I 
 
 LIBRARY OF 
 
 ALLEN KNIGHT 
 
 CERTIFIED PUBLIC ACCOUNTANT 
 502 California Street 
 
 SAN FRANCISCO. CALIFORNIA 
 
 i 
 
GIFT OF 
 
Digitized by the Internet Archive 
 
 in 2007 with funding from 
 
 IVIicrosoft Corporation 
 
 http://www.archive.org/details/commerciallawOOtipsrich 
 
COMMERCIAL LAW 
 
 BY 
 
 FREDERICK S. TIPSON, C. P. A., 
 
 Fellow of the American Association 
 of Tuhlic Accountants 
 
 PUBLISHED BY 
 
 FREDERICK S. TIPSON 
 150 Nassau St., New; Ypftx \ \ \ 
 
\^"- 
 
 
 Copyright, 1903, by 
 F. S. TIPSON. 
 
 (^ (^Oido^X^w.^^ 
 
 » » :> « 'V » « 
 
preface^ 
 
 This volume contains all questions set in the Commer- 
 cial Law paper at the New York State semi-annual 
 examinations for certified public accountants, from De- 
 cember 1896 (the date of the first examination held), to 
 June 1902, with full answers and explanations in plain, 
 and, as far as possible, non-technical language. It will 
 be noticed that many answers given here are quite differ- 
 ent to those which would have been correct at the time 
 the earlier papers were set; this appUes particularly to 
 the Corporation Law and the United States Bankruptcy 
 Law of 1898; the numerous modifications of the former 
 in New York State, and the enactment of the latter having 
 effected basic alterations of great import. 
 
 It would really seem now as though the old legal motto, 
 "Stare decisis et non quieta movere" (To stand by deci- 
 sions and not to disturb what has been settled) had been 
 allowed to a considerable extent to fall into desuetude, 
 so numerous are the apparently conflicting legal decisions 
 rendered from day to day. The consequences have not 
 been particularly happy. 
 
 It has been decided that where a broker hypothecates 
 his customers' securities he may do so, "provided he keeps 
 securities of a like description and amount under his own 
 control." "Under his control" has been decided as "keep- 
 ing in his own possession." The question would naturally 
 arise, how is business done in Wall Street? and what is 
 
 380282 
 
the advantage to the broker of re-pledging his dient's 
 securities ? 
 
 Another astonishing decision on record is that inspectors 
 of election have not the power to determine the genuine- 
 ness of proxies ! What are they then appointed for ? 
 
 The attention of the student is particularly drawn to the 
 terms "good'' and "valuable" consideration. In the case 
 of deposit, and commission or mandate bailments, where 
 the bailee acts "without reward/' unless the difference 
 is accurately appreciated the question would not unnatur- 
 ally arise "how, then, can a bailment be a contract?" 
 The very gratifying success that the author's Theory 
 of Accounts has met with has led him to believe that in 
 publishing these text-books he is supplying an acknow- 
 ledged and very decided want. 
 
 The following books have been consulted by the 
 writer in the preparation of this manual; and to their 
 authors, as well as to numerous friends in the accountancy 
 profession who have favored him with valuable sugges- 
 tions, he tenders hearty thanks : 
 
 White's Manual for Business Corporations. 
 
 Essentials of Business Law. — Burdick. 
 
 The Care of Estates. — Hill. 
 
 Accountants' Guide. — Gottsberger. 
 
 Law Dictionary. — Bouvier. 
 
 The New Commercial Law. — American Book Co. 
 
 Encyclopedia of Accounting. — G^. Lisle, C. A. 
 
 Encyclopedia of Law Forms. — Spalding. 
 
 Frederick S. Tipson. 
 September 15, 1903. 
 
December 1896* 
 
 I. Draw the following promissory notes and forms of 
 indorsement : 
 
 NOTES. 
 
 (a) Not negotiable; maker, John Brown; payee, Wal- 
 ter Jones ; amount, $1,000.25 ; time, four months ; place of 
 payment, Bank of America. 
 
 (b) Negotiable; maker, payee, amount, time and place 
 of payment as in a. 
 
 (c) Negotiable; requiring no indorsement. 
 
 INDORSEMENTS. 
 
 (d) Indorsement by above payee, in blank. 
 
 (e) Indorsement by above payee, to Robinson & Co. 
 in full and further negotiable. 
 
 (/) Indorsement by Robinson & Co., relieving them 
 from further liability. 
 
 (g) Indorsement by Robinson & Co., to Henry Miller, 
 not further negotiable. 
 
 (a) Albany, December 15, 1902. 
 
 Four months after date I promise to pay to Walter 
 Jones One thousand ^Y^^^ Dollars at the Bank of Amer- 
 ica. Value received. 
 $1,000.25. John Brown. 
 
 (b) Albany, December 15, 1902. 
 Four months after date I promise to pay to the order 
 
 of Walter Jones One thousand ^s/^^^ Dollars, at the 
 
 Bank of America. Value received. 
 
 $1,000.25. John Brown. 
 
 (c) Albany, December 15, 1902. 
 Four months after date I promise to pay to Walter 
 
Jones or bearer One thousand ^'/loo Dollars, at the Bank 
 
 of America. Value received. 
 
 $1,000.25. John Brown. 
 
 (d) Walter Jones. 
 
 (e) Pay to the order of Robinson & Co., 
 
 Walter Jones. 
 (/) Without recourse. 
 
 Robinson & Co. 
 (g) Pay to Henry Miller. 
 
 Robinson & Co. 
 
 2. When an indorsed promissory note is not paid at 
 maturity. 
 
 (a) What course should the holder pursue in order to 
 prove presentation? 
 
 (b) Against whom can the holder bring suit for re- 
 covery ? 
 
 (c) Against whom can an indorser who has been com- 
 pelled to pay this dishonored note bring suit for recovery ? 
 
 (d) Under what circumstances is an indorser relieved 
 from liability? 
 
 (e) How may the holder be relieved from the neces- 
 sity of protesting it for non-payment? 
 
 (/) What are the principal defenses that may be urged 
 by the maker of a note in an action for non-payment ? 
 
 (g) What defense (good as against the payee or in- 
 dorser who has knowledge thereof) will not relieve the 
 maker from liability to a subsequent purchaser in good 
 faith before maturity? 
 
 (h) How is the liability of indorsers affected by an 
 agreement between the holder and the maker of the note 
 to extend time of payment beyond maturity? 
 
 (a) He should have the note protested by a notary 
 public, and send immediately to the maker and to each 
 
indorser a copy of the certificate of protest, and a notice of 
 non-payment, with a description of the note. 
 
 (b) Against the maker or any endorser of the note to 
 whom proper notice has been sent. Indorsers "without 
 recourse" are of course excepted. 
 
 (c) Against the maker or any prior indorser to whom 
 proper notice of non-payment has been sent. 
 
 (d) By indorsing "without recourse" ; by not receiving 
 proper notice of non-payment; by an agreement between 
 holder and maker to extend the time of payment. 
 
 (e) By the words "no protest" or "protest waived" 
 appearing on the note. 
 
 (/) Infancy, usury, alteration, forgery, want of con- 
 sideration, and fraud or compulsion. 
 (g) Want of consideration. 
 (h) They are relieved from liability. 
 
 3. Draw the following bills of exchange and forms of 
 indorsement and acceptance: 
 
 DOMESTIC BILL. 
 
 (a) Drawer, Sm.ith & Jones, Boston; drawee. Brown 
 & Robinson, New York; amount, $500.50; payee, Edward 
 Hunt, New York; time, 10 days sight. 
 
 (b) Indorsement by payee in blank. 
 
 (c) Acceptance by drawee, payable at Bank of New 
 York. 
 
 FOREIGN BILL. 
 
 (d) Drawer, J. M. Wilson, Son & Co., London; 
 drawee, Flint, Heddy & Co., New York; amount, 
 $9,000.50; time, 60 days date. 
 
 (e) Indorsement by payee to in full. 
 
 (/) Form of drawee's acceptance. 
 
8 
 
 $500.50. Boston, Mass., Dec. 24, 1902. 
 
 (a) At ten days' sight pay to the order of Edward 
 Hunt Five Hundred ^^/^qq Dollars and charge to account 
 of Smith & Jones. 
 To Brown & Robinson, 
 
 New York. 
 
 (b) Edward Hunt. 
 
 (c) Accepted, December 26th, 1902. 
 
 Payable at Bank of New York. 
 
 Brown & Robinson. 
 
 (d) London, December 10, 1902. 
 $9,000.50. 
 
 Sixty days after date of this first of exchange (second 
 and third of same date and tenor unpaid) pay to the order 
 of Bartlett & Co., of Boston, Nine Thousand ^^/loo Dollars 
 and charge the same to the acount of 
 
 J. M. Wilson, Son, & Co. 
 To Flint, Heddy & Co., 
 New York, U. S. A. 
 
 (e) Pay to the order of 
 
 Bartlett & Co. 
 (/) Accepted, December 27, 1902, 
 
 Flint, Heddy & Co. 
 
 4. If the drawee of a draft or bill of exchange refuses 
 to accept the same on presentation: 
 
 (a) How is the due date of the draft, or bill aflfected? 
 
 (b) In what manner if any is he liable under the draft, 
 or bill, if he has funds of the drawer or is indebted to the 
 drawer ? 
 
 (c) On what grounds can the holder commence action? 
 
(d) How can a third party prevent the bill from be- 
 coming due at once, and what would be his position if 
 obliged to pay the bill? 
 
 (a) It becomes due at once, and the holder can demand 
 payment of the drawer forthwith. 
 
 (b) The drawee is not liable to the holder until he has 
 accepted it, nor can he be sued by him for refusing to 
 accept. The drawee, however, is liable to the drawer if 
 he has funds of the drawer in his possession and refuses 
 to accept. He may be sued by the drawer for damages 
 sustained by reason of his non-acceptance. 
 
 5. What is a corporation, and how does it differ from a 
 joint-stock company? 
 
 A corporation is an artificial person created by law to 
 transact such business as may be set forth in its articles 
 of incorporation. It has the right of succession or con- 
 tinuance, regardless of change in its membership. A joint 
 stock company, while similar to a corporation in form, 
 and as to its method of transacting business, is more in 
 the nature of partnership as regards the individual liability 
 of its share-holders. 
 
 6. Describe briefly the following: 
 
 (a) A sole corporation. 
 
 (b) A corporation aggregate. 
 
 (c) An eleemosynary corporation. 
 
 (d) A public corporation. 
 
 (e) A private corporation. 
 
 (a) A sole corporation is a single individual possessed 
 of corporate powers. Such corporations do not exist in 
 
lO 
 
 the United States of America. Examples in England are 
 the sovereign, and bishops of the established church. 
 
 (b) A corporation aggregate is a collection of individ- 
 uals united in one body. It is an artificial person, but 
 capable of transacting such business as it may be entitled 
 to the same as a natural person. 
 
 (c) An eleemosynary corporation is one formed for 
 charitable purposes. 
 
 (d) Public corporations are those created for political 
 purposes. Municipal corporations would be familiar in- 
 stances. 
 
 (e) A private corporation is one founded by private 
 enterprise. Instances would be ordinary business corpor- 
 ations, banks, insurance companies, etc. 
 
 7. Answer briefly : 
 
 (a) How may corporations be created? 
 
 (b) What acts of a corporation are called ultra vires? 
 
 (c) What is a franchise f 
 
 (d) Through whom does a corporation act in transact- 
 ing its business ? 
 
 (e) By whom must all contracts, deeds, mortgages, 
 leases and other instruments binding a corporation be 
 signed and whence do the signers derive their authority? 
 
 (/) Explain the manner of issuing and of transferring 
 the capital stock of a corporation and state the principal 
 rights acquired by stockholders. 
 
 (g) What is the limit of a stockholder's liability? 
 
 (h) How may a corporation be dissolved? 
 
 (a) Corporations are created by the State under gen- 
 eral or special law — that is, under the general corporation 
 law, or by charter. 
 
 (b) All acts of a corporation exceeding the powers con- 
 ferred upon it as set forth in its articles of incorporation 
 
II 
 
 are termed "ultra vires," which means "beyond the power 
 of." 
 
 (c) A franchise is a right of an exclusive character 
 conferred upon a corporation. Thus the right of a rail- 
 road to operate its road is called its franchise, which has 
 a value in itself distinct from that of any other kind of 
 property. 
 
 (d) A corporation acts through its officers, who are 
 appointed by its directors. The directors are elected by 
 the stockholders. 
 
 (e) Such documents should be signed by the president 
 and the secretary. They derive their authority from the 
 directors as expressed by resolutions, recorded in the 
 corporation minute book. 
 
 (f) Each stockholder receives a stock certificate stating 
 on its face the number of shares of capital stock he is 
 entitled to; his name; and the par value of the shares. 
 The stub of the stock certificate contains the same particu- 
 lars, which are posted to the individual account of the 
 stockholder in the sharer ledger. 
 
 When a stockholder desires to transfer he executes a 
 bill of sale and power of attorney authorizing the transfer 
 — a proper form for which is printed on the other side of 
 the certificate. This indorsed certificate is then handed 
 to the proper officer of the corporation, who cancels it 
 and issues new certificates — recording the transaction on 
 the transfer books. 
 
 The principal rights of stockholders are (i) to vote at 
 meetings held for the election of officers; (2) to partici- 
 pate in profit earned if distributed in the form of divi- 
 dends. 
 
 (g) A stockholder's liability is generally limited to the 
 
12 
 
 amount of his investment as evidenced by the amount of 
 capital stock he holds. If the corporation becomes bank- 
 rupt he loses the amount he has invested and has no fur- 
 ther liability. The stockholders of National Banks are, 
 however, liable for the par value of their holdings and for 
 an additional amount equal thereto. Thus, if $2,000 
 stock were held by an individual, he would lose this 
 amount and be personally liable to the extent of $2,000 
 additional. 
 
 (h) Corporations may be dissolved by act of legisla- 
 ture ; by expiration of time limit as per charter ; by con- 
 sent of stockholders and surrender of franchise; by for- 
 feiture of franchise for "mis-user" or "non-user" ; or by 
 a "quo warranto" proceeding. 
 
 8. Answer briefly: 
 
 (a) What is a contract? 
 
 (b) How is a contract made? 
 
 (c) What are some kinds of contracts that must be in 
 writing ? 
 
 (d) What are some forms of contracts that must be 
 under seal? 
 
 (e) Which contracts if made on Sunday are void, and 
 which are not void ? 
 
 (a) A contract is an agreement between two or more 
 persons to do or not to do some particular thing for a 
 consideration. 
 
 (b) A contract is made orally, in writing, or in writing 
 under seal. The two former contracts are called "parol" 
 contracts ; the latter a "specialty" contract. 
 
 (c) All those stipulated in the "Statute of Frauds," 
 which requires that the following kinds of contracts must 
 be in writing in order to be binding: (i) Promises to 
 
13 
 
 answer for the debt, default or miscarriage of another; 
 (2) Agreements made in consideration of marriage, except 
 mutual promises to marry; (3) Leases of land for more 
 than one year ; (4) Contracts for the sale of lands or any 
 interest in lands; (5) Agreements that by their terms are 
 not to be performed within one year from the making of 
 them; (6) Agreements of an executor or administrator 
 to be personally responsible for the debts of the estate; 
 (7) Contracts for the sale of personal property involving 
 more than fifty dollars, unless some part of the property 
 be delivered, some part of the price be paid, or the sale 
 be by auction. 
 
 (d) Bonds, deeds, mortgages. 
 
 (e) As a rule all contracts made on Sunday are void 
 except such as would come under the heads of "works of 
 mercy" and "works of necessity." It will be noted that 
 the latter phrase is capable of a very wide interpretation. 
 
 9. Answer briefly: 
 
 (a) What is a debt and what can a creditor demand 
 in payment of a debt ? 
 
 (b) When a creditor accepts in satisfaction payment 
 of less than the full amount of a debt, how can the debtor 
 guard against further demands? 
 
 (c) When, where, and to whom must payment of a 
 debt be made ? 
 
 (d) Is a debtor legally entitled to a receipt? 
 
 (e) Which has the prior right to apply a payment 
 against any one of several debts, the debtor or the cred- 
 itor? 
 
 (f) When a partial payment is made on a debt bearing 
 interest, in what manner is it applied? 
 
 (g) When does the period of limitation begin to run, 
 and what are some of the ways in which its operation 
 can be modified? 
 
14 
 
 (a) A debt is the amount of money due from one 
 person (the debtor) to another (the creditor). 
 
 The creditor can demand in payment legal tender 
 money. 
 
 (b) He should secure a release under seal, which being 
 a specialty contract implies a consideration; or he might 
 in addition to paying the sum agreed on as satisfaction of 
 the full debt pay some nominal sum as a consideration. 
 
 (c) A debt must be paid on the day it falls due. It 
 must be paid at place specified (if any), or at the creditor's 
 residence or place of business. Payment must be made 
 to the creditor or to his agent or representative. 
 
 (d) No; only as a matter of courtesy. His protection 
 is to take a witness. 
 
 (e) The debtor. 
 
 (/) Interest is first paid; the balance, if any, being 
 applied to principal. 
 
 (g) The period of limitation begins to run whenever 
 the debt is due, or whenever an action for its recovery 
 might have been commenced. Its operation may be modi- 
 fied by the absence of the creditor or debtor from the 
 State at the time the debt became due — when the term of 
 limitation is extended to date of return into the State. 
 A new promise to pay or part payment of principal or 
 interest renews the debt, and makes it good again for the 
 period dating from the new promise. 
 
 ID. What is a partnership f How may the relationship 
 of partner be established ? Define nominal partner, silent 
 partner, dormant partner, special partner. 
 
 The relationship of partnership results from an agree- 
 ment between two or more persons to place their money 
 
15 
 
 or its equivalent in some undertaking, and to share the 
 profits and losses in certain proportions. Its relationship 
 may be established by entering into a written contract of 
 agreement termed articles of co-partnership; by oral 
 agreement, or by implication — i, e,, where the relationship 
 of partnership is assumed from the acts of the parties. 
 
 Nominal partner : One in name only. He has no voice 
 in the conduct of the business nor any interest either. 
 But he is liable for its debts. 
 
 Silent partner: One who invests money in a firm or 
 enterprise, but whose name does not appear as partner, 
 although he has a voice in controlling the affairs of the 
 business. He is Uable the same as other partners as soon 
 as his proper relationship becomes known. 
 
 Dormant partner : One who is either silent or ostensible, 
 but has no voice in the management of the business. 
 
 Special partner: One whose Uability is limited to the 
 amount of his investment. He is a member of a limited 
 partnership, but has no right to participate in the manage- 
 ment. 
 
 II. In what respects are partners trustees for each other 
 and in what respects are they agents for each other? 
 
 As between themselves partners are trustees for one 
 another in regard to the firm property. They are agents 
 for each other inasmuch as they may individually bind the 
 firm by contracts with third persons within the scope of 
 the partnership business. 
 
 12. What are the relative liabilities of a new partner 
 and a retiring partner? 
 
i6 
 
 A new partner is not liable for the debts of the firm 
 prior to his becoming a member of it unless he expressly 
 agrees to become so. He may become so by agreement 
 with a retiring partner to assume his share of the liabili- 
 ties, however. 
 
 A retiring partner is liable for any debts incurred by 
 the firm subsequent to his retirement, in case of a failure, 
 unless he publishes the fact, and sends proper notices 
 to creditors, etc. 
 
 13. How is a limited partnership formed? 
 
 A limited partnership can only be formed in those States 
 where statutes have been enacted authorizing the formation 
 of limited partnerships. The parties forming this connec- 
 tion must make and sign a certificate or agreement which 
 is properly executed and filed with the public records of 
 the State and county in which the business is to be con- 
 ducted. The certificate must include the firm name, names 
 of partners, and amount of capital contributed by each. 
 It is not infrequently found that a firm contains general 
 and special partners. The liability of the special partners 
 would, of course, be limited, while that of the general 
 partners would not. 
 
 14. State the difference between a sale and a consign- 
 ment. 
 
 A sale is a transfer of the title of property as well as 
 that of the property itself from one person to another for 
 a consideration. A consignment is the transfer of the 
 custody of property without transfer of the title to the 
 consignee. The property still belongs to the consignor. 
 
17 
 
 15- What kind of action can the consignor maintain 
 against a consignee who converts to his own use the pro- 
 ceeds of the sale of consignor's goods? 
 
