankrupt, after one month and within twelve months after being so declared, may file an ap- plication for a discharge in the court of bankruptcy, and the judge shall grant the discharge unless at the hearing held thereon it shall appear that the bankrupt has "committed an offense punish- able by imprisonment as herein provided ; or with intent to con- ceal his financial condition, destroyed, concealed, or failed to keep books of account or records from which such condition might be ascertained ; or obtained property on credit from any person upon a materially false statement in writing made to such person DISCHARGE Of CONTRACT 69 for the purpose of obtaining such property on credit ; or at any time subsequent to the first day of the four months immediately preceding the filing of the petition, transferred, removed, de- stroyed, or concealed, or permitted to be removed, destroyed, or concealed, any of his property with intent to hinder, delay, or de- fraud his creditors ; or in voluntary proceedings been granted a discharge in bankruptcy within six years ; or in the course of the proceedings in bankruptcy refused to obey any lawful order of, or to answer any material question approved by, the court." The discharge of the bankrupt acts as a discharge of all of the debts and contracts of the bankrupt at the time of the filing of the petition except a certain class of debts which are tinged with wrong or fraud, or debts due the government, or debts due creditors who were not duly notified of the proceedings. Discharge by Breach. We have already considered how a contract may be terminated and discharged by fulfilling the terms thereof. We have now to consider how it may be dis- charged by failure or refusal of one or both of the parties to fulfill the agreement. When the terms of the agreement have been broken, there arises in the place of the contract a new obli- gation under which the party in default is placed. That obliga- tion is to pay to the other party the damage arising therefrom. The injured party acquires a new right through the breach called a right of action. The contract may be broken in any one of three ways. A party may renounce his liability thereunder or he may, by his own acts, make it impossible for him to fulfill, or he may wholly or partially fail to perform, what he promised. Breach by Renouncing Liability. When one party to the contract renounces his liability thereunder before performance is due and declares that he will not perform, a breach of con- tract arises and the injured party may at once institute an action for damages. Windmuller v. Pope, 107 N.Y. 674, was an action to recover damages for breach of contract. The parties entered into a contract whereby plaintiff sold to defendant 1200 tons of old iron to be delivered at a certain time. Before the time expired defendant notified plaintiff that he would not receive nor pay ;0 CONTRACTS for any of the iron. Plaintiff thereupon sold the iron elsewhere. Held that the plaintiff was justified in treating the contract as broken at that time, and was entitled to bring action immediately without tendering delivery or waiting the expiration of the time fixed for the performance. If during the course of the performance one of the parties clearly refuses to continue with his part, the contract is broken, and the other party is excused from further performance, in fact, he must not go on if his continuing would increase the damage. In Clark v. Marsiglia, i Denio (N.Y.) 317, defendant delivered to plain- tiff a number of pictures to be cleaned and repaired. After he had commenced defendant gave him orders to stop, as he had decided not to have the work done. Plaintiff, however, finished the work and claimed the whole amount of the contract. Held that he had no right to increase the amount of damages by going on with the work. When the contract was broken he was entitled to just compensation for the injury he had sustained by the breach of the agreement. Breach by Making Performance Impossible. If one of the parties puts it out of his power to perform before the perform- ance is due, the other party need not wait, but may consider the contract broken. In Wolf v. Marsh, 54 Cal. 228, Marsh promised in writing to pay Wolf a certain sum of money. The note contained the following condition : " This note is made with the express understanding that if the coal mines in the Marsh Ranch yield no profit to me this note is not to be paid and the obli- gation herein expressed shall be null and void." Thereafter and before the mines had yielded anything defendant sold them. Held, that the yielding of profit by the mines was a condition precedent to the payment of the note, but Marsh had rendered the happening of that condition impossible by selling the mines, and the obligation therefore became absolute. And this is true if the impossibility is created after the con- tract is performed in part. In Woodberry v. Warner, 53 Ark. 488, Woodberry, the owner of a steam- boat, employed Warner, a pilot, at a salary of $720 per year with the further agreement that as soon as the net earnings of the boat should amount to $8000 he should become the owner of a one-fourth interest. In about two years Woodberry sold the boat. Held, that as he had put it out of his power to fulfill the contract, he was liable to Warner for the value of his services over and above his regular wages. DISCHARGE OF CONTRACT 7l In order that one party may recover damages for a breach of contract on the part of the other the first party must show that the second party's promise was not dependent upon the acts of the first party ; that is, if A is to draw a ton of coal for B for $7, A can not sue B for payment until he has performed his own part. In Weber v. Clark, 24 Minn. 354, defendant owned a farm of 200 acres and agreed to pay plaintiff $100 if he would find a purchaser for it. Plaintiff found a man who bought part of it, and then sued for the $100. Held, that he could not recover, as he was not entitled to the money until he had per- formed his part of the contract and found a purchaser for the whole farm. This rule does not apply to contracts in which the promises are independent of each other. Here a breach by one does not discharge the other. Tracy v. Albany Exchange Co., 7 N.Y. 472, was an action for breach of covenant in a lease which provided that plaintiff might have the refusal of the premises at the expiration of the lease for three years longer. When the lease expired defendant refused to renew it at the same rate, but asked $200 per year more. Plaintiff was somewhat in arrears of rent at the expiration of the first lease. Held, that the payment of the rent was not a condition precedent to the right of the plaintiff to a renewal of the lease, the covenant to renew and the covenant to pay rent being independent promises. Plaintiff could bring his action for breach of the contract to renew, although he was guilty of default in the payment of his rent. Breach by Failure to Perform Entire and Divisible Contracts It is clear that when one party wholly fails in, the act that was the entire consideration for the second party's promise, and that must be done before the second party can be required to perform his part, the second party will be excused. But certain cases come up in which one party has done part of what he promised or a part of the contract has been carried out, and we have to consider whether or not the whole contract has therefore failed. In other words, is it an entire or a divisible contract ? A common illustration of the cases under which this question arises is an agreement to deliver and pay for goods in install- ments at different times. The English rule, which holds all contracts of this class as divisible, is fol- lowed in Myer v. Wheeler, 65 Iowa 390, in which plaintiff sold to defendant 72 CONTRACTS " ten car loads of barley, like sample, to be delivered from time to time on the railroad tracks at Calmar, Iowa, and defendant was to pay seventy cents per bushel for each car load when delivered. After the first car was delivered defendant refused to allow more than sixty-five cents, saying that the barley was not equal to sample, but urged plaintiff to ship balance. Plaintiff refused. Held, that the contract was severable, and that the refusal to pay for the first car load did not entitle plaintiff to rescind and refuse to deliver the other car loads ; that plaintiff could recover the actual value of the car delivered, and defendant could recover damages for the failure to deliver the other nine cars. But the courts in this country generally seem to hold the con- trary view, and make the test the real intent of the parties. If it was intended to be all one contract, the courts do not make it divisible because it is to be executed or carried out at stated periods. In Norrington v. Wright, 115 U.S. 188, plaintiff made a contract of sale to defendant of 5000 tons of iron rails for shipment from a European port at the rate of about 1000 tons per month, beginning in February, the whole con- tract to be shipped before August. Plaintiff shipped only 400 tons in Febru- ary and 885 tons in March. As soon as defendant learned of the failure of plaintiff to ship as agreed, he refused to accept and pay for what was shipped, and sought to rescind the whole contract for the failure to ship 1000 tons per month. In this case the contract was held to be entire and not divisible, and the defendant had the right to rescind the whole contract. Representation and Condition. Certain failures to perform are not considered of sufficient importance to invalidate the contract, but merely give rise to a right of action for the damages caused. If one of the terms of the contract is but subsidiary and does not defeat the main object of the contract, a breach of such term does not discharge the contract. Such a term is styled a repre- sentation and not a condition. A statement descriptive of the subject-matter or of some material incident, such as, the time or place of shipment, is generally regarded as a condition. In Filley v. Pope, 115 U.S. 213, a contract provided for the sale of iron to be shipped from Glasgow as soon as possible. It was shipped from Leith. Held, that the buyer might refuse to accept. The place of shipment was a m iterial incident and a warranty or condition precedent, upon the failure of which the other party might repudiate the whole contract. A representation is a separate stipulation and neither suspends nor defeats the agreement. DAMAGES In Laws v. Meeker, 5 Johns. (N.Y.) 354, defendant sold plaintiff a wagon for $50 and represented at the time of the sale that he had been offered $50 for it by different persons. The wagon was not really worth over $25. Held, that this was not a warranty and constituted no grounds for an action. 15. DAMAGES Nature and Extent. As we have already learned, the party who is guilty of a breach in the performance of his part of the contract may be compelled by the courts to make good the loss incurred by the other party. If the contract be discharged by the breach, the party not in default is released from further per- formance. He may also recover a pro rata amount upon the part performed if he has done anything under the contract. In certain cases there is also provided the extraordinary relief of an injunction or a specific performance. If the action brought by the party not in default is for money damages, the amount allowed will be the loss or injury caused as the natural result of the breach or that would ordinarily be within the contemplation of the parties. The object is to com- pensate the party injured and not to punish the party in default. In Beeman v. Banta, 118 N.Y. 538, defendant contracted to construct a refrigerator for plaintiff who was engaged in preparing poultry for market, and v.'ith a knowledge that plaintiff intended to make use of it at once for freezing and keeping chickens for the May market, expressly warranted that the freezer would keep them in perfect condition. This it failed to do, and as a conse- quence a large number of chickens spoiled. It was held that the plaintiff, in an action on the warranty, could recover as damages the difference in the value of the refrigerator as constructed and its value as it would have been if made according to contract, and that he could also recover the market value of the chickens lost, less the cost of getting them to market and selling them. Specific Performance and Injunction. The special relief of specific performance and injunction is granted only when money damages do not constitute an adequate remedy, as in a contract calling for the conveyance of land. The particular place could not be duplicated elsewhere, and it might have a special value to the purchaser for which money would but poorly compensate him. Specific performance would therefore be decreed at the 74 CONTRACTS instance of the purchaser compelling the vendor to convey, but it would not be decreed against the purchaser to compel him to accept the property because there would be an adequate remedy at law in the way of damages, as the owner could sell to some one else, and the difference between what the purchaser had agreed to pay and what he could get tor the land after the breach would be the amount of his damages. So also the remedy by injunction is exercised only in special cases in which damages would not afford adequate relief to the injured party. In Cort v. Lassard, 18 Ore. 221, plaintiff, a theatrical manager, sought to restrain defendants, who were acrobats, from performing at a rival theater in the same place. Defendants had agreed to perform for plaintiff exclusively for six weeks, and plaintiff alleged that he had prepared for them and adver- tised them and that he would lose large profit, as they were unique attractions. Held, that when a contract stipulates for special, unique, or extraordinary personal services, involving special merit, skill, or knowledge, so that in case of default the same services could not be easily obtained elsewhere nor be compensated for by an action at law, a court of equity will be warranted in applying its preventive remedy of injunction. 1 6. DISCHARGE OF RIGHT OF ACTION By Mutual Agreement. As the breach of a contract gives rise to a right of action for the damages suffered, we have to determine how this right may be discharged, and we find there are three means by which it may be effected. The parties may discharge the right by mutual agreement if a valuable consid- eration be given, as a payment in satisfaction of the damages or an instrument under seal. In Hale v. Spaulding, 145 Mass. 482, defendant agreed in writing to pay plaintiff six sevenths of any loss he might be subjected to as the indorser of a certain note. Thereafter plaintiff executed under seal, a receipt " in full satisfaction of defendant's liability on the document." This discharged the right of action on the original agreement. By Judgment. The party may prosecute the right of action in the courts and obtain a judgment, the right of action being then merged in the judgment. DISCHARGE OF RIGHT OF ACTION 75 By Statute of Limitations. If the right of action is not merged in a judgment or discharged by consent within a given time, the law will refuse to enforce it by reason of the lapse of time under what is termed the statute of limitations. This statute, which was first enacted in England, provided that all actions upon account, and some others, shall be commenced and sued within six years. Like the statute of frauds it has for its object the discouraging of litigation and the suppression of perjury, as the lapse of time makes the proof less certain and the resurrection of old and stale claims would be a fruitful field for fraud and perjury. A provision analogous to the English statute has been enacted in all of the states. In New York and most of the other states the period is six years on contracts not under seal and twenty years on sealed instruments or judgments of the court duly recorded. Certain other actions are barred in three, two, and one years. (See Appendix, p. 351.) The statutes in the different states vary, and in a number of them negotiable instruments are not barred for a longer time than simple contracts. In the most of the states real property actions are given a longer period to run. When the Time under the Statute Begins. The time begins to run from the day the injured party would be entitled to bring a suit for the claim. Sturgis v. Preston, 134 Mass. 372, was an action to recover money paid under mistake. Held, that it was barred unless the action was brought within six years from the date of the payment of the money, because the right of action accrued upon that day. Most of the statutes provide that the absence of the defendant from the state at the time the cause of action arises will postpone the running of the statute until his return. In Engel v. Fischer, 15 Abb. N.C. (N.Y.) 72, it was held that a person who comes within the state with the purpose of continuing therein, concealed under a fictitious name to avoid pursuit by his creditors, is not to be regarded as having come within the state within the meaning of the statute until the day he is discovered. If the plaintiff is under disability, such as infancy, insanity, or imprisonment at the time the right of action arises, the time will 76 CONTRACTS be extended. But the disability must exist at the time the statute begins to run or it will have no effect. New Promise. The promise or right of action may be re- newed, either by a new agreement, which by some of the stat- utes must be in writing, or by a payment on account. The statute then begins to run under the new promise or after the new payment. In Blaskower v. Steel, 23 Ore. 106, plaintiff, between the years 1878 and 1885, sold to H a quantity of cigars. On May 18, 1885, there was a credit on the account. Held, that this revived the whole account for a further statutory period, and the claim would not outlaw until six years after the payment. / QUESTIONS ON CONTRACTS 1. Define contracts. 2. Mention the elements necessary to constitute a binding contract. 3. Distinguish between executed and executory contracts. 4. A agrees to give B $10 for delivering to him one ton of hay. B delivers the hay, but A has not yet paid him for it. Is the contract executed or executory on A's part? On B's part? 5. What are formal contracts? Simple contracts ? 6. What is necessary to constitute a seal ? 7. Distinguish between oral and written contracts. 8. Distinguish between express and implied contracts. 9. Brown employs Whitmore as his agent to procure a purchaser for his house and lot. Whitmore, without Brown's knowledge, purchases it himself and takes title in the name of a third party. Is the contract binding ? Give reason. 10. Who is an infant? In general, is a contract made by an infant valid? Is it void? What are the rights of the infant after becoming of age in reference to the contracts made during his infancy? 11. Carpenter, an infant, traded with Smith a flock of sheep for a horse; later, becoming tired of his bargain, he tendered back the horse and demanded his sheep. At the time of the trade Carpenter stated that he was over twenty- one years of age, when, in fact, he was but eighteen. Could he recover back his sheep? 12. Smith, becoming tired of the trade, tendered back the sheep and de- manded the horse, claiming his right to disaffirm the contract because Car- nenter was not of age. Could he recover his horse? 13. Carpenter, after he becomes of age, is in debt and his creditors seek to recover the sheep on the ground that the contract was made during Carpenter's infancy. Can they succeed? CONTRACTS 77 14. Edwards, an infant, agrees with Larkin to purchase his automobile. After Edwards becomes of age and before he has disaffirmed the contract, Larkin sues him for damages because of his failure to take the machine. Was the contract binding, or was Edwards bound to disaffirm the contract upon becoming of age ? 15. In question 1 1, could Carpenter tender back the horse and demand his sheep before he became of age? 16. In question n, though the horse dies after Carpenter received it, could he still disaffirm the contract and demand his sheep back? 17. In question n Carpenter demands back his sheep, but does not offer to return the horse. Can he get his sheep and keep the horse, in case the horse is living and he still has him ? 1 8. What class of infants' contracts are void instead of voidable? 19. What class of infants' contracts are valid and binding? 20. One Stewart sold to Haines, an infant, a suit of clothes, which were necessaries and with which he was not properly provided. The suit was rea- sonably worth $25. Stewart charged him $50 for it. In an action to recover the $50, could Haines succeed ? If not, what could he recover, if anything? 21. Are doctor's services necessaries? Are articles of jewelry necessaries ? .22. Strong, an infant and a son of a laboring man, bought of plaintiff a gold watch worth $50. Plaintiff sought to hold Strong for the price of the watch, claiming that it was for necessaries. Could he recover? 23. In the above case, if Strong was the son of a bank president and a wealthy man, would the contract be for necessaries ? 24. In the last case, if Strong's father had already provided him with a good gold watch before he purchased the watch of plaintiff, could plaintiff recover as for necessaries ? 25. Can an insane person make a valid contract? 26. A contracted with B, an insane person, not knowing of B's insanity. B's condition was such that it was not noticeable at times that he was of unsound mind. Under their contract A purchased a horse and wagon of B and paid him a fair price for it, and afterwards disposed of the wagon. Could B repudiate the contract? 27. In the above case B had been judicially declared insane by the courts. Could B repudiate the contract? 28. A knew of B's insanity. Could the contract be set aside? 29. In question 20, if Haines had been a lunatic instead of an infant, could Stewart have recovered? 30. Rogers, while intoxicated to such a degree that he did not know what he was doing, sold his gold watch, worth $50, to Bush for $5. After be- coming sober, he tendered back the $5 and demanded the watch. Could he recover? 31. Can a married woman now make a contract in her own name? Could she under the common law ? 78 CONTRACTS 32. What is offer and acceptance? 33. Baker offers to sell Holt his automobile for $600. Holt replies, '' I will accept your offer and take the machine at $600, provided you will accept $300 in cash and my note at two months for the balance." Is this a valid contract? Give reason. 34. Fitch has two typewriters, a Remington and a Smith Premier. He offers to sell Carey the Remington for $75. Carey writes back, telling him that he will pay him $75 for the Smith Premier. Is this a valid acceptance of the offer? 35. A murder having been committed in the city of Rochester, the mayor offers a reward of $1000 for information that will lead to the apprehension and conviction of the murderer. O'Laughlin of Elmira gives such informa- tion, through which the murderer is convicted. At the time he gives the information he has no knowledge that any reward has been offered, but after learning of it claims the reward. Can he recover? Give reason. 36. Smith's horse became frightened while being driven along the canal and went in. Jackson, who was driving near, saw him and went to the rescue and spent time and labor in helping to get the horse and wagon out. After they had succeeded in their efforts Jackson claimed $10 for his services. C<3uld he recover? 37. When does an offer become effectual? When does an acceptance become binding ? 38. In what mode or way must the acceptance be made? 39. Defendant wrote plaintiff on the 2ist of June that he would sell him his piano for $250. On the 25th of June plaintiff deposited in the post office an acceptance of the offer. This letter in the regular course of the mails reached defendant at noon on the day of the 26th, but about nine o'clock on the morning of the 26th defendant sold the piano to another party and sent plaintiff word. Could plaintiff recover damages for breach of contract against defendant, or was the contract not yet completed? 40. In the above case suppose defendant sent the offer to plaintiff by a messenger. Plaintiff instead of replying by the messenger sent the letter through the mail, but before the letter reached defendant he had sold the piano. Could plaintiff recover for breach of contract? 41. Suppose in question 39 defendant about six o'clock in the afternoon of the 25th telegraphed plaintiff withdrawing his offer. This message was sent a few hours after plaintiff had mailed his acceptance of the offer. Was the acceptance binding or was the withdrawal of the acceptance sent in time? 42. In question 40 if defendant in his offer had told plaintiff to reply by mail, could plaintiff recover? 43. If in question 39 defendant had died on June 23, would plaintiff's ac- ceptance on the 25th without notice of his death have been good? 44. Define consideration. When is consideration necessary in a contract? 45. What effect has a seal in regard to consideration? CONTRACTS 70 46. Stone promises to give his grandson $100 when the grandson becomes of age. Stone does not fulfill his promise. Can the grandson compel him to pay? 47. If in the above case Stone had paid the $100, could he recover it back? 48. One Powers promised Evans $100 provided he would name his child after Powers. The child was so named and Powers refused to pay. Could Evans recover? 49. Blake owed Ayers $500 which was due July i. July 2 Blake paid $400, and Ayers in consideration of getting the money then, agreed to accept it in full payment. Thereafter Ayers sued for the balance of $100. Could he recover? 50. In the above case if Blake had given $400 and two sheep worth $5 each, could Ayers have recovered the remaining $90? 51. In question 49 if the sum owed by Blake to Ayers had been in dispute, Ayers claiming it to be $500 and Blake claiming it to be $350, and they had agreed upon a settlement of $400, which was paid and accepted in full pay- ment, could Ayers then sue for the balance of $100 which he claims to be due? Why? 52. Ayers owes Blake $100 which is due. Blake makes a promise to extend the time of payment one year. Thirty days after Blake makes this promise to extend the time of payment, he sues Ayers for the amount. Ayers claims the account is not yet due. Can Blake recover? 53. In the above case Ayers gives Blake a chattel mortgage an his house- hold furniture in consideration of the extension of one year. In that case can Blake sue before the year has elapsed ? 54. Gibson rescues Rogers from being run over by a railroad train. Out of a spirit of thankfulness Rogers promises to give Gibson $100. Failing .to keep his promise, Gibson sues him. Can he recover? 55. Gilbert who is unable to read or write the English language signs a paper which is represented to him to be an agreement for a particular kind of paint. It turns out to be a promissory note for $50. Is the note valid? 56. A contracted with B to purchase a horse which stood in B's stable. A thought he was buying the bay horse, while B thought he was selling a brown. Could A recover damages for B's refusal to deliver the bay horse? 57. Define fraud. 58. A sells B his grocery store and stock of goods. B has an opportunity of inspecting the store, and does look through it. The most of the stock had previously been injured by a flood which filled A's cellar. B purchases, and later upon discovering this, sues A for damages. Can he recover? 59. In the sale of goods where the buyer can inspect them, what rule is said to apply ? 60. What are uberrima fides contracts? 61. Gordon sells Brownell a horse, tells him that he is the best horse in the neighborhood, and that if he keeps him until fall he can sell him for $50 80 CONTRACTS more than he pays for him. As a matter of fact the horse is an inferior animal and Brownell loses on his purchase. Can he recover damages from Gordon ? 62. If Gordon had represented that the horse was but eight years old, when in fact it was twelve, but Gordon believed it was only eight, could Brownell have recovered damages? 63. If in the above case when Gordon stated the horse was but eight years old he knew that he was twelve, but made the statement falsely, still Brownell knew all the time that the horse was twelve years old and was not deceived by the statement, could Brownell recover damages of Gordon ? 64. Define duress. 65. A is threatened with imprisonment and physical injury, unless he signs a note that is presented to him. He signs it. Is the note valid ? 66. If the physical injury and imprisonment had been threatened to A's wife unless A signed the note, would the note have been valid? 67. If the imprisonment and violence had been threatened to A's brother unless A signed the note, would the note have been valid? 68. Is a promise made by a child to his parent or a patient to his physician void ? Does it come under a different rule from an ordinary promise? 69. A was employed by B to do an unlawful act. After A has performed his part of the agreement he sues B for his pay. Can he recover? 70. If B had paid A, could he recover back the money? 71. A statute in New York State requires a physician to have a certain license before practicing. A physician practicing without such a license sues tor his services. Can he recover? 72. A makes a wager with B that C will be elected governor of New York State at the coming election. C is defeated and the money is paid to B. A brings an action to recover the money wagered. Can he succeed? 73. A, who is an important witness against B, a criminal on trial, is prom- ised $100 by B if he will refrain from testifying. He refuses to testify against B, and later sues B for the $100. Can he recover? 74. A promises B $500 provided he does not marry in two years. At the end of two years, B, having kept his promise, demands the $500. Can he recover? 75. Cross sold his meat market to Sterling and agreed that he would not engage in the same line of business in the same city, which had 10,000 inhab- itants, for the period often years. Was this agreement valid? 76. If in the above case Cross had agreed not to engage in the same busi- ness within the state for a period of ten years, would the agreement have been valid ? 77. If in question 75 Cross had been engaged in manufacturing automo- biles, would the restrictions in that case have been valid? Would the restric- tions in question 76 have been valid? 78. A and B go into a grocery store together. B is asked by 'the grocer to pay an account which he owes. Being unable to pay it he refuses. A CONTRACTS 8 1 thereupon without B's knowledge or request pays the bill to save his friend's credit. He then seeks to recover the amount from B. Can he recover it? 79. Liman owes Davis $500. Liman agrees to sell one Noble a team of horses, provided he will pay him $50 in cash and will pay Davis $500 within ten days. Noble takes the team and pays the $50 in cash. Liman in the meantime departs from the country. Davis brings action against Noble for the $500. Can he recover? 80. A undertakes to do certain work for B in the nature of some fine deco- rating and interior finishing in B's house. A assigns the contract to C, who seeks to go on with the work. Can he complete the work and recover of B ? 81. What is the statute of frauds and what is its object? 82. A, who was administrator of the estate of one Shepherd, stated orally to B, a creditor of Shepherd's, that he would see that B was paid the sum due him ; if it did not come out of the estate he would pay it himself. The estate did not pay. Could the promise be enforced? 83. If in the above case Shepherd was still living and A was a friend of his, could B collect on A's promise ? 84. Clarkson agrees to sell Miller all of the grass growing on his farm for the coming season. The contract is not in writing. Can it be enforced? 85. If the contract had been to sell all of the pine lumber to be. cut on his farm by the purchaser, could the contract have been enforced? 86. If the contract had been to sell the wheat growing on his farm, could an oral contract have been enforced ? 87. If Clarkson was to have cut the grass and timber himself and to have delivered it to Miller, could the contract have been enforced? 88. A employs B to work for him for the period of one year from the coming March. Must this contract be in writing to be valid ? 89. If the agreement had been to work for B during the life of A, would the oral contract have been valid? 90. In February, A leases his farm to B for one year from the following March. Must this lease be in writing to be valid in New York State? 91. Under the sale of goods act, if the sale amounts to the sum specified therein or over, in what three ways may the contract be rendered valid ? 92. Burrow goes to Sanburn's wagon factory and orders a wagon made according to his special design, with his coat-of-arms on the sides and fin- ished up in some particular way. The price for the wagon is to be $200. When it is nearly completed, but before it is delivered, the factory burns. Under the New York rule, who loses? 93. Under the Massachusetts rule, who loses? 94 Under the English rule, who loses ? 95. If in the above case the order had been for a wagon of the style and kind regularly manufactured by this party, who would lose under the New York rule? Under the Massachusetts rule? Under the English rule? 96. What is necessary to discharge a contract by performance? COM. LAW 6 82 CONTRACTS 97. A owes B $100. He tenders him a check for $100 in payment of the debt. Must B accept it ? 98. In the above case, if B does accept, does it discharge the original contract ? 99. Emerson enters into a contract with Foster who agrees to build him an engine and boiler for his flour mill. The contract is that the engine and boiler shall be constructed and installed in complete running order to the entire satisfaction of Rmerson. Foster does the work, and the plant seems to run satisfactorily ; but Emerson is not satisfied, says he does not want it, and orders Foster to take it out. Expert machinists claim that the work is done in a satisfactory manner. Must Emerson accept it, or has he the right to reject it under the agreement ? 100. A orders a suit of clothes of B, his tailor, and specifies that he will not take them unless they are satisfactory to him, he being the sole judge. The suit, as far as any third party could determine, is a good fit ; but A says he does not want it, it is not satisfactory to him. Can he refuse to accept the suit ? 101. A agrees with B to manufacture and deliver 1000 pairs of shoes in 90 days, but because of a strike in A's factory he is unable to fulfill his agree- ment. Is the strike which renders the performance of the contract practically impossible an excuse for his non-performance ? 102. If in the above case A's agreement to furnish the shoes to B had stipulated that the contract was subject to strikes, etc., would he have been liable for non-performance ? 103. A employs B to paint his house. When the work is partially done the house burns. Does this excuse B's non-performance of his contract, and can B recover a portion of his pay ? 104. What do we mean when we speak of the merger of one contract into another ? 105. Hall gives Wood his promissory note, payable one month after date. Wood changes the note, making it payable twenty days after date. What effect has this upon the instrument ? 106. If the alteration was made without any intention to defraud, could Wood recover on the original contract ? 107. Who may file a voluntary petition in bankruptcy ? 108. Who may be adjudged an involuntary bankrupt ? 109. What are the duties of a bankrupt after he has been adjudged such ? 1 10. When may a bankrupt file a petition for his discharge from his debts ? 111. Edwards sues Adams on a note given for $100. Adams sets up the defense that one year after giving the note, and before the commencement of the action, he filed a petition in bankruptcy and received his discharge. Is the defense good ? 112. A employs B to deliver 100 loads of stone for him within 30 days, foi $100. After he has delivered 10 loads, B, within 3 days after the agree- CONTRACTS 83 ment is made, throws up the contract and says that he will not perform any further. What remedy has A ? May he proceed at once with his remedy, or must he wait until the 30 days have expired ? If3. In the above case, B, after delivering 5 loads, refused to perform fur- ther until he received his pay for the whole contract. Had he the right ? 114. For breach of the contract to deliver the stone, what would be the damages that would be allowed for the injury ? That is, by what rule would they be measured ? 1 15. When is the special remedy of a specific performance granted ? 1 1 6. When a right of action for damages is sued in the courts and placed in judgment, what do we say becomes of this right ? 117. Define the statute of limitations. What is its object ? 118. When does the period under the statute of limitations begin to run ? 119. Does the fact that the plaintiff is an infant or an insane person at the time the right of action arises affect the running of the statute of limitations ? SALES OF PERSONAL PROPERTY i. IN GENERAL Sale and Barter. A sale is a contract between parties to give, and to pass, rights of property for money which the buyer pays or promises to pay to the seller for the thing bought. As stated in this definition a sale is a contract and subject to all of the requirements of a valid contract. The parties must be com- petent to enter into a binding contract. There must be mutual assent and there must be a consideration. If there is an absence of consideration, the transfer is a gift. The price or consideration must be paid or promised in money. This distin- guishes sale from barter, which is the exchange of one article of personal property for another. In Commonwealth v. Packard, 5 Gray (Mass.) 101, defendant was tried for the unlawful sale of intoxicating liquor. It was proved by a witness that he called for intoxicating liquor at defendant's hotel, that a waiter by defend- ant's order gave it to him and that he offered to pay, but the defendant would not take anything. Held, that it was not a sale but a mere gratuity or gift, and the defendant was discharged. As a general thing the same rules apply to a barter as to a sale, and we can consider that the law applicable to a case of barter is practically the same as that explained in this chapter on sales. It seems, however, that the power or authority vested in an agent to sell does not give authority to barter. In Edwards v. Cottrell, 43 Iowa 194, it was held that the mortgage of a chat- tel, with power of sale by the mortgagee upon default in payment, confers upon him no right to barter the mortgaged property or to dispose of it other- wise than for cash. Transfer of the Right of Property. There must be a transfer of the right of property, that is, a transfer of the absolute prop- 84 IN GENERAL 85 erty in the thing sold, in order to constitute a sale. This "abso- lute property " is a term used to distinguish it from a special property, or right in personal property. For instance, when property is pledged, the special property passes to the pledgee and the general title remains in the owner. The transfer of a special property in a chattel constitutes bailment and will be considered in another chapter. Sale and Bailment The rule is that if the identical thing is to be returned, even though in a different form, as wheat ground into flour, it is a bailment; but if the identical thing is not to be returned, the general rule is that it is a barter or a sale. In Hyde v. Cookson, 21 Barb. (N.Y.) 92, plaintiff and one Osborn entered into an agreement whereby plaintiff furnished certain hides to Osborn who took them to his tannery and manufactured them into sole leather, and was to return them to plaintiff in New York. Plaintiff was then to sell them at his discretion, and when sold the net proceeds less costs, commissions of plaintiff, expenses, etc., were to go to Osborn for tanning. If there was any loss, Osborn was to stand it. Osborn failed before the contract was completed and assigned to defendant. Defendant refused to deliver the hides to plain- tiff, claiming it was a sale and the title was in Osborn. Held, that it was not a contract of sale but a bailment, the right of property remaining unchanged, and plaintiff was entitled to the hides. It is held that the delivery of logs to be sawed into boards is not a sale but a bailment. The importance of the distinction is realized when we perceive that if it is a bailment the title does not pass from the original owner by the delivery, but if the transaction constitutes a sale, the title passes. The question often arises when the stock or material delivered is destroyed by fire, or otherwise, and it is required to be determined upon whom the loss shall fall. An exception to the rule is the case of a warehouseman who receives grain and mixes it with like grain in the same storage. Here there is evidently no inten- tion to return the identical grain, but some of the same kind ; still some cases hold that this transaction is one of bailment in which title does not pass, but others follow the general rule and hold it a sale under which the title passes to the warehouseman. 86 SALES OF PERSONAL PROPERTY 2. FIXTURES Personal and Real Property. In treating of the law applica- ble to the sale of personal property it is necessary for us to distinguish between personal and real property. We under- stand in a general way that real property is land and rights issuing out of and concerning it. As distinguished from this, we learn that personal property is property of a personal or removable nature, and includes all property rights not included in the classification of real property. Personal property is also called chattels. We often find much difficulty in distinguishing between the two classes of property. It is plain that a house and lot or a farm is real property, and it is equally apparent that a horse and wagon or a suit of clothes is personal property. But the standing of certain articles known as fixtures is less clearly defined. By the early English law any interest in land less than the absolute title or freehold was called personal property, but in the United States this is not the rule. The only interest in land that can be classed as personal property at the present time is the lease. In Taylor v. Taylor, 47 Md. 295, A at the time of his death left a will giving his real estate to a certain party and his personal estate to his son absolutely. A owned a number of leases of property, some of which were to run for ninety- nine years. Held that these leases passed as personal property to the son. Fixtures are Chattels. In regard to fixtures, we learn that they are chattels, either actually or constructively affixed to the land. In some cases they can not be removed and are consid- ered part of and pass with the land, while under other conditions they may be separated from the realty and do not pass with it. The early common law was most favorable to the landowner, regarding anything attached to the realty as his property, but the rule was relaxed, at first in favor of the tenant who erected fixtures for use in his trade or business, which were held to be removable. Now, however, the question arises not only between landlord and tenant, but also between mortgagor and mortgagee, and vendor and vendee. A person selling his farm must know FIXTURES g^ what he can remove and what he has sold with the land. The tenant must determine what he can take with him and what passes to the landlord because of its attachment to the realty. Different rules have been laid down by different courts. One of the tests often applied is the intention of the party annexing the chattel to the land. This intention is inferred from the nature of the article affixed, the relation of the party making the annexation with the owner of the land, the struc- ture and mode of the annexation and the purpose for which it is to be used. In Hinkley v. Black, 70 Me. 473, plaintiffs entered into possession of a tract of land under a contract for its purchase, and erected large and substantial build- ings with engines and machinery for manufacturing an extract of bark for tan- ning purposes. Plaintiffs failed to pay for the land, so never acquired title. In an action to recover the machinery and engines it was held that they were a part of the realty, and could not be sold as personal property as against the owners of the land. In Ottumiva Woolen Mill Co. v. Hawley, 44 Iowa 57, it was held that the machinery of a woolen mill, consisting of looms, carders, breakers, condensers, etc., were part of the realty. The looms were fastened to the floor by screws, and the carders were kept in position by their own weight, one weighing 3000 pounds. The spinning jacks were fastened by cleats nailed to the floor. The question in this case arose between the purchaser under a mortgage and the owner. The court said that of the three requisites generally considered necessary to constitute a chattel a part of the realty, the first, that of physical attachment, is very uncertain, and the only value to be attached to it is in determining the intention of the owner in making the annexation. The sec- ond, being application to the use or purpose to which that part of the realty with which it is connected is appropriated, is met in this case by the use of the machinery in the mill. The third requisite, being the intention of the party making the annexation, was held by the court to be the controlling consider- ation in determining the whole question. It seems that there are other tests that have to be applied in connection with the intent, to determine whether or not the chattel is a part of the realty. One is the mode and degree of the annexation. That is, if the chattel is so firmly and securely affixed to, and incorporated into, the building that it can not be removed without injury to itself and the building it is generally not removable. Under the common law the mode and degree of annexation was practically the controlling question. 88 SALES OF PERSONAL PROPERTY Murdoch v. Gifford, 18 N.Y. 28, holds a rule contrary to that in the case of the Ottumiva Woolen Mill Co. v. Hawley, as in this case it was held that looms in a woolen factory, connected with the motive power by leather bands and so attached to the building by screws holding them to the floor that they could be removed without injury to themselves or the building are chattels. The question arose between the mortgagor and mortgagee. In Despatch v. Bellamy, 12 N.H. 205, it was held that an engine used in a building and so placed that it can not be removed without taking down part of the building is a fixture ; while loose, removable machinery not attached to the building is not regarded as part of the real estate. The engine in this case could not be removed without taking the boards off the side of the building, and the boilers were set in brick, requiring the wall to be torn down to remove them. In this case the question arose between the grantor and the purchaser. A person may not intend to make a permanent improvement, but the chattel may be so firmly annexed that the law will not permit him to carry out his intention of removing it. In such a case the damage to the realty must be very pronounced to constitute the chattel a part of the real property if it is the expressed intent of the party that the chattel shall remain personalty. Hendy v. Dinkerhoff, 57 Cal. 3, was an action to recover possession of a steam engine and boiler. One Lampson was in possession of land under a contract to purchase from defendant, the contract providing that in case of failure to purchase, all tools shouM belong to defendant. Plaintiff later leased an engine and boiler to Lampson and the agreement was that if Lampson failed to pay, plaintiff might retake them. The engine was built into the rmsonry so that it could not be removed without destroying the masonry and the wall to which it was affixed, but it was held that even as against the defendant, the owner of the land, the chattel remained the property of the plaintiff. But, on the other hand, the fact that it may be removed with- out such injury does not necessarily make it personalty. Goodrich v. Jones, 2 Hill (N.Y.) 142, held that fencing material that has been used as part of the fences on a farm, but is temporarily detached without any intent to divert it from such use, is a part of the realty aqd passes by a conveyance of the farm to a purchaser. Gas and water pipes running under the floors and between the walls are not removable fixtures, but gas fixtures, chande- liers and water faucets screwed in through holes in the walls or FIXTURES gg floors are removable when erected by a tenant. Stoves and furnaces put up in the usual way by a tenant are treated as fur- niture and are removable, but if built into brickwork they are non-removable fixtures. In McKeage v. Hanover Ins. Co., 81 N.Y. 38, it was held that gas fixtures simply screwed on to the gas pipes, and mirrors .which are not set into the wall but put up afterwards and supported by hooks so driven into the wall that they can be removed without injuring the walls, form no part of the realty and do not pass by deed or mortgage of the premises. In Towne v. Fiske, 127 Mass. 125, it was held that a portable hot-air furnace resting by its own weight upon the ground, put into a house by a person in possession under an agreement for a deed to the premises to be given him, does not become a part of the realty, although connected with the house by a cold air box and pipes and registers in the usual way. So gas fixtures in a house, although attached by screws to pipes are not a part of the realty. Another test is the appropriation of the chattel to the use or purpose of that part of the realty to which it is connected. It seems that an article which is essential to the use for which the building or land is designed, or which is especially adapted to the place where it is erected, is regarded as a non-removable fixture, although it is but slightly connected with the realty. This rule is illustrated in the case of the Ottumwa Woolen Mill Co. v. Hawley on page 87. In Dudley v. Hurst, 67 Md. 44, it was held that machinery used in the canning business, part of which is attached to the soil and other parts of which are necessary to the use of the part so attached, is a fixture that will pass to the mortgagee. When the principal part of the machinery is a fixture by actual annexation, such part of it as may not be so physically annexed, but which if removed would leave the principal part unfit for use and would not of itself, standing alone, be well adapted for general use elsewhere, is consid- ered constructively annexed. Bishop v. Bishop, n N.Y. 123, held that poles used necessarily in cultivat- ing hops, but which are taken down for the purpose of gathering the crop and piled in the yard with the intention of being replaced in season next year, are a part of the realty. In McRea v. Central Bank, 66 N.Y. 489, plaintiff as mortgagee claimed the machinery in a building erected expressly for use as a twine factory. The machinery was heavy and was fastened to the floor by bolts, nails, and cleats and was attached to the gearing. Most of the machinery could have been re 90 SALES OF PERSONAL PROPERTY moved without material injury to the building and used elsewhere. It was proved that the machinery was put in the building for permanent use. Held, that the evidence was sufficient to find an intent to make the machinery part of the realty. The court said the criterion of a fixture is the union of three requi- sites: i, Actual annexation to the realty or something appurtenant thereto; 2, Application to the use or purpose to which that part of the realty to which it is connected is appropriated ; 3, The intention of the party making the an- nexation to make a permanent accession to the freehold. In such cases the court said the purpose of the annexation and the intent with which it is made are the most important considerations. This last rule in the case of McRea v. Central Bank does not apply between landlord and tenant, as it is held that the tenant can not intend articles for permanent use on land that does not belong to him. This rule inaugurates the theory of constructive annexation and is contrary to the common law, which requires actual annexation to the realty. Snedeker v. Warring, 12 N.Y. 170, was a case in which the owner of realty, after giving a mortgage, placed on his ground in front of his house a statue of Washington, made by himself, and weighing about three tons. It was on a base three feet high. This base rested upon a foundation built of mortar and stone. The statue was not fastened to the base, nor the base to the founda- tion. Held, that the statue was a part of the realty and that it was as firmly attached to the soil by its own weight as it could have been by clamps and screws. In the same case a sun dial, similarly placed, was also held to be realty. Rogers v. Crow, 40 Mo. 91, was a case where the builders of a church left a recess in which an organ was to be placed. The organ was required to com- plete the design and finish of the building and was attached to the floor and intended to be permanent. Held, that the organ was a part of the realty and passed to the purchaser of the land. Force pumps, pipes, and shafting, and machinery attached by spikes, nails, and butts, are part of the realty. Symonds v. Harris, 51 Me. 14, held, that machinery used in a sash and blind factory and attached to the mill by spikes, bolts, and screws, and which was operated by belts running from the permanent shafting driven by a water wheel under the mill, was part of the realty. Under the rule of constructive annexation some cases hold that machinery, permanent in its character and essential for the purposes of the building becomes realty, although not actually attached thereto. FIXTURES 9I Illustrations of this class of fixtures are ponderous machinery kept in place by its own weight, cotton gins, and duplicate rollers for a rolling mill, all of which are held to pass with the realty. Deal v. Paltner, 72 N.C. 582, held that a carding machine not fastened to the house and requiring several men to move it, is a fixture, and passes with the land to a purchaser. Other cases hold that machinery is personal property unless actually annexed. Such cases hold that heavy machinery in a factory screwed to the floor but removable without injury is not realty. In Hubbell v. Savings Bank, 132 Mass. 447, it was held that a mortgage of land does not cover machinery upon the floor of a building on the land, sup- ported by iron legs fastened to the floor by screws only for the purpose of steadying it, and which, although of great weight and adapted for use in the business carried on in the building, can be removed without injury to the building and used elsewhere. The machinery in dispute consisted of a large engine lathe, a small engine lathe, an iron planer, and an upright drill. Relation of the Parties. The relation of the parties has some weight in determining the character of the fixtures. As between landlord and tenant the presumption is that tenants do not intend the improvements to be additions to the realty, and they are therefore allowed greater rights in removing the chattels than any other class of persons. For the encouragement of trade and the promotion of industry the rule has been established that trade fixtures erected by a tenant are removable. A carpenter shop, a ballroom, and a bowling alley erected on blocks or posts have all been held to be removable. Holmes v. Tremper, 20 Johns. (N.Y.) 29, held, that a cider mill and press erected by a tenant, holding from year to year, at his own expense and for his own use in making the cider on the farm, are not fixtures that pass with the realty. In Conrad v. Saginaw Mining Co., 54 Mich. 249, it was held that as be- tween landlord and tenant under a mining lease, engines and boilers erected by the tenant on brick and stone foundations, bolted down solidly to the ground and walled in with brick arches; also- 1 dwelling houses erected by the tenant for miners to live in, standing on posts or dry stone walls, where the intent was not to make them a part of the realty but merely to use them in the mining operations, will be regarded as " trade fixtures " and may oe removed by the tenant at or before the termination of the lease. 92 SALES OF PERSONAL PROPERTY Carlin v. Ritter, 68 Md. 478, held, that as between landlord and tenant wooden structures or buildings resting by their own weight on flat stones laid upon the surface of the ground without other foundation are not part of the realty. But if the building is a permanent structure on a foundation it becomes part of the real estate. The tenant must exercise his right to remove fixtures before the expiration of his term. If he does not remove them before he surrenders the premises, he can not reenter and claim them. In Dostalv. McCaddon, 35 Iowa 318, defendant after his lease had expired entered upon plaintiff's premises to remove a vault and safe he had constructed, and this action was brought to restrain him from removing them. Held, that the tenant could not exercise his right of removing trade fixtures after he had surrendered possession of the premises. When the question arises between' vendor and vendee or mortgagor and mortgagee the presumption is stronger against the vendor and mortgagor, as being the owners of the realty they are supposed to have intended the improvements to be perma- nent. The parties may agree that the chattels annexed are to remain as personalty, and effect will be given to the agreement. In Smith v. Whitney, 147 Mass. 479, the tenant's lease provided that he might erect buildings for manufacturing purposes and remove them within the limit of his lease. He erected a brick engine house complete in itself. The engine and boiler were on a solid foundation of masonry. Held, that the tenant had a right to remove the house, and the engine and boiler as well. The nice question as to whether or not trees, grass, and grow- ing crops are realty or personal property often comes up and has been discussed on page 55. 3. PARTIES TO A SALE Seller and Purchaser. The parties to a sale are the seller or vendor and the purchaser or vendee. The general rule is that no man can sell goods and convey a valid title unless he is the owner or his duly authorized agent. Possession is not an essen- tial to the right to sell, ownership being enough, and the right- ful owner can sell what is wrongfully held by another. PARTIES TO A SALE 03 Webber v. Davis, 44 Me. 147, was an action to recover the value of a horse once owned by defendant and which was stolen from him. After the horse was stolen plaintiff paid defendant $20 for him and agreed to run his own risk of finding him. The horse was worth $60, but if he was not found, plaintiff was to lose his $20. A few weeks afterwards plaintiff located the horse but defendant first got possession. Held, that plaintiff could recover on the ground that title will pass by a sale without delivery from the true owner, although at the time of the sale the goods were in the wrongful possession of a third person. Seller must have Good Title. The principle of a holder in good faith which is discussed under the negotiable instrument law does not apply in the sale of personal property, the general rule being that one can not give a better title than he himself has. In Williams v. Merle, 1 1 Wend. (N.Y.) 80, a master of a boat took four barrels of potash from plaintiff's warehouse and turned them over to the clerk of his principal, the boat owner, who sold them to defendant, a broker, who paid a reasonable price for them. In an action to recover them it was held that a purchaser of personal property i? not protected against the claim of the true owner, although he purchase in good faith and for a valuable considera- tion, if the vendor has no title or authority to sell. In Moody v. Slake, 117 Mass. 23, A, falsely representing himself to be a member of a firm, bought goods in their name from plaintiff who sent them to the firm. On the refusal of the firm to receive them A got possession of the goods from the carrier and sold them to defendant who bought them for value and in good faith. Held, that plaintiff could recover the goods of defendant. The defendant had no better title than his vendor. However innocent therefore the person may be who buys property from one not the owner, he obtains no title whatever, except in a few special cases, as, for instance, negotiable instru- ments. It follows then that a person buying goods that were either lost or stolen has no claims on them as against the true owner. Hoffman v. Carmv, 20 Wend. (N.Y.) 21, held, that an auctioneer who sells stolen goods is liable to the owner, notwithstanding that the goods were sold and the proceeds turned over to the thief without knowledge that they were stolen. A thief acquires no title and can convey none, and no matter how many sales or transfers of the property there may have 94 SALES OF PERSONAL PROPERTY been after the thief disposed of it before it came into the posses- sion of the holder, the true owner can recover. It makes no difference that the purchase was made in good faith and for full value. In Breckenridge v. McAfee, 54 Ind. 141, plaintiff brought an action for the value of wheat which his hired man had stolen and sold to defendant. Held, that a thief acquires no title to property stolen and can confer none on a person to whom he sells the same. And such person is liable to the owner for the value of such goods without regard to his innocence or good faith in making the purchase. Pledgee may Sell. An exception to the rule that a person not the owner can not sell personal property is the case of a pledgee, or, one with whom the chattels are left as security for money loaned, as he can sell after default in payment by the owner. So also the master of a vessel can sell the cargo in cases of absolute necessity, but actual necessity must exist or the purchaser gets no title. Factor may Sell. A factor or commission merchant is a per- son to whom goods are shipped or consigned for the purpose of sale. A sale made by him conveys a good title and binds the original owner under statutes passed in most of the states, even though he goes beyond his authority and sells when he is not authorized to do so by the owner ; but the factor or commission merchant must have actual possession or he will not give a good title if he exceeds his authority. This statute is limited to mer- cantile transactions and applies only to factors or commission merchants. If the owner of goods trusts the possession of them to an- other, thereby enabling the other party to hold himself out to the world as having not only the possession but also the ownership of the goods, a sale by such party to a person without notice who acted upon the strength of such apparent ownership will bind the true owner, if the person having possession is one who from the nature of his employment might ordinarily be taken to have the right to sell. In Nixon v. Brown, 57 N.H. 34, plaintiff employed one M to purchase a horse for him. M bought the horse, paid for it with plaintiff's money, and THE CONTRACT OF SALE 95 took the bill of sale in his own name. He afterwards informed the plaintiff of what he had done and showed him the bill of sale, but plaintiff allowed him to go away with the horse and the bill of sale. M went to the defendant, who had no knowledge of the agency, showed him the bill of sale and sold him the horse. The court held that the plaintiff could not recover the horse from the defendant. As we have learned in contracts the purchaser must be a party competent to contract except in the case of necessaries. 