LIBRARY 
 
 OF THF, 
 
 UNIVERSITY OF CALIFORNIA. 
 
 OF" 
 
 0. 
 
 
 Received 
 Accession No. 
 
O. B. PA 
 
 Attorni 
 Rooms 6 and 8, f 
 
 
 
 
 .oITY 
 
 
 
** -4. J. 1 
 
 Outlines of 
 Commercial Law 
 
 Oitott 
 
 Business Colleges 
 fiaoe Been 
 Cooking Ton 
 
 A California 
 by a California 
 
ttle Present This Book 
 
 to the consideration of the Commercial Colleges of 
 California, with the feeling that it will fill a place 
 heretofore unoccupied. 
 
 We call attention to the following points of ad- 
 vantage possessed by this work : 
 
 FIRST. It is prepared especially for use in Cali- 
 fornia, and has the essentials of the law of California, 
 regarding business transactions, embodied in it. 
 
 SECOND. It is prepared by a lawyer in active 
 practice in the Courts of California, who has also had 
 some nine years' experience as a teacher. 
 
 THIRD. The work contains more law, in less 
 space, than general text books, published for use 
 throughout the United States, in this : that it does 
 not need to state generally what the law is, and then 
 state "that there A numerous exceptions, and the 
 student will have to look at the statutes of his own 
 state in order to find out what the law is there." 
 
 FOURTH. The book is written in the concrete, 
 rather than the abstract, and contains numerous illus- 
 trations. 
 
 FIFTH. The illustrations, so far as possible, 
 are taken directly from reports of cases decided by the 
 
Supreme Court of California, and of other states where 
 the same law exists, so that the illustrations can be 
 relied upon as stating the law correctly. 
 
 SIXTH. The book is not padded with an ap- 
 pendix of useless and misleading u forms." A number 
 of the more common and necessary forms are given 
 in the body of the work. 
 
 SEVENTH. The work does not deal with 
 generalities, but states the exact law correctly regard- 
 ing business transactions. 
 
 EIGHTH. It is so arranged as to be valuable 
 as a reference book for students after finishing their 
 College course; hence a College should have no second- 
 hand volumes on hand, but can sell new books to each 
 class. 
 
 NINTH. The book is up-to-date, and any amend- 
 ments made to the substantive law, by future Legisla- 
 tures, will be supplied gratis, in the form of supple- 
 ments, thus keeping the work strictly up-to-date. 
 
 We respectfully invite correspondence in regard 
 to the work, and solicit your orders. 
 
 For further information, address 
 
 O. B. PARKINSON, 
 
 STOCKTON, CALIFORNIA. 
 
OUTLINES OF COMMERCIAL LAW 
 

OUTLINES 
 
 OF 
 
 COMMERCIAL LAW 
 
 A TEXT BOOK FOR SCHOOLS 
 AND COLLEGES 
 
 BY 
 
 O. B. PARKINSON, 
 
 OF THE 
 
 STOCKTON, CALIFORNIA, BAR 
 
 STOCKTON, CAL. 
 1898 
 
7 J' 
 
 Entered According to Act of Congress in the Year 1898, by 
 
 O. B. PAUKINSON, 
 In the Office of the Librarian of Congress, at Washington. 
 
3 
 
 PREFACE. 
 
 The fact that most authors of Commercial Law text-books 
 heretofore published have endeavored to supply a text-book which 
 could be used in every State in the Union, and at the same time 
 sufficiently condensed to be within the scope of a college text- 
 book, and consequently have omitted many important details 
 relating to the every-day business law of particular States, is the 
 reason for the production of this work. 
 
 This book is based on the Codes and Statutes and judicial 
 decisions of the State of California, and is designed for use on the 
 Pacific Coast. 
 
 TVe have endeavored to avoid general statements, which are 
 always misleading, and have tried to supply the exact law applica- 
 ble to each subject treated. 
 
 AVe have refrained from any extended discussion of remedies 
 or practise in Court, as they are matters which are understood 
 only by regular attorneys of long practice, and can not possibly 
 be elucidated in the few pages we might devote to them. 
 
 "We have supplemented abstract statements of law with numer- 
 ous examples showing their application, and would call especial 
 attention to this feature, as well as to the test questions requiring 
 thoughtful work on the part of the student. 
 
 Besides the Codes and Statutes referred to, a number of other 
 works have been freely consulted. 
 
 The illustrations given, so far as possible, are taken from 
 decided cases of the Supreme Courts of the various States, and of 
 
VI PKEFACE. 
 
 the United States, so that such cases cau be relied upon as stating 
 the law correctly. 
 
 We have omitted the usual collection of forms for the reason 
 that a form seldom can be made to apply to the case at hand, and 
 consequently serves rather to confuse than aid. 
 
 0. B. PARKINSON. 
 Stockton, CaL, November, 1898. 
 
CONTENTS. 
 
 CHAPTER. PAGE. 
 
 I. HISTORY AND INTRODUCTION 9 
 
 II. CONTRACTS 13 
 
 ^III. PARTIES TO CONTRACTS 16 
 
 U IV. CONSENT OF PARTIES 21 
 
 V. CONSIDERATION . 26 
 
 VI. THE OBJECT 29 
 
 VII. INTERPRETATION, NOVATION AND CANCELLATION 35 
 
 VIII. KEMEDIES 40 
 
 IX. DEFENSES STATUTE OF FRAUDS 47 
 
 X. DEFENSES STATUTE OF LIMITATIONS 52 
 
 XI. DEFENSES PERFORMANCE 57 
 
 XII. NEGOTIABLE PAPER 66 
 
 XIII. PROMISSORY NOTES 72 
 
 XIV. BILLS OF EXCHANGE . . - 78 
 
 XV. CHECKS 84 
 
 XVI. TRANSFER OF NEGOTIABLE PAPER 90 
 
 XVII. ENDORSEMENT 93 
 
 XVIII. PRESENTMENT AND NOTICE 98 
 
 XIX. GUARANTY AND SURETYSHIP 101 
 
 XX. INTEREST AND USURY 106 
 
 XXI. SALES OF PERSONAL PROPERTY 109 
 
 XXII. DELIVERY 115 
 
 XXIII. WARRANTY 122 
 
 XXIV. CONDITIONAL SALES AJSD MORTGAGES 127 
 
 (vii) 
 
Vlll CONTENTS. 
 
 CHAPTER. PAGE. 
 
 XXV. BAILMENTS 134 
 
 XXVI. COMMON CARRIERS 145 
 
 XXVII. SHIPPING 158 
 
 XXVIII. AGENCY 161 
 
 XXIX. PARTNERSHIP 170 
 
 XXX. CORPORATIONS 180 
 
 XXXI. FIRE INSURANCE 193 
 
 XXXII. MARINE INSURANCE 198 
 
 XXXIII. LIFE AND ACCIDENT INSURANCE 201 
 
 XXXIV. REAL PROPERTY 207 
 
 XXXV. DEEDS 214 
 
 XXXVI. MORTGAGES 221 
 
 XXXVII. LANDLORD AND TENANT . 229 
 
COMMERCIAL LAW. 
 
 CHAPTER I. 
 
 HJSTOBY AXD INTRODUCTION. 
 
 Whenever and wherever m the history of the world there has 
 been an association of persons, some rule or regulation of conduct 
 has "been found necessary. 
 
 The first law that we have any record of was almost coincident 
 with the creation. 
 
 A prohibitory law was given to Adam and Eve in the garden 
 of Eden, and a punishment was meted out for disobedience of 
 that law; and through all authenticated history from that time to 
 the present,, there has been no country or nation able to maintain 
 itself without some code of laws. 
 
 "When the wants of people were few and easily supplied, few 
 regulations were required for their government, but as education, 
 arts, sciences, commerce, and civilization generally, have been 
 gradually extended during the centuries, law has become not 
 merely a collection of rules, but a distinct science, consisting of 
 a most complex system of regulations calculated to define and 
 specifically set forth every act and thing which a person may be 
 called upon to do in his intercourse with his fellow-men. 
 
 While it is impossible to explain the meaning of law in a sin- 
 gle definition, the following may be sufficiently accurate for the 
 purpose of this work: "Law is a rule of action dictated by some 
 supreme power capable of enforcing obedience or punishing dis- 
 obedience." 
 
 (9) 
 
10 COMMERCIAL LAW. 
 
 Law generally may be classified as Natural^ Moral, and 
 Human, or Municipal. Municipal Law consists of those rules 
 prescribed by the supreme power of a state or country, declaring 
 what is right and proper, and forbidding what is wrong. 
 
 It is with Municipal Law that we have to do in this book, and 
 only with that division of Municipal Law which is called Civil 
 Law. 
 
 OKI MINT AL LAW is that division of Municipal Law which 
 prohibits acts which are against public peace and harmony, and 
 provides penalties for the punishment of wrongdoers. 
 
 Such crimes as murder, robbery, and forgery, and the punish- 
 ments of 'tine, imprisonment, and death, are included in the Crim- 
 inal Law. 
 
 CIVIL LAW comprises the rules regulating the rights ot 
 individuals in their business relations with each other, and the 
 remedies for the breach of such obligations; as in case A owes B 
 $100, the law declares that B has the right to collect it, and in 
 case A refuses to pay, the law provides a means for compelling 
 payment. 
 
 SOUKCES OF LAW. The most ancient source of part of 
 our modern law is the unwritten law established in England many 
 years ago, and which has since been mostly written. It is called 
 the Common Law. 
 
 The English emigrants brought with them the laws of Eng- 
 land, so that this Common Law became transplanted throughout 
 the United States as the English-speaking people gained control 
 of this country. 
 
 STATUTE LAW consists of the enactments of the United 
 States Congress amd of the Legislature of the several states. In 
 California most of the Statute laws are incorporated in volumes 
 called Codes. 
 
 The Commercial Law is for the most part contained in the 
 Civil Code and the Code of Civil Procedure. 
 
 CONSTITUTIONS AND COUKTS. The Constitutions of 
 
HISTORY AND INTRODUCTION. 11 
 
 the United States and the State Constitution, and the judicial 
 decisions of the Supreme Court of the United States, and of the 
 Supreme Court of each State, are further sources of law. 
 
 CONFLICT OF LAWS. There being so many sources of 
 law it is often the case that the law as declared from one of these 
 sources conflicts with or is opposed to the law as declared from 
 some other source, hence it is important that we should know 
 which law will govern in case of a conflict. 
 
 The Constitution of the United States is highest in authority, 
 and extends over all the states, and the states are allowed to make 
 only such local laws as do not conflict with the Constitution of 
 the" United States. 
 
 The laws of Congress are next in order, and are in force in 
 e^ery part of the United States. The State Constitution comes 
 next and has authority within the limits of the state. Xext to 
 the State Constitution are the Statutes passed by the State Legis- 
 lature. Lastly, the Common Law regulates subjects upon which 
 the other sources are silent. The laws of one state have no 
 authority in and can not be enforced in any other state. 
 
 IXIT.KXATIOXAL LAW. Each country has its own laws, 
 and lias no right whatever over the persons and property of 
 another country; but for mutual protection, the leading nations 
 of the globe have, by common consent, and by agreements and 
 treaties, formed what is known as International Law, or the Law 
 of Xations, which all nations are in honor bound, and in honor 
 only, to respect; e. g., it would be a breach of International Law 
 for a neutral nation to aid with ships or munitions of war one of 
 two nations which are at war with each other, or to protect and 
 refuse to deliver or punish pirates. There is no means of enforc- 
 ing obedience to International Law except by war. 
 
 ADMIRALTY AXD MARITIME LAW. Admiralty Law 
 consists of the rules of a nation regulating commerce and ship- 
 ping on the high seas. 
 
 Admiralty jurisdiction extends to acts done on the high seas 
 
12 COMMERCIAL LAW. 
 
 during a war, while Maritime jurisdiction extends to contracts 
 touching rights and duties pertaining to commerce and naviga- 
 tion in time of peace. 
 
 Under these laws the term "High Seas" includes the Great 
 Lakes and navigable rivers, even within the limits of a single 
 state. The United States Courts alone have jurisdiction over 
 cases between American citizens arising under these laws. 
 
 COMMEEOIAL LAW. The subjects which form the princi- 
 pal part of this book were originally a part of the Common Law, 
 and are derived mainly from the customs of the merchants of 
 London and Liverpool, and for that reason the particular part 
 referring to negotiable paper and business transactions has been 
 called the "Law Merchant." 
 
 The legal maxim, "Ignorance of the law excuses no one," 
 applies in business transactions as well as where a criminal offense 
 is committed. No one can say that he did not know what the 
 law was, and thus escape the consequences of his acts, hence it is 
 important that every one should have a practical knowledge of the 
 laws of business. 
 
 TEST QUESTIONS. 
 
 1. Distinguish critically between Criminal Law and Civil 
 
 La\\ r . 
 
 2. j^ame the different sources of law in the order of their 
 
 present authority. 
 
 3. The captain of a vessel on Lake Superior runs his vessel 
 into and damages another vessel. Under what general 
 law should the damage suit be brought? 
 
 4. What was the Law Merchant? 
 
CHAPTER II. 
 
 CONTRACTS. 
 
 CONTRACTS are the basis of, or enter into, almost every 
 transaction in business life, hence they naturally and properly 
 should be studied first as a whole. 
 
 The different subjects treated of under the title "Commercial 
 Law,'' such as agency, partnership, insurance, and negotiable 
 paper, are merely branches of the Law of Contracts. 
 
 DEFINITION. A Contract is an agreement for a considera- 
 tion to do or not to do a certain thing. 
 
 The word "agreement" implies that there must be at least two 
 person? as parties to the Contract. A mere voluntary promise 
 upon the part of one individual without any corresponding prom- 
 ise on the part of another is not a Contract. 
 
 ESSENTIALS OF CONTRACTS. It is essential to the 
 existence of a Contract that there should be: 
 
 (1) Parties capable of contracting. 
 
 (2) Their consent. ^ " 
 
 (3) A lawful object. 
 
 (4) A sufficient consideration. 
 
 Each of these essentials will be fully considered in subsequent 
 chapters. 
 
 Contracts may be either express or implied, written or oral. 
 
 An EXPRESS CONTRACT is one the terms of which are 
 stated in words; as for example, A says to B, "I will sell you this 
 horse for $50." B says: "I accept your offer. Here is $50." 
 This is an Express Contract. 
 
 IMPLIED CONTRACTS are those the existence and terms 
 of which are manifested by conduct; as, where a person enters a 
 
 (13) 
 
14 COMMERCIAL LAW. 
 
 grocery store, asks for $1.00 worth of coffee, receives it, and walks 
 away without saying anything about payment. It is implied that 
 he will pay for the coffee, and lie is as liable for the price of it as 
 though he had expressly said that he would pay. Even where 
 there is an Express Contract made, there are usually one or more 
 Implied Contracts accompanying and connected with the trans- 
 action; as where a person makes an Express Contract for the pur- 
 chase of groceries, it is in cities usually implied that the grocer 
 will deliver the groceries, and also implied that the customer's 
 house will be open to receive them, during reasonable hours. 
 
 And, generally, there is the implied agreement in every trans- 
 action that the parties thereto will do whatever is necessary to 
 make possible the carrying out of the conditions of the Contract. 
 
 WRITTEN CONTRACTS are those in which the terms of 
 the Contract are set forth by means of handwriting, printing, or 
 by any characters, on any material, with any instrument, and 
 signed by the parties. 
 
 The particular advantage of Written Contracts is that the 
 exact language assented to by the parties may be preserved for 
 future reference; so it is important in writing a Contract to use 
 such materials as will make the writing indelible and permanent. 
 A Contract written in lead pencil is legal, but is easily altered. 
 
 OEAL CONTRACTS are those in which the Contract is 
 entered into by means of spoken words. In general, Oral Con- 
 tracts are equally as binding upon the parties as Written Con- 
 tracts. (Exceptions will be noted in a subsequent chapter.) 
 
 The great advantage of Oral Contracts is in the ease with 
 which they can be entered into. In matters of small consequence 
 Oral Contracts are preferred to the formal written ones. 
 
 CONFLICTING CONTRACTS. If a Contract in writing is 
 made, and also an Oral Contract concerning the same object and 
 between the same parties, which is materially different from the 
 written agreement, the written agreement will control the Oral 
 Contract. In so far as the Oral Contract is in conflict with the 
 
CONTRACTS. 15 
 
 written one it is of no effect. The reason for this is that the 
 Written Contract is presumed to be more carefully and formally 
 made,, and to be the result o- deliberation, and therefore more 
 nearly to express the real intentions of the parties than an oral 
 one. For a like reason parts in handwriting control printed 
 parts in a Contract. 
 
 ENTIRE CONTRACT. An Entire Contract is one in which 
 an entire performance on the part of one party must precede per- 
 formance by the other; as where a carriage maker agrees to manu- 
 facture a certain carnage at a price of $100. The carriage must 
 be fully completed before the maker can demand any part of the 
 pay. A half -finished carriage would be of no use to the customer. 
 
 SEYERABLE CONTRACTS are those in which complete 
 performance by one party is not necessary before anything can be 
 required of the other. When the price is expressly apportioned 
 by the Contract or the apportionment may be implied to each 
 item to be performed, the Contract will generally be held to be 
 severable; as in case a Contract is made for the purchase of ten 
 tons of pig iron at $80 per ton. If only five tons were delivered 
 the contractor could claim payment for the five tons at $80 per 
 ton. 
 
 TEST QUESTIONS. 
 
 1. Name the essentials of every Contract. 
 
 2. State fully the difference between "Express" Contract and 
 "Implied" Contract, and the advantage of each. 
 
 3. A agrees to build a house for $2,000, the money to be 
 paid when the house is completed. A never completes 
 the house. Can he draw any of the contract price? Ex- 
 plain fully. 
 
 4. A agreed with B. that B should deliver 100 tons of Kay at 
 
 $5 a ton to A. B delivered twenty tons and no more. 
 Discuss the transaction fully as a Contract, and the reme- 
 dies of each party. 
 
CHAPTER III. 
 PARTIES TO CONTRACTS. 
 
 ALL PARTIES except those forbidden by law may contract 
 about any legal object in a lawful manner, but there are excep- 
 tions expressly made by the Statute Law, as follows: "All per- 
 sons are capable of contracting except 
 
 (1) Minors; 
 
 (2) Persons of unsound mind; and 
 
 (3) Persons deprived of civil rights." 
 MINORS are: 
 
 (1) Males under 21 years of age; 
 
 (2) Females under 18 years of age; 
 
 tmd in computing the periods specified the time must be calculated 
 from the first minute of the day on which persons are born to the 
 same mirmte of the corresponding day completing the period of 
 minority, that is, if a male child is born on the 10th day of March, 
 -at 6 o'clock A. M., he becomes of age on the 10th day of March, 
 twenty-one years after, at one minute past 12 o'clock A. M. 
 
 In general, a minor's Contracts are considered valid until he 
 wishes to avoid them, which he may do either before his majority 
 or within a reasonable time afterwards. Some Contracts, how- 
 ever, especially declare a minor may not make, hence these are 
 absolutely void from the beginning; as, 
 
 A Contract appointing an agent. 
 
 All other Contracts (not valid), however, are merely voidable. 
 'The marriage of a minor does not remove the disability of minor- 
 ity; that is, a minor who marries does not acquire any more rights 
 and is not deprived of any rights whatever in regard to Contracts 
 by reason of such marriage. 
 (16) 
 
PARTIES TO CONTRACTS. 17 
 
 By a special Act of Legislative a marriage settlement given 
 by a minor who is capable of contracting marriage is valid, and 
 can not be afterwards avoided. A minor who falsely represents 
 himself as being of full age can not afterwards avoid the Contract 
 on the ground of his minority. This rule is in harmony with the 
 legal maxim, "Xo one is allowed to take advantage of his own 
 wrongful act." 
 
 PEESONS OF UXSOUXD MIX D. This is quite a com- 
 prehensive term and includes idiots, lunatics, drunken persons, 
 or persons who from great age, sickness, or other causes are not 
 of sound mind. A person who claims that his contract is not 
 valid because of his unsoundness of mind must show that his 
 mind was unsound at the time of entering into the contract. The 
 fact that he was of unsound mind before or after the date of enter- 
 ing into the contract would not be sufficient to relieve him in any 
 degree from responsibility for his contract. 
 
 A person who enters into a contract while he is of unsound 
 mind, may, when he is restored to sound mind, refuse to carry 
 out his part of the contract, on the ground it was entered into 
 while he was not capable of contracting. This sort of a contract, 
 therefore, is said to be a Voidable Contract. 
 
 A person who has a monomania, that is, who is of unsound 
 mind on one subject only, can not avoid any contract which he 
 may mal:e concerning other subjects. 
 
 If a person is an absolute idiot, his contract is absolutely void, 
 and of no effect whatever. And where a person has been judi- 
 cially declared insane, and a guardian appointed, his contracts are 
 void even though made during a lueid interval. 
 
 DRUXKARDS. Drunkenness is in itself no excuse for non- 
 performance of a contract, and contracts entered into while under 
 the influence of, or suffering from the effect of, intoxicating liquor, 
 are only voidable when a person is so drunk as to seriously impair 
 the reasoning faculties, or in other words, to make him of 
 unsound mind. 
 
 It has been decided that where a person voluntarily becomes 
 2 
 
18 COMMERCIAL LAW. 
 
 intoxicated that he may enter into a contract and afterwards 
 avoid it, such intoxication is no defense whatever against a person 
 who wishes to compel him to perform his contract. 
 
 PERSONS DEPRIVED OF CIVIL RIGHTS are not abso- 
 lutely debarred from making contracts, but may make them, and 
 after they are released from prison or restored to their rights, 
 they may avoid the contracts. In case of a person who is impris- 
 oned for life, however, an exception is made. His contracts are 
 considered valid. 
 
 DISAFFIRMANCE OF CONTRACTS. A person is said to 
 disaffirm a voidable contract when he refuses to be bound by its 
 terms. The right of disaffirmance may be exerted by one who 
 has entered into a contract while under disability. He is allowed 
 a reasonable time after the disability is removed. As in the case 
 of a minor, a man must disaffirm his contract within a reasonable 
 time after becoming twenty-one years of age. Should the minor 
 die before reaching his majority, the contract may be disaffirmed 
 in the same manner in his behalf, by the administrator of his 
 estate. What would be a reasonable time depends on the cir- 
 cumstances of each case. 
 
 In one case a minor sold a promissory note, received the pur- 
 chase money, and endorsed the note to the purchaser, and for 
 eleven months after she arrived at her majority, made no offer to 
 return the purchase money or disaffirm the sale. It was held that 
 eleven months was an unreasonable time, and she therefore could 
 not recover the note. 
 
 Disaffirmance must be manifested by some positive act. The 
 party disaffirming must do or say something to show that he 
 avoids the contract. Thus it is held that where a minor grantor 
 of land on attaining his majority executes another deed, this 
 second deed will avoid the first. 
 
 AFFIRMANCE. A voidable contract may be affirmed within 
 a reasonable time after (not before) the disability is removed, 
 either. 
 
PARTIES TO CONTKACTS. 19 
 
 (1) By express ratification in words: or 
 
 (2) By acts which imply affirmance; or 
 
 (3) By omission to disaffirm. 
 
 AVe observe that disaffirmance must be more formal and 
 explicit than affirmance. By merely saying or doing nothing a 
 person will affirm a contract, while if he wishes to disaffirm, he 
 must make it known in some positive manner. 
 
 The right of affirmance or disaffirmance is confined exclusively 
 to the person who is under disability; so that while a minor has a 
 right to disaffirm certain contracts, an adult who enters into the 
 contract with the minor has no right to disaffirm. 
 
 CONTRACTS FOE NECESSARIES. A minor or a person 
 of unsound mind can not disaffirm a contract, otherwise valid, to 
 pay the reasonable value of things necessary for his support or 
 that of his family. This is an exception to the general rule of 
 contracts stated above, and it is just in its operation, both to the 
 person under disability and those dealing with him. 
 
 It is necessary, however, that the credit be given to the minor 
 or incompetent person himself, otherwise he is not chargeable, 
 though he has received the articles. Reasonable value is a ques- 
 tion of fact and would ordinarily be the market value of the goods 
 at the time they were furnished. 
 
 NECESSARIES OF LIFE are: 
 
 (1) Proper food; 
 
 (2) Clothing; 
 
 (3) Lodging; 
 
 (4) Medical attendance; 
 
 (5) Education. 
 
 "What is necessary depends on a person's station in life, and is 
 not restricted to what is absolutely necessary merely to support 
 life. A person with a large estate can bind himself to pay for 
 more expensive clothes, better food and lodging, and a higher 
 education, than a poor person. Each case must be determined 
 according to its own circumstances. In one case kid gloves, silk' 
 
20 COMMERCIAL LAW. 
 
 cravats,, walking canes, and cologne, were held not to be neces- 
 saries. Generally, luxurious articles of utility may be included 
 under the term ''necessaries," e. g. } a watch; while luxurious arti- 
 cles which are purely ornamental are not included as necessaries, 
 e. </., ear-rings; and even an article which is considered necessary 
 lor persons in any station in life, such as flour, would not be a 
 necessary if a person were already well supplied with flour; and a 
 dealer furnishing such person with unusual quantities of flour 
 could not recover pay for more than was required for ordinary use. 
 ALIEN ENEMIES.- In the event of war breaking out 
 between the United States and a foreign country all business is 
 suspended between the countries, and every subject of the foreign 
 country is considered an enemy; hence, by furnishing goods to a 
 merchant in the foreign country, a merchant of the United States 
 would be aiding the enemy; therefore all such contracts are abso- 
 lutely void. 
 
 TEST QUESTIONS. 
 
 1. Who are competent parties to a contract? 
 
 2. Distinguish between "void" and "voidable" contracts. 
 
 3. A minor orphan contracts a bill for butter and flour, and 
 is sued for the price. He pleads infancy as a defense. In 
 whose favor should the Court decide? 
 
 4. A farm hand wrote and signed a promissory note. Upon 
 
 being sued for the amount, he alleges intoxication as a 
 defense. Can he defeat the suit upon such plea? 
 
 5. A person enters into a contract and afterwards becomes 
 
 insane. The contract being otherwise valid, how may it 
 be enforced against his estate? 
 
 6. Illustrate fully the manner in which a contract may be 
 "affirmed" or "disaffirmed." 
 
 7. Name the "necessaries of life" and illustrate what articles 
 would or would not be "necessaries" under certain circum- 
 stances. 
 
CHAPTER IV. 
 
 CONSENT OF PAETIES. 
 
 CONSENT is the agreement by the parties to a contract con- 
 cerning the object of the contract, and must be free, mutual, and 
 fomnntnicated ly each to the other. Until there is an agreement 
 containing these three elements, there is no consent to the con- 
 tract. 
 
 A PROPOSAL or offer must, of course, be made by one party 
 wishing to enter into a contract. This does not bind the person 
 who makes the offer until his offer is accepted,, and he may with- 
 draw it at any time before acceptance. The rule is that an oral 
 proposition must be accepted at the time it is made,, or at furthest, 
 before the parties separate. if they separate without having 
 entered into the contract, the offer can not be accepted later unless 
 time \vas expressly given. 
 
 In case of a written proposal being made a reasonable time is 
 allowed for acceptance or refusal, and what a reasonable time is 
 must be determined by the circumstances of each case. 
 
 ACCEPTANCE. The parties must agree upon the same 
 thing in the same sense, in order to make a valid contract; hence 
 the acceptance must be absolute and unqualified. If it contains 
 any conditions it is not a valid acceptance, but amounts in effect 
 to a new proposal; as if A offers to sell a typewriter to B for $100 
 cash, and B replies, saying, "I will accept your offer if you will 
 take my note instead of the cash." B thus makes a new offer, 
 which may be accepted by A or not, as he pleases. 
 
 WRITTEN' PROPOSALS. In case a proposal is sent by let- 
 ter, the offer remains open until the letter in the usual course of 
 mail would reach its destination, and for a reasonable time there- 
 after. 
 
 (21) 
 
22 COMMERCIAL LAW. 
 
 The acceptance of a written offer takes effect as soon as the 
 party accepting it has put his acceptance in the course of trans- 
 mission to the proposer, even though the proposer may not receive 
 the acceptance for a long time, or may not receive it at all. 
 
 This may seem to work a hardship on the proposer, but he 
 may limit the time for holding his offer open for acceptance in 
 this manner: "If I do not hear from you within ten days I shall 
 conclude you do not accept.'* This would relieve him from hold- 
 ing open the offer more than ten days even though an acceptance 
 had been mailed within the ten days and not received until after 
 the ten days had elapsed. 
 
 In case an offer is sent by mail, and within proper time is 
 accepted by mail, we have seen that from the moment the letter 
 of acceptance is started, the acceptance is complete, therefore, if 
 the proposer changes his mind and mails a letter withdrawing the 
 offer before the acceptance reaches him, the acceptance is never- 
 theless effective and the contract is complete. 
 
 IMPLIED GENERAL PEOPO SALS. Every storekeeper by 
 placing goods on his shelves and opening his doors to the public, 
 thereby invites every one to come in and make purchases, and any 
 person may enter such store and demand any article therein dis- 
 played on tender of the proper price. This is the acceptance of 
 the general proposal, and when thus accepted the contract is 
 complete. 
 
 CONSENT, VOIDABLE. A consent which is obtained by 
 
 (1) Duress; 
 
 (2) Menace; 
 
 (3) Fraud; 
 
 (4) Undue influence; or 
 
 (5) Mistake; 
 
 is not free, and the contract is therefore voidable on the ground 
 of lack of consent. 
 
 DURESS consists in 
 
 (1) Unlawful confinement of a person or his relatives; 
 
CONSENT OF PARTIES. 23 
 
 (2) The unlawful detention of his property; as where a person 
 holds a sum of money and refuses to deliver it until a contract is 
 entered into. And under the first subdivision above, one who 
 pays money for his release from prison under unlawful confine- 
 ment, may recover the money so paid. 
 
 AILXACE consists of a threat of unlawful injury to the per- 
 son or character or property of a person, made with the intent of 
 compelling consent to a contract. A person who enters into a 
 contract under such menace, may avoid the contract on that 
 ground, and if he has paid anything, may recover everything he 
 has paid by reason of the threat made. It must be remembered 
 that the threat must be of unlawful prosecution. A threat of 
 lawful prosecution against a person will not constitute duress; and 
 a person claiming duress must show not only that he was in fear, 
 but that he had reasonable grounds for believing that he or his 
 property was in actual danger. 
 
 F1LVUD, generally, is said to be some deception practised with 
 the intent of inducing a person to enter into a contract. This, 
 however, is not strictly correct. In order to constitute fraud in a 
 legal sense it is necessary that material damage should be done by 
 reason of the deception. 
 
 Xo matter what false statements or representations are made 
 to a person, if he does not believe them, and is not deceived 
 thereby to his injury, he can not claim to have been defrauded; 
 and he is bound to use such diligence as an ordinarily prudent 
 business man would use in entering into contracts, otherwise he 
 can not avoid the contract on the ground of fraud, as the law will 
 not assist any one who is defrauded by reason of his own negli- 
 gence or foolishness. 
 
 Xevertheless, if, as in the case of a man buying a horse, 
 the person relies entirely on the dealer's judgment, stating that 
 he knows nothing about a horse and wishes a gentle, well-broken 
 animal, and the dealer by wilful falsehood assures him that the 
 horse is all that is desired, when in fact he is not, the purchaser 
 
24 COMMERCIAL LAW. 
 
 is entitled to avoid the contract, return the horse, and receive 
 back his money on the ground of fraud. 
 
 CRIMINAL LIABILITY. A person who defrauds another, 
 or who makes any contract or conveyance with the attempt to 
 defraud or deceive, or to hinder or delay creditors in the collec- 
 tion of their just debts, is, under the provisions of the Penal Code, 
 guilty of a misdemeanor, and may be punished by fine and im- 
 prisonment, in addition to any civil liability in damages to the 
 injured party. 
 
 UNDUE INFLUENCE consists in taking an unfair advantage 
 of another's weakness of mind, or necessities, or distress, or by 
 using a person's confidence unduly to induce him to enter into 
 contracts; as where a child would take advantage of an aged 
 father's weakness of mind to induce him to disinherit other chil- 
 dren. Undue influence, however, must be carefully distinguished 
 from the ordinary influence which is brought to bear by one per- 
 son upon another in every-day life for the purpose of inducing 
 the making of contracts. Just what amount of weakness of mind 
 or distress on the part of one party, and what amount of influence 
 exerted on the part of the other party, will constitute undue in- 
 fluence, so as to make the contract voidable, is a question of fact 
 to be determined by the circumstances of each case. In any 
 event, the influence so exerted must have resulted in damage to 
 the person influenced,, otherwise the contract can not be avoided. 
 