 He can maintain either a criminal action against the 
 consignee for wrongful conversion, or a civil action for 
 default in respect to accounting, or both at one and the 
 same time. 
 
i8 
 
 June 1897* 
 
 1. What is a bailment f State the titles, general re- 
 lations and respective obligations of the parties to a bail- 
 ment. 
 
 A bailment is a delivery of personal property by one 
 person to another upon a contract, express or implied, 
 that the person to whom the goods are delivered will con- 
 form to the purpose or object for which the property was 
 delivered. The party who receives the property in trust 
 is called the bailee; the party who delivers it, the bailor. 
 The respective obligations of the parties to a bailment 
 and the consequent degree of responsibility attaching to 
 each depends upon the kind of bailment — whether it is for 
 the benefit of the bailor exclusively, the bailee exclusively, 
 or both. The bailee would have to take care of the prop- 
 erty entrusted to him, and in doing so would have to ex- 
 ercise ordinary, extraordinary or slight diligence — de- 
 pendent upon who was to be benefited. On the other hand, 
 the bailee would be held responsible for ordinary, slight, 
 or extraordinary negligence in the care of the property. 
 
 2. Define the following kinds of bailment: (a) de- 
 posit, (b) commission or mandate, (c) loan for use, 
 (d) pledge, (e) bailment for hire. 
 
 (a) A deposit bailment is a delivery of property to the 
 bailee to be kept by him without reward, and to be deliv- 
 
19 
 
 ered as per contract. (N. B., ''without reward'' does not 
 mean "without consideration," or there would be no 
 valid contract. In this case the "inducement" is the con- 
 sideration). 
 
 (fc) A commission or mandate bailment is one where 
 the bailee agrees to do something with the thing bailed 
 for the bailor without compensation. 
 
 (c) A loan for use bailment is the loan of something 
 to the bailee to be used by him without payment and re- 
 turned to the bailor or disposed of according to his direc- 
 tion when the bailment terminates. 9 ^^<^'^ ^t> a -no r/ 
 
 (d) A pledge bailment is one where the custody of 
 personal property is transferred to the bailee as security 
 for the payment of a debt or the performance of some 
 other obligation. 
 
 {e) A bailment for hire is a delivery of personal prop- 
 erty where compensation is given for usage, etc. Bail- 
 ments for hire are divided into (i) hire of things, (2) hire 
 of services, (3) hire of custody, and (4) hire of carriage. 
 
 3. State the principal points of law governing bail- 
 ments, in respect to (a) return of property to bailor, 
 {b) use of property by bailee, (c) sale of pledge by bailee, 
 {d) liability of bailee. 
 
 (a) Return of property to bailor: 
 
 (i) Deposit bailment: property must be returned to 
 the bailor at a certain time, or on demand, or to a third 
 party at a certain time or on demand. 
 
 (2) Loan for use: property must be returned by the 
 borrower at the time, place, and in the manner agreed on. 
 If no time is specified, it must be returned within a reason- 
 able time; if no place is stated, it must be returned to 
 
20 
 
 the bailor at his residence or the place where it was taken 
 from. 
 
 (3) Bailment for hire: the bailee must return the prop- 
 erty when the purpose of the bailment is fulfilled in as 
 good condition as received, natural wear excepted. 
 
 (b) Use of property by bailee : 
 
 ( 1 ) Deposit bailment : bailee must not use the property 
 except it would be benefited thereby. Should he do so 
 he must account to bailor for profits less expenses incurred 
 by him. 
 
 (2) Pledge bailment: bailor has not the right to use 
 the property, but only to hold it. But should usage be 
 necessary for the preservation of the property, he must 
 account to bailor for profits. 
 
 (3) Bailment for hire: property hired must be used 
 only for the purpose specified. 
 
 (c) Sale of pledge by bailee: 
 
 (i) Pledge bailment: before the bailee can sell the 
 pledge, he must make proper demand for payment of the 
 debt after it becomes due. Payment having been refused 
 on demand, he must give proper notice to bailor to redeem 
 the pledge, notify him of time and place of sale, sell the 
 pledge, and apply the proceeds to payment of the debt. 
 The bailee cannot retain the property as an oflfset against 
 the debt ; he must sell it at an open, public sale. 
 
 (2) Bailment for hire: if charges are not paid within 
 a reasonable time, the bailbi^, after public notice, may 
 sell the property, compensate himself out of the proceeds, 
 and return the remainder less costs to the bailor. 
 
 (d) Liability of bailee: 
 
 (i) Deposit bailment: this being for the sole benefit 
 
21 
 
 of the bailor, the bailee is only liable for gross negligence 
 in the care of the property. 
 
 (2) Commission bailment: the liability of the bailee 
 is the same as in the deposit bailment, and for the same 
 reason. 
 
 (3) Loan for use: here the bailment is for the exclu- 
 sive use of the bailee, and he would be held responsible 
 for slight negligence. He would, however, be exempted 
 from liability for inevitable accidents, i. e., such as could 
 not be foreseen and guarded against. 
 
 (4) Pledge bailment : the bailee in this case would be 
 liable for ordinary negligence as the bailment is for the 
 benefit of bailor and bailee. 
 
 (5) Bailment for hire: the bailee is responsible for 
 ordinary negligence. 
 
 4. What are common carriers? To what extent is a 
 common carrier liable as insurer? What security has 
 the carrier for the payment of his charges? 
 
 Common carriers are persons who make a continuous 
 offer to the public to transport passengers or merchandise 
 in consideration of receiving compensation for their risk 
 and labor. 
 
 He is an insurer of the safety of the goods he car- 
 ries and is responsible for injury to them unless such 
 be caused by the act of God or the public enemy. Even 
 then he may be held liable if his previous neglect brought 
 the property into danger resulting in such loss. 
 
 He has a lien on the property he carries as security for 
 the payment of his charges. 
 
 5. What is a general assignment and under what cir- 
 
22 
 
 cumstances may it be set aside ? What advantage to the 
 debtor has an insolvent assignment over a general assign- 
 ment ? What are preferences in an assignment ? 
 
 A general assignment is the transfer by a debtor of all 
 his property to another party for the benefit of his cred- 
 itors. If made for the purpose of keeping it out of the 
 hands of his creditors such a transfer is a fraud upon 
 them and can be set aside. 
 
 Under the bankruptcy laws the debtor who has trans- 
 ferred all his property to a trustee elected by his creditors 
 or by the court, who has been honest in his business re- 
 lations, who has not defrauded any of his creditors or 
 wilfully injured property, and who has acted in accord- 
 ance with the requirements of the statute, after his adju- 
 dication as a bankrupt, may obtain a discharge from all 
 his debts in full, except taxes. His creditors must accept 
 the compensation offered them, and the debtor if sued on 
 any debt from which the order discharges him, may plead 
 his discharge as a defence, and thuse defeat the action. 
 In the case of a general assignment the acceptance of 
 anything less than the full amount of a debt is optional 
 with any creditor, and the debtor may at any time be suc- 
 cessfully sued by a dissatisfied creditor. The advantages 
 of the former kind of assignment are, therefore, obvious. 
 
 Preferences are now only those claims whose payment 
 is provided for under the bankruptcy law, viz., all taxes, 
 State and Federal, and wages (not exceeding $300 to any 
 one person). They are so called because they must be 
 paid in full before any distribution of the assets is made 
 amongst the creditors. 
 
23 
 
 6. When a partnership assigns : 
 
 (a) By whom must the instrument be executed? 
 
 (b) What property may be included? 
 
 (c) What debts must first be discharged? 
 
 (a) The instrument must be executed by all the part- 
 ners. 
 
 (b) All firm assets. 
 
 (c) Taxes and wages first; then general creditors. 
 Next come loans to firm by partners, and lastly capital in- 
 vestments. 
 
 7. Answer briefly the following: 
 
 (a) What are the powers of an assignee? 
 (6) How must an assignee quaHfy? 
 (c) How may an assignee resign ? 
 
 (a) His powers are to convert all assets into cash, and, 
 if necessary, to sue debtors. He may then divide the pro- 
 ceeds ratably among the creditors. 
 
 (b) The assignee must qualify by filing inventories and 
 schedules of assets and liabilities and giving a bond as 
 security for the faithful performance of his duties. 
 
 (c) An assignee may resign by filing a complete state- 
 ment of his fiscal acts to date, supported by vouchers, and 
 getting released from his bond. 
 
 8. What courses of action under the insolvent laws are 
 open to a debtor who is unable to discharge his obliga- 
 tions ? 
 
 He may make a general assignment and compound with 
 creditors, getting released in full from obligations ; or he 
 may voluntarily ask to be adjudged a bankrupt, and in 
 
24 
 
 due course ask for his discharge, which would free him 
 from all liabilities. 
 
 Ky 9. Define briefly the following instruments: (a) bill 
 
 of lading, (b) charter party, (c) consular invoice, (d) 
 bottomry bond, (e) respondentia bond. 
 
 (a) A bill of lading is a written memorandum signed 
 by the captain of a vessel as agent for the owner or char- 
 terer, and delivered to the shipper acknowledging that the 
 goods mentioned in it have been received upon the vessel 
 for transportation. 
 
 (b) A charter party is the contract by which a vessel 
 is hired. 
 
 (c) A consular invoice is a bill made out by a shipper 
 of merchandise from one country to another containing 
 cost price, quantity and description of goods shipped, and 
 sworn to before the consul of the country they are intend- 
 ed for at the port of shipment. 
 
 (d) A bottomry bond is the obligation given for a loan 
 secured upon a vessel and its accruing freight charges. ' 
 
 (e) A respondentia bond is the same, only the security 
 is the vessel's cargo. 
 
 10. What is a guaranty f State the titles and the mu- 
 tual relations of the parties to a guaranty and the con- 
 sideration necessary to make it binding. How may a 
 surety be relieved from liability? 
 
 A guaranty is a contract by which one person agrees 
 to become responsible for the debt or default of another. 
 
 There are three parties to a guaranty : the debtor, who 
 is primarily responsible; the creditor to whom he is re- 
 sponsible; and the guarantor. Where the guaranty is 
 
25 
 
 made at the same time as the principal contract one con- 
 sideration will support both. But if the guarantee be 
 made subsequently, there must be separate consideration 
 to make the contract binding. A nominal sum would 
 be sufficient. 
 
 In the case of a continuing guaranty the surety may be 
 relieved from liability if the agreement be altered; if the 
 time of payment be extended ; or if fraud has been prac- 
 ticed upon him. 
 
 11. What is the extent of the liability of the guarantor 
 under each of the following: (a) guaranty for payment, 
 (b) guaranty for collection, (c) continuing guaranty? 
 
 (a) In the guaranty for payment the guarantor be- 
 comes absolutely liable for the full amount of the debt 
 immediately the debtor refuses to pay it. 
 
 (b) In the guaranty for collection the necessity is 
 placed upon the creditor to show that he is unable to col- 
 lect from the debtor by legal process before the guarantor 
 can be called upon; but when that point is proved the 
 creditor can collect from the guarantor the full amount 
 of the debt, and any costs he has had to pay in his attempts 
 to collect from the debtor. 
 
 (c) In the continuing guaranty the guarantor guaran- 
 tees all indebtedness up to a certain amount, and so long 
 as the specified amount is not exceeded, he is absolutely 
 liable, for the debtor's default. 
 
 12. On what loans may a higher rate of interest than 
 6% be taken? 
 
 What is the time for the payment of a note falling due 
 on (a) Saturday, (b) Sunday, (c) Saturday when the 
 following Monday is a legal holiday? 
 
26 
 
 Pawnbroker's loans; call loans in Wall street; and mar- 
 itime loans. 
 
 (a) Due Saturday; time for payment, Monday. 
 
 (b) Due Sunday; time for payment, Monday. 
 
 (c) Due Saturday when the following Monday is a 
 legal holiday; time for payment, Tuesday. 
 
 13. In the case of a debt secured by collateral what 
 course is open to the creditor? 
 
 The creditor may sell the collateral at public sale, re- 
 coup himself for debt and interest, and return excess bal- 
 ance (if any) to debtor. 
 
 14. Define briefly each of the following terms: (a) 
 agent, (b) agency, (c) general agent, (d) special agent, 
 (e) power of attorney, (f) In what cases is an acknowl- 
 ment of execution of a power of attorney necessary ? 
 
 (a) Agent — one who acts for and represents another, 
 called his principal. 
 
 (b) Agency — the legal relation existing between an 
 agent and his principal. 
 
 (c) General agent — one who is appointed to do acts of 
 a class. 
 
 (d) Special agent — one who is appointed to do indi- 
 vidual acts. 
 
 (e) Power of attorney — an instrument under seal for- 
 mally constitutmg one person agent for another. 
 
 (f) An acknowledgment of execution of a power of at- 
 torney is necessary whenever the authority conferred is to 
 execute any instrument that is to be recorded. 
 
15- In a certain stock corporation only 50% of the sub- 
 scribed capital has been called. A has paid all the install- 
 ments called and has loaned to the company an additional 
 sum, for which he has taken its promissory note, and has 
 transferred the note to B. B demands payment. May 
 the company call further installments on A's stock, and 
 offset the amount so called against the promissory note 
 held by B? Explain your answer. 
 
 The corporation may call further installments on all of 
 its capital stock, but not on A's only. The amount so 
 called could not be offset against the note held by B for 
 the reason that if a note is transferred for value before 
 maturity, it cuts off cross claims and other defences which 
 might have been set up if the note had remained in the 
 hands of A. 
 
28 
 
 December 1897* 
 
 1. What is an executory contract, and in what respect 
 does it differ from a contract executed? 
 
 An executory contract is one in which the thing agreed 
 upon has not been done; where it has, the contract is 
 termed executed. A contract may be executory on the 
 part of one, and executed on the part of the other party to 
 it. An executed contract signifies that the rights referred 
 to in it have been acquired. 
 
 2. State (a) the essentials to the vaHdity of a contract, 
 (b) exceptions to the general rule as to the validity of 
 a contract, (c) the act or acts necessary to make a con- 
 tract of sale valid. 
 
 (a) To make a valid contract the parties to it (i) must 
 be competent; (2) must give their consent; (3) there 
 must be consideration ; and (4) subject matter, i. e., some- 
 thing to contract about. 
 
 (6) Exceptions: 
 
 (i)As to competency: certain persons have been de- 
 clared by law incompetent to make valid contracts. Such 
 are the insane, idiots, drunkards, infants, and alien ene- 
 mies. But insane persons may make valid contracts in 
 lucid intervals; drunkards, when sober; and infants for 
 necessaries. 
 
29 
 
 (2) As to consent: parties may have consented, yet 
 the contract may be invaHd ; for the consent may have been 
 given without understanding the terms of the agreement, 
 or through duress or fraud. 
 
 (3) As to consideration: specialty contracts are said 
 to import a consideration. Negotiable paper in the hands 
 of an innocent purchaser can be collected from the maker 
 by the holder, although not by the original payee to whom 
 the note was given as accommodation, i. e., "without con- 
 sideration." 
 
 (4) As to subject matter: the contract may possess 
 every element of validity and yet be invalid, because the 
 law has declared that certain subjects contracted on can- 
 not be enforced. Such are those that are against public 
 policy, immoral, or fraudulent. 
 
 (c) The acts necessary to make a contract of sale valid 
 are offer, acceptance, and conformity to the statute of 
 frauds. 
 
 3. (a) When goods are sold on credit, in whom is the 
 right of possession and of property vested ? 
 
 (b) State the rights of the vendor and of the vendee 
 in case of the insolvency of the vendee before obtaining 
 possession. 
 
 (a) In the vendee. 
 
 (b) The vendor has the right of "stoppage in transitu." 
 The vendee has the right to pay for the goods and compel 
 delivery. 
 
 4. (a) After the delivery of goods to a common car- 
 rier, as ordered by the vendee, in whom do the right of 
 property and the risk rest? 
 
30 
 
 (6) What rights or remedies has the vendor of goods 
 sold on credit, in case the vendee becomes insolvent while 
 the goods are in transitu f 
 
 (a) The vendee. 
 
 (b) He has the right of stoppage. 
 
 5. Show the difference between a general agent and a 
 special agent. 
 
 The decision of the Supreme Court of the United States 
 is : "A general agent is one who is appointed to do acts 
 of a class, while a special agent is one appointed to do 
 individual acts." 
 
 6. What redress has a principal in case his agent 
 pledges (a) the goods of the principal, (b) the negotia- 
 ble paper of the principal? 
 
 (a) This would depend largely upon trade custom 
 and the use the agent makes of the avails of the pledge. 
 If the agent does not disclose the name of his principal 
 and converts to his own personal use the proceeds, he 
 could be sued in both a civil and a criminal action, and the 
 goods probably be replevined. 
 
 (b) In this case unless the agent is empowered to sign 
 for his principal he would have to commit forgery to ne- 
 gotiate the notes. The principal could then institute crim- 
 inal proceedings against his agent, and by notifying the 
 makers of the notes of the forgery secure payment at 
 maturity. 
 
 7. (a) To what extent is a principal bound by a con- 
 tract made by his agent? 
 
 (b) In the case of goods sold by an agent, what are 
 the rights of the principal in respect to payment by the 
 purchaser ? 
 
31 
 
 (a) So long as an agent acts within the scope of his 
 authority the principal is liable for all contracts made by 
 him. The principal will also be bound if the agent exceeds 
 his authority, if his acts are apparently authorized by him 
 (the principal), or by business usages. This applies only 
 to general agents. In the case of special agents the prin- 
 cipal will only be bound by contracts specifically author- 
 ized by him and cannot be held should the agent exceed 
 his authority. It is the duty of third parties in contract- 
 ing with a special agent to inform themselves of the pre- 
 cise extent of his authority. 
 
 (b) The principal may direct that all payments be 
 made to him personally, and he has the right to sue where 
 payment so asked for is refused. 
 
 8. What is each of the following: (a) a general lien, 
 (b) a particular lien? State what is necessary to create 
 a lien. 
 
 (a) A general lien is the right of one party to retain 
 possession of any property of another against whom he 
 has a claim. 
 
 {b) A particular lien is the right of one party to re- 
 tain possession of some particular property in connec- 
 tion with which he has some claim against another. Fa- 
 milar instances would be the lien of a common carrier, 
 of a bailee, or of an inn-keeper. 
 
 To create a lien there must be possession, either legal 
 or equitable, of the property liened, and some charges 
 due upon the same. 
 
 9. Show how the authority of an agent may terminate. 
 The authority of an agent may terminate (i) by revo- 
 
32 \ 
 
 cation of his authority by his principal ; (2) by renouncing I 
 the authority of his principal; (3) by expiration of time 
 limit, when he is appointed for a certain stated period; 
 
 (4) by such a change in the condition of either principal ; 
 
 or agent as would produce incapacity to act, e. g., insanity, ' 
 
 bankruptcy or death. ^ 
 
 10. Define partnership, general partner, special part- \ 
 ner. State the rights of a special partner in case of the ; 
 insolvency of the firm. 
 
 Partnership results from a contract entered into by two 
 or more persons to combine their money, effects, labor, 
 or skill, or some or all of them, in some lawful business 
 and to share the profits and losses as such between them. 
 
 A general partner is one of the ordinary partners in a 
 firm and is personally liable to firm creditors not only ; 
 for the amount of capital he contributes to the firm, but if \ 
 the firm assets are insufficient to pay its creditors in full, ! 
 he is personally liable to the full extent of all his private \ 
 property. \ 
 
 A special partner is a member of a limited partnership, i 
 his share of liability to firm creditors being limited to the 
 amount of his capital investment. He takes no share in 
 the management of the affairs of the firm ; if he does, he i 
 may be held liable as a general partner. In a limited ■ 
 partnership it is usual to find general partners and one or 
 more special, who are separately designated as such. 
 
 His rights are restricted to immunity from any greater 
 claims than the amount of his capital. ; 
 
 11. (a) To what extent does the act of one partner ! 
 bind his copartners? ^ 
 
 (b) Must a partner account to his firm for profits j 
 made by him in a separate business? j 
 
33 
 
 (c) State the process of dissolving a partnership. 
 
 (a) A partner is an agent of the firm and also of his 
 co-partners for the purposes of the partnership business. 
 Any act therefore done by one partner in carrying on firm 
 business in the usual way is binding on his co-partners. 
 He may hire agents, buy and sell goods, pay and collect 
 debts, and in general, enter into all contracts for them 
 within the scope of the partnership concern. 
 