4. THE CONTRACT OF SALE Contract may be Executory or Executed. The contract of sale, like other contracts, may be executory or executed. In the executory contract of sale the title has not passed to the purchaser. It is simply an agreement to make a transfer at some future time. In the executed contract the title has passed and the sale is complete. At the time of the sale the subject- matter or thing sold must be in existence. If it has ceased to exist, the sale is void. Dexter v. Norton, 47 N.Y. 62, was an action to recover damages for breach of a contract by defendant to sell and deliver to plaintiff 621 bales of cotton bearing certain marks and numbers specified in the contract at a certain price. After defendant had delivered 460 bales the remaining 161 bales were destroyed by fire without fault or negligence of the defendant. The court held that where a contract is made for the sale of certain specified articles of personal property under such conditions that the title does not vest in the vendee, if the property is destroyed by accident without the fault of the vendor so that delivery becomes impossible, the vendor is excused from delivery. Potential Existence. Regarding the sale of things not yet in existence, if they are such as the natural products or expected increase of what is already owned, they are said to have a "potential existence" and may be sold. Therefore a man may sell a crop of hay to be grown on his fields, the wool to be clipped from his sheep, or wine to be produced from his vineyard. Argues v. Wasson, 51 Cal. 620, was an action to recover certain grain and flaxseed taken by the sheriff on an execution against one Hansen. Hansen leased land from plaintiff, and to secure the rent and a store account which he owed plaintiff he gave him a mortgage upon all the crops of every kind to be 96 SALES OF PERSONAL PROPERTY produced on the land during the next ensuing season. When the mortgage was given, Hansen was in possession, but had not plowed the land nor sowed the seed. As soon as the crops were harvested the sheriff seized them. It was claimed that as the crops were not in existence at the time the mortgage was given, they were not the subject of sale or mortgage, but the court held that they were the product of property which the mortgagor possessed at the time, and the crops were, as it is said, potentially in existence, and therefore the subject of sale or mortgage. But when the subject of the contract is to be acquired after- wards, as the land from which one expects to raise the hay or grain, or the sheep from which one expects to clip the wool, the article can not be sold. A valid agreement however may be made to sell it, that is, an executory contract to sell it can be entered into. The question as to whether the contract of sale is exe- cuted or executory is important when the property is lost or destroyed, for if it is an executed contract, the vendee loses, if it is executory, the vendor. When Title Passes. We may here ask, when does the title pass from vendor to vendee ? Is it when the goods are de- livered or when the contract is completed ? The answer seems to be that the title vests in the vendee immediately upon the completion of the contract of sale without regard to the fact of whether or not the goods are delivered. In Terry v. Wheeler, 25 N . Y. 520, there was a sale of lumber in the vendor's yard. The pieces sold were designated and the price paid, but the vendor agreed to deliver the lumber at the railroad station. The lumber was destroyed before such delivery. Held, that it was an executed contract of sale. The title had passed and the loss fell on the purchaser. In an executory contract, it being but a promise to sell, the title does not pass until the sale is completed. In Fitch v. Beach, 15 Wend. (N.Y.) 221, there was an agreement for the sale of a boat load of lumber, part of which was landed and the unloading of the remainder suspended until an inspector could be procured to measure it. After waiting a day the vendor reloaded the lumber landed and went away. In an action for wrongfully taking the lumber it was held that the title had not passed, as something remained to be done between the vendor and vendee, namely, the measuring and sorting of the lumber. The only remedy would oe damages for breach of contract. THE CONTRACT OF SALE 97 It is often difficult to determine whether the parties have entered into a contract of sale or simply into an agreement to sell. The intention of the parties in this respect is controlling. In Callaghan v. Myers, 89 111. 566, it was held that in an agreement to pur- chase a lot of books, if a part of the price is paid, possession given, and the amount to be paid if the books should prove to be as represented is fixed, the title will pass as against the creditor of the vendor. Whether the sale is com- plete and the title passes depends upon the intention of the parties. Intention. When the intention of the parties is not clear, certain rules are observed in determining it If the chattels in contention are not agreed upon, or are not separated from a larger number or quantity, it is clear that the parties intended only an executory contract. For instance, if A buys 10 horses out of a drove of 50, there is no complete contract until the particular 10 have been designated or separated from the rest. If the articles are not ready for delivery, or there is still some- thing to be done on them, it is but an executory agreement. McConihe v. New York r Erie Railroad, 20 N.Y. 495, was an action to recover damages upon a contract under which plaintiff was to furnish material and build 15 lumber cars for the defendant at $475 per car, to be paid six months from the date of delivery. The defendants were to furnish iron boxes for the cars of a model made by them. When the cars were completed, ex- cepting the part prevented by the default of the defendants in not furnishing the boxes, they were destroyed by fire while in the possession of plaintiff and without his fault. Held, that the title to the cars was still in plaintiff, and he could not recover for labor and material. But if it is the sale of an article in bulk the title passes, although it has not been measured, if it is the apparent intent that it shall pass ; and in the cases in which it is the sale of part of a bulk or mass, all of the same quality, it is not necessary to have the part sold separated in order to have the title pass. In the case of Chapman v. Shepard, 39 Conn. 413, A sold B a quantity of bags of meal on board ship at a certain price per bag. B, without paying A, and before the bags were counted, sold 500 bags to C, who gave his promissory note. Thereafter C informed A of his purchase and was told he could remove the bags when he pleased, but after he had removed part A refused to let him remove the remainder. Held, that the title had passed to COM. LAW 7 98 SALES OF PERSONAL PROPERTY I, Edwin P. Nichols, of Rochester, Monroe County, New York, party o/Me *&*/^H __ heirs, executors, administrators and assigns, against --- myself _ .the said party of the first part nd against all and every person or persons whomsoever, shall and will warrant, and for ever defend. OpOH Condition, that if -- 1 - the said party. - of the first part, shall and do well and truly pay unto the said party. - of the second part, __hifi_executors, administrators or assigns, the sum of Two Hundred Dollars ($200.00) according to the terms of a note this day executed and delivered to said Edward Frank, which note with interest thereon will fall due on the tenth day of March in the year one thousand nine hundred and six, then these presents shall be void, flltft I tha said pnrfy _ o f the first part, for myself, mv Ptn^ntfirg, administrators and assigns, do covenant and agree to and with tho said part^t _ of the second part, _hJ_s_execu tors, administrators and assigns, that in case default shall be made in the payment of the said sum above mentioned, .OIL. fhp < n t. e r<>a t. thereon then it shall and may be lawful for, and _ I _ the said party. ...... of the first part, do hereby authorize and empower the said pa rty...... of the second part_his h.eirs ^.executors, ad- ministrators and assigns, with the aid and assistance of any person or persons, to enter _ the dwelling-house, store, and other premises and such other place or places as the said goods or chat* tels are or may be placed, and take and carry away the said goods or chattels, and to sell and dispose of the same for the best price they can obtain; and out of the money arising therefrom, to retain anil pay the said Bum above mentioned, wipr . one thousand nine hundred and fi 104 SALES OF PERSONAL PROPERTY Foreclosure. After default in the payment of the mortgage, the mortgagee must foreclose the mortgage in order to cut off all of the rights of the mortgagor. The procedure differs under the statutes of the different states. It consists in giving notice to the mortgagor and selling the property at public sale. The mortgage itself may contain provisions for the foreclosure. The mortgagor is usually allowed the time until the date of the sale in which to pay the amount due and redeem the property mortgaged. 6. WARRANTIES Classification. We have seen that a condition in a contract of sale which is required to be performed before the contract is completed will defeat the sale if it is not carried out. A condi- tion is one of the essential elements of such a contract. Aside from this there are certain warranties which are collateral undertakings on the part of the seller to be responsible in dam- ages if certain conditions as to quality, amount, or title of the article are not as represented. The warranty is a separate con- tract, and, if made at a different time from the contract of sale, it must be supported by a separate consideration. If made at the same time, the consideration of the sale will also operate as a consideration for the warranty. There are two classes of warranty, express and implied. Express Warranty. The express warranty, as its title would indicate, is an express undertaking or agreement made by the seller. No special form of words is necessary to create a war- ranty. Any statement framed with the intention of making a warranty will be so construed. It must be distinguished from a mere expression of opinion on points regarding the chattel, of which the seller had no special knowledge and on which the buyer may be expected to exercise his own judgment. A war- ranty is an assertion of a fact of which the buyer is ignorant. In Hunter v. McLaughlin, 43 Ind. 38, the vendor in selling a patent right in a ditching machine, exhibited the letters patent and the model and stated that if properly constructed it would work well. It was claimed that it was prop- WARRANTIES IO5 erly constructed and did not work well. It was not shown that the vendor had ever made and used a machine constructed after this model or that he represented that he had made and used one. The court held that the statements were nothing more than mere expressions of opinion, which for aught that appeared the vendor might have honestly believed. Stroud v. Pierce, 6 Allen (Mass.) 413, held, that a statement by a piano agent that the instrument is " well made and will stand up to concert pitch " is a warranty, it being a representation of fact. If the representation is a warranty^ the contract will not be broken by a breach, but an action for damages will arise. If it is a mere expression of opinion, there is no remedy if it turns out to be unfounded. In Anthony v. Halstead, 37 L. T. N. S. (Eng.) 433, the following memo- randum was given: <; Received from C. Anthony, Esq., 60 for a black horse, rising five years, quiet to ride and drive, and warranted sound up to this date, or subject to the examination of a veterinary surgeon." Held, to be a warranty of soundness and not a warranty that the horse was quiet to ride and drive. Burge v. Stroberg, 42 Ga. 88, held, that a statement that a horse is fourteen years old is a warranty that he is no older. Prtichard v. Fox, 4 Jones (N.C.) 140, held, that a warranty that a soda fountain was in good condition is broken if, from inherent defects in construc- tion existing at the time of the sale, it was liable to get out of order from time to time. A general warranty is held not to include defects apparent on simple inspection and requiring no skill to discover them, nor defects known to the buyer. In Dean v. Morey, 33 Iowa 120, defendant sold to plaintiff a horse that was a cribber. Held, that he was not bound to disclose this fact to plaintiff, as the horse was subject to the inspection of the buyer, and a simple examination of the horse's mouth would have shown the defect. An express warranty must be distinguished from the mere praising or puffing of his goods by an owner ; as, the statement by an agent that he has the best plow on the market or by a driver that his team is the best in the city. Implied Warranty. Implied warranty differs from express warranty in that although it exists in the contract of sale, it is not mentioned or stated in express words. In every contract of sale there is an implied warranty of title when the goods sold 106 SALES OF PERSONAL PROPERTY are in the possession of the vendor at the time of the sale, unless, of course, there is an express agreement to the contrary ; but in cases in which the goods are in the possession of a third party, there "is no such implied warranty and the purchaser buys at his peril. In Huntingdon v. Hall, 36 Me. 501, defendant sold plaintiff a small house which was on another man's land and not occupied by defendant. There was no express warranty of title. This action was brought to recover damages on an implied warranty of title, as defendant did not own the house. Held, that there was no implied warranty of title in this case. The implied warranty arises when the vendor is in possession of the chattel himself, but when the chattel is in the possession of another the purchaser buys at his peril. Long v. Hickingbottom, 28 Miss. 772, held, that in the sale of a chattel, if possession at the time is in another and there is no covenant of warranty, the rule of caveat emptor applies, and the party buys at his peril. But if the seller has possession of the article sold, and he sells it as his own and for a fair price, he warrants the title. As to the implied warranty of quality, we find the maxim, caveat emptor, meaning " let the buyer beware," to be the gen- eral rule of our law. When there has been a sale of specific goods which the buyer has an opportunity to inspect, he buys at his own risk as to quality, unless there is an express war- ranty. There is no implied warranty of the quality. In Frazier v. Harvey, 34 Conn. 469, defendant sold to plaintiff some hogs which, unknown to both parties, had a disease of which they died later. This was an action on the implied warranty of soundness of the hogs. Held, that when there is no express warranty and no fraud in the sale of personal prop- erty, the purchaser takes the risk of its quality and condition. But when the chattel is to be made or supplied to the order of the purchaser, there is an implied warranty that it is reason- ably fit for the purpose intended, if that purpose is commu- nicated to the seller. Tabor v. Peters, 74 Ala. 90, held, that the vendor of a patent churn, being himself the manufacturer, and contracting to furnish the purchaser with a quantity of churns, must be held to have warranted that they were useful and reasonably suitable for the intended purpose ; and if they proved to be worth- less, there would be a breach of the implied warranty which would be a good defense against an action for the purchase price. WARRANTIES IO7 If the sale is by sample, there is an implied warranty that the quality of the bulk is equal to that of the sample. In Myer v. Wheeler, 65 Iowa 390, plaintiff sold defendant 10 car loads of barley like sample, to be delivered from time to time. Defendants had never seen the barley. Held, that there, was a warranty that the barley would be equal to the sample. In Graff v. Foster, 67 Mo. 512, defendant bought some oranges of plaintiff, to be like samples exhibited by plaintiff. In an action for the purchase price, defendant claimed that the oranges were greatly inferior in quality to sam- ple, and set up breach of the implied warranty. Held, that it is not necessary that the word "warranty" shall be used. It is sufficient if the seller under- takes that the goods shall be as represented. So, if the seller exhibits sam- ples as fair specimens of the stock and agrees to deliver goods equal in quality to the samples, and the purchaser buys, relying on this promise, it is a warranty. To constitute a sale by sample it must appear that the con- tract of the parties was made solely with reference to the sample exhibited. In Day v. Raguet, 14 Minn. 273, plaintiff sold to defendant whisky which was to be five per cent better than a sample shown. Held, that it was not a case of sale by sample. In a sale by description there is an implied warranty that the goods shall be salable or merchantable, aside from the fact that a condition precedent to the sale is that the goods shall answer the .description. In such a case, the buyer having no opportu- nity to inspect the goods, the rule of caveat emptor does not apply, and the buyer has a right to expect that he is getting a salable article answering the description in the contract, and not an article that is worthless. In Weiger v. Gould, 86 111. 180, plaintiff sold defendant oats and represented them to be a good grade of white oats, such as defendant was purchasing at forty cents. Held, that he must deliver merchantable oats and can not deliver wet, dirty oats. When a person buys of a manufacturer an article made for a particular purpose, there is an implied warranty that it is fit for the desired purpose, also that it is free from latent defects aris- ing from the process of manufacture and unknown to the pur- chaser which render the article unfit for the purpose intended. 108 SALES OF PERSONAL PROPERTY In Rodgers v. Niles, n Ohio St. 48, defendant agreed with plaintiff that he would deliver to him at a future time three steam boilers with which to run the engines in his roller mill. Held, that there was an implied warranty that the boilers should be free from all such defects in material or workmanship, either latent or otherwise, as would render them unfit for the usual purpose? of such boilers. Delivery and Payment. To complete the sale it is necessary for the seller to deliver the goods and for the purchaser to pay for them, and unless there is an express agreement to the contrary these acts are concurrent. Delivery in this sense does not necessarily mean the passing of the article itself, but rather the passing of the ownership or title. That is to say, the delivery need not be actual ; it may be constructive. It is actual when the article itself is handed over. It is constructive when a bill of sale or a receipt is handed over instead. 7. REMEDIES FOR BREACH Rights of Vendor. The parties may not fulfill their contract of sale and the question then arises as to what are their respec- tive rights. The vendee may refuse to complete the contract of sale by declining to accept the goods, or after accepting and retaining the goods, he may refuse to pay the purchase price. In case the goods have not been delivered and the title has not passed to the purchaser, the vendor may elect to avail himself of any one of three remedies. First, he may resell the goods, after having tendered them and been refused, and recover damages for the loss, if any. Second, he may hold the goods for the vendee and sue for the entire purchase price, or, as his third remedy, he may keep the goods and sue for the damages, which will be the difference between the contract price and the market price at the time and place of delivery. Ditstan v. McAndrew, 44 N.Y. 72, was an action brought on a contract for the sale of certain hops, which defendant had refused to take. Plaintiff placed them in the hands of a broker who sold them for a fair price and then brought this action for the difference between the contract price and the price for which the hops were sold. The court held for plaintiff, and said that on the failure of the purchaser to perform, the vendor as a general rule has his choice REMEDIES FOR BREACH IO9 of three remedies: (i) To hold the property for the purchaser and recover of him the entire purchase money. (2) To sell it, after notice to the pur- chaser, as his agent for that purpose, and to recover the difference between the contract price and that realized at the sale. (3) To retain it as his own and recover the difference between the contract price and the market price at the time and place of delivery. Bagley v. Findlay, 82 111. 524, was a case in which the purchaser refused to take the goods for which he had contracted and the court said, " When the vendee of specific goods refuses to take and pay for them, the vendor may store them for the vendee, giving him notice that he has done so, and then recover the full contract price ; or he may keep the goods and recover the excess of the contract price over and above the market price of the goods at the time and place of delivery; or he may, upon notice to the vendee, proceed to sell the goods to the best advantage and recover of the vendee the loss if they fail to bring the contract price." Some cases do not allow the first remedy mentioned in Dustan v. Me Andrew, and hold, that the vendor can either re- tain the goods and sue for the difference between the contract price and the market value, or resell the goods and sue for the loss. But in the case of a resale the vendor must be fair and obtain the reasonable value of the article, as otherwise the price received will be disregarded and the difference between the market price and the contract price will rule. If the title and possession have passed to the purchaser, the only remedy is an action against the purchaser for the contract price, or if not for the contract price, for the reasonable value of the goods. Stoppage in Transitu. There is another class of remedy by which the seller may obtain the purchase price if the title has passed to the buyer but the physical possession is in the vendor, and that arises from his lien upon the goods. As soon as the goods are in the actual possession of the vendee the lien is lost. After the title may have passed to the purchaser, still the actual possession or custody, as we have learned, may yet be in the vendor, or the goods may be in transit ; that is, on the road to delivery, in the possession of the railroad or express company. When the goods are in the custody of the seller, he may hold them under his lien for the purchase price, and when in transit the law gives the unpaid vendor the right to intercept them, 1 10 SALES OF PERSONAL PROPERTY if he can, and thereby prevent them from reaching the pur- chaser. This right, called " stoppage in transitu" exists when the purchaser becomes insolvent after the sale or was insolvent when the sale was made, though the fact was unknown to the vendor. The right of stoppage in transitu extends not only to the vendor himself but to an agent who, upon the order of his principal, has purchased goods and paid for them with his own money. So also a third person who advances the money for the purchase and takes an assignment of the bill of lading can ex- ercise the right of stoppage in transitu. In Gassier v. Schepeler, 5 Daly (N.Y.) 476, plaintiff advanced the money on a cargo of iron for defendant and received the bill of lading as security for the advance. Plaintiff sent the bill of lading to defendant, who became insol- vent before he received the goods. Held, that plaintiff could stop the goods in transit and could retake them and compel the defendant to deliver to him the bill of lading. This right can be exercised only against an insolvent or bank- rupt person. By an insolvent is meant one unable to pay his debts in the usual course of his business. In O'Brien v. Norris, 16 Md. 122, it was held that the right of stoppage in transitu was not defeated by showing that the vendee was actually insolvent at the time of the purchase, unless it was shown that such insolvency was known to the vendee, when, of course, he would be held to have contracted with that in mind. Technical insolvency, as being declared a bankrupt, is not necessary, and suspending of payment is sufficient to justify a vendor in exer- cising the right of stoppage in transitu. In Durgy Cement Co. v. O'Brien, 123 Mass. 12, it was held that the fact that the vendee's notes went to protest because of his inability to pay them in the regular course of business was sufficient to justify plaintiff in exercising the right of stoppage in transitu. If the vendor stops the goods when the purchaser is solvent, he does so at his peril, and will be obliged to deliver the goods in addition to becoming liable for damages to the vendee. In order to exercise the right the goods must be in transit. It is held that the transit begins when the seller has delivered the custody of the goods to the carrier and extends to the time when the actual possession and custody of the goods are ac- quired by the purchaser. In other words, the goods are liable REMEDIES FOR BREACH m to stoppage in transitu as long as they are in the possession of the Carrier, and as soon as delivered to the buyer or his agent the right ceases. No particular form is necessary in order to exercise this right. It is simply required that notice be given the carrier not to deliver the goods, and that it be given in time for the carrier or transportation company, by using reasonable diligence, to notify its agents to hold them. The usual mode is a notice to the carrier stating the vendor's claim and forbidding delivery to the vendee or requiring that the goods be held subject to the vendor's orders. In Jones v. Earl, 37 Cal. 630, the vendor delivered to the agent of the car- rier in possession of the goods, a letter to the effect that the vendee had been served with an attachment and that he desired to save the goods. He gave the agent a bill of particulars of the goods and directed him to deliver them to no one but the vendor's agent, who would be there to look after them. Held, to be a sufficient notice to stop the delivery of the goods. In Mottram v. Heyer, 5 Denio (N.Y.) 629, plaintiff made demand of the defendants when the goods were in the customhouse and after the bills of lading and freight receipts had been given to defendants. Defendants were insolvent. Held, that this demand was not sufficient. It must be made of the carrier, in whose custody the goods are, under such circumstances that the carrier may prevent their delivery to the vendee. The vendor's right of stoppage in transitu does not cease on the arrival of the goods at the point of delivery, but when they come into the vendee's actual or constructive possession. The right of stoppage in transitu is defeated in case the bill of lading is in the hands of the vendee and he transfers it to a third person who in good faith pays value for it. The third party can hold the goods. Rights of Vendee. We have treated thus far only of the rights and remedies of the vendor. There are also cfttain rights that the buyer has which it is necessary for us to con- sider. The vendor may fail to deliver the goods or there may be some defect in the goods delivered. When the vendor refuses to deliver the goods and the title to them has not passed to the buyer, the buyer's remedy is to sue for damages for breach of the contract. If the purchase price is unpaid, the damages will be the difference between the contract price and the market price of the goods at the time and place of delivery, 112 SALES OF PERSONAL PROPERTY but if the purchase price has been paid, this sum should be added to the amount that may be recovered. In Harralson v. Stein, 50 Ala. 347, it was held that a purchaser can recover as damages from a vendor who refuses or fails to deliver the goods bought, the difference between the agreed price and the market price at the time they ought to have been delivered, that is, the loss which the vendee would suffer if he had to go out and buy the articles in the market. Specific Performance. Another remedy is offered the buyer in certain few cases, and that is specific performance. Gener- ally damages for the breach is an adequate remedy, but when, because of the peculiar nature of the property and the difficulty of obtaining it elsewhere, specific performance alone can com- pensate the vendor, it will be granted by a court of equity. Treasurer v. Commercial Mining Co., 23 Cal. 390, was an action to compel the defendant to issue to plaintiff 46 shares of capital stock of the company. It was shown that the stock had no fixed market value, that it was fluctuating and uncertain in value, and therefore the damages arising from a breach of the contract to deliver such stock could not be ascertained. Held, that specific performance would be allowed, because damages would not afford a full and adequate remedy. When the goods delivered do not correspond to the articles sold, the buyer may rescind the contract and sue for damages. Also, if some warranty has been violated, he can recover damages, although he will not be allowed to return the goods if the title has passed to him, but the contrary is the rule when the title has not passed to the buyer. QUESTIONS ON SALES OF PERSONAL PROPERTY 1 . Define a sale. Distinguish between a sale and a gift. 2. ^Distinguish between sale and barter. Between sale and bailment. 3. A delivers to B loo yards of cloth to be made into coats. When the coats are nearly completed B's shop burns and the coats are destroyed. Upon whom will the loss fall? 4. Brown delivered two black walnut logs at Smith's sawmill. Smith in return was to give him 500 feet of planed pine lumber. What was the trans- action, a sale, a barter, or a bailment ? 5. Distinguish between real and personal property. 6. Define fixtures. 7 Mention the three requisites which are necessarily combined to make a fixture a part of the realty as laid down in McCrea against Central Bank. SALES OF PERSONAL PROPERTY u$ 8. Under the common law which of these three is the most important? 9. In a majority of the cases at the present time which of these requisites seems to be controlling? 10. Higgins owned some land which was mortgaged to Green. He erected on this land a sawmill and placed therein an engine which was built in ma- sonry, and put in other machinery which was fastened to the floor, all of which he intended at the time to be permanent. Green foreclosed the mortgage and obtained the property. Who was entitled to the engine and machinery ? 11. In the above case, if the machinery had been set on the floor and held there by its own weight, who would have been entitled to it? 12. Edwards, who is the owner of a house and lot, is repairing and paint- ing his house. While the painters are at work the blinds are removed for the purpose of painting. Before they are replaced Edwards sells the house and lot to Gray. Are the blinds a part of the realty which passes to Gray, or are they personal property, and can Edwards remove them? 13. In the above case do the chandeliers and gas fixtures which are screwed into the gas pipes pass to Gray or remain the property of Edwards? 14. Do the gas and water pipes, themselves, pass with the realty to Gray or remain the property of Edwards? 15. Wells, who rents a house of Myles, places a furnace in the cellar and connects it with the house by pipes and registers in the usual way. It is not attached to the floor. When Wells moves, Myles refuses to allow him to take the furnace, claiming it belongs to the realty. Who gets the furnace? 1 6. A large stamping machine weighing ten tons is used in a building on B's land which passes to C, the purchaser, under a mortgage foreclosure. The machine is not fastened to the building, but kept in place by its own weight. To which does it belong, B or C ? 17. In the above case if B had been merely a tenant and had placed the stamping machine in the building for his own use and C had been the owner of the land, could B have removed the machine at the end of his tenancy, or would it have become the property of C? If B had left the machine in the building and ten days after his tenancy expired had gone back to claim it, would he have been entitled to it ? 1 8. Name the parties to a sale. Who can sell ? 19. B sold to Smith a horse which had broken out of the pasture lot and wandered away, its whereabouts at the time being unknown to its owner. Later it came back to B 1 s farm and Smith claimed it. Could he recover ? 20. Gordon loses his watch and it is afterwards picked up on the street by Hogan, a jeweler. Hogan puts it in his shop and sells it to Lane. Gordon discovers it in the possession of Lane and sues for its recovery. Lane bought the watch in good faith, believing it to belong to Hogan, and paid what it was reasonably worth. Who gets the watch ? 21 . In the above case, if Hogan had stolen the watch, would the result have been any different? COM. i AW 8 114 SALES OF PERSONAL PROPERTY 22. C, a commission merchant, receives a car load of watermelons from Lo- gan & Co., with instructions to hold them until Logan & Co.'s agent arrives. C sells them to Weaver as soon as they are received. Logan & Co. brings an action against Weaver to recover them. Who is entitled to the melons? 23. A, a horse dealer, sends B, his employee, to Canandaigua with his horse authorizing him to buy another horse at that place to match him. In- stead of carrying out his instructions B sells the horse to C. A brings an action to recover the horse from C. Who owns the horse? 24. Clark, a farmer, sells to Spence in the spring, the hay and corn that he shall raise on his farm during the coming season. The corn has not yet been planted. Is the sale good? 25. Clark also sells to Spence the wool from 100 sheep which he agrees to buy within 30 days, but which he does not yet own. Is the sale good? 26. B goes to A, a cattle dealer, and out of a herd of 50 cattle in the field buys 10, pays for them, and promises to take them the next day. Without picking out the particular 10, he leaves. Has the title in these 10 passed to B or is it still in A? 27. In the above case suppose B, before leaving, picked out and branded the 10 cattle, paid the purchase price, and agreed to call and drive them away the next day. Did the title pass to B or was it still in A? 28. A also goes to C, a grain merchant, and buys 50 bushels of wheat out of a bin containing several thousand bushels. He pays for the wheat, but it is not measured. That night the warehouse burns. Upon whom does the loss of the 50 bushels of wheat fall, A or C? 29. Define a conditional sale. 30. Mahoney buys a stove from Fisher, paying $5 down and signing a con- tract which provides that the stove has been merely leased to Mahoney, the title remaining in Fisher until the whole purchase price of $40 is paid. Mahoney at once sells the stove to Burns, who gives him $20 for it, be- lieving the stove belongs to Mahoney. Can Fisher take the stove from Burns? 31. If the above transaction takes place in a state requiring conditional contracts to be filed, and the above contract is not filed, who is entitled to the stove? 32. The above stove is sent to Mahoney by Fisher for trial, to be re- turned if not found satisfactory, no specified time within which it must be returned being given. Mahoney keeps the stove a year without offering to return it and then, when a bill is presented for the stove, he says that it is not satisfactory and offers to bring it back. Has the sale been completed, and can Mahoney be compelled to pay? 33. Define chattel mortgage. 34. In the case of a chattel mortgage, who is entitled to the possession of the property, the mortgagor or the mortgagee? 35. If the mortgagor makes default in payment, what must the mortgagee do to obtain absolute title to the chattel? SALES OF PERSONAL PROPERTY 115 36. What is a warranty? Does it differ from a condition? If so, how? 37. What different classes of warranty are there ? 38. Coon, a sewing-machine agent, sells a machine to Mrs. Randall, telling her that it is the best machine on the market, and that it runs so easily that it will nearly run alone. She finds out that the machine is of inferior quality, runs hard, and does not work well, so seeks to recover damages for breach of warranty. Does the representation constitute a warranty? 39. Is a representation that a horse is sound and fourteen years old a warranty ? 40. A sold a team of horses to B. He was driving the horses when the sale took place and immediately delivered them over. It was found after- wards that the horses did not belong to him, and an action was brought against him for breach of warranty. Was there any warranty? If so, what? 41. Suppose at the time A sold the horses he did not have them in his pos- session, but stated that they were in Cs livery stable. B brought an action against him for breach of warranty. Was there any warranty? If so, what? 42. Frank sold a car load of apples to Jeffreys, nothing being said as to their quality. They were in the possession of Frank at the time they were sold, and each party had an opportunity to inspect them. It was found that they were of an inferior grade, and Jeffreys sued for damages for breach of an implied warranty of quality. Could he recover? What rule would apply? 43. X contracted to make for Y a new improved hayrack. When Y received it he found that it was not suitable for the purpose for which it was purchased and would not remain in position on the wagon. Was there any implied warranty on the part of X ? 44. Meyer purchased a quantity of cloth from Scott. The order was taken from a sample which Scott carried with him. When the cloth was received it was an entirely different quality, being much lighter in weight. Meyer sued for damages on an implied warranty that the cloth was to be like the sample. Was there such an implied warranty and could he recover? 45. A sold B 100 barrels of sugar to be delivered in 30 days. When the time for delivery arrived, B refused to accept the sugar or pay the purchase price. What three remedies had A? 46. If the sugar had been delivered and accepted by B, but B had refused to pay for it, what remedies had A ? 47. If A resides in New York and B in Rochester, and B becomes bankrupt after the sugar has been shipped by A but before it reaches Rochester, what special remedy has A? 48. If the goods had reached Rochester and had been delivered to B, but had not yet been disposed of and had been still in his possession, would A have had the same special remedy? 49. If, in question 45, B had been ready to receive the sugar but A had refused to deliver it, what damages could B have recovered? 50. What is specific performance, and when is it granted by the court? NEGOTIABLE INSTRUMENTS i. IN GENERAL Definition. A negotiable instrument may be defined as a written instrument or evidence of debt which may be transferred from one person to another by indorsement or delivery so that the legal title becomes vested in the transferee. The principal forms of negotiable instruments are promissory notes, bills of exchange, and checks. Negotiable instruments are an important factor in business transactions of the present day, passing from hand to hand, in a sense, as a substitute for money. As a means of transferring funds and paying debts the check is as common among business houses as the money itself, while the promissory note is an equally important factor of our business system. The note is taken to the bank when the borrower desires money advanced to him by that institution. It is given to close a business trans- action when the date of payment is a day in the future, and as a large part of the business of to-day is transacted on credit, we can see the great usefulness of the promissory note as a trans- ferable evidence of debt. The term " negotiable " is applied to these instruments because they pass freely from hand to hand, they by their terms pro- viding for such transfer. Basis of Negotiable Instrument Law. It is a common state- ment that the negotiable instrument law is based upon, and derived from, the customs of merchants. In the early law there is but little mention of commercial questions, any dispute arising between merchants and customers having been decided on the spot by a special court or committee that sat to administer speedy justice to the merchants at the markets or great fairs. These 116 SJV GENERAL uj markets or fairs were held from time to time in the different cities in which the mercantile pursuits were largely carried on by merchants of different nations. These disputes were not determined by any fixed law but by the customs of the mer- chants. In the old English law books it was said that justice was administered " while the dust fell from the feet," so quickly was the court supposed to act. This practice finally developed into certain rules which were taken up and enforced by the courts and became the basis of our mercantile laws. As the merchants dealt between different countries, it is easy to understand that the customs of the different nations came to be much the same, and the laws founded upon these customs had much similarity. The result is therefore that the negotiable instrument law, which is based more directly upon these customs than is any other branch of the law, does not materially vary in the different jurisdictions. Statute Law. It is very important that contracts which are to pass from hand to hand and from state to state with almost the freedom of money should be subject to practically the same laws and rules, and to this end a statute law covering the principal questions concerning negotiable instruments has been adopted in many of the states, giving a uniformity that renders these instruments more freely negotiable than they would other- wise be. We speak of negotiable instruments as contracts, and in reality they are written contracts, possessing special charac- teristics which give them privileges and qualities different from those in ordinary contracts. Principal Characteristic. The principal characteristic of a negotiable instrument, and that which makes it pass freely as a substitute for money, is that in the hands of a third party who purchases it in good faith and for value before it is due, it is enforceable, while the original holder, perhaps, could not enforce it for the reason that the party who made the instrument has a good defense or counterclaim. As soon, however, as an innocent purchaser comes into possession of it for value he can not be prevented from collecting because of any defenses existing between the original parties. In other contracts the purchaser Il8 NEGOTIABLE INSTRUMENTS acquires only the right of the party from whom he buys, but in the case of negotiable paper he may acquire a better title than the original holder. Essential Conditions. The question arises as to what condi- tions are essential to constitute a contract a negotiable instru- ment. In general we find that no exact form need be followed, although custom has prescribed forms that are very generally used, but it is required that a negotiable instrument must be in writing, properly signed, negotiable in form, payable in money only, the amount must be certain, must be payable absolutely, to a designated payee, at a time that is certain. The Instrument must be in Writing. The first requirement by the custom of merchants is that the instrument be in writing. No oral contract could be negotiable. By a written contract we mean one in either writing or printing, and the writing may be executed with any substance, as ink or pencil. Geary v. Physic, 5 B. & C. (Eng.) 234, was an action on a promissory note. The defense was that the indorsement to plaintiff was made in lead pencil and that such indorsement was not within the term " writing" as required by the law and custom of merchants. The court held, that the writing was sufficient. When the law requires an instrument to be written it does not require the writing to be in any particular mode or to be done with any particular material. The whole instrument must be written. No essential part, as the names of the parties, the amount, or the date can be omitted from the writing. In Currier v. Lockwood, 40 Conn. 349, it was held that the following instru- ment was not a promissory note, "$17.14. BRIDGEPORT, CONN., Jan. 22, 1863. tt Due Currier & Barker seventeen dollars and fourteen cents, value received. " FREDERICK LOCKWOOD." This is merely a due bill. It does not contain a promise to pay. A bare acknowledgment of a debt does not in legal construction import an express promise to pay. The Instrument must be signed by the Party executing It. It is usual that the signature be made by writing the name of the signer, but it is not necessary, as he may affix his mark or any other character intended to be a signature. IN GENERAL 119 In Brown v Butchers' fir Drovers' Bank, 6 Hill (N.Y.) 443, the bank sued Brown as the indorser of a bill of exchange. The indorsement was made with a lead pencil and in figures, thus, " i. 2. 8.," no name being written. It was known that they were in Brown's handwriting and that he meant them as his indorsement. It also appeared that he could write. The court charged the jury that if they believed the figures were made by Brown as a substitute for his proper name with the intention of binding himself as indorser, he was liable. The judgment was for the plaintiff. This was held to be correct. A person may be bound by any mark or designation he thinks proper to adopt, provided he uses it as a substitute for his name, and intends to bind himself. It is usual to place the signature at the close of the instrument, but if it is shown that it is meant for a signature, it may be placed on any other part. Taylor v. Dobbins, i Strange (Eng.) 399, is an English case decided in 1720 which holds that it is sufficient if the maker writes the note with his own hand, and there need be no subscription in that case, for it is sufficient if his name is in any part of it. " I, J. S., promise to pay, is as good as I promise to pay, subscribed, J. S." The Instrument must be Negotiable in Form. The instrument must be payable to " Order " or " Bearer." If made payable to a particular person or persons only, it is not a negotiable instru- ment, and falls under the rules governing a simple contract. In other words, the intent of the party making the instrument to execute a negotiable paper must appear by some express words showing such a purpose. Chamberlain v. Young, 1893, 2 Q. B. (Eng.) 206, was an action on the fol- lowing instrument : "Five months after date pay to order, the sum of one hundred and fifty pounds, for value received. (Signed) "E. MALCOLM TOWER. "To Mr. A. J. YOUNG. 11 The defense claimed it was not a bill of exchange. The court held that it was a bill of exchange payable to order, and was valid. It virtually said pay to the order of the drawer. The Instrument must be Payable in Money, and the Amount must be Definite and Certain. The very reason it must be .pay- able in money is that if it were payable in any other commod- ity the amount could not be definite and certain. If payable in 120 NEGOTIABLE INSTRUMENTS a given number of bushels of wheat, the person taking it would be obliged to determine the value of wheat at that place ; the value at another place might be materially different. By the term "money" is meant the legal tender of the country; that is, a note payable in Spanish money is not a negotiable instru- ment in the United States. (See " Legal Tender," page 63.) Thompson v. Sloan, 23 Wend. (N.Y.) 71, was a suit on a note made and dated at Buffalo, N.Y., for $2500, payable twelve months after date at the Commercial Bank of Buffalo, N.Y., in Canadian money. Held, that it was not a negotiable note. A promissory note, in order to be negotiable within the meaning of the law merchant, must be payable in current money and not in the money of some other country. The sum payable is considered fixed and certain if it is a given amount with interest, or payable by stated installments or with exchange (the bank's charges), or with the costs of collection in case payment is not made at maturity. Dodge v. Emerson, 34 Me. 96, was an action on a note " payable to the Protection Insurance Co., or order, for $271.25, with such additional premium as may arise on policy No. 50, issued at the Calais Agency." Held, that the instrument was not a promissory note, the amount payable being indefinite and uncertain. Lent v. Hodgman, 15 Barb. (N.Y.) 274, held, an instrument not negoti- able as uncertain which provided as follows : " Pay A. B. for 68 bushels of wheat in store, at 3 cents below first quality wheat." In Fralick v. A r orton, 2 Mich. 130, a note for $60, but $ro if paid by Janu- ary I, was held not negotiable, as uncertain. In Parsons v. Jackson, 99 U.S. 434, certain bonds certified " that the Vicks- burg, Shreveport & Texas Railroad Co. are indebted to John Ray, or bearer, for value received, in the sum of either ,225 sterling or $1000 lawful money of the United States of America ; to wit, .225 sterling if the principal and interest are payable in Condon, and $1000 lawful money of the United States of America if the principal and interest are payable in New York or New Or- leans." Held, that in the absence of an express designation as to the place where the bonds were to be paid, the instruments were not negotiable, as the amount to be paid was uncertain. The judge said, " One of the first rules in re- gard to negotiable paper is that the amount to be paid must be certain, and not be made to depend on a contingency." In a Negotiable Instrument there must be a Designated Payee. -There must be no uncertainty as to the person to whom the IN GENERAL 12 j money is to be paid. The instrument must be made payable to a certain person, or his order, or to the bearer. It need not name the payee, but it must be payable to a person or persons who can be definitely ascertained at the time of payment. If payable to A or B, it is not a negotiable instrument under the law merchant, but it has been so rendered by statute in some states. Mclntosh v. Lytle, 26 Minn. 336, was an action on a written instrument drawn as follows : "$200. ST. PAUL, MINN., Jan. 22, 1879. " Dawson & Co., Bankers. Pay to the order of, on sight, two hundred dol- lars in current funds. E LYTLE." Held, that it was not a negotiable instrument, as it did not designate the payee. Shaw v. Smith, 150 Mass. 166, was an action by the administrator of the estate of F. B. Bridgman on the following instrument: "$126. BELCHERTOWN, July 19, 1873. " For value received I promise to pay F. B. Bridgman's estate, or order, one hundred twenty-six dollars on demand, with interest annually. " EUGENE BRIDGMAN." It was contended that this was not a promissory note because there was no definite payee, but the court held that, as the promise was to pay F. B. Bridg- man's estate and he was dead and administrators had been appointed, the payees were in existence and ascertainable. They were therefore designated with sufficient definiteness, and the instrument was negotiable. Musselman v. Oakes, 19 111. 81, was an action upon an instrument purport- ing to be a promissory note, payable to "Olive Fletcher or R. H. Oakes." Held, the instrument was not negotiable, as it was not payable to a certain person. This was payable to Fletcher or Oakes, but to which it was not certain. Noxon v. Smith, 127 Mass. 485, was an action on a note payable to "the Trustees of the Methodist Episcopal Church or their Collector." Held, to be a promissory note, as it was not payable to different persons in the alternative but to a certain designated payee, the trustees of the church, their collector being but their agent and payment to him would be payment to them. The Instrument must be Payable absolutely and Uncondition- ally. If the instrument is so drawn that any condition may arise which would render it of no effect, it is not a negotiable 120 NEGOTIABLE INSTRUMENTS a given number of bushels of wheat, the person taking it would be obliged to determine the value of wheat at that place ; the value at another place might be materially different. By the term "money" is meant the legal tender of the country; that is, a note payable in Spanish money is not a negotiable instru- ment in the United States. (See " Legal Tender," page 63.) Thompson v. Sloan, 23 Wend. (N.Y.) 71, was a suit on a note made and dated at Buffalo, N.Y., for $2500, payable twelve months after date at the Commercial Bank of Buffalo, N.Y., in Canadian money. Held, that it was not a negotiable note. A promissory note, in order to be negotiable within the meaning of the law merchant, must be payable in current money and not in the money of some other country. The sum payable is considered fixed and certain if it is a given amount with interest, or payable by stated installments or with exchange (the bank's charges), or with the costs of collection in case payment is not made at maturity. Dodge v. Emerson, 34 Me. 96, was an action on a note " payable to the Protection Insurance Co., or order, for $271.25, with such additional premium as may arise on policy No. 50, issued at the Calais Agency." Held, that the instrument was not a promissory note, the amount payable being indefinite and uncertain. Lent v. Hodgman, 15 Barb. (N.Y.) 274, held, an instrument not negoti- able as uncertain which provided as follows : " Pay A. B. for 68 bushels of wheat in store, at 3 cents below first quality wheat." In Fralick v. Norton, 2 Mich. 130, a note for $60, but $50 if paid by Janu- ary I, was held not negotiable, as uncertain. In Parsons v. Jackson, 99 U.S. 434, certain bonds certified " that the Vicks- burg, Shreveport & Texas Railroad Co. are indebted to John Ray, or bearer, for value received, in the sum of either ^225 sterling or $1000 lawful money of the United States of America ; to wit, ^225 sterling if the principal and interest are payable in Condon, and $1000 lawful money of the United States of America if the principal and interest are payable in New York or New Or- leans." Held, that in the absence of an express designation as to the place where the bonds were to be paid, the instruments were not negotiable, as the amount to be paid was uncertain. The judge said, " One of the first rules in re- gard to negotiable paper is that the amount to be paid must be certain, and not be made to depend on a contingency." In a Negotiable Instrument there must be a Designated Payee. -There must be no uncertainty as to the person to whom the IN GENERAL I2I money is to be paid. The instrument must be made payable to a certain person, or his order, or to the bearer. It need not name the payee, but it must be payable to a person or persons who can be definitely ascertained at the time of payment. If payable to A or B, it is not a negotiable instrument under the law merchant, but it has been so rendered by statute in some states. Mclntosh v. Lytle, 26 Minn. 336, was an action on a written instrument drawn as follows : "$200. ST. PAUL, MINN., Jan. 22, 1879. " Dawson & Co., Bankers. Pay to the order of, on sight, two hundred dol- lars in current funds. E LYTLE " Held, that it was not a negotiable instrument, as it did not designate the payee. Shaivv. Smith, 150 Mass. 166, was an action by the administrator of the estate of F. B. Bridgman on the following instrument: "$126. BELCHERTOWN, July 19, 1873. " For value received I promise to pay F. B. Bridgman's estate, or order, one hundred twenty-six dollars on demand, with interest annually. " EUGENE BRIDGMAN." It was contended that this was not a promissory note because there was no definite payee, but the court held that, as the promise was to pay F. B. Bridg- man's estate and he was dead and administrators had been appointed, the payees were in existence and ascertainable. They were therefore designated with sufficient definiteness, and the instrument was negotiable. Musselman v. Oakes, 19 111. 81, was an action upon an instrument purport- ing to be a promissory note, payable to "Olive Fletcher or R. H. Oakes." Held, the instrument was not negotiable, as it was not payable to a certain person. This was payable to Fletcher or Oakes, but to which it was not certain. Noxon v. Smith, 127 Mass. 485, was an action on a note payable to "the Trustees of the Methodist Episcopal Church or their Collector." Held, to be a promissory note, as it was not payable to different persons in the alternative but to a certain designated payee, the trustees of the church, their collector being but their agent and payment to him would be payment to them. The Instrument must be Payable absolutely and Uncondition- ally. If the instrument is so drawn that any condition may arise which would render it of no effect, it is not a negotiable 122 NEGOTIABLE INSTRUMENTS paper. Consequently, a promise to pay a certain sum out of a designated fund is not negotiable, and this is the case even though the fund exists at the time or the condition that would nullify the contract never arises. In Richardson v. Carpenter, 46 N.Y. 660, an instrument in the following form was held not to be a negotiable instrument, as the money was payable out of a particular fund. " Please pay A, or order, $500 for value received out of the proceeds of the claim against the Peabody Estate, now in your hands for collection, when the same shall have been collected by you." Blake v. Coleman, 22 Wis. 415, was an action on a promissory note in the usual form, on the back of which was indorsed, " The conditions of the within note are as follows : L. S. Blake or bearer is not to ask or expect payment of said note until his, Coleman's, old mill is sold for a fair price. 1 ' It was shown that this indorsement was made at the time the note was given. The note was given for a new fanning mill, and the defendant still had his old one on hand. Held, that this indorsement qualified the note and made it a mere agreement, and not being a negotiable instrument it could not be collected upon until the agreement was fulfilled. Warden v. Dodge, 4 Denio (N.Y.) 159, was an action on an agreement in which defendants promised to pay to plaintiff or order $250 with interest, payable one half in two years and the other half in three years " out of the net proceeds, after paying the cost and expenses, of ore to be raised and sold from the bed on the lot this day conveyed by Edward Madden and Edwin Dodge, which bed is to be opened and the ore disposed of as soon as conveniently may be." Held, that the payment of the amount depended on a contingency, so the agreement was not a promissory note. A promissory note must be payable absolutely and not dependent upon some contingency or event. Here the fund might not be adequate. But the promise is not made conditional by designating a place of payment in the instrument. Not only must the amount be payable absolutely, but the time of payment must be definite and fixed. That is, the date of payment must be definitely stated, or it must be on or before a certain definite date, or at a certain time after the happen- ing of an event that is sure to occur. A note payable a certain number of days after the death of a person is negotiable, the date being certain because the time is sure to arrive. Shaw v. Camp, 160 111. 425, held, that the following was a negotiable in- strument, as the meaning was that it should be payable after the death of the PROMISSORY NOTES 123 maker. u After my death date I promise to pay Hanson Camp or order the sum of $750 without interest." But the contingent event must be certain to occur or the promise will not be absolute. Kelley v. Hemmingway, 13 111. 604, was an action on an instrument in the following form : "CASTLETON, April 27, 1844. "Due Henry D. Kelley fifty-three dollars, when he is twenty-one years old, with interest." DAVID KELLEY> ,, Plaintiff proved that Henry D. Kelley became of age before the action was commenced. The court held that the instrument was not negotiable, as pay- ment was contingent on an event that might or might not happen. The money was therefore not payable "absolutely and at all events," and the paper lacked one of the necessary elements of a negotiable instrument. Duffield v.Johnston, 96 N.Y. 369, was an action brought to recover the last two payments on the following instrument : "THOMAS JOHNSTON, ESQ.: "Dear Sir: (i) Please pay to J. J. Duffield, or order, the sum of six hundred and sixty-six dollars when the brown stone work of your eight houses situated on the south side of East One Hundred and Fifth Street, between Second and Third Avenues, City, is topped out. " (2) The sum of four hundred dollars when the stoops of said eight houses are set. " (3) The sum of three hundred and seventy-five dollars when the brown stone work of the said eight houses is completed ; and charge the same to me, and oblige, yours, etc., WM. CHAVE." Held, that it was not a bill of exchange because not payable absolutely. It was payable only upon condition that the work should be done as specified, and might never become payable. The law simply requires that the time of payment shall be sure to arrive. 