 MISTAKE is, 
 
 (1) An unconscious ignorance of a fact material to the con- 
 tract; or 
 
 (2) A belief in the existence of a thing material to a contract, 
 which does not exist. 
 
 It is absolutely necessary that the mistake be mutual; therefore 
 mistake, under the law of contracts, means something entirely 
 different from what is ordinarily meant by the term. 
 
 If the misapprehension is only on the part of one party, the 
 other party knowing full well concerning the matter, it amounts 
 
Y) 
 
 or- 
 
 CONSENT OF PARTIES. 25 
 
 to a deception on the part of the party having such knowledge; 
 as if A thinks he is selling a tract of land, other than that actually 
 conveyed, and B thinks that he is receiving that which is con- 
 veyed, it is a mutual mistake; hut if A knows he is selling a tract 
 of land other than that B thinks is conveyed, it is a fraud on 
 A's part, and not a mistake. To take advantage of mistake, rea- 
 sonable diligence must be used in avoiding the contract by the 
 party who is injured, and he must return anything which he has 
 received under the contract before he can avoid it. 
 
 TEST QUESTIONS. 
 
 1. Xame three elements constituting consent. 
 
 2. A physician buys a horse from a dealer for use in his pro- 
 fession; the horse proves to be vicious and refuses to stand. 
 Under what circumstances would the contract be voidable, 
 and under what valid? 
 
 3. A man purchases an article for a certain but unexpressed 
 
 purpose; it proves to be unfit for such purpose. May he 
 return the article and rescind the contract? 
 
 4. Distinguish critically between "mistake" and "fraud" in 
 
 law of contracts. 
 
CHAPTER V. 
 CONSIDERATION. 
 
 CONSIDERATION. In all contracts there is in reality a 
 consideration offered by each party to the other to induce him to 
 enter into the contract. For convenience, however, money, or its 
 equivalent, is usually spoken of as the consideration in ordinary 
 contracts, and the thing, other than money, is called the object 
 of the contract. 
 
 As a general rule all contracts require a consideration, but 
 there are two exceptions. 
 
 (1) Negotiable paper in the hands of an innocent purchaser 
 for value before maturity. 
 
 (2) Certain mutual promises, as mutual promises to marry. 
 VALUABLE CONSIDEKATION consists of 
 
 (1) Any benefit to the promisor. 
 
 (2) Loss or inconvenience to the promisee. 
 
 It is not therefore necessarily money which is the considera- 
 tion, but any benefit, and the word "any" includes the smallest 
 benefit which is of value. The law does not presume to say what 
 is the reasonable value of an article. 
 
 Examples. In the absence of fraud, or other legal reason for 
 avoiding the contract, a person who sells a fine horse for $5.00 
 must abide by his contract. He can not avoid it on the ground 
 of the inadequacy of the consideration. 
 
 An agreement to pay in future greater interest on a note, is 
 sufficient consideration for the agreement of the creditor not 
 to sue. 
 
 The part payment of a note when all is due is not sufficient 
 consideration for a promise to extend the time of payment. 
 (26) 
 
CONSIDERATION. 27 
 
 GOOD CONSIDERATION" consists of the love and affection 
 which near relatives have toward each other. A man deeds his 
 son a house and lot without any valuable consideration merely as 
 a gift. The love inducing the gift would be a good consideration. 
 Such consideration will only he sufficient after the gift has been 
 made. A mere promise to give something in the future, even to 
 a child, can not be enforced. 
 
 It is the duty of a father, mother or child of any poor person, 
 who is unable to maintain himself, by working, to maintain such 
 person to the extent of their ability, and the promise of an adult 
 child to pay for necessaries previously furnished to a parent is 
 binding. The law in such cases presumes the love and affection 
 which makes tbe good consideration. 
 
 I'UKDITOirS EIGHTS. While it is true that as between 
 the parties to a contract, a small consideration, or the considera- 
 tion of love and affection, may be sufficient to support a contract, 
 nevertheless, if a person deeds valuable property for an extremely 
 small sum to a friend, with the understanding that it is to be 
 reconveyed to him, and this contract is made for the purpose of de- 
 frauding his creditors, the conveyance may be set aside, and the 
 contract declared void in a suit brought by the' creditors. The 
 same is true in case a man gives his property to his relatives in 
 order to prevent his creditors from enforcing their just claims; 
 and in general, when there are creditors, the conveyance of prop- 
 erty for a small or no consideration, is considered good evidence 
 of fraud. 
 
 ANY CONSIDERATION which is perversive of the letter 
 or intent ot the law, is an unlawful consideration, and will not 
 support a contract; as A gives B his note on the consideration 
 that B will procure A's escape from jail, B can not collect any- 
 thing on the note because the releasing of prisoners in such man- 
 ner is unlawful. 
 
 IMPOSSIBLE. Everything is deemed possible which is pos- 
 sible in the nature of things. A man who has agreed to pay 
 
28 COMMERCIAL LAW. 
 
 $100 as consideration for services performed can not avoid pay- 
 ment on the ground of impossibility by saying that it is impos- 
 sible for him to pay the hundred dollars. It is not impossible in 
 the nature of things. A mere pecuniary impossibility is not a 
 legal impossibility. 
 
 When the consideration is on its face impossible of execution, 
 the entire contract is void; as where the consideration is that A 
 shall travel from San Francisco to Kew York in a day. 
 
 FAILING. If the consideration is apparently sufficient, but 
 in fact worthless, or if sufficient when the contract is made, and 
 subsequently becomes of no value, this failure of consideration 
 will make void the entire contract; as where a person receives 
 shares of stock in a mining company, and afterwards discovers 
 that the certificate of stock has been forged. 
 
 TEST QUESTIONS. 
 
 1. A man in contemplation of insolvency conveys his property 
 
 to his son. May his creditors enforce payment from that 
 property? 
 
 2. A agrees to give B $100 to leave the state until a certain 
 
 case is tried so as not to be a witness. B does so and 
 returns. A refuses to pay the $100. Discuss the reme- 
 dies of B. 
 
CHAPTER VI. 
 
 THE OBJECT. 
 
 THE OBJECT of a contract is the thing which it is agreed 
 on the part of the party receiving the consideration to do, or not 
 to do; or in other words, it is the thing about which the agree- 
 ment is made; as in the case of the purchase of a horse, the horse 
 is the object of the contract. 
 
 LAWFUL. The object of the contract must be lawful when 
 the contract is made, and possible and ascertainable by the time 
 the contract is to be performed. 
 
 Where a contract has but a single object, and such object is 
 unlawful, the entire contract is void; but where a contract has 
 several distinct objects, if one is lawful and the others unlawful, 
 the contract is valid in regard to the lawful object, and void as to 
 the rest: as where a person gives a mortgage securing an individual 
 note, and a company note, if the company note is void, the mort- 
 gage security will nevertheless be good as securing the individual 
 note. 
 
 UNLAWFUL. That is not lawful which is 
 
 (1) Contrary to an express provision of law; 
 
 (2) Contrary to public policy: 
 
 (3) Otherwise contrary to good morals. 
 
 Under the definition in subdivision one, it makes no differ- 
 ence in the validity of the contract that the contract is not crim- 
 inal in its nature. It is enough if it is contrary to the provisions 
 of law; as if a man agrees for a consideration to drive a horse 
 through the streets of a city at the rate of fifteen miles per hour; 
 fast driving being prohibited, the contract would be invalid, even 
 though in itself there is no wrong in driving a horse at a rapid 
 
 rate. 
 
 (29) 
 
30 COMMERCIAL LAW. 
 
 If payment is refused under such a contract, the driver can 
 not recover the consideration in a suit at law, because the con- 
 tract is unlawful, and in accordance with the legal maxim, "The 
 law will not aid wrongdoers." 
 
 Under subdivision two, it has been decided that agreements 
 in consideration of aiding a candidate to procure an office, to 
 share the salary of the office, are contrary to public policy and 
 therefore void; as is a contract to keep a witness for the gov- 
 ernment out of the way until after a trial is over. In either of 
 these cases no part of the contract can be enforced. 
 
 CONTEACTS IN EESTEAINT OF TEADE also come 
 within the purview of subdivision two above, as being against 
 public policy. It often happens that a person builds up a profit- 
 able business, and people are attracted to his place of business by 
 reason of his personal qualities. If he sells out his business to a 
 stranger, it is customary for the stranger to require a contract 
 from him to the effect that he will not open another store for the 
 transaction of the same kind of business, as he would probably by 
 so doing take many of his regular customers away from the 
 stranger. Such contracts, however, are not void, provided the 
 seller agrees to refrain from carrying on a similar business within 
 the limits of a specified county, city, or part thereof; and even 
 such a contract is only valid so long as the buyer, or any person 
 deriving title to the good-will from him, carries on a like business 
 therein. 
 
 It is held that where A agreed not to carry on the business of 
 street paving in the city of San Francisco, or the state of Cali- 
 fornia, that the entire contract was void as including more terri- 
 tory than allowed by law. 
 
 A contract which does not specify any territorial limit at all, 
 is, of course, void; as, where a contract was entered into not to 
 engage in tf any branch of the yeast powder business," the con- 
 tract was held to be absolutely void. 
 In regard to partners, however, the limit within which any 
 
THE OBJECT. 31 
 
 outgoing partner may carry on a similar business on dissolution 
 is the boundary of the city or town where the partnership bus- 
 iness has been transacted, or a specified part therein. The theory 
 upon which contracts of restraint of trade are allowed at all, is 
 that the buyer is entitled to the good-will of the business. Good- 
 will is the expectation of continued public patronage. Our law- 
 makers have concluded that in the ordinary lines of business a 
 man can not expect patronage from a larger extent of territory 
 than one county, hence that limit has been fixed. 
 
 CONTRACTS RESTRAINING MARRIAGE. Every con- 
 tract in restraint of the marriage of any person other than a minor 
 is void; but this does not affect limitations where the intent was 
 not to forbid marriage,, but only to give the use until marriage; 
 thus a contract by which a father agrees to give his son one thou- 
 sand dollars if he does not marry until he is twenty-one years of 
 age, is in all respects valid; but if the contract is that the son shall 
 forfeit all claim to his inheritance if he marries at any time, it is 
 invalid; but where a widow is given the use of certain property 
 until she remarries, the condition is valid, as merely giving the 
 use until marriage and not forbidding marriage. 
 
 BROKERAGE CONTRACTS are in all cases void. The pro- 
 prietor of a so-called marriage bureau can not enforce the collec- 
 tion of any fee agreed to be paid him for negotiating a marriage, 
 as the contract in itself is against public policy, in that it en- 
 courages marriage of persons hastily, and as a mere matter of 
 business speculation. 
 
 FRAUDULENT CONTRACTS. All contracts which have 
 for their object an exemption of any one from responsibility for 
 his own fraud, or for fraudulent injury to the person or property 
 of another, are against the policy of the law, and therefore void; 
 as for example, where a debtor in failing circumstances makes a 
 transfer of his property to a friend for the purpose of defrauding 
 his creditors, such contract is absolutely void in all respects, and 
 creditors may recover the property and have it applied to the sat- 
 
32 COMMERCIAL LAW. 
 
 isfaction of their debts, upon proving that fraud has been com- 
 mitted. 
 
 The debtor himself, however, is bound by the act of trans- 
 ferring the property to his friend, and can not compel the friend 
 to give back the property, as he himself committed fraud, and the 
 law will not aid wrongdoers. The law provides, however, that a 
 debtor may make assignments of his property to any person in 
 trust for the benefit of his creditors. This act when done with- 
 out fraud is valid, and any surplus that may remain after his 
 creditors are paid, the assignee must return to the debtor. Under 
 what is termed the National Bankruptcy Law, which is in force 
 in all the states and territories, creditors, upon proper application 
 to the Court, may compel the placing of his property in the hands 
 of an assignee for the purpose of being sold to satisfy their claims. 
 Any assignments, if voluntary, must place all creditors on an 
 equal footing. So far as the assignment gives one creditor a 
 larger share than another it is void, as being a fraud upon other 
 creditors. 
 
 CONTKAKY TO GOOD MORALS. A note given by a wife 
 for land conveyed to her by her husband in consideration of her 
 allowing him to get a divorce, has been held void, as being con- 
 trary to good morals. Obscene publications come under the head 
 of immoral contracts, and consequently any such contracts are 
 void, and the price agreed to be paid can not be recovered in a suit 
 at law; and under the Penal Code any person who writes, composes, 
 distributes, sells, or publishes any lewd paper, picture, or figure, 
 or sings any ]ewd or obscene song in public, is guilty of a mis- 
 demeanor, and his contract for performance of any such acts is 
 absolutely void. 
 
 "Wagers are against good morals, and will not be enforced by the 
 Courts; however, it has been held that before the wager has been 
 decided by the stake-holder either party may recover his money 
 from the stake-holder, but that after the money has been paid by 
 him to one of the parties, the transaction is complete, and the 
 money so paid can not be recovered. 
 
THE OBJECT. 33 
 
 It has been held that where a purse is offered by way of pre- 
 mium or reward, for the winner of a horse-race, it does not come 
 within the law against bets or wagers, and the contract may be 
 enforced. 
 
 SUXDAY CONTRACTS. In many of the states there are 
 laws against making contracts on Sunday, and the impression is 
 so general that it is necessary to state that in California there is 
 no Sunday law, and, consequently, any contracts which would be 
 valid on any other day of the week would be valid on Sunday. 
 Even contracts which would appear to be in desecration of the 
 Sabbath, such as a contract to play ball on Sunday, are valid, and 
 the ball player may collect his wages for his services performed 
 on Sunday, if his claim is otherwise valid. Sunday is, however, 
 a legal holiday, and certain acts relating to business of the state 
 and the Courts are not valid if performed on that day; not be- 
 cause it is Sunday, but because it is a legal holiday. 
 
 ELEMENTS OF FRAUD. As has been stated in a previous 
 chapter, a mere falsehood is not necessarily a fraud, and the fol- 
 lowing elements must all be represented in a contract before the 
 contract can be declared void on the ground of fraud. 
 
 (1) The means resorted to must be for the purpose of induc- 
 ing the one deceived to enter the contract. 
 
 (2) They must be false in fact. 
 
 (3) The party resorting to them must have had no belief in 
 them, or no reasonable ground for believing them. 
 
 ( i) The party deceived must have relied upon them, and been 
 justified in relying upon them. 
 
 (.">) There must have been material damage to the party de- 
 ceived. 
 
 From the fourth element it will be seen that a person must 
 exert at least ordinary care in accepting any statements as true, 
 otherwise he can not claim to have been defrauded. 
 
 In the case of a sale of wool which had been exposed to a rain- 
 storm in order to make it weigh heavier, the seller explained the 
 3 
 
 VERSTTV 
 
34 COMMERCIAL LAW. 
 
 stains on the sacks caused by the water by saying that they were 
 old sacks. It was held that the purchaser exerted due diligence; 
 that all the elements of fraud were present, and that he was en- 
 titled to rescind the contract and receive back what he paid for 
 the wool. 
 
 TEST QUESTIONS. 
 
 1. A "baseball player contracts to play a certain game on Sun- 
 day, for a consideration. May he collect the sum agreed 
 upon? 
 
 2. A marriage broker procures a wife for A and sues him for 
 
 a fee of $50. Can he recover judgment? Give reasons. 
 
 3. A sells his store to B and agrees not to open another store 
 in the same line of business. Discuss the validity of the 
 agreement. 
 
 4. A agrees to give his daughter $5,000 on her eighteenth 
 birthday if she remains unmarried until that time. Can 
 she recover the $5,000 before that time? Give reasons. 
 
CHAPTER VII. 
 INTERPRETATION, NOVATION, AND CANCELLATION. 
 
 Even though a contract may have been entered into by formal 
 and carefully-drawn writing, or by the most explicit oral under- 
 standing, yet it often happens that the meaning is not plain, and 
 ha- been understood differently by the respective parties; hence 
 certain rules ha\e been laid down for the interpretation of con- 
 tracts: and, in general, ail contracts are to be interpreted by the 
 same rules. 
 
 MTTUAL INTENTIONS. A contract must be interpreted 
 so as to give effect to the mutual intention of the parties as it 
 existed at the time of contracting, so far as the same is ascertain- 
 able and lawful. Of course, so far as any part of the contract is 
 unlawful, it is void and of no effect. The language of a contract 
 is to govern its interpretation, if the language is clear and explicit, 
 and does not involve an absurdity. In a case where a bond was 
 given the intention was to have it read "two thousand two hun- 
 dred dollars.' 5 The word "thousand'* 5 was omitted, and it read 
 "two two hundred dollars." The Court decided that 
 
 the language did involve an absurdity, there being no such thing 
 wo two hundred dollars/' and that therefore oral evidence 
 would be admitted to show what was intended. 
 
 WRITTEN CONTRACTS. When a contract is reduced to 
 writing, the intention of the parties is to be ascertained from the 
 writing alone, unless, through fraud, mistake, or accident it fails to 
 express the real intention of the parties; as in a case where a man 
 who could not read was asked to sign a promissory note with the 
 understanding that it provided for the payment by him of $100. 
 In fact the note provided for the payment of $500. The Court 
 
 (35) 
 
36 COMMERCIAL LAW. 
 
 held that oral evidence of the intention might be given, and the 
 contract was declared void on the ground of fraud. The execu- 
 tion of a contract in writing, whether the law requires it to be 
 written or not, supersedes ail oral agreements concerning the 
 same matter, which preceded or accompanied it. Effect is to be 
 given to every part of a contract if reasonably practicable, and 
 the whole contract is to be taken together in construing the mean- 
 ing, and not by parts; and where there are several contracts relat- 
 ing to the same matters between the same parties, they are to be 
 taken together as parts of the one transaction; as in cases where 
 a number of letters have been written containing proposals and 
 acceptances, all of the letters will be read together as forming one 
 contract, the parts of the letters containing rejected proposals 
 being rejected from the contract. 
 
 TECHNICAL WORDS. The words of a contract are to be 
 understood in their ordinary and popular sense, rather than ac- 
 cording to their strict legal meaning, unless they are used by the 
 parties in a technical sense; and such technical words are to be 
 interpreted as usually understood by persons in the business or 
 profession to which they relate. A word which is used with a 
 particular meaning in one portion of a contract is presumed to 
 have been used in like sense in other places. 
 
 The word "stubble," as used in a lease, was held to be a tech- 
 nical word, including grain remaining uncut after the period of 
 harvest, as well as the straw from which the grain had been cut, 
 it being shown that that was the meaning as usually understood 
 by farmers in that section of the country. 
 
 LAW OF PLACE. A contract is to be interpreted according 
 to the law and usage of the place where it is to be performed, or 
 if no place of performance is specified, then according to the law 
 and usage of the place where it is made. Mere usage, however, 
 can not be admitted in evidence to destroy the plain meaning of a 
 contract. A contract may be perfectly valid, even though in its 
 terms it declares things which are contrary to the ordinary usage; 
 
ItfTERPRETATIOX, NOVATION, CANCELLATION. 37 
 
 but evidence of usage is used as an instrument of interpretation 
 only; as in the case of the word "stubble" in the case cited above, 
 the decision was based partly on the usage of the place as to the 
 meaning of the word "stubble." 
 
 KKPrGXANCIES. Where different clauses of the same con- 
 tract are in conflict with each other, they must be reconciled, if 
 possible, by such interpretation as will give some effect to the re- 
 pugnant clauses. Where, however, there is a flat contradiction 
 between different parts, that in handwriting controls printed 
 parts, and special statements control general statements. Written 
 statements control oral declarations. Parts purely original con- 
 trol those copied from a printed form. In cases of uncertainty 
 which still exist after the foregoing rules are applied, the lan- 
 guage of the contract must be interpreted most strongly 
 against the party who caused the uncertainty to exist. If A 
 agreed to work for a day, he writing the agreement himself, in 
 case it was uncertain as to what the word "day" meant, it would 
 be construed to mean the longest working day rather than the 
 shortest. 
 
 TIME. If no time is specified for the performance of an act 
 required to be performed, a reasonable time is allowed. If the 
 act is in its nature capable of being done immediately, as, for ex- 
 ample, if it consists in the payment of money only, it must be 
 performed immediately upon the thing to be done being exactly 
 ascertained. The word "immediately" does not mean within any 
 particular minute or hour, but as soon as, with ordinary diligence, 
 the act can be accomplished. What a reasonable time is depends 
 upon the circumstances of each case. 
 
 In one case where A agreed to convey certain lands, his fail- 
 ure to do so within eight years was held to be an unreasonable 
 length of time, and the contract was broken by reason of such 
 failure. 
 
 NOVATION is the substitution of a new obligation for an 
 existing one, and is made, 
 
38 COMMEECIAL LAW. 
 
 (1) By substituting a new obligation; 
 
 (2) By substituting a new debtor; or 
 
 (3) By substituting a new creditor. 
 
 Novation is made by contract, and is subject to all the rules 
 concerning contracts in general. 
 
 CANCELLATION. A contract not in writing may be altered 
 in any respect by consent of the parties in writing without a new 
 consideration,, and the original contract is cancelled thereby to 
 the extent of the new alteration. 
 
 A contract in writing may be altered by a contract in writing 
 or by an executed oral agreement, and not otherwise; as for ex- 
 ample, if by a written contract A agrees to sell B a horse for fifty 
 dollars, the parties may alter the written contract by writing "one 
 hundred dollars/' or they may orally agree that the price shall be 
 one hundred dollars, and as soon as the hundred dollars is paid 
 and the horse delivered, the original contract is canceled. 
 
 Destruction intentionally caused by a party entitled to benefit 
 under the contract, or with his consent, extinguishes all the 
 obligations of the contract in his favor, and in any case the 
 destruction of a written contract with the intent to extinguish 
 the obligations thereof, extinguishes the contract as to all parties 
 consenting to the act. 
 
 TEST QUESTIONS. 
 
 1. A railroad company took a cable rope from the manufac- 
 turers with the understanding that it was to be kept and 
 paid for if satisfactory. The company returned the rope 
 to the manufacturers. The manufacturers sued for the 
 price. Were they entitled to recover? 
 
 2. A entered into a written contract with B by which he was 
 to pay $100 for goods. A admitted that he had signed 
 the writing and knew what it contained at the time, but 
 stated that there was an oral agreement at the time that 
 
INTERPRETATION, XOVATIOX, CANCELLATION. 39 
 
 he was only to pay $75 for the goods. In case of suit 
 will he be compelled to pay $75 or $100? Give reasons. 
 
 3. In the above case suppose that A could not read and was 
 
 informed that the consideration was $75. Would he be 
 compelled to pay the $100? 
 
 4. A agreed to rent to B a "spike" team. On a trial for dam- 
 age for refusal to furnish the team, A claimed that a 
 "spike 7 ' team meant two horses for hauling spikes; B con- 
 tended that it meant three horses for any purpose. State 
 di/Ierent circumstances which would decide the case for 
 one party or the other. 
 
CHAPTER VIII. 
 REMEDIES. 
 
 DEFINITION. In every contract, as we have seen, there are 
 mutual promises by the parties thereto. If all of these promises 
 were at all times faithfully kept and performed there would be 
 no damage done and consequently no redress required, but it is 
 the common experience of mankind that contracts are often 
 broken. We have from the old common law the maxim, "There 
 is 110 wrong without a remedy." Remedies are obtained by appli- 
 cation to the Courts by means of what is called a suit or action at 
 law. 
 
 SUIT is commenced by filing a written statement called a 
 complaint in Court, setting forth the contract, and that it has 
 been broken, and the damage claimed by reason of the breach 
 of contract. 
 
 A summons, or notice, is then issued commanding the one who 
 has broken the contract to appear within a certain time named, 
 and make answer to the complaint against him. After he does 
 this, the trial is had and the Court or jury determines whether 
 the contract has been broken, and if so what relief is proper. 
 
 The Order made by the Court stating the relief that is granted 
 is called the judgment, and this judgment of the Court is enforced 
 by a Sheriff or Constable, and is called the execution of the judg- 
 ment. Judgment may be for specific performance, injunction, or 
 for damages. 
 
 EXECUTION. Where the judgment is for damages, the 
 
 Sheriff or Constable may seize the real and personal property of 
 
 the debtor and sell it. If there is any surplus, he must return 
 
 it to the debtor, but he must be careful to sell personal property 
 
 (40) 
 
REMEDIES. 41 
 
 first, then real propert} r , and only so much as is necessary to satisfy 
 the judgment. Execution may issue any time within five years 
 from entry of judgment. 
 
 EXEMPTIONS. As a matter of public policy, it would not 
 be good policy to allow a creditor to take every article which the 
 debtor owns away from him in satisfaction of his debts, as it 
 might effectually prevent him from earning his livelihood, and 
 thereby create a class of paupers who would be a burden on the 
 general public; hence, the general rule is, that whatever is neces- 
 sary for the actual earning of a person's livelihood, or for his 
 ordinary use, is exempt from execution. The following are illus- 
 trations of what is exempt: 
 
 (1) Necessary household and office furniture. 
 
 (2) Necessary farming utensils; not exceeding in value $1,000; 
 also two work animals, harness and wagon. 
 
 (3) All public property, such as jails, court-houses and town 
 halls. 
 
 (4) The library of an attorney, the piano of a music teacher, 
 the typewriter of a stenographer, the horses and dray of a dray- 
 man, and other like things by which a debtor earns his living. 
 
 DAMAGES. In case a party to a contract fails to fulfil his 
 agreements, and a suit is brought and judgment entered, this 
 judgment usually provides that he must pay a certain sum of 
 money as damages to the injured party. 
 
 In general the damages allowed is the amount which will 
 compensate for all the injury suffered. 
 
 DIKECT AND CONSEQUENTIAL DAMAGES. Damage 
 must be the natural and proximate result of an act in order that 
 compensation in money may be obtained. There are only two 
 classes of cases where injuries have been sustained for which dam- 
 ages may be allowed. The injury must be: 
 
 (1) Direct; that is, such as proceeds immediately from the 
 act, or, 
 
 (2) Consequential; such as Hows necessarily from the act; for 
 example: 
 
42 COMMERCIAL LAW. 
 
 A killed a mare. The damage sustained was direct damage 
 in the loss of the animal. She had an unweaned colt. The cost 
 of employing other means to raise the colt was consequential dam- 
 age, and the owner of the mare recovered as damages the value of 
 the mare, and the additional expense of raising the colt. The 
 additional injury caused by the co]t kicking its keeper was too 
 remote to charge A. The kicking was neither the direct result 
 of the killing of the mare, nor did it necessarily result therefrom. 
 The colt might have kicked the man had the mother lived. 
 
 SPECULATIVE DAMAGES. Damages must always be 
 either direct or consequential; and they must also be certain. If 
 a man makes a mere supposition or speculation that he has been 
 damaged, he can not recover damages. In the above example, the 
 extra price which the colt might have brought, had it been reared 
 by the mother, is mere speculation, and not recoverable. No one 
 can tell whether the colt would have been of more value had the 
 mother lived, or not. 
 
 LIQUIDATED, OR FIXED DAMAGES. In some contracts 
 it is found that, owing to the nature of the contract, it is very 
 difficult to say what amount of damages will compensate for a 
 breach thereof. When from the nature of the case it would be 
 impracticable or extremely difficult to fix the actual damage after 
 it occurs, the parties may agree beforehand upon an amount which 
 shall be allowed as damages to the injured party in case the con- 
 tract is broken. This agreement is usually made a part of the 
 
 contract itself, but it may be specified in a separate instrument. 
 A purchased a sailing vessel from F. "P agreed to deliver the 
 vessel within twenty days, and it was agreed that if he did not he 
 should pay $2,000 as damages to A. He failed to deliver, and on 
 suit being brought, the Court held that it was one of the cases in 
 which it was extremely difficult or impracticable to fix the actual 
 damages, and therefore allowed the $2,000 agreed upon as dam- 
 ages. In the ordinary cases, however, where the damage can be 
 ascertained, fixed damages are not allowed. 
 
REMEDIES. 43 
 
 EXEMPLARY DAMAGES are damages which are allowed 
 in addition to any actual damage suffered in cases where there has 
 been wilful injury inflicted. Such damages,, however, are never 
 allowed for mere breach of contract, but only in cases of wilful or 
 malicious injury. Such wilful wrongs are called torts, and addi- 
 tional damages by way of example,, or exemplary damages, are 
 allowed in such cases, except in cases where a person by reason of 
 being of unsound mind or a minor is not capable of knowing that 
 the act is wrongful. If a person commits wrongful injury to 
 animals, such as maliciously leaving horses to starve, or die from 
 want of water, exemplary damages may be given in addition to 
 damages for the actual value of the horses. 
 
 In contracts for the payment of money only, the damage 
 caused by the breach thereof is deemed to be the amount due with 
 interest thereon. The actual loss occasioned by the breach of 
 such a contract may be much greater than the amount due with 
 interest, but the law does not inquire into consequences which 
 may arise beyond the amount due with interest. 
 
 BEEACH OJf CONTRACT TO DELIVER PERSONAL 
 PROPERTY. If Hie property has not been paid for, the damage 
 caused by the breach of contract on the part of the seller is the 
 difference between the value of the property to the buyer, and 
 the price he has agreed to pay; as, if a fruit dealer bought at 
 wholesale certain apples for $50 and they were not delivered, and 
 he had a contract for their sale for $75, his damage caused by the 
 non-delivery of the apples would be the difference between $50 
 and $75, or $25. 
 
 If the personal property has been paid for and not delivered 
 the amount of the damages is either, 
 
 (1) The value of the property at the time it should have been 
 delivered, with legal interest; or 
 
 (2) The highest market value of the property at any time up 
 to the time verdict is given in a suit for the recovery of damages. 
 
44 COMMERCIAL LAW. 
 
 BREACH OF CON TE ACT TO PAY FOR PERSONAL 
 PROPERTY SOLD. Where a buyer breaks his contract and 
 fails to accept and pay for personal property which he has bought, 
 the damage to the seller is the amount of the contract price, and 
 the seller may store the goods for him, and sue him for the con- 
 tract price. 
 
 BREACH OF CONTRACT TO BUY PERSONAL PROP- 
 ERTY. In case the title has not passed, but there is a mere 
 agreement to buy upon delivery, if the buyer refuses to accept and 
 pay for personal property the seller may; 
 
 (1) Resell the property and recover as damages the amount 
 of the difference between what he sold for and what the buyer 
 has agreed to pay him; or, 
 
 (2) He may keep the goods and recover as damages whatever 
 profit he would have made by the sale plus the expenses incurred 
 in handling the goods. 
 
 EMPLOYEE WRONGFULLY DISCHARGED may recover 
 damages which he may suffer by reason thereof. He may either 
 
 (1) Regard the contract as broken and sue at once for the 
 breach, and may recover the profits that would have been made 
 had the contract been fulfilled; or 
 
 (2) Treat the contract as rescinded and sue for the reasonable 
 value of his services from the time he commenced work until the 
 contract would have been completed. 
 
 In either case he must use ordinary diligence in looking for 
 other employment, and in case he secures other employment at 
 less wages, his damage will be the difference between what he does 
 receive, and what he would have received under his contract. 
 
 It must be carefully remembered, however, that such damages 
 are only obtainable in case an employee is wrongfully discharged. 
 If he has been discharged by reason of failure to properly perform 
 his duties he has no remedy, and if he has injured his employer 
 by reason of his negligence or unskilful performance of his duties, 
 the employer may recover damages from him. 
 
 SPECIFIC PERFORMANCE is the compelling of a person 
 
REMEDIES. 45 
 
 to carry out the terms of his contract in case he refuses or 
 neglects to do so. It is the general rule, as we have seen, that 
 where contracts are broken the person who commits the breach 
 of contract is made to pay damages in money to the other for the 
 breach thereof, but there are some cases in which it is considered 
 that mere money damages will not compensate a person for a 
 breach of contract; and in such cases a judgment will be given 
 compelling the full or specific performance of the contract. 
 