 (b) It would depend upon the terms of the articles of 
 co-partnership. If it were stipulated that each partner 
 was to devote the whole of his time exclusively to partner- 
 ship business, and it could be proved that such business 
 had suffered through the failure of one of the partners to 
 do so, in consequence of attending to the affairs of his 
 separate business, it is probable that he would have to ac- 
 count to his firm for profits made in such business. But 
 if this stipulation were not inserted, and bad faith 
 towards his firm could not be proved, it is very question- 
 able whether he could be so called on. 
 
 Of course, if he made use of the firm assets in the pros- 
 ecution of a separate business, he could undoubtedly be 
 called on for an accounting to the other members of his 
 firm. 
 
 (c) Partnership may be dissolved (i) by the act of the 
 parties — mutual consent or otherwise; (2) by the act of 
 God, as the death of one of the partners ; (3) by act of the 
 law, as the bankruptcy of the firm or one of the partners ; 
 (4) by a valid assignment of all the partnership effects for 
 the benefit of creditors; (5) by the assignment of the 
 whole of one partner's interests to his co-partner, or a 
 stranger ; (6) by limitation, i. e., expiration of the period 
 for which the partnership was formed. 
 
34 
 
 Either a receiver is applied for or one of the partners 
 agrees to act for the others with powers in liquidation. 
 He (i) completes unfinished engagepients ; (2) converts 
 into cash the assets; (3) liquidates outside and then 
 partnership liabilities, i. e., capital prcf rata. 
 
 12. State briefly the effects of a dissolution of a part- 
 nership on the rights and powers of the individual part- 
 ners. 
 
 On the dissolution of a partnership the right of the 
 members to bind one another as agents ceases. The liqui- 
 dating partner has the power to make such contracts as 
 may be necessary to finish up uncompleted firm engage- 
 ments, but he is not allowed as a rule to make further 
 engagements. His powers are strictly what is termed "in 
 liquidation." 
 
 13. Explain the following points regarding a guaranty : 
 (a) nature and purpose, (b) manner of making, (c) how 
 the position of a guarantor of negotiable paper differs 
 from that of an indorser. 
 
 (a) A guaranty is an agreement by one party to be- 
 come responsible for the debt or default of another, which, 
 in order to conform to the statute of frauds, must be in 
 writing. The parties to it are the creditor, the debtor and 
 the guarantor. Its purpose is the guaranteeing to the 
 party to whom given the payment of a debt or the per- 
 formance of certain duty by a third party. 
 
 (b) Being a contract, there must be consideration. 
 If the guaranty be given at the time the principal contract 
 is made, the original consideration will support the guar- 
 anty also. But if made at any subsequent time separate 
 
35 
 
 consideration must be given. The guarantor simply 
 writes for value received: I guarantee the payment (or 
 
 collection, or ) of this and signs 
 
 his name with guarantor underneath. 
 
 (c) The position of a guarantor of negotiable paper 
 differs from that of an endorser principally in this re- 
 spect: he is not entitled to prompt notice of protest. 
 As soon as the debtor fails to pay he must, on notification, 
 pay for him. But as an offset to this he acquires the 
 right of subrogation. 
 
 The student will do well to bear in mind the difference 
 between "guaranty for collection" and "guaranty for pay- 
 ment." 
 
 14. (a) Describe the steps necessary for the formation 
 of a business corporation. 
 
 (b) State what is requisite for the validity of a con- 
 tract by a corporation. 
 
 (a) The name of the proposed corporation having been 
 selected by the incorporators and approved (as not con- 
 flicting with that of any existing domestic corporation) 
 by the Secretary of State, any three or more natural per- 
 sons, two-thirds of whom must be citizens of the United 
 States, and at least one of them a resident of this State, 
 may become a corporation by making, signing, acknow- 
 ledging and filing a certificate which shall contain : 
 
 The name of the corporation ; 
 
 The purpose for which it is to be formed ; 
 
 The amount of the capital stock and amount of pre- 
 ferred stock, if any ; 
 
 The number and par value of shares and the amount of 
 capital with which it is proposed to begin business ; 
 
36 
 
 The location of its principal business office ; 
 
 Its duration; 
 
 The number of its directors (not less than three) ; 
 
 The names and post office address of directors for the 
 first year ; 
 
 The names and post office address of the incorpora- 
 tors, with the number of shares each agrees to take. 
 The fees having been paid to the Secretary of State and 
 the State Treasurer, the certificate is filed and recorded 
 in the office of the Secretary of State, a copy of it filed 
 in the office of the clerk of the county in which the office 
 of the corporation is to be located, and the corporation 
 may commence business as soon as the amount of capital 
 specified in its articles of incorporation as the amount of 
 capital with which it will begin business shall have been 
 paid in. 
 
 (b) In order to be valid, a contract by a corporation 
 must be authorized by the board of directors; recorded 
 in the minute book; be executed by the proper officer or 
 officers, and in the manner stated in its by-laws. It must 
 also properly fall within the scope of the business as out- 
 lined in its articles of incorporation, i. e., it must not be 
 ultra vires. 
 
 15. State what facts must be established to show the 
 validity of an issue of bonds by a municipality. 
 
 (i) Authorization by record on municipality minute 
 book. 
 
 (2) Specified purpose. 
 
 (3) Provision for redemption at maturity. 
 
 (4) Issue must not work the creation of an excess of 
 debt limit. 
 
37 
 
 3une 1898^ 
 
 1. (a) What are the essential elements of a sale? (&) 
 What is the effect of a sale of goods in fraudulent pos- 
 session of the vendor? (c) What is meant by a sale to 
 arrive and what is the legal effect of such a sale ? 
 
 (a) The essential elements of a sale are: (i) the par- 
 ties must be competent to contract; (2) they must mutual- 
 ly assent to the contract in the same sense ; (3) there must 
 be a consideration; (4) there must be subject matter or 
 something sold; (5) the sale must conform to the statute 
 of frauds. 
 
 (b) It can be set aside. 
 
 (c) By a sale to arrive is meant a sale of merchandise 
 *'en route'' before actual arrival. The sale is conditional 
 on the arrival of the goods, i. e., if the goods do not ar- 
 rive there is no sale. Such a sale, however, may be made 
 absolute if the bill of lading be transferred by the vendor 
 to the. vendee as it would indicate an intention on the 
 part of the parties to transfer the title, unless an express 
 agreement were made to the contrary. 
 
 2. Answer the following in relation to a promissory 
 note: (a) How may the indorser be relieved from lia- 
 bility? (b) How is the liability of an indorser affected 
 by an arrangement between holder and maker extending 
 the time of payment? (c) How far is an indorser holden 
 when the maker becomes insolvent and settles with his 
 creditors for 50 cents on the dollar ? 
 
38 
 
 (a) The indorser is relieved from liability: (i) by in- 
 dorsing "without recourse"; (2) by failure to receive 
 prompt notice of non-payment; (3) by an arrangement 
 between maker and holder to extend the time of payment. 
 
 (b) He is relieved from liability. 
 
 (c) For the balance. 
 
 3. Is the /validity of a note or a check affected by the 
 fact of its being dated on a legal holiday? on Sunday? 
 Explain. If the date of a note should be changed by the 
 holder, would its validity be affected thereby ? 
 
 The validity of a note or check is not affected by its 
 being dated on a legal holiday ; but if dated on a Sunday, 
 either would, according to the strict letter of the law, 
 be void, as all contracts entered into on Sunday, except into 
 for necessaries or works of mercy, are void. Still, in 
 practice, the date of the performance or execution of the 
 contract would probably be the determining factor. 
 
 Any alteration on the face of a note made by the holder 
 without the consent of the maker would make it invalid as 
 a negotiable instrument. 
 
 4. (a) If A gives a note to B in payment of a debt, 
 and it is indorsed by C as surety, can B collect from C 
 if he has not protested the note? Give reasons for your 
 answer. 
 
 (b) Money is obtained at a bank on a note payable to 
 order; the indorsement is genuine, but the maker's name 
 is forged. On whom does the loss fall? Why? 
 
 (a) Yes, because he is not entitled to prompt demand 
 and notice of refusal like an endorser. If, however, C 
 can prove that, owing to B's failure to make demand and 
 
39 
 
 send him prompt notice of non-payment, he has suffered 
 loss which he might have avoided, he is i^eHeved from 
 liabiHty. 
 
 (b) The loss falls on the endorser because he impliedly 
 contracts with the bank that the instrument is genuine. 
 
 5. If a man is in the employ of a firm and receives an 
 interest in the profits in lieu of salary, is he liable as a 
 partner? If he has no salary but shares in profits and 
 losses, is he a partner? Explain. 
 
 No; because he has no interest in the capital. But if 
 he shares in profits and losses he would be held liable by 
 third parties as a partner by implication, although no 
 partnership agreement existed. 
 
 6. One partner of a firm, who is responsible financially, 
 is in debt to the firm beyond his right to draw money; 
 how can said indebtedness be collected without dividing 
 the firm? Can one partner be sued by another member 
 of the firm ? Could the claim be assigned to a third party 
 and collected by him? 
 
 He could give his personal note to an individual member 
 of the firm, who could indorse it over to the firm's attor- 
 neys for collection. 
 
 One partner cannot bring an action at law against an- 
 other member of the firm for any act of omission or com^ 
 mission in the partnership affairs during the continuancie 
 of the partnership. 
 
 Yes. 
 
 7. (a) What is meant by agency f (b) How should 
 an agent's authority be conferred? (c) Has an agent 
 
40 
 
 power to delegate his authority? (d) Has an agent who 
 has sold goods for a principal a right to collect the amount 
 due for the same? (e) Mention and differentiate the 
 classes of agents. 
 
 (a) Agency is the legal relation existing between one 
 person who acts for and represents another called his 
 principal. 
 
 (b) An agent's authority may be conferred by parol, 
 either orally or by letter. The more formal way, however, 
 is to confer it by power of attorney executed under seal. 
 
 (c) No, unless expressly authorized by the principal, 
 or unless the nature and usages of the business require or 
 justify it. 
 
 (d) The right depends upon the kind of agent. A 
 factor has the right to collect from the purchaser unless 
 he has been definitely notified to the contrary, while as a 
 general rule a broker is not. The right is largely influ- 
 enced by custom and usage. 
 
 (e) Agents may be divided as follows : 
 
 (i) Special and general; (2) limited and unlimited; 
 (3) factor and broker. 
 
 A general agent is one who is appointed to do acts of a 
 class ; a special agent to do individual acts. 
 
 A limited agent is bound by particular instructions ; the 
 term is applied to a general agent whose authority is re- 
 stricted and limited. An unlimited agent is a special agent 
 to whom authority has been given to use any means he 
 may find necessary to accomplish the thing to be done. 
 
 A factor is an agent who has the property of his prin- 
 cipal in his own possession for sale. A broker is an agent 
 employed to negotiate sales between the buyer and seller ; 
 the thing sold does not usually pass into his possession. 
 
41 
 
 It is quite customary, however, for the same person to be 
 factor and broker. 
 
 8. If an agent exceeds instructions in making a con- 
 tract, can the principal be held, always supposing that 
 the other party to the contract does not know to what 
 extent the agent's powers are limited? Define precisely 
 the extent of a principal's liability for acts of his agent. 
 
 Yes, provided the act of the agent comes within the 
 scope of the agency business. As a rule the principal is 
 liable for the acts of a general agent — even though he 
 exceed the scope of his authority; provided the acts be 
 such as are customarily performed by a general agent in 
 that particular line of business. In the case of a special 
 agent the case would be different; it is the duties of 
 third parties to ascertain the precise extent of the agent's 
 authority. 
 
 The liability of a principal for acts of his agent arises 
 (i) under the contract; (2) from the wrongful act of his 
 agent; and (3), by subsequent ratification of his unau- 
 thorized act. 
 
 (i) Under the contract: the principal is Hable for all 
 the acts of his agent done within the scope of his au- 
 thority. If the agent's authority be limited by private in- 
 structions, the principal will be liable if he exceed them, 
 provided third parties have no knowledge of such special 
 instructions. 
 
 (2) Wrongful act of agent: the principal is liable for 
 all wrongful and negligent acts of his agent — except where 
 he commits a willful act of trespass, not within the scope 
 of his authority. The willfulness of the act relieves the 
 principal. I J 1 
 
42 
 
 (3) Ratification of unauthorized acts: this may be ex- 
 pressly done by assent of the principal, or may be inferred 
 from his failure to disaffirm and repudiate the acts of his 
 agent. 
 
 9. State what is required to constitute a partnership. 
 Define limited partnership and state how it is constituted. 
 
 To constitute a partnership there must be an agreement 
 between two or more persons to combine their labor, 
 property, and skill, or some of them, for the purpose of 
 engaging in some lawful trade or business, and to share 
 the profits and losses, as such, between them. 
 
 This agreement may be written or oral; or it may be 
 inferred from the acts of the parties. 
 
 A limited partnership exists where there is at least one 
 general partner who manages the business and is liable 
 without limit for all the partnership debts, and one or 
 more special partners whose liability for firm debts is 
 limited to the sum contributed by each to the firm capital. 
 In order to constitute such a partnership a certificate or 
 agreement must be properly executed by the persons de- 
 siring to unite, which must be filed with the public records 
 of the county in which the business is to be transacted. 
 The name of the firm, nature of the business, names of 
 the partners, and the amount of capital contributed by each 
 should be stated. The terms of the partnership should 
 also be published in the press. 
 
 10. What IS a factor? Explain the difference between 
 a factor and a broker. 
 
 A factor is an agent who receives personal property 
 
43 
 
 and sells it for a commission. He differs from a broker 
 in that the property about to be negotiated comes into his 
 possession ; whereas this is not the case with the broker. 
 
 11. What is a warranty? What is the rule of damages 
 for breach of warranty? 
 
 A warranty is a contract on the part of the seller to be 
 responsible for damage should the property sold be not as 
 represented and described; it must be supported by a 
 consideration, and may be either express or implied. The 
 rule of damages for breach of warranty is (i) if the 
 vendee has paid the price, he may sue the vendor for the 
 damages ; and (2) if he has not paid it he may set up his 
 claim as partial defence to any action brought against him 
 for the price. The measure of the damages is generally 
 the difference between the value of the goods sold and the 
 value of them had they been as represented. The vendee, 
 however, may in special cases be entitled to special dam- 
 ages. 
 
 12. Explain the difference between an attorney in fact 
 and an attorney at law. Write out a form of power of 
 attorney to sign checks and indorse negotiable paper. 
 
 An attorney in fact derives his power to act from the 
 letter or power of attorney of his principal, by whom he 
 is appointed, while an attorney-at-law is a professional 
 lawyer, who has passed certain prescribed examinations 
 and has been "admitted to the bar." 
 
 FORM OF ""power OF ATTORNEY.'^ 
 
 Know all men by these presents : 
 
 That T, John Brown, of Utica, County of Oneida and 
 
44 
 
 State of New York, have made, constituted and appointed, 
 Henry White, of Albany City, my true and lawful attorney 
 for me and in my name, place and stead, in transacting 
 any business directly or indirectly with the Latimer Ex- 
 change Bank, N. Y., its officers or agents, to sign, indorse, 
 draw, accept, make, execute and deliver, all such notes, 
 checks, bills of exchange, and other contracts or instru- 
 ments in writing, with or without seal, and such verbal 
 contracts as he may deem proper, giving and granting 
 unto my said attorney full power and authority to do and 
 perform all, any, every act and thing whatsoever requisite 
 and necessary to be done in and about the premises, as 
 fully, to all intents and purposes, as I might or could do 
 if personally present, with full power of substitution and 
 revocation, hereby ratifying and confirming all that my 
 said attorney or his substitute shall lawfully do or cause 
 to be done by virtue hereof; and any such notes, checks, 
 bills of exchange, contracts or instruments, signed, in- 
 dorsed, drawn, accepted, made, executed or delivered by 
 my said attorney, and which shall be hereafter received 
 by or come to said bank or its said officers or agents shall 
 bind, and are hereby ratified and confirmed by the under- 
 signed. 
 
 In witness whereof, I have hereunto set my hand and 
 seal the fifteenth day of February, in the year one thous- 
 and nine hundred and three. 
 
 Sealed and signed in presence of 
 John Doe, 
 Richard Roe. John Brown [seal.] 
 
 13. Define usury and state the penalty for usury. Men- 
 tion the principal exemptions from the operation of the 
 usury law. 
 
45 
 
 Usury is the taking of more interest for the use of 
 money than the law allows. 
 
 The penalty in New York State for usury is forfeiture 
 of principal and interest. 
 
 The principal exceptions from the operation of the 
 usury law are (i) pawnbrokers' loans; (2) call loans in 
 Wall Street; (3) maritime loans. 
 
 14. How may a partnership be terminated? What steps 
 should be taken by a retiring partner to relieve himself 
 from further partnership responsibility when the business 
 is continued by the former copartners? 
 
 A partnership may be terminated ( i ) by agreement of 
 all the partners; (2) by act of one of the partners; (3) 
 by a decree of a court ; (4) by operation of law. 
 
 He should, on retirement, notify all the partnership cus- 
 tomers and creditors of the severance of his connection 
 with the firm, and advertise the fact in the public press. 
 
 15. When a portion of the stock of a corporation is 
 held by the company and stands in the name of the treas- 
 urer as trustee, can the treasurer vote the stock at an an- 
 nual election of directors, and if so, must he vote it as 
 instructed by the old board of directors? 
 
 Such stock could not be voted on. 
 
46 
 
 December 1898* 
 
 1. When does a deed conveying real estate take effect? 
 Is there any legal presumption as to the time a deed 
 took effect, and if so, is this presumption subject to re- 
 buttal ?- Give reasons. Define escrow, 
 
 A deed conveying real estate takes effect upon delivery 
 and acceptance. 
 
 The legal presumption as to the time a deed took effect 
 is the date of its acknowledgment; but this is subject to 
 rebuttal because the consideration might not have passed 
 until a subsequent date and the deed not delivered. 
 
 Escrow is the delivery of a deed to a third party to be 
 by him delivered to the grantee upon the event of certain 
 conditions, upon which last delivery the transmission of 
 title is complete. 
 
 2. A in Boston offers by letter a quantity of shoes at 
 a certain price to B in New York. B mails a letter from 
 New York to A in Boston, declining the offer. Three 
 hours later B in New York telegraphs A in Boston as 
 follows: "Offer accepted. Ship at once." This tele- 
 gram is received by A two hours in advance of B's letter 
 of declination. Is there a contract? Explain fully. 
 
 There is a contract. 
 
 A contract of sale consists of offer and acceptance. A 
 having received the telegram, and ignorant of the sending 
 of a letter by B, is justified in considering acceptance com- 
 plete, and in shipping the goods at once. 
 
47 
 
 3- A indorses B's note in favor of C for $i,ooo. At 
 the same time he guarantees in writing the payment of a 
 note by B to C for the same amount. Neither note is pro- 
 tested at maturity, and neither is paid by B. C sues A 
 for the amount of the two notes. Can he recover, and if 
 so, how much ? Give reasons for your answer. 
 
 C can recover $i,ooo from A as guarantor; nothing 
 from A as indorser. 
 
 C cannot recover from A as indorser because he failed 
 to protest the note and notify him promptly of non-pay- 
 ment. Such omission relieves the indorser from liability. 
 
 C can recover $i,ooo from A as guarantor because 
 usually a guarantor is not entitled to prompt notice of 
 such payment. 
 
 4. What rights and remedies have two equal part- 
 ners in a business when they are irreconcilably divided 
 as to the management of its affairs? 
 
 (i) They may secure a dissolution by a decree of a 
 court of equity and the appointment of a receiver. 
 
 (2) One partner may assign the whole of his interest 
 for value to the other or to a third party. 
 
 (3) They may dissolve the partnership by mutual con- 
 sent, one of them acting as liquidator. 
 
 5. How must the contracts of a corporation be made? 
 Are there any exceptions to the general rule? Explain 
 fully. 
 
 Contracts must be made in the manner laid down in the 
 by-laws. They must be authorized by the board of direct- 
 ors as evidenced by resolution duly recorded. 
 
 This applies to all contracts of importance. But the of- 
 
48 
 
 ficers of the corporation are the agents of the directors 
 and can as a rule make all contracts for the general carry- 
 ing on of business. Were this not so the directors would 
 have to be in perpetual session. It is clear then that the 
 directors at their meeting explicitly (by resolution) or 
 impliedly (by non-dissent) ratify the acts of their agents 
 — i. e.y the officers of the corporation. 
 
 6. What is meant by stoppage in transit f Give an 
 example showing the proceedings. 
 
 By stoppage in transit is meant the right which the 
 vendor of goods has to order the carrier not to deliver 
 them to the party previously directed (the vendee), but to 
 hold them subject to his (the vendor's) order. 
 