2. PROMISSORY NOTES Definition. A promissory note is an unconditional written promise made by one or more persons to pay to another or his order or bearer a certain sum of monev at a specified time. 124 NEGOTIABLE INSTRUMENTS The party who makes the note and whose promise is con- tained therein is called the maker, and the party to whom the premise is made is called \htpayee. Form. There is no exact form of note required by law ; in ordinary business practice it is printed in blank and filled in. It may or may not draw interest, but will not unless provided for in the note. The following form is a common one : If the note is without interest the words " with interest " are omitted. In this note Dickson is the maker and Strouss is the payee. If Strouss, the payee, wishes to obtain the money before the note matures, he indorses it by writing his name upon the back, and he is then also called the indorser, the person to whom he transfers it being called the holder or indorsee, The above note is an illustration of a several note, as there is but one maker. There may be also a joint note and a joint and several note. In a joint note there are two or more makers and the obliga- tion to pay rests upon the makers jointly, and they must be sued together; if one is released the other or others can not be held. In King v. Hvare, 13 M. & W. (Eng.) 494, it was held that a judgment against one of two joint debtors is a bar to an action against the other on the same debt. When two or more persons make a note and agree to pay jointly and severally the form is substantially as follows: 125 Upon this note the makers may be sued together or either one can be held severally for the full amount. If the last note should be drawn in the form of the several note, but be signed by Holden and also by one or more sure- ties, it would be construed by law to be a joint and several note. Dart v. Sherwood, 7 Wis. 523, was an action against the signers of the following promissory note as joint makers. "$400. RIPON, Wis., Nov. 4, 1856. " Thirty days after date, for value received, I promise to pay Putnam C. Dart, or order, four hundred dollars with interest, at the rate of twelve per cent per annum. J. C. SHERWOOD, WM. C. SHERWOOD, Surety." Held, by the court to be a joint and several note ; joint because signed by both parties and several because each defendant promised severally. In /K v. Clute, 19 Hun (N.Y.) 35, the following note was held to be joint and several, and separate judgments might be rendered against the two makers. "$270. STOCKTON, March 14, 1875. " One day after date I promise to pay Lorenzo Ely, or bearer, two hundred and seventy dollars at the post office in Stockton. Value received with use. THOMAS W. CLUTE. J. B. CLUTE." In a few of the states the distinction between joint, and joint and several notes has been abolished, and all notes signed by two or more parties have been declared to be joint and several. Signatures. The construction of a signature may be to a certain extent ambiguous, and it may be well to note the effect 126 NEGOTIABLE INSTRUMENTS of a signature which is apparently intended to be made by an agent or attorney to bind his principal. It is plain that if the maker or any other party signing exe- cutes the signature in any of the following forms, the principal alone is bound, provided of course the agent acts within his authority : James Lane by George Chapman, Agent ; James Lane by his agent, George Chapman ; James Lane by George Chapman ; George Chapman, agent for James Lane ; or George Chapman for James Lane. Long v. Colburn, 1 1 Mass. 97, was a case which held that the signature "Pro William Gill J. S. Colburn," on a promissory note, was the signature of the principal, William Gill, and that he was bound by it. On the other hand we find the courts holding that the agent alone is bound by such signatures as the following : George Chapman, Agent; George Chapman, agent of James Lane; George Chapman, president, or treasurer, etc., or George Chapman, president of the Genesee Gas Co. Davis v. England, 141 Mass. 587, was an action on a promissory note in the form, " I promise to pay," and signed, " W. H. England, President and Treasurer Chelsea Iron Foundry Co." Held, that the signature made it the note of England and not of the company. McClellan v. Robe, 93 Ind. 298, held, a note in the usual form in which several persons signed and after their names added, " trustees of the G. Lodge, etc.," rendered the signers individually liable, the words added being but descriptive of the parties. When the signature to the instrument is made by the agent writing the name of the principal followed by the agent's name, the courts differ as to the effect given. Such a signature as James Lane, George Chapman, Agent, or Genesee Gas Co., George Chapman, President, is held by some courts to be the principal's signature, and he alone is bound. Liebscher v. Kraus, 74 Wis. 387, was an action brought on the following promissory note : " $637.40. MILWAUKEE, Jan. i, 1887. " Ninety days after date we promise to pay to Leo Liebscher, or order, the sum of six hundred and thirty-seven dollars and forty cents, value received. "SAN PEDRO MINING & MILLING Co., F. KRAUS, President." PROMISSORY NOTES 127 Plaintiff demanded judgment against the corporation and Kraus as joint makers. The couit held that it was the note of the company alone and that Kraus signed for the company as its president. The signature alone showed plainly enough that Kraus was acting as officer or agent of the company. Other courts hold that it is the signature of both the principal and the agent, and that both are liable. Mathews &* Co. v. Mattress Co., 87 Iowa 246, was an action on a promissory note against The Dubuque Mattress Co. and John Kapp. The note read " we promise to pay " and was signed " Dubuque Mattress Co., John Kapp, Pt." Held, that Kapp was personally liable. Where a person signs a note and adds thereto his name of office, and there is nothing on the face of the instrument to show he does not intend to be bound, he is personally liable, because the name of the office is merely descriptive of the person. And still other courts hold the signature to be ambiguous and allow evidence to explain it. Bean v. Pioneer Mining Co., 66 Cal. 451, was an action on a promissory note reading " we promise to pay " and signed " Pioneer Mining Company, John E. Mason, Supt." Held, that the signature was ambiguous and parol evi- dence was admissible to show that it was understood by the payee to be the note of the company, and that the consideration for which it was given passed to the company. The body of the instrument may contain statements that will explain the instrument, or the margin or heading of the paper may disclose the identity of the principal or the fact of the agency. Casco National Bank v. Clark, 139 N.Y. 307, was an action against Clark and Clop.e on the following promissory note : 3 "$7500. BROOKLYN, N.Y., Aug. 2, 1890. 8 Three months after date, we promise to pay to the order of Clark and | Chaplin Ice Company, seventy-five hundred dollars at Mechanics Bank, t value received. JOHN CLARK, Pres. 2 "E. H. CLOSE, Treas." Defendants claimed that they had signed as officers of the Ridgewood Ice Company and had not become personally liable on the note. But the court held that the name of the company printed on the margin of the paper did not create any presumption that the note was made by the company, and that the officers of the company had a right to obligate themselves. Discharge. The agreement of the maker of a note or of the acceptor of a bill of exchange is that upon the date of maturity 128 NEGOTIABLE INSTRUMENTS of the note or bill he will pay absolutely the amount named therein to the payee designated therein or to his order. His promise is absolute, and it can be discharged only in some one of the ways in which a contract can be discharged, as by payment, lapse of time, etc. The only condition he can require is that the holder surrender the note or bill, and the maker is not obliged to pay without re- ceiving the instrument, as otherwise, if it were lost, it might be presented by a person purchasing of the finder, and so payment might be compelled the second time. Relief in such a case is generally given the payee, however, by compelling the maker to pay upon being furnished a bond to indemnify him against any loss because of the reappearance of the note. 3. BILLS OF EXCHANGE Definition. A bill of exchange, or draft, is a written order from one person to another to pay to a third party or his order a certain amount of money at a specified time. A common form of a bill of exchange is : ^m^^#?^$&^^ \oT In this bill of exchange the American Book Company is the drawer, the National Park Bank is the payee, and Davis is the drawee. After Davis has accepted the bill he is called the acceptor. Bank Draft. When the drawer and drawee are banks the bill of exchange is known as a bank draft and constitutes a BILLS OF EXCHANGE 129 common method of paying the debts of parties residing in dif- ferent localities. The form is as follows : Merchants Bank of Rochester, No 225273 Chemical National NewYork City. Allen owes Brown of Albany $100 and wishes to pay him, therefore he goes to his bank in Rochester and purchases a draft on a New York bank and sends it to Brown. This draft he has made payable to himself and on the back indorses " pay to. the order of William Brown " and signs " Charles M. Allen." The draft might have been made payable to Brown on its face, but the advantage of the other form is that when the draft is returned to the Merchants Bank, having been indorsed by Brown, it contains a complete record of the transaction, and in case of a dispute is a receipt which Allen could procure for use in evidence. The banks have an arrangement among themselves through the clear- ing, house and their correspondents in the large financial centers like New York and Chicago, by reason of which they can issue these drafts. The New York or Chicago draft is as readily ac- cepted as the money itself, and is unhesitatingly cashed by banks anywhere. Here it may be seen how the bill of exchange or bank draft acts as a convenient transfer of obligation without the necessity of conveying money between distant points. The bill of exchange and promissory note like the bank draft may be transferred by the payee, and so may pass from hand to hand, and thus take the place of money. Bills of Exchange may be either Foreign or Inland. A foreign bill of exchange is a bill drawn in one state or country and pay- able in another. A n inland bill of exchange is one drawn and made payable in the same state or country. As will be seen, COM. LAW 9 130 NEGOTIABLE INSTRUMENTS the last illustration is an inland bill. A foreign bill is some- times drawn in duplicate or triplicate, and upon the payment of one the other or others become void. The seveial copies are termed a set, the object in having them so drawn being that if one is lost, the other, or others, will reach their destination. In the earlier times the custom was to send each copy by a different route, thus assuring safety and dispatch. The first copy presented was the one paid. A common form for a foreign bill is : But the custom of issuing bills in a set is fast becoming obso- lete, and the practice between the states is to draw foreign bills in the same form as inland bills. Time and Sight Drafts. Drafts are also drawn as either time or sight drafts. The following is a sight draft, that is, it is pay- able on presentation. A time draft is one payable at a given time after demand or sight. BILLS OF EXCHANGE ! 3 ! The draft is a common means employed by business houses to collect debts due them from parties residing in other places. The creditor draws upon the debtor, naming a bank as the payee, for the purpose of making the collection. Acceptance. A bill of exchange being an order on the drawee to pay a certain amount of money to a third party, it is not binding upon the drawee until he has accepted it. The accept- ance is signified, if a sight draft, by payment ; if a time draft, by the drawee writing the word " accepted " across the face of the draft and signing his name. After he has accepted the bill, he becomes the acceptor and his obligation is then fixed and absolute and can be enforced against him, his position becoming much the same as that of the maker of a note. According to the law merchant, the acceptance could be either oral or written, but by statute in most of the states it must be in writing. Barring the case of an acceptance for honor, which will be dis- cussed later, the only person who can accept a bill is the drawee. In Cook v. Baldwin, 120 Mass. 317, it was held that the words "I take notice of the above, Henry Baldwin " written on a bill of exchange do not necessarily import an acceptance, and parol evidence of a refusal can be shown. The court said a bill of exchange may be accepted by an oral promise to pay as well as by a written one, or by such language and conduct on the part of the drawee, when the bill is presented to him, as justifies the payee in be- lieving that he consents to pay it. National Park Bank v. Ninth National Bank, 46 N.Y. 77, was an action to recover the money paid on a forged draft, which the plaintiff had accepted and paid. The court held that the plaintiff could not recover. It is a well-settled rule that it is incumbent upon the drawee of a bill to be satisfied that the signature of the drawer is genuine, and he is presumed to know the handwriting of such drawer, and if he accepts or pays a bill to which the draw- er's name has been forged, he is bound by the act and can neither repudiate the acceptance nor recover the money paid. The Bill must be presented to the Drawee for Acceptance or Payment Until accepted the drawer is the party liable to the payee. He agrees that the drawee will accept it or he him- self will pay it if proper presentment and demand be made upon the drawee, and notice of dishonor be given him. If the bill is payable a given number of days after sight or demand it must be presented to the drawee for acceptance at maturity by the 132 NEGOTIABLE INSTRUMENTS holder. If the drawee refuses to accept, the drawer must be duly notified and he thereupon becomes liable for the bill. But if the bill is payable a certain number of days after date or upon demand or upon a day specified, it need not be presented for acceptance, presentment for payment being sufficient. Still it may be presented for the purpose of binding the drawee. A bill payable at sight or a given number of days after sight must be presented for acceptance within a reasonable time, failure to do so releasing the drawer. Just what time may be deemed reasonable depends upon the circumstances of the case, and this does not prevent the circulation of the bill from one party to another before presentment. In Chambers v. Hill, 26 Tex. 472, a bill of exchange dated December 18, 1851, was not presented for payment until two years and^nine months there- after. The draft contained no specific date for payment. Held, that the draft was payable on demand and must be presented for payment within a reason- able time to hold the drawer and indorser ; and that an unexplained delay of two years and nine months is unreasonable, and the drawer and indorser are released. In Wallace v. Agry, 4 Mason (U.S.) 336, a bill drawn June 18 at Havana, Cuba, on Williams in London, payable sixty days after sight and pre- sented in London on October 31, having been kept by the holder in Boston from July 6 to September 29, was found to have been presented within a rea- sonable time. Aymar v. Beers, 7 Cowen (N.Y.) 705, held, that a bill drawn on December 12 in New York, "three days after sight," and presented January 10 in Rich- mond, Va., having been in the payee's hands during that time, was presented within a reasonable time under the circumstances of the case. When the drawee refuses to accept, the bill is said to be dishonored. Acceptance for Honor. Mention has been made of acceptance for honor. This is also known as acceptance supra protest. When the bill has been dishonored and protested, a third party who may or may not be the drawer accepts it to protect the drawer or any of the other parties to the instrument. The obli- gation of such an acceptor is to pay the bill if upon a further . presentation of it to the drawee for payment, at maturity, it is again dishonored and duly protested, and due notice is given to such acceptor. CHECKS , 33 Virtual Acceptance. There is another mode of acceptance known as "virtual" acceptance, which is practically a promise to accept. . If the virtual acceptance consist of a written uncon- ditional promise to accept a bill already drawn or one to be drawn in the future, it is binding in favor of one who has taken it with a knowledge of the acceptance and in reliance thereon. The promise must clearly describe the bill and must be absolute in its terms. 4- CHECKS Definition. A check is a draft, or order, drawn on a bank or banker, directing payment on demand by the bank to a third person or his order or to bearer, of a certain sum of money. A common form of check follows : New Haven, Conn ? ^/ O *~~ No 849 THEME-RCH; s /NATIONAL BANK, A check is drawn by a party having money on deposit in the bank and, as shown in the definition, is a special form of bill of exchange with the bank as drawee. In the above check Eldridge is the maker or drawer, the Merchants Bank of New Haven, Conn., is the drawee, and Farley is the payee. A check is in- tended for immediate payment upon presentation, and the implied contract of the drawer is that the bank will pay the check. In case it does not, the drawer is liable absolutely, and no notice of dishonor is necessary. 134 NEGOTIABLE INSTRUMENTS Harrison v. Nicoilet National Bank, 41 Minn. 488, was an action for dam- ages for protesting the following instrument before it was due. "45 WASHINGTON AVENUE SOUTH, " HARRISON THE TAILOR, "$199.92. "MINNEAPOLIS, MINN., March 27, 1888. " On April 14 pay to the order of E. Harrison one hundred and ninety- nine T V, dollars. j. T. HARRISON. " To CITIZENS' BANK, "Minneapolis, Minn." Payment was demanded and the instrument protested on April 14. The plaintiff contended that it was a bill of exchange and entitled to days of grace, while the defendant claimed that it was a check and not entitled to grace. Held, that one of the essentials of a check is that it shall be payable on de- mand and, as this was payable in the future, it was not a check but a bill of exchange and entitled to grace. Check must be Presented without Delay. But the payee of a check must present it for payment within a reasonable time, or the drawer will be discharged from loss occasioned by his delay. What would be a reasonable time would depend upon circumstances, but it is generally considered that the check should be presented within a day after its receipt. Grange v. Reigh, 93 Wis. 552, was an action against the drawer of a check. After banking hours on July 20 defendant drew and delivered to plaintiff in Milwaukee, where plaintiff resided, a check for $1211 upon the South Side Savings Bank of that city. The check was not presented on July 21, although the bank was open and would have paid it at any time during the banking hours of that day. The bank failed, and did not open after that date. The court held that the party receiving a check must present it for payment within a reasonable time in order to preserve his right of recourse on the drawer in case of non-payment ; and when such party resides and receives the check at the place in which the bank is located, a reasonable time for such presentation reaches, at the latest, only to the close of banking hours on the suc- ceeding day. The defendant in this case is therefore discharged from liability. In Mohawk Bank v. Broderick, 13 Wend. (N.Y.) 133, a check drawn on the Mechanics & Planners Bank of Albany was transferred by defendant to Meyers and by him deposited in the Mohawk Bank of Schenectady. This bank retained the check 23 days before presentment, although a daily mail passed between Schenectady and Albany, a distance of 16 miles. When presented payment was refused. Held, that the holders had not used due diligence in making presentment, and were not entitled to maintain an action against the payee who had negotiated the check. CHECKS I35 Certified Checks. A check purports to be drawn upon a deposit made by the drawer in the bank upon which it is drawn, and although in fact there may be no such deposit, it is still a check. Checks pass freely between parties as money, yet. unless the drawer is known to have on deposit in the bank funas sufficient to meet the check, or unless his solvency is known, a person is not safe in accepting the check. It is therefore customary in such cases to have the bank certify the check, that is, the cashier or teller stamps the word " certified " and the date with his signa- ture on the face of the check. The bank then takes the amount from the drawer's deposit and puts it in a separate account. The result is that the check is thereafter the check of the bank rather than of the drawer, and it is good as long as the bank is solvent. When the holder has the check certified, the bank by so certifying becomes the principal and only debtor, and the holder by accepting the certified check discharges the drawer. But if the drawer procures the certification before delivering the check, he is not released from further liability. Minot v. Russ and Head v. Hornblower, 156 Mass. 458, were two cases arising from the failure of the Maverick National Bank and decided together by the court. In the first case the defendant on October 29, 1891, drew a check on the Maverick National Bank payable to plaintiff, who informed him that the check must be certified by the bank before it would be received. On the same day the defendant presented it to the bank for certification. The bank complied by writing on the face of it " Maverick National Bank. Pay only through clearing house. J. W. Work, Cashier. A. C. J., Paying Teller." After the check was certified the defendant, on October 31, 1891, delivered it to plaintiff for a valuable consideration. The bank stopped payment Mon- day morning, November 2, 1891. In the second case on Saturday, October 31, 1891, defendants drew their check on the Maverick National Bank payable to plaintiffs and delivered it to them. As the check was received too late to be deposited by the plaintiffs for collection in time to go through the clearing house that day, plaintiffs procured the certification of the check by the bank during banking hours in the following form : " Maverick National Bank. Certified. Pay only through clearing house. C. C. Domett. A., Cashier." At that time the defendants in both cases had on deposit sufficient funds to pay the checks, and the bank on certification charged to the defendants' accounts the amounts of the checks which they credited to a ledger account called certified checks. It was held 138 NEGOTIABLE INSTRUMENTS without recourse is not out of the due course of trade. The security continues negotiable, notwithstanding such an indorsement. Nor does such an indorse- ment indicate that the parties to it are conscious of any defect in the security, or that the indorser does not take it on the credit of the other party or parties to the note. On the contrary, he takes it solely on their credit, and the in- dorser only shows thereby that he is unwilling to make himself responsible for the payment." Indorsement ; How made. The indorsement must be on the instrument itself or on a paper attached to it. The indorsement must relate to the entire instrument; a part can not be trans- ferred by indorsement, or a part to one party and the remainder to another. Hughes v. Kiddell, 2 Bay (S.C.) 324, was an action against the indorser of a note. The note was given by one David Bush to the defendant Kiddell for ^473 sterling. Kiddell afterwards made the following indorsement : " I assign over to Hudson Hughes the sum of $1930.50 as part of this note of hand. " BENJAMIN KIDDELL." Afterwards he made another indorsement and assigned the residue to Hughes. The court held that each indorsement was bad, as it affected only part of the note, and that being so, two bad indorsements would not constitute one good one. Any writing intended to transfer the title to the instrument will be construed as an indorsement. Adams v. Blethen, 66 Me. 19, was an action against the indorser of the following note : " LINNEUS, May 30, 1873. "I promise to pay James H. Blethen, or order, $137.50 at ten per cent interest, on demand. EBENEZER TOZIER." On the back of this note was written, " I this day sold and delivered to Catherine M. Adams the within note. JAMES H. BLETHEN." Held, that the defendant assumed all of the liability of an ordinary indorser. This indorsement but expressly stated what every indorsement impliedly states, a sale or transfer of the note. The liability of an indorser can be limited or qualified only by express terms. Presentment and Demand. As has been said, to fix the lia- bility of the drawer or indorser, the first step is presentment to the drawee or maker and demand. Bills of exchange payable a certain time after sight are presented for acceptance ; notes, checks, and bills payable on demand or sight are presented for NEGOTIATION 139 payment. Presentment consists in exhibiting the instrument to the payor or handing it to him, while demand is a request to either accept or pay it as the case may be. If the paper is pay- able at a bank the mere fact that at the time of maturity the paper is at the bank at which it is payable is sufficient presentment and demand, provided the bank has knowledge of the fact. Presentment and demand must always be made at the place designated in the instrument. Promissory notes are often drawn in the following form, designating the place of payment : This is called a bank note, but the place of payment desig- nated may be some other place than a bank. In Brooks v. Higby, \\ Hun (N.Y.) 235, a bill was drawn on N. F. Mills, 1 14 South Main St., St. Louis, and by him accepted. The notary's certificate stated that the bill was presented for payment " at the place of business of N. F. Mills, St. Louis." It appeared that Mills had two places of business in St. Louis. The court held that the certificate was insufficient, as it did not show at which place presentment was made. The bill was addressed to Mills at a particular place and by him accepted at that place, making it the place of payment, and a due presentment and demand of payment at that place was necessary in order to charge the indorser. In case there is no designated place of payment, it is said that the paper is payable generally. This means that it is pay- able at the place of business or residence of the maker of the note or acceptor of the draft, and when he has a known place of business, that should have preference over his residence. 140 NEGOTIABLE INSTRUMENTS Barnes v. Vaughan, 6 R.I. 259, was an action against the indorser of a note which was not made payable at any particular place, but was left by the plaintiff at the Mount Vernon Bank in Foster for collection. The only demand made upon the maker, Northrup, was that the usual printed bank notice was mailed to him by the cashier and directed to Providence, where he lived in the early part of the month in which the notes became due. The court held that there was no legal and proper demand made upon the maker and therefore the indorser was discharged. The rule is that in order to charge the indorser payment must be demanded of the maker on the day the note becomes due, unless the note is made payable at a designated place, as at a bank named, when it is only necessary to make demand at such place ; but if no place of payment is named in the note, it is necessary to present it to the maker person- ally or at his place of business or abode, otherwise the indorser can not be charged. In Taylor v. Snyder, 3 Denio (N.Y.) 145, the note was dated at Troy, N.Y. The maker then and afterwards resided in Florida to the knowledge of the holder and indorsers, but presentment was made in Troy though not personally on the maker or at his residence. It was held to be insufficient. The court said, " When no change has taken place in the residence of the maker between the making of the note and the time of its payment, the inter- vention of a state does not dispense with the necessity of making due demand of payment." But in M" 1 Cruder v. Bank, 9 Wheaton (U.S.) 598, it was held that when a resident of a state, after giving a note, removes therefrom and takes up his residence out of the state, it is not necessary in order to charge the indorser to demand payment of the maker at his new residence. If the maker or acceptor has neither a known residence nor a place of business, the holder need only be present with the paper and ready to receive payment at the place where the con- tract was made. Maiden Bank v. Baldwin, 13 Gray (Mass.) 154, held, that a presentment for payment at any bank in Boston, of a note payable "at bank in Boston" or " at either bank in Boston," was a sufficient demand upon the maker to charge the indorser. Time. Presentment for payment must be made on the day on which the instrument falls due, unless some "inevitable accident" or other legal obstacle prevents such presentment. The fact that both the holder and indorser know that the note will not be paid when due and that the maker is dead and the estate insolvent, does not relieve the holder from his ob- ligation to make presentment and give notice of dishonor. NEGOTIATION I 4 , Days of Grace. Drafts, bills of exchange, and promissory notes formerly had days of grace, that is, three days were added to the time stated in which the instrument should become due. The purpose of this was to give the payor in the early days of slow transportation an opportunity to arrange for pay- ment. A note at thirty days drawn June 10 would not be payable until July 13; but days of grace have been abolished by statute in most of the states and an instrument matures on the date fixed. If given a number of days after date, the day on which the instrument is drawn is excluded ; thus, a note dated January 10 payable thirty days after date is due February 9. If the date of maturity is Sunday or a legal holiday, the instrument is payable on the next succeeding busi- ness day. Salter v. Burt, 20 Wend. (N.Y.) 205, was an action on a check drawn on August 9 but postdated August 21, and as checks are payable without grace, the day on which it became due fell on Sunday. Jt was presented for pay- ment, and notice of non-payment was given on Saturday, August 20. The court held that it was presented before it came due. If a negotiable instru- ment which does not have grace falls due on Sunday, it becomes due and pay- able on Monday, but when grace is allowed the rule is different, and Saturday is the day it becomes due. In the states in which days of grace are yet allowed, if the last day of grace is a holiday or Sunday, the instrument is pay- able on the preceding day. Johnson v. Haight, 13 Johns. (N.Y.) 470, was a case in which the third day of grace fell on Sunday, November 29, and payment was not demanded of the maker until November 30. It was held that the law is well settled that de- mand must be made on the third day of grace unless that falls on Sunday, and then payment must be demanded on the second day of grace. Therefore in this case the indorser was discharged. But when the time is reckoned by the month, as it is when the instrument is made payable one or more months after date, the note falls due on the corresponding date of the month in which it is due. Thus a note dated January 31, 1903, due one month after date, would mature February 28, 1903, where no grace is allowed, and if dated February 28, it would be due March 28. 142 NEGOTIABLE INSTRUMENTS Roehner v. Knickerbocker Insurance Co., 63 N.Y. 160, held, that a note without grace dated December 11, payable four months after date, is due and payable April n. Not only must the presentment for payment be made on the right day, but it must be made at a reasonable time on that day. If presented at a bank, it must be during banking hours. In other cases the time must be at a reasonable hour. Dana v. Sawyer, 22 Me. 244, was a case in which presentment for pay- ment was made at the maker's house between eleven and twelve o'clock at night, the maker being called up from bed for that purpose. Held, that the presentment was made at an unreasonable hour, and the demand was not sufficient. Farnsworth v. Allen, 4 Gray (Mass.) 453, was an action against the in- dorser of a note, and the defense was insufficient presentment and demand for payment. The holder did not know the maker's place of residence. He gave it to a notary who arrived'at the maker's house at nine in the evening. The maker and his family had retired for the night, but he answered the bell, and upon the note being presented refused payment. Held, to be sufficient presentment ; the rule is that it must be presented at such a time, regard being had to the habits and usages of the community where the maker resides, that he may reasonably be expected to be in condition to attend to ordinary business. Newark India Rubber Mfg. Co. v. Bishop, 3 E. D. Smith (N.Y.) 48, was a case in which a note payable at a bank was presented after banking hours and the clerk still there refused payment, although funds had been left with the regular teller to pay it. Held, that the presentment and demand were not sufficient. The presentment must be made by the holder or his duly authorized agent, upon the proper person, who is the maker or acceptor, or, if he is dead, his personal representative. Stinson v. Lee, 68 Miss. 113, was an action against an indorser. The no) was signed " A. G. Cunningham, Agent." Nothing appeared on the face of the note showing for whom he professed to act. Presentment and demand of payment was made upon S. A. Cunningham, the wife of A. G. Cunningham. Held, that the demand was insufficient. By the signature the note was made by A. G. Cunningham, and the demand to bind the indorser must be made on him. Toby v. Maurian, 7 La. 493, was an action against the indorser of a note. The defense was want of due presentation. The maker died on the last day of grace. The notary called with the note and found no one but a mulatto woman who informed him of the death of the maker. The note was then NEGO TIA TION , A *43 protested without any inquiry or demand being made of any heirs or repre- sentatives of the deceased. Held, that demand must be made of the heirs or legal representatives of deceased unless the impossibility of such demand. is shown. Notice of Dishonor. After payment has been refused and the instrument dishonored, notice of such dishonor must be given to the drawer of a bill of exchange and to each indorser if a bill or note, and any drawer or indorser to whom such notice is not given is discharged. This notice under the law merchant must be given within a reasonable time, but by the negotiable instrument law adopted in many of the states it is expressly stipulated when the notice is to be given. If the parties reside in the same place, it must be given the following day. If they reside in different places, and notice is sent by mail, it must be deposited in the post office so as to go the day following the dishonor ; if given otherwise than through the mail, it must be done in time to be received as soon as the mailed notice would have been. In Simpson v. Turney, 5 Humph. (Tenn.) 419, the bank was the holder of a promissory note, payable at said bank, made by James H. Jenkins, to Anthony Dibrell, and indorsed as follows, "A. Dibrell, S. Turney, and John W. Simp- son." Turney's residence was within one mile of the bank. The note was due on February I, and was protested on that day. On February 3 notice was sent Turney from the bank. Simpson, the next indorser, gave him no notice. The court held that the notice was not given in time. If it had been given by Simpson on the 3d, it would have been good, as each indorser is given a day to notify his prior indorser, but this was not done. The notice given was not valid as to the bank, so could not be to any one to whose benefit it would inure. Smith v. Portion, 87 N.Y. 590, was a case in which the holder notified the third indorser by mail and inclosed notices for the second and first indorsers. The third indorser notified the second and inclosed notice for the first. The second indorser received the notice on the 6th, and mailed notice to the first Indorser on the 7th, in time to go on the second mail closing at 1.30 P.M. The first mail closed at 9.30 A.M., and defendant contended that notice should have been sent by that mail. The court held that the notice was sufficient and that plaintiff had used due diligence in giving notice. The notice may be given by the holder or his agent or by any party who may have to pay the debt and who is entitled to be reimbursed. 144 NEGOTIABLE INSTRUMENTS In Stafford v. Yates, 18 Johns. (N.Y.) 327, a note with two indorsers was dishonored and notice given by the holder to both indorsers. Tne second indorser sued the first, and it was held, that the notice was sufficient ; that it was not necessary for the second indorser to give notice to the first. It was sufficient that notice was given him, and the notice of the holder inures to the benefit of any indorser. Notice to Indorsers. When there are several indorsers the last indorser can look to the previous one, or in fact to any one who has indorsed before him, as well as to the maker or acceptor. Therefore it often happens that the holder upon dishonor of the instrument gives notice to the last indorser, and he in turn gives notice to the prior indorser, to whom he will look to be reim- bursed in case he is obliged to pay the instrument. The notice of dishonor may be either oral or written, and can be either delivered personally or sent through the mail. Some cases hold that the postal service can not be used when the par- ties reside in the same town, but by statute in New York State the post office can be used even in that case. In Hobbs v. Straine, 149 Mass. 212, plaintiff took a written notice of dis- honor to defendant's office, and finding no one there, left it. The court instructed the jury that if they determined that it was left in -a conspicuous place, it was sufficient. Held, that this was correct. It is sufficient to charge the indorser if the notice is delivered personally, left at the indorsees place of residence or business, or deposited in the post office addressed to him at his residence or place of business with the postage prepaid. Waiver. Notice may be waived, and frequently the indorser adds " protest waived," the effect of this being to waive present- ment and notice of dishonor as well as formal protest. In Shaw v. McNeill, 95 N.C. 535, the note in question had upon the mar- gin the words " no protest." There was no notice of dishonor. The court held that the effect of these words was to waive presentment and notice. Protest. Protest is a formal declaration in writing and under seal, of an officer called a notary public, certifying to the demand and dishonor. Protest of foreign bills of exchange is necessary, but it is not required in the case of notes, checks, and inland bills, although it is often employed in giving notice of their dishonor. The notary makes the presentment and demand, and upon re- fusal issues a certificate like the following : NEGOTIATION 145 County of- *,- , one of tRe Notaries Public in and for the County aforesaid, $tt6{ Cttftfg, that on the 27Jfell day of AlgUBt in the year One thousand nine hundred and, t lie '_atthe request of Flower City National Bank. -- ... _ -. . which is hereunto annexed. I did present the original m: to ....:... ldgar...lo..Q.d. at B.Q..Cke.B.$e.r.. : , ,.,, N. Y., and demanded.: = ..payment thereof ., which was refused. 3, the said Notary, did fprotesf, and by these presents do publicly and solemnly Protest, as well against the maker and tndorstr of the said _______________ iJblJjLj. ----- . _rrrr_ a against all others whom it doth or may concern, for exchange,- re-exchange, and all costs, damages and interest, already incurred or to be hereafter incurred by reason of the non-payment . a of the said. ..... .."kills _ - 3 bo futfer Cttftff, That on the same day and year above written, due notice* of the foregoing demand, non-payment ______________________ and Protest (by notice partly printed and partly written, signed by me) was given to thedraHST and... the - several endorsers thereon by depositing notices at the post-office at., - Rochester, ' - ( N. Y., portage fully paid, directed as follows : To.........lien.e...M.,..S.trou.8B..: ____ at - Rochester, New York. each of the above named places being the reputed place of residence of the person to whom the notice was directed, and the post-office nearest thereto. t0us bone onb QwttsM. in the Ci*y of Each.aatar.... , N. Y, the day and year first above written. 3n &et(mon TUJtrtof, I have herponto, set tny hand and affixed myjpfficial seaL Notary Public. COM. LAW 10 146 NEGOTIABLE INSTRUMENTS After attaching the instrument to this certificate the notary mails a notice after the following form to all indorsers: endorsed by you, is PROTESTED for non-payment,. and that the holders look to you (or the payment thereof. Your obedient .serva To Notary Public. Irregular Indorser. Frequently there appears on the back of a bill or note the name of a person who is not a party to it and to whom it was never indorsed. Such a person is known as an irregular or anomalous indorser. The object of such an indorsement is to give additional security to the payee. Differ- ent states hold differently as to the liability of such a party, some holding him to be a joint maker, and others a guarantor, but the rule commonly followed seems to be that he is liable as an ordinary indorser. Coulter v. Richmond, 59 N.Y. 478, was an action on a promissory note made by Anson and indorsed by defendant, payable to the order of plaintiff. The note was indorsed at the request of the maker before delivery to the payee, to enable the maker to purchase bonds of the payee. The court said : " In some states such an indorser is regarded as a guarantor, in others an indorser, and in others a joint maker; but it is well settled in this state that a person making such an indorsement is presumed to have intended to become NEGOTIATION 147 liable as second indorser, and on the face of the paper without explanation he is to be regarded as second indorser, and, of course, not liable upon the note to the payee, who is supposed to be the first indorser; but it is competent by proof to show that the indorsement was made to give the maker credit with the payee and others, to hold him as first indorser." In this case the latter was found to be the intention and the indorser was held as first indorser. Such indorsements are frequently used when the payee of a note wishes to get it discounted at a bank, that is, to get the money on it. The bank requires an indorser, and the payee gets a friend to indorse the note. The irregular indorser is liable to the bank the same as any other indorser. Accommodation Paper. The question of accommodation paper must be discussed here, as it is an instance of the drawer or indorser of a bill and the indorser of a note becoming liable without notice of dishonor. Accommodation paper is the term used to denote negotiable instruments that have been executed without consideration and for the purpose of lending the name of the maker, indorser, or acceptor. To illustrate, A may desire a loan, so he goes to B and asks the favor. B gives him a note which A indorses and discounts at the bank. If B refuses pay- ment at maturity because it is really A's debt, the bank can, of course, proceed against B, as his name is on the paper, but it can also proceed against A without the formality of demand and notice. The reason is apparent as, A being the real debtor, it can not be supposed that he expects B to pay, but considers himself the principal debtor. American National Bank v. Junk Bros., 94 Tenn. 624, was an action against the indorser of some notes. The defense was that notice of dishonor had not been given. It was shown that the notes were given for the defendant's accom- modation and then indorsed by him to plaintiff. Such being the case, it was the indorser's duty to provide funds to meet them at maturity, and he was bound, therefore, without presentment, protest, and notice. The Holder or Payee. We have yet to consider the position and rights of the holder or payee of the instrument. Whether he be the original payee or an indorser, he is the party in whose hands the instrument rests and who has the right to the money which it represents. We have already learned that negotiable 148 NEGOTIABLE INSTRUMENTS instruments have a distinguishing characteristic not possessed by any other contract, which is that when they have passed into certain parties' hands under particular conditions they are valid and enforceable, although not valid between the original parties to them. The rule is generally said to be that a negotiable instrument in the hands of an innocent purchaser for value and before maturity is not subject to any of the defenses that might be interposed to it between the original parties, but this is not true of certain absolute defenses which affect the very existence of the contract, and which we will consider later. To bring the instrument under the rule, the holder must be an innocent purchaser for value, or as it is often expressed, a " bona fide holder for value " or a " holder in due course." The term " bona fide holder" means a holder who has acquired the instru- ment in good faith, without knowledge or notice of any defenses or defects that could be set up against any prior holder. To constitute notice, the holder must have had actual knowledge of the defect, or his carelessness must have been so great as to amount to "bad faith." In Hotchkiss v. National Bank, 21 Wallace (U.S.) 354, the court said: "A party who takes negotiable paper before it is due for a valuable consideration, without knowledge of any defect of title, in good faith, can hold it against all the world. A suspicion that there is a defect of title in the holder, or a knowledge of circumstances that might excite such suspicion in the mind of a cautious person, or even gross negligence at the time, will not defeat the title of the purchaser. That result can be produced only by bad faith, which implies guilty knowledge or willful ignorance." The instrument must be complete and regular on its face. Da-vis Sewing Machine Co. v. Best, 105 N.Y. 59, was an action to recover the value of certain notes diverted by plaintiff's president. When defendant purchased the notes they were complete and regular and signed by plaintiff's treasurer, but they were not signed by the president, although a blank ruled space with the title of his office printed thereunder was left at the foot of the instrument. It was conceded that the plaintiff was entitled to the notes unless the defendant was a bona fide holder thereof. The court held that any one buying commercial paper which remains incomplete and imperfect in some essential particular does not acquire the character of a bona fide holder. DEFENSES 149 He must be a holder "for value." This means that he must have given a valuable consideration for it, and it is not enough that it be a gift In DeWitt v. Perkins, 22 Wis. 473, the plaintiff, being acquainted with the defendant and knowing that he was responsible, purchased shortly before maturity a promissory note against defendant for $300, paying therefor $5. As between the original parties the note was invalid for want of consideration. Held, that the plaintiff was not a bonafide holder for value. The considera- tion paid by him was nominal. It was on the face of it merely either a gift or a subterfuge to get the note into other hands to cut off the defense of want of consideration. We have discussed in the subject of contracts what is necessary to constitute a valuable consideration. The purchaser of a negotiable instrument must take it before maturity, and if it is a bill of exchange that has been dishonored, without notice of previous dishonor. The mere fact that a note or bill is past due is considered sufficient notice of defect to put the purchaser on his guard, and a party buying past due paper can not be said to be a bonafide holder. If, therefore, in the case of a bill of exchange that has been presented for acceptance and dishonored, this fact is brought to the notice of the pur- chaser, he is not a bona fide holder. Continental National Bank v. Townsend, 87 N.Y. 8, was an action of indorser against maker. The defense was a set-off against the original payee. On the last day of grace the note was indorsed to plaintiff. The question was whether or not the transfer was made before maturity. The court held that it was and that the plaintiff was a bonafide holder. The maker has the whole of the last day to pay, so it is not past due until the close of that day. (yCallaghan v. Sawyer, 5 Johns. (N.Y.) 1 1 8, was an action by indorser against maker. Defendant offered to prove a set-off. At the time of the transfer of the note to the plaintiff it was overdue. The court held that the set-off should be allowed. The note had been long overdue and dishonored when it was in- dorsed, and the point is well settled that the indorser took the note subject to all the equities and to every defense which existed against it in the hands of the original payee. 6. DEFENSES General Statement. It can be stated as a general proposition that a bona fide purchaser before maturity and for value takes title free from all defects and defenses, or, as is often stated, I5O NEGOTIABLE INSTRUMENTS " free from all equities " except such as affect the very existence of the instrument and which are said to constitute absolute defenses. The absolute defenses are either cases in which no valid con- tract ever existed, or where the contract is declared illegal and void by statute. No Delivery. The instrument may never have been de- livered. It is considered by the law merchant to be a sufficient delivery to hold the maker or acceptor, if it is handed over by the party himself or his agent either with or without authority, or if it gets into circulation through the negligence of the maker. The question is, did the maker deliver the instrument or was his act or representation responsible for its coming into the hands of bonafide holders ? If this be true, he must suffer, although it was not his intention to deliver the instrument. On the other hand, if he has been deprived of the possession of the paper by fraud or theft, he can not be compelled to pay the amount named to any one, as in this case the instrument was never delivered and no contract existed. In Chapman v. Rose, 56 N.Y. 137, defendant entered into a contract with one Miller to act as agent for the sale of a patent hay fork, and a contract was signed by both, also an order for one hay fork. Another paper was then presented to defendant which Miller said was a duplicate of the order. Defendant signed it without reading or examining it. It was the note in suit and plaintiff purchased it in good faith for value and before maturity. Held, that when one has the opportunity and the power to ascertain the exact charac- ter of the obligation he assumes, and he takes the word of another instead, he can not claim that he intended to sign a different instrument to defeat a bona fide holder. To avoid liability he must show he was guilty of no negligence or carelessness in signing. If in the making of the instrument there was such fraud as would vitiate a contract, then no contract exists, and the maker or acceptor can not be held. Walker v. Ebert, 29 Wis. 194, was an action against the maker of a prom- issory note by the holder, who claimed to have purchased for value before maturity. The defense was that defendant was a German, unable to read and write the English language, and that the payee fraudulently induced him to sign an instrument represented to him to be a contract of agency, which was in fact a promissory note. Held, that it was a good defense. The instru- DEFENSES I5 , ment never, in the contemplation of the law, existed as a negotiable instru- ment. The party not having been guilty of any negligence in signing, and his signature having been obtained by fraud, he was no more bound than if his signature was a forgery. Alteration or Forgery. Another failure of contract arises when there has been a material alteration or forgery, for in these instances the minds of the parties have not met in the contract. To alter the terms of a negotiable instrument without authority after it has been signed, destroys its validity even in the hands of a bona fide holder. Horn & Long v. Newton City Bank, 32 Kans. 518, was an action against Horn & Long, the makers of a promissory note. The note was given for a threshing machine, and was originally drawn payable to "H. C. Pitts' Sons Manufacturing Company," and after delivery to the company it was altered by substituting the name of " O. B. Hildreth " as payee. The alteration was made without the knowledge or consent of Long, and he never ratified the change. Horn and the payee made the change. Held, that this was a mate- rial alteration and released Long, although the bank was a bona fide holder for value. Draper v. Wood, 112 Mass. 315, was an action against Wood & Higgins as makers of the following promissory note : "$iooo. "NORTH HADLEY, Mar. 31, 1868. " For value received, we promise to pay L. L. Draper, or order, one thou- sand dollars on demand, with interest at 12 per cent. GEO. A. WOOD. H. S. HIGGINS." Higgins defended on the ground that the note he signed had been changed by substituting "we" for "I" and adding the words, "at 12 per cent." It was shown that Wood made the changes in good faith, but without consulting Higgins. Held, that the note was void as against Higgins. Any alteration of a negotiable instrument which changes its legal effect is a material alteration. Sullivan v. Rudisill, 63 Iowa 1 58, was an action upon a note. After the note was given by defendant, with Fuller as surety, the plaintiff innocently procured R to sign as surety. The court held the note void, but allowed a recovery upon the original consideration. When a promissory note has been innocently altered without any fraudulent purpose, the payee may recover in an action on the original consideration. It was also held that the signing by a party as a joint maker, after the execution by the original maker and without his knowl- edge and consent, is a material alteration. 152 NEGOTIABLE INSTRUMENTS There must be an intent to make the alteration, and it must be made, of course, without the consent of the maker or ac- ceptor of the instrument. The alteration must also be made by a party to the instrument or one in lawful possession of it. The holder can not be prejudiced or injured by the act of a stranger without his consent. In Langenberger v. Kroeger, 48 Cal. 147, a person not a party to the instru- ment, without authority wrote across the face of a draft the words, " payable in United States gold coin." Held, that the alteration was not such as to vitiate the draft, although, if the alteration had been made by the payee or by his instruction, it would have invalidated the bill, as the change was evidently material. It will be seen from the foregoing paragraphs that when a signature to a negotiable instrument is forged, the party whose name is so used can not be held. Want of Capacity to Contract. The contract represented by the instrument may not be binding, for the reason that the party or parties did not have the capacity to contract ; as, the note or bill of an infant or lunatic. Still, if a valid negotiable instru- ment comes into the hands of an infant, he may, if of full mental capacity, transfer it to another. The mere fact that a contract is illegal is not an absolute defense to a negotiable instrument in the hands of a bona fide holder ; but if the contract is expressly made illegal and void by statute, an absolute defense is created. Equities. Other defenses than those described as absolute are termed " equities," and are valid defenses between the original parties to the instruments, but, as we have learned, can not be set up against bona fide holders. Lack of consideration is a good defense as between the original parties, but not as against a bona fide holder for value. It is an equity, and not an absolute defense. The fact that there is an absolute defense to an instrument does not discharge all of the parties to it, or through whose hands it has passed. As we have seen, such defense exonerates the maker or acceptor of a negotiable instrument, but it does not relieve the liability of the indorser, because every person DISCHARGE 153 who negotiates such an instrument warrants that it is genuine, that he has a good title to it, and that all prior parties have capacity to contract. In Williams v. Tishomingo Saving Inst., 57 Miss. 633, defendants in- dorsed a bill of exchange to which they claimed title through a forged indorse- ment. The court held that the indorser warranted the genuineness of the prior indorsements on the bill and also his title to the paper. Should it be ascertained even after the payment of the bill that any of the indorsements were forged, the drawee can recover the amount of the bill from the party to whom he paid it, and each preceding indorser may recover from the party who indorsed the bill to him. 7. DISCHARGE Payment. Negotiable instruments, like other contracts, are discharged by payment. A payment by the maker or acceptor to the holder, and the surrender of the instrument to him, ends the transaction and releases all the parties to the paper. Slade v. Mutrie, 156 Mass. 19, was an action to recover the balance of a promissory note. The defendant paid plaintiff $125 and received the note and a receipt in full settlement of all accounts to date. The jury found that the plaintiff intended to receive the amount in full payment. The court said the delivery of a promissory note by the holder to the maker, with the inten- tion of transferring to him the title of the note, was an extinguishment of the note and a discharge of the obligation to pay it. Payment before Maturity. But if payment is made before maturity, and the paper should again get into circulation, it would be valid in the hands of a bona fide holder who acquired it before maturity. Stoddard v. Burton, 41 Iowa 582, was an action against the maker of a lost or stolen promissory note made January 5, 1866, payable to A or bearer, on or before January 6, 1868. The defense was that it had been paid to Thomp- son, a holder, on October n, 1866. The court held that the note by its terms was payable at any time within two years after its date at the option of the maker. So it could not be said to be out of the ordinary course of business for him to pay it at any time, as that express provision was incorporated in the instrument, and the note not having been paid before maturity the plaintiff was not a bona fide holder. 154 NEGOTIABLE INSTRUMENTS Payment by Indorser. Payment by one of the indorsers after the instrument has been dishonored does not discharge it, as the prior indorsers and the maker or acceptor are still liable. Th& payment to extinguish the instrument must be made by or for the party primarily liable. The instrument may also be discharged by the intentional cancellation thereof by the holder or by any other act that would discharge a simple contract. In Larkin v. Hardenbrook, 90 N.Y. 333, Loper executed a deed of cer- tain premises to defendant, and in consideration thereof the note in suit was executed and delivered to the grantor, who thereafter intentionally canceled, destroyed, and surrendered the same to the defendant. The court said : " The rule is well settled that where the payee delivers up the obligation which he holds against another, with the intent and for the purpose of dis- charging the debt, in the absence of fraud, such surrender operates as a release and discharge of the obligation." Discharge of Indorser. An indorser or drawer is discharged by any act that discharges the instrument or that discharges a prior party. Thus, the third indorser on a promissory note would be discharged by any act that would discharge either the maker (which would cancel the instrument) or the first or second indorser. Any agreement on the part of the holder of a nego- tiable instrument to extend the time of payment, unless with the assent of the indorsers, discharges the indorsers' liability. 