i OBtNSON . u zu . c> in in < LJ 2 .J -I U . Cl i n in UNIVERSITY OF CALIFORNIA LOS ANGELES SCHOOL OF LAW LIBRARY 13 INDICTMENTS AGAINST ALLEGED DYNAMITERS* Here are two indictments brought against the three alleged dynamiters now in the county Jail. The first is for murder against the Mc * a . ma j a n s i and others for alleged dynamiting of ; the newspaper building at Broadway and First street, and is a sample of the 19 similar ones. The second is against McManigal, J. J. McNamara nd others for the blowing up of the n the superior uucni. of tne '<- of California, in and for the county of Los Angeles. r^n^nr The people of the state of ',auior- nlaintiff vs. M. A. Schmidt, J. B McNamara, J. J. McNamara William Caplan, John Doe, Ri c "F" Roe, John Stiles and Jane Doe, defendants. Indictment. -The Grand Jury of Los Angeles Bounty in the name and by the au- hoSty of the people of the state of California, accuse M. A. Schmidt J.- B McNamara, J. J. McNamara Wil- liam Caplan, John Doe, Richard Roe,- John Stiles and Jane Doe of murder, committed as follows: "Heretofore, to wit: On the first* day of October. 1910, at and in the? county of LOS Angeles, and state of* California, and before the finding of this indictment, the said MA. Schmidt J B. McNamara, J. J. Mc> Namara and William Caplan, and John Doe, Richard Roe. John fotiles| and Jane Doe, whose true names are to the grand jurors aforesaic 1 un- known did then and there willfully, unlawfully, feloniously and with mal- ice aforethought, kill and murder one A Churchill Harvey-Elder, a human "in tne superior court California, in and for the county "The pSple of the state of California, plaintiff, vs. O. E. McManigal J^ J. McNamara. John Doe, Richard Roe, John Stiles and Jane Doe, defen- dantsIndictment. "The grand jury of Los Angeles county, in the name and by the au- thority of the people of the state of California, accuse a E - McMamgal. T' J McNamara, John Doe, Richard Roe,' John Stiles and Jane Doe, wnos< true names are to the grand jurors aforesaid unknown, of the crime of maliciously depositing and exploding, SB attempting to explode dynamite nitroglycerin, nitrogelatm, and othe chemfll compounds and exp osives, with intent to injure and destroy buildings, and to injure, intimidate and terrify human beings, a felony, committed as follows: "Heretofore, to-wit: on the 25th day of December, 1910, at and in th 1 county of Los Angeles, state of Cali- ornia and before the finding of this SffcfanSt, the said O. E. McManigal JJ McNamara, John Doe, Richard Roe' John Stiles and John Doe die! Then and there wilfully, unlawfully, feloniously and maliciously deposit, empt to explode and explode at, in, undS and near the building, office and foundry of the Llewellyn Iron works, a corporate body, at and near the corner of Main street and Redon- do street, in the city of Los Angeles, , county of Los Angeles, state of Ca i- fornia dynamite, nitroglycerin, SSUelatln and other enemies . com- pounds and explosives, with the in- tent then and there and thereby to Sure and destroy said building, of- 4 and foundry of the said Llewel yn Iron works, and with the Intel then and there and thereby to in- jure intimidate and terrify certain human beings, to-wit: Reese Llewel- ?vn John Llewellyn, William Llew- ellyn, David E. Llewellyn, Walt* Tavor Sprigg Harwood and the JtockholdVrs proprietors, directors and emploves of said Llewellyn Iron Sirta to the said building, office and foundry" that said building, office and foundry was, then and there, a place where human beings usually inhab- ited, assembled, frequented, passed and'repassed." Home of American Extension University FOREWORD TO SECOND EDITION \Vhen we began putting the text matter for this Course in pamphlet form, instead of in bound volumes of books, and mailing the lessons out from week to week and month to month, a few lessons at a time, we anticipated greater satisfaction on the part of our students. But we were not prepared to expect the tremendous re- sults which we have really achieved. The percentage of students -who actually keep up the Course under the new plan is over THREE times as great as under the old. This great appreciation of the Course in its present form, combined with the really remarkable satisfaction our stu- dents express with our PERSONAL instruction and INDIVIDUAL attention to quizzers, examinations, and consultation inquiries, has caused our enrollment of students to increase by leaps and hounds. The result is that this second edition of the Course in this form is made necessary almost six months in advance of the time we had planned for it. It is with heartfelt appreciation of the good work and co-operation of our present student-body and with full assur- ance and determination that those enrolling hereafter shall likewise not find their confidence in us misplaced that we offer this second edition of our Extension Law Course. A. C. BURNHAM President January 1911 nTyji/nzen E>l4-^ri)too 5c^oe?l of (Non-Reaident Instruction) CHARTERED UNDER THE LAWS OF CALIFORNIA S?jrartm*ttt af FRANK C. SMITH, LL. B.. D Copyr{gbt 1910. by THE BRODIE BURNHAM CO. Lot Anfeln "Tke great problem of America to- day is tkat of ADULT education." --Chas. W. EJiot. AMERICAN EXTENSION UNIVERSITY \s < (NON-RESIDENT INSTRUCTION) CHARTERED UNDER THE LAWS OF CALIFORNIA OFFICERS OF ADMINISTRATION AND INSTRUCTION Trustees A. C. BURNHAM, President DIAN R. GARDNER, Counsel A. C. BRODIE, Registrar M. B. BURNHAM, Treasurer E. V. GAHAN, Secretary FACULTY DEPARTMENT OF LAW A. C. BURNHAM, B.S., LL.B. President FRANK C. SMITH, LL.B., Dean Member New York Bar Evidence, Pleading, Practice, Procedure. R. W. CORE, A.B., LL.B. Member Michigan Bar Domestic Relations. Contracts, Municipal Corporations, Torts, International Lazv. C. H. SAYLES, LL.B. Member Michigan Bar History of the Law, Private and Public Corporations, Equity, Trusts Contracts MORRIS M. FERGUSON, A.B., LL.B. Member Illinois Bar Real Property, Abstracts, Real Estate Law, Personal Property, A. E. DENNIS, A. B., LL. B., Member Missouri Bar Guaranty and Suretyship, Constitutional Law, Statutory Law and Pleading. CHARLES COAN, LL. B., Member Colorado Bar Criminal Law, Negotiable Instruments. Lucius RANDOLPH, JR., LL. B., Member District of Columbia Bar Patent Law, Trademarks and Copyrights. FREDERICK M. HALL, LL. B., Member Massachusetts Bar Mining Law, Sales, Agency, Partnership. SPECIAL FACULTY FOR CANADA JOHN KING, K. C. of the Law Society of Upper Canada WARWICK F, CHIPMAN, B. C. L. of the Law Society of Quebec W. H. TRUEMAN, LL. B. of the Law Society of Manitoba AMERICAN EXTENSION UNIVERSITY PRELIMINARY STATEMENT The American Extension University is chartered under the laws of the State of California, as an educational institu- tion, and is authorized to give instruction either to resident students, or by correspondence, and to confer all appropriate honors and degrees. The Extension Law Department of the University gives a complete course in Law by correspondence, leading to the degree of Bachelor of Laws, LL,B. NEED OF THIS COURSE. Within the past three years, four different institutions have offered such a course and the remarkable combined enrollment of over 30,000 stu- dents secured by them within eighteen months of organization, is sufficient evidence of the demand for training by this method. The President of the American Extension University was the prime mover in the organization of two of these institutions and was the active business manager of three of them during their inception and early development. He is probably better informed, both as to the strength and weakness of the policies of these organizations than any other living man. He was also for many years an exceptionally successful teacher in one of America's largest regular State Universities. Besides being for several years a post-graduate student of two of the largest universities in this country and of Paris, Gottingen and Berlin in Europe, he has himself taken four different correspondence courses in as many different schools, and is thus thoroughly familiar with the actual practice of the best of these institutions, as well as with the most up-to-date and effective methods yet devised for correspondence instruc- tion in general It is believed that, in spite of the good work being done by the institutions already in the field, there are three certain respects in which all Extension and Correspondence courses, heretofore offered, fall short. These deficiencies are: 1. The present courses are too expensive; 2. The present courses are too detailed and extensive and require too much time for the busy man of today; 3. The present courses do not give enough attention to the statutory laws or codes of the different States. 6 AMERICAN EXTENSION UNIVERSITY * The American Extension University Law Course is less expensive, occupies one's spare time for but two years, is guar- anteed to prepare one to pass the legal examinations for the bar of any State, and carries with it the highest legal honors given at graduation from the best residence universities, the degree of Bachelor of Laws. This course is the only Law course given by mail where the lessons and instruction are mailed weekly, and not de- livered in bulk for the full course, and where the Faculty keeps in close personal touch with the students and actually gives their work constant personal supervision. And it is the only one where the lessons on Pleading and Practice, and on the Statutes and Codes, are made practical and take into account the vital differences in different States. The Dean of the Law Faculty has an international reputa- tion as a Law writer an4 editor. He was the original editor of "The American Lawyer," for twenty years has been law editor of "The American Banker," and for seven years held also a like editorship with "The Financier," all of New York City. He instituted, and was the editor of the early volumes of the American and English Railroad Cases, New Series, and the American and English Corporation Cases, New Series, serial law works of recognized authority. As Secretary some years ago, of the Committee on Law Reporting and Digesting, of the American Bar Association, his investigations and reports were the marked features of the Committee's work, and received international notice. Scarcely less prominent, was his service, at about the same time, as Sec- retary of the Committee on International Arbitration, of the New York State Bar Association. In practice he has been in close affiliation always, with banking, corporation, commercial and like business interests, and is, in all respects, eminently fitted for the Deanship of our Law Course, designed primarily to meet the needs and condi- tions of modern business life, and the modern business man. He is now resident in Los Angeles, and will give the work of our students his personal attention and care. The Faculty is composed of strong men each a specialist in the lines assigned to him, and each having practical business and professional experience in addition to being a skilled teacher. DEPARTMENT OF LAW 7 GUARANTEE The University gives an absolute guarantee to fit each student to pass the Bar Examinations of any State he may chose, without any expense farther than the amount for which he contracts.* A PRACTICAL COURSE This course is SHORT, PRACTICAL, INEXPENSIVE and GUARANTEED to be sufficient. It, therefore, meets all the needs of any person, desiring a knowledge of Law for any purpose and who is unable to attend a resident school. WHO SHOULD STUDY LAW. The study of the law particu- larly appeals to three classes of men : 1st. Those who undertake the study with the intention of taking up the law as their life profession ; 2nd. Those who desire a knowledge of the law as a part of a liberal education; 3rd. Business men. To each of these three classes the Extension Law Depart- ment of the AMERICAN EXTENSION UNIVERSITY offers excep- tional advantages. The law student receives a course of preparation for the Bar Examination and for actual practice -far more complete and thorough than that given in any other Correspondence or Extension law course, or even in the great majority of the resi- dent law schools. The course given covers all subjects upon which examinations are held in any State. The importance of the study of law as a part of a liberal education is just beginning to be appreciated. Both as a mat- ter of general culture and of intellectual development, a full course in law will be found of greater real value than the ordinary course leading to the A. B. degree in the average American college. For the one who undertakes the study of law with this object in view, no course of study can surpass the one given by this University. Only a few years ago the study of law was one which was supposed to be reserved for those who were fitting themselves to practice it as a profession. Such a view has been abandoned in recent years, and the value of the study of this important science for everyone is now recognized. To no class of the community, except perhaps our legislators, is a general knowl- *See note page 26. 8 AMERICAN EXTENSION UNIVERSITY edge of the law more essential than to the business mem. The old maxim that "an ounce of prevention is worth a pound of cure" holds better here than elsewhere. Few business men have time to complete the regular course of law such as is presented for the embryo lawyer, but the busiest one has the time to take a more or less extended course on the branches of particular interest to him, which will be his constant protector in all business matters. All the law which a business man needs or would desire to know, is to be found in the Extension Course of the AMERICAN EXTENSION UNIVERSITY; while the Consultation Priyileges granted to students cannot fail to prove of inestimable value to any person actively engaged in the business world. The Dean and the Faculty, with their wide experience as lawyers, law teachers and law writers, and with their deep knowledge not only of the law, but also of history and political science and modern business needs and methods, have produced a course which is not simply a mechanical compilation of legal rules, but comprises also a deep and thorough treatment of the history, philosophy and science of the law, showing not only what the law is, but how and why it came to be so. This secures to the student not merely a few legal principles learned by rote and easily forgotten, but a clear insight into the spirit and meaning o^the law, and lays a sound foundation upon which to build the structure of his later course. REQUIREMENTS FOR DIPLOMA. All students who have suc- cessfully completed the prescribed course of study, passing an examination upon each subject with an average standing of at least 75 per cent., and who have complied with all other requirements of the University, are entitled to a Diploma certi- fying to the completion of the regular law course. DEGREE OF BACHELOR OF LAWS. The conditions on which the degree of Bachelor of Laws, (LL.B.) is given, are as fol- lows: The successful completion of the course of instruction, including all lectures and selected cases furnished by the Uni- versity; the passing of a satisfactory examination upon the same; the passing of a satisfactory examination upon the stat- utes of the applicant's state; the production of a satisfactory thesis of at least three thousand words upon some designated legal subject, or the passing of the bar examination of some State. DEPARTMENT OF LAW 9 EXAMINATIONS. Current examinations are given at the completion of the prescribed work for each month. Final ex- aminations are required to be taken before a proper officer, or an authorized representative of the University. The examina- tion may be waived in cases where the applicant has success- fully passed the bar examination in some State. UNIVERSITY EXTENSION TEACHING The extension of college and university instruction beyond the walls of the class room, to those who for business, financial or other reasons are unable to study in residence, has become the established policy of the leading institutions for higher education in this country. Extension teaching, as developed in recent years, is car- ried on by three different methods: First, by correspondence; second, by class study, taken up by a club specially organized for this purpose ; and third, by lecture courses of short periods. All of these methods have been profitably employed in the study of law. The first of these, the correspondence method, is the one most highly endorsed and most extensively used. There are several reasons for this and among others the following may be noted: The student whose time for study is very limited, or be- cause his occupation is irregular, loses no time traveling back and forth to class or lecture room in the performance of his school exercises. The good results of studying law by himself are marked. The student learns how to find the law for himself, and this ability to find the law is of as much advantage as to know the law. The correspondence student does not depend so much on being told, for he has learned to depend on himself. Each receives the personal attention of capable teachers and his progress is in no way influenced by the progress of any other student. The lessons go directly to the home of the student and he can take his own time in their preparation. He is not hurried over his work to keep pace with unusually bright students who are in advance of him ; nor retarded by dull 'stu- dents who would continually keep the class back. What one man may grasp in ten minutes may require an hour's careful thought for another. 10 AMERICAN EXTENSION UNIVERSITY (Extract from The American Law School Review, May- June, 1908, page 166.) THE VALUE OF CORRESPONDENCE INSTRUCTION IN THE LAW BY GRIFFITH OGDEN ELLIS The pioneers in any movement must expect doubt and even opposition, for there seems to be a natural prejudice against anything new, especially in methods of education, even in Amer- ica, a country famous as a worshipper of the god of all things new. Therefore, those who started correspondence instruction and regularly organized institutions for the practice of this method of instruction realized that it would be hailed, if not opposed, as a new feature in educational methods, which must overcome prejudices even of those who should have been its friends and supporters. As the prejudice was only natural, however, perhaps no one has any right to find fault with it. Before going further, I want it understood that in refer- ring to resident schools in this article in no case do I do so in the spirit of criticism, or even of invidious comparison. In measuring the value of anything, we must have some standard from which to measure, and I regard and here use the resident schools simply as the gold standard in methods of legal educa- tion. In this article I hold no brief for any particular correspon- dence school. I speak simply on behalf of the correspondence system of instruction itself. In spite of- opposition and preju- dice, it has gone steadily on advancing in popular esteem since the first Correspondence School of Law was founded, eighteen years ago. It is true that this movement, like all new move- ments and all reforms, has to a certain extent suffered by reason of its devotees as well as at the hands of its opponents. Any sincere and conscientious advocate of the correspondence method must admit that it has its weak points and its defects ; but the same thing might with all propriety be admitted for the resident law schools in all justice must be so admitted. Cer- tainly no one would claim that correspondence law schools are better than the best resident schools, for that would be not only untrue, but foolish. However, admitting the weaknesses, or defects, or deficiencies, properly attributable to it, the correspon- dence method of instruction has features of immense value to DEPARTMENT OF LAW 11 the public at large, and institutions giving correspondence in- struction have their place not as rivals of the resident schools and universities, not necessarily as institutions in the same class, but as institutions that serve that greater body of earnest and ambitious men and women who want to learn, who want to educate themselves, who want to improve their condition and prospects in life, but whose circumstances do not permit them to attend a resident school. As a matter of fact, I am sure that our own school has created for the resident law colleges vastly more students than it has taken away from them, and the same is true of all other good law correspondence schools. We have many students who take up the study of law with no idea of practicing it as a profession, but who have an idea that they would like to study law and improve their minds and add to their education, and which study they can pursue in no other way than through a correspondence school. They become interested in the study of law, and some wish to go to a resident school, and circumstances often so change that these students can and do take advantage of the opportunity. A correspon- dence law school that is conscientiously and sincerely conducted will always recommend that its students go to resident schools if they can; for it must be recognized that the resident law schools offer many advantages that correspondence schools cannot give. The atmosphere of the classroom, the association with students pursuing the same line of work, and to a more or less extent with the professors also, has a tendency to produce the best results in an earnest student in a resident school. On the other hand, so far as mere thoroughness is concerned, a correspondence school need yield nothing to the resident school, provided the school is earnestly and sincerely conducted, and the student himself earnestly and sincerely desires to learn and will do his part as a student. This is proved by the results attained by the graduates of correspondence schools at State Bar Examinations, and, for that matter, in the practice of the profession. That fact, however, is quite as much a tribute to the student as to the correspondence school, if not more so ; for no man can go through a correspondence course unless he earnestly desires to learn, and when he does go through such a course, and completes it, it is certain that he has learned at least as large a percentage of the subjects covered as has the average graduate of the resident law school pursuing the same course. The resident schools, of course, offer the fullest oppor- 12 tunities for learning, if the student attending will do his part in them. As an instructor, I think I may claim the correspon- dence school can offer equal advantages, though in making that statement I admit I hold some mental reservations, and in no statement in this article do I speak merely from theory, because I have had experience as a student in two of the best university law schools, and also fifteen years' experience in correspondence instruction since admission to the bar. I repeat, therefore, that while the correspondence school should not and does not seek to take the place of the resident school, it has an important place all its own. It should not be regarded by the resident law schools as a rival, nor should it be opposed by them. They should en- courage it, if their faculties are, in the broadest sense, public educators, instead of simply ambitious advocates of their own institution and of their own method. Knowing all of the ad- vantages and values of the resident school, having seen them and participated in them as a student, and knowing the advaa- tages and values on the one hand, and, on the other the weak- ness and deficiencies of the correspondence school ; having seen them and taken part in them as an instructor, I think I may claim for the correspondence school, in the field that it seeks to occupy and does occupy, a position of the very highest service and value to the public. For our own school, as an institution, I ask neither consideration nor favors, for as an educational factor I am acquainted with the results of its work and know it to be entitled to the highest consideration on behalf of its students and in their interests, and I am sure the same may be said of several other correspondence institutions. The main point is that the Correspondence Schools of Law have their place, and were in fact brought into existence by the necessities of a large body of students, who were, in the nature of things, entitled to as much in the way of opportunities as any one else, but to whom circumstances closed the doors of the resident schools and universities. The correspondence method of instruction, therefore, has its place, and during the last eighteen years it has conclusively proved its value to the public. So far as individual schools are concerned, I speak not for them neither for the one with which I am connected, nor any other. I recognize the method, however, give it the credit that is due it, and let the individual schools stand or fall by their own merits. With all institutions it should be, and ulti- mately is, simply a case of the survival of the fittest. DEPARTMENT OF LAW 13 The students whom the correspondence schools serve are, in the vast majority, not very young men, but men who have been out in the world long enough to have realized from their business experience the value, yea, the necessity, of education, and by those experiences to develop ambitions, many of them for the practice of law, but ambitions which the circumstances in which they are placed make it impossible for them to gratify through the means offered by resident schools. Either for family or other reasons, they cannot afford to give up their businesses or their incomes to attend a resident school. They must, therefore, either give up their ambitions or study by some other method. For them, at least, the correspondence school offers the best opportunity that is obtainable. It offers them substantially the same course as does the resident school. It may not offer them all the benefits or opportunities or advan- tages that the resident school does, but it at least offers them the opportunity to receive the same information that they would get in a resident school, and to obtain it according to their own time and opportunity for study, and by a method which, if con- scientiously practiced by the school and earnestly carried out by the student, is, for the purposes of thoroughness, nearly ideal. In this connection the following letter written by one student, Rev. Harry White, of Natick, Mass., a graduate of Harvard and a man whose education and experience are such as to qualify him to form a correct judgment, may be of interest. It is about as clear a statement of the merits of the correspond- ence method as could be offered, and is certainly a high com- mendation of the work being done by the school in which he was enrolled as a student. "Dear Sirs: Being a graduate of Harvard, I shared in the prejudice which many college men have against the correspondence schools; and, desiring some knowledge of the law, I took the work up with you with considerable mis- giving. I am glad to be able to say I have been most agreeably surprised by the character of the work done in Correspondence Schools of Law. "In comparing correspondence schools with resident schools and colleges, we are constantly unfair to the former on account of the prestige which is enjoyed by the latter. Any man looking back at the facts of his university days will see that, although a great many scholars were on the teaching force, it was exceptional that the great scholar was also the great teacher. While there are some obvious advantages in favor of the resident study at a university, there are also some decided advantages in favor of the correspondence school. Take the facts about lectures. If the student listens attentively to the lectures with- out taking notes, he soon forgets them. If he takes notes, his attention is divided, and he misses a part of the lecture. If the instructor happens to be dull and prosy, the student is at a still greater disadvantage. If the air is bad, or he chances to feel tired or ill at the time of the lecture, he misses still more of its substance. With the correspondence school, the student does not labor under these disadvantages. The instruction being printed or written, the stu- 14 AMERICAN EXTENSION UNIVERSITY dent is able to get everything. If he does not understand, he can read it over again. If he is still unable to understand, he can have it explained for him, without making himself conspicuous, or annoying the lecturer by an interrup- tion. He is able to control his own rate of progress and to go as rapidly or as slowly as he chooses. He is not hampered by the dull students nor hurried by the bright ones. "Your lesson papers seem to be constructed on the soundest pedagogical basis. There is the supplementary matter which illustrates or explains the matter of the text-book and the questions by which the student may test his knowledge of the text. "Your lectures cover the subject in a way which enables the student to grasp the subject he is studying as a whole, into which he can fit the different subordinate principles, so that it all lies in his mind as a systematized unit, rather than a mass of separate and unrelated facts and details which must be retained by sheer force of memory. "But, however, much praise may be due to the lesson papers and lectures, I think that the most effective part of your instruction is that in the Test Questions and Practice Department. It is everybody's experience that we learn best by doing things. We learn to walk by putting the principles of walking into practice, and we learn to swim in the same fashion, and the student of law learns law best by putting the legal principles, as he studies them, into practice, by working out just such Test Questions as youi furnish him, and by doing such work as is prescribed in the Practice Department. He will make mistakes, of course, but there is just as much learned if not, indeed, more in making mistakes and being corrected, as there is in not making mistakes. "If you will pardon this somewhat lengthy letter (which you may print, if you care to, for this work seems to me to be so desirable, not only to a man who desires to be a lawyer, but to every man who is a citizen, that I should like to have it taken up more universally), I should say that your catalogue does not fairly or adequately represent the merits of your work. Your school does suffer from two limitations, it is true. It cannot supply a student with brains and it cannot make him work. But, if he has the average amount of intelligence and the average capacity for work, he can learn law with your system of instruction. He can learn law thoroughly, and with a great deal of pleasure in the learning." One of our students, a university graduate, who was finally able to return to the law school of his own university and grad- uate therefrom, wrote us: "In some respects I think your method is superior to university class- room work for man preparing for the bar examination." Both these men are qualified to form opinions that are en- titled to consideration, for they are men of high education, having had considerable experience with both methods of study. OPINION OF THE LATE WM. R. HARPER, PRESIDENT OF CHICAGO UNIVERSITY Along the same line, the late Dr. William R. Harper, while President of the Chicago University, a short time before his death, in a public address said : "In some respects there is opportunity for better work in correspondence study than in the ordinary class-room recitation. Each student in a corres- pondence course has to recite on all the lessons, while in many a class-room the student recites on only about one-thirtieth of the work of a three months' DEPARTMENT OF LAW 15 course. It is safe to say that the standard of work done in correspondence courses is fully equal to that of the work done in the large class. Indeed, I may say that there is a larger proportion of high-grade work done by correspond- ence than in class recitation. People who take work by correspondence do it because they want to get something out of it, while in many courses in colleges the students take the work because it is required in the curriculum." Further, drawing his illustrations from the teaching by correspondence in Hebrew and other dead languages, President Harper said : "The work done by correspondence is even better than that done in the class-room. The correspondence student does all the work himself. He does twenty times as much reciting as he would in a class where there were twenty people. He works out the difficulties himself and the results stay with him." In another address Dr. Harper is said to have stated that the students who took the freshman and sophomore work of his university by correspondence and came to Chicago to enter the junior class, were more thoroughly prepared than were those who took the freshman and sophomore work in resident attendance. Whether the foregoing statement is absolutely correct I cannot say; but I can very well believe, from my ex- perience, that the statement in the form given is absolutely true. CORRESPONDENCE SCHOOL STUDENTS EXCEL IN BAR EXAMINATIONS Admitting that the correspondence method of instruction is good in some ways, the question may be raised : Can the law be successfully taught by correspondence? Seventeen or eigh- teen years ago the asking of such a question might have been justified. Today, however, that is not the case, for the reason that the experience of the various Correspondence Law Schools and of thousands of students who have studied in these schools has conclusively proved that the law can be successfully taught by correspondence, as is proved by the fact that those same students have taken the State Bar Examinations and have suc- ceeded passing them almost without exception. After all is said and done, it is results that count. It was stated in a maga- zine article some time ago that 25 per cent of the graduates of the resident law schools fail on the bar examinations, and that 60 per cent of the law office students fail on bar examinations. The records of the leading (Correspondence Law Schools show that less than 1 per cent of the graduates of these schools who take the bar examinations fail to pass. While I do not mean to claim by this statement any superiority for the Correspon- dence Law Schools over the resident schools, for in both cases 16 AMERICAN EXTENSION UNIVERSITY the result depends largely on the student, the above record is at least a high tribute to the students of the correspondence schools, to their earnestness, their persistence, and their ability, and it proves conclusively that a man can learn the law by cor- respondence and that he can learn it thoroughly and well. As has been stated, a man cannot go through a correspon- dence course in law except he wants to learn. Study by corres- pondence is harder than at the resident schools, for it has none of the adventitious attractions that university life offers, and no one takes a correspondence course merely because father can afford it and it is a nice way to spend a few years, which is the spirit with which so many boys go to college. Results are what should be sought, and that, if a man has learned the law and knows it, he is entitled to the fullest con- sideration, opportunity, and respect, and that neither courts nor schools should throw in his way rules or requirements or ob- stacles that can be overcome only by circumstances and oppor- tunities, and against which brains and knowledge alone are of no avail. The question, it seems to me, therefore, should be, in all bar examinations and in all tests : What and how much do you know ? not in any sense, where or how did you learn it ? (From Blackstone's Commentaries, 1 Black. 5.) WHAT BLACKSTONE SAYS ABOUT A KNOWLEDGE OF LAW For I think it is an undeniable position, that a competent knowledge of the laws of that society in which we live, is the proper accomplishment of every gentleman and scholar, an highly useful I had almost said essential part of liberal and polite education. And in this I am warranted by the example of ancient Rome, where, as Cicero informs us, the very boys were obliged to learn the twelve tables by heart, as a carmen neces- sarium or indispensable lesson, to imprint on their tender minds an early knowledge of the laws and constitution of their coun- try. And, first to demonstrate the utility of some acquaintance with the laws of the land, let us only reflect a moment on the singular frame and polity of that land which is governed by this system of laws. A land, perhaps, the only one in the universe, in which political or civil liberty is the very end and scope of the constitution. This liberty, rightly understood, con- DEPARTMENT OF LAW 17 sists in the power of doing whatever the laws permit, which is only to be effected by a general conformity of all orders and degrees to those equitable rules of action by which the meanest individual is protected from the insults and oppression of the greatest. As therefore every subject is interested in the preser- vation of the laws, it is incumbent upon every man to be acquainted with those at least with which he is immediately concerned, lest he incur the censure as well as inconvenience of living in society without knowing the obligation which it lays him under. And this much may suffice for persons of inferior condition who have neither time nor capacity to enlarge their views beyond that contracted sphere in which they are appointed to move. But those on whom nature and fortune have bestowed more abilities and greater leisure cannot be so easily excused. These advantages are given them not for the benefit of them- selves only, but also of the public; and yet they cannot, in any scene of life discharge properly their duty either to public or themselves without some degree of knowledge in the laws. But to proceed from private concerns to those of a more public consideration. All gentlemen of fortune are, in conse- quence of their property, liable to be called upon to establish the rights, to estimate the injuries, to weigh the accusations and sometimes to dispose of the lives of their fellow-subjects by serving upon juries. In this situation they have frequently a right to decide, and that upon their oaths, questions of nice im- portance, in the solution of which some legal skill is requisite, especially where the law and the fact, as it often happens, are intimately blended together. And the general incapacity even of our best juries to do this with any tolerable propriety has greatly debased their authority and has unavoidably thrown more power in the hands of judges to direct, control and even reverse verdicts than perhaps the constitution intended. (The Saturday Evening Post, July 25, 1908.) BOUND FOR THE TOP In the nature of every civilized man there is an instinct of progressiveness a desire to excel in some particular. It is found, in some degree, in the most inefficient as well as the most energetic of men. If the opportunity for its outlet does not occur in his work, it will display itself in his recreation even in his dissipation. It appears in the ditch-digger and in the 18 accountant, in the mill operative and in the skilled mechanic. It may exhibit itself in the breeding of a few hens, the improve- ment of a bull terrier's progeny, or in the raising of the earliest peas, or the biggest squash in a suburban lot. It may turn to the building of a motor boat or sail boat ; to experimental recrea- tions in mechanical, electrical or chemical affairs; to studies in literature or art. All these may be recreations and relaxations entirely foreign to the man's daily occupation, and yet it is quite possible to find in them the fighting chance for greatly improved conditions. Van Depoele, a cabinet maker of Detroit, Michigan, took up the study of electricity for evening amusement, and he be- came the inventor of the overhead trolley system and a highly successful constructer of electric street railways. One of the largest truck farmers of Marblehead, Mass., developed from a dry goods clerk who used to cultivate a few vegetables in a small suburban lot. Corliss, the inventor of the noted cut-off valve system for steam engines, made his experiments after working twelve hours a day as a meat-cutter. Nathaniel Hawthorne attained his splendid height in literature while working in the custom house. Turner, one of the greatest of English painters, gained some measure of renown while earning his living as a barber. William Herschel, afterward knighted for his attainments as an astronomer, built his famous instruments and astounded the scientists of the day by his discoveries while earning his living as a violinist at concerts and dances. The whole point is that, while the chance of promotion for the mechanic, the clerk, the employe of any sort, may occur at any moment and should find him ready, other chances may, and frequently do, occur outside of any actual advancement in his particular occupation. But it is absolutely certain that unless he is ready for them, they will, in either case, mean nothing to him, nor will he often see them. If he has not a few dollars ahead the better job, a hundred miles away, or the good bargain in a little real estate, or the chance to develop some bright little business idea, appeals in vain. If he has not acquired sound confidence in himself and some assertiveness of his own knowl- edge, he will not be called upon to take charge when his chief or foreman is away sick or on a vacation. If he permits his recrea- tions to absorb his energies in matters which return him nothing DEPARTMENT OF LAW 19 either in useful knowledge or good hard dollars, he may easily reach middle age with a reputation as a "rattling good fellow" but without the power to raise a hundred dollars for the most urgent necessity or the most promising of chances. This getting ready and. keeping ready gives a man strength, self-confidence and a cheery outlook. It easily lifts him out of the waiting class because he feels that he is not bound to his job ; that, although favor or preferment is a mighty good thing, if it comes his way, he is not dependent upon any one man or firm for his fighting chance. (Extract from Chicago daily papers.) MORE NEED OF TRAINING The necessity for thorough preliminary training for success in the modern business world was emphasized by the Rev. Alexander J. Burrowes, President of St. Ignatius College, in an address last night to the graduates of the commercial course of St. Ignatius High School. "There has been a great change in the business world of recent years," he said. "As much brains, as much special train- ing, is demanded of the business man today as of the professional man. The modern business man does not confine his activities to sitting behind a counter and waiting for people to sell goods to him and buy them from him. He is active and aggressive and he creates and meets great problems which demand wide knowledge and a trained mind. "I believe the numerous cases of breakdown by business men under the strain of modern life is due to their insufficient mental foundation. Their minds are not fitted to carry the strain put upon them by the complexity of modern industrial life." (Extract from The Saturday Evening Post, June 13, 1908.) THOMAS F. RYAN, HIS PERSONALITY AND POINT OF VIEW BY ISAAC F. MAXOSSON. Yet when I asked him if he had ever laid down any definite business rule to follow, he said: "No, I never have followed any rule. I've simply worked hard and kept at it. My experience has led me to believe that 20 AMERICAN EXTENSION UNIVERSITY in this country men are judged not so much by what they are as by what they do. Therefore, satisfaction comes from doing things. "I have always found it a good plan, however, to master the details of an enterprise before moving. I like to take hold and build up. It is good to lead forlorn hopes. But when I have finished a work it ceases to have interest for me. I prefer to look forward rather than backward; I'd rather speak of what I have accomplished than discuss what I am going to do." I asked him to indicate the qualities which in his opinion most make for a young man's success these days. Mr. Ryan said: "Industry, sobriety and concentration." And right here may be repeated a little incident which throws light on Mr. Ryan's methods. He is a director in many corporations, and is the type of director who directs. As a re- sult, he has often surprised lawyers with his knowledge of law. Several years ago one of his sons found a worn set of Chitty's Blackstone in the attic. Taking it downstairs, he said : "Father, whose books are these ?" Mr. Ryan picked them up fondly, and said: "I bought those books when I was starting out in business as a boy. I thought that, in order to succeed, I'd have to know law, so I studied Blackstone at night." LAW IN GOVERNMENT SERVICE One of the most encouraging features with respect to legal education in the District of Columbia, is the remarkable change in the sentiment which existed some years ago among the gov- ernment officials with regard to the desirability of having the civil employes of the government take up the study of law while in the government service. There has been a change of front in this particular, and the recognition which is being given in the government departments to those who hold degrees in law has had a very marked effect upon the increased registration of the law schools in Washington. Exchange. (Reprinted from Chicago Tribune, August 16, 1908.) From sketch of Frank H. Hitchcock, chairman Republican National Committee. STUDIED LAW IN EVENING "My new work satisfied me, and so did my surroundings. I DEPARTMENT OF LAW 21 made the acquaintance of Mr. Justice Harlan of the Supreme Court, told him what I meant to do, and he invited me to attend one of his lectures on constitutional law at George Washington University. I heard him and that led me to study law, going to classes in the evening and paying my own way as I went along/' ( Extract from Law Magazine. ) LAW IN BUSINESS AFFAIRS The advantage of an education in law is apparent to anyone who has observed the management and guidance of the largest enterprises in the country. Inspection of the directorates of large corporations shows one or more men well skilled in the law, in their membership. These men determine and direct the business affairs of the corporations, and avoid the dangers and expenses of much litigation. This is specially noticeable in the case of the United States Steel Corporation, which is possibly the largest private corpora- tion in the United States. The Chairman of the Board of Directors of that company, Hon. E. H. Gary, distinguished as a lawyer and a jurist, has managed its affairs with less friction to the Government, the State, the public and its employes, than any other corporation approaching it in magnitude, in the United States. Judge Gary, being a lawyer, appreciated the advantages of his company doing business along legal lines, and it is not only one of the best managed corporations, but one of the most profitable. What is good in principle for this concern, should apply to others. Every business man should acquaint himself along these lines, that he may conduct his business without friction, avoid the expense of litigation, and devote all of his energies to production and distribution. (From The Prudential.) Foresight is where we are able to blunder into success with- out looking surprised. Puck. But, pray, Mr. Puck, when do we ever "blunder into suc- cess", Never! The thing is impossible. There can be no success unless one works for it. Did Napoleon "blunder into success" ? Did Washington or Franklin or Jefferson or Jackson or Lincoln or Grant or any one else of our highly successful . 22 AMERICAN EXTENSION UNIVERSITY Americans in the arts of war or peace "blunder into success"? No, no ; every one of them achieved success by assiduous devo- tion to the genius of hard work. So it was with our own great Prudential. Here there was no blundering, no tumbling into good fortune. Success came wonderful, marvelous, unparal- lelled success because the price demanded was paid; hard, everlasting work. And so it is with every successful man in our service. In no case did he ever "blunder into success." In every case, from the year 1875 to this 'year of most glorious prospects and oppor- tunities, this year of grace, 1909, the men who have succeeded have won their successes by getting "on the job" from the start and working it for all it was worth to them and to the company. No, siree; you cannot "blunder into success." You can blunder into failure all right and easy, but into success Never ! Note. In order to avail oneself of the Guarantee mentioned on page 7, it is necessary that the student complete the regular Course in the prescribed two year term and take the bar examination at the first regular examinati6n after completing the Course, or after the expiration of the term of study re- quired by the statutes of the state chosen, in case such state has a statute requirement as to term of study. AMERICAN EXTENSION UNIVERSITY (NON-RESIDENT INSTRUCTION.) CHARTERED UNDER THE LAWS OF CALIFORNIA LOS ANGELES A. C. BURNHAM, B. S. LL. B., President DEPARTMENT OF LAW FRANK C. SMITH, LL. B.. Dean LESSON I. TITLE I.- LEGAL OUTLINES. TITLE II. HISTORY OF THE LAW. BY C. H. SAYLES, LL.B. Copyright, 1910 by The Brodie Burnham Co. Los Angeles J < . u z u . C> Ifl W < U Z . J i ni/i r-i r-i . P ' 5 n j EXTENSION LAW COURSE LESSON I CONTENTS. TITLE I. LEGAL OUTLINES. Chapter I. Elementary Principles. Chapter II. Classification of the Law. Chapter III. Where to Find the Law. TITLE II. HISTORY OF THE LAW. Chapter I. Origin of the Law. Chapter II. Babylonian Law. Chapter III. Grecian Law. Chapter IV. Roman Law. Chapter V. English Common Law. AMERICAN EXTENSION UNIVERSITY (NON-RESIDENT INSTRUCTION.) CHARTERED UNDER THE LAWS OF CALIFORNIA EXTENSION LAW COURSE. LESSON I. TITLE I. LEGAL OUTLINES. TITLE II. HISTORY OF LAW. BY C. H. SAYLES, LL.B. TITLE L LEGAL OUTLINES CHAPTER I ELEMENTARY PRINCIPLES. 51. Law in General. 2. Definition. 3. Purpose of Law. 4. The Rule of Precedent. 5. Foundations of Law. 6. Legal Rights and Duties. 7. Wrongs Public and Private. 5 1. LAW IN GENERAL. All things, material and spiritual, animate and inanimate, within the realm of human knowledge, observation, experience and endeavor, are subject to law. The foundation of social order, the evolution of public and private rights, and the basic factor of all human progress, is law. Law in the general sense, is simply a rule of action. That action may be that of nature, or of man. The law of nature is the basis of many sciences. Law, as formulated by man, is a purely technical term, with which alone these lectures deal. As a governing instrumentality in human affairs it is a science which concerns and affects all mankind. 2. DEFINITION. In its technical and most common use, the term "law^jiasjbeen defined as "a rule of civil conduct pre- scribed by the supreme power in a state, commanding what is right and prohibiting what is wrong/" Bouvier's Law Dic- tionary defines the laws of a Commonwealth to be "those rules and principles of conduct which the governing power in a com- 'Blackstone Comm., 14. 26 munity recognizes as the rules and principles which it will en- force or sanction, and according to which it will regulate, limit or protect the conduct of its members." The Supreme Court of the United States has defined the laws of a State thus: "The rules and enactments promulgated by the legislative authority thereof, or long established local customs having the force of laws." 2 3. PURPOSE OF LAW.-^The purpose of law is the promo- tion of private and public welfare and the protection of estab- lished rights. ") Progress requires sound rules of conduct rules that are protective of existing rights, or remedial or punitive in cases where they are disregarded and infringed. The only theory which justifies legislation, and all forms of governmental control, is the general good of the community thereby affected. The United States Supreme Court, on this question, has well said: "All laws, all political institutions, are dispositions for the future, and their professed object is to afford a steady an(j permanent security to the interests of society." 3 4. THE RULE OF PRECEDENT. What is known as the Rule of Precedent sometimes called "Stare Decisis" is of prime importance in the study and practice of law. This rule may be defined as that requirement compelling the following of estab- lished legal doctrine or decisions in like cases. That is to say, where the courts, upon a given state of facts, and upon sound legal reason, have come to a conclusion of law and de- cided accordingly, that decision makes, and is, the law of the realm subject to the jurisdiction of such courts, for all time thereafter, on the point or points involved in such case, unless, and until, it is reversed by a higher court, or is abrogated by legislative action. The decisions of the highest court having jurisdiction are the true precedents, and the rule of precedent requires that these decisions be followed in subsequent cases involving like issues. A rule of law so established cannot be disregarded merely because the courts come to consider it unjust, 4 or inconvenient/' The proper remedy in such cases is legislative, not judicial. A precedent, if flatly absurd or unjust, may be disregarded, and must be if set aside by legislation. 'Swift vs. TysonN4 Peters, 18. 'Childress vs. Emory, 8 Wheaton "Rector, etc., of ChfhML Church, vs . 672. Philadelphia County, 24 Howard 302. 6 Ex parte Kearney, 7 Wheaton 45. DEPARTMENT OF LAW 27 The great body of expressed law is not found in statutes or codes enacted by legislatures. It is that which is created by the final decisions of the courts, deduced from legal remedies applied in cases similar to the one at issue. Accordingly a condition of facts wholly dissimilar to any that has ever pre- ceded it, cannot be governed by precedent as there has been no preceding like case but, itself, is a precedent for succeeding similar conditions. 5. FOUNDATIONS OF LAW. Law^is based upon the exist- ence of rights, duties, 'wrongs and remedies. For instance: primitive man, even, had rights, foremost of which, as with his most fully civilized descendent, was the right of life. Be- cause of this right, a duty devolved upon others to respect it; a violation of that duty constituted a wrong, and that wrong required a remedy. As a matter of fact, however, the method of law develop- ment thus suggested, is exactly the reverse of the process by which the law has historically evolved. At* the outset there was to continue the illustration no declared and established rule recognizing the inviolability of human life, and providing re- dress or penalty for violence against it. The first incident in the formation of the law against homicide was the homicide itself; not the laying down of a rule forbidding it. After re- peated takings of human life, the growing aversion thereto became crystallized into an unwritten, and later into a written, rule prohibiting it, accompanied by penalties for its violation. And thus with each particular of the existing law. 8 5 6. LEGAL RIGHTS AND DUTIES. Certain legal rights are personal, such as the absolute rights of personal security, per- sonal liberty and private property. Other rights are relative, as in relation to others, such as the rights and the duties exist- ing between fellow citizens, as such, those between private citizens and public officers, and the relations between master and servant, husband and wife, parent and child, guardian and ward, and the like. Property rights, though they relate pri- marily to property, are none the less personal rights, centering in those having legal relation thereto. Duties are the correlative of rights, and a definition of one necessarily makes clear the meaning and legal measure of the other. 'See "The Foundations of Legal Liability," Street, Vol. III., pp. 3-4. 28 AMERICAN EXTENSION UNIVERSITY J 7. WRONGS PUBLIC AND PRIVATE. Public wrongs are those of such a character that they, in some degree, affect the public peace, order or health, even though the immediate vic- tims thereof be private individuals. Such wrongs are termed crimes. For public wrongs the law provides only punishment to the offenders, except that, in some jurisdictions, in Certain cases, where restitution is possible, it is prescribed, or allowed, as a part of the penalty.; Private wrongs are all wrongs perpetrated, willfully or negligently, by one person upon another, not amounting to crimes, and yet of sufficient gravity to require legal remedy. These wrongs are termed torts. For private wrongs the law purports to provide redress against the perpetrator in the form of monetary damages, or of property restitution, or both. CHAPTER II. CLASSIFICATIONS OF THE LAW 8. Substantive and Adjective Law. 9. Municipal Law. 10. International Law. 11. Martial and Maritime Law. 12. Basis of American Law. 13. Varying Systems of Pleading. 14. Relative Importance of Written Laws. 15. Equity Its Source and Jurisdiction. 5 8. SUBSTANTIVE AND ADJECTIVE LAW. All law is capable of classification into either Substantive or Adjective law. Substantive law embraces all provisions which relate to the rights and obligations of individuals between themselves, be- tween individuals and the community at large, and of the wrongs which violate such rights and obligations. v 'Adjective law has to do solely with the rules of legal pro- cedure and practice by which such rights and obligations are upheld and enforced, and such wrongs redressed and punished.' The great body of the law is substantive, and it is this por- tion which is chiefly being added to constantly, as the science of jurisprudence progresses. 7 5 9. MUNICIPAL LAW. The term "municipal," as thus used, refers to a state or nation, and not merely to its primal mean- ing of a city, town or other minor part of the body politic. T A reference to the chart hereto ly discerning these classifications, appended will aid the student in clear- DEPARTMENT OF LAW 29 Municipal law is that body of rules prescribed by the govern- mental power, either by legislative act, or by recognition and enforcement. If by the former method, they are known as "written;" if by the latter, as "unwritten" laws. In either in- stance, however, they are equally obligatory. It is this de- partment of law with which the practitioner is chiefly con- cerned, and to which Blackstone referred in giving his defini- tion of law previously quoted. 8 5 10. INTERNATIONAL LAW. Of no less importance, but perhaps less urgent in one's immediate needs in the study of elementary legal principles, is the law of nations, or interna- tional law. For our present purposes it is sufficient to say that it comprises the body of obligations due from one sovereignty, or the citizens thereof, to another sovereignty, or its citizens, and that it is either public or private. The subject in general, and as to its subdivisions, will be fully treated in due course, hereafter. 5 11. MARTIAL AND MARITIME LAWS. The nature and scope of these divisions of the law is clearly indicated by their names. (The former is that system of rules dominant and en- forcible, in this country, only in time of war, or of other great public calamity or peril, when the municipal law is sus- pended at the seat, or in the immediate vicinity, of military operations. With the passing of the occasion for military su- premacy, martial law must yield to the civil, or municipal law. Maritime law relates solely to commerce on navigable wa- ters, to navigation of vessels, their rights and restrictions, and those of the seamen thereon, to persons and property in trans- portation thereby, and to all marine affairs. The United States courts have, by constitutional provision, exclusive jurisdiction over all admiralty, or maritime matters. 12. CHIEF BASIS OF AMERICAN LAW. The principal basis of the law of all the States in this country, ejccept Louisiana, whose judicial system is founded upon the Roman law, as modified by the Code Napoleon, is the Common Law of England. Most of the States have provided that the law of England, com- mon and statute, up to, at least, the fourth year of James I"., "For a full explanation and inter- Blackstone Comm., 44-46. pretation of municipal law, see 1 30 AMERICAN EXTENSION UNIVERSITY shall, with certain specified exceptions, be accepted as the basis of the law of such States. 9 The United States, as such, has no common law. The only Federal law is the United States Constitution and its statutes and treaties. 13. VARYING SYSTEMS OF PLEADING. The States having, as stated, adopted the English substantive common law, ac- cepted also its common law system of pleading and practice, that is to say, its adjective law. This system was cumbersome, burdened with a multitude of formalities and unreasonable technicalities, and was soon found to be unsuited to modern business interests. A few States, however, still retain that sys- tem almost in its entirety, 10 but in far the larger number legal procedure has been radically modified. Several Commonwealths have adopted what are called Prac- tice Acts, abrogating the most serious objections to the common law system, while retaining other salient features. 11 Nearly, one-half of the total number, though, have wholly abolished the old method, and established the code system, under which, in concise terms, rules are laid down for the guidance of court, litigants and lawyers, and compelling directness, exactitude and simplicity in legal practice. 12 Certain of those which have thus come to be known as code States have amplified the code system of government so that it controls, not merely the course of legal procedure, but covers, in its several departments, practically all the social, civil, and political relations of the citizenship and of the State. . RELATIVE IMPORTANCE OF WRITTEN LAWS. The rel- ative importance of the written laws in the United States is as 'At the time of the Revolution, the inois, New Hampshire, New Jersey, people of the colonies, being chiefly Rhode Island. emigrants from England, knew no "Practice act States: Alabama, Ar- laws other than those they had kansas, Delaware, District of Colum- brought with them from their father- bia, Maine, Maryland, Massachusetts, land. Upon attaining their independ- Michigan, Mississippi, New Mexico, ence they naturally adopted the body Ohio, Pennsylvania, Tennessee, Ver- of this familiar law as the basis of mont, Virginia, West Virginia. their own independent jurisprudence, "Code States: Alaska, Arizona, Cal- so far as it was applicable to their ifprnia, Colorado, Connecticut, Geor- new social and national condition. gia, Idaho, Indiana, Iowa, Kentucky, Accordingly such portions of the Kansas, Louisiana, Minnesota, Mis- English law, statute and common, souri, Montana, Nebraska, Nevada, with the exception noted, in force New York, North Dakota, North Car- prior to the Revolution, became the olina, Oklahoma, Oregon, South Car- common law of this country. olina, South Dakota, Texas, Utah, "Common law States: Florida, 111- Washington. Wisconsin, Wyoming. ^ DEPARTMENT OF LAW 31 follows: (1) Constitution of the United States; (2) treaties and laws made in conformity therewith; (3) State constitu- tions; (4) State statutes; (5) municipal ordinances. /^The United States Constitution, and the Federal statutes and treaties, are the supreme law of the land and must be up- held in every State, Territory and Province of the Union.)} The laws of the individual States and other subdivisions of the country are enforcible only within their respective boundaries, with certain exceptions to be noted under the head of Private International law. Municipal ordinances must always give precedence to national and State laws, if in conflict therewith, and are of effect only within the limits of the municipality which enacted them. EQUITY ITS SOURCE AND JURISDICTION. Out of the inadequacies, rigors, unyielding technicalities, and consequent injustices of the English common law, arose the English system of equity jurisprudence, to do justice, and compel right and conscionable dealing between litigants. 13 Its province is to give relief where the remedies of the common law fail or are inadequate. But for its administration, many wrongs would go unredressed, and many rights unvindicated. Its appeal is to conscience to that which is morally right rather than, as at law, to that which is legally obligatory. For example, the law will hold one to a deed executed by him, even though its exe- cution was procured by fraud; but a court of equity will set it aside. Again, the law affords no escape from the contract of marriage, but equity, for prescribed reasons, will break off the legal bands. 1 * ~T The English equity system, acquired by the States adopting the English common law, has, like its fellow, been materially altered, in most jurisdictions, so as to conform it, in practice, to present-day conditions. Its history, development and modern method of application will be fully presented in due course. "Reeves, in the second volume of Henry VI. that equity decisions were his History of the English Law, pp. reported. 466, 600, gives an excellent account r X"The principal subjects within the of the rise and growth of equity , jurisdiction of equity are accident, jurisprudence, and there points out account, foreclosure of mortgages, that it originated in the reign of Will- interpleader, injunction, partition of iam the Conquerer, was substantially joint estates, specific performance of broadened in the days of Richard II., contracts, and trusts and trustees. but that it was not until the time of 32 AMERICAN EXTENSION UNIVERSITY CHAPTER III. $16. In General. 17. "Written Law." 18. "Unwritten," or "Judicial" Law. 5 16. IN GENERAL. Law is the product of evolution. In studying it consideration must constantly be given to the ad- vanced and advancing condition of the world today, over that which existed when certain laws under consideration were en- acted, or certain decisions were rendered. Given a certain statement of facts, the searcher for the law governing same naturally will not expect to find legislative or judicial action pertinent thereto at a date when the stated conditions would have been impossible. However, law upon similar conditions of fact, dissimilar in incident though the latter may be, is often of great value. 8 17. "WRITTEN LAW." The most apparent, and accord-, ingly that which we may, for convenience here, take as the first source of legal information, and to the authority of which, while they are in force, all legal rules emanating from all other sources must conform, are, as has already been intimated, the constitution and treaties of the United States, the constitutions of the respective States, and all acts of the legislative depart- ments of State and Nation enacted in conformity therewith. 