 Example: A (vendee) orders goods from B (vendor) 
 and directs them to be shipped to him by the American 
 Express Co. B, after dispatching the goods, learns that 
 A is in failing curcumstances and has allowed two notes 
 to go to protest. He wires or writes to the express com- 
 pany not to deliver the goods but to hold them subject to 
 his order. The goods must be in transit; and the vendor 
 must be assured of the insolvency of the vendee. 
 
 7. Explain what is meant by the statement that "a 
 common carrier is an insurer of goods entrusted to him 
 to be transported to a designated destination." Are there 
 any qualifications or exceptions to this liability? Give 
 reasons and full explanation. 
 
 It means that if the goods entrusted to him for trans- 
 portation are lost, destroyed, or damaged, he may be held 
 responsible. 
 . An injury to goods caused by the act of God or the 
 
49 
 
 public enemy would exempt the carrier from his responsi- 
 bility, unless the loss were caused by his previous neglect 
 in bringing the property into danger. Thus if his delay ex- 
 poses the property to destruction, or if he take a different 
 route from the one agreed upon, he becomes liable for loss. 
 The carrier may limit the amount of his liability unless 
 the value of the article is stated by the shipper and is 
 received with full knowledge of its value. The carrier 
 cannot limit his liability by a printed notice unless the 
 attention of the shipper is expressly drawn to it. 
 
 8. Define arbitration and give the general rule by which 
 the proceeding is governed. In what cases is arbitration 
 usually resorted to? Wherein does an arbitration differ 
 from a reference? 
 
 Arbitration is an agreement to submit a disputed claim 
 to the judgment of a third party or parties called arbitra- 
 tors, and to be bound by their decision. The parties dis- 
 puting may agree to accept a third party — mutually ac- 
 ceptable as an arbitrator ; or they may each select a repre- 
 sentative and agree that the parties so selected shall agree 
 on an arbitrator. The arbitrator's decision is binding if 
 given in the terms of the contract submitted to him, and 
 this decision would be a defence to a suit in which any- 
 thing else was demanded on the claim. Either party can 
 revoke his submission prior to the time of the arbitrator's 
 award ; but when the decision is rendered, it at once be- 
 comes binding. 
 
 Arbitration is usually resorted to where it is deemed 
 desirable to save the expense and delay of litigation; in 
 partnership disputes, and in such cases as labor strikes, 
 etc. 
 
50 
 
 Arbitration differs from a reference in the following 
 respects : ( i ) In an arbitration, the arbitrator is selected 
 by the disputants themselves, whereas the referee is ap- 
 pointed by the court. (2) In an arbitration either party 
 may revoke his submission prior to the arbitrator's de- 
 cision, whereas in a reference — when once entered on, 
 neither party can withdraw previous to the referee's de- 
 cision without being non-suited. (3) The arbitrator is 
 both jury and judge, while the referee simply takes the 
 testimony and reports to the judge by whom he is appoint- 
 ed, for a decision in the case. 
 
 9. What is a broker? What is meant by the terms 
 bought note and sold note? Illustrate, and show to what 
 extent such notes are used. 
 
 A broker is an agent who acts on behalf of another 
 person in buying or selling. He is an intermediary be- 
 tween two parties : the buyer and the seller. In general 
 there are two classes of agents : factors and brokers ; the 
 distinction being generally that in the case of factors the 
 goods of his principal come into his possession, whereas 
 this is not the case with brokers. It often happens, how- 
 ever, that an agent is both factor and broker. 
 
 "Bought" and "sold" notes are the records of a transac- 
 tion which a broker who has carried out the transactions 
 on behalf of one or both parties sends to the principals. 
 The record which he sends to the purchaser is called the 
 bought note, and that which he sends to the seller the sold 
 note. There are three varieties of bought and sold notes. 
 
 (i) "Sold for you to C. D.," or "Bought for you from 
 A. B." These notes are signed by the broker with the 
 work "Broker" after his signature. As the principals are 
 
SI 
 
 disclosed, the broker can neither sue nor be sued on such 
 a contract. 
 
 (2) "Sold for you" or "Bought for you." The broker 
 signs his name with "Broker" afterwards. As he has 
 signed as broker he can neither sue nor be sued on the con- 
 tract. 
 
 (3) "Sold to you by me" or "Bought of you by me." 
 This is signed by the broker without adding the word 
 "Broker." Here the broker has assumed the position of 
 principal, and as such can sue and be sued. All stock 
 exchange transactions and wherever a broker is made use 
 of to buy or sell are evidenced by these notes. 
 
 10. What is meant by ultra vires in regard to the act 
 of a corporation ? Explain, and give an example of such 
 an act. 
 
 Ultra vires means "beyond the strength" or "outside 
 of the power of." Any contract made by a corporation 
 involving ventures outside of and not within the scope 
 or powers given by its charter would be said to be ultra 
 vires. 
 
 The articles of incorporation of every corporation must 
 set forth the purpose or purposes for which it is to be 
 formed, i. e., the nature of the business it proposes to en- 
 gage in. It may not engage in any business foreign to 
 this. If it does it acts ultra vires. 
 
 It has been decided (Nat. Park Bank v. G. A. M. W. 
 and S., 116 N. Y., 281) that a manufacturing corpora- 
 tion has no power to endorse accommodation notes. 
 Should it do so, the act would be ultra vires. 
 
 11. When the capital of a corporation is legally in- 
 
52 
 
 creased, have the old stockholders any pre-emptive right 
 to purchase the new stock? Give reasons. 
 
 They have. 
 
 The capital of a corporation can only be increased by 
 the consent of all or a majorty of the stockholders. By 
 withholding or giving their consent they are able to enforce 
 this right. The right to subscribe for or purchase such 
 stock, particularly in the case of a corporation doing a 
 flourishing business, is sometimes very valuable. 
 
 12. What is a receiver? What is his first duty on tak- 
 ing possession of property or trust funds committed to 
 his care ? Give reasons and illustrations. How should he 
 deposit trust funds in a bank? Illustrate. 
 
 A receiver is a person appointed by a judge of a court 
 of law to take charge of property where the interests of 
 third parties are likely to be injured. After he has been 
 appointed and his bond filed, he should give notice of 
 his appointment by publication and advertise for the 
 payment to him of all monies due the estate and for the 
 presentation to him of all claims. He should then have 
 the property insured and appraised and deposit all funds 
 in a bank in his own name as receiver: 
 
 e. g. John Brown, 
 
 Receiver for Smith & Martin. 
 
 13. What is meant by the rule hearsay evidence is ex- 
 cluded? Illustrate. State the rule as to the admission 
 of books of acount as evidence in court. Explain. 
 
 *'Hearsay"is the evidence not of what the witness knows 
 himself, but of what he has heard from others. Such 
 
53 
 
 evidence derives its value from the credit to be given to the 
 veracity and competency of some other person and is 
 merely a recital or assertion. It is excluded for two rea- 
 sons : ( I ) Because the party making such declarations is 
 not under oath; and (2) because the party against whom 
 it operates has no opportunity of cross-examination. 
 
 A witness stating that he had heard Mr. So-and-so say 
 that he had heard certain statements made would be met 
 with "I object" on the part of counsel and told to confine 
 his testimony to matters of personal knowledge. 
 
 Books of account are not evidence per se, i. e., the 
 mere production of a ledger with charges and credits 
 showing a balance due by defendant to plaintiff would not 
 be evidence in itself, but only as substantiated by collateral 
 evidence, such as the books of original entry, correspon- 
 dence, shipping receipts, etc., supported by the testimony 
 of the writers under oath. 
 
 14. Where in New York must a corporation file the 
 annual report required by law? What must this report 
 contain? What remedy has a director when the annual 
 report, despite his protest, has not been filed? What is 
 the penalty for failure to file an annual report ? 
 
 The annual report must be filed in the office of the 
 Secretary of State in Albany. 
 The report must contain: 
 
 ( 1 ) The amount of its capital stock and the proportion 
 actually issued. 
 
 (2) The amount of its debts or an amount which they 
 do not exceed. 
 
 (3) The amount of its assets or an amount which its 
 assets at least equal. 
 
54 
 
 The duty of making and filing the annual report has 
 been transferred from the directors to the executive offi- 
 cers of the corporation. Any officer who fails to file the 
 annual report after being requested in writing by a stock- 
 holder or creditor becomes liable to a fine of $50 a day 
 as a penalty for every day he delays. 
 
 15. A policy of insurance contains a clause exempting 
 the company from liability if the insured premises remain 
 idle or vacant 20 days without the permission of the com- 
 pany indorsed in writing on the policy. A policy holder 
 applies to the agent who issued the policy for such per- 
 mission, and the agent gives permission orally, saying 
 that the written consent of the company is not necessary. 
 The insured building burns. The owner sues the com- 
 pany. In whose favor should judgment be rendered? 
 Why? 
 
 What is the duty of an executor in regard to policies 
 covering property of the testator? 
 
 The judgment should be rendered in favor of the in- 
 surance company, because the extent of the agent's author- 
 ity was in this respect stated in the policy, and it was the 
 duty of the insured to have read his policy. Had he done 
 so he could have ascertained the precise limits of the 
 agent's authority in this respect and have known that as 
 he was exceeding his stated powers he could not bind his 
 principal, the insurance company. 
 
 All existing policies should be transferred to his own 
 name as executor, and all new ones taken out in the same 
 way. 
 
55 
 
 June 1 89a 
 
 1. What is an account stated? To what extent is it 
 conclusive ? Does the mere rendering of an account make 
 it an account stated? On what grounds may an account 
 stated be opened ? 
 
 An account stated is an account rendered by one party 
 (the creditor) to another (the debtor) and accepted by 
 him as correct. This acceptance may be expressly stated ; 
 but if the debtor fails to object within a reasonable time 
 his assent to the correctness of the account will be im- 
 plied by law. 
 
 It is conclusive upon the debtor and creditor as to the 
 accuracy of the items in the statement without further 
 proof. 
 
 The mere rendering of an account does not make it an 
 account stated, because the debtor may refuse to assent 
 to the correctness of the items, or it may be rendered by 
 the creditor (E. O. E.) (errors and omissions excepted). 
 To make it an account stated the statement must be ac- 
 cepted by the debtor as correct. 
 
 An account stated may be opened where the party ob- 
 jecting can show fraud, mistake or palpable error. 
 
 2. After how many years is a mutual account between 
 merchants barred? When does the statute of limitations 
 begin to run? 
 
 A mutual account between merchants is barred by the 
 statute of limitations after six years. The statute of lim- 
 
56 
 
 itations begins to run from the date of the last item on 
 either the debit or credit side of the account. 
 
 3. A makes a' bond and mortgage and afterward trans- 
 fers the mortgaged property to B. As the mortgage ap- 
 proaches maturity B applies to the holder of the mortgage 
 for an extension of the time payment. Will the granting 
 of such an extension affect the liability of A on his bond, 
 and if so, in what way ? 
 
 The granting of such an extension of time will relieve 
 A from his liability, because any extension of time made 
 without the consent of the guarantor or surety relieves 
 him from liability. 
 
 4. What is a contract? On what is a contract founded? 
 State the difference between an express contract and an 
 implied contract. What certain conditions are requisite 
 to the validity of an express contract? 
 
 A contract is an agreement between two or more parties 
 to do or not to do something for a consideration. 
 
 It is founded upon an offer and acceptance to do or not 
 to do something in the same sense. 
 
 In an express contract the offer and acceptance are made 
 either in writing or orally; in an implied contract they 
 are inferred from the acts of the parties contracting. 
 
 The conditions requisite to the validity of an express 
 contract are: There must be subject matter, i. e., some- 
 thing agreed to be done or not to be done; the parties 
 must give their consent ; they must be legally competent ; 
 there must be consideration. 
 
 5. How is a pledge of stock usually made? Must the 
 pledgee return to the pledger the identical certificate 
 
57 
 
 representing the stock pledged? Has the pledgee the 
 right to sell or repledge the stock ? 
 
 The stock certificates are endorsed in blank and de- 
 livered by the pledgor to the pledgee. A written, signed 
 memorandum to the effect that the stock is held in pledge 
 is generally handed to the pledgor, a copy of which is 
 attached to the stock certificate. 
 
 No ; not necessarily. 
 
 The pledgee has the right to sell or repledge the stock 
 provided he keeps "under his control," i. e., "in his pos- 
 session" other securities of a like kind and amount (Dou- 
 glas & Jones vs. Carpenter, 17 App. Div., N. Y., 329). 
 
 6. State completely the law in respect to the application 
 of payments made on account, where there are several 
 distinct debts or evidences of debt. 
 
 The debtor, on paying, has the right to stipulate against 
 which debt his payment is to be placed. If he fails to do 
 this, the creditor may appropriate the payment according 
 to his own wishes. If neither debtor nor creditor appro- 
 priates, the law will do so in such a way as will do justice 
 to all parties. 
 
 7. Mention several different ways in which a partner- 
 ship may be dissolved. What effect has a dissolution on 
 the property, interest in the joint stock, or joint rights 
 of the partners, or on their powers over old debts due to 
 them or by them? 
 
 A partnership may be dissolved: (a) by agreement 
 of all the partners; (b) by act of one of the partners, i.e., 
 by assigning all his interest, or in some affirmative way 
 
58 
 
 renouncing the contract; (r) by a decree of account on | 
 
 any of the following grounds: i 
 
 ( 1 ) Improper or fraudulent conduct on the part of one ; 
 or more of the partners. ! 
 
 (2) Violation of the articles of co-partnership. 
 
 (3) The exclusion of a partner from his proper share 
 
 in the management. ^ 
 
 (4) Continued quarreling amongst the partners. ^ 
 
 (5) Intemperance, dissipation or gross immorality. j 
 
 (6) Inability of a partner from any cause to perform j 
 his part of the contract. i 
 
 '» 
 
 (d) By operation of law, e. g. 
 
 (i) Death of a partner. , 
 
 (2) Insanity or imbecility of a partner. i 
 
 (3) Sale of a partner's interest on execution against ; 
 him. 
 
 (4) Bankruptcy of a partner. 1 
 
 (5) Breaking out of war between the countries where 
 the partners reside. 
 
 (6) Any event happening which severs unity of in- i 
 terest. 
 
 A dissolution of partnership has no effect upon the -i 
 firm property. The joint agency of the partners ceases; 
 they may simply bind each other as all Joint debtors or 
 joint creditors may. 
 
 8. By what means and to what extent may a retiring 
 partner terminate his liability for the debts of the partner- 
 ship so that such liability shall attach to no new obliga- 
 tions ? How may he escape from his liabilities for exist- 
 ing obligations ? 
 
59 
 
 By giving notice in writing and by advertising the fact 
 of his retirement to the creditors and the public generally 
 he may limit his liability so that he may not be held re- 
 sponsible for any debts incurred by the firm subsequent 
 to his retirement. 
 
 By agreement with any incoming partner or by agree- 
 ment with the remaining partner or partners that they 
 shall pay all firm debts for a consideration he may appar- 
 ently escape liability for existing obligations, but in order 
 to be binding as against creditors they (the creditors) 
 would have to give their consent to the arrangement. 
 So long as the liabilities were paid the creditors would 
 make no objection; but should the new firm be unable to 
 pay in full for any reason, then the retired partner could 
 still be held, unless, as before said, the creditors had as- 
 sented to the arrangement. 
 
 9. Distinguish between general and special agents. To 
 what extent is the principal bound by the act of his agent? 
 Must third parties, for their own protection, ascertain the 
 agent's authority? Is the authority of a general agent 
 unlimited? To what extent is the authority of an agent 
 affected by usage or custom ? 
 
 A general agent is one appointed to perform for his 
 principal acts of a class ; a special agent, specific acts. 
 
 The principal is bound by any act of his agent within 
 the scope of his authority. If the agent exceeds his au- 
 thority, but the act be such as is customary for a general 
 agent to perform in that particular line of business, and 
 third parties are acting in good faith, having no informa- 
 tion as to the extent of the agent's authority, the principal 
 will still be bound; for it will be generally supposed, in 
 
6o 
 
 the absence of specific instructions to the contrary, that 
 the general agent possesses authority to perform all the 
 acts customary for a general agent to perform in that 
 particular line of business. 
 
 Third parties should, in the case of special agents, al- 
 ways ascertain the precise extent of the agent's power; 
 because he cannot bind his principal by any act outside of 
 his specified authority. In the case of general agents it 
 would alway be wise for third parties to ascertain the 
 agent's authority. 
 
 The authority of a general agent is limited (a) by the 
 authority conferred on him by his principal, and (b) by 
 usage and custom. 
 
 It is always supposed that a general agent possesses 
 all the authority to perform those acts which it is the cus- 
 tom and usage for a general agent in any particular line 
 of business to possess. 
 
 10. In taking the accounts of a firm, state the principles 
 which determine whether a given expense or loss is to be 
 placed to the debit of the firm or to the debit of one or 
 more of the partners separately. 
 
 If the expense or loss be incurred through breach of 
 duty of a party, by fraud, negligence, ignorance, or ex- 
 travagance, whether by design or not, the expense or loss 
 may be charged to that party ; the partnership cannot le- 
 gally be asked to contribute to it. For an honest mistake 
 in judgment, however, unless it amounted to gross negli- 
 gence or ignorance, a partner could not ordinarily be held 
 personally liable by the partnership. 
 
6i 
 
 11. State the powers and interests of surviving part- 
 ners in a business. 
 
 A partnership is dissolved upon the death of a partner, 
 and the possession of firm property and its management 
 for the purpose of winding up affairs is vested exclusively 
 in the surviving partners, who are said to be tenants in 
 common with the representatives of the deceased partner 
 as to the firm effects, but not as to possession. The sur- 
 viving partners are'trustees for the representatives of the 
 deceased, for firm creditors, and for themselves. 
 
 It is their duty to settle up matters without unnecessary 
 delay in the best manner for all interested. They are held 
 strictly to account for their transactions by courts of 
 equity. 
 
 12. State the rule of interest applicable where partial 
 payments are made. 
 
 In the absence of any express agreement the rule is, 
 first, apply the payments to the discharge of accrued in- 
 terest ; the balance, if any, to the account of the principal. 
 The principal is never mcreased by the addition to it of 
 unpaid balances of interest. 
 
 13. What property may a corporation receive in pay- 
 ment for its shares of stock ? 
 
 A corporation may receive in payment for its shares 
 of stock, money, labor, or property actually received for 
 its use and lawful purposes authorized by its certificate 
 of incorporation or required for its use. 
 
 In the absence of fraud in the transaction the judgment 
 
62 
 
 of the directors as to the value of the property pur- 
 chased is conclusive. 
 
 14. Are stock dividends which represent the accumu- 
 lated earnings or profits of a corporation, income or cap- 
 ital in this state as between life-tenant and remainder- 
 man ? Explain. 
 
 If earned or accrued before the life estate arose, without 
 reference to the time when declared or made payable, 
 they are held to be principif and to belong to the body of 
 the estate. But if it is found that the fund out of which 
 the dividend was paid accrued or was earned after the 
 life estate arose, then it is held that the dividend is in- 
 come and belongs to the tenant for life. 
 
 15. As between life-tenant and remainder-man, is a div- 
 idend declared but not paid during the lifetime of a tes- 
 tator to be treated as capital or income? Give reasons. 
 
 Such a dividend belongs to the body of the estate as 
 capital. It was a chose in action at the time of testator's 
 death just as much as an account or note receivable. 
 
 Again, when a dividend is declared, it becomes separate 
 from the other corporation assets, and is set aside for the 
 use of stockholders of record. 
 
63 
 
 3anuari? 1900* 
 
 I. Give illustrations of the following kinds of indorse- 
 ment of a promissory note : In blank, special, restrictive, 
 protest waived, qualified. Explain the legal effect of 
 each. 
 
 When the payee endorses by simply writing his name 
 across the back of a note it is called a blank indorsement. 
 It is transferrable by mere delivery the same as if made 
 payable to bearer. 
 
 Blank Indorsement. "Fred'k S. Tipson/^ 
 
 Supposing the note is payable to me a special indorse- 
 ment would be "Pay to John Brown or order Fred'k S. 
 Tipson." 
 
 A restrictive indorsement might take one of three 
 forms : 
 
 ( 1 ) "Pay to John Brown only — Fred'k S. Tipson." 
 
 (2) "Pay to John Brown for collection — Fred'k S. 
 Tipson." 
 