8. INTEREST AND USURY Definition. As the question of interest is one that very fre- quently arises in connection with negotiable instruments, it is well to consider it here. A common definition of interest is, " The compensation paid for the use of money." The amount upon which the interest is reckoned is called the principal. The interest is usually a certain annual per cent of the principal. In most of the states the rate of interest is prescribed by statute and known as legal interest, and when no rate is desig- nated by the parties this rate will prevail. In some states the legal rate is fixed at 6 per cent, in others 7 per cent. (See table, INTEREST AND USURY 155 P a ge 353.) The statutes of the different states also determine whether or not a higher rate may be agreed upon between the parties and, in most cases, say how high a rate may be charged by agreement. The taking of a higher rate than that allowed by the statute of a particular state is called usury and is punished in some of the states by the forfeiture of all of the interest ; in others, as in New York State, by the forfeiture of both principal and interest. Where such statutes exist, a person agreeing to accept usurious interest can not collect either the money due or the interest. Originally the word " usury " was identical in meaning with interest, and meant any compensation taken for the loan or use of money, but the modern sense, as will be seen, is entirely different. Claims on which Interest can be Collected. Interest can be collected on all claims or amounts where it is mutually agreed by the parties that it is to be paid, as on a promissory note, which contains the words " with interest " or " with use," or some words to the same effect. It can also, without stipulation in the agree- ment, be collected upon debts from the time they become due until they are paid ; in other words, all overdue debts draw interest. An illustration is the case of a promissory note con- taining no provision for interest, as such a note draws interest from the date it becomes due until it is paid, but does not draw interest before maturity. In the matter of Trustees, etc., 137 N.Y. 95, the court held that interest may not be allowed in any case unless by virtue of some contract, express or implied. or of some statute or on account of default of the party, when it is allowed as damages for the default. But when the amount of the debt is not determined and is uncertain, or where the debt consists of a running account with payments at different periods, it is held that interest does not attach. In Wood v. Hickok, 2 Wend. (N.Y.) 501, plaintiffs were wholesale grocers and defendants country merchants. Defendants purchased different bills of goods of plaintiffs between February, 1824, and November, 1825, amounting 156 NEGOTIABLE INSTRUMENTS in all to $1190.62, and made various payments, amounting in June, 1827, to $1191.25. In the suit the plaintiffs charged interest amounting to $64.87. No mention had been made of interest until in 1827, when an account was transmitted in which there was a barrel of brandy in dispute. Plaintiffs claimed it was the custom among grocers to charge interest after 90 days. Held, that the account was not liquidated, and an unliquidated running account does not carry interest unless there is an agreement between the parties that interest shall be allowed. Compound Interest. Interest upon interest can not be col- lected in the absence of a special agreement, and some jurisdic- tions do not allow it then. QUESTIONS ON NEGOTIABLE INSTRUMENTS 1. Define negotiable instruments. What are the principal classes? 2. Name and explain the principal source of the negotiable instrument law. 3. Name the principal characteristics of a negotiable instrument. 4. Is the following a negotiable instrument? " Rochester, N.Y., Aug. 3, 1903. Due John Brown, one hundred dollars. Value received. George Smith." 5. An instrument is written in lead pencil in the following form : " Buffalo, N.Y. I, George Smith, promise to pay to Thomas McCarty, or order, fifty dollars. Value received." Mention three particulars in which this paper is not in the usual form. 6. " Philadelphia, Pa., Sept. I, 1903. Five months after date I promise to pay George Williams the sum of twenty-five dollars. Value received. E. D. Parsons." Is this a negotiable instrument? 7. Is a promissory note payable in Mexican money a negotiable instru- ment? 8. Is there any reason why the following is not a negotiable instrument? Explain. "Three months after date, for value received, I promise to pay Charles Benham, or order, one hundred dollars, or ninety-five dollars if paya- ble two months after date. Signed Elmer Clark." 9. Is an instrument payable to one of three different persons named negotiable ? 10. State whether or not the following is a negotiable instrument. " For value received, I promise to pay to Thomas Rice, or order, one hundred dollars when he shall be married. Charles Ellis." 1 1 . Draw a promissory note, and name each party to it. 12. Name three forms of promissory notes and illustrate each. 13. " One month after date, for value received, I promise to pay E. F. Sher- wood, or order, two hundred dollars. James Grant, Edward F. Grant." What kind of promissory note is the above? NEGOTIABLE INSTRUMENTS 157 14. A note is signed James Willis by John Rogers, Agent. Which of the two parties does the signature hold ? 15. A note is signed Frank Getman, agent of William Carr. Which is liable on the note, Getman or Carr? 1 6. A note is signed Erie Gas Co. by Edward Booth, President. What is the effect of this signature in different states ? 17. What is the agreement of a maker of a note as to paying the same? 18. Draw a bill of exchange. Designate the different parties to the same. 19. How does a bank draft differ from a bill of exchange? 20. Distinguish between foreign and inland bills of exchange. 21. Distinguish between time and sight drafts. 22. What is meant by accepting a draft, and what is the party called who accepts it? 23. What is the obligation of the party accepting the draft before and after the acceptance ? 24. When must a presentment for acceptance be made? 25. When acceptance is refused what is said of the bill? 26. Define acceptance supra protest. Define virtual acceptance. 27. Draw a check. Designate the parties. 28. "The Merchants Bank of Rochester, Rochester, N.Y., Aug. 25, 1903. Thirty days after date pay to the order of George Harris one hundred and fifty dollars. William Copeland." Is this a check, or is it a draft? 29. When must a check be presented to the bank for payment ? Upon whom will the loss fall in case of delay? 30. A check on a Rochester bank is given to A by B in Rochester on July 25. It is not presented for payment on the 26th, and on the 27th the bank fails. Is it A's or is it B's loss? .31. What is a certified check? If the check is certified by the drawer before its delivery and the bank fails before the check is paid, who loses? If the payee secures the certification after the check has been delivered to him and the bank fails before payment, who loses ? 32. What is meant by negotiation of a negotiable instrument, and how is it accomplished ? 33. Illustrate a full or special indorsement. A blank indorsement. 34. What is the contract or the undertaking of the indorser? Upon what is it conditioned? 35. When the indorser wishes to avoid personal liability, how may he indorse? 36. The indorsement on a one hundred dollar note is as follows : " Pay to X or order fifty dollars of the within note. Signed, Y." Is this a good indorsement? 37. Define presentment and demand. 38. If a note is payable at the Alliance Bank of Rochester, N.Y., where must presentment and demand be made? 158 NEGOTIABLE INSTRUMENTS 39. When must presentment for payment be made? 40. Define days of grace. 41. When a negotiable instrument with days of grace falls due on Sunday, which is the last day of payment ? If the instrument has no days of grace, which is the last day of payment ? 42. A note without days of grace falls due on July 3, which is Sunday. What is the last day of payment ? 43. If a note has days of grace, the last day of grace being Monday, July 4, what is the last day of payment? 44. A note was presented the day it matured at the maker's residence between eleven and twelve o'clock at night. Payment was refused. Was the presentment good? 45. A note was presented to the wife of the maker. No effort was made to present it to him personally. Was the presentment good? 46. After the instrument has been dishonored, what notice, if any, is required, and to which of the parties must it be sent? When must it be sent? 47. If no notice is sent to any of the indorsers, what is the effect? 48. What is protest, and upon what negotiable instruments is it necessary? 49. Define an irregular indorser. Define accommodation paper. 50. What is necessary to constitute the holder a bona fide holder for value? 51. Plaintiff purchased a negotiable note before maturity. The note on its face was for $500. The purchaser was acquainted with the maker and knew that he was solvent. He paid $25 for the note. Was he a bona fide holder? 52. If the purchaser had taken the above note after maturity and paid the face value, $500, for it, would he have been a bona fide holder? 53. A becomes the bona fide holder for value, of a note upon which the maker's name was forged. Can he collect of the maker? Can he collect of the indorser? 54. A made and delivered a promissory note payable three months after date to the order of B. B after receiving the note changed the time of pay- ment to four months without the knowledge or consent of A. Did this affect A's liability on the instrument ? 55. C becomes a bona fide holder for value, of a promissory note which was given from A to B without consideration. C sues A on the note and A sets up the defense of no consideration. Can C recover? 56. B executed a promissory note to C for $100 payable three months after date. One month after date he paid the note. The note instead of being destroyed was lost and came into the hands of X, a bona fide holder for value. Can X recover on the note? 57. Define interest. Define usury. 58. Brown makes a note for three months, but says nothing in reference to interest. He pays the note nine months after having made it. Can interest be collected upon it, and, if so, for how long? AGENCY i. IN GENERAL Definition. An agent is a person employed by another to do some act or acts for the employer's benefit or on his account. The person for whom the agent acts is called the principal. Agency is the legal relation existing between the principal and the agent. A person dealing with the agent is known as the third party. The principal must be a person competent to make contracts, for no one can make a contract through an agent which he has not the power to make himself. The agent, since his acts are the acts of his principal, is not necessarily required to be com- petent to make a contract ; therefore we find it to be the general rule, that any person with sufficient understanding to transact the business committed to his charge may be an agent. Infants or married women may be so employed, and may bind their prin- cipals by a contract which they could not make themselves. It can readily be seen how impossible it may be for any one person to transact all his business without assistance ; conse- quently we can easily realize the vast scope and great impor- tance of the law of agency. Classes of Agents. Agents are usually divided into two classes, general and special. General Agent. A general agent is one who is authorized to transact all of his principal's business of a particular kind, or in a certain place. Having received from his principal a general authority to do certain acts, he is not limited to the performance of a specific act, but is permitted a certain amount of discretion in carrying on the particular line of business for which he is employed. The acts of a general agent, while acting within 160 AGENCY the scope of his authority, will bind his principal, whether or not they are in accordance with his private instructions. If he is apparently clothed with authority, the principal is bound. Munn v. Commission Co., 15 Johns. (N.Y.) 44, was a case concerning a general agent, and the court said : " The distinction is well settled between a general and a special agent. As to the former, the principal is responsible for the acts of the agent, when acting within the general scope of his authority, and the public can not be supposed to be cognizant of any private instruc- tions from the principal to the agent ; but where the agency is a special and temporary one, there the principal is not bound, if the agent exceeds his employment." Special Agent. A special agent is one who is appointed for a special purpose, or to transact a particular piece of business. He is given but limited authority. His acts do not bind his principal beyond the scope of the particular authority given him. It is readily seen that the distinction is a difference in degree rather than in kind. In the case of a general agent there has been general power delegated, the authority is necessarily broad, and a person dealing with such agent may reasonably infer that he has the authority usually conferred upon such agents under like circumstances ; while in the appointment of a special agent, the object is to accomplish a special purpose or to carry out a particular piece of business, and one would naturally infer the authority was limited. 2. RELATION OF PRINCIPAL AND AGENT Agreement. The relation of principal and agent may be created in several different ways. The ordinary way is by agreement, as where one man employs or appoints another to represent him in a certain transaction or in a general way. This is really an agency by contract, except in case of a gra- tuitous agent, and all the rules governing contracts govern also the relations of the principal and agent as between themselves. The reason why a gratuitous agent is not an agent by con- tract is that, there being no consideration, the agreement can RELATION OF PRINCIPAL AND AGENT 161 not be enforced as a contract, as we have learned in the chapter on contracts. An agent by agreement may be appointed orally except in the following cases : First. Where by the terms of the agency the service is not to be performed within one year ; then, by the statute of frauds, the agreement must be in writing. In Hinckley v. Southgate, 1 1 Vt. 428, defendant made a parol agreement in February with plaintiff that plaintiff would carry on defendant's gristmill for one year from April i, next. Plaintiff offered to perform, but defendant would not allow him. It was held by the court that the case was clearly within the statute of frauds, since the work was not to be performed within one year ; consequently the parol agreement could not be enforced. Tnt(le v. Sweti, 31 Me. 555, was an action upon a parol agreement to employ plaintiff for three years to labor for defendant in making powder casks, for which he was to be paid a certain price per day. Defendant refused to permit him to work, and it was held that the agreement could not be enforced, since the labor was not to be performed within one year and the contract was not in writing. Second. When the contract between the principal and the third party is required to be under seal, the authority of the agent to execute the instrument must itself be under seal. Hanford v. McNair, 9 Wend. (N.Y.) 54. Here A by writing, not under seal, authorized an agent to enter into a contract for the purchase of a quantity of lumber. The agent entered into a sealed contract for such purchase. Held, an agent can not bind his principal by sealed instrument unless he has authority under seal to do it. In Johnson v. Dodge, 17 111. 433, the question was as to the proper authority of the agent to sell land. The court said the power to convey land must be in writing and under seal, as the land can be conveyed only by deed, and the power to convey must be of equal dignity with the act to be executed. Power of Attorney. The formal method of appointing an agent is by a written instrument under seal known as a power of attorney. A form similar to that shown on the following page is used when the power conferred is the authority to sell and convey certain real estate. When the power conferred is to execute a deed, mortgage, or any other instrument that is to be recorded, COM. LAW ii 1 62 AGENCY I, John E. Martin, of Albany, Albany County, New York have made, constituted and appointed, and by these presents do make, constitute and appoint _-J.jOAapll...A....Iley......O.f.....RQ.Qh..es..ter,...N.eyir...Yo..rk.,.. m.y true and lawful attorney /&-__me and in WL~name, place and stead to .grant , bargain, and sell all my real estate situated in. the said Rochester, New York, or any part thereof, for such price, and on such terms, as to him shall seem best, and for me and in my name, to make, execute, acknowledge, and deliver good and sufficient deeds and convey- ance for the same, either with or without the covenants of war- ranty: ' giving and granting unto my said attorney full power and authority to So and perform, all and every act and thing whatsoever requisite and necessary to be done in, and about the premises, as fully to all intents and purposes, as I might or could do if personally present, with full power of substitution and revocation, hereby ratifying and confirming all that my said attorney or his substitute shall lawfully do or cause to be done by virtue hereof* In 1KlUne00 TKHberCOf,......:! have hereunto set....y._Jiand and seal the...lQ.th. day o/......Q.Ct.0.b.fir. , ..in, the year one thousand nine hundred and f..i.Y.S Sealed and delivered in the presence of Jftate of . New York. .../ City of Albany }ss. county of Albany id , .Tnhn V :. Martin . to me known and known to me to be the individual described in, and who executed the foregoing instrument and he duly acknowledged that he exetuted Hie same. Notary Public RELATION OF PRINCIPAL AND AGENT 163 the power of attorney must be so executed as to entitle it to be recorded in the same place. This requires that it shall be acknowledged in substantially the form shown on page 162 before a notary, public, or some other officer empowered by law to take such acknowledgment. This form may be used to confer other authority by inserting, in place of the authority to sell real estate, the exact authority intended. Ratification. The second way in which the relation of prin- cipal and agent may be created is by ratification. The assent of the principal to the act of the agent may be given either before or after the agent's act. If given before, then it is an agency by agreement and has already been ex- plained. If given after the act has been performed by the agent, it is a ratification of this act and gives the same effect to it as though there had been a previous appointment. This may be true in a case where the agent had no previous authority whatever, or where the agent had some prior authority but exceeded this authority in the particular act. The ratification operates as an extension of the authority to this act In Merritt v. Bissell, 84 Hun (N.Y.) 194, it was held that where a person was clothed with some authority as agent, the ratification by his principal of his unauthorized acts relates back and makes such acts of the agent the acts of the principal from the beginning, the same as though they had been duly author- ized at the start. The ratification to bind the principal must be made with a knowledge of all the material facts ; if made under a misunder- standing, or through a misrepresentation, the principal will not be bound. The principal must repudiate the agent's unauthor- ized act within a reasonable time after he learns of it, or he will be presumed to have ratified it. The ratification may be by express words or by accepting the benefits of the act. In Pike v. Douglass, 28 Ark. 59, A without authority purchased a bill of goods for persons about to form a copartnership, in their name and on their credit as partners. They received the goods and sold them. One of the partners afterwards repudiated the purchase, claiming that the other partner was to buy the goods and that the agent had no authority to buy for him, 164 AGENCY and he so advised the sellers. Held, this was not sufficient. He should have restored the goods, but as they kept the goods they were liable as partners ; they had ratified the act by retaining the benefit. But if the principal ratifies the act it must be as a whole, for he can not accept the benefits of a part and reject the remainder. An axiom of the law is, " A man can not take the benefits of a contract without bearing its burdens." In Eberts v. Selover, 44 Mich. 519, a subscription agent canvassing for a history to cost $10, had a book for signatures, and on this it was printed that no terms except those printed thereon should be binding. A justice of the peace consented to sign on condition that his office fees from that time to the time of delivery of the book should be taken in .payment. This was agreed, and he was given a written memorandum by the agent to that effect. Held, if the company ratified the contract it must be upon the terms agreed upon. As the agent went beyond his authority they could repudiate the contract and refuse to deliver the book, but they could not repudiate part and still hold the subscriber. Necessity. The third way in which the relation between principal and agent may be created is by necessity. This is where the relations or positions of the parties are such that the authority of the principal is presumed. The leading illustration of this is the case of husband and wife. The wife can contract for the necessities of the household and bind the husband for their payment. Benjamin v. Dockham, 134 Mass. 418, was an action for the price of milk delivered to defendant's wife, who because of his cruelty was living apart from him. Held, that as the wife is authorized by law to pledge her husband's credit, it is a case of compulsory agency and her request is his request. Another illustration is that of a shipmaster, who has authority in case of necessity to purchase supplies for the vessel and pledge the credit of the owner. In McCready v. Thorn, 51 N.Y. 454, an action was brought against the owners to recover for services and advances rendered to the master of the ship. The master was running the vessel under an arrangement with the owners whereby the master was to furnish everything and divide the profits, but the plaintiff had no notice of this. The owners of the vessel were found liable for moneys and labor so advanced. OBLIGATION OF PRINCIPAL TO AGENT 165 3. OBLIGATION OF PRINCIPAL TO AGENT Compensation. The principal is under obligation to- the agent to compensate him for his services. When the agreement fixes the compensation the agent is to receive, this, of course, will control. Wallace v. Floyd, 29 Pa. St. 184. Here the plaintiff agreed to work for a given time at a certain salary. He stayed beyond the time, and nothing was said about the salary for the additional period. It was held that he could recover the salary only at the rate agreed upon. It was said that the best valuation of services was that mutually agreed upon by the parties themselves. In the absence of an express contract, the law will imply an agreement to pay what the services are reasonably worth, unless it can be fairly inferred that the services were intended to be gratuitous. Even if the service was unauthorized but is subsequently ratified, and the benefit is accepted by the principal, the agent, ordinarily, can recover for the service to the same extent as though the service had been originally authorized. In Gelatt v. Ridge, 117 Mo. 553, plaintiff was employed to sell real estate on the owner's terms. He sold on other terms, but the principal ratified the sale. Held, that the agent was entitled to his commissions as originally agreed. The principal is also under obligation to reimburse the agent for any sums which he may have paid out, or for which he may have become individually liable in the due course of his agency and for the principal's benefit. Maitland v. Martin, 86 Pa. St. 120, was a case in which a broker purchased for B certain bonds which B left in his hands several years, when he directed that they be sold. It was then learned that three of the bonds had been repudiated by the state where issued. Held, that the broker might be reim- bursed. That the loss fell on B if the broker acted within the lines of his duty and in good faith. The agent is further entitled to indemnity from his principal for the consequences of any act performed within his authority and in the execution of his employment. But to be entitled to indemnity the act must be lawful, or the agent must have been ignorant of the fact that the act was illegal. 1 66 AGENCY In Moore v. Appleton, 26 Ala. 633, plaintiff brought an action to be reim- bursed for damages which he had been obliged to pay because of certain acts performed by him as agent for defendant in dispossessing a third party of lands claimed by the defendant and which plaintiff had reason to believe belonged to defendant. Held, that the act was not manifestly illegal, and that the law implies a promise of indemnity by the principal for losses which flow directly and immediately from the execution of the agency. 4. OBLIGATION OF AGENT TO PRINCIPAL Agent must obey Instructions. The agent is under obliga- tion to his principal to obey the principal's instructions. So long as the agent carries out his instructions he is protected, but if he goes contrary to them and loss ensues, he is liable for the damage ; as, where an agent is instructed by his principal to send a certain claim for collection to A, and instead he sends it to B and loss ensues, the agent is liable. In Whitney v. Merchants Union Express Co., 104 Mass.' 152, the Express Company received for collection a draft with instructions to return at once if not paid. They instead held the draft until the drawee wrote for some ex- planation. They then failed to present it for two days after the drawee had received a reply from the drawer, and at this time the drawee became insolvent. Held, that the Express Company was liable to the drawer. Agent must use Judgment. The agent owes the duty to his principal to exercise judgment and skill necessary to the prudent and careful discharge of his agency. This prudence and skill can generally be said to be the same as is ordinarily observed by prudent and careful men, under similar circumstances and engaged in similar business. Whitney v. Martine, 88 N.Y. 535, was a case where an attorney was em- ployed as agent to loan moneys on bond and mortgage. He made loans when the parties giving the bonds were insolvent and took mortgages on realty already mortgaged. The principal lost, and it was held that the attorney was liable to his principal for the loss. Thus, an agent to purchase a car load of wheat must exercise and possess only such knowledge and skill as is common to careful dealers in grain ; while an agent to purchase an expen- sive and intricate engine is bound to exercise the caution and skill of an engineer. OBLIGATION OF AGENT TO PRINCIPAL 167 Fiduciary Relation. There exists between the principal and his agent what is said to be a fiduciary relation, which means that their relations are such that the utmost good faith is required in their dealings. An agent can not, therefore, acquire any rights that are contrary to the interests of the principal. He must not act for both the principal and the third party in a transaction without their consent. Walker v. Osgood, 98 Mass. 348, was an action by a real estate agent for commissions. Defendant had employed him to sell or trade his farm and the agent effected an exchange and made an agreement' with the third party that he was to receive from him a commission. It was held by the court that the broker was the agent of the owner and could not act for the third party, and if he exacted from the third party a promise of compensation, he could not recover of the owner for his services, even though an exchange or sale was effected. The interests of the parties are adverse, and an agent for one can not act for the other without his knowledge and consent. Neither must the agent use his position or authority for his own benefit. In Bunker v. Miles, 30 Me. 431, defendant was employed by plaintiff to buy a certain horse for him for $80 or as much less as he could, and was to have $i for his trouble. Defendant bought the horse for $72.50, and returned to plaintiff no part of the $80. The court allowed plaintiff to recover the balance of $7.50, holding that the agent could not make a profit for himself out of the transaction. An agent authorized to sell or rent will not be permitted to buy or lease the property himself without the principal's consent. Kerfoot v. Hyman, 52 111. 512. Here plaintiff owned certain land and employed defendant to sell it for a certain amount. The defendant bought it himself and took the title in the name of a third party, but for his own benefit without the owner's consent, and at the same time had a part of it sold for as much as he obtained for the whole of it for the plaintiff. Held, that the agent must account to the plaintiff for the excess received, and the remainder not sold will revert to the principal. Also an agent commissioned to compromise a claim can not purchase it at a discount and then enforce it in full against the principal. The agent is under obligation to his principal to render a true account of all of the proceeds and profits of the agency. 168 AGENCY In 'the absence of an express agreement to the contrary the agent must render an account to his principal upon demand or within a reasonable time. Subagents. Another obligation of the agent to his principal is to act in person, except when authorized either by his principal or by established custom, to appoint subagents. The reason for this is obvious ; the principal employs the agent because of his confidence and trust in his ability and honesty to act in his stead, and the agent appointed can not delegate to another the duty or trust which h'as been confided to him. Still, an agent can in some cases appoint subagents to perform duties which do not involve an exercise of his discretion, but are merely mechanical or ministerial acts. In Renwick v. Bancroft, 56 Iowa 527, A was employed to sell a piece of realty and to fix the price, etc. After looking over the property he employed B to find a purchaser and B did find such a purchaser and sold the property. It was held that the agent might properly appoint such a subagent, as there was no discretion placed in the subagent, and A could employ such party as he wished to help him in carrying out the agency. Sometimes, from the nature of the case, it is implied that the agent is to appoint another agent for his principal. In that case the first agent is relieved from liability for the acts of the third party if he himself uses care and discretion in his appointment ; whereas if he but employs a subagent, he is personally liable to the principal for the acts of the subagent to the same extent precisely that he would be in case they were his own acts. A very interesting illustration of this point is the case of a man depositing at his home bank commercial paper payable at some other city. The question then is, does, the owner of the paper authorize the home bank to appoint subagents, or does he authorize it to employ additional agents in his behalf ? It is evident that, whichever view is maintained, it is within the contemplation of the parties that the home bank can not execute the agency alone but must have aid at the point where the note or paper becomes due. If the correspondent bank is a subagent, then the home bank is liable for its acts the same as for its own ; but if the home bank had the authority to appoint OBLIGATION OF AGENT TO PRINCIPAL 169 the correspondent bank an agent for the principal, the corre- spondent bank is liable directly to the principal, and the home bank, if it used care in appointing the agent, is exonerated. In New York, Michigan, and some other states the first theory is held. Allen v. Merchants Bank, 22 Wend. (N.Y.) 215, is a case where a draft was drawn by plaintiff in New York on a Philadelphia merchant and deposited by plaintiff in the Merchants Bank of New York. Defendant bank sent the draft to the Philadelphia bank. It was presented by the Philadelphia bank notary, but he did not properly protest it, and because of the lack of the proper protest plaintiff lost. Held, that the bank receiving a draft is liable for any neglect of duty in the collection, whether arising from the default of its offi- cers, its correspondents abroad, or the agents of its said correspondents. The second theory is held in Iowa, Massachusetts, Pennsyl- vania, and other states. In Guelich v. National State Bank, 56 Iowa 434, a bill of exchange was deposited with defendant bank of Burlington, Iowa, against a New York party. Defendant sent it to the Metropolitan Bank of New York for collection. This bank failed to present it for payment and protest in proper time. Held, when the holder of a bill of exchange, payable at a distance, deposits it in a local bank for collection, he thereby assents to the course of business of banks to collect through correspondents, and the correspondent bank becomes his agent and is responsible to him direct for its negligence in failing to present the bill within the proper time. Gratuitous Agent. It may be well to note also the legal relation of the agent who undertakes to perform some service for the principal without compensation. In such a case the promise being without consideration is not enforceable, and the agent can not be held liable for neglecting or refusing to perform. Thome v. Deas, 4 Johns. (N.Y.) 84. Here A and B were joint owners of a vessel and A voluntarily undertook to get the vessel insured, but neglected to do so, and the vessel was lost. Held, that no action would lie against A for his non-performance, though damage resulted to B, as there was no consider- ation for A's promise. But if the agent enters upon the performance of the under- taking, he is bound to exercise skill and care in what he does. 1 70 AGENCY In Williams v. Higgins, 30 Md. 404, a party undertook voluntarily and gratuitously to invest money for another. It was held that in such a case the gratuitous agent must use due diligence and exercise proper caution or he will be liable, and if he is given positive instructions, he will be liable if he disre- gards them. The question of gratuitous agent often comes up in the case of bank directors, who fill their offices without compensation. Delano v. Case, 121 111. 247, held, if bank directors are guilty of negligence in permitting their bank to be held out to the public as solvent, when in fact it is insolvent, and thereby induce parties to deposit their money there and it is lost, such depositors may recover from the directors, as they are bound to exercise care and dilligence in their offices. 5. OBLIGATION OF PRINCIPAL TO THIRD PARTY Scope of Authority. The main object of agency is to effect a contractual relation between the principal and the third party. The identity of the principal may be disclosed or it may be withheld. In the case of either a disclosed or an undisclosed principal, he is bound by such acts of the agent as are within the actual or apparent scope of his authority. The difficult question then is to determine what is the scope of his authority. If the principal clothes the agent with ap- parent authority to do an act, the principal is bound, although the agent had private instruction to the contrary, or had a limit put upon this authority. A doctor might employ an agent to buy him a particular horse. He has no apparent authority to buy a team or any other horse. But when a stock dealer employs an agent to buy horses for him, the agent has apparent authority to buy a team, although he may have had private instructions to the contrary. The one is clearly a special and the other a general agent. It seems settled that when the agent has apparent authority the principal is bound. It is only required in such a case that the person dealing with the agent, acting with average prudence and in good faith, is justified in believing that the agent pos- sesses the necessary authority. LIABILITIES OF PRINCIPAL FOR TORTS OF AGENTS 171 Notice to Agent It is the rule that notice to the agent of anything within the scope of the agency is notice also to the prin- cipal. And the principal is chargeable with knowledge of all the facts that have been brought to his agent's attention in the transaction in which the agent is acting for the principal. If this were otherwise, the principal would be in a position to claim ignorance whenever he might wish to do so, and there- fore would be in a better position than if he dealt with the third party direct. 6. LIABILITY OF PRINCIPAL FOR TORTS OR WRONGS OF AGENT General Rule. The principal is liable for the contractual ob- ligations of his agent in his behalf, and there are various ways in which he can be rendered liable by the agent for the agent's torts or wrongful acts. The rule is that the principal is liable for the wrongs com- mitted by the agent in the course of his employment and for the principal's benefit. This is obviously true where the principal commands or rati- fies the act, and we find that it is also true where the principal neither ratifies nor commands it. The law considers that when 1 person chooses to conduct his affairs through another, he must "ee that they are managed with due regard for the rights and safety of others. Dempsey v. Chambers, 154 Mass. 330, was an action for damages in break- ing a plate-glass window. It was proved that the party who delivered coal for the defendants, and in so doing broke the window, was not authorized to deliver coal for them, and they did not know of his doing it. Later, after they knew of the broken window, they presented a bill for the coal. Held, that by ratifying the acts of this man they become liable for his negligent acts. Fraud and Negligence. Fraud is one of the wrongs of fre- quent occurrence in the relation of agency, the agent having made false and fraudulent representations in carrying out his principal's business. It is the general holding that the princi- pal is liable for the agent's fraud in the course of the princi- pal's business and for his benefit. 172 AGENCY The negligence of the agent is among the wrongs for which the principal is liable, if such negligence was committed in the ordinary discharge of the agency. In Brady v. Railroad Co., 34 Barb. (N.Y.) 249, an agent failed for four days to present a draft and the party drawn on failed. Held, that the principal was liable for the negligence of his agent in not presenting the draft in proper time. When the wrong is committed by the agent in the course of his employment, and even to benefit himself personally and not his principal, some authorities hold that the principal is never- theless liable. In Cobb v. Railway Co., 37 S.C. 194, an engineer willfully and unnecessa- rily blew the whistle and frightened a horse. Held, that the railway company was liable for acts done by its engineer maliciously, wantonly, and willfully while in the exercise of his duties, whether in the course of his employment or not. Others hold the principal is not liable. In Stephenson v. Southern Pacific Co., 93 Cal. 558, a railway engineer inten- tionally and wantonly backed his engine toward a street car that was crossing the track, with the simple intent of frightening the passengers, without collid- ing with the car. As a result the plaintiff, a passenger, was frightened and jumped from the car and was injured. Held, that the act of the engineer was without any reference to the service for which he was employed and not for the purpose of performing his employer's work, and that the principal was not responsible. Liability for Malicious Wrongs. But it is held that the principal is not liable for the malicious wrongs or crimes of the agent, unless he expressly authorized the same. There is an exception to this in the case of laws or statutes which are said to be in the nature of police regulations designed to promote the safety and health of the community. In cases of this kind the principal is liable, even though the agent act directly con- trary to instructions and without his knowledge and consent. The. laws regulating the speed of automobiles on the public roads, and those prohibiting the selling of liquor on Sunday or to children, may be mentioned as examples under this head. Commonwealth v. Kelley, 140 Mass. 441, has relation to a statute which prohibited the closing on Sunday of curtains or blinds, so as to obscure the OBLIGATION OF AGENT TO THIRD PARTY 173 interior of premises where liquor was sold. The owner had given instruc- tions that they be kept open, but the bartender, without his knowledge, closed them. Held, that the owner was liable. The statute forbids him to' do the prohibited act, or permit it to be done, and it includes the acts of his servants as well as his own. 7. OBLIGATION OF THIRD PARTY TO PRINCIPAL It is clear that the third party is liable to the principal for contracts entered into with the agent, within his authority, or which are subsequently ratified by the principal. The third party is also liable to the principal for moneys or property obtained from the agent by duress or fraud ; hence, if an agent is compelled to pay illegal charges to protect his principal's interest, the principal may recover of the third party. The third party may also be liable to the principal for fraud or wrong, or for collusion with the agent to injure the principal. Mayor v. Lever, 1891, i Q. B. 168, is an English case in which the plaintiff was proprietor of gas works. It was the duty of the company's man- ager to obtain and recommend bids for coal and supplies. Defendant bribed him to recommend his bid, and added the price of the bribe to the bid. In an action against them, it was held that plaintiff could recover the damages from the agent who had accepted the bribe, or from the defendant who had given it. They were joint wrongdoers, and could be held jointly or severally. He is also liable for unlawfully interfering with the agent in the performance of his duties as agent. In Railroad Co. v. Hunt, 55 Vt. 570, it was held, that maliciously to cause the arrest of plaintiff's engineer while running a train, and then to delay the train and thereby damage the company, is actionable, and the railroad com- pany can recover for such damages from the person so causing the arrest. 8, OBLIGATION OF AGENT TO THIRD PARTY When an agent makes a contract on behalf of his principal, he may in certain cases bind himself. If he holds himself out as having authority to act for a principal in a transaction in which he has no such authority, he is liable to the third party for the damages suffered. 1/4 AGENCY In Kroeger v. Pticairn, 101 Pa. St. 311, A, the agent for an insurance com- pany, obtained and delivered to B a policy of insurance on B's store, contain- ing a clause that no petroleum should be kept on the premises. B told A it was necessary to keep a little, and A assured him if he kept only a barrel it need not be noted in the policy, and was all right. The store burned, and B could not recover because he had a barrel of petroleum. Held, A, the agent, was liable, as he gave positive assurance in excess of his authority. The agent is also presumed to represent not only that he has authority, but that his principal was competent to give such authority. In the case in which there is no real principal, but the one so represented is fictitious, the agent himself becomes the principal, and is liable as such. Lewis v. Tilton, 64 Iowa 220, held, an unincorporated organization can not be a party to a contract, and persons contracting in the name of such an or- ganization are themselves personally liable either as being themselves in fact principals, or as holding themselves out as agents for a principal which never in law existed. In some instances, the agent expressly pledges his credit, and of course in such cases he is liable. 9. TERMINATION OF THE RELATION OF PRINCIPAL AND AGENT The agency may be terminated by limitation, by acts of the parties, or by a change in the condition of the parties. Termination by Limitation. If the contract of agency is by its terms to continue for but a limited time, the agency termi- nates when the time expires ; or if the particular business for which the agency was created has been completed, the agency is terminated. Moore v. Stone, 40 Iowa 259. An agent was employed to negotiate for the purchase of certain land. He obtained the contract for the conveyance, the first payment was made, and the agent was paid for his services. Held, the agency was then terminated as the object for which the agency was created had been accomplished. Here the agent, after he was paid for his services, bought in the property at tax sale, and plaintiff sought to set it aside on the ground that he was still his agent, but as the agency was held to be termi- nated, the court refused to interfere. TERMINATION OF AGENCY 175 Termination by Act of the Parties. Under certain conditions either party may terminate the relation. This may be done by mutual agreement, by the principal revoking the agent's authority, or by the agent renouncing the agency. Since the principal appoints the agent, and the relation is one of confidence for his own protection, he has the power to termi- nate it at will. It is therefore the general rule that the principal may terminate the agent's authority at any time and with or without good cause. This of course gives the agent a claim for damages if the agency is revoked contrary to agreement. It may be well to note here the distinction between the power to terminate the agency and the right to terminate it. The principal generally has the power, but if it violates an agree- ment with the agent, he does not have the right to so terminate the agency, and he is therefore liable to the agent for damages. In Standard Oil Co. v. Gilbert, 84 Ga. 714, there was a written contract for one year, fixing the agent's compensation. This was renewed the nexf year, and from then on was lived up to, but nothing was said about the agreement. Held, that there was a tacit renewal from year to year, and that the principal could not, during the year, deprive the agent of his salary before the expiration of the year. Though the power of revocation existed, the right to revoke did not exist. The revocation of the agency by the principal need not be made in any formal way, but may be by oral instructions or by written notice. In some cases it may be implied by the condi- tions; as, when a principal gives an agent authority to sell his house, anrl before the agency is executed it is destroyed by fire, in which case a revocation must be implied. A revocation is binding only upon those who have notice of it. The principal must therefore not only give notice to the agent but to those who upon the strength of the previous authority are likely to deal with him ; otherwise he may be held for the acts of the agent after the revocation. There is .a class of cases in which the principal has no authority to revoke the agency. This is where, as it is said, the agency is coupled with an interest ; as when the agent has an interest in the subject-matter of the agency by way of security. 176 AGENCY For example, when a person has possession of personal property with power to sell and apply the proceeds to the payment of a debt due the agent, such a case constitutes a power coupled with an interest. In Knapp v. Alvord, 10 Paige Ch. (N.Y.) 205, a cabinet maker on going abroad, employed an agent to carry on his business, and gave him the full and entire control of his property, with a written power to sell any or all of the furniture or stock, and apply the proceeds to the security or payment of a cer- tain note, indorsed by said agent and a third party, or for any renewals upon which the agent might become liable. Held, the agent had a power coupled with an interest which survived the principal's death, and the agent could sell after such death. As to the rights of the agent to renounce the agency, it seems that he also has the power but not the right to renounce at will. And it may be either express or implied ; as, if the agent abandons his work, the principal may consider the agency as renounced. 10. CHANGE IN CONDITION OF THE PARTIES The agency may also terminate by a change in the condition of the parties. Death. The death of either the principal or the agent ter- minates the agency and it is no longer binding on the estate of the deceased or the survivor. And in this case no notice of the termination need be given to third parties. The agency termi- nates upon the principal's death, and any contract made there- after by the agent is a nullity. Farmers Loan and Trust Co. v. Wilson, 139 N.Y. 284, held that the power of an agent to collect rent due his principal ceased upon the principal's death, unless the agency was coupled with an interest. And payments made thereafter do not bind the principal's estate, although made in ignorance of his death. Insanity. If either the principal or the agent become insane, the effect is to terminate the agency, as the principal is no longer competent to enter into a contract, and the agent, if insane, is not competent to carry out the intentions of the principal. But if the principal has not been legally declared insane, persons dealing with the agent in ignorance of his insanity are protected. CHANGE IN CONDITION OF THE PARTIES 177 Any other cause that may render the agent incompetent to carry out the agency will also terminate the agency, as the ill- ness of the agent or his imprisonment. Bankruptcy. The mere insolvency of either party does not affect the agency, but it will be terminated when either party becomes technically bankrupt, because when a party becomes a bankrupt his property passes out of his hands and he is unable to carry out any contract in reference to it. The above rule does not apply, however, when the agency is coupled with an interest. In the case of the bankruptcy of the agent his authority ceases except to perform some formal act not involving the transfer of any property. Marriage. Under the common law many restrictions were placed about a married woman, the control of her property pass- ing to her husband. Consequently, upon her marriage, any contract of agency in which she was principal was dissolved, as she no longer had the power to deal with her own property. But every state has passed laws enlarging the rights of married women, and in most instances giving' them full power to own and manage their property and to carry on their own separate business. The result is that a married woman may appoint agents, and the act of marrying does not affect her status in a business way and therefore has no effect on the relation of principal and agent, nor does it dissolve an agency then existing. War. It is the general law in the different states in this country that the existence of a state of war between the country of the principal and that of the agent terminates the agency. This is because of the rule prohibiting all trading or commer- cial intercourse between two countries at war. QUESTIONS ON AGENCY 1. Define agent. Define principal. 2. Brown & Co. appointed one Gary, who was but 19 years old, as their agent to buy certain goods for them. Later they refused to take the goods, setting up that the agent was an infant and the contract could not be CD- forced. Was this a good defense to the contract ? 3. Into what two classes are agents divided ? COM. LAW i T. 178 AGENCY 4. X, a farmer, is on his way to town and Y, his neighbor, asks him to bring back for him a wheel for his mowing machine, which has been broken. X agrees to do this without any compensation. X forgets to obtain the wheel and returns without it. Y is unable to proceed with his work and sues X for damages. Can he recover ? 5. The Brown Medicine Co., by oral agreement, employ Hartman, who is an experienced agent, to travel for them, advertising and selling their medi- cines. By their agreement he is to travel in every state in the Union and is to spend not less than two weeks in each state. Hartman before com- mencing his work obtains a better offer elsewhere, and the company sue him for breaking the contract. Can they recover ? 6. An agent was authorized to sell a car of coal for his principal at $6 a ton. Contrary to his authority he sold it for $5 per ton, and received $120 down. The principal accepted the $120 and delivered 20 tons of coal, then refused to deliver more until the full price of $6 a ton was paid. Could the principal refuse to deliver the balance under the contract ? 7. A man running an automobile through the country meets with an acci- dent and is unable to proceed farther. Another party, who is a stranger to him, comes along with a horse and wagon and the first party asks to be driven to the nearest railroad station. 4 miles away. When he reaches there he refuses to pay anything for the services. Can the man with the horse and wagon recover anything ? If so, how much ? 8. A party employs an agent to sell certain shares of railroad stock for him at par value. The agent sells them for $10 a share above par and then remits his principal the par value of the stock. Can the agent retain the balance, or can the principal recover it from him ? 9. Brown & Co., through the Merchants Bank of Rochester, draw on S. P. Kendall, merchant, of New York City. The Merchants Bank forward the draft to their correspondent, the Chemical National Bank of New York City. This bank negligently fails to present the draft for one week, and in the mean- time S. P. Kendall becomes insolvent. Brown & Co. sue the Merchants Bank of Rochester. Can they recover ? 10. The American Bicycle Co. opened a store in Buffalo and placed X there in charge of the business. He employed Y as head clerk at $20 per week. X was expressly instructed by the company not to pay any employee over $10 per week. Y worked several weeks and sued for his wages. Could he recover ? n. A is driving on the city streets, and through the negligence and care- lessness of the street car motorman he is run into and injured. Can A recover of the street car company ? 12. An agent, without any authority so to do, accepts a bill of exchange in the name of his principal, believing that the principal will ratify his act. The principal refuses to ratify. Is the agent liable ? 13. An agent was employed by A to sell his team of horses. In a railroad accident the horses were killed. Did this terminate the agency ? AGENCY 179 14. A appointed B, his agent, to represent him for one year at a salary of $100 a month. At the end of 3 months he discharged him without cause. Could A so discharge his agent, and if so, was he liable to B for damages ? 15. In the above case B deals with parties as the agent of A after he has been discharged. The parties with whom he deals have no knowledge of his discharge. Can they hold A on the agreement made by B ? 16. An agent employed to sell goods for his principal, sells to B the day after his principal's death, neither B nor the agent knowing that the principal is dead. Can B hold the principal's estate on the contract ? 17. If in the above case the principal had become insane, but had not been legally so declared, could the principal have been held ? BAILMENT i. IN GENERAL Definition. Bailment is defined as a delivery of some chattel by one party to another, to be held according to the special pur- pose of delivery, and to be returned or redelivered when that special purpose is accomplished. As we have already seen, a bailment differs from a sale, in that the title to the property does not pass in a bailment. Practically every case in which one receives and holds or handles the property of another, with- out buying it or receiving it as a gift, is a case of bailment. When one borrows or lends a book, hires a horse, or sends a package by express, he is within the rules of bailment. Where the possession but not the title has passed to the vendee, which case we have considered in the chapter on sales, we find that the vendee holds as bailee ; as, for instance, when property is taken on trial. Hunt v. Wyman, 100 Mass. 198, was an action for the price of a horse. Plaintiff had the horse for sale and agreed to let defendant take it and try it ; if he did not like it he was to return it on the night of the day he took it in as good condition as he got it. Almost as soon as the horse was delivered to defendant's servant it escaped from him without the servant's fault and was injured so that the defendant could not try it. The horse was not returned in the time stated. Held, to be a bailment and not a sale, therefore the plaintiff could not recover. In Nelson v. Brown, 44 Iowa 455, it was held that a contract acknowledging the receipt of grain for storage, "loss by fire and the elements at the owner's risk," with the option to the party receipting for it to return grain of equal test and value, constitutes a bailment which is converted into a sale whenever the bailee disposes of the grain. The parties to a bailment are the bailor, or the owner of the chattel who delivers it over, and the bailee, who is the party vested with the temporary custody of the chattel. i So IN GENERAL !8r Classification. Bailments are generally classified according to the Roman law under five heads. 1. Deposit; a bailment of goods to be kept by the bailee gratuitously for the benefit of the bailor. 2. Mandate ; a delivery of goods to the bailee who is to do something to them gratis. 3. Loan for use ; a loan of personal property for the benefit of the bailee without recompense. 4. Pledge or pawn ; a bailment as security for a debt. 5. Hiring, which is the loaning of a chattel for a considera- tion or reward. Another and more practical division of the subject of bailment is made according to the benefit or recompense as follows : 1. Bailment for the benefit of the bailor ; deposit and mandate. 