 A.S to the classes of contracts, the rule is that a breach of con- 
 iract concerning personal property may be relieved by money 
 damages: while if a person agrees to convey real property and fails 
 to do so the Court will compel him to do so upon application by 
 the injured party. Jn such a case, however, the party injured by 
 the breach of contract must himself perform, or be compellable 
 to perform, his part of the contract, in accordance with the maxim, 
 -lie who seeks equity must do equity." 
 
 A person who applies to the Court for a judgment for specific 
 performance must do so within a reasonable time after the breach 
 of contract. In one case where six years had elapsed the Court 
 held that the injured party had waited an unreasonable length of 
 time, and refused to compel a specific performance by the other. 
 "What a reasonable time is, however, depends upon the circum- 
 stances of each case. 
 
 AX IXJUXCT10X is a writ or order requiring a person to 
 refrain from a particular act. It sometimes happens that a person 
 inflicts injury upon the property of another, or threatens to do so; 
 and to await the slow process of an ordinary suit at law might 
 result in irreparable injury to the property; therefore when there 
 is no plain, speedy and adequate remedy at law a person injured 
 may apply to a Court for an injunction. 
 
 Injunction was held to be the proper remedy in the following 
 
 A tenant was digging up fruit trees; an injunction was granted 
 to compel him to stop. 
 
46 COMMERCIAL LAW. 
 
 An ex-sheriff was restrained from collecting taxes,, by injunc- 
 tion. A person attempted to divert all the water from a miner's 
 ditch. An injunction was issued to compel him to cease. 
 
 TEST QUESTIONS. 
 
 1. Name the various stages of an action for a debt. 
 
 2. A agrees to build a ship for B, and in case he fails to com- 
 plete the work he is to forfeit $10,000 as damages. Is that 
 part of the contract valid? Give reasons. 
 
 3. A enters into a contract with B for the purchase of B's 
 
 land. At the time fixed for the performance B refuses to 
 convey. What remedy or remedies has A? 
 
 4. A agreed to keep certain horses in pasture at a certain 
 
 price. The horses died from lack of food and water in 
 the pasture field. What damages may be recovered by the 
 owner? 
 
CHAPTER IX. 
 DEFENSES STATUTE OF FEAUDS. 
 
 DEFINITION. It sometimes happens that a person sues 
 another for breach of contract through mistake, there having been 
 in fact no breach of contract, or it may happen that the contract 
 has been partly performed, or there may be some legal reason for 
 not performing the contract. When a person has any such rea- 
 sons he may offer them as defenses to the action against him. A 
 defense, then, is a legal reason given by the defendant tending to 
 show that there is no case against him. 
 
 The principal defenses are: 
 
 (1) Statute of frauds; 
 
 (?) Statute of limitations; 
 
 (5) Performance; 
 
 (4) Counter claim. 
 
 THE STATUTE OF FEAUDS has for its object the preven- 
 tion of fraud in contracts by requiring certain contracts to be in 
 writing. The statute provides that the following contracts are 
 invalid unless the same or some note or memorandum thereof be 
 in writing, and subscribed by the party to be charged, or by its 
 agent. 
 
 (1) An agreement that by its terms is not to be performed 
 within a year; 
 
 (2) A promise to answer for the debt, default, or miscarriage 
 of another. 
 
 (3) An agreement made upon consideration of marriage 
 except mutual promises to marry. 
 
 (4) An agreement for the sale of personal property for a price 
 
 of $200 or over, unless 
 
 (47) 
 
48 COMMERCIAL LAW. 
 
 (a) The buyer accepts or receives part of the thing; or, 
 (&) The buyer pays at the time part of the price; or 
 (c) The sale be by auction. 
 
 (5) An agreement for leasing real property for more than one 
 year. 
 
 (6) An agreement for the sale of real property. 
 
 (7) An agreement employing an agent to purchase or sell real 
 property. 
 
 EXPLANATION. It has been found by experience that in 
 matters of small consequence people are likely to fulfil their con- 
 tracts, and less dispute consequently arises as to the meaning of 
 puch contracts. It would be very inconvenient, moreover, if a 
 person were required to write out a contract every time he wished 
 to make a trilling purchase, so the law has particularly specified, 
 as above stated, what contracts are considered important enough 
 to reduce to writing, and by thus reducing them to writing the 
 interpretation is made reasonably certain. 
 
 Of course, the statute does not mean by the word "invalid" 
 that a person who orally enters into such contracts as are required 
 to be in writing, is guilty of any crime, or that he will be crim- 
 inally liable for his act. 
 
 In so far as each party carries out the contract, and no one is 
 injured, the statute does not apply and the contract is valid; in 
 other words the statute does not actually make the contract void, 
 but simply prevents any party who may be injured by breach of 
 the contract from obtaining any remedy by suit at law if the 
 other party sets up the statute as a defense for non-performance. 
 
 "Note or memorandum" must be full enough plainly to 
 describe the contract and the parties thereto. 
 
 "Subscribed" means written at the end of the instrument. 
 Mere signing of the name in or on some other part of the con- 
 tract will not do. 
 
 "By the party to be charged." The other party need not sub- 
 scribe his name. It is not necessary to state the consideration in 
 the writing. 
 
DEFENSES STATUTE OF FRAUDS. 4 ( .) 
 
 "BY ITS TEEMS NOT TO BE PEKFOKMED WITHIN A 
 YEAR."' The words (c bj its terms" are particularly important. 
 If it does not appear by its terms that the agreement is not to be 
 performed within a year from the making of it, the contract may 
 be made orally and be valid in all respects. It is only when by its 
 terms it expressly states that it is not to be performed within a year, 
 or that fact otherwise appears by the terms of the contract, that 
 the contract must be in writing; thus, a verbal contract was entered 
 into to deliver saw logs sufficient to keep a sawmill running for 
 two years. It was held that by its terms the contract was not to 
 be performed within a year, and hence not being in writing the 
 contract was imalkl, and when the lumberman failed to furnish 
 the logs, the owner of the sawmill could not recover damages, nor 
 had he any remedy of any kind. 
 
 If the contract may be performed within a year it need not be 
 in writing under any circumstances even though it actually takes 
 lon.uvr than the year to perform it. As, if A agrees to build a 
 carriage and to begin work immediately, the contract is binding 
 although not in writing, even though by A's delay the carriage 
 is not finished within a year. The object of this provision is to 
 secure good evidence of contracts that will endure for a year's 
 time or more. 
 
 It has been the common experience of man that the memories 
 of people fail in a very short time. Even where they honestly try 
 to state the exact terms of a contract it is difficult to do so after 
 the lapse of a year or more. 
 
 "TO ANSWER FOR THE DEBT, DEFAULT, OR MIS- 
 CARRIAGE OF ANOTHER/ 7 If A promises to pay B's debt, 
 he must make his promise in writing in accordance with the stat- 
 ute of frauds, or he can not be bound by the contract; but if A 
 goes into a store with B and tells the storekeeper to let B have 
 certain goods and that he. A, will pay for them, this is a different 
 matter. It is an original promise by A himself, and the debt is 
 not B's, but A's, and he will be obliged to pay, even though he 
 4 
 
50 COMMERCIAL LAW. 
 
 does not make the promise in writing. This promise must be 
 made, however, to the creditor, and not to the debtor. 
 
 If A agrees with 1) for a consideration that he, A, will pay B's 
 debts, B may compel A to do so, even though the agreement was 
 not in writing. 
 
 "IN CONSIDERATION OF MARRIAGE EXCEPT MU- 
 TUAL PROMISES TO MARRY." This provision has reference 
 particularly to what are known as marriage settlements; as, where 
 a man promises to deed a house and lot to a woman if she will 
 marry him; or where a father promises his daughter $1,000 if she 
 will marry. All such agreements must be in writing, or they are 
 invalid. One exception is made of mutual promises. If one 
 promises to marry another and does not fulfil his promise, even 
 though' it be an oral promise, which is usually the case, the party 
 injured may recover damages. 
 
 "SALE- OF PERSONAL PROPERTY." If the price is 
 uncertain at the time the contract is made, but subsequently 
 proves to be more than $200, it can not be enforced, unless in 
 writ ins:; as, if a stack of hay is sold unmeasured at the rate of 
 $5.00 per ton, and afterwards is found to contain fifty tons, the 
 contract is invalid unless in writing. Whether acceptance of a 
 sample will satisfy the statute depends on whether the sample 
 is a mere specimen, ( or whether it is to constitute part of the 
 thing sold. If the latter, it is sufficient to make valid an oral 
 contract, even though the price is more than $200, but if a mere 
 specimen, it is not considered as part of the thing sold. 
 
 PART PAYMENT must be "at the time" of the sale, and 
 "payment" means actual payment in money, or its equivalent, 
 not a mere credit. If the sale is made by auction, the auctioneer's 
 memorandum must be made at the time of the sale. The auc- 
 tioneer's clerk may make the memorandum. 
 
 LEASES AND SALES OF LAND. Transactions regarding 
 land have always been deemed important, and, as we shall see in 
 
. 
 
 - 
 
 DKFKXSKS STATfTK OF FliAUDS. ">! 
 
 a subsequent chapter, instruments affecting the title to real prop- 
 erty must be placed on record with the recorder of the County in 
 which the land is situated. Long verbal leases of land would 
 tend to confusion in titles, and invite litigation. So in the sale 
 of land, in all cases, a written instrument called a deed must be 
 given from the seller to the buyer before there is any valid sale. 
 
 SUBDIVISION SEYEX, requiring an agent to be authorized 
 in writing, to buy or sell real estate, is in harmony with the pro- 
 visions of subdivisions five and six. If a principal can not make 
 a valid sale of real estate without a writing, neither should his 
 agent be allowed to do so. 
 
 TEST QUESTIONS. 
 
 the effect of the Statute of Frauds upon a sale by 
 sample. 
 
 A and 13 enter into an agreement for the sale of goods. 
 There is no evidence of the contract except that the day 
 after the conversation A pays B $50 on account. Suppos- 
 ing the total price to be $500, will this payment satisfy the 
 Statute so as to dispense with a writing? 
 
CHAPTER X. 
 
 DEFENSES STATUTE OF LIMITATIONS. 
 
 EXPLANATION. It has been found by long experience 
 that justice and right require that all suits at law for breach of 
 contract should be brought within a reasonable time after the 
 right accrues. If long delays are had, witnesses may be dead or 
 their memories have failed,, or in cases of written documents to 
 be used as evidence, they may have been lost, and consequently 
 great difficulty be had in proving the terms of the contract. It is 
 right that a person charged with breach of contract should be 
 afforded an opportunity to defend himself while he still may have 
 evidence on hand with which to do so. It would be unfair to him 
 if the party who claimed to be injured were allowed to wait for 
 years, arid then sue him, and compel him unjustly to pay money, 
 or otherwise comply with the terms of an ancient contract. 
 
 L'nder the common law system no definite limits were fixed 
 within which acts must be done, or contracts enforced, but merely 
 a reasonable time was allowed. This, of course, led to a great 
 deal of litigation to enable people to find out in each case what a 
 reasonable time was; so that our modern statutes have in many 
 cases fixed definitely the periods within which certain acts must 
 be done, or suits brought. 
 
 These statutes are known under the general term of "Statute 
 of Limitations." When the time has passed within which an 
 action should have been brought, without its having been brought, 
 the claim is said to be barred by the "Statute of Limitations," or, 
 as it is more commonly called, "outlawed." 
 
 PROVISIONS. The following are the principal periods of 
 (52) 
 
DEFENSES STATUTE OF LIMITATIONS. 53 
 
 limitation. After ten years, the State can not sue for the recovery 
 of real estate claimed by, and in possession of, private persons. 
 
 After five years, an individual can not sue for the recovery of 
 real property claimed by, and in the possession of, private 
 persons. 
 
 After four years, an action can not be brought upon any con- 
 tract, obligation, or liability founded upon an instrument in writ- 
 ing, executed in this State. Promissory notes and mortgages 
 come under this head. 
 
 After three years, an action can not be maintained for 
 
 (1) Trespass upon real property; 
 
 (2} Taking, detaining, or injuring personal property; 
 
 (3) Belief on the ground of fraud or mistake. 
 
 After two years, an action can not be brought on oral con- 
 tracts; or on contracts in writing, executed out of the State. 
 
 After one year, no action can be maintained for libel, slan- 
 der, assault, battery, and false imprisonment. 
 
 After six months, an action can not be maintained against an 
 officer to recover property or taxes illegally collected, nor against 
 a county on claims which have been rejected. 
 
 In addition to the limitations prescribed for the commence- 
 ment of actions, a lease of land is invalid if given for a longer 
 period than ten years, and a lease of city lots if given for a longer 
 period than twenty years. 
 
 OUTLAWED IN OTHEB STATES. Where a cause of action 
 has arisen in another State or country, it is considered barred in 
 every other State, without regard to the time of the limitation; 
 thus, if a note became due and payable in Florida, and by the laws 
 of that State became outlawed in two months, the note would 
 also be outlawed in California, even though the Statutes of Cali- 
 fornia prescribed four years as the time of limitation. 
 
 NO LIMITATION IN FAVOR OF BANKS. There is no 
 limitation to an action brought to recover money or other prop- 
 erty deposited with any bank, trust company, or savings and loan 
 society. 
 
54 COMMERCIAL LAW. 
 
 BEGINNING OF THE PERIOD. Generally speaking, the 
 Statute of Limitations begins to "run" whenever an action could 
 he legally commenced; as, in case of a note, it hegins the day after 
 the note is due. In case of a current account, each item outlaws 
 by itself as it is due, unless time is given, when the entire account 
 outlaws from the end of the time. 
 
 In mutual accounts, that is, where goods are purchased by 
 both parties, the time begins to run from the date of the last item 
 on either side. 
 
 All store accounts, although they are entered in writing in 
 books, are considered as oral contracts, and outlaw in two years. 
 
 In actions on the ground of fraud or mistake, the time begins 
 to run from the time of the discovery by the aggrieved party of 
 the facts constituting the fraud, and not from the time of the 
 commission of the fraud, or happening of the mistake. 
 
 In case of a note payable on demand, the Statute begins to run 
 from the date of the note, and not from the date of the demand. 
 
 DISABILITY OF CREDITOR. If a person who is entitled 
 to bring an action, be at the time the cause of action accrues, 
 either, 
 
 (1) A minor; 
 
 (2) Insane; 
 
 (3) Imprisoned for a term less than life; 
 
 such person is said to be under disability, and the time during 
 which such disability exists is not a part of the time limited for 
 the commencement of the action; therefore, in case of a note being 
 given in favor of a minor, it would not be outlawed until at least 
 four years after the minor became of age, whether it was due 
 before that time or not. 
 
 It must be remembered that the disability must have existed 
 at the time the right to sue accrued. 
 
 When the Statute has commenced to run, subsequent dis- 
 ability will not stop it; thus, if the Statute has begun to run 
 against a creditor on a note, and he becomes insane, and continues 
 
DEFENSES STATUTE OF LIMITATIONS. 55 
 
 hopelessly insane, the Statute nevertheless will run, and the note 
 will be outlawed in four years' time., without any allowance for 
 the disability. 
 
 DEPENDANT OFT OF THE STATE. If when the cause 
 of action accrues against a person he is out of the State, or if after 
 the cause of action accrues he goes out of the State, all of the 
 time or times when he is actually out of the State are to be 
 excluded from the time limited for the commencement of the 
 action: thus, if a man leaves the State after the cause of action 
 accrues on a note, and is gone six months, then returns and again 
 goes for six months, the two absences are to be added together and 
 the time of limitation is extended for the period of one year, 
 hence in such a case there would in reality be five years before the 
 note would be outlawed instead of four. 
 
 It ha* been held that a foreign corporation, such as an English 
 Insurance Company having its agent in the State, is not absent 
 from the State within the meaning of the Statute. 
 
 XEW PPiOMISES. At the Common Law it was the rule that 
 after a debt was barred by the Statute of Limitations, a new 
 promise to pay. whether oral or written, would be sufficient to 
 revhe the debt. 
 
 This has been changed by Statute so that no acknowledgment 
 or promise is sufficient evidence of a new or continuing contract 
 by which to revive the debt, unless the same is contained in 
 some writing, signed by the party to be charged thereby, and 
 this written acknowledgment or promise must be direct, unequiv- 
 ocal, and unconditional, and made to the creditor. 
 
 An admis>ion or promise to a stranger is not sufficient, and in 
 casi- of joint debtors the promise of one does not avail against 
 another. This new promise itself, being in writing, will 'be out- 
 lawed four years after the making of the promise. 
 
 PAKT PAYMENT is not sufficient in itself to revive a debt 
 which has been barred by the Statute, unless it is evidenced by a 
 writing signed by the debtor. 
 
56 COMMERCIAL LAW. 
 
 It is not sufficient that the creditor signs a writing or makes 
 an endorsement upon a note, or otherwise executes a writing 
 showing the payment. It must be done by the debtor or his agent. 
 
 IN CASE OF SUIT BROUGHT after a claim is outlawed, the 
 person who wishes to rely on the fact of its being outlawed, must 
 set up this fact and prove it in Court. 
 
 When this is done the Statute of Limitations is a good defense 
 to the suit, and he is not obliged to carry out the contract. 
 
 TEST QUESTIONS. 
 
 1. An account is contracted February 1, 1894, for $100. On 
 
 March 1, 1898, $50 is paid. May the payment of the 
 remaining $50 be enforced? 
 
 2. A note is dated May 1, 1878; payment conditioned one day 
 
 after date. It is not delivered till July 15, 1879. When 
 is it barred by the Statute? 
 
 3. A man signs a note in Stockton. January 1, 1897, payable 
 
 one year after date. Six months after he signs it he goes 
 to Europe and remains five years. On what date will the 
 note be outlawed? 
 
 4. A gave a note July 1, 1896; July 1, 1897, he became hope- 
 
 lessly insane. When will the note be outlawed? 
 
CHAPTER XL 
 
 DEFEN SES PERFORMANCE. 
 
 DEFINITION. Performance is the carrying out of the con- 
 tract in substantial accord with its terms. When this is done, 
 the party so performing has a perfect defense against a suit 
 brought against him for non-performance. This defense differs 
 somewhat from that of the Statute of Limitations and the Statute 
 of Frauds, in that while they are excuses for non-performance, 
 in this defense the defendant simply says that he has performed 
 the contract, and because of having performed it, he should not 
 be compelled to perform his part of the contract a second time. 
 
 MANNER OF PERFORMANCE. In order that a person 
 may make good his defense of performance, he must show that he 
 has performed his part of the contract in at least a substantial 
 accordance with its terms. 
 
 It is not absolutely necessary that he should comply with 
 every minute detail set forth in the contract as to the manner of 
 performance, unless those details concern material parts. 
 
 Even if the contract prescribes a certain manner of perform- 
 ance, a debtor is exciised from performing in that manner if his 
 creditor gives him different directions in regard to the perform- 
 ance of his obligation; and if he performs the obligation in accord- 
 ance with the later instructions of his creditor, the obligation is 
 extinguished by such performance, even though the creditor does 
 not receive the benefit of such performance. 
 
 As, if the agreement is that the debtor is to send certain money 
 at a certain time by bank draft, and his creditor instructs him to 
 send the money by express, the obligation is performed if he sends 
 
 (57) 
 
58 COMMERCIAL LAW. 
 
 it by express, even though the money be lost en route. A part 
 performance of an obligation extinguishes the obligation to the 
 extent of the part performance,, if the contract is a divisible con- 
 tract, but a part performance does not extinguish the obligation 
 where the contract is indivisible; as, where a man agrees to build 
 a dam before high water comes. He builds part of the dam and 
 abandons the work. The high water comes and destroys the 
 work he has done. The contract is indivisible. The part per- 
 formance was of no value, and hence does not extinguish any part 
 of the obligation. 
 
 TIME OF PERFORMANCE. In most contracts time is not 
 considered as being of the essence of the contract; that is, thai 
 it is not so important that the act must be done at the exact time 
 specified in order to make the performance valid. 
 
 Unless a person can show that material damage has been suf- 
 fered by reason of a contract's not being performed at a particular 
 time, the performance will be good, even if not done at the exact 
 time specified in the contract. 
 
 If a contract is to be performed within a certain time after 
 date, the day of the date is excluded, and all of the last day which 
 completes the time is included. 
 
 If the last day of performance or the particular day specified 
 for performance falls on Sunday or a holiday, the act may be done 
 on the next business day thereafter; as, if the day of performance 
 fell on Sunday and Monday following was Washington's birthday, 
 the next day, Tuesday, would be allowed for the performance. If 
 no time is specified for the performance of an act a reasonable 
 time is allowed. If the act is, in its nature, capable of being done 
 instantly as, for example, if it consists in the payment of money 
 only it must be performed immediately after the thing to be 
 done is ascertained. 
 
 PLACE OF PERFORMANCE. When the agreement speci- 
 fies a particular place at which performance must be had, the per- 
 formance should be had at that place, although if the perform- 
 
DEFENSES PERFORMANCE. 59 
 
 ance is accepted at any other place, or can be had at any other 
 place without material damage being done, it will nevertheless be 
 a good performance; as. where a sum of money is to be paid at a 
 certain bank, it should be paid at that bank, but if the creditor 
 accepts payment of the money at any other place, he can not 
 afterwards complain that the money was not paid at the bank, for 
 the performance has been had without any damage to him. 
 
 PAYMENT. The word "payment" is excluded in the term 
 "performance," and means the performance of a contract for the 
 delivery of money (which includes any kind of stamped metal or 
 paper authorized by the government to circulate). The delivery 
 of anything other than money is not payment; hence where a per- 
 son owes money and gives a promissory note it is not payment in 
 any sense, but simply an extension of the time within which to 
 pay. 
 
 HOW PAYMENT APPLIED. It sometimes happens that a 
 debtor owes a certain creditor different sums of money upon dif- 
 ferent contracts; thus, he may owe a simple account, a promissory 
 note, unsecured; and a promissory note secured by mortgage, to 
 the same man. In such a case if he should pay his creditor $100 
 the question would arise, Which of the three debts should the hun- 
 dred dollars be applied upon? 
 
 The rule is as follows: 
 
 (1) It must be applied to whichever debt the debtor directs it 
 to be applied upon. 
 
 (2) If the debtor fails to make such directions the creditor 
 may apply the payment as he pleases towards the extinction of 
 any obligation, even though the obligation is outlawed at the time 
 of the payment. 
 
 (3) If neither party make application within a reasonable 
 time, such payments must be applied in the following order: 
 
 I. On interest; 
 II. On principal; 
 III. On the obligation earliest in maturity; 
 
60 COMMERCIAL LAW. 
 
 IV. On an unsecured note; 
 V. On a secured note. 
 
 EVIDENCE OF PAYMENT. The ordinary evidence of the 
 payment of a debt is a written receipt, signed by the creditor, 
 stating in effect that the money has been paid. 
 
 This is good evidence of payment, but it is not always conclu- 
 sive, as it may be possible that a receipt has been given by mis- 
 take or obtained through fraud, menace, duress, or undue influ- 
 ence; and a creditor may show any of these facts, if they be facts. 
 So when an obligation has been delivered up to a debtor, such as 
 a promissory note or mortgage, it is presumed that he has paid 
 everything under it, though, of course, the contrary may be 
 shown; so in case a person has a receipt for a later installment of 
 money paid, it is presumed that he has paid all former install- 
 ments; but in this case, as in the others, it may be shown that as 
 a matter of fact he has not paid former installments. 
 
 GOOD TENDER is the offer of something in satisfaction of 
 an obligation made in accordance with the terms of the contract, 
 and with the intent to extinguish the obligation. 
 
 This, as a matter of defense to a suit, amounts to the same as 
 actual performance. If a person can show that he has offered to 
 perform in a proper manner, and the offer has been refused, he is 
 not to suffer damage because he has not actually performed. 
 
 Good tender does not relieve a person from the obligation of 
 performance, but it does relieve him from the consequences of 
 failure of performance. He must hold himself ready to perform 
 the obligation at all reasonable times thereafter, unless the per- 
 formance should, by lapse of time, become impossible, as in case 
 where the agreement was that A should deliver a certain horse, 
 and the horse died after the time tender was made and acceptance 
 was refused, further tender of performance was excused. 
 
 ESSENTIALS OF GOOD TENDER 
 
 (1) It must be in strict accordance with the terms of the con- 
 tract; as in case the contract requires gold coin, it is necessary that 
 
DEFENSES PERFORMANCE. 61 
 
 gold coin should be offered in payment. An offer of silver coin 
 of equal amount would not be good tender. 
 
 (2) A tender in full is necessary. A tender of part of the 
 amount of a debt is of no effect whatever as good tender. 
 
 (3) Tender must be made by the debtor or his agent. Ten- 
 der by a stranger is not good tender. 
 
 ' (1) It must be made at proper time. A tender of a load of 
 wool at 11 o'clock at night was held to be bad tender, all ware- 
 houses being closed at that hour. 
 
 (5) To a proper person; that is, to a creditor or his agent. 
 
 (0) The place, if no place is specified in the contract, may be 
 any place where the creditor may be found. 
 
 (?') The offer must be free from any condition, which the 
 creditor is not bound on his part to perform. The creditor is 
 always bound, however, to give a receipt for payment. 
 
 In case of payment of money, only such money as is authorized 
 by the government for the payment of debts need be accepted, 
 and the offer of any other kind of money is not good tender. 
 
 EFFECT OF GOOD TENDER. When a person has made 
 a good tender, and it is not accepted, this does not at once relieve 
 him from the performance of the obligation at any subsequent 
 time, but it does relieve him from the payment of interest, or 
 any additional burdens which might accumulate after the tender 
 was made; and it relieves him from any judgment for costs or 
 expenses above the amount he has tendered, in case suit is brought 
 against him. 
 
 If he makes the tender at the proper time, and it is refused, he 
 mast still be ready to perform his part of the contract at any time, 
 or, in other words, he must keep his tender good, and in case he 
 is sued he must show in his defense that he has made a good ten- 
 der, and has continued to make the good tender. 
 
 He is not obliged, however, to hold his tender good forever. 
 The Statute of Limitations will run against the claim, whatever 
 it niav be, and it will be outlawed whenever the limitation expires. 
 
62 COMMERCIAL LAW. 
 
 In tender of money the offer must be not only in the kind of 
 money prescribed by the contract, but it must also be the exact 
 amount. No one is required to give change. The matter of 
 making change is only a matter of convenience, an accommoda- 
 tion which a creditor is usually willing to grant to his debtor, but 
 if the creditor demands the exact amount, it is not a good tender 
 to tender a greater amount and demand change. 
 
 ACCORD AND SATISFACTION. Under some circum- 
 stances, a creditor will find it to his advantage to accept part pay- 
 ment of his debt and give a receipt in full rather than to insist on 
 a payment in full. If it is money that is to be paid, the debtor 
 may not have any money and the creditor may be willing to 
 accept as full payment something altogether different; as, a horse. 
 
 In such a case, an agreement to accept something less or differ- 
 ent from that specified in the contract as full performance, is called 
 an "accord,"'" and when the agreement is carried out, and the 
 acceptance is actually had, this is called "satisfaction;" e. g., A 
 owes B $100; B agrees to accept $90 in full payment. This is an 
 accord. A pays the $90, and gets a receipt in full. This is satis- 
 faction. The transaction would be in legal effect the same if A 
 had offered and B had accepted a horse instead of the $100. It 
 makes no difference whether there has been a dispute as to the 
 correct amount of the bill or not. It is nevertheless an "accord 
 and satisfaction" when the conditions of the definition are ful- 
 filled. 
 
 The contract of accord and satisfaction is an exception to the 
 ordinary rule of contracts, in that no new consideration is 
 required, and when satisfaction is had under an accord, the cred- 
 itor can not afterwards collect the remainder of the debt. 
 
 In order that accord and satisfaction may be used as a defense 
 to a suit it is, of course, necessary that a defendant in his answer 
 to a suit should show that the accord had been entered into, and 
 that satisfaction had been had. 
 
 Accord without satisfaction is not a bar to an action. The 
 plaintiff must show that the accord has been executed. 
 
DEFKNS MS 1 K UFORMANCE. 63 
 
 ARBITRATION AND AWARD. Courts have been insti- 
 tuted as means of settling disputes between individuals in regard 
 to business transactions,, and Courts are most frequently resorted 
 to when one of the parties is unwilling to settle at all, and where 
 the object is to compel him to settle. It sometimes happens, how- 
 ever, that both parties are willing to settle the matter but are 
 unable to agree as to the proper settlement., and yet do not wish. 
 to maintain a lawsuit. In such a case they may agree to leave 
 tin 1 decision of the case to third parties, and agree that they will 
 ui.idi' by their decision. It is customary for one to select an arbi- 
 trator, the other to select another, and the two arbitrators to select 
 a third. The three thus chosen are called a Board of Arbitration. 
 The Board of Arbitrators will examine into the disputed matter 
 and render a decision in favor of one party or the other, and if 
 this decision is. properly made on a full understanding of the facts, 
 hiding upon both parties, and neither one can afterwards 
 maintain a suit at iaw against the other in the same matter for an 
 amount larger than the amount allowed by the Board of Arbitra- 
 tion. The decision thus given by the Board of Arbitration is 
 called ''a \\ard." 
 
 The agreement to submit to arbitration is not a binding agree- 
 ment, however, as either party may revoke his consent to the arbi- 
 tration at any time before the award is actually made. 
 
 LIS PENDENS. This is a Latin phrase meaning "a suit 
 pending." It would be harassing and vexatious if a man were 
 allowed to bring two suits against his debtor upon the same cause 
 of action, in the same Court, at the same time; and it is against 
 the policy of the law to permit a multiplicity of suits; hence a 
 person can not bring two suits at the same time against the same 
 person, upon the same cause of action, for the same relief, in the 
 same Court. 
 
 IT all these essentials are not present, a person can not claim 
 that another suit is pending. 
 
 When they are all present, the claim of Us pendens is a valid 
 defense to a second suit brought against a defendant. 
 
64 COMMERCIAL LAW. 
 
 Thus, if A sued B upon a certain note for $500, B could say 
 that there was a suit pending if A again sued on the same $500 
 before the first suit had been disposed of, while it would be per- 
 fectly proper for A to sue B for the amount of $500, and at the 
 same time sue him for damages for breach of a different contract. 
 
 COUNTEK CLAIM. It sometimes happens that when a 
 debtor owes his creditor, the creditor may also owe the debtor 
 an amount, so that when a suit is brought the defendant may 
 present his claim against the plaintiff, and this counter claim 
 must be subtracted from the original amount of the debt; or if it 
 is an amount equal to the debt sued for it will be a full defense, 
 an equal set-off against the plaintiffs claim; for example, if A is 
 sued by B on a claim of $100 for breach of contract, A, if he has 
 one, may set up in his answer a counter claim for $50, if it be a 
 claim also arising on contract, but a claim for injuries could not 
 be set up as a counter claim to a claim arising upon contract; and 
 the claim must' exist in favor of the defendant against the 
 plaintiff. 
 
 A claim set up by a third party is not good as a counter claim, 
 neither can a claim which is barred by the Statute of Limitations 
 be set up as a counter claim. 
 
 If the defendant fails to set up a counter claim in his answer, 
 he can not afterwards bring a separate suit for the amount. 
 
 The reason of this doctrine of counter claim is to prevent a 
 multiplicity of suits by compelling parties to test the validity of 
 their claims in a single action. 
 
 TEST QUESTIONS. 
 
 1. A contracts to build a large court-house in a day. Is he 
 answerable in damages for failure to fulfil his contract? 
 
DEFENSES PERFORMANCE. 65 
 
 2. A agreed to pay a debt in salt to be packed in barrels, to be 
 
 furnished by the creditor. The creditor did not furnish 
 the barrels. Would that excuse A from delivering the 
 salt? 
 
 3. Distinguish between "legal" tender and "good" tender. 
 
 4. A o\ves B $100, but is unable to pay it. He offers B a 
 
 wagon in satisfaction of the debt, which B accepts. What 
 is the legal term for the transaction? 
 
CHAPTER XII. 
 
 NEGOTIABLE PAPEB, 
 
 
 
 NEGOTIABLE PAPER can not be well explained in a single 
 brief definition. It has been used as a medium of exchange and 
 as evidence of debt for many hundreds of years. It is an excep- 
 tion to the general rule of contracts in that its collection may be 
 enforced by an innocent holder, even where fraud has been prac- 
 ijsed in obtaining it originally: and it also protects an innocent 
 holder against other like defenses. The chief difference between 
 negotiable paper and ordinary written contracts is that negoti- 
 able paper has the function of passing from hand to hand, as 
 money, and can be collected by an innocent holder for value, 
 while mere assignable paper is charged with all equities between 
 the original parties. 
 