5 18. "UNWRITTEN," OR "JUDICIAL" LAW. However, be- cause all legislative enactments, and even constitutions them- selves, are expressions merely of the then will of those thereby governed, which expressions may at any time, in due course, be materially changed, and even entirely abolished by those who created them, they are, in the acquirement of true legal learn- ing, subsidiary to the mastery of those rules of legal reasoning and interpretation, without which constitutions, statutes and codes would be dormant and forceless, or the instruments of erratic tyranny. These rules of legal reason the supremely important part of the law-student's study, and of the skilled practitioner's equipment are to be found primarily in_ the reported decisions of the courts of England and America, and, secondarily, sum- marized therefrom in legal text-books, the judicial discussions of legal publicists, the formulated and systematized courses of law schools, and the like. DEPARTMENT OF LAW 33 This portion of our jurisprudence constitutes the large bulk of applied law, whereby the principles involved in written en- actments, and the unwritten principles of the common law, are fitted to the varied and varying conditions of individual and communal life, and is sometimes called "judicial law" to dis- tinguish it from the enacted, or "written" law. Technically speaking, therefore, judicial law is "unwritten" law. 15 TITLE II. HISTORY OF THE LAW CHAPTER I. ORIGIN OF THE LAW 19. Value of Legal History and Theory. 20. Earlier Forms of Law Its Development. 21. Earlier Governmental Forms Development. 8 19. VALUE OF LEGAL HISTORY AND THEORY. Whoever aspires to pre-eminence in the legal profession, must have a thorough knowledge of the doctrines, principles and rules of law as a classified and orderly whole, exhibiting the law, thus, in its true light as a science. ; To be a thoroughly accomplished lawyer, the student must explore far beyond the law's imme- diate boundary lines, and ascertain its origin, follow its de- velopment, and note the function it has at various epochs filled in human affairs. This study is rightly termed the philosophy of the law. Some practitioners delight to criticise such study as being without practical value, and declare it to be wholly academic. /"Those, however, who have stood, and who today stand, at the head of the profession, enriching and adorning it, as well as being its recognized most efficient ministers, are those who have gone deepest into the history of its causes, changes, administrators, theorists, and preservers. The stu- denf is therefore urged to extend his historical studies of the law far beyond what it is practicable for these lectures to carry him. "The decisions of the courts of ap- part of every law library. Complete pellate jurisdiction, Federal and State, information as to same and their are published in book form at regular service in study and in practice will intervals, and constitute an important be given later in the course. 34 20. EARLIER FORMS OF LAW ITS DEVELOPMENT. Law antedates written history and its origin is accordingly obscure. Among primitive peoples the law at first evidently derived its force from the right of might alone, and later from custom thereby created. ). It soon became apparent that the proper reg- ulation of family, communities and other groupings forming the social order, required fixed and recognized rules of conduct to avert personal rapacity and general disorder. Thus were developed laws governing the domestic relations, fixing title and possession to personal property, giving retribution for crimes and recompense for torts. Subsequently when the wan- dering families and tribes began to settle in permanent loca- tions, rights of real property were established, and those af- fecting barter, sale, loaning, and like early transactions of a commercial nature were gradually evolved. 21. EARLY GOVERNMENTAL FORMS DEVELOPMENT. The primal forms of government were based upon the family re- lation as their type. The authority of the* father over the in- dividual members of the family and over their blended or com- mon interests, grew into the dominance of the patriarch or chieftain over the tribe. : Thence into the superi6F~autrTority of a group of chieftains, and, by due expansion, into those forms of supreme communal command, ranging from the barbaric to the most highly advanced systems of the most cul- tured epochs, and the completest of codes. CHAPTER II. BABYLONIAN LAW 22. Most Ancient Code Chief Features. 22. MOST ANCIENT CODE CHIEF FEATURES. The oldest known code of laws, and probably the most ancient code of importance, is that of Hammurabi (Khammurabi). The exact date of its establishment is uncertain, but it has been estimated as being the law of Babylon between the years 2000 and 3000 B. ,C. Babylonian jurisprudence, however, did not reach its perfection until a much later date, at the time of its overthrow by Persia. .The adjective law of Babylon never attained the perfection of its substantive law. j Law was administered chiefly by the DEPARTMENT OF LAW 35 priests, iand its procedure consisted largely of long and formal oaths, rather than by relying upon direct evidence. Witnesses, to a certain extent, acted in the capacity of jurymen. The family was the unit of government. Marriage was by purchase of the bride from her parents. It was the subject of contract; was accompanied by a complete adjustment of prop- erty rights ; and usually contained provisions covering the basis of possible divorce. 16 Married women, although regarded with great respect by their children, were virtually slaves of their husbands. Adoption and emancipation of children were pro- vided for. The law of property, real and personal, was well developed, methods of conveying and encumbering real estate were similar to those of the present day.) The party conveying al- ways had the right of repurchasing the property sold, at the price he received for it, unless he expressly waived such right in the deed.) /Mortgages, pledges and other forms of security for money borrowed, were very common.) Wills were not known under this law, the gift of real property oy the owner, with a reservation to himself of a life-interest therein, making such instruments unnecessary. Personal property law was more highly advanced than under the early English common law^. .; Babylon, being a great commercial center, naturally had legal provisions of large scope and much nicety affecting con- tracts of all kinds, and the various transactions of commercial life.y' Future as well as present transactions could be made the subjects of contract. Agency, partnership, brokerage, and, in fact, much of the present-day commercial system was the subject of this law.' Babylonian jurisprudence, or at least many of its most salient features, were appropriated and preserved by the con- quering Persians, and by them diffused throughout a vast ter- ritory. 18 A typical marriage and divorce then shall she be ... and thrown contract is the following, taken from into the water. If Remu says to Lee's Historical Jurisprudence, Part Bastu, his wife, "Thou art not my I., Chap. 1 : wife," he will give her ten shekels of "Remu, the son of Sanhatu, has silver as her quit-money, taken in marriage Bastu, the daughter "Samas-rabi has put Naramtu away. of the priestess Samas, Belisumu, the She bears her ziku (?) and has re- daughter of Ugibitu. shekels ceived her quit-money. If Naramtu of silver is her gift; since she (i. e., is married to another, Samas-rabi will the mother), has received it, she is not love her more." (Followed by content. If Bastu says to Remu, her oath, date and witnesses.) husband, "Thou art not my husband," 36 AMERICAN EXTENSION UNIVERSITY CHAPTER III. GRECIAN LAW 523. Origin and Salient Features. 23. ORIGIN AND SALIENT FEATURES. The ancient Greeks, although not regarded as great law-makers, wisely accepted the principal property and commercial features of the Baby- lonian system, and the provisions of the maritime laws of the Phonecians, and on this basis ultimately constructed an exact and effective jurisprudence^ The laws of Athens, as the most cultured and advanced province of the nation, became the most highly developed, and is taken as the type of Grecian law. _, The adjective law of Greece directly contrary to that ot Babylon, its great progenitor was far in advance of its sub- stantive law. Legal procedure thereunder was quite similar to that of the common law courts of England later. The judge usually prepared a report of the case before him, which he submitted to the dicastery a form of jury who thereon de- cided the case by vote.~~ The execution of judgments of the courts was, in most instances, left to the successful party. In- deed this method was iollowed under nearly all ancient sys- tems. The substantive law, aside from that taken from the Baby- lonian, was principally concerned with domestic relations, torts and crimes. In Sparta, marriage was accomplished by capture of the bride ; in Athens, it was by purchase. Divorce was freely given the husband. The wife was without any legal rights of importance. CHAPTER IV. ROMAN LAW 24. Greatest of Legal Systems. 25. Origin and Growth. 26. The Roman Codes. 27. Civil and Canon Laws. 5 24. GREATEST OF LEGAL SYSTEMS. The Roman law is the one system of jurisprudence which stands out in high prom- inence over all others. It survived the destruction of empires, as time passed its wisdom and strength was increasingly ap- preciated, and it has become the basis of the great legal systems DEPARTMENT OF LAW 37 of two continents. No other judicial system is worthy of being placed by its side, with the possible exception of the English common law itself in large part founded thereon. 25. ORIGIN AND GROWTH. By the discovery of the In- stitutes of Gaius, in 1816, a complete view of the Roman legal system as it existed three centuries and a half before the time of Justinian its great codifier was obtained. We find therein the same elements and development, the same general family organization, and the same evolution therefrom of the state, as in earlier systems. But, while Rome passed through the same progressive stages as other nations, she advanced far beyond where they had stopped. 'Rome became a republic about 500 B. C. , For nearly two hundred years thereafter the plebians, or common people, were in constant contest with the patricians, or aristocracy, for politi- cal supremacy. They finally obtained equal civil rights, and soon created a distinctly plebian assembly) About 450 B. C., ten men, known as the decemvirs, were elected to draw up a codification of the law. Ten tables were prepared the first year, and set up in the forum. The next year two more were added, thus constituting the Twelve Tables, famous as the first au- thentic compilation of Roman law, and regarded as the founda- tion of Roman jurisprudence up to the time of Justinian, 500 A. D. 17 After the fall of the Republic in the first century B. C., the sole power of law-making lay in the Emperor. Laws which owed their authority to him were called constitutiones. The Emperor appointed certain leading lawyers, known as juris consults, whose decisions on legal questions were cited in court as authority upon disputed points of law. These decisions were termed jus respondendi. From the membership of the juris consults came the great law writers, Gaius, Scaevola, Paulus, Julianus, Papinian and others. 26. THE ROMAN CODES. Previous to the reign of Jus- "These tables made provision for Roman citizens, hence the distinction the government of Roman citizens in legal provisions applicable to each, mainly, as a consequence of which a Later this distinction was removed, department of law, created chiefly for but the principles of the jus gentium the settlement of controversies be- were retained and formed a control- tween foreigners and known as the ing factor in later Roman law. So, jus gentium was formed. Accord- too, it was part of the law which be- ing to the early Roman view, foreign- came the prime basis of modern legal ers were denied equal privileges with systems. 38 AMERICAN EXTENSION UNIVERSITY tinian, the Roman laws had been reduced to the form of a code several times. The principal compilation of this kind was that under Theodosius II., in 435 A. D. This was supplanted in the folowing century by the Justinian Code, universally rec- ognized as the most magnificent production of human reason, and the most potent legal system, ever framed. 18 Upon the fall of the Roman Empire, the victorious Teutonic tribes adopted parts of these codes, particularly those portions applicable to real property. 19 In the twelfth century the Roman law was fully taken as the basis of legal instruction in European law schools, and has ever since occupied supreme place in legal opinion, authority and study. 27. CIVIL AND CANON LAWS. The term "civil" as applied to the Roman law (the jus civile Romanorum) comprises all laws at any time in force among the Roman people. /The term "civil law," however, in said connection, is accepted to mean only that adaptation of such law to meet the conditions of Roman life at the time of the reign of Justinian, and as included in his compilations thereof. The Canon law was that portion of the Roman law, which by Veason of the close alliance of church and state in later Roman history, governed ecclesiastical affairs. That is to say, it is that part of the Roman law accepted and administered by and in behalf of the Catholic Church. 20 ^) "This code is formed of the fol- tus, made necessary by the later con- lowing compilations: (1) "The Early stitutiones of Justinian. (5) "The Code," compiling the imperial consti- Novels." The numerous constitu- tutiones. It is sometimes called the tiones issued by Justinian after the "Codex Vetus," and was finished in publication of the Codex Vetus, and 529 A. D. (2) "The Pandects," or making many material changes in Digest, consisting of the codification the law, led to a separate collection of the entire civil law, other than the of them after his death, and these constitutiones. This was issued in comprise the "Novellae Constitu- 533. (3) "The Institutes," also pub- tiones," now usually called the lished in 533. This was really a text- "Novels." book for the study of law, and "See generally on this topic chap- founded largely upon the earlier ter 44 of Gibbon's Decline and Fall works of Gaius. Although primarily of the Roman Empire, a treatise, it was given the authority "The canon law was adopted in of enacted law. (4) "The New Code." toto as a part of the English com- This work was promulgated in 534, mon law. and was a revision of the Codex Ve- DEPARTMENT OF LAW 39 CHAPTER V. ENGLISH COMMON LAW 28. Derivation and Development. 29. Feudalism. 30. "Adjective Law." 28. DERIVATION AND DEVELOPMENT. The only independ- ent system of unwritten law evolved by any nation of modern times is that of the English Common Law. jjThis system arises from immemorial custom and usage, having the force of law, by reason of judicial recognition and sanction J It is based upon the crude laws of the ancient Britons, to which have been added from time to time, the broadening and varied rules, culture and customs of the Romans, Picts, Saxons, Danes, Normans and other virile peoples. The Jutes, Angeles, and Saxons settled small portions of Britain,) subjecting the inhabitants to a more or less tyrannic control. The political institutions growing out of the mingling of these powerful tribes, were chiefly the rules and customs of their ancestors as affected by the Roman law, after the over- throw of the Roman empire, as already noted. In time Eng- landor Angleland became divided into three well-defined minor kingdoms, between which there was constant rivalry for supremacy, and, in addition, against them all, stood the original Britons seeking to regain control of their country. /The kingdom of Kent was the first to become regulated by a definite system of law/ Alfred the Great mentions King Aethelberbt of that kingdom as one of the great law-givers from whom he obtained many of the principles incorporated in his own legal work. Offa, placed on the throne of the Anglo-Saxon kingdom there, is another king whose laws were the foundation of Alfred's wise system. After his repulse of the Danes in 878, Alfred devoted the remainder of his life in establishing a sounder form of government, based on fixed, systematized laws. fH.is work in this particular was that of codifying the laws then in force in various sections of the king- dom, rather than in the making of wholly new law.) In the tenth century the kingdom so strongly built up by Alfred was overthrown by the Normans, the then most civilized of European nations. '(With the exception of the introduction into England of the Norman feudal system, very few innova- tions in English law were made by William the Conquerer) The changes that thereafter took place were made gradually, and 40 AMERICAN EXTENSION UNIVERSITY only in rarely exceptional cases was there any radical reform in the main body of the law. In the early part of the eleventh century, and in large meas- ure denning the realms subject to the three dominant sovereign- ties we have referred to, there were three well-defined legal systems there in vogue, viz., (1) the Danish laws; (2) the Mer- cian laws; and (3) the West Saxon laws. The confusion con- sequent upon this difference of legal measures, among people in a common land, and with growing common interests, and under the supreme dominion of a single monarch, led to the establishment, by King Edward the Confessor, of a uniform system, extracted from the three above named. This system was thereafter observed throughout the entire land, and, be- cause of its comprehensive scope, was called the "common law." 21 29. FEUDALISM. Feudalism is a system of government employed by the ruling powers in the early history of Europe and by most of said powers still retained in some modified form whereby the inhabitants of the kingdom, in return for allotments of land, bound themselves to the landowners as their masters; and under which, too, the subject was allotted the ownership, or long lease, of land by the sovereign, in return for military services. The king granted land to his tenants-in- chief, who in turn let or "feudated" it to sub-tenants, and they to others, and so on down to the actual tillers of the soil. By his status under this system of tenure of real property, the political, social and economic standing of every inhabitant was determined. Feudalism as it existed in Europe at the time of the fall of Rome, differed in the several nations. It never became established in this country as a recognized legal and political institution. 22 30. COMMON LAW "ADJECTIVE LAW." The early Eng- lish adjective law continued in a very primitive state long after 21 The historical steps leading up to History of English Law; Lee's His- this consummation are not only in- torical Jurisprudence; Hallam's Con- tensely interesting, but of much prac- stitutional History of England; and tical value to the student of law who White's Outline of Legal History, seeks to fit himself most completely "See Robinson's Elements of Amer- for high professional standing. We ican Jurisprudence; Fiske's Critical commend the careful reading of the Period of American History; and following works dealing with English Vol. 4 of Kent's Commentaries on legal history: Pollock and Martland's American Law. DEPARTMENT OF LAW 41 the Norman invasion. This seems somewhat strange, in view of the material advance in legal conditions and in substantive law made by William the Conquerer. Subsequent to 1164, however, when Henry II. forced upon the ecclesiastical courts the Constitution of Clarendon, wherein the jurisdiction of such courts was definitely marked out and by which much of the complexity and uncertainty of legal pleading and procedure was removed, we find the system of legal practice gradually im- proving. After the Barons of England, in their triumph over kingly usurpations, had, in 1238, decided that the English law as it then stood should not be changed to correspond with the Roman law, the adjective as well as the substantive law became a fixed institution. During this century, among other important statutes en- acted, was that of Westminster II., which, by its failure to provide a remedy in cases for which there was no form of writ of complaint, a form of pleading called equity pleading grew up, bringing thus a new element in the adjective law. 28 '"This form of pleading will be fully the Course, presented tmder its own title later in QUIZZER ELEMENTARY PRINCIPLES -Z/^U ^> 1- 1. What things are subject to law? 2- Define law in its general sense. 3- With what kind of law do these studies deal ? 4- Whom does it affect? 4^ JA K^MJ^ *l l 5- 2. Define law in its technical sense./ j^sc^xvW /~ , " 6- How has the United States Supreme Court defined the laws of a State? *h_ \Q^JU^ vU^v/U Q- Jj \ J ^ "^ rrrw v^ir^ **- <~ ^ \s\* v CLASSIFICATIONS OF THE LAW ^uA 1-58. How can all law be classified? Define each. A 2- 9. State the meaning of the word "municipal" as used in the term "municipal law." 3- Define "municipal law." 4- What is the distinction between "written" and "unwrit- ten" municipal law? 5- Is the obligation to observe both forms of law alike? 6- What is the relative importance of municipal law to the practitioner? oK.G^r.^0 \^ 7- 8 10. Define international law. 8- State its two classifications. 9- How does it rank in importance with municipal law? 10- 5 11. What is martial law? DEPARTMENT OF LAW 43 11- When is it invoked? When suspended? 12- Define maritime law. xMLx3w 13- What courts in this country have exclusive jurisdiction over maritime or admiralty affairs, and why? 14- 12. What is the basis of the law of most of the States in this country ? 15- What State alone is excepted therefrom, and why? 16- Why have the States this common basis for their laws? 17- Has the United States, as such, any common law? 7? & 18- What is the only purely Federal law? 19- 13. What system of pleading was originally adopted by the ^^ States? 20- What were the objections to such system? 21- Is such system now in general use in the States ? Name any changes. 22- What are "Practice Acts"? 23- What are codes? 24- Name, as fully as possible, the States using the respect- ive systems. 25- 14. State, in their true order, the relative importance of written laws in this country. / *- * i 26- Within what limits, in each case, are these laws en- forceable ? / <#'* 27- 15. Whence did what is known as equity arise? 28- What is the province of equity? "3v 29- Give examples where equity gives relief not afforded by the law. 'k^rkJL^T fr 30- Over what subjects chiefly has equity jurisdiction? WHERE TO FIND THE LAW 1- 16. What consideration must be kept in mind in the search for present-day law? 44 AMERICAN EXTENSION UNIVERSITY 2- 5 17. What is the most accessible source of information as to "written" law? 3- What is the measure of authority of same ? 4- 18. To what is "written" law subsidiary in importance to the student and practitioner ? And why ? 5- Where are the rules of legal reason to be found, pri- marily, and secondarily? 6- What is the relative importance of judicial decisions in law study and practice? 7- What is this branch of the law sometimes called ? And why? 8- Are the reported judicial decisions, technically speak- ing, "written" or "unwritten" law? HISTORY OF THE LAW ORIGIN AND EARLY GROWTH 1- 8 19. What knowledge is essential to highest professional standing? C v^xLA^n eXc^rx, 2- What is known as the "philosophy of law" ?vJL* 3- 20. What can you say as to the age of law?^ J J Un*>&^v hH*-rt% 4- From what did law originally derive its force? 5- How was systematized law developed, and why? 6- How did property and commercial rights first evolve P^ 7- 21. Upon what were early forms of government based ?/ 8- Give outline of governmental development. BABYLONIAN LAW l- 22. Name the most ancient legal code known, and its ap- j . ri <^^f\ -wv*-~ XV. & -\> proximate date. When did Babylonian jurisprudence reach its perfec- tion? . tn ^. DEPARTMENT OF LAW 45 3- What was the relative position of adjective law at that time? '-"' 4- By whom was this law chiefly administered? / fi *"! 5- What was its principal method of proving cases ? 6- In what double capacity did witnesses serve in litiga- tion? 7- What was the unit of government? 8- State the nature of the marriage contract, and the status of married women. *"" w \ "WJLXV. G\/'*!fL&~+JL*\t^,~~ $* O (j .^ jA V-v^e~vx 9- What was the status of property-law under this system ? 10- Name any special right in grantors to real property sold. *Tfl_^A^v>U 11- What can you state as to the law of mortgages, pledges and the like? 12- How was the necessity of wills avoided? 13- State what you know as to the law of contracts, agency and partnership under this code. 14- Was Babylonian jurisprudence disseminated to other countries to any extent ? If so, how ? GRECIAN LAW l- 5 23. Whence did Greece receive portions of its jurispru- dence, and what were they?^^ tx/ * v ' 2- What was the relation of Athenian law to that of the rest of Greece? A" What relative position did the Grecian adjective law OCCUpy? 4/x. A^ 06trOv. - 4- To what legal system in modern use can the legal pro- cedure of Greece be compared ? 5- Outline the usual course of procedure in Greece. 6- How were judgments enforced and was the method unlike that of other ancient systems? OA^^. % /a^ &*>vAM*4 U$ Sy v *X4 iTvC^*.. "~ 46 AMERICAN EXTENSION UNIVERSITY 7- With what did the substantive law chiefly deal? i . . 7o\<*v)A*C<3t^ *igg V.-$r^-4 . ' JJL. V-> /t 5- When did R6me become a republic? O< "*.9^^ 6- What political or social divisions existed, and what was their relative legal status ? f^U^^^c - (P*-l (^v^^djt^ 14- Name some of the great law writers among the juris consults. ~'*-t-^-& . * , (yfr^AjtwtCi 15- 5 26. State what you can as to the early Roman codes. Name the first great code, and when was it compiled? TT DEPARTMENT OF LAW 47 16- What code supplanted all others, and when, and what is its position in jurisprudence? Q^^tt^u^^ C 17- Enumerate the several divisions of the Justinian Code, and state when each was promulgated. 18- What happened to Roman jurisprudence upon the fall .. of the Empire ? /4 e ^-^L^LC^- *^j 19- When, and where, was the Roman law made the basis of legal instruction ? / 2. C*^ZX*-r^ ~ <- 3- Can indictable acts, or those subject to penalties or forfeitures, or those otherwise prohibited, be made the subject of contract? ,fo 4- How can unlawful agreements be broadly classi- fied? 5-27. What is the nature of a contract agreeing to com- mit an unlawful offense ? 6- Name some acts not subject to contract for this reason. 7- What is the nature of a contract based upon a civil wrong and illustrate. 8- Can a contract whereby, in a composition with creditors, one receives more than the others, be legally enforced and why? ^c 9- What can you say as to the nature of an agreement to secure fictitious bids at an auction? 10- Can one employed to make such bids, legally re- cover the agreed pay therefor and why? > 11- What effect upon the bid of the successful bidder at an auction, has fictitious bidding? (/o-^ 12- State fully the distinction between fraud and ille- gality in such matters. 48 AMERICAN EXTENSION UNIVERSITY 13-28. How is it ascertained whether a contract is prohib- ited by statute? 14- (a) Can contracts involving prohibited acts be en- forced? 15- Can contracts involving acts for which a statutory penalty is imposed be enforced? 16- How is a legislative intention covering these two classes of acts determined state fully? 17- State accurately the rule covering this subject. 18- (b) Define a wager. 19- Can a wager be readily distinguished always from a condition in a contract illustrate. 20- Does the mere fact that a contract is a wager make it invalid? 'ro 21- Name some contracts that are in fact wagers that are not illegal for that reason. 22- When are contracts for the sale of grain or stock illegal and why? 23- What effect upon a wagering contract has the fact j that one of the parties intended a bona-fide sale ? G 24- What factor in a contract covering merchandise to be delivered at a future date makes it a wager- ing contract and what obviates this? 25- What is sufficient in a contract to constitute it one of wager? 26- (c) What limit, at common law, was there upon the interest rate chargeable? \\^ JL^ 27- Has the old rule been changed if so, why and to what extent? ^* 28- What is charging interest above the legal rate called? 29- Is there any penalty for such over-charge ? 30- What is necessary to constitute usury? 31- Is a loan of chattels at a rate more than the legal interest on their value would be, usury ? , \ o . 32- Is the purchase of a note at a discount greater than the legal rate, usury and why ? 33- What is the effect where commercial paper is dis- counted at such rate merely to disguise the ex- cess interest? 34- Define compound interest, and is charging such in- terest usury? /V~o DEPARTMENT OF LAW 49 35- Is your answer to the last part of the foregoing question true in all states ? Vu> 36- Is a provision for an attorney's fee in a note, in case of suit thereon, usury? - 1 o 37- Is the commission charged by a broker for obtain- ing a loan for another, usury? 7to 38- Does the exaction of a bonus by a lender constitute usury? ' 'vwity. 39- Is payment of a bonus by a borrower, to his own or the lender's agent, usury ?>vtf- 40- Will usury taint a note at legal interest given in renewal of a usurious note ? 41- (d) What distinction at common law was made between contracts made on Sunday and those made on other days? J "-V . . 42- How is this subject regulated at present? ~ 43- State some statutory differences, as to contracts prohibited on Sunday. 44- What contracts are excepted from the operation of Sunday law statutes ? 45- Where the terms of a contract are decided on Sun- day, but the contract is not actually made until a week day, is such contract valid? 46- Is a promissory note signed on Sunday and deliv- ered the following day valid and why? W 47- Can a contract made on Sunday be validated by subsequent ratification state fully? 48- (e) What can you say concerning statutes restricting business occupations? 49- What classes of persons, generally, come within such restrictions ? 50- Can persons not complying with such statutes le- gally recover upon contracts made without com- plying there with ?/V o 51- Is an agreement to sell intoxicating liquor, where its sale is prohibited by statute, or where the statute imposes a penalty for conducting such business without license, valid? 52-29. What can you say as to the legality of contracts contrary to public policy? C' ^i^ M\ 50 AMERICAN EXTENSION UNIVERSITY 53- (a) Are contracts tending to interfere with the impar- tial performances by public officres, of their du- ties, valid? ./VCT 54- State some types of contracts of this character which are invalid. '.AA/l^ww^wV A o&JUv< 55- (b) Define a lobbying contract. 56- Are such contracts legal and why?;vv 57- What contracts designed to influence legislation are, and what are not, legal? ; 58- Are contracts to secure administrative action in public offices valid? 59- Is a contract to influence a municipal, or a quasi public corporation contract valid? 60 (c) Are contracts tending to pervert or obstruct public justice valid? "v^ 61- What contracts with witnesses are, and what are not, valid? 62- Is a contract to stifle criminal prosecution valid? y What exceptions if any, are there in this matter? 63- Is a contract tending to encourage litigation valid and why? /I. 5. 64- Define the term " maintenance," and are contracts therefor valid? 65- What is "champerty"; and are contracts therefor legal? 66- (d) What contracts in restraint of trade are legal; and what are illegal? 67- State the reason upon which such agreements are held to be void. 68- What measure of restraint of trade in a contract will be held valid? 69- In determining this question, what inquiry will the court make ? 70- Is a restraint, unlimited as to territory, void? 71- Can a contract not to enter into business anywhere within a named state be enforced and why? 72- What is the limit of restraint in behalf of the party benefited thereby which will be upheld? 73-30. What is the effect of illegality upon a contract (a) and is this effect always uniform? 74- Distinguish the various limits of the effect of ille- gality in contracts. DEPARTMENT OF LAW 51 75- (b) Can the legal consideration be divided from the il- legal consideration in contracts where both appear? 76- State fully when such separation can and cannot be had. 77- (c) Where the direct object of a contract is illegal what effect does this have on the contract? 78- Same, in cases where the direct object is lawful but the intention of the parties is unlawful? 1 J<^ 79- Can a party collect for goods sold which he then knew were to be used unlawfully? ~-,-^- 80- Can money loaned, knowing it is to be used in gam- bling, be recovered legally and why? 81- Can money loaned to pay a gambling debt already incurred be so recovered? -yik 82- (d) How is the validity of a promise to pay money upon an unlawful transaction determined? 83- Where such promise is in the form of negotiable paper, what additional question arises? 84- Wnen and when not can the innocent holder of negotiable paper given for an illegal considera- tion collect same ? 85- What is the rule where a transaction is void but the consideration thereof is legal? I ' / / /L JL o*. J* to hjZsm. - ** 52 AMERICAN EXTENSION UNIVERSITY LESSON 5.- CHAPTER V. OFFER AND ACCEPTANCE 31. Mutuality of Expressed by "Words. 32. Same Expressed by Conduct. 33. Same Illustrations. 34. Offer Must be Known by Acceptor. 35. Offers Partly Communicated. ' 36. Acceptance Must be Communicated. 37. Acceptance Must Coincide With Offer. 38. Offer and Acceptance by Mail. 39. When Acceptance is Complete. 40. Acceptance Must Not Modify Offer. 41. Conditional Acceptances. 42. Ancilliary Matters in Acceptance. 43. Lapsing of Offer. 44. When Offer is Revocable. 45. Notice of Revocation Must be Communicated. 46. "Refusals," and Their Revocation. 47. By Whom Offers Must be Accepted. 48. Auctions. 49. Public Offers and Bids. 50. Offer Must Concern Contractual Relations. 51. Conflict of Laws. 31. Mutuality of Expressed by Words.-^Every contract reduced to its actual inception arises from the ac- ceptance of an offer .J Every expression of mutual intention is reached by one party making an offer and the other party accepting it; the legal result being an obligation, or legal tie, binding the parties to the performance of the conditions thus agreed to. Such an expression of mutual intention can usually be reduced to the form of a simple question and answer. For instance: A says, "I will sell my horse for $50., and B says, "I will take him." Or B says, "I will give you $50 for your horse. Will you take it?" and A says, "I will." To the same effect, legally, although in a different manner, the act of a merchant in displaying his goods at a stated price, and that of a customer taking them to the wrapping counter, or saying that he will take such goods, indicating them amount to an offer and acceptance and hence constitutes a legal contract. fA contract made under the last condition is sometimes called a tacit contract./ ^S-'v 32. Same Expressed by Conduct. From the last illustration given it will be seen that both an offer and its acceptance may be made by conduct instead of by words. ^Sending goods in response to an order therefor is an accept- f DEPARTMENT OF LAW 53 ance by conduct, of the offer to buy contained in the order. t : A common illustration of this class of contracts is offered by the sending of goods by error or otherwise, to one who has not ordered them and their use or consumption by the per- son to whom they were delivered. The sending or delivery is the offer, the use or consumption is the acceptance, legally implying a promise to pay the market price therefor.j Again, a person allows another to perform services for him* under such circumstances that such other person could not reasonably be supposed to be doing the work for nothing, the former's acquiesence in receiving the services, consti- tutes an acceptance of the services done, and he will be held liable to pay for them.) A ordered of B a publication which was to be completed in twenty-four numbers ; he refused to accept more than ten numbers ;{Jt was held that A's accept- ance of the ten numbers received, created a promise to pay for them, v )although he was not liable on his promise to take the entire number. r However, in such cases in order to make a valid con- tract there must be a definite request, actual or implied, for the work to be done and not a mere inquiry whether the other would be willing to do it, or willing to have it done. Acceptance of proffered work or service constitutes a legal promise to pay for it. /Where silence is relied upon as an acceptance, it must be such silence as constitutes an assent) lf the nature of the contract, or of the offer is such that ac"- ceptance should be definitely expressed, either in spoken or writing speech, then acceptance by silence will not be suffi- cient. "When acceptance is by conduct, the contract is im- plied from the conduct of the parties in contrast to those in- stances where the contract is expressed by words. 36. Same Illustrations. An offer and its accept- ance may be made in various forms. The presence of a street car on the street is an offer by the company to carry passengers, and when a person enters the car, he accepts the offer and promises to pay the fare. This is an offer of an act for a promise. If a person has lost property and offers a reward for its return, it is a promise offered for an act. If A promises to B a hundred dollars for services which B promises to perform, a contract arises from the offer of the 1 Fogg v. Portsmouth Athenaeum, 44 N. H., 115. 54 AMERICAN EXTENSION UNIVERSITY promise and the giving of a promise in return. This is a case of a promise offered and a promise accepted. 34. Offer Must be Known by Acceptor.-/To be ef- fectual an offer must be communicated to the offeree, or the doer of a service within the offer, for without such com- munication, there could be no union of minds in mutuality of assent, and therefore no contract. For this reason a person who performs a service for which a reward has been offered, but who at the time of doing the service, does not know of the offer, cannot legally claim the reward.^ In the case of Fitch v. Snedaker, 2 a sheriff offered a reward for informa- tion leading to the arrest and conviction of a murderer. The plaintiff gave the information which led to the arrest and conviction of the guilty party but at the time he did so, he did not know of the offered reward, and the court in a suit brought to recover it held that he could never have ac- cepted it, not knowing it had been made, and therefore was not entitled to it. A frequently cited illustration of this principle is the case of a captain who was engaged to command a ship. Be- fore the end of the voyage for which he had contracted he gave up his command but helped work the vessel to her des- tination. It was held that he could not recover for the ser- vices rendered after relinquishing his command, inasmuch as his offer to perform them had never been communicated to the owners of the ship and they had had no opportunity either to refuse or to accept same. 3 (For the same reason it has been held that the person who saves the property of an- other from destruction by fire without the owner's knowl- edge, cannot recover for his services. ^ ;One, Bartholomew, had a stack of wheat in a field owned by Jackson, and which he promised Jackson he would remove by a certain time in order that the latter might burn the stubble.) (Jackson, rely- ing on this promise, set fire to the stubble in a distant part of the field and afterwards finding that the stack had not been taken away moved it himself to save it from the fire. For this service he brought suit against Bartholomew for pay for this work, but the court held that as it was rendered without the request of Bartholomew, and without his knowi- ng N. Y., 248. 'Bartholomew v. Jackson, 20 Johns 'Taylor v. Laird, 25 L. J. Ex., 329. (N. Y.;, 283. DEPARTMENT OF LAW 55 edge, there was no promise actual or implied on his part to pay for it. ) 35. Off ers Partly Communicated. In some instances the terms of an offer are left partially uncommunicated. In such cases the liability of the acceptor depends upon his knowledge of the existence of the terms of the offer. In an old English case a ticket bore on its face only the words, "Dublin to Whitehaven." The purchaser was held not to be bound by the conditions which were printed on the back of the ticket, as on the face thereof there was a complete contract, and the purchaser had no knowledge of the terms on the other side. In another instance, though, where the face of the ticket referred to "conditions on the back," and the purchaser admitted knowledge of the existence of such conditions but did not read them he was held bound thereby. In all such cases, the controlling question is whether the terms of the offer have been fully communicated to the acceptor or his attention actually called thereto. , The ten- dency is towards a rule holding that if one accepts a paper containing terms of offer, he is bound by the same although he may not choose to inform himself of their nature. ) The rule as stated governing railway tickets applies equally to bills of lading, warehouse receipts, telegraph blanks and the like. 36. Acceptance Must be Communicated. Accept- ance must be communicated to the offerer by words or con- duct. A mere mental acceptance by one, of a communicat- ed offer, does not constitute a contract. A had received from B a written agreement to pay him as sole agent, a stated commission for the sale of certain lands if made within three months. B himself sold the land within one month and A brought suit for breach of contract. It was held that inasmuch as A had failed to communicate to B an ac- ceptance of his offer, there was no mutual obligation, and therefore that the offer might be revoked by B, which was effectually done when he himself sold the land. 54 " J A party making an offer may prescribe a manner of ac- ceptance but he cannot by the term of this offer turn the mere silence of the offeree into an acceptance. In other ' Stensgaard v. Smith, 43 Minn., 11. 56 AMERICAN EXTENSION UNIVERSITY words, one cannot by his own offer compel the offeree to signify his refusal thereof or else be held to have accept- ed it. A offered to buy B's horse, adding, "If I hear no more about it I shall consider the horse mine." The evi- dence showed that B had made up his mind to accept the offer but as he had not communicated his intention to A the court held that there was no contract. 6 37. Acceptance Must Coincide with Offer. The ef- fect of the due acceptance of an offer is to form a contract. It transforms the offer into an obligation that binds the parties thereto. The communication of an acceptance dif- fers from that of an offer in that it may, or may not, consum- mate a contract according to the nature and conditions of the offer. An offer is not "communicated" until brought to the actual knowledge of the offeree, while an acceptance may be considered "communicated" though it has not actu- ally come to the knowledge of the party making the offer. If the party making the offer intimates, either expressly -or impliedly, that a particular form of acceptance will be suf- ficient to bind the bargain, it is only necessary for the party to whom the offer is made to accept in the manner indicated. Again, if the party making the offer intimates that it will be sufficient to act on it without communicating the acceptance of it to him, the performance of the consideration named in the offer will of itself constitute an acceptance without ver- bal notice thereof. It may be generally stated that if an of- fer contemplates the doing of a certain act as the consider- ation of the promise tendered by the offer, the performance of that act will complete the contract, unless the offer di- rectly calls for the communication to the offer or of an ac- ceptance. 38. Offer and Acceptance by Mail. If the offer or re- quires or suggests a particular means of acceptance, he takes the risk of an acceptance so made reaching him. A common instance of this exists when an offer is made by mail, or telegram. In such cases it is to be assumed that the acceptance may be made in the same way unless the offer expressly states otherwise. When acceptance is made in the required manner, the contract becomes instantly bind- Pelthouse v. Bindley, 11 C. B., N. S., 869. DEPARTMENT OF LAW 57 ing, and its consummation dates from the time the accepting letter or telegram is put in the course of transmission, irre- spective of its actual receipt by the other. Where an offer is made by mail, the postoffice is regarded and is in fact the agent of the offerer, as was said in one case. As soon as the letter of acceptance is delivered to the postoffice the con- tract is as complete and final and absolutely binding, as if the acceptor had put his letter into the hands of a personal messenger sent by the offerer himself as his agent to deliver the offer and receive the acceptance. 7 / The defense in the case cited was that there was no contract legally because the plaintiff's letter of acceptance was never received by the de- fendant, but the court held otherwise on the principles just stated. /In another case the defendant offered by letter sent through the mail to insure the plaintiff's house for a stated sum, and the plaintiff accepted by mail, but before his let- ter of acceptance reached the company his house burned. The company was held liable for the agreed insurance be- cause the contract was completed when the letter of the plaintiff was mailed. 8 These decisions are based on the theory that when an offer is made to one who is not in immediate communica- tion with the offerer, the offer remains open for acceptance for such time as is prescribed by the offerer, or as may be reasonable under the circumstances for the offer to be re- ceived and passed upon by the offeree. In other words, that an offer contained in a letter remains open until the letter reaches the offeree and he has had a reasonable time to con- sider same and that a contract is formed the moment he ac- cepts it, and in pursuance thereof mails a letter accordingly to the offerer. 39. When Acceptance is Complete.-|-In case an ac- ceptance becomes lost, or is delayed in transit, the same rule holds good^ though the reluctance of the courts to apply it makes it interesting to note the steps by which it has been followed. /The principle was at first laid down that the posting of a letter of acceptance completed the contract no matter what became of the letter.)/ f Later the English courts tried to modify this holding by saying that the contract did 8 Taylor v. Merchants Fire Ins. Co., 9 ' Household Ins. Co. v. Grant, 4 Ex., How., 390. 108. 58 AMERICAN EXTENSION UNIVERSITY not become binding until the letter of acceptance was re- ceived, but that its operation then dated back to the date of the posting of the letter/ /A later case held that the contract was complete at the time of posting the letter of acceptance, but subject to the condition subsequent that if the letter did not arrive in due time, the offeror might assume that the offer had not been accepted./ fHowever, the settled rule is as has already been made clear, that the contract is conclud- ed by the posting of the letter of acceptance and that it is not suspended, or subject to any condition occuring after the letter is actually mailed. This rule holds good, also, and for like reasons to offers made by telegraph, cable and aero- graph, and to acceptances thereof forwarded by like means| 40. Acceptance Must Not Modify Offer. To_form^a contract there must be a clear proposition made by one party and clearly accepted by the other without any modi- fication. (If the acceptance changes the offer in any respect, however small, it amounts simply to making a counter offer; it is not an acceptance which will form a contract.^) It has well been said that an acceptance to be good must be such as to conclude an agreement or contract between the parties on the offer made, and to do this, it must in every respect meet and correspond to the offer neither falling short of or going beyond the terms proposed, but exactly meeting them at all points and closing with them just as they stand. (In Jen- ness v. Mount Hope Iron Company, 10 the court held that a reply agreeing to take a certain number of kegs of nails less than the quantity offered by the defendant at a stated price did not constitute an acceptance of the offer and therefore entered a nonsuit against the plaintiff. ) This sound and es- sential doctrine has, however, in some instances been carried to extremes. " rtFor instance, A who lived in California of- fered, for a price named, to sell certain land to B who lived in Iowa. B telegraphed his acceptance adding, "Money at your order at First National Bank here." On suit brought by A the court held that as the offer mentioned no place of payment, B's telegraph stating one was a conditional ac- ceptance and not binding on either party unless accepted by A.j (in another case the plaintiff offered the defendant $300 Potts v. Whitehead, 23 N. J., Eq., 10 53 Maine, 20. 512. "Sawyer v. Brossart, 67 Iowa, 678. DEPARTMENT OF LAW 59 for two horses. Defendant replied, "You may have the horses for $300 if you will come for them. ' ' The court said that no contract was formed as the acceptance was coupled witha new condition. 12 ) ^fhe principle that an acceptance must meet the offer squarely and unconditionally,} is well stated in Bruner v. Wheaton. 13 The court therein, said: "In order that an acceptance may be operative it must be unequivocal, uncon- ditional, and without variance of any sort between it and the proposal, and it must be communicated to the other party without unreasonable delay. To constitute a valid contract there must be a mutual assent of the parties thereto and they must assent to the same thing in the same sense." 41. Conditional Acceptance. A conditional accept- ance of an offer is a rejection of the offer. Such an accept- ance is no acceptance; but merely, as before stated, the sub- stitution of a counter offer. .A person who thus conditional- ly accepts an offer cannot thereafter bind the proposer by an unconditional Acceptance, even though the offer has not been withdrawn^/ In Cozart v. Herndon, 14 the plaintiff, a corporation, offered to purchase of the defendant certain land for $15,000 of its capital stock. The defendant re- plied that he would accept the offer, but reserved in his ac- ceptance, all timber on the land for his own benefit. The court held that such acceptance was conditional and that the defendant was not entitled to the stock offered as stated. j 42. Ancilliary Matters in Acceptance. However, the fact that an acceptance contains matters ancilliary to the transaction will not make it conditional. The accept- ance of a load of flour offered for sale, is not qualified be- cause it contained an inquiry as to the form of remittance. 1! In like manner, the acceptance of an offer to sell cotton has been held unqualified, although it contained directions for shipping, as the directions were entirely subordinate to the contract. 16 43. Lapsing of Offer. An unaccepted offer will lapse under several conditions so that a subsequent acceptance will be ineffectual. The death or insanity of either party "Fenno v. Weston, 31 Vt., 345. * Clark v. Dales, 20 Barb., 42. 13 46 Mo., 363. 10 Brisban v. Boyd, 4 Paige, 17 "114 N. C., 252. 60 AMERICAN EXTENSION UNIVERSITY before an offer has been accepted will cause it to lapse, for the legal representatives of the offeror cannot be bound by an acceptance and the legal representatives of the offeree cannot accept an offer in his behalf./ In accordance with the principles already stated, however, an acceptance mailed before the death or insanity of the offerer, but not received until afterwards makes a valid contract. 17 ^An offer may also lapse because it is not accepted in the manner prescrib- ed by the offer. //A offered in writing to sell flour to B, speci- fying that the answer be sent by return of the wagon with which he the offer was delivered. B sent his acceptance by mail thinking that it would reach A sooner than by the wagon. It was held that A was not bound by the accept- ance as it was not sent in the manner directed by his offer. 18 / An offer may also lapse by the passing of the time specified therein for acceptance, or if there is no time specified, by the passing of such time as is reasonable for acceptance. What amounts to a reasonable time is to be determined from all the circumstances of each case. Lastly an offer may lapse by revocation. J. Jr J 44. When Offer is Revocable. An unaccepted offer creates no legal rights and may therefore be withdrawn at any time before its acceptance. 'This is true even though there has been a promise with the offer to hold it open for a certain length of time, unless the promise was given for a consideration,^ If there is a consideration for the promise to hold the offer open for a given time, this, of course, of it- self constitutes a contract, a failure to comply with which would give the offeree the same rights to specific perform- ance, or an action for damages, that would arise under any other form of breach of contract/ In an old English case, one, Oxley, the defendant, offered Cook, the plaintiff, a large quantity of tobacco at a specified price. Cook was asked that the offer be kept open until four o'clock of a cer- tain day, to which Oxley agreed, and before that hour, Cook communicateed his acceptance; but in the meantime, Oxley had changed his mind and refused to sell. The court held that Oxley 's promise to keep the offer open was not binding for want of a consideration given him by Cook, and that the "Mactier v. Frith, 6 Wend., 103. 18 Ellason v. Henshaw, 4 Wheat, 225. DEPARTMENT OF LAW 61 offer could be revoked by Oxley at any time before its ac- ceptance. The rule thus established continues in full force today. 45. Notice of Revocation Must be Communicated. Legally speaking "communication" of a revocation of an offer differs from communication of an acceptance, in that an acceptance is "communicated" when it is put in the course of transmission, while a revocation is not communi- cated until it is actually received. It is possible therefore tlint a letter containing the acceptance of an offer made to its writer, and the notice of the revocation of such offer sent by the offerer, and posted at the same time, will result in the acceptance being effectual, as it legally became so on the posting of the letter, and the revocation being ineffective, because it was not received before the acceptance was mail- ed, rfn case the offer and withdrawal are received in sepa- rate letters at the same time, and the acceptance of the offer was put in transmission before the letter containing the withdrawal was opened, the acceptance would form a con- tract.^ The rule is not so clear where the party making the offer has done some*overt act which puts it out of his power to perform the contract upon acceptance, but has not com- municated his revocation to the offeror. It is fairly certain that an^overt act is a sufficient revocation if the person to whom the offer was made had sufficient notice of it ; but it is not very clearly settled what would amount to sufficient no- tice. It is doubtful if the mere statement to the offeror, by a stranger to the transaction, that the party making the offer had changed his mind, would constitute proper notice to the offeree. If sufficient notice is lacking, the offer must be held to continue open, and will be turned into a binding contract by its acceptance. In an old case, the defendant, in England, wrote to the plaintiff, in New York, offering for sale a quantity of tin, and asked for a reply by cable. The plaintiff replied at once as requested, but the defendant in the meantime had mailed a letter of revocation. The court held that both legal principle and practical convenience required that a person who has accepted an offer, not known by him to have been revoked, shall be in a position safely to act upon the 62 AMEEICAN EXTENSION UNIVERSITY footing that the offer and acceptance constitutes a contract binding upon both parties. 19 /This decision established +Le rule, that, until the moment of acceptance, an offer is revo- cable, but that the notice of revocation must be actually communicated, and the moment of such communication is the moment of its actual receipt by the offeree. As we have already seen, where a party making an offer uses the mail as his messenger to carry the offer and bring back the ac- ceptance, an acceptance is legally "communicated" to him when such letter is mailed and thus put in charge of his chosen means of communication, but his revocation of his offer cannot be regarded as "commiinicated" until it is^actu ally delivered by his messenger to the party for whom it is intended. 46. "Refusals" and Their Revocation.-+A "refusal" j * " ^**^Tz " "^^ j may be defined as a promise to hold an offer open for a given time. It frequently happens that persons give what is call- "ed a ' ' refusal " of an offer for a certain length of time. Sucji a promise, as we have already found, is not binding unless it is supported by a consideration. In such cases, the man- ner of retracting the refusal of an offer depends, to a cer- tain extent, upon whether the parties are in immediate com- munication. Where such is the case the offer may be re- voked at once, any time before acceptance, and the general rule seems to be that any overt act, indicating a change of intention by the party making the offer, amounts to its with- drawal. Some courts hold this to be true even though the withdrawal is not brought to the knowledge of the other party., 1 Where the parties are at a distance, however, the general rule, as before stated, appears to be that the party to whom the offer is made has the right to rely upon it and to conclude the contract by accepting it at any time before actually receiving notice of its revocation. 47. By Whom Offer Must Be Accepted. It is not ne- cessary that an offer be made to a particular ascertained person, but there can be no contract till it lias been ac- cepted by some ascertained party. This proposition is il- lustrated by the general offer of a reward to the public for certain information, or for any other named service.) Such " Bryne v. Van Tienboren, 5 Common Pleas Div., 344. DEPARTMENT OF LAW 63 an offer becomes a contract to pay the reward whenever any individual renders the service. The troublesome questions which arise in connection with this class of contracts come mainly from two causes, first, where the party performing the service may not, at the time of performance, know of the offer of the reward. Upon the question of the right to the reward under such circumstances, the courts disagree, some holding that it is not necessary that the reward should be the motive for the service rendered, but that the contract is with any person who performs the service requested. Others hold that the reward can not be recovered by a per- son performing the service, in ignorance of the offer, be- eauee there is Jacking tins mutual consent essential to the formation of a contract. (As illustrative of the former rule, we nui}^ sny that the Enjglish courts allowed a plaintiff to recover the offered re- warobn the ground that there was a valid contract consum- mated with the person who performed the condition men- tioned in the advertisement. The chief contention of the defendant in that case referred to was that the reward was not the motive of the plaintiff in giving the information, but the court held the motive was immaterial. 20 On the other hand, the basis of the ruling that one is not entitled to a re- ward, as a matter of contract, where he performed the ser- vice in ignorance at the time, of the reward offered, we may set the case of Fitch v. Snedaker, wherein the court said: 'To the existence of a contract there must be mutual assent, or in another form, offer and consent to the offer. The mo- tive inducing consent may be immaterial, but the consent is vital. Without that there is no contract. How then can there be consent or assent to that of which the party has never heard?" 21 (The second source of difficulty is presented by declar- ation of an intention, or statements of probable action, sent out generally by circular letter, advertisements, or other method of miscellaneous offerings. ) CThe acceptance of any such statements, not definitely made as clear propositions, can not result in any contractual liability^ fThey must be distinguished from general, actual, definite, offers whose ac- " Williams v. Carwadine, 4 B. & A., 21 38 N. Y., 250. 621. 64 AMERICAN EXTENSION UNIVERSITY ceptance by an individual forms a contract. In the cases under consideration terms must be carefully distinguished from mere matters of inducement, for every term of an offer becomes a promise when the offer is accepted, while mat- ters of inducement impose no liability on any one. As illus- trating this distinction is the case of Moulton v. Kershaw, 22 wherein the defendants sent a communication to the plain- tiffs, saying, "We are authorized to offer Michigan salt at eighty-five cents per barrel. Shall be pleased to receive your order." The plaintiffs ordered two thousand barrels but the defendants refused to fill the order. The court held that the defendants ' letter was simply an invitation to deal, and not an actual offer that could be turned into a binding contract by acceptance. 48. Same Auctions. Some of the above distinc- tions arise in connection with sales by auction. An auc- tioneer's advertisement of a sale of goods is held not to bind him to conduct the sale at the time announced, and so, fail- ure to do so does not make him legally liable to reimburse parties who expend money to attend the advertised sale. 23 The court said: "Unless every declaration of intention to do a thing creates a binding contract with those who act upon it, and in all cases after advertising a sale the auctioneer must give notice of any articles that are to be withdrawn, we can not hold the defendant liable." However, an advertise- ment of an auction "without reserve" creates a binding promise on the part of the auctioneer to deliver the goods to the highest bidder at the sale. 24 This case differs from the proceeding one in that the highest bidder is a definite person who has fulfilled the terms of a definite offer, while, the at- tendant of an advertised sale is merely one of an indefinite number of persons who at the sale might not actually bid, and whose losses therefore cannot be definitely ascertained. When an auctioneer actually puts up property for sale and receives bids therefor, the putting up of the property is an offer, and a bid therefor is an acceptance of the offer at the price bid. Each subsequent larger bid is an acceptance by the auctioneer of the last proceeding bid, to the extent that 22 59 Wis., 316. Bench, 286. 23 Harris v. Nickerson, 8 Queen's * Warlow v. Harrison, 1 E. & E., 295. DEPARTMENT OF LAW 65 he can be legally held thereto by the highest responsible bid- der. 49. Public Offers and Bids for Contracts. To the same general effect as offers and bids at public auctions, so far as the liabilities of the offeror and the rights of the of- feree or bidder are concerned, are the legal rules govern- ing public offers for supplies, contracts, and the like. Where one, by public print, or other form of promis- cous and general publicity, seeks offers for certain specified materials, or for stated work or services, requesting bids therefor, he impliedly, if not actually tenders the order or contract therefor to the one making the highest bid. Ac- cordingly, unless the public announcement specifically re- serves the right to reject bids, the highest responsible bid- der can legally compel the other party to give him the order advertised. The reason for this is that such bid is an ac- ceptance of the offer, and itself constitutes, and consum- mates a contract. The offer of the order, though made to the world at large, is made to an "ascertained" person the moment a responsible party puts in tlie best bid. Of course, where such public offer for bids is coupled with certain stat- ed conditions, all bids thereunder are held subject to such conditions. An offer must be sufficiently definite in terms, to be capable of creating legal relations, in order for its ac- ceptance to constitute a binding obligation. AVhere one agrees to do certain work for another, for " whatever is right," there is no contractual relation thus created suffi- ciently definite to be enforced by law. 25 J 50. Offer Must Concern Contractual Relations. An offer to be entitled upon its acceptance to be made the basis of legal rights and action if not then fulfilled, must be in relation to such matters as are subject to contractual liabil- ity. For instance, the offer of hospitality embodied in an invitation to a social function, and its acceptance by one in- vited, although thereby the latter may incur expense and if the function is not held he may be said to have suffered some loss or damage, cannot be made the subject of legal redress, where the invitation is withdrawn, or the function is aban- doned. In other words such matters are not, generally 28 Taylor v. Brewer, 1 M. & S., 290. 66 AMERICAN EXTENSION UNIVERSITY speaking, capable of legal recognition, for they do not con- stitute legal contractual relations. 51. Conflict of Laws. Where the locality of the for- mation of a contract is material, as very frequently is the case, it is determined by the place of the acceptance. Thus, where an offer was made in Massachusetts and accepted in Rhode Island, it was held that the contract was made in the latter state and must be determined by Rhode Island law. 2C This matter becomes material in determining the law by which a contract is to be interpreted and enforced, and also often in deciding upon the capacity of the parties to the con- tract, since the laws of different states vary on these points. The consideration of these questions will be taken up later and dealt with fully when we come to the subject of Conflict of Laws. = Perry v. Iron Company, 15 R. I. ,380. QUIZZEE. OFFER AND ACCEPTANCE. 1-31. What is the basis of every contract ? > 2- How is the expression of mutual intention usually given 1 ? Illustrate common forms of offers and acceptances. 4-32. How, other than by words, can offer and accept- ance be made ? Illustrate. T&cX/V CC^A^C* ^ 5- State the rule governing contracts by conduct. 6- When must a definite request covering contract be made? 7- When will silence suffice to bind one ? 8- State the distinction between implied and ex- pressed acceptances. 9-33. Give illustrations of various forms of offers and ac- ceptances. 10-34. What is necessary on the part of the acceptor to obligate the offerer? k \*Aj V" 11- Is one who performs service in ignorance of offered reward, entitled thereto ? 12- Is the rule on this point uniform? If not state dif- ferent views, and basis of each. DEPARTMENT OF LAW 67 13- Give at least two illustrations on this point. 14-35. Where the terms of an offer are only partially known to an acceptor, what is the governing rule? 15- What is essential on the part of an acceptor to bind the offeror to his offer? 16- 36. What do you know about conditions printed on railway tickets, bills of lading, telegraph blanks, and the like? 17- Can one bind an offerer by simply, in his own mind, accepting the offer? 