2. Bailment for the benefit of the bailee ; loan for use. 3. Bailment for the benefit of both the bailor and bailee; pledge and hiring. The last Bailment, for the mutual benefit of both parties, is again classified as ordinary and exceptional, the exceptional bailments being those of postmaster, innkeeper, and common carrier. All other cases of bailment for mutual benefit of bailor and bailee are ordinary bailments. Degrees of Diligence and Care. In all cases of bailment a certain degree of diligence or care is required of the bailee. A lack of the required diligence or care is termed negligence and renders the bailee liable. By the early authorities the diligence or care required of the bailee was classified into degrees, and to a certain extent this division is still adhered to. The absence of the required dili- gence renders one liable for negligence. Where the bailment is for the benefit of the bailor alone, no benefit nor remunera- tion accruing to the bailee, it is not expected nor required of the bailee that he shall exercise the degree of care or diligence necessary in a case in which he is paid for his services. So it is said he is bound to exercise slight diligence toward the property in his care and is liable for gross negligence. In the case of a bailment for the benefit of both parties, a 1 82 BAILMENT benefit accrues to the bailee and a greater degree of diligence is demanded of him than in the former case, therefore it is required that he exercise ordinary diligence and he is liable for ordinary negligence. The bailment for the sole benefit of the bailee, being without any benefit to the bailor, imposes upon the bailee a greater degree of diligence than in either of the other cases, and it is said that great diligence is exacted of him while he is answerable for even slight negligence. Ordinary care is defined to be the care which persons of ordi- nary prudence under like circumstances are wont to bestow upon their own property of the like description. Slight care or dili- gence is something less than ordinary care, yet not amounting to an utter disregard of the property. It may be said to be the care that might be exercised by a very careless person. Great care or diligence, on the other hand, is that which would be exercised under similar circumstances by a more than ordinarily prudent and careful person. In First National Bank v. Ocean National Bank, 60 N.Y. 278, plaintiff deposited bonds in defendant's vaults for safe keeping and defendant charged nothing therefor. The vault was burglarized and the bonds stolen. The court held that a gratuitous bailee is liable only for gross negligence and is not bound to take any special or extraordinary measures for the security of the property intrusted to him. In Mariner v. Smith, 5 Heisk. (Tenn.), 203, Smith left $900 in gold at the counting house of Mariner & Curtis to be sold if 50 per cent premium could be had. The gold was placed, in the presence of Smith, in the safe of Mariner & Curtis where the firm kept their own money. The safe was afterwards broken open and the gold, as well as the money belonging to Mariner & Curtis, was taken. The court held that the question as to whether the bailment was for reward or not depended upon the intention and contract of the parties. The liability of a bailee without reward is to be determined by his bona fide per- formance of the fairly understood terms of the contract, which will be ascer- tained by the express contract explained by the surrounding circumstances, or by the failure to perform the terms of the contract as it was understood by the parties at the time. Besides the degree of care or diligence that is demanded of the bailee, the law requires that he act honestly and in good faith. He must not abuse his trust nor sell, pledge, or otherwise deal with the property in his hands as though he were the owner. BAILMENT FOR THE BAILORS SOLE BENEFIT 183 Tortious Bailee. In the case of a tortious bailee, that is, one who holds the possession of the property through an unlawful or wrongful act, as theft, trespass, and fraud, or having received it in a rightful way misappropriates it or applies it to a use other than that intended, he is liable to account absolutely for the prop- erty, and although it may be injured or lost while in his posses- sion, but without his fault, he must nevertheless account for it. A thief who steals a horse, and while driving it is run into by a runaway team which kills the horse, is liable for the value of the horse, although he was guilty of no negligence. Or, if a man hires a horse to drive to Albany and instead goes to Troy, and on the way the horse is injured without the fault of the bailee, still he is absolutely liable. In Fisher v. Kyle, 27 Mich. 454, defendant hired a horse of plaintiff to drive to a certain place. He drove beyond the place stated, and the horse fell dead while being driven. The defendant was held liable for the value of the horse. A person who hires a horse for a specific journey and drives him beyond that journey takes upon himself all the consequences of such addi- tional drive, and if the horse dies while being so driven, the hirer is liable. Liability Varied by Contract. As a general rule the parties to a bailment may by contract vary the rights or liabilities of the parties, making the liability of the bailee either greater or less than it would otherwise be, except that the law will not allow the bailee to be exempt, even by contract, for the conse- quences of his own willful misconduct. In Archer v. Walker, 38 Ind. 472, A and B were partners in the banking business. To enable the firm to draw sight drafts on New York they bor- rowed from B a number of U. S. bonds and deposited them in New York as collateral security against overdrafts. The firm expressly agreed in writing that the bonds were "to be returned or accounted for to B." The bonds were stolen from the bailee in New York. Held, that the firm was liable to B for the loss. 2. BAILMENT FOR THE BAILOR'S SOLE BENEFIT Deposit and Mandate. This class of bailment arises fre- quently in everyday life. Every undertaking of a friend or neighbor to hold or convey an article of personal property gra- tuitously and as a favor comes under this class. A man may 1 84 BAILMENT gratuitously take the chattel belonging to another to keep it in his custody. To illustrate, A stores B's wagon in his barn gra- tuitously ; or he takes it to perform some work upon it, as to paint it without charge ; or it may be he carries it from one place to another, as to take B's wagon home for him. A bailment for the bailor's benefit may come under any one of these three classes, or it may combine two or all of them. Two of the divisions of the Roman law are included under this head. They are deposit, which is the placing of a chattel with the bailee to be kept by him without pay, and mandate, which is the bailment of a chattel upon which the bailee is to do something gratuitously. Liability of Bailee. An agreement by the bailee to carry out the gratuitous bailment, as we have seen, can not be enforced because of the lack of consideration, but when the bailee receives the property and carries out the bailment, he is bound to do it with care, and he will be liable for gross negligence or for wrong- ful acts in relation thereto. The act of the bailor, in surrender- ing the possession of the chattel upon the faith of the bailee's undertaking, furnishes sufficient consideration. A person who finds property and takes it into his possession is a gratuitous bailee, and is bound to care for it as such. It is often a difficult question to determine whether it is a gratuitous bailment or a bailment for the mutual benefit of the parties, that is, whether or not the bailee is entitled to compen- sation. The original intent of the parties is the test. If the bailee receives the chattel in the usual course of his business, and business usage and his ordinary method of dealing give him the right to demand compensation, the bailment is net considered gratuitous, even though nothing was said as to compensation. , Pattison v. Syracuse National Bank, 4 T. & C. (N.Y.) 96, was an action to recover the value of bonds stolen from the defendant's bank, where they had been deposited by plaintiff for safe keeping. Nothing was said about com- pensation at the time of the deposit. Held, that if the defendant had the right to demand compensation by its course of dealing with depositors, the bailment was not gratuitous. The degree of diligence required of defendant depended upon whether or not the bailment was gratuitous, BAILMENT FOR THE BAILOR'S SOLE BENEFIT 185 But if the bailee undertakes the service for a near relative or personal friend, or out of mere charity or favor, and if the trust puts him to but little trouble and the bailment is out of his usual course of business, it is presumed to be without compensation. In Dart v. Lowe, 5 Ind. 131, plaintiff, a merchant in Peru. Ind., being about to go to Cincinnati, had placed in his hands by Thayer, another merchant, $81 with which to buy goods for Thayer. When Thayer handed plaintiff the money he remarked that he would rather pay him tor his trouble than go himself. To this plaintiff made no reply. This, with other money, was stolen from plaintiff on his way and through no gross negligence on his part. Plaintiff bought goods on credit for Thayer and charged him nothing for his services as buyer. The question arose as to whether it was a bailment for hire or a gratuitous bailment. The court held that to render the bailee liable for negli- gence as a bailee for reward when he is acting without the scope of his ordinary occupation, it must be expressly proved that he was to receive a compensation. The court further held that when the bailment is for the sole benefit of the bailor, the law requires only slight diligence and makes him liable only for gross negligence. Bailment through an Agent Either party to a contract of bailment may act through an agent, and delivery to the agent of the bailee is delivery to the bailee. Degree of Care Necessary. In this class of bailment, as we have seen, only the lowest degree of care and diligence is required of the bailee ; that is, slight care, and he is not held liable for loss or injury unless guilty of gross negligence, as was held in Dart v. Lowe. Griffith v. Lipperwick, 28 Ohio St. 388, was an action to recover the value of certain government bonds, deposited by plaintiff with defendants as gratuitous bailees and stolen from defendant's banking house. The bonds, when de- posited, were in a tin box. the key of which was retained by plaintiff. Defend- ants had a small burglar proof safe in which they kept similar bonds of their own and other depositors, but plaintiff's and similar bonds of another depositor were kept outside, the other depositor consenting that his should be so kept. Held, to be a question for the jury as to whether or not- this was gross negli- gence. Good faith generally requires that such bailee should keep the goods intrusted to him with as much care as he ordinarily keeps his own of the same kind, and he should also keep them with such degree of care as would be reasonable, considering the nature of the goods and the circumstances of the bailment. McKay v. Hamblin, 40 Miss. 472, held, that when there is no contract for 1 86 BAILMENT the safe keeping of property and no compensation agreed to be paid for the custody of the same, the party in possession is a mere depositary, and, in the event of loss, is liable only for gross neglect. It is sometimes stated that the rule requires that the same degree of care be exercised that a man bestows upon his own, and this is undoubtedly true when the bailor knows the bailee's habits and the place or manner in which he is to keep or handle the goods, for when he knows these conditions, the law presumes that he agrees that the goods shall be so treated. Coggs v. Bernard, 2 Ld. Raymond 909, was an early English case that was decided about the year 1700. The defendant, it seemed, undertook without compensation to move some casks of brandy from one place to another, but by his carelessness a quantity was spilt. It was held that if a man undertakes to carry goods safely and securely he is responsible for any damages they may sustain in the carriage through his negligence, although he is not a common carrier and is to have nothing for his services. In Spooner v. Mattoon, 40 Vt. 300, plaintiff and defendant were soldiers in camp, occupying tents 10 rods apart. Plaintiff had considerable money, and fearing it might not be safe, left it with his friend, the defendant, without expectation of reward, for safe-keeping. For two nights he so left it, and came for it in the morning. On the third morning he did not call for it, and defendant started for plaintiff's tent with the money. He put it under his arm inside of his vest, so that the pocketbook would not be seen. It slipped out and was lost. Held, that the defendant was not guilty of gross negligence, so was not liable. No absolute rule can be laid down as to just how a gratuitous bailee must care for the chattel in his charge. The circum- stances of the case control; that is, different care would be required of the person who receives a watch or a valuable vase, from that expected of the person who receives a wagon or a load of stone. It is said that a gratuitous bailment seldom demands skilled labor or care, and the gratuitous bailee is excused from the results of inevitable accident, accidental fire, etc. Use of Property. In bailments of this class the question arises as to whether or not the gratuitous bailee may use the thing bailed to him. Clearly, he can not make any use of it except for the bailor's benefit, otherwise the bailment would not be included in this class. When the bailee accepts the custody of an animal, he undertakes to feed and care for it. Proper care would require BAILMENT FOR BAILEE'S SOLE BENEFIT 187 him to drive a horse for exercise, to milk a cow, etc., but the profits derived from the use of the animal in this class of bail- ment go to the bailor. The bailee has a right to incur such expenses in caring for the thing bailed as are necessary. In Devalcourt v. Dillon, 12 La. An. 672, A deposited in the hands of B mer- chandise to be sold, the proceeds to be applied on a debt which he owed to B. Held, that whatever useful and necessary expenses B incurred in fulfilling the bailment were chargeable to A. Termination. This class of bailment is terminated either by the accomplishment of the purpose of the bailment or by the express act of either party. The bailee may surrender the arti- cle bailed, and so terminate the relation, or the bailor may make a demand and recover the chattel. When the bailment is for the purpose of accomplishing some act, as the delivery of a chattel from one place to another, the bailee, after undertaking the bailment, must accomplish it with at least slight care, or be responsible for breach of contract. But by mutual assent, the bailment may be terminated at any time. The delivery of the identical chattel is necessary. If it is in a bettered condition, the bailee derives no benefit ; and if in worse, it is not his loss unless due to his gross negligence. If it is lost, he is liable in so far as the loss is due to his lack of slight diligence or care. 3. BAILMENT FOR BAILEE'S SOLE BENEFIT Definition. This class of bailment consists of the gratuitous loan for use. The bailee is what we call in ordinary language, the "borrower." When a man lends his lawn mower or his bicycle to a friend to use and afterwards to be returned, the loan is a bailment for the bailee's sole benefit. The bailor must voluntarily give the possession of the article to the bailee without exacting any recompense for its use. This bailment must be distinguished from the loan of something that /s to be consumed and afterwards to be paid back in kind, as flour or grain, which was under the Roman law, mutunm, or a " loan for consumption," but which is in fact no bailment at BAILMENT all, but a barter ; that is, the exchange of the particular property for another of a like kind. The loan may be for a definite period or at the will of the bailor, who may terminate it whenever- he pleases. In Clapp v. Nelson, 12 Texas 370. plaintiff sued to recover the possession of a wagon and two mules which he had loaned to the defendant for " a day or two," but which defendant had neglected to return. Held, that when prop- erty is loaned for a definite period or for a day or two or a week or two, if it is not returned at the end of the longer period, the lender can bring an action for it without first making a demand for the property. Responsibility of Bailee. The bailee being the only one bene- fited, the duty devolves upon him to exercise the highest degree of care or diligence in the use of the chattel, or, as it is expressed, he is bound to use 'great diligence, and is responsible for every loss which is occasioned by even slight negligence. In Hagebush v. Ragland, 78 111. 40, defendant borrowed a horse of plaintiff to drive on a visit to his brother, and when the horse was returned it was so injured that it died. The 'court held the defendant liable, and said that when an animal is borrowed without hire, the borrower is bound to take extraordi- nary care of it, and if a failure of such duty results in injury to the lender, the borrower will be liable. Bennett v. O'Brien, 37 111. 250, held, that the loan of domestic animals necessarily involves their keeping, and the expense thus incurred by the borrower is not a compensation to the lender which changes the gratuitous character of the bailment. In a suit brought by the lender against the bor- rower of a horse which dies in the possession of the latter, it devolves upon the borrower to show that he exercised extraordinary care toward the property borrowed. Wood v. AfcClure, 7 Ind. 155, held, that the borrower is to use extraordi- nary diligence in regard to property loaned to him, and is responsible for the slightest neglect ; but if the property perish, or is lost or damaged, without any blame or neglect on his part, the owner must sustain the loss. Great diligence, then, is such as one more than ordinarily Careful would bestow upon his property under like circum- stances. Such a high degree of care being required of the gra- tuitous bailee, he is held strictly to the terms of the bailment, and when he deviates from these terms he is liable for the loss or damage ensuing. BAILMENT FOR BAILEE'S SOLE BENEFIT 189 In Martin v. Cuthbertson, 64 N.C. 328, plaintiff borrowed a horse to ride to the residence of one Cline and return next day, but instead he rode a mile and a half farther and in a different direction. The horse died during its absence on the third day after leaving home. It was admitted that there was no negligence. Held, that without regard to the question of negligence the bailee is liable for any injury which results from his departure from the con- tract. But where the borrower, while using the chattel within the terms of the bailment, encounters some accident whereby the thing loaned is injured or lost without even slight negligence on his part, he is not liable. Watkins v. Roberts, 28 Ind. 167, was an action for the value of a horse loaned by plaintiff to defendant. The defense was that while defendant, who had borrowed the horse to go to a certain place and return, was on his way, and without any fault or negligence on his part, he was met by some cavalry soldiers of the United States, who forcibly took the horse from him. It was held to be a good defense, and rendered the defendant free from liability. If the chattel is injured or destroyed by inevitable accident or by fire, or if it is an animal and dies a natural death, the loss will not fall upon the bailee unless he is in fault. In Beller v. Schultz, 44 Mich. 529, plaintiff loaned a flag to defendant. After it was hoisted a hailstorm came up and damaged it. Held, that in the absence of proof that defendant had failed to take due care of the flag he was not liable. A borrower of property is not an insurer, even though it be gra- tuitously loaned. Use of Property. As we have seen, this class of bailment carries with it the right to use the chattel, subject to such con- ditions and limitations as the bailor may be reasonably supposed to have made. Such expense as may be necessary to preserve the chattel while in use is to be paid by the borrower, as feeding and sheltering a horse or other domestic animals. But any extraordinary expense which wholly preserves the property for the owner may properly be chargeable to the bailor. As soon as the bailment is ended, either by the expiration of the term, the act of the bailor, or the mutual agreement of the parties, the borrower must immediately deliver the property to the bailor or his order. IQO BAILMENT 4. BAILMENT FOR MUTUAL BENEFIT Definition. This class of contract differs from those just considered in that the benefits to be derived are mutual instead of being confined to one side. It is a business transaction rather than an act of favor or friendship. Bailments of this class may consist of (i) the hired service about a chattel, (2) the hired use of a chattel, or (3) pledge or pawn. In mutual benefit bailments it is essential that there be a rec- ompense for the use of the chattel or for the work to be be- stowed upon it. The amount may be definitely fixed or, in the absence of an agreed price, it may be such as shall be determined to be just and reasonable. In Chamberlin v. Cobb, 32 Iowa 161, plaintiff owned a horse for which he had no use, and, to avoid the expense of keeping it, requested defendant to take it and do his work with it in consideration of its feed and keep. Held, to be not a mere gratuitous loan, under which defendant would be required to exercise extraordinary care, but a contract for the mutual benefit of both parties, under which defendant was required to exercise ordinary care in the keeping and care of the animal. Like all other bailments, the possession of the chattel must be intrusted to the bailee, and as in other contracts, the parties must be competent to contract and the object of the bailment must be lawful. Hired Service about a Chattel. In the hired service about a chattel the bailment may be for the purpose of having the chattel stored or cared for, or it may be for the purpose of having work performed upon it, or for the purpose of having it carried from place to place. Among the hired custodians who store or care for property are safe depositaries, who for a consideration keep valuables in a safe place, and warehousemen, who for a certain charge keep goods and merchandise in storage. The hired work upon a chattel includes that of the wagon-maker who takes a wagon to repair it, of the watchmaker who takes a watch to adjust it, and of other classes of mechanics who receive chattels to be- stow labor of different kinds upon them. The hired carriage of BAILMENT FOR MUTUAL BENEFIT 191 a chattel may be performed by a private carrier, who for hire undertakes to transport a particular chattel, or the public or common carrier who follows as a business the conveying of chattels or persons. Private carriers are within the usual rules of a mutual benefit bailment, while public carriers, including rail- roads and express companies, come within a special class, having exceptional liabilities imposed upon them by law, which will be discussed later. Pennewill v. Cullen, 5 Harr. (Del.) 238, was an action against the owner of a boat, for damage to a load of corn which was spoiled by water getting into it. Defendant's boat was generally employed to carry coal for a certain party from Philadelphia to New York and on returning to bring lime to defendant. Three or four times the boat had carried loads for other par- ties. The question was as to whether or not the defendant was liable as a common carrier. The court held the test to be whether the defendant held himself out to the public as engaged in the business of a common carrier. It was not necessary that his trips should be regular between the same places. If engaged in the business of carrying grain for others generally, to and from any point, he was a common carrier. But if he kept his vessel for his own use, he would not be liable as a common carrier, even though he chartered or hired it to another by special agreement. In the bailment for hire the degree of care or diligence re- quired of the bailee is said to be ordinary diligence, or such care as a prudent person exercises toward his own property under like circumstances. He is therefore liable for loss or injury to the chattel caused by ordinary negligence or, in other words, a failure to bestow ordinary care and diligence. In Jones v. Morgan, 90 N.Y. 4, plaintiff stored certain household goods in a building owned by defendant and rented by him for that purpose. Plaintiff had a room allotted to her. Most of the goods were stolen by employees in charge of the buildings. Held, that the defendant was a bailee for hire and bound to exercise ordinary care and prudence. The plaintiff was given a judgment. In Maynard v. Buck, 100 Mass. 40, defendant was a drover who received cattle to drive from Brighton to Worcester, for hire. He received two head of cattle from plaintiff and while driving them the herd became frightened by a train and the two wandered away. Held, that the defendant was bound to use the same care in regard to the cattle that men of ordinary prudence would exercise over their own property under the same circumstances. The plaintiff recovered. 192 BAILMENT While the chattel is in the possession of the workman em ployed in working upon it, if it is destroyed by inevitable acci- dent or through some natural cause and without any fault upon his part, he will not be liable. A greater degree of care is required of the safe depositary who stores jewelry and valuables than is required of a cattle keeper. So the exact care and precaution required of the bailee depends much upon the circumstances of the particular case. Morehead v. Brown, 51 N.C. 367, was a case in which a bailee, to store and keep cotton for hire, permitted it to remain with the roping off, the bagging torn, and the under portion in the mud and water so that it became stained and much of it was destroyed. The court held that there was a want of ordinary care and the defendant was liable. A keeper of horses who carelessly leaves doors or gates open so that the animals are lost or injured can be held liable. In Swann v. Brown, 51 N.C. 150, defendant, a keeper of a livery stable, permitted the owner of certain horses to go into the stable at a late hour of the night and take them out, in consequence of which, a horse belonging to plaintiff made his escape and was lost either by passing out with the other horses or afterwards, as the door was left partly open. Held, that the de- fendant was guilty of lack of ordinary care and was liable. Ordinary care was said to be that degree of care which, under the same circumstances, a person of ordinary prudence would take of the particular thing were it his own. When the bailee is to perform some work upon the chattel, he must exercise such skill as a prudent workman of the same class would bestow upon a similar undertaking. And for a failure to exercise ordinary skill he will be liable as for a lack of ordinary diligence. In Smith v. Meegan, 22 Mo. 150, defendant took plaintiff's boat to make certain repairs upon it. Held, that he was bound to use ordinary diligence in the care of the boat and was liable for any damages to it occasioned by launching it into the river at a time and under circumstances of great danger which ought to have been foreseen and which resulted in the destruction of the boat. Thus it is apparent that the skill required in different cases varies greatly according to the nature of the work required, but in all cases honesty and good faith are required of the bailee. BAILMENT FOR MUTUAL BENEFIT 193 The bailee, for hire, has the right to the undisturbed posses- sion of the chattel during the accomplishment of the purposes of the bailment, and when the work is completed he has the right to demand suitable compensation. This compensation may be fixed in advance or left to be computed later on a basis of what is just and reasonable. Redelivery. When the service required by the bailment has been completed, it is the bailee's duty to deliver the chattel to the bailor, and it is the duty oJ the bailor to pay the compensation. The delivery back must be to the bailor, his agent, or to his order. It is customary for warehousemen who conduct places of storage, also wharfingers who keep wharves on which goods are received and shipped for hire, to give to the bailor, or owner of the goods, at the time the goods are delivered, a receipt known as a warehouse or wharfinger's receipt. These receipts are generally considered as representing the property itself and are assignable from one person to another, and the warehouseman is held to be the bailee of the person to whom the receipt is transferred. Dodge v. ' Meyer, 61 Cal. 405, holds, that a bill of lading represents the property for which it is given, and by its indorsement, or delivery without indorsement, the property in the goods may be transferred where such is the intent in making the indorsement or delivery. Lien. Although, as we have said, it is the duty of the bailee to deliver back the chattel, still he may keep possession until he is paid for his services on the chattel or payment has been tendered to him. The bailee therefore is said to have a lien upon the chattels for his services. Harris v. Woodruff, 124 Mass. 205, held, that a person has a lien for the expenses incurred and skill bestowed upon a horse delivered to him to be trained to take part in running races. Low v. Martin, 18 111. 286, held, that a warehouseman has a lien for proper charges upon grain stored in his warehouse, and he may retain possession of it to secure the payment of such charges. This lien holds only for the service bestowed upon the par- ticular chattel, and lasts only while the bailee retains possession. COM. LAW 13 IQ4 BAILMENT In Tucker v. Taylor, 53 Ind. 93, defendant, a mechanic, received a wagon to repair. In payment for his labor he was to have the use of the wagon and a horse to take a journey. After the work was done the defendant permitted the owner to take the wagon with the understanding that it was to be returned at a later day and the horse sent with it so that he could make the journey. The owner having failed to furnish the horse and wagon, the defendant asserted his lien and sold the wagon. This action was brought by the original owner to recover the wagon. Held, that defendant lost his lien when he relinquished the possession of the wagon to the owner. The court also held that there was no lien if the agreement was that the labor should be paid for on a future day. Hired Use of a Chattel. The hiring of a chattel for use is frequently illustrated in everyday transactions. The hiring of a horse at a livery stable, or the hiring of a rowboat on the river, are each included in this class. After the contract is made it is the bailor's duty to deliver the chattel and to allow the bailee or hirer to have possession for the agreed purpose or during the stipulated time. In Hickok v. Buck, 22 Vt. 149, defendant leased plaintiff a farm for one year, and agreed to provide a horse for plaintiff to use during the term. He furnished a horse at first, but took it away and sold it before the expiration of the term. Held, that plaintiff had an interest in the horse for the period, and could recover damages from defendant for taking it away. It is the bailee or hirer's duty to use the chattel with care, and for no other purpose than that for which it was hired. He also has a further duty to return it at the termination of the bailment and to pay the consideration for its use. As in other instances of a mutual benefit bailment, the bailee must use ordi- nary care and diligence. This is the rule only when the chattel is used as agreed. And if the bailee uses the hired property in a way materially different from that mutually agreed upon, he is in most instances liable absolutely for any resulting loss or injury. This is illustrated in the case of Fisher v. Kyle, on page 183. Pledge or Pawn. This class of mutual benefit bailments con- sists of the loan or deposit of a chattel as security for some debt or agreement. This mode of securing a debt differs from a chattel mortgage in that the possession is transferred in BAILMENT FOR MUTUAL BENEFIT 195 the pledge, while in the case of a chattel mortgage the posses- sion is generally retained by the owner. In the mortgage the title passes conditionally to the mortgagee, while in a pledge it remains in the bailor. Collateral security is another term applied to this class of bailments, but the term has a broader meaning and includes chattel mortgages as well. The name " pawn " is the old expres- sion, and is still in use as applied to a class of persons called pawnbrokers, who make a business of loaning money on articles of personal property deposited with them. But the same object is accomplished by the banker who loans money and accepts as collateral security, stocks, warehouse receipts of grain, bills of lading, etc. From this we can see that the subject of a pledge may be any kind of personal property, including bills and notes, certificates of stock, bonds, and bank deposits. But the thing pledged must be in existence, for if it has ceased to exist, the pledge is void ; as, in a case where the chattel has been burned or, if an animal, it is dead. Boynton v. Payrow, 67 Me. 587, held, that the giving of a savings bank book to a third person for delivery to a creditor as security for a debt will create a valid pledge of the book and deposit. The pledgee must exercise ordinary care and diligence to- ward the thing pledged, and when the property is delivered as security for a particular loan, it can not be held as security for any other. In the case of Baldwin v. Bradley, 69 111. 32, a quantity of whisky was pledged for money borrowed, and a few weeks later another lot was pledged for another loan. Each pledge and loan was separate from the other. Held, that each pledge was security for the loan made at the time, and not both for the first loan. The bailee must keep the chattel in his possession, and if he voluntarily surrenders possession to the owner, the benefit of the bailment or pledge as security is lost. An exception is the re- delivery of the thing pledged to the bailor for some temporary purpose and with the understanding that the pledgee is again to have possession, in which case the security is not lost. The pledgee has the right to use the chattel pledged if it is of 196 BAILMENT such a nature that it requires use ; for instance, a horse may be driven for exercise. But if the article pledged would be the worse for usage, then the pledgee is prohibited from using it. All profits derived from the article pledged belong to the pledger and must be accounted for to him, but all necessary expenses for the keeping of the property are chargeable to the owner. In the case of Androscoggin Railroad Co. v. Auburn Bank, 48 Me. 335, it was held that when a pledgee holds as collateral security bonds upon which interest accrues at certain periods, the pledge necessarily implies an authority in the pledgee to collect the interest and hold it on the same terms as the pledge itself. The pledgee has a right to the undisturbed possession of the chattel pledged. After the pledgor has made default in paying the debt secured, the pledgee may sell the chattel, after giving the pledgor a reasonable notice of the time and place of sale, which notice must be preceded by demand of payment. The sale, unless the pledgee is a pawnbroker, must be by public auction, and the goods must be struck off to the highest bidder. In Stearns v. Marsh, 4 Denio (N.Y.) 227, defendant sent plaintiff ten cases of boots and shoes as collateral security for a note of defendant's, due Novem- ber 5, which plaintiff held. From November 2 to 15 plaintiff advertised an auction sale of boots and shoes and sold the goods so pledged on the latter date without any notice to defendant. They sold for a very low price, and plaintiff sued for the balance of the note. The shoes were worth the face of the note. It was held that he could not recover. The pledgee can not sell the pledged property until he has called upon the debtor to redeem the property, and he must also give him notice of the time and place of sale. In case the pledged property consists of notes, bills, or bonds, which will soon become due, the proper procedure is to hold them until maturity and collect them if possible, applying the proceeds on the debt. Union Trust Co. v. Rigdon, 93 111. 458, held, that a pledge of commercial paper as collateral security for a debt does not, in the absence of a special power to that effect, authorize the pledgee to sell the security so pledged either at public or private sale upon default of payment of the original debt by the pledgor. The pledgee is bound to hold and collect the same as it becomes due, and apply the net proceeds to the payment of the debt so secured. The pledgee has no right, unless in extreme cases, to compromise with the patties to the security for a less sum than its face value. INNKEEPERS 197 The pledger has the further remedy of bringing an action in the equity court to foreclose his claim upon the article pledged, and when large amounts are involved, this is a frequent proced- ure. When the original debt has been discharged without recourse to the property pledged, the pledger is entitled to the return 'of his chattels, the object of the bailment having been accomplished. But before the pledger is entitled to the return of the chattels pledged, the principal debt and also the interest and all necessary expenses incidental to the pledge must be paid. A tender made by the pledgor to terminate the pledge must include both the interest, if any, and all such necessary expenses. 5. INNKEEPERS Definition. Aside from the classes of bailment already dis- cussed there are mutual benefit bailments which, because of the extraordinary diligence and care required of the bailee, are termed exceptional bailments. Innkeepers and common carriers are the principal illustrations of this class. An innkeeper is one who keeps a house, or inn, for the lodg- ing and entertainment of travelers. In the modern sense he is a hotel keeper, an inn being the same as our hotel or tavern. The innkeeper or hotel keeper differs from a boarding-house keeper in that his is a public calling and he is required by law to receive and give accommodations to all persons of good behavior who apply and offer to pay for their accommodation, unless his house is full. Boarding-house keepers, or restaurant keepers, can receive or refuse such persons as they please. In Pinkerton v. Woodward, 33 Cal. 557, it was held that an inn is a public place of entertainment for all travelers who choose to. visit it. It is distin- guished from a private lodging or boarding house in that the keeper of the latter is at liberty to choose his guests, while the innkeeper is obliged to enter- tain and furnish all travelers of good conduct and means of payment, every- thing which they have occasion for as travelers on their way. A traveler who enters an inn as a guest does not cease to be a guest by proposing to remain a given number of days, or by ascertaining the price that will be charged, or by paying in advance for his entertainment. This question arose in a suit to recover gold dust brought by plaintiff to defendant's hotel and, at defend- 198 BAILMENT ant's suggestion, deposited in the safe, from which it was afterward stolen. The court held the landlord liable, and stated the rule to be that an innkeeper is liable as an insurer of the goods of the guest committed to his care unless the loss is occasioned by the act of God, or the public enemy, or by the neglect or fraud of the guest. Neither a company owning the sleeping cars attached to a train nor a steamship company can be held to be an innkeeper. In Pullman Palace Car Co. v. Smith, 73 111. 360, Smith purchased a ticket on the Palace Car Company's car and while asleep on the trip his money was taken from his vest pocket, the vest being under his pillow. In an action for the money it was held that Palace Car Companies are not liable as innkeepers. Clark v. Burns j 118 Mass. 275, held, that a steamship company is not liable as an innkeeper for a watch worn by a passenger on his person during the day or kept within reach at night, although the passenger pays a round sum for transportation, board, and lodging. Guests. The relation of innkeeper arises only with reference to such parties as are his guests, a guest being one who as a transient traveler partakes of the entertainment of the inn or hotel. He may be a guest, although he does not stay over night. In Head v. Amidon, 41 Vt. 15, plaintiff and his father drove to defendant's hotel with their horse and wagon. They had the horse cared for, went in and laid off their coats, had dinner and staid until evening, when they left. The court held that this created the relation of innkeeper and guest. In Watting v. Potter, 35 Conn. 183, plaintiff resided about half a mile from defendant's hotel. Plaintiff went to the hotel one evening, staid all night and had his breakfast, for which he paid. Held, that the relation of innkeeper and guest existed, and the defendant was liable as such for money lost by plaintiff at the hotel. A person receiving a gratuitous accommodation is not a guest. To create the relation of guest the innkeeper must receive pay for the accommodation. Innkeeper's Liability. The innkeeper is a bailee of the prop- erty and baggage of the guest, and this includes the horse that is placed in the innkeeper's stable as well as the wearing apparel, jewelry, and money of the guest. By the common law the re- sponsibility of the innkeeper as bailee was exceptionally great. He was in most cases held to be an insurer of the goods and liable if they were lost, even without any fault on his part, unless INNKEEPERS 199 the loss was occasioned by the guest's negligence or by an act of God, flood, lightning, etc., as illustrated in the case of Pinkerton v. Woodward, which we explained on page 197. In Hulett v. Swift, 33 N.Y. 571, plaintiffs goods were destroyed by fire while he was a guest at defendant's hotel. The cause of the fire was unknown, but plaintiff was free from negligence. Held, that the innkeeper was liable. An innkeeper is an insurer of property committed to his custody by a guest unless the loss be due to the negligence or fraud of the guest, or to the act of God or the public enemy. Other cases go so far as to relieve the innkeeper from liability in case of loss if he can show positively that he was in no way negligent, but this is a modification of the common law rule. In Howth v. Franklin, 20 Tex. 798, it was held that when property com- mitted to the custody of an innkeeper by his guest is lost the presumption is that the innkeeper is liable for it, but he can relieve himself from that liability by showing that he has used extreme diligence. The innkeeper is responsible for the acts of his servants and employees the same as for his own acts. Rockwell v. Proctor, 39 Ga. 105, was a suit against defendant, an innkeeper, for a coat which had been left by plaintiff who was a guest at defendant's hotel. The coat had been given to a negro in charge. Held, that the defend- ant was liable as innkeeper for the ac. of his servant. Therefore the innkeeper is liable for any theft of the guest's property, and he is not excused on the plea that he selected his servants carefully and performed his own duty well. Limitation of Liability. The statutes^ in most of the states now allow the innkeeper to relieve himself from the extreme rigor of the common law, permitting him to limit his responsi- bility for money and valuables by requiring the guest to deliver them into his special custody. This is generally done by requir- ing that they be placed in the innkeeper's safe. But notice of this requirement must be given to the guest, or the common law liability will attach. Bodwell v. Bragg, 29 Iowa-232, held, that the mere posting of notices in the room of a guest, limiting the liability of the landlord if certain directions are not observed, does not operate as notice to the guest unless he reads it or his attention is called to its contents. 200 BAILMENT Termination of Relation. The liability of the innkeeper for the guest's personal property exists as long as the owner of the property maintains his relation as guest of the hotel or inn. MacDonald v. Edgerton, 5 Barb. (N.Y.) 560, held, that if a person after becoming a guest at an inn goes away for a brief period, leaving his property with the intention of returning, he is to be considered as still continuing a guest, and if his property is lost during his absence, the innkeeper is liable. Sasseen v. Clark, 37 Ga. 242, held, that when a hotel keeper sonds his por- ter to the cars to receive the baggage of persons traveling, and there is deliv- ered to the porter the baggage of a traveler who becomes the guest of the hotel, the liability of the innkeeper begins at the delivery to the porter and con- tinues until redelivery to the actual custody of the guest. If the porter takes charge of the baggage to deliver to the car, the liability of the innkeeper con- tinues until the baggage is so delivered. But after the relation of guest has ceased, the innkeeper is liable for property left with him only as an ordinary bailee. Innkeeper's Lien. As we have seen, the innkeeper is com- pelled to receive any proper person who may apply for accom- modations, but he need not receive those who can not pay, and he may require payment to be made in advance. When he is not paid in advance, the law gives him a lien for all unpaid charges upon the property which the guest has brought into the house and placed in the custody of the inn- keeper as bailee. In Threfall v. Borwick, L.R. 10 Q.B. (Eng.) 210, A went to the defendant's inn and staid there with his family, taking with him to the inn as his own a piano which he had hired of the plaintiff. When A left the inn he was in debt to defendant and defendant detained the piano by virtue of his lien as inn- keeper. Held, that defendant could hold the piano under such lien. The innkeeper can detain the property until he is paid, but if he voluntarily surrenders it, the lien is lost. 'Statutes in most of the states now give boarding-house keepers a like lien, but by common law it extended only to innkeepers. 6. COMMON CARRIERS Definition. Common carriers also belong to the class of exceptional bailments. Like innkeepers they are as a general rule required to serve all alike and can not choose their custom- COMMON CARRIERS 2OI ers. They are also bound to exercise a greater degree of care and diligence toward property placed in their possession than any of the ordinary bailees. A carrier is denned to be one who undertakes to transport personal property from one place to another. He may be either a private carrier who comes under the class of ordinary bailees or a common carrier who is subject to special rules. A common carrier is one whose regular calling is to transport chattels for all who may choose to employ and remunerate him, while a private carrier is one who transports goods gratuitously or only in special cases. Pierce v. Milwaukee Railway Co., 23 Wis. 387, was an action to recover the value of eight bundles of bags which had been used in transporting grain and were then on their return empty. Defendants sought to avoid liability as com- mon carriers by showing that it was the usage of the ro'lroads to carry empty bags free of charge, and that they were responsible only ibr gross negligence. Held, that the consideration for such carriage was the patronage given the company in carrying the grain ; that the carriage was therefore not gratuitous, and the defendant was liable as a common carrier. Steele v. McTyer,-$i Ala. 667, was an action against defendant as a common carrier for loss of fifteen bales of cotton shipped by plaintiff on defendant's flat- boat to Mobile. The boat was wrecked by running into a log. Held, that defendant was liable, as the damage was not due to an act of God or inevitable accident. The court also said that if the defendant held himself out to the general public, though but for a single trip, as ready and willing to carry any cotton that might be shipped on the boat, he was liable as a common carrier to persons availing themselves of his services; but if he did not constitute himself the servant of the public, proposing only to carry cotton belonging to particular persons with whom he had contracted for a full cargo, he could not be held liable as a common carrier to a third person with whom the master of a boat, in violation of his instructions, made a contract to carry freight. A carrier may be one who operates by land or by water, the laws regulating their liability being much the same. Express, railroad, and steamboat companies are everyday examples of common carriers. In order to constitute one a common carrier two things are necessary ; first, a continuous offer to the public to carry, and second, the charge of a compensation for the service. Haynie v. Waring, 29 Ala. 263, held, that one who undertakes to carry goods for another gratuitously is liable only for gross negligence and not as a common carrier. 202 BAILMENT Goods and Payment for Carriage. Common carriers are said to be carriers of " goods," and this term includes animals, money, and in fact any article of personal property that is subject to transportation. By the common law a common carrier is bound to receive without respect of persons whatever may be offered him for transportation, when the charges are paid or offered to be paid. Payment must be offered, as the carrier is under no obligation to carry free or upon credit. If he does not obtain his pay upon receipt of the goods, he may hold them until his charges are paid, the law creating a lien upon the goods for the charges and expenses in favor of the common carrier. This compensation is sometimes termed "freight" when applied to the charge for carrying goods. After the goods have been de- livered to the carrier the shipper can not retake them without paying the freight, and if they are intercepted before reaching their destination, the full freight can be recovered by the carrier. The consignor or shipper is the party primarily liable for the freight and not the consignee or the person to whom the goods are shipped, unless the consignee expressly agrees to pay it. In Wooster v. Tarr, 8 Allen (Mass.) 270, defendant shipped mackerel at Halifax upon plaintiffs vessel. In the bill of lading it was specified that they be delivered in Boston "unto Howe & Co. or to their assigns, he or they paying freight for said goods. 1 ' They were delivered to parties to whom Howe & Co. had sold, and as plaintiff could not collect the freight from Howe & Co. who were insolvent, it was held that he could recover of de- fendant, even though the goods were purchased for and on account of Howe & Co. and shipped at their risk. The shipper is liable to the carrier for the freight, even though he does not own the goods and the carrier has waived his lien thereon. Regulation of Charges. The charges that may be made are in some instances regulated by statute. In the absence of any statute regulating the subject, the carrier may agree to give one party a lower rate than others, but he can not impose exorbitant or unreasonable rates or conditions upon any one. In the case of Johnson v. Pensacola Railroad Co., 16 Fla. 623, plaintiff sued defendant railroad company for excessive freight money claimed to have been COMMON CARRIERS 203 paid. He proved that he was charged more than another shipper of lumber. Held, that as a common carrier defendant can not charge excessive or unreason- able rates of freight. The common law protects the individual from extortion and limits the carrier to a reasonable rate, but it does not require equal rates to all. 318$ tons of Coal, 14 Blatchf. (U.S.) 453. In this case the New Haven Rail- way Co., owning a dock at New Haven, refused to receive coal on its cars on said dock from a canal boat thereat, unless the master of the boat employed shovelers designated by the company, at a price fixed by the company, which was ordinarily the usual market price, to shovel the coal into tubs which were hoisted by derricks into the cars. The canal boat owners paid the company ten cents per ton for the use of the tubs and machinery. Held, that the requirements of the company were unreasonable and could not be enforced. The carrier can retain the goods under his lien until all the freight and charges are paid. Not only must he be a carrier for hire, but he must carry in the regular course of his business in order to be classed as a common carrier. That is, it is not sufficient that he carry goods in some particular business; he must undertake to carry for any one who asks him. The test is whether he carries for par- ticular persons only or for every one who applies. If he holds himself out to carry for every one who asks him, he is a common carrier; but if he does not do it for every one, but carries for certain persons only, it is a matter of special contract. Or, as it is said in other words, a common carrier is one who follows the business as a public employment. In Satterlee v. Groat, \ Wend. (N.Y.) 272, defendant, who had been a common carrier between Schenectady and Albany, sold out all of his teams but one which he used on his farm and for a year or more entirely gave up the business. One Dows then engaged him to bring some loads for him from Albany to Schenectady. He sent his servant to bring these loads, but ex- pressly instructed him to carry for no one else. The man brought two loads, and when he went for the third, as it was "not ready, he, contrary to his instructions from defendant, took a load from plaintiff to be delivered to Frank- fort. On the way one box was broken into and stolen. The servant was afterwards convicted of the theft. Held, that the defendant could not be held unless he was at the time a common carrier, and if the defendant was em- ployed under a special contract for carrying the goods, he was not liable. The defendant having abandoned his business as a common carrier stood upon the same footing as he would if he had never been engaged in such business. 204 BAILMENT Right to refuse Goods. As we have said, a common carrier is bound by the common law to receive whatever is offered to him to carry without respect to the persons offering. This rule is subject to three qualifications, viz. : First, the offer of the chattel must be for hire ; Second, the bailment must be within the carrier's means of safe conveyance; Third, such carriage should be in the line of his vocation. We have already discussed the first qualification. As to the second, it is but reasonable that the carrier may refuse to receive goods when he has not sufficient room or adequate facilities for carrying them safely. He is under no obligation to furnish extra equipment to satisfy an unusual demand. So, if the article carried be larger or heavier than the carrier can handle, he may refuse it on that ground. Furthermore, he may decline to receive particular property which may at the time V-> ex- posed to extraordinary danger or hazard on his route. Phelps v. Illinois Central Railway Co., 94 111. 548, held, that the fact that the road was under the military control of the officers of the United States Army was a sufficient excuse for defendant to refuse to receive freight while the road was in such control during the Civil War, it not being safe for the defendant to undertake the carriage of freight. The article offered for transportation may not be in the line of the carrier's vocation. A freight carrier may not necessarily hold himself out to carry passengers. He need carry only the class of goods included in his public profession. Johnson v. The Midland Railway Co., 4 Exch. (Eng.) 367, was an action for damages against the Railway Co. for refusing to transport five tons of coal offered by plaintiff. The defendant never carried coal and did not hold itself out for any such business, and could not, unless it gave up its passenger traffic. Held, that a common carrier is not bound to carry every description of goods but only such goods, and to and from such places, as he has publicly professed to carry, and for which purposes he has conveyances. Interstate Commerce Law. The carrier may prescribe reason- able rules as to the time and manner of receiving goods. He can not be required to receive them at an unreasonable hour or place, and he may insist that the goods be packed in a reasonable way. But by statutes passed in most of the states the carrier is COMMON CARRIERS 205 prohibited from discriminating in favor of one customer over another either in rates or privileges of any kind. The common carrier must not select his patrons arbitrarily, but must furnish equal facilities to all. To further this object a statute was passed by the Congress of the United States in 1887 which is known as the Interstate Commerce Law. This law was designed to regulate the com- merce between the states and applies to all common carriers, either by land or water, who do business in two or more states or territories. It provides that no discrimination shall be made between large or small, constant or occasional, shippers, and that no charges shall be unjust or unreasonable. It also provides that proportionate charges shall be made for long and short distances. The law further requires that the schedule of rates shall be published and filed with commissioners who are appointed to oversee the enforcement of the law and are known as the Interstate Commerce Commissioners. The act also makes it un- lawful for any common carrier who comes under its provisions to enter into any combination or agreement by which the continuous carriage of freight from one point to another shall be delayed or interrupted. All of the large railroad and express companies do business in more than one state, and therefore come within the provisions of this act. When Liability Begins. The common carrier becomes re- sponsible for the goods when they are delivered to him for carriage and accepted by him in the capacity of a carrier. The delivery should be made to the agent or person whose business it is to receive freight, not to any one who may be about the place of delivery. Trowbridge v. Chapin, 23 Conn. 595, was an action against the owner of a steamboat as a common carrier. It was the duty of the clerk of the boat to receive freight for transportation. Plaintiff's property was taken on board by a porter and left in a place pointed out by a person whose appearance and employment indicated that he was a common laborer. No inquiry was made by the porter as to whether the person had authority to receive the freight. Held, that it was not sufficient evidence of delivery to make defendant liable lor the loss of the property. 206 BAILMENT It is not necessary, as we have seen, that the transportation shall actually begin before the common carrier's liability at- taches, but rather the carrier is liable as soon as he accepts the goods. So in the case of expressmen and other carriers who go after the goods and receive them at the shipper's resi- dence or place of business, their liability begins when they receive the goods. Receipts. It is always prudent for the shipper or sender of the goods to demand of the carrier a receipt for the articles delivered. This is termed a freight receipt, way bill, or bill of lading. Origi- nally a bill of lading was given only by a carrier by water, but it is now given by all carriers. It consists of a writing showing the receipt of the goods and the terms of the contract of carriage in brief form. 7. LIABILITY OF COMMON CARRIERS Limits of Liability. As in the case of the innkeeper, the liability of the common carrier is exceptionally great. He is held liable as an insurer of the goods against all risks of loss or injury, except when the loss arises from the following causes : (i) by an act of God, or by a public enemy, (2) by the act of the shipper, (3) by the act of the public authority, (4) from the nature of the goods. In the early times this strict measure of responsibility was placed upon the carrier for reasons of public policy. In an age of thieving and lawlessness the carrier had many opportunities to defraud his customers, and, by collusion with thieves and robbers, to cause the shipper to be defrauded. To this absolute liability as an insurer there were only two exceptions under the common law, and these were losses occa- sioned either by act of God or the king's enemies. But modern methods make the reason for the rule less urgent, and modern legislation has relieved the carrier's liability in the other cases just specified. Loss or Injury by Act of God. This includes those causes which man neither produced nor can contend against ; as, acci- dents caused to the goods while the carrier is within the line of LIABILITY OF COMMON CARRIERS 207 duty, by lightning, tempest, earthquake, flood, sudden death, snow, rough winds, freezing, and thawing. Denny v. New York Central Railroad Co., 79 Mass. 481, held, that the rising of the Hudson River, caused by a flood, which ruined goods in defend- ant's warehouse, was an act of God for which defendant would not be liable. Ballentine v. North Missouri Railroad Co., 40 Mo. 491, held, that a snow- storm which blocks up a railroad to the extent that it delays and hinders the running of the cars is an act of God for which a carrier can not be held liable. But a prudent man will foresee the less violent of these causes, such as snow and freezing, and a carrier will not be excused for loss in such cases, unless he has exercised prudence and foresight in regard to them. In the case of Vail v. Pacific Railroad, 63 Mo. 230, fruit trees shipped on defendant's road were frozen while en route, and the freezing was held to be an act of God for which the company was not liable, unless caused by un- necessary delay in transporting the trees or by their careless exposure to the cold. In Parsons v. Hardy, 14 Wend. (N.Y.) 215, plaintiff received on Novem- ber 19, at Albany, a quantity of merchandise to transport by canal to Ithaca. When he arrived at Montezuma locks the winter set in, and he was prevented by ice from going farther, having had to stop on the way to repair an accident caused by being run into by a scow. Plaintiff took care of the goods at Montezuma, but the defendant took them from there. Held, that the plaintiff should have delivered them in the spring, but if the owner took them, it relieved the plaintiff and he could recover pro rata for the part performed. As to the time of delivery, the carrier must exercise due diligence, and is excused by accident or misfortune. It is enough if he exercises due care and diligence to guard against delay. Loss by Fire. Loss by fire, unless caused by lightning, is not an act of God and a common carrier is not excused from loss by this cause unless it is expressly contracted for. Parker v. Flagg, 26 Me. 181, held, that unless a carrier limits his responsi- bility by the terms of a bill of lading or otherwise, he can not escape the obligation to deliver the goods at their destination unless prevented by the public enemy or by an act of God. A loss by accidental fire is not a sufficient excuse unless the fire be caused by lightning. Loss or Injury by Public Enemies. This is a loss caused by those at war with one's country. 208 BAILMENT In McCranie v. Wood, 24 La. An. 406, defendant contracted with plaintiff, a carrier by boat, to remove certain cotton belonging to plaintiff to places deemed safe from hostilities during the Civil War. It was stored where it was deemed safe, but hostilities arose in that direction and the cotton was destroyed. Held, that defendant had performed, as far as was in his power, and the goods having been destroyed by the public enemy, he was not liable. But the violence of mobs or rioters does not bring the par- ticipants within the term "public enemies." Loss or Injury by Act or Fault of the Consignor. This arises when the shipper carelessly packs the goods and they are injured, or when he incorrectly addresses them so that they are delayed or lost, in which cases the carrier is not liable. In Klauber v. American Express Co., 21 Wis. 21, plaintiff shipped some clothing which was not entirely covered and while being transported by de- fendant was damaged by rain. Held, that the owner is not required to cover goods shipped so that they shall be safe from rain, mud, and fire, and the defendant here is liable. If there had been a hidden defect in the packing from which damage resulted in the ordinary course of handling, it would have been the act of the owner and the carrier would have been relieved. In Congar v. Chicago Railway Co., 24 Wis. 157, plaintiff shipped by de- fendant's road, trees and other nursery stock from Whitewater, Wis., directed to " luka, la." The consignee was a resident of luka, Tama Co., la. The de- fendant took them to luka, Keokuk Co., la., in consequence of which delay the stock became worthless. Defendants proved that they examined the maps and found the place in Keokuk Co. Held, that the company was not respon- sible. The negligence, if any, was upon the part of plaintiff in not marking the goods with the name of the county or the road by which they were to go. Any deception or bad faith on the part of the shipper as to the article shipped, whereby it is made to appear less valuable or less liable to be injured, will relieve the carrier from responsi- bility for any injury. American Express Co. v. Perkins, 42 111. 