 (3) "Pay to John Brown for the account of William 
 Smith. — Fred'k S. Tipson.'' 
 
 It will be noticed that in each case the indorsement 
 restricts the full and free negotiation of the paper there- 
 after. 
 
 Where ''protest waived'' is inserted all indorsers are 
 bound by the agreement to surrender their right to prompt 
 notice of non-payment. 
 
 A qualified indorsement usually consists in adding 
 "without recourse" to the signature of the indorser. Such 
 
64 
 
 indorsement does not aiTect the further negotiation of the 
 paper, but it does relieve the indorser from all liability to 
 pay the paper if prior parties do not. 
 
 2. Will the devise or assignment of all the rights, etc., 
 of a partner make the legatee or assignee a partner ? Ex- 
 plain. 
 
 It will not. Partnership results from an agreement 
 between two or more parties, and no legatee or assignee 
 can become a partner without the consent and agreement 
 of the remaining partner or partners. 
 
 3. Can a partner buy a debt against his firm? Explain. 
 
 Not usually, as it would result in the establishment of 
 inconsistent relationships. Again, supposing he had to 
 sue for the debt, as partners are only recognized as in- 
 dividuals in law, he would have to sue himself as a mem- 
 ber of the firm ! 
 
 4. In what way does a deed become operative ? 
 
 A deed becomes operative by execution and delivery. 
 
 5. State when the statute of limitations begins to run 
 (a) on a note payable on demand, (&) on a note payable 
 on a day certain or at a particular period after date, {c) 
 on goods sold and delivered without any agreement as 
 to credit, {d) on mutual accounts. 
 
 (a) The date of the note. 
 
 {h) From the due date. 
 
 {c) From the date of the bill. 
 
6s 
 
 (d) From the date of the latest entry on either side of 
 either account. 
 
 6. By whom must a certificate of incorporation of a 
 stock company be executed? State the minimum num- 
 ber of incorporators required. What is the limitation as 
 to number of directors? May corporations, copartner- 
 ships, minors and persons acting in a representative ca- 
 pacity be incorporators? 
 
 It must be executed by the incorporators. 
 
 The minimum number is three. There is no limitation 
 as to the number of directors, but the minimum is three. 
 
 They may not ; incorporators must be "natural persons 
 of full age." 
 
 7. Has a special partner prior right over other partners 
 in distribution of capital surplus on the winding up of the 
 firm? Are his rights subordinate to those of all other 
 creditors ? Why ? 
 
 He has no inherent right in such distribution, but he 
 may make such an agreement with the general partners 
 as to the distribution of capital surplus in the event of a 
 wind-up. 
 
 His rights are subordinate to those of all other creditors 
 because he is liable to them for the full amount of capital 
 contributed by him. He is not entitled to anything until 
 the creditors are paid in full. 
 
 8. To whom does the right of stoppage in transit be- 
 long? Under what circumstances may this right be ex- 
 ercised? When does the right of stoppage cease? 
 
66 
 
 The right of stoppage belongs to the vendor. Insol- 
 vency of the buyer and all or a portion of the purchase 
 price unpaid would be sufficient grounds for exercising 
 the right. 
 
 On payment of the purchase price or on delivery. 
 
 9. Within what period must an action be brought in 
 the case of (a) instruments under seal, (b) written con- 
 tracts not under seal, (c) unwritten contracts, (d) per- 
 sonal injury resulting from negligence? 
 
 (a) Twenty years. 
 
 (b) Six years. 
 
 (c) Six years. 
 
 (d) Two years. 
 
 10. How is an agent's authority derived from his prin- 
 cipal? Where the acts to be performed by the agent 
 could not be performed by the principal except by an in- 
 strument under seal, what is required? 
 
 An agent's authority is desired from his principal by 
 appointment by letter, orally, or by power of attorney un- 
 der seal. 
 
 An agent must be appointed by power of attorney under 
 seal where his acts could only be performed under seal 
 by his principal. 
 
 11. On the death of a partner, what right have his rep- 
 resentatives to the firm property? 
 
 His representatives have no right to the firm property, 
 nor can they interfere in the management of firm affairs. 
 
67 
 
 They have not even the right to examine the partnership 
 books to ascertain the interest of the deceased unless by 
 special order of court. It is the duty of the surviving 
 partners to wind up partnership matters and to account to 
 deceased's representatives, paying to them the amount 
 realized for his interest. If dissatisfied, deceased's repre- 
 sentatives may demand a formal accounting under a court 
 order. 
 
 12. What constitutes an insurable interest in property? 
 
 Such an interest as would suflfer by damage happening 
 to or destruction of the property. 
 
 13. On the dissolution of a corporation in whom does 
 the title to the corporate property vest? To whom is 
 such title-holder responsible? 
 
 The title vests in the trustees, i. e., the directors, unless 
 other persons shall be appointed by the legislature or by 
 some court of competent jurisdiction. 
 
 They are responsible to the creditors and stockholders. 
 
 14. When a partial payment is made, is it applied in 
 the first instance to the discharge of the accrued interest 
 or of the principal? If the payment is less than the ac- 
 crued interest, how is subsequent interest computed? 
 
 It is applied in the first instance to the discharge of the 
 accrued interest. On the balance of principal on which 
 accrued interest was not paid. The principal is never 
 increased by adding to it any unpaid balance of interest 
 as a basis of further interest. 
 
68 
 
 15. What is the meaning of the term escrow when ap- 
 plied to deeds ? When does a deed in escrow take eflf ect ? 
 
 Where a deed is given by the maker (the obligor) to 
 a third party to be delivered to the obligee upon the ful- 
 fillment of certain conditions or the happening of a certain 
 event, the deed while so held is said to be in escrow, that 
 is, it is a mere scroll or writing and not a contract obli- 
 gation. 
 
 A deed in escrow takes effect after delivery to the 
 obligee from the date of its delivery by the maker (the 
 obligor) to the third party. 
 
69 
 
 3une 1900* 
 
 I. State the general rule governing the interpretation 
 of contracts. Mention any exception to this rule. 
 
 The mutual assent of the parties to the terms of a con- 
 tract is what contracts derive their force from. The in- 
 terpretation of the contract, then, is governed by the in- 
 tention of the parties at the time they entered into the 
 agreement. The parties must have assented to the same 
 thing in the same sense or there is no contract. 
 
 Where either party's acts is inconsistent with his alleged 
 expressed intention in the contract, his intentions at 
 the time will be interpreted by his acts instead of his 
 words. 
 
 2. Describe the acts necessary to fix the responsibility 
 of the drawer and indorsers of negotiable paper and men- 
 tion the omissions which will operate to discharge the 
 drawer or indorsers. 
 
 To fix their responsibility the instrument must be in 
 writing, must be signed, payable in money on or before 
 a fixed time, and delivered. 
 
 They are discharged from liability if presentation for 
 payment be not made when due. Forgery invalidates the 
 instrument entirely. Endorsers are discharged if they do 
 not receive prompt notice of non-payment, as also, if an 
 extension of time is granted to the maker. 
 
70 
 
 3- Does a judgment when docketed have preference 
 over an existing unrecorded mortgage? State the prin- 
 ciple of law involved. 
 
 It does. 
 
 Between mortgagor and mortgagee a mortgage is 
 perfectly valid though unrecorded. But for the pro- 
 tection of third parties the law declares that mortgages 
 must be recorded. The judgment would have the prefer- 
 ence here, because the requirements of the law as to re- 
 cording have not been complied with. 
 
 4. State the essential feature of a partnership. Must 
 each partner have an interest in both profits and losses? 
 
 The essential feature of a partnership is the agreement 
 to share the profits in a certain proportion. 
 
 The partners may make any agreement they like 
 amongst themselves as to the sharing of profits and losses. 
 They must share profits ; but it may be that one or more 
 partners may be held exempt from sharing in the losses. 
 But no such agreement will prevent such a partner from 
 being liable for the debts of the partnership, unless the 
 creditor knew of this agreement between the partners 
 when the debt was contracted. 
 
 5. What law governs as to questions arising under a 
 will disposing of personalty and realty in various dif- 
 ferent States? 
 
 As to personalty, the law of the State in which the per- 
 son resided will govern ; as to realty, the law of the State 
 in which the property is situated. 
 
71 
 
 6. Where a valid debt exists for a certain sum of money 
 does a receipt for a less sum specifying that it is ''in full 
 of the debt" or ''of all demands'' debar the creditor from 
 collecting the amount unpaid? Explain. 
 
 It does not. The agreement to accept less than the full 
 amount of a valid debt is a new contract and would be 
 voidable for want of consideration. The debtor should 
 give something of value as a consideration for the release 
 of the balance of the debt, or, preferably, get a release un- 
 der seal, which is said to "import'' a consideration. 
 
 7. A and B are partners. Can B, on the death of A, 
 sell the firm property and give good title thereto? Ex- 
 plain. 
 
 He can. 
 
 B, on the death of A, becomes tenant in common 
 of the firm property with A's representatives, and 
 trustee for himself, the firm creditors and A's representa- 
 tives. It is his business to wind up the firm affairs, realize 
 on the assets, and liquidate the liabilities. He is entitled, 
 therefore, to sell the firm property, but must account to 
 A's representatives for the proceeds and obtain the sanc- 
 tion of a court of equity. 
 
 8. When does the title pass to the purchaser (a) under 
 a contract of sale; (b) when goods are manufactured on 
 order? Mention two of the grounds on which a contract 
 of sale may be voided. 
 
 (a) On delivery, actual or constructive. J 
 
 (b) When the goods are manufactured, set aside from 
 general stock, and invoiced to the purchaser. 
 
^2 
 
 A contract of sale may be voided by fraud or breach 
 of warranty. 
 
 9. May an agent be orally empowered to make a writ- 
 ten contract for the sale of land or to convey the land 
 after sale? Explain. 
 
 He may not. Such contracts would have to be in writ- 
 ing and under seal ; and an agent cannot legally execute 
 a contract under seal unless he himself is so appointed. 
 
 10. Define dower. When does the right of dower ac- 
 crue? Is this right affected by any assignment made by 
 the husband? 
 
 An estate in dower is the right which a wife has to 
 the use for life of one-third of all the real estate of which 
 her husband was possessed of an estate of inheritance at 
 any time during marriage. 
 
 The right accrues on the death of the husband. 
 
 It is not. 
 
 11. What is the nature of the interest of each partner 
 in partnership property? Has a partner an exclusive 
 right to any part of such property? In what way can 
 a partners interest be ascertained and made available? 
 
 They are co-trustees and tenants in common. 
 
 He has not. 
 
 By an accounting; realization and liquidation of the 
 firm's assets and liabilities ; and pro-rata division of sur- 
 plus amongst the partners. 
 
 12. May a corporation buy its own stock? Explain 
 fully. 
 
73 
 
 J 
 
 Not ordinarily, for the effect woul be to virtually re- 
 duce the amount of the capital. But the stock may be 
 received in payment of a debt due the corporation by a 
 stockholder; it may be received as a gift; and it may be 
 purchased out of its surplus. But such stock could not 
 be voted on. 
 
 13. Explain the distinction between surcharging an ac- 
 count and falsifying an acount. 
 
 To "surcharge'' is to prove the omission of an item 
 from an account which is before the court as complete 
 (an account stated) which should be inserted to the 
 credit of the party surcharging. Leave to surcharge and 
 falsify is granted in preference to opening an account (in 
 case of an account stated by the parties), or reported by -/ 
 an auditor, where the party obtaining the liberty would 
 be excluded by the account were it not granted. 
 
 To "falsify'' is to prove that an item in an account be- 
 fore the court as complete, which is inserted to the debit 
 of the party falsifying, should have been omitted. When 
 a bill to open an account has been filed, the plaintiff 
 is sometimes allowed to surcharge (i. e., add an addi- 
 tional item of charge) and falsify (i. e., eliminate an item 
 charged) such account. If anything has been wrongly 
 charged he is at liberty to show it, and that is a falsifica- 
 tion. 
 
 14. Is it necessary that a guaranty for the debt or de- 
 fault of another be in writing and express the considera- 
 tion in order to hold the guarantor ? Is notice of non-pay- 
 ment necessary to charge the guarantor of the payment 
 of a promissory note? 
 
74 
 
 The guarantee must be in writing. If made at the same 
 time as the principal contract the original consideration 
 will also support the guarantee ; but if made subsequently 
 to it, the consideration must be expressed. 
 
 It is necessary to notify the guarantee of non-payment ; 
 but failure to do so promptly will not relieve the guaran- 
 tor from payment. 
 
 15. When does a proxy, executed by a member of a 
 corporation without specifying the time it is to continue 
 in force, become invalid? Must a proxy holder be neces- 
 sarily a stock-holder? Have inspectors of election power 
 to determine the genuineness of proxies ? 
 
 After eleven months. 
 
 No ; but no officer, clerk, teller, or bookkeeper of a cor- 
 y poration formed under or subject to the banking law may 
 act as proxy for any stockholder at any meeting of any 
 such corporation. 
 
 No. If they are apparently the acts of the stockholders, 
 and regular upon their face, that ends the matter so far 
 as the inspectors are concerned. 
 
75 
 
 January 190U 
 
 1. What is essential to the proper execution of a deed 
 conveying land? What attestation is required? When 
 does the record of a deed take effect? How does a war- 
 ranty deed differ from a quit claim deed ? 
 
 It must be signed, sealed, acknowledged, delivered and 
 recorded. 
 
 The attestation of one witness. 
 
 The moment it is handed to the recording officer. 
 
 A quit claim deed simply releases all right, title and in- 
 terest of the grantor, while a warranty deed in addition 
 carries a guaranty of title. The liability upon the lat- 
 ter covenant only arises upon actual and rightful dispos- 
 session of the grantee by one having a better title. 
 
 2. Where a delivery only is necessary to complete a 
 contract of sale, can the buyer, by refusing to receive the 
 property, throw the risk of injury or loss on the seller? 
 What remedy or remedies has the seller? Explain. 
 
 He cannot. 
 
 He may retain possession of the goods, and after giving 
 notice to the buyer he may sell them in the usual way 
 and recover from the buyer any loss which may happen 
 upon the resale. 
 
 3. What books are stock corporations required by 
 law to keep? What must the stock book show? Does 
 a corporation incur a penalty by neglecting or refusing 
 
76 
 
 to keep a stock book? If so, state the amount of the 
 penalty. Who besides stockholders have the right to 
 inspect and make extracts from the stock book? 
 
 Proper books of account of all its business transactions 
 and a stock book. 
 
 It must contain the names of all the stockholders, al- 
 phabetically arranged, the number of shares held by each, 
 place of residence, the date when they became owners of 
 the stock, and the amount paid thereon. 
 
 It does. 
 
 Fifty dollars for every day it neglects to keep one. 
 
 Judgment creditors. 
 
 4. On the dissolution of a partnership, what is the mu- 
 tual relation of the partners in respect to the partnership 
 property and effects? To what extent does each partner 
 continue to be the agent of all? May one partner main- 
 tain an action at law against another for what may be 
 properly due him on partnership account? Explain. 
 
 They are joint tenants and trustees for themselves and 
 firm creditors. 
 
 Each partner continues to be the agent of all in settling 
 up firm affairs, collecting debts and discharging liabilities. 
 
 Only until an accounting, and the partnership balances 
 adjusted, either by voluntary agreement or the judg- 
 ment of a court. 
 
 5. If, on the dissolution of a partnership by the death of 
 a partner, it happens that there is not sufficient property 
 and effects to pay its obligations, what liability, if any, 
 will attach to the estate of the deceased partner? State 
 the rights of the deceased partner's individual creditors 
 and next of kin in such case. 
 
77 
 
 In such a case the deceased partner's personal estate 
 may be held to pay firm debts ; but personal creditors have 
 preference over partnership creditors. 
 
 The individual creditors are paid in full first; then 
 partnership creditors ; the residue going to next of kin. 
 
 6. Is the corporate seal always necessary in order to 
 bind a corporation? Can a foreign corporation avail 
 itself of the statute of limitations of the state of New 
 York in an action brought in the New York courts? 
 Must a stockholder own stock for any particular length 
 of time to enable him to issue a valid proxy to vote at 
 any meeting of stockholders? Without any specified 
 time being stated as to its continuance, how long will a 
 proxy continue in force? 
 
 No. 
 
 It cannot. 
 
 Yes ; at least ten days before such meeting. 
 
 Eleven months from the date of its execution. 
 
 7. What is (a) a release, (&) a mutual release? In 
 what respect does a release differ from a receipt? Can 
 a mutual release, given on the adjustment of old accounts, 
 be disturbed? Explain. 
 
 (a) A release is a contract containing a relinquishment 
 of some right or claim by some person in favor of an- 
 other. Verbal contracts may be released by parol. Writ- 
 ten contracts require a written release, and contracts un- 
 der seal require the release to be under seal. 
 
 (6) A mutual release is a contract wherein each party 
 agrees to release the other from all rights, claims, or de- 
 mands existing between them. 
 
t 
 
 78 
 
 The difference between a release and a receipt is this : 
 The former is a contract and expresses consideration, 
 while the latter is onfy a memorandum and is not absolute 
 proof of payment, being open to rebuttal by parol evidence. 
 
 A mutual release given on the adjustment of old ac- 
 counts could be disturbed if fraud could be proved or 
 gross mistake shown. 
 
 8. What is usurious interest? Who may take advan- 
 tage of the usury to escape liability on the debt? Can a 
 corporation interpose the defense of usury? Can a con- 
 tract, legal under the usury laws of the state where made, 
 be enforced in a state where it would have been usurious ? 
 
 Usurious interest is any rate in excess of that prescribed 
 by law. The rate varies in different states. In New York 
 it is six per cent, per annum. 
 
 The borrower or his representatives. 
 
 It cannot. 
 
 It can. 
 
 9. In a general partnership what rule will govern the 
 apportionment of profits and losses when not mentioned 
 in the agreement? If the partnership agreement merely 
 provides for diversion of profits, how will losses, if any, 
 be borne? In a case where one or two partners was to 
 receive three-fourths of the profits, and there was no 
 profit, how should the loss be divided? Does a partner- 
 ship exist where the agreement does not expressly or by 
 implication provide for community in the losses? 
 
 They will be divided equally. 
 They will be borne equally. 
 It should be divided equally. 
 
79 
 
 No. Partnerships are formed to make profits and to 
 share them in certain proportions. 
 
 Community in the losses would be implied from this 
 agreement. 
 
 lo. Within what time must a domestic stock corpora- 
 tion, or a foreign stock corporation doing business in 
 this state, file its annual report? Is any exception made 
 in the case of a stock corporation doing business without 
 the United States ? What must such annual report show ? 
 By whom must such report be signed, by whom verified 
 by oath and in what offices must the same be filed ? What 
 penalty attaches for failure to file such report? Is it 
 necessary to file such a report after the corporation has 
 passed into the hands of a receiver ? 
 
 During the month of January as of January ist. 
 Yes; it must be filed before May ist as of January ist. 
 The report must show : 
 
 ( 1 ) The amount of its capital stock and the proportion 
 actually issued. 
 
 (2) The amount of its debts or an amount which they 
 do not exceed. 
 
 (3) The amount of its assets or an amount which its 
 assets at least equal. 
 
 Such report shall be made by the president, or a vice- 
 president, or the treasurer, or a secretary of the corpora- 
 tion. It need not be verified by oath. It need only be 
 filed in the office of the Secretary of State. Fifty dollars 
 a day is the penalty payable by any officer who fails to 
 make and file the report within ten days after being re- 
 quested to do so by a creditor or stockholder of the cor- 
 poration. 
 
 It is not. 
 
8o 
 
 11. State briefly the requirements of the statute of 
 frauds in respect to agreements which by their terms are 
 not to be performed within one year from the making 
 thereof and also in respect to promises to answer for the 
 debt, default or miscarriage of another person. 
 
 Such agreements must be in writing, and to be valid 
 as contracts the consideration must be expressed. 
 
 12. What should a bill of lading contain? By whom 
 should it be signed? As between the ship-owner and the 
 shipper, what is the character of the bill of lading in re- 
 spect to the goods received? May it be contradicted? 
 Does the same character exist as between a ship-owner 
 and an assignee of the bill of lading for value ? Explain. 
 What is understood by "lay days," "demurrage"? 
 
 It should contain the name of the consignor, the con- 
 signee, the master, the place of departure, the destination, 
 the rate of freight, primage and other charges, things 
 shipped, with marks and number of same. 
 
 It should be signed by the master. 
 
 It is a simple receipt. 
 
 It may. 
 