18- Wliat is mutually necessary between offeror and acceptor to bind both? 19- Cannot an offeror prescribe the manner of the ac- ceptance of the offer? 20- What limit, if any, is there to such right ? 21- Give an illustration of attempted limitations on the right of an offeree to refuse an offer. 22- What is the effect of due acceptance? 23- 37. How does a communication of an acceptance differ from that of an offer? 24- When is an offer not " communicated?" 25- When is an acceptance "communicated?" 26- How must an acceptance be made where the offer names a method for same ? 27- If an offer indicates that doing a stated thing will be an acceptance, what is the legal result of so doing? 28-38. State the rules governing acceptance of offers made by mail or telegraph? 29- In offers by mail what is the legal relation to of- feror of the postoffice service? Same as to one by telegraph. 30- When does an acceptance, duly made by mail or telegraph, operate to consummate a contract? 31- Give illustrations of binding acceptances by mail where letter of acceptance never reached offeror. 32- What is the legal theory underlying the governing rule in such cases ? 33-39. State the progressive steps whereby existing rule in such cases became legally established. 68 AMERICAN EXTENSION UNIVERSITY 34- Restate the now settled rule for acceptance by mail or telegraph. 35- What is essential to constitute a valid contract ? 36-40. If an acceptance modifies, or changes the terms of the offer, what results ? 37- Give illustrations of modifying acceptances, and tell the result in each case. 38- State some extreme cases of the application of the rule of modified acceptances. 39- What is necessary to make an acceptance fully and clearly operative ? 40-41. What is the legal effect of conditional acceptances ? 41- Give an illustration of a conditional acceptance. 42- 42. How does ancilliary matter in an acceptance af- fect its legal operation ? 43- State some illustrative cases of acceptances with ancilliary matters therein. 4443. When will an offer lapse ? 45- Can an offer made by one who subsequently dies be accepted thereafter by offeree ? 46- Can one's legal representatives, after his death, ac- cept an offer made him? 47- What is the rule where an acceptance is duly mailed by offeree before offerer's death but not received until afterwards? 48- State what you know about an offer lapsing be- cause not accepted in the manner the offer pre- scribed. 49- Same, as to lapse of offer by the passing of time. 50- How is " reasonable time," for the acceptance of an offer, to be determined'? 51- How, otherwise than by ways covered by questions already asked, can offers lapse? 52- When can an offer be revoked or withdrawn? 53-44. What rights are created by an unaccepted offer? 54- Suppose offer is coupled with a promise to hold it open for a stated time, what effect has such promise? 55- When will a promise to hold an offer open be bind- ing on offerer? DEPARTMENT OF LAW 69 56-45. State the legal difference between " communica- tion " of the revocation, and one of the accept,- ance, of an offer be explicit. 57- What difference, if any, is there in the rule as to such "communication" where the parties are together, and where they are distantly apart ? 58- Suppose an offeror has done some act rendering it impossible to fulfill his offer, what follows? 59- What would, and what would not, constitute no- tice to offeree of offerer's change of intention? 60- What are the legal rights of an offeree who has accepted an offer, not knowing of its revocation by offeror? 61- State concisely, the rule as to up to what moment an offer is revocable; and likewise as to the "communication" of revocation. 62-46. Define "refusals" of offers. 63- When are "refusals" legally obligatory? 64- When can they be revoked and how? 65-47. By whom can, or must, an offer be accepted to bind the offeror ? 66- Must offers be made to definite individuals to hold the offeror? 67- What about offers of reward, as constituting legal obligations ? 68- When do such offers become binding contracts ? 69- What troublesome questions arise in such matters ? 70- State, and illustrate, the rule governing cases where a party does a service ignorant of a re- ward offered therefor. 71- What differing rules prevail on this point, and state the basis of each. 72- How do statements indicating offers, differ in legal obligation, from actual offers? 73- Are matters of inducement to trade, legally offers? 74- State distinguishing characteristics of such forms of communication. 75-48. What distinctions arise in cases of auction sales? 76- Does the failure to hold an auction at the time named in an advertisement render the advertiser liable to one who attends at time and place stated and why? 70 AMERICAN EXTENSION UNIVERSITY 77- What is legal effect of an advertisement of an auc- tion ' ' without reserve ? ' ' 78- When is an auctioneer bound by bids received upon his offers? 79- What is the legal nature and effect of increasing bids'? 80-49. What rules govern public offers for contracts? 81- What legal rights does one acquire by answering advertisements for supplies, etc., and making bids? 82- How, if at all, can the general legal rights of a bid- der under such circumstances, be curtailed? 83-50. To what must offers relate to make them obliga- tory upon acceptance ? 84- Can offers included in social invitations be made the basis of legal redress if withdrawn? 85- What is the rule as to definiteness of terms of an offer, to bind one thereto legally? 86-51. How are contracts based upon an offer made in one state, and received and accepted by a party in another state, to be construed? 88- Where are contracts so entered into legally "made," or executed? DEPARTMENT OF LAW 71 LESSON 6.- CHAPTERVI. STATUTE OF FRAUDS. 52. Definition and Origin. 53. English Statute American Counterparts. 54. As Affecting Realty Transactions. 55. Fourth Section. (a) Promise by Executor and Administrator. (b) Promise to Answer for Another's Obligation. (c) Marriage Agreements. (d) Contracts for Interest in Lands. (e) Contracts Not Performed Within a Year. 56. Seventeenth Section. Contracts for Sale of Goods, Wares and Mer- chandise. (a) In General. (b) What this Section Includes. (c) Value of Goods. (d) Partial Acceptance and Receipt. (e) Payments of Earnest Money. 57. Memorandum Required by Statute. (a) Form. (b) Parties. (c) Substance. (d) Varying Written Terms by Parol Evidence. (e) Must State Consideration. (f) Who Must Sign Memorandum. 58. Operation and Effect of Statute. 59. Summary. 52. Definition and Origin. What is known as the 11 Statute of Frauds," is that act of the legislature passed to prevent fraud, and to that end requiring contracts concern- ing eertr.in matters to be in writing or at least" that some written, definite memoranda thereof be made, or that, in personal property transactions, in lieu of the writing, a full or partial delivery and acceptance be made, or a full or par- tial payment therefor be given. Each state has a statute of this kind, and known by this name; and while, in some respects the statutes of the respective states vary, they are all based upon, and closely follow the original statute of frauds, enacted in England, in 1676. 53. English Statute, and American Counterparts. The object of the English statute, like that of 13 Elizabeth, was to prevent the facility with which frauds were com- mitted, and to remove the temptation to perjury offered by dependance upon parol or oral evidence alone. The Act was entitled, "An Act for Prevention of Frauds, and Perjuries," and its purpose was declared in its opening paragraph, thus: "For prevention of many fraudulent practices, which 72 AMERICAN EXTENSION UNIVERSITY are commonly endeavored to be upheld by perjury and sub- ornation of perjury." The statute was very sweeping in its provisions, cover- ing numerous stated cases, and conditions. Only two sec- tions of the original statute, however, have been generally adopted in the United States, viz., the fourth and the sev- enteenth. Some states have accepted both of these sec- tions, in substantially their entirety, while others have taken only the fourth. The careful student will, of course, refer to the statute of his own state for specific information as to its special provisions, as in all like instances; but the following review of the statute will be found to accurately cover all of its general features. The original statute did not make a contract entered into against its provisions, null and void, it still recognized such contracts as being valid so far as their bona-iides were concerned : but it sim- ply forbade their enforcement by the courts. That is to say, the act related to the remedy, not to the right, of such contracts, and applied its restraint by providing that, "no action shall be brought" on contracts made in violation of its requirements. This characteristic has been followed by most of the states, but a very few, Missouri and Wisconsin, only, at the present time, make the specified contracts ab- solutely void, that is, absolutely without legal effect. The chief practical distinction between these two classes of provisions is that under the former, and the gen- eral rules, contracts made in violation of the statute, while unenforceable in themselves, may nevertheless be relied upon and proven when they are only collaterally, i. e. indi- rectly at issue, while in the latter instance they are, legally, wholly unrecognized. 54. As Affecting Realty Transactions. By far the most important contracts coming within the statute of frauds, and therefore, required to be in writing, are those af- fecting the transfer of the title to, or of some interest in, land. While our present study is upon the general subject of contracts and all the elements thereof already covered, and those which will later be considered, are fully appli- cable to agreements concerning real estate, still, because of 1 Michels v. West, 109 111., App., 418. DEPARTMENT OF LAW 73 the general, specific, clear-cut distinction between contracts affecting personalty, and those relating to realty, the provi- sions of the statute of frauds referring to the latter class of engagements, will be presented and discussed under the subject of Real Property. Accordingly we now turn to a consideration of those other sections of the statute in gen- eral use in this country. 55. The Fourth Section (a) Promise by Execu- tor or Administrator. Subdivision (1) of section 4 of the statute provides that no action shall be brought to charge an executor or administrator upon any special promise to, answer damages out of his own estate unless the agreement, or some memorandum or note thereof, shall be in writing and signed by the party to be charged therewith, or some other person by him lawfully authorized^" If an executor or administrator has no assets of the es- tate in his possession at the time of making the promise, then the statute applies ^otherwise, he is presumed to have promised in behalf of the estate. 2 ; ^The promise must be to pay the debt of the deeedent^and not one contracted by its executor or administrator in the course of the administra- tion of the estate. Such debts are the personal obligations of the executor or administrator for which he will be given credit on his final settlement. 3 In Meade v. Bowles, 4 the defendant was an administrator who had promised orally to pay the plaintiffs their attorney fees for services in con- nection with the estate. The defense was that the contract not being in writing was void under the Statute of Frauds. The court held that inasmuch as the defendant had agreed to pay the plaintiffs, the fact that the services were for the estate made the debt none the less the debt of the defendant and not the debt of the estate, and, therefore, not a promise to " answer for a debt of the estate." (b) Promise to Answer for Another's Obligations. Subdivision (2) of the same section provides that no action shall be brought whereby to charge a defendant upon any special promise to answer for the debt, default or miscar- riage or another, unless the agreement upon which the ac- tion is brought, or some memorandum or note thereof, is in 2 Pratt v. Humphery, 22 Conn., 317. v Stuart, 115 N. Y., 638. 3 Baker v. Fuller, 61 Me., 152; Wales * 123 Mich., 696. 74 AMERICAN EXTENSION UNIVERSITY writing signed by the party to be charged therewith or by some person by him duly authorized. /The essentials to bring a case within this section of the statute are that there be a binding and subsisting liability or obligation on the part of a third person to the promis Thus, if a person promises to work for another, and the lat- ter promises to pay a certain compensation in return for that work, the work is impliedly that which must be first performed, and then the party agreeing to pay must per- form, or be liable for a breach of contract, upon proof of performance by the one doing the work. , Great difficulty is experienced, in some cases, in deter- mining whether a promise is a warranty, or a condition pre- cedent to the obligation imposed upon the promisee. An undertaking that goods to be sold and delivered shall pos- sess a certain quality, whether in the form of a description or of a warranty, is a condition, the performance of which is precedent to the duty of paying therefor imposed by the contract upon the vendee. In Pope v. Allis, 5 the plaintiff bought through brokers 500 tons of iron with the under- standing that it to be "No. 1" quality, delivered in Milwau- kee. After delivery and examination the plaintiff refused to accept the iron, although it had been paid for by his agents. Defendant refused to reimburse the plaintiff, claiming that the latter could not rescind the contract, as there was only a breach of warranty. The court rendered a decision to the effect that the contract did not become an executed contract until the condition as to the quality of the iron was complied with. The jury having found the iron to be other than of "No. 1" quality, the condition was treated as of the essence of the contract, and its breach gave the plaintiff the right to rescind and to recover the money paid. An acquiescence in a breach of a condition prece- dent, however, turns it into a warranty; but payment of the consideration is not necessarily a waiver of the right to treat the contract as discharged. 3 Bruce v. Snow, 20 N. H., 484. 115 U. S., 363. 'Van Home v. Torrance, 2 Fal., 304. DEPARMENT OF LAW 89 CHAPTER VIII. QUASI CONTRACTS. 64. In General Kinds. 65. Money Paid. 66. Money Received. 67. Use and Occupation. 68. Work and Services. 69. Where Tort Is Waived. 64. In General Kinds. Our definition of quasi con- tracts revealed that the legal obligations thus termed are simply the law's method of compelling a party who has re- ceived, or by his own act obtained from another something of value except by way of voluntary gift, to pay a fair price therefor even though no agreement express or implied so to do, had been given previously to obtaining such value. / In short, quasi contracts are legal fictions. That is, where no promise was actually made to compensate for benefits re- ceived, under circumstances warranting the presumption that pay therefor was expected, the law makes believe that such promise was made, and so compels the recipient, upon the other's demand, to pay what is reasonable therefor. For instance : A man steals my horse and sells it for $100. The law says I may waive the tort and recover the money received by the thief for the animal, if I desire to do so. Why? Because the law, in order to protect my legal right to the money, and enforce against the thief his legal duty to surrender it to me, implies a promise, that is, feigns a promise where there was none in fact, in order to support my legal right to the money. All I have to do in such a case is to prove that the defendant, without right, sold my horse for cash, which he still retains. Quasi contracts arise from the following reasons: (1) Money paid; (2) Money received; (3) Use and occupation; (4) Work and services; (5) Where a tort is waived and suit is brought in assumpsit. 65. Money Paid Where a person pays money for another not at his request which would thus constitute an implied contract, but under circumstances where the re- cipient with full knowledge of the payment accepts the ben- efit thereby done him, the law w r ill require him to reim- burse the party who so paid the money. For example : A Ante 4, (c) 90 AMERICAN EXTENSION UNIVERSITY man, not a party to a note, was asked by a third person in the presence of the maker, to pay it. Such party did so, and receiving the note, handed it to the maker, saying: "Pay me the amount of the note sometime." On suit brought upon these facts, the court held that the maker of the note receiving the benefit of such payment without objection, and knowing of the request to pay it, and his acceptance of the paid note, raised an implied promise on his part to re- imburse the party who took it up. 2 As a general principle of law, money paid under mistake of fact can be recovered; 3 but money paid under a mistake of law cannot. 4 Upon like principles to those stated above, money paid under duress, or undue influence, or by misrepresentations, can be recov- ered at law. 5 66. Money Eeceived. Actions under this title can be maintained where one party has received money belonging to another, and which he ought in equity and good con- science to pay to such other. Privity of contract is not rie- cessary in this class of actions. Money collected for an- other and withheld; and money given to another for a spec- ified purpose, but not applied as directed; are familiar illu- strations -of the class of cases included under this right of action. 7 67. Use and Occupation.^- Wli ere a person, without legal right, or without having previously so arranged with the owner or his agent, enters into the possession of prem- ises whether houses or lands, or both and occupies and uses them, the law presumes a promise on his part to pay the reasonable value of such use and occupation. It will there- fore uphold a claim by the owner for the recovery of such value. 8 / 68. Work and Services. Where one does an act,or renders a service, for another person who is under a moral "Briguier v. Coeney, 39 la., 190; Poe * Arnold v. Ga., Ry. Co., 50 Ga., 304; v. Dorrah, 20 Ala., 288; Watkins Chandler v. Sanger, 114 Mass., v. Richmond College, 41 Mo., 302. 364; Ligonies v. Ackerman, 46 "Newell v. Smith, 53 Conn., 72; Ind., 552. Espey v. Cincinnati Bank, 18 Wall 'Curtis v. Pawly, 107 Cal., 257. (U. S.), 603. ' Benter v. Craig, 2 Mo., 198; Guth- 4 United States Bank v. Daniel, 12 Pe- rie v. Hyatt, 1 Har., 446. ters 33; Richardson v. Dever, 17 s Skinner v. Skinner, 38 Neb., 756. Col., 398. DEPAKTMENT OF LAW 91 and legal obligation to do such act or service, and it is so done under such circumstances of urgent necessity that com- mon decency would not sanction delay in so doing, the law gives the performer of such labor a right to recover of the other party what such service was fairly worth, even though no promise or inducement was given therefor by such party. 9 Burial of one's wife in the absence of the husband, his whereabouts being unknown; and providing a sick child with medical attendance and nursing, the father having abandoned it; are illustrations of this feature of such con- tracts ; 10 as, too, is the case of making provision for a fam- ily driven from their home by a brutal husband and father. lx Again, where one accepts the services of another, under circumstances showing that they were not gratuitously given; 12 and where services are rendered without any agree- ment as to the compensation therefor, 12 a like liability, and right of action, are created, although they more clearly re- semble implied, rather than quasi, contracts. 69. Where Tort is Waived. Any action to recover for a wrong done another, could formerly be brought only for damages for the tort. Certain classes of torts, however, are now regarded as having created a contractual obligation, giving the wronged party, therefore, the right of waiving the tort, if he wishes so to do, and suing the wrong doer in an action of assumpsit as for a legal debt. Such a case is where one, having lawful possession of personal property of another for safe keeping, or to be used according to direc- tions of the owner, converts the same to his own use by sell- ing it. )^The owner may, in such event, sue, either on the tort, and get damages, or for the value of the goods, in an action of contract. " V'ln suing as on contract, his recovery is limited to the amount actually received for the goods by the wrong doer. 15 / To sustain such an action the goods must have been sold, not exchanged or bartered; 1G the wrong Force v. Harnes, 17 N. J., Eq., 389; 348; Blaisdell v. Gladwin, 4 Gush., Patterson v. Patterson, 59 N. Y., 373. 582. "White v. Brooks, 43 N. H., 402; 10 Ambrose v. Kerrison, 10 C. B., 776. Bowman v. Browning, 17 Ark., 11 Ray v. Alden, 50 N. H., 83. 599; Watson v. Stever, 25 Mich., "Shelton v. Johnson, 40 la., 84; 386. Viley v. Pettit, 96 Ky., 576. 1S Saville v. Welch, 58 Vt., 683. 18 Spearman v. Texarkana, 4 Ark., "Fuller v. Duren, 36 Ala., 73. 92 AMERICAN EXTENSION UNIVERSITY doer must have received a benefit; and the owner a detri- ment or loss. 1T ( Obtaining another's money wrongfully, and the wrongful use of another's real property, are addi- tional instances where such a right may be executed. "Webster v. Drinkwater, 5 Me., 319. QUIZZEE. STATUTE OF FRAUDS. l-52. Define the statute of frauds. 2- Has each state such a statute? 3-53. State its origin and purpose fully. 4- What was the title of the original act? 5- What can you say as to the comprehensiveness of the original act? 6- What sections thereof have been generally adopt- ed in this country? ** 1- What was the legal effect on contracts under the statute? 8- Did the act affect validity of contract? If not, to what did it apply? 9- Has the characteristic of the English Act been generally followed in this country? 10- State any exceptions thereto. . ~ ti>u>. 11- State the practical distinction between the two classes of provisions in this country. 12-54. What is the most important class of contracts af- fected by the statute ? fisujJi . '" . 13- To what class of contracts under the statute is our present attention directed and why? 14-55. What does subdivision (1) of section 4 of the statute provide? 15- (a) What is necessary for the statute to apply under this subdivision? 16- When is the promise presumed to be in behalf of the estate? 17- What must the promise be ? 18- What were the facts and holding in the case of Meade v.Bowles? 19- (b) What does subdivision (2) of section 4 provide? 20- What are the essentials of a contract in order to bring it within this subdivision? DEPARTMENT OF LAW 93 21- Does the statute apply to an original promise not in writing? 22- What are sureties ? 23- What is the nature of their promise ? 24- What is the nature of the promise in a recogniz- ance? 25- Upon what does the rule seem to be based? 26- What is the important test under this provision of the statute? &nX 27- What determines whether the promise is original or collateral? 28- Does relationship determine if so when? 29- Is a promise to a debtor to pay his debt due to an- other within the statute ? 30- What was the case of Vogel v. Melms? 31- (c) What does subdivision (3) of section 4 provide? 32- In what case does the provision not apply? 33- What must be the nature of the promise so far as consideration is concerned? 34- Cite a case on this point. 35- (d) What does subdivision (4) of section 4 provide ? 36- What interests are not within this provision? 37- Give an example. 38- Define "Fructus Naturales," and "Fructus In- dustriales. ' ' 39- To which, as a general rule, does the statute apply? 40- Does this subdivision apply to crops severed from the soil? 41- (e) What does subdivision (5) of section 4 provide ? 42- What is the essential point to bring a contract under this pro vision? t7*jVu^-/ t yuj^n^ 43- State fully the conditions when a contract will, and when it will not, fall within this provision? 44- Give at least two illustrations of cases within the last question? 45- What principles apply in case an oral contract was to be performed in less than a year, and one party had performed? 46- What did the case of Britain v. Rossiter decide? *47-56. What does the 17th section of the statute provide ? 94 AMERICAN EXTENSION UNIVERSITY 48- (a) Need the consideration appear in the memoran- dum and why? 49- What was the legal effect, under the English stat- ute, of a contract of conveyance ? 50- What must be the condition of a chattel sold, to obtain the benefit of the legal effect referred to ?^ 51- What is an executed contract of sale ? Cxrw^f^ 8 52- What is an executory contract of sale? ^MiV 53- What remedy exists for the breach of an execu- tory contract? ft Qi 54- What did Lord Tent erden 's Act provide !*>*' 55- What is legal effect on a contract of the words "shall be allowed to be good"- in this section? 56- (b) Does this differ at all, if so, how, from the provi- sions of 4th section? 57- Are the English decisions uniform on this point ? n - 58- Is there any uncertainty as to what is included within the phrase, "goods, wares and merchan- dise?" 59- State the varying statutory phrases in this coun- try analogous to this provision. 60- Is a contract for stocks or bonds, within the stat- ute, in this country ? \MixQ-- 61- When is a contract for work and labor within the statute? 62- (c) When the value is uncertain how is it decided? 63- When there is a series of transactions what fact is necessary to be determined? by^ ^ 64- (d) What will take a contract for goods, wares, and merchandise, out of the statute? (>.&txJ(ffc*~*4^*' 65- Give the facts and holding in Jamison v. 1 Simon^ 66- (e) What effect does part payment have ? ' 67- Can there be a constructive acceptance by a ven- dee? 68-57 Does the form of the memorandum required, af- (a) feet the contract's validity? Ao 69- What is the effect of a non-compliance with the statute as to the memorandum? 70- When may the note or memorandum be made ? 71- What is the purpose of the form of the memoran- dum? 72-(b) What must appear in the memorandum? DEPAETMENT OP LAW 95 73- When may parol evidence be used to establish the identity of a party to a contract ? 4 $j~^A~ 74- Give an example showing the admissibility of pa- rol evidence to prove the identity of a party. /- > 75- (c) May the memorandum consist of separate com- munications? x ^ vu/e/GzX.~<24- A -4*J . Q-. . "H^_ 79- Does the fact that there is an agreement need to be expressed? VVCT- t-vuV- 'wjJ&wJ)^(L$ 80- Give an example of a disconnected memorandum? 81- Will a written repudiation by one party alone af- fect the contract ? "Vvcr" 82- What is essential as to terms of the agreement, as shown by disconnected writings? 83- ? State the three methods which parties may use in making contracts not within the statute? L 84- What is 'the rule as to the admissibility of parol evidence in such cases? 85- Can parol evidence be used in connection with contracts with the statute ? 86- What is requisite as to the written memorandum of contracts within the statute ? 87- (e) What is the English rule as to consideration un- der the fourth section? Wu^ *- f j^% L 88- What is the general rule in the United States? ? What exception is there to this rule??; 90- Name the states in which the statute requires tl memorandum to express the consideration' 91- (f) By whom must the memorandum be signed? *>. 92- Need the party to be charged sign it personally 7 93- If not, by whom else can it be done, and in what ., manner, and where? "n. $>*>* 94- What is the rule where mutual promises are the consideration? 95- What did Krohn v. Bantz decide ? H A 96- What were the facts and holding in Baptist Church v. Bigelow? 97- What was the ruling in Norton v. McCarty? X i * 96 AMERICAN EXTENSION UNIVERSITY 98- Need the agent's authority be in writing? 99- Does your state so provide ? 100-58. Is a contract which is contrary to the statute, void? ^b 101- Does the statute apply to collateral contracts used as evidence? \ *r~ 102- What is the law in some states as to voidability? 103- What are the three methods of construction of the statute? 104- Does the statute apply to contracts by corpora- tions? 105- Does the statute apply to implied contracts? 106- To whom is the statute available as a defense, and in what cases ? 107- What presumptions are there in pleading a con- tract under the statute ? 108- 59. Summarize the general requisites of the memo- randum, f - t. CONDITIONAL CONTRACTS 1-60. What is a conditional contract? 2- Name the different kinds of conditions affecting . contracts". ' 3- What are the distinguishing features of each of the several conditions affecting contracts ? 4-61. What is a condition subsequent? 5- How are such conditions usually anticipated in contracts? 6- What circumstances may be the basis of a contrac- tual condition ? C^rvOW^ fiuWV 7-62. What are conditions concurrent ? Illustrate. 8- To what contracts is this form of condition partic- ularly applicable ? &*yvA * *t 9-63. What are conditions precedent? 10- When do the promisee's rights arise under condi- tions precedent? 11- Give illustrations of common forms of contract containing conditions precedent. 12- What are conditions precedent sometimes called? 13- What may be the nature of a condition precedent as to its fact? Illustrate. DEPARTMENT OF LAW 97 14- Of what relation to a contract are conditions pre- cedent which effect a discharge of the contract ? Illustrate. 15- With what other factor of contracts are conditions sometimes confused? 16- State the facts and the decision in the case of Pope v. Allis. 3 <^r^ 17- What effect upon a condition precedent has an ac- quiesence in a breach therefor? 18- Does payment of the consideration waive the right to treat the contract as discharged? >M>- l-64. What is the nature of a quasi contract? 2- State fully the characteristics of quasi contracts. 3- State a case of the nature of a quasi contract. 4- From what five reasons or causes do quasi con- tracts arise? 5-65. When does the payment of money by one person 1 for another create a quasi contract ? Illustrate; 6- Can money paid under a mistake of fact be re- covered? 7- Same, as to money paid under a mistake of law? 8- Can money paid under duress, or by undue influ- ence, or misrepresentation, be recovered if so, upon what principle? 9- 66. When can money received by one party but be- longing to another be recovered, and on what principle ? 10- Is privity of contract necessary in this class of ac- tion? 11- Give familiar illustrations of this class of cases. 12- 67. What can you say as to use and occupation being the basis of a quasi contract ? State fully. 13-68. Can one who does work, or renders services, for another recover payment therefore as on a quasi contract? Illustrate. 14-69. What class of actions were formerly the sole rem- edy for a wrong done by one to another? 15- How are certain classes of such wrongs now re- garded and what legal rights arise therefrom? -7 ^ 98 AMERICAN EXTENSION UNIVERSITY LESSON 7.- CHAPTER IX. OPERATION OP CONTRACTS. 70. Contractual Obligation When Enforceable by Third Party. 71. Privity of Contract. 72. Same Changes in Common Law Rule. 73. Acquirement of Contract Rights by Third Parties. (a) By Novation. (b) By Subrogation. (c) By Assignment of Contract. 74. Unassignable Contracts. 75. Assignability of Right of Action on Contracts. 76. Notice of Assignment. 77. Assignment of Negotiable Instruments. 78. Assignment by Operation of Law. 70. Contractual Obligations When Enforceable By Third Party. While, as has been stated, contractual rights are, in general, conferred only upon those who have taken contractual obligations, still there are some circum- stances whereunder, as has also been said, one not a direct party to the agreement can enforce its provisions made actually or impliedly for his benefit. For instance, where one party deeds property to another, specifically directing that the grantee hold it for the benefit of a third person, such third person, although not a party to the contract it- self, and hence under no contractual obligation, can, in equity, compel, the grantee to observe the conditions of the conveyance. 1 ;' While one can, under circumstances similar to the illustration given, enforce a contract to which he is not a party, one cannot, on the contrary, have legal liability imposed upon him under a contract in which he did not participate. 2 ) 70. Privity of Contract. From the foregoing it is seen that the relation whereby contractual rights and du- 1 Newton v. Taylor, 32 Ohio St., 399; ception, but the rule now seems Chace v. Chapin, 130 Mass., 128. to be settled that near relation- The exceptions to this general doc- ship is no exception to the rule ap- trine have principally been in plied in some jurisdictions, name- cases where a legal trust in favor ly; that a third person cannot of the third party has been sue upon a contract made for his created, or where an equitable benefit and to which he is not a trust relation arises, as in the 11- party. lustration given, and in the case 2 Dumford v. Nessiter, 5 Maule & of one paying money to a party for S., 446; Walker v. Cronin, 107 the use of a third person. Rela- Mass., 555. tionship, also, was formerly an ex- DEPARTMENT OF LAW 99 ties are imposed upon one, arises from one's relations to the contract, this contractual relation is commonly term- ed the privity of contract. } Without this privity this re- lation to the contract no right of action accrues to anyone upon a breach of the contract by one or the other of the parties thereto. To illustrate: A water company con- tracted with a city for the extinguishment of fires and failed to keep its contract. The house of A was burned for want of a sufficient supply of water to put out the fire. He brought suit against the company for damages to cover his loss, basing his right of action upon its contract with the city, and setting forth its failure to furnish sufficient water to extinguish the fire which consumed his property, as the cause of his loss. It was held by the court that there was no privity of contract between him and the company and, that therefore, an action by him for breach thereof, could not be sustained. 3 . CHAPTER X. INTERPRETATION OF CONTRACTS. 79 Definition and Purpose. 80. Entire Contract Must be Regarded. 81. Grammatical Errors Ambiguities. 82. Implied Obligations. 83. "Time," in Contracts. 84. "Penalty," and "Damages," in Contracts. 85. "Joint," and "Several," Contracts. 79. Definition and Purpose. The words " interpre- tation" and "construction" as applied to the question of the meaning of a contract, signify the ascertainment, from the instrument itself, of the actual intention and purpose of the parties thereto as it is expressed therein. The purpose of interpreting and construing contracts, as the given defini- tion of the words show, is to get therefrom the real intention DEPARTMENT OF LAW 105 of the parties thereto, so as to carry it out fully and accu- rately.; Courts enforce contracts; they do not make them for the contracting parties. Accordingly they seek the meaning of the contract from its own context only, and do not inject therein anything not clearly expressed thereby. * , The construction of contracts is a question of law for the courts, and not for the jury, to decide. 80. Entire Contract Must Be Regarded. The first great rule in the interpretation of contracts is that a con- tract in its entirety the whole contract must be consider- ed, and the intention of the parties thereto must be gathered fromjill and not from any portion merely of the lan- guage they have used in the contract. 2 The words of a contract are to be understood in their plain meaning, subject, however, to the inference of inten- tion as shown by the whole document. The most common usage of words may be varied by their usage in a particu- lar locality; and, again, the whole instrument may show an intention to give a narrower or broader meaning to words than is commonly given in a strict interpretation. In every case the court is governed by the intention of the parties as shown by the whole document. Words with a general meaning will be restricted to the subject-matter to which they apply, and will be construed most strongly against the party using them. Formerly the courts of common law held more to the principles of a strict interpretation of contracts rather than to allowing the intention, derived from the whole contents of an agreement, to govern them; but this has long been done away with. A statement in the decision of the United States supreme court in Herryford v. Davis, cited above emphasizes this point of arriving at the intention of the par- ties, thus : ( "What, then, is the true construction of the con- tract ? The answer to this question is not to be found in any name which the parties may have given to the instrument, and not alone in any particular provision it contains, discon- nected from all the others, but in the ruling intention of the parties, gathered from all the language they have used. It 1 Brown v. Slater, 16 Conn., 192; see, too, Mason v. Alabama Iron Steele v. Branch, 40 Cal., 3. Wks., 73 Ala., 270; Alton v. 2 Herryford v. Davis, 102 U. S., 235; Transp. Co., 12 111., 38. 106 AMERICAN EXTENSION UNIVERSITY is the legal effect of the whole which is to be sought for." 80. Grammatical Errors Ambiguities. Obvious mistakes in writing and grammar seldom have any effect upon the interpretation of contracts. The most usual error, causing a different meaning to be given to a contract than was intended, is incorrect punctuation; but courts will not allow this form of error to control the intention as expressed in the whole document. Where a particular word, or the contract as a whole, is susceptible of two meanings, one of which will render the contract valid, and the other of which will render the con- tract invalid, the former will be adopted, so as to uphold the contract. 3 So, where one construction will render the con- tract unlawful as being contrary to law or public policy, and the other will render it lawful, the latter will be adopted; as it is presumed that the intention was to execute a contract valid in law. 4 . The same rule applies to the interpretation of certain words so as to give them a reasonable rather tha'n an unreasonable meaning. The fact that the parties, them- selves, placed an erroneous construction on the terms of a contract, will not prevent the court from giving it the true construction. 5 but where the meaning is doubtful, such con- struction by the parties is of great weight in determining the actual meaning, and in some cases it may be controll- ing. 6 Even in cases where one party has acted upon the interpretation most favorable to his rights, that interpreta- tion will prevail, providing it is not a too strained construc- tion. 7 So, too, parties will be bound by what their contract, by its words, expresses, whether they actually intended it, as they in fact expressed it, or not. 8 ' 82. Implied Obligations. Certain obligations are ne- cessarily implied in a contract, and when these implications are necessary, or are necessarily drawn from the instru- ment itself, it will be presumed that such was the inten- 3 Pitney v. Bolton, 45 N. J. Eq., 639; sell v. Young, 94 Fed., 45. Coyne v. Weaver, 84 N. Y., 386; Hosmer v. McDonald, 80 Wis., 54; Phillips v. McFarlane, 3 Minn., District of Columbia v. Gallaher, 109. 124 U. S., 505. 4 Alfree v. Gates, 82 Iowa, 119; ' London & S. F. Bank v. Parrott, 125 United States v. Central Pac. Ry. Cal., 472. Co., 118 U. S., 235. 8 Cramp Ship Bldg. Co. v. Sloan, 21 B Hershey v. Luce, 56 Ark., 320; Rus- Fed. Rep., 561. DEPARTMENT OF LAW 107 tion of the parties. Whether or not they knew the con- sequences of the terms, as expressed by them does not mat- ter. The rule will hold, unless they actually exclude the ne- cessary implication from the operation of the contract "by express provisions therein. This principle is illustrated by an ordinary contract of sale. In this class of contracts, in the absence of some express provision to the contrary, it is conclusively presumed that the seller intended to stipulate that he had title to the property and the right to sell it. This implication of law is called "implied warranty." 83. "Time" in Contracts. Time is said to be of the essence of a contract when, by the express terms of the con- tract, it is clear that the thing to be done was to be accom- plished at a stated time. ) The common law rule, that time is of the essence of a contract, is not generally taken into con- sideration unless the parties expressed such an intention in the contract. In the absence of such an expression, the rule is that a reasonable time was meant. In some cases, accord- ing to the nature of the contract, it will be implied that time is of the essence, as in contracts for the manufacture and the sale of goods. ){ In contracts, such as those for the sale of land, time is not of the essence of the contract. In other words, if one of the parties, in such cases, does not do a cer- tain stated thing by a certain day, the other party is not dis- charged from the contract because of the former's tardiness. 84. "Penalty" and "Damages" in Contracts. If the parties to a contract name therein a certain sum to be paid by one to the other, on breach of the contract, such sum may be recovered if it was intended to represent the damages sustained by non-performance of the contract. If, however, it was intended merely as a penalty for non-fulfillment, re- gardless of the actual loss sustained, the courts will limit the amount recovered to the amount of the actual loss shown. In determining whether the sum named in the contract is a penalty, or is liquidated i. e. ascertained damages, the following tests may be applied: (1) Is the sum named, greater than the value of the subject matter as expressed in the contract ? (2) If the value is not expressed, is the sum in excess of the probable damage ? (3) If the debt is pay- able in installments, is the sum fixed in the contract greater than the total of all the installments? According to the 108 AMERICAN EXTENSION UNIVERSITY findings, as determined by these questions, the character and hence the measure of the recovery under such a provi- sion is determined. The courts will not be controlled by the term used by the parties in the contract. Whether they used the word "damages" or "penalty," the sum recover- able thereunder will depend upon the interpretation of their real instruction, as shown by the document itself. Recov- ery is had in an action for breach of contract. A full treat- ment of the different aspects of damages will be given under the subject of Damages. The following rules are useful in determining whether the sum fixed by parties is liquidated damages, or is merely a penalty. /(I) If the value of the subject matter of the contract is certain or is easily ascertained, the sum in excess of that value is a penalty, and no greater amount can be re- covered. (2) If, however, the value of the subject matter is uncertain, and the sum fixed is not, on the face of the con- tracts, greatly in excess of the probable damages, the sum is recoverable as liquidated damages. (3) r'lf the obliga- tion is to be paid in installments, it is not imposing a penalty to provide that on default in any one payment the entire bal- ance of unpaid payments shall at once fall due. J 85. "Joint" and "Several" Contracts. A contract in which two or more persons join in the promise or obliga- tion, is a "joint" contract, and enforceable against all of them. 9 A contract in which two or more persons promise individually and singly is a "several" contract and enforce- able only against each one individually. This principle will yield, however, under an expression in the contract directly to the contrary. A "joint" promise is collective ;,a "several" promise is singular. In the first class of cases the promisee must unite all the promisors in his suit ; in the second class he can sue any one or more of them seperately for the full amount. A "joint and several" promise is one where the parties under- take both collectively and seperately to do the thing prom- ised. Under such a contract the promisee may sue either promisor singly, or he may sue all, or any number less than all, at any one time. 10 9 Bower v. Swodlen, 1 Atk., 294; 10 Bangor Bank v. Treat, 6 Greenleaf, Cutts v. Gordon, 13 Me., 474. 207. DEPARTMENT OF LAW 109 In the case of subscriptions by a number of persons to promote some common enterprise, the promises, though joint in form, are held to be several. Each subscriber is held to promise seperately and severally, and an action against all the subscribers jointly will not lie. ll Joint and several engagements are almost entirely controlled by statute at the present time, hence, in practice, the student must consult the affairs of his own state. 11 Dean v. Wilson, 10 Wall., 158. QUIZZEE. OPERATION OF CONTRACTS. 1-70. Can one not direct party to a contract enforce its provisions? If so, when 1 ? 2- In what cases have exceptions been made, prin- cipally? 3- Does the fact of personal relationship afford a basis for such exceptions ? 4- Can one have a legal liability imposed upon him by a contract wherein he does not participate ? 5-$71. From what does contractual obligation arise? 6- What is the contractual relation commonly called? 7- What legal right accrues from this relation? 8- State a case where a right of action was derived for lack of privity of contract. 9-72. Has the common law rule as to the right to sue without privity of contract been changed? If so, how and where ? 10- Upon what theory is this based? 11- Under what system of procedure is this particular- ly permitted? 12- What is always essential as the basis of such right ? 13- Give illustrative case which was lost for lack of privity of contract. 14-73. Define novation. 15- (a) How, only, can novation be effected? 16- Give an illustration of a novation. 17- What was the only common law form of contract assignment? 110 AMERICAN EXTENSION UNIVERSITY 18- Is novation an exception to the rule forbidding con- tract enforcement by non-contracting party Why? 19- (b) Define subrogation. 20- How does it differ from novation ? 21- What is the only right acquired by the person sub- rogated? 22- Does subrogation extinguish the obligation of the original promisor 1 ? 23- In this respect does subrogation differ from no- vation if so, how? 24 : What is the real contractual relation of a subra- gator? 25- What are a subragator's rights, and upon what are they contingent? 26- What is the legal position of a subrogator after the default of the original promisor? 27- (c) State the general rule governing the assignment,of contracts. 28- To what contracts does the rule apply? 29- What presumption attaches to all contracts? 30- What right, and in whose favor, is based upon this presumption? 31- What contracts cannot be assigned and why? 32- What criterion governs all cases, as to their assign- ability? 33-74. Are contractual liabilities assignable and why? 34- Give Pollock's statement of the rule. 35- State a case where an assigned contract-liability was not enforced. 36-75. What is a "chose in action?" 37- Are such rights assignable if so, when? 38- What contract-interest can one assign? 39- Are assigned contract rights subject to any defen- ses that were good between the original parties ? If so, name some defenses. 40-76. Is it necessary to give notice to any one, of the as- signment of a contract? 41- If so, to whom and for what reason? 42- Between what parties is such notice unnecessary? 43- Is the rule requiring notice universal ? DEPARTMENT OF LAW 111 44- If not, what advantage follows giving it where it is not required? 45- 77. Are the rules governing the assignment of general contracts, applicable to negotiable instruments ? 46- What can you say as to lack of privity of contract in such instruments; how they pass to others; and necessity of notice of transfer? 47- What is the rule as to transfer of such instruments after their maturity 1 ? 48- What effect does maturity of commercial paper produce as to its legal character? 49- How can matured commercial paper be trans- ferred, and by what rules is it then governed? 50- 78. What can you say as to transfer of contractual ob- ligations by operation of law? 51- State instances of such transfers. INTERPRETATION OF CONTRACTS. l-79. Define "interpretation," and "construction," as they apply to determining contracts. 2- What is the purpose of the interpretation and the construction of contracts ? 3- What is, and what is not, the province of the court as to contracts ? 4- Where do courts obtain the meaning of contracts ? 5- What is the nature of the question as to the con- struction of contracts and who decides it? (faUs 6-80. State the first great rule in the interpretation of contracts. 7- In interpreting contracts how are their words to be taken and understood? 8- How may the common usage of words be varied and what, as to same, may the contract show? 9- By what is the court always governed? 10- How will the words of a contract be restricted, and construed? 11- What rule of construction has become modified, and with what result? 12- What is the true construction of a contract? 13-81. What effect on a contract have grammatical er- rors? 112 AMERICAN EXTENSION UNIVERSITY 14- Can improper punctuation control the interpreta- tion of a contract? y^ 15- What is the rule governing interpretation making a contract valid or invalid? 16- What is the rule governing interpretations render- ing the contract unlawful or lawful? 17- So, too, as to reasonable or unreasonable meanings of words? 18- What effect on a court's interpretation of a con- tract will an erroneous interpretation placed thereon by the parties thereto, have ? 19- What follows where one party has acted upon his own interpretation? 20- Also, where the contract words express a meaning other than that intended? 21-82. What will be presumed as to obligations necessar- ily implied, though not definitely expressed, in a contract? 22- What effect does an ignorance of the consequences of terms used, have? 23- How can implications necessarily arising from the express words of a contract, be avoided? 24- State an illustration of a "necessary implication." 25- What is an implied warranty? 26-83. What is meant by the term, "time is of the es- sence" of a contract? 27- What is the common law rule as to time being of the essence ? 28- How can time be made the essence of a contract? 29- Where it is not so made the essence, what rule gov- erns the interpretation as to time ? 30- Will time ever be implied as being of the essence of contracts? 31- Name some cases where it will, and others where it will not, be so implied. 32- 84. State the rule as to "liquidated damages," and "penalties," named in contracts. 33- What tests determine whether a sum fixed in a con- tract is to be regarded as damages or penalty. 34- Will the court be controlled in its interpretation by the term used in the contract ? DEPARTMENT OF LAW 113 35- What will determine the amount recoverable under such a provision? 36- How is recoverey in such cases obtained? 37- Give some rules helpful in determining whether a sum fixed in the contract is to be taken as dam- ages or as penalty. 38-85. What is a "joint" contract, and against whom is it f orceable ? 39- What is a "several" contract, and against whom is it enforceable ? 40- What kind of a promise is collective and what is singular? 41- Define a "joint and several" promise. 42- Against whom is such a contract enforceable? 43- Are subscription contracts joint or several? 44- How are joint and several contracts now con- trolled? /A 114 AMERICAN EXTENSION UNIVERSITY LESSON 8.- CHAPTERXI. DISCHARGE OF CONTRACTS. 86. In General. 87. By Fulfillment. 88. By Release, Recission and Waiver. 89. By Substitution of New Terms. 90. By Stipulations of Contract. 91. By Impossibility of Performance. (a) Impossible Conditions. (b) By Act of Law. (c) By Destruction of Subject-matter. (d) By Incapacity to Perform. 92. By Accord and Satisfaction. 93. Same Subject Matter of . 94. By Operation of Law. (a) By Death. (b) By Receiving Better Security. (c) By Unauthorized Alteration. (d) By Bankruptcy. (e) By Statute of Limitations. 95. By Breach. (a) In General. (b) By Renunciation. < (c) By Impossibility or Failure to Perform. 86. In General. The discharge of a contract is the putting to an end of the contract,-^or, rather the termina- tion of all legal liabilities thereunder. This may be accom- plished in many ways, some by the action of the parties, thereto, themselves ; others by the operation of law. In the first instance a discharge is accomplished, (a) by the ful- fillment of the terms of the contract that is to say, by its performance; (b) by voluntary agreement between the par- ties; that is, by their rescinding the contract, or by the re- lease of one or more of the .parties thereto, or by the making of a new contract in place of the original one; and (c) by a breach of the contract by one of the parties, and the like. In the second instance it is accomplished (a) by the death of any of the parties to the contract; (b) by their bank- ruptcy or insolvency; (c) by a material unauthorized altera- tion of the instrument when the contract is in writing; (d) by a merger of the contract in another one; (e) by judicial judgment, and (f) by limitation of a time prescribed by statute. The consideration of the manner in which con- tracting parties may be released from their contractual ob- ligations, involves the consideration also of the liabilities and rights of action arising upon the discharge of contracts. DEPARTMENT OF LAW 115 As a general rule no right of action arises in any case except upon discharge by a breach of contract. The breach may be total, or merely a failure to abide by a certain term of the agreement. In either event the legal liability is the same, although the measure of damages thereon may vary. This subject of legal right of actions upon contracts will be treat- ed in the succeeding lesson. 87. By Fulfillment. It needs no judicial authority to establish the fact that where the parties to a contract carry out its provisions in full, leaving nothing undone, and leave nothing to be done, on either side, the contract, by such ful- fillment, is terminated. Such termination of a contract is the simplest form of the discharge of contractual obliga- tions. Where a promise is given upon an executed considera- tion, the performance of that promise discharges the con- tract; but where one promise is given in consideration for another, performance by one party does not necessarily dis- charge the contract, although it releases the performer from liability for non-performance. The fact as to the perform- ance being complete depends upon the construction, rather than upon the operation of the contract. 88. Release, Recission and Waiver. Where the par- ties to a contract, by an express agreement, thereafter agree to release each other from all contractual liability under the contract, such termination thereof is termed a recission, re- lease, or waiver, and under proper conditions is fully bind- ing upon all parties in interest, j Such an agreement can le- gally affect only cases of executory contracts, and is not valid or binding where a right of action has accrued in favor of either party. If it is intended to release such right of ac- tion, a special stipulation therefor must be incorporated in the release or recission of the contract; or it must be given in a seperate instrument. In short, to merely release a con- tract does not, of itself, release any accrued rights of action thereunder. 1 A contract of release must have a consideration, just the same as any other contract, in order for it to be binding on the parties. Mutual releases, where there are still things 1 Moore v. Detroit Locomotive Works, 14 Mich., 266. 116 AMERICAN EXTENSION UNIVERSITY to be done under the contract by both parties, are sufficient, one release being a consideration for the other. Where the release runs to only one party, some additional considera- tion must be given, 2 or it must be under seal, 3 Written contracts, and those under seal, can be released by a parol contract. 4 This, because the release contract is a new agreement as we have stated is necessary for it to be, and a parol contract is wholly valid always. A parol re- lease without consideration would of course be void. 5 The weight of American authority is that the surren- der of the evidence of indebtedness, such as voluntarily re- turning a note or mortgage to the maker, amounts to a re- lease of the debt, and that such a release is valid whether the surrender was made for or without a consideration. However, the surrender must be made with the intention and for the purpose of discharging the indebtedness. 6 89. Substitution of New Terms. Naturally a mater- ial change in a contract, whereby new terms and conditions are incorporated therein; or whereby certain provisions of the contract are erased or annulled, discharges the original contract. In order to work a discharge by the substitution of new terms, the same must amount to a new contract and the in- tention to discharge the old one must thereby distinctly ap- pear. This may be done by novation, or by substitution of parties, or by the creation of new terms entirely inconsis- tent with those of the old contract.) Substitution differs from waiver in that in waiver the contractual relation is ex- tinguished, another form of contract obliterating and super- seding the old form. In the latter case, the change of rights and liabilities,and the consequent extinction of those .which before existed, form the consideration on each side for the new contract created by such alteration. To illustrate : In contracts for the sale of goods and their delivery at a stated time, the purchaser often verbally requests a postponement of delivery. After such has been granted, he sometimes re- 2 Finch v. Simon, 70 N. Y. Supp., 361. 169; Myers v. Byington, 34 la., 3 Lancaster v. Elliott, 50 Mo. App., 205. 245; Kidder v. Kidder, 33 Pa. St., 6 Vanderbech v. Vanderbech, 30 N. J. 268. Bq., 270; Albert v. Zigler, 29 Pa. 4 Cummings v. Arnold, 3 Met., 486. St., 50. 6 Seymore v. Menham, 17 Johnson, DEPARTMENT OF LAW 117 fuses to accept the goods at all, and when sued alleges that the contract was discharged by the alteration of the time of performance, and that the new contract is void because not in writing and so contrary to the 17th section of the statute of frauds. The majority of the English and American cases sustain the latter claim, but the first contention of the pur- chaser is not upheld, the courts holding that a voluntary for- bearance to delivery, done at the request of the other party, differs from a substitution of one agreement for another, in- asmuch as the postponement is not inconsistent with the terms of the original contract, and the purchaser prolongs the time of delivery at his own request. This is not the case where a contract is so far altered as to be inconsistent with the original agreement ; or where a new party is substituted by the agreement of all concerned; in which instances the original contract would be thereby annulled 90. By Stipulation of Contract. A contract may con- tain the elements of its own discharge under the following circumstances: (a) non-fulfillment of a specified term of the contract; (b) the occurence of a particular event; or (c) the exercise of an option to terminate upon notice. In case of non-fulfillment in the contemplation of the parties, as evidenced by their contract, no liability arises for non-per- formance of a particular term unless some loss, not contem- plated by the parties, accrues therefrom, through the fault of the party failing to perform. The occurence of a particular event at a date later than that of the contract, is termed a condition subsequent. Upon the happening of such event as stated in the contract, it is thereby fulfilled. An ordinary bond furnishes an ex- ample of such a condition in a contract; that is, on the ful- fillment of the condition of the bond as therein stated, the bond becomes, ipso-facto, discharged. Thus, also, a com- mon carrier's contract may terminate on the occurence of events implied in every contract such as the happening of "an act of God," like an earthquake, avalanche or lightning, or inherent defects in the article carried, whereby they per- ish) 8 The provision relating to optional termination is in- stanced by contracts of rental from month to month, and in 8 Fisk v. Chapman, 2 Ga., 349; Cros by v. Fitch, 12 Conn., 410. 118 AMERICAN EXTENSION UNIVERSITY fact, any contract providing for the release of either party from the obligations of the contract, upon notice to the other as specified therein. 91. By Impossibility of Performance. (a) Impos- sible Conditions. Impossible conditions in a contract can- not be performed. If, therefore, a person contracts to do what, at the time, is absolutely impossible, the contract will not bind him, but, generally, where the contract is to do a thing which is possible in itself, the non-performance there- of is not excused by the occurence of an inevitable .accident, or other contingency. It is immaterial that the contingen- cy was unf orseen. Thus, if a man contracts to build a house and during its construction it is destroyed by fire, the unf or- seen destruction does not excuse non-performance. 9 If a promisor makes his promise unconditionally, he takes the risk of being held liable thereon, even though performance should become impossible by circumstances beyond his con- trol. He should have provided against such contingencies by proper provisions in his contract. There are certain ex- ceptions to this rule, as will be pointed out in the following paragraphs. (b) By Act of Law. Legal impossibility to fulfill a contract arising from the operation of law, exonerates the promisor. The case of Hughes v. Wamsutta Mills, 10 is an example of this kind of impossibility. In that case the plaintiff contracted to forfeit the money due him as wages, if he left defendant's employ without giving two weeks no- tice. While in such employment he was arrested and con- fined in jail. After his release, the employer refused to pay him the money due for services up to the time of his ar- rest, claiming forfeiture thereof by reason of the breach of the agreement to give the notice stated. Suit was brought, and the court held that the act of the law in the making of the arrest, constituted a legal impossibility of performance of the contract, which excused the plaintiff from any liabil- ity for his failure to give such notice, and therefore gave him judgment against his employer. (c) By Destruction of Subject-Matter. The destruc- tion of the subject matter of a contract, without the fault of * School Dist. No. 1 v. Danchy, 25 10 H. Allen (Mass.), 201. Conn., 530. DEPARTMENT OF LAW 119 either party thereto, operates as a discharge of the contract. If the intention of the parties as shown by the contract was based upon the assumption that a certain thing should con- tinue in existence, then if, without the fault of the parties, the thing ceases to exist, the implied condition upon which the contract depended fails and the duty of performance no longer remains. In the case of Dexter v. Norton et al., 1X the defendant contracted to deliver to the plaintiff 607 speci- fied bales of cotton, which were identified by their marks. He had delivered 460 bales when the remainder were de- stroyed by fire without his fault. Cotton rose in value and the plaintiff claimed the increase in value as damages. The court held that under the contract the plaintiff would not have been obliged to accept other bales than those which had been specified and marked, and as thus identified were sold to him, and that, accordingly, the defendant could be legally held to deliver only the said bales, delivery of which was impossible by reason of the fire, and hence, the part of this contract which was unexecuted thus became im- possible of performance. The existence of those certain bales was held to be an implied condition upon which the contract was based and their destruction was not the fault of the defendant. He was, therefore, legally excused from performance. (d) By Incapacity to Perform. In contracts for per- sonal services there is always the implied condition that the party to render the services will be physically able to exe- cute the contract by so doing. If one is incapacitated from rendering the service contracted for, by his own illness or by the illness or death of others upon whose personal ser- vices the contract was based, he will be excused from fulfill- ment of the contract, by the impossibility of carrying it out, owing to the incapacity stated. i: The courts are usually liberal in construing this rule. The case of Spaulding et al. v. Rosa et al., 13 was decided upon this principle of law. In that case an opera company was discharged from liability on its contract to give a certain number of performances, on account of the sickness of its leading tenor and chief attrac- tion, whose presence was regarded as of the essence of the 11 47 N. Y., 62. 13 71 N. Y., 40. "Sween v. Gilbert, 21 Wis., 401. 120 AMERICAN EXTENSION UNIVERSITY contract. In cases where a contract for personal services has been performed in part, before the incapacity has oc- curred, the party contracting for such services must recover for the portion rendered, on a quantum meruit that is, upon the basis of what the service actually rendered is worth and not on the basis of the contract itself as the con- tract, as stated, is discharged by the happening of the inca- pacity. 92. By Accord and Satisfaction. The legal notion of accord is a new agreement on a new consideration to dis- charge a debtor. It is not enough that there be a clear agreement, or accord, and a sufficient consideration, but the accord must be executed. 14 Such an agreement carried out is called an Accord and Satisfaction. This may J)e denned as as a settlement of a claim by giving something different than that which was originally agreed upon, or, in the case of a disputed claim, by compromising the amount. By the accord the parties agree upon a sum of money or other mat- ter to be given and accepted as compensation for the breach of a contract, instead of the legal remedy provided by law; and by the execution of the accord, that is, by the actual de- livery and acceptance of the matter agreed upon, the right of action is satisfied and discharged. To operate as an ac- cord and satisfaction it is necessary that an offer of money be accompanied by such acts and words as amount to a stip- ulation that if the money is accepted it is to be in satisfac- tion, so that the party to whom it is offered must understand that if he takes it he does so subject to such condition. Where a party believed that a claim against him had been fully paid, but finally sent a check for part of the amount with a statement that it was in "full settlement" and that he would "expect in return a receipt in full" and the check was retained but the party retaining it afterwards brought suit for the balance of his claim, it was held that the accep- tance of the check resulted in an accord and satisfaction. 