458, was an action brought against the express company to recover for the value of a package containing a wreath, made partially of glass, which was broken. The company was not informed of the fragile nature of the goods shipped. Held, that in order to charge a common carrier as insurer he must be treated in good faith, and con- cealment or suppression of the truth will relieve him from liability. When a package containing articles of a brittle nature is delivered to a carrier, he must be informed of the nature of its contents in order that he may use care pro- portionate to its fragile character, if be is to be held liable as a common carrier. LIABILITY OF COMMON CARRIERS 209 Loss or Injury arising from the Nature of the Goods. When the loss arises, not from any act of the carrier, but because of the inherent nature of the goods, the carrier is relieved. This applies to the natural decay of vegetables and fruit and other perishable commodities, also to the loss of live stock arising from their own viciousness and habits, as when cattle gore or trample upon each other. But the carrier must take such care of live stock as prudence and foresight demand, and must feed and water them, unless the shipper undertakes this duty. Clarke v. Rochester and Syracuse Railroad Co., 14 N.Y. 570, was an action for damages for the loss of a horse shipped on defendant railway from Roches- tei to Auburn, which, upon arrival, was found dead. Held, that the carrier was liable, unless the damage was caused by an occurrence incident to the carriage of animals in a railroad car, and which the defendant could not by the exer- cise of diligence and care have prevented. Evans v. Fitchburg Railroad Co., 1 1 1 Mass. 142, was also an action for injury to a horse, and the court held that a common carrier is liable for all accidents and mismanagements incident to the transportation, but not for injuries produced by or resulting from the inherent defects or essential quali- ties of the article which he undertakes to transport. If the injury is produced by fright, restiveness, or viciousness of the animal, which the defendant exer- cised all proper care and foresight to prevent, it would be unreasonable to hold him responsible for the loss. Loss or Injury caused by Public Authority. An example of such a loss is a seizure of the goods by process of law, or by the direct act of one's own government. Ohio Railway Co. v. Yoke, 51 Ind. 181, was an action against the railroad company for failure to deliver goods shipped by them. Their answer was that while the wheat was being shipped, one Johnson took out a writ of replevin, and by virtue of this writ the sheriff of the county seized the grain and took it out of the possession of the company. Held, that the common carrier is excused from liability when the goods are seized by virtue of a legal process and taken out of his hands. V Limitation of Liability by Contract. The carrier in most of the states may limit his liability to a certain extent by contract with the shipper. That is, by special agreement a lighter degree of responsibility may be stipulated for. He may stipu- late not to be liable for loss by fire, robbery, accidental delay, or dangers from navigation, provided he is not himself in fault; COM. LAW 14 210 BAILMENT but he can not contract away his liability for the fraud, mis- conduct, or negligence of himself, his agents, or servants. Not- withstanding his attempt by contract to limit his liability, he will still be held to the responsibility of a mutual benefit bailee, and he is required to exercise ordinary care and diligence, as well as honesty and good faith. Camp v. Hartford Steamboat Co,, 43 Conn. 333, was an action against the defendant steamboat company as a common carrier for the value of goods shipped by them and lost through the boat running upon a rock and thereby springing a leak. The bill of lading given by the company when the goods were shipped provided that the company should not be responsible for damage to the goods from any perils or accidents not resulting, from their own negli- gence or that of their servants. Held, that the exemption stipulated for was valid and lawful and the defendants were not liable. Boorman v. American Express Co., 21 Wis. 152, held, that an express com- pany may exempt itself by special contract from its liability as an insurer ; or for loss or damage of any package for over $50, unless the just and true value thereof is stated in the receipt ; or upon any property not. properly packed and secured for transportation ; or upon any fragile fabric unless marked as such upon the package containing it, and when a receipt embodying such conditions is given to the shipper, his assent is presumed. The carrier is also allowed to state a reasonable limit to the amount for which he shall be held liable in case of loss, unless the shipper shall state the valuation at the time of the delivery of the goods to the carrier. Express companies generally con- tract that in case no valuation is given, they will not be liable for a sum to exceed $50, and such a provision is generally upheld. In Belger v. Dinsmore, 51 N.Y. 166, plaintiff expressed a trunk by defend- ant company and received a receipt which contained a statement that as a part of the consideration of the contract it was agreed that in case of loss the owner should not demand over $50, at which price the article was valued, unless otherwise expressed. Held, that by accepting the receipt and failing to give another valuation, the plaintiff assented to the limitation, and in case of loss could claim no more. In Hart v. Penn. Railroad Co., 112 U.S. 331, plaintiff shipped five horses and other property in one car, under a bill of lading signed bv him, which stated that the horses were to be transported " upon the following terms and conditions which are admitted and accepted by me to be just and reasonable. First, to pay freight thereon ' at a specified rate ' on the condition that the LIABILITY OF COMMON CARRIERS 211 carrier is liable on the stock to the extent of the following agreed valuation: if horses or mules, not to exceed $200, etc. 11 By the negligence of the railroad company one of the horses was killed and others injured. It appeared that they were race horses worth $25,000. Held, that the liability of the company for the horses was limited to $200 each, the limitation in the bill of lading being just and reasonable and binding on the plaintiff, even though the loss occurred through the company's negligence. Delivery by Carrier. The carrier is bound to transport the goods with reasonable dispatch, and by the prescribed or cus- tomary route, and at the termination of the journey to deliver them over to the consignee or his authorized agent within a reasonable time. Berje v. Railway Co., 37 La. An. 468, held, that a stipulation in the bill of lading exempting the company from liability for loss arising from delay for any cause, is unreasonable, and will not relieve the carrier from liability for losses caused by negligence. The carrier is liable absolutely to deliver to the right party. If he delivers to the wrong party, no matter how cautiously and innocently, he is liable. Delivery on a forged order or through the fraud of a stranger will not relieve him. In Odett v. Boston Railroad, 109 Mass. 50, plaintiff bought hay from one Swasey, to be delivered to the plaintiff at the depot of the defendants, who as common carriers were to carry the hay to plaintiff in Boston, where it was to be weighed. Swasey delivered the hay to defendants and directed them to market it in plaintiff's name and carry it to him. After the hay reached Bos- ton Swasey directed defendants to deliver it to a third party.. Held, that the title passed to plaintiff on the delivery of the hay to defendants, and they were liable to him therefor. Powell v. Myers, 26 Wend. (N.Y.) 591, held, that common carriers of pas- sengers and their baggage are liable for the latter until its safe delivery to the owner. The delivery of the baggage upon a forged order will not discharge them . When a bill of lading has been issued by the carrier, he must deliver the goods to the holder of it. He should, therefore, demand the bill of the consignee, otherwise, if it has been negotiated, he runs the risk of being required to make good the property to a purchaser holding the bill of lading. Forbes v. Boston Railroad, 133 Mass. 154, held, that the delivery of goods by a common carrier to a person unauthorized to receive them without requiring the production of the bill of lading, but relying upon such person's representa- 212 BAILMENT tion that he is the holder of it, renders the carrier liable to the person entitled to the possession of the goods without regard to the question of the carrier's negligence or care. When the carriage is by water a delivery on the usual wharf is sufficient, but while on the wharf, goods should be handled with reasonable care. A railroad company may deliver the goods at the depot or freight house, and according to the laws of Alabama, New York, Wisconsin, Vermont, Michigan, Louisi- ana, and many other states, they must also notify the consignee, and they are liable as common carriers until the consignee has had a reasonable opportunity to remove the goods. In the case of Moses v. Boston Railroad, 32 N.H. 523', ten bags of wool were delivered to defendant to be transported to Boston and then delivered to the consignee. The train arrived in Boston between one and three o'clock in the afternoon, and in the usual course of business two or three hours were re- quired for unloading. The warehouse was closed at five o'clock, and during the night it burned. Held, that the defendant was liable as a common car- rier until the consignee had had reasonable opportunity during the hours in which such goods are usually delivered, of examining them and taking them away, after being informed that they were ready for delivery. In this case he had no such opportunity to take the goods, and the defendant was still liable as a common carrier. Massachusetts, Iowa, California, Pennsylvania, and other states hold that the delivery and safe storage of the goods in the freight depot relieve the carrier from further liability other than as a warehouseman. In Francis v. Dubuque Railroad Co., 25 Iowa 60, plaintiff shipped goods by defendant road to Ackley, where plaintiff resided. They arrived at 8.15 P.M. and were at once unloaded and safely placed in defendant's warehouse ready for delivery. That night the warehouse burned, and the goods were destroyed. Held, that the liability of a railroad company as a common carrier terminates and the company's responsibility as a warehouseman commences upon the arrival of the goods at the point of destination and their deposit in the warehouse of the company to await the convenience of the consignee. If such carriers as express companies in the cities, whose custom it is to deliver to the consignee at his residence or place of business, deliver at any other place or store the goods in the depot as is practiced by freight companies, such delivery will not be sufficient. This rule applies also to draymen and teamsters. CARRIERS OF PASSENGERS 213 8. CARRIERS OF PASSENGERS Definition. A common carrier of passengers is one who transports persons from one place to another for hire. A pub- lic carrier may be both a carrier of goods and of passengers. The passenger may be carried by water or by land. The com- mon carrier of passengers is bound to receive and carry alike all persons who shall apply and are ready and willing to pay for their transportation. In Bennett v. Dutton, 10 N.H. 481, it was held that the proprietors of a stagecoach who hold themselves out as common carriers of passengers are bound to receive all who desire passage, so long as they have room and there is no legal excuse for a refusal. It is not a legal excuse that they have agreed with a connecting coach line that they will receive no passengers on certain days from a given point unless they come on a coach of said line. Rights and Duties. But the coach driver may refuse to carry when he has no more room or when the party applying is not a suitable person. He need not receive a drunken person, a noto- rious criminal, or a person infected with a contagious disease. Neither is he obliged to take persons to a place which is not on his route, or at which he is not accustomed to stop. Atchison Railroad Co. v. Weber, 33 Kans. 543, held, that where an unattended passenger becomes sick or unconscious or insane after entering upon a jour- ney, it is the duty of the company to remove him from the train and leave him until he is in a fit condition to resume his journey. The fare required of the passenger must be reasonable, and in many states it is regulated by statute. The carrier is bound to have means and appliances suitable to the transportation, and to use all reasonable precautions for the safety of passengers. He can prescribe reasonable rules as to showing tickets, etc. The carrier is not an insurer of the lives and safety of the passengers, but he is held to a high degree of care, and will be liable for even slight negligence. While the carrier does not warrant the safety of the passengers, he is held to the highest degree of care prac- ticable under the circumstances. In Jngalls v. Bills, 9 Mete. (Mass.) I, plaintiff was a passenger on de- fendant's coach. By reason of the breaking of one of the iron axletrees, in 214 BAILMENT which there was a small flaw that could not be seen, he was injured. Held, that defendant was not answerable for the injury thus received. Proprietors of coaches who carry passengers for hire are answerable for injuries to pas-, sengers which happen by reason of any defect in the coach that might have been discovered by the most careful and thorough examination, but not for an injury which happened because of a hidden defect that could not, upon such examination, have been discovered. In most of the states the carrier is not permitted to limit his liability for injury to the passenger. It is considered con- trary to public policy to exempt the carrier from liability for even slight negligence when the lives and safety of human beings are concerned. Baggage. The passenger who pays his fare to the carrier is entitled to have certain baggage taken without charge, and for this baggage the carrier is liable as for the carriage of freight. Baggage in this sense includes such articles of per- sonal necessity, convenience, and comfort as travelers under the circumstances are wont to take on their journeys. It does not include merchandise or a stock of goods used in the traveler's business. In Pardee v. Drew, 25 Wend. (N.Y.) 459, plaintiff took passage at New York on defendant's boat and brought on board with him a trunk which was put with the other baggage. It contained silks and other merchandise he had purchased in New York for his store. The trunk was lost, and this action was brought for its value. Held, that defendant was liable as a common car- rier for baggage, but it must be such articles of necessity and personal con- venience as are usually carried by travelers, and in this case the carrier was not liable. In Dexter v. Syracuse Railroad Co., 42 N.Y. 326, plaintiff sued for the value of the contents of his trunk which was lost by defendant. It con- tained, aside from his wearing apparel, material for two dresses purchased for his wife, and also material for a dress intended for his landlady. Held, that the common carrier is liable for the loss of such property received as baggage as is designed for the personal use of the passenger or his family, but it does not include articles purchased for persons not members of his family. In this case the company was held liable for all but the dress intended for the landlady. The carrier is also liable for money which the passenger includes in his baggage for his traveling expenses and personal use, not exceeding a reasonable amount. CARRIERS OF PASSENGERS 21$ Duffy v. Thompson, 4 E. D. Smith (N.Y.) 178, held, that a passenger on a voyage from a foreign country may keep money designed for small personal expenses in his trunk while on board ship, and hold the shipowner responsible for it. If the baggage is not delivered into the actual custody and keeping of the carrier, but is retained in the possession of the passenger, the carrier is under no such liability for its safety. Carpenter v. New York Railroad Co., 124 N.Y. 53, held, that a carrier was not liable for the effects of travelers not delivered into his custody, and money retained at night and placed under the traveler's pillow was not in the custody of the carrier. The carrier may by special contract make reasonable modifi- cations of his liability for baggage. But the carrier can not relieve himself wholly from liability, and the limitation must be brought to the passenger's notice and must be reasonable. Con- ditions limiting the carrier's liability to each passenger to a given amount have been upheld. In Mauritz v. Railroad Co., 23 Fed. Rep. (U.S.) 765, it was held that a railroad company can not limit its liability for the safe carriage of a passenger's baggage by a notice printed upon the face of a ticket, unless the passen- ger's attention is called to it when purchasing the ticket, or unless the cir- cumstances are such that it would' be negligent of him not to read it. When the passenger can not read and the agent makes no explanation when he sells the ticket, the passenger is not bound. The clause in the ticket was that the company would not be liable for lost baggage excepting wearing apparel, and then only for a sum not to exceed $50. The liability of the carrier for the baggage does not terminate until the passenger has had reasonable opportunity to take charge of it after it has reached its destination. If it is not claimed after a reasonable time, the carrier may store it, and his liability as a carrier ceases, he being liable thereafter only as a warehouseman. Roth v. Buffalo Railroad Co., 34 N.Y. 548, held, that when a passenger did not call for his trunk, but left it in the hands of the company over night, with- out any arrangement with them, and it was destroyed before morning by the burning of the depot, the company was not liable. The common carrier's liability for baggage terminates within a reasonable time after the arrival of the baggage at the place of destination, if the carrier is ready to deliver the same to the passenger. 2l6 BAILMENT QUESTIONS ON BAILMENT 1. Define bailment. Distinguish from sale. Who is the bailor ? Who is the bailee ? 2. What are the five classes of bailments under the Roman law ? 3. Classify bailments according to recompense. 4. What care or diligence is said to be required in the case of a bailment for the benefit of the bailor ? For what degree of negligence is the bailee liable ? 5. In the case of a bailment for the benefit of both parties, what degree of care is required, and what degree of negligence renders the bailee liable ? 6. In the case of a bailment for the benefit of the bailee, what degree of care is required, and what degree of negligence renders the bailee liable ? 7. Brown steals a horse, and while riding it carefully is run into by a run- away team and the horse is killed. Brown was exercising the greatest care, and was not guilty of any negligence whatever. Is he liable for the value of the horse ? 8. A, a farmer, intending to go to town the next day, promises B that he will take two bags of wheat for him without charge. The next morning he starts away without it, and B is put to the necessity of hiring a man to take the wheat for him. Can he recover damages from A for breach of A's agreement ? 9. If in the above case A had taken B's wheat on his wagon and started to town with it, but in loading it had carelessly put a plow on the top of it, in consequence of which the bag was torn open and the wheat scattered along the road. Could B have recovered of A for the loss of the wheat ? 10. In question 8, if nothing was said by the parties as to whether or not A was to receive any compensation for taking the wheat, and he had been in the habit of doing numerous little errands for B without charge, which would the presumption be, that he was a gratuitous bailee, or a bailee for hire ? 11. Bernard, as a favor to Webster, receives a sum of money to keep for him until next day. He puts it with his own in his pocketbook which was in his coat pocket. That night Bernard's house was robbed, and the pocketbook that also contained money of his own was taken from his coat, which hung on the foot of the bed. Was Bernard liable ? What degree of care was required of Bernard ? 12. Nelson borrows a bicycle from Wood, rides it to a ball game, and leaves it in the bicycle rack unlocked. The bicycle is stolen. It was left in the same place with many other bicycles, but no one was placed in guard over it. Is Nelson liable to Wood for the bicycle ? 13. A borrows a horse of B with which to work his garden. He keeps the horse two days, and then sends it back. While A had the horse he cared for it and furnished its feed. One shoe was off, and he had the horse shod. The horse was injured during the bailment through the slight negligence of A. Was A liable ? BAILMENT 217 14. In the above case, if the horse had been injured by an accident with- out any negligence or fault on the part of A, would A have been liable ? 15. In question 13, if the horse had died a natural death without any fault of A, would A have been liable ? 16. Under what three divisions do we consider bailments for mutual benefit ? 17. In question n, if Bernard was to receive $5 for caring for the money, what degree of care would be required of him, and for what negligence would he be liable ? 1 8. Dodge employed a keeper of a livery stable to board and care for his team. The keeper of the stable left the door open so that one of Dodge's horses got out and was kicked by another horse. Was the livery-stable keeper liable ? 19. A takes his wagon to B, who represents himself to be a wagon maker, and employs him to repair it. B is wholly incompetent and does not under- stand the business, and as a result the wagon is damaged. Is B liable ? 20. After the purposes of the bailment of the class in question 19 have been accomplished, what is the duty of the bailee ? Of the bailor ? 2 1 . What security has the bailee for his services ? 22. Harris takes his desk to a cabinet maker to be repaired and revarnished. After the work is completed he sends for the desk, and the cabinet maker refuses to deliver it until he receives his pay, whereupon Harris brings an action to recover the possession of the desk. Can he succeed without paying for the work ? 23. In the above case, if the cabinet maker had let Harris have the desk, could he have compelled Harris to deliver it back to him or else pay him for his services ? 24. Define pledge or pawn. Distinguish from chattel mortgage. 25. What kind of personal property may be the subject of a pledge ? 26. What is the result when the property pledged has been destroyed by fire ? 27. What degree of care and diligence must the pledgee exercise toward the property pledged ? 28. Has the pledgee the right to use the chattel pledged ? If so, when ? 29. If the pledger makes default in paying the debts secured by the pledge, what rights has the pledgee ? 30. In case the property pledged consists of bills or notes which will soon become due, what are the rights of the pledgee ? 31. What are the two principal examples of exceptional bailments ? 32. Define an innkeeper. Distinguish an innkeeper from a boarding-house keeper. 33. Reed enters Porter's hotel, and leaving his baggage with the clerk, goes to dinner. After dinner he calls for his baggage, meaning to take the three o'clock train. The baggage is lost. Does the relation of innkeeper and guest exist between them ? 218 BAILMENT 34. Swift went to Porter's hotel as a friend and guest of Porter for the purpose of visiting him and without paying anything for his accommodation. Did the relation of innkeeper and guest exist between them ? 35. Hewlett becomes a guest at Porters hotel, and while there the hotel is destroyed by fire. Porter is free from negligence. Is he liable to Hewlett for baggage lost in the fire ? 36. In the above case, if Hewlett's baggage had been stolen by a servant in the employ of Porter, would he have been liable ? 37. In question 35, if the hotel had been destroyed by a flood or cyclone and Hewlett's baggage lost without any negligence on Porter's part, would Porter have been liable ? 38. Porter gave notice to his guests that he would be liable for money or valuables only when they were placed in the office safe, and not when they were left in their rooms. Hewlett left $1000 in bank notes locked in his trunk in his room. This was broken into and the money stolen. Was Porter liable ? 39. When Hewlett applied to Porter for accommodations, Porter refused to receive him unless he paid in advance. Had Porter this right ? 40. Hewlett was received as a guest by Porter, and after staying three days packed up his trunk preparatory to leaving. Porter refused -to allow him to remove his trunk from the hotel until his bill was paid. Had Porter this right ? 41 . Define a common carrier. 42. What two requisites are necessary to constitute a person a common carrier ? 43. Wooster shipped 100 barrels of flour to Allen & Co. When the goods arrived the carrier refused to deliver them until Allen & Co. had paid the charges. Had the carrier a right to so hold them ? 44. In the above case suppose the carrier delivered the goods to Allen & Co. and then looked to Wooster for the freight. Wooster claimed that the agreement between the parties was that Allen & Co. should pay the freight. Could the carrier hold Wooster ? 45. In the absence of a statute regulating the rates of the railroad company a common carrier charged one Johnson $1.50 a hundred for carrying freight a certain distance. The Pennsylvania Coal Company had received a special rate of $1.20 a hundred, because they were large and important shippers. Had the carrier the right to make this distinction ? 46. Suppose in the above case the railroad company desired to put Johnson at a disadvantage with his competitors, as the competitors shipped all of their freight by this carrier while Johnson shipped some by another carrier. Therefore they charged Johnson $2.80 a hundred, while all other shippers had the regular rate of $1.50 a hundred. Had the railroad company the right so to charge him ? 47. The Pony Railroad Company, owners of a small line of railroad being BAILMENT 219 constructed to convey passengers to a pleasure resort, were called upon to transport for plaintiff a heavy boiler. The company refused to accept it on the grounds that they had no car sufficient in size to carry it nor any facilities to transport it. Had they the right so to refuse it ? 48. In the above case, if the boiler was not too large for their equipment, had they the right to refuse on the ground that they were carriers of passengers only, and did not carry freight ? 49. What is the object of the interstate commerce law ? 50. When does the carrier's responsibility for goods intrusted to him begin ? 51. What is the liability of a common carrier for goods intrusted to him ? 52. Name four exceptions to this exceptional liability. 53. Plaintiff's goods were lost by the carrier by reason of lightning striking the car in which they were contained, and the car being consumed by fire. Was the carrier liable ? 54. In the above case, if the fire was caused by sparks from a fire along the course of the railway for which the company was not to blame, was the com- pany liable ? 55. If the goods in question 53 had been lost through acts of a mob of strikers, would the carrier have been liable ? 56. If the goods had been lost through the act of an army while the coun- try was at war, would the carrier have been liable ? 57. Conger ships a barrel of crockery which has been but carelessly packed and with no mark placed upon it to give the carrier notice of its contents. While being handled in the usual course of transportation the crockery is broken. Is the carrier liable ? 58. Clark ships a car load of cattle from Chicago to New York City. While on the way one of the cattle, being vicious, gored a number of others so that they died from their wounds. Is the company liable ? 59. In question 54, if the company had expressly contracted that it would not be liable for accidental fire not caused through its negligence, would it have been liable ? 60. In the same case, if the fire had been caused by the gross negligence of the company's employees, but it had expressly contracted not to be liable for fire from any cause whatever, would it have been liable ? 61. The carrier receives certain goods to be delivered to one J. R. Myers of New York City. When the goods reach there, a person applies to the freight office and asks for the goods, stating that his name is Myers. The goods are delivered to him, and it later transpires that the party who applied was not the consignee of the goods, but a party who obtained them fraudu- lently. Can the consignee recover the value of the goods from the carrier ? 62. Certain goods are carried by the New York Central Railroad consigned to one Powell at Albany. The goods reach Albany and are placed in the depot at four in the afternoon. A notice b mailed to Powell which reaches him 220 BAILMENT the next morning. Within that time a fire occurs and the goods are destroyed. Is the railroad company responsible ? State the holding in the different states. 63. Brown, a respectable person, applies to the Pennsylvania Railroad Company for transportation on one of their passenger trains, offering to pay vhe usual fare. Have they the right to refuse him, there being sufficient room on their cars ? 64. If Brown was drunk and disorderly, had they a right to refuse him ? 65. What is the liability of the carrier for the lives and safety of its passengers ? 66. What is baggage, and what is the carrier's liability for a passenger's 67. Drew, a passenger on the New York Central Railroad, had his trunk checked and placed in the baggage car of the train upon which he received transportation. The trunk, which was lost, contained his wearing apparel, a dress for his wife, which he had purchased on the journey, some presents for his friends, and a sum of $20 in a purse, which money he intended to use on his journey. Was the railroad company liable for all of the contents of this trunk ? If not, for what portion of it was the company liable ? 68. If the company had expressly contracted with Drew that their liability for baggage should be limited to $50 and he had had notic'e of this limitation, /e executed, acdnow/. tie Jaea'/iate'y his aMearm. a et <6ecf cmtuitemp a yeneia/ watianfy ana' ' /Ae Mua/ ft// cwenanto fe //ic 302 REAL PROPERTY cvnvevtna ana* adduitna Jo Mem Me we dtmti/e o/Me data Sit aee Aom aw enctvm&tanoe > (c4 'ISfeea' dAa// conJotm to Me ieaueiementd o/ Me /10 o'cdocd A<-^ / the f / ' Merchants National Bank, Rochester, New York. it i8 THnbCr8tOOb Mat tAe dttfafattonJ adoicdaea ale to to ana* rftna / Me Aeild, executed, aa'mtntdtiatoU ana a4>iald with my seal Dated the fifteenth day of September. One Thousand Nine Hundred and Five tta I do hereby make, constitute and appoint the said party of the second part my true and lawful attorney, irrevocable in bis OW/Hname or otherwise, but at his proper costs and charges, to have, use and take, all lawful ways and means for the recovery of the said money and interest: and in case of payment to discharge the same as fully as I might could do if these presents were not made. i . fourth day of J a n u a r y six . Sealed and delivered in the presence of 320 REAL PROPERTY chasers of the property. If not so recorded, they are in most states valid as between the original parties, but not against persons who have purchased in ignorance of the existence of the mortgage. But in some states the statutes require the mortgage to be recorded in order to render it valid. Discharge. If the mortgage is paid according to its terms when it becomes due, it is discharged; or payment after it is due, but before an action is brought to foreclose, discharges the mortgage. In order to cancel the mortgage on the records, a formal discharge is executed and filed ; otherwise the mortgage, although paid, would still appear by the records to stand against the property. The mortgage which we have discussed would be discharged in the following form : STATE OF NEW YORK, I, Fred C. White, of Geneva, Ontario County, New York, assignee of the mortgage hereinafter described, 2)0 bereb^ Certlf^, *SrAaSa year. May I was a holiday, and possession was retained until May 4, the 1 excuse given being the difficulty to get trucks to move defendant, also that on the 3d of May one of the boarders was ill. On the afternoon of the 4th | of May the keys were tendered plaintiff and refused. Held, that the plaintiff was entitled to consider the lease renewed for another year. It was in the option of the landlord so to regard it or to accept the surrender of the premises. LANDLORD AND TENANT 323 Made and executed Q&flpgm William E. Weaver of the .Cl.ty.._r=^_...of- : _.___JBualo and vJLyman Collins ........__ -, New York, of the first part, of the- this fi.f.t.b._=r__day of_- and.. , New York, of the second part, -in the year One thousand nine hundred Jtl COtt0t$tAllOft of the rents and covenants hereinafter expressed, the said party of the first part has emtseb onfc feeaseb, and does hereby demise and lease to the said party of the second part_^=r , \ thg following premises, viz : The house, "barn and lot known as number 406 South Street in with the privileges and appurtenances, for and during the term of.~3rMQ....y.8..8>r.8i. : j=r^..from the first Hay of He. aember. _ i 190 5 which term will end_rrrr:..li.03:.em.b.er.....5Q.,....lSQ7.> .. And the snidfarty of the second part covenants that he will pay to the party of ithe first part, for the use of said premises, the ZHQn.tllly.._.-rr-..rent of EjP-CtjL^ : -^rr=. Dollars ($.....40.00. ), to be paid _m.on.thly in adyance an the first day _ mcinth. jdurin tb^b, said part y of the second part shall fail to pay said rent, or any part thereof, when it becomes .due r~ _ _it is agreed that said party of the first part may sue for the same, or re-enter said premises, or resort to any legal remedy. The fart y of the__..f irst part agrte 8 to pay all . i.taxes to be assessed on said premises during said term . The part y of the second part covenants that at the expiration of said term he will surrender up said premises to the party of the first part in as good condition as now, necessary wear and damage by the elements e-graptpH the hands and seals of the said parties the day and year first above written. [U S.J 324 REAL PROPERTY Express and Implied Covenants. The covenants contained in a lease are either expressed or implied. The implied covenants exist whether they are mentioned or not ; the express covenants must be included in the express conditions of the lease, and may be many or few. The implied covenants, on the part of the lessor, are those regarding quiet enjoyment and the payment of taxes. The usual words of grant in a lease are "demise and lease," or "grant and demise," these words being said to import a cove- nant of quiet enjoyment. This covenant is broken when the tenant is evicted by some one who has a paramount title. Duncklee v. Webber, 151 Mass. 408, was an action for breach of an implied covenant of quiet enjoyment of a written lease for one year. Within the time the property was sold under a mortgage ; and the plaintiff, upon receiv- ing notice to quit, followed by threats of ejectment, moved away. Held, that plaintiff could recover. The landlord also impliedly covenants that he will pay all taxes assessed against the premises during the term. There is no implied covenant on the part of the lessor, or landlord, that the premises are in a tenantable condition. Reeves v. McComeskey, 168 Pa. St. 571, held, that no implied covenant that the landlord warrants the leased premises to be tenantable, or that he undertakes to keep them so, arises out of the relation of landlord and tenant ; and in the absence of a provision in a lease that the lessor shall make repairs, it is no defense to an action for rent that the premises are not in a tenantable condition. Lucas v. Coulter, 104 Ind. 81, was an action for rent of a store leased to defendant. The defense was, that the store was rented for the manufacturing and selling of musical instruments, and that it was so 'imperfectly and defect- ively constructed that rain and sand came through the roof and ceiling, causing damage to the instruments. Held, that in the letting of a store, room, or house, there is no implied warranty that it is, or shall continue to be, fit for the purpose for which it is let. The tenant must determine for himself the safety and fitness of the premises. On the part of the lessee, or tenant, there is an implied cove- nant that he shall pay the rent stipulated for ; and, although no sum is specified in the lease, the tenant must pay a reasonable rent, unless it appears that it was the intention of the parties that none was to be paid. LANDLORD AND TENANT 325 The lessee also impliedly covenants to repair, and if the leased premises consist of a farm, it is implied that he is to cultivate it in a husbandlike manner. The covenant to repair is not to rebuild when the property is burned down, but, as it is said, to keep it " wind and water tight," that is, to keep the roof from leaking and the siding tight. The premises must be kept in repair, except for ordinary wear and tear. Turner v. Townsend, 42 Neb. 376, was a case in which the tenant sued the landlord for the value of a front window in the leased store. The window had been broken by a storm during the tenancy and replaced by the tenant, the land- lord having refused to put in a new one. Held, that he could not recover. The landlord is not bound either to repair leased premises himself or to pay for the repairs made by his tenant unless he has expressly contracted to make the repairs. Auivorth v.Johnson, 5 C. & P. (Eng.) 239, held, that a tenant of a house from year to year is bound only to keep it wind and water tight. Rights and Liabilities under a Lease. Aside from the cove- nants in a lease there are certain rights and liabilities which arise from the relation of landlord and tenant. In the absence of an agreement to the contrary the tenant is entitled to the exclusive possession of the premises. He is liable for waste and is estopped from denying his landlord's title, that is, the tenant can not for any purpose claim that the premises do not belong to his landlord. Gray v. Johnson, 14 N.H. 414, held, that if a tenant recognizes the title of his landlord by accepting a lease or by paying the rent, he will be estopped during the term of his tenancy from disputing it, although the want of title may appear from the landlord's own testimony. Hamilton v. Pittock, 158 Pa. St. 457, held, that a lessee of an oil lease who takes a second lease of the same premises from a person claiming adversely to the original lessor, can not refuse to pay the rent under the second lease on the ground that the lessor in the first lease had the better title to the land. As we have seen in the case of a life tenant on page 295, the tenant is entitled to emblements when his estate is cut off by some contingency without his fault. In the case of Gray v. Worst, 129 Mo. 122, Shoemaker owned some land, of which he gave a deed in trust to Toms to secure a loan. Shoemaker after- wards leased the land to defendant for a year and defendant paid the rent in full. Before defendant had harvested his crops Toms foreclosed his claim and 326 REAL PROPERTY sold the property to plaintiff. Plaintiff at once claimed the crops as owner of the land, but defendant as lessee gathered them before leaving. In this action for the value of the crops it was held that the lessee was entitled to them and plaintiff could not recover. The landlord is under no obligation to repair unless the lease expressly binds him to such duty. And he is entitled to the fixtures annexed to and made a part of the realty. The ques- tions as to when the fixtures may be removed by the tenant, and when they may be claimed by the landlord, have been discussed in the chapter on Sales. Assigning or Subletting of Lease. Unless the tenant is re- strained by an express covenant against subletting or assigning, he may assign or sublet his lease without the consent of the land- lord. If the interest granted by the lessee is for a shorter time or for rights inferior to those granted in his own lease, it is a sublease. In Collins v. Hasbrouck, 56 N.Y. 157, it was held that where a lessee exe- cutes an instrument conveying the whole of his unexpired term, but reserving rent at a rate and time of payment different from those in the original lease, and a right of reentry on non-payment of rent and the breach of other condi- tions, and also providing for a surrender of the premises to him at the expiration of the time, the instrument is a sublease and not an assignment. And in the case of a sublease the subtenant is not liable for rent to the original lessor, but only to the original lessee. Trustees v. Clougk, 8 N.H. 22, held, that he to whom the lessee sublets for but a part of the term is only a subtenant and not an assignee of the term. Such subtenant is not liable to the original lessor for the rent. If the interest conveyed by the tenant is his whole interest in the lease, it is an assignment of the lease, and the assignee is lia- ble to the original lessor for rent. In the case of an assignment of the lease the landlord may look to either the original lessee or to the assignee of the lease for the rent. The assignee takes all of the interest of the original tenant and is bound to pay rent, to repair and to use the property in any special way pro- vided for in the lease. But these obligations of the assignee of the lease do not in any way release the original lessee from his obligations to his lessor. LANDLORD AND TENANT 327 In the case of Sanders v. Partridge, 108 Mass. 556, the lessees of real estate granted to them for ten years by a written lease, delivered the lease to defend- ant with the indorsement by which they assigned to him all their "right, title, and interest in and to the within lease." Neither the lessee nor the defend- ant personally occupied the premises, but after the assignment the rents were turned over to defendant. Held, that the landlord can maintain an action against the defendant for the rent. Eviction. At the expiration of the lease the landlord is enti- tled to the possession of the premises, and if the tenant does not surrender them, the landlord may institute proceedings to evict him. The statutes in the different states provide the procedure by which the tenant holding over after his lease has expired may be evicted on short notice. This is termed " summary proceed- ings." This form of procedure is also provided by statute for the eviction of the tenant when he does not pay his rent. The landlord who wishes to evict a tenant by summary proceedings obtains a process from some court which is served upon the ten- ant, and if it is found by the court when the case comes up for a hearing that the landlord is entitled to the possession of the premises, the court empowers one of its officers to evict the ten- ant from the premises. Where the tenancy is not for any fixed period, but is a ten- ancy from year to year or month to month, it can not be termi- nated by either party except by notice. Under the common law a tenancy from year to year could be terminated by notice six months before the expiration of the period, and in the case of a tenancy for a shorter period, as from month to month, by a notice equal to the length of the period. In Steffens v. Earl, 40 N.J. L. 128, it was held that in monthly tenancies a month's notice to quit is sufficient, but the notice must be to quit at the end of one of the monthly periods. Until this notice has been given, the landlord can not evict the tenant, and until the tenant has given a like notice to the land- lord, he is liable to be held for the rent unless the landlord accepts his surrender of the premises. The statutes in the different states have in many instances changed the common law rule and a shorter notice is rendered sufficient. 328 REAL PROPERTY QUESTIONS ON REAL PROPERTY 1. Define real estate. 2. Is a dwelling house real estate? 3. Who owns the bed of a stream which is not navigable ? 4. A has a farm upon which there is a pond one half mile in diameter. Has A the right to prohibit people from fishing and rowing upon this pond ? 5. A's farm has a small river running through it. Has A the exclusive right to fish on the part running through his property? 6. In the above case, if the river had been a navigable stream, what exclu- sive rights would A have had ? 7. In questions 4 and 5 to whom would ice, freezing on the water men- tioned, belong? In question 6 to whom would the ice belong? 8. Define corporeal real property. Incorporeal real property. Easement. Give an illustration of each. 9. Define an estate in fee simple. 10. What is the right of eminent domain? 11. Wilson owns the absolute title in a farm. He dies leaving his widow the use of it during the remainder of her life. She leases it to Johnson for one year. What estate in the land did Wilson have? What estate did his widow receive after his death? What estate did Johnson have? 12. In the above case could Wilson's widow grant to any one an estate in the land that would exist beyond her own life ? Could she grant an estate in the land that would last as long as she lived? 13. Had Wilson's widow the right to cut timber on the farm for the purpose of repairing the buildings? For use as fuel? To sell for lumber? To use in manufacturing wagons? 14. Explain what is meant when it is said that a life tenant must not com- mit waste. 15. In question 11 suppose there was a coal mine on Wilson's farm which he had been working during his life. Can his widow continue to work it under her life estate? Can she open it and work it if it had existed on the farm but had never been worked? 1 6. If Wilson's widow should sow a field of wheat on the farm and then die before it was harvested, would the wheat belong to her estate, or to the person to whom Wilson had left the farm after his widow's death ? 17. Name and define the three estates by marriage. 1 8. What conditions are necessary in order that the husband shall have an interest as a tenant by curtesy in his wife's real property? 19. If, in question 1 1, Wilson had not left any will, what would the interest which the widow would have taken in his land be called ? What interest in it would she have obtained under the common law? 20. A, a married man, buys a farm for $5000, and gives back a purchase money mortgage for #4000, paying the balance of $1000 in cash. A's widow REAL PROPERTY 329 does not join in the mortgage. Upon A's death will his widow have dower in the whole farm, or will the mortgage which she did not sign come in ahead of it? 21. If, in the above case, the mortgage given by A had not been a purchase money mortgage, but had been given some years after A had purchased the farm and his wife had not joined in it, in what part of the land would the widow have taken dower? 22. What are homestead rights? Did they exist at common law? 23. Property is conveyed to A to hold in trust for B, a minor child, until he shall become of age, the use and benefit of the property to go to B. What estate in the land has A? What estate has B? 24. Distinguish between joint tenancies and tenancies in common. 25. What do we call an agreement to convey land? 26. What is a deed, and what are the two principal classes of deeds? 27. Name six requisites of a valid deed of conveyance. 28. What is the granting clause ? Is it necessary to a valid deed? 29. What is the habendum clause in a deed, and with what words does it begin ? 30. A gave a deed to B. In the granting clause it recited that an absolute conveyance was given to B. In the habendum it recited that B had a title in fee subject to a life estate in C. What estate did B get under the deed? 31. Is a date necessary to the validity of a deed? From what time does a deed take effect ? 32. Fisher draws a deed of a house and lot, naming his grandson as grantee. He places the deed in his safe, and after two years dies. The deed is found and the grandson claims the property under it. Can he recover the property? 33. If, upon drawing the deed, Fisher had given it to his banker to hold until his death to deliver to the grandson at that time, could the grandson hold the land? What kind of delivery to the banker would this have been? 34. What is the acknowledgment? 35. Is the deed valid as between the parties when it is not recorded? Is it valid as to third parties who had no notice of it and who acquired rights to the land after it was given ? 36. What is the covenant of seizin, and when is it broken? 37. What is the covenant of quiet enjoyment? 38. A sold a farm to B. and in the deed there was a covenant of quiet enjoyment. After B obtained possession, C, a third party, claimed title to the farm and brought an action against B to recover it. In this case C was defeated, as the court decided he had no claim whatever. Was A's covenant of quiet enjoyment broken? If C had recovered in his action, would the covenant of quiet enjoyment have been broken ? 39. What is the covenant against incumbrances? 40. If, in question 38, A's deed had contained a covenant against incum- brances and there had existed a judgment on record against A, which was a 330 REAL PROPERTY Ken upon the property, would the covenant have been broken? If there had been unpaid taxes against the property, would the covenant have been broken? 41. What is the covenant of further assurance? 42. What is the covenant of warranty of title? 43. If A's deed to B, in question 38, had contained a warranty of title, and after B had possession D had gone upon the land and removed a building which he had erected temporarily and which he had the right under an agree- ment to remove, would the covenant have been broken? 44. Does a quitclaim deed contain any of the covenants of a warranty deed ? 45. What covenant is sometimes used in a quitclaim deed? 46. What is a mortgage ? 47. Under the common law, was it the mortgagor or the mortgagee that had the legal title to the mortgaged property? 48. In most of the American states which party has the legal title to the property? 49. What is the defeasance clause in a mortgage? 50. What three covenants are often included in a mortgage? Are they necessary to the validity of a mortgage? 51. Why is a note or bond generally given with the mortgage? 52. Can a mortgagee assign his interest in a mortgage? Can it be assigned orally? 53. What is the remedy of the mortgagee when the debt secured by the mortgage is not paid as agreed? 54. Is an unrecorded mortgage valid as between the original parties? Is it valid as to third parties who have acquired subsequent interests in the land? . 55. Can the mortgagor place more than one mortgage upon the same piece of property? If so, which mortgage has the preference? 56. Must a lease of land for more than one year be in writing? 57. A rents a house and lot of B for one year at the annual rental of $200. At the end of the year nothing is said and he remains for another year, pay- ing his rent. After remaining in the house for two months of the third year A vacates it. B claims the rent for the whole year. Can he recover? 58. What are the two implied covenants on the part of the lessor? 59. Is there an implied covenant on the part of the lessor that the premises are in a tenantable condition? Is there an implied covenant on the part of the lessee that he will pay rent? If the rent is not specified in the lease, how much will he be required to pay? 60. If there is no covenant to that effect in the lease, is there an implied covenant on the part of the landlord to repair during the term of the lease? 61. Is there an implied covenant on the part of the lessee or tenant to re- pair during the term of the lease? 62. Does the covenant to repair require the rebuilding of the premises if they are burned down? REAL PROPERTY 331 63. Hamilton leases a house and lot of Turner. He does not pay his rent and Turner sues him. Hamilton claims that Turner is not the owner of the property, and it develops upon the trial that a third party has a paramount title. Can Hamilton defeat Turner's suit for rent in this way? 64. A leases his farm to B for one year. C, a mortgagee, forecloses a mort- gage on the farm against A and sells it to D, who takes possession and ousts B before he has an opportunity of harvesting his crops. To whom do the crops belong, D or B ? 65. If there is no restriction in the lease, can the tenant assign his rights? 66. Emery leases a building for one year and then leases all but one room to Boland for the whole length of his term. Which does this constitute, an assignment or a subletting? 67. In the above case the owner of the building sues Boland for the rent. Can he recover? , 68. If, in question 66, Emery had rented the entire building for the full term of his lease to Boland without any restrictions, what would it have constituted, an assignment or a subletting? 69. In question 68 the landlord sues Boland for the rent. Can he recover? 70. If the tenant's lease of the property is for a definite time, how may the landlord evict him at the end of his term, provided he does not voluntarily surrender the property? 71. If the tenant is holding from year to year, how must the landlord pro- ceed in order to terminate the tenancy? Courts. We have dealt with law as defining the rights and limitations of individuals in their dealings with one another ; but these rights must often prove of little value in protecting the individual in his property and personal relations unless a means of enforcing them is provided. For this purpose the Constitution of the United States has established a system of Courts. Jurisdiction. The jurisdiction of a court is defined as the power to hear and determine a cause. The courts of a particular class are empowered to hear only a certain line of causes or disputes ; while another line of cases, involving different amounts or arising between different parties or being of a different nature, will be determined by entirely different courts. It is essential in all cases that the particular court before which a question is brought for determination shall have jurisdiction, for if it has not, its decision is of no effect, and may be set aside at any time. Jurisdiction of Subject-matter. The jurisdiction of a court must be both of the subject-matter and of the person. Juris- diction of the subject-matter means the power of the court regarding the subject or thing in dispute. Thus, in an action concerning the title to a particular piece of land in Monroe County, New York, if the case were brought in the county court of Erie County, New York, this court would have no jurisdiction of the question of the title to land outside of Erie County, therefore, there would be a lack of jurisdiction of the subject-matter. Again, the justice courts in New York have no power to determine questions affecting the title to real property, and, therefore, the above case could not be determined by a justice court, as such court has no jurisdiction of the sub- ject-matter. 332 COURTS AND THEIR JURISDICTION" 333 Jurisdiction of the Person. Jurisdiction of the person, or of the party, against whom an action or cause is brought, is neces- sary, or the decision will have no effect as against such person or party. For example, a court of the state of Michigan can determine only matters of its own subjects. It can not therefore compel a resident of another state to obey its commands unless it obtains jurisdiction of the person while within the state of Michigan. Jurisdiction of the person is generally acquired by the service of a notice or command upon the party, which notice is generally called a summons and will be treated of later. Classification of Courts. The courts of the United States and of the different states may be arranged under several classifica- tions, which we will consider in the following order : Courts of Original Jurisdiction. Courts of Appellate Jurisdiction. Courts of both Original and Appellate Jurisdiction, Courts of Record. Courts Not of Record. ~. ., ~ /Law Civil Courts \ _ . I Equity. Criminal Courts. Courts of General Jurisdiction. Courts of Limited or Special Jurisdiction. Courts of Original Jurisdiction. Courts of Original Jurisdic- tion are those courts that have authority to hear and determine questions when they are first presented for judicial determination or decision. They are the courts that hear both sides of the dis- pute and render their decision therefrom. Courts of Appellate Jurisdiction. A Court of Appellate Juris- diction has no power to hear a case when it first arises. It can only review the decision of a lower court when such deci- sion is brought before it for determination. The taking of a case from a lower court to a higher one is called an appeal. Original and Appellate Jurisdiction. There are other courts that have in some cases original and in others appellate juris- diction ; that is, they have jurisdiction to hear appeals from some 334 COURTS AND THEIR JURISDICTION lower court or courts, and they can also try certain cases in the capacity of courts of original jurisdiction. Courts of Record and Not of Record. Courts are known as Courts of Record and Courts Not of Record. Courts of record are, as their name implies, those which are required by law to keep a record of their proceedings, this record being kept on file in some safe place for future reference. Courts Not of Record, on the other hand, have no record of their proceedings preserved. Civil and Criminal Courts. Courts are either Civil or Crimi- nal. Civil courts hear cases in which the rights and liabilities of individuals towards each other are in dispute. A civil action is one which seeks the establishment, recovery, or redress of private rights, while a criminal action has for its purpose the protection of the community against those whose acts would endanger it. Criminal courts are those which administer criminal law and hear and determine criminal actions. Common Law and Equity Courts. Civil Courts may be either Common Law Courts or Equity Courts. The distinction between the common law court and the equity or chancery court was in former times well defined, a different set of judges presiding over, and an entirely different system prevailing in, each court. But the line of distinction is in most jurisdictions less pronounced now than formerly, and in New York State and many of the other states the same judge presides in both a common law and an equity court ; at one term of court hearing common law cases and at another equity cases. General and Special Jurisdiction. Courts of General Jurisdic- tion are those in which it is assumed, unless the contrary is shown, that they have jurisdiction to hear the cases before them. In such a court the fact that it has jurisdiction does not have to be expressly pleaded or proved, while in the case of a court of inferior or special jurisdiction, the jurisdiction of the court over the case in question is not presumed, but must be especially set out in the pleadings. Federal Courts. The courts of the United States are called Federal courts and are empowered to hear cases arising under the United States Constitution, laws, and treaties. The Constitution COURTS AND THEIR JURISDICTION 335 provides that the judicial power of the United States shall be vested in one Supreme Court and in such inferior courts as Congress may from time to time establish. In pursuance of this authority, Congress has established, in addition to the Su- preme Court, several inferior courts which are known as the Circuit Court and the District Court. The Federal courts have jurisdiction only in those cases in which it is expressly conferred upon them by the Constitution, and by Congress under the power granted to it by the Constitu- tion. This jurisdiction extends to all cases arising under the United States Constitution, the laws of the United States and treaties made under their authority, and all cases affecting am- bassadors, public ministers, and consuls ; to all cases of admi- ralty and marine law, which includes all things done upon and relating to the seas and all transactions in connection with com- merce and navigation and to damages for injuries upon the high seas and the navigable lakes and rivers of the United States. They also have jurisdiction of controversies in which the United States is a party, and of cases between two or more states, between a state and citizens of another state, between citizens of different states, between citizens of the same state claiming land under the grant of a different state, and between a state or its citizens and foreign states, citizens, or subjects. District Court. The United States is divided into districts each comprising one state or less. Each of the following states constitutes one district : Arizona, Alaska, Colorado, Connecticut, Delaware, Idaho, Indiana, Kansas, Maine, Maryland, Massachu- setts, Minnesota, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, North Dakota, Oklahoma, Oregon, Rhode Island, South Carolina, South Dakota, Utah, Vermont, Washington, and Wyoming. The following states contain two districts each : Arkansas, California, Florida, Georgia, Illinois, Iowa, Kentucky, Louisiana, Michigan, Mississippi, Missouri, North Carolina, Ohio, Virginia, West Virginia, and Wisconsin ; and the following, three districts : Alabama, Pennsylvania, and Tennessee; while New York and Texas are each divided into four. 336 COURTS AND THEIR JURISDICTION A judge is appointed to preside in each district. The district judge receives a salary of $6000 per year. The district court has jurisdiction of all crimes and offenses cognizable under the authority of the United States and com- mitted within the particular district or upon the high seas, except where the punishment is death ; all causes of action arising under the postal and bankruptcy laws ; all cases of admiralty and marine questions, and many other cases. For the relief of the court, and the convenience of the parties in each district, a number of referees in bankruptcy are ap- pointed. These referees hear the cases and report to the dis- trict judge, who grants or refuses the final discharge. Circuit Court. The United States is divided into nine cir- cuits as follows : First Circuit : Maine, Massachusetts, New Hampshire, and Rhode Island. Second : Connecticut, New York, and Vermont. Third : Delaware, New Jersey, and Pennsylvania. Fourth : Maryland, North Carolina, South Carolina, Virginia, and West Virginia. Fifth : Alabama, Florida, Georgia, Louisiana, Mississippi, and Texas. Sixth : Kentucky, Michigan, Ohio, and Tennessee. Seventh : Illinois, Indiana, and Wisconsin. Eighth : Arkansas, Colorado, Indian and Oklahoma Terri- tories, Iowa, Kansas, Minnesota, Missouri, Nebraska, New Mexico, North Dakota, South Dakota, Utah, and Wyoming. Ninth : Alaska, Arizona, California, Idaho, Montana, Ne- vada, Oregon, and Washington. The chief justice and the associate justices of the Supreme Court are allotted to the circuits, in which they may sit as circuit justices. Two or more circuit judges are also appointed for each circuit, and they have the same power in the court as the Supreme Court justice allotted to the circuit. The circuit court judge receives a salary of $7000 per year. In the first and fourth circuits there are two circuit judges, in the second and eighth four, and in each of the other circuits three. COURTS AND THEIR JURISDICTION 337 A circuit court may be held by the Supreme Court justice of the circuit, by a circuit judge of the circuit, or by one of the district judges of the district. The circuit court has original jurisdiction of cases in equity or common law where the amount in dispute exceeds $2000 and the question arises under the United States Constitution, laws, or treaties ; also in controversies in which the United States is a party, and in disputes between citizens of different states. It also has jurisdiction when the amount involved exceeds the sum of $2000 and the controversy arises between citizens of the same state over a claim for land granted by a different state. Its jurisdiction includes all crimes arising under the authority of the United States, having concurrent jurisdiction with the dis- trict court of the crimes within its jurisdiction, and it has juris- diction of patent and copyright cases and of questions concerning Indian lands. Circuit Court of Appeals. The circuit court as well as the district court has only original jurisdiction, all appeals from either court being taken to the circuit court of appeals, which consists of three judges, the presence of at least two being necessary to constitute a quorum. The Supreme Court judge assigned to the circuit and the district judges within the circuit are competent to sit as judges of the circuit court of appeals. This court has appellate jurisdiction only and hears appeals from both the circuit and the district courts. It hears all ap- peals from these courts except in a few special cases, which will be mentioned later, where appeals are taken directly to the Supreme Court of the United States. Supreme Court. The Supreme Court consists of the chief justice and eight associate justices. The chief justice receives a salary of $13,000 and the associate justices $12,500 per year. This court has both original and appellate jurisdiction, its original jurisdiction extending over all proceedings brought against ambassadors, public ministers, consuls, and their fami- lies, and over all controversies of a civil nature in which a state is a party. It has appellate jurisdiction to hear appeals from the district COM. LAW 22 338 COURTS AND THEIR JURISDICTION or circuit courts in all cases where the jurisdiction of the court is in question, cases of conviction of a capital crime, cases that involve the construction or application of the United States Constitution, and cases in which the constitutionality or validity of any law of the United States or any treaty made under it is drawn into question, also a few other important ques- tions. Of the less important cases the determination of the circuit court of appeals is final, but in the more important mat- ters and those in which a large amount is involved an appeal may be taken from that court to the Supreme Court. State Courts. While the federal or United States courts above enumerated deal only with certain specific cases over which they are given jurisdiction by the Constitution, the great mass of questions not specifically placed within the jurisdiction of these federal courts is within the jurisdiction of the state courts. Justice Court. The systems of courts in the different states differ somewhat, but in the more important features are essen- tially the same, the lowest court being the Justice Court, presided over by the justice of the peace. In New York State this is a town office, the justice being elected by the people every four years. It is a court not of record, and has original jurisdiction only. It hears both civil and criminal cases and is of limited or special jurisdiction. In the larger cities there are two modifications of this court, one branch hearing civil cases and being known as the Munici- pal or City Court, and the other branch dealing with the criminal cases and known as the Police or Magistrate's Court. The jurisdiction of the justice court is over the minor or more trivial cases, and includes the punishment of petty offenses which it is not thought necessary to bring before the higher courts. In civil cases it has jurisdiction when the amount in- volved does not exceed $200. It has no jurisdiction when the title to real property is involved. In its criminal branch it has exclusive jurisdiction of certain prescribed misdemeanors, such as petit larceny, assault in the third degree, malicious mischief, etc. COURTS AND THEIR JURISDICTION 339 By way of definition of the term " misdemeanor " it may be said that crimes are classified as felonies and misdemeanors. A felony is a crime punishable by either death or imprisonment in a state's prison. All other crimes are misdemeanors. County Court. In New York and many other states, the court next in importance is the County Court. The jurisdiction of this court is limited to the county, and the judge is known as the county judge. It is a court of record, having jurisdiction of both civil and criminal cases, and having both original and appellate jurisdiction. Its jurisdiction is special or limited, being confined exclusively to those cases in which jurisdiction is expressly conferred upon it. In civil matters it has jurisdiction to foreclose a lien or mort- gage on real property when the mortgage does not exceed $1000 and the realty is within the county. It has jurisdiction in an action in which a judgment for a sum of money only is de- manded, the amount not to exceed $2000, and the defendant or defendants reside within the county. It also has jurisdiction of the care and custody of the property of incompetent persons, such as lunatics, habitual drunkards, etc. In criminal cases it has jurisdiction over all crimes committed within the county and not punishable with death, except the minor criminal cases over which the justice court has exclusive jurisdiction. The county court has appellate jurisdiction to hear appeals from the justice court in certain cases. Surrogate's Court. This court, or as it is known in some states, the Probate Court, has to deal with the settlement of the estates of deceased persons, the probating of wills, and the protection of minor children, and with all matters pertaining to the dispo- sition of the property of deceased persons. Circuit Court or Supreme Court. In some states this court is called the District Court, and in others the Court of Common Pleas. In New York State it is called the Supreme Court, which name may be somewhat misleading, for instead of being the highest court, as its name would seem to indicate, it is a court of original jurisdiction. It is a court of record and has general jurisdiction. In this state it is properly divided into 340 COURTS AND THEIR JURISDICTION these branches : Trial Term, Equity Term, Special Term, and Appellate Division. For the purposes of this court the state is divided into eight districts, in each of which there are a number of judges elected by the people. For the purposes of the appel- late division of the supreme court the state is divided into four departments. Trial Term is a term of this court which convenes for the pur- pose of trying both civil and criminal cases. It may convene with or without a jury. Equity Term convenes for the purpose of trying equity cases. Special Term. In special term one judge sits without a jury for the purpose of hearing arguments and granting motions having principally to do with the practice of the court. Appellate Division. This court is composed of five judges in each department, except in the department which includes New York City, where there are seven. It has appellate jurisdiction to hear appeals of both civil and criminal cases from the county, surrogate's, and supreme courts Court of Appeals. The court of last resort in the state of New York is known by tne above title, but in the majority of the states this court is known as the Supreme Court. It has exclusively appellate jurisdiction. In New York State it is com- posed of one chief judge and six associate judges. This court never hears the evidence in a case, but merely hears appeals from the appellate division of the supreme court. Not all cases can be taken before this court, the decision of the appel- late division of the supreme court being final in many of them. It reviews questions of fact in a case only when the judgment is death. In all other cases it reviews questions of law. Court of Claims. From the fact that a state is supreme and can not be sued by its citizens, there arises a demand for some tribunal to hear and determine claims against the state, or on the part of the state against the citizen. To meet this necessity a State Board of Claims has been established, consisting of three commissioners appointed by the governor. This court convenes at various stated times, and hears and determines any of these claims which may be brought before it. COURTS AND THEIR JURISDICTION 341 Reference. A Referee is a person appointed by the court to hear the evidence in a case and to report thereon to the court. It is customary for the court to grant a reference when the case requires the examination of a long account. In some other cases a reference may be had either upon motion of the parties or in the discretion of the judge. A case involving a long account is tried before a referee because of the difficulty the jurors would have in carrying in their minds the numerous items involved therein and the great delay to which the court would be subjected on account of the expenditure of time required to hear cases of this character. A referee hears the case in the same manner as a judge, and has the same power to preserve order and grant adjournments. QUESTIONS ON COURTS 1. For what purpose are courts established ? 