 No; it becomes a contract and cannot be contradicted. 
 
 "Lay-days" are the number of days after the arrival 
 of the ship at her port in which she may receive or deliver 
 cargo. 
 
 By "demurrage" is meant compensation for any delay 
 beyond the stipulated lay-days. 
 
 13. What is the legal relation between a broker and his 
 principal, where the broker is employed to purchase stock 
 and hold it for his principal on a deposit being made 
 with him of a part of the price? Explain. 
 
8i 
 
 The legal relationship is that of pledgor and pledgee. 
 The broker takes his principal's "margin'' and loans the 
 balance requisite to purchase the stock, which he holds as 
 security for his advance. In other words, the stock is 
 ^'pledged" with him. 
 
 14. Compare co-ownership and partnership, and state 
 four important grounds on which they differ. 
 
 CO-OWNERSHIP. 
 
 Not necessarily the result of agreement. 
 
 Does not necessitate a community of profits and losses. 
 
 Either owner can transfer his interest so as to put an- 
 other person in the same position as regards others as he 
 himself occupies. 
 
 Co-owners are not co-agents. 
 
 PARTNERSHIP. 
 
 Is the result, necessarily ^ of agreement. 
 Necessitates a community of profits and losses. 
 The assignment of a partner's interests effect an imme- 
 diate dissolution of the partnership. 
 Partners are co-agents. 
 
 15. Should the proceeds arising from a mortgage, lease 
 or sale of real property under a surrogate's order for the 
 payment of debts and funeral expenses be included by 
 an executor in his account of proceedings? Explain. 
 
 No; but they must be paid into the surrogate's court 
 by the executor, and for that purpose he should pay them 
 to the county treasurer to the credit of the special pro- 
 ceeding, to be distributed subject to the direction of the 
 surrogate's court. 
 
 -^ 
 
82 
 
 3une 190U 
 
 I. What does the term certificate of incorporation in- 
 clude? By whom must a certificate of incorporation be 
 executed? State the requirements for filing and record- 
 ing such a certificate. May a corporation exercise any 
 corporate privileges before paying the organization tax 
 and fees for filing? 
 
 The certificate of incorporation includes: 
 (i) The name of the proposed corporation. 
 
 (2) The purpose or purposes for which it is to be 
 formed. 
 
 (3) The amount of the capital stock, and if any por- 
 tion thereof be preferred stock, the preferences thereof. 
 
 (4) The number of shares of which the capital stock 
 shall consist (each of which shall not be less than five nor 
 more than one hundred dollars), and the amount of capi- 
 tal (not less than five hundred dollars), with which the 
 said corporation will begin business. 
 
 (5) The city, village or town in which its principal 
 buisness is to be located. 
 
 (6) Its duration. 
 
 (7) The number of its directors (not less than three). 
 
 (8) The names and post-office addresses of the direc- 
 tors for the first year. 
 
 (9) The names and post-office addresses of the sub- 
 scribers of the certificate, and a statement of the number 
 of shares of stock which each agrees to take in the cor- 
 poration. 
 
83 
 
 It must be executed by the incorporators. Prior to 
 filing and recording the organization tax of one-twentieth 
 of one per cent, upon the authorized capital stock of the 
 corporation must be paid to the State Treasurer ; ten dol- 
 lars for filing and fifteen cents per folio for recording 
 to the Secretary of State. 
 
 It may not. 
 
 2. State briefly what matters should be specified by 
 articles of copartnership. In the absence of any agree- 
 ment, how are losses and gains to be shared? How are 
 firm assets to be applied when there are both individual 
 creditors and creditors of the firm? 
 
 The names of the partners should be stated and the 
 date of the commencement and the duration of the part- 
 nership inserted. The amount of capital to be contrib- 
 uted by each should be specified, the maximum amount 
 to be withdrawn by each, and the proportion in which 
 profits and losses are to be divided. 
 
 Equally. 
 
 Firm creditors come first; then individual creditors. 
 
 3. Does the admission of a new member terminate the 
 former partnership and create a new one in law? Is it 
 the same in practice? Is a new partner necessarily liable 
 to creditors of the old firm by any contract which he may 
 make with the members of the old firm to assume the 
 old debts and be liable for them the same as the other 
 members. Explain in each case. 
 
 It does, because a new contract is necessary. 
 It is not. 
 
 He is if the creditors are cognizant of and assent to the 
 agreement and the retiring partner is relieved from lia- 
 
84 
 
 bility; but if they are not party to the agreement, the 
 retiring partner can still be held if the new partner fails 
 to pay. 
 
 4. What is negotiable paper? What are the essentials 
 which give to such contracts their peculiar privileges? 
 Give the names of the most common kinds of negotiable 
 paper. What words are required to give negotiability ? 
 
 By negotiable paper is meant written evidence of debt 
 which may be transferred by indorsement or delivery, 
 giving the holder the full right to sue and collect it. 
 
 (i) The fact that in the hands of an honest purchaser 
 the paper can be collected, whether it was binding in the 
 hands of the original holder or not. 
 
 (2) The fact that it is payable absolutely in money at 
 a designated time. 
 
 There are three general kinds of negotiable paper: 
 Promissory notes, bills of exchange or drafts, and checks. 
 
 "Pay to A B or order," or "Pay to the order of A B," 
 or "Pay to A B or bearer," or "Pay to bearer." 
 
 5. State briefly the duty of the executor of a deceased 
 partner, as to the continuance of the business in which 
 the testator was engaged. 
 
 If the testator's will so directs and the surviving part- 
 ners assent, the executor may become a partner and con- 
 tinue the business ; if not, he has nothing to do with the 
 continuance of the business. His duty is to ascertain the 
 amount of the testator's interest as soon as possible from 
 surviving partners, and collect the amount due him for 
 same. 
 
85 
 
 6. In respect to ownership of property what is under- 
 stood by (a) joint tenancy, (b) tenancy in common, 
 (c) tenancy in severalty? What peculiarity attaches to 
 a joint tenancy that does not exist in a tenancy in com- 
 mon ? On the death of a tenant in common to whom does 
 his share pass ? 
 
 Joint tenancy is the estate which subsists between sev- 
 eral persons in any subject of property by purchase or 
 grant ; never by inheritance. 
 
 Tenancy in common may exist from grant, purchase 
 or inheritance. 
 
 When real property is conveyed or transferred by deed 
 or will to one person, he is said to be a tenant in sever- 
 alty. 
 
 The peculiarity attaching to a joint tenancy that does 
 not exist in a tenancy in common is "the right of sur- 
 vivorship" : that is, upon the death of one of the tenants 
 his share and interest pass to the surviving tenant or ten- 
 ants. On the death of a tenant in common his share 
 passes.to his heirs. It is also to be noted that dower at- 
 tached to the interest of a tenant in common, but not to 
 that of a joint tenancy. 
 
 7. Where a mortgage of goods and chattels is given 
 unaccompanied by an actual change of possession of the 
 property mortgaged, what is necessary to give it validity 
 as against creditors of the mortgagor or as against sub- 
 sequent purchasers and mortgages in good faith ? When 
 does such a mortgage cease to be valid as against cred- 
 itors of the person making the same? What steps are 
 necessary to give it new life and validity? 
 
 It should be recorded. 
 
 After one year. 
 
 It must be re-recorded. 
 
86 
 
 8 What constitutes agency? How is the authority of 
 an agent acquired? Distinguish between general agents 
 and special agents. Is the authority of a general agent 
 unlimited ? To what extent is the principal bound by the 
 acts of his agent ? Mention three classes of agents. 
 
 Agency is the employment of one person (the agent) 
 by another (the principal) to do some act or acts for his 
 benefit or account. 
 
 The authority of an agent is acquired from his principal 
 by appointment by letter, orally, or in writing under seal. 
 
 A general agent is one appointed to do acts of a class, 
 while a special agent is appointed to perform specific acts. 
 
 No; it is limited by the terms of his contract with his 
 principal and the usages and customs of a general agent 
 in that particular line of business. 
 
 He is bound by all acts authorized by contract and by 
 all that are customarily performed by a general agent in 
 his particular line of business. 
 
 Factors, brokers, attorneys in fact and at law. 
 
 9. What remedies has the pledgee of shares of stock 
 as collateral security for a debt which is overdue and un- 
 paid? 
 
 He may sell the collateral and recoup himself. If pro- 
 ceeds of sale are insufficient, he can maintain an action 
 at law for the balance. 
 
 10. Define real property, personal property. What is 
 understood by (a) things in possession, {h) choses in 
 action? To what class do accounts, promissory notes 
 and all forms of indebtedness belong? 
 
87 
 
 Real property may be defined as that kind of property 
 the ownership in which at death will by law become vested 
 in one's heirs and not in one's personal representative, 
 i. e., administrator or executor. Personal property is all 
 other. 
 
 By (a) things in possession is meant any property of 
 which one has actual possession. By (&) choses in action 
 is meant any claims upon which an action at law may be 
 maintained. 
 
 Accounts, promissory notes, and all forms of indebted- 
 ness belong to choses in action. 
 
 11. What is understood by the expression intermediate 
 account? When may an executor or administrator vol- 
 untarily file in the surrogate's court an intermediate ac- 
 count? What is a compulsory intermediate account? 
 When is an account said to be judicially settled? 
 
 It is an account rendered by an executor intended to 
 disclose the condition of an estate at any time prior to 
 the final accounting. It is not made the subject of ju- 
 dicial settlement. 
 
 At any time. 
 
 A compulsory intermediate account is one made by 
 order of the surrogate upon application of certain parties 
 on the happening of certain events. 
 
 An account is said to be judicially settled when a de- 
 cre has issued from the surrogate's court signifying 
 that the account as rendered is made conclusive upon the 
 parties in interest. 
 
 12. Where a fund is directed to be invested and the in- 
 terest, dividends and income applied to the use of the 
 beneficiary for life, does a profit realized on the sale of 
 
 < 
 
stock in which a portion of such fund is invested belong 
 to the Hfe tenant as income or to the body of the estate? 
 State the general rules of law which govern. 
 
 To the Principal (4 Tucker, 180). 
 
 "The outlook of all the cases seems to be that disre- 
 garding forms the court will treat anything in the nature 
 of a premium, that is to say an appreciation in the value of 
 the capital, as capital, and anything that is interest, 
 income or proceeds, no matter how extraordinary or un- 
 usual it may be, as belonging to the life tenant'' (5 Redf. 
 121). 
 
 13. What is understood by the term good will of a 
 business? Is the good will of a business a recognized 
 asset? Explain. How is good will generally valued? 
 
 By good will is meant the capitalized value of the net 
 earnings of a business for a term of years based upon the 
 assumption that the old customers will resort to the old 
 place. 
 
 It is ; because in addition to the value of the actual capi- 
 tal (i. e., the excess of assets over liabilities in a business) 
 there is to be taken into consideration the earning capacity 
 of an undertaking. Where profits are large this is a 
 very valuable asset. 
 
 Good will is generally valued by taking the average 
 net earnings of a business for a term of years and taking 
 from three to ten years of this amount as its worth. 
 
 14. State the rule of law as to time of maturity of 
 negotiable instruments. Mention any exception to the 
 general rule. 
 
89 
 
 All negotiable instruments must mature on a certain 
 date, or on a stated day after a given date. 
 
 Notes payable on demand are an apparent exception, 
 but the date can be made certain by making demand. 
 
 15. What is understood by submission to arbitration? 
 What may be submitted for arbitration? In what man- 
 ner may the submission to arbitration be made? Gen- 
 erally, can a member of a partnership by a submission 
 bind his partners to an award made in pursuance to it? 
 Explain. 
 
 An agreement to submit a disputed claim to the judg- 
 ment of a third party, and to be bound by his decision. 
 
 Any matter in wfeidi dispute which the parties at vari- 
 ance consent to refer to the judgment of a third party. 
 
 The parties at variance agree upon a third party to act 
 as arbitrator, or each selects some one to represent him- 
 self on the understanding that they (the parties selected) 
 are to choose and decide on another party to act as arbi- 
 trator. The matter to be arbitrated is reduced to writing 
 and a contract drawn up wherein each disputant agrees 
 to be bound by the arbitrator's decision. 
 
 He can ; because the award having been given and sub- 
 mission being compulsory, he has power as an agent to 
 bind his partners. 
 
90 
 
 January? 1902^ 
 
 1. What is required of a corporation as to (a) number 
 of incorporators, (b) number of directors, (c) capital 
 to be paid in, (d) books to be kept? Define subscriber, 
 incorporator, stockholder. 
 
 (a) Not less than three. 
 
 (b) Not less than three. 
 
 (c) Not less than five hundred dollars to start, and 
 fifty per cent, of the whole capital stock must be paid in 
 within one year. 
 
 (d) Proper books of account, and a stock-book. 
 Subscriber : One who agrees to take and pay for a cer- 
 tain number of shares. 
 
 Incorporator: One who as such signs the articles of 
 incorporation. 
 
 Stockholder : One who own a certain number of shares 
 and whose name appears in the stockbook. 
 
 2. What is meant by accommodation paper ? What are 
 the rights and liabilities of parties to accommodation 
 paper ? 
 
 Accommodation paper is so called because one party 
 accommodates the other with the loan of his credit. Sup- 
 pose that B is short of funds and of credit at the bank. 
 He goes to his friend A, who is also short of funds but 
 long of credit at the bank, and asks him for his promis- 
 sory note for the sum he needs, payable at the time when 
 
91 
 
 he thinks he will be able to pay the note. A makes out 
 the note payable to B. B takes the note to the bank and 
 discounts it. B cannot collect direct from A because there 
 was no consideration ; but if B fails to pay, the bank can 
 make A do so. 
 
 In the above case if B does not pay A is liable. If A 
 pays on B's default he can sue B for the amount. 
 
 3. State the rule of law as to what shall be deemed 
 fixtures, (a) as between the seller and the buyer of real 
 estate, (5) as between the landlord and tenant. 
 
 (a) "Whatever is applied to the soil belongs to the 
 soil." A building with all its appurtenances is a fixture. 
 The rule is that a sale of real estate carries with it all 
 fixtures unless they are expressly reserved by the vendor. 
 
 (b) A tenant may remove things that he has annexed 
 to land or buildings unless the same are built or fixed into 
 the wall of a building so as to be essential to its support. 
 The rule is that a tenant may remove any fixtures he has 
 put in provided the premises are not left in a worse con- 
 dition than when he took posession. He must remove 
 them before his tenancy expires, or he will be held to 
 have waived his right. 
 
 4. May one partner without the knowledge of his 
 copartners make a general assignment of partnership 
 property for benefit of creditors ? Explain fully. 
 
 He may not. He may assign his own interest, which 
 would work a dissolution of the partnership. As to the 
 firm property, he is a co-trustee and tenant in common, 
 and joint action is necessary to make a general assign- 
 ment. 
 
92 
 
 5- In case of an agreement to prosecute a business and 
 divide the profits (no mention of losses being made) 
 would a partnership exist? How would the losses, if 
 any, be borne ? In case A promises to give B as compen- 
 sation for services a portion of the profits of his business, 
 without liability on B's part for losses, is there a partner- 
 ship ? Explain. 
 
 It would. Partnership results from an agreement to 
 share profits. This implies sharing of losses also. 
 
 In this case the losses would be borne equally. 
 
 No; B shares not as a partner who contributes to the 
 capital, but in lieu of salary for services rendered. 
 
 6. May the board of directors of a certain corporation 
 delegate its authority to agents or to a quorum composed 
 of less than a majority of its members? May a director 
 vote by proxy at a meeting of the board of directors? 
 Is a director or stockholder of a corporation chargeable 
 with actual knowledge of its business merely because he 
 is a director or stockholder? Give reasons in each case. 
 
 Yes. 
 
 He may not. 
 
 A director is so chargable, because he is really a trustee 
 for the stockholders and is entrusted by them with the 
 business management of the corporation. A stockholder 
 as such is not so chargable, because he has no voice in 
 the management of affairs. 
 
 7. What is understood by the acknowledgment to a 
 deed? State the object of such acknowledgment. Is it 
 an essential part of the instrument? Is the recording of 
 a deed not properly acknowledged good against creditors 
 and subsequent purchasers without notice? 
 
93 
 
 A statement made to a proper officer by the parties 
 whose names are signed to the deed, and written by the 
 officers on the deed, that they voluntarily signed the in- 
 strument. 
 
 To enable the deed to be recorded. 
 
 It is not. 
 
 No. 
 
 8. An estate with a life tenancy consists in part of 
 shares in a certain corporation that has voted to increase 
 its capital stock. Woud the proceeds of a sale of the 
 right to subscribe for the estate's quota of this new issue 
 go to the life tenant or to the body of the estate? Ex- 
 plain. 
 
 Options or privileges given to subscribe for stock and 
 bonds should inure to the benefit of the remainder man 
 and go as principal. The right to subscribe belonged to 
 the Trust Estate, and accrued upon condition that the 
 Estate chose to pay for or purchase the bonds or stock. 
 If the option is accepted the purchase operates to increase 
 the capital or change its manner of investment. 
 
 9. What is a bond ? What does the ordinary bond used 
 in business acknowledge? What is the sum specified in 
 the obligatory clause of the bond called? Is it regarded 
 as the measure of damage which may be collected on a 
 default in the condition? Explain. 
 
 A bond is an obligation in writing, under seal, which 
 may be either single, as where the obligor binds or obliges 
 himself, his heirs, executors and admmistrators to pay a 
 certain sum of money to another on a day named ; or con- 
 ditional, that is if the obligor does some particular act, 
 
94 
 
 the obligation shall be void, or else remain in full force 
 and effect. 
 
 That one party obliges himself to pay to another a cer- 
 tain sum of money on certain expressed conditions. 
 
 It is called the principal. 
 
 It is not ; the penalty is twice the sum of the principal, 
 and that is usually the measure of the damage, which may 
 include interest, costs, etc. 
 
 ID. In what manner should a mortgage of real estate 
 be executed? What certificate should be affixed to a 
 mortgage to show that it has been properly executed and 
 recorded ? 
 
 A mortgage on real estate is customarily given as col- 
 lateral security for the payment of a bond. It is in form 
 a conveyance or deed of real estate upon condition, to 
 become void (the defeasance clause) upon performance 
 of the condition, and to become absolute upon default in 
 performance of the condition. 
 
 To be valid it must conform to the statute of frauds, 
 and it must be signed, sealed, executed with all the for- 
 mality of deeds, and must be delivered. It should also be 
 properly acknowledged and recorded. 
 
 The certificate of the record clerk of the register of 
 deeds. 
 
 II. State the rule (in the absence of any special stipu- 
 lation) for computing interest on a contract where pay- 
 ments have been made from time to time. 
 
 The question is indefinite. In order to answer it intel- 
 ligently the specific terms of some contract should be 
 cited. 
 
95 
 
 The rule is first to apply the payments to the discharge 
 of the accrued interest. When the payments exceed the 
 accrued interest then after applying sufficient to discharge 
 it, to apply the balance as a payment upon the principal. 
 In other words, the old United States rule of partial pay- 
 ments covers in such cases. 
 
 12. After the dissolution of the firm of A and B, B 
 conveys by indorsement to C a note held by the firm. 
 What rights has C against the firm? 
 
 Having given proper notice to B of the non-payment 
 of the note, he can sue A and B severally for the amount 
 due, as notice to any one partner is notice to the firm 
 even though there has been a dissolution. 
 
 13. Explain the nature and effect of an account stated. 
 May one recover on an account stated on proof of the ad- 
 mission of a general balance, without proving the items 
 of the account? When does the right of action for the 
 balance arise? 
 
 An account stated is an agreed balance of accounts 
 which has been examined and accepted by the parties 
 to it. It is in the nature of a new promise, and is con- 
 clusive as to the liability of the parties with reference 
 to the transactions included in it, except in cases of fraud 
 or manifest error. 
 
 Yes. It is not usually necessary to prove the items 
 of the account. 
 
 (i) Within a reasonable time of the rendering of the 
 account and its correctness being assumed by implication, 
 i. e., the silence of the party to whom rendered. (2) From 
 
96 
 
 the date of the actual acknowledgment of the correctness 
 of the amount of the balance shown in the account. 
 
 14. What is understood by carrier's lien? When is 
 freight considered as earned by a carrier? State the 
 remedy of the carrier in case freight is not paid when 
 earned. Does the carrier waive his right of lien by de- 
 livery of goods to the consignee before payment of 
 freight ? On what conditions only may a lien be retained ? 
 
 The right to retain possession of goods as security for 
 freight charges thereon. 
 