 It must be thoroughly understood before we can fully under- 
 stand what a negotiable instrument is, that it is the rule of con- 
 tracts that certain contracts can not be transferred from one to 
 another, and even when written contracts are of such a nature 
 that they may be transferred from one person to another gener- 
 ally, still the person who accepts the transfer from a person who 
 has not a good title himself, does not get any better title than the 
 seller had. 
 
 Suppose that A had stolen a horse; he, of course, has no goocl 
 title to the horse; he sells the horse to B. No matter how much 
 B may have paid for the horse, nor how innocent of wrongdoing 
 he may have been, he gets no good title to the horse, the thief 
 having none. 
 
 In the case of negotiable paper, however, if A had stolen a 
 (66) 
 
NEGOTIABLE PAPER. 67 
 
 negotiable note instead of the horse, and sold it to B, B, being an 
 innocent purchaser, before maturity of the note, B then would 
 have had a perfectly good title to the note, and could collect it 
 from the maker. 
 
 This distinction will be fully discussed later. 
 
 THE ESSENTIALS of every negotiable instrument are: 
 
 (1) In writing: 
 
 (2) An unconditional promise or request; 
 
 (3) Negotiable in form; 
 
 (4) Payable in money only; 
 
 (5) P"or a definite sum payable generally; 
 
 (6) To an ascertained and designated payee; 
 
 (7) Time for payment must be certain; 
 
 (8) Properly signed. 
 
 Ft must be carefully borne in mind that the above are abso- 
 lutely essential to negotiable paper. Any paper which lacks any 
 of these elements is not a negotiable instrument. 
 
 FN "WRITING includes writing in script, with pen or pencil, 
 printing, typewriting, or any method of placing thoughts upon 
 an impressible substance; or it may be partly in handwriting, 
 partly printed, or partly typewritten. The rule is the same in 
 this regard as in ordinary contracts. 
 
 SIGNATURE. A signature is usually and properly the name 
 of the person who executes the instrument, written by himself at 
 the bottom of the instrument, with the intention of signing it, 
 but anything written anywhere on a negotiable instrument may 
 be proved as a signature. A signature stamped upon a note with 
 a rubber stamp has been held good, and even in one case where a 
 person wrote the figures "128'" on the back of a note, pretending 
 to the payee, who could not read, that it was his proper signa- 
 ture, the Court held that the figures so written were the signature 
 of the person making them. 
 
 NEGOTIABLE IN FORM. The words "to order" or "to 
 bearer" are the customary words showing negotiability. They 
 
68 COMMERCIAL LAW. 
 
 indicate that it is permitted to transfer the note from one person 
 to another. These words, or some equivalent words, such as "pay 
 to any one/ 5 or "pay to myself or order/' renders an instrument 
 negotiable in form. Without some such words the instrument is 
 not negotiable. 
 
 Where a person makes a note payable to an obviously fictitious 
 payee, such as "pay to Robinson Crusoe/' it is equivalent to "pay 
 to bearer." 
 
 PAYABLE IN MONEY ONLY. Money is the standard by 
 which we measure the value of all other articles, and being a 
 standard it is presumed to be an invariable standard; that is to 
 say, $100 to-day is presumed to be worth just $100 at any future 
 time; hence the certainty of receiving the amount stipulated for 
 by a note in passing from hand to hand is only obtained by mak- 
 ing it payable in money only. 
 
 If it were payable in wheat, the price of which is constantly 
 fluctuating, no one but a mere speculator would care to take such 
 an instrument to hold for any certain time. Money therefore 
 being the only convenient imperishable standard measure of 
 values, is the only thing which can serve as a basis for commercial 
 paper. 
 
 AN UNCONDITIONAL PROMISE OR REQUEST. If the 
 promise made is a conditional one, it would, of course, render the 
 payment uncertain, and thus be open to the same objection as 
 would the instrument if made payable in commodities instead of 
 mone} r ; thus a promise to pay "if a sale be made in twelve 
 months/' or a promise to pay "when convenient," renders the 
 paper non-negotiable. 
 
 A DEFINITE SUM. A promise to pay "a reasonable attor- 
 ney's fee," is uncertain, and renders a note not negotiable, while 
 a promise to pay "$50 attorney's fee" does not affect negotiability. 
 
 The law has drawn some fine distinctions, however, in these 
 matters, and it has been held that "payable with exchange," does 
 not affect negotiability, because exchange can always be deter- 
 mined without difficulty. 
 
NEGOTIABLE PAPER. 69 
 
 This is under the maxim, "That is certain which can be made 
 tain." 
 
 PAYABLE GENERALLY, means payable out of general 
 funds, and not out of specific funds, as "payable out of funds now 
 on deposit in the Farmers Bank" would render the note not 
 negotiable as being out of a specific fund. No one could tell at 
 the time of receiving the note whether the money was still on 
 deposit in the Farmers Bank. 
 
 ASCERTAINED AND DESIGNATED PAYEE. The fol- 
 lowing designations have been held sufficient, "Pay to bills pay- 
 able" equals "to bearer," "Pay to trustees acting under the will of 
 A," "Pay to A or his heirs," "Pay to John Doe," equals, "Pay to 
 bearer/' "Pay to the now secretary of a certain corporation," it 
 being held that in all of the above cases that while the designa- 
 tion made does not specify definitely a certain person, yet the 
 designation is sufficiently accurate so that the payee may be 
 found, and under the maxim, "That is certain which can be made 
 certain," the designations have been held good. 
 
 Where a note was made payable "to the secretary" of a certain 
 corporation, it was held not to be sufficiently certain as a designa- 
 tion of the person, as the corporation might change its secretary 
 at any time. 
 
 If no payee be named at all the instrument is mere waste 
 paper: as for example, "Pay on the within $750." 
 
 TIME CERTAIN. A negotiable instrument may be with or 
 without date, with or without designation of the time or place of 
 payment, but if it does not specify the time of payment, it is pay- 
 able immediately, and when it does specify a time, it is absolutely 
 necessary that the time specified should be certain or be capable 
 of being made certain; as, if payable on demand, or at sight, the 
 time can be made certain. 
 
 An instrument payable "when I am of age," is uncertain, as 
 there is no certainty of the maker's reaching his majority. 
 
 If a negotiable instrument falls due on Sunday, or other holi- 
 
 OP THK 
 
 DIVERSITY 
 
 = 
 
70 COMMERCIAL LAW. 
 
 day, it is payable on the next business day thereafter, the time 
 being extended by reason of the holiday. 
 
 Days of grace are three days which were allowed to a debtor 
 for payment of his obligation after the time of its maturity. 
 
 These days of grace are not now allowed. 
 
 GENERALLY. The amount stated in negotiable instru- 
 ments should be written both in words and figures. Where there 
 is a difference between the words and figures, the amount written 
 in words controls. 
 
 A negotiable instrument may contain a pledge of collateral 
 security with authority to dispose thereof, but it must not contain 
 any other contract further than this. 
 
 A due bill, such as is often given as an acknowledgment of 
 a debt, is not in any sense a negotiable instrument, being a mere 
 acknowledgment that money is due, and not being a promise of 
 payment. 
 
 The words ''for value received," often seen in a negotiable 
 instrument, are useless. The law presumes that a written instru- 
 ment has been given for value. These presumptions may, of 
 course, be rebutted, and this would be so whether the words "for 
 value received" were inserted or not. 
 
 There are six different classes of negotiable instruments, viz.: 
 
 (1) Bills of Exchange; 
 
 (2) Promissory Notes; 
 
 (3) Bank Notes; 
 
 (4) Checks; 
 
 (5) Bonds; and 
 
 (6) Certificates of Deposit. 
 
 FRAUD, MISTAKE, DURESS. If a person procures 
 another to sign a negotiable instrument through either fraud, 
 mistake, or duress, it can not be collected by the person committing 
 such fraud, or guilty of such duress, or participating in the mis- 
 take; but should such person sell the instrument before maturity 
 to an innocent purchaser in the usual course of business, who 
 
NEGOTIABLE PAPER. 71 
 
 paid value for it, that person would ha.ve a right to collect the 
 note from the maker, notwithstanding such irregularity in the 
 making of the instrument. So, also, as before explained, if an 
 owner loses a negotiable instrument, the finder has no title and 
 can not collect it from the maker, but if the finder sells it to an 
 innocent purchaser before maturity, that purchaser has an absolute 
 right to collect from the maker. 
 
 This is the distinguishing characteristic of the contract 
 entered into by one who signs a negotiable instrument, and 
 wherein such contracts differ from all other contracts. 
 
 Of course, a person whose name has been forged to a negoti- 
 able paper, can not be compelled to pay it no matter who holds it, 
 or how innocent the holder may be of any wrongdoing, because 
 he has not signed the instrument and it is not his instrument. 
 
 TEST QUESTIONS. 
 
 1. Is the following negotiable? Give reasons. 
 
 December 1, 1896. 
 
 On demand I promise to pay to K. S. Cox One hun- 
 dred ($100) dollars with interest at Ten (10) per cent per 
 annum. 
 
 E. Boyd. 
 
 2. A made out a note payable "to bearer" and left it lying on 
 his desk. His clerk stole the note and sold it to B, who 
 did not know it to be stolen. Can B compel A to pay the 
 note at maturity? Give reasons. 
 
 3. Suppose in the above case A had signed the note, but left 
 
 the amount blank. Can B compel A to pay it at maturity? 
 
CHAPTER XIII. 
 PROMISSORY NOTES. 
 
 DEFINITION. A Promissory Note is an unconditional 
 promise in writing by a person to pay a certain sum of money, 
 generally, "to bearer," or "to order," of some one named therein, 
 at a specified time. 
 
 A promissory note is merely given as evidence of a debt. In 
 legal effect it is not a debt in itself, and when we say a person 
 owes another a note, in strictness we mean, that he owes a sum of 
 money and that the debt is evidenced by the note. 
 
 It is in that respect merely a means of proof that one man 
 owes another money, but it is also more than this in that under 
 certain rules and conditions governing negotiable paper, a prom- 
 issory note may circulate as money and may have a certain value 
 in the markets of the business world. 
 
 If no time is specified for the payment of a note, it is due at 
 once. If no place is specified for the payment of a note, it is pay- 
 able at the place of residence or business of the maker, or at any 
 place where he may be found. 
 
 FORM. In regard to the form of promissory notes, it is pos- 
 sible to have a great variety. One form is as good as another, so 
 i'ar as negotiability is concerned, provided it contains all the ele- 
 ments required as specified under the general head of "Negotiable 
 Paper." 
 
 The ordinary form is as follows: 
 3100.00 
 
 Stockton, CaL, Jan. 2, 1898. 
 
 Six (6) months after date I promise to pay J. Boyd, or order, 
 One hundred ($100.00) Dollars. 
 
 ( 72 ) M. Meyers. 
 
PROMISSORY NOTES. 73 
 
 In addition, there may be inserted in the above outline any or 
 all of the following clauses after the word "Dollars;" "together 
 with interest at the rate of six (8) per cent per annum, payable 
 semiannually, and if not so paid when due to be added to the 
 principal and become a part thereof, and bear interest at the same 
 rate;" also, "I agree to pay in case suit or action is instituted to 
 collect this note, or any part thereof, the sum of Twenty ($20) 
 Dollars as attorney's fee in such suit or action;" "and further, I 
 herewith pledge my gold watch, No. 7421, as security for the pay- 
 ment of this note, and hereby authorize J. Boyd to dispose of 
 said watch and apply the proceeds to the payment of this note, 
 in case I fail to pay said note at its maturity." 
 
 If two persons wish to make a note so that both will be liable 
 to pay it, they usually write "WE promise to pay, etc.," in which 
 case it is called a joint note; or it may read, "We or either of us 
 promise to pay, etc.," in which case it is called a joint and several 
 note. 
 
 In either case, however, the makers are individually and 
 jointly liable to pay the full amount of the note. 
 
 The note may provide for the payment in installments, and 
 i'or any rate of interest, payable at any specified times. It may 
 be payable on demand, or at a certain date, or after a certain date. 
 It may be written and signed on paper or any substitute, in any 
 language, in pencil or in ink. 
 
 PARTIES. The original parties to a note are termed the 
 maker, the person whose name is signed as promisor, and the 
 payee, the person to whom the promise is given. 
 
 If the payee writes his name on the back of the instrument 
 with the intent to transfer it to a third party, he is then called 
 an endorser, and the person to whom he transfers it is an endorsee, 
 and in like manner when this endorsee transfers it and writes his 
 name on the back thereof, he becomes an endorser, and the per- 
 son to whom he transfers the note, the endorsee, and so on as 
 often as it is transferred. 
 
74 COMMERCIAL LAW. 
 
 NEGOTIABILITY.- It must be carefully remembered and 
 thoroughly understood that in order to be negotiable, a note must 
 contain all the elements required to constitue a negotiable instru- 
 ment. 
 
 A person may gi\re a written contract for the payment of 
 money, and while it may be in form somewhat like a promissory 
 note, if it lacks any one of the essentials it is not a negotiable 
 instrument: hence the utmost care must be taken not to confuse 
 instruments which are often passed as promissory notes with 
 negotiable instruments proper; and it is important to remember 
 that while a mere written contract for the payment of money can 
 be transferred by endorsement, and may pass from one hand to 
 another, it is nevertheless a mere written contract, and a holder 
 gets no more rights under it than he does under any ordinary con- 
 tract, and he accepts it subject to any defenses which may be 
 made between the original parties. 
 
 CONSIDEKATI.ON.--As we have seen, it is one of the rules 
 of contracts that every contract must have a sufficient considera- 
 tion, and this is also the rule in" negotiable instruments, so far as 
 the original parties are concerned; but even if A signs a note with- 
 out any consideration, and an innocent holder, for value, before 
 maturity, presents it for payment at maturity, A can not refuse 
 to pay on the ground of want of consideration, it being the pecul- 
 iar characteristic of negotiable paper that an innocent holder 
 must be protected. 
 
 Therefore, so far as innocent holders are concerned, promis- 
 sory notes are an exception to the rule that a consideration is 
 required. 
 
 ACCOMMODATION NOTE. A wishes to borrow money, 
 but has no security to offer. 13 is a friend of A, who has no 
 money, but has property. He signs a note payable to A, which A 
 takes to the bank and borrows money upon. A, of course, expects 
 to pay the note at maturity, but if he does not, the bank can 
 compel B to pay the note, notwithstanding the fact that it was 
 given without consideration. All of the parties knew that the 
 
PROMISSORY NOTES. 75 
 
 note was given without consideration, and for the purpose speci- 
 fied. Such a note is called an Accommodation Note, and by 
 the laws of business, does not require consideration. A, how- 
 ever, should he play false to his friend, could not collect the 
 money on the note from B, though the bank could. 
 
 Of course, in an accommodation note it is not necessary that 
 any purchaser be innocent in order that he may collect from the 
 maker. In fact, he usually knows that no consideration has 
 passed. 
 
 BONA FIDE HOLDEE. A person who receives without 
 notice of irregularities, a negotiable promissory note, in the usual 
 course of business, for value, before maturity, is called a bona- 
 Qde holder, and such a person has an absolute right to collect the 
 amount due on the note at maturity from the maker; but if such 
 a holder sells the note, and afterwards it is given back to him, 
 he does not thereby retake the absolute right of collection, but 
 takes it as a gift subject to all equities and defenses between the 
 original parties; so a finder or a thief can not collect a note, but 
 his bona-fide endorsee may collect it. An equitable defense is one 
 which does not appear on the face of the note, and which does 
 not destroy its negotiability as fraud, force, theft, incapacity, pay- 
 ment; and even of these defenses, a maker can only avail himself 
 when they are between him and his payee. 
 
 FORGERY may be committed either by signing another's 
 name to a note, or by a material alteration in the note. 
 
 .NTo one, as w r e have before observed, acquires any rights under 
 a forged name, neither does he acquire any rights where an alter- 
 ation has been made, unless the alteration has been made possible 
 through the negligence of the maker; as, where he writes in lead- 
 pencil, or leaves blanks which may be easily filled; but in any 
 i vc-ii t the alteration must be material. 
 
 The following are material alterations: 
 
 (1) Change of date of note; 
 
 (2) Change in time of payment: 
 
76 COMMERCIAL LAW. 
 
 (3) Change in amount or interest; 
 
 (4) Change from "gold" to "silver." or "pounds" to "dollars;" 
 
 (5) Change in parties; 
 
 (6) Change in liability of parties; as where a maker's name is 
 changed so as to make him liable only as surety; 
 
 (7) Change in place of payment. 
 
 BANK BILtS are promissory notes issued by a bank. A pri- 
 vate bank has no authority to issue notes to circulate as money. 
 
 National banks, however, are allowed to issue notes secured by 
 deposit of Government Bonds in the United States Treasury, 
 and these notes circulate as money without the necessity of 
 endorsement, being made payable "to bearer," and being practi- 
 cally guaranteed by the United States Government. 
 
 Such notes are in a sense negotiable after having been paid by 
 the maker, as they can be immediately passed out again as money, 
 and preserve their negotiability when thus sent forth. 
 
 BONDS. A Bond is in legal effect identical with a promis- 
 sory note; in fact, it is a promise to pay money, usually of large 
 denominations, and is a very formal document, having attached 
 to it separate promises called coupons, to pay the interest on the 
 Bond. 
 
 Bonds are most frequently issued by some branch of the gov- 
 ernmental authority, state, county, district, or nation, and their 
 payment is in such case provided for by taxation. 
 
 They are signed by the executive officers of the governing 
 body of the municipality which issues them, and are negotiable to 
 the same extent and for the same purpose as an ordinary promis- 
 sory note. 
 
 TEST QUESTIONS. 
 
 1. Is the following negotiable? Give reasons. 
 
 I promise to pay to S. Brown, or order, within six 
 months from date, the sum of Fifty ($50.00) Dollars, and 
 
PROMISSORY NOTES. 77 
 
 in case suit is brought for the collection of this note I 
 promise to pay a reasonable attorney's fee. 
 
 J. Gould. 
 
 2. A is a merchant; B comes to him after banking hours; 
 shows him a note for $100, apparently signed by a respon- 
 sible party, due thirty days hence; says he is in urgent 
 need of cash at once and will take $50 for the note. A 
 buys the note from him for $50 and afterwards learns that 
 the signature has been forged. What remedy, if any, has A? 
 
 3. Suppose in the above case the signature was genuine, but 
 had been obtained by B through fraud. Could A collect 
 the note from the maker? Give reasons. 
 
 4. A forger has "raised" a note from $40 to $140. Discuss 
 the rights of collection by A, who is a subsequent holder. 
 
CHAPTER XIV. 
 BILLS OF EXCHANGE. 
 
 EXPLANATION". In the early days of commercial activity 
 it was found inconvenient and unsafe for persons doing business 
 at a distance to send the actual coin from one place to another, 
 and there was invented and brought into use what are known as 
 Bills of Exchange. 
 
 Suppose A in San Francisco transacts business with B in New 
 York. A owes B $1,000. Instead of sending the coin he goes to 
 the San Francisco Bank, pays in his thousand dollars., and gets a 
 Bill of Exchange or draft drawn in favor of B against the New 
 York Bank, and sends it by mail to B. 
 
 On receipt of this Bill of Exchange B goes to the New York 
 Bank, endorses the bill, and is paid a thousand dollars. In each 
 case the parties pay to the bank a small amount as compensation. 
 
 B or some other man in New York wishes to send money to 
 pay a debt in San Francisco. He goes to the New York Bank, 
 pays his money, receives a draft, sends it to San Francisco, and 
 his creditor gets his money from the San Francisco Bank. 
 
 In this way the New York and San Francisco Banks keep 
 even or nearly so on the amount of money owing the one to the 
 other. 
 
 If at any time the balance in favor of the one or the other 
 gets too large, and there seems no prospect of getting even other- 
 wise than by sending the coin, the balance is shipped in the actual 
 coin across the continent. This, however, rarely or never occurs. 
 
 These Bills of Exchange, or drafts, as they are usually called, 
 if drawn between parties in the same state or country, may be 
 (78) 
 
BILLS OF EXCHANGE. 79 
 
 endorsed and passed from hand to hand as money and are subject 
 to all the rules concerning promissory notes and negotiable paper 
 in general, and being issued usually by banks generally have a 
 higher commercial value than promissory notes. 
 
 DEUX IT 1 OX. A bill of exchange is an unconditional order 
 or request in writing by one person to another directing the pay- 
 ment "to order" of a person named therein, or "to bearer," of a 
 certain sum of money, generally at a certain time. 
 
 The following is the ordinary form of a Bill. 
 
 THE FABMEKS' BAXK. 
 
 No. 2140. Stockton, Cal., Jan. 2d, 1898. 
 
 At sight pay to the order of Thomas Sawyer Five Hundred 
 ($500.00) Dollars. 
 
 M. TWAIN, 
 
 To First Xational Bank, Cashier. 
 
 Boston, Mass. 
 
 iX BILLS. A Foreign Bill is one which is drawn in 
 one country to be paid in another, or in one state to be paid in 
 another. On account of the liability or possibility of a bill's 
 being lost in transmission, it has been customary to draw the bill 
 in duplicate or triplicate, and send the copies by different routes, 
 especially when between diil'erent countries where mails are car- 
 ried by ships; as between different states, bills are now seldom. 
 drawn even in duplicate. 
 
 A creditor, however, may demand, as a matter of right, under 
 the laAv, that his debtor shall execute the bill of exchange in trip- 
 licate, each copy stating the existence of the others, and all form- 
 ing one set. 
 
 1XLAXD BILL. The Inland Bill is almost universally used 
 as a means of paying debts between people in different parts of 
 the same state or country. It is never drawn in sets. An Inland 
 Bill is universally known as a draft. 
 
80 COMMERCIAL LAW. 
 
 PAETIES. By examining the form above shown, it will be 
 seen that there are three original parties. The one who signs the 
 draft, M. Twain, is called the Drawer. The one to whom it is 
 addressed, The First National Bank, Boston, Mass., and who is 
 to pay the draft, is called the Drawee, and the one to whom it is 
 made payable, Thomas Sawyer, is called the Payee. 
 
 Sometimes a person wishes to visit a distant city and not carry 
 money on his person. He draws a draft in favor of himself. In 
 such case he is both drawer and payee. 
 
 The subsequent parties are endorsees and endorsers, as in the 
 case of promissory notes, and there may of course be any number 
 of them. 
 
 TIME OF PAYMENT. A draft such as the above is called 
 a Sight draft, and means that it is to be paid as soon as the drawee 
 sees it, or when it is presented to him for payment. 
 
 A draft payable "on demand" is practically a sight draft, and 
 due upon presentation. A draft may be drawn any number of 
 days after sight. In such cases it is called a time draft. The 
 object of a time draft is either to accommodate the debtor and 
 creditor in the transaction, who may have reasons for wishing to 
 defer payment, or to accommodate the bank, if it is a large draft, 
 in order that it may make provisions for its payment. Days of 
 grace are not allowed on drafts. 
 
 ACCEPTANCE. When a sight draft is presented to the 
 drawee, the drawee must either pay it or refuse to do so. He is 
 under no obligation to pay it and trust the drawer for his money, 
 unless he chooses to do so. 
 
 In the case of a time draft, the payee should present it to the 
 drawee for acceptance. Without this presentment, the drawee 
 may not even know of the existence of the draft, and may not be 
 prepared to pay it when due, so that it is customary and proper 
 for the payee immediately npon the receipt of the draft, to take 
 it to the drawee and notify him that he holds such an instrument. 
 
 The drawee, if he wishes to pay it when due, will "accept" the 
 
BILLS OF EXCHANGE. 81 
 
 draft by writing the word ''accepted" across the face of the draft 
 with the date, and his name: or simply his name with or without 
 date or other words, will he a binding acceptance, and is in effect 
 his promise to pay the draft when due. 
 
 A draft payable ten days after sight would be due ten days 
 after such acceptance. The acceptance, therefore, has the double 
 object of making the drawee liable for its payment, and fixing 
 the time, in case of a time draft, of its maturity. 
 
 If the drawee refuses to accept the draft he is said to "dis- 
 honor" it, and the draft is said to be "dishonored." 
 
 ACCEPTANCE FOR HONOR. When a drawee dishonors 
 a bill, it may have passed through a number of hands, and the 
 dishonor of the bill cause considerable trouble to some or all of 
 the parties thereto, hence it is a rule of law that after a bill has 
 thus been dishonored it may be accepted or paid by any person 
 for the honor of any party thereto. 
 
 The holder of the bill is not bound to let it be accepted for 
 honor, but he is bound to accept payment for honor, if it is 
 tendered. 
 
 The person who accepts or pays for honor, must write a state- 
 ment on the bill showing for whose honor he accepts or pays, and 
 mast give notice to that party of the fact of such acceptance or 
 payment within a reasonable time. Having done so he is entitled 
 to reimbursement from him, and from all parties prior to him. 
 
 PRESENTMENT FOR ACCEPTANCE. Drafts payable at 
 sight, on demand, or after sight, must be presented within ten 
 days plus a reasonable time for transmission to the place of pre- 
 sentment. 
 
 Delay in presentment for acceptance is excused, however, when 
 caused by circumstances over which the holder has no control. 
 
 As to how presentment should be made, the following rules 
 exist: 
 
 (1) The draft must be presented by the holder or his agent; 
 6 
 
82 COMMERCIAL LAW. 
 
 (2) On a business day within reasonable hours; 
 
 (3) To the drawee or his agent. 
 
 The drawee has until the next business day to accept or refuse 
 the draft. If the drawee, or his agent, or place of business can 
 not be found, the presentment is excused. 
 
 AS A NEGOTIABLE INSTRUMENT, a draft is identical 
 \vith a promissory note, being subject to the same equities and 
 defenses and endowing a bona-fide holder with the same rights 
 and privileges. A bona-fide holder gets a good title without 
 regard to whether he took the bill before acceptance or after, so 
 long as he procures it before maturity. 
 
 LETTER OF CREDIT. This is a form of non-negotiable 
 draft which does not specify definitely any particular drawee, but 
 is given generally on any bank or banker requesting them to pay 
 the payee any sum or sums upon a certain amount stated in the 
 letter. 
 
 This is for convenience of persons who are taking extensive 
 tours. Instead of carrying money they take the letter of credit, 
 having first deposited with their local bank a sum of money, and 
 in each city with which the local bank does business, the traveler 
 may present his letter of credit, and draw any amount not to 
 exceed that specified in the letter, less the amount already drawn. 
 
 It is the duty of the bank from which he draws to write upon 
 the letter the date of payment, the name of the bank so paying, 
 and the amount paid. 
 
 The bank which pays the last amount, making the total called 
 for in the letter, keeps the letter to be used as a voucher in set- 
 tling with the other banks. 
 
 As each bank pays the traveler, it draws on the local bank for 
 the amount, which it has paid, to reimburse itself. 
 
 Letters of credit, while they are used in a similar manner as 
 negotiable instruments, and we classify them under that head, 
 are usually not negotiable, being drawn in favor of one person 
 only, whose signature is clearly identified. 
 
BILLS OF EXCHANGE. 83 
 
 TEST QUESTIONS. 
 
 1. Explain the transaction of sending $100 to a friend in New 
 
 York by regular Bank Exchange. 
 
 2. A payee fails to present a draft for payment within the 
 
 proper time after acceptance. The drawee becomes insol- 
 vent before payment. Discuss the liabilities of the parties. 
 
 3. A bill becomes due December 1st, 1896; December 5th, 
 
 1896, A purchases the bill in good faith and for a valuable 
 consideration. Discuss A's rights and liabilities and. the 
 rights and liabilities of the drawer. 
 
 4. On March 1st, 1897, A buys a negotiable instrument which 
 is dated July 1st, 1896, payable six months after date. 
 Discuss A's right to recover on the paper. 
 
CHAPTER XV. 
 CHECKS. 
 
 DEFINITION. A Check is a bill of exchange drawn upon 
 a bank or banker against deposit funds, payable on demand, with- 
 out grace, and without interest. 
 
 EXPLANATION". The use of checks is much more recent 
 than that of bills of exchange proper. 
 
 Checks are usually used only for making payments in a par- 
 ticular locality, town, or city. A business man who necessarily 
 pays out large sums of money, obviates the necessity of making 
 change, on paying his bills, and secures himself against robbers, 
 by placing his mone} r on deposit in a bank and drawing checks 
 for the exact amount required to pay any bill presented. 
 
 The check when presented and paid at the bank is marked 
 "paid"'' and a record is kept of such payment on the bank books, 
 so that there is an additional receipt in case the creditor attempts 
 to make a second collection. 
 
 Checks are sometimes made so that they do not conform to 
 the requirements of negotiability. In such cases they amount to 
 mere orders for the payment of money, and afford no protection 
 whatever to a holder more than any ordinary written contract. 
 
 The following is the ordinary form of checks: 
 
 Stockton, Cal., January 2, 1898. Number 10. 
 
 THE FARMERS' BANK. 
 Pay to R. M. Stanley, or order, One Hundred and yVu 
 
 ($100.25) Dollars. 
 
 L. M. McCOY. 
 
 (84) 
 
85 
 
 PARTIES AND THEIR LIABILITIES. The names of 
 the parties are. of course, the same as in any other hill of ex- 
 change, and their liability is the same, except that the drawer and 
 endorsers are exonerated by delay in presentment only to the 
 extent of the injury which they suffer thereby; and further, an 
 endorsee after its apparent maturity, but without actual notice 
 of its dishonor, acquires a title equal to that of an endorsee before 
 such period. 
 
 The drawer in executing the check agrees that there are funds 
 on deposit in the bank for its payment, and that the bank will 
 pay the amount upon proper presentment. 
 
 Sometimes a bank will even cash a check when the drawer has 
 not actually coin on deposit with which to pay it, but in doing so 
 the bank, of course, takes the chances on the maker's insolvency, 
 or his refusing to deposit further with them. In any event the 
 bank is not obliged to cash the check, and can not be compelled 
 to do so even if the maker has funds on deposit, so that in case of 
 refusal of payment the payee must se'ek his remedy against the 
 maker, provided he has presented the check within proper time, 
 and lias given proper notice of the refusal of the bank to pay. 
 
 PRESENTMENT OF A CHECK FOR PAYMENT, as in the 
 case of a bill of exchange proper, must be made within ten days 
 after the time in which it can with reasonable diligence be trans- 
 mitted to lhe proper place for such presentment, and if not pre- 
 sented, the drawer and endorsers are exonerated, unless such pre- 
 sentment is excused; and delay or failure of presentment is only 
 excused when caused by circumstances over which the holder has 
 no control. 
 
 Example. A draws a check against The Farmers' Bank in 
 favor of B. B uses reasonable diligence and it requires two days 
 to reach the bank. The bank fails on the llth day after the 
 check is issued. The drawer is responsible for the payment of 
 the check. 
 
 Suppose that B is immediately accessible to the bank, and does 
 
86 COMMERCIAL LAW. 
 
 not go to the bank lor the purpose of presentment until the 15th 
 day. The bank fails on the 14th day. B must lose the money. 
 The law gives him ten days after he reaches the bank within which 
 to present his check. If lie fails to do so,, he must suffer for his 
 own negligence. So far as A, the drawer, is concerned, the check 
 is presumed to be paid after ten days plus the reasonable time 
 required to reach the bank. 
 
 This rule is a very just one, otherwise in the above case A 
 would be required to keep large sums of money on deposit to meet 
 checks drawn an indefinite time beforehand, and be constantly 
 liable to extra losses in case of the failure of the bank. 
 
 It is to be noted, however, that no matter how long a time 
 elapses after the drawing of the check, the holder may cash it pro- 
 vided there is funds in the bank, and the bank is still doing busi- 
 ness. 
 
 CEKT1FIED CHECKS. There is nothing to prevent a per- 
 son who is so disposed from drawing a check upon a bank in 
 which he has no funds deposited, and which he knows will not be 
 cashed. This being true, a creditor before receiving a check in 
 payment will often require that it be "certified," which means 
 that the cashier of the bank against which it is drawn is to write 
 the word "certified," or "'good," or some equivalent word, with 
 his name, across the face of the check. 
 