2. What is the jurisdiction of a court ? 3. What is the effect of a decision of a court not having jurisdiction of the question ? 4. Name and define the two different classes of jurisdiction. 5. Name the different classifications of the courts of the United States and of the several states. 6. What is a court of original jurisdiction ? Of appellate jurisdiction ? 7.. Define courts of record ; courts not of record. 8. Define civil and criminal courts ; common law and equity. 9. Distinguish between the courts of general jurisdiction and those of special jurisdiction. 10. How are the courts of the United States established, and over what questions have they jurisdiction ? 11. Name the different United States courts, and describe each. 12. What is the lowest state court ? Describe it, and state its jurisdiction. 13. Describe the county court and its jurisdiction. 14. Describe the surrogate's court and its jurisdiction. 15. Describe the circuit or supreme court and its jurisdiction. 1 6. Name and describe the four branches of the supreme or circuit court in the state of New York. 17. Mention and describe the highest state court and its jurisdiction. 18. What is the court of claims, and over what questions does it have jurisdiction ? 19. How is a referee appointed and in what cases ? PLEADING AND PRACTICE WE have learned that a system of courts is established in each state as well as in the United States. To enable the courts to conduct their business in an orderly manner, certain rules of practice are prescribed which must be observed by those desir- ing relief in these courts. Action. When a person desires the relief afforded by the courts, he institutes an action or suit. An action is defined as the legal and formal demand of one's rights made upon another person or party and insisted upon in a court of justice. Parties. In an action at law it is necessary that there be two or more parties. The party who brings the action is known as the plaintiff, and the one against whom it is brought, as the defendant. In a criminal action the plaintiff is the state or the people of the state, and the defendant is the one accused of the crime. The same person can not be both plaintiff and defendant. A party in all civil cases must be competent to contract ; but when incompetent, as in the case of an infant or lunatic, he may bring suit through a person appointed for that purpose and known as a guardian. Summons. An action is commenced by the service of a notice upon the defendant, this notice being called a summons. The summons is in some jurisdictions issued by the judge or clerk of the court, while in other jurisdictions it may be issued by the attorney for the plaintiff. In New York State if George Elliott of Buffalo, New York, should bring an action in the Supreme Court against Charles Phillips of the same place the summons would read as follows : 343 PLEADING AND PRACTICE 343 SUPREME COURT, COUNTY OF ERIE GEORGE ELLIOTT, Plaintiff, v. CHARLES PHILLIPS, Defendant. TO THE ABOVE-NAMED DEFENDANT: You are hereby summoned to answer the complaint in this action, and to serve a copy of your answer on the plaintiff's attorney within twenty days after the service of this summons, exclusive of the day of service ; and, in case of your failure to appear or answer, judgment will be taken against you by default for the relief demanded in the complaint. Trial desired in the county of Erie. Dated this loth day of February, 1904. HERMAN J. WESTWOOD, Attorney for plaintiff. 794 Ellicott Square, Buffalo, New York. This summons must be served personally upon the defendant, either by a sheriff or a constable, or by a person of suitable age. The laws expressly provide in a few cases that the summons may be served upon the defendant by advertising it in a news- paper, but this is only in case the defendant is not within the state, or if within the state he can not be located. Pleadings. After an action or suit has been commenced by the service of a summons, the parties must serve their pleadings within a certain prescribed time.- These pleadings are the formal allegations of the parties by which both plaintiff and defendant present to the court and to each other their respective versions of the question in dispute. Complaint. The complaint, which is the first pleading in a case, and is in some states called the petition or declaration, consists of a statement of the cause of action which the plaintiff sets forth as his reason for seeking the aid of the court against the defendant. Under the old common law the forms of plead- ings were very technical, but under the modern form of proce- dure they are required only to set forth the facts in a clear and concise manner. The complaint is commonly served with the summons, but may be served later. After the complaint has 344 PLEADING AND PRACTICE been served upon the defendant or filed with the court, as the rules of the particular court may require, it is then necessary for the defendant within a certain number of days (usually twenty) to file or serve a statement of the reasons why he should not comply with the demands of the plaintiff. If such a statement is not filed, the plaintiff is given judgment against the defendant by default. The pleading which is filed by the de- fendant may be either an answer or a demurrer. Answer. The answer, or plea as it is sometimes called, is a statement in concise form of the defendant's defense to the matters set up in the complaint. The answer may deny the claim of the plaintiff, or it may admit it and set up other facts by way of counterclaim or set-off. To illustrate, the plaintiff may sue for $100, which he alleges in his complaint the defendant owes him for the purchase price of a horse sold by plaintiff to defendant. The defendant in his answer may allege that he did not purchase the horse, but merely took it to keep for its use, and this would be a denial. Again, he may admit purchasing the horse for $100, but allege that he worked for defendant three months at $50 per month, and that his wages had not been paid, and ask that this be an offset against the price of the horse, and that he, the defendant, be given a judgment for the balance of $50. This defense con- stitutes a counterclaim or set-off. Reply. When a counterclaim is alleged, new facts, are brought up and it is necessary for the plaintiff, if he wishes to deny them, to make a reply, or replication, which is really the plaintiff's reply or answer to the neW^acts. set forth by the defendant. Demurrer. The defendant may consider that the facts set up in the plaintiff's complaint, even if true, do not constitute a sufficient case in law against him, and for this reason it does not require that a defense be interposed, therefore he demurs to the plaintiff's complaint. By demurring he in effect says, admitting that all the plaintiff sets forth in his complaint is true, still he is not entitled to recover. The question on the demurrer must be argued before the judge, and if the demurrer is sustained, the PLEADING AND PRACTICE 345 plaintiff must correct or amend his complaint or he fails in his action. If the demurrer is overruled, the defendant must answer or the case will go against him. A demurrer may also be inter- posed to an answer or a reply in the same manner as to the complaint. Trial. After the pleadings are served the case comes to trial. A trial is held before the court, consisting of the judge alone in some cases and in others of a judge and a jury. A jury is a body of men, usually twelve, who are brought together to hear a case and sworn to decide the same according to the evidence brought before them. Questions of Law or of Fact. Questions which give rise to a trial may be questions of law or questions of fact. In the former the facts of the case are admitted, and the question to be decided is the application of the law to these facts. This is a question for the court and is tried without a jury. A question of fact arises when the testimony of the witnesses differs and the true state of facts remains to be determined. Questions of fact are generally tried before a jury. Every criminal case may be tried before a jury if the defendant demands a jury trial. In most cases an equit^ cause is tried before the judge without a jury. All cases involving simply a question of law are tried before a judge without a jury. It may be said that the law is to be decided by the judge, and the facts by the jury. The jurors are sworn to determine the case according to the evidence, and the question arises as to what constitutes the evidence. Evidence. We find that the evidence consists of the testi- mony of persons who now something about the facts and are sworn to tell the truth. These persons are known as witnesses. Written documents and papers pertaining to the case are also admitted as evidence. Subpoena. In order to procure the attendance of the wit- nesses at the trial of a case the court issues an order, called a subpoena, commanding them to appear at a certain time to give evidence in the case, and in default of their appearance they are subject to a fine for contempt of court. Refusal to testify when called as a witness is also contempt of court. 346 PLEADING AND PRACTICE Deposition. When a necessary witness is outside of the state, or, in the justice court, outside of the county or an adjoin- ing county, it is not within the power of the court to compel his attendance, therefore statutes have been passed allowing his testimony to be taken in a certain prescribed way before a notary public or other officer, who reduces the testimony to writing and returns it to the court. The opposing party must have notice of the time and place of the taking of the deposi- tion and also an opportunity to question the witness. Lawyers. The case for both the plaintiff and the defendant is conducted by officers of the court known as lawyers. The lawyer prepares the pleadings for his side of the case, presents the case to the court, and questions the witnesses. Verdict. After the jury has heard the witnesses for plaintiff and defendant, it weighs the evidence on both sides of the ques- tion and arrives at a decision as to the party in the right. This decision is called the verdict. In order to render a verdict the jurors must all agree. If, after a reasonable time, they have failed to agree, they are dismissed, and a new trial is held before another jury. Judgment. The verdict of a jury is but a determination of the facts of a case. It is for the judge to give the judgment, which is the official decision of the court upon the respective rights and claims of the parties to the action. Thus in a suit for damages against a railway company for running over plaintiff's horse, the jury might find that the plaintiff ought to recover $100 from the defendant, and bring in its verdict to that effect. Upon this verdict the judge decrees that the defendant shall pay this amount to the plaintiff and so gives the judgment of the court to the plaintiff for $100 dollars and costs. The costs are an allowance given to the successful party to compensate him for his expenses in conducting the case. In a criminal mat- ter the jury finds the defendant guilty, and the judge pronounces the penalty or punishment. Execution. After the judgment of the court has been ren- dered, the party against whom the damages are adjudged may not voluntarily pay them. Jrj such an event, the law provides PLEADING AND PRACTICE 347 a method of procedure called an execution, which is a command issued by the court to one of its officers, either a sheriff, consta- ble, or marshal, authorizing and requiring him to collect the amount named as damages, and if not paid to take certain prop- erty of the person against whom the judgment is given, sell it, and apply the proceeds upon the judgment. Levy and Sale. The taking of the property under the au- thority of the execution is called a levy. The property after being levied upon is advertised by the officer and sold at public sale to the highest bidder. Exemption. The sheriff or officer can levy upon any prop- erty owned by the judgment debtor except certain articles which he is allowed by law to claim as exempt from execution and sale. The exemptions differ in the different states and are generally more liberal to a married man or one who supports a family than to a single man. The exemptions ordinarily consist of clothing, household articles of a certain value, etc., and are set forth in detail in the Appendix at page 359. New Trial. After the judgment has been given, the unsuc- cessful party may within a certain time move for a new trial, either for the reason that he has discovered some new evidence, or because of some error of the judge in the first trial. If the judge can be convinced that, during the trial, he has made a material error or that the defeated party really has discovered new evidence that is material to his case, the judge may, at his dis- cretion, order a new trial. If a new trial is denied, the defeated party has no recourse but to pay the judgment or take an appeal. Appeal. The party dissatisfied with the judgment of the trial court may take an appeal to a higher court by fulfilling cer- tain prescribed conditions, which in most cases consist in giving an undertaking to pay the costs if the decision of the trial court is affirmed. The appeal is generally on questions of law alone, the deci- sion of the trial court on questions of fact being final. The appellate court hears the arguments of the lawyers on each side, and it may then affirm the decision of the trial court, or it may reverse it and send the case back for a new trial. 348 PLEADING AND PRACTICE When the case has been taken to the highest appellate court to which a case of its kind can be carried, and this last court affirms the judgment of the trial court, the case is finally deter- mined. Supplementary Proceedings. In case the sheriff or other officer intrusted with the execution is unable to collect the money or find property sufficient to satisfy it, he may return the execu- tion with his certificate that it is unsatisfied. The party who obtained the judgment, and who is called the judgment creditor, may then apply to the judge for an order to examine the judg- ment debtor in reference to his property. This order of the judge requires the judgment debtor to appear before a referee appointed by the court and answer questions which may be asked him in reference to his property. The referee also has power to subpoena other witnesses and to adjourn the proceed- ings from time to time. When the examination is completed the referee reports the evidence to the judge who appointed him, and if it is found that the judgment debtor has any property which is not exempt, he is ordered to turn it over to the proper officer. Replevin. This is an action brought to recover the posses- sion of certain articles of personal property which have been wrongfully taken, or, if rightfully taken, are being wrongfully withheld. By giving a bond, the plaintiff can have the property taken from the defendant and held in the custody of an officer until the action is determined. In this action their right to the possession of the goods is the question in dispute. Attachment. In certain cases the court will issue a writ of attachment, which is an order to the sheriff or other officers to seize certain property of the defendant and hold it as security for any judgment which may be obtained. This writ is used principally against absconding, concealed, or fraudulent debtors. It is used also when the defendant does not reside within the state, but the goods attached are within it. In such a case the court gets jurisdiction of the property, which it may dispose of to satisfy a judgment thereafter obtained in the action. Garnishment. In some states there is a provision in the law PLEADING AND PRACTICE 349 by which a person owing money to the defendant may be brought into the suit and ordered not to pay the money over to the defendant, and he may also be ordered to pay it into court. This procedure is frequently employed when the third party owes wages to the defendant, as by garnishment proceedings he' will be compelled to pay over a part of the wages to the court, or retain it to apply on any judgment the plaintiff may obtain. QUESTIONS ON PLEADING AND PRACTICE 1. Define an action. 2. How many parties must there be to an action ? 3. Name the parties in an action. 4. What is a summons and how must it be served ? 5. What are the pleadings in an action ? 6. What is the first pleading served by the plaintiff? 7. What is the first pleading served by the defendant ? 8. What is a reply ? 9. What is a demurrer ? 10. If the demurrer is sustained, what effect does it have on the action ? 11. If the defendant's demurrer to the plaintiff's complaint is overruled, what step must the defendant then take ? 12. Before whom is a trial held ? 13. Before whom is a question of law tried ? 14. Before whom is a question of fact tried ? 15. Before whom is a criminal case tried ? An equity case ? 16. Define witnesses. 17. What is a subpoena, and what is its purpose ? 18. What is a deposition, and when is it allowed ? 19. What is a lawyer ? 20. What is the verdict in a case ? The judgment ? 21. Define execution, levy, and sale. 22. What are exemptions ? 23. When and how may a new trial be had ? 24. What is an appeal, and upon what questions is it taken ? 25. Describe Supplementary Proceedings. 26. What is a Replevin Action ? 27. Define Attachment. 28. Define Garnishment. APPENDIX LIMITATION OF ACTIONS THE following table will show in a general way the number of years that must elapse before a claim will be barred by the statute of limitations in the different states and territories. Many of the states recognize classifications and subdivisions which it is not practicable to include here, but a general idea of the time limit can be obtained from these columns. STATE OPEN ACCOUNT WRITTEN INSTRUMENT SEALED INSTRUMENT JUDGMENT Alabama .... 3 6 IO 20 Alaska 6 6 IO 10 Arizona 3 4 5 5 Arkansas .... 3 5 5 IO California .... 2 4 4 5 Colorado .... 6 6 6 20 Connecticut .... 6 6 i? No limit Delaware 3 6 20 20 District of Columbia ' 3 3 12 12 Florida 2 5 20 20 Georgia 4 6 20 7 Hawaiian Islands . 6 6 Idaho ..... 4 5 5 6 Illinois 5 10 10 20 Indiana 6 10 IO 20 Indian Territory 3 3 5 10 Iowa 5 10 10 20 Kansas 3 5 5 5 Kentucky .... 5 '5 15 15 35 i 352 APPENDIX STATE OPEN ACCOUNT WRITTEN INSTRUMENT SEALED INSTRUMENT JUDGMENT Louisiana .... 3 5 IO IO Maine . . . 6 6 20 20 Maryland . 3 3 12 12 Massachusetts 6 6 20 2O Michigan .... 6 6 IO IO Minnesota .... 6 6 6 IO Mississippi .... 3 6 6 7 Missouri . . . 5 10 10 10 Montana. .... 5 8 8 IO Nebraska .... 4 5 5 5 Nevada 4 4 6 6 New Hampshire 6 6 20 20 New Jersey .... 6 6 16 20 New Mexico .... 4 6 6 7 New York .... 6 6 20 2O North Carolina 3 3 10 10 North Dakota .... 6 6 IO 10 Ohio 6 15 15 15 Oklahoma .... 3 5 5 5 Oregon ..... 6 6 10 IO Pennsylvania .... 6 6 20 20 Rhode Island .... 6 6 20 2O South Carolina 6 6 I 5 20 South Dakota. 6 6 2O 10 Tennessee . 6 6 6 IO Texas 2 4 4 10 Utah 4 6 6 8 Vermont ..... 6 6 8 8 Virginia . . . . 2-5 5 IO 20 Washington .... 3 6 6 6 West Virginia 5 10 IO 10 Wisconsin .... 6 6 20 20 Wyoming .... 8 5 5 5 APPENDIX 353 INTEREST TABLE The following is a summary of the legal rates of interest prescribed by statute in the different states and territories, with the maximum rates allowed by special contract between the parties, and the penalties imposed for the taking of usury. STATE LEGAL RATE MAXIMUM RATE PENALTY FOR USURY Alabama 8 8 All interest forfeited. Alaska . 8 12 Forfeiture of double interest. Arizona . 6 No limit No penalty. Arkansas 6 10 Principal and interest forfeited. California 7 No limit No penalty. Colorado 8 No limit No penalty. Connecticut . 6 6 No penalty. Delaware 6 6 Forfeiture of a sum equal to the money lent. District of Columbia 6 10 All interest forfeited. Florida . 8 10 All interest forfeited. Georgia . 7 8 All interest over 8 per cent forfeited. Idaho 7 12 Interest and 10 per cent per annum of principal forfeited. Illinois . 5 7 All interest forfeited. Indiana . 6 8 All interest over 6 per cent forfeited. Indian Territory 6 10 Principal and interest forfeited. Iowa 6 8 Interest and 8 per cent per annum of principal forfeited. Kansas . 6 10 Forfeiture of all interest in excess of 10 per cent, and also an amount equal to the excess contracted for. Kentucky 6 6 All interest over 6 per cent forfeited. Louisiana 5 8 All interest forfeited. Maine 6 No limit No penalty. Maryland 6 6 All interest over 6 per cent forfeited. Massachusetts 6 No limit No penalty. COM. LAW 23 354 APPENDIX I .WnAI MAXIMUM STATE KATE RATE PENALTY FOR USURY Michigan 5 7 All interest forfeited. Minnesota 6 10 Principal and interest forfeited. Mississippi 6 10 All interest forfeited. Missouri . 6 8 Excess of interest forfeited. Montana 8 No limit No penalty. Nebraska 7 10 All interest forfeited. Nevada . 7 No limit No penalty. New Hampshire 6 6 Forfeiture of three times the excess of interest charged. New Jersey 6 6 All interest forfeited. New Mexico . 6 12 Forfeiture of double the interest, and fine of not less than $25 and not over $100. New York 6 6 Principal and interest forfeited. North Carolina 6 6 All interest forfeited. North Dakota 7 12 All interest forfeited. Ohio 6 8 Forfeiture of excess of interest. Oklahoma 7 12 All interest forfeited. Oregon . 6 10 Principal and interest forfeited. Pennsylvania . 6 6 Forfeiture of excess of interest. Rhode Island . 6 No limit No penalty. South Carolina 7 8 All interest forfeited. South Dakota . 7 12 All interest forfeited. Tennessee 6 6 Forfeiture of excess of interest, and fine. Texas 6 10 All interest forfeited. Utah 8 No limit No penalty. Vermont 6 6 Forfeiture of excess of interest. Virginia . . 6 6 All interest forfeited. Washington . 6 12 Forfeiture of excess of interest. West Virginia 6 6 All interest over 6 per cent forfeited. Wisconsin 6 10 All interest forfeited. Wyoming 8 12 All interest forfeited. APPENDIX 355 DAYS OF GRACE The following table shows the states and territories in which days of grace are still allowed on negotiable instruments. If allowed on paper payable at sight, the fact is designated in the first column ; if on demand paper, in the second ; and if on paper payable a certain time after date, in the third column. STATE Alabama Yes Alaska No Arizona . Yes Arkansas Yes California No Colorado No Connecticut No Delaware No District of Columbia .... No Florida No Georgia No Idaho No Illinois o . No Indiana No Indian Territory ..... Yes Iowa No Kansas No Kentucky No Louisiana No Maine . . . . . . - Yes Maryland No Massachusetts Yes Michigan Yes Minnesota ...... Yes Mississippi Yes Missouri No Montana ...... No SIGHT DEMAND Yes No Yes Yes No No No No No No No No No No No No No No No No No No No No Yes No No TIME Yes Yes Yes Yes No No No No No No Yes No No No Yes No Yes Yes Yes No No No Yes No Yes Yes No 356 APPENDIX STATE SIGHT DEMAND TIME Yes No Yes Nevada No Yes Yes New Hampshi/e . . Yes No No New Jersey No No No Yes Yes Yes New York No No No North Carolina Yes No Yes North Dakota No No No Ohio No No No Yes Yes Yes Oregon No No No Pennsylvania ...... No No No Rhode Island Yes No No South Carolina Yes . No Yes South Dakota Yes Yes Yes Tennessee No No No Texas Yes No Yes Utah . . . . . . - No No No. Vermont ...... No No No Virginia No No No Washington ...... No No No West Virginia No No No Wisconsin No No No Wyoming Yes Yes Yes APPENDIX 357 STATUTE OF FRAUDS MARRIED WOMEN The following tables show the amounts to which the Sale of Goods Act in the Statute of Frauds applies in the different states ; also the condition of the statutes in the different states and territories that give married women the right to contract in their own name. STATE Statute of Frauds. Sale of goods, wares, and mer- chandise, to the value of $ , must be in writ- ing, etc. May a married woman become a trader and carry on business in her own name, and sue and be sued as if single ? Alabama. Alaska. Arizona. Arkansas. California. Colorado. Connecticut. Delaware. District of Columbia, Florida. Georgia. Idaho. Illinois. Indiana. Indian Territory. Iowa. Kansas. Not in force. $50. Any value. $30- $200. Not in force. f5- Any value. $200. Not in force. $3- Any value. Not in force when contract is to be performed within one year. Yes, but can not sell or mortgage her real estate without her husband's consent. Yes. Yes. Yes, if she obtains a permit from the court. Yes. Yes. Yes. Yes. Yes, if she obtains permit from the court. Yes, but she can not bind herself by contract of suretyship. Yes. Yes, except that she can not go into partnership without her husband's consent. Yes, but she can not become surety for any one, neither can she sell or mortgage real estate unless her husband joins in the conveyance. Yes. Yes. Yes. 358 APPENDIX STATE Statute of Frauds. Sale of goods, wares, and mer- chandise, to the value of $ , must be in writ- ing, etc. May a married woman become a trader and carry on business in her own name, and sue and be sued as if single ? Kentucky. Louisiana. Maine. Maryland. Massachusetts. Michigan. Minnesota. Mississippi. Missouri. Montana. Nebraska. Nevada. New Hampshire. New Jersey. New Mexico. New York. North Carolina. North Dakota. Not in force. Over $500. Must be proved by a wit- ness and corrobo- rating testimony. $30- $50. $50. $50- $50. $50. $30- $200. $50- $50. $33- $30. Any value. $50. Not in force. $50. Yes. Yes, if she carries on a separate trade. Yes, except in certain partnership contracts. Yes. Yes, but she must file a married woman's certificate. Yes, but she can not become surety for, nor form a partner- ship with, her husband. Yes, but she can not convey real estate unless her husband joins in the conveyance. Married woman has same rights as a single woman. Yes. Yes, in most cases has all the rights of a single woman. Yes. Yes. Yes, but she can not become surety for her husband. Yes, but she can not become surety for her husband, nor become liable as surety or guarantor, except in certain cases. Yes, but her husband must join in a mortgage or conveyance of real estate. Yes. Yes, provided she registers as a trader in the office of Registrar of Deeds. Yes. APPENDIX 359 STATB Statute of Frauds. Sale of goods, wares, and mer- chandise, to the value of $ must be in writ- ing, etc. May a married woman become a trader and carry on business in her own name, and sue and be sued as if single ? Ohio. Oklahoma. Oregon. Pennsylvania. Rhode Island. South Carolina. South Dakota. Tennessee. Texas. Utah. Vermont. Virginia. Washington. West Virginia. Wisconsin. Wyoming. Not in force. All amounts over $50. $50. Not in force. Not in force. $50. $50. Not in force. Not in force. $200. $40. Not in force. $5- Not in force. $50. $50. Yes. Yes. Yes. Yes, except that she can not be- come surety, indorser, or guar- antor. Yes. Yes. Yes. Yes. Yes, but she can not carry on a partnership business nor buy on credit. Her profits are liable for her husband's debts. Yes. Yes, but she can not become surety for her husband. Yes. Yes, but she can not become a partner with her husband. Yes. Yes, she can carry on business with her own separate property. Yes. EXEMPTION LAWS In most of the states there exists a homestead law which exempts certain real property from liability of attachment by the creditors of the owner. Certain personal property is also exempt, and in most cases wages are exempt for a specified period. The following is approximately the law in the several states and territories : ALABAMA. Homestead to the value of $2000 or 160 acres of land not exceeding $2000 in value. Personal property to the value of $1000 and $25 wages. ALASKA. No homestead law. Specified articles of personal property worth from $750 to $1000, and wages for thirty days preceding judgment. 360 APPENDIX ARIZONA. Homestead to the value of $4000 if claim is recorded. Per- sonal property to the value of $1000. Wages earned for thirty days preceding levy. ARKANSAS. Homestead of 160 acres in country or one-quarter acre in town or village, not exceeding in value $2500. Personal property including wages for sixty days, to the amount of $500 for the head of a family and $200 for a single person. CALIFORNIA. Homestead to the value of $5000. Certain specified articles of personal property not to exceed $1000. Wages for thirty days if necessary to support family, but one half of wages is liable for debts contracted for necessaries. COLORADO. Homestead to the value of $2000 if claim is recorded. Cer- tain specified articles of personal property, including library and instruments of professional men. Sixty per cent of any amount of wages due. CONNECTICUT. Homestead to amount of $1000 if claim is recorded. Certain specified articles of personal property and wages to the amount of ISO- DELAWARE. No homestead exemption, and each county has a special law as to exemption of personal property. DISTRICT OF COLUMBIA. Specified articles of personal property not ex- ceeding $1000. Wages for two months not to exceed $200 and the salary of all government employees. FLORIDA. Homestead consisting of 160 acres in country or one half acre in town.. Personal property to the value of $1000 for the head of a family residing in the state, and all wages. GEORGIA. Constitution of the state provides a homestead exemption of $1600, either real or personal property, and the statutes allow fifty acres of land and five acres additional for every child under sixteen years of age. Certain specified articles of personal property and all laborers' wages. IDAHO. Homestead to the value of $5000 for a married man and $1000 for a single man, but declaration of homestead must be filed. Specified articles of personal property to the value of $1000 and wages for thirty days. ILLINOIS. Homestead to value of $1000. Personal property, $400 for married persons, $100 for single persons. Wages to the amount of $15 weekly for the head of a family. INDIANA. $600 worth of either real or personal property is allowed as exemption to householders and married women residents of the state. One month's wages not to exceed $25. INDIAN TERRITORY. Homestead worth $2500, but not to exceed 160 acres if in the country. Personal property and wages for sixty days, not to exceed $500 for married persons and $200 for single persons. IOWA. Homestead one half acre in town or forty acres in country. Specified articles of personal property not to exceed $200 and wages for ninety days, APPENDIX 361 KANSAS. Homestead one acre in town and 160 acres in country. Speci- fied articles of personal property and wages for three months preceding levy. KENTUCKY. Homestead to the value of $1000. Specified articles of personal property and wages to the amount of $50. LOUISIANA. Homestead to the value of $2000. Specified articles of per- sonal property and all laborers' wages. MAINE. Homestead to the value of $500 if recorded. Specified articles of personal property. Wages to the value of $20 except in suit for necessaries and then $10. MARYLAND. $100 worth of personal property and wages to the amount of $100. MASSACHUSETTS. Homestead to the value of $800 if recorded. Specified articles of personal property and wages to the amount of $20 except in suit for necessaries, and then $10. MICHIGAN. Homestead to the value of $1500. Specified articles of per- sonal property and goods to the value of $250. Eighty per cent of the wages of a householder not to exceed $30, others forty per cent up to $15. MINNESOTA. Homestead consisting of a city lot or one half acre in a town or eighty acres in the country, not allowed to a single man unless he resides on the property. Specified articles of personal property amounting to about $1500 and wages to the amount of $25. MISSISSIPPI. Homestead to the value of $2000, but not over 160 acres if in the country. Personal property consisting of certain articles in the country, and to the value of $250 in towns. Wages of $100 per month to head of family, $20 to others. MISSOURI. Homestead to the value of $3000 in cities and $1500 in country and towns. Personal property consisting of certain specified arti- cles not to exceed in value $300, including ninety per cent of wages. MONTANA. Homestead to the value of $2500. Specified articles of per- sonal property and wages for thirty days. NEBRASKA. Homestead to the value of $2000. Personal property not exceeding $500, but not in addition to homestead, and wages for sixty days. NEVADA. Homestead to the value of $5000. Specified articles of per- sonal property and wages not to exceed $50 earned in month process is issued. NEW HAMPSHIRE. Homestead to the value of $500. Certain specified articles of personal property and wages to the amount of $20 except as against debts for necessaries. NEW JERSEY. Homestead to the value of $1000 if advertised and re- corded according to law. Personal property to the amount of $200 and wear- ing apparel, also all wages. NEW MEXICO. Homestead to the value of $1000. Personal property consisting of certain specific articles and $500 when party does not own homestead- Wages for three months, except in certain specific cases. 362 APPENDIX NEW YORK. Homestead to the value of $1000 if notice is recorded. Cer- tain specific articles to the head of a family, and personal property in addition to the value of $250, except for purchase price. Wages for sixty days if necessary for the support of the family. NORTH CAROLINA. Homestead to the value of $1000. Personal prop- erty to the value of $500, and sixty days' wages if necessary for the support of the family. NORTH DAKOTA. Homestead to the value of $5000. Personal property to the value of $1000 to the head of the family residing in the state. Wages not exempt. OHIO. Homestead to the value of $1000. Certain specific articles of per- sonal property. Wages for three months if necessary for the support of the family. OKLAHOMA. Homestead consisting of 160 acres in the country, or one acre in city or town. Personal property consisting of certain specific articles. Wages for ninety days to the head of a family. OREGON. Homestead to the value of $1500, not to be less than twenty acres in the country or one lot in city or town. Personal property consisting of certain specific articles, and wages for thirty days if necessary for the sup- port of the family. PENNSYLVANIA. Real or personal property to the value of $300, and all wages. RHODE ISLAND. Household furniture to the value of $300, tools and books to the value of $300, and library of professional men. Wages to the amount of $10, except as against debts for necessaries. SOUTH CAROLINA. Homestead to the value of $1000. Personal prop- erty to the value of $500. Wages for sixty days if there is a family depend- ing on them for support. SOUTH DAKOTA. Homestead consisting of 160 acres in the country or one acre in city or town, to the value of $5000. Personal property to the value of $750, to the head of a family, and $300 to a single person not the head of a family. No exemptions against purchase price. Wages for sixty days if necessary for support of family. TENNESSEE. Homestead to the value of $1000. Certain specific articles of personal property. $30 in wages. TEXAS. Homestead consisting of 200 acres in country, or city lot to the value of $5000. Certain specific articles of personal property. Current wages for personal services. UTAH. Homestead to the value of $1500, and $500 additional for wife and $250 for each child. Certain specific articles of personal property not exceeding $1000, and one half of wages for thirty days, but not to be less than $30. VERMONT. Homestead to the value of $500. Certain specific articles of personal property, and wages to the amount of $10. APPENDIX 363 VIRGINIA. Homestead to the value of $2000. Certain specific articles of personal property and one month's wages, not to exceed $50. WASHINGTON. Homestead to the value of $2000 if declaration is filed. Certain specific articles of personal property, and in the case of a householder $1000 in addition. Wages to the amount of $100 if family is dependent thereon. WEST VIRGINIA. Homestead to the value of $1000. Personal property, including wages, to the amount of $200. WISCONSIN. Homestead consisting of one fourth acre in town or forty acres in the country. Certain specific articles of personal property, not to ex- ceed $200 in value. Wages for three months, not exceeding $60 a month. WYOMING. Homestead to the value of $1500. Personal property to the value of $800 for a married man, and $300 for a single man. Wages not to exceed $100. CHATTEL MORTGAGES The following extracts show the statutory provisions as to chattel mort- gages in the different states and territories : ALABAMA. Must be recorded in the office of the probate judge where the mortgagor resides and also where the property is located. Remains in force as long as the debt. No renewal necessary. If the property is moved to another county, the mortgage should be recorded there within three months. Is not valid as to third parties on a stock of merchandise remaining in the possession of the mortgagor. Is not valid as to third parties on after acquired property. ARIZONA. Must be filed in the office of the recorder where the mortgagor resides and where the property is located. No renewal is necessary. Is not valid as to third parties on stock of merchandise remaining in possession of mortgagor nor on after acquired property. ARKANSAS. Must be filed or recorded in the office of the recorder where the mortgagor resides. If recorded, is good for the life of the debt, but in case of extension by partial payment, these payments must be recorded. If it is filed, it is valid for one year and must be renewed within thirty days preceding the expiration of one year. Is valid as to third parties on stock of merchan- dise remaining in possession of the mortgagor, provided he acts as agent for the mortgagee when sales are made. Is valid as to third parties on after acquired property if the mortgage provides therefor. CALIFORNIA. Must be recorded in the office of the recorder where the mortgagor resides and where the property is located. Remains in force dur- ing the life of the debt. No renewal is necessary. If the property is re- moved to another county, the mortgage should be recorded there within thirty days. Is valid as to third parties on stock of merchandise remaining in pos- session of the mortgagor, but not valid on after acquired property. 364 APPENDIX COLORADO. Under $300 it may be filed in office of recorder where the property is located. In other cases it must be recorded in the office of the recorder. Remains in force for two years on sums of $2500 or under, for five years on sums of $2500 to $20,000, for ten years on sums of $20,000 or over. Must be renewed by annual statement showing unpaid amounts remaining due. Mortgagee may take possession any time within thirty days after ma- turity and mortgage remains valid during that time. It is valid as to third parties on stock of merchandise remaining in possession of the mortgagor if the mortgage so states and the property is applied to the mortgage debt. It is also valid on all after acquired property except merchandise. CONNECTICUT. Must be recorded in the town clerk's office where prop- erty is located. Only specific articles are subject to mortgage. Need not be renewed. Is not valid as to third parties on stock of merchandise remaining in possession of mortgagor, or on after acquired property. DELAWARE. Must be recorded within ten days in the office of the recorder where property is located. Is valid for three years, at which time it must be renewed. Is valid as to third parties on stock of merchandise remaining in possession of the mortgagor, but is not valid on after acquired property. DISTRICT OF COLUMBIA. Must be recorded in the office of the recorder where property is located. Need not be renewed. Is not valid as to third parties on stock of merchandise remaining in possession of the mortgagor, or on after acquired property. FLORIDA. Must be recorded in the office of the clerk of the circuit court where the property is located. Need not be renewed. Is not valid as to third parties on stock of merchandise remaining in possession of mortgagor. GEORGIA. Must be recorded in the office of the clerk of the superior court where the mortgagor resides, if he is a resident, and if he is not, then where the property is located. No renewal is necessary. Is valid as to third parties on stock of merchandise remaining in possession of the mortgagor and on after acquired property. IDAHO. Must be recorded in office of recorder where the property is ocated. If the property is removed to another county, mortgage must be recorded within ten days. Is not valid as to third parties on stock of mer- chandise remaining in possession of the mortgagor unless the proceeds of sale go to the mortgagee. Is not valid on after acquired property. ILLINOIS. Must be recorded in the office of the recorder where the mort- gagor resides, if he is a resident ; and if he is not, then in the county where the property is located. Is valid until the debt matures or for three years if the debt has not matured, and within thirty days of the maturity of the debt or at the expiration of three years may be renewed by filing an affidavit showing the amount due. If mortgagor resides in the state, mortgage must be acknowl- edged by a justice of the peace, or one of certain court officers, of mortgagor's county. Is not valid as to third parties on stock of merchandise remaining in possession of the mortgagor or on after acquired property. APPENDIX 365 INDIANA. Must be recorded within ten days in the office of the recorder where the mortgagor resides. Need not be renewed. Is valid as to third parties on stock of merchandise remaining in possession of mortgagor. INDIAN TERRITORY. Must be filed or recorded with the clerk of the recording district where the property is located. If recorded, no renewal is necessary. If filed, it is not valid for more than one year unless within thirty days before the expiration of the year there has been filed an affidavit that the mortgage has not been paid. It is valid as to third parties on stock of mer- chandise remaining in the possession of the mortgagor if the mortgagor acts as agent for the mortgagee. IOWA. Must be recorded in the office of the recorder where the mort- gagor resides. On exempt property the wife must join except for the purchase price of the property. No renewal is necessary. It is valid as to third par- ties on stock of merchandise remaining in the possession of the mortgagor and on after acquired property. KANSAS. Must be filed with the register of deeds of the county where the property is located, and where the mortgagor resides if he resides within the state. It is valid for two years from the date of filing. Must be renewed within thirty days preceding expiration by affidavit showing the amount unpaid. Is valid as to third parties on stock of merchandise remaining in the posses- sion of the mortgagor if the mortgagor acts as agent for the mortgagee when sales are made. Also valid on after acquired property if the mortgage pro- vides therefor. KENTUCKY. Must be recorded with the county clerk where the property is located. It is valid for five years after the maturity of the debt if no note has been given, and .for fifteen years where a note has been given. No re- newal is necessary. Is valid as to third parties on stock of merchandise remaining in the possession of the mortgagor if the goods can be identified, but is not valid on after acquired property. LOUISIANA. Chattel mortgages are unknown in this state. MAINE. Must be recorded in the office of the town clerk where the mort- gagor resides, and if the mortgagor does not reside in the state must be recorded in the county where the property is situated. No renewal is neces- sary. Is valid as to third parties on stock of merchandise remaining in pos- session of the mortgagor, but is not valid on after acquired property. MARYLAND. Must be recorded within twenty days in the office of the clerk of the circuit court where the mortgagor resides, or if he does not reside in the state must be recorded in the county where the property is located. No renewal is necessary. MASSACHUSETTS. Must be recorded within fifteen days with the .town clerk where the mortgagor resides. If the mortgagor is a non-resident, the mortgage must be recorded where the property is located. No renewal is necessary. Is valid as to third parties on stock of merchandise remaining in possession of the mortgagor, but is not valid on after acquired property. 366 APPENDIX MICHIGAN. Must be filed with the city or town derk where the mort- gagor resides. Remains in force for one year, and must be renewed within thirty days preceding expiration by affidavit showing amount unpaid. Is valid as to third parties on stock of merchandise remaining in possession of the mortgagor and on after acquired property if the mortgage so provides. MINNESOTA. Must be filed with the city, town, or village clerk where the mortgagor resides and where the property is located. Remains in force for six years after filing as against creditors or subsequent mortgagees or pur- chasers. No renewal is necessary. Husband and wife must join, and two witnesses and an acknowledgment are necessary. Is not valid as to third parties on a stock of merchandise remaining in the possession of the mortgagor, but if the mortgage so recites it is valid on after acquired property. MISSISSIPPI. Must be recorded with the chancery clerk where the prop- erty is located. If property is removed, it must be re-recorded within one year. No renewal is necessary. It is not valid as to third parties on stock of mer- chandise remaining in possession of the mortgagor, but is valid on after acquired property. MISSOURI. Must be filed or recorded with the recorder where the mort- gagor resides. Is valid for five years if filed, and during the life of the debt if recorded. No renewal is necessary. Is not valid as to third parties on a stock of merchandise remaining in possession of the mortgagor unless the proceeds of sales go to the mortgagee in reducing the mortgage debt. It is not valid on after acquired property unless the mortgagee takes possession before creditors secure a lien. MONTANA. Must be filed with the county clerk where the mortgagor resides. If he does not reside in the state, must be filed in the county where the property is located. Is valid until sixty days after the debt matures, not exceeding, however, one year and sixty days. Must be renewed within sixty days after the debt becomes due by filing an affidavit in the office where the mortgage is filed, setting forth the amount due. Is valid as to third parties on stock of merchandise remaining in possession of the mortgagor if made in good faith and proceeds of the sale go to the mortgagee. NEBRASKA. Must be filed with the county clerk where the mortgagor resides, and if he does not reside in the state, must be filed in the county where the property is situated. Is valid for five years against others than the parties, but it is not valid as to third parties on stock of merchandise in pos- session of the mortgagor, or on after acquired property. NEVADA. Must be recorded in the office of the recorder where the mort- gagor resides and where the property is located. Remains in force for six years from maturity of the debt. No renewal is necessary. If the mortgage is recorded, it is valid as to third parties on stock of merchandise remaining in possession of the mortgagor. NEW HAMPSHIRE. Must be recorded with the town clerk where the mortgagor resides. If he does not reside in the state, must be recorded in the APPENDIX 367 County where the property is situated. No renewal is necessary. Is not valid as to third parties on a stock of merchandise remaining in the possession of the mortgagor unless the proceeds of the sale go to the mortgagee in reduction of the mortgage debt. NEW JERSEY. Must be recorded with the county clerk or register of deeds where the mortgagor resides. If he does not reside in the state, must be re- corded in the county where the property is situated. Need not be renewed. If recorded, it is valid as to third parties on a stock of merchandise remaining in possession of the mortgagor. If the mortgage so provides it is valid on after acquired property. NEW MEXICO. Must be filed or recorded with the probate clerk where the property is located. Remains in force for one year. Must be renewed within thirty days preceding its expiration by affidavit showing the amount unpaid. Crops can not be mortgaged until they have matured and are har- vested. It is not valid as to third parties on a stock of merchandise remain- ing in possession of the mortgagor. NEW YORK. Must be filed with the register of New York City or the county clerk if in a county seat, otherwise with the town clerk where the mortgagor resides. If the mortgagor does not reside in the state, the mortgage must be filed in the county where the property is situated. Remains valid for one year as against subsequent mortgagors and purchasers . Must be renewed within thirty days preceding expiration by statement showing the amount due. Is not valid as to third parties on a stock of merchandise remaining in posses- sion of the mortgagor unless the mortgagor is in possession as agent for the mortgagee and the sale is for his benefit. It is not valid on after acquired property. NORTH CAROLINA. Must be recorded with the register of deeds where the mortgagor resides. If he does not reside in the state, must be recorded in the county where the property is located. No renewal is necessary. It is not valid as to third parties on stock of merchandise remaining in possession of the mortgagor unless the mortgagor has possession as the mortgagee's agent and the proceeds go to the reduction of the mortgage debt. It is not valid on after acquired property. NORTH DAKOTA. Must be recorded with the register of deeds where the property is located. Remains in force for three years. Must be renewed within ninety days preceding the expiration of three years by affidavit showing the amount unpaid. Is valid as to third parties on a stock of merchandise remaining in the possession of the mortgagor if the mortgagor is required to account to the mortgagee for the proceeds of the sale. It is also valid on after acquired property. OHIO. Must be filed with the township clerk, or the recorder, if in the county seat where the mortgagor resides. If the mortgagor does not reside in the state, must be filed in the county where the property is situated. Re- mains in force for one year. Must be renewed within thirty days after the 368 APPENDIX expiration by an affidavit showing the amount unpaid. Is not valid as to third parties on stock of merchandise remaining in possession of the mort- gagor unless the mortgagee takes possession before the third party makes a levy or unless the mortgagor is by the terms of the mortgage made agent for the mortgagee and required to account to the mortgagee for all sales. Is not valid on after acquired property unless the property is actually delivered to the mortgagee or the mortgagee takes possession before other rights intervene. OKLAHOMA. Must be filed with the register of deeds where the mortgagor resides if a resident of the state ; if not, where the property is located. Re- mains in force for three years. Must be renewed within thirty days preceding expiration by affidavit showing the amount unpaid. It is valid as to third parties on stock of merchandise remaining in possession of the mortgagor, but is not valid on after acquired property. OREGON. Must be filed or recorded with the county clerk where the mort- gagor resides. If he does not reside in the state, must be filed or recorded in the county where the property is located. Remains in force for one year and must be renewed within thirty days preceding expiration by affidavit showing the amount unpaid, unless it is executed and acknowledged as a real estate mort- gage and recorded, in which case no renewal is required. Is not valid as to third parties on stock of merchandise remaining in possession of the mortga- gor or on after acquired property. PENNSYLVANIA. Must be recorded with the county recorder or register where the mortgagor resides. If the mortgagor does not reside in the state, must be recorded in the county where the property is located. Only specific articles can be mortgaged. Must be renewed within three months after ma- turity. Is not valid as to third parties on stock of merchandise remaining in possession of the mortgagor or on after acquired property. RHODE ISLAND. Must be recorded with the town clerk where the mort- gagor resides. If he does not reside in the state, must be recorded in the county where the property is located. . No renewal is necessary. If properly recorded, it is valid as to third parties on stock of merchandise remaining in the possession of the mortgagor, but is not valid on after acquired property as against creditors who secure a lien before the mortgagee takes possession. SOUTH CAROLINA. Must be recorded within forty days with the register of conveyances where the mortgagor resides. If he does not reside in the state, must be recorded in the county where the property is located. No renewal is necessary. It is valid as to third parties on stock of merchandise re- maining in the possession of the mortgagor and also on after acquired property. SOUTH DAKOTA. Must be filed with the register of deeds where property is located. Remains in force for three years. Must be renewed within thirty days preceding expiration by an affidavit showing the amount unpaid. It is valid as to third parties on stock of merchandise remaining in the possession of the mortgagor, provided the mortgagor is required to account to the mort- gagee for the proceeds of sales. It is also valid on after acquired property. APPENDIX 369 TENNESSEE. Must be filed or recorded with the register of deeds where the mortgagor resides. If he does not reside in the state, must be filed or recorded in the county where the property is located. Remains in force for six years. Need not be renewed. Is not valid as to third parties on a stock of merchandise remaining in the possession of the mortgagor, nor on after acquired property. TEXAS. Must be filed with the county clerk where the mortgagor resides. If he does not reside in the state, must be filed in the county where the prop- erty is located. Need not be renewed. Is not v?Jid as to third parties on stock of merchandise remaining in the possession of the mortgagor. UTAH. Must be recorded in the office of the recorder where the mort- gagor resides. If he does not reside in the state, must be recorded in the county where the property is located. Remains in force for one year. Must be renewed within thirty days after one year from filing by affidavit showing amount unpaid. It is not valid after five years. Is not valid as to third parties on stock of merchandise remaining in possession of the mortgagor. VERMONT. Must be recorded in the city or town clerk's office where the mortgagor resides. If he does not reside in the state, must be filed in the county where the property is situated. Need not be renewed. It is valid as to third parties on stock of merchandise remaining in possession of the mort- gagor. If possession is taken, it is valid on after acquired property. VIRGINIA. Must be recorded in the county or city clerk's office where the property is located. Need not be renewed. Is not valid as to third parties on stock of merchandise remaining in possession of the mortgagor unless the mortgagor has possession as mortgagee's agent, and the proceeds go to the reduction of the mortgage debt, but it is not valid on after acquired property. WASHINGTON. Must be filed and recorded with the county auditor where the property is located. Remains in force for two years if less than $300 ; if over % 300, for the life of the debt. May be renewed within two years by an affidavit showing the amount unpaid. It is valid as to third parties on stock of merchandise remaining in possession of the mortgagor, but the mortgage should be so drawn that the mortgagor must apply sales in payment of mort- gage debt. It is valid on after acquired property. WEST VIRGINIA. Must be recorded with the county clerk where the property is located, and if property is removed must be re-recorded within three months. No renewal is necessary. It is not valid as to third parties on stock of merchandise remaining in possession of the mortgagor, nor is it valid on after acquired property. WISCONSIN. Must be filed with the city or town clerk where the mort- gagor resides. If he does not reside in the state, must be filed in county where property is located. Remains in force for two years. Must be renewed within thirty days preceding the expiration by an affidavit showing the amount unpaid. It is valid as to third parties on stock of merchandise remaining in possession of the mortgagor, provided sworn statements are filed every sixty COM. LAW 24 370 APPENDIX days, showing amount of goods sold, amount added, and payment made on mortgage debt, but is not valid on after acquired property. WYOMING. Must be recorded in the county clerk's office where the prop- erty is located. Remains in force for two months after the debt is due. If property is removed, mortgage must be re-recorded. Must be renewed within sixty days after maturity of the secured debt. It is valid as to third parties on stock of merchandise remaining in the possession of the mortgagor, provided the proceeds of the sales are applied to the debt secured. It is also valid on after acquired property. GLOSSARY Abandonment : In marine insurance, the giving up of property partly destroyed to the insurer, the owner's purpose being to claim the full amount of insurance. Abrogate : To repeal ; to annul or destroy ; to abolish entirely. Acceptance: In mercantile law (i) the act by which the person upon whom a bill of exchange or other order is drawn engages to pay it. (2) The bill after it has been accepted. Acceptance for Honor: Acceptance for the protection of the drawer, by a person other than the drawee. Acceptor : One upon whom a bill of exchange is drawn and who agrees to pay it at maturity. Accommodation Indorser : One who indorses commercial paper without con- sideration, in order that another may raise money upon it. Accommodation Paper : Commercial paper for which no consideration passed between the original parties. Accord and Satisfaction : The settlement of a dispute or the satisfaction of a claim by an executed agreement between the parties, giving the aggrieved party something different in amount or value from the thing claimed. Acknowledgment : The act by which a party who has executed an instrument declares or acknowledges it before a competent officer to be his or her act or deed. Action : The formal means of recovering one's rights in a court of justice a suit at law. Act of God : Any accident resulting from a physical cause which is irresistible, such as lightning, tempest, etc. Adjudication : The act of a court in giving judgment in a suit or controversy. Administrator : One who is appointed to take charge of the property or estate of a person who died without having made a will. Affidavit : A statement in writing, signed by the person making it, and sworn to by him before an officer authorized to take oaths. Agency : The relation existing between two parties by which one is author- ized to do certain acts for the other with a third party or parties. Agent : A person who acts for another called his principal. Age of Consent : The age at which infants are capable of entering into a valid contract of marriage. 