15 It must be borne in mind that an accord is not a defense to the original debt unless the promisee therein agrees to accept the agreement itself in satisfaction of his debt; so that in case it is not performed his only remedy will be an "Hosier v. Hursh, 151 ?a. St., 415. Hutten v. Stoddard, 83 Ind., 539. 15 Brown v. Symes, 31 N. Y. Sup., 629; DEPARTMENT OF LAW 121 action for breach of the new agreement. There must be a valid agreement substituting a new cause of action in place of the old. Both the agreement and the consideration are new. 16 In case a creditor accepts the liability of a third party in full satisfaction of a debt due him by another, this extinguishes the original debt. In order to have this effect, however, the liability of the orginal debtor must be com- pletely cancelled and no right reserved against him. The acceptance, therefore, of the note of a third party by a cred- itor amounts to an accord and satisfaction of the debt for which the note was given. 17 In such a case, however, it is possible that the acceptance of the note may be conditioned upon its payment and that if the note is not paid when due, the creditor may claim the full amount due him. 18 93. Same Subject-Matter. The subject matter of an accord and satisfaction may in general be anything of value. A mere expression of satisfaction does not amount to an accord and satisfaction. For example, in an action of trespass against one for taking another's horses the owner's statement that he was satisfied on receiving back his horses, could not be pleaded as an accord and satisfaction. The de- livery of a promissory note to the maker, and the giving by him of another note in satisfaction, though of a less amount, discharges the former debt. A compromise of differences as to the amount due, whereby a less sum than that claimed is accepted in full discharge, bars any further claim. But where the amount due is undisputed, payment of a part of the debt is no consideration for a promise to treat the debt as thus paid, and the creditor can bring suit for the bal- ance. 19 The mere statement accompanying a check, that it is sent in settlement of an account for a larger sum, does not bind the creditor to treat it other than as a part payment by the debtor. 20 94. By Operation of Law. (a) By Death. Death of either party terminates all contracts for personal ser- vices, or those involving personal relations, such as those for labor, professional services, personal skill, agency, partner- 16 Rogers v. City of Spokane, 9 Wash., 85. 168; Kromer v. Heim, 75 N. Y., 1S Sanders v. Bank, 13 Ala., 353; 574. Conkling v. King, 10 Barb., 372. J 7 Hunter v. Moul, 98 Pa. St., 13; "Fuller v. Kemp., 138 N. Y., 231. N. Y. Bank v. Fletcher, 5 Wend., *> Curran v. Rummell, 118 Mass., 482. 122 AMERICAN EXTENSION UNIVERSITY ship, and the like. Those contracts wherein only rights or interests in property are involved, are not usually affected by death, but must be performed by the deceased's estate. (b) By Receiving Better Security. The acceptance of a higher grade of security, in the place of a lower the former being more effective in the eye of the law extin- guishes the lower, regardless of the intention of the parties. For this reason a judgment extinguishes a right of action, 21 the former creating a greater and more binding obligation in law than the latter. This extinguishment is often called merger, but a strict interpretation of the word "merger" conveys the idea of absorbing rather than of discharging, and hence is not accurately used in this connection. To thus work a discharge it is essential that the superior se- curity, or contract, be given to discharge the inferior rather than to be in addition thereto. 22 Furthermore the subject- matter of, and the parties to, the contract must be the same. (c) By Unauthorized Alteration. If an alteration of a written contract by an addition or erasure is such that it changes the legal effect of the instrument, and is made with such intention by a party to the contract or his agent with- out the consent of the other party, the contract is discharg- ed. 23 The alteration must be material, such as changing the date of a note, or the time of payment; 24 adding to or withdrawing the name of the maker or drawer; 25 Add- ing or erasing words of negotiability; 26 or procuring the signature of a witness to a bond which was unattested at its date of execution, and the like. 27 It is not necessary that the alteration be prejudicial against the party whom it is sought to make liable; the simple fact of such alteration suffices. (d) By Bankruptcy. Bankruptcy or insolvency, dis- charges the person adjudged bankrupt or insolvent from contractual liabilities, when he is discharged by order of the court in which the bankruptcy or insolvency proceedings 21 Hartford v. Street, 46 la., 594; Cole v. Clark, 56 N. Y., 34. v. Favorite, 69 111., 457. "Crawford v. Bank, 100 N. Y., 50; "Martin v. Hamlin, 18 Mich., 364; Charlton v. Reed, 61 Iowa, 166. Bill v. Porter, 9 Conn., 30; An- * Henry v. Coats, 17 Ind., 161; Wal- drews v. Smith, 9 Wend., 53; Hor- lace v. Jewell, 21 Ohio St., 163. ton v. Maffit, 14 Minn., 289. M Davis v. Henry, 13 Neb., 497. * Lee v. Star Bird, 55 Me., 491; Ivory 2t Adams v. Frye, 3 Mete. (Mass.), v. Michael, 33 Mo., 398; McGrath 103. DEPARTMENT OF LAW 123 were pending. A detailed treatment of this subject will be taken up under the subject of " Bankruptcy." (e)By Statute of Limitations. Strictly speaking, mere lapse of time does not discharge a contract. However the right to sue on claims, is, by statute in every state known as the Statute of Limitations, limited to a prescribed term, which if invoked by the party to be charged, bars the right of recovery. Hence, if a defendant pleads this statute after lapse of the statutory time covering the claim sued on, the contract is, to all practical intents, discharged. 28 Claims against which the statutory time has run are commonly termed ''outlawed." If part payment is made on such a claim, or a new promise to pay it is given, the claim is revived and the statute begins again to run against it from the time of such part payment or new promise. 94. By Breach. (a) In General. Breach of a con- tract is brought about by the breaking of an obligation therein imposed. It always gives the injured party a right 28 The statutory limit of the right to maintain legal action on various broken contracts, varies in the sev- eral states and territories, and as to different classes of obligations. The following table gives the existing terms, expressed in years for all jurisdictions. States and Territories. Open Acc't. Arizona .. . Alabama Alaska . . . 6 3 6 Arkansas . California Colorado Conn 3 4 6 6 Delaware . . . D C 3 3 Florida 4 Georgia Idaho 4 4 Illinois 5 6 I. T 3 Iowa 5 Kansas 3 Kentucky . . . Louisiana . . . Maine 5 3 6 Maryland Mass 3 6 Michigan .... Minnesota . . . Mississippi . . Missouri .... Montana .... 6 6 3 5 5 Nebraska Nevada . 4 4 Notes & uns'led Judg'ts contract; 3 4 5 6 (e) 20 6 (e) 10 5 10 4 (o) 5 6 20 6 io 3 (f) 12 5 (h) 20 6 (h) 7 (P) 5 6 10 20(np) 10 20 5 10 10 20 (n) 5 5 15 15 (v) 5 10 6 (j) 20 3 (f ) 12 6 20 6 10 6 10 6 7 10 10 8 10 (k) 5 10 (p) 4 6 N. H 6 New Jersey ... 6 New Mexico . . 4 New York .... 6 N. C 3 N. D 6 Ohio 6 Oklahoma .... 3 Oregon 6 Penn 6 R. 1 6 (a) S. C 6 S. D. 6 Tennessee .... 6 Texas 2 (&) Utah 4 Vermont 6 Virginia 2 (&) Wash 3 W. Va 5 Wisconsin .... 6 Wyoming .... 8 (u) (A) Between merchants, 20 years. (E) Under seal, 10 years. (F) Under seal, 12 years. (H) Under seal, 20 years. (I) Under seal, or not nego- tiable, 17 years. (J) Witnessed, 20 years. (K) Justice, 5 years. (L) Justice, 6 years. (M) Justice, 7 years. (N) Justice, 10 years. (O) Foreign, 2 years. (P) Foreign, 5 years. (R) Foreign, 10 years. (S) Foreign, same as State where ren- dered, but not over 10 years. (T) Foreign, 1 year. (U) On debts or judgments incurred before debtor became resident, suit must be be- gun within 1 year after residence is secured. (V) From date of last execution. (Y) Witnessed, 14 years. (&) Store accounts, other accounts 3 years. Accounts between mer- chants, 5 years. 6 (s) 20 6 (s) 20 6 7 6 (s) 20 (1) 3 (e) 10 (m) 6 10 15 15 5 5 (t) 6 (e) 10 6(h) 5 6 (h) 20 6 20 6 (h) 20 (r) 6 10 4 10 6 8 6(y) 8 (1) 5 (e) 10 (s) 6 6 10 10 (s) 6 (h) 20 (r) 5 (u) 21 124 AMERICAN EXTENSION UNIVERSITY of action, and often discharges the contract entirely. In the latter case either party cannot procure performance by the other, as the courts have nothing upon which to base a legal remedy. This form of discharge is more often applicable to certain terms or provisions of a contract, rather than to the contract as a whole. In such case the contractual relation is not extinguished unless the particular provision is sufficiently important to destroy the effect of the entire agreement. (b) Renunciation. Renunciation of a contract, in or- der to give a right of action immediately upon the refusal of performance, must be distinct and unequivocal; must be acted upon by the promisee as an absolute refusal; and must work a prejudice to him. The act of renunciation con- sists in doing something inconsistent with the contractual relation, or making a positive statement, capable of being proved, of an absolute refusal to perform. It may justify the other party in treating the contract as rescinded, r and excuse him from performance of his part, before taking proceedings against the renunciator to enforce his rights. It may also prevent the renunciator from afterwards con- tinuing the contract by withdrawing his refusal to perform if the other party has, in the meantime, acted upon such dis- avowal. If the renunciation by a buyer in a contract of purchase, does not occur until after performance by the other part} has begun, and such renunciation is a refusal to perform the remainder of the contract by refusing to receive the balance of the goods, the seller is exonerated from farther perform- ance and may bring an action against the buyer immediate- ly for the goods already delivered and for the loss of profits on the balance refused. Such were the facts and ruling in Hale et al., v. Trout et al., 29 in which the plaintiffs brought an action for the price of lumber already sold and delivered under an installment contract, and for damages for breach of the contract. Judgment was rendered in favor of the plaintiffs upon the ground that they need not deliver the balance of the lumber after the purchasers ' absolute refusal to accept it, but, having stood ready to perform, had a right to sue upon the contract for loss of profits thereunder and 35 Cal., 229. DEPARTMENT OF LAW 125 to recover accordingly. From the foregoing it is apparent that a contract may be renounced while it is yet executory, and before any per- formance on either side is due; and the injured party may treat the contract as discharged. (c) By Impossibility, or Failure, to Perform. Ina- bility, or refusal, to perform a contract in part or in whole is, of course, not an actual breach until the contract time of performance arrives. However, where one has voluntarily put it out of his power to perform, even though the time of performance is not due, the contract may be treated by the other party as discharged and bring an action thereon im- mediately. In cases where demand is necessary before per- formance is due, and performance is impossible because of the promissor's act, the courts have held that demand need not be made before suit. 30 In the case of Woolner et al., v. Hill et al., 31 the plain- tiffs contracted with the defendants to buy a certain quan- tity of alcohol, to be delivered at the rate of 500 barrels per month, payment on delivery. Defendants, one month after the execution of the contract, made a general assignment in favor of creditors. Plaintiffs brought action for breach of contract and the defendants defended on the ground that no demand or tender was made by the plaintiffs before suit. The court held that the defendants having voluntarily dis- abled themselves from performing the contract by making the assignment could not require tender or offer of perform- ance by the plaintiffs, who stood ready to perform, and that in such cases a demand is not necessary. 30 Boyle v. Guysinger, 12 Ind., 273; 81 93 N. Y., 576. Smith v. Jordan, 13 Minn., 264. QUIZZES. DISCHARGE OP CONTRACTS. l-86. What is meant by the discharge of a contract ? 2- How may a contract be discharged? 3- Name the different ways in which this may be ac- complished. 4- What does the consideration of the discharge of contracts involve? 126 AMERICAN EXTENSION UNIVERSITY 5- What is the general rule as to when rights of ac- tion on contracts accrue ? 6-87. Describe the simplest form of the discharge of con- tracts. 7- What discharges a contract based upon an execut- ed consideration? 8- Does performance by one party, where a promise is given for a promise, discharge the contract? 9- 88. Define a release, or rescission, of a contract. 10- What is the effect on a contract of a release thereof? 11- Upon what class of contracts is such an agreement binding and when? 12- What is necessary in such agreement to release a right of action which has accrued on a contract ? 14- What is an essential factor of a contract of release ? 15- What distinction, as to necessity of additional con- sideration, is there between mutual releases and those running only to one party? 16- Can written contracts be released by parol Can sealed instruments and why? 17- Is a parol release without consideration valid? 18- What is the effect on a contract of the surrender of the evidence of indebtedness to the maker? 19- What is necessary to make such a surrender a valid discharge ? 20-89. What effect on a contract does the material chang- ing of its terms have ? 21- What is necessary to cause such change to work a discharge, and how can it be done ? 22- How does the substitution of new terms in a con- tract differ from waiver ? 23- Give illustrations of a change in contract-terms not affecting its discharge. 24- Under what circumstances would alterations in a contract annul it? 25-90. Can a contract contain elements of its own cancel- lation ? If so name some. 26- When does non-fulfillment of a contract, contem- plated by the contract itself, impose no lia- bility? DEPARTMENT OF LAW 127 27- What is a condition subsequent, and when does it affect a contract ? 28- Give an example of a contract containing such a condition describe fully. 29- What implied events in contracts may terminate them*? 30- Give an instance of contracts containing an option- al termination. 31-91. What can you say as to impossible conditions in (a) contracts and their effect thereon? 32- What, likewise, as to contracts possible in them- selves, but not performed through inevitable ac- cident. 33- How can one protect himself from liability under such circumstances'? 34- (b) Does legal impossibility to perform a contract ever discharge from liability thereon if so when? 35- (c) What effect on a contract does destruction of its subject matter have? state fully. 36- State the facts and the decision in the case of Dex- ter v. Norton. 37- (d) Does incapacity to perform a contract ever work its discharge if so what contracts, and when? 38- How do courts usually construe personal service contracts ? 39- What is the rule as to recovery under such con- tracts where they have been partially per- formed? 40- 92. Give the legal notion of accord and satisfaction. 41- Define accord and satisfaction. 42- What do the parties thereto agree? 43- What is necessary to make an offer operate as an accord and satisfaction? 44- Give an illustration where the retaining of a check so operated. 45- When is an accord and satisfaction a sufficient defense ? 46- What effect on a debt has the acceptance by the creditor, of the liability, therefor, of a third party? 47- What is necessary in order to work such effect? 128 AMERICAN EXTENSION UNIVERSITY 48- Does the taking of a third party's note have the same effect? 49- Does the question of the payment or non-payment of such note at all affect the matter if so how? 50-93. What may be the subject matter of an accord and satisfaction? 51- Does simply expressing one's self as satisfied with a certain thing, work an accord and satisfaction? give examples. 52- Does delivery and acceptance of a note for an amount less than the full claim discharge the debt? 53- What can you say as to the discharge of a debt upon payment of a lesser sum in cases of a dis- puted, and those of an undisputed, amount of in- debtedness? 54- Is a creditor bound by the statement accompany- ing a check for a lesser sum than the debt, that it is sent in full settlement ? 55- What may he do with such a check? 56-94 What contracts does death wholly terminate? 57- (a) What contracts, if any, continue in force after death of a party thereto? 58- (b) What effect does the obtaining of a higher grade of security have upon the lesser in a contract? 59- What effect upon a right of action has a judgment thereon? 60- What is such extinguishment often called, and is such designation accurate and why? 61- What is essential to have a superior security work a discharge of an inferior one ? 62- (c) Does the unauthorized alteration of a contract af- fect it if so, how, and what is essential to such result? 63- Name several kinds of alterations that will dis- charge a contract. 64- Does the intention witL which such alterations are made affect the legal effect? 65- (d) What effect on contract liability does bankruptcy have? DEPARTMENT OF LAW 129 66- (e) Does lapse of time ever, strictly, discharge an ob- ligation? 67- What right arising from contract may lapse of time affect and how? 68- Describe the Statute of Limitations. 69- What term is commonly applied to obligations against which such statutory time has run? 70- What will revive an "outlawed" claim? 71- From what time will such statute again begin to run? 72-95 How are breaches of contracts brought about? 73- (a) What right, and to whom, does the breach of a contract give? 74- What other effect does such breach sometimes have? 75- (b) What is the renunciation of a contract? 76- What is necessary to give an immediate right of action thereon? 77- In what does the act of renunciation consist ? 78- What effect upon the other party may the renunci- ation by one have? 79- What effect on a seller's rights and liabilities has the refusal of a buyer to receive all goods bought? 80- What were the facts and the judgment in the case of Hale v. Trout? 81- When, only, can a contract be renounced? 82- How may the injured party treat a renounced con- tract? 83- (c) When does inability or refusal to perform consti- tute a breach of contract ? 84- What is the rule where one voluntarily incapaci- tates himself from fulfilling a contract before time of performance is due? 85- Give the facts and judgment in the case of Wool- ner v. Hill. 86- What were the court's holdings in that case? be specific and full. 130 AMERICAN EXTENSION UNIVERSITY LESSON 9. CHAPTER XII. ACTIONS AND DEFENCES. 96. When Right of Action Accrues. 97. Election of Remedies. 98. Defences To Actions on Contracts. 99. Duress. (a) Definition. (b) Of Persons. (b) Of Goods. (c) Of Goods. 100. Fraud. (a) Definition. (b) Distinctions. (c) Essential Features. (d) Falsity of Representation. (e) Nature of Misrepresentation. (f) Reliance on False Statements. (g) Intention That Statement be Acted Upon, (h) Statement to Third Party. (i) Damage, (j) Remedies. 101. Misrepresentation. (a) Distinguished From Fraud and Mistake. (b) Essentials. (c) Matters of Opinion. . ' (d) True Statement Knowledge of Facts. (e) Materiality. (f) Effect in General. (g) Effect in Law. (h) Effect in Equity. lO.i'. Mistake. (a) In General, and Definition. (b) As to Subject Matter. (c) Ignorance of Law. (d) As to Identity of Party. (e) Effect. 103. Undue Influence. (a) Nature. (b) Effect and Remedy. 96. When Right of Action Accrues. The mere fact that a person has entered into a contract with another can give no cause of action, and none can arise, until there is some breach of such contract, which, therefore, must be regarded as the cause of action. The contract may give a party the right to demand its performance according to its terms, but there is no delict, and no cause of action, until the other party refuses or neglects to perform some duty re- quired of him by the terms of the contract. * 97. Election of Remedies. It frequently happens that as the result of certain breaches of contract more par- 'Tillinghast v. Boston & P. R.; Lumber Co., 39 S. C., 484. . DEPARTMENT OF LAW 131 ticularly, perhaps, in those cases of breaches of contractual obligations created by law, and of obligations imposed by law, in addition to those voluntarily assumed by parties to the contract itself the party injured by the breach has more than one kind of remedy, or of action, available for his redress. In such cases he has, of course, a choice of reme- dies, but he must make a choice; he cannot pursue two ac- tions at the one time upon the same cause of action. 2 This matter is one of legal procedure rather than of substantive law and hence is not properly within the scope of the pres- ent lesson. It will be fully treated under the subjects of Actions and of Election of Remedies, in the second year's lessons. 98. Defences to Actions on Contracts. The defence to an action on contract must necessarily be based upon some fact or factor arising from the contract itself, either in connection with its inception or consummation, or incor- porated therein. Several items of possible defence having special reference to the competency of parties ; the fact, suf- ficiency, or failure of consideration; the legality of the pur- pose of the contract, and the like, have been presented in our discussion of those topics. In addition, there are sev- eral other matters, any of which, if present in the contrac- tual relation, renders the contract thereby affected, void or voidable, at the instance of the injured party, and which he can, therefore, invoke in absolute and total defence of the contract if he elects to avoid it. The principal matters of this character are duress, fraud, misrepresentation, mistake and undue influence. 99. Duress. (a) Definition. Duress consists of actual or threatened violence or imprisonment. There may be duress of person, or duress of goods, either of which if effectually exercised will be sufficient ground of avoiding a contract made because of its influence upon one. Duress of the person is of two kinds: (1) duress of imprisonment which is compulsion through an actual illegal restraint of one's personal liberty; and (2) duress of mind, which is compulsion through creating a rational fear of loss of life, of bodily injury, or by actual confinement. = Peters v. Bain, 133 U. S., 670; Hay dock v. Cooper, 53 N. Y., 68. 132 AMERICAN EXTENSION UNIVERSITY (b) Of Person. An unlawful imprisonment of a par- ty, or his lawful imprisonment through abuse of legal pro- cess; imprisonment of a near relative of his to whom he owes some legal duty ; or unlawful and great bodily harm to him or to such relative; or the threatening of such imprison- ments or harm, is duress of person. Duress, therefore, can arise from either force or fear. It has been held in several states that, although an imprisonment be legal, if the pro- cess be sued out maliciously and without probable cause, the party imprisoned was under duress. 3 The contracting party, or some one of his immediate family, must be the sub- ject of the duress, and it must be the act of the other party to the contract, or of his agent. 4 A contract entered into in order to relieve a third person from duress is not voidable on that ground, although release from duress as a considera- tion for a contract is unreal consideration and vitiates a sim- ple contract for that reason. (c) Of Goods. The unlawful detention, seizure or de- struction of the property of another is duress of goods. 5 Such duress exists when one is compelled to submit to an illegal exaction in order to obtain his property from one who refuses to surrender possession unless the exaction is endur- ed. 6 This form of duress is not, in itself, ground for avoid- ing a contract, but if the detention is obviously without right, a promise based upon such detention is void for want of consideration. Money paid for the release of goods from duress may be recovered as money had and received by the other party which rightfully belongs to the one making the payment. The party pleading duress as a defense must show clearly that he was actually influenced by it, and not by any other cause in doing the thing from which he now in- vokes belief. 7 100. Fraud. (a) Definition. Fraud is a false rep- resentation of a material fact, or the non-disclosure of a ma- terial fact under such circumstances that its concealment 'Severance v. Kimball, 8 N. H., 386; 188; Shattuck v. Watson, 53 Ark., Watkins v. Baird, 6 Mass., 506; 147. Strong v. Grannis, 26 Barb. (N. 5 Benjamin on Sales, 60. Y.,) 122; Bowker v. Lowell, 49 " Hackley v. Headley, 45 Mich., 570; Me., 429; Taylor v. Cottrell, 16 Scholey v. Mumford, 60 N. Y., 111., 93. 498. 'City Nat. Bank v. Kusworn, 88 Wis., ' Hines v. Cours, 93 Ind., 266. DEPARTMENT OF LAW 133 amounts to a false representation, made with knowledge of its falsity, or in reckless disregard of whether it is true or false, to one who did not know that it was false, with the in- tention that it shall be acted upon by the other party, and which is acted upon by him to his injury. The common law defined fraud in an exact and precise sense which allowed no flexibility of meaning; but in equity, any unfair dealing which is ground for equitable relief is called fraud, and the courts of equity have carefully refrained from confining this idea within the limits of a defi- nition. This has given rise to what is termed constructive fraud. 8 Inasmuch as this branch of fraud is peculiarly ap- plicable to cases of trust relations, it will be treated under the subject of Equity Jurisprudence. (b) Distinctions. Fraud differs from mistake in that in fraud the statement of the adversary party is the cause of the false impression, while this is not the case in mistake. It differs from misrepresentation in that a misrepresenta- tion is made by one who believes it to be true and is justified in such belief by reason of the surrounding circumstances, while fraud is committed by one who knows that his state- ment is false, or who makes it positively without reasonable grounds for believing it to be true. Some authors treat the non-disclosure of material facts as distinct from fraud, 9 but the better reasoning seems to be that non-disclosure amounts to fraud, unless there is no le- gal duty to speak, and the party is not bound by good faith to disclose. Otherwise, the non-disclosure, or concealment, is equivalent to a false representation. In other words, mere silence, or non-disclosure of facts, will not invalidate a contract, whatever may be the intention in failing to make the disclosure, except in contracts made between parties where full faith requires it. It is evident that non- disclosure, as a legal term, is meaningless unless certain facts exist that by right ought to be disclosed; and such is the case only in contracts requiring such good faith. 1( (c) 'Essential Features. To constitute legal fraud, the representation must be (1) false, which includes non- disclosure where active steps are taken to prevent discov- 8 Meldrum v. Meldrum, 15 Colo., 478. w Keats v. Lord Cadogan, 10 C. B. 9 Page on Contracts, p. 99, Sec., 56. 591. ery, or where there is a duty to disclose the facts suppress- ed; (2) it must be of a past or existing fact; (3) it must be of a material fact ; (4) it must be such that the other party has a right to rely on it, or is compelled to rely on it; (5) it must be made with a knowledge of its falsity, or in reckless disregard of whether it be true or false; (6) it must be made directly to the other party or intended to reach him so that he will act upon it; (7) he must be actually deceived there- by; and, (8) it must result in an injury. Under the subject of Mistake, fraud in the factum or in the actual drawing up of a contract will be touched upon. In such cases, it will be seen that the contract is gen- erally held to be void, and cannot be rescinded, because there is, legally, nothing to rescind. It is simply annulled, and the defrauded party is placed in his original position. Thus, substituting a quit-claim deed for a mortgage; ll or in- serting, without the knowledge of the other party, a clause making a certain pledge collateral security for all debts ow- ing, instead of for only the debt in question; 12 or a false statement as to the manner of payment in a written order; ia each makes such instruments void. Under the present treatment of the subject, fraud is considered only in those cases whereby one, knowing the parties, consideration and subject-matter, is induced to enter into a contract by false representations of the other party. (d) Falsity of Representation. The form in which a false representation is made is immaterial. It may consist of an actual false statement; of statements partly true but framed so as to mislead; or of either words or conduct which prevent the other party to the contract from discovering the truth. There is no difference in principle between fraud in fact and fraud in law. Where the direct and inevitable con- sequence of an act is to delay, hinder, or defraud creditors, the presumption at once conclusively arises that such illegal object furnished one of the motives for doing it, and it is thus, upon this ground, held to be fraudulent. 14 Many of the cases illustrating this principle are also examples of ac- tive concealment. Thus fraud was held to exist where a 11 Givan v. Masterson, 152 Ind., 127. St., 165. "Haldeman v. Bank, 19 Ky. L. R., "Robinson v. McKenna, 21 R. I., 1691. 117. "Clinch, etc. Co., v. Willing, 180 Pa. DEPARTMENT OF LAW 135 judgment of over seven thousand dollars was bought for four hundred dollars, the vendee not disclosing that the judgment debtor was dead, leaving an estate worth six thou- sand dollars. 15 In contracts of sale, disclosure is not ordinarily incum- bent on the seller. The rule is, caveat emptor "let the buyer beware. " 16 Even if the contract is one which by the statute of frauds must be in writing, or some note or memo- randum thereof must be in writing, oral misrepresentation, if containing the other elements of fraud, constitutes ground for recovering money paid under an executed con- tract. (e) Nature of Misrepresentation. A mere expres- sion of opinion, belief or expectation, however unfounded, will not invalidate a contract, nor give cause for an action for deceit. Notwithstanding this, a representation of an intention, may amount to a fraudulent representation. Rep- resentations of fact may be better illustrated by examples than by an abstract rule. Thus, statements that a water- right is sufficient to irrigate all the land sold; 1T or that a stream never overflowed on the land sold; 18 or that a certain amount of hay has been cut from the land; 19 or that a pat- ented article has had a certain sale ; 20 are material represen- tations. On the other hand, a statement which amounts to a mere speculation, or, even a statement of a material fact which is given as a matter of belief only, are considered as opinions. (f ) Reliance on False Statement. In order that a person may be entitled to rescind a contract or maintain an action for deceit in procuring same, the false representa- tions must have been of such a character, and made under such circumstances, that he had a right to rely on them. If the party who claims to have been misled acted when he did not know that such false statement had been made; 21 or if he disbelieves the statements at the time of the alleged M Gottschalk v. Kircher, 109 Mo., 16 Laidlaw v. Organ, 2 Wheat., (U. 170. Vendee further represent- S.,) 178. ed that the judgment-debtor was "Hill v. Wilson, 88 Cal., 92. alive and execution-proof. See 1S Oakes v. Miller, 11 Colo. App., 374. also Roseman v. Canovan, 43 Cal., 16 Coon v. Atwell, 46 N. H., 510. 110; George v. Johnson 6 Humph., ^ King v. White, 119 Ala., 429. (Tenn.,) 36; Coles v. Kennedy, 81 21 Burnett v. Hensley, 118 la., 575. Iowa, 360. 136 AMERICAN EXTENSION UNIVERSITY fraud; 22 he cannot be said to be defrauded. One to whom false statements are made and who believes them in spite of information to the contrary received from others may in law be justified in relying thereon and may hold the party mak- ing such statements, liable for fraud. 23 It is necessary that the false representation be the sole motive which influenced the party to whom it was made. 24 The courts are somewhat indefinite as to the necessity of investigation by the person to whom the representation is made! It is clearly settled however, that negligence, on the part of the person to whom the false statements are made, in investigating the truth thereof, is no defense for the other party in an action of fraud brought by such former person, on the contract. 25 Many cases hold that where the facts are generally accessible to both parties, public policy demands that the law should require persons to whom rep- resentations are made to use all reasonable means to deter- mine the truth, and that a failure to investigate may amount to inexcusable negligence precluding the negligent party from obtaining relief. 26 (g) Intention That Statement Be Acted Upon. It is not necessary that the intention be to deceive. If the state- ment has had the elements of fraud hitherto discussed, it is sufficient if the party making it intends it to be believed, and action by the other party in reliance thereon, to be taken. 27 Thus if he knows the statement is false but believes that it will come true thereafter, he is guilty of fraud. 2S (h) Statement to Third Party. As a general rule, unless the person making the false statement intends to in- duce action by a particular person, who in fact acts thereon, legal fraud does not exist. So, if A makes a false state- ment to C, B's agent, to induce B to act thereon, this is fraud if it would be fraud had A made the statement to 22 City National Bank v. Hickox, 4 M Andrus v. Refining Co. 130 U. S. Johns., (N. Y.,) 212. 643. Such is the law in Ariz. ^Morrill v. Palmer, 68 Vt., 1; Vir- Ark., Cal., Ga., Ida., 111., Ind., la. ginia Land Co. v. Haupt, 90 Va., Ky., Me., Md., Mass., Mich., Minn. 533. Mo., N. H., N. Y., Or., Pa., Utah. 24 Sioux National Bank v. Bank, 56 Va., Wash., and Wis., Fed., 139; Sprague v. Taylor, 58 27 Sukeforth v. Lord, 87 Cal., 399; Conn., 542. Mooney v. Davis, 75 Mich., 188. 25 Strand v. Griffith, 97 Fed., 854. 2S Reid v. Cowduroy, 79 la., 169. DEPARTMENT OF LAW 137 B in person. 29 Or, if A make a false statement to B in X's presence, intending that X shall hear and act upon such statement, A is guilty of fraud toward X. 30 A statement made to the general public may amount to fraud. For in- stance, a false statement in the advertisement of a sale may be a fraud. 31 (i) Damage. Fraudulent representations may not result in injury, and in such case legal fraud does not exist. False representations to induce one to do a legal duty; 32 or to pay his own debt; 33 or to sell his property for its full value ; 34 are illustrations of this condition. It is clear and logical that one who wishes to recover damages must show damages, but most courts hold that false representations, made knowingly with intent to deceive, causing deception and thereby inducing one to make a contract that he would not otherwise have made, are grounds for rescission though no actual damage follows. 35 (j) Remedies. Apart from contract, a person injur- ed by fraud may bring an action at common law for deceit, and is entitled to such damages as he has sustained. Courts of equity will, also in like manner, grant relief from misrep- resentation or fraud, by compelling the defendant to make good the loss sustained by the plaintiff. These rules apply to fraud arising ex delicto, 36 being in the nature of a tort. The rules with regard to rights in cases of frau|L arising ex contracts, 3T are particularly effective as concerns the af- firmation or avoidance of a contract. Upon discovery of the fraud, the injured party may (1) affirm the contract and sue for the damages sustained; or (2) he may repudiate the contract and resist an action upon it at law or in equity. In case of repudiation, the party rescinding may in equity, obtain a cancellation of the con- tract. As a general rule, the right to recover damages is de- 29 Schofield v. Schofield, 77 Conn., 1; ** Potter v. Lumber Co., 105 Wis., Hubbard v. Weave, 79 la., 678. 25. 30 Brown v. Brown, 62 Kan., 666. M Baker v. Maxwell, 99 Ala., 558; 81 Hadley v. Importing Co., 13 Ohio MacLaren v. Cochran, 44 Minn., St., 502. 255; Harlow v. LaBrun, 151 N. Y., 32 Deobold v. Opperman, 111, N. Y., 278; Williams v. Kerr, 152 Pa. St., 531. 560. 83 Brown v. Blunt, 72 Me., 415. 3e From a wrong. SI From a contract. 138 AMERICAN EXTENSION UNIVERSITY pendent upon restoration of the money or goods obtained under the contract. On the other hand, the right to avoid a contract is limited in certain ways. It is true that a per- son may keep the contract open until he is sued upon it, and that a plea of fraud then set up is a sufficient ground for re- cission; but, in thus postponing his repudiation, the courts may decide that he has waived his right to take advantage of the fraud by not exercising his option to rescind; or by accepting some benefit under the contract after he has be- come aware of the fraud; or by reason of the fact that inno- cent third parties have since acquired an interest, for value, under the contract. It must be borne in mind that the con- tract, until the defrauded party has made his election, is voidable and not void. If the right to avoid is lost, the person upon whom the fraud has been practised must resort to his action for damages for the tort. 101.' Misrepresentation. (a) Distinguished From Fraud and Mistake. Misrepresentation is an innocent false statement of a material fact made by one party to a contract to the other party or parties, with the intention of influencing the latters' action. It is to be distinguished from mistake in that the erroneous belief in misrepresen- tation is due to the false statement of one of the parties to the contract, while in mistake such erroneous belief must be due to some other cause. It is distinguished from fraud in that in fraud the party making the false statement has actual or constructive knowledge of its falsity and makes the statement with intent to deceive the person to whom it is made. Legal misrepresentation is essentially a bona fide misstatement. Some authorities treat it as in part mis- take and in part fraud, 38 but it is best discussed as a seper- ate topic. Misrepresentation is often confused with "condition" or " warranty" in a transaction. In case of doubt, the test is: Is the misstatement a part of the contract? If so, it is a condition or warranty, and its falsity does not affect the formation of the contract, but operates to discharge the in- jured party from his obligation, or to give him a right of action based on the contract. "Taylor v. Ford, 131 Cal., 440. DEPARTMENT OF LAW 139 (b) Essentials. To constitute misrepresentation, the statement must be one of fact ; it must be false ; it must have been believed in and acted upon by the party to whom it is made; and, although it may exist in the ordinary sense of the term, it has no legal existence, unless it is a misstate- ment of a material fact. (c) Matters of Opinion. Mere matters of opinion or of hearsay, cannot constitute misrepresentation. Thus, statements as to the opinion of the value of certain book ac- counts, 39 or of certain property, 40 are not legal misrepre- sentations. 41 (d) True Statements Knowledge of Facts. It is evident that a true statement of fact is not a misrepresen- tation. Also, if the person to whom the representation is made is informed of the facts, no legal misrepresentation exists. 42 So a false statement made after the transaction is entered into cannot be legal misrepresentation. 4S Nor is a false statement as to the condition of a business, mis- representation, if the facts in question are shown by the books of the business and the party to whom such repre- sentations are made examines such books. 44 It has been held that misrepresentation is not operative if both par- ties have an equal opportunity to know the truth. 45 (e) Materiality of Facts Stated. Finally, the mis- representation, in order to be operative, must be a mis- statement of a material fact. For example, in a contract for the sale of realty, a representation by the vendor that the area of the tract is substantially greater than it really is, is ground for a rescission of the contract. 4G On the other hand misrepresentation as to an immaterial fact has no legal effect. Thus where a surety, signing a note as an ac- commodation, is told that the note signed by him is a renew- al of a former note, when in reality it is to cover an over- draft, legal misrepresentation does not exist. 47 Such mis- statement does not affect the subject-matter or change the surety's liability in the least. "Kenton Ins. Co., v. Wiggington, 89 87 Wis., 297. Ky., 330. 44 Coiton v. Stanford, 82 Cal., 351. " Dooley v. Insurance Co. 16 Wash., Mamlock v. Fairbanks, 46 Wis., 155 415 42 Wright v. Phipps, 90 Fed. 556; Newton v. Tolles, 66 N. H., 136. Patton v. Glatz, 87 Fed. 283. 4T Deposit Bank v. Peak, 110 Ky., 579. 43 Commercial Bank v. Insurance Co., 140 AMERICAN EXTENSION UNIVERSITY (f ) Effect in General. The party seeking relief must, by reason of the particular misrepresentation, have receiv- ed some right, or incurred some liability, substantially dif- ferent from that so represented to him. In order to be ef- fective as grounds for avoiding a contract, the misrepresen- tation must have been made by the party against whom re- lief is sought, or by some one acting on his behalf. In a certain class of contracts, sometimes referred to as uberrimae fide, 48 in which, from their nature, or from the particular circumstances, one party must wholly rely upon the other for his knowledge of the facts, there is an exception to the general rule that a misrepresentation not amounting to fraud, and not constituting a material fact, does not vitiate the contract. Instances of such contracts are those of insurance, contracts between attorney and client, principal and agent, guardian and ward, and, to a limited extent, contracts for the sale of land, and contracts to purchase shares in stock companies. , (g) Effect in Law. At common law, as uninfluenced by equity, the original rule seems to have been that misrep- resentation which did not affect the formation of the con- tract, and was not made a condition thereof, had no effect on its validity, even though it concerned a material fact. An action of deceit could not be brought on an innocent misrep- resentation, in the great majority of jurisdictions. 49 Nor could a contract induced by an innocent misrepresentation be rescinded. Many jurisdictions now allow this form of action if the misrepresentation, though innocent, are mater- ial and damaging. 50 (h) Effect in Equity. In equity, the weight of au- thority is that rescission may be allowed to one who is in- duced to enter into a contract by misrepresentation of a material fact. 51 Thus, bona fide material misrepresenta- tions as to the value of collateral security of a note ; 52 or as to the fact of land being oil bearing; 53 or as to the amount ""Of the utmost good faith." Gunther v. Ulrich, 82 Wis., 222. " Dushane v. Benedict, 120 U. S., " Johnson v. Bnt, 93 Ala., 160; Jones 630; Nash. v. Trust Co., 163 Mass., v. Foster, 175 111., 459. 574. -Borders v. Kattleman, 142 111., "Totten v. Burhans, 91 Mich., 495; 96. Bennett v. Judson, 21 N. Y., 238; M Braunschweiger v. Waits, 179, Pa. Loper v. Robinson, 54 Tex., 510; St., 47. DEPAETMENT OF LAW 141 of debts owing by the vendee who seeks credit ; 54 are each ground for rescission in equity. The combined effect of the equitable rule allowing re- scission for a material misrepresentation, and the common law rule which treats misrepresentation as a fraud, is grad- ually establishing a doctrine at common law that such a mis- representation is ground for an informal rescission at law. 53 Thus, an innocent misrepresentation as to the amount of timber on property conveyed; 56 or as to the extent of physical injuries; 57 are held sufficient to enable the party misled thereby, to avoid the contract which he has been so induced to make. So far as the remedy is concerned, if the false statement is sufficient to avoid the contract, it makes little difference whether it is a case of misrepresen- tation or of fraud. 102. Mistake. (a) In General and Definitions. It must be borne in mind that this subject has to do with mistake of intention, and not mistake of expression, which amounts to incorrect construction. In the latter case, the court will usually correct the contract providing that proof of the mistake in expressing the real intention of the par- ties to the contract, is clear and convincing. Legal mistake, contrary to legal fraud, renders a contract void, and not voidable. Mistake, to have this effect, must be mutual, both parties must have equally shared therein, or there must have been mistake on one side and fraud on the other. Mistake, in the broad legal sense of the term is "that result of ignorance of law or of fact, which has mislead a person to commit that which, if he had not been in error, he would not have done." 58 A mistake of a fact is an uncon- scious ignorance, or forgetfulness, of the existence or non- existence of a fact, past or present, material to the contract. 59 (b) As to Subject Matter. Mistake as to subject mat- ter will avoid a contract when the subject-matter, unknown to the parties, did not, or has ceased to, exist; or when the parties confuse the identity of the subject-matter; or M Ernst v. Colin, 62 S. W. (Tenn.,) M McKinnon v. Vollmar, 75 Wis., 82. 186. "Wilcox v. Railway, 111 Fed., 435 M Ruff v. Jarrett, 94 111., 475; Mooney M Jeremy Eq. Juris., 358. v. Davis, Mich., 188. ra Pomroy Eq. Juris., 839. 142 AMERICAN EXTENSION UNIVERSITY mistake, mutually, as to its true condition. One of the lead- ing English cases on the subject of a non-existing subject- matter arose out of a sale of cargo of corn which was sup- posed, by the parties at the time of the sale, to be on its voy- age to England, but which, in fact, having become heated while out at sea, had been unloaded and sold. It was held that the contract was void, inasmuch as it " plainly imported that there was something which was to be sold at the time the contract was made and something to be purchased," whereas the object of the sale had in fact ceased to exist. 60 The inducement to execute the contract must have been such that ordinary diligence could not discover the error. 61 An interesting case illustrative of a mistake as to the nature of the subject-matter is where the defendant sold and delivered to the plaintiff a thorough-bred cow for the sum of $80, both parties to the contract supposing the cow was barren. Before the time for the performance of the con- tract by delivery of the cow arrived, the defendant discov- ered that she was with calf, whereupon he rescinded the sale and declined to deliver. As a breeder the cow was worth from $750 to $1000. Plaintiff brought a suit in replevin to get possession of the animal, claiming title under the sale. The court held that the right of rescission was properly ex- ercised by the defendant, and that the mistake or misappre- hension of the parties as to the actual condition of the cow went to the whole substance of the agreement. 62 In cases in which one's contract is to supply a certain article abso- lutely, and not impliedly conditional upon its existence, the rule is otherwise. 63 (c) Ignorance of Law. Mistake of law, by reason of which the parties did not understand the legal effect of their contract does not void it. Mistake of a foreign law, how- ever, is a mistake of fact, and will vitiate the contract. 64 Of course, in cases of fraud, or of violation of confidence, * Couturier v. Hastie, 5 H. L. Gas., Neb., 247. 673; and see, Ketchum v. Catlin K Sherwood v. Walker, 33 N. W. Rep., 21 Vt., 191. (Mich.,) 919. "Gibbs v. Linabury, 22 Mich., 479; Perkins v. Say, 3 Serg. & R., (Pa.,) Cline v. Guthrie, 42 Ind., 236; 327. Walker v. Ebert, 29 Wis., 194; "Haven v. Foster. 9 Pick., (Mass.,) First National Bank v. Leerman, 5 112. DEPARTMENT OF LAW 143 even though coupled with a mistake of law, the contract may be set aside. 65 (d) As to Identity of Party. Honest mistake as to the person with whom one is contracting will release one from such contractual obligations. Justice Cooley once said: "No man can be compelled against his will to ac- cept another contracting party in place of the one he has dealt with, even though a contract with such other party may be equally valuable, and in its results exactly the same." 66 This mistake is often brought about by the sub- stitution of one party for another under a contract without notice to the real party in interest. 6T Also where one party, claiming to be some one other than he is, procures a prom- ise, as of marriage; or obtains a contract of any other kind that would not otherwise have been given him. (e) Effect. The effect of mistake is to render the contract void. If the contract is executed in whole or in part the amount paid, or the other consideration given, un- der it may be recovered where, however, the mistake is the direct result of fraud, the contract is rendered voidable only. In the case of executory contracts, the mistaken party may repudiate and successfully defend an action brought upon it. These rules are applicable only where the mistake is such as to effect the essential elements of the contract. Mistake in the inducement or an erroneous belief as to a collateral, although material, fact which does not affect a knowledge of the existence and identity of the essential elements of the contract not due to any state- ment made by the adversary, does not operate as a grounds for avoiding the contract. For this class of mistake, neith- er the law nor equity furnishes any relief. 68 It may seem difficult to draw a decided or strict line of demarkation be- tween mistake in the inducement, and the mistake which 86 Upton v. Tribelack 91 U. S., 45. " Gregory v. Wendell, 40 Mich., 443. " Thus, in Boston Ice Company v. Potter, 123 Mass., 29, the defend- ant, who had bought ice of the plaintiff, ceased to take more upon termination of the contract, on ac- count of dissatisfaction, and con- tracted for ice with another com- pany. Later on, plaintiff bought the other company's business and delivered ice to the defendant with- out notifying the latter of the sub- stitution until after the delivery and consumption of the ice. The court held that there was no priv- ity of contract between plaintiff and defendant and therefore that the action to collect for the ice could not be maintained. Moore v. Scott. 47 Neb., 346. 144 AMERICAN EXTENSION UNIVERSITY will justify a repudiation of the contract. It may be safely said that the courts are somewhat divided on this point as applied to similar conditions ot fact, many courts consider- ing extreme cases of facts in the inducement, as material and essential elements of the agreement. 69 A party who is entitled to avoid a contract on the ground of mistake must rescind at law, or seek his re- lief in equity. 103. Undue Influence. (a) Nature. Undue in- fluence, as regards the formation of a contract, is denned as an unconscientious use of the power arising out of circum- stances and conditions of the contracting parties which raises the presumption of fraud. Undue influence may con- sist in the use, by one in whom confidence is reposed by an-< other, or who holds a real or apparent authority over him, of such confidence or authority for the purpose of obtaining an unfair advantage over him, 70 by taking advantage of an- other's weakness of mind; 71 or in taking a grossly oppres- sive and unfair advantage of another's necessities or distress. 72 (b) Effect and Remedy. When the relative position of the parties is such as to raise the presumption of undue influence, a contract so made cannot stand unless the person claiming the benefit of the contract can rebut the presump- tion of said influence by contrary evidence, proving* the transaction to have been fair and reasonable. 73 The rules respecting the right to rescind contracts en- tered into under duress, or undue influence, follow the rules which apply to fraud, with the qualifications, however, that, unless it is clear that the freedom of the injured party has been restored; or that the will of the injured party is re- lieved from the dominant influence under which it has act- ed; or that the imperfect knowledge with which he entered into the contract is supplemented by the fullest assistance and information; an affirmance of the agreement, by such party, will not be allowed to bind him. " Page on Contracts, 156. 72 Bigelow on Frauds, p. 259. 70 Brock v. Barnes 40 Barb. (N. Y.,) " Schofield v. Walker, 58 Mich., 96 521. Wise v. Foote, 81 Ky., 10. " Tracy v. Sackett 18 Ohio. St., 58. DEPARTMENT OF LAW 145 CHAPTER XIII. PROOF OF CONTRACTS , , 104. In General. 105. Methods of Proof. (a) Sealed Instruments . (b) Parol Evidence. (c) To Prove Contract Invalid. (d) As to Contract Terms and Parties. (e) As to Custom. (f) To Show Mistake. 104. In General. The proof of a contract involves the circumstances and intentions under which it was made. These circumstances and intentions are questions of fact for the jury, or for the court when it sits as judge of the facts. The general rules governing this subject will be treated under the subject of Evidence, but it is well, now, to con- sider some elementary rules as applied to the proof of the facts of a contract when the terms are in dispute. The fact of the existence of a contract is governed by the same rules. 105. Methods of Proof. Contracts under seal are proved by evidence of their sealing and delivery. Con- tracts by word of mouth, verbal contracts, or in writing, are proved by parol evidence or those written evidences pro- duced in court which the respective parties offer to support their contentions. The rules applicable to oral contracts are governed by general laws of evidence and will not be here considered. (a) Sealed Instruments. Contracts under seal are said to prove themselves. By that is meant that once the fact of the sealing of a contract being established, and its delivery to the other party proven, no farther evidence as to the making of the contract is necessary. In other words, the fact of a seal on a contract legally and conclusively, of itself, proves the contract upon the fact of the sealing being shown. Contracts under seal were formerly attested by the signature of two or more witnesses to the execution of the contract. When these witnesses could not be produced at the trial, proof of their handwriting was sufficient. In most states attesting witnesses, except in particular cases, as in wills, are not now required. 146 AMERICAN EXTENSION UNIVERSITY (b) Parol Evidence. Parol or oral evidence is ad- missible in proving a simple and unsealed written contract, (1) to show that the signature thereto is that of the person sought to be charged, or that the defendant made the con- tract; (2) to supplement the writing constituting part of the contract; or (3) to connect several separate writings which go to make up the whole contract. In ordinary contracts parol evidence must necessarily be admitted to prove the identity of the parties. In cases in which the offer was in writing, and the acceptance was by parol, proof of acts con- stituting acceptance must necessarily be by parol evidence. Such is the case where a written offer was made to buy goods with instructions to ship if the offer is accepted. The seller completes the contract by shipping the goods, and this fact may be proved by parol evidence. (c) Same. To Prove a Contract Invalid. Incapac- ity, such as minority, insanity, etc., mistake, fraud, want of genuine consent, and the like, in the making of a written contract, may be shown by parol proof. In the case of a sim- ple contract, where only the promise appears in writing, it may be shown by oral testimony that there was no consider- ation therefor. In the case of Rhine v. Allen, 1 the plaintiff executed a deed to certain mining land in favor of the defen- dant and others, in which the mutual consideration was ex- pressed as paid. In reality, the defendant had not paid anything, and plaintiff brought action to collect the con- sideration for the conveyance, which the defendant had re- pudiated. The court allowed the plaintiff to show by parol evidence that the consideration from the defendant recited in the deed as paid, had not in fact been paid. The defend- ant, in contradiction of the plaintiff's contention, was al- lowed to show by oral testimony that there was a condi- tion coupled with the consideration to the effect that he might work the mine a year, and if he chose to make an ab- solute purchase within that time, for the consideration as agreed upon, he might do so. The preponderance of evi- dence of this collateral fact sustained the defense. (d) Same As To Contract- Terms and Parties Parol evidence is also admissible to explain the terms of a 1 36 Cal., 362. DEPARTMENT OF LAW 147 contract; and to identify the contracting parties. Explana- tion of the terms of a contract may amount merely to evi- dence of the identity of the parties thereto, as where two persons have the same name, or where an agent has con- tracted in his own name but on behalf of a principal whose name or whose existence he omitted to disclose. 2 But the names of the parties cannot be changed or contradicted by parol evidence, nor can a person show by parol testimony that he acted merely as agent for another when he contract- ed in his own name. 3 Other matters such as a description of the subject matter; the extent of the liability intended; and the limitation of the meaning of certain words; may also be thus proved, when they are not definitely shown in the contract. The uncertainty and indefiniteness of the contract, to allow the admission of such evidence, must be sufficient to render the contract unintelligible or ambiguous without such oral proof. 4 (e) Same As to Custom. Parol evidence of custom in a particular locality, or of a usage of trade, is admissible to explain written contracts. The custom may concern a mode of living, or pertain to agriculture, commerce, or any o the numerous subject-matters of contract. The theory of the admissibility of oral evidence of custom or usage, like the theory allowing the admission of parol evidence as ex- planation, is that the parties did not intend to put in writing the whole of the contract by which they were to be bound, but contracted with reference to what was generally under- stood by persons in their particular location or line of business. A custom or usage to be admissible as proof must have been one that was established at the date of the contract. Furthermore it must be general, uniform, certain, con- tinued, acquiesced in, consistent with the law, and reasonable. (f ) Same To Show Mistake. The admission of pa- rol evidence to prove the intention of parties in cases where by mistake, the contract does not express the true intention. 2 Martin v. Smith, 65 Miss., 1; Wake- 460. field v. Brown, 38 Minn., 361. 4 Sanderson v. Piper, 5 Bing (N. C.), ' Dexter v. Ohlander, 93 Ala., 441; 425. Brigham v. Herrick, 173 Mass., 148 AMERICAN EXTENSION UNIVERSITY necessitates the application of equitable remedies, which will be more fully discussed when we take up the subject of Equity. We may say now that equity admits such evidence in many cases where courts of purely common-law jurisdic- tion would apply the strict rules of evidence, and thus fail to afford full relief. In all cases where a contract is alleged not to express the actual agreement, because of a mistake of the parties thereto, the mistake must have been mutual, and the evidence thereof must be clear and con-, vincing. Or, in other cases, there must have been some fraud on the part of the party to the contract, other than the one seeking to reform it. In case of fraud in procur- ing the execution of a contract, the contract is void. The proper remedy in such cases is an action at law for dam- ages; but, when the fraud consists in an unfair knowledge by one of the parties, after the execution of the contract, whereby he will profit by the other's mistake, equity will rectify the mistake, even though it is not mutual. 5 "Moffet H. & C. Co. v. City of Rochester, 178 U. S., 373. QUIZZEE. ACTIONS AND DEFENCES. l-96. When does a right of action on a contract accrue state fully? 2- 97. What can you say as to a party having a choice of remedies in certain cases arising from con- tracts'? 3- Can a party under such circumstances pursue two actions at one time upon the same cause of ac- tion? 4-98. Upon what must the defence to an action on con- tract be based? Name several items of possible defence to such actions. 5-99 Define duress and name its kinds. 6- (a) What is the effect upon a contract, or duress exer- cised upon its execution? 7- Name the two kinds of duress of the person. DEPARTMENT OF LAW 149 8-(b) Define duress of person. 9- From what can duress arise? 10- Is one legally under duress where his imprison- ment is legal but the process was maliciously issued? 11- Upon whom must the act of duress be imposed in order for it to be available in defence of a con- tract? 12- Who must perform the act of duress in order for it to be so available ? 13- Is a contract entered into in order to relieve a third person from duress voidable on that ground? 14- (c) Define duress of goods. 15- When does such a duress exist ? 16- Is this form of duress ground for avoiding a con- tract? 17- What is the effect upon a contract given to recover goods detained without right ? 18- Can money paid for the release of goods from du- ress be recovered? 19- What must the party pleading duress show, to make such defence effective ? 20-100 Define fraud. 21- (a) What distinction in the definition of fraud did the common law and the equity courts make. 22- (b) How does fraud differ from mistake? 23- How does fraud differ from misrepresentation? 24- Is the non-disclosure of material facts fraud? 25- Is mere silence of fact, a basis for invalidating a contract ? 26- (c) Name the eight essential features of fraud. 27- How does fraud, in the actual making of a con- tract, affect it ? 28- Can a void contract be rescinded and why? 29- Name illustrations of common forms of fraud in contracts which render same void. 30- (d) Is the form in which a false representation is made material as affecting the validity of a contract? 150 AMERICAN EXTENSION UNIVERSITY 31- In what may a false representation consist state fully? 32- Is there any legal difference between fraud in fact and fraud in law? 33- Is disclosure of facts incumbent in contracts of sale? 34- Do oral misrepresentations in contracts, coming under the statute of frauds constitute grounds for invalidating the contract? 35- (e) Will mere expressions of opinion, belief, or expec- tation, invalidate a contract ? 36- Will representations of an intention amount to a fraud? 37- Give several illustrations of the application of the principles covered by the last two questions. 38- (f) What is essential in false representations, to en- able one to rescind a contract or maintain an ac- tion for deceit in procuring same ? 39- Can one who did not know that the statements made were false or one who disbelieves such statements as made, take advantage of same? 40- Is it necessary that the false representations be the sole motive in entering into a contract to avoid same for that cause ? 41- What duty of investigation does the law impose upon one entering into contracts? 42- (g) Is it essential that there be an intention to de- ceive in making a false representation? 43- What is sufficient in making false representations, to work an invalidation of a contract? 44- (h) Will false representations made to a third party give grounds for invalidating a contract if so, when? 45- Can a statement to the general public amount to a fraud on any individual? 46- (i) Does legal fraud exist where no injury results from fraudulent representations? 47- Is it a legal fraud to make false representations to induce one to perform a legal duty? DEPARTMENT OF LAW 151 48- When will false representations, followed by no actual damage, give basis for rescinding a con- tract? 49- (j) May a person injured by fraud, apart from con- tract, maintain an action for damages therefor if so, under what form of action? 50- Will courts of equity afford relief for misrepresen- tation if so, how? 51- What choice of action has an injured party upon discovery of fraud? 52- Upon what is the right to recover damages de- pendent as a general rule ? 53- How is the right to avoid a contract limited state fully? 54- Are contracts secured through misrepresentations void or voidable? 55-101 Define misrepresentation, and distinguish it (a) from fraud and mistake ? 56- How is misrepresentation confused with, and to" be distinguished from, " condition" or " war- ranty" in a contract? 57- (b) What is essential to constitute legal misrepresen- tation? 58- (c) What matters of opinion or of hearsay constitute misrepresentation ? 59- (d) Is a true statement of fact ever a misrepresenta- tion? 60- Is there a legal misrepresentation where the party to whom it is made knows the facts? 61- Is a misrepresentation, made after the transaction is entered into, legally a false statement? 62- Is misrepresentation operative where both parties have equal opportunity to know the truth? 63- (e) What is finally essential to make a mis-statement legally operative ? 64- How do misrepresentations as to an immaterial fact effect a contract? 65- (f) What is essential in order to render misrepresen- tations an effective ground for avoiding a con- tract? 152 AMERICAN EXTENSION UNIVERSITY 66- What class of contracts and for what reason are an exception to the general rule placing ob- ligations not to misrepresent concerning same? 67- (h) Can one, in equity, rescind a contract which he made by misrepresentation of the other party? 68- What innocent misrepresentations are held suffi- cient to enable the part} 7 misled thereby to avoid the contract? 69- 102 What kind of mistake does the law take cogniz- (a) ance of? 70- How will courts correct mistake of intention, and how mistakes of expression, in a contract? 71- How does legal mistake affect a contract ? 72- What is essential in mistakes for it to have this effect? 73- Define mistake. 74- Define mistake of fact. 75- (b) When will mistake as to the subject matter pf a contract avoid same illustrate? 76- (c) Does mistake of law avoid a contract? 77- Does mistake of a foreign law avoid a contract? 78- How does fraud, or violation of confidence, coupled with mistake, affect a contract ? 79- (d) Will honest mistake as to the identity of the other party to a contract give grounds for rescinding same and why? 80- (e) Where a contract is executed fully, or in part, be- fore mistake is discovered, can the consideration given therefor be recovered? 81- What is the effect on a contract where the mistake is the direct result of fraud? 