 When the goods have been transported to their destin- 
 ation and the consignee notified of same. 
 
 The remedy is, after proper notice and the expiration 
 of a certain period of time, for the carrier to sell the goods 
 at public auction and apply the proceeds to the payment 
 of the freight, storage charges, and the expenses of the 
 sale. 
 
 He does. 
 
 The retention of the goods. 
 
 15. May a person enter into a contract under any name 
 he may choose to assume ? Explain. 
 
 He may, provided his identity is not concealed, and 
 provided the name is not used with intent to defraud. 
 
 A person may ordinarily trade under any name he 
 chooses, provided he registers same together with his 
 real name as provided for by law. 
 
97 
 
 3unc 1902* 
 
 I. As against the maker of a promissory note payable 
 on demand with interest, when does the statute of limita- 
 tions begin to run? What is the object of this statute? 
 
 From the date of the note, or if interest is paid from 
 time to time, from the date of the last payment. The ob- 
 ject of the statute of limitations is to compel people to 
 collect their debts or commence action at law for the re- 
 covery of same within a reasonable time of their incur- 
 rence. The older a claim gets the more difficult is it to 
 get evidence to support it and to defend against it. The 
 possibility of the introduction of fraudulent claims and 
 of fraudulent defences is by this statute greatly reduced. 
 
 2. Is one who is a depositing and check-drawing cus- 
 tomer of a bank under obligation to verify the correctness 
 of the balance shown by his passbook and returned vouch- 
 ers ? Explain. 
 
 He is; for if owing to his neglect to do this it should 
 happen that his signature had been forged to checks, and 
 money obtained thereon from the bank separately, the 
 bank would be relieved from liability, as the common 
 carrier would be held guilty of contributory negligence. 
 The customer would be "estopped" because of his negli- 
 gence. 
 
98 
 
 3- What is meant by the capital of a partnership? Is 
 the capital the same as its actual assets? Is the capital 
 of each partner necessarily the amount due to him from 
 the firm? Explain. 
 
 By capital is primarily meant the amount of money, 
 or the value of the goods, or skill invested in a concern 
 by the partners. But it must be borne in mind that cap- 
 ital is of fluctuating value, increasing or diminishing in 
 worth from day to day according as profits or losses are 
 made. 
 
 It is not; it is the excess value of the assets over the 
 liabilities of a business. 
 
 It is not; because, as before stated, where profits and 
 losses are adjusted, the capital of each partner may be 
 greater or less than the amount shown before the books 
 are "closed.'' Again, even after the books are ''closed" 
 the capital of partners shown in the balance sheet is not 
 necessarily the amount due to them, because in the event 
 of a dissolution of the partnership from any cause the 
 assets would first have to be realized and all outside in- 
 debtedness liquidated, and only the residue would be due 
 partners. Assets have a curious habit of diminishing in 
 value in the process of realization, while there are neces- 
 sary expenses attending same. Liabilities, on the other 
 hand, are awkwardly obstinate in the persistent manner 
 in which they refuse to be got rid of at less than full 
 value. 
 
 4. Define profits. In ascertaining the net profit of a busi- 
 ness, is it right to deduct interest on capital employed? 
 Under ordinary circumstances, should gains be treated 
 as profits of the year in which they are earned or the 
 year in which they are received? 
 
99 
 
 Profits are the net earnings of a business available for 
 distribution in the form of dividends, if a corporation; 
 or for capital accretion if an ordinary firm. 
 
 It is entirely a matter of agreement. 
 
 Gains should be treated as profits of the year in which 
 they were earned. 
 
 5. What is the eflfect of a judgment recovered against 
 a person prior to his filing a petition in voluntary bank- 
 ruptcy, in case he is adjudged a bankrupt? 
 
 If recovered at any time within four months prior to 
 his filing a petition, the judgment will be dissolved if 
 proved that he was insolvent and that its enforcement 
 would work a preference. 
 
 6. If A contributes one-third and B two-thirds of the 
 capital of a partnership, and nothing is said as to how 
 the profits shall be divided, what proportion should go 
 to each? 
 
 One half. 
 
 7. Has an executor a right ex officio to examine the 
 books of a partnership in order to ascertain his testator's 
 interest therein? Within what period can an executor 
 compel surviving partners to pay the interest of his tes- 
 tator? 
 
 No ; but he may examine the partners to ascertain testa- 
 tor's interest, and if dissatisfied he may obtain an order 
 for an accounting from a court of equity which would 
 confer on him the right to examine the partnership books. 
 
 There is no stated period; a "reasonable" time is usu- 
 
100 
 
 ally allowed. If dissatisfied the testator may cite the 
 partner to show cause why the testator's interest should 
 not be paid. 
 
 8. State the method of taking a partnership accounting 
 under a decree for an accounting between or among part- 
 ners. 
 
 The articles of co-partnership should first be carefully 
 examined to ascertain the amount of capital to be contrib- 
 uted by each and the proportion of profits the partners 
 severally are entitled to. The accountant should then ex- 
 amine the book of accounts and satisfy himself that these 
 provisions have been complied with. Next he should make 
 a careful and exhaustive audit of the cash receipts and ex- 
 penditures, and examine the books to see that the profits 
 stated are correct. Finally he should make up a balance 
 sheet in the form of a ^'statement of affairs," showing the 
 amount due each partner. 
 
 9. Has the treasurer of a corporation, as such officer, 
 any authority to bind the corporation by a contract for 
 work, labor and services? Can the stockholders of a 
 business corporation lawfully authorize a transfer of its 
 entire property to another corporation in exchange for 
 the stock of the latter? Explain. 
 
 Not unless he is so authorized by the by-laws. But the 
 general rule is that an agreement made by an officer or 
 agent of a corporation who assumes to act in its behalf 
 can be enforced against the corporation when it has re- 
 ceived the benefit of the agreement. 
 
 Yes; under a consolidation agreement assented to by 
 at least two-thirds of the stockholders. 
 
I^I 
 
 10. From whom must the appllealion 'f 6f "a' v()kmtary 
 dissolution of a corporation proceed? Under what con- 
 ditions may such application be made? To whom should 
 such petition be presented? 
 
 From the stockholders. 
 
 If the directors by majority vote of the whole board 
 adopt a resolution that it is in their opinion advisable to 
 dissolve the corporation, and the stockholders after proper 
 notice and at a meeting properly called signify their 
 written consent to same (the holders of two-thirds in 
 amount of the stock of the corporation ) , then the corpora- 
 tion shall file such consent, attested by its secretary or 
 treasurer and its president or vice-president, together with 
 the names and addresses of the directors and officers. 
 
 The petition should be presented to the Secretary of 
 State. 
 
 11. A debtor sends a check to his creditor, stating it to 
 be in full payment of his account to date, and the creditor 
 retains and uses the check but declines to regard it as 
 full payment; whereupon the debtor demands that it be 
 accepted as such payment or that it or its avails be re- 
 turned at once. The creditor neglects to return the check 
 or its proceeds but repeats his demand for a balance 
 alleged to be still due. Is there an accord and satisfac- 
 tion? Give reasons for your answer. 
 
 No. An accord and satisfaction is a compromise set- 
 tlement of a disputed claim. It must be the result of 
 an agreement. Here there is none, as the creditor does 
 not agree to accept less than the amount he originally 
 claimed. 
 
 He would be justified in using the avails of the check 
 on which he would have a lien. 
 
102 
 
 12.. J>oea-a dividend on stock, declared before a testa- 
 tor's death, but not payable till after his death, become a 
 part of his estate or does it belong to the life tenant as 
 income ? 
 
 It becomes a part of his estate, as immediately a divi- 
 dend is declared the amount of same is set aside from the 
 general assets of the corporation and belongs to the 
 stockholders of record. 
 
 13. What is a contract? What are the essentials of 
 every contract? State the general rule as to who may 
 contract. Distinguish between good consideration and 
 valuable consideration. Will a good consideration sup- 
 port an executory contract ? 
 
 A contract is agreement between two or more compe- 
 tent persons based upon consideration, to do or not to do 
 some particular thing. 
 
 The essentials to every contract are: The contracting 
 parties must be legally competent to contract; they must 
 give their consent ; there must be consideration, and there 
 must be subject matter, i. e., something which they agree 
 to do or not to do. 
 
 The general rule as to who may contract is that any 
 person is competent to contract who has not been declared 
 legally incompetent. 
 
 By good consideration is meant the natural love and 
 affection existing between relatives. 
 
 A valuable consideration is an inducement of value, 
 and may be a benefit to the promissor or a loss or incon- 
 venience to the promisee. 
 
 It will not. i 
 
I03 
 
 14- Is a local assessment for improvement apportiona- 
 ble iDetween life-tenant and remainder-man? Explain. 
 
 It is generally ; but it depends largely on circumstances, 
 such as the condition of the property, and whether the 
 income arising from same would be increased thereby. 
 
 15. If a note is held by a bank at which it is payable 
 and is not paid when due, must there be a presentment 
 and demand of payment? Is the presentation of a ma- 
 tured draft to the drawer for payment sufficient notice 
 to him of non-payment by the acceptor? 
 
 No presentment and demand of payment are necessary. 
 The maker is bound to have funds there to meet it. 
 
 It is not; evidence must be furnished the drawer that 
 the draft has been presented for payment, and that pay- 
 ment has not been made. This evidence is the notice of 
 protest by a notary public. 
 
I04 
 
 d. p* a. Xaw 
 
 State of New York. 
 
 § I Any citizen of the United States, or person who 
 has duly declared his intention of becoming such citizen, 
 residing or having a place for the regular transaction of 
 business in the state, being over the age of 21 years and 
 of good moral character, and who shall have received 
 from the regents of the University a certificate of his 
 qualifications to practice as a public expert accountant 
 as hereinafter provided, shall be styled and known as 
 a certified public accountant; and no other person shall 
 assume such title, or use the abbreviation C. P. A. or any 
 other words, letters or figures, to indicate that the person 
 using the same is such certified public accountant. 
 
 § 2 The regents of the University shall make rules for 
 the examination of persons applying for certificates un- 
 der this act, and may appoint a board of three examiners 
 for the purpose, which board shall, after the year 1897, 
 be composed of certified public accountants. The regents 
 shall charge for examination and certificate such fee as 
 may be necessary to meet the actual expenses of such ex- 
 aminations, and they shall report annually their receipts 
 and expenses under the provisions of this act to the state 
 controller, and pay the balance of receipts over expendi- 
 tures to the state treasurer. The i;egents may revoke 
 any such certificate for sufficient cause after written no- 
 tice to the holder thereof and a hearing thereon. 
 
 § 3 The regents may, in their discretion, waive the 
 examination of any person possessing the qualifications 
 mentioned in § i who shall have been, for more than one 
 year before the passage of this act, practicing in this state 
 on his own account, as a public accountant, and who 
 
I05 
 
 shall apply in writing for such certificate within one year 
 after the passage of this act. 
 
 § 4 Any violation of this act shall be a misdemeanor. 
 
 § 5 This act shall take effect immediately. 
 
 Notes on the law. 
 
 1 The use of the abbreviation C. P. A. or any other 
 words, letters or figures to indicate that the person using 
 the same is a certified public accountant is prohibited ex- 
 cept to those holding regents certified public accountant 
 certificates. 
 
 2 The three examiners are appointed to serve for one 
 year. Since 1897 the board has been composed of certi- 
 fied public accountants. 
 
 3 Certificates will be revoked for cause. 
 
io6 
 
 C. p. a Xaw 
 
 State of Illinois. 
 
 A Bill for an act to regulate the practice of Public Ac- 
 counting; to establish a Board of Accountancy for the 
 examination of Public Accountants ; to provide for the 
 granting of certificates to those who qualify under the 
 provisions of this act, and to provide a penalty for any 
 violations thereof. 
 
 § I (i) Be it enacted by the people of the State of 
 Illinois represented in the General Assembly: That with- 
 in thirty days after the passage of this act, the Governor 
 shall apoint, with the advice and consent of the Senate, 
 a Board of Accountancy, to consist of three members to 
 be selected in the manner hereinafter provided, for the 
 examination of persons applying for certification and reg- 
 istration under this act, and for the performance of such 
 other duties as may be hereinafter provided. 
 
 (2) That the members of the Board of Accountancy 
 first appointed shall be selected by the Governor from the 
 names of public accountants skilled in the practice of that 
 profession, and actively engaged therein within the State 
 of Illinois. One member of the said board shall hold 
 office for the term of two years, one for the term of four 
 years, and one for the term of six years from the first 
 day of March next preceding such first appointment; 
 and upon the expiration of each of said terms, and of each 
 succeeding term, a member shall be appointed from 
 holders of certificates under this act. 
 
 (3) In the event of a vacancy arising, the Governor 
 shall appoint a successor for the unexpired term of the 
 retiring member, from the holders of certificates issued 
 under this act chosen as aforesaid. 
 
I07 
 
 § 2 Any citizen of the United States, or person who 
 has duly declared his intention of becoming such citizen, 
 having a place for the regular transaction of business 
 as a professional accountant, within the State of Illinois, 
 being over the age of 25 years, of good moral character, 
 and who shall have received from the Board of Account- 
 ancy a certificate of his qualification to practice as a public 
 accountant, as hereinafter provided, shall be styled and 
 known as a Certified Public Accountant ^ and no other 
 person shall assume such title, or use the abbreviation, 
 *C. P. A.," or any other words or letters to indicate that 
 the person using the same is a certified public accountant. 
 
 §3(1) The granting of certificates shall be based up- 
 on an examination in ^Theory of Accounts,'' "Practical 
 Accounting," "Auditing," and "Commercial Law" as 
 affecting accountancy, and such examinations shall take 
 place at Springfield or Chicago as often as may be neces- 
 sary in the opinion of the Board of Accountancy, but not 
 less frequently than once a year, and under such rules and 
 regulations as may be adopted by the said Board. 
 
 (2) The time and place of holding the examination 
 shall be duly advertised for riot less than three consecu- 
 tive days in one daily newspaper published in Springfield 
 and one published in Chicago, not less than thirty days 
 prior to the date of each examination, and by letter mailed 
 not less than twenty days before such examination to each 
 person who may have applied to any officer of said Board 
 for information as to such examination. 
 
 § 4 The Board of Accountancy may in its discretion 
 under regulations provided by its rules, waive all or any 
 part of the examination of any applicant possessing the 
 qualifications mentioned in § 2, who shall have had five 
 successive years' previous experience as a public account- 
 ant, who shall apply to the Board of Accountancy in writ- 
 ing within one year after the passage of this act, and who 
 shall have been practicing in this State as a public ac- 
 countant on his own account for a period of not less than 
 one year next prior to the passage of this act ; also of any 
 person who shall have been actively in practice as a public 
 
io8 
 
 accountant for not less than five years next prior to the 
 passage of this act, outside the State of IlHnois, who shall 
 have passed an examination equivalent, in the opinion of 
 the Board, to the examination to be held under the pro- 
 visions of this act. 
 
 §5(1) The Board of Accountancy shall within thirty 
 days after their appointment meet and organize by elect- 
 ing one of their number as president, and one of their 
 nunmber as secretary, and shall from time to time adopt 
 such rules and regulations for their government as shall 
 be necessary and not contrary to the provisions of this 
 act. 
 
 (2) The Board of Accountancy shall transmit to the 
 Secretary of State, all certificates granted by them, for 
 registration in his office, and no such certificates shall be 
 valid until' they shall have been registered as herein pro- 
 vided, and such registration shall be attested on the face 
 of such certificates under the name of the Secretary of 
 State and Seal of the State of Illinois. 
 
 §6(1) Each applicant for a certificate under the pro- 
 visions of this act shall pay to the secretary of the Board 
 of Accountancy at the time of filing an application, a fee 
 of Twenty-five Dollars ($25.00). 
 
 (2) Each successful applicant for a certificate shall 
 pay to the secretary of the Board of Accountancy a fee 
 of One Dollar ($1.00), to be transmitted to the Secretary 
 of State, for the registration of his certificate, as provided 
 for by this act. 
 
 (3) Each holder of a certificate, issued under the pro- 
 visions of this act, shall pay to the secretary of the Board 
 of Accountancy on the first day of July of each year after 
 1903, a license fee of Ten Dollars ($10.00) as shall be 
 provided by the rules of the Board of Accountancy. 
 
 § 7 (i) From the fees collected under Sec. 6, there 
 shall be paid all the expenses incidental to the meetings 
 and examinations held by the Board of Accountancy, and 
 the issuance of certificates and also the traveling expenses 
 of the members of the Board while performing their du- 
 
109 
 
 ties under this act, including the compensation and ex- 
 penses of the secretary. 
 
 (2) The members of the Board of Accountancy shall 
 each be paid as remuneration for the time actually ex- 
 pended upon the affairs of the Board an amount not ex- 
 ceeding Ten Dollars ($10.00) per day, provided that all 
 such expenses and remuneration must be paid from the 
 receipts of the Board, and no expense incurred under this 
 act shall be a charge against the funds of the State. 
 
 (3) The Board of Accountancy shall report annually 
 to the Governor a full account of its proceedings, and 
 shall include in such report a full and complete statement 
 of all moneys received and disbursed by its secretary. 
 
 § 8 The Board of Accountancy may revoke any cer- 
 tificate issued under the provisions of this act for unpro- 
 fessional conduct or other sufficient cause, provided that 
 written notice shall have been previously mailed to the 
 holder of such certificate, twenty days before any hearing 
 thereon, stating the cause for such contemplated action, 
 and appointing a date for a full hearing thereof by the 
 Board; and provided further, that no certificate shall be 
 revoked until a hearing shall have been had. In the event 
 of the revocation of a certificate, notification of such action 
 shall be communicated to the Secretary of State, who shall 
 thereupon remove the name of the holder of such certifi- 
 cate from the register herein provided for. 
 
 § 9 If any person shall represent himself to the public 
 as having received a certificate, as provided in this act, 
 or shall assume to practice as a certified public accountant, 
 or use the abbreviation, "C. P. A.," or any other words 
 or letters to indicate that the person using the same is a 
 certified public accountant, without having received such 
 certificate, or after the same shall have been revoked, or 
 without having complied with the provisions of this act, 
 he shall be deemed guilty of a misdemeanor, and upon 
 conviction thereof shall be fined a sum not exceeding Two 
 Hundred Dollars $(200.00) for each offense; provided 
 that nothing herein contained shall operate to prevent 
 a certified public accountant, who is the lawful holder of 
 
no 
 
 a certificate issued in compliance with the laws of another 
 State, from practicing as such within this State, and styl- 
 ing himself a certified public accountant, provided he shall 
 cause his certificate to be registered and shall pay the an- 
 nual fee hereinbefore provided, unless such practice be 
 temporary only, in which case he shall be allowed to prac- 
 tice upon the same terms and in the same manner as cer- 
 tified public accountants residing in this State now are, 
 or hereafter may be, admitted to practice in such State. 
 
Ill 
 
 C. p. U. Xaw 
 
 State of Pennsylvania. 
 
 "An Act to establish a board for the examination of ac- 
 countants to provide for the granting of certificates 
 to accountants, and to provide a punishment for the 
 violation of this act. 
 
 "Section i. Be it enacted by the Senate and House 
 of Representatives of the Commonwealth of Pennsylvania 
 in General Assembly met, and it is hereby enacted by the 
 authority of the same, that any citizen of the United 
 States residing or having an office for the regular trans- 
 action of business in the State of Pennsylvania, being 
 over the age of twenty-one years, and of good moral 
 character, and who shall have received from the Gov- 
 ernor of the State of Pennsylvania a certificate of his 
 qualification to practice as a public expert accountant as 
 hereinafter provided, shall be designated and known as a 
 certified public accountant, and no other person shall as- 
 sume such title or use the abbreviation C. P. A., or any 
 other words, letters, or figures to indicate that the person 
 using the same is such certified public accountant. Every 
 person holding such certificate and every copartnership of 
 accountants, every member of which shall hold such cer- 
 tificates, may assume and use the title of certified public 
 accountants, or the abbreviation thereof, C. P. A., pro- 
 vided that no other person or copartnership shall use such 
 title or abbreviation or other words, letters, or figures to 
 indicate that the person or copartnership using the same 
 is such certified public accountant. 
 