 This has the legal effect of making the bank responsible for 
 the payment and is practically the same thing so far as fixing the 
 liability of the bank, as the acceptance of a draft, except that in 
 the case of acceptance of a draft, the drawer still remains liable, 
 while in the case of certification of a check, the drawer is released 
 and the bank only is liable. 
 
 The bank, after having certified a check, will always make 
 note on the depositor's account, of the amount certified, charging 
 him with the certification in a similar manner as if the money had 
 been actually paid. 
 
 If there is no money on deposit, the bank will not certify the 
 check, and the creditor will refuse to accept it. 
 
CHECKS. 87 
 
 The principal reason for having a check certified is that the 
 bank is usually more reliable financially than an individual. 
 
 An oral certification is of no effect. It must be written. 
 
 FORGERY. A check is liable to forgery in the same manner 
 as any other negotiable instrument, by the signing of another's 
 name,, or by alteration; and the question frequently arises in case 
 of loos by forgery, whether the bank or the maker must bear the 
 loss. 
 
 In forgery of signature the rule is that the bank must know 
 the signature of its depositors. 
 
 When a person opens a deposit account with the bank, the 
 bank should require him to write his signature in a book kept for 
 that purpose, just as he expects to write it in drawing checks, and 
 the bank is thereafter conclusively presumed to know the deposit- 
 or's signature, and if it pays out any money on his account on a 
 forged signature, no matter how cleverly it may be executed, the 
 bank must stand the loss. 
 
 The rule, however, is different as regards forgery by altera- 
 tion. If the drawer has properly and carefully filled all blanks 
 with some indelible writing material, so that the checks can not 
 be easily altered, the bank must stand the loss if the note is 
 altered, and the bank pays a larger sum than that for which the 
 check was originally drawn. 
 
 On the other hand, if by the drawers ordinary carelessness in 
 leaving blanks, or writing lightly, or with pencil, he renders the 
 forgery easily consummated, the drawer must bear the loss. 
 
 The maxim of law upon which this rule rests is: "Of two inno- 
 cent parties he must suffer who made the wrong possible." 
 
 BAXK BOOK. When a person deposits money in a bank 
 against which he wishes to draw checks, he is given a small' bank 
 book ruled with debit and credit columns, for the purpose of keep- 
 ing a record of money deposited and checked out. 
 
 When a deposit is made, the bank enters the amount on the 
 left page, and this operates as a receipt. 
 
88 COMMERCIAL LAW. 
 
 Periodically the depositor hands his book to the cashier, and the 
 amount of the checks drawn is entered on the other page and the 
 hook balanced, thus showing him at any given time just how much 
 money is to his credit. 
 
 CEKTIFICATE OF DEPOSIT. If a person wishes to deposit 
 money in a bank without any intention of drawing checks against 
 the deposit, and simply for safe keeping, the bank will give him 
 what is called a Certificate of Deposit. 
 
 The ordinary form is as follows: 
 
 THE FARMERS' BANK. 
 
 No. 5GO. 
 
 This certifies that J. Brown has deposited in this bank Five 
 Hundred ($500.00) Dollars, payable to the order of himself on 
 return of this Certificate properly endorsed. 
 
 R. EDWARDS, 
 
 Cashier. 
 
 It should be noticed that the words of negotiability are slightly 
 different from those in other negotiable instruments. The word 
 "promise" is not used, the word "payable" being substituted. It 
 is, however, a negotiable instrument and may circulate from hand 
 to hand indefinitely. 
 
 An ordinary check signed by the cashier of the bank is some- 
 times drawn in lieu of the Certificate of Deposit, and serves exactly 
 the same purpose. It is called a cashier's check. 
 
 TEST QUESTIONS. 
 
 A person presents a check to a bank for payment. The 
 bank pays the check and afterwards discovers that the sig- 
 nature is a forgery. Who loses the amount of the check? 
 
CHECKS. 
 
 2. September 1st, 1896, a Stockton grocer gives a check to a 
 
 Stockton merchant for $100. September 14th, the mer- 
 chant takes the check to the bank and finds that the bank 
 has suspended payment. Can he compel the grocer to pay 
 him another $100? Give reasons. 
 
 3. A check is forged by altering the amount stated therein 
 from $100 to $200. The bank pays $200 on the check. 
 Who must lose the $100, the bank or the maker? Discuss 
 fully. 
 
 4 A draws a check on a bank December 1st, 1897; he gives 
 it to B in payment of a debt December 15th, 1897. De- 
 cember 30th B goes to the bank and finds that the bank 
 was insolvent December 10th. Can he compel the payment 
 of the debt by A? Discuss fully. 
 
CHAPTER XVI. 
 
 TRANSFER OF NEGOTIABLE PAPER. 
 
 BONA-FIDE HOLDER. We have before stated that a bona- 
 fide holder is one who takes a negotiable instrument, 
 
 (1) For value; 
 
 (2) Without notice of defects; 
 
 (3) In the usual course of business; and 
 (<t) Before maturity. 
 
 FOR VALUE. It is, as we have learned, the general rule of 
 all contracts that there must be a valuable consideration, or the 
 contract is void, and this rule holds good in regard to negotiable 
 paper. 
 
 It is not necessary that actual money value be paid or that 
 something equal in value be paid. The valuable consideration 
 may be merely the forbearance to sue on an obligation; but in 
 any event unless there is some substantial value given the trans- 
 action would give rise to suspicion of fraud. 
 
 This rule is a just one, for if a person has paid nothing for an 
 instrument he loses nothing, and is not injured if the instrument 
 is void. 
 
 WITHOUT NOTICE OF DEFECTS. By defects in nego- 
 tiable paper \ve mean that there has been fraud, duress, menace, 
 mistake, want of consideration, or some such like irregularity 
 between the original parties at the time the paper was executed. 
 
 In order that a person may claim to be a bona-fide holder and 
 have all the rights pertaining to negotiable paper, he- must have 
 no notice of any such defects, must be actually innocent and igno- 
 rant of anything tending to show that the paper is invalid. For- 
 (90) 
 
TRANSFER OF KEGOTIABLE PAPER. 91 
 
 n-ai notice is not necessary. If he purchases a paper, knowing 
 of such defects, he gets no better title than the one from whom he 
 received it had. 
 
 IX THE TSUAL COURSE OF BUSINESS. Checks, drafts, 
 and other negotiable instruments are passed from hand to hand 
 as a daily occurrence in the payment of debts, making up of bal- 
 ances, and various other business transactions, and if a person 
 procures the paper in the usual course of business he is presumed, 
 so far as that is concerned, to have a good and sufficient title; but 
 if he accepts a paper from an entire stranger, who asks for the 
 loan of money and agrees to give the paper as security, it is not 
 a business-like transaction, and not in the usual course of busi- 
 ness, and such a transaction is sufficient to arouse the suspicions 
 of an ordinarily prudent business man. In such a case, therefore, 
 he can not be held to have received the paper in the ordinary 
 course of business, and even though he may have paid value for 
 it without actual notice of defects, still, if it should develop that 
 there were defenses against its payment, or the paper was void, he 
 woulc! be obliged to suffer any loss rather than the maker. 
 
 BEFORE MATURITY. Negotiable paper is presumed to be 
 paid when due. If it is not paid when due, the law declares that 
 it has lost its negotiability, and is thereafter mere assignable 
 paper in the same manner as an ordinary written contract. 
 
 Therefore, before a person can claim to be a bona-fide holder, 
 and entitled to all his rights thereunder, he must show that he 
 has obtained the paper before maturity. While the paper may 
 pn>s from hand to hand by endorsement after maturity, its nego- 
 tiability dies ^\ith the day of maturity, and no matter how much 
 value the holder may pay, or how innocent he may be of any 
 defects, or how regularly he may have received it, if he purchases 
 after maturity, and the paper is void, he has no recourse against 
 the maker. 
 
 If his endorser's title is good, his own will be good after 
 maturity. If it is not good, his will not be good. 
 
92 COMMERCIAL LAW. 
 
 MATURITY. -What maturity is, is, in the light of what has 
 been said, very important to know. When the time is stated in 
 days, days, of course, must he counted, when it is in months, calen- 
 dar months are meant. 
 
 In counting the time the date of the paper is excluded, and all 
 of the last day is included. 
 
 A negotiable paper bearing interest, payable on demand, is 
 due one year after its date, whether demanded or not; a note 
 on demand without interest, matures six months after date. 
 
 TEST QUESTIONS. 
 
 1. January 2nd, 1898. 
 
 On demand I promise to pay to J. Eoss, or order, One 
 Hundred ($100.00) Dollars with interest at one (1) per 
 cent per month. R. BOYD. 
 
 July 2d, 1898, the paper having circulated from hand to 
 hand, comes into the possession of A. Is A a bona-fide 
 holder so far as having received the paper before maturity 
 is concerned? 
 
 2. Stockton, August 1st, 1897. 
 On demand I promise to pay to J. Ross, or order, One 
 
 Hundred ($100.00) Dollars. R. BOYD. 
 
 December 1st, 1897, the note comes into the possession of 
 A. So far as time is concerned is A a bona-fide holder? 
 
CHAPTER XVII. 
 ENDORSEMENT. 
 
 DEFINITION. We have seen that in accepting or certifying 
 an instrument, the person so doing must write across the face of 
 Iho instrument, while in endorsement he must write across the 
 bade of the instrument. 
 
 The place on the instrument where a name is written, to a 
 large extent determines the purpose for which it is written. 
 
 Endorsement is the writing of one's name on the back of a 
 negotiable instrument, with or without other words, with the pur- 
 pose of transferring the title thereto. 
 
 The name when thus written also evidences the contract to 
 transfer, in case of a paper made payable "to bearer," however, 
 it is not necessary that the instrument should be endorsed in order 
 to pass title, as the words "to bearer" in themselves give the title 
 to whomever may be in possession of it, while all instruments pay- 
 able "to order" must be endorsed. 
 
 WHO MAY ENDORSE. Any competent party may endorse, 
 the rule as to competent parties being the same as in ordinary 
 contracts. Under these rules, a minor or person of unsound mind 
 maj avoid his endorsement if made, and may recover back his 
 paper from his immediate endorsee, but after it gets into the hand 
 of a third person, who is a bona-fide holder, the bona-fide holder 
 is protected, and the minor or person of unsound mind has no 
 right to recover his paper; and, as has been intimated before, even 
 a thief or finder may endorse and pass a good title to a bona-fide 
 holder, although he himself has no title. 
 
 If a person who has a right to endorse a paper dies, his legal 
 
 representative may endorse the paper. 
 
 (93) 
 
94 COMMERCIAL LAW. 
 
 A paper owned by a partnership may be endorsed by any mem- 
 ber of the firm signing the firm name. 
 EORM OF ENDORSEMENT. 
 
 (1) In blank; as "R. Thomas." 
 
 (2) In full; as "Pay to R. Boyd, or order. 
 
 R. THOMAS." 
 
 (3) Without recourse: "Pay to R. Boyd, or order, without 
 recourse to me. R. THOMAS." 
 
 or simply, "Without recourse. 
 
 R. THOMAS." 
 
 (4) Restrictive; "Pay to R. Boyd for collection. 
 
 R. THOMAS." 
 
 IN BLANK. An endorsement in blank is one in which no 
 endorsee is named, being- simply the endorser's name written on 
 the back of the paper. 
 
 This in legal effect is equivalent to making the paper payable 
 "to bearer," but any lawful holder may afterwards turn a blank 
 endorsement into a special one by writing above it a direction for 
 payment to a particular person. 
 
 ENDORSEMENT IN FULL, as shown above, specifies the 
 name of the person to whom it is to be paid, and prevents any one 
 from transferring it except the person designated. 
 
 This form of endorsement is to be preferred to a blank endorse- 
 ment as it affords security against fraud on the part of an unlawful 
 holder, should the paper be lost, by making it necessary for the 
 paper to have the signature of the person designated as endorsee. 
 
 WITHOUT RECOURSE. When a person wishes to relieve 
 himself from liability for payment as endorser, he uses the restrict- 
 ive form of endorsement. The only effect this form of endorse- 
 ment has is to relieve the endorser from liability for payment. 
 It does not effect the negotiability of the instrument or relieve 
 the endorser in any other way. 
 
 As shown above, either an endorsement in blank or an endorse- 
 ment in full may be made without recourse. 
 
ENDORSEMENT. 95 
 
 RESTRICTIVE ENDORSEMENT. It frequently happens 
 that a person decides to transfer a note to another person merely 
 for collection, or to be held as security, or for some temporary 
 purpose, and wishes to prevent such person from transferring it 
 to others. Such an endorsement in effect creates an agency and 
 does not transfer the full title. 
 
 The endorser may however in turn endorse to a third person, 
 but only by like restrictive endorsement, he having only a limited 
 title; as agent himself, he can not convey more than the same 
 limited title as agent. 
 
 ENDORSEE'S LIABILITY. Every endorser of a negoti- 
 able instrument, unless his endorsement is restricted, warrants to 
 every subsequent holder thereof, who is not liable thereon to him, 
 
 (1) That it is in all respects what it purports to be; 
 
 (2) That he has a good title to it; 
 
 (3) That the signatures of all prior parties are binding upon 
 them; 
 
 (4) That if the instrument is dishonored he will, upon 
 proper notice, or without notice, where excused by law, pay the 
 eame. 
 
 Of course, as we have seen, a person who restricts his endorse- 
 ment is not liable for the payment of the paper, but is liable on 
 the first three warranties above stated. 
 
 The first three warranties are in the nature of original war- 
 ranties, and if there is a breach of any of them, the party injured 
 may proceed against the endorser at once. 
 
 The fourth warranty is conditional that if the paper is dis- 
 honored, the endorser will pay. This makes it necessary to pre- 
 sent the paper to the maker and upon his refusal to pay, to give 
 notice to the endorser. 
 
 These warranties must be taken, however, in connection with 
 other rules concerning negotiable paper. 
 
 In the case of a check we have seen that the bank upon which 
 it is drawn is absolutely responsible for the genuineness of the 
 
 -BSITY 
 
96 COMMERCIAL LAW. 
 
 drawer's signature; so in this case the endorser is liable for the 
 genuineness of the signature, if the bank pays on a forged signature. 
 
 ALLONGE. After passing through many hands, a negotiable 
 instrument sometimes has all available space filled with endorse- 
 ments. In such a case it is permissible and lawful to paste a piece 
 of blank paper on the end of the instrument, upon which other 
 endorsements may be written. This is called an "Allonge." 
 
 TIME OF ENDORSEMENT. As has been before explained, 
 an endorsee, after maturity, takes the paper subject to all equities 
 and defenses between the original parties, not however between 
 other parties. 
 
 The fact that an instrument has arrived at maturity and has 
 not been paid is a suspicious circumstance, sufficient to put any 
 one on guard; and it is the law of negotiable instruments that they 
 become at maturity, while not void, simply ordinary written con- 
 tracts. 
 
 It must not be understood that the non-payment at maturity 
 relieves the maker from the payment absolutely, but it allows him 
 to present any legal defense, if any he have, against its payment. 
 
 AGAINST PEIOE ENDORSERS. The holder even after 
 maturity has a right of action for breach of the following general 
 warranty in addition to the warranties above stated: 
 
 "One who sells an instrument thereby warrants that he has 
 no knowledge of any facts which tend to prove it worthless, or 
 its invalidity for any cause." 
 
 TEST QUESTIONS. 
 
 1. Stockton, July 1st, 1898. 
 
 On demand we promise to pay One Hundred ($100.00) 
 Dollars to J. Boss, or order. R. BOYD, 
 
 D. STONE. 
 
K. \PORSEMENT. 97 
 
 In the above note Stone claims to be liable only as an endorser. 
 Are there any circumstances under which he might sub- 
 stantiate the claim? Discuss fully. 
 
 *?. A holds a note to which he has forged B's name. A then 
 sells the note to 0, and endorses it "without recourse." 
 B now proves the note to be forged. Can C collect it 
 from A? 
 
 Q . A, B and C are successive endorsers; each has endorsed 
 "\vithout recourse." D, a bona-fide holder, finds on pre- 
 sentment for payment that the note is a forgery. What 
 are his rights if any against the prior endorsers and the 
 maker? 
 
 1. A signs a note in favor of B, B knowing A at the time to 
 be insolvent. B sells the note to C, after maturity, C 
 being ignorant of the maker's insolvency. Has C any 
 remedy against B? 
 
CHAPTER XVIII. 
 PRESENTMENT AND NOTICE. 
 
 NECESSITY FOR. It is not necessary to make presentment 
 i'or payment to the principal debtor on a negotiable instrument 
 in order to charge him; but it is necessary in order to hold the 
 endorsers on an instrument to make demand of payment upon the 
 principal debtor on the day of maturity, and upon his refusal to 
 pay to notify the endorsers of such refusal. 
 
 PRESENTMENT HOW MADE. Presentment for payment 
 must be made as follows, as nearly as by reasonable diligence it is 
 practicable: 
 
 (1) By the holder; 
 
 (#) To the principal debtor at the place specified for payment, 
 and if the debtor is not there, to any person having charge of such 
 place; 
 
 (3) If no place is specified, wherever the debtor may be found; 
 
 (4) Upon the day of its maturity, or if on demand on any day, 
 and within reasonable business hours. 
 
 If the debtor has no place of business, or if he can not with 
 reasonable diligence be found, presentment is excused. 
 
 If the day of maturity falls on a holiday, presentment may be 
 made on the next business day thereafter. 
 
 While it is not absolutely necessary, it is proper and a good 
 business practice for the person who makes the presentment actu-. 
 ally to show the paper to the debtor, and inform him that he 
 is the holder and has come to demand payment, or words to that 
 effect. 
 
 PROTEST. When a maker or acceptor of an instrument 
 refuses payment, the paper is said to be dishonored ? and notice of 
 the dishonor is given by protest, 
 (98) 
 
PRESENTMENT AND NOTICE. 99 
 
 This protest is a document containing a copy of the instru- 
 ment, stating the presentment, the manner in which it was made, 
 the presence or absence of the debtor, and his refusal to accept or 
 pay. and the reason if any; and finally protesting against all the 
 parties to be charged. 
 
 This protest must be made on -the day of presentment, or on 
 the next business day, and is made by a notary public, who makes 
 a second presentment himself in order that he may personally 
 certify to the dishonor of the instrument. 
 
 The notary then sends written notices of the fact of protest 
 to the parties to the paper, and makes a statement on the protest 
 of the names of the parties to whom he has sent notices. 
 
 All this given under the seal of the notary, is kept by the 
 holder as evidence of presentment and dishonor. 
 
 It is not necessary to make a formal protest in the case of an 
 inland bill, where the parties are near at hand, and proof is read- 
 ily furnished: but the law requires that a foreign bill shall be for- 
 mally protested, either before a notary public, as above described, 
 or, if one can not be obtained, by any reputable person in the 
 presence of two witnesses. 
 
 The notice of dishonor is not required to be in any particular 
 form, and may be given, 
 
 (1) By delivering it to the party to be charged, or his agent, 
 personally: 
 
 (2) By mailing the notice, postage prepaid, in time for the first 
 mail which closes in the afternoon of the first business day suc- 
 ceeding the dishonor. 
 
 It is usual for a holder to give notice to all prior holders, but 
 if he chooses to do so he may notify only the holder immediately 
 preceding him. AVhen this is done, that holder may in turn have 
 a like time to notify his preceding holder and so on, one giving 
 notice to the other until all are notified. 
 
 Of course, if the principal debtor pays the paper on present- 
 ment, all parties thereto are released from all obligations, and no 
 protest or notice is 
 
100 COMMERCIAL LAW. 
 
 NOTICE WHEN EXCUSED. 
 
 (1) When the party by whom notice should be given, can not, 
 with reasonable diligence, ascertain either the place of business, 
 or residence of the party to be charged; or 
 
 (2) When there is no post-office communication between the 
 towns where each resides, if in different towns; 
 
 (3) When the party to be charged is the person who dishonors 
 the instrument; or 
 
 (4) When notice is waived by the party entitled thereto; notice 
 of dishonor is excused. 
 
 It often happens that a paper is signed and several other par- 
 ties immediately endorse it for the primary object of securing its 
 payment. In such case it is customary for such endorsers to sign 
 a statement like the following: 
 
 "We hereby waive demand of payment, protest, and notice;" 
 and such a waiver is binding upon them, and relieves the holder 
 from the trouble of making any demand, protest, or notice. 
 
 TEST QUESTIONS. 
 
 The maker of a negotiable instrument lives on a farm. 
 The holder of such instrument on the day of maturity goes 
 to the farm for the purpose of making presentment for 
 payment. He finds that the maker is absent and can not 
 learn his exact whereabouts.. Under such circumstances 
 can he give notice of presentment? 
 
 A draft falls due on Sunday. The next; day is the Fourth 
 day of July. Can presentment be lawfully made there- 
 after? 
 
 A holder attempts to give notice of protest by depositing 
 a letter, properly addressed and prepaid, in the post-office, 
 before the post-office closes in the afternoon of the next 
 day after the dishonor. The train which would regularly 
 carry the letter, does not leave the station until the second 
 day after the dishonor. Is the notice properly given? 
 
CHAPTER XIX. 
 GUARANTY AND SURETYSHIP. 
 
 KXPLANATION.r-Early in the history of the law there were 
 material differences between a surety and a guarantor, but these 
 differences have been so modified by statute that at present, so 
 far as the legal status and legal liability are concerned, their posi- 
 tions are practically, identical. 
 
 There are some differences yet remaining, but they are in the 
 main merely formal, and not essential differences, so that we will 
 consider the two as constituting but one subject. 
 
 A GUARANTY is a promise to answer for the debt, default, 
 or miscarriage of another. It will be seen from the definition 
 that the contract of guaranty is a contract annexed to, or placed 
 upon another contract; e. g., A has made a contract by which he 
 promises to pay a certain sum of money to B; C writes a statement 
 upon this contract (or he may make it on a separate paper), to the 
 effect that if A fails to pay the money, he himself will pay it. 
 
 LIABILITY. It was further held that it was necessary that 
 the guarantor should have notice of default on the part of his 
 principal, but such is not now the law. 
 
 Xo notice is required and a guarantor is therefore absolutely 
 liable immediately upon the default of the principal. 
 
 IN" WRITING. A contract of guaranty or suretyship must 
 be in writing, except in case where the promise may be taken as 
 being an original obligation, and where in fact the principal credit 
 is given the guarantor himself; as in case A goes into a grocery 
 store and says to the proprietor, "Send B certain groceries; I will 
 pay for them;" while the grocer knows, of course, that the grocer- 
 
 (101) 
 
102 COMMERCIAL LAW. 
 
 ies are for B, and that A is to receive no benefit from them, still 
 he may hold A as the principal debtor, under his own statement, 
 without any contract in writing. 
 
 CONSIDERATION".-- -When a guaranty is entered into at the 
 same time with the original obligation or with the acceptance of 
 the latter by the guarantee, and forms with that obligation a part 
 of the consideration to him, no other consideration need exist. 
 
 In all other cases there must be a consideration different from 
 that of the original obligation, but the writing need not express 
 the words "value received/' or in any other way show a considera- 
 tion. Consideration may be proved orally at any time when 
 necessary. Of course, in all cases, being a contract, a guaranty 
 requires a consideration. 
 
 KINDS. Generally speaking there are three kinds of guar- 
 anties: of payment, of collection, and continuing guaranty. 
 
 GUARANTY OF PAYMENT. One who guarantees the pay- 
 ment of a written instrument may write, "1 guarantee the pay- 
 ment of the within instrument," or some such like words, and 
 sign his name, or he may sign his name on the face of the instru- 
 ment, beneath that of the maker, and add the words "surety" or 
 "guarantor." He may even write his name on the back of an 
 instrument in a similar manner as an endorser; but it is to be 
 carefully noticed that he is not an endorser, and has not the right 
 of notice which an endorser has in case of failure of the principal 
 to pay. 
 
 His guaranty means that he will pay absolutely upon the fail- 
 ure of the principal debtor. 
 
 GUARANTY OF COLLECTION. A guaranty to the effect 
 that an obligation is good or collectible, imports that the debtor 
 is solvent, and that the demand is collectible by the usual legal 
 proceedings if taken with reasonable diligence. 
 
 In making such a guaranty the guarantor usually writes, "I 
 hereby guarantee the collection of this note," and signs his name. 
 
GUARANTY AND SURETYSHIP. 103 
 
 He becomes liable to pay the obligation only after a judgment has 
 been obtained against the principal debtor, and an execution 
 returned unsatisfied. 
 
 Thus we notice a distinction between the guaranty of pay- 
 ment and the guaranty of collection. In the case of guaranty of 
 payment, mere refusal to pay makes the guarantor liable; while 
 in guaranty of collection, the creditor must bring a suit and pur- 
 sue it until the last legal procedure is had. 
 
 As to what is a reasonable time within which to commence 
 suit, it has been held that the failure of the creditor to begin an 
 action for six months after maturity of the obligation constitutes 
 such negligence as will release the guarantor. 
 
 If it is shown, however, that at maturity and thereafter the 
 principal debtor was insolvent, or has left the state or county, 
 leaving no property therein not exempt from execution, the guar- 
 antor is liable without suit. 
 
 CONTINUING GUARANTY. A guaranty relating to a 
 future liability of the principal under successive transactions, is 
 called a continuing guaranty, e. g., "I hereby guarantee the pay- 
 ment of all goods which The Stockton Paper Mills may hereafter 
 sell to J. B. Ross, within six months from date hereof, and to the 
 amount of Two Thousand ($2,000.00) Dollars; this to be taken 
 as a continuing guaranty. 
 Dated July 21st, 1898. (Signed) R, RYAN." 
 
 The above is the usual form of continuing guaranty. It may, 
 however, be simply for a specified time, without stating an amount, 
 or for an indefinite time, stating a specified amount* 
 
 This guaranty means that Ryan would be responsible for any 
 Two Thousand Dollars worth of goods purchased during the six 
 months. 
 
 The purchaser can therefore, after purchasing the full amount, 
 pay off a part or all, and the guaranty is still valid for any further 
 purchases up to the amount, and within the time. 
 
 A continuing guaranty may be revoked at any time by the 
 guarantor in respect to future transactions. 
 
104 COMMERCIAL LAW. 
 
 EXONERATION OF GUARANTORS. A guarantor is ex- 
 onerated except so far as he may be indemnified by the principal, 
 if by any act of the creditor without the consent of the guarantor 
 the original obligation of the principal is altered in any respect, 
 or the rights or remedies of the creditor against the principal in 
 respect thereto, are in any way impaired or suspended; and the 
 partial satisfaction of an obligation reduces the obligation of a 
 guarantor to the same extent. 
 
 E. //., if in the case of continuing guaranty above giA r en, the 
 paper company should agree with J. B. Ross to extend credit to him 
 for purchases beyond the six months' life of the guaranty, that 
 would be such a relinquishment of the right to sue Ross during the 
 six months as would also relieve the guarantor from liability for 
 payment, unless he agreed that the credit should be given. 
 
 A guarantor's obligation is extinguished also if he performs 
 or offers to perform the obligation resting upon him in accord- 
 ance with the contract, and such performance is refused. 
 
 Such a case comes under the general rule of good tender, 
 which we have before considered.. In any event a guarantor can 
 not be held beyond the express terms of his contract. 
 
 The ordinary ways in which a guarantor may be discharged 
 from his liability are, 
 
 (1) Expiration of time, on a continuing guaranty; 
 
 (2) Notice from the guarantor; 
 
 (3) Alteration of the agreement, such as substituting differ- 
 ent goods for the ones for which payment is guaranteed; 
 
 (4) Giving time to the principal; and 
 
 (5) Fraud practised upon the guarantor by the creditor or by 
 the debtor with the creditor's consent. 
 
 Fraud practised upon the guarantor by the debtor, without 
 the knowledge of the creditor, "will not release the guarantor, but 
 gives him a right of action against the debtor for damages for 
 the fraud. 
 
 REMEDIES OF PARTIES. As we have seen, if the prin- 
 
GUARANTY AtfD SURETYSHIP. 105 
 
 cipal debtor fails to perform his obligation the creditor may sue 
 the guarantor at once, and if the guarantor is compelled to pay 
 the creditor, he in turn has a right to sue the principal debtor; 
 having paid his debt for him, he has a right to demand reimburse- 
 ment. 
 
 CONTRIBUTION. Where, as often happens, there are sev- 
 eral guarantors or sureties, each one is liable for all of the debt 
 and the creditor may compel any one to pay all of the debt. Any 
 guarantor who is thus compelled to pay all of the debt, may in 
 turn compel each of his co-sureties to contribute their proportion 
 of the debt to reimburse him. This is known as contribution 
 among sureties or guarantors. 
 
 TEST QUESTIONS. 
 
 1. A enters a store with B. B orders some goods for him- 
 self. A says to the merchant, "If B does not pay for those 
 goods I will." B fails to pay for them. What right of 
 collection, if any, has the merchant against A? 
 
 2. A guarantees the payment by B of $1,000 for goods pur- 
 
 chased within one year's time.. On the last day of the 
 year B purchased goods at thirty days' time. Can the 
 wholesaler hold A for the goods? Discuss the question 
 fully. 
 
 3. A wholesaler and his customer A go to B together and A 
 
 makes this statement, "The wholesaler will furnish me a 
 choice, well-selected stock of fresh groceries to the amount 
 of $5,000 if you will guarantee the payment." B agrees 
 and gives a written guaranty. The wholesaler ships gro- 
 ceries to A, knowing that they are not salable nor fresh. 
 A fails to pay for the groceries. Is B liable on his guar- 
 anty? Discuss fully. 
 
CHAPTER XX. 
 INTEREST AND USURY. 
 
 INTEREST is the compensation allowed by law or fixed by 
 the parties for the use, or forbearance, or detention of money. 
 
 This subject is especially important to every one, and the defi- 
 nition just stated should be carefully examined. 
 
 It will be noticed that it is compensation either allowed by 
 law, or fixed by the parties; hence under the definition any rate 
 fixed by the parties is allowable by law. 
 
 A common transaction is borrowing money and paying inter- 
 est thereon for the use of money, but the law allows interest in 
 cases where people refuse or neglect to pay money which they are 
 lawfully entitled to pay, as in case where a judgment is obtained 
 against a person and he declines to pay the amount of the judg- 
 ment. 
 
 He may not be using the money: he may not even have the 
 money with which to pay, nevertheless interest is charged against 
 him because he detains money from the person who holds the 
 judgment against him. 
 
 Interest is usually a certain per cent upon the principal sum, 
 and unless otherwise stated, is presumed by law to be annual. 
 It is usual to state definitely in the contract that the interest is 
 to be at a certain rate per cent per annum, or per month. 
 
 "Ten per cent per annum/ 7 means an interest of $10 on each 
 $100 for each year the money is used or detained. 
 
 (106) 
 
INTEREST AtfD USURY. 107 
 
 LEGAL BATE. The legal rate, unless there is an express 
 contract in writing fixing a definite rate, is seven per cent per 
 annum. This applies to all money due. 
 
 The laws of the different states provide for different rates, 
 some states limiting the amount to a certain rate. 
 
 The law of the place where the contract for payment of inter- 
 est is made, however, will govern in the, payment thereof, unless 
 it is expressly provided in the instrument that the principal and 
 interest are payable in some different place. 
 
 OX WHAT ALLOWED. Interest is allowed by agreement 
 on all forms of debt, from the time of the creation of the debt 
 until it is paid; or it may begin at any time after the creation of 
 the debt, or after the debt is due, and in any event where no 
 express agreement is made interest is allowed on all claims as soon 
 as they are due and remain unpaid, and on all judgments. 
 
 For example; if goods are sold "for cash" and cash is not paid, 
 interest may be collected from the date of the sale until payment. 
 If they are sold on sixty days' time, interest begins at the expira- 
 tion of the sixty days. 
 
 COMPOUND INTEREST. Compound interest is allowed 
 only where there is a special agreement therefor by the parties, 
 evidenced by a contract in writing. They may agree that the 
 interest may be paid yearly, semi-annually, or even monthly, and 
 if not so paid when due it may be added to the principal and be- 
 come a part thereof, and bear interest at the same rate. 
 
 USURY is the taking of higher interest, or the agreement to 
 take or give higher interest than the law provides. 
 
 This, as we have noticed by a careful study of the definition 
 01 interest, can not apply in California, as any rate of interest 
 may be allowed by agreement. 
 
 In some states, however, the law forbids the taking of any 
 greater than the legal rate, and provides penalties therefor. 
 