82- What legal rights has a mistaken party in an exe- cutory contract ? 83- Does mistake as to collateral facts furnish a basis for rescinding a contract? 84- What choice of remedies must one make who is en- titled to avoid a contract on the ground of mis- take? 85-S103 Define undue influence. 86- (a) Of what may undue influence consist state fully? DEPARTMENT OF LAW 145 CHAPTER XIII. PROOF OF CONTRACTS 104. In General. 105. Methods of Proof. (a) Sealed Instruments . (b) Parol Evidence. (c) To Prove Contract Invalid. (d) As to Contract Terms and Parties. (e) As to Custom. (f) To Show Mistake. 104. In General. The proof of a contract involves the circumstances and intentions under which it was made. These circumstances and intentions are questions of fact for the jury, or for the court when it sits as judge of the facts. The general rules governing this subject will be treated under the subject of Evidence, but it is well, now, to con- sider some elementary rules as applied to the proof of the facts of a contract when the terms are in dispute. The fact of the existence of a contract is governed by the same rules. 105. Methods of Proof. Contracts under seal are proved by evidence of their sealing and delivery. Con- tracts by word of mouth, verbal contracts, or in writing, are proved by parol evidence or those written evidences pro- duced in court which the respective parties offer to support their contentions. The rules applicable to oral contracts are governed by general laws of evidence and will not be here considered. (a) Sealed Instruments. Contracts under seal are said to prove themselves. By that is meant that once the fact of the sealing of a contract being established, and its delivery to the other party proven, no farther evidence as to the making of the contract is necessary. In other words, the fact of a seal on a contract legally and conclusively, of itself, proves the contract upon the fact of the sealing being shown. Contracts under seal were formerly attested by the signature of two or more witnesses to the execution of the contract. When these witnesses could not be produced at the trial, proof of their handwriting was sufficient. In most states attesting witnesses, except in particular cases, as in wills, are not now required. 146 AMERICAN EXTENSION UNIVERSITY (b) Parol Evidence. Parol or oral evidence is ad- missible in proving a simple and unsealed written contract, (1) to show that the signature thereto is that of the person sought to be charged, or that the defendant made the con- tract; (2) to supplement the writing constituting part of the contract; or (3) to connect several separate writings which go to make up the whole contract. In ordinary contracts parol evidence must necessarily be admitted to prove the identity of the parties. In cases in which the offer was in writing, and the acceptance was by parol, proof of acts con- stituting acceptance must necessarily be by parol evidence. Such is the case where a written offer was made to buy goods with instructions to ship if the offer is accepted. The seller completes the contract by shipping the goods, and this fact may be proved by parol evidence. (c) Same. To Prove a Contract Invalid. Incapac- ity, such as minority, insanity, etc., mistake, fraud, want of genuine consent, and the like, in the making of a written contract, may be shown by parol proof. In the case of a sim- ple contract, where only the promise appears in writing, it may be shown by oral testimony that there was no consider- ation therefor. In the case of Rhine v. Allen, 1 the plaintiff executed a deed to certain mining land in favor of the defen- dant and others, in which the mutual consideration was ex- pressed as paid. In reality, the defendant had not paid anything, and plaintiff brought action to collect the con- sideration for the conveyance, which the defendant had re- pudiated. The court allowed the plaintiff to show by parol evidence that the consideration from the defendant recited in the deed as paid, had not in fact been paid. The defend- ant, in contradiction of the plaintiff's contention, was al- lowed to show by oral testimony that there was a condi- tion coupled with the consideration to the effect that he might work the mine a year, and if he chose to make an ab- solute purchase within that time, for the consideration as agreed upon, he might do so. The preponderance of evi- dence of this collateral fact sustained the defense. (d) Same As To Contract-Terms and Parties Parol evidence is also admissible to explain the terms of a 1 36 Cal., 362. DEPARTMENT OP LAW 147 contract; and to identify the contracting parties. Explana- tion of the terms of a contract may amount merely to evi- dence of the identity of the parties thereto, as where two persons have the same name, or where an agent has con- tracted in his own name but on behalf of a principal whose name or whose existence he omitted to disclose. ~ But the names of the parties cannot be changed or contradicted by parol evidence, nor can a person show by parol testimony that he acted merely as agent for another when he contract- ed in his own name. 3 Other matters such as a description of the subject matter; the extent of the liability intended; and the limitation of the meaning of certain words; may also be thus proved, when they are not definitely shown in the contract. The uncertainty and indefiniteness of the contract, to allow the admission of such evidence, must be sufficient to render the contract unintelligible or ambiguous without such oral proof. 4 (e) Same As to Custom. Parol evidence of custom in a particular locality, or of a usage of trade, is admissible to explain written contracts. The custom may concern a mode of living, or pertain to agriculture, commerce, or any of the numerous subject-matters of contract. The theory of the admissibility of oral evidence of custom or usage, like the theory allowing the admission of parol evidence as ex- planation, is that the parties did not intend to put in writing the whole of the contract by which they were to be bound, but contracted with reference to what was generally under- stood by persons in their particular location or line of business. A custom or usage to be admissible as proof must have been one that was established at the date of the contract. Furthermore it must be general, uniform, certain, con- tinued, acquiesced in, consistent with the law, and reasonable. (f ) Same To Show Mistake. The admission of pa- rol evidence to prove the intention of parties in cases where by mistake, the contract does not express the true intention. * Martin v. Smith, 65 Miss., 1; Wake- 460. field v. Brown, 38 Minn., 361. 4 Sanderson v. Piper, 5 Bing (N. C.), 'Dexter v. Ohlander, 93 Ala., 441; 425. Brigham v. Herrick, 173 Mass., 148 AMERICAN EXTENSION UNIVERSITY necessitates the application of equitable remedies, which will be more fully discussed when we take up the subject of Equity. We may say now that equity admits such evidence in many cases where courts of purely common-law jurisdic- tion would apply the strict rules of evidence, and thus fail to afford full relief. In all cases where a contract is alleged not to express the actual agreement, because of a mistake of the parties thereto, the mistake must have been mutual, and the evidence thereof must be clear and con-, vincing. Or, in other cases, there must have been some fraud on the part of the party to the contract, other than the one seeking to reform it. In case of fraud in procur- ing the execution of a contract, the contract is void. The proper remedy in such cases is an action at law for dam- ages; but, when the fraud consists in an unfair knowledge by one of the parties, after the execution of the contract, whereby he will profit by the other's mistake, equity will rectify the mistake, even though it is not mutual. 5 5 Mofet H. & C. Co. v. City of Rochester, 178 U. S., 373. QUIZZEE. ACTIONS AND DEFENCES. l-96. When does a right of action on a contract accrue state fully? 2-97. What can you say as to a party having a choice of remedies in certain cases arising from con- tracts'? 3- Can a party under such circumstances pursue two actions at one time upon the same cause of ac- tion? 4- 98. Upon what must the defence to an action on con- tract be based? Name several items of possible defence to such actions. 5-99 Define duress and name its kinds. 6- (a) What is the effect upon a contract, or duress exer- cised upon its execution? 7- Name the two kinds of duress of the person. DEPARTMENT OF LAW 149 8-(b) Define duress of person. 9- From what can duress arise ? - 10- Is one legally under duress where his imprison- ment is legal but the process was maliciously issued? 11- Upon whom must the act of duress be imposed in order for it to be available in defence of a con- tract? 12- Who must perform the act of duress in order for it to be so available ? 13- Is a contract entered into in order to relieve a third person from duress voidable on that ground? 14- (c) Define duress of goods. 15- When does such a duress exist ? 16- Is this form of duress ground for avoiding a con- tract? 17- What is the effect upon a contract given to recover goods detained without right ? 18- Can money paid for the release of goods from du- ress be recovered? 19- What must the party pleading duress show, to make such defence effective? 20-100 Define fraud. 21- (a) What distinction in the definition of fraud did the common law and the equity courts make. 22- (b) How does fraud differ from mistake? 23- How does fraud differ from misrepresentation? 24- Is the non-disclosure of material facts fraud? 25- Is mere silence of fact, a basis for invalidating a contract ? 26- (c) Name the eight essential features of fraud. 27- How does fraud, in the actual making of a con- tract, affect it ? 28- Can a void contract be rescinded and why? 29- Name illustrations of common forms of fraud in contracts which render same void. 30- (d) Is the form in which a false representation is made material as affecting the validity of a contract? 150 AMERICAN EXTENSION UNIVERSITY 31- In what may a false representation consist state fully*? 32- Is there any legal difference between fraud in fact and fraud in law ? 33- Is disclosure of facts incumbent in contracts of sale? 34- Do oral misrepresentations in contracts, coming under the statute of frauds constitute grounds for invalidating the contract? 35- (e) Will mere expressions of opinion, belief, or expec- tation, invalidate a contract ? 36- Will representations of an intention amount to a fraud? 37- Give several illustrations of the application of the principles covered by the last two questions. 38- (f) What is essential in false representations, to en- able one to rescind a contract or maintain an ac- tion for deceit in procuring same ? 39- Can one who did not know that the statements made were false or one who disbelieves such statements as made, take advantage of same? 40- Is it necessary that the false representations be the sole motive in entering into a contract to avoid same for that cause? 41- What duty of investigation does the law impose upon one entering into contracts? 42- (g) Is it essential that there be an intention to de- ceive in making a false representation? 43- What is sufficient in making false representations, to work an invalidation of a contract ? 44- (h) Will false representations made to a third party give grounds for invalidating a contract if so, when? 45- Can a statement to the general public amount to a fraud on any individual? 46- (i) Does legal fraud exist where no injury results from fraudulent representations? 47- Is it a legal fraud to make false representations to induce one to perform a legal duty? DEPARTMENT OF LAW 151 48- When will false representations, followed by no actual damage, give basis for rescinding a con- tract? 49- (j) May a person injured by fraud, apart from con- tract, maintain an action for damages therefor if so, under what form of action? 50- Will courts of equity afford relief for misrepresen- tation if so, how? 51- What choice of action has an injured party upon discovery of fraud? 52- Upon what is the right to recover damages de- pendent as a general rule ? 53- How is the right to avoid a contract limited state fully? 54- Are contracts secured through misrepresentations void or voidable? 55-101 Define misrepresentation, and distinguish it (a) from fraud and mistake ? 56- How is misrepresentation confused with, and to be distinguished from, " condition" or " war- ranty" in a contract? 57- (b) What is essential to constitute legal misrepresen- tation? 58- (c) What matters of opinion or of hearsay constitute misrepresentation ? 59- (d) Is a true statement of fact ever a misrepresenta- tion? 60- Is there a legal misrepresentation where the party to whom it is made knows the facts ? 61- Is a misrepresentation, made after the transaction is entered into, legally a false statement? 62- Is misrepresentation operative where both parties have equal opportunity to know the truth? 63- (e) What is finally essential to make a mis-statement legally operative ? 64- How do misrepresentations as to an immaterial fact effect a contract ? 65- (f) What is essential in order to render misrepresen- tations an effective ground for avoiding a con- tract? 152 AMERICAN EXTENSION UNIVERSITY 66- What class of contracts and for what reason are an exception to the general rule placing ob- ligations not to misrepresent concerning same? 67- (h) Can one, in equit}^ rescind a contract which he made by misrepresentation of the other party? 68- What innocent misrepresentations are held suffi- cient to enable the party misled thereby to avoid the contract? 69- 102 What kind of mistake does |he law take cogniz- (a) ance of? 70- How will courts correct mistake of intention, and how mistakes of expression, in a contract? 71- How does legal mistake affect a contract? 72- What is essential in mistakes for it to have this effect? 73- Define mistake. 74- Define mistake of fact. 75- (b) When will mistake as to the subject matter ,of a contract avoid same illustrate? 76- (c) Does mistake of law avoid a contract? 77- Does mistake of a foreign law avoid a contract? 78- How does fraud, or violation of confidence, coupled with mistake, affect a contract? 79- (d) Will honest mistake as to the identity of the other party to a contract give grounds for rescinding same and why? 80- (e) Where a contract is executed fully, or in part, be- fore mistake is discovered, can the consideration given therefor be recovered? 81- What is the effect on a contract where the mistake is the direct result of fraud? 82- What legal rights has a mistaken party in an exe- cutory contract ? 83- Does mistake as to collateral facts furnish a basis for rescinding a contract? 84- What choice of remedies must one make who is en- titled to avoid a contract on the ground of mis- take? 85-103 Define undue influence. 86- (a) Of what may undue influence consist state fully? DEPARTMENT OF LAW 153 87- (b) What defence to a claim of undue influence has a party against whom such influence is charged'? 88- How far do the rules applicable to fraud and du- ress apply to cases involving undue influence ? PROOF OF CONTRACTS. 1-104. What doe.i the proof of a contract involve'? 2- Who decio.es the questions of fact thus arising? 3- Under what subject will the general rules as to proof be found? 4-105. How are contracts under seal proven? 5- (a) How are other contracts proven? 6- What is meant when one says that sealed contracts prove themselves? 7- What can you say as to attesting witnesses upon sealed contracts ; how proof is made in their ab- sence; and present requirements as to such wit- nesses? 8-(b) When is oral, or parol evidence admissible to prove a contract ? 9- What contracts cannot be established by parol tes- timony ? 10- Name contracts which require parol testimony to prove same. ll-(c) What circumstances, showing a contract to be in- valid can be proven by parol ? 12- In what cases can lack of consideration be shown by parol? 13- State the facts in the case of Rhine v. Allen. 14- (d) What facts, supplemental to the contract, can be proven by parol? 15- What may be so proven in "explanation" of the contract ? 16- What may not be so proven? 17- What degree of "indenniteness" is necessary to sanction oral proof of a contract in writing? 18- What can you say as to admissibility of oral proof, of a custom or usage? 19- (e) Upon what theory is such evidence allowed? 154 AMERICAN EXTENSION UNIVERSITY 20- What is essential as to the custom sought to be so proven? 21- (f) What is the nature of the remedy in case of mis- take in drawing a contract*? 22- What must be the nature of the mistake to war- rant verbal proof thereof? 23- State fully the factor of fraud in the procuring of a contract to warrant proof in an action to cor- rect same. 24- When will equity rectify a mistake, even though it be not mutual? Ammran Extension Intu^rattg (Non-Resident Instruction). Chartered under the Laws of California. Extension Law Course. Frank C. Smith, LL. B., Dean. LESSONS 10 to 15.- TITLE IV. NEGOTIABLE INSTRUMENTS. By Charles Coan, LL., 'B. LESSON 10. CHAPTER I. GENERAL CHARACTERISTICS AN D KINDS. 1. Importance and Origin. 2. The "Law Merchant." 3. What is "Negotiability?" 4. Essentials of Negotiability. 5. Forms of Negotiable Instruments. 6. Certain Instruments Distinguished. (a) In General. (b) Parties. 7. Liability of Parties. 8. Definitions. 9. Consideration. 10. Law Governing Commercial Pappr. 11. How Made. 12. Promissory Notes. 13. Bills of Exchange. 14. Checks. 15. Bank Notes. 16. Bonds and Stocks. 17. Letters of Credit. 18. Certificates of Deposit. 19. Bills of Lading. 1. Importance and Origin. Negotiable instruments including, as the term does, bills of exchange, promissory notes, checks, corporate, governmental, and municipal bonds, bank drafts, bank notes, letters of credit, certificates of deposit, and other forms of financial and commercial paper, comprises one of the largest branches of the law of contracts. These varying instruments have several attri- butes in common and yet each possesses distinctive legal qualities distinguishing it from the others. The law relating to commercial paper presents the widest divergence from the general principles governing 2 AMERICAN EXTENSION UNIVERSITY. contracts of any of the departments of contracts. This arises from the fact that the rules applicable to bills and notes those instruments most commonly in use in com- mercial life did not have their origin in the English com- mon law, but were a part of the Law Merchant of Lombardy and other commercial cities of Italy, and were therefrom adopted by the early traders and bankers of England, and ultimately grafted on to the English Common Law. * 2. "Law Merchant" This body of law known in its original language as the "lex mercatoria," and now frequently so called was a system of law governing mer- chants and mercantile transactions during the mediaeval era and afterwards, throughout Southern and Western Europe. It harmonized the mercantile law of the different commercial cities and nations, and was of more universal authority than the common law of England. 1 As already stated, it was adopted into the English law, and is a part of the common law of this country. Its rules are the basis, not only of our general law affecting negotiable instruments, but the uniform Negotiable Instruments Law adopted by many of the states and certain to be adopted by all of them in due time, and the like present-day law of England and her colonies, may be said to be the modern exponent of the Law Merchant. 2 3. What Is Negotiability. Those forms of negotiable instruments coming under the classification of commercial paper, and including principally and, perhaps, only bills of exchange, promissory notes, checks and such other forms as fulfill the same special purposes as these, are the repre- sentatives of money itself a representative of value and they therefore partake of many of the attributes of money and possess privileges not shared by any other kind of per- sonal property. This money-quality, this representative of money value, which enables such paper to pass from hand to hand until its maturity as money, and which endows it 1 Randolph on Commercial Paper, 1. in defining the jurisdiction of the 1 A very important and interesting United States circuit and district discussion of the law merchant is courts congress specifically recog- contained in an appendix to Vol. 1 nizes this system of law by giving of Cranch'b United States supreme such courts jurisdiction over cases court reports. See also Supp. to arilsing thereunder. U. S. Rev. Stat. c. 137, 1, where, DEPARTMENT OF LAW. 3 with these special privileges, arises from its quality of "negotiability." This distinguishing characteristic is that arising from the form of the paper by which the legal title thereto, and to the whole amount of money expressed upon its face, may be transferred from one person to another by indorsement and delivery of the paper by its holder, or, on paper of a certain form, by delivery only. 3 Negotiability, as applied to commercial paper means not only that the instrument may be transferred, and that the transferee may bring an action on it in his own name, but also that such transfer shall be subject to no equities or rights between prior parties, and that out of the transfers of the paper shall grow an orderly commercial relation and liability between the holder and all persons whose names are on the paper. 4 4. Essentials of Negotiability. To render an instru- ment negotiable it must, in its form and substance, contain factors, the presence of all of which makes the instrument legally negotiable, and the absence of any one of which may render it non-negotiable, or at best, only quasi-negotiable. These essential factors are: (1) a date; (2) a promise to pay money; (3) certainty of the payee; (4) definiteness of amount to be paid; (5) certainty of time of payment, i. e. the date of the maturity of the instrument; (6) definiteness of place of payment ; and, (7) certainty as to the payor or promisor, i. e. the party who made and issued the instrument. 5. Forms of Negotiable Instruments. The usual forms of negotiable paper are bills of exchange usually called bills or drafts promissory notes, and checks. The essentials above mentioned must all be complied with in order for these instruments to be truly negotiable, and it is well to dwell upon this fact with emphasis so that it may be clearly fixed in the mind. To illustrate : a negotiable instrument must be for the payment of money and only money. If it is payable in any kind of property or of work or services, it is not negotiable. Accordingly, a note promissing to pay one hundred dollars in "oil stock," or in "cattle," or in "work and labor" is 3 See 1 Daniel, Neg. Insts. 1. 4 Bouvier's Law Diet. 4 AMERICAN EXTENSION UNIVERSITY unnegotiable. Likewise a draft, or a check so payable. The instrument must contain no conditions. The promise, or the request, or the order, as the case may be, must be absolute, as has been said. The full amount called for must be payable at all hazards, and not dependent upon any contingency. Thus , an instrument calling for the payment of a certain sum of money "out of the sale of my crops," is not negotiable, although it is, otherwise, a good evidence of indebtedness. These, and the other requisites of negotiability will be farther treated in the discussion of the several kinds of negotiable paper. 6. Certain Instruments Distinguished, (a) In General. There are some essential differences between drafts, checks and notes, which, while they have much in common, it is well to get a clear understanding of before taking them up separately. In a bill of exchange, or draft, one person requests another to pay still another a certain sum of money. Three parties are here involved. The first the one who issues the paper is called the drawer; the second the one to whom the paper is addressed is called the drawee ; and the third the one to whom the paper is given, or made payable is called the payee. A check is a bill of exchange, but it has some features which give it a special character necessary to carefully note. A bill of ordinary character may be drawn on any person or corporation; but a check, in order to be such, must and can be drawn only upon a bank or banker. Furthermore, a bill, like a promissory note, may be payable on time, that is, after a stated period such as "ten days after sight" or "ten days after date," as well as "at sight," or "on demand," whereas a check must always be drawn payable on demand. If an instrument although intended as a check does not comply with these two requirements, it is not a check, but a draft. Thus we see that all checks are drafts, but all drafts are not checks. Important differences between these instruments, too, are the facts that a check and, indeed, a promissory note need not be protested in the event of non-payment, whereas protest is required of bills of exchange; and, that delay in presenting a bill to the drawee will absolutely DEPARTMENT OF LAW 5 exonerate the drawer, but delay in presenting a check will not have this effect unless the drawer has been injured thereby. (b) Parties. On promissory notes only two parties are primarily involved, namely, the maker or promisor, and the payee or promisee. Besides the parties to the instruments under consider- ation already defined, there may be three others, legally speaking, i. e. the indorser, the indorsee, and the holder. If the payee or other holder of such paper made payable to his order wishes to transfer it to another, he must do so by writing his name across the back of it, indorsing it in other words and by delivery of it to the other party, who is, in legal contemplation, the purchaser of the paper. When this is done the party so transferring is known as the indorser, the party so receiving is the indorsee, and while he remains the owner of the paper he is its holder. Thus the holder, upon such transfer by him of the paper becomes the indorser, and his indorsee or purchaser, becomes also the holder. 7. Liability of Parties. The legal liability of the various parties to these instruments is different each from the other, and it is important that an accurate understand- ing thereof be had. Some are responsible primarily, others, secondarily. On a bill of exchange as it is originally drawn, the only person then liable, is the drawer. To make the drawee re- sponsible he must agree to pay it, and he makes and signi- fies this agreement by accepting the draft. His doing so is termed an " acceptance" and is usually evidenced by his writing or stamping the word "accepted" across the face of the instrument and signing his name thereunder. Upon doing this he becomes the " acceptor" and the one then liable principally on the paper. If acceptance of a bill is refused the holder may im- mediately sue the drawer. If acceptance is given, the holder must wait until the instrument matures, at which time he must present it to the acceptor for payment. If it is not then paid he must protest it, and give "due notice of such non-payment to the drawer, in order to legally hold him. 6 AMERICAN EXTENSION UNIVERSITY By this it is seen that the drawer of a bill is only sec- ondarily liable after the drawee has accepted it, and that he will be bound to pay only if the acceptor the party primarily liable fails to do so, and if protest for such non-payment be made, and notice of the protest be duly given him. In the case of a promissory note the maker is primarily responsible throughout. The liability of an indorser is secondary. By writing his name on the back of the bill he says in effect: "If the drawee does not accept, or if the drawee having accepted does not pay, I will, provided that the instrument has been presented to him for acceptance, or payment demanded, and notice of non-acceptance or non-payment has been given to me/' S. Definitions. Summarizing what has already been said in drawing the distinctions between certain kinds of instruments and showing the liability thereon of the several parties thereto, these definitions will be found helpful: A promissory note is an unconditional promise in writing for the payment of a sum of money, by one person to another, on demand, or at a fixed determinable future date, or to the order of a specified person, or to bearer. 5 A bill of exchange is an unconditional request or order in writing, by one person addressed to another person, directing such person to pay, at a time therein stated, the sum of money therein named, to a third person, also named therein. 6 A check is a written order on a bank or banker, drawn against a deposit of funds, directing the payment of the amount named therein to a person therein named, or to his order, or to bearer, immediately on its presentation. 7 The person giving a promissory note is called the maker. If it is drawn in favor of a specific individual named in the. body of the paper, and not merely to "bearer" or to "cash," he is known as the payee. Notes are fre- quently drawn to the maker's own order; they then take effect only on indorsement and delivery by him. A person drawing a bill of exchange is called the Hall v. Farmer, 5 Denio, 486. ' Bowen v. Newell, 5 Sanf. 328. * Bouvier's Law Diet. DEPARTMENT OF LAW 7 drawer; the person on whom it is drawn, the drawee; and the one in whose favor it is drawn, the payee. When accepted by the drawee, he becomes the acceptor. Indorsement is the transfer of an instrument written on the paper, and usually consists of writing the name across the back of the instrument. 8 The person so trans- ferring is called the indorser; the party to whom the paper is then delivered is the indorsee and the holder. Dishonor of commercial paper is the neglect or refusal of the person primarily liable thereon, to liquidate the same according to its terms at the time of its maturity. A bill of exchange is also termed dishonored when the person on whom it is drawn refuses or declines to accept same on its presentation to him for that purpose. The time when the paper is due and payable is spoken of as its maturity. Formerly it was the practice to allow "days of grace," usually three in number, after the expira- tion of the time limited for the payment of a bill or note, the paper being then fully payable on the last day of grace. But this indulgence, unnecessary now in these days of rapid and sure communication and transmission, has been done away with by statute in most all of the states. Maturity therefore may now be said to be the day indi- cated in an instrument itself as its due date. If payable "on demand," or "at sight," it matures when presented. Some of the states fix a time by statute determining the time of the maturity of such instruments as are payable "on demand." Where this is not so provided for, however, presentation of the paper for payment fixes its maturity. 9. Consideration. Commercial paper must be based upon a consideration either actual or presumed. The con- sideration is expressed by the term "value received" in an instrument when it is used; otherwise it is implied. There is sometimes issued what is called "accommoda- tion paper" where one, without actual consideration, and wholly to accommodate another, gives his paper, or his in- dorsement, for the purpose of enabling the latter to procure credit. Between the parties themselves there is no liability on paper of this character; but when it passes into the hands of a bona fide holder, who gives value for it and 'Com. v. Spilman, 124 Miss., 329. 8 AMERICAN EXTENSION UNIVERSITY without notice that it is merely an accommodation paper, he is entitled at maturity to recover from the accommodator if necessary, the amount named therein, notwithstanding the fact that there was no actual consideration passed be- tween the original parties at the inception of the paper. 1( 10. Law Governing Commercial Paper. It is fre- quently the case that commercial paper in the due course of modern business life circulates from one state to another, and at maturity is far from the place where it was issued. In such event it becomes important to determine what law applies to it. It may be said in general that the law of the place where an instrument is delivered is that which con- trols it. This is what is termed the law of place. There may be instances where it is rather difficult to determine just what law applies, but these are now of rare occur- rence, and the rule here laid down is a safe one to follow in the large majority of cases. 11 The validity of paper itself is fixed by the law of the place where it is made. If valid there, it can be enforced anywhere, except in those cases where it appears on the face of the instrument that it is void on the ground of public policy. The nature, obligation and interpretation of such instruments are governed by the law of the place of their payment. 11. How Made. It will be observed that in the defi- nition of each form of commercial paper there is implied an instrument in writing. This does not require that it must necessarily be written in ink. 12 It may be in pencil or any other substance capable of making legible writing. This of course includes printing, at least so far as the body of the instrument is concerned, though the signature must be actually written. The use of a mechanical device of any kind in affixing a signature would hardly answer the re- quirements. 13 The signature of the maker is usually placed at the lower right hand corner of the instrument, and as has been said before the names of the indorsers on the back. 10 Dunn v. Weston, 71 Me., 273. "Commonwealth v. Ray, 3 Gray, 447. "Commercial Bank v. Simpson, 90 "Reg. v. Harper, 15 Am. Law Rev., N. C., 471. 553. DEPARTMENT OF LAW 9 The time of delivery is as a rule shown by the date of an instrument, and when there is a date it is presumed that the paper was delivered at that time. No particular form of words are necessary to consti- tute a negotiable instrument, except that they must cover the essential features of such instruments heretofore pointed out. Where no time is expressed as to when the instrument is to become due it is held to be payable on demand. The words ' ' order " or " bearer, ' ' or their equiva- lent, placed in connection with the name of the payee, are necessary to show negotiability. If made payable to a named person only without some such word, the paper is not negotiable. When made payable to bearer, such paper may be transferred by delivery without the necessity of in- dorsement by the holder. 12. Promissory Notes. As has been stated the usual form of a note after giving the place where made, and the date, either provides "on demand," or a specific time "after date," a promise to pay "to bearer," or "to the order of," a specific person therein named, a sum of money at a fixed or determinable future date, and usually has a place of pay- ment named therein. It becomes effective on delivery. At the time of payment when according to the terms of the in- strument it is due, it must be presented for payment to the maker, and if a place of payment is named therein, the presentation and demand must be made at that place. If no place of payment is named in the paper it should be pre- sented at the place of the residence or at the usual place of business of the maker. If no such place can with reason- able diligence be found, it is the general rule that then presentation for payment is not required in order to charge the maker. Where a note is signed by two or more makers it may be either joint or joint and several. If it reads: "We promise," it is joint only, but if signed by two or more per- sons and begins "I promise," or "We jointly and severally promise," it is both joint and several. If signed by a firm or a corporation it is both joint and several. This means that the parties are liable jointly and severally, and in the case of a firm or corporation it makes no difference whether the paper reads, "I," or "We" promise. 10 AMERICAN EXTENSION UNIVERSITY 13. Bills of Exchange. Bills of exchange are of two kinds, domestic or inland, and foreign. An inland or do- mestic bill of exchange is one drawn and payable within the one state or country. A foreign bill of exchange is one drawn in one state or country, and payable in another. A bill drawn in one of our states and payable in another is therefore, in the legal sense, a foreign bill. Inland or domestic bills of exchange are usually drawn in but one part, and the same is the practice where the bill is drawn in one state and payable in another; but where it is payable in a foreign country they are usually drawn in triplicate for greater certainty of safe carriage and trans- mission, the duplicate advices to the drawee being mailed under separate covers. Forms of these and also of other commercial instruments, will be given in the lessons on Forms. i 14. Checks. One of the most common forms of nego- tiable instruments is the ordinary bank check which has already been defined. We have seen that it is necessarily drawn on a bank or banker; that it presupposes a fund against which it is drawn, and that it is payable instantly on demand. As stated it in some respects resembles an inland bill of exchange; 14 but it differs in the essential par- ticular that it presupposes the existence of a fund on hand at the bank at which it is to be paid; 15 that it must be drawn on a bank or banker; and that it is payable on demand. It passes by indorsement or delivery in the same manner as do other like negotiable instruments. It has been held that where a check is post-dated, or appears to be payable on a future day, it is really a draft or bill of exchange and not a check. 16 A check should always bear a date; and it has been said that where a check contains no date it is never payable. 17 Another standard writer says that this question as to a check having the date blank has never been adjudi- cated. 1( While the Negotiable Instruments Law, which has "Conger v. Armstrong, 3 Johns. ie Minturn v. Fisher, 4 Cal., 36. Cas. (N. Y.), 5. "Morse on Banking, 233. "Etepy v. Bank of Cincinnati, 18 "Daniel Neg. Insts., p. 601. Wall (U. S.), 620. DEPARTMENT OF LAW 11 been adopted in many of our states contains the provision that "Wnere an instrument is not dated it will be con- sidered to be dated as of the time it was issued," it is be- lieved that a bank would be warranted in refusing to pay an undated check. The question of when a check should be presented for payment is of great importance and will be fully dwelt upon later. At this point it is sufficient to say that it must be done with diligence and without unnecessary delay. The question whether the tender of a check instead of money in payment of a debt, is good in law, and if re- fused works a cancellation of the debt ; and also as to what is a proper tender, will be considered later. As a general rule, we may say that where the parties have previously in the regular course of their business transactions used checks, such a tender would be held to be good; but if in prior transactions cash had always been used, it would not be. Of course if a check is paid when presented a debt thereby recognized is discharged. 15. Bank Notes. Bank notes while not generally looked upon as being negotiable instruments are such in fact. They are the promissory notes of the bank or banker issuing them; are payable on demand, and are intended to and generally do circulate as money. In the United States while legally state banks may issue notes, yet it is not now done because of the burden of a heavy federal tax thereon. Accordingly, at the present time the national bank system is the exclusive source of bank notes in this country. The issue is regulated by act of congress and can only be done with the approval of the United States treasury depart- ment. The banks are required to deposit United States bonds with the department to secure their issues. It may be remarked in passing that the "scrip" issued at times during great business depression, are really bank notes, for they are the promises of the banks to pay money. Whether these issues are really legal has always been a grave question which has not yet been judicially deter- mined. Bank notes must not be confounded with United States treasury notes issued by the United States govern- ment which are of course negotiable instruments of like character. These and bank notes are not securities for 12 AMERICAN EXTENSION UNIVERSITY debt, but, to all practical intents and purposes are money and are intended to serve the practical uses of money. 16. Bonds and Stocks. The bonds of corporations whether municipal or private are also negotiable instru- ments and are frequently so made specifically, in form being drawn "to bearer," or "to the order of," some named payee. They are clearly so as to their legal quality of transfer by delivery or by indorsement clear of all defenses. The in- terest on bonds is usually witnessed by coupons that is to say, by small notes, maturing at the several interest periods, and covering the amount of interest then due attached to the bond itself. These coupons may be severed from the bond and transferred without it. Daniel refers to them as "Coupon bonds." 19 Corporate bonds are as a rule signed by the president of the corporation and countersigned by such other officer as the corporate laws may provide, usually the secretary or treasurer. While it is usual to also attach the seal of the corporation, it is not at all necessary to do so in order to legalize them. While bonds are usually sealed instruments, there are exceptions. Bonds may be issued by either private or public corporations, and when issued by a public corporation are termed municipal, state or government bonds as the case may be. The ordinary corporate stock certificate may also be included in this general class. They may be said to be governed by the same legal rules and prin- ciples as corporate bonds. 17. Letters of Credit. Letters of credit in a manner resemble bills of exchange. In fact, however, they differ materially. A letter of credit is used when a person intend- ing to travel desires to have on hand ready funds at the point where he desires to make use of them. The chief advantage of the letter of credit over the certified check or the cashier's check, is that the holder may at any time draw thereon only the amount which he desires. They, like bank notes, are not securities for debt; but rather letters of request whereby one person usually a bank or banker re- quests another person usually also a bank or banker to advance money and give credit to a third person; and "Daniel Neg. Insts., p. 490. DEPARTMENT OF LAW 13 wherein the person issuing the letter undertakes to repay such sum or sums as may be so advanced. Letters of credit may be addressed to a particular person, and if so they are known as "special" letters. Or they may be addressed to no person in particular, simply to "any bank or banker" for instance, and are then called "general" letters of credit. Letters of credit are not nec- essarily issued for a certain amount, but signify the largest amount for which they are issued and will be honored or redeemed by the drawer. As they are drawn upon by the holder or payee the banker making the payment indorses the amount paid by him to the holder, on the back thereof or on some other prepared space on the letter. This is done from time to time as funds are called for up to the total face of the instrument. 18. Certificates of Deposit. Certificates of deposit, are receipts for money deposited, with a promise to hold, or pay it, as may be agreed between the parties and as stated in the certificate. They are usually issued by bank- ing houses and intended more as funds left for safe keeping than to be drawn against. They represent an indebtedness of the issuing party, to be paid on surrender of the certifi- cate. They usually bear interest and may be transferred by indorsement unless restricted thereon. 19. Bills of Lading. Bills of lading which are really quasi-negotiable instruments, possess certain qualities which render them in some respects closely akin to the nature of the instruments we have been discussing. They may be defined as the written acknowledgment by the rep- resentative of any common carrier, that he has received the goods therein described, for the voyage or journey therein stated, to be carried upon the terms, and delivered to the persons, therein specified. It is at once a receipt for the goods described therein, which renders the carrier respon- sible as their custodian, and an express written contract for their transportation and delivery. 20 The negotiable nature of bills of lading arises from the fact that they are frequently used to transfer the title to goods purchased, before their delivery to the buyer, and 20 Cavallaro v. Texas Rwy. Co., 110 Cal., 348. 14 AMERICAN EXTENSION UNIVERSITY while they are still in the possession of the party issuing the bill. They may be transferred by indorsement and when indorsed pass the title to the goods and the goods them- selves the same as by an actual delivery and transfer thereof. A bill of lading should state the quantity of merchan- dise covered thereby; such marks of identification as may be thereon; the names of the shipper and of the consignee; of the master of the ship or other common carrier trans- porting them; the places of the departure and of the dis- charge of the shipment ; and the cost of the freightage. QUIZZEE. GENERAL CHARACTERISTICS AND KINDS. 1-1. What does the term " negotiable instruments" include 1 ? 2- What is the relative importance of such instru- ments in the law of contracts ? 3- Is the law relating to such instruments based upon the general principles of the law of contracts ? 4- If not, upon what is any divergence based? 5- 2. Define the "Law Merchant." 6- What laws did this system harmonize? 7- How did it become a part of the English Common Law? 8- Of what present-day law is the Law Merchant the basis ? 9-3. Of what is commercial paper the representative? 10- What quality attaching to commercial paper en- dows it with special privileges? 11- What are the special privileges attaching to com- mercial paper? 12- From what does the distinguishing characteris- tics of commercial paper arise? 13- What is negotiability? 14- 4. State the essentials of negotiability. 15-5. What are the usual forms of negotiable paper? 16- What is requisite to endow paper with the quality negotiability? DEPARTMENT OF LAW 15 17- In what only must a negotiable instrument be payable ? 18- Can an instrument payable in work or property, be negotiable? Illustrate. 19- Can an instrument containing conditions be negotiable? 20- What quality must the promise or order of a paper possess to make it negotiable? Illustrate. 21-6. Describe the form and substance of a bill of exchange. 22- (a) How many parties are involved in a bill of ex- change? Describe the relation of each to the paper, and state what he is called. 23- How does a check differ from a bill of exchange? 24- Upon whom may a bill be drawn, and upon whom must a check be drawn? 25- Are all checks drafts, and are all drafts checks? 26- What is the difference between a bill or a note, and a check, as to the time of payment thereof? 27- Distinguish between the essentials of a bill and of a check. 28- (b) How many parties are there to a promissory note and what are they called? 39- What is the common technical term applied to the paper ? 30- Define an indorser. 31- Define an indorsee. 32- Define a holder. 33- Describe how these relations succeed each other. 34- Define indorsement. 35-7. What can you say as to the liability of the various parties to commercial paper. 36- Name the parties liable on a bill of exchange and state how such liability is created. 37- How does one become liable as an acceptor on such paper? 38- Who is primarily and who secondarily liable on bills of exchange? 39- What is the common technical term applied to the " acceptance" of checks? 40- Who is principally liable on certified or accepted checks? 16 AMERICAN EXTENSION UNIVERSITY 41- What right has a holder of a bill the acceptance of which is refused? 42- What must a holder of a bill do if it is accepted? 43- What must a holder do if a bill is not paid at ma- turity and for what reason? 44- What is the liability of the drawer of a bill? 45- Who is primarily liable on a promissory note? 46- What is the liability of an indorser, and what is the legal effect of his indorsement? 47-8. What is a promissory note? 48- Define a bill of exchange. 49- Define a check. 50- What do we term the person who makes a note ? 51- The one in whose favor a note is drawn is called by what term? 52- When does a note become effective? 53- Where would you look to find whether there were any indorsements? 54- Name the parties to a bill of exchange. 55- State what relation they each bear to the bill. 56- Define what is meant by dishonor of commercial paper. 57- What is meant by the term maturity? 58- What are days of grace, and are they now gen- erally in use? 59- When is a demand note due? 60- Is there any exception to this rule if so what is it? 61- 9 What is the rule as to consideration, as affecting commercial paper? 62- How is consideration shown in an instrument? 63- What is accommodation paper? 64- What is the liability on accommodation paper when in the hands of innocent holders ? 65- Is there any different rule as to the immediate parties if so, what is it? 66-10. What do you understand the term "law of place" to mean? 67- What law applies to the validity of commercial paper? 68-ll. Is it necessary that commercial paper be in writing. DEPARTMENT OF LAW 17 69- What is covered by the term writing. 70- How should the signature be affixed? 71- Where on the paper would you look to find the name of the maker? 72- How would you fix the time of delivery of an instrument ? 73- What word or words are necessary to show ne- gotiability? 74- Is paper made payable to a certain named per- son, only, negotiable? 75- Must a note made to bearer have an indorsement in order to transfer it? 76- 12 If no place of payment is stated in a note where should it be presented? 77- When is a note a joint note, and when several? 78- How does this rule affect the paper of a firm or corporation? 79-13. How many kinds of bills of exchange are there? 80- What is the difference between a domestic and a foreign bill of exchange? 81- In what forms are domestic, and what form foreign bills usually drawn? 82- 14. In what essential particular does a check differ from a bill of exchange? 83- What is the legal effect of a post-dated check? 84- Would a bank be warranted in refusing payment of an undated check? 85- What is the rule as to presentation of a check? 86- Does a payment by check ever cancel a debt? 87-15. Are bank notes negotiable instruments? 88- What is the difference between a bank note and a treasury note? 89- What can you say concerning the use and the legality of bank " scrip?" 90-16. Are corporation bonds negotiable ? 91- Is the corporate seal necessary to make the bond legal? 92- What is the purpose of the coupons attached to a bond? 93- Are the coupons negotiable? 94- What is the difference between state and mu- nicipal bonds and those of a private concern? 18 AMERICAN EXTENSION UNIVERSITY 95- What can you say as to the nature of corporate stock? State fully. 96-17. What is the purpose of letters of credit, and what other instrument do they resemble? 97- Define them. 98- Name the different kinds of letters of credit. 99- What is the difference between them? 100- 18. What are certificates of deposit? 101- When are they usually issued, and state their characteristics ? 102- 19. How would you define a bill of lading? 103- Are they ever spoken of as negotiable in- struments ? 104- From what does the negotiable value of bills of lading arise ? 105- What are they usually termed? 106- Can a bill of lading be transferred and if so, how? 107- What should a bill of lading contain? State fully. DEPARTMENT OF LAW 19 LESSON 11.- CHAPTER H. CONSIDERATION. 20. Necessity of Consideration. 21. Good Consideration. 22. Void Consideration. 23. Good and Valuable Consideration Distinguished. 20. Necessity of Consideration. Commercial paper requires a legal consideration to support it of the same character as is necessary with all other kinds of contracts. This necessity applies between the parties to the instru- ment at its inception as well as to those who become con- nected with it later on by indorsements. Whether one be maker, guarantor, surety, acceptor, indorser, or indorsee, there must be a sufficient consideration to sup- port the several contracts thereby entered into, or the rights of the respective parties cannot be legally enforced. * Each separate liability requires a separate considera- tion, so that the consideration for the making of an instru- ment will not support an indorsement after its delivery. 2 What consideration is necessary is determined by the law of the place where the paper is made. 3 It is not absolutely required that in order to be valid a consideration must be adequate in value to the face of the instrument. Accord- ingly, paper purchased for an amount below its face value does not invalidate the transaction. 4 Unless therefore the good faith of a transaction is clearly impeached, inadequacy of consideration is immaterial. 5 21. Good Consideration. Money loaned or ad- vanced, goods sold and delivered, or a money value in any form, is always a good consideration. So too is an advance or loan to a third person made at the request of the maker of an instrument. A bill or note may be given in contempla- tion of a liability incurred at the time, but payable in the future, and if given as security for a debt, the consideration is good also. And a note or bill given by one to discharge or extinguish the debt of another, 6 is valid, the considera- 1 See Ante, 9. 'Kitchen v. Loudenback, 48 Ohio z Williams v. Williams, 67 Mo., 661. St., 177. 3 Evans v. Andertson, 78 111., 558. Stack v. Weatherwax, 52 Hun. 4 Tod v. Wick, 36 Ohio St., 392. (N. Y.), 615. 20 AMERICAN EXTENSION UNIVERSITY tion being sufficient if the original debtor is discharged from liability. 7 Exchange of commercial paper of any description is a good consideration the one for the other, and they need not be for the same amount. Each instrument is an independ- the obligation in such an exchange, not conditioned on the payment of the other unless such condition be expressed in the paper. 8 As between the original parties the paper not having been transferred to an innocent holder non-pay- ment of one obligation may be available by the issuer of the other as a set-off on the claim of payment of such other instrument. Services may be a valuable consideration for commer- cial paper if given in any character that makes the service a valuable and legal one. Services rendered or contracted to be rendered in aid of an illegal end, or in matters that are against public policy, such as acting as lobbyist to procure legislation, are not a valid consideration to support paper given therefor. 9 An agreement for services to be rendered in the future is a good consideration; and a promise to re- frain from injurious remarks, promises of marriage, and others of a similar character, though not based upon a pecu- niary character, have been held to be a good consideration. Where a bill or note is given for a subscription to an educational, benevolent or charitable object, for which sim- ilar obligations of others have been given, there is a good consideration. In the absence of other like obligations such an instrument so given cannot be enforced against the maker. 1( Where a sufferer from a fire received from a re- lief committee money raised by voluntary subscription to benefit him and others and gave his note for it, the court held that there was a good consideration. u However a note given by a child to a parent to cover an advance- ment; 12 and a note given to be used in equalizing the divi- sion of a parent's estate, would not be enforceable as a debt or note against the maker. 13 'Seymour v. Prescott, 69 Me., 376. Iowa, 596. 8 Hall v. Henderson, 84 111., 611. "Bayou Sara v. Harper, 15 La. Rose v. Truax, 21 Barb. (N. Y.), Ann., 233. 361 - "Marsh v. Chown, 104 Iowa, 556. "Simpson College v. Tuttle, 71 " Hardin v. Wright, 32 Mo., 452. DEPAETMENT OF LAW 21 A valid consideration is also necessary for the exten- sion of the time of payment of an instrument, or for for- bearance to sue upon it at maturity. And part payment, or a payment of interest in advance, before maturity, while then a sufficient consideration for forbearance, are not so after the paper has become due. 14 The giving of new security for over-due paper is however a good consideration for such extension or forbearance. 15 An agreement to pay a note already overdue will create no new liability unless the paper be outlawed, when such new promise will take it out of the statute of limita- tions, and will be a valid consideration. 16 22. Void Consideration. Where negotiable paper is based upon an agreement against public safety and policy, as with an enemy in time of war; the corrupt procurement of a public contract; or when given to influence the conduct of a public officer, or the sale of a public office ; it is without valid consideration and is void. So also is a note or bill which has as its consideration the compounding of a felony or misdemeanor, or to procure or facilitate a divorce and the like. A bill or note is also void for want of consideration if it be given to restrain or prevent a marriage; or in restraint of trade; or is based on a bet or wager. Nor can there be any valid consideration for an instrument if it is given in violation of any express statutory provision. For instance, paper given for lottery tickets, where their sale is pro- hibited under the law; or for violating a license law, liquor law, or Sunday law will be without valid consideration. In considering the cases of instruments void by reason of illegality of consideration, there is a distinction between those where the statute declares a contract founded upon such a consideration to be absolutely void, and those where the consideration is held to be void by the courts. In the first instance the instrument is void even in the hands of a bona fide holder for value; in the second it is void only as between the immediate parties, but is good in the hands of a bona fide holder. 17 "Liening v. Gould, 13 Cal., 598. " Vallett v. Parker, 6 Wend. (N. Y.), "Robertsen v. Blevins, 57 Kan., 50. 615. 16 Stallings v. Johnson, 27 Ga., 564. 22 AMERICAN EXTENSION UNI V ERSITY It must be remembered however in applying the rule as to consideration, that the question can only be raised be- tween the original parties to the transaction and such sub- sequent holders as have notice thereof or who take the paper without value, 18 In such cases it is necessary for the defendant to prove not only want of consideration but also that the plaintiff is not a bona fide holder for value. This however does not apply in the cases referred to above where the consideration is nullified by statute, and an instrument so given is of no value in the hands of any person what- soever. 23. Good and Valuable Considerations Distin- guished. Consideration is divided into two principal classes; good and valuable. Good consideration is the natural love and affection of near relatives, such as prompts the bestowal of benefits. Commercial paper based upon such consideration, so long as it does not pass into the hands of a holder for value, cannot be sued upon. 19 Valuable consideration however is anything which has a pecuniary or monetary value. Not necessarily money it- self, but either that or its equivalent. An action on com- mercial paper can only be sustained by the original holder thereof, when it is based upon a valuable consideration. 20 18 United States v. Bank of Metropo- consideration, the lesfeons on Con- lis, 40 U. S., 393. tracte, Chapter III on Consider- M Harris v. Harris, 69 Ind., 181. ation. 20 See, generally, as to validity of DEPAKTMENT OF LAW 23 CHAPTER III. ACCEPTANCE AND INDORSEMENT. 24. Acceptance Generally. 25. What Acceptance Is. 26. How Acceptance is Made. 27. Acceptance Supra Protest. 28. Effect of Acceptance. 29. Indorsement Generally. 30. Kinds of Indorsement. (a) In Blank. (b) Special. (c) "Without Recourse." (d) Restrictive. (e) Qualified and Conditional. 31. Indorsement Rights and Liabilities. (a) How Established. (b) Limit and Order of Liability. 32. Acceptance and Indorsement of Certain Instruments. (a) Checks. (b) Bank Notes. (c) Certificates of Deposit. (d) Bonds and Coupons. (e) Bills of Lading. 24. Acceptance Generally. The first important step in the life of a bill of exchange after its delivery is its presentment for acceptance. This must not be con- founded with presentment for payment at maturity. The two presentments are of entirely different effect and play entirely different parts. It will be remembered, that both domestic or inland as well as foreign bills of exchange are drawn on some person, either an individual, firm or cor- poration. It then becomes the duty of the holder of the bill to promptly present it for acceptance to the drawee; for if it be not accepted, it is then dishonored. Nor has such presentment anything to do with indorsement, both occupying entirely different positions and having a lia- bility based on entirely different grounds. 25. What Acceptance Is. The acceptance of a bill is the agreement on the part of the drawee to pay the bill drawn on him according to its terms, when it becomes due. 1 There is no liability on the part of a drawee until he has agreed, by his immediate acceptance or by a previous agreement, to pay. 2 As has been said it is the duty of the holder of a bill to promptly present it to the drawee for ac- ceptance; if he fails to do so, he not only loses his claim 'Cox v. National Bank, 100 U. S., 2 Luff v. Pope, 5 Hill (N. Y.), 413. 712. 24 AMERICAN EXTENSION UNIVERSITY against the drawer, but against all other parties that is, all indorsers and transferrors liable on the bill. 3 In the event that acceptance of a bill be refused and it thus becomes dishonored, it should be protested if it be a foreign bill. In all cases, in the event of a dishonor, notice thereof is required to be given to all parties liable on the bill. When a bill is presented for acceptance the drawee is entitled to have it produced for his examination, and a rea- sonable time to allow him to determine whether or not he will accept the same. 4 When a bill is in two or more parts, as we have seen to be the practice regarding foreign bills of exchange, either part may be presented and the drawee need accept only one of them. 26. How Acceptance Is Made. As has been stated the usual form of acceptance is by writing the word "ac- cepted" across the face of a bill together with the signa- ture of the acceptor. But it has been held that if the drawee simply writes his name across the face or even on 'the back of a bill, it is an acceptance. 5 An acceptor should be careful in accepting a bill drawn in more than one part, that his acceptance be not placed on any of the other parts, for if he should do so and the accepted parts pass into the hands of different bona fide holders he will be liable on each part on which his name appears. 6 While there may be an acceptance by parol, i. e. not by writing on the paper, 7 the holder of paper has a right to refuse such an acceptance. It is now however the general rule by statute that written acceptance is required. If a bill be drawn on a co-partnership acceptance by one member of the firm will be binding on the firm. Should a bill be drawn on a member of a firm individually, who in accepting it uses the firm name, it will nevertheless be his individual acceptance, and the firm will not be liable. 8 Care must be taken not to confound a bill drawn against two or more persons jointly, who are not co-partners, and one drawn against a firm. As we have seen, one partner may accept for the firm and the firm will be bound; in the 8 Adams v. Boyd, 33 Ark., 33. T Joyce v. Wing Yet Lung, 87 Cal. Connelly v. McKean, 64 Pa. St., 113. 424. "Raines v. Nance, 52 111. App., 406. 'Nichols v. Diamond, 24 Eng. Law & 6 Bank of Pittsburg v. Neal, 63 U. S., Eq., 403. 96. DEPARTMENT OF LAW 25 other instance however only those individuals accepting a bill will be liable, 9 and as against those not accepting it should be protested. Acceptance may also be made after a bill has matured and been protested for non-payment, and in such a case the bill is regarded as payable on demand. 10 There may be a qualified or conditional acceptance though a holder is al- ways entitled to an absolute and unconditional acceptance according to the terms of the bill. While a holder has the option of refusing a conditional or qualified acceptance, yet if he accepts it his duty is at once to notify the drawer and all prior indorsers, for his ac- ceptance of a conditional or qualified acceptance without their consent, discharges them from liability on the paper. 12 "To pay when goods consigned to me are sold;" "to pay as remitted for; "to pay when cargo of equal value is consigned to me," and acceptances payable at a different time, or at a different place from that named in the bill, are examples of conditional and qualified acceptances. An ac- ceptance "when in funds," or words of similar character, makes the drawee liable only when he is in possession of funds from which he is authorized to pay the bill. 13 In every case of a conditional or qualified acceptance there is no liability until the performance of the condition, or the happening of the event upon which the promise is predicated. 14 However if the condition or qualification set forth be rendered impossible by the act of God, or of the law, the acceptor is thereby discharged. 15 27. Acceptance Supra Protest. Acceptance supra protest, or acceptance for honor, is where the drawee named in a bill refuses to accept it, and the bill has been pro- tested for non-acceptance, when a stranger to the bill that is one on whom it is not drawn intervenes and accepts it for the honor of the drawer or for any of the indorsers. 16 . If it be not stated for whose honor the bill is accepted it is presumed to be for the honor of the drawer. While accept- ance for honor is a conditional acceptance it is an exception to the rule requiring the consent thereto of the drawer and 'Smith v. Milton, 133 Mass., 371. "Marshall v. Clary, 44 Ga., 513. 10 Stockwell v. Branble, 3 Ind., 428. ,' " Everard v. Warner, 36 Minn., 383. 11 Ford v. Angelrodt, 37 Mo. 50. * Rawson v. Beach, 13 R. I., 151. 32 Gibson T. Smith, 75 Ga. 33. "Walton v. Williams, 44 Ala., 347. 