 "Sec. 2. The Governor of the State of Pennsylvania 
 shall appoint a board of five examiners for the examina- 
 tion of persons applying for certification under this act. 
 Three of said examiners shall be public accountants, who 
 
112 
 
 shall have been in practice as such for at least five years, 
 one of whom shall be appointed for the term of one year, 
 one for two years, and one for three years, and, upon the 
 expiration of each of said terms, an examiner shall be 
 appointed for the term of three years, and after one thous- 
 and eight hundred and ninety-nine these three examiners 
 shall be certified public accountants. The other two ex- 
 aminers shall be practising attorneys in good standing in 
 any of the courts in the State of Pennsylvania; one of 
 them shall be appointed for the term of one year and the 
 other for two years, and, upon the expiration of each of 
 said terms, a successor shall be appointed for the term of 
 two years. The examination of certificates shall be based 
 upon an examination in commercial law and general ac- 
 counting; said examination shall take place in Philadel- 
 phia, Harrisburg, and Pittsburg twice a year during the 
 months of May and November of each year, under such 
 rules and regulations as may be adopted by the board. 
 The fees provided by this act shall be twenty-five dollars 
 for each applicant, from which shall be paid for the ex- 
 penses incident to such examination for stationery and 
 clerk hire a sum not exceeding two hundred dollars, and if 
 any surplus above said expenses shall remain at the end of 
 any year it shall be paid after the traveling expenses of 
 the board shall be deducted therefrom into the treasury 
 of the Commonwealth. The results of such examinations 
 shall be certified to the Governor and filed in the office of 
 the Secretary of Internal Affairs and kept for reference 
 and inspection for a period not less than five years, the 
 Governor to issue the certificates. 
 
 "Sec. 3. The Governor of the State of Pennsylvania 
 may revoke any such certificate for sufficient cause upon 
 the recommendation of the Board of Examiners, who shall 
 have given written notice to the holder thereof, and after 
 he has had a hearing thereon. 
 
 "Sec. 4. The Board of Examiners may, in its discre- 
 tion, waive the examination of any person who shall have 
 been for three years before the passage of this act prac- 
 ticing in the State of Pennsylvania as a public accountant, 
 
113 
 
 and who shall apply in writing for such certificate within 
 one year after the passage of this act. 
 
 "Sec. 5. If any person shall hold himself out as having 
 received the certificate provided for in this act, or shall 
 assume to practice thereunder as a certified public ac- 
 countant, or use the initials C. P. A. without having re- 
 ceived such certificate, or after the same shall have been 
 revoked, he shall be deemed guilty of misdemeanor, and, 
 on conviction thereof, shall be sentenced to pay a fine not 
 exceeding five hundred dollars." 
 
114 
 
 C. p. a Xaw 
 
 State of Maryland. 
 
 Section i. Be it enacted by the General Assembly of 
 Maryland, That any citizen of the United States, or any 
 person who has duly declared his intention of becoming 
 such citizen, residing or having a place for the regular 
 transaction of business in the State of Maryland, being 
 over the age of twenty-one years and of good moral char- 
 acter, and who shall have received from the Governor of 
 the State of Maryland a certificate of his qualification to 
 practice as a public expert accountant, as hereinafter pro- 
 vided, shall be styled and known as a certified public ac- 
 countant ; and no other person shall assume such title, or 
 use the abbreviation ''C. P. A.," or any other words, let- 
 ters, or figures to indicate that the person using the same 
 is such certified public accountant. 
 
 Sec. 2. The Governor shall, within sixty days after 
 the passage of this act, appoint a board of four examiners 
 for the examination of persons applying for certificates 
 under this act; two of said examiners shall be public 
 accountants, selected from a list of six names proposed by 
 the Maryland Association of Public Accountants, one of 
 which said two examiners shall hold ofiice for the term 
 of one year, and one for the term of two years, and upon 
 the expiration of each of said terms, and of each succeed- 
 ing term, an examiner shall be appointed for the term of 
 two years, and after the year nineteen hundred each suc- 
 cessor to said two examiners shall be appointed from such 
 persons as may hold certificates as Certified Public Ac- 
 countants under this act. The other two of said board of 
 examiners shall be practicing attorneys, in good standing, 
 in any of the courts of the State of Maryland; one of 
 
"5 
 
 them shall hold office for the term of one year, the other 
 for the term of two years, and upon the expiration of each 
 of said terms and each succeeding term a successor shall 
 be appointed for the term of two years, such successors 
 to be practicing attorneys, in good standing, as herein- 
 before mentioned. 
 
 Sec. 3. Examinations of persons applying for certifi- 
 cates under this act shall be held at least once every year 
 and be conducted according to such rules and regulations 
 as the said board of examiners may adopt for the purpose. 
 The results of such examinations shall be certified to the 
 Governor, and to all persons as may have passed exam- 
 ination satisfactory to said board of examiners, and by 
 it been recommended, the Governor shall issue the cer- 
 tificate mentioned in the first section of this act. 
 
 Sec. 4. The board of examiners shall charge for ex- 
 amination and certificate such fee as may be necessary 
 to meet the actual expenses of such examination and 
 issuing of such certificate, and shall report annually the 
 receipts and expenses under the provisions of this act to 
 the State Controller, and the surplus, if any, of receipts 
 over expenses shall be paid into the State Treasury. The 
 Governor may revoke any certificate issued under the 
 provisions of this act for sufficient cause; provided writ- 
 ten notice shall have been given to the holder thereof, and 
 after he has had an opportunity for a hearing thereon. 
 
 Sec. 5. The board of examiners may in its discretion 
 waive the examination of any person possessing the quali- 
 fications mentioned in Section i of this act, who shall 
 have been at the time of the passage of this act practicing 
 in this State as a public accountant on his own account, 
 and who shall apply in writing to said board for such 
 certificate within one year after the passage of this act, 
 and upon the recommendation of said board the Governor 
 shall issue said certificate to such person. 
 
 Sec. 6. Any person who shall violate any of the pro- 
 visions of this act shall be deemed guilty of a misde- 
 meanor, and upon conviction thereof in any court having 
 criminal jurisdiction shall be fined not less than fifty dol- 
 
ii6 
 
 lars nor more than two hundred dollars, or be confined 
 not more than six months in the county jail, if the con- 
 viction takes place in Baltimore City in the Baltimore 
 City Jail, in the discretion of the court. 
 
 Sec. 7. And he it enacted, That this Act shall take 
 effect from the date of its passage. 
 
117 
 
 c. p. a Xaw 
 
 State of California. 
 
 Section i. Within thirty days after the passage of 
 this act the governor shall appoint five persons, at least 
 three of whom shall be competent and skilled public ac- 
 countants, who shall have been in practice as such in this 
 State for not less than five consecutive years, to constitute 
 and serve as a State Board of Accountancy. The mem- 
 bers of such board shall, within thirty days after their 
 appointment, take and subscribe to the oath of office as 
 prescribed by the Political Code, and file the same with 
 the Secretary of State. They shall hold office for four 
 years, and until their successors are appointed and quali- 
 fied; save and except that one of the members of the 
 board first to be appointed under this act shall hold office 
 for one year, one for two years, one for three years and 
 two for four years. Any vacancies that may occur, from 
 any cause, shall be filled by the governor for the unex- 
 pired term ; provided, that all appointments made after the 
 first year must be made from the roll of certificates issued 
 and on file in the office of the governor. 
 
 Sec. 2. The State Board of Accountancy shall have 
 its office in the city and county of San Francisco, and its 
 powers and duties shall be as follows : 
 
 1. To formulate rules for the government of the board 
 and for the examination of and granting of certificates 
 of qualification to persons applying therefor; 
 
 2. To hold written examinations of applicants for such 
 certificates, at least semi-annually, at such places as cir- 
 cumstances and applications may warrant ; 
 
 3. To grant certificates of qualification to such appli- 
 cants as may, upon examination, be found qualified in 
 
ii8 
 
 "theory of accounts," "practical accounting," "auditing" 
 and "commercial law," to practice as certified public ac- 
 countants ; 
 
 4. To charge and collect from all applicants such fee, 
 not exceeding twenty-five dollars, as may be necessary 
 to meet the expenses of examination, issuance of certifi- 
 cates and conducting its office; provided, that all such 
 expenses, including not exceeding five dollars per day for 
 each member while attending the sessions of the board 
 or conducting examinations, must be paid from the cur- 
 rent receipts, and no portion thereof shall ever be paid 
 from the State treasury ; 
 
 5. To require the annual renewal of all such certificates, 
 and to collect therefor a renewal fee of not exceeding one 
 dollar. 
 
 6. To revoke for cause any such certificate, after writ- 
 ten notice to the holder, and a hearing being had thereon ; 
 provided, that such revocation must receive the affirmative 
 vote of at least four members of the board ; 
 
 7. To report annually to the Governor, on or before 
 the first day of December, all such certificates issued or 
 renewed, together with a detailed statement of receipts 
 and disbursements ; provided, that any balance remaining 
 in excess of the expenses incurred may be retained by the 
 board and used in defraying the future expenses thereof. 
 
 8. The board may, in its discretion, under regulations 
 provided by its rules, waive the examination of applicants 
 possessing the qualifications mentioned in section three, 
 who shall have been for more than three years prior to 
 the passage of this act practicing in this State as public 
 accountants on their own account, and who shall, in 
 writing, apply for such certificates within one year there- 
 after. 
 
 Sec. 3. Any citizen of the United States, or any per- 
 son who has duly declared his intention of becoming such 
 citizen, residing and doing business in this State, being 
 over the age of twenty-one years and of good moral char- 
 acter, may apply to the State Board of Accountancy for 
 examination under its rules, and for the issuance to him 
 
119 
 
 of a certificate of qualification to practice as a certified 
 public acountant, and upon the issuance and receipt of 
 such certificate, and during the period of its existence, or 
 of any renewal thereof, he shall be styled and known as a 
 certified public accountant or expert of accounts, and no 
 other person shall be permitted to assume and use such 
 title or to use any words, letters or figures to indicate 
 that the person using the same is a certified public account- 
 ant. 
 
 Sec. 4. Any violation of the provisions of this act 
 shall be deemed a misdemeanor. 
 
 Sec. 5. This act shall take effect from and after its 
 passage. 
 
120 
 
 C. p. H. Xaw 
 
 State of Washington. 
 
 AN ACT 
 
 To create a state board of acountancy, and prescribe its 
 duties and powers; to provide for the examination 
 of, and issuance of certificates to qualify applicants, 
 with the designation of certified public acountant, and 
 to provide the penalty for violations of the provisions 
 thereof. 
 
 Be it enacted by the Legislature of the State of Washing- 
 ton: 
 
 Section i. Within thirty days after this act shall 
 take eflfect, the Washington association of public account- 
 ants shall nominate fifteen reputable and skilled account- 
 ants, who shall have been in practice as such not less than 
 three consecutive years, from which the governor shall ap- 
 point five. The said five skilled accountants duly elected 
 and appointed shall constitute the board of accountancy of 
 the State of Washington, and shall hold office, as respect- 
 ively designated in their appointments, for the term of 
 one, two, three, four and five years, as hereinafter pro- 
 vided, and until their successors have been duly elected 
 and appointed. The members of such board shall, within 
 thirty days after their appointment, take and subscribe to 
 the oath of office as prescribed by the statutes of the State 
 of Washington, and file the same with the secretary of 
 state. The certified public accountants of the State of 
 Washington, as hereinafter provided, shall annually nom- 
 inate five of their number, one of whom the governor of 
 the State of Washington shall appoint to fill the vacancy 
 annually occurring in said board, such appointment to be 
 for the term of five years. In case of a vacancy occurring 
 
121 
 
 from any cause, the governor shall fill the vacancy by 
 appointing a certified public accountant from the names 
 last submitted, to serve as a member of the board for the 
 remainder of the term. 
 
 Sec. 2. The state board of accountancy shall have its 
 office at such place in the State of Washington as shall 
 be designated by the board, and its powers and duties 
 shall be as follows : 
 
 (i) To formulate rules for the government of the 
 board and for the examination of, and granting of certifi- 
 cates of qualification to persons applying therefor. 
 
 (2) To hold written examinations of applicants for 
 such certificates, at least semi-annually, at such places as 
 circumstances and applications may warrant. 
 
 (3) To grant certificates of qualification to such ap- 
 plicants as may, upon examination, be found qualified in 
 theory of accounts, practical accounting, auditing, and 
 commerical law, to practice as certified public accountants. 
 
 (4) To charge and collect from all applicants such 
 fee, not exceeding twenty-five dollars, as may be neces- 
 sary to meet the expenses of examination, issuance of 
 certificates, and conducting its office: Provided, That all 
 such expenses, including not exceeding five dollars per 
 day for each member while attending the sessions of the 
 board or conducting the examinations, must be paid from 
 the current receipts ; and no portion thereof shall ever be 
 paid from the state treasury. 
 
 (5) To revoke for cause such certificates, after writ- 
 ten notice to the holder, and a hearing being had thereon : 
 Provided, That such revocation must receive the affirma- 
 tive vote of at least four members of the board. 
 
 (6) To report annually to the governor, on or before 
 the first day of January in each year, all such certificates 
 issued during the preceding year, together with a detailed 
 statement of receipts and disbursements : Provided, That 
 any balance remaining in excess of the expenses incurred 
 shall be transferred to the common school fund of the 
 State. 
 
 (7) The board may, in its discretion, under regula- 
 
122 
 
 tions provided by its rules, waive the examination of ap- 
 plicants possessing the qualifications mentioned in sub- 
 section three of this section, who shall have been for more 
 than one year prior to the passage of this act, residents of 
 the State of Washington, and who shall, in writing, apply 
 for such certificate within one year thereafter. 
 
 (8) Every certified public accountant, during the time 
 he continues the practice of his profession shall, annually, 
 on such date as the board of accountancy may determine, 
 pay to the secretary of said board of accountancy, a fee of 
 one dollar, in return for which payment he shall receive a 
 renewal certificate for one year. 
 
 Sec. 3. Any citizen of the United States, or any person 
 who has duly declared his intention of becoming such citi- 
 zen, residing and doing business in the State of Washing- 
 ton, being over the age of nineteen years and of good 
 moral character, may apply to the state board of account- 
 ancy for examination under its rules, and for the issuance 
 to him of a certificate of qualification to practice as a certi- 
 fied public accountant ; and upon the issuance and receipt 
 of such certificate, and during the period of its existence, 
 he shall be styled and known as a certified public account- 
 ant, and no other person shall be permitted to assume and 
 use such title, or to use any words, letters or figures to 
 indicate that the person using the same is a certified pub- 
 lic accountant, or expert of accounts. 
 
 Sec. 4. Any person violating the provisions of this 
 act shall be deemed guilty of a misdemeanor, and upon 
 conviction thereof before any court of competent jurisdic- 
 tion, shall be punished by a fine in any sum not exceeding 
 one hundred dollars. 
 
 Sec. 5. This act shall take eflfect from and after its 
 passage and approval by the governor. 
 
123 
 
 II nbei 
 
 Account : page 
 
 Surcharging 73 
 
 Falsifying 73 
 
 Stated — Nature of 95 
 
 Agency : 
 
 Definition of 26 
 
 General 26 
 
 Special 26 
 
 Limited 40 
 
 Unlimited 40 
 
 Arbitration 49 
 
 Definition of 49 
 
 Different from a Reference 49 
 
 When Resorted to 50 
 
 Assignee : 
 
 Powers of 23 
 
 How to Qualify 23 
 
 Resignation of 23 
 
 Assignment : 
 
 General 22 
 
 Insolvent , 22 
 
 Preferences in 22 
 
 Attorney at Law 43 
 
 Attorney in Fact 43 
 
 Bailments : 
 
 Definition of 18 
 
 Deposit 19 
 
 Commission or Mandate 19 
 
 Hire 19 
 
 Loan for Use 19 
 
 Pledge 19 
 
 Bill of Lading 24 
 
124 
 
 Bills of Exchange: page 
 
 Domestic — Form of 7 
 
 Foreign — Form of 7 
 
 Bond : 
 
 Definition of 93 
 
 Bottomry Bond 24 
 
 Bought Note 50 
 
 Broker 40 
 
 Capital Stock: 
 
 How Issued 11 
 
 How Transferred 1 1 
 
 Common Carrier: 
 
 Definition of 21 
 
 Extent of Liability 21 
 
 Security for Payment of Charges 21 
 
 Consignment : 
 
 Definition of 16 
 
 Consular Invoice 24 
 
 Contract : 
 
 Definition of 12 
 
 Executory ". 28 
 
 How Made 12 
 
 Parol 12 
 
 Specialty 12 
 
 Validity of 28 
 
 Corporation : 
 
 Annual Report 53 
 
 Contracts — How Made 47 
 
 Definition of 9 
 
 Sole 10 
 
 Aggregate 10 
 
 Eleemosynary 10 
 
 Public ' 10 
 
^25 PAGE 
 
 Private lo 
 
 How Created lo 
 
 How Dissolved 12 
 
 Debt: 
 
 Definition of 88 
 
 Partial Payment of 14 
 
 Period of Limitation 14 
 
 Escrow 68 
 
 When Deed in Takes Effect 68 
 
 Factor 40 
 
 Fixtures 91 
 
 Franchise : 
 
 Definition of 14 
 
 Goodwill: 
 
 Definition of 1 1 
 
 Guaranty : 
 
 Definition of 25 
 
 Hearsay Evidence 53 
 
 Indorsements : 
 
 Blank 63 
 
 Qualified '. 63 
 
 Protest Waived 63 
 
 Restrictive 63 
 
 Special 63 
 
 Indorser : 
 
 How Relieved from Liability 38 
 
 Lien: 
 
 General 31 
 
 Special 31 
 
 Mortgage : 
 
 How Executed 94 
 
 Definition of 14 
 
 Dormant 15 
 
126 
 
 Partnership : page 
 
 Nominal 15 
 
 Silent 15 
 
 Special 15 
 
 Limited 16 
 
 Dissolution of 33 
 
 Profits : 
 
 Definition of 99 
 
 Promissory Note: 
 
 Description 5 
 
 Endorsements 5 
 
 Form of 5 
 
 Receiver : 
 
 Definition of 52 
 
 Release : 
 
 Mutual yy 
 
 Respondentia Bond 24 
 
 Sale: 
 
 Definition of 16 
 
 To Arrive 37 
 
 Sold Note 50 
 
 Stock-holders : 
 
 Liability — Limitation of ii 
 
 Rights of II 
 
 Stoppage in Transitu : 
 
 Rights of Vendor 30 
 
 Rights of Vendee 30 
 
 Ultra Vires 12, 51 
 
 Usury : 
 
 Definition of 45 
 
 Exemptions 45 
 
 Penalty for 45 
 
 Warranty 43 
 
 Breach of 43 
 
Aids to Accountant Students 
 
 BY 
 
 FREDERICK S. TIPSON, C. P. A. 
 
 The theory of ACCOUNTS 
 
 PRICE, $3.00. 
 
 COMMERCIAL LAW 
 
 PRICE, $3.00. 
 To follo\A^ at short intervals : 
 
 AUDITING, 
 PRACTICAL ACCOUNTING 
 
 Vyese Ma.nua.ts contain aU questions set at the Nem) York 
 State Certified Public Accountant examinations from 
 December 1896, to June 1902 f inclusive — <^ith fuU 
 answers and explanations^ 
 
 PUBI^ISHED BY 
 
 FREDERICK S. TIPSON, 150 Nass^LU Street, New York 
 
Certified Public Accountant 
 
 — « 
 
 Examinations: 
 
 FREDERICK S. TIPSON, C. P. A., 
 
 Fellow of the American Association 
 of Public Accountants, 
 
 150 NASSAU STREET, NEW YORK, 
 
 is prepared to coacli candidates for C. P. A. 
 examinations, New York State, and by cor- 
 respondence — all States where C. P. A. legisla- 
 tion is in force. Fee for the full course, which 
 includes complete instruction in all subjects 
 covered by the examinations, $ioo; payable 
 in four monthly installments of $25 each. 
 
J'J-l 
 
THIS BOOK IS DUB ON THB LAST DATB 
 STAMPBD BBLOW 
 
 AN INITIAL FINE OF 25 CENTS 
 
 WILL BE ASSESSED FOR FAILURE TO RETURN 
 THIS BOOK ON THE DATE DUE. THE PENALTY 
 WILL INCREASE TO SO CENTS ON THE FOURTH 
 DAY AND TO $1.00 ON THE SEVENTH DAY 
 OVERDUE. 
 
 MAY 27 1936 
 
 
 
 
 
 
 -J^*"" 
 
 
 ..^'^ 
 
 
 \r 
 
 
 X -, . s V-.;« 
 
 
 J\ • 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 LD 21-100m-7,'33 
 
VB 06057 
 
 / 
 
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