108 COMMERCIAL LAW. 
 
 TEST QUESTIONS. 
 
 1. A signs a note as follows: 
 
 June 1st, 1896. 
 
 One day after date I promise to pay to J. Brown, or 
 order, One Hundred ($100) Dollars, without interest. 
 
 R. CAINE. 
 May interest be at any time collected on the note? 
 
CHAPTER XXI. 
 
 SALES OF PERSOXAL PROPERTY. 
 
 IXTRODUCTIOX. Property is anything which has value, 
 and is susceptible of ownership; air, for example, has value, but is 
 not susceptible to ownership, while land complies with the require- 
 ments of the definition. 
 
 Property is divided with respect to kind into two general 
 classes, real and personal property. 
 
 Real property will be discussed fully in a subsequent chapter. 
 
 Personal property, while difficult of exact definition, may be 
 said to be generally movable property, such as live stock, furni- 
 ture, vehicles, and musical instruments. Even where property 
 is considered immovable, such as a house, yet if it is actually 
 moved, it is considered as personal property; or a house may be 
 considered as personal property, even while remaining affixed to 
 the soil, if it is placed upon the land for a mere temporary pur- 
 pose, and to be removed. 
 
 Trees are considered real property while growing. As soon as 
 cut down, are considered personal property. 
 
 Annual crops, however, such as wheat and barley, are con- 
 sidered personal property, and may be sold or mortgaged as such 
 even while growing. 
 
 TRADE-MARK. One who make a business of selling a par- 
 ticular article may, by his skill in preparing or handling such 
 article, procure for it a large sale and great profit to himself. 
 AVhen such is the case, and he desires to prevent others from imi- 
 tating his goods, or selling similar goods under like name, he 
 may use what is called a trade-mark, 
 
 (109) 
 
110 COMMERCIAL LAW. 
 
 A trade-mark is any word, letter, device, emblem,, or symbol 
 affixed by any tradesman to denote any goods sold by him, other 
 than any words denoting a class or description. 
 
 In order to be effective a person so claiming a trade-mark 
 must file with the Secretary of State, or with the Commissioner 
 of Patents in the United States Patent Office, a copy or descrip- 
 tion of such trade-mark, accompanied by his fee for filing of $3.00 
 to the State, or $25 to the "United States. 
 
 A trade-mark thus filed is personal property, and subject to 
 sale as other personal property. 
 
 INFRINGEMENT OF TRADE-MARK. Any one who uses 
 a forged trade-mark with a wilful intent to deceive or defraud 
 is guilty of a misdemeanor, and may be punished accordingly; and 
 the phrase "forged trade-mark" includes every alteration or imi- 
 tation of any trade-mark, so nearly resembling the original as to 
 be likely to deceive. 
 
 Any one infringing a trade-mark, in addition to the penal 
 offense committed, is also liable in damage to whatever extent the 
 rightful owner of the trade-mark may suffer by reason of the 
 infringement. 
 
 DEFINITION. A sale is a contract by which for a pecun- 
 iary consideration called a price, one transfers to another an inter- 
 est in property. By analyzing this definition we see that a sale 
 is a contract, and hence liable to all rules regarding contracts; 
 and further that the consideration is pecuniary. 
 
 "Price" means "money." A contract in which the considera- 
 tion is goods or merchandise is called "barter," and thirdly we 
 notice that the sale is a transfer of an interest in property, so that 
 a sale can be completed even before the property itself changes 
 hands. 
 
 SUBJECT MATTER. One of the essential elements of 
 every contract, as we have learned, is subject matter. 
 
 In the sale of personal property this subject matter must be 
 either in actual existence, or in potential, or probable, existence- 
 
SALES OF PERSONAL PROPERTY. Ill 
 
 as for example, A during the winter makes a sale of peaches which 
 he expects to have on his trees the following summer. The 
 peaches in this case are in potential or probable existence. If, 
 however, the crop should fail for any cause, the sale will become 
 void, because of failure of subject matter, and the purchaser 
 may recover any moneys paid, and rescind his contract. 
 
 A similar case is where the parties have entered into a con- 
 tract of sale in regard to something which has ceased to exist, 
 in ignorance of that fact; as where A has bought a horse from B, 
 and at the time of making the sale the horse was dead. A can 
 recover the price paid and avoid the sale on the ground of no sub- 
 ject matter. 
 
 The same is true where the subject matter is partly destroyed, 
 as in case of goods damaged by fire or otherwise. 
 
 ILLEGAL SUBJECT MATTER. This subject has already 
 been discussed in a previous chapter, and the same rule applies to 
 the subject matter of sales as to any other contract. 
 
 The subject matter, however, is considered to be legal unless 
 the law especially declares it to be illegal. 
 
 The sale of obscene and immoral publications is an instance of 
 illegal subject matter prohibited by law, and the sale of such mat- 
 ter so prohibited is absolutely void, and neither party has any 
 recourse against the other: the seller for the recovery of the price, 
 or the buyer for non-delivery of the writing. 
 
 PARTIES. The parties to a sale must be competent parties, 
 under the general rule of parties to contracts. In the contract of 
 sale the particular names given are seller or vendor, and buyer or 
 vendee. 
 
 STATUTE OF FRAUDS. The particular portion of the 
 Statute of Frauds which reiers to the sale of personal property, or 
 an agreement to buy or sell, is as follows: 
 
 Xo sale of personal property, or agreement to buy or sell it for 
 a price of $200 or more, is valid, unless. 
 
112 COMMERCIAL LAW. 
 
 (1) The agreement, or some note or memorandum thereof, be 
 in writing,, and subscribed by the party to be charged, or by his 
 agent; or 
 
 (2) The buyer accepts and receives part of the thing sold; 
 
 (3) The buyer at the time of the sale pays a part of the price. 
 
 By a careful analysis of the above it will be seen that the stat- 
 ute contains very just provisions in regard to sales, and at the 
 same time makes sales of small amounts easy to consummate. 
 
 SUBDIVISION ONE. It is not necessary that there should 
 be a special formal agreement in writing. A mere note or memo- 
 randum is sufficient, and it need not be subscribed by both par- 
 ties. The person who gives the note or memorandum only need 
 subscribe, or write his name under, the memorandum. 
 
 A formal Bill of Sale, as it is called, is often made, however, in 
 which is stated formally that the vender sells to the vendee at a 
 certain price certain described property, and in which he warrants 
 that he has title to the same. 
 
 The vender signing the instrument can be held liable under 
 its terms, while it can not be enforced against the vendee unless 
 he has also signed it. 
 
 SUBDIVISION" TWO. If the buyer accepts and receives 
 part of the thing sold, this does away with the necessity of any 
 writing. 
 
 The fact that he has taken part of the goods as his own, the 
 law declares to be sufficient evidence that he has bought them, 
 and no writing or further proof is required. 
 
 SUBDIVISION TIIEEE. This is similar to subdivision 
 two. If the vendee pays at the time part of the price, or all of 
 it, this is held to be sufficient to make a valid sale without regard 
 to any writing or actual delivery of the goods. 
 
 Examples: A wishes to buy fifty tons, of hay at $10 per ton. 
 We see at a glance that the amount is over $200, hence there are 
 three ways in which he can make a valid purchase. 
 
SALES OF PERSONAL PROPERTY. 113 
 
 First: He may secure a written instrument from B, the ven- 
 der, without paying anything, or even seeing the hay. 
 
 Second: He may go and take a wagon load of the hay and 
 transfer it to his own premises without any writing; or 
 
 Third: He may pay a part of the $500 without any writing, 
 or without receiving any of the hay. In either of the three cases 
 a valid sale is consummated. 
 
 AUCTION" SALES. A sale hy auction is a sale by public 
 outcry to the highest bidder on the spot. 
 
 It is complete when the auctioneer publicly announces by the 
 fall of his hammer or in any other customary manner that the 
 thing is sold. Until he makes such announcement any bidder 
 may withdraw his bid. 
 
 IX WRITING. An auction sale of course must conform to 
 the Statute of Frauds in regard to sales, and when property is 
 sold by auction an entry made by the auctioneer or his clerk in 
 his sale book at the time of the sale, specifying the names of the 
 vendor and the vendee, the thing sold, the price and terms of sale, 
 binds both parties in the same manner as if made by themselves. 
 In such sales the auctioner is considered as the agent of both par- 
 ties. 
 
 BY BIDDIXG. This is the employment, by a seller, of any 
 person to bid without an intention on the part of such bidder to 
 buy, and on the part of the seller to enforce his bid, and is such a 
 fraud upon the buyer as entitles him to rescind his purchase; or 
 when he discovers the fraud he may demand the property on ten- 
 der of the amount of the highest bona-fide bid. For example, A 
 is a bona-fide bidder. He bids $50 on a horse; B, a bona-fide 
 bidder, bids $60 on the horse; A then bids $70; C, a by-bidder, 
 continues to bid against A until $100 is reached, and the horse 
 declared sold to A for that price. If A discovers the fraud he 
 can compel the sale of the horse to him upon tendering $70, the 
 amount of his highest lnl against ]>. the only other bona-fide 
 bidder, 
 
 8 
 
114 COMMEECIAL LAW. 
 
 An owner of property or his agent has a right as a matter of 
 course to bid on his own goods if he does so fairly and openly, 
 unless he has announced, or the auctioneer has announced by his 
 authority, that the sale is to be without limit or reserve, or makes 
 any equivalent declaration. 
 
 TEST QUESTIONS. 
 
 1. A water-trough is imbedded in the ground. Discuss the 
 
 question as to whether it is personal or real property. 
 
 2. A makes a contract with B for the purchase of twenty tons 
 
 of hay at $5.00 per ton, to be hauled by A from a large 
 stack until the full twenty tons is supplied. A afterwards 
 refuses to take the hay. Is he liable in damages? 
 
u JM 1 V 1-. 
 
 i 
 
 CHAPTER XXII. 
 
 DELIVERY. 
 
 TRANSFER OF TITLE. Ownership or title is an intangible 
 thing. The only way we can tell that a person owns a thing, or 
 has title to it, is by the conduct of himself and others in regard 
 to that thing. 
 
 As we have seen in the preceding chapter, the sale of personal 
 property of the value of $200, or over, must be evidenced, by cer- 
 tain acts, and when these acts are done, the title, poetically speak- 
 ing, wings its night in spirit from the vendor to the vendee. 
 
 VALUE LESS THAN $200. In case where the property is 
 less than $200 in value, the usual evidence of the title having 
 passed, is the delivery of the property the subject of the sale. 
 "Unless credit is extended by agreement, all sales are presumed to 
 be for cash. 
 
 DELIVERY means, 
 
 (1) The actual changing of the possession from the vendor to 
 the vendee of the article sold; or 
 
 (2) In cases where the article sold is of such great bulk as to 
 be difficult of actual delivery, a symbol may be passed. As, if 
 bales of cotton are sold, the key of the warehouse in which it is 
 stored, may be delivered instead of the cotton. 
 
 This amounts to a delivery of the cotton itself, and is called 
 Constructive Delivery. 
 
 DELIVERY, HOW MADE. A vendor must put personal 
 property into a condition fit for delivery, and deliver it to the 
 buyer within a reasonable time after demand. 
 
 Delivery, however, does not mean that the vender shall carry 
 
 (115) 
 
116 COMMERCIAL LAW. 
 
 the property to the vendee's residence., or place of business, but 
 in absence of any agreement,, personal property sold is deliverable 
 at the place where it is at the time of the sale, or agreement to 
 sell, or if it is not then in existence it is deliverable at the place 
 where it is produced. 
 
 If the vendor agrees to send the thing sold to the vendee's 
 place of business or residence, he must follow the directions of the 
 latter as to the manner of sending. If he does not, he is liable for 
 its damage. 
 
 If he follows such directions and uses ordinary care in for- 
 warding the article, it is at the risk of the buyer. 
 
 EXAMPLES. A buys kerosene at a grocery store with the 
 intention of carrying it away himself. As soon as the kerosene 
 is drawn and set out qn the counter within reach of A, it amounts 
 to a delivery to him. 
 
 If he orders the kerosene sent to his house in the grocer's deliv- 
 ery wagon, and through the driver's carelessness the kerosene is 
 lost en route, it is not a delivery, and the grocer must stand the 
 loss. 
 
 Suppose further that the oil is to be sent by the grocer's 
 wagon, and while on the way lightning strikes the can and the 
 oil is lost. 
 
 This being without fault of the grocer, the oil is considered as 
 having been delivered, and A must stand the loss. 
 
 DELIVERY BY SEGREGATION. This is a case of actual 
 delivery where it is sometimes difficult to tell whether a delivery 
 has been made, and a great deal of litigation has been had to 
 determine what constitutes a segregation or delivery of goods that 
 are not easily carried away at the time of the sale; e. g., if A goes 
 to B and agrees on a price he will pay for fifty bags of wheat, 
 which are with other bags of wheat in a large pile, the question 
 always arises in the event of the failure to take the wheat, or in 
 the event of its destruction, whether at the time of the contract, 
 the wheat was delivered. 
 
frfiLIVERY. 117 
 
 The rule in this regard is as follows: If at the time of the 
 contract, fifty bags of wheat were separated from the pile, or so 
 marked and designated so that A knew exactly which fifty sacks 
 of wheat were his, such segregation or marking would constitute 
 a legal delivery. 
 
 On the other hand if no such marking or segregation was had, 
 there was no delivery, and in case all of the wheat was destroyed 
 before A removed the fifty bags, B must lose all, as he can not 
 specify any particular wheat as belonging to A. 
 
 The general rule in the abstract is as follows: "When any- 
 thing remains to be done by the vendor to the goods before they 
 are ready for the vendee, the title does not pass, and it is not a 
 delivery until such thing is done." 
 
 DELIVERY TO CAIUtlER. Merchants in the west fre- 
 quently purchase large quantities of goods in eastern cities, which 
 are sent across the continent by rail. 
 
 The railroad companies are known as common carriers, and a 
 delivery of goods by a Xew York merchant, properly packed, 
 marked, and in good condition, is considered a delivery to the 
 merchant in the west, particularly if the buyer's directions as to 
 what route the goods are to be sent, are followed. 
 
 In case then of a wreck or fire by which the goods are 
 destroyed en route, the seller would be relieved of any liability, 
 and would not suffer the loss. 
 
 STOPPAGE IN TRANSIT IT. Taking the cases just above 
 cited of the purchase from the Xew York merchant of goods, it 
 is a rule of law that notwithstanding that delivery to the common 
 carrier is a delivery of the goods to the western merchant, and 
 that the western merchant must bear the loss if any be suffered; 
 yet if the price of the goods has not been paid, and the vender 
 learns of the vendee's insolvency before the goods reach the ven- 
 dee, he may notify the carrier to stop the goods and return them 
 to him. 
 
118 COMMERCIAL LAW. 
 
 This right, however., can only be exercised under the following 
 circumstances. 
 
 (1) Debt must he for the identical goods shipped. 
 
 (2) Goods must be in carrier's hands. 
 
 (3) Vendee must be insolvent. 
 
 IN TRANSIT. Literally we understand that when goods are 
 in transit, they are actually moving, or in the process of carriage 
 from one place to another,, but so far as concerns the right of 
 stoppage in transitu, the goods are in transit even after they have 
 reached their destination and are in the warehouse or freight 
 station of the carrier. 
 
 At any time therefore before the delivery into the actual or 
 constructive possession of the buyer, the right may be exercised. 
 
 If, however, the buyer has the actual possession, or the key of 
 the warehouse (constructive possession), the right is at an end. 
 
 THE DEBT. It must be carefully remembered that the 
 goods can not be stopped on account of a general balance due, but 
 the money must be owing on the identical goods. 
 
 Even if a part payment has been made on the goods, they may 
 be stopped. And where a note has been given for the purchase 
 price, the goods may be stopped, as a note is not a payment, but 
 mere evidence of the debt. 
 
 If part of the price of the goods has been paid, and the vendor 
 stops the goods in transit, he must either return the portion paid 
 or relinquish such part of the goods as the debtor may demand as 
 the equivalent of the price, if the goods are of such material as 
 to be severable. Of course, if he is tendered the full amount of 
 the price by the debtor, he must release the goods. 
 
 THE INSOLVENCY. By insolvency is meant when a per- 
 son ceases to pay his debts in the manner usual with persons of 
 his business, or when he declares his inability or unwillingness to 
 do so. 
 
 It is not necessary that the vendor should wait until the ven- 
 
DELIVERY. 119 
 
 dee be declared an insolvent by a Court. Such a delay would 
 defeat the right of stoppage entirely. The insolvency., or at any 
 rate the vendor's knowledge of the insolvency, must have been 
 after the shipment of the goods. If he sells goods, knowing the 
 purchaser to be insolvent, he does so at his peril. 
 
 STOPPAGE, HOW EI-TECTED. The vendor may take 
 actual possession of the goods himself, or he may give notice to 
 the earner or his agent who has immediate possession of the 
 goods. 
 
 In the case above referred to, a telegram sent to the con- 
 ductor of a train or an agent through whose hands the goods 
 must pass before reaching their destination would be sufficient, 
 and if the carrier delivers the goods to the vendee after receiving 
 such notice he is liable in damages to the vendor. 
 
 The following is the ordinary form of such notice: 
 
 Xew York City, Sept. 21, 1898. 
 To Wells, Fargo & Co., 
 
 Agent at San Francisco, 
 
 Dear Sir: On the 19th hist. I delivered to you two cases of 
 _-ods marked and consigned to J. Ross, San Francisco, Cali- 
 fornia. Certain things have arisen which give me the right of 
 stoppage in tnnisitu. I therefore hereby instruct you not to 
 deliver these goods, but to hold them subject to my further 
 order. 
 
 J. Dalton. 
 
 LEGAL EFFECT. Stoppage in transitu does not of itself 
 rescind the sale, but is a means of enforcing the lien of the seller 
 for the price of the goods. Until further action is taken, there- 
 lore, the vendor does not recover title to the goods by recovering 
 -sion, but simply holds them to satisfy his lien for the' pur- 
 chase price. 
 
 BILL OF LADIXG. A bill of lading is a written memoran- 
 dum, signed by the carrier, stating that certain goods have been 
 
120 COMMEKClAL LAW. 
 
 received for shipment, with the names of the consignor and the 
 consignee, and an agreement upon his part to deliver them to the 
 consignee. 
 
 This bill of lading is usually made in duplicate, one copy 
 being sent to the consignee; and upon presenting it to the car- 
 rier, the carrier is ordinarily bound to deliver to him the goods 
 named therein. 
 
 In case of stoppage in transitu, however, the carrier is under 
 no obligation to deliver the goods to an insolvent vendee, even if 
 he does produce a bill of lading, but it often happens that a bill 
 of lading is received by the vendee many days before the goods 
 arrive, and if he sells the bill of lading to a bona-fide purchaser, 
 the right of stoppage in transitu can not afterwards be exercised 
 so as to defeat the rights of the innocent holder of the bill of 
 lading. 
 
 While a bill of lading has not all the elements of a negotiable 
 instrument, nevertheless the law provides that it may pass to a 
 bona-fide holder in like manner as a bill of exchange. 
 
 FKAUDULENT SALES. In order to defraud creditors, a 
 person owing sums of money often seeks to dispose of his property 
 by a formal sale with the understanding, express or implied, that 
 the property or its equivalent, is to be returned to him. The law 
 especially provides, however, that all such sales, or attempted 
 sales, are void, and declares that unless such sale is accompanied 
 by immediate delivery, and followed by actual and continued 
 change of possession, it is void as against creditors. 
 
 In certain instances, however, where actual delivery is diffi- 
 cult, the law allows such a transfer to be evidenced by a written 
 document, stating the fact of the sale, which must be recorded in 
 the office of the County Eecorder in the County where the prop- 
 erty is situated. 
 
 Even when these directions of the law are followed, the sale 
 can be set aside at the instance of the creditors if they can show 
 that the sale has been consummated for the purpose of defraud- 
 ing them. 
 
DELIVERY. 121 
 
 TEST QUESTIONS. 
 
 1. A and B were conversing in regard to a horse. A said, "I 
 will give you $50 for that horse in the corral." B replies, 
 "Agreed. There is your horse." Was there a delivery of 
 the horse sufficient to constitute a sale? 
 
 5. A ordered a harvesting machine from B. While in a half- 
 iinished state the machine was destroyed. Whose loss is it? 
 
 3. A gives a bill of sale of his grocery store to B. B came to 
 
 the store, but A did not remove. A's signs were not 
 removed. Was there a delivery of the store as against 
 creditors of A? 
 
 4. A vendor of goods learns after they are shipped that the 
 vendee is insolvent. State fully how be may protect him- 
 self from the effect of the vendee's insolvency. 
 
 5. Goods are shipped from Boston to San Francisco. Upon 
 their arrival, the Railroad Company places them in their 
 warehouse and notifies the consignee that the goods are 
 at his disposal. Before the goods are removed the carrier 
 receives notice from the vendor to hold them. Explain 
 the rights of the parties. 
 
 6. A vendor, under proper circumstances, notifies a carrier to 
 
 hold goods. Before the date of such notice, the vendee 
 has received and sold the Bill of_ Lading for a small part 
 of the value of the goods, and immediately thereafter de- 
 clared himself insolvent. Discuss the rights of the parties. 
 
CHAPTER XXIII. 
 WARRANTY. 
 
 DEFINITION. A warranty is an engagement by which a 
 seller assures to a buyer the existence of some fact affecting the 
 transaction, whether past, present, or future. 
 
 This assurance or warranty is, of course, a contract. It is 
 usually made at the time the contract of sale is entered into, and 
 the consideration for the principal contract is the consideration 
 for the warranty. If made independently of the contract of sale, 
 it requires a separate consideration. 
 
 Warranties may be express or implied. 
 
 EXPEESS WARRANTY consists of a warranty expressly 
 stated in words. All statements, however, made by the vendor 
 for the purpose of inducing another to buy, are not warranties. 
 
 All such expressions as, "These are the finest peaches raised 
 in the State/ 7 or "This is the handsomest horse I ever saw/' are 
 mere dealer's talk, expressions of his opinion, and not warranties. 
 
 The test of a warranty is, "Did the vendor assume to assert a 
 fact of which the vendee was ignorant, or did he merely intend 
 to give his opinion?" 
 
 By a careful study of the general definition of warranty and 
 the test above given, it will be seen that a vendor can not be 
 chargeable with a breach of warranty, even if he wilfully misstates 
 some material fact, provided the vendee is not deceived. 
 
 IMPLIED WARRANTIES. It would be inconvenient and 
 extremely annoying to both parties if the buyer, in order to pro- 
 tect himself, was required to procure, or the seller to give, express 
 warranties concerning the subject matter of every sale. 
 (122) 
 
WARRANTY. 123 
 
 Hence the law in certain cases declares that by the very act of 
 selling goods, a vendor gives certain warranties. 
 
 The following are implied warranties on the part of the 
 vendor: 
 
 (1) That he has a good and unincumbered title to the prop- 
 erty. 
 
 (2) If sold by sample, that the quality of the bulk shall be 
 equal to the quality of the sample. 
 
 (3) That provisions sold by a regular dealer for domestic use 
 to an actual consumer are sound and wholesome. 
 
 (4) If he has manufactured an article, he warrants that it is 
 free from any defects not disclosed, arising from the process of 
 manufacture, and that proper materials have been used therein. 
 
 (5) That an article manufactured for a particular purpose is 
 reasonably fit for that purpose. 
 
 (6) That merchandise inaccessible to the buyer, is sound and 
 merchantable. 
 
 (7) Generally, a seller impliedly warrants that neither he nor 
 his agent knows of any fact concerning the thing sold which would 
 destroy the buyer's inducement to buy. 
 
 REMARKS. Under subdivision three above, it will be noted 
 that there is no implied warranty in the case of a wholesale dealer 
 in provisions selling to a retail dealer, while there -is a warranty 
 from the retailer to the person who buys for his own use. There 
 are good reasons for this distinction. 
 
 The retailer is presumed to be an expert judge of wholesome 
 provisions, and to inspect them before accepting them, and as he 
 does not necessarily consume any of them himself, no personal 
 injury may come to him through unwholesome provisions. 
 
 It must also be carefully noted that the provisions must be 
 sold by a regular retail dealer, or there is no warranty, and it 
 has been held that it is only when the provisions are sold for 
 immediate consumption, that the warranty applies. If the pur- 
 chaser holds them indefinitely before attempting to use them, he 
 
124 COMMERCIAL LAW. 
 
 can not then claim the benefit of implied warranty if he finds 
 them unwholesome. 
 
 Under subdivision five,, it is to be noted that an article manu- 
 factured for a purpose is only required to be ordinarily or reason- 
 ably fit for the purpose. 
 
 It need not be the best article or machine for the purpose, but 
 it is sufficient if it is reasonably fit. Thus, if a man contracts for 
 the manufacture of a gun which will shoot half a mile, and the 
 gun is produced that will shoot half a mile with a reasonable 
 degree of precision, the warranty is satisfied, even though there 
 may be many other guns which will shoot half a mile with a far 
 greater degree of precision. 
 
 The general implied warranty, stated in subdivision seven, 
 covers a multitude of cases of warranty; e. g., a horse dealer may 
 know that a particular horse, which he is offering for sale, has 
 inherited tender feet, and in all probability will go lame upon 
 being driven. 
 
 Under the first six implied warranties, he is freed from any 
 responsibility, but under the last, if a purchaser can show the 
 dealer's knowledge of the defect in the horse, he may recover for 
 breach of warranty. 
 
 EXPEESS STATEMENT CONTROLS IMPLIED. While 
 it is true that where no express warranty is given, the above con- 
 sidered implied warranties are always in effect, yet any of these 
 implied warranties may be set aside and superseded by an 
 express statement in regard to the transaction; for instance, if a 
 provision dealer expressly says that he does not warrant certain 
 provisions to be wholesome, the buyer then buys them without 
 any implied warranty as to their fitness for use. 
 
 CAVEAT EMPTOE, meaning, "Let the purchaser beware," 
 enters largely into the question of whether a vendor has been 
 guilty of breach of warranty or not. 
 
 Every person is presumed to exercise the degree of skill in his 
 business transactions which is customary with ordinarily prudent 
 
WARRANTY. 125 
 
 persons in like transactions, and if lie does not do so, implied 
 warranties will not protect him, as the law declares that a general 
 warranty does not extend to defects inconsistent therewith of 
 which the buyer was then aware, or which were then easily dis- 
 cernible by him without the. exercise of peculiar skill. 
 
 This general rule, ho wever correct it may be, is somewhat 
 difficult of application. Ordinary skill or discernment might be 
 charged against a person familiar with the subject matter, and 
 not against a person unfamiliar; e. g., A having no special knowl- 
 edge of horses, goes to a dealer and tells him he wants a sound 
 horse. He picks out a horse apparently sound, but which the 
 dealer well knew was diseased. In such case the dealer is guilty 
 of breach of warranty, notwithstanding the purchaser's presence 
 and examination of the horse. 
 
 Suppose, however, that a professional horseman went to the 
 dealer, examined and selected a horse, which afterwards proved to 
 be diseased. He would have no remedy against the dealer for 
 breach of implied warranty, if by using the ordinary skill used 
 by people in his line of business he could have discovered the con- 
 dition of the horse. 
 
 In the case of provisions, if a customer views a certain box of 
 potatoes and tells the dealer to send that particular box of pota- 
 toes to his residence, he can not afterwards claim breach of war- 
 ranty if the potatoes are unfit for use. If, on the contrary, he 
 merely orders a box of potatoes without seeing them, the dealer is 
 bound under his general warranty to furnish sound and whole- 
 some potatoes. 
 
 BREACH OF WARRANTY. When a vendor violates any 
 of the warranties above mentioned there is said to be a breach of 
 warranty on his part, and he is so far responsible for such breach 
 of warranty that the buyer has a remedy against him, and is 
 entitled to recover to the extent of the injury suffered. 
 
 There 1 are three leincdirs under the varying conditions of the 
 sale; 
 
126 COMMERCIAL LAW. 
 
 (1) If the goods are neither received nor paid for, the buyer 
 may refuse either to receive or pay for them. 
 
 (2) If goods are received and paid for, he may sue for damages 
 for breach of the warranty; or 
 
 (3) If goods are received and not paid for, set up damage as 
 a counter claim against the vendor's action for the price. 
 
 TEST QUESTIONS. 
 
 1. A grower sold seed in packages marked "Large Bristol Cab- 
 
 bage Seed;" it proved to be cabbage seed of an inferior and 
 worthless variety. Has the vendee any right of action 
 against the vendor? 
 
 2. Goods sold by sample were delivered to the vendee; the 
 vendee on inspecting the goods found that they did not 
 come up to the sample. Discuss his right to reject the 
 goods. 
 
 3. A furniture dealer assures a customer that a certain table 
 is of walnut. The customer is familiar with the wood and 
 knows that it is oak. He, however, says nothing but pur- 
 chases the table and afterward claims a breach of warranty 
 on the part of the dealer in saying that the table was wal- 
 nut. All the facts being shown, discuss his right to 
 recover against the dealer. 
 
 4. A dealer sells a plow to A for plowing ordinarily tillable 
 
 soil. It is so made that the share will not stay in the 
 ground. Has the buyer any remedy? 
 
 5. A steals a wagon and sells it to B. The true owner com- 
 pels B to restore it. What remedy has B? 
 
 6. A sells a wagon to B, and at the same time states that the 
 title to the wagon is in dispute, and that he will not be 
 responsible for a return of the price if it should be deter- 
 mined that he is not the owner. It is so determined. Has 
 B any remedy? 
 
CHAPTER XXIV. 
 COSTDITIO:N T X\L SALES AXD MOKTGAGES. 
 
 DEFLNTTIOX. A conditional sale is a sale in which the 
 title is vested, defeated, or modified upon the occurrence of an 
 uncertain event. 
 
 These events may be 
 
 (1) Precedent; 
 
 (2) Concurrent: or 
 
 (3) Subsequent 
 
 to the agreement for sale. 
 
 (1) If A agrees that lie will hold certain goods subject to B's 
 order, and upon the condition that B will pay a debt of old 
 standing, the title passes as soon as B has paid the old debt. The 
 payment of the old debt is the condition preceding the passing of 
 the title. 
 
 (2) Conditions concurrent are those which are mutually 
 dependent, and are to be performed at the same time; as in the 
 case of cash sales the delivery of the goods and payment of the 
 cash are concurrent conditions. 
 
 (3) Conditions subsequent refer to a future event upon the 
 happening of which the obligation becomes no longer binding; as 
 the sale of land to become void if the title of the vendor proves 
 to be defective. 
 
 SALES ON TEIAL. This is a form of sale on condition prec- 
 edent, the condition being that the article sold prove satisfac- 
 tory for the purpose for which it was bought. 
 
 Such sales are usually made on trial for a certain specified time, 
 and if the time elapses and the purchaser does not return the 
 
 (127) 
 
128 COMMERCIAL LAW. 
 
 goods, the sale becomes absolute; or in the absence of a special 
 agreement,, a reasonable time for trial is allowed. What is reason- 
 able time depends on the circumstances in each case. 
 
 In such sale if the purchaser, in the course of trying, breaks, 
 injures, or destroys the article, the question at once arises, Who 
 must bear the loss? 
 
 The rule is as follows: "If the purchaser gave the article such 
 trial only as articles reasonably fit for such purposes ordinarily 
 stand without breaking, the loss falls on the vendor. On the 
 contrary if the purchaser negligently and. carelessly or improperly 
 uses the article, and it is thereby broken, the loss falls on the pur- 
 chaser." 
 
 SALES BY SAMPLE are conditional sales, there being a 
 precedent condition that the quality of the bulk shall equal the 
 quality of the sample. 
 
 This class of sales has been discussed under the head of War- 
 ranty, and it will be noted that such sales are both sales under 
 warranty and conditional sales. 
 
 SALES OF GOODS TO ARRIVE. In long ocean voyages it 
 sometimes happens that vendees sell out their business or change 
 their occupation, while the goods are on the way. 
 
 In such cases it is customary to make the sale of the goods 
 conditional upon their arrival. The sale becomes absolute when 
 the goods arrive. If they never arrive, the sale is void; and a 
 reasonable time only is allowed for the goods to arrive. 
 
 A sale may, of course, be made of goods to arrive, without the 
 condition, which will be absolute in the beginning. In such case 
 the buyer must take his chances. If the goods do not arrive, the 
 loss falls upon him. 
 