26 AMERICAN EXTENSION UNIVERSITY the previous indorsers. The practice in such cases is to make this kind of an acceptance before a notary public, that it may thus be clearly established. When a bill of exchange is accepted and delivered to the holder, it is irrevocable even though the holder may con- sent thereto, for it is well settled that the drawer and in- dorers have a vested interest in an acceptance. r 28. Effect of Acceptance. The acceptance of a bill admits the drawer's signature as well as his legal capacity and his authority to make the bill. 18 The drawee also by his acceptance admits that he has in his possession funds of the drawer to pay the bill. 10 There cannot be an accept- ance in the legal sense of the term, of a promissory note al- though frequently when a note is made payable at a bank, the bank upon presentation issues its certificate that it has funds wherewith to pay it. This however is virtually a cer- tification, and not an acceptance, for it imposes upon ,the bank an absolute obligation to pay. 2< In the case of a written prmise to pay a non-existent bill one not yet drawn there has been considerable variance of judicial decision. The position however taken by Chief Justice Marshall in the leading case on that subject in which he says that "a letter written within a reasonable time before or after the date of a bill of exchange, describing it in terms not to be mistaken, and promissing to accept it, is, if shown to the person who afterwards takes the bill on the credit of the letter, a virtual acceptance, binding the person who makes the promise," 21 has been followed by the best authorities. This has also been held to apply to like agreements by telegraph. 2! 29. Indorsement Generally. It should also be borne in mind that acceptance and indorsement are entirely dis- tinct identities legally, and that the liability involved is likewise different. It must be understood that the law affecting indorsements applies to bills of exchange, notes, 17 Anderson v. First Nat. Bank, 1 Me- 2I> Mead v. Merchants Bank, 25 N. Y., Crary, 252. 148. 18 Hoffman v. Milwaukee Nat. City 21 Coolidge v. Payteon, 15 U. S., 31. Bank, 79 U. S., 181. Central Sav. Bank v. Richards, 109 "Heermance v. Morris, 101 N. Y., Mass., 414. 63. DEPARTMENT OF LAW 27 and, in fact all instruments wherever indorsement is per- mitted. In all such cases the liability of the indorser is in a general way the same. As we have already seen, 23 an indorsement of commer- cial paper accompanied by its delivery is virtually the transfer of the paper by one party to another, and is usually made by the holder writing his name across the back of the instrument. 24 An indorsement however may be made on a separate piece of paper attached to the instrument itself, called an allonge, meaning, a rider. In practice an allonge is used only when the back of an instrument is filled with indorsements and space is required for more indorsements. An indorsement is not only the transfer of the paper and an undertaking to pay it upon notice of its dishonor, but also carries with it a warranty as to title thereto in the indorser, and as to its genuineness and validity, and the legal capacity of the parties. 25 30. Kinds of Indorsement, (a) In Blank. Indorse- ment may be general or special; in blank, or in full. The usual form of indorsement, by simply writing the name across the back of the paper, is termed a general indorse- ment, or an indorsement in blank. That is to say it is in- dorsed generally, not being made payable to any designated person. Under such an indorsement instruments can be passed by mere delivery from one party to another without necessarily being indorsed by the subsequent holders. While this may be done legally it is customary to require each transfer or tranferror of an instrument to indorse it, so as to be able to show a chain of title in the instrument. Fur- thermore, any one to whom paper indorsed generally or in blank has been delivered, may, as the holder of the paper, fill in the blank above the indorser 's name, making the indorsement special, if he so desires. (b) Special. An indorsement is special, or in full, when it designates the indorsee by name or otherwise, such as, "Pay J. L.," or, "Pay J. L. or order;" or "Pay to the order of J. L.." When an indorsement is special or in full, the paper can only be transferred by the indorsement of the 53 Ante, 6 (b). 28; Turnbull v. Bowyer, 40 N. Y., ^Higgins v. Bullock, 66 111., 39. 45*6. 25 Kenworthy v. Sawyer, 125 Mass., 28 AMERICAN EXTENSION UNIVERSITY person named therein. Under such an indorsement the paper cannot legally pass by mere delivery. 26 In order to transfer an instrument with all its original incidents as to negotiability, it is not necessary, where there is a special indorsement, to use the words "or order/' to make the paper further negotiable. These words are required only in the making of the paper and an instrument originally negotiable remains so irrespective of the character of its indorsements, 27 unless some indorsement specifically transfers it only to a person therein named, as "Pay to J.D.only." A general indorsement or indorsement in blank may subsequently be made special by any indorser before its delivery to another by writing above his name the words necessary to make it such. In a similar manner where there is a special indorsement, it can be made general by the indorser, before delivery. 28 Any indorser has the right to enlarge or restrict his own liability previous' to delivering his indorsed paper to another. (c) "Without Recourse. ' ' An indorsement * * without recourse," is where the indorser exempts himself from liability in the event of the dishonor of the paper. Such an indorsement is made by adding to the signature of the indorser, the phrase, "without recourse," or other words equivalent thereto. While this renders such an indorser free from liability to pay the paper, it does not affect the liability of the maker or of other unrestricted indorsers. An indorsement "without recourse" while exempting the indorser from liability of payment, carries with it, however, a warranty as to the genuineness of the paper, the indorsers right to transfer it and that the previous parties are legally competent. (d) Restrictive. A restrictive indorsement is where certain terms are contained in the paper restricting its use. In some states particular words are required for this pur- pose. Examples of restricted indorsements are, "Pay to J. L. only;" "to J. L. for my use;" "for my account;" "for account of J. L." and the like. While such an indorsement 26 Fawsett v. National Life Ins. Co., w Fawsett v. National Life Ins. Co., 97 111., 17. supra. DEPARTMENT OF LAW 29 remains in effect it destroys the negotiability of the paper. 29 The most common form of restrictive indorsement are the words "for collection," frequently placed on paper when it is turned over to a bank for the purpose of collection. The legal advantage following such an indorse- ment is that the title to paper so indorsed remains in the indorser does not pass to the bank, in other words so that in case of the failure of a collecting bank while the paper or its proceeds is in its hands, the indorser can prove title thereto and claim it. "For Deposit" is another usual form of such indorsement, the legal effect of which is that a bank accepting paper so indorsed thereby credits the depositor at once with its amount, and does not do so conditionally upon its being collected. (e) Qualified and Conditional. A qualified indorse- is one where the indorser restrains, limits, qualifies or enlarges his liability from what the law implies to be his true liability. 30 A conditional indorsement is one that is made upon a condition, either to give effect to or to avoid an indorse- ment. It may be either a condition precedent or subse- quent, and the indorsement is not binding upon the indorser unless the condition be fulfilled. 31 To illustrate : "Pay to J. L. or order provided he arrives at the age of twenty-one years," is an indorsement upon a condition precedent. "Pay to J. L. or order, unless before maturity I notify you to the contrary," is an indorsement upon a condition subsequent. 31. Indorsement Rights and Liabilities, (a) How Established. In every case before legal liability attaches to an indoser there must be a delivery of the paper to some transferee. Such delivery need not necessarily be made in person; it may be made by messenger or by mail. 33 The law of the place where an indorsement is made governs the liability of the indorser. 34 The lawful possession of a "Mechanics Bank v. Valley Packing 83. Co., 4 Mo., 200. ."* ss Mendenhall v. Baylies, 47 Ind., 577. '"Turley v. Hodge, 3 Humph. ^ Canterbury v. Bank of Sparta, 91 (Tenn.), 73. Wis., 57. J1 Johnson v. Barrows, 12 La. Ann., 34 Moore v. Clopton, 22 Ark., 125. 30 AMERICAN EXTENSION UNIVERSITY negotiable instrument confers on the holder all rights and title to the instrument, but mere possession without legal title is not sufficient. 35 A forged indorsement passes no title to paper; and forgery is committed if an indorsement be made by an actual person bearing the same name as the payee or indorsee but not in fact the party in interest. 36 Power to indorse may be delegated to an agent, and when duly authorized he has all the legal powers of his principal for that purpose. Such authority however must be expressly conferred. 37 In the event of the death of a party to an instrument his executor or administrator has power to indorse, and to transfer same. 38 While indorsement may be made either before or after the maturity of an instrument, if made afterwards a holder so receiving it takes it subject to all the defenses and equi- ties existing between the original or any previous parties thereto, as distinguished from the right of one who takes before maturity against whom no such defenses are' al- lowed. 39 Although in order to pass legal title to paper in- dorsement thereof is necessary, the equitable title may be passed by mere delivery without indorsement. 40 Where an indorsement is omitted by accident, mistake or fraud, it may be compelled by proper legal action. When obtained the liability and rights of such an indorsement relate back to the time of the transfer of the instrument. 41 An instru- ment payable to two or more persons who are not partners must be indorsed by all of them in order to pass the full title thereto, unless one is authorized to sign for all 42 in which event he must sign the name of all as indorsers. An indorsement may be made to anyone, even to per- sons laboring under legal disability such as infants, insane persons and married women. 43 (b) Limit and Order of Liability. Where an in- dorser desires to exempt himself from full liability his in- 88 Andrews v. Bond, 16 Barb. (N. Y.), 238; and see closing paragraphs 640. of 3, ante. 38 Beattie v. National Bank, 174 111., 40 Van Riper v. Baldwin, 19 Hun. (N. 571. Y.), 344. 87 Whitney v. Western Stage Co., 20 4 - Southard v. Porter, 43 N. H., 379. Iowa, 554. " Rhyhimer v. Fickert, 92 111., 315. "Nelfeon v. Stallenwerck, 60 Ala., 43 Philliskirk v. Pluckwell, 2 M. & S., 140. 393. 39 Cole v. Stearns, 46 N. Y. Supp., DEPARTMENT OF LAW 31 tention so to do must clearly appear from the indorsement itself, otherwise he will be held fully responsible as an indorser. A firm was closing up its business and was suc- ceeded by a new partnership in which one of the old firm was a member. This party indorsed a note on account of the old firm, thus: "B. & H, old fir min liquidation" and signed it. In an action against him as indorser it was contended by him that the indorsement showed that it was made for the mere purpose of transferring title to the note, but the court held that this position could not be sus- tained and that the words inserted did not clearly express an intention to limit his personal liability, failing in which he was held to his indorsement. 44 But in a case where an indorsement read, "For value received, etc. I transfer unto J. P. H., all my right and title to the within note, to be enjoyed in the same manner as may have been by me," the court held the indorser was exempted from personal lia- bility thereon, as the indorsement clearly showed that he reserved no right in the paper. 45 Where an indorsement read "For value received we guarantee the payment of the within note, and hereby waive demand, and notice of non-payment," it was held, that the writing constituted an indorsement with an enlarged liability. 46 An indorsement cannot be for less than the full amount of the instrument. Hence where an indorsement said: "Pay to A. P. L. or order Four hundred dollars out of this note," the court held such indorsement to be void. 4 It is not usual to date an indorsement, but in the absence of a date it is presumed to have been made before the maturity of the paper. 4S Where there are several successive indorsements the order in which the names appear on the paper prima facie represents the order in which the indorsements were made and so determines the order of liability of the indorsers. 49 This may be overcome by proof of an arrangement between the parties involving a different order of liability. In the 44 Fassin v. Hubbard, 55 N. Y., 469. Frank v. Kaigler, 36 Tex., 305. "Hailey v. Falconer, 32 Ala., 536. *" Lewis v. Parker, 31 Eng. Com. 48 Robinson v. Lair, 31 Iowa., 14. Law, 200. ^Rhinehart v. Schall, 69 Md., 352. 32 AMERICAN EXTENSION UNIVERSITY case of accommodation paper an indorser has the right to rescind his obligation and is entitled to the cancellation of the instrument at any time before it is negotiated. 50 32. Acceptance and Indorsement of Certain Instru- ments. (a) Checks. Checks not payable to bearer or to a named person only, whether uncertified or certified pass by indorsement. The certification of a check has been said to be " equivalent to an acceptance," and as in case of accept- ance makes the bank the principal debtor. 52 There is no necessity however for the holder to present a check for ac- ceptance as he is entitled to payment on demand in any event ; but where a holder desires to keep a check in circu- lation and still feel assured that the bank will pay it when presented, the practice of certification, or acceptance, has now become quite common. Acceptance of a check in the legal sense which we have been using it in this lesson is not contemplated or permis- sible in law, because the very nature of a check precludes this form of acceptance for the reasons already given. 53 (b) Bank Notes. Bank notes and government treasury notes, require neither acceptance nor indorsement. They are in effect money, and intended to be used as such. They pass current by simple delivery because of the char- acter of their source. Indorsement would add nothing to their value or security. Being payable in coin on demand they require no acceptance to insure redemption. (c) Certificates of Deposit. Certificates of deposit pass by indorsement and the rights and liabilities of the parties thereto is practically the same as in the case of notes, bills of exchange, and other commercial instruments. 5 ' There is the important characteristic pertaining to these instruments that no right of action thereon accrues to the holder until they have been actually presented for payment and payment demanded and refused. 5r> Being issued by banks they require no acceptance. 60 Smith Exer's. v. Wyckoff, 3 Sandf. j 54 Poorman v. Mills Co., 35 Cal., 118. Ch. (N. Y.), 89. I McGough v. Jamison, 107 Pa. St., 51 Merchants Bank v. State Bank, 10 33'6. Wall., 648. ""McGough v. Jamison, 107 Pa. St., "See 7, Ante. 336. K First Nat'l Bank v. Leach, 52 N. Y., r ' 6 Morgan v. United States, 113 U. S., 350. 491. DEPARTMENT OF LAW 33 (d) Bonds and Coupons. Bonds, and coupons when detached from their bond, also pass by delivery and indorse- ments in a similar way. 5G Acceptance is not required thereof as they are the undertaking of their principal obli- gors. The legal rules applicable to indorsements and to in- dorsers of other negotiable instruments, apply with full force and effect to these. (e) Bills of Lading. Bills of lading are transferred by indorsement and delivery of the instrument, and pass whatever title to the goods thereby called for, that the transferor had at the time. 57 There is however this impor- tant fact to be kept in mind, that a bill of lading stands for the goods only during their transit and until they are delivered to the person entitled to them as therein called for. 58 Mere arrival of the goods at the point of destina- tion is not enough to prevent a bill of lading from being legally transferred by indorsement. This can be done up to the time actual delivery thereof to the consignee takes place. 59 57 Misbouri Pacific R'wy v. Heiden- P., 38. heimer, 82 Tex., 199. B> Cairo First Nat. Bank v. Crocker, 18 Meyerstein v. Barber, L. R., 2 C. Ill Mass., 163. QUIZZEE. CONSIDERATION 1-20. Does commercial paper require a consideration ? 2- To what parties thereto does this apply? 3- Would the consideration for the making of a note support an indorsement after delivery! 4- What is the rule as to seperate consideration? 5- What law fixes the kind of consideration neces- sary? 6- Must the consideration equal the face of the in- strument in order to be valid ? 7- Is buying of paper below its face value taking it out of the usual course? Is inadequacy of consideration material? 9- State the exception if any. 10-21. Is the loan of money or the sale and delivery of goods a good consideration? 34 AMERICAN EXTENSION UNIVERSITY 11- Does this apply to an advance of money? 12- If the maker of an instrument requests a loan or advance to a third person, would that be a good consideration? 13- If the note be given for a liability incurred at the time, but payable in the future, is there good consid- eration? 14- Is a note given to secure a debt possessed of a good consideration? 15- If a note be given by a person to extinguish the debt of another, is there a good consideration? 16- What is the important fact to be considered in this class of cases? 17- Is exchange of paper a good consideration? 18- Must the exchanged instruments be for the same amount? 19- Are they related to each other in any manner, or under any circumstances ? 20- Is non-payment of the obligation under any cir L cumstances available as a set-off? 21- Are services a valuable consideration? 22- What nature of services if any are such as would be considered a good consideration? 23- Are there any services that might not form the basis of a good consideration? if so name them. 24- Are services to be rendered in the future a good consideration? 25- Are services without a pecuniary character a good consideration? 26- Give an instance of such a case. 27- Is an obligation given as a subscription to an edu- cational, benevolent or charitable object good under any circumstances if so, when? 28- If a note be given by a person who receives aid from a relief committee, for that aid, where the fund from which he received such aid was raised for the express purpose, is there good consideration? 29- Can a parent collect on a note given by his child to cover an advancement to him and why? DEPARTMENT OF LAW 35 30- Is a note enforceable against the maker if given to equalize an interest in the parent's estate and why? 31- Is a consideration necessary for the extension of a note? 32- Is this also true as to a forbearance to sue upon it? 33- Is part payment before maturity a good considera- tion for forbearance ? 34- How as to a payment of interest in advance before maturity? 35- How would you answer the two foregoing ques- tions if the facts stated in them occurred after maturity ? 36- Would the giving of new security for the extension or forbearance affect it in any way if so, how? 37- Under what circumstances if any would an agree- ment to pay an overdue note create a new liability? 38- 22. What nature of agreements, if any, are of such a character that a paper if given against them are void as against public safety? 39- Would a note given for the purpose of facilitating a divorce be good and why? 40- Would a note which was given to violate a license law be good and why? 41- Give an instance of a note that would be void for want of consideration. 42- Is there any distinction between the case of a note given for a consideration held to be absolutely void, and one held void by the courts if so, state it? 43- What is the rule in this respect? 44- Between whom can the question of consideration be raised ? 45- What proof is required as to subsequent holders? 46-23. Into what classes is consideration divided? 47- Define "good" consideration. 48- Is paper based upon such consideration good, and under what circumstances? 49- Define "valuable" consideration and distinguish from merely "good" consideration. 36 AMERICAN EXTENSION UNFEESITY ACCEPTANCE AND ENDORSEMENT l-24. What do you understand to be the first thing to be done upon receipt of a bill of exchange? 2- Is there any difference between presentment for acceptance and presentment at maturity if so state same. 3- When a bill is presented for acceptance and not accepted, what then becomes its legal status? 4-25. What is the agreement entered into upon accep- tance? 5- Is there any liability before acceptance ? 6- If the holder fails to present for acceptance, what is the legal result ? 7- If a bill is dishonored what is incumbent on the holder? 8- Is the drawee entitled to see the bill before ac- ceptance ? 9- Must he accept or refuse same immediately on presentation? 10- In the case of a foreign bill of exchange drawn in triplicate, is it sufficient to present one part or must all be presented? 11- Is a drawee required to place his acceptance on one part, or must he place it on all of them? 12-26. How is acceptance of a bill usually indicated? 13- Can it be indicated in any other manner? 14- In the case of a foreign bill of exchange where the acceptor writes his name across all of the parts what is his liability? 15- May there be an acceptance by parol? 16- Is the holder bound to accept such parol accep- tance if it is offered? 17- If a bill of exchange be drawn on a firm and ac- cepted by one member of the firm would such acceptance bind the firm? 18- In the case of a bill drawn on a person who is a member of a firm, and in accepting it he uses the firm name, who will be liable? 19- Is there any difference as to acceptance between a bill drawn on a firm and one drawn against two or more persons jointly? if so state same. 37 20- If in the case of a bill being drawn against two or more persons jointly all of them do not accept, what is the rule as to liability, both as to those accepting and those declining to do so? 21- Can a bill be accepted after it has been protested? 22- If a bill be accepted when is it payable? 23- May there be a qualified or conditional accep- tance ? 24- Is a holder bound to receive such an acceptance ? 25- If such an acceptance be taken, what is the hold- er's duty as to the drawer and prior indorsers? 26- If such conditional or qualified acceptance be taken without their consent how is their lia- bility affected? 27- Give an example of a conditional or qualified ac- ceptance. 28- When do you consider the drawee becomes liable if his acceptance reads, "when in funds?" 29- What is necessary in order to fix liability in the case of a conditional or qualified acceptance? 30- Are there any conditions under which such ac- ceptances are discharged by reason of the hap- penings of other events if so what ? 31-27. What do you understand by acceptance " supra protest?" 32- For whose account may such acceptance be made? 33- Is there ever any presumption as to for whom the acceptance is made? if so what? 34- What kind of acceptance would you term an ac- ceptance supra protest? 35- Is there any different rule to be followed in this, from other conditional acceptances? 36- Before whom should such acceptance be made ? 37- Can an acceptance of a bill of exchange be re- voked if so when? 38-28. What is admitted by the acceptance of a bill? 39- Can there be an acceptance of a promissory note ? 40- If a bank accepts a note there payable what is its liability? 38 AMERICAN EXTENSION UNIVERSITY 41- What do you understand the rule to be as to a promise to accept a non-existing bill of ex- change ? 42- Does this rule apply to promise by letters, or to any other mode of communication'? 43- 29. In your opinion is acceptance and indorsement the same? 44- Does the law differ as to the liability of an indor- ser on a bill of exchange from an indorser on a promissory note? 45- What is an indorsement % 46- Must it necessarily be on the instrument itself? 47- If not, where can it be made and when, and what is the name of that on which it is then placed? 48- Do you understand the indorsement to be any more than the transfer of the paper? 49- If it has any other significance, what is it? 50- Are there any warranties involved in an indorse! ment if so name them? 51-30. Name the different forms of indorsement. 52- (a) What is the usual form of indorsement? 53- What kind of an indorsement is that called, and what is its effect upon the instrument? 54- What rights as to an indorsement, has one to whom paper has been transferred by a blank indorsement ? 55- (b) What is a special indorsement ? 56; Give an example of a special indorsement. 57- What is the rule as to transfer when the paper has a special indorsement ? 58- Is it necessary to use the words "or order," to make an instrument with a special indorse- ment, further negotiable? 59- Can a general indorser make his endorsement special? 60- How is it done? 61- Can a special indorsement be made general? 62- If so, by what method? 63- Give the reason for the rule. 64- (c) What is meant by an indorsement "without re- course." DEPARTMENT OF LAW 39 65- What is the effect of such an indorseemnt on the liability of the party making it? 66- Has such an indorsement any effect on the liabil- ity of the maker or other indorser? 67- (d) What is a restrictive indorsement ? 68- Give examples of such an endorsement and state their legal effect. 69- When an instrument is indorsed "for collection, " what kind of indorsement is it? 70- (e) What is a qualified indorsement? 71- Define a conditional indorsement. 72- When does a conditional indorsement become binding? 73- Give an example of an indorsement with a con- dition precedent. 74- Give an example of an indorsement with a con- dition subsequent. 75- Is there any difference as to the warranty between the different forms of indorsement if so what ? 76-31. Is an indorser liable before the delivery of the instrument ? 77- (a) Must delivery be made in person if not how otherwise can it be made? 78- What law governs the liability of an indorser? 79- What is necessary to confer title and the posses- sion of all rights to the holder of paper? 80- Is mere possession sufficient? 81- Does a forged indorsement pass title? 82- Can power to indorse be delegated? 83- What authority would such agent have ? 84- Must such authority be expressly conferred or may it be presumed? 85- Has an administrator or executor power to endorse ? 86- When may the paper be indorsed? 87- What is the difference in liability between an indorser before maturity and one after ma- turity? 88- How can the equitable title to an instrument pass? 40 AMERICAN EXTENSION UNIVERSITY 89- How does this differ from the manner in which the legal title passes $ 90- If endorsement is omitted are there any cases in which it may legally be compelled? 91- What are the cases in which this may be done? 92- When indorsement is so compelled, to what time does it relate ? 93- If the instrument be payable to two or more who are not partners by whom must the indorse- ment be made? 94- Can they delegate that authority? 95- If this be done what names should appear on the indorsement ? 96- Can a paper be indorsed to a person laboring under a legal disability? 97- (b) What is the rule where an indorser seeks to ex- empt himself from liability ? 98- Can an indorsement be for less than the whole amount of the instrument? 99- Is it necessary for an indorsement to bear a date? 100- What is the rule when it bears no date? 101- How is the order of successive indorsements de- termined? 102- What determines the order of liability of in- dorsers ? 103- Can this be overcome if so, how? 104- Can an indorser on accommodation paper at any time rescind his obligation if so, when? 105-32. How do checks pass from one person to another? 106- (a) After certification of a check what is the position of the bank? 107- Is the holder required to present a check for cer- tification in order to make the bank liable ? 108- What do you understand to be the purpose of cer- tification of a check ? 109- Is it necessary to present a check for acceptance ? 110- (b) Do bank notes require endorsement? 111- How do they pass current ? 112- Why is indorsement of them unnecessary? 113- Do certificates of deposit pass by indorsement? DEPARTMENT OF LAW 41 114- What important characteristic is there as regards liability in the case of a certificates of deposit? 115- (d) Do bonds and their coupons pass by indorse- ment 1 ? 116- Must they be presented for " acceptance V 9 117- What rules as to indorsement are applicable thereto 1 ? 118- (e) How may a bill of lading be transferred? 119- What title thereto, if any, passes by indorsement? 120- What do you understand a bill of lading to stand for? 121- Can a bill of lading be transferred after delivery of the goods it calls for? 122- Can it be transferred at any time after the arrival of the goods at the point of destination? 123- What is the time that fixes when it may or may not be transferred? 42 AMERICAN EXTENSION UNIVERSITY LESSON 12.- CHAPTER IV. TRANSFER. 33. Method of Transfer. 34. Rights of Transferee. (a) Generally. (b) Holderb in Due Course. (c) Pledges of Commercial Paper. $33. Method of Transfer. The usual method of transferring commercial power is by indorsement, as we have already seen. There are, however, some instances where a transfer may be by delivery without indorsement, as where the paper is payable to bearer or to cash; but otherwise a transfer is usually by indorsement. Indorse- ment differs from the ordinary method of the transfer of choses in action which is accomplished by assignment there- of, and whereby the assignee takes the title of his assignor with all its infirmities. In the transfer of commercial paper by indorsement before its maturity, however, there are many instances where the transferee obtains a better title even than his transf error had, the legal effect of the indorse- ment being to absolve the paper, in the hands of a bona fide holder for value, from all defenses good between prior parties. An assignment not being an indorsement nor in any manner legally equivalent thereto, does not render the as- signor liable to his assignee nor to subsequent holders of the paper on any warranty or to indemnify the holder if the maker of the paper dishonors same. 1 There may be an assignment or transfer of negotiable paper as with any ordinary chose in action, but where this occurs it is done by a separate instrument executed for that purpose, and as already stated is not equivalent to an in- dorsement. 2 A transfer by assignment unaccompanied by an in- dorsement, is subject in the hands of the assignee to de- fenses good between the prior parties, 3 and does not confer upon the assignee the rights of a bona fide holder for *De Hass v. Roberts, 59 Fed. Rep., Osgood v. Hartt, 17 Fed. Rep., 575. 856. 3 Osgood v. Hartt, Id. DEPARTMENT OF LAW 43 value. 4 One who takes commercial paper by an assign- ment cannot sue thereon, in his own name, but must bring action in the name of the original party for his, the as- signee's, benefit whereas one who takes by indorsement before maturity can sue on the paper in his own name. An instrument is deemed overdue when payable at a fixed time and upon being presented for payment on that day, during business hours, is not paid. Notice of such non- payment must be given to the indorsers if the order to hold them liable. Where an instrument is payable on demand or at sight, or otherwise no specific time for payment is therein stated, it must in the absence of statutory provision di- recting otherwise be presented within a reasonable time after its issue. 34. Rights of Transferees. (a) Generally. There is some divergence of opinion as to the rights of a person who endorses a bill to another, either for value or for the purposes of collection, and again, in due course, comes into possession of the bill. Some hold that such a party would acquire additional rights as a subsequent indorsee, while others maintain the contrary, 5 holding that such party thus receives such paper subject to all defenses, if any, that were good against him when he first possessed it. One taking a bill supra protest is an indorsee for value and entitled to all the rights and remedies of an indorsee in due course against those liable on the paper, even though no formal indorsement or transfer is made to him. 6 A transfer of paper by an instrument of assignment while not placing the assignor under any of the legal obli- gations to the assignee that would be involved had the trans- fer been by an indorsement, and accordingly not giving to the assignee the legal rights that he would have acquired had he received it under an indorsement, still passes title to the instrument from one to the other. An instrument that is negotiable and not due, which is so transferred, cannot by the assignee be transferred by his indorsement the paper lacking the indorsement of the assignor. In other 4 Hull v. Swarthout, 29 Mich., 25; s Dugan v. United States, 3 Wheat Joseph v. Catron, 81 Pac. Rep. (U. S.), 172. (N. M.), 439. e Gazzam v. Armstrong, 33 Ky., 554. 44 AMERICAN EXTENSION UNIVERSITY words, such an assignment terminates the course of paper by indorsement. (b) Holders in Due Course. In addition to what has been said 7 as to the rights of transferees of negotiable paper it may be added that to be a holder in due course, so as to be protected from equities and defenses available between antecedent parties, one must, himself, or through someone through whom he traces title, be a bona fide holder for value, before maturity, in the ordinary course of business and without notice, either actual or constructive, of dishonor, fraud, defect of title, illegality or any other defense that would defeat recovery between such antecedent parties. 8 as they follow, and are a part, only, of the legal attributes of an indorsement. A transfer not being retrospective, the law in force at the time of the transfer is what governs. A transfer is complete upon the executing of the indorsement and the delivery of the paper to the transferee. (c) Pledges of Commercial Paper. A pledge of com- mercial paper as collateral or otherwise, does not in general give the pledgee power to sell or transfer it, until the failure of the pledgor to pay the original debt. 9 In such event notice of sale is required to be given to the pledgor. The courts have gone so far as to hold that such a sale without such notice being given is absolutely void. 10 Furthermore such pledgee can enforce it against the maker of the paper only to the extent of his claim against the pledgor at least \>here the maker has a valid defense against the pledgor on the note. " 'Ante 31 (b). ;j^| 10 Evans v. Darlington, 5 Black. "Smith v. Livingston, 111 Mass., 342 r~j;(Ind.), 320. ' Lewisby v. Varnum, 12 Abb. Prac ..x 11 Yellowstone Nat. Bk. v. Gaynor, 19 (N. Y.), 305. $$ Mont., 403. DEPARTMENT OF LAW 45 CHAPTER V. 35. Holders for Value. 36. Extent of Rights. (a) Before Maturity of Paper. (b) After Maturity of Paper. 37. What Constituted "Notice." (a) Express. (b) Constructive. (c) Special Forms of Notice. 38. Rights of Bank Discounting Paper. 39. Paper as Collateral as Affecting Rights. 40. Order of Liability. 41. What Constitutes Cause for Enquiry. 42. Prima Facie Evidence of Title. 43. Negligence in Issuing Paper. 44. Paper Procured by Fraud. 45. Elstoppel, When Raised. 46. Rights of Holder in Special Cases. 35. Holders for Value. A holder, as we have seen is one legally in possession of commercial paper whether as payee or indorsee, or if payable to bearer, the bearer there- of. A holder in due course or a bona fide holder for value is one who can trace his title to the instrument through one who received it in like manner, and wtihout notice of any fraud, defect of title, illegality or other defense be- tween the antecedent parties, and who is accordingly pro- tected from all equities and defenses available between such antecedent parties. * Whether one is a bona fide holder in due course is largely decided by whether he received the paper in good faith without collusion with any antecedent party. The early English rule was that where a holder took paper under cir- cumstances which ought to have excited the suspicion of a prudent man, he was not a legal bona fide holder. 2 This rule was later modified by making gross negligence on his part the test of the bona fides of the holder. 3 The law how- ever today is as laid down in the case of Smith v. Livings- ton, 4 which holds that the true question is not whether there were suspicious circumstances attending the transfer, but whether the holder took it without actual notice of any infirmity or taint. The court said, "This rule is simple, easily understood and acted on, and in conformity with the general principles of commercial law which protects the free 1 Smith v. Livingston, 111 Mass., 342. 3 Goodman v. Harvey, 31 E. C. L., 212. 2 Gill v. Cubitt, 10 E. C. L., 154. 4 111 Mass., 342. 46 AMERICAN EXTENSION UNIVERSITY circulation of negotiable paper. The other rule laid down in some cases, that an indorsee for value cannot recover if he takes the note without due caution or under circumstances which ought to excite the suspicions of a prudent man is in- definite and uncertain. Circumstances which ought to ex- cite the suspicion of one ma n might not attract the attention of another." 36. Extent of Rights. (a) Before Maturity. A bona fide holder may fill in a blank left for the amount in a promissory note, with the sum stated in the margin, unless it was left by mistake, when it may be corrected by a court of equity. 5 And as we have already learned, 6 an indorsee holding under a blank indorsement may fill it in any manner to suit his wishes. Generally, therefore, one holding paper received before its maturity in due course of business, for value given there- fore and without notice of any rights or equities against the paper between prior parties, has the legal right to rely im- plicitly and alone upon what the paper shows on its face, and is legally entitled to recover thereon the full face there- of, plus interest, if it be an interest bearing instrument. 7 But a transfer of commercial paper before maturity but without indorsement, passes only an equitable title, and notice thereafter given to the transferee of equities between the maker and the payee, will make the transferee subject thereto, even though he subsequently obtains an actual in- dorsement before maturity. 8 (b) After Maturity of Paper. After its maturity commercial paper loses its negotiability and is then subject to all the rights and defenses arising between parties thereto before its maturity. 9 So, an accommodation note paid at its maturity by the real debtor, although he was not a party to the note, cannot thereafter be transferred by him so as to give it validity against the accommodation makers and indorsers. 10 37. What Constitutes "Notice." (a) Express.- Notice as used in connection with the acquirement of com- 5 Chestnut v. Chestnut, 104 Va., 539. 9 Y. M. C. A. Gym. Co. v. Rockford Ante 29 (a). Nat. Bank, 179 111., 599. 'Williams v. Neely, 67 C. C. A., 171. 10 Cottrell v. Watkins, 89 Va., 801. 8 Pavey v. Stauger, 45 La. Am., 353. DEPARTMENT OF LAW 47 mercial paper is not necessarily express notice; but it is knowledge, or the means of knowledge, to which a party wilfully shuts his eyes, as to the rights and defenses against the paper, the circumstances of which defenses must be of so strong a character as to put him upon inquiry. 11 And it must be understood that a purchaser who takes an instru- ment with notice of equities or defenses takes subject to them, notwithstanding the fact that he may have paid full value for the instrument. 12 (b) Constructive. Constructive notice arising either from the appearance of the paper or from extrinsic circum- stances may be legally sufficient to put a purchaser on his guard. For example, a restrictive indorsement, or a memo- randa showing non-acceptance, or the refusal of a bank to discount, or any other fact or peculiarity out of the ordinary course of unembarrassed commercial paper, as should put a prudent person on inquiry, will be sufficient. So, too, notice to one member of a firm will charge the firm as such on paper which it acquires. (c) Special Forms of Notice. Newspaper notice or report of alleged facts affecting commercial paper, is no notice whatsoever, legally, to a purchaser in good faith, unless in addition thereto, actual notice be brought home to him. 14 In all of the transactions spoken of herein, notice to an agent representing another is notice to his principal. Vnd though the latter receives no personal notice, due no- lice to his agent binds him. 15 If a party transfer negotiable paper void in his hands to an innocent holder, and subsequently again comes into its possession by repurchase or otherwise, he is still affected with the original knowledge he had as to the paper and cannot recover from prior parties thereon. 16 38. Rights of Bank Discounting Paper. A bank dis- counting commercial paper for one of its customers who is not in its debt, and giving him credit on its books for the proceeds thereof, is not such a bona fide holder for value as to be protected against any equities or defenses there may "Greer v. Costi, 56 Mo., 307. 13 Savingb Bank v. Schott, 135 111., "Crampton v. Perkins, 65 Md., 22. 669. 13 Powell v. Waters, 8 Cowen (N. Y.), "Central Nat'l Bank v. Valentine, 18 669. Hun. (N. Y.), 417. 14 Clark v. Ricker, 14 N. H., 44. 48 AMERICAN EXTENSION UNIVERSITY be against the paper unless some other consideration passes. This however only continues while the deposit is not drawn out. for nothing has been actually paid or parted with up to that point and is a mere giving of naked credit. 17 But if before receiving notice of any infirmity of the paper, the bank should pay out such proceeds on the check of the de- positor, it thereby becomes a purchaser for value and is entitled to protection as such. 18 39. Paper as Collateral as Affecting Eights. Where there is no reference in an instrument itself as to its being issued as collateral security for another debt, a holder in due course is not bound to inquire whether it is an original or a collateral indebtedness. But where the circumstances show that one wilfully, and for apparent cause, refrained from making inquiry for the reason that he did not desire to become acquainted with any facts against the merits of the paper, he is then not a holder in good faith without notice. 19 40. Order of Liability. A bona fide holder who takes paper without due notice of any defenses has the right to treat the parties thereto as liable to him in the order, and to the extent, they appear on the instrument. Any knowledge of defenses to the paper acquired by him subsequently to his becoming the holder thereof, in no way affects his legal rights as a bona fide holder. 20 41. What Constitutes Cause for Inquiry. Where a holder acquires paper in the usual course of business, any- thing upon its face, or in the mode of its transfer to him that is of an unusual or peculiar character is sufficient legally to put him upon inquiry. He therefore under such circum- stances takes it at his peril and subject to all equities and defenses between the original parties. 21 Accordingly if a transferee should take an equitable assignment of paper, not at the time in the possession of his transferor, he would not be a holder in due course of trade. So, too, where one takes overdue negotiable paper he does so subject to all defenses and equities. This is true even though he has taken it without notice and for value; "Kost v. Bender, 25 Mich., 515. 265. 18 Dreilling v. First Nat. Bank, 43 M Colby v. Parker, 34 Neb., 514; see Kan., 197. also, ante 31 (b). "Schmueckle v. Waters, 125 Ind., - l Roberts v. Hall, 37 Conn., 205. DEPARTMENT OF LAW 49 the fact that the paper is in circulation after its maturity being of itself legally sufficient to put him on inquiry. 25 These equities are those growing out of the instrument itself; as to collateral matters the holder takes unaffected by them. 23 42. Prima Facie Evidence of Title. The possession of negotiable paper payable to bearer, or if payable other- wise, indorsed in blank or to the holder specially, is prima facie evidence of title. Such holder is presumed to have taken it in good faith for value before maturity in the usual course of business and without notice. 24 Such presumption throws the burden of proving that paper is defective, upon the one attacking the title and mak- ing the defense against it. If it be shown that an instru- ment was lost by, or was stolen from, the true owner; or that it is tainted with fraud or illegality in its inception; or that it was obtained by fraud or duress; such presumption is thereby overcome. The holder must then show affirm- atively that he is a bona fide holder for value, and that he or someone through whom he traces title, took the paper in good faith without notice, before maturity, and in the usual course of business. 25 43. Negligence in Issuing Paper. Negotiable paper even though originally procured by fraud may, when in the hands of a bona fide holder for value, be recovered upon, unless at the time of its purchase, it was absolutely void. The mere fact that the maker did not intend to sign such a paper, but one of entirely different character, is of no avail. 26 Where the maker is negligent in signing an instru- ment, a bona fide holder may recover thereon no matter how gross the fraud perpetrated by reason of such negligence. The reason for this rule is that where one of two innocent persons must suffer by the act of a third, the one whose action, negligence or omission enabled such third person to occasion the loss must sustain it. 27 What constitutes such negligence is a question to be de- termined by a jury from the facts and circumstances of each 22 Morgan v. Uinted States, 113 U. S., K Conant v. Johnson, 165 Mass., 450. 499. x Parkersburg Bank v. Johnson, 22 23 National Bank v. Texas, 20 Wall W. Va., 520. (U. S.), 72. "Citizens Bank v. Smith, 55 N. H., " Cook v. Norwood, 106 111., 562. 593. 50 AMERICAN EXTENSION UNIVERSITY case; 28 although when a particular state of facts is either admitted or not disputed, the question whether negligence existed is then a matter of law for the court to determine. People who are infirm, decrepit, aged or ignorant, and whose paper is in circulation, are as a rule defendants in this class of cases. Whether negligence existed in their action in issuing the paper rests entirely on the facts of the case. But where a person possessing ordinary faculties signs an instrument without reading it, or being unable to read trusts entirely to the representations of a stranger, as to its contents, he has no legal defense to the instrument in the hands of a bona fide holder. 29 44. Paper Procured by Fraud. There is a class of cases however where no commercial instrument of any kind was ever executed and yet where parties are sought to be held as upon commercial paper. For instance, the name of a person may be signed by him to a blank piece of paper for a purpose entirely foreign to the making of a note,' and which was afterward filled out as a promissory note, circu- lated as such and reached the hands of a bona fide holder, for value. In such cases, and all others of similar character the instrument never existed in contemplation of law and no recovery can be had thereon even in the hands of a bona fide holder. 30 There seems to be a distinction between this class of cases and those depending upon whether or not there was any confidence reposed by the signor in the person to whom the signature was given. For instance, where a man signed his name to a piece of paper in which it was supposed an evaporator was ordered but the space was filled by the party who received the signature by framing a promissory note; 31 or where one signed a paper the blank space above which was to be filled out by the one to whom he entrusted his signature with an order on a savings bank, but instead a promissory note was written in; 32 such note will be held good in the hands of a bona fide holder. This, on the prin- ciple above stated that where one of two parties must suffer 28 Becker v. Hart, 120 N. Y., Supp., 31 McDonald v. Muscatine Nat. Bank, 270. 27 Iowa, 319. "Oft v. Fowler, 31 Kan., 478. 32 Breckenridge v. Lewis, 84 Me., 349 "'Cline v. Guthrie, 42 Ind., 227. DEPARTMENT OF LAW 51 loss from a wrong he whose act or negligence made the wrong possible, must bear the loss. On the same principle where an instrument had an ex- istence, and possession thereof was obtained through the negligence of the person executing it; or even if through his negligence it was materially altered prior to coming into the hands of a bona fide holder, such holder can neverthe- less recover thereon. Furthermore for like reason if a document be so drawn that part of it can be easily detached, leaving a perfect commercial instrument, the latter may be recovered on in the hands of a bona fide holder for value. 33 And where an instrument contains blanks and is filled up in a manner even amounting to a fraud, there may be a recovery on it in the hands of such a holder. 34 All of which shows that one must be careful what instruments he signs, or he may well pay for his negligence. 45. Estoppel, When Raised. If a purchaser however having some doubt regarding the paper, should make in- quiries concerning it before purchasing, and receive assur- ances of its genuineness and legality, and buys it relying upon such assurances, those giving them will be prevented from thereafter setting 1 up any defense against such holder. 35 In order to so operate however, such representa- tion must be made after the execution of the instrument, to a person expecting to purchase the same, and he must rely on its truth. But the fact that the instrument itself has attached to it a statement which sets forth substantially the same facts as those made by an individual answering inquiries, has been held hardly sufficient. 36 46. Rights of Holders in Special Cases. The mere fact that a transferee knows that paper is accomodation paper does not prevent him from being a bona fide holder. There is sufficient consideration therefor if value is paid to the party for whose accomodation the instrument was exe- cuted and negotiated. 37 As to what amount is recoverable by a bona fide holder of an instrument, void as between the parties, it is settled that only such sum as may have been actually paid for it 33 Brown v. Reed, 79 Pa. St., 370. se Jaqua v. Montgomery, 33 Ind., 46. "Ledwith v. McKim, 53 N. Y., 307. 3T Jonete v. Berryhill, 25 Iowa, 298. ^Rudd v. Matthews, 79 Ky., 479. 52 AMERICAN EXTENSION UNIVERSITY by the holder with interest thereon, can be recovered by him. 38 Where an instrument is held by a person who holds or indorses it in an official or fiduciary capacity, the purchaser thereof is put upon his inquiry as to the former's authority, title and right to hold and to transfer the paper. 39 It is well settled too, that a holder is not necessarily required to prove that he paid value for the instrument pro- vided it is established that his predecessor in ownership was such a purchaser. In other words, if any previous holder was a bona fide holder, the present holder, without showing that he himself paid value, can avail himself of the legal position of such previous holder. 40 CHAPTER VI. LIABILITIES OF THE PARTIES. 47. Liability of Drawee for Non- Acceptance. , 48. Effect of Acceptance. 49. Principal Debtor on Note. 50. Admissions of Maker. 51. Acceptor Supra Protest. 52. Transferror by Delivery. 53. Contract of Indorsement. 54. Indorser and Surety Distinguished. 55. Liability on Different Forms of Indorsement. 56. Indorser of Non-Negotiable Instruments. 57. Obligations of Indorser. 58. Order of Liability of Indorserte. 59. Modification of Indorser's Liability. (a) In General. (b) Oral Proof Showing Modification. 60. Liability of Irregular Indorsers. 61. Agent When Considered Party. 47. Liability of Drawee for Non Acceptance. The drawee of a bill of exchange is under no legal obligation to accept it unless for a valuable consideration he has agreed to do so. If he has authorized the drawer to make the draft he is bound to accept it, if it is drawn substantially as au- thorized, and if all conditions, if any, expressed in the au- thority so given, be performed. Accordingly where a drawee for a valuable considera- tion has, either expressly or impliedly, promised to accept 38 Bain v. Gagnon, 19 Mont., 402. Bank, 47 N. Y. Supp., 880. 88 Bank of Patterson v. Nat. Broadway w Montclair v. Randall, 107 U. S., 159. DEPARTMENT OF LAW 53 a draft, and afterwards refuses, so to do, he becomes liable for such breach. 1 48. Effect of Acceptance. A promise to accept will sometimes be implied by law, from the relationship of the parties, or from the usages of trade. 2 If the drawee has money in hand belonging or owing to the drawer, it requires but slight evidence as to previous transactions to support such a presumption. If however a drawee should receive notice of the bankruptcy of the drawer before the accept- ance, his right to accept is thereby revoked, as the funds in his hands are no longer legally available for the payment of the bill, but are subject to the proceedings in bank- ruptcy. 3 Upon the acceptance of a bill the acceptor becomes the principal debtor thereon, and is the party primarily and originally liable to pay the bill. The drawer and indorsers are merely sureties, liable to pay only upon his default. An acceptor's obligation is similar to that of the maker of a promissory note. 4 By his acceptance a drawee admits everything essen- tial to the validity of the accepted bill and warrants to a bona fide holder that every essential, necessary to the crea- tion of his liability exists. 5 For instance, he thereby admits the existence of the drawer and cannot afterwards say that he is a fictitious person, or that he was dead at the time the bill purports to have been drawn. If drawn by a firm he ad- mits the existence of such a firm. So, too, by his acceptance, he admits the genuineness of the signature of the drawer, that of the payee, or of any subsequent indorser. 6 He does not however vouch for the genuineness of the body of the bill. 7 He admits the legal capacity of the drawer of the bill, and of the payee to indorse it. This, however, does not in- clude the authority of the payee to indorse, but simply his legal capacity to be a payee. An acceptance furthermore raises a legal presumption that the acceptor has funds in his hands to pay the bill, and 1 Riggs v. Lindsay, 11 U. S., 500. Ala. 558. 2 Helm v. Mayer, 30 La. Ann., 943. 5 Jarvis v. Wilson, 46 Conn., 90. 3 Citizens Bank v. First Nat. Bank, e Holt v. Ross, 54 N. Y., 475. 6 Law Rep. (Eng. & Irish App.), 7 White v. Continental Nat. Bank, 64 352. N. Y., 316. 4 Capital City Ins. Co. v. Quinn, 73 54 AMERICAN EXTENSION UNIVERSITY such presumption is conclusive in favor of a bona fide holder of the bill, for value. 8 49. Principal Debtor on Note. The maker of a promissory note is the primary party liable thereon, and where there are two or more makers, their liability is joint or several according to the wording of the note. 50. Admissions of Maker. The maker of a note thereby admits the existence of the payee, and if payable to a firm or corporation admits their legal existence. 9 He also admits the existence of the place of payment, 10 and where payable to order, admits the capacity of the payee to indorse. lx 51. Acceptor Supra Protest. An acceptor supra protest agrees to pay the bill on due presentment if it be not paid by the drawee, provided it be duly presented to the latter for payment and protested if unpaid and that he such acceptor receive notice of such facts. He is liable to the holder and to all parties to the bill, subsequent to the party for whose honor he accepted it. 12 An acceptor supra protest is bound by all the estoppels which are binding on the ordinary acceptor, and also those that would be binding upon the party for whose honor he accepts. 52. Transferror by Delivery. A transferror by de- livery of a note payable to bearer, or indorsed in blank, in- curs no liability upon the instrument and is not responsible on it if it be dishonored at maturity. 13 He, however, warrants that the instrument is what it purports to be; that it is a valid obligation; that the parties nave legal capacity; and that there is no defense arising out of his connection with the instrument which may render it without value. He is liable for the consideration paid him, if it fail in any of these qualities. 14 53. Contract of Indorsement. Each indorsement of commercial paper is a separate obligation, and a ne\v and 8 Kendall v. Galvin, 15 Me., 131. "Salt Springs Bank v. Syracuse Sav- Stoutimore v. Clark, 70 Mo., 471. ings Instn., 62 Barb. (N. Y.), 104. 10 Brown v. First Nat. Bank, 103 Ala., " May v. Dyer, 57 Ark., 441. 123. " Daskam v. Ullman, 74 Wis., 474. "Wolke v. Kuhne, 109 Ind., 313. DEPARTMENT OF LAW 55 independent contract, 15 subject to the law of the place where the indorsement is made. If a transferror put his name on the back of a paper payable to bearer, or which is indorsed in blank, thereby making the instrument transferable by delivery, he thereby becomes liable as an indorser. An unqualified indorsement imports first, an executed contract for the sale and transfer of the instrument, and, second, an executory contract which binds the indorser to the assumption of a future contingent liability in respect to it, in other words to pay it if the maker or previous indorser does not. 16 An indorsement without recourse binds the indorser only to the first of these contracts. 54. Indorser and Surety Distinguished. The obliga- tion of an indorser is entirely different from that of a surety. The obligation of a surety is not an independent contract, but is identical with that of the maker; and such defenses as are available to the maker inure to the surety. An in- dorser 's obligation, however, being a new contract, is sepa- rate and apart from that of the other parties to the paper, and may be valid and subsisting though the contracts of the other parties to the instrument be wholly void. 1T 55. Liability on Different Forms of Indorsement. A qualified indorsement, no matter in what language it may be expressed, is an express declaration of the absence of full or partial responsibility, the operation and effect of which is to render the indorser liable merely as a transferror. 18 If a payee, or indorser, in making the indorsement should use words in the form of an assignment in making the transfer, he will still be liable as an indorser, the pur- ported assignment being treated as an indorsement unless containing words qualifying it. The party making such an indorsement would thereby render himself liable as an in- dorser and not as an assignor. 19 Where a payee makes his indorsement in the form of a guaranty, however, he is liable as an indorser so far as con- 15 Sinker v. Fletcher, 61 Ind., 276. " Hannum v. Richardson, 48 Vt., 508. "Johnson v. Willard, 83 Wis., 420. ^ Merrill v. Hurley, 62 N. W. Rep., "Bowman v. Hiller, 130 Mass., 153. 958. 56 AMERICAN EXTENSION UNIVERSITY cerns the transfer of the instrument, but in all other re- spects is held as a guarantor. 20 56. Indorser of Non-Negotiable Instrument. The indorsement of a non-negotiable instrument carries with it no guaranty of its payment. It is merely a transfer of its legal and equitable title, unless such transfer be in a form from which the intention to guarantee may be inferred. If he induced the transferee to take the paper by an agree- ment that he guarantees its payment, he is then held upon his express or implied promise. 21 57. Obligations of Indorser. An indorser other- wise a vendor or transferror of commercial paper by in- dorsement is liable in the same manner as a transferror by delivery, although the transferror by delivery is liable only to his immediate transferee, while an indorser is liable to all subsequent bona fide holders. An indorser warrants to a bona fide holder that the in- strument is a valid and subsisting obligation. He warrants the legal capacity of the antecedent parties; that the sig- natures are genuine; and the legality of the consideration moving between the antecedent parties. 22 Each indorsement of an instrument being equivalent in law to the drawing of a new bill, the indorser engages that, upon being duly presented, the bill will be accepted or paid according to its terms, and that, if not so accepted and paid he will indemnify the holders, provided it be protested for non-payment and proper notice be given him of such dis- honor. Both drawers and indorsers therefore are condi- tional debtors up to the time their liability becomes fixed by notice of dishonor, by the drawee or the maker, when they become absolute debtors, to either of whom the holder may resort. 23 58. Order of Liability of Indorsers. Indorsers are as a rule liable to each other in the order in which their in- dorsements successively appear, each being liable to all suc- ceeding indorsers, but not to the preceding ones. 24 In this respect, a drawer is legally considered the first indorser on ^VanSant v. Arnold, 31 Ga., 210. -" Cochran v. Atchison, 27 Kan., 728. 21 Shafstall v. McDaniel, 152 Pa. St., 23 Allen v. Chambers, 13 Wash., 332. 598. "Cogswell v. Hayden, 5 Oregon, 22. DEPARTMENT OF LAW 57 a bill. This order of liability, however, may be rebutted by proof of the actual relation of the parties, or by an express agreement under which the indorsements were made. As to its bearing upon the rights of a bona fide holder without notice, no such agreement would be admissible to control his rights. 25 59. Modification of Indorsees Liability. (a) In General. Between the immediate parties to commercial paper one may qualify his liability as he may think fit. If the qualifying terms be expressed in the indorsement, it will control such liability as to all subsequent indorsees. And between such immediate parties an indorser, although his indorsement is absolute, may qualify it by a contempora- neous agreement, which, however, would only affect the immediate parties to the agreement and not subsequent indorsees. 26 (b) Oral Proof Showing Modification. The funda- mental principle that where a contract has been reduced to writing, the instrument itself is the best evidence of the agreement between the parties, and that parol evidence of a different oral understanding affecting same is inadmissible to vary, qualify or contradict its terms, applies to negotiable instruments with full effect. The applicability of this principle to the contract of indorsement depends upon how far an indorsement is to be considered a complete written contract, so as to bring the case within its operation. The weight of authority in this regard is, that when a payee signs his name across the back of an instrument for the pur- pose of negotiation; or a subsequent holder for a like pur- pose writes his name under the indorsement of the payee, parol evidence would be inadmissible to show that his con- tract was other than that of an indorser. Therefore it can- not be so shown that he intended to bind himself as maker, surety or guarantor, and not as an indorser; or that the in- dorsement was a qualified one; or that he intended to assume no liability whatever. In fact he cannot introduce any evidence to prove terms or conditions other than those expressed in the instrument, or in his indorsement thereof, itself. 27 25 Hill v. Shields, 81 No. Car., 251. "Johnson v. Glover, 121 111., 283. 28 Davis v. Brown, 94 U. S., 424. 58 AMERICAN EXTENSION UNIVERSITY It is competent, however, to admit parol evidence to impeach the consideration or delivery of an instrument, and an indorser may so show as to his immediate indorsee, that there never was a valid delivery of the instrument, or that there was a conditional delivery, and even that the indorse- ment was a receipt for payment. 28 60. Liability of Irregular Indorsers. The relation and liability of an irregular indorser is one very difficult to define in general terms. His relation to the instrument is anomalous. His liability may be that of an original promi- sor, a guarantor, or a first or second indorser, depending en- tirety on the character of the instrument and the purpose for which it was made. Evidence is admissible, as between the immediate parties, to show the actual time of the in- dorsement; 29 but the nature of his liability is a matter that can only be determined according to the jurisdiction in which the case arises. 61. Agent When Considered Party .If a broker dis- closes his agency and the name of his principal, he assumes no personal liability in the transaction of making or in- dorsing paper as such broker or agent. Therefore he does not in such cases warrant the genuineness or value of the instrument which he may transfer by delivery. But if he suppresses information of such agency, or conceals the name of his principal, and accordingly deals with the purchaser as being himself a principal, the latter may hold him to the liabilities of implied warranty, as if he were in fact the prin- cipal. 3< A broker may of course bind himself by express warranty where he has disclosed his agency, or he may exempt himeslf from such implied warranties by an express agreement. 28 Stack v. Beach, 74 Ind., 571. 30 Worthington v. Cowles, 112 Mass., a Way v. Butterworth, 108 Mates., 509. 30. QUIZZEE. TRANSFER. l-33. What is the usual method of transfer of commer- cial paper? 2- How may paper payable to bearer be transferred ? DEPARTMENT OF LAW 59 3- What is the difference between this method of transfer and that by assignment*? 4- Is an assignment equivalent to an indorsement? 5- What is the difference as to liability'? 6- Can negotiable paper be assigned, if so how is it usually done? 7- Is an assignment without indorsement subject to defenses'? 8- When is an instrument deemed overdue ? 9- If no specific time for payment be stated what is the rule 1 10-34. What is the legal status of one who indorses paper (a) to another and later in due course, comes again into possession of it ? 11- What rights has an acceptor supra protest 1 ? 12- Distinguish between the rights of a holder under an assignment, and those under an indorsement. 13- Can a negotiable instrument that is assigned be transferred by indorsement by the assignee? 14- (b) Who is a holder in due course so as to be protected from equities and defenses? 15- Is a transfer retrospective ? 16- What law governs the transfer? 17- When is the transfer complete ? 18- What is the rule as to the power of sale and trans- fer in relation to pledged paper? 19- Is notice of such sale necessary? RIGHTS OF THE PARTIES. l-35. What is meant by a holder in due course? 2- Is good faith important ? 3- What is the rule laid down in Gill v. Cubitt? 4- How was this rule modified? 5-36. What is the present law on the subject? 6- (a) What right has a holder to fill in the amount left blank in paper? 7- What reliance may a holder have upon paper pur- chased in due course? 8- What title passes where paper is passed without indorsement, and subsequently the holder learns of equities against the paper? 60 AMERICAN EXTENSION UNIVERSITY 9-(b) What rights, if any, are modified where paper is acquired after its maturity? 10- Can accommodation paper to which the one ac- commodated was not a party, but is paid by him when due, be transferred by him against the accommodation parties'? ll-37. What notice of equities against parties is suffi- (a) cient to bind a purchaser ? 