37 372 GLOSSARY Alias : A Latin word meaning otherwise or hitherto. Alien : One who was born out of the jurisdiction of the country of his res- idence, and, never having been naturalized into it, owes allegiance to the sovereign of another country. Alienate : To convey the title to property. Alien Enemy : An alien who is the subject of a hostile power. Alimony : An allowance made to a wife by order of the court, out of her hus- band's estate or income, during a suit for divorce or separation or at its termination, for her support for life or for a shorter period. Annulment : The act of making void. Ante-dated : Dated at a time earlier than the actual date. Appraise : To set a price or value upon. Appurtenance : In a deed or lease, anything that will go with the land, as a right of way, or a yard which has always been used with it. Arbitration : The investigation and determination of a cause or matter in con- troversy, by an unofficial person or persons mutually chosen by the con- tending parties. Articles of Copartnership : The written agreement by which a copartnership is formed. Assent : Act of agreeing to anything ; consent. Assets : Property available for the payment of debts. Assign : To make over ; to transfer to another. Assignee: (i) The person to whom a failing debtor transfers all of his re- maining property, for the purpose of having it distributed among his cred- itors. (2) One to whom anything is assigned. Assignment: (i) A transfer of his property to an assignee by a failing debtor. (2) A transfer by one person to another of any property, per- sonal or real. Assignor : One who assigns property. Attachment : The seizure of property by legal process, for the purpose of bringing the same into the custody of the law. Attestation : The act of witnessing an instrument in writing, and subscribing one's name to it as a witness. Attorney in Fact : An agent appointed by power of attorney. Award : The decision of arbitrators. Bailee : One to whom the goods of another are delivered for a certain purpose. Bailment : The delivery of goods to another in trust for a certain purpose, the goods to be returned after the object of their delivery has been accomplished. Bailor : One who delivers goods to another under a contract of bailment. Bank Note : A promissory note payable at a bank. Bankrupt : One who has done some act which renders him liable to be pro- ceeded against by his creditors under the bankruptcy law. GLOSSARY 373 Bankruptcy : The condition of one who has been declared by a court of bank- ruptcy to be a bankrupt. Barter : To trade by exchange of goods, in distinction from trading by the use of money. Beneficiary: (i) In life insurance, the person to whom a policy is made pay- able. (2) The person for whose benefit another holds the legal title to real estate. Beyond Seas : Denotes absence from the country, and is generally held to mean absence from the particular state. Bill of Exchange : A direction in writing by the person who signs it ordering the one to whom it is addressed to pay a third person a definite sum of money at a specified time. Bill of Lading : A document delivered by a carrier to one sending goods by him, acknowledging that they have been received by him for transportation to a certain place. It is both a receipt and a contract. Bill of Sale : An agreement in writing by which one person sells his interest in personal property to another. Blank Indorsement : The indorsement of a negotiable instrument by merely writing the name of the indorser without mentioning the name of any person to whom it is to be paid. Bona Fide : In good faith. Openly and without deceit or fraud. Bond : A written and sealed instrument by which one party agrees to pay to another a certain amount of money or to perform a certain act. Breach : In the law of contracts, the violation of an agreement or obligation. By-laws : The private laws or regulations made by a corporation for its own government. Capital Stock : The fund or property as a whole, contributed or supposed to have been contributed to a corporation at its organization as its property. Caveat Emptor : Latin phrase meaning " Let the buyer beware," and applying to a case in which the thing sold is before the buyer and he examines it. Certificate of Deposit : A certificate issued by a bank or banker, showing that a certain sum of money has been deposited there, payable to a certain person or to his order or to the bearer. Certificate of Stock: A certificate given by the proper officers of a corpora- tion, showing that a certain person owns a certain number of shares of the capital stock. Certified Check : A check drawn by a depositor on a bank and accepted by the bank as valid. After certification the amount of the check is taken from the depositor's account and set aside to meet the check. Cestui que Trust : One for whose benefit property is held by a trustee. Charter: (i) A special act of legislature creating a particular corporation. (2) A formal instrument by which a government grants special rights or privileges to a particular person or persons. (3) To hire or let a vessel or part of it. 374 GLOSSARY Charter Party : The written instrument by which the owner of a vessel lets it, or a part of it, to another. Chattel : An article of personal property. Chattel Mortgage : A conditional sale of personal property, which is to be- come void if a certain thing happens. Chiefly used as a security for the payment of money. Check : A written order for money drawn upon a bank or banker and payable immediately. Chose in Action : A thing of which one has not the possession, but only a right to demand by action at law Chose in Possession: Personal property of which one has the actual possession. Civil Law : The system of law of ancient Rome. Also used in distinction from criminal law. Client : A person who employs an attorney to act for him in any legal business. Collateral Security : A separate obligation given to guarantee the performance of another contract. Common Carrier : One who, as a business, undertakes for hire to transport from place to place passengers or goods of all who choose to employ him. Common Law : The old law of England that derives its force from long usage and custom. Compromise : An agreement between a debtor and his creditors, by which they consent to accept a certain proportion of the amounts claimed and discharge him from the remainder. Concurrent : Existing together. Condition Precedent: A modifying clause of an agreement requiring some act to be performed by one person before another is liable, or in order to make him liable. Condition Subsequent : A part of an agreement relating to a future event, upon the happening of which the obligation is no longer binding upon one of the parties to a contract. Consanguinity : Relation by blood. Consideration : The reason or inducement in a contract upon which the par- ties consent to be bound. Consignee : One to whom merchandise given to a carrier by another person for transportation is directed. Consignor : One who gives merchandise to a carrier for transportation to another. Copartnership : Same as partnership. Copyright : The exclusive privilege, secured from a government, of printing, publishing, and selling copies of writings or drawings. Corporation : A collection of individuals united by authority of law into one body under a special name, with the capacity of perpetual succession and of acting in many respects as an individual. Counter-claim : Same as set-off. GLOSSARY 375 Covenant : Any promise contained in a sealed instrument. Coverture : The legal state and condition of a married woman. Crime : A wrong which the government takes notice of, as injurious to the public, and for the commission of which it inflicts a punishment. Curtesy : The estate a man has in the lands of his wife upon her death, in case a living child has been born to them during their marriage. Damages : Compensation in money to be paid by one person to another for an injury inflicted by the one upon the other. Days of Grace : Days (usually three) allowed by custom for the payment of bills and notes beyond the day specified for payment on the face of them. Decree : The judgment or decision of a court of equity. Deed : A written agreement signed, sealed, and delivered by which one per- son conveys lands to another. De Facto : In fact, actually. Default : Omission ; neglect or failure. Defendant : The party against whom an action or suit is brought. Demand : The request for payment of a claim. Demise : A conveyance of an estate in real property for life or for years. Deponent : One who makes oath as to the truth of a written statement. Deposit : A bailment or delivery of goods to be kept and returned without recompense. Deviation : In the law of marine insurance, a voluntary departure without necessity from the regular course of the specific voyage insured. Devise : To grant by will. Disability : Want of qualification ; incapacity to do a legal act. Disaffirmance : The annulling or canceling of a voidable contract. Discount: (i) To take interest in advance. (2) A deduction from a price a^ked, or from an account, debt, or demand. Dishonor : The non-payment of negotiable paper when it is due. Divorce : The separation of husband and wife by decree of the courts. Domicile : The place where a man has his permanent home, and to which he intends to return if absent. Dower: The right of a widow to the use or ownership of some portion of the real estate owned by her husband. Draft : Same as bill of exchange. Drawee : The person upon whom a bill of exchange is drawn, and who is directed to make the payment. Drawer : The person who draws or makes a bill of exchange. Duress : Personal restraint or compulsion. Easement : The right in the owner of one piece of land to use the land of another for a particular purpose. Emblements : Growing crops of any kind produced by expense and labor. Eminent Domain : The right of the sovereign power to take private 'property for public purposes. 376 GLOSSARY Enact : To make a law, or to establish by law. Entail: To limit the succession of real property; that is, to control the descent of real property after the death of the owner. Equity of Redemption : The right which a mortgagor has to redeem his estate after the mortgage has become due. Escheat: The reverting of land to the state upon the death of the owner without lawful heirs. Escrow : A deed or bond delivered to a third party to be held and delivered to the grantee or creditor upon the performance of some condition. Estate : An interest in property. Estoppel : A rule of law which precludes a man from denying certain facts or conditions in consequence of his previous allegations or conduct or admissions. Eviction : The dispossession of a person by process of law from land which he has previously held. Executed Contract : One in which nothing remains to be done by either party. Execution: (i) A written command issued to a sheriff or constable, after a judgment, directing him to enforce it. (2) The act of signing and seal- ing a legal instrument, or giving it the form required to make it a valid act. Executor : A person named in a will to carry out its provisions. Executory Contract : One in which something remains to be done on one or both sides. Ex post Facto Law : A law which renders criminal an act done previously and i which when done was innocent. Extradition : The surrender by one government to another of a person charged with a crime. Fee Simple : Full ownership in lands. Firm : All the members of a partnership taken collectively. Foreclosure : The process of cutting off the right or interest of the mortgagor and his assignees in mortgaged premises. Forgery : The fraudulent making or altering of a written instrument. Franchise : A privilege, or right, conferred upon individuals by grant from the government. Fraud : Any cunning, deception, or artifice used to circumvent, cheat, or de- ceive another. Freehold : An estate of inheritance or a life estate. Freight: The compensation to be paid a carrier for the transportation of goods, or the goods themselves while being transported. Good Will : Benefit arising from the fact that persons used to trading or doing business at a particular place will continue to do so ; it is a property sub- ject to transfer. Grant : To transfer by deed. Guarantor : One who makes a guaranty. GLOSSARY 377 Guaranty : A contract whereby one person engages to be answerable for the debt or default of another person. Guardian : One who is entitled to the custody of the person or property of an infant or one not able to take care of himself, as an idiot or insane person. Guest : A person received and entertained at an inn or hotel. Idiot : One who never had reasoning power. In Statu Quo : In the same state or condition as before. Inchoate : Incipient ; incomplete. Incorporate : To form into a corporation. Indemnity: Compensation for damage suffered or that which is given or promised to a person to prevent him from suffering damage. Indorsee : One to whom an indorsement is made. Indorsement : (i) A name, with or without other words, written on the back of negotiable paper. (2) The agreement implied in one's writing his name on the back of negotiable paper, to pay it if the principal debtor does not. Indorsement in Blank : An indorsement in which the name of the indorsee is omitted. Indorsement in Full : An indorsement to a definite person. Indorsement without Recourse : An indorsement by which the indorser passes the title to the instrument, but does not assume the liability of an indorser. Indorser : One who makes an indorsement on negotiable paper. Infant: In law, one under the age of twenty-one years. Insolvency : State of being unable to pay one's debts. Insurable Interest : Such an interest in the thing insured that the person possessing it may be injured by the risk to which the thing insured is exposed. Insurance : A contract of indemnity against loss from certain causes. Insurer : The party agreeing to furnish insurance. Intestate : One who dies without making a will. Invalid : Of no legal force. Issue : In real property law, all persons who have descended from a common ancestor. Joint Stock Company : A species of partnership possessing some of the char- acteristics of corporations. Joint Tenants : Two or more persons to whom land is conveyed by deed or devised by will, the survivor taking the whole interest. Judgment : The final determination by a court of the rights of the parties in an action. Jurat: The certificate at the end of an affidavit showing when and before whom it is sworn. Jurisdiction : The legal authority of a court. L.S. : An abbreviation of a Latin phrase, and means "the place of the seal." It now takes the place of a seal in some jurisdictions, or denotes where a seal is to be affixed. 378 GLOSSARY Landlord : (i) One who owns and rents or leases lands or houses. (2) The keeper of an inn. Law Merchant : The general body of usages in matters relative to commerce. Lease : A contract by which one grants to another for a period the use of certain real estate. Legacy : A gift by will ; commonly applied to money or personal property. Legal Tender : That kind of money which may legally be offered in payment of a debt. Lessee : A person to whom a lease is made. Letters of Administration : An instrument issued out of the court having jurisdiction, granting power to settle the estate of one dying without leaving a will. Letters Testamentary : An instrument out of the court having jurisdiction, granting power to the person named as executor in a will to carry out the provisions of the will. Lien : A right which one person has to retain the property of another by way of security for a debt or claim. Liquidated Damages : The sum of money agreed by the parties to a contract in advance, to be paid in case of breach. Litigation : A suit at law. Lunatics : Persons who have lost their reason. Mandamus : A writ issued by a superior court to an inferior court or to an officer, commanding something to be done. Mandate : A bailment of personal property in which the bailee undertakes without compensation to do something for the bailor with the thing bailed. (The bailor is generally termed the mandator, and the Lailee the mandatary.) Maturity : The time at which commercial paper legally becomes due. Merger : The absorption or extinguishment of one contract in another. Minor : Same as infant. Misrepresentation : A false and fraudulent statement made by a party to a contract, relative to a particular fact, with the knowledge that the state- ment is untrue. Mortgage : A grant or conveyance of an estate or property to a creditor for the security of a debt, to become void on payment of such debt. The mortgagor is the one who gives the mortgage upon his property; the mortgagee the one to whom the mortgage is given. Municipal Law : The rules prescribed by the supreme power in a nation or state. Necessaries : Such things are as proper and essential for the sustenance of man. Negotiable Paper : An instrument, as a bill or note, which may be transferred from one to another by indorsement or delivery. Nominal Damages : Those given for the violation of a right from which no actual loss has resulted. GLOSSARY 379 Non-suit : The name of a judgment given against a plaintiff when he is un- able to prove his case. Non-user : A failure to use rights and privileges. Notary Public : A public officer whose principal function is to administer oaths and take acknowledgments. Notice of Protest : A notice given by the holder of a bill or note to the drawer or indorser, that the bill has been protested for refusal of payment or acceptance. Nuisance : Anything that unlawfully injures or damages a person in the en- joyment of life and property. Oath : A pledge given by the person taking it that his promise is made under an immediate sense of his responsibility to God. Offeree : One to whom an offer is made. Offerer : One who makes an offer. Open Policy : An insurance policy in which there is no valuation of the thing insured. Oral Contract : A contract made by means of spoken words. Ordinance : A rule, or order, or law. Usually applied to the acts or laws passed by the common council of a city. Outlawed : A debt is said to be outlawed when it is barred by the statute of limitations. Par : Equality of value. Bills of exchange and stocks are at par when they sell for their face value. They are above or below par when they are worth more or less than their face value. Paramount Title : In real property law, denotes the superior or better title. The title which will prevail when a dispute as to ownership arises. Parol Contract : Any agreement not under seal. It is often used as synony- mous with oral contract. Partnership : The relationship resulting from an agreement between two or more persons to place their money, effects, labor, and skill, or some or all of them, in some enterprise or business, and divide the profits and bear the losses in certain proportions. Party Wall : A wall common to two adjoining estates. Pawn : A sale of personal property on condition that it may be redeemed within a certain time. Payee : The person to whom the payment of any kind of commercial paper is directed to be made. Perjury : A willfully false statement by one who is lawfully sworn and required to tell the truth, made in a judicial proceeding and in relation to a matter that is material to the point in question. Per Se : In itself. Personal Property : Such things as are movable, and that may be taken by the owner wherever he goes. Plaintiff : The person who brings a suit at law* 380 GLOSSARY Pledge : A bailment of personal property to secure the payment of some debt or the fulfillment of some agreement. Pledgee : The bailee of personal property under a pledge. Pledger : The bailor of personal property under a pledge. Policy : The written contract of insurance. Post-dated : Having a date subsequent to that at which the agreement is actually made. Post-mortem : After death. Power of Attorney : A written instrument under seal by which one party ap- points another to act for him. Premium : The consideration or price paid for insurance. Presumption : An inference of the law, from certain facts, of the existence or truth of some other fact or proposition. Probate : The act or process of proving a will. Promisee : One to whom a promise is made. Promisor : One who makes a promise. Prima Facie : Literally, at the first appearance. Prima facie evMence is that which is sufficient to establish a fact unless it be rebutted or contradicted. Principal: (i) A party for whom another is authorized to do certain acts with third parties. (2) A sum of money at interest. Promissory Note : A written promise, signed by the party promising to pay a certain sum of money at a certain time to a person named, or to his order, or to the bearer. Prosecute : To proceed against by legal measures. Protest : A formal declaration in writing by a notary public of the demand and refusal to pay a note or bill. Proxy: (i) One who represents another. (2) A writing by which one authorizes another to vote in his place. Public Enemies : Those who belong to a nation at war with another. Public Policy : The principles under which the freedom of contract or private dealing is restricted by law for the good of the community. Quantum Meruit : As much as he deserves. Quasi : As if; analogous to. (Quasi corporations are bodies like corporations, and yet are not strictly corporations.) Quitclaim Deed : A form of deed in the nature of a release. Ratification : Giving force to a contract which otherwise is not binding. Real Estate : Same as real property. Real Property : That which is fixed or immovable, and includes land and whatever is erected or growing on it, together with what is beneath or above the surface. Realty : Same as real property. Receiver : Usually a person appointed by a court to take and hold property in dispute, the property of an insolvent, or the property of a dissolved corporation. GLOSSARY 381 Recoupment : A reduction or diminution of damages on account of a breach of warranty or defects in performance. Release : An instrument in the general form of a deed that in distinct terms remits the claim to which it refers, and being under seal, although reciting only a nominal consideration, extinguishes the debt. Remainder : An estate in real property to take effect after another's estate is terminated. Remedy: The legal means employed to enforce a right or redress an injury. Rent : Compensation for use of real property. Replevin : An action to recover the possession of goods wrongfully taken and retained. Rescission : The annulling or dissolution of contracts by mutual consent or by one party. Residence : The place where a man makes his home, or where he has dwelt permanently for a considerable length of time. Residuary Devisee : The person named in a will who is to take all the real property remaining after all of the other devises are paid. Residuary Legatee : The person named in a will who has the residue of the personal property after the payment of the other legacies specifically men- tioned in the will. Revert : To fall again into the possession of the donor, or of the former proprietor. Right of Survivorship : The right that the survivor or survivors have to take the interest of their deceased joint tenant, which in other cases would go to his heirs. S.S. : Abbreviation for the Latin word "Scilicet," meaning to wit; that is, to say. Sale : The transfer of the ownership in property for a price in money. Satisfaction : Payment of a legal debt or demand ; the discharging or cancel- ing of a judgment or a mortgage, by paying the amount of it. Seal: An impression upon any impressible substance, or a piece of paper pasted on with intent to make a seal of it. Seaworthiness: The fitness of a vessel in all respects of materials, equipment, and construction for the service in which it is employed. Set-off : A claim which one party has against another who has a claim against him ; a counter-claim. Severance : The removal of fixtures from the land. Shipper : One who gives merchandise to another for transportation. Simple Contract : A contract, either oral or written, which is not under seal. Special Partner : One who invests capital in a partnership, and is liable for its debts only to the extent of his investment. Specialty : A contract under seal. Specific Performance : Performance of a contract according to its precise terms. It is frequently compelled by a court of equity. 382 GLOSSARY Statute : An act of the legislature. Statute of Frauds : An English statute, generally reenacted in this country, requiring certain contracts to be made in writing, designed to prevent fraud and perjury. Statute of Limitations : A statute requiring an action to be commenced within a certain time after the demand has arisen. It limits the time to sue, hence its name. Stock : Same as capital stock. It is also used to denote the shares into which the capital stock is divided. Stockholder : The owner of one or more shares of the stock of a corporation. Stoppage in Transitu : A stoppage by the seller of goods sold on credit before they reach their destination upon his learning of the buyer's insolvency. Subagent : A person appointed by an agent to perform some duty relating to the agency. Subcontract : A contract made by one who has agreed with a third party to perform labor or services, for the whole or part performance of that labor or service. Subpoena : A writ commanding the attendance of a person in court. Subrogation : The substitution of one person or thing hi the place of another, particularly the substitution of one person in the place of another as a creditor, with a succession to the rights of the latter. Suit : The prosecution of some claim or demand in a court of justice. Summons : A writ directed to a sheriff or other officer, requiring him to notify the person named that an action has been commenced against him in the court from which the writ issues, and that he is required to appear upon a certain day and answer the complaint in such action. Surety : One who has agreed with another to make himself responsible for the debt, default, or misconduct of a third party. Similar to guarantor. Tenant : One to whom another has granted for a period the use of certain real estate. Tender : An offer of a sum of money in satisfaction of a debt or claim, by producing and offering the amount to the creditor and declaring a willing- ness to pay it. Testator : A person who makes a will. Tort : A private wrong or injury, other than that arising from the breach of a contract, for which damages can be collected. Trade-mark : The symbol, emblem, or mark which a manufacturer puts upon the goods he manufactures. Trespass : Any wrongful act of one person whereby another is injured. Trustee : One who holds property for the benefit of another. Uberrima Fides : The most perfect good faith. Ultra Vires : The acts or proceedings of a corporation done beyond the scope of its powers. Underwriter : Same as insurer. GLOSSARY 383 Usury : Illegal interest. Validity : Legal strength or force ; the quality of being good in law. Vendee : One to whom anything is sold ; a purchaser ; a buyer. Vendor: A seller; the person who sells a thing. Verbal : Parol, by word of mouth. Verdict : The finding of a jury reported to the court. Vested : Already in force. Void : Of no force or effect. Voidable : That may be avoided ; not absolutely void. Waiver : The abandonment of a right, or a refusal to accept it. Ward: A minor under guardianship. Warranty : An agreement to hold one's self responsible, if a certain thing does not turn out as represented. Waste : Damage or destruction done or permitted to land or trees by a tenant. Wharfinger : The owner of a wharf who maintains it for the purpose of receiv- ing and shipping merchandise. Will : An instrument by which a person disposes of his property, to take effect after his death. Writ : A precept in writing issued from a court, either as the commencement of a suit or incidental to its progress, and requiring the performance of a certain act or giving authority to do it. ABBREVIATIONS Abb. N. C. . ... Abbott's New Cases. Ala. ....... Alabama. App. Div. ...... Appellate Division. Ark. ....... Arkansas. A. & E Adolphus & Ellis. Barb. ....... Barbour. Blatchf. Blatchford. B. & C Barnewell & Creswell. Cal. ....... California. Can Canada. Ch. Div. ...... Chancery Division. Conn Connecticut. Cush Gushing. C. & P. . . . . . . . Carrington & Payne. Del Delaware. Eng English. Exch Exchequer. Fed. Rep Federal Reporter. Fla Florida. Ga. ....... Georgia. Harr Harrington. Heisk. . Heiskell. How Howard. Humph. Humphrey. H. L. C. House of Lords Cases. Ill Illinois. Ind Indiana. Johns Johnson. Kans Kansas. Ky Kentucky. La. ....... Louisiana. La. An. ....... Louisiana Annual. Ld. Raymond ..... Lord Raymond. L. R. Q. B Law Reports, Queen's Bench. L. T. N. S Law Times, New Series. Mass. ....... Massachusetts. Md Maryland. COM. LAW 25 385 386 ABBREVIATIONS Me Maine. Met. or Mete. Metcalf. Mich Michigan. Minn Minnesota. Miss. ....... Mississippi. Mo Missouri. Mo. App Missouri Appeal. M. & W. Meeson & Welsby. N e b Nebraska. 5J.C North Carolina. N.H New Hampshire. N.T. Eq. New Jersey Equity. N J. L New Jersey Law. N.Y New York. Ohio St Ohio State. Ont Ontario. Ore. Oregon. Pa. Pennsylvania. p a> St Pennsylvania State. Paige Ch Paige's Chancery. Pick Pickering. Q. B Queen's Bench. Q. B. D. Queen's Bench Division R.I Rhode Island. Sandf. Ch Sandford's Chancery. S.C South Carolina. Tenn Tennessee. Tex. Texas. Tex. Civ. App Texas Civil Appeal. T. & C Thompson & Cook. U.S United States. Va. Virginia. Vt Vermont. Wall Wallace. Wend Wendell. Wis Wisconsin. W. Black Wm. Blackstone. W. Va. . .... West Virginia. INDEX Absolute property, 85. Abstract of title, 300. Acceptance, 25. bill of exchange, 131. of deed, 306. for honor, 132. how made, 27. must be communicated, 26. supra protest, 132. virtual, 133. when binding, 27. Accident insurance, 283. Accommodation paper, 147. Accord and satisfaction, 32. Acknowledgment, 307. Act of God, loss by, 206. Action, 342. Actions, table of limitations of, 351. Agency, 159. coupled with an interest, 175. created by necessity, 164. created by ratification, 163. questions, 177. relation of principal and agent, 1 60. termination of, 174. Agents, authority to execute instrument under seal, 161. can renounce agency, 176. classes of, 159. compensation of, 165. defined, 159. fraud and negligence of, 171. general, 159. gratuitous, 169. how appointed, 161. malicious wrongs of, 172. must exercise judgment, 166. must obey instructions, 166. negligence of, 172. Agents, notice to, 171. obligation to principal, 166. obligation to third party, 173. scope of authority, 170. special, 160. when written appointment required, 161. Alienation clause, fire insurance policy, 272. Alteration of negotiable instruments, 151. of written instruments, 65. Annexation to the realty, 87. Anomalous indorser, 146. Answer, 344. Appeal, 333, 347. Appellate division, 340. Approval, sale on, 101. Articles of copartnership, form, 222. Assignment, of fire insurance policy, 272. of lease, 326. of mortgage, 316. of mortgage, form, 319. of rights under contracts, 51. of stock, form, 259. Attachment, 348. B Baggage, 214. when carrier's liability terminates, 215. Bailee, defined, 180. liability of, in bailment for bailee's benefit, 188. liability of, gratuitous, 184. liability of, in mutual benefit bailment 191. liability of, may be varied by contract, 183. lien of, 193. may use, in bailment for bailee's benefit, 189. tortious, 183. 388 INDEX Bailment, 1 80. classification, 181. degrees of care and diligence, 181. distinguished from sale, 85. exceptional, 197. for bailee's sole benefit, 187. for bailor's sole benefit, 183. hired service about a chattel, 190. hired use of chattel, 194. for mutual benefit, 190. ordinary and exceptional, 181. pledge or pawn, 194. questions, 216. redelivery, 193. Bailor defined, 180. Bank draft, 128. form, 129. Bank note, form, 139. Bankrupt, duties of, 67. Bankruptcy, 66. acts of, 67. discharge in, 68. dissolves a partnership, 242. effect on contracts, 52. exemptions in, 67. meeting of creditors, 68. of party terminates agency, 177. trustee, 68. who may avail themselves of, 66. Barter, 84. Bill of exchange, 128. acceptance, 131. acceptance for honor^ 132. dishonor, 132. foreign, 129. form, 128, 130. inland, 129. presentment, 131. virtual acceptance, 133. Bill of lading, 206. Bill of sale, contents of, 99. form, 98. Blank indorsement, 136. Boarding-house keepers, 197. Bona fide holder for value, 148. Bond, 316. form, 317. Breach of contract, by failure to per- form, 71. by making performance impossible, 70. Breach of contract, by renouncing liabil- ity, 69. Breach, discharge of contract by, 69. By-laws of corporation, 250. Cancellation of fire insurance policy, 273. Capital of partnership, 230. Care or diligence, degrees of, in bail- ment, 181. Carrier, see Common Carrier, 200. Cases, explanatory note, 12. Casualty insurance, 283. Caveat emptor, 39, 106. Certificate of stock, form, 249. Certified check, 135. Chattel mortgage, 101. filing of, 102. foreclosure, 104. form, 103. requirements of, IO2, table, 363. Check, 133. certified, 135. form, 133. must be presented without delay, 134. Circuit Court, 339. of appeals of United States, 337. of the United States, 336. Civil Courts, 334. Civil law, 9. Coal, real or personal property, 56. Collateral security, 195. Commercial law defined, IO. Common carrier, 200. compensation, 202. delivery, 21 1. liability of, 206. liability for baggage, 214. lien of, 202. limitation of liability by contract, 209. limits of liability, 206. loss arising from nature of goods, 209. loss by act of God, 206. loss by act or fault of consignor, 208. loss caused by public authority, 209. loss by fire, 207. loss by public enemy, 207. of passengers, 213. INDEX 389 Common carrier, of passengers, rights and duties, 213. of passengers, when liability for bag- gage terminates, 215. receipt, 206. right to refuse goods, 204. when liability begins, 205. Common law, 9. courts, 334. Common stock, 258. Compensation, of agent, 165. of a partner, 232. Complaint, 343. Compound interest, 156. Compromise with creditors, 33. Concealment in life insurance, 277. Condition, in contract, 72. in contract of sale, 99, 104. Conditional contract, filing of, IOO. of sale, 99. Consideration, compromise, 33. contracts under seal, 14. in executed contract, 29. in executory contract, 29. extension of time, 33. for gift, 29. good, 33. moral obligation, 33. must be legal, 34. must be possible, 34. must be present or future, 35. payment of less amount, 31. promise may be sufficient, 31. settlement to avoid litigation, 33. valuable, 33. Constitution, defined, 8. United States, 10. Constitutional law, 8. Contempt of court, 345. Contract, against public policy, 46. assignment of rights under, 51. consideration, 29. defined, 12. discharge of, 60. of drunkard, 23. entire and divisible, 71. executed, 12. executory, 12. express, 15. filing conditional, 100. Contract, formal, 13. implied, 15. in restraint of trade, 48. of insane person, 21. made on Sunday, 46. of married women, 23. necessary conditions of, 12. not to be performed within one year, 57- object must be legal, 44. of infants, 1 7. of sale, 95. of sale, in writing, 99. of wager void, 46. operation of, 50. oral, 15. parties acquiring under, 50. parties necessary, 15. questions, 76. simple, 13. subject-matter, 44. uberrima fides, 40. under seal, 14. waiver or rescission of, 60. written, 15. Copartnership, see Partnership, 221. Corporate, name, 250. seal, 250. Corporation, 247. by-laws, 250. common and preferred stock, 258. directors, 261. dissolution, 254. dividends, 258. form of assignment of stock, 259. formation of, 251. implied powers, 252. liability for acts of agents, 254. liability of stockholders, 251, 261. management, 260. membership, 257. method of dissolution, 257. notice of meeting of stockholders, 260. power to hold real estate, 250. powers and liabilities, 252. private, 248. private stock corporation, 249. public, 248. questions, 262. rights of creditors of, 261. 390 INDEX Corporation, stock and non-stock, 249. stockholder in, 257. transfer of stock, 259. ultra vires acts, 254. vote of stockholders, 260. Corporeal real property, 291. Costs, 346. Counterclaim, 344. Counterfeit money, not payment, 63. County Court, 339. Court, of Appeals, 340. Circuit Court of Appeals of United States, 337. Circuit or Supreme, 339. of Claims, 340. County, 339. Justice, 338. Municipal or City, 338. Police or Magistrate's, 338. Surrogate's or Probate, 339. United States Circuit, 336. United States District, 335. United States Supreme, 337. Courts, 332. of appellate jurisdiction, 333. civil, 334. classification of, 333. common law, 334. criminal, 334. equity, 334. of general jurisdiction, 334. jurisdiction of, 332. not of record, 334. of original jurisdiction, 333. of both original and appellate jurisdic- tion, 333. questions, 341. of record, 334. of special jurisdiction, 334. ' state, 338. Covenants, in deed, 308. in a lease, 322. in lease, express and implied, 324. Coverture, estate during, 296. Credit insurance, 285. Criminal Courts, 334. Criminal law, 9. Crops, real or personal property, 56. Curtesy, 296. Customs of merchants, 116. Damages, 73. Days of grace, 141. table, 355. Death, effect on contract, 52. of partner dissolves partnership, 240. of party terminates agency, 1 76. Declaration, 343. Deed, 302. acknowledgment, 307. conditions, 304. covenant against grantor, 310. covenant against incumbrance, 309. covenant of further assurance, 310. covenant of quiet enjoyment, 309. covenant of seizin, 308. covenant of warranty of title, 310. date and seal, 305. delivery and acceptance of, 306. delivery in escrow, 306. description in, 305. granting clause, 304. habendum clause, 305. property to be conveyed, 304. quitclaim, 310. quitclaim, form, 311. recording, 307. signing, 306. testimonium clause, 306. warranties in, 308. warranty, form, 303. words of conveyance, 304. Defeasance clause, mortgage, 313. Defendant, 342. Deficiency judgment, 318. Delivery, by common carrier, 211. of deed, 306. in escrow, 306. in sale of personal property, 108. want of, in negotiable instruments, 150. Demand, negotiable instruments, 138. Demurrer, 344. Deposit, 183. Deposition, 346. Description, sale by, 107. Deviation, marine insurance, 281. Directors of corporations, 261. Discharge, in bankruptcy, 68. of contract, 60. of contract by bankruptcy, 66. INDEX 391 Discharge, of contract by agreement, 60. of contract by alteration of written in- strument, 65. of contract by 'breach, 69. of contract, impossibility of perform- ance, 64. of contract by operation of law, 65. of contract by performance, 6l. of indorsee of negotiable instruments, 154. of mortgage, 320. of mortgage, form, 320. of negotiable instruments, 153. of promissory note, 127. of right of action, 74. Dishonor, of bill of exchange, 132. of negotiable instruments, notice of, 143- Dissolution of corporation, 254. by expiration of charter, 255. by forfeiture, 256. by repeal of charter, 255. by surrender of charter, 255. method of, 257. Dissolution of partnership, 237. by act of partner, 238. by bankruptcy, 242. by change in membership, 238. by contract, 237. by death of partner, 240. by, decree of court, 241. by mutual consent, 238. District Court of the United States, 335- Dividends of corporation, 258. Divisible contracts, 71. Dormant partner, 226. Dower, 297. Drafts, time and sight, 130, Drawer, obligation of, 137. Drunkenness, 23. Duress, 43. E Easement, 291. Ecclesiastical law, 8. Elevator insurance, 286. Emblements, 295. Eminent domain, 292. Employer's liability insurance, 284. Endowment, life insurance, 275. Entire contract, 71. Equitable estate, 299. Equities in negotiable instruments, 152. Equity, 9. Courts, 334. of redemption in mortgage, 312. term, 340. Estate, by curtesy, 296. during coverture, 296. equitable, 299. in fee simple, 292. in land, 292. in land, homestead, 298. life, 293. by marriage, 296. by marriage, dower, 297. in severally and joint estates, 299. for years, 321. Eviction of tenant, 327. Evidence, 345. Exceptional bailments, 181, 197. Executed contract, 12. consideration, 29. Execution, 346. Executory contract, 12. consideration, 29. when title passes in sale, 96. Exemption, 347. in bankruptcy, 67. homestead, 298. laws, table, 359. Express and implied covenants in lease, 324- Express contract, 15. Express warranties, 104. Fact, questions of, 345. Factor may sell, 94. Federal courts, 334. Fee simple, estate, 292. Felony, 339. Feudal .system, 292. Fidelity insurance, 285. Fiduciary relation between principal and agent, 167. Filing, chattel mortgage, IO2. conditional contract, 100. 392 INDEX Fire, insurance, 265. insurance policy, 270. loss by, 207. Fixtures, 86. relation of parties, 91. right of a tenant to remove, 91. when must be removed, 92. Foreclosure, chattel mortgage, 104. mortgage, 318. Foreign bill of exchange, 129. form, 130. Forgery of negotiable instruments, 151. Form, articles of copartnership, 222. assignment of mortgage, 319. assignment of stock, 259. bank draft, 129. bank note, 139. bill of exchange, 128. bill of sale, 98. bond, 317. certificate of protest, 145. certificate of stock, 249. chattel mortgage, 103. check, 133. discharge of mortgage, 320. foreign bill of exchange, 130. inland bill of exchange, 1 29. joint and several promissory note, 125. land contract, 301. lease, 323. mortgage, 314. notice of protest, 146. power of attorney, 162. promissory note, 124. quitclaim deed, 311. sight draft, 130. summons, 343. warranty deed, 303. Formal contracts, 13. Fraud, 38. actual, 38. concealed, 39. in contract of insurance, 268. grounds for action, 42. liability of partners for, 236. in marine insurance, 280. of agents, 171. Freight, 202. receipt, 206. Full indorsement, 136. Further assurance, covenant of, 310. Garnishment, 348. General agents, 159. Gift, 84. consideration of, 29. Glossary, 371. God, act of, 206. Good consideration, 33. Good will of partnership, 230. Goods, 202. Goods, wares and merchandise, 58. Grace, days of, 141. Grass, real or personal property, 56. Gratuitous, agents, 169. bailee, degree of care required of, 1 86. bailee, liability of, 184. bailee, use of property by, 186. bailment, termination of, 187. Guaranty insurance, 285. Guests, 198. H Habendum, 305. Heir, in conveyance, 304. Hired, service about a chattel, 190. use of a chattel, 194. Holder for value of negotiable instru- ments, 147, 149. Homestead, 298. Hotel keeper, 197. Ice, to whom belongs, 291. Illegal object of contract, 45. Implied, contracts, 15. covenants in lease, 324. partnership, 225. powers of corporation, 252. warranty, 105. Incorporation, 251. Incorporeal real property, 291. Incumbrances, covenant against, 309. Individual liability of partners, 231. Indorsement, blank and full, 136. how made, 1 38. of negotiable instruments, 136. without recourse, 137. INDEX 393 Indorser, anomalous, 146. discharge of, 154. irregular, 146. notice to, 144. obligation of, 137. payment by, 154. Inevitable accident in bailment, loss by, 189. Infancy, 1 6. Infant's contracts, affirmance of exe- cuted, 1 8. affirmance of executory, 1 8. for necessaries, 20. void, 19. voidable, 17. who may disaffirm, 17. Injunction, 73. Inland bill of exchange, 1 29. form, 129. Innkeeper, 197. guests of, 198. liability of, 198. lien, 200. limitation of liability, 199. termination of relation, 200. Insane person, liable for necessaries, 22. lucid interval, 22. Insanity, 21. of party terminates agency, 176. Installment sale, 99. Insiyrable interest, fire, 265. life, 275. marine, 280. Insurance, 265. accident, 283. casualty, 283. credit, 285. description of property insured, 267. effect of fraud, 268. elevator, 286. employer's liability, 284. fidelity or guaranty, 285. fire, 265. fire policy, 270. form of contract, 267. life, 274. marine, 280. plate glass, 286. premium, 265. Insurance, questions, 286. representation, 268. steam boiler, 286. title, 285. warranty, 269. Interest, 154. compound, 156. table, 353. on what claims allowed, 155. International law, 7. Interstate commerce commissioners, 205. Interstate commerce law, 204. Involuntary bankruptcy, 66. Irregular indorser, 146. Joint estates, 299. promissory note, 124. and several promissory note, 124. and several promissory note, form, 125- stock company, 242. tenants, 299. Judgment, 346. deficiency, 318. discharge of right of action by, 74, Jurisdiction, of court, 332. of the person, 333. of subject-matter, 332. Jury, 345. Justice Court, 338. Land contract, 55, 299. form, 301. Land, estate in, 292. Landlord and tenant, 321. assigning and subletting lease, 326. eviction, 327. rights and liabilities of, 325. Law, civil, 9. commercial, IO. common, o. constitutional, 8. criminal, 9. definition of, 7. ecclesiastical, 8. international, 7. moral, 7. municipal, 8. 394 INDEX Law, questions of, 345. sources of, IO. statute, 10. unwritten, 10. written, 10. Lawyers, 346. Lease, assigning and subletting, 326. covenants in, 322. express and implied covenants, 324. form, 323. of land when required to be in writ- ing. 57- real property, 321. rights and liabilities under, 325. term of, 322. Legal tender, 63. Legality of voyage, marine insurance, 282. Levy and sale, 347. Liability, of common carrier, 206. of common carrier begins, 205. of common carrier limited by contract, 209. of innkeeper, 198. of partners to third parties, 234. Lien, of bailee, 193. of common carriers, 2O2. of innkeeper, 200. Life estate, 293. tenant must not commit waste, 294. Life insurance, 274. concealment, 277. endowment, 275. form of policy, 278. insurable interest, 275. misrepresentation, 277. notice of death, 280. payments, 279. premium, 277. suicide, 279. Lightning, loss by, 270. Limitation of action (table), 351. statute of, 75. Limited liability of, stockholders of cor- poration, 251. partner, 227. Litigation, settlement to avoid, 33. Loss by fire, 270. Lost goods, vender has no title, 93. Lunatic, sec Insane Person, 21. M Machinery as fixtures, 90. Maker of promissory note, 124. Management of corporations, 260. Mandate, 183. Marine insurance, 280. abandonment, 283. deviation, 281. fraud, 280. insurable interest, 280. legality of voyage, 282. losses, 282. misrepresentation, 281. seaworthiness, 281. warranty, 281. Marriage, agreement in consideration of, 55- effect on contract of agency, 177. estates by, 296. Married women, 23. table, 357. Memorandum required under the statute of frauds, 54. Merger, 65. Misdemeanor, 339. Misrepresentation, 38. in life insurance, 277. marine insurance, 281. Mistake, 35. Moral law, 7. obligation, 33. Mortgage, 312. any interest in realty may be mort- gaged, 313. assignment of, 316. assignment of, form, 319. chattel, 101. clause fire insurance policy, 273. covenants in, 316. defeasance clause, 313. description of, 313. discharge of, 320. discharge of, form, 320. equity of redemption, 312. foreclosure, 318. form, 314. recording, 318. second or subsequent, 321. Mortuary tables, 277. INDEX 395 Municipal or City Court, 338. Municipal law, 8. Mutual benefit bailment, 190. Mutuum, 187. N Name, of corporation, 250. of partnership, 235. Necessaries, infant, 20. lunatic, 22. Necessity, agency created by, 164. Negotiable instruments, 116. accommodation paper, 147. alteration or forgery, 151. defenses, 149. discharge of, 153. essential conditions, 118. indorsement, 136. irregular indorser, 146. maker must have capacity to contract, 152. may be signed by one partner, 233. must be payable absolutely, 121. must be negotiable in form, 119. must be payable in money, and amount must be certain, 119. must be signed, 118. must be in writing, 118. must have designated payee, 120. negotiation, 136. notice of dishonor, 143. payment, 153. place of payment, 139. presentment and demand, 138. principal characteristics, 117. protest, 144. questions, 156. right of holder or payee, 147. statute law, 117. waiver of notice, 144. Negotiation of negotiable instruments, 136. New trial, 347. Nominal partner, 226. Non-disclosure, effect on contracts, 40. Non-stock corporations, 249. Notice, to agent, 171. of death, life insurance, 280. of dishonor, 143. effect on liability of partner, 234. Notice, to indorsers, 144. of loss, fire insurance, 274. of meeting of stockholders, 260. to one partner, notice to all, 236. of protest, form, 146. by retiring partner, 239. O Obligation of agent to principal, 166. of agent to third party, 173. of drawer, 137. of indorser, 137. of principal to agent, 165. of principal to third party, 170. of third party to principal, 173. Offer and acceptance, 24. must pertain to same object, 25. Offer, must be communicated, 25. may lapse, 28. may be withdrawn, 28. Operation of law, discharge of contract by, 65. Oral contracts, 15. Ordinary bailment, 181. Ore, real or personal property, 56. Ostensible partners, 225. Parties, in an action, 342. to a contract, 15. Partner, 225. compensation of, 232. dormant, 226. good faith between, 231. individual liability of, 231. liability for fraud, 236. liability of, to third parties, 234. limit of authority, 234. may sell, 229. may sign negotiable paper, 233. nominal, 226. notice to one, notice to all, 236. power of majority, 233. public or ostensible, 225. rights between 'themselves, 229. right of purchaser or inheritor, 229. secret or unknown, 225. silent, 226. special or limited, 227. 396 INDEX Partnership, 221. agreement executed, 221. capital, 230. dissolution of, 237. form of written agreement of, 222. good will, 230. implied, 225. name, 235. notice of retiring partner, 239. oral contract, 224. questions, 243. reality of, 227. record of transactions of, 232. remedies against, 236. trade-marks and trade names, 231. written contract, 222. Passengers, carriers of, 213. Pawn, 194. Pawnbrokers, 195. Payee, of negotiable instruments, rights of, 147. of promissory notes, 124. Payment, before maturity, of negotiable instruments, 153. in life insurance, 279. of negotiable instrument, 153. of negotiable instrument by indorser, 154. by note or check, 6l. place of, 139. in a sale, 108. Personal property, 86. Plaintiff, 342. Plate-glass insurance, 286. Plea, 344. Pleading and practice, 342. questions, 349. Pleadings, 343. Pledge or pawn, 194. Pledgee may sell, 94. Police or Magistrate's Court, 338. Policy of fire insurance, 270. additional insurance, 271. alienation clause, 272. amount recoverable, 271. assignment, 272. cancellation, 273. factory insurance, 273. location of property, 270. mortgage clause, 273. Policy of fire insurance, notice of loss, 274. of life insurance, 278. pro rata clause, 274. renewals, 273. vacancy, 272. Potential existence of chattel, 95. Power of attorney, 161. form, 162. Powers and liabilities of corporations, 252. Practice and pleading, 342. Preferred stock, 258. Premium, in fire insurance, 265. in life insurance, 277. Presentment, of check, 134. of bill of exchange, 131. Presentment and demand, of negotiable instruments, 138. when made, 139. by whom made, 142. upon whom made, 142. for payment, whefl made, 140. Principal and agent, relation of, 160. termination of relation, 174. Principal, bankruptcy of, terminates agency, 177. death of, terminates agency, 176. insanity of, terminates agency, 176. and interest, 154. liability for wrongs of agent, 171. may terminate agency unless coupled with an interest, 175. must indemnify agent, 165. must reimburse agent, 165. obligation to agent, 165. obligation of third party to, 173. Principal defined, 159. Private, carrier, 201. corporation, 248. stock corporations, 249. Probate Court, 339. Promissory note, 123. discharge of, 127. form, 124. joint, 124. joint and several, 124. several, 124. signature, 125. Property, real and personal, 86. Pro rata clause, fire insurance policy, 274. INDEX 397 Protest, form of certificates, 145. of negotiable instruments, 144. form of notice, 146. Public, corporation, 248. enemy, loss by, 207. loss arising from public authority, 209. partners, 225. policy, contracts against, 46. Purchaser, 92. Questions, of law or fact, 345. agency, 177. bailment, 216. contracts, 76. corporations, 262, courts, 341. insurance, 286. negotiable instruments, 156. partnership, 243. pleading and practice, 349. real property, 328. sale, 112. Quiet enjoyment, covenant of, 309. Quitclaim deed, 310. form, 311. R Ratification, agency created by, 163. Real estate, also real property, 290. Real property, 86, 290. corporeal and incorporeal, 291. jemblements, 295. estates in fee simple, 292. estate by marriage, 296. estate for years, 321. land contract, 299. leases, 321. life estate, 293. power of corporation to hold, 250. questions, 328. sale and conveyance of, 299. title, 299. Record, of deed, 307. of mortgage, 318. Redelivery, bailment, 193. Referee, 341. Reference, 341. Remedies against partnership, 236. Renewal of fire insurance policy, 273. Replevin, 348. Reply, 344. Representations, in contracts, 73. in insurance policy, 268. Restaurant keepers, 197. Restraint of trade, 48. Reward, 25. Right of action, 69. s Sabbath day, 46. Sale, conditional, 99. conditions in contract of, 104. contract of, 95. contract in writing, 99. and conveyance of real estate, 299. delivery and payment, 108. of goods act, 58. three conditions necessary under act, 59- installment, 99. parties, 92. of personal property, 84. questions, 1 1 2. remedies for breach, 108. rights of vendee, in. rights of vendor, 108. on trial, 101. under execution, 347. warranties in contract of, 104. when title passes, 95, 96. Sample, sale by, 107. Seal, 14. authority of agent to execute instru- ment under, 161. of corporation, 250. on deed, 305. imports consideration, 14, 29. Seaworthiness, marine insurance, 281. Second mortgage, 321. Secret partners, 225. Seizin, covenants of, 308. Seller, 92. must have good title, 93. Several promissory notes, 124. Severally, estates in, 299. Sight draft, 130. form, 130. Signatures on promissory notes, 125. Silent partner, 226. 398 INDEX Simple contract, 13, 15. form required, 15. Sleeping cars not inns, 198. Special, agent, 160. partner, 227. property, 85. term, 340. Specific performance, 73. in contract of sale, 112. State courts, 338. Statute law, 10. Statute of frauds, 53. agreement not to be performed within one year, 57. agreements in consideration of mar- riage, 55. contracts for the sale of land, 55. promise to answer for debts of an- other, 54. promise of executor or administrator, 54- sale of goods act, 58. table, 357. when writing sufficient, 54. Statute of limitations, 75. new promise under, 76. when time begins to run, 75. Steam boiler insurance, 286. Steamship not an inn, 198. Stock, certificate, 249. common, 258. corporation, 249. of corporation, transfer of, 259. preferred, 258. subscription in a corporation, 257. Stockholders, of corporations, 257. liability of, 261. limited liability, 251. notice of meeting, 260. vote of, 260. Stolen goods, vendor has no title, 93. Stoppage in transitu, 109. Subagents, 168. Subject-matter of contract, 44. Subletting lease, 326. Subpoena, 345. Suicide in life insurance, 279. Summary proceedings, 327. Summons, 342. form, 343. Supplementary proceedings, 348. Supreme Court, 339, 340. of United States, 337. Surrogate's Court, 339. Tenant and landlord, 321. Tenant, for life, 294. in common, 299. right to remove fixtures, 91. Tender, 63. Term of lease, 322. Termination, of agency, 174. of agency by act of the parties, 175. of agency, distinction between power and right, 175. of agency by limitation, 1 74. of bailment for bailor's benefit, 187. Testimonium clause in deed, 306. Thief of goods acquires no title, 93. Time, draft, 130. of presentment for payment, 140. Title, abstract of, 300. insurance, 285. to real property, 299. when passes in sale, 95, 96. Tortious bailee, 183. Torts of agent, principal liable for, 171. Trade fixtures, 91. Trade-mark of partnership, 231. Trade name of partnership, 231. Transfer of right of property, 84. Trees, real or personal property, 56. Trial, 345. term, 340. Trustee in bankruptcy, 68. U Uberrima fides, 40. Ultra vires acts, 254. Undue influence, 43. United States Constitution, IO. Unknown partners, 225. Unwritten law, 10. Usury, 154. Valuable consideration, 33. Vendee, 92. rights of, in. INDEX 399 Vendor, 92. rights of, 1 08. Verdict, 346. Virtual acceptance of bill of exchange, 133- Voidable contracts, 17. Voluntary bankruptcy, 66. Vote of stockholders in corporation, 260. W Wagers, 46. Waiver of contract, 60. Waiver of notice, 144. War, effect on contracts of agency, 177. Warranties, express, 104. implied, 105. Warranties, in deed, 308. in insurance policy, 269. in marine insurance, 281. in sale, 104. of title, covenant of, 310. Warranty deed, form, 303. Waste, of life tenant, 294. Water, to whom belongs, 290. Witnesses, 345. Work, labor and services, 58. Writing, when appointment of agent must be in, 161. Written, contracts, 15. instrument, discharge by alteration^ 65. law, 10. ^LIBRARY # s CHOOL OF LAW UBUAK\ UNIVE11SITY OF CALIFORNIA LOS ANGELES