 If no agreement is made at all in regard to the matter, the loss 
 will fall on the buyer. 
 
 A CHATTEL MORTGAGE is a contract by which specific 
 personal property is hypothecated for the performance pf an act, 
 without the necessity of a change of possession. 
 
CONDITIONAL SALES AND MORTGAGES. 129 
 
 It is the law in some states, and was so under the old common 
 law system, that chattel mortgages were mere sales on condition, 
 but our modern law has changed the form to agree with the fact, 
 and made mortgages mere liens on property given as security, 
 instead of indulging in the fiction of a sale, and depriving the true 
 owner of the possession of his property. 
 
 It will be seen that a mortgage gives a special lien, and that, 
 it is not necessary for the mortgagee to have possession of the 
 property. 
 
 Of course, there is nothing to prevent a person making a con- 
 ditional sale of any property he may have, with the understanding 
 that the sale is to become void upon the payment of some amount, 
 or other condition fulfilled. 
 
 IX TTRITIXG. A chattel mortgage can only be created, 
 renewed, or extended by a writing executed with the formalities 
 required in the case of a grant of real property; that is, it must be 
 acknowledged before some officer qualified to administer oaths, 
 and recorded in the office of the county Recorder of the county 
 in which the property mortgaged is situated; and further accom- 
 panied by an affidavit of all the parties thereto that it was made 
 in good faith and without any design to hinder, delay, or defraud 
 creditors. 
 
 FORM. A mortgage of personal property may he made in 
 substantially the following form: 
 
 "This mortgage, made the 1st day of September, in the year 
 One Thousand Eight Hundred and Ninety-eight, by A B, of 
 Stockton, California, by occupation a farmer, mortgagor, to C 
 I), of the same place, by occupation a grain dealer, mortgagee; 
 
 "Witnesseth: That the mortgagor mortgages to the mortgagee 
 all that certain personal property situated and described as fol- 
 lows, to wit: 
 
 "Being one two-horse spring wagon, one spring-tooth harrow, 
 one Gorham seed-sower, all situated on what is known as the A B 
 ranch near Stockton, in San Joaquin County, California, as 
 
130 COMMERCIAL LAW. 
 
 security for the payment to said C T), the mortgagee, of One Hun- 
 dred ($100.00) Dollars on the 1st day of February, in the year 
 One Thousand Eight Hundred and Ninety-nine, with interest 
 thereon at the rate of Ten (10) per cent per annum, according to 
 the terms and conditions of a certain promissory note, of even 
 date herewith, a copy of which is as follows: 
 
 "September 1, 1898. 
 
 "February 1, 1899, after date, I promise to pay to C D, or 
 order, One Hundred ($100.00) Dollars with interest at the rate of 
 ten (10) per cent per annum, from date hereof until paid. 
 
 "A B. 
 
 "IN WITNESS WHEREOF, The said mortgagor has hereunto 
 set his hand the day and year first above written. 
 
 "A B." 
 
 The form of oath annexed to the mortgage proper, is as fol- 
 lows : 
 
 State of California, ) gg 
 County of San Joaquin. \ 
 
 A B, the mortgagor in the foregoing mortgage named, and C 
 D, the mortgagee in said mortgage named, each being duly sworn 
 each for himself, doth depose and say: That the aforesaid mort- 
 gage is made in good faith and without any design to hinder, 
 delay, or defraud any creditor or creditors. 
 
 A B, 
 C D. 
 
 Subscribed and sworn to before me this 1st day of September, 
 1898, in the County of San Joaquin. 
 [SEAL] E F, Notary Public. 
 
 ACKNOWLEDGMENT is simply for the purpose of afford- 
 ing good evidence that the mortgagor signed the mortgage, and 
 rendering it improbable that he will ever dispute his signature. 
 
 An acknowledgment is taken thus. In the above example A 
 B appears before the notary personally with the mortgage fully 
 
CONDITIONAL SALES AND MORTGAGES. 131 
 
 drawn up and signed (or he may sign it in the notary's presence) 
 and says to the notary, U I acknowledge this to be my signature. 
 I signed it to this mortgage for the purpose of mortgaging the 
 property therein described," or some such like words. Xo form 
 of words is required so long as A B sufficiently admits his signa- 
 ture and its purpose. The notary will then affix to the mortgage 
 his certificate to the effect that A B acknowledged to him the 
 execution or signing of the mortgage. The mortgage may then 
 be recorded. 
 
 RECORDING. So far as the parties to the instrument are 
 concerned, the mortgage would be valid between them without 
 being recorded, or even without the affidavit annexed, but in 
 order to protect the mortgagee against other creditors, he must 
 see that the mortgage is recorded in the office of the County 
 Recorder of the county in which the property mortgaged is situ- 
 ated, and also of the county in which the mortgagor resides. 
 
 If the property be partly in different counties, the mortgage 
 must be recorded in each county. 
 
 A mortgagor who removes the mortgaged property from the 
 county in \vhich it was mortgaged, without the written consent of 
 the mortgagee, and with the intent to defraud the mortgagee, is 
 guilty of the crime of larceny, and may be punished accordingly. 
 
 As the only effect of recording is to give notice to the world 
 that the property has been mortgaged, and that therefore there is 
 a lien or claim upon the property by some one, other than the 
 legal owner, it follows that even if the mortgage is not recorded 
 any one who has actual notice of the mortgage can not claim any 
 right to the property as against the mortgagee, of her than he 
 would have had if the mortgage had been recorded. 
 
 FORECLOSURE is regularly had by bringing a suit and get- 
 ting a judgment authorizing the sale of the property by the Sher- 
 iff or Constable. 
 
 It is often provided in the mortgage, however, that in case of 
 dv? fault the mortgagee may take possession and sell. When he 
 
132 COMMERCIAL LAW. 
 
 does so take possession there is no necessity for suit, but in either 
 case if there is any surplus remaining of the proceeds of the sale 
 after the mortgage debt is satisfied, such surplus must be returned 
 to the mortgagor. 
 
 LIMITATIONS ON MORTGAGE. Chattel mortgages, as 
 they are understood in our modern law, have been confined to cer- 
 tain classes of personal property, which are enumerated by statute. 
 
 So far as the parties are concerned, one may mortgage to 
 another anything he may choose, but as against creditors a mort- 
 gagee will only be protected when he holds a mortgage upon 
 property such as is especially provided for by statute. 
 
 These articles are quite numerous, and are frequently changed 
 or added to by our lawmakers, hence we do not give a list of such 
 articles, but recommend the student who wishes 'to execute a 
 chattel mortgage to consult a reliable attorney. 
 
 TEST QUESTIONS. 
 
 1. A street railway company purchased a cable rope from the 
 
 manufacturer with the understanding that it was to be 
 returned if unsatisfactory. The cable company returned 
 the rope. In a suit for the price of the rope by the manu- 
 facturer against the railway company, in whose favor 
 should the case be decided? 
 
 2. A farmer brings a small sack of wheat as a sample to a 
 
 dealer. The dealer offers a certain price which the farmer 
 agrees to accept. He leaves the sample and departs. He 
 afterwards sells the grain to a different dealer. Has the 
 first dealer any remedy? 
 
 3. Suppose in the above case the grain when offered for deliv- 
 
 ery proved to be lighter in weight in proportion to the 
 quantity than the sample, Discuss the question of breach 
 of warranty. 
 
COlSDITIOKAL SALES AND MORTGAGES. 133 
 
 4. In a sale of goods to arrive, under the warranty that they 
 
 should arrive, it was found upon arrival that they were 
 totally unfit for the purpose for which they were sold. 
 Has the buyer any remedy? 
 
 5. A signs a mortgage in favor of B, but it is neither acknowl- 
 
 edged nor recorded. 13, however, holds the mortgage and 
 when due, requests payment. A refuses to pay and says 
 that he did not sign it. Can his signature be proven in 
 any way so as to make him liable? 
 
 6. A mortgage is properly made out, signed, and acknowl- 
 
 edged, but before it is recorded a creditor of the mort- 
 gagor attaches the property. Can he hold it against the 
 mortgage ? 
 
CHAPTER XX V. 
 BAILMENTS. 
 
 DEFINITION. In case of a sale of personal property the 
 ownership is transferred. A bailment, however, contemplates a 
 change of possession without change of ownership. 
 
 The subject is so broad that it is difficult to confine it within 
 the bounds of a definition, but the following will be sufficiently 
 comprehensive for our purpose: 
 
 "A bailment is a delivery of some chattel by one party to 
 another to be held according to the special purpose of the delivery, 
 and to be returned when that special purpose is accomplished." 
 
 The party who delivers the chattel is called the bailor, and the 
 party to whom the delivery is made is called the bailee. 
 
 DILIGENCE EEQUIBED OF THE BAILEE. It will be 
 readily understood that a person who has in his charge property 
 belonging to another must exercise some degree of care in its 
 keeping, and the law has endeavored to define the degree of care 
 required under different circumstances. 
 
 It is to be noticed first that there are three kinds of bailments 
 with respect to the purpose thereof: 
 
 (1) Bailments for the benefit of the bailor only; 
 
 (2) For the benefit of both; 
 
 (3) For the benefit of the bailee. 
 
 In bailments for the bailor's sole benefit, as where A requests 
 another, without compensation, to hold his horse for a few min- 
 utes, the diligence required of the other is but slight, and he will 
 not be chargeable for any injury happening to the animal unless 
 he is extremely careless in his holding of the horse. 
 (134) 
 
BAILMENTS. 135 
 
 Suppose, however, that A gives B a sum of money for holding 
 the horse. This is a mutual benefit. A has his horse taken care 
 of, find B has the money. Here the law requires B to use ordi- 
 nary care, and if through the lack of ordinary care the horse is 
 injured, B is liable. 
 
 Suppose ;uaiii that B borrows the horse from A for use, not 
 paying any consideration; B is then required to use great dili- 
 gence in the care of the horse, as the bailment is for his own bene- 
 fit exclusively. 
 
 DEGBEES OF NEGLIGENCE. Corresponding to these de- 
 of care we have degrees of negligence used in inverse order: 
 tlms. great, ordinary, and slight negligence. 
 
 In the first example above, B is liable ior great negligence 
 only. In the second case he is liable if he is ordinarily negligent. 
 In the third case he is liable if he is only slightly negligent. 
 
 The following tabulation will show this relation at a glance: 
 
 For benefit of 
 
 Care required by bailee 
 
 For what negligence 
 liable 
 
 Bailor 
 Both 
 Bailee 
 
 Slight 
 Ordinary 
 Great 
 
 Great 
 Ordinary 
 Slight 
 
 This is the general rule in regard to bailments. An exception 
 is "common carriers,' 7 which subject will be discussed later. 
 
 STANDARD OF DILIGENCE. While the law uses the 
 words "slight, ordinary, and great" in the attempt to fix a liability 
 in the case of bailments, it will be readily seen that this standard 
 is a most variable and uncertain one. 
 
 What would be ordinary care in regard to one transaction, 
 might be the grossest negligence in regard to another. 
 
 We will, therefore, take up different kinds of bailments, and 
 illustrate how these degrees are applied. 
 
1S6 COMMERCIAL LAW. 
 
 DEPOSIT. A deposit may be voluntary or involuntary, and 
 for safe-keeping or for exchange. 
 
 A voluntary deposit is made by one giving to another, with his 
 consent, the possession of personal property to keep for the bene- 
 fit of the former, or of a third party. The person giving is called 
 the depositor, and the person receiving the depositary. 
 
 An involuntary deposit is made: 
 
 (1) By the accidental leaving or placing of personal property 
 in the possession of any person, without negligence on the part 
 of its owner; or, 
 
 (2) In cases of fire, shipwreck, inundation, insurrection, riot, 
 or like extraordinary emergencies, by the owner of personal 
 property committing it, out of necessity, to the care of any per- 
 son. 
 
 Bailments of this class, if without compensation, are for the 
 benefit of the bailor only, and under the rule the bailee is only 
 required tc exercise slight diligence, and is liable only in case of 
 great negligence. 
 
 Suppose A deposited a sack of coal with B. B would only be 
 required to place it in an out-house; while if A deposited a dia- 
 mond with B, slight diligence would require that it be placed in a 
 much more secure place. 
 
 LOST PEOPEETY. A person who finds property is not 
 required to take charge of it; but if he does so, he may claim com- 
 pensation for all expense of keeping it, and a reasonable reward in 
 addition thereto. 
 
 Finding is therefore a bailment for the benefit of both parties, 
 and the finder must use ordinary diligence in the care of the 
 property. 
 
 USE OF PEOPEETY. When property is placed on deposit, 
 the bailee has no right to use the property in any way, unless the 
 proper care of the property necessarily includes its use; as in 
 deposit of a horse, the horse should be exercised for his proper 
 
BAILMENTS. 137 
 
 t?are, but such use must stop at the point where it ceases to benefit 
 the animal. 
 
 BETUtfXIJSTG PROPERTY. A depositary must deliver the 
 thing to the person for whose benefit it was deposited,, on demand, 
 whether the deposit was made for a specified time or not, pro- 
 vided his proper charges of keeping, if any, are paid or offered. 
 
 He must also return any natural increase of the property at 
 the same time; e. g., if he is given one hundred sheep on deposit, 
 he must return not only the original one hundred sheep, but all 
 others by natural increase which he may have when demand is 
 made. 
 
 The property must be returned in as good condition as the 
 degree of care required and the natural deterioration by lapse of 
 time will permit. 
 
 LOAX. A loan for use is a contract by which one gives to 
 another the temporary possession and use of personal property, 
 and the other agrees to return the same thing to him at a future 
 time without reward for its use. 
 
 This loan for use, of course, does not transfer the title, and 
 any increase there may be during the period of the loan must be 
 returned to the lender. 
 
 A borrower being a bailee for his own benefit, must use great 
 care of the thing lent, and is correspondingly liable for any slight 
 negligence. 
 
 In such case the borrower is bound to use as much skill in the 
 care of the thing lent as he causes the lender to believe him to 
 possess; e. g., if he borrows a horse to drive, telling the lender that 
 he is a skilful driver and understands thoroughly the care of 
 horses, when in fact he knows nothing of horses or of driving, he 
 is liable for damage to the horse if caused by his inexperience, 
 no matter how much effort he makes to use the animal properly. 
 
 A borrower must repair all injuries to the thing lent, occa- 
 sioned by his negligence, however slight, though he is not respon- 
 
 run I 
 
138 COMMERCIAL LAW. 
 
 sible for inevitable accident or "act of God," as the killing of a 
 horse by lightning. 
 
 He must not use an article for any purpose other than that 
 for which it was borrowed,, and must not relend it to another. 
 
 The lender of a thing for use may at any time require its 
 return,, even though he lent it for a specified time or purpose, but 
 if the borrower thereby suffers injury, the lender must indemnify 
 him -for such loss. 
 
 The borrower must return the article without demand when 
 the time has expired, or the purpose is accomplished. 
 
 PLEDGE. A pledge is a deposit of personal property by way 
 of security for the performance of another act. This is a kind 
 of bailment in which each party, the bailor and the bailee, 
 receives a benefit, the bailor receiving some consideration for the 
 pledge, and the bailee holding the pledge as security for some- 
 thing which he has given. 
 
 Anything which is capable of delivery may be pledged, and in 
 order to make a valid pledge the property must be actually deliv- 
 ered into the possession of, or placed under the control of, the 
 pledgee. 
 
 The degree of care required of the pledgee being ordinary, the 
 pledgee is liable for any ordinary negligence. 
 
 He is not liable for slight negligence, hence, under the same 
 circumstances a pledgee can use the thing in his possession with 
 less care than a borrower, and still not be liable for any damage 
 incurred; as in the case of the borrower, it depends a good deal 
 on the nature of the property pledged, and his own representa- 
 tions as to his qualifications and facilities for taking care of the 
 article. 
 
 For instance, in the pledge of a horse, if he represents to the 
 pledger that he understands horses and has a good barn, and other 
 conveniences for the proper care of the animal, when in fact he 
 has neither skill nor accommodations, he will be guilty of ordi- 
 
BAILMENTS. 139 
 
 nary negligence in case the horse suffers from the lack of ordinary 
 care and shelter. 
 
 As in the case of property loaned or placed on deposit, the 
 increase of the property pledged must be returned with the prop- 
 erty; and it is also a rule of law that the increase, if any, becomes 
 a part of the pledge, and is considered as pledged with the original 
 property. 
 
 DISTINGUISHED FROM MORTGAGE. A pledge of per- 
 sonal property and a mortgage of personal property are alike in 
 that they are both given as security for the performance of some 
 act; but they are radically different in that while the pledged 
 property is actually given into the possession or control of the 
 pledgee, in the case of the mortgage, the mortgaged property is 
 not given into the possession or control of the mortgagee, but the 
 lien on the property is evidenced by a writing called the "mort- 
 gage." 
 
 SALE OF PLEDGE. When performance of the act for which 
 a pledge is given as security is due, the pledgee may collect what 
 is due by sale of the pledged property. 
 
 Before he can sell, however, he must 
 
 (1) Make demand on the pledgor for performance of his obli- 
 gation. 
 
 (2) If performance is refused, the pledgee must give reasonable 
 notice to the pledgor of the time and place of the sale. 
 
 (3) A sale must be by public auction. 
 
 If the pledgor demands that the pledge be sold even before the 
 obligation is due, the pledgee must sell the article if it can be sold 
 for a price sufficient to satisfy his claim. 
 
 If the price received, less the expenses of the sale, is more 
 than enough to pay the debt, the pledgee must pay the surplus 
 to the pledgor. 
 
 The pledgee has no right to consider the debt canceled and 
 retain the pledged property in payment. He must sell. 
 
146 COMMERCIAL LAW. 
 
 HIRING. Hiring is a bailment by which one gives to another 
 the temporary possession and use of property for reward. This 
 being a bailment for the benefit of both parties requires ordinary 
 care on the part of the bailee, and he is liable for ordinary negli- 
 gence, and, as we have previously illustrated, what is ordinary care 
 depends upon the circumstances in each case. 
 
 The bailee must repair all injuries or deteriorations caused by 
 his ordinary negligence. 
 
 When a thing is hired for a particular purpose, the hirer must 
 not use it for any other purpose, and if he does, the letter may 
 hold him responsible for its safety during such use in all events, 
 and may terminate the hiring; so that the rule of ordinary dili- 
 gence only applies where the bailee uses the thing for the particu- 
 lar purpose; e- y-, suppose A hires a horse to drive to Lodi. In- 
 stead of driving to Lodi he drives in an opposite direction. The 
 horse falls through a bridge and is killed without any fault of A. 
 He is nevertheless liable for the loss of the horse because he vio- 
 lated the provisions of his contract of hiring. 
 
 The hirer is not liable for any repairs or damage caused by 
 ordinary wear and tear, or such as would ordinarily happen 
 \vh ether the hiring was had or not. 
 
 As in the example above, suppose that in driving the horse in 
 a proper manner a shoe was lost, the hirer would not be liable to 
 pay for having the horse shod, and in fact, if necessary to save 
 the horse from lameness, it is the hirer's duty to have the horse 
 shod at the nearest shop, and he may deduct the price from the 
 amount of his hiring. 
 
 HIKE OF SERVICES. This is a delivery of goods to another 
 for the purpose of having some work or service done or performed 
 upon them, for which compensation is to be paid. 
 
 It is a bailment for the benefit of both bailor and bailee, and 
 the rule of ordinary diligence and liability for ordinary negligence 
 applies to its full extent. 
 
BAILMENTS. 141 
 
 In arriving at what is ordinary diligence, however, in this bail- 
 ment perhaps more than in any other, the character of the services 
 to be performed must be carefully considered. 
 
 SKILL REQUIRED. Ordinary care ^n such a case consists 
 in the handling of the article with such care as ordinarily skilful 
 workmen in that particular line bestow on work of like nature. 
 
 EXAMPLE. A jeweler in repairing a watch, is only required 
 to be an ordinarily good watchmaker in order to escape liability. 
 If he is not an ordinarily good workman in that line it makes 
 no difference how hard he may try to perform the work properly, 
 li< is liable if he does not do it as well as an ordinarily skilful 
 watchmaker would perform the work. 
 
 A watchmaker or diamond cutter is held to no greater degree 
 of care in his line of work than a street contractor who gravels 
 streets. 
 
 The mere fact that there may be more men who can properly 
 gravel streets than there are who can repair watches or cut dia- 
 monds, makes no difference in the degree of care required in the 
 services performed. 
 
 (''are" should be distinguished from "skill." A diamond set- 
 ter requires a higher degree of skill and training in order to be 
 ordinarily proficient in his business than a street contractor, but 
 the degree of care is the same. 
 
 BAILOR'S INSTRUCTIONS. If a bailor gives the work- 
 man particular instructions as to how to perform certain work 
 upon the article, and the workman endeavors to prosecute the 
 work under these instructions and the article is damaged or 
 destroyed, lie is not liable in damages, unless he is grossly negli- 
 gent. 
 
 On the other hand, if the workman deviates from his instruc- 
 tions in a material particular, and the article is thereby damaged, 
 he is liable for all loss. 
 
 LIEX. A person who alters or repairs any article of personal 
 
142 COMMERCIAL LAW. 
 
 property at the request of the owner, has a lien upon it for his 
 reasonable charges for work done and materials furnished, and 
 may retain possession of the article until such charges are paid, 
 and if the charges are not paid within two months after the 
 owner is notified that the work is done, the bailee may proceed to 
 sell the property at public auction, after notice given, and apply 
 the proceeds of the sale to his charges and costs, giving the remain- 
 der, if any, to the owner. 
 
 COMMISSION is a contract of bailment by which the bailee 
 undertakes without pay to do some act for the bailor. This being 
 for the bailor's benefit exclusively the bailee is only required to 
 exercise slight diligence, and is liable for damage only in case he 
 is guilty of great negligence; e. #., A is going to a store for gro- 
 ceries, and his neighbor requests him to bring him a sack of flour. 
 This is a commission, and A is not responsible for the loss of the 
 sack of flour unless it occurred through his great negligence. 
 
 Such transactions are commonly called "running errands." 
 Commission differs from hire of services only in the matter of 
 compensation and liability incurred. 
 
 HIRE OF CUSTODY. This is a class of bailments in which 
 there is no service to be performed, but simply proper care, and 
 keeping the property from harm, and, as in like cases for the bene- 
 fit of both parties, ordinary care is required, and the bailee is 
 liable for ordinary negligence. 
 
 Under this class may be noted innkeepers, commission mer- 
 chants, warehousemen, and agistors, those who take in domestic 
 animals for pasturage. 
 
 These have been treated generally under the head of 
 -Deposit." 
 
 In all of the above-mentioned where goods are left in custody 
 for hire, the bailee must use ordinary care, and is liable for ordi- 
 nary negligence. 
 
 INNKEEPERS. The term "innkeeper" includes hotel keep- 
 ers, board and lodging house keepers, 
 
BAILMENTS. 143 
 
 As has been stated they are liable only for ordinary negligence, 
 and the law has made some special provisions applicable to the 
 peculiar character of their business, and affecting their liability. 
 
 If the innkeeper keeps a fire-proof safe and notifies his guests 
 that he keeps such a safe, and that he will not be liable for articles 
 of great value and small compass, such as money and jewelry, 
 unless placed therein, he may thus excuse himself, unless he con- 
 tributes to such loss himself, such as by unlocking the door of the 
 guest's room and leaving it open. 
 
 GUESTS. A guest is any proper person who applies for 
 entertainment and offers to pay for the same. 
 
 It may be seen from a careful consideration of the above defi- 
 nition, that an innkeeper is not required to receive drunken, 
 insane, or disreputable people, or those afflicted with contagious 
 diseases, or those who would injure his business in any way; and 
 he may demand pay in advance. 
 
 He must receive guests at any hour of the day or night, and if 
 he refuses to do so .he is not only liable to the injured party for 
 any damage he may suffer, but is also guilty of a misdemeanor and 
 can be punished criminally. 
 
 On the other hand, a guest who obtains board and lodging at 
 an inn, without paying therefor, or who absconds without paying, 
 is guilty of a misdemeanor. 
 
 LIEX. Innkeepers have a lien upon the baggage and other 
 personal property of their guests for their proper charges, and 
 may retain possession of such property. If it remains unclaimed 
 for a period of six months, lie may sell the property at public 
 auction, and if there be any surplus after paying his charges and 
 the costs of sale, it must be returned to the owner of the property. 
 
 TEST QUESTIONS. 
 
 1. Xame three kinds of bailments, and the degree of diligence 
 and negligence corresponding to each, 
 
144 COMMERCIAL LAW. 
 
 2. A delivers a valuable race horse to B for safe keeping, 
 
 under the agreement that B may have the use of him in 
 return for his care and feed. B puts the horse into a plow 
 team and works him in an ordinarily careful manner. The 
 horse, however, is so injured as to unfit him for racing pur- 
 poses. Discuss the right of A to recover damages. 
 
 3. A borrows a wheelbarrow. While in his possession it is 
 
 consumed by fire. Discuss his liability for its loss. 
 
 4. A leaves a valise containing valuable articles in B's store, 
 without compensation to B. A thief enters in A's absence 
 and steals the valise. Illustrate under what circumstances 
 B would or would not be liable for the loss. 
 
 5. A man demands accommodation at a hotel. He seems in 
 
 every way a desirable guest, but a large number of the other 
 guests threaten to leave the hotel on account of their per- 
 sonal dislike of this guest. Would the landlord be justi- 
 fied in refusing him accommodation? 
 
 6. A pledges a Hock of sheep to B. B keeps them for a year, 
 
 and shears the wool from them at proper times. He 
 returns them with the same amount of wool on the sheep 
 as there was when he received them, but keeps the wool he 
 has shorn oil. Will the law protect him in so doing? 
 
 7. A wishes to pledge one hundred sacks of wheat in a ware- 
 house. He endorses the warehouse receipt to B as security. 
 Is this such a delivery of the wheat to B as will constitute 
 a pledge? 
 
CHAPTER XXVI. 
 
 COMMON CAEEIEES. 
 
 DEFINITION. Every one who offers to the public to carry 
 persons, property, or messages, as a business and for hire (except 
 telegraphic and telephonic messages), is a common carrier of what- 
 (ver he thus offers to carry. 
 
 Eailroad, steamboat, and stage companies are common carriers 
 of freight and passengers, as well as expressmen, hackmen, dray- 
 men, and others who offer as a business to carry goods or passen- 
 gers for hire. 
 
 CAEEIEES OF FEEIGHT. A common carrier must, if able 
 to do so, accept and carry whatever is offered to him at a reason- 
 able time and place of a kind that he undertakes or is accustomed 
 to carry, and must not give preference in time, price, or otherwise 
 to one person over another. 
 
 He may demand his pay in advance, however, and may refuse 
 to carry unless it is forthcoming. 
 
 The obligation resting upon a common carrier being to accept 
 only such kind of freight as he undertakes or is accustomed to 
 carry, an expressman could not be compelled to carry heavy iron 
 or bridge timbers upon his wagon, that not being in the line of 
 his business. 
 
 The rule that the carrier must not give preference in price is 
 made to protect the public, and not the carrier, so that it is held 
 that while a carrier can not charge one person a higher rate than 
 what is usual or reasonable, still he may carry for another person 
 at a lower rate than what is reasonable, or without compensation, 
 
 (141) 
 
 10 
 
146 COMMERCIAL LAW. 
 
 if he chooses; and a further exception to the rule is, that he must 
 always give preference in time to the United States or to a state. 
 
 A common carrier must start at such time and place as he 
 announces to the public, unless detained by accident or the ele- 
 ments, or in order to connect with carriers on other lines of travel. 
 
 LIABILITY. Common carriers carrying goods for compen- 
 sation would, under the general law of liability, be liable only for 
 ordinary negligence, but owing to the extensive and important 
 interest affected by the business of common carriers and the great 
 injury to the public in general where there is any negligence upon 
 the part of the carrier, in the course of the business of carriage, 
 the law has applied a very strict rule to the Common Carrier. 
 
 It is this: "A common carrier is absolutely liable for the safety 
 and proper carriage of freight without regard to any degrees of 
 care or negligence."' 
 
 He is made an insurer of the goods confided to his care. To 
 this general rule, however, there are these exceptions. 
 
 He is not liable for loss or damage caused by 
 
 (1) An inherent defect or spontaneous action of the property 
 itself. 
 
 (2) The act of a public enemy. 
 
 (3) The act of the law; or 
 
 (4) Any irresistible, superhuman cause. 
 
 Thus, if fruit is given him which must necessarily spoil before 
 it could reach its destination, he is relieved of liability, or if the 
 carriage is stopped and the goods taken by a Spanish army; or 
 where the laws of the State forbid the sale of such goods, and 
 they are seized by an officer; or where the carriage is struck by- 
 lightning and the goods thereby destroyed. 
 
 LIMITATION ON LIABILITY. The obligations of a com- 
 mon carrier can not be limited by general notice on his part, but 
 may be limited by special contract. 
 
 Any limitation, however, whether by contract or not, unless 
 
COMMON CARRIERS. 147 
 
 manifested by the signature of the shipper,, must be public,, law- 
 ful, uniform, and reasonable, otherwise it is void. 
 
 The following are common limitations which are allowable: 
 
 A carrier may print upon his tickets, shipping receipts, or 
 other like documents, specifying the rate of charge, that he will 
 not be liable for damage to breakable articles, unless properly 
 packed; that he will not carry high explosive substances; or that 
 he will not be liable for loss of articles of small compass and great 
 value, unless he is informed at the time of their receipt of the 
 \alue thereof. These are all reasonable limitations and are held 
 to be lawful. 
 
 CCBIPKXSATIOX. At all times it has been held that the 
 c airier is entitled to a reasonable compensation. However, as the 
 word "reasonable" is a very elastic term, the modern statutes pro- 
 vide that common carriers shall not charge more than a certain 
 fixed rate, under penalty if they do so. He, of course, is at liberty 
 to charge less than the established rate, should he so desire. 
 
 DELIVERY. What constitutes delivery is as important a 
 question in the case of delivery by a common earlier, as it is in the 
 case of a sale of personal property, and there is a great deal of law 
 upon the subject. 
 
 A general statement of the law, however, is about as follows: 
 "A delivery is complete when the goods are placed in the posses- 
 sion of the consignee, or are placed in such a position that he is 
 enabled to take possession at any time/ 7 
 
 Thus, it is held that for the purpose of fixing the time when 
 the goods are delivered, a railway company may, after the arrival 
 of certain goods at the station, notify the consignee that the goods 
 have arrived and that after thirty-six hours, or other reasonable 
 time, from the time of notice, the goods will be held by the carrier 
 as the agent of the consignee, and as a warehouseman, and riot as 
 carrier. 
 
 This applies particularly where it is not the custom or busi- 
 
148 COMMERCIAL LAW. 
 
 ness of the carrier to deliver goods at the residence or place of 
 business of the consignee. 
 
 "Where, however, it is customary, as is often the case with 
 stage and express 'companies, for delivery to be made at the resi- 
 dence or place of business of the consignee, the carrier is liable 
 as a carrier, until he so delivers the goods. 
 
 It is to be noted that when the carrier ceases to be a carrier 
 and becomes a warehouseman, as stated above, he is then liable 
 only for ordinary care and ordinary negligence. 
 
 If a common carrier accepts freight for a place beyond his 
 usual route he must, unless he stipulates otherwise, deliver it at 
 the end of his route to some other competent carrier for forward- 
 ing; and his liability ceases upon such delivery. 
 
 The carrier has a lien on the goods in his custody until all 
 his proper charges are made, and may refuse to deliver until the 
 charges are paid. 
 
 INTERSTATE COMMERCE LAW. As the railroad com- 
 panies are the most important of common carriers in some 
 respects, and as single companies operate their lines of railway 
 through many different states, the Congress of the United States 
 has enacted a law to regulate traffic by common carriers, between 
 states, known as the Interstate Commerce Law. 
 
 It is intended to be uniform in its application. Its provisions 
 are in general designed to protect shippers from exorbitant prices, 
 and insure the safe carriage of their property. 
 
 The following are a few of its more important provisions: 
 
 (1) The provisions of this act shall apply to all common car- 
 riers, contracting to carry from one state or territory to another, 
 or through other states and territories to a foreign country, or 
 from foreign countries to any state of the United States, but does 
 not apply to transportation wholly within one state. 
 