12- Does the fact that a purchaser has paid value for paper, knowing of defenses thereto, give him any added rights'? 13- (b) From what may constructive notice arise? 14- Will notice to one of a firm bind the firm? 15- (c) Is information had from newspaper accounts legal " notice" of facts affecting commercial paper? 16- What can you say as to the sufficiency of notice given to one's agent? 17- What is the position of a party having notice, who transfers the paper to a third person, and subsequently again comes into possession of it? 18-38. Is a bank which discounts paper of its depositors and gives them credit for the amount on the books a bona fide holder? 19- Is there any course by which a bank may attain such relationship to such paper if so, how? 20- How would notice of an infirmity in the paper affect the bank? 21-39. What is the rule as to the necessity of inquiry whether paper is given as collateral security? 22-40. What is the order of liability of indorsers to a holder of paper? 23- Does subsequent knowledge acquired by a holder, of equities against paper have any effect on his rights? 24-41. What facts should put a transferee upon inquiry? 25- What is the title of one who takes paper that is overdue ? 26- Does the fact of one 's having paid value for paper and having no notice of equity, alter the case ? DEPARTMENT OF LAW 61 27- Has the fact that the paper is in circulation after being overdue anything to do with this if so, what? 28- Is such a holder affected by collateral matters? 29-42. What is necessary to confer prima facie evidence of title? 30- Is there any further presumption if so, what ? 31- What is the effect of such presumption? 32- Can such presumption be overthrown if so, what must be shown? 33- What is the holder then required to prove af- firmatively? 34-43. Can a note procured by fraud ever be recovered upon? 35- If the maker should prove that he intended to sign a paper of a different character, would that avail him? 36- What is the reason for this rule? 37- How is the question of negligence in putting out negotiable paper determined? 38- When, if ever, are such questions, questions of law? 39- When does such negligence rest on the facts of the case? 40- When is it no defense ? 41-44. State a case where it was held that a note of this class could not be recovered upon even in the hands of a bona fide holder? 42- Give an instance of a case where it was held in this class of cases, that there could be a re- covery? 43- Upon what ground is the distinction made be- tween these cases ? 44- Can a paper be recovered on where possession of it was obtained by negligence of the person making it? 45- Would the fact that a material alteration existed on the face of the paper make any difference? 46- If an instrument was surreptitiously detached from another piece of paper would the rights of a bona fide holder be affected? 62 AMERICAN EXTENSION UNIVERSITY 47- If an instrument showed that a blank therein had been filled up in a way showing fraud, what would be the position of such a bona fide holder? 48-45 If, prior to the purchase of a paper, inquiry was made as to the instrument, and satisfactory as- surances were given, how would such assur- ances subsequently affect the person making them? 49- To whom must such assurances be given? 50- If the instrument has attached thereto a state- ment giving such assurances is it sufficient? 51-46. What effect does knowledge that paper is accom- modation paper have on one becoming a bona fide holder? 52- What can be the recovery on the part of a bona fide holder in the case of an instrument void be- tween the parties ? 53- If a paper is in the hands of one holding it, in a fiduciary or official capacity, is the person who takes it bound to make any inquiry if so, what? 54- Must a holder prove he paid value for paper if so, when? LIABILITIES OF THE PARTIES. l-47. When is the drawee of a bill of exchange under legal obligation to accept it? 2-48. When will a promise to accept a bill be implied? 3- Will the bankruptcy of the drawer before ac- ceptance, alter the case if so, why? 4- Upon acceptance who becomes the principal debtor? 5- What then is the position of the drawer and the indorser? 6- What is admitted by virtue of an acceptance? 7- What, if anything, is not admitted? 8- Are there any legal presumptions raised by an ac- ceptance if so, what? 9-49. Who is the principal debtor on a note? 10-50. What is admitted by the maker of a note? What is the liability of an accepter supra protest? DEPARTMENT OP LAW 63 12- By what is such an acceptor bound? 13-52. What is the liability of a transf error by delivery? 14- What are his warranties'? 15- What is his liability, and when, if paper fails in any of the warranties ? 16-53. What is the effect of the contract of indorsement? 17- What law governs the indorsement? 18- What effect has the writing, by a transferror, of his name on the back of an instrument payable to bearer? 19- What contracts are implied by an unqualified in- dorsement? 20- How does an indorsement "without recourse" differ from this? 21-54. Is the obligation of a surety and indorser the same? 22- If you say they are different state the obligation of each. 23-55. What is the effect of a qualified indorsement? 24- What would be the effect of using words of as- signment in making a transfer? 25- When will this be considered a qualified indorse- ment? 26- What would be the effect of making an indorse- ment in the form of a guaranty? 27-56. What effect has the indorsement of a non-nego- tiable instrument? 28- May such an indorsement be a guaranty if so, when? 29- 57. Is the liability of a transferror by delivery, any different from that of a transferror by in- dorsement? State to whom the liability of each exists. 30- State the warranties of the indorser to a bona fide holder. 31- What is the agreement implied by indorsement and why? 32- When and up to what time are drawers and in- dorsers only conditional debtors? 33-58. State the order of liability of indorsers. 34- When and how may this order of liability be altered. 64 AMERICAN EXTENSION UNIVERSITY 35- State the effect of an agreement altering the order of liability. 36-59. May an indorser's liability be qualified if so, how? 37- (a) Who would be affected by such qualification if it is made by a separate contemporaneous agree- ment? 38- (b) Does the general rule governing proof of written contract apply to negotiable instruments'? 39- State the rule governing proof of written instru- ments. 40- How far does such rule affect the contract of in- dorsement? 41- What is the weight of authority on this point ? 42- What cannot be shown by parol evidence? 43- For what purposes may parol evidence be in- troduced? 44- 60. Define the relation and the liabilities of irregu- lar indorsers. 45- What may, and what may not, be proven by parol evidence as affecting such indorsers ? 46-61. Does a broker or agent ever assume any liability if so, what and how? state fully. DEPARTMENT OF LAW 65 LESSON 13.- CHAPTER VII. MATURITY. 62. In General. 63. When Certain Forms Mature. 64. Maturity of Certain Instruments. 62. In General. The question as to the time of the maturity of commercial paper arises principally when deter- mining whether an action thereon has been prematurely brought ; whether an action is barred by the statute of limi- tations ; whether paper was duly presented for payment, and notice of dishonor given at the proper time; whether protest was made prematurely or was too late; whether an instrument was transferred before its maturity so as to make the holder a bona fide purchaser or otherwise; and whether a bill was prematurely paid by an accommodation acceptor or surety. Substantially the same legal principles govern the question of maturity in all cases but maturity is determined by the law of the place where the instrument is payable. A bill or note in terms payable on a fixed day or in a specified number of days, months or years after its date, becomes due on that day. Tender of payment on a later day, without interest, is not sufficient, and a tender before such day is premature. 63. When Certain Forms Mature. If an instrument be payable "on or before" a stated date, the maker has the option to pay it before the time so fixed, if he chooses. It is sometimes a valuable privilege to do this in the saving of interest where the amount involved is large, or when the paying of the indebtedness may help other business trans- actions. While paper so drawn may be paid at any time after its date still it does not mature and payment cannot be compelled until the expiration of the stated time. The same is true if paper reads "by," or "on or by" a certain time or date. If made payable "on or after" a fixed date, it is due any time on demand after that date but not before. An instrument is deemed payable on demand when it is so expressed, or if it reads "when demanded" or "after date," or "on demand after date" or "at sight" or "on pre- sentation" or words of similar import. The fact that such 66 AMERICAN EXTENSION UNIVERSITY an instrument contains a provision for interest makes it none the less payable on demand. * This rule as to maturity applies generally where no certain time of payment is expressed in the paper. In some cases it has been held that paper payable on demand is not overdue, so as to affect its transfer, making one a purchaser or transferee after maturity, until a demand of payment has actually been made. The weight of opinion however inclines to the rule that such an instrument is not overdue for the purposes of transfer until after the lapse of a reasonable time, irrespective of whether a demand has been made or not. 2 What is a reasonable time must be determined upon the facts of each particular case. 64. Maturity of Certain Instruments. As has been stated a check unless otherwise expressed therein, or is post- dated, is payable immediately, on or after its date. A check however is not overdue, as affecting its transfer, unless there has been an unreasonable delay in presenting it so that the check becomes what is termed a stale check. The rule as to determining what is a reasonable time applying to other forms of commercial paper, and which have already been stated, pertains also to checks. A certificate of deposit is subject substantially to the same rules as a promissory note. They are usually payable on demand, and are so payable when no time is expressed therein. 3 If an instrument be payable in installments at fixed times, each installment becomes due at the time specified, and in the absence of an express provision in the instrument, an action will lie only for the installments which may at any time become or be due. An instrument payable on the happing of a contingency or the performance of a condition, will become due for all purposes on the performance of the condition or the hap- pening of the contingency. An instrument though payable at a fixed time may con- tain a provision that will cause it to mature earlier. For instance, the provision that the paper may become due at the option of the person holding it in the event of some 'Shaw v. Shaw, 43 N. H., 170. Neb. ,494. 2 Kirkwood First Nat'l Bank, 40 s Beardsley v. Webber, 104 Mich., 88. DEPARTMENT OF LAW 67 default of the payor, other than in the payment of the prin- cipal as in the case of a default in the payment of an in- stallment, or of interest, or in a note payable in installments that the whole amount shall become due and payable on default of payment of any of the installments. 4 In cases of this character such default also renders the paper due as respects indorsers and guarantors thereon. Where such option exists the right may be waived or lost by an unreasonable delay in exercising it, by an agree- ment with the maker, extending the time of payment, or by accepting payment after default. 5 So in a deed of trust or mortgage securing notes pay- able at different times, a provision that none of them shall become due until the maturity of the last would, so far as the enforcement by law is concerned, postpone the matur- ity of all of the notes until that time. If a note be payable with interest, such interest does not become due until the note is due. If interest be payable annually, with the option on the part of the holder of the instrument to make it a part of the principal in case of default, no right of action accrues thereon, until the prin- cipal becomes due. If however, interest be due at stated periods without further provision affecting it, it is due at such fixed times without regard to the maturity of the prin- cipal debt, although the holder may wait until the principal becomes due before demanding payment or suing therefor and no rights will be lost to him thereby. 6 'Heath v. Arhey, 96 Ga., 438. * Nat'l Bank of North America v. Meson v. Luce, 116 Cal., 236. Kirby, 108 Mass., 497. 68 AMERICAN EXTENSION UNIVERSITY CHAPTER VIII. PRESENTMENT. 65. Necessity of Presentment. 66. Presentment for Acceptance Only, Insufficient. 67. Presentment to Maker. 68. As to Guarantors. 69. Presentment of Collateral Paper. 70. Who Should Make Presentment 71. To Whom Presentment Should Be Made. 72. Methods of Presentment. 73. Place of Presentment. 74. Time of Presentment. 75. Reckoning of Time. 76. Hour of Presentment. 77. Effect of Failure to Present. 78. Personal Presentment. 79. Presentment at Address of Bill. 65. Necessity for Presentment. In order to fix the liability of the drawer of a bill, the indorser of a note, or the acceptor of a bill for honor, it is necessary to show that legal presentment of the bill or note, and demand for payment, was made by the holder to the drawee or maker, or that there was the exercise of due diligence for the purpose of obtaining payment. 1 Presentment for payment, in the legal sense, includes a demand for its payment. 66. Presentment for Acceptance Only, Insufficient. Where a bill has been presented for acceptance and was duly accepted it does not obviate the necessity of its being presented for payment according to its terms. If a holder neglects so to do he loses his remedy upon the bill. How- ever, where a bill has been presented for acceptance and been dishonored, there is no necessity of its presentment for payment, except in the case of a bill that has been after- wards accepted supra protest. 2 67. Presentment to Maker. No presentment for payment is necessary to charge the maker of a note, or the acceptor of a bill. In the case of a note payable on demand it has been held that the commencement of a suit thereon without any other form of presentment is a sufficient de- mand. 3 68. As to Guarantors. There is some conflict of de- cision as to whether it is necessary to present paper for 'Harvey v. Girard Bank, 119 Pa. 2 Adams v. Darby, 28 Mo., 162. St., 212. 'Bell v. Sackett, 28 Cal., 409. DEPARTMENT OF LAW 69 payment to the maker or acceptor, in order to charge a guarantor. Some jurisdictions seem to hold that the con- tract of guaranty is an absolute unconditional contract, and so makes a guarantor liable, in case of the default of the principal debtor, without the necessity of proving a demand upon the latter for payment. 4 If, however, a guarantor restrict his undertaking a different rule applies, and in such a case presentment becomes necessary. However where it appears that a guarantor suffered damage by reason of the failure of the holder to make a presentment to the principal debtor, he would be discharged to the extent of such damage. 5 69. Presentment of Collateral Paper. Where a bill drawn on a third person be received in full satisfaction of a debt when paid; or a note is endorsed to a holder as condi- tional payment of a debt ; the person so receiving it assumes the duty of its presentment to the maker or acceptor for payment. His failure to do so not only wipes out his remedy on the paper, but also the debt for which it was given. So, also, where paper is transferred so that the proceeds may be collected and applied on a debt, such presentment and de- mand is required of the transferee, and if he be guilty of laches in this regard, he must sustain the loss. 6 70. Who Should Make Presentment. Notes and in- land bills of exchange are presented by the holder or his agent. A demand by a notary public as agent is sufficient, There is no need of a power of attorney or other written instrument to prove agency for that purpose. 7 The per- sonal representative of a deceased party may make the pre- sentment, and where a holder has become bankrupt or insolvent, presentment should be made by the trustee or assignee in the insolvency proceedings. In the case of a foreign bill, however, presentment should be made by a notary public personally. Presentment by his clerk or agent will not be sufficient. 8 71. To Whom Presentment Should Be Made. Pre- sentment for payment should be made to the acceptor of a bill, or to the maker of a note, or to the authorized agent of 4 Baker v. Kelly, 41 Miss., 704. See, Minehart v. Handlin, 37 Ark., 282. contra, Newton Wagon Co. r. T Seaver v. Lincoln, 38 Mass., 269. Diers, 10 Neb., 288. 8 Commercial Bank v. Barksdale, 36 5 Burrows v. Zapp, 69 Tex., 474. Mo., 563. 70 AMERICAN EXTENSION UNIVERSITY either. 9 Should the maker of the note, or the drawer of the bill, be deceased at the time of the maturity of the paper, presentment should be made to the personal representative of the deceased if there be one, and if there be none, it should be made at the former dwelling place, or the place of busi- ness of the deceased. 10 Where there are two or more makers who are not part- ners, whether the liability be joint or several, it is necessary that presentment be made to each in order to charge the drawer or indorser. 1X Where, however, there are two or more makers or acceptors of a bill of exchange, who are partners, presentment to one of them will be sufficient. This is so even should the firm be subsequently dissolved, since it will still be considered a partnership as to all antecedent transactions. 12 In the case however of one partner dying before the maturity of the instrument, presentment should be made to the surviving partner, and not to the personal representative of the deceased partner. 13 72. Method of Presentment. For a valid present- ment and demand to be made, the person doing so must have the bill or note in his possession, unless special circum- stances such as its loss or destruction are shown to excuse its absence. 14 The reason for this requirement is that the acceptor or the maker may judge of the genuineness of the paper, payment of which is demanded, and of the right of the holder to receive payment; as well, too, that the payee may obtain immediate possession of it upon paying it. Where paper is destroyed or lost, the presentment of a copy with an offer of indemnity against the original, is sufficient. The demand for payment must be according to the terms of the instrument. A demand therefore for payment in a spe- cial kind of currency, as of gold, unless it is so specified in the instrument, is not warranted. 1B 73. Place of Presentment. A bill or note payable at a designated place must in order to discharge the drawer or indorser, be presented for payment at that place. 16 If it be made payable in a city or town, without designating any Brown v. Turner, 15 Ala., 832. "Waring v. Betts, 90 Va., 51. 10 Philpott v. Bryant, 14 E. C. L., 288. " Langenberger v. Kroeger, 48 Cal., u Benedict v. Schmieg, 13 Wash., 476. 148. Gates v. Beecher, 60 N. Y., 522. " Cox v. National Bank, 100 U. S, "Barlow v. Coggan, 1 Wash. Ter., 704. 257. DEPARTMENT OF LAW 71 in Ms possession ready to receive payment. If the maker anywhere in the specified place on that day with the paper particular place therein, it will be sufficient if the holder be or acceptor however has a place of business or residence in the designated place it must be there presented. 1T Presentment and demand for payment at the place named in the instrument is an essential part of the contract so far as indorsers are concerned, and it is important as well even as to the maker. There can be no substitute for this necessity. Even previous notice that the paper will be pre- sented elsewhere, cannot take the place of such present- ment. 1! When payable at a designated place, such as at a par- ticular bank, formal demand there is not necessary. Hence if such a bill or note is proved to be at the designated place on the date of its maturity, ready to be given up if paid, it will be deemed a sufficient demand. 19 The mere physical presence at such place of the instrument, however, without the bank having knowledge of that fact, is insufficient. For instance, where a letter containing a bill of exchange was laid down, with other papers on a desk in the office of an offi- cial of the bank, and it disappeared without his having ever seen it, the court held that there was no sufficient presentment and demand. 20 When the place of payment is specially designated in the acceptance of a bill, it must be presented at that place in order to make the drawer or the indorser liable, even though the bill be addressed to a different place. 21 This however is with the proviso that the designation of the place of pay- ment in the acceptance be not of such a character as to alter or change the tenor of the instrument. 22 The weight of authority in the United States is that the designation of a place of payment in a note does not make it incumbent, as a condition precedent to create an obligation by the maker of the note, that it should be presented at that particular place for payment. If no place of payment be named in an instrument then it must be presented for payment at the usual and principal "Meyer v. Hibsher, 47 N. Y., 265. "Troy City Bank v. Lauman, 19 "Parker v. Stroud, 98 N. Y., 383. N. Y., 477. "People's Bank v. Brooks, 31 Md., 7. a Niagara Bank v. Fairman, 31 "Chicopee Bank v. Philadelphia Barb. (N. Y.), 408. Bank, 75 U. S., 641. 72 AMERICAN EXTENSION UNIVERSITY place of business of the maker, or the acceptor, during busi- ness hours ; or if he has no established place of business, then at his residence, during reasonable waking hours. 74. Time of Presentment. Where an instrument is payable on a day certain, in order to legally charge the drawer or the indorser, it should be presented on the day of its maturity during reasonable hours. Presentment a day before, 23 or a day after, 24 maturity is not sufficient. When no certain day is specified an instrument should be presented within a reasonable time after its date. What is a reasonable time must be judged in all cases from the circumstances of the case and the situation of the parties. This rule also applies to sight drafts. It is impracticable to lay down any specific rule by which the question of what is a reasonable time can be measured in every case. In the event of a bill or note being indorsed after maturity it is as if a new bill were drawn payable at sight, and therefore to charge the indorser, presentment should be made within a reasonable time. The same rule as to what is a reasonable time applies in such instances as in the case of other paper payable on no specified day. 25 However, where an instru- ment is transmitted by mail for payment and is by mistake of the postal authorities delayed, such as the misdirection of a package of mail matter by a postmaster such delay will be excused; 26 but in all such cases presentment must be made within a reasonable time thereafter. 27 75. Reckoning of Time. The day of the date or of the sight of paper is to be excluded in reckoning time when a bill or note is made due a certain number of days after its date, or after sight. 2S If it be due on a Sunday or legal holi- day, presentment should be made on the day preceding. 29 In the states where the legislature has provided for a Satur- day half holiday, presentment may be made up to noon of that day, or subsequently, as may be provided by statute. 30 A month, according to the custom of merchants, is a calendar month, and not a lunar month. So, when an instru- ment is dated on a day in any month and payable in a speci- 23 Robinson v. Blen, 20 Me., 109. Conn., 401. "Davis v. Herrick, 6 Ohio, 75. * Durden v. Smith, 44 Miss., 548. 28 Union Bank v. Ezell, 10 Hump. s Henry v. Jones, 8 Mass., 452. (Tenn.), 385. " Barlow v. Gregory, 31 Conn., 261. "Windham Bank v. Norton, 22 ^ Sylvester v. Crohan, 138 N. Y., 494. DEPARTMENT OF LAW 73 fied number of months from that date, it becomes due on the same day of the month in the stipulated number of months afterward, 31 irrespective of the number of days in the intervening months. A note that would, under this rule, become due on the 29th, 30th or 31st of February, because dated on a corresponding date in some preceding month and made payable a stated number of months thereafter, will be due on February 28th, except in leap years when it will mature on the 29th. Where however a bill or note is undated the time of maturity will be reckoned from the date of its delivery, that being then presumed to be the date of its execution. 76. Hour of Presentment. Where an instrument is made payable at a bank it should be presented during the usual business hours of the bank, and paper payable at a place of business should be presented during usual business hours of such business. If paper is to be presented at the payer's residence it may, as already stated, be presented at any time of the day down to the ordinary hours of rest in the evening. 32 77. Effect of Failure to Present. The effect of a fail- ure to make such presentment would not be to relieve a maker from his promise to pay as agreed, but only to relieve him from damages resulting from such failure, if he was ready at the appointed time and place to pay his obligation and there was no one there to receive the money. A plea of this fact in a suit upon an instrument, and payment into court of the amount due thereon, will be a bar to a recovery from him of interest and costs, but it will be no bar to the cause of action itself. 33 It has however been held that where a note is made payable at a bank and no presentment was duly made, if the maker sustain damage thereby he is relieved from all liability. 34 How far this would apply to demand notes depends upon the law of the jurisdiction in which the question arises, as there is a wide divergence of judicial opinion as affecting paper of this class. The parties may agree orally upon the place of payment 31 McMurchey v. Robinson, 10 Ohio, ** Montgomery v. Tutt, 11 Cal., 317. 496. 34 Lazier v. Koran, 55 Iowa, 75. 31 Farnsworth v. Allen, 4 Gray, 435. 74 AMEKICAN EXTENSION UNIVERSITY where no such place is mentioned in an instrument, and the effect of this would be to make a demand for payment at that place sufficient to bind a drawer or indorser. 35 Where no place of payment be designated or agreed upon, demand should be made on the acceptor, or the drawer as the case may be, at his residence or place of business, to charge the drawer or indorser, and where such party has no place of business, it should be made at his residence. 86 In order to be deemed a place of business it must not be a place used temporarily by the person for the transaction of some particular business, but his regular and known place of business for the conducting of money transactions; though an office where one receives business callers and where it appears that he had no other known place of busi- ness would be a proper place for the making of a demand. 37 78. Personal Presentment. If presentment be made on a party in person, and no objection is made to the place where such presentment was made, and there be a refusal to pay, it will be deemed a sufficient presentment. 38 79. Presentment at Address of Bill. Where a bill is addressed to a drawee at a particular place, and accepted generally by him, such address indicates where it is to be presented for payment. A presentment for payment at such place is sufficient as against the drawer or indorsers. 39 CHAPTER IX. DISCHARGE AND PAYMENT. 80. Payment as Discharge. 81. Appropriation of Payments. 82. Time of Payment. 83. Payment to Whom Made. 84. Payment by Whom Made. 85. Payment for Honor Supra Protest. 86. Right to Reissue Paid Paper. 87. Payment by mistake. 88. Discharge Other Than by Payment. 89. Discharge of Indorsers. 90. Payment by Check. 80. Payment as Discharge. A negotiable instrument 35 Pearson v. Bank of Metropolis, 26 "West v. Brown, 6 Ohio St., 542. U. S., 89. M Parker v. Kellogg, 158 Mass., 112. '* Miltenberger v. Spaulding, 33 Mo., ' M Farnsworth v. Mullen, 164 Mass., 421; and see Ante . 112. DEPARTMENT OF LAW 75 is discharged when the right of action thereon is extin- guished; that is to say when the instrument is paid or all legal liability thereon is otherwise released or discharged. One of several parties to an instrument may be discharged and the others still be liable. Payment is the performance of the contract with the intention of extinguishing the liability of the party paying, or of the one for whom the payment is made. Payment al- ways extinguishes the liability of the party paying, but whether it has a similar effect as to the contract itself, de- pends upon whether such payment fulfills all the obligations of the contract. If it does, the contract is extinguished; otherwise if it does not. 81. Appropriation of Payments. Where one is in- debted to another on two or more instruments or accounts, and payment is made in an amount insufficient to satisfy all of them, and the payment is voluntary and not under stress of legal process, the debtor has the right to appropriate the money paid to whatever account he pleases. He may do this even though it be to the prejudice of a party who is security for one of the unpaid debts. As between a debtor and a creditor, the debtor has the right to say to what debts of his, payments shall be credited, up to the time suit is brought on an instrument. As to third parties, such as in- dorsers, sureties and the like, such appropriation must be made by him within a reasonable time. * If a debtor makes no appropriation of his payments the creditor may apply same as he pleases to the various accounts held by him. A creditor however cannot apply a payment to a debt not yet due, if he holds an obligation of the debtor already due. In order to make an appropriation of payments it is not neces- sary for the debtor to make an express declaration thereof to the creditor; but any facts or circumstances showing an intention to make an appropriation to cover certain indebt- edness, will be binding on the creditor. 2 82. Time of Payment. To operate as a discharge of commercial paper a payment must be made in due course, and it must be made in good faith and without notice that the title of the holder to the paper is defective. Payment made before maturity and without a surrender of the in- 1 Green v. Ford, 79 Ga., 130. " Taylor v. Sandiford, 20 U. S., 13. 76 AMERICAN EXTENSION UNIVERSITY strument, will be valid between the original parties to the paper but will be no defense to the payer as against a bona fide holder who took the instrument for value before maturity. 3 When payment is made the instrument should be taken up by the payor. If a receipt merely for the money, or other evidence of payment, is taken instead of the paper itself, and the latter should later turn up in the hands of a bona fide holder before maturity, the debtor would not be pro- tected by the possession of the receipt. 83. Payment to Whom Made. In order to discharge a debt the payment must be made to the holder of the in- strument or to some person authorized by him to receive it. Where an instrument is payable to order, or is indorsed in full that is to a named indorsee payment to the payee or indorsee in possession of the paper is valid. But posses- sion of the instrument in such a case by one other than the named indorsee is no evidence of his authority to receive payment, and if such person is not in fact authorized to re- ceive payment, the payor will not be discharged. 4 Where however an instrument is indorsed in blank or is payable to bearer, the person in possession of the instrument will be entitled to receive payment thereof. Accordingly if pay- ment is made to such holder in good faith it will be valid, although it subsequently appear that he had no right to the instrument or to receive the money due thereon. 5 The taking up of a note by an indorser in the hands of a bona fide holder for value before maturity makes him legally a purchaser from such holder and he succeeds to his legal rights on the paper. When paid by an indorser after maturity, such payment does not extinguish the debt, but the indorser has the right of recovery thereon against the maker, or the prior indorsers, and is entitled to be subro- gated to any collateral security held by them for the pay- ment of the instrument. 6 Payment to a payee should only be made before indorse- ment and transfer of the paper by him. If the maker of a note pays it to the payee after his indorsement and transfer "Gosling v. Griffin, 85 Tenn., 737. Stoddard v. Burton, 41 Iowa, 582. Doubleday v. Kress, 50 N. Y., 410. Tilford v. Garrells, 132 111., 557. DEPARTMENT OF LAW 77 thereof, or after notice of such an assignment or transfer, either before or after maturity, and does it without obtain- ing the note, it will not avail him as against the transferee and holder of the note. 7 84. Payment by Whom Made. Any one liable on an instrument may discharge his liability to the holder by paying it; and payment at its maturity by the party ulti- mately liable thereon, i. e., the maker or in case of an ac- cepted bill of exchange, the acceptor discharges the instru- ment. So, too, would payment by one of several joint mak- ers or acceptors. Except in the case of accommodation paper payment by the drawer of a bill or by an indorser does not discharge the instrument. In such excepted cases the one who so pays is remitted to his former rights against the antecedent parties on the paper, and is subrogated to the benefit of any secur- ities to which the holder who has so been paid is entitled against such antecedent parties. Even should an endorser make a payment it would not affect the maker's liability on the instrument, and notwithstanding such payment the holder may still recover the whole amount of the instrument from the maker, being then accountable for its amount to the one making such partial payment. 8 85. Payment for Honor Supra Protest. Any per- son may intervene and pay a bill of exchange for the honor of a party liable thereon, where it has been protested for non-payment ; and this he may do without any request from the one from whom he pays. 9 As was stated in a previous lesson, 10 such payment should be certified before a notary public, and a declaration for whom the payment is made should be recorded by the notary either in the protest of the paper or on a separate instrument, and the parties con- cerned should be duly notified. Such payment is usually termed an act of honor of the paper, and the person so hon- oring it succeeds to the title and rights thereon of the person for whom he so pays and from whom he thus receives it. Such payment of an instrument discharges all parties thereto, subsequent to the one for whose honor it has been T Cox v. Cayan, 117 Mich., 599. 9 Wood v. Pugh, 7 Ohio, 164. 8 Madison Square Bank v. Pierce, 10 See 2 1 Ante. 137 N .Y., 444. 78 AMERICAN EXTENSION UNIVERSITY taken up. 11 The doctrine of supra protest, or that allowing payment for honor has no applicability to promissory notes. Hence the payment of a note by one not a party thereto, without the request so to do by one who is a party thereto, gives that person so paying no legal right because of such payment to force payment from any of the prior parties. 12 86. Right to Reissue Paid Paper. Payment of paper at maturity by the maker or acceptor discharges the instru- ment and it cannot thereafter be reissued. But where a bill is paid at maturity by the drawer thereof, if it was payable to his own order and he is accordingly the payee as well as the drawee, it may be reissued by him. If a bill is payable to the order of a third person it cannot be reissued. An indorser however who pays a bill or note at or after maturity may reissue it and give his indorsee a right of action thereon against the prior parties. If an instrument is paid or taken up before its maturity by the drawer or the indorser, the pay or may reissue and further negotiate it. 13 87. Payment under Mistake. Payment made under a mistake of material facts may be recovered back. Hence money paid on a forged, canceled or altered instrument, or paid upon an instrument by mistake to one who has no right to demand it, may be recovered back. 14 If however after discovering the mistake, the payor be guilty of laches i. e., of negligence in taking advantage of his rights so that the position of the other party is changed to his damage, he loses his rights to recover. Negligence of itself will not defeat recovery; but where negligence exists, and if a recovery were permitted loss would be thrown upon an innocent party, the negligence will be a bar to such recovery by the one guilty of such negligence. Discharge Other than by Payment. There may be a discharge of commercial instruments by the same means, other than by fulfillment thereof, as will discharge any other form of contract. Novation, accord and satisfac- tion, release of an obligor, such as an acceptor or maker, by "McDowell v. Cook, 45 Am. Dec., Thompson, 124 Mass., 514. 289. "Talbot v. National Bank, 129 "Smith v. Sawyer, 56 Me., 139. Mass., 67. ** West Boston Savingb Bank Y DEPARTMENT OF LAW 79 the holder and the like. No agreement of any character between the parties can attach to an instrument however so as to affect the rights of a bona fide holder without notice, who takes it before maturity. So also the cancellation of an instrument by the holder or with his consent, whether by its destruction or by writing or stamping words of cancellation across its face showing intent to cancel, is a discharge. Like- wise a material alteration of the terms of an instrument without the consent of all parties liable thereon, will have like effect. Judgment recovered on a bill or note extinguishes the instrument and discharges the debt thereby witnessed be- tween the parties to the action, making the obligation there- after to rest upon the judgment and not upon the original indebtedness. But unless the judgment is satisfied and paid the obligation is not extinguished between the plaintiff and the parties to the instrument, prior and subsequent to the defendant, or between the defendant and a party on the paper prior to the plaintiff. Discharge in bankruptcy or insolvency discharges the liability of the bankrupt or insolvent but does not affect the liability of other parties to an instrument. 89. Discharge of Indorsers. Unless the actual rela- tion of an indorser on an instrument is proved to be different from that which it appears on the face of the instrument to be, as in the case of accommodation indorsers, each indorser is presumed and held bound to indemnify each subsequent party to the instrument, and has himself the right to be indemnified by each prior party thereto. 15 To this extent there is the relation of suretyship between the parties; the maker or acceptor being the principal debtor, and the drawer and indorsers, in the order in which their names appear, being sureties or guarantors. The same causes that will discharge a surety or a guarantor will therefor dis- charge an indorser. 16 So that if the holder of an instrument enter into a binding agreement to give time to the acceptor or maker or to a prior indorser, without the consent of the subsequent indorsers, he discharges the subsequent indors- ers from liability. It is said however that where in granting "McDonald v. Magruder, 28 U. S., "Smith v. Rice, 27 Mo., 505. 470. 80 AMERICAN EXTENSION UNIVERSITY such right the holder expressly reserves his rights against subsequent parties they are not so discharged. 17 Giving time of payment to an indorser however would not discharge prior parties. Such an agreement must be fixed and definite in extent and founded on a legal consider- ation. 1! But a release of, or a composition with, the ac- ceptor or the prior indorsers, without the consent of subse- quent indorsers, releases the latter from liability. The sur- render by a holder of any security he may have received from the maker or acceptor, discharges the indorsers to the amount of the security so surrendered. And the release of one joint party to an instrument, discharges all the joint parties. So also where one of several joint parties is, as to the others, a surety, a release or extension of time granted to the principal with knowledge of the relation of the par- ties, discharges the surety. 19 90. Payment by Check. If a person receiving a check presents it with due diligence at the bank on which it is drawn, and it be dishonored, it will not be considered as payment of the debt for which it was given. But laches on the part of the holder of such check, such as a delay for several days in presenting it for payment, will discharge the debt if any damage result to the drawer of the check from the failure of the holder to promptly present same. 20 It is not required that a check be presented on the day it is drawn or is received by the payee, but it should be presented or put in course of collection not later than the day after it is received. "Hagey v. Hill, 75 Pa. St., 108. "Hamilton v. Winona Lumber Co., "Brooks v. Allen, 62 Ind., 403. 95 Mich., 436. "Irvine v. Adams, 48 Wis., 468. QUIZZER. MATURITY. l-62. In what instances does the question of the time of the maturity of commercial paper usually arise ? The law of what place governs the question of maturity? When does an instrument payable on a fixed day, or at a stated time after a fixed date, mature ? DEPARTMENT OF LAW 81 4-63. What option and in whose behalf applies to paper payable "on or before" a fixed date? 5- Of what practical service is such an option? 6- When does paper so drawn mature ? 7- Give illustrations of other forms of maturity hav- ing the same effect. 8- When is paper payable ' ' on or after ' ' a stated date, due? 9- Name several forms, the use of which make paper due on demand. 10- Does a provision in an instrument for the payment of interest affect its maturity? 11- When is paper payable on demand "overdue" so as to affect its transfer? 12- What determines the question of "reasonable time" in fixing the maturity of demand paper? 13-64. When does a check mature? 14- When is a check "overdue" so as to affect its transfer? 15- What are "overdue" checks called? 16- By what rule is the question of reasonable time in the presentment of checks determined? 17- When do certificates of deposit mature and what rules govern that matter? 18- What can you say as to the question of maturity of installment notes? 19- When will instruments payable upon the happen- ing of a stated contingency mature ? 20- State fully the rule governing the maturity of in- struments due on a fixed date but containing pro- visions giving the holders the option to declare them due earlier upon certain defaults illus- trate. 21- Can such an option be waived or lost if so, in what ways ? 22- When will a series of notes due at different dates, but secured by a mortgage which provides that none of them shall be payable until the maturity of the last one, mature ? 23- When does interest on an interest-bearing note become due ? 82 AMERICAN EXTENSION UNIVERSITY 24- When does a right of action accrue on a note bear- ing interest payable annually, with option to holder to make it a part of the principal if unpaid when due? 25- Is this changed where interest is due at stated periods without further provision affecting it if so, in what way? PRESENTMENT l-65. What is necessary to be shown in order to fix the liability of the drawer of a bill? 2- Does this apply to any others if so, to whom? 3- What does "presentment" in the legal sense in- clude ? 4- 66. When a bill is presented for acceptance and ac- cepted, is there need for any further presentment at maturity if so, what? 5- Would the fact that the bill was discharged when presented for acceptance alter the case if so, how? 6- Is there any exception to this rule if so, what? 7- 61. Is presentment necessary to charge a maker or acceptor ? 8- When is the beginning of a suit said to be a suffi- cient demand? 9- 68. What do you understand to be the rule as to guar- antors? Answer fully, and give reasons. 10-69. In the case of an instrument being given in satis- faction of a debt, what is the duty of the person receiving it and what would be the result of his failure to act ? 11- What is required of one who receives an instru- ment, the proceeds of which are to be applied on a debt, and what penalty would be incurred from his failure to act? 12-70. Who may present a note or inland bill? 13- Is a power of attorney necessary for this purpose ? 14- Where a party holding paper be deceased when it is due, who may present? 15- Who may present when the party be insolvent or bankrupt? DEPARTMENT OF LAW 83 16- Who should present a foreign bill? 17- Would presentment by a clerk be sufficient? 18-J71. To whom should the instrument be presented? 19- If the payor be deceased, to whom must present- ment be made? 20- If there be several makers not partners, to whom should presentment be made? 21- If the liability be joint what difference would this make? 22- If they were partners what would be sufficient pre- sentment ? 23- If the firm had in the meantime been dissolved, what presentment would be required in order to be sufficient? 24- If a partner died before the maturity of the instru- ment, to whom should it be presented? 25-72. Is possession of the instrument necessary in order to make a valid presentment? Give reason for answer. 26- In case of the loss or destruction of the instrument what would be a sufficient presentment? 27- Is payment in a special kind of currency necessary if so, when? 28-73. What is the rule where a paper is made payable in a city without designating a particular place ? 29- Is there any difference if the party has a residence or place of business therein if so, what? 30- Is demand for payment at the place named essen- tial? 31- Who, if anyone, is affected? 32- Can there be a substitute for it, or will previous notice be sufficient? 33- If payable at a particular bank is formal demand necessary? 34- What will be deemed a sufficient demand in such a case? 35- If the instrument is in the bank without the knowl- edge of the bank's officers will that be deemed a sufficient presentment? 36- If the place of payment be designated in the accep- tance where should the bill be presented? 84 AMERICAN EXTENSION UNIVERSITY 37- Would this control if the bill were addressed to a different place 1 38- Is there any proviso regarding this, or.is it absolute give reason for answer? 39- 74. When an instrument is payable on a fixed day when should it be presented ? 40- Would presentation the day before, or after, be sufficient ? 41- What is the rule when no day be specified 1 ? 42- What is the effect of indorsement after maturity 1 ? 43- When should presentment be made in such a case ? 44- If a paper be transmitted by mail and delay is caused by the postal authorities, what is the effect? 45- What is the rule as to presentment in such cases ? 46-75. How is time reckoned in determining the maturity of commercial paper? 47- Do we figure in these cases by lunar or calendar months ? 48- What determines the date for the purpose of fixing maturity when an instrument is undated ? 49- When will paper maturing by its terms on Febru- ary 29th, 30th or 31st be payable? 50-76. At what hour must presentment be made if pay- able at a bank ? 51- When, if payable at a place of business, and when if payable at a residence ? 52-77. What, as regards the liability of the maker, is the result of failing to make presentment ? 53- Would the fact that the failure to present resulted in damage to him affect the result ? 54- Where no place of payment is mentioned in the paper can a place be agreed on? 55- How would such an agreement affect a drawer or indorser? 56- Where no place of payment be named or agreed on where should presentment be made? 57- What is deemed requisite to make a place of busi- ness such as to make a presentment thereat suffi- cient? 58-78. What is the rule, as to personal presentment, as to the place of making it ? DEPARTMENT OF LAW 85 59- 79. If a bill be addressed at a particular place and ac- cepted generally, would this address indicate anything as to the place of presentment? DISCHARGE AND PAYMENT. 1-80. When is a negotiable instrument discharged? 2- Does the discharge of one party thereto discharge all parties ? 3- What is meant by payment ? 4- What is the effect of payment on the liability of the party making it ? 5- How does it affect the contract itself? 6-81. When has a debtor the right to make an appropria- tion of his payments to certain of his indebted- ness? 7- Can he make an appropriation of payment in favor of one debt, and in prejudice of a party who is security on another debt? 8- Until when has a debtor the right to make such appropriation? 9- What is the rule as to third parties on this matter? 10- When may a creditor make appropriation of pay- ments as he desires, upon several debts held by him? 11- To what debts must the creditor give preference? 12- How may appropriation be expressed by a debtor? 13-82. When does payment operate as a discharge? 14- What is the effect of payment of an instrument before its maturity? 15- What should be done with an instrument on pay- ment thereof being made ? 16- Would a receipt for payment of a negotiable in- strument protect the payor as evidence of pay- ment of such instrument ? 17-83. To whom should payment be made? 18- When would payment to a payee or indorsee in possession of paper be deemed valid? 19- What would be the effect of payment to a person in possession where the instrument is indorsed in full, or is payable to order? 86 AMERICAN EXTENSION UNIVERSITY 20- Would possession be sufficient to authorize such payment ? 21- In what case, if any, would payment to a person in possession of an instrument be valid? 22- What would make an indorser a bona fide holder? 23- What is the effect of payment by an indorser after maturity? 24- Does it extinguish the debt? 25- Has an indorser, paying an instrument, any right to the collateral security, if any, held by the payee? 26- When only should payment be made to a payee ? 27- How will payment of an instrument affect an in- dorsee if it is made after indorsement or transfer to him, and without surrender of the paper? .28-84. How may one liable on an instrument obtain his discharge from the holder? 29- What will be the effect of payment of paper at its maturity by the one ultimately liable thereon? 30- What will be the effect of a payment by one of sev- eral joint makers or acceptors? 31- When will payment by a drawer or indorser dis- charge an instrument ? 32- What is the general rule as to payment by a drawer or indorser? 33- Will part payment by an indorser affect the liabil- ity of the maker, and what right has a holder in such a case ? 34- In such a case for what would the maker be liable ? 35-85. To what rights does one who pays for honor suc- ceed? 36- What is its effect on parties subsequent to the one for whose honor a bill is paid? 37- What application has the doctrine of supra protest to promissory notes? 38- What rights, if any, does a person who makes such payment acquire in the case of a note ? 39-86. What will prevent the reissue of an instrument? 40- When may it be reissued by the drawer even if paid at maturity? 41- If it were to the order of a third party what effect if any, would it have? DEPARTMENT OF LAW 87 42- Has an indorser the right to reissue paid paper and if so, what rights does such reissue confer? 43- What effect will payment before maturity have on the right of a drawer or indorser to reissue paper? 44-87. When may payment made under a mistake be re- covered? 45- What effect will laches in seeking such recovery have, if any? 46- Will negligence defeat such recovery? 47- When will negligence bar a recovery? 48- 88. What methods other than by payment are there of discharging negotiable paper? 49- Can an agreement discharging paper attach to an instrument so as to affect the rights of a bona fide holder without notice, before maturity? 50- What will be the effect of cancellation of such paper? 51- What will be the effect of a material alteration in such paper? 52- What is the effect of a judgment in an action upon such paper? 53- What is its effect on other parties, not parties to the action, of a judgment rendered thereon? 54- What will be the effect of a discharge in bank- ruptcy on one's liability on such paper? 55- What will have a similar effect ? 56- 89. What relation have indorsers to one another? 57- Is this likewise true of accommodation indorsers? 58- Is there any relation of suretyship in the engage- ment of an indorser if so, what is it? 59- What will discharge an indorser? 60- Can such discharge be prevented if so, how? 61- Will the extending of the time of payment to an indorser discharge prior parties on commercial paper? 62- When will a release, or a composition with an ac- ceptor or prior endorsers, release subsequent in- dorsers ? 63- What will be the effect on indorsers of the surren- der of security given the payee for the debt ? 88 AMERICAN EXTENSION UNIVERSITY 64- What will be the effect on indorsers of the release of a joint party? 65- Where one of several joint parties is, as to the other, a surety, what effect will a release or ex- tension of time to the principal debtor, with knowledge of the relation, have as to him? 66-90. When will the receipt of a check that is dishonored, not be considered payment ? 67- What will discharge the debt, even if the check were dishonored? 68- When should a check be presented? 69- Is presentment on the day it is made, or is received by the payee, necessary if not, what will suf- fice? DEPARTMENT OF LAW 89 LESSON 14.- CHAPTER X. PROTEST 91. Definition. 92. Formalities. 93. When and by Whom Made. 94. Protest Certificate as Evidence. 95. Protest as Notice of Dishonor. 96. Protest Not Evidence of Collateral Facts. 97. Lofet Certificate of Protest. 98. Note rial Fees. 91. Definition. Protest in its general sense refers to and includes all the steps legally necessary to charge an drawer or indorser on commercial paper. It is indispen- sable in the case of a foreign bill of exchange. ^ (The pro- test may be either for non-acceptance or non-payment. It has been held that protest is unnecessary in the case of in- land bills of exchange and promissory notes. 2 } Protest may be defined as a solemn declaration in writ- ing, in duo form, by a notary public, usually under his notar- ial seal, or if not by a notary by some responsible unofficial person, on behalf of the holder of a bill or note, protesting against all parties for any loss or damages by the non-accep- tance or non-payment, as the case may be, of the bill or note. 92. Formalities.-/-The formalities of protest apply without qualification, and a strict conformity thereto is necessary to a valid protest.; The certificate of protest should identify or designate the instrument to which it refers. This is usually done by affixing the instrument pro- test or writing in a copy of it. It must set forth the fact of the presentation of the paper for acceptance, or for pay- ment. 'A protest setting forth a demand of payment, and saying nothing of presentment of the paper, is defective on its face. 3 There should also be a statement as to the party to whom it was presented, and the one to whom it was made. /The time and place of presentment must also be stated together with a statement of the additional fact of a demand for acceptance or for payment. The fact of a refusal of 1 Ticonic Bank v. Stackpole, 41 Mo., - Green v. Louthain, 49 Ind., 139. 302. 3 Musson v. Lake, 45 U. S., 262. 90 AMERICAN EXTENSION UNIVERSITY acceptance or of payment must also be set forth; and the certificate of protest should be signed by the notary making it. (''While according to some authorities the seal of the notary is not requisite, it is advisable that it should be affixed to the certificate. / 93. When and By Whom Made. A protest should be made on the day of the presentment or demand, and should be made at the place where the refusal of acceptance or of payment takes place. It should be made by a notary per- sonally. He cannot deputize another to do it. Where however no notary can be found, protest may be made by any respectable or substantial citizen of the place. 4 94. Protest Certificate as Evidence. The certificate of protest is prima facie evidence of its own authority and execution. It will be received as evidence of the truth 'of the facts set forth therein within the scope of the official duty of the notary, 5 and is prima facie evidence of the dishonor of the instrument therein described. In most states notarial protest of inland bills and prom- issory notes is by statute also made prima facie evidence of the same facts as in the case of foreign bills. A notary upon being called as a witness may use the certificate of protest to refresh his memory, and the protest itself has been held admissible in evidence to prove the facts set forth in it. 6 95. Protest as Notice of Dishonor. The usual prac- tice is to embody in the certificate of protest a statement as to notice of dishonor, although in some states it may be done by a separate certificate. The certificate being evidence only of such facts as may be stated therein, it will not be notice of dishonor unless it be stated therein that such notice was given. T In such cases it should also contain a statement as to the manner of giving the notice, as well as the time and place when such notice was given. It is not necessary to set forth the contents of the notice, nor by whom the notice was given where it makes the positive 4 Todd v. Neal, 49 Ala., 266. 'Martin v. Smtih, 66 N. W. Rep., 61. Pierce v. Idseth, 106 U. S., 546. 7 Thorp v. Craig, 10 Iowa, 461. DEPARTMENT OF LAW 91 statement that such notice was given the presumption being that the notary made the service of notice. 8 96. Protest not Evidence of Collateral Facts. The protest will not be received as evidence of facts collateral to and independent of the presentment, refusal and notice Hence a statement therein that demand was made of "one of the administrators," would not establish the fact of the death of the acceptor and the granting of letters of admini- stration to the party to whom the notice was given, i'or the same reason the fact of diligent search and inquiry for the indorser of a note for the purpose of giving notice of dishonor, cannot be proved by a statement contained in a certificate of protest. 9 97. Lost Certificate of Protest. If a certificate of protest be destroyed or lost, proof of the facts it stated, must be made in the usual manner for proving the contents of lost instruments. Independent of statutory enactment prescribing other classes of evidence, the best evidence which the nature of the case permits, such as copies, records or memoranda, and the like, may be introduced to prove the certificate. 10 98. Notarial Fees. In all cases where protest is re- quired the notarial fees are a legal charge on the part of the holder, and may be added to the instrument and charged against the party protested. Where however as in the case of an inland bill or promissory note not requiring protest, but whose protest is made for the purpose of evidence of dishonor of the paper, there is some doubt as to whether fees therefor can be recovered. Where there is no indorser, and hence protest would be absolutely useless from a legal standpoint, no protest fees are chargeable against the maker of the paper. So, too, where there is a guarantor of a note, protest being unnecessary to fix his liability, protest fees are not legally recoverable. 1X 8 Slaughters v. Farland, 31 Gratt J * McGarr v. Lloyd, 3 Pa. St., 474. (Va.), 134. "Woolley v. Van Valkenburgh, 16 Reier v. Strauss, 54 Md., 278. Kan., 20. 92 AMERICAN EXTENSION UNIVERSITY CHAPTER XI. NOTICE OF DISHONOR 99. Necessity of Notice Definition. 100. To Whom Must Be Given. 101. When Must Be Given. 102. When Negotiated After Dishonor. 103. When Note Payable in Installments. 104. Form of Notice. " 105. Mode of Giving Notice. 106. Misdirected Notice. 107. What Will Excuse Protest and Notice. 108. Waiver of Notice. 109. Proof of Notice. 99. Necessity of Notice. Notice of dishonor is re- quired to be given to all indorsers and acceptors liable on a dishonored instrument, and the failure to do so discharges the liability of such a party to whom no notice is given. The mere fact that a party charged on commercial paper has knowledge of the dishonor of paper on which he is liable, is not sufficient. He must, in order to lay the legal foundation for holding him to the paper, receive notice -in due form and manner of the dishonor. Due notice is not notice r knowledge received in any sort of way by verbal telling from an outside party, by newspaper items, or even by information received from the maker of the paper itself that he has not paid it-f-it is notice of the fact of dishonor given by the protesting omcer, at the instigation and on behalf of the holder of the paper, that presentment and demand thereof was duly made, pay- ment was refused, and that its dishonor is protested against him said party so notified and that he will be held liable to pay said paper. \ Accordingly where a bill of exchange has been presented tor acceptance, or a bill or note has been presented for payment, and been refused, such notice of dishonor must be given in order to hold the drawer or indor- ser thereon liable. l To charge an indorser alone notice to him only is sufficient, and need not necessarily be given to the drawer. 100. To Whom Must be Given. In the case of suc- cessive indorsers a holder, if he so chooses, may give them all notice so as to fix the liability of all. Such notice will inure to the benefit of each party and against those who stand subsequent to him on the paper. A holder however 1 Long v. Stephenson, 72 N. C. 569. DEPARTMENT OF LAW 93 is not required to give notice to all indorsers in order to fix the liability of any particular indorser receiving notice. He is required to notify only the indorser to whom he looks for payment, although in practice usually all parties to the instrument are duly notified. Therefore the holder's im- mediate indorser, if he receives regular notice, will not be discharged because the holder did not give notice to a previous indorser. 2 The holder of paper is required only to send notice to his immediate indorser who receiving notice should prompt- ly transmit it to his immediate indorser and so on. Each will then be liable to his immediate indorser or to the holder, even though the notice did not reach some as soon as if it had been directly sent them by the holder; the holder having his day in which to notify his indorser and each indorser having the same time to notify his predecessor and so on. If then an indorser receiving notice, wishes to have a remedy over against a prior indorser, it devolves upon him to give notice to such prior indorser, irrespective of whether the holder has done so or not, and so on through the series of indorsers up to the first. 3 101. When Must be Given. Notice of dishonor must be put in transit to the party to be held thereby, " within a reasonable time ' ' after the dishonor and protest of the paper in order to hold such party. It should be done as soon after protest as is possible in the usual and due course of business, and in any event not later than the day following protest- preferably on the very day of the protest. Notice if given prior to the dishonor of paper will be void, as there is in such cases no default at the time the no- tice would thus be given; 4 and ntice if forwarded by mali should, as already suggested, be posted early enough to be sent by mail of the day succeeding the dishonor. 5 Sundays and legal holidays are excluded in computing the time when notice should be sent. Notice of the first occurrence of dis- honor should be given, the one presentment and demand, 2 Big Sandy Bank v. Chilton, 40 W. 265. Va. 491. King v. Crowell, 61 Me. 244. * Wood v. Callaghan, 61 Mich. 402; 5 Smith v. Poillon, 87 N. Y. 590. Butler v. Duval, 4 Yerg. (Tenn.) 94 AMERICAN EXTENSION UNIVERSITY followed by dishonor of paper, laying the legal foundation upon due notice being given to hold indorsers. Paper once dishonored need not be presented again in the hope that it will be paid and it should not be so re-presented, if one wishes to surely hold indorsers. Failure to protest and to give due notice on the first dishonor may be deemed a waiver of the right to call upon indorsers. To charge the indorser of a note payable on demand he must be given notice of nonpay- ment on the first demand; and notice of nonpayment, on a second demand, even though it be received by the indorser as soon as would a notice had it been sent after the first demand, will be insufficient. Nor is it sufficient to hold indorsers, to prove that notice of dishonor for nonpayment of a draft was sent where there had been previous dishonor of the paper by its non acceptance and no protest and notice was thereafter sent. This is so even in the case of bills which need not have been presented for acceptance, if 'as matter of fact they were so presented, and their acceptance was refused. 6 Where the holder of a bill tenders it to the drawee for acceptance before it is due, and acceptance is refused, but the holder keeps it until it is due and then presents it for payment which is also refused, and then returns to the second indorser, and he not knowing of the laches of the holder in not protesting the paper for non-acceptance takes it up, it has been held that his ignorance of the laches of the former holder of the bill when paid, would not entitle him to recover against the first indorser who sets up that laches as a defense. 7 Such a payment however having been made under a mistake of fact may be recovered from the party to whom it was made. 8 102. When Negotiated After Dishonor. The indor- ser before maturity of a bill or note which has been dishon- ored, and whose liability has been fixed by due notice, is not entitled upon further negotiation of the instrument, to additional notice at the hands of such subsequent holder. 9 And if an indorser originally charged with notice pays the United States v. Barker, 2 4Fed. * Talbot v. Nat'l Bank of Common- Cas. 1004. wealth, 129 Mass. 67. 'Bartlett v. Benson, 2 M. & W. 737. 'St. ohn v. Roberts, 31 N. Y. 441. DEPARTMENT OF LAW 95 note or bill and receives it back, and puts it in circulation a second time without erasing his endorsement, he will be liable to a subsequent indorsee without further notice of dishonor, he being estopped from denying such liability. 103. When Note Payable In Installments. Notice of dishonor being required in the case of all bills and notes, at once upon their being dishonored, in order to charge indorsers in the case of a note payable in installments, notice should be given of the non-payment of each unpaid install- ment. The omission to give notice of the non-payment of an installment will not however affect the liability of an indorser of the note for the non-payment of an install- ment of which he had been duly notified. 10 104. Form of Notice. The notice of dishonor is not required to be in any prescribed language. Nor must it necessarily be in writing. Verbal notice will be sufficient if it covers all the essentials of due notice. When given in writing it should be dated so as to aid in the identification of the paper. If the name of the person sought to be held is omitted, or is inaccurately stated, it will render the notice invalid as to him. So also the omission of the place of ad- dress of such party, or an inaccurate statement thereof, although if the notice be in fact received, the incompleteness or inaccuracy of address will be immaterial. Sufficient facts must appear in the notice to constitute it a notice of dishonor those facts essential to due notice as previously given " and the contents of a written notice may be proved without the production of the notice itself. The notice should so designate or distinguish the paper pro- tested as to leave no reasonable doubt in the mind of the party notified as to which paper is intended; but immaterial omissions or misdescriptions will not vitiate a notice. 12 The notice should be signed by the notary or other party protesting the paper, or at least accurately indicate the person from whom it proceeds. 105. Mode of Giving Notice. Notice of dishonor may be sent by mail though it has been held that when the "Fitchburg Ins. Co. v. Davis, 121 Mass. 121. "Townsend v. Heer Dry Goodte Co. "See, Ante, 99. 85 Mo. 508. 96 parties reside in the same immediate neighborhood, and are accustomed to receive mail at the same post office, such notice should be served personally, or left at the residence or place of business of the person to be charged. 13 It has been said that the mail service is to be resorted to only when the parties live in different towns or at a wide distance apart in large cities; but if a notice so deposited be in fact received in due time, it will be held sufficient. The deposit of a notice duly addressed and with sufficient postage there- on, in a street letter box provided by the post office depart- ment for the reception of letters, or the delivery of such a notice so prepared to an official letter carrier, will be deemed sufficient irrespective of whether it was ever in fact received. 14 106. Misdirected Notice. If the party giving notice be ignorant of the place of residence or business of the party to be notified, he should exercise due diligence in making inquiry regarding the same. This inquiry must be ordinary and reasonable; and when he acts in good faith upon the information so obtained the party to be charged will be held liable even though the notice may have been sent to the wrong place. 15 Where however after such diligent inquiry no place of business or place of residence of the party to be charged can be ascertained, a notice addressed to him and deposited in the post office at the place of residence of the holder of the paper will be sufficient. 16 107. What Will Excuse Protest and Notice. It has been held that where the drawer of a bill has no effects in the hands of the drawee, and hence no financial right to expect that the drawee will honor such draft, yet the drawer will not be discharged for want of presentment of the paper or notice of dishonor. However, a drawer is entitled to the presentment of his draft and notice if it is dishonored, if, at the time of drawing, he had reason to expect his bill would be honored, based upon a state of facts connected with the transactions as they then existed between the drawee and himself, even if he had no actual credits with "Forbes v. Omaha Nat'l Bank, 10 " Garver v. Downie, 33 Cal. 176. Neb. 340. Staylor v. Ball, 24 Md. 200. " Pearce v. Langfit, 101 Pa. St. 511. DEPARTMENT OF LAW 97 the drawee. 1T If an instrument be void an indorser thereof is liable without proof of demand and notice. Where a drawer or indorser receives funds from the acceptor or maker, for the special purpose of paying the bill or note, or agrees to pay the same upon having security placed in his hands, he cannot insist upon demand or notice, he having no remedy over, when he thus assumes primary liability. But where such primary liability is not assumed when receiving security, such party is still entitled to de- mand and notice. 18 When the drawer and drawee of the paper are the same person no notice nor presentment is necessary. So, too, if a bill be drawn on a partnership by one of its members; or by the partnership on one of the firm, notice is unnecessary. If the maker or acceptor abscond subsequent to the making of a note or the accepting of a bill, and before maturity thereof presentment to him or an attempt to make such presentment is unnecessary as it would be unavailing. But if the instrument be made payable at some specified place, as at a particular bank,, or a named address, it should nevertheless be presented at that place. 19 If demand at the place of payment as specified in the instrument has become impossible by reason of the fact that the place has ceased to exist, such presentment is unneces- sary. 20 108. Waiver of Notice. The right of a drawer or indorser to require presentment protest and notice may be dispensed with by his waiver of same. An agreement of waiver, between an indorser and the maker of paper will inure to the benefit of an indorsee. 2I Such act or declara- tion must be the act of the person entitled to take advantage of such formality. Any member of a partnership may make such a waiver on behalf of the firm without special author- ity if the paper was executed in the course of the partner- ship business; and it may be so made even after the disso- lution of the firm. 22 17 French v. Bank of Columbia, 8 U. 20 First Nat. Bank v. Wever, 15 S. W. S. 153. Rep. 41. 18 Ray v. Smith, 84 U. S. 411. 21 Rogers v. Hackett, 21 N. H. 100. "Farwell v. St. Paul Fruit Co. 45 "Darling v. March, 22 Me. 184. Minn. 499. 98 AMERICAN EXTENSION UNIVERSITY If a waiver be contained in the body of a written instru- ment it binds each party to the contract who sign the instru- ment. If however a waiver be contained in an indorsement, it binds only the person making it and does not affect the other indorsers. A waiver may be made by a drawer or indorser at the time of the execution of the instrument, or of the indorse- ment, or any time thereafter before maturity of the in- strument. A waiver may be in direct and positive terms, by implication, or by an understanding between the parties of such a character as to be clear that a waiver is intended. 23 Waiver of protest is equivalent to an express waiver of pre- sentment and notice as well as of protest. 24 Waiver of notice however is not a waiver of due presentment and demand. 25 Waiver may be implied from the act or language of a drawer or an indorser which would put a reasonable person off his guard or would induce him to forbear making presentment or notice. 26 An agreement made before maturity to renew an instru- ment, or to extend the time of payment, waives the neces- sity of demand and notice; but an agreement to extend the time for bringing suit thereon is not such waiver; nor is the mere request for a forbearance. If the drawer or indorser with knowledge of the neglect of the holder to use due diligence, promises to pay, or assents to the continuance of his liability as if due diligence had been exercised he thereby waives the consequence of the laches of the holder and stands in the position as if he had been properly charged by presentment, demand and notice. 27 If however he be ignorant of the laches, such promise to pay will not be binding. 109. Proof of Notice. The party bringing an action on commercial paper that has been protested, must allege and prove notice, as well as presentment, demand, and protest or show sufficient cause for failure to send such notice. He may show the receipt of such notice affirmative- ly or by admissions of the defendant. Or it may be shown * Johnson Co. Bank v. Lowe, 47 Mo. * Sprague v. Fletcher, 8 Ore. 367. App. 154. M Quaintance v. Goodrow, 16 Mont. ** Lancaster Bank v. Hartman, 110 376. Pa. St. 196. * Curtis v. Sprague, 51 Cal. 239. DEPARTMENT OF LAW 99 that all the necessary steps were taken as provided by law; in which case the defendant is presumed to have received the notice. It will be sufficient if facts are proven that raise a prima facie presumption of the notice having been sent. 28 a Saco Nat'l Bank v. Sanborn, 63 Me. 340. QUIZZEE. PROTEST 1-91. To what does protest in its general sense refer? 2- When is it indispensable, and for what purpose is it made? 4 3- On what paper is it legally unnecessary? ^^ 4- Define protest. 5-92. Is strict formality required? ^f* 6- What should the certificate contain state fully? 7-93. When should the protest be made? 8- Where should it be made ? 9- By whom should it be made? 10- Need it be made by any law officer if not by whom else and when can it be so made? ' ll-94. Of what is the certificate of protest prima facie evidence? 12- Is the protest of an inland bill or promissory note of any value if so, what? - 13- Can it be used to refresh the notary's memory? 14- Of what facts is it evidence ? 15-95. Is the certificate of protest ever evidence of notice - of dishonor if so, when? /->-*- v. * 16- What must it then contain state fully? 17-96. How far is the certificate evidence of collateral facts. Give illustration of collateral facts that such certificate will not prove. 18-97. How may the facts be proven if the certificate be lost or destroyed? 19-98. When are protest fees a legal charge and against whom? 20- Are they a charge when there is no indorser and why? 21- Can they be charged against a guarantor and why ? i 55- 1^7 NOTICE OF DISHONOR l-99. To whom must notice of dishonor be given? . ' 2- What is the effect of the failure to . give such notice ? t'UX*^ - 3- If a party has knowledge of the dishonor otherwise than by due notice, is he still entitled to such notice? 4- Define " due notice." 5- If a bill of exchange be presented for acceptance and refused should notice be given and why? 6- Is it necessary to give notice to the drawer in order to hold the indorser? 7- 100. May a holder notify all indorser s, and what will be the effect of such notice ? 8- Is he required to do so if not what is he required to do? 9- Will a holder's immediate indorser be discharged for the failure to notify prior indorsers? "v^ 10- To whom only is a holder required to send notice and what should such party then do?. 11- What is required of an indorser who receives notice in order to have a remedy against a prior in- dorser? .^jXArX. ^v^y^ >V 12-101. When must notice of dishonor be put in transit? 13- Is a notice given prior to dishonor good and why? 14- Must notice be given of the first dishonor of paper and why? 15- Should paper once dishonored be again presented for payment? *v\Ar 16- What is the legal danger of such re-presentation? 17- Would notice of the dishonor of a second demand be sufficient, where previous demand had been refused and why? 18- Where a bill, not necessary to be presented for ac- ceptance, was so presented and was refused, and then was presented for payment and again re- fused, of which last refusal alone notice was sent, what will be the effect? DEPARTMENT OF LAW 101 19- What will be the position of a second indorser who not being aware of the facts stated in the last question, takes up the bill state fully? 20- 102. What are the rights of an indorser before maturity where a bill has been dishonored and notice given upon the further negotiation of the in- strument? 21- If an indorser who had notice takes up the paper and puts it into circulation a second time, is he entitled to notice from a subsequent indorsee and why ? VMT" 22-S103. What is the rule as to notice of dishonor where a note is payable in installments? * ivv^ki^ 23- What will be the effect of failure to give notice in the case of one particular unpaid installment? 24-104. Is any particular form of notice required? 25- Must notice of dishonor be in writing? 26- When in writing what should it contain; and what will be considered fatal omissions? 27- What proof, if any, will render incompleteness or inaccuracy in a notice immaterial? 28- Must a written notice be produced to prove its contents? 29- What must the notice contain, and what omissions if any, will not affect it ? 30-105. When parties reside in the same immediate neigh- .yu borhood how should the notice be given? ' 31- When may mail service be resorted to in serving notice? 32- What will be the effect of depositing a notice in a street letter box or when delivered to a letter carrier? 33- What will make the mode of service immaterial? 34-106. What course, as to giving notice, should be pursued when one is ignorant of the place of business or residence of party to be notified? 35- How can notice then be sent? ; 36- \vl07. What will excuse presentment, protest and no- tice? 37- When is the drawer of a bill legally entitled to have it presented, and so to get notice ? 102 AMERICAN EXTENSION UNIVERSITY 38- What will be the effect of a void instrument as to the necessity for presentment and notice? 39- What effect will the fact that the drawer or indor- ser has funds in his hands for the purpose of paying the instrument have? 40- How would this apply if it is securities that are so held? 41- Is there any exception if so, what ? 42- What effect will the fact that the same person is the drawer and drawee of paper have as to right to notice ? 43- What, if the bill is drawn on a firm by one of its members? 44- How, if it is drawn by one of the partner's, on his firm? 45- What is the rule as to necessity of notice in the case of an absconding debtor? 46- What is the rule as to presentment when the place specified in the bill has ceased to exist ? 47- 108. Can presentment, notice and protest be waived? 48- Who will such waiver affect? 49- By whom can such waiver be made ? 50- When can such waiver be given by a member of a firm and is special authority to waive re- quired? 51- How will such right be affected by the dissolution of the firm? 52- What will be the effect of a waiver contained in the body of an instrument"? 53- What is its effect if it be in the indorsement only ? 54- When may a waiver be made ? 55- In what manner must a waiver be made ? 56- What will be the legal effect of a waiver of protest only? 57- Will waiver of notice have the same effect if not what is its effect? 58- Can waiver be implied by act or language if so, what must be its nature? 59- What will be the effect, on the question of waiver, of an agreement made before maturity of paper to renew it? DEPARTMENT OF LAW 103 60- Will an agreementextending the time of bringing suit on paper have a similar effect? 61- How will it be affected by a request for a forbear- ance? 62- What will be the effect of a promise to pay, after neglect to conform to the formalities, where the party knew of such neglect? 63- If there is no such knowledge will it alter the situ- ation if so, how? 64- 109. On whom is the burden of showing that everything necessary to hold indorsers has been complied with? 65- How may it be shown ? 66- What is the presumption after such proof is made ? 67- To what extent must such proof go? l/lU I Zm / MW _> sl H oJ ni- F Z n > in 01 sue on it. This right can- not be rebutted by proof that he actually has no beneficial interest in the paper unless there be an allegation in the answer, of mala fides on the part of the plaintiff. Proof of such bad faith, and of wrongful possession of the paper would however defeat a holder's right to recover. 5 A holder of paper under an indorsement in blank may fill it up in his own name thus making the paper payable to himself this being but a formality which as we have already learned such a holder has a legal right to do. Or he need not fill up the indorsement at all, as the suing on it is evidence of his intention to treat the indorser who is sued, as a transf error and indorser to himself. 6 Instruments Specially Indorsed. Where an in- strument is specially indorsed to the holder and is not pay- able to bearer or indorsed in blank, a nominal holder merely cannot, unless authorized by statute, sue in his own name. This for the reason that the legal title to the paper is still in the transferror in such a case, and his name must be used as plaintiff, as the real party in interest, to maintain an action. Where however an instrument specifically indorsed to a certain named person is in the possession of such person as the legal holder and owner thereof, of course he may in his own name maintain legal action thereon. 115. What Constitutes Right to Sue. The right to sue in one's own name must exist at the time suit is brought. An indorsement made afterwards but before the trial, whereby a party for the first time then obtains such right, will not be sufficient. 7 The right to maintain legal action must continue in the plaintiff during the life of the *McLeod v. Snyder, 110 Mo., 298. Poorman v. MillB, 35 Cal., 118. ' Illinois Conference v. Plagge, 177 T Alabama Terminal etc. Co. v. Knox, 111., 431. 116 Ala., 667. DEPARTMENT OF LAW 107 suit. Hence a transfer of the instrument sued upon during the pendency of a suit thereon operates as a discontinuance of such action unless the new purchaser of the instrument is duly substituted as plaintiff. Where there are several indorsers, the action need not be in the name of the last holder. Any indorser may sue, by striking out the subsequent indorsements. A holder's own indorsement if left uncanceled, will not prevent his right of recovery, as his possession of the paper will raise a legal pre- sumption that he has not delivered it under the indorsement. And suit may be brought even without actual possession of the instrument, if the indorsee holds it merely as agent or trustee. But if the title to the bill, as well as its possession, be in another, an indorser cannot maintain an action thereon. .* l '- ^ An action should be brought by the party entitled to receive the proceeds of the instrument. A defendant in such case however cannot question the plaintiff's title except on the ground of bad faith in the plaintiff, or of sub- stantial prejudice therefrom to the defendant's rights, 8 unless it be in a jurisdiction where it is required by statute that the suit be brought by the real party in interest. As a general rule one who holds under a blank indorsement is the real party in interest, but a defendant may show that a plaintiff seemingly so holding has in fact no such title, for although possession of paper, while it lasts, carries with it the presumption of title it does not prevent proof that in fact the possessor of paper has no such title. 9 116. Who May Be Sued. Ordinarily an action can- not be maintained against a party who has indorsed paper subsequent to the plaintiff. Were the rule otherwise, a de- fendant in such an action might as indorser, recover back from the plaintiff on the latter 's liability as an indorser previous to the defendant the very amount recovered from him. In the case of an original indorsement to the defend- ant, without recourse, or without consideration, who had in- dorsed the paper back to the plaintiff absolutely and for value, or where other special circumstances of like legal import arise, this would not apply. 8 Caldwell y. Lawrence, 84 111., 161. Hays v. Hammond, 74 N. Y., 486. ,An indorser cannot sue an acceptor or maker until he has paid the obligation. ; In a suit by an indorser against a prior party to the paper, it is necessary, as a basis for his right of action^f or him to show that notice of non-payment and protest was duly received by such prior party. 117. When Right of Action Accrues. {As soon as payment is refused the right of action commences, 1 : provided that all the necessary formalities to fix liability on indorsers and others have been complied with. It is not necessary before beginning action to wait until sufficient time elapses to permit all parties to receive notice of dishonor, so long as the necessary steps are in fact taken to fix their liability before action is begun. 10 ) When a bill is dishonored for non-acceptance, a right of action accrues at once against the drawer and the indor- sers, provided the proper steps are taken to render them legally liable. It is not necessary to wait for the maturity of the paper, in such cases. 118. When Right of Action Expires. (When the right of action expires depends largely upon the provisions of the statute of limitations in force in the state where the right arose. ) While the length of time in which an action can be maintained under such statute varies in the several jurisdictions, yet under all, (the statute always begins to run from the day when the right of action accrues J Whether payment by one of the makers of a joint or a joint and several obligation takes it out of the statute as to the others, is a rather vexed question. The better opinion on this subject is that if the obligation be joint such pay- ment will extend the statutory limitations as to the other makers, but that if it be joint and several, it will not. Where several are jointly bound on an instrument, service of process in an action begun thereon on one of the parties will stop the running of the statute as to all.} (Where one of two or more sureties pays the surety obli- gation before it is barred by the statute, such surety may maintain an action against his co-surety or co-sureties for contribution of payment even after the bar of the statute be complete as to the original obligation.; (The reason for 10 Shed v. Britt, 1 Pick. (Mass.), 401. DEPARTMENT OF LAW 109 this is that such surety's right in that action accrues only from the date of the payment by him. ^\) A payment by a surety however will not revive an obli- gation as against the principal debtor, if it be already barred by the statute of limitations. (Most states also have a provision tha.t the operation of this statute is suspended as against a person, against whom a right of action accrues, if he is out of the state and hence beyond the jurisdiction of its courts, until his return to the state.) fche period during which such party is absent from the state is not, therefore included in the computation of time under the statute.^ Such a provision does not refer to a temporary absence with one's fixed residence within the state, but to an established domicile out of the state and a residing out of the state. 12 Unless special circumstances arise to change the rule the statute of limitations of the place where a suit is brought governs the right of action.; 119. Revival of Right of Action. n acknowledge- ment of a debt, or a new promise to pay & debt, made by a debtor after the right of action thereon is barred by the statute of limitations, will revive the right of action so that the time under the statute will then begin to run anew from the date of such acknowledgement or new promise. /(The acknowledgement must be such as to imply a promise to pay the barred debt and must be of such a character as will clearly identify the debt; furthermore it must be uncon- ditional. Y& most states it is provided by statute that such acknowledgement or promise must be in writing and signed by the person to be charged. Prior to the passage of such acts, and in jurisdictions where they do not exist, a verbal promise to pay is sufficient. 13 J An acknowledgement or promise made to one party to an instrument inures to the benefit of all subsequent parties thereof but does not apply to prior parties. > Part payment of an outlawed debt amounts to an acknowledgement of the debt, from which a promise will be implied by law; as will a payment of interest on a debt. But realizing on collateral 11 McCrady v. Jones, 44 S. C., 406. " Bribcoe v. Anketell, 28 Miss., 371. "Farr v. Durant, 90 Wis., 341. given to secure the original debt will not affect the statute as applying to such debt. In fact no payment but a volun- tary one directly made or authorized will suffice to revive a barred indebtedness. The burden of proving such an acknowledgement or new promise is on the party alleging it. ' Such proof need not be in writing unless so required by statute although such evidence is always most conclusive. $120. Several Actions on One Instrument. At com- mon law it was possible for a holder of dishonored paper to bring simultaneous actions against all parties liable to him thereon. This is the rule at present although it is possible to sue the maker and indorsers separately if the holder so elects. Judgment recovered against one indorser and not satisfied, is no bar to a subsequent action by the same plain- tiff against the maker. And an action may be maintained against an indorser even after judgment is had against the maker, where the judgment has not been satisfied. 14 121. Action Against Indorser and Surety. Where an indorser sues a prior indorser for money paid on an in- strument whereon both are liable it is necessary for him to prove that he has actually made payment of the paper. It will not be sufficient for him to show that judgment has been previously recovered by his indorsee against several indor sers. Only the actual liquidation of the indebtedness by him gives him a right of action against the prior parties. A surety on an instrument cannot be sued in most instances until due diligence has been used to collect from the maker or principal debtor. 122. Joint and Several Liability. Parties jointly liable should be jointly sued. Successive indorsers are not joint makers, hence need not be sued jointly although they may be joined in one action if it is deemed desirable to do so. Judgment against one joint maker will be a bar to further action against the other. 15 Where however the liability is joint and several separ- ate actions may be brought against the several makers, and as to the joint makers they should be proceeded against "Righter v. Van Riper, 3 N. J. Law., u Holman v. Langtree, 40 Ind., 349. 287. DEPARTMENT OF LAW 111 jointly. On liability that is both joint and several as to certain parties, actions may be maintained against them either jointly or severally at the option of the holder of the paper. Under statute at the present time in most of the states, and in England, all parties to a bill or a note may be joined as defendants in one action. In some instances sureties are also expressly included. Makers and indorsers can now be sued together in one action. Without such a statute succes- sive indorsers could not have been joined as defendants in the same action. 16 123. Actions on Collateral Securities. What action is to be pursued regarding collateral securities depends upon the jurisdiction in which the question arises. It may be said generally however that it is the duty of the holder of paper to collect the collateral given to secure it when it becomes due^ regardless of whether the instrument has matured or not. Where collateral is received without any special agreement concerning it, the party receiving it is liable for ordinary diligence in realizing thereon > ^ / &is negligence in that particular, especially if thereby the security is rendered valueless, discharges the debt which it secured. 17 /' 124. Actions on Lost Paper. In the event of the loss of commercial paper the owner should at once notify the parties to it, so as to prevent their taking it up without due inquiry. An advertisement in the public press or by posters or other form of public notice of the loss, is one method of giving notice to others to avoid their receiving such paper.; In some states an allegation that such notice has been gfiven is necessary in an action on such paper, before recovery can be had on it. v If the instrument has been absolutely destroyed however, as by fire, or through error or otherwise, and the proof thereof is clear and con- vincing, no such allegation is necessary. While ordinarily in the event of loss, indemnity to protect the payor in case the instrument later turns up in other hands is required to be given before payment will be enforced, in the case of the sure destruction of paper no indemnity is as a rule required. "Wolf v. Hostetter, 182 Pa. St., 292. Iowa, 377. "First Nat. Bank v. O'Connell, 84 112 AMERICAN EXTENSION UNIVERSITY 125. Allowance of Interest.-f-Where interest is pro- vided for in an instrument, it will be included in the amount recoverable at law in an action on the instrument. < ! Where however interest is not specifically provided for an instru- f ent draws interest from the time of its maturity at the legal rate without prior demand. The rate of interest when allowed is governed by the law of the place where the instrument is made and in force at the time the instrument is made. /'When interest is not provided for, then the law in effect at the time of the matur- ity of the paper, if it differs from that affecting it at the time it was made, will control. /'In the case of demand notes without express reserva- tion of interest, they bear interest from the date of the demand only; or from the time of the commencement of suit, when no other verbal demand has been made.} 126. Defenses to Commercial Paper. (a) In Gen- eral. All defenses to negotiable instruments are practically based on three grounds; (1) Repudiation that is to say, that the party did not execute the instrument set up; (2) Illegality that the instruments as alleged had no legal binding force; and (3) Discharge that the defendant's liability thereon has been discharged or modified. (b) Repudiation of Instrument.-t-Forgery and altera- tion come under this head.) A forged instrument is not the contract of the party named and will involve no liability on his part, unless by some sanctioning action of his own he is estopped from setting up the defense. An alteration to be available must be a material altera- tion, and if so it will be sufficient to discharge all parties not consenting to it, without any allegation or proof of fraud. 18 If an alteration is immaterial and does not in any way vary the meaning of the paper or the liability of the parties there- to, it will not invalidate it. But any alteration which changes the operation of the instrument or the liability of the parties is material, whether the change be prejudicial to the parties or not. Proof of either of these facts will constitute a good de- "Eckert v. Pirkel, 59 Iowa, 545. DEPARTMENT OF LAW 113 fense even against a bona fide holder before maturity, as such fact renders the paper void. 19 (c) Illegality of Instrument. Illegality and fraud be- long to the second class of defenses referred to. In the ear- lier lessons we have discussed the effect on a contract, and on commercial paper in particular, of illegal consideration. It is not necessary to dwell farther thereon in this connec- tion, except to say that where a consideration for paper is clearly illegal, that fact is always a good defense thereto. Where the exaction of usury is prohibited the fact of usury in the making of a note, avoids it as against all parties. The question of usury is one difficult to discuss in general terms for in many of our states it has been prac- tically done away with by statute, and in others its effect is regulated so that the entire matter rests on statute for its construction and effect. It may be said, however, that where by mistake a note is made to draw interest in too large a sum, it will not be held usurious where the mistake is clearly shown and no usurious intent existed. Fraud vitiates commercial paper the same as it does all other contracts. It may be accomplished by false rep- resentation. If so such representations must be material to the obtaining of the paper and must have induced the party to execute or deliver it. The fraudulent concealment of material fact has the same legal effect as a direct false statement. that renders an instrument void may be either in its inception or in its subsequent transfer! /Hence paper originally obtained by fraud or for a fraudulent considera- tion, will be held void if that act be pleaded as a defense and is proven. / It will be no defense to the maker of an instrument to show that an indorsement thereon was procured by fraud against the indorser; nor can an indorser set up that the instrument was procured by fraud or duress upon the maker^i A guarantor however may set up that the note guaranteed by him was obtained by fraud from his prin- cipal. 20 And where one in good faith deposits paper in a bank for collection and the bank is known by its officers "Gettysburg Nat. Bank v. Chisholm, ; Putnam v. Schuyler, 4 Hun. (N. Y.), 169 Pa. St., 564. lt>. to be insolvent at the time it receives such paper, it will amount to a fraud on the part of the bank and entitle the depositor to recover his deposits as made. 21 Fraud to be available as a defense must be specially pleaded, and the burden of proving the fraud alleged is on the party setting it up. / (d) Discharge and Payment. This class of defenses has been treated in the preceding chapter under the same heading. It is unnecessary therefore to say more here other than to emphasize the self-evident fact that where paper has been paid, or legal liability thereon has been otherwise satisfied, released, waived or barred, it is a lawful defense to an action to collect same from one so absolved from liability. CHAPTER "XTTT. THE NEGOTIABLE INSTRUMENTS LAW. 127. Generally. 128. Definition. 129. Form and Interpretation of Instruments. 130. Consideration. 131. Negotiation. 132. Rights 01 Holders. 133. Liability of the Parties. 134. Presentment for Payment. 135. Notire of Dishonor. 136. Discharge. 137. Bills of Exchange. 138. Checks. 127. Generally. As has been pointed out from time to time in the foregoing lessons on this topic, there are several important points upon which the courts of the several states have taken differing views; prescribing by their decisions varying rules of law within their respective jurisdictions upon identical questions of fact. The reason for this divergence of opinion is the fact that the custom of merchants in the various sections of the country, was not uniform upon certain matters, and the courts while engaged in the process of building up the law, in enforcing these, dif- ferent mercantile customs, established the conflicting legal rules. 81 Cragle v. Hadley, 99 N. Y., 131. DEPARTMENT OF LAW 115 For instance, and to name only a few common points of divergence. In some states the affixing of a seal to an instrument rendered it non-negotiable, while in others it did not. Likewise a provision for the payment of attorney's fees in case of dishonor, was held by some states to make paper unnegotiable, while in others it was the reverse. Again some courts said that the alteration of commercial paper made it absolutely void even in the hands of inno- cent holders; others held that the latter could enforce it according to its original tenor. Certain courts held that a check was an assignment of the amount of money called therefor, and hence denied the drawer the right to stop payment on a check duly issued by him , while the majority of the courts denied this doctrine. Without continuing the illustrations farther it may be said that in these days of far-reaching commercial enter- prise, where business operations are so greatly subject to and dependent upon the use of mercantile paper, this variance affecting rights and remedies arising out of such paper was little short of calamitous. Consequently con- certed legislative action was sought by eminent commercial and legal bodies, to bring about unity of rule and procedure affecting commercial instruments. The result of this movement is that since 1895 thirty- five states and territories have adopted acts substantially uniform in every controlling feature, and known as "The Negotiable Instruments Law. ' ' Its adoption by the remain- ing states at an early day seems assured. * This act created no new law, the aim being solely to adopt and embody certain prevailing rules. The law itself declares that "in any case not provided for in this act, the rules of the law merchant shall govern." Accordingly on any point omitted in that law, resort is not to be had to any previous statute, as all statutes affecting commercial in- struments have been repealed in the states adopting this 1 The jurisdictions that have adopted tana, Nebraska, New Jersey, New thib law are: Alabama, Arizona, Mexico, New York, North Carolina, Colorado, Connecticut, District of North Dakota, Ohio, Oregon, Columbia, Florida, Hawaii, Idaho, Pennsflvania, Rhode Island, Ten- Illinois, Iowa, Kansas, Kentucky, nessee, Utah, Virginia, Washing- Louisiana, Maryland, Massachu- ton, Webt Virginia, Wisconsin, Wy- setts, Michigan, Missouri, Mon- oming. 116 AMERICAN EXTENSION UNIVERSITY law but to the custom of merchants as recognized by the courts of the state where such question arises. Taking this law as it exists in the majority of the states which have it, we will now discuss its principal provisions and distinctions in connection with what has been said upon the same topics in our previous discussion of the law af- fecting such instruments. This discussion will however be only as to the main outlines of the law, the student being directed to the law in his own state, if it has been there adopted, for a full knowledge of same. 2 128. Definitions. The definitions and meaning of terms as given in this act are substantially as we have stated them in these lessons. There are but one or two upon which it may be well to particularize at this time. The vexing question as to what is or is not a "reason- able time" within which demand paper must be presented, or other matters the culmination of which is not specifically fixed otherwise, must be done, and which the courts had found it difficult to solve,(is provided for in this act by the provision that in determining that question regard is to be had to the nature of the instrument, the usage of the trade or business, if any, with respect to which such instruments are given, and the facts of the particular case. As to when it is necessary to present an instrument falling due on a Sunday or a legal holiday concerning which prior to the adoption of this act and in many of the states where it is not yet effective authorities differed and differ, some claiming that it must be made on the day after while others required it to be made the day before, is under this act specifically required to be made on the next succeeding secular or business day. 129. Form and Interpretation of Instruments. The provisions of the act regarding the form and interpretation of instruments also follows the established lines as we have laid them down. rThe act however goes somewhat farther than was sometime previously held, in that it provides that if an instrument is no longer in the possession of a party z It is proper to note that the section mentis Law, but are the consecu- numbers followed in this topic are tive section numbers of our lessons not those corresponding to the on this title, sections of the Negotiable Instru- DEPARTMENT OF LAW 117 whose signature appears thereon, a valid and intentional delivery thereof by him to another is presumed, until the contrary be proved. J If the sum called for by an instrument is expressed in both words and figures, and there is a discrepancy between the two, the words^overn, as under the former rule. If the writing be ambiguous or uncertain, then reference may be had to the figures to fix the amount. If the ambiguity in an instrument be of a character that there is a doubt whether it be a bill or a note, the holder has the right of election as to which of these he will regard if .) Where a signature appears on an instrument, and if it be not clear in what capacity the person signing it intended to become liable on the paper, he will be deemed an indorser. > / 130. Consideration.-f-The doctrine of consideration has been largely extended, in that every negotiable instru- ment is under this law deemed to have been issued for a val- uable consideration, and each one whose signature appears thereon is deemed to have become a party thereto for value, ; It has also settled the question as to whether an ex- isting or a pre-existing debt for which an instrument is given, is legal value, by answering it in the affirmative. 131. Negotiation. - - What constitutes negotiation is very much simplified by this statute. Tt provides that ne- gotiation is the transfer of an instrument from one person to another in such manner as to constitute the transferee the holder .thereof .^f payable to bearer it is negotiated by delivery .Ylf payable'to order it is negotiated by the indorse 1 ment of r the holder, completed by delivery^ (An indorsement must be of the entire instrument^ (Hence an indorsement purporting to transfer to the indorsee a part only of the amount payable, or purporting to transfer the instrument to two or more indorsees severally, does not operate as a negotiation of the instrument although if an instrument be paid in part, it may be indorsed as to the residue.) Where a person is required to indorse in a representative capacity; such as cashier, secretary, assignee or executor, the indorse- ment by him may be made in such terms as to negative His personal liability. /The provisions as to the time of indorsement provide that unless it bear date after the maturity of the instru- 118 AMERICAN EXTENSION UNIVERSITY ment, every negotiation is deemed prima facie to have been made before the instrument was due. Unless the con- trary appears, each indorsement is presumed also to have been made at the place where the instrument is dated. ' A / 132. Eights of Holders. Who is a holder in due course, and his rights, are clearly fixed and set forth. It is provided that one who takes under the following conditions is a holder in due course, viz. : 1. That the instrument is complete and regular on its face. 2. That the party became the holder of it before it was overdue and without notice that it was previously dishon- ored, if such was the fact. 3. That he took it in good faith and for value. 4. That at the time it was negotiated to him he had no notice of any infirmity or defect in the title of the person ne- gotiating it. If an instrument payable on demand be negotiated an unreasonable time after issue, the holder will not be deemed a holder in due course." And if a transferee receive notice of infirmity in the instrument or defect in title of the person negotiating it, before he has paid the full amount agreed to be paid, he is only deemed a holder in due course to the extent of the amount theretofore paid by him. The statute sets out practically the same causes to which we have previously referred that would make title defective, and requires actual notice of the infirmity or de- fect, or knowledge of such facts that one's action in taking an instrument amounts to bad faith. ! The right of a holder in due course we have set out as well as those of a holder not in due course. The statute pro- vides in this respect that a holder who derives title through a holder in due course who was not himself a party to any fraud or illegality affecting the instrument, has all the rights of such former holder in respect to all parties prior to the latter, and every holder is deemed prima facie to be, a holder in due course. If it be shown that the title of any person who has negotiated an instrument be defective, the holder must prove that he or some person under whom he claims acquired title as a holder in due course; the rule however not applying in favor of a party who became bound prior to the acquisition of such defective title. DEPARTMENT OF LAW 119 133. Liability of the Parties. The liability and war- ranties of the different parties, as well as those of a broker or agent, are set out under this heading, and practically reit- erates the rules and the law as has been laid down in the course of these lessons. Accordingly we have not deemed it necessary to again refer specifically to them here. 134. Presentment for Payment. The provisions under this heading contain no additional features from those already described. The act clears up however some debated questions, as for instance the provision that an instrument at presentation must be exhibited to the person from whom payment is demanded, and when paid must be delivered to the party paying it; and that where several persons not partners are primarily liable on an instrument and no place of payment be specified therein, presentment must be made to them all. It is prescribed that delay in making presentment for payment will be excused when it is caused by circumstances toeyond the control of the holder, and is not imputable to his default, misconduct or negligence. As was stated during the course of the lessons, days of grac'e have been abolished. } An instrument falling due on Saturday is to be presented' for payment on the next succeeding business day, except those payable on demand, which may at the option of the holder be presented for payment before twelve o'clock noon on Saturday in states making that day a half holiday, excepting, of course, when that day is a holiday. It is also provided that if an instrument be payable at a bank it is equivalent to an order on the bank to pay the same when due, for the account of the principal debtor thereon. Payment made at or after the maturity of an in- strument in good faith and without notice that the title of the holder is defective constitutes payment in due course. 135. Notice of Dishonor. Notice of dishonor may be given by one who is an agent either in his own name or in the name of the party entitled to give notice, whether that party be his principal or not. When it is given by or on behalf of a party entitled to give notice, the holder and all parties subsequent to the party to whom notice is given receive the legal benefit of such notice. If an instrument be dishonored in the hands of an agent he may give notice 120 AMERICAN EXTENSION UNIVERSITY to the parties liable thereon or to his principal. If the notice be given to his principal it must be within the same time as if such agent were the holder, and the principal upon receiv- ing such notice has the same time in which to give notice to the others on the instrument as if such agent had been an independent holder. iJ When a party is dead and such death be known, and there be no personal representative or he cannot with diligence be found, notice sent to the last resi- dence or last place of business of the deceased will suffice. Where parties live in the same municipality, notice by mail is specifically permitted; but it must be deposited in the mail so as to reach such parties in the usual course of the mails on the following day., 1 (If a party to be notified resides in a different locality notice by mail is to be given as we have hereinbefore stated. ! If given otherwise than through the mail then it must be given within the time that notice would have been received in due course of mail, if it had been duly and properly deposited in the postoffice.yThe term postoffice includes that method of depositing in reg- ular mail receptacles to which attention has been calledJV If these rules are complied with, a miscarriage of the mails whereby a notice was not in fact duly delivered, will not legally affect the question of due and timely notice. } (Omis- sion to give notice of dishonor by non-acceptance, does not prejudice the rights of one who is a holder in due course subsequent to such omission. '; ;' Where a waiver is embodied in an instrument itself, it binds all the parties thereto, but if written above the signa- ture of an indorser it binds him only. ; 136. Discharge.-^In addition to the methods of dis- charge we have stated in the lessons, the Act provides that any act which will discharge a simple contract for the pay- ment of money, discharges a negotiable instrument. A holder has the right at any time to expressly re- nounce his rights against any party to the instrument. If such renunciation be absolute and unconditional as to the principal debtor, and is made at or after maturity of the instrument, it discharges the instrument. fA renunciation, however, does not affect the rights of a holder in due course without notice. Unless the instrument be delivered up to the person primarily liable thereon, a renunciation must be DEPARMENT OF LAW 121 in writing} If an instrument or any signature thereon appear to be cancelled and one allege that such is not really the case, the burden of proof lies on the party alleging that such cancel^ lation was made unintentionally, or under a mistake or without authority.'"" The following are set down as material alterations such as would be sufficient to effect a discharge of instru- ments: (1) The date; (2) the sum payable, either principal or interest; (3) the time or place of payment; (4) the num- ber and relation of the parties; (5) the medium of currency in which payment is to be made, or which adds a place of payment where no place of payment is specified, or any other change which alters the effect of the instrument in anyjespect. -However if an instrument has been materially altered and is in the hands of a holder in due course not a party to the alteration, he can enforce payment according to its orig- inal tenor./ 137. Bills of Exchange. An additional provision has been incorporated in this act permitting the drawer or any indorser of a bill to insert thereon the name of a person to whom the holder may resort in case of need, in case the bill be dishonored by non-acceptance or non-payment. Such person is known as the ''referee in case of need," and a holder may or may not resort to his referee in case of need, as he sees fit. fAn exception between presentment for payment and presentment for acceptance is made in that in the case of presentment for acceptance when Saturday is not a holiday, such presentment should be made before noon on that day. I If there be an acceptance for honor it may be for a part only of the sum for whicn the bill is drawn; which differs from a regular acceptance which must be of the bill. Where there has been an acceptance for the honor of one party there may be a further acceptance by a different person for the honor of another party on the paper. If a holder refuses to receive payment supra protest he loses his right to recover and of recourse against aiiv party who would have been discharged by such payment^ 138. Checks. The provisions of the act applicable 122 AMERICAN EXTENSION UNIVERSITY to a bill of exchange payable on demand apply to checks. Certification of checks by the banks on which they are drawn is equivalent to an acceptance. Where the holder of a check procures its certification it discharges the drawer and all indorsers from liability thereon. QUIZZER ACTIONS AND DEFENSES. 1-110. Who has the right to sue on commercial paper in his own name ? 2- When may a person who holds in a representative capacity so sue? 3- When may an accommodation indorser who has paid the instrument sue thereon? 4- When must all the partners of a firm join in an ac- tion on paper transferred to the firm? 5- Can an action be brought by the surviving part- ners, and under what circumstances ? 6- What course can be pursued by a firm if an instru- ment be indorsed to it in blank ? 7- . What effect as to the right of action on the origi- nal debt has the acceptance of a bill or the giving of a note therefor, have ? 8- Does the right of action revive at any time if so, when? 9- Has the creditor then any option as to how to pro- ceed if so, what? 10- If suit is brought on the original debt what be- comes of the instrument given to witness it, and what is the reason for this proceeding? 11-111. Can a co-partner sue his firm on an instrument made by it to himself, and why? 12- Is there any way by which an action can be brought under these circumstances if so, how? 13- Who must join in an action on paper payable to parties jointly who are not co-partners? 14- What is the course to be pursued if one of such joint parties should be dead? 15- Who are the parties to an action where paper is paid by a party supra protest? DEPABTMENT OF LAW 123 16- Is a banker who pays the acceptance of his cus- tomer which has been provided for by the latter, such a party? 17-112. Can several actions be commenced on an entire de- mand*? 18- What will be the effect of a recovery of part of such a demand if it is divided and suit is brought on one part thereof? 19-113. Can a nominal holder sue on paper in his posses- sionif so, when*? 20- What presumption arises in cases of such pos- session? 21- What will result on proof that the holder has no beneficial interest in the paper? 22- When will such proof be permitted? 23- What will be the effect of such proof? 24- Can a holder under an indorsement in blank, fill it up and why? 25- Is it necessary for him to do so ? 26- What presumption follows the beginning of an action by a holder against the indorser to him? 27- 114. Can a nominal holder sue in his own name on an instrument that is specially indorsed? 28- Is this ever permitted if so, when? 29-115. When must the right to sue on paper in one's own name exist? /4f"fc^i A^!A- U ^ 30- Will an indorsement made after suit is brought, be sufficient to fix holder's right to sue? 31- How long must the right of action continue in the plaintiff ?v/v v i'V* TJU. jLCL j{ fa, 32- What will be the effect of a transfer of the instru- ment sued upon during the pendency of an ac- tion thereon? : _ :;.-'.-. , 33- Where there are several indorsers must a suit on the instrument be in the name of the last holder? 34- May any indorser sue i so, when? 35- Will the fact that a holder's own indorsement is uncanceled have any effect and why? 36- May suit be brought without actual possession of the paper if so, when? , 124 AMERICAN EXTENSION UNIVERSITY 37- Will the fact that the paper, and the title to it, was in another make anv difference if so, what? 38- Who should bring an action on a commercial in- strument ? 39- Can a defendant question the plaintiff's title to paper in his possession? 40- If your answer to the last question be in the nega- tive, state when it can be done if at all. 41- What is the general presumption in favor of one who holds paper under a blank indorsement? 42- Is proof rebutting such presumption permitted if so, when? 43-116. Can an action be maintained ordinarily against a party to an instrument subsequent to the plain- tiff? Give reason for answer. 44- When may this be done, if at all? 45- What must an indorser show as a basis of his right to sue the maker or acceptor ? 46- If an indorser sue a prior party on the paper, what is it necessary for him to show as a basis of his right of action? 47-H7. When does a right of action commence, and on what does it depend? 48- Is it necessary to wait until time shall elapse for all parties to have received notice of dishonor before beginning action? 49- When does the right of action accrue where a bill has been dishonored for acceptance? 50- Is it necessary in such a case to wait until the maturity of the instrument? 51-118. Upon what does the time of expiration of a right of action depend? 52- When does the statute of limitations begin to run against a right of action? 53- If an obligation be joint, will a payment by one of the joint obligers take it out of the statute? If it be several, what will be the effect ? 54- What effect will service of process on one of sev- eral joint parties have as to the operation of the statute against the others? DEPARTMENT OF LAW 125 55- If one of several sureties make a payment before the obligation is barred by the statute, can he maintain an action against his co-sureties after the statute has barred the original obligation and why*? 56- Will a payment by a surety on paper barred by the statute revive it against his principal? 57- When is the operation of the statute of limita- tions suspended as against a debtor and for how long? 58- What kind of non-residence in the state is con- templated by the statute as suspending its operation? 59- What statute of limitations controls an action? 60-119. What is necessary to revive a right of action once outlawed? 61- When will the statute then begin to run anew against a right of action? 62- What must be the character of an acknowledg- ment of, or a new promise to pay, a debt to remove the bar of the statute? 63- In what form must the acknowledgment or new promise be expressed? 64- Is a verbal promise ever sufficient if so, when? 65- What will be the effect of a new promise or an acknowledgmnet of indebtedness made to one of several parties who are creditors ? 66- What will be the effect of part payment of an outlawed claim? 67- What the payment of interest on such a claim? 68- Will realizing on collateral given with an original debt, affect the running of the statute ? 69- What kind of payment is necessary to revive a barred debt? 70- On whom is the burden of proving an acknowl- edgment of indebtedness or a new promise to pay? 71- May such promise be proven by parol? 72- 120. When if ever was it possible for a holder to bring simultaneous actions asrainst all parties liable to him on dishonored paper? 126 AMERICAN EXTENSION UNIVERSITY 73- Can the maker and indorsers be sued separately? 74- Will an unsatisfied judgment against an indorser now be a bar to an action by the same party against the maker? 75- Can an action be maintained against an indorser after judgment is had against the maker? 76-121. If an indorser sue a prior indorser for money paid by him, what is it necessary for him to prove ? 77- Will it be sufficient in such a case for such in- dorser to show a previous judgment recovered against several indorsers by his indorsee ? 78- What is necessary before recovery can be had against a surety? 79-122. How should those jointly liable be sued? 80- Are successive indorsers joint makers? 81- Will a judgment against one joint maker affect the other joint makers? 82- Should several makers of the one instrument be proceeded against in the same way? 83- Where the liability is both joint and several what course is to be pursued? 84- What is now the general rule as to the joining of parties ? 85- Under this rule can makers and indorsers now be joined in the one action? 86- WTiat is it that makes this possible? 87-123. Upon what does the course to be pursued regard- ing collateral depend? 88- What is the duty of the holder regarding col- lateral when it becomes due ? 89- Does the maturity of the principal instrument af- fect this course ? 90- What is the rule where such collateral is received without any special agreement ? 91- What will be the result of negligence in realizing on collateral? 92-124. What should be done in the event of the loss of a bill or note? 93- What is the reason for this ? 94- Is a public advertisement a proper form of notice to give concerning lost instruments ? DEPARTMENT OF LAW 127 95- Is it ever necessary in an action on lost paper to allege such a notice if so, when? 96- Is this necessary if the paper be clearly shown to have been destroyed*? 97- What is the rule regarding giving indemnity against lost paper in each of these cases ? 98-125. Where the instrument provides for interest can it be included in the amount recoverable? 99- If interest be not specifically provided for does the instrument draw interest if so, from when? 100- Is it necessary to make a prior demand for it in such a case ? 101- What law governs the rate of interest where in- terest is provided for? 102- When it is not provided for what law governs? 103- What is the rule as to interest on demand notes where it is not expressly reserved? 104-126. What are the grounds on which defenses to ne- gotiable instruments are based? 105- (a) Under which of the heads you name would you place forgery and alteration of instruments? 106- (b) Why should you place forgery under this head? 107- Is a party ever estopped from setting up this de- fense if so, when? 108- What kind of alteration is necessary to consti- tute such a defense? 109- When is the alteration of an instrument a defense ? 110- Is it necessary to prove fraud in such a case ? 111- What kind of alteration is considered material? 112- How would proof of these facts affect a bona fide holder before maturity? 113- (c) To which of the classes of defenses does illegality and fraud belong? 114- What is the rule where usury exists ? 115- On what does the question of usury depend? 116- If a note be drawn by mistake for an amount that would be usurious, what will be the effect? 117- Does fraud vitiate commercial paper? 118- Of what may the fraud consist? 119- What must be its character? 128 AMERICAN EXTENSION UNIVERSITY 120- Is the time of the fraud material, or does it relate to the inception or the indorsement state your understanding as to this, fully? 121- If a maker show that an indorsement was pro- cured by fraud will it be a good defense as to him? 122- Can the indorsers set up as a defense a fraud per- petrated on the maker? 123- How will this state of facts affect a guarantoi t 124- If a deposit be made in a bank, known by its offi- cials to be insolvent at the time, what rights has the depositor? 125- To make fraud available as a defense how must it be pleaded? 126- On whom is the burden of proving the fraud ? 127- (d) What can you say as to discharge and pajnnent of paper as a defense to an action thereon? THE NEGOTIABLE INSTRUMENTS LAW. 1-127. What can you say as to the lack of uniformity on important points of judicial decisions affecting commercial instruments ? 2- What was the reason of this divergence? 3- Name some of the points on which there was such divergence ? 4- What effect did this divergence have upon modern business interests and why? 5- What resulted therefrom and what was the final outcome ? 6- Did the Negotiable Instruments Law create new law if not, what did it consummate? 7- Is your state one of those that has adopted this law? 8- Upon points not covered by this law to what must resort be had in determining same and why? 9- To what must regard be had in determining the question of reasonable time ? 10- 128. Where this act is effective when is an instrument due on Sunday or a holiday to be presented? 11-129. What is presumed if an instrument be no longer in the possession of a person whose name ap- pears thereon? DEPARTMENT OF LAW 129 12- If the sum to be paid is expressed in both words and figures, and there is a discrepancy between the two, which governs ? 13- When do figures therein have any affect? 14- If there be a doubt as to whether an instrument is a bill or a note, has the holder any right of election if so, what ? 15- If a signature appear in an instrument and there is doubt as to what liability the person intended to assume thereby, to what liability will he be held? 16-130. Is there now any presumption as to consideration if so, what? 17- What is presumed in favor of one whose signature appears on an instrument ? 18- Is an existing or pre-existing debt deemed a val- uable consideration? 19-131. How is negotiation defined by this statute? State fully. 20- What part of an instrument may be transferred by indorsement ? 21- Will an indorsement transferring part of the amount payable thereby be good? 22- Will an indorsement to two or more indorsees sev- erally be a negotiation? 23- How is this affected where part of the amount called for by an instrument has been paid? 24- Can one who indorses in a representative capacity negative his personal liability if so, how? 25- When is an indorsement presumed to have been made? 26- Is there any exception as to this if so, when? 27- Is there any presumption as to the place where each indorsement is made if so, what? 28-132. Under what conditions does a person become a holder in due course ? 29- When will one who takes paper payable on de- mand not be deemed a holder in due course? 30- If a transferee receive notice of infirmity in an in- strument, or a defect in the title of the person negotiating it before the full amount has been paid by him, what is the result ? 130 AMERICAN EXTENSION UNIVERSITY 31- What is required to make the title to the instru- ment defective ? 32- What is the title of a holder who derives through a holder in due course, who is not himself a party to any fraud or illegality affecting the instrument ? 33- What is presumed to be the title of each holder? 34- If the title of a person who negotiated an instru- ment be defective what is the holder required to prove? 35- What exception is there to this rule ? 36-133. What can you say as to the provisions of this act concerning the liability of parties'? 37- 134. What is the rule as to possession of an instru- ment on presentment for payment? 38- Where there are several persons not partners li- able primarily on an instrument, and no place of payment be specified therein, how must pre- sentment be made? 39- When is delay in making presentment excused? 40- What is the rule under the act as to paper falling due on Saturday ? 41- What is the rule as to demand paper in this respect ? 42- What is the result of making an instrument pay- able at a bank ? 43- What constitutes a payment in due course ? 44-135. May notice of dishonor be given by an agent if so, how ? 45- When it is given by or on behalf of a party en- titled to give notice, what is the result? 46- If paper be dishonored in the hands of an agent, to whom may he give notice, and what is the result? 47- If a party be dead and there be no personal repre- sentative or he cannot be found, how should notice be given ? 48- Where the parties live in the same place can notice by mail be given, and when must it be de- posited ? DEPARTMENT OF LAW 131 49- If parties live in different localities and notice is given otherwise than by mail, what is the rule as to time? 50- How would miscarriage of the mails affect the le- gality of notice so given? 51- Does failure to give notice of dishonor for non- acceptance prejudice a holder in due course sub- sequent to the omission? 52- What is the effect of a waiver written in the body of an instrument? 53- ^When will a waiver affect an indorser only? 54-136. What act under this law will discharge an instru- ment? 55- May a holder renounce his rights against any party to the instrument if so, when? 56- What is its effect if it be absolute and uncondi- tional as to the principal debtor, and when must it be made ? 57- What is its effect on a holder in due course with- out notice ? 58- When must a renunciation be in writing? 59- If an instrument or a signature thereon appear to be cancelled, and it is alleged that such is not really the case, what must be proved, and by whom? 60- State the material alterations of an instrument " that will effect a discharge of it? 6.1- How would this be effected by the fact that the instrument is in the hands of a holder in due course, and what must he show? 62- What amount may he recover thereon in such a case? 63-137. Who is the ''referee in case of need" under this law? 64- What option has the holder in respect to such reference ? 65- What is the exception as to presentment for ac- ceptance on a Saturday? 66- Can an acceptance ho for ] art of a bill of ex- change ? 67- How does this differ from a regular acceptance? 132 AMERICAN EXTENSION UNIVERSITY 68- Where there has been acceptance for the honor of one party, may there also be a further accept- ance by a different person, for the honor of another party? 69- What is the result of the refusal of a holder to receive payment supra protest I 70-138. In what way does the act apply to checks ? 71- What is the result of the certification of checks by the banks on which they are drawn? 72- Who is discharged where the holder procures the certification of a check f