 (2) All charges must be just and reasonable, and no discrim- 
 inations made between large or small shippers, or regular and 
 
COMMOtf CARfciEftS. 149 
 
 irregular shippers; no greater charges proportionately for a "short 
 haul' 7 than a "long haul/' under similar circumstances, must he 
 made. 
 
 (3) A carrier must post conspicuous schedules of rates in every 
 depot, station, or office where passengers or freight are received 
 for transportation, and such published rates must not he deviated 
 from unless ten days' public notice he given of advance in rates. 
 All such rates or schedules must he filed with the United States 
 Commerce Commissioner, and in case of unlawful deviations an 
 injunction may he issued to compel obedience to the law. 
 
 (4) The Commissioner has power to inspect and is required to 
 inspect the books of all such carriers, and make reports yearly to 
 the Secretary of the Interior and to Congr 
 
 A CAKKIEK OF PEKSOXS for reward must use the utmost 
 care and diligence for their safe carriage, and is not excused for 
 default in this respect by any degree of care. 
 
 From the above statement we understand that the carrier of 
 passengers is under the same liability as a carrier of freight, and 
 is, like him, an exception to the general rules of liability. 
 
 A carrier of persons for reward then is absolutely liable for 
 any accident which may happen to his passengers, unless caused 
 by their negligence or some irresistible cause which the carrier 
 could not have foreseen and guarded against, such as a stroke of 
 lightning killing a passenger, or the attack of a public enemy. 
 
 The law is very strict and goes to extreme lengths in this mat- 
 ter, as it chould do in protecting the lives of the public. Thus: 
 "A carrier must not overcrowd or overload the vehicle, and must 
 give all passengers such accommodations as are usual and reason- 
 able; must travel at a reasonable rate of speed without unreason- 
 able delay or deviation," and other similar provisions regulate the 
 conduct of the carrier's business. 
 
 It is presumed in this discussion that we are dealing with 
 common carriers of passengers for reward. A carrier of persons 
 
150 COMMERCIAL LAW. 
 
 without reward is only required to use ordinary care and diligence 
 for their safety. 
 
 EIGHTS AND DUTIES. A carrier has a right to enforce 
 such regulations in regard to the conduct of his business as are 
 lawful, public, uniform, and reasonable. 
 
 Thus, he may require the fare to be paid in advance, and also 
 that each passenger must purchase a ticket before entering the 
 carriage, and if he fails to do so, may require him to pay ten per 
 cent additional after he boards the carriage. 
 
 If a passenger refuses to pay his fare or surrender his ticket 
 on request, the employees of the carrier may put him and his bag- 
 gage out of the carriage, using no unnecessary force, at any usual 
 stopping place, or near any dwelling house on stopping the car- 
 riage. 
 
 "Usual stopping place" means a regular station where people 
 reside. A water tank at which a train usually stopped for water, 
 was held nevertheless not to be a usual stopping place under this 
 provision. 
 
 A passenger if ejected at a usual stopping place, may re-enter 
 011 offering to pay his fare from the place he originally boarded 
 the carriage, or on producing his ticket. 
 
 If ejected at a dwelling house, however, he would have no right 
 to re-enter, it not being a place where passengers are received. 
 
 WHO ARE PASSENGERS. Every proper person who ten- 
 ders the proper fare must be accepted as a passenger by the carrier. 
 
 The general statement of the law is practically the same as in 
 the case of an innkeeper, but in the application there is a differ- 
 ence. The innkeeper, it will be remembered, is not required to 
 receive persons afflicted with contagious or infectious diseases, or 
 persons of bad character, or who otherwise would bring disrepute 
 upon his house, or cause a loss of business. 
 
 The law presumes that there are places for the care of persons 
 suffering from diseases, and places where persons of bad character 
 
COMMON CARRIERS. 151 
 
 inav find accommodation, but it does not raise any such presump- 
 tion in the case of a common carrier. 
 
 So far as he is concerned he must accept even persons afflicted 
 with disea.-o, although he might be required to provide separate 
 apartments for them. 
 
 He must not, however, accept drunken and disorderly persons 
 who would be dangerous to the life and limb of other passengers. 
 
 He can not refuse to accept any person on account of his bad 
 character or reputation, so long as he conducts himself properly. 
 Xeither can he refuse to accept a person because of his blindness 
 or physical deformity. 
 
 In some of the southern states, special statutes have been 
 passed requiring railroad companies to provide separate cars for 
 colored persons, and when such cars are so provided, the colored 
 persons can not ride in the same car with white persons. 
 
 In California and in the western states generally, there is no 
 such law, and other races, such as the negroes or Chinese, may 
 ride in the same car \\ith white persons, upon complying with the 
 same conditions. 
 
 A person who is not lawfully on board the carriage, or who 
 rides in the part not designated for passengers, such as the brake- 
 beam of a car, can not claim any damages in case of injury to 
 their persons, except in case where the employees of the carrier 
 resort to unnecessary force in ejecting him, and thereby injure 
 him: the rule being, as stated above, that the carrier must use no 
 unnecessary force in ejecting any one from the carriage. 
 
 CONTRIBUTORY NEGLIGENCE. Aa we have seen, a 
 common carrier of persons may make rules for the conduct of his 
 business, and may require passengers to conform to them, if they 
 are: 
 
 (1) Lawful; 
 
 (?) Public; 
 
 (3) Uniform; and 
 4 Reasonable. 
 
152 COMMERCIAL LAW. 
 
 Under these provisions, a railroad company usually posts 
 notices requiring passengers not to stand on the platform; to 
 keep heads and arms inside of car windows; not to get on or off 
 the train while in motion, etc. 
 
 If a person is injured while violating any such regulations as 
 the above, he is said to be guilty of contributory negligence; that 
 is, he contributes to his own injury, and the company is not liable 
 in damages where such negligence on the part of the passenger 
 can be shown. 
 
 A passenger is also guilty of contributory negligence if he 
 does any act which contributes to his own injury, even though not 
 in violation of some regulation of the carrier. 
 
 He might in a spirit of bravado swing himself from a moving 
 train, and hold only by his hands, or might climb to the top of a 
 car and run along on the top, or do other things which no prudent 
 man would be expected to do, and which the carrier could not 
 possibly provide against by regulations. 
 
 In such case, he can claim nothing from the carrier if he is 
 injured. The happening of an injury, however, is prima-facie 
 evidence that the carrier has been negligent, and it devolves upon 
 him to show that the passenger contributed to his own injury. 
 The passenger is bound to exercise ordinary care for his own 
 safety, and if he does not, he relieves the company from liability 
 to the extent that he himself is negligent. 
 
 LUGGAGE. A common carrier of persons, unless his vehicle 
 is fitted for the reception of persons exclusively, must receive and 
 carry a reasonable amount of luggage for each passenger, without 
 charge, except for an excess of weight of over 100 pounds for a 
 passenger, provided that if such carrier be a proprietor of a stage 
 line he need not receive and carry for each passenger, without 
 charge, more than 60 pounds of luggage. 
 
 Luggage may consist of whatever the passenger takes with 
 him. for his personal use and convenience; hence trunks, valises, 
 bicycles, and tricycles are held to be proper luggage. 
 
COMMON CARRIERS. 153 
 
 A common carrier, while he must carry a great variety of 
 articles under the term luggage, still may limit his liability for 
 loss or damage in a reasonable amount, This is usually fixed at 
 not to exceed $100 for a trunk, or $50 for a valise. 
 
 In any event, a carrier of luggage could not be made to pay 
 for the loss of the contents of a valise which were of unusual and 
 extraordinary value, such as a valise full of money or jewelry. 
 
 In order to make a carrier liable for loss or damage to luggage 
 it is necessary to give it into his keeping. 
 
 If a passenger carries his valise or other baggage with him, he 
 alone is responsible for its safety, unless its loss occurs through 
 negligence of the carrier or his servants. 
 
 EIGHTS OF THIRD PARTIES. Common carriers are, of 
 course, liable generally for any violation of the rights of parties, 
 other than their passengers, the same as any one else. 
 
 Railroad companies are the most numerous and powerful of 
 common carriers in this country, and special statutes have been 
 directed toward them. 
 
 A railroad company must make and maintain a good and suf- 
 ficient fence on either or both sides of their track and property, 
 under penalty of damages for any domestic animals killed by their 
 trains. 
 
 This, of course, does not apply in cities or towns where stock 
 is not permitted to run about the highways, as in such case the 
 owners of stock would themselves be violators of the law; and 
 "the law will not aid wrong-doers.'"' 
 
 Such carriers are further required to ring a bell and blow a 
 whistle at specified distances from each street or road crossing, 
 and are liable for damages for all injuries suffered by third parties 
 when these provisions are violated; and the person in charge of a 
 locomotive engine who fails to so ring the bell, or sound the 
 whistle, is guilty of a misdemeanor and may be punished crim- 
 inally; and generally, any employee who wilfully omits a duty by 
 which human life is endangered is guilty of a misdemeanor. 
 
154 COMMERCIAL LAW. 
 
 A number of cases have arisen in which sparks from a loco- 
 motive engine have set fire to grain fields and other personal 
 property along the route of the railway. 
 
 The rule of damages deduced from these cases is generally 
 stated as follows: 
 
 That a railroad company is liable for all property destroyed 
 by reason of fires from locomotive engines, the law requiring such 
 companies to furnish their locomotive smoke-stacks with such 
 cinder screens as will effectually prevent such destruction of 
 property. 
 
 TELEGRAPHS. Telegraph companies are considered under 
 the head of carriers, but there are some important differences 
 which will be noted. 
 
 One great difference is in the matter of liability. A carrier 
 of telegraphic messages is required to use great care and diligence 
 in the transmission and delivery of messages, and is liable for 
 slight negligence, but is not an insurer of the correctness or 
 safety of the transmission as is the case with other carriers. 
 
 Such carrier must deliver a message to such place and person 
 as provided in the address, if he is within a distance of two miles 
 from the main office nearest the place of address, and should he 
 delay unreasonably, either in the transmission or delivery, he is 
 liable in damages to the party injured. 
 
 ORDER OF TRANSMISSION. A carrier of messages by 
 telegraph must, if it is practicable, transmit every such message 
 immediately upon its receipt, but if this is not practicable he 
 must transmit them in the following order: 
 
 (1) Messages concerning public business; 
 
 (2) Messages intended for immediate publication in news- 
 papers; 
 
 (3) Messages relating to sickness or death; 
 
 (4) Other messages in the order in which they were received. 
 RIGHTS AND DITTIES. A carrier of telegraphic messages 
 
COMMON CARRIERS. 155 
 
 may limit his liability in a similar manner as a carrier of passen- 
 gers or freight. 
 
 He may stipulate that he will not be liable above a certain 
 specified sum, unless the message is "repeated/' that is, sent back 
 to the sending office for comparison. 
 
 He can not, however, absolutely limit his liability to any 
 certain amount, as momentous consequences may follow a wrong 
 dispatch. 
 
 He may demand pay in advance, and require senders to write 
 in ink, or on particular sized paper. 
 
 He may refuse to pay any damage caused by the missending 
 or misreading of a message written in cipher, unless the cipher 
 is explained to him. cipher messages being those in which signs 
 or letters are used to represent words. 
 
 A carrier is liable, however, in any case where damage occurs 
 through a change, by the operator, of the message as written by 
 the sender. 
 
 In one case a company was compelled to pay damages where 
 the message read, "Send Shep by next train," and the operator, 
 thinking to correct poor spelling, sent the message thus: "Send 
 sheep by next train, 77 thus causing a dealer to send his agent a 
 large consignment of sheep instead of a dog named Shep, thereby 
 causing great expense and loss to the owner. 
 
 If an operator wilfully divulges the contents of a telegraphic 
 iu:e, or alters it unlawfully, the company is not only liable 
 for any damage which may occur in consequence, but the operator 
 is guilty of a felony and may be punished criminally therefor. 
 
 TELEPIIOXES. The law of telephones is of recent growth, 
 hut so far as it has developed, telephones have been generally held 
 to be governed by the same rules as telegraphs, so far as in the 
 nature of things they can be made applicable. 
 
 Thus, as in the case of other carriers, telephone companies are 
 bound to give prompt and proper service to all comers, and are 
 liable for damages in case they refuse. 
 
156 COMMERCIAL LAW. 
 
 Of course, they can not be held responsible for missent meg- 
 sages as they do not,, strictly speaking, send any messages at all, 
 but simply furnish the appliance by which the customer sends 
 his own message. They are liable only for ordinary negligence 
 in the conduct of their business. 
 
 TEST QUESTIONS. 
 
 1. A passenger on a train refuses to give up his ticket because 
 
 the train is so crowded that he can not get a seat. The 
 conductor puts him off the train. Can he recover dam- 
 ages? 
 
 2. A freight company refuses to take goods because of a strike 
 
 on the line. Can a shipper recover damages suffered on 
 account of refusal of the company to carry the goods? 
 
 3. A railroad company unloads goods at its depot, and the 
 goods are immediately destroyed by fire. Is the company 
 liable for the loss? 
 
 4. A car load of live stock consigned to B is killed in a wreck. 
 
 The wreck is not caused by any negligence of the company. 
 Will the company be liable for the damages? 
 
 5. If goods perish on the road by "act of God," does the seller 
 
 or the buyer bear the loss? 
 
 6. A passenger refuses to pay his fare; the train is stopped 
 and he is ejected at a farm house. He then offers to pay 
 his fare, but is refused admittance to the train. May he 
 recover damages? 
 
 7. Explain the doctrine of "contributory negligence." 
 
 8. A package is sent by express to a grocery store in San Fran- 
 
 cisco. The package is stolen out of the delivery wagon 
 of the express company. Discuss the liability of the com- 
 pany. 
 
COMMON CARRIERS. 157 
 
 9. AVhile a train is traveling at its customary speed a passen- 
 ger attempts to pass from one car to another, and in doing 
 so falls from the car and is injured. Discuss his right to 
 collect damages. 
 
 10. A writes a telegraphic message and delivers it to the oper- 
 ator. The operator makes a mistake in reading the mes- 
 sage as written, which results in loss to A. Discuss A's 
 riglit to recover damages. 
 
CHAPTER XXVII. 
 SHIPPING. 
 
 GENERAL DEFINITIONS. The term "ship" or "ship- 
 ping" includes steamboats, sailing vessels, canal boats, barges, and 
 every structure to be navigated from place to place for the trans- 
 portation of merchandise or persons. 
 
 A charter party is the contract by which a ship is let or hired 
 out to a person for use. 
 
 BILL OF LADING. A bill of lading is an instrument in 
 writing, signed by a carrier or his agent, describing the freight, 
 stating the name of the consignor, the terms of the contract for 
 carriage, and an agreement that the freight will be delivered to a 
 certain person, or order, at a specified place. 
 
 As we have stated before, a bill of lading has by special statute, 
 been made a negotiable instrument, and can therefore pass from 
 hand to hand in the same manner and with like effect as is the 
 case with a Bill of Exchange. 
 
 Bills of lading are usually signed in sets of three; one being 
 given to the consignor, which operates as a receipt for goods 
 received, another held by the carrier as a memorandum of the 
 transaction, and the third sent to the consignee. 
 
 A bill of lading, as used in sending by ship, is practically the 
 same as a bill of lading used in sending goods by train. 
 
 LIABILITY OF MARINE CARRIERS. A marine carrier 
 is liable in like manner as an inland carrier, except for loss or 
 injury caused by perils of the sea or fire. 
 (158) 
 
SHIPPING. 159 
 
 Perils of the sea are from, 
 
 (1) Storms and waves; 
 
 (2) Rocks, shoals, or other obstacles; 
 
 (3) Change of climate; and 
 
 (4) Generally, all dangers peculiar to the sea. 
 
 A marine carrier is not liable for damages for loss of goods by 
 fire, unless caused by the design or neglect of the carrier or his 
 agents. 
 
 In consequence of the great danger for loss of goods sent by 
 sea, it is customary for all shippers to place insurance on such 
 goods. 
 
 MARITIME LOAN'S. On long voyages it is not uncommon 
 for a ship to be disabled so as to need repairs beyond the amount 
 of coin or credit which she may have. In such cases the captain 
 of the vessel is authorized to borrow money for the purpose of 
 repairs, and give as security a document in the nature of a mort- 
 gage upon the ship or its cargo, or both, for the repayment of the 
 loan. 
 
 This document is called a bottomry bond, if made on the vessel, 
 and if made on the cargo, is called a respondentia bond. 
 
 PAYMEXT OF LOAXS. It sometimes happens that two or 
 more loans may be required at different ports before the vessel 
 reaches her destination, and in such case, the rule of priority in 
 repayment is exactly the reverse of the rule in ordinary mortgages. 
 
 In ordinary mortgages the mortgage first made must be first 
 paid. On marine loans the last made must be first paid, on the 
 theory that the last loan saved the vessel from destruction. These 
 loans being made with the ship and cargo as security, are required 
 to be repaid only in case the ship reaches her destination in safety, 
 and not otherwise. 
 
 AUTHORITY OF SHIPMASTER. A master of a ship is a 
 general agent for its owner, and also general agent for each of the 
 owners of the cargo. 
 
160 COMMERCIAL LAW. 
 
 He, therefore, in addition to authority to borrow money as 
 above described, has authority to do whatever the owners might 
 do for the preservation of their respective interests; so in case a 
 cargo, if found to be of such perishable nature, or in such dam- 
 aged condition that if left on board the ship, would be lost, he 
 has power to sell such cargo; and likewise if the ship is seriously 
 injured beyond the possibility of pursuing the voyage, the master 
 may sell the ship; and in like case he of course may sell the cargo, 
 if no other ship can be obtained to carry it to its destination at 
 reasonable cost. 
 
 He likewise has power, in case of storm or other danger which 
 makes it necessary, to throw overboard such part of the cargo 
 as is necessary for the safety of the ship. In such case the owners 
 of the part of the cargo which is saved must contribute their pro 
 rata of the value of the cargo thrown overboard to the owner of 
 such cargo. 
 
 This act of contribution is called "General Average." 
 
 TEST QUESTIONS. 
 
 1. A vessel is delayed on her journey, for repairs. She has 
 
 on board a cargo of fruit. Under what circumstances 
 would the captain be justified in selling it? 
 
 2. Illustrate circumstances under which the master of a vessel 
 would be justified in throwing overboard part of the cargo. 
 
CHAPTER XXVIII. 
 AGENCY. 
 
 DEFINITION. An agent is one who represents another, 
 called the principal, in dealing with third persons. 
 
 Such representation is called "agency." Any person having 
 the capacity to contract, may appoint an agent, and any person 
 may be an agent. The last sentence should be carefully noted. 
 
 It will be remembered that persons having capacity to con- 
 tract are those who are not minors, persons of unsound mind, or 
 persons deprived of civil rights. 
 
 Any one of these three classes can not be a principal, but any 
 person may be an agent. This includes, of course, even the three 
 classes above excepted, but as a matter of fact of the three classes 
 a person deprived of civil rights could not ordinarily be an agent, 
 as he is usually confined in the State Prison; and a person who 
 is an absolute idiot, would, as a matter of fact, be incapable of 
 attending to business of any kind, and hence could not be an 
 agent. 
 
 Minors, however, may be agents to the full extent of the defi- 
 nition. 
 
 CLASSES OF AGENTS. Generally speaking there are two 
 classes of agents, general agents and special agents. 
 
 A general agent is one who is empowered to transact all busi- 
 <>f his principal of a particular nature, or all business at a 
 particular place. 
 
 He may. without special instructions, do any act in regard to 
 the business, which his principal could do if personally present. 
 A special agent is an agent for a particular act or transaction, 
 
 (161) 
 
 II 
 
162 COMMERCIAL LAW. 
 
 and is empowered to do only what is necessary to complete that 
 act -or transaction. 
 
 APPOINTMENT OF AGENT. An oral authorization is suf- 
 ficient for any purpose, except that an authority to enter into a 
 contract, required by law to he in writing, can only be given by 
 an instrument in writing; thus if a person wishes to appoint an 
 agent for the purpose of selling land, or mortgaging property, 
 he must give him such authority in writing, under the same 
 solemnities as is required in the deed or mortgage. 
 
 Such an instrument is called a Power of Attorney, and simply 
 sets forth the names of the parties, and the power which the one 
 gives to the other. It is signed by the principal, and must "Be 
 acknowledged and recorded in order to give proper effect to the 
 agent's subsequent acts. 
 
 EVIDENCE OF AUTHORITY. In dealing with agents, a 
 third party does so at his own peril, and must be able to show that 
 he had reasonable grounds for believing the agent to be possessed 
 of proper authority. 
 
 A written authorization, signed by the principal, is of course 
 good evidence. 
 
 In case there is no written authority, the fact that a principal 
 has allowed another to hold himself out as his agent, and by his 
 conduct has assented to his transactions, is good evidence of the 
 creation of the agency. 
 
 An ofiice clerk or bookkeeper might be held to have power to 
 collect bills for the firm, although that was not his exclusive busi- 
 ness; and where a servant is repeatedly sent to a store for goods 
 on credit the merchant is justified in extending reasonable credit, 
 and the master is responsible for all such goods bought, even 
 though in some cases the master did not authorize their purchase. 
 
 IMPLIED POWERS. As a general rule an agent, even though 
 he is a special agent, has implied power to do all acts which nec- 
 essarily pertain to I he carrying out of the purposes of the agency. 
 
AGENCY. 163 
 
 Thus, an authority to sell property includes authority to war- 
 rant the title of the principal,, and to warrant the quality and 
 quantity of the property. 
 
 A general agent to sell, who is intrusted by the principal with 
 the possession of the thing sold, has authority to receive the price 
 at any time until his agency is revoked; and even a special agent 
 to sell has authority to receive the price on delivery of the thing 
 sold, but not afterwards, as his agency, is, of course, terminated 
 with the closing of the sale. 
 
 So an agent to sell has power to incur proper charges for car- 
 riage or expressage in delivering the property. 
 
 LIABILITY OF PARTIES. There being three parties to a 
 transaction where an agent is employed, instead of two, as in con- 
 tracts previously discussed, there arise many questions as to the 
 liability in case of pecuniary loss resulting from the transaction, 
 and the law has prescribed certain rules governing the varying 
 conditions under which loss may occur. 
 
 LIABILITY OF PIMXOIPAL TO THIRD PARTIES. "A 
 principal is responsible for all acts of his agent done within the 
 apparent scope of the agent's authority/ 7 This rule must be care- 
 fully examined and understood. 
 
 The word "apparent 77 is very important in its signification. 
 A may employ an agent for the purpose of buying general hard- 
 ware. He may not choose to purchase stoves, yet if his agent, 
 being known as his agent for the purchase of general hardware, 
 does purchase stoves, the sto\e manufacturers may recover dam- 
 ages from A in case of his refusal to receive or pay for the stoves. 
 
 The principal is thus liable for whatever acts the agent does 
 which appear to be within the scope of his authority, and he can 
 not bind third parties by any private instructions given to the 
 agent without the knowledge of the third party. 
 
 AGENTS WRONGFUL ACTS. A principal is responsible 
 to third persons for the negligence of his agent in the transaction 
 
164 COMMERCIAL LAW. 
 
 of the business of the agency, including wrongful acts committed 
 by such agent in and as a part of the transaction of the business. 
 
 For example: While it is the duty of an engineer to stop a 
 train, still if he does so suddenly and without just reason therefor, 
 and thereby injures passengers, the railroad company is liable in 
 damages; or in case of a bridge, if the builder's agent negligently 
 and improperly constructed it so that accidents are caused thereby, 
 the builder is liable. 
 
 An agent who thus wilfully commits a wrong may also be held 
 liable criminally if his intent can be shown to injure life or limb; 
 and as a matter of course the agent's wilful acts, which are not 
 done in and as part of the business of the agency, are chargeable 
 only to himself; as in case of the engineer, if while in charge of 
 the employer's engine, he should shoot a man, the principal could 
 not in such case be held liable, shooting not being a part of the 
 agency. 
 
 So a principal is liable for the unskilfulness of his agent. If 
 a stage company employs an unskilful driver Avho overturns the 
 coach and maims passengers, the company is liable, and can not 
 excuse themselves by saying he was recommended as a skilful 
 driver, or by any like excuse. 
 
 The principal is bound to employ proper agents in dealing 
 with third persons. 
 
 PRINCIPAL'S LIABILITY BY RATIFICATION. It 
 sometimes happens that an agent will do an act beyond both the 
 actual and apparent scope of his authority. In such cases the 
 principal may afterwards agree to ratify, or be bound by the act, 
 and when he does so, he is liable for all damage which may arise 
 ir. consequence of the act. 
 
 Ratification may be manifested, 
 
 (1) By actual notice to the third party by the principal; 
 
 (2) By accepting the benefits of the act: 
 
 (3) By neglecting to disaffirm within a reasonable time after 
 notice of the act, 
 
AGENCY. 165 
 
 A principal can not ratify an act which he had no power to 
 authorize beforehand; and if he ratifies part of an indivisible 
 transaction, it is a ratilication of the whole. 
 
 Thus, if he accepts goods purchased without authority, he can 
 not refuse to pay the price. "Where an authority is required to be 
 in writing a ratilication can only be made by a similar writing. 
 
 LIABILITY OF AGEXT. The principal is, of course, liable 
 to the agent on hi? contract of employment for payment of the 
 agent's salary, and for all proper expenses which the agent may 
 incur in carrying out the principal's instructions. 
 
 The principal is also liable for any damage which may happen 
 to the agent, without the agent's fault, in carrying out the in- 
 structions of the principal. 
 
 This latter rule has occasioned much litigation. It must be 
 accepted with some qualification and explanation. For instance, 
 a principal directs his agent to operate a certain piece of machin- 
 ery. If the agent asserts that he is a skilful operator, and famil- 
 iar with that particular machine, when in fact he is not, and is 
 injured because of his lack of knowledge, the principal can not be 
 held liable. 
 
 On the other hand, if the agent is known to be ignorant of the 
 machinery, and the principal gives certain instructions which the 
 agent follows to the best of his ability, using ordinary care, and 
 is then injured, the principal is liable for damages for the injury; 
 so also the principal is liable to an agent for damages for injuries 
 received by reason of defective machinery or tools supplied to the 
 workman by the principal. 
 
 A^KXT-'S LIABILITY TO THIED PARTIES. One who 
 assumes to act as an agent is responsible to a third person and to 
 the principal for his acts in the course of his agency, in the fol- 
 lowing Cii- 
 
 (1) When credit is given to him personally; 
 
 (2) When he enters into a written contract in the name of his 
 principal without believing that he has authority to do so; 
 
166 COMMERCIAL LAW. 
 
 (3) When his acts are wrongful in their nature. 
 
 Of course, when credit is given to him personally he becomes 
 to that extent the principal in the transaction, and in such cases 
 is personally liable. 
 
 Under the second subdivision both he and the principal are 
 liable under the written contract to third parties. 
 
 When his acts are wrongful in their nature, he, as a matter of 
 right, should be and is held responsible; and as we have seen, 
 when such wrongful acts are connected with the business of the 
 agency, and as a part of such agency, the principal is also respon- 
 sible. 
 
 The agent can not claim in order to relieve himself of liabil- 
 ity for a wrongful act, that he did it under authority of the prin- 
 cipal, as a principal can not give an authority to commit a wrong; 
 any such attempted authority is absolutely void, and the agent 
 is not liable as an agent, but as a wrong-doer. 
 
 LIABILITY TO PKINCIPAL. An agent is generally liable 
 to the principal for all acts which he may do in the name of the 
 principal, but without the scope of his actual authority. 
 
 It is his duty to obey strictly the instructions of the principal. 
 
 In only one case has he power to disobey the principal's in- 
 structions, and that is in a case where it is clearly in the interests 
 of his principal that he should do so, and there is not time to com- 
 municate with the principal. 
 
 The most familiar instance under this doctrine, is the case of 
 a master of a ship, who in emergency may not only hypothecate 
 the ship and cargo, but even sell both, or cast the cargo over- 
 board. Such acts must not be done, and the agent will be liable 
 therefor, unless he can show an overwhelming necessity for such 
 disobedience to instructions. 
 
 An agent is bound to disclose all information which he may 
 obtain, to the principal, and must not in any way advance his 
 own interests at the expense of the interests of his principal; e. g., 
 
AGENCY. 
 
 A may instruct his agent to sell wheat if he can get $1.50 per 
 cental. The agent receives $1.60 per cental. He has no right to 
 appropriate the difference to his own use; on the contrary, should 
 he disobey instructions and sell the wheat for $1.40 per cental, he 
 must hear the loss. 
 
 The principal is entitled to the highest degree of skill pos- 
 sessed by the agent in the line of his employment, and he is liable 
 to the principal for any loss resulting from his lack of proper 
 attention to the business of the agency. 
 
 EIGHTS AND DUTIES OF THIRD PARTIES. A third 
 party in dealing with an agent is bound to exercise ordinary care 
 and prudence in learning the extent of the agent's authority, and 
 if he is deceived through lack of ordinary prudence, the principal 
 can not be made to respond in damages. 
 
 He is not, however, bound to make a special investigation into 
 the details of the agency before transacting business with the 
 agent. 
 
 Thus, where even a stranger presents himself, representing 
 that he is a selling agent of some well-known business house, and 
 carries with him certain samples, and generally conducts himself 
 and presents such credentials as men in his class of business usu- 
 ally present, a purchaser would be justified in giving an order to 
 such person and holding the principal responsible for a failure to 
 fill such order. 
 
 NOTICE TO AGENT. As against principal, both principal 
 and agent are deemed to have notice of what either has notice of, 
 and in good faith and the exercise of ordinary care and diligence 
 should communicate to the other. Hence, if a third person 
 desires to change or countermand an order when it is proper to do 
 so, he may send notice to the agent of his desire, and such notice 
 will be deemed to be notice to the principal. 
 
 AGENCY TERMINATED. An agency may be terminated, 
 generally speaking, in three ways: 
 
168 COMMERCIAL LAW. 
 
 (1) By expiration of time; 
 
 (2) Act of the parties; 
 
 (3) Change in condition of the parties, or subject matter. 
 BY EXPIRATION OF TIME. An agent may be hired for a 
 
 specified time,, and at the expiration of that time his agency is 
 terminated, unless by his contract he is also required to finish 
 certain work. In such case the time is extended until such work 
 is finished; and in case no time is set, a special agency is termi- 
 nated as soon as the particular business for which the agent was 
 appointed, is consummated. 
 
 ACT OF PARTIES. The principal may at any time revoke 
 the agency by giving proper notice to the agent, and to third 
 parties dealing through him, unless the agent's power is coupled 
 with an interest in the subject matter, as in case he is part owner 
 of the business. 
 
 The agent also may renounce the agency at any time upon 
 notice, but he is liable for any damages which may occur by his 
 leaving the employment before the expiration of his term, or 
 lief ore the finishing of his special work. 
 
 In any case no particular form of notice, either by the agent 
 or his principal, is required. Any notice which will properly 
 inform either of the desire of the other, is sufficient. 
 
 CHANGE IN CONDITION OF THE PARTIES AND IN" 
 SUBJECT MATTER, The agency is revoked by the incapacity 
 or death of either party, though in case of the death or incapacity 
 of the principal, the agent is bound to exercise his powers as agent 
 for a reasonable time if necessary to preserve the property of his 
 principal, and is entitled to compensation for such service. 
 
 Bankruptcy of either party is such a change in the condition 
 of the parties as terminates the agency. If the principal becomes 
 bankrupt, his property is all placed out of his control, and his 
 authority terminates. 
 
 By the bankruptcy of the agent, he is technically considered 
 
A(rEXCY. 169 
 
 to have lost his business standing for the time: but it seems there 
 is no objection to a person's being employed as an agent while 
 his property is in the hands of a court of bankruptcy. 
 
 The extinction of the subject of the agency, such as the death 
 of a horse,, which an agent was employed to train, or the decaying 
 of fruit which the agent was employed to sell, terminates the 
 agency. 
 
 TEST QUESTIONS. 
 
 1. An agent makes a contract with B, a third party, in his 
 own name. B does not know of the agency. Can the 
 principal enforce this contract with B? 
 
 2. In the above case should B discover the real principal, can 
 he enforce a claim for damages against him? 
 
 3. An agent to sell goods, buys certain goods for his firm. 
 
 Discuss the obligations of his firm to pay for the goods. 
 
 4. A has authority as a general agent; he is given special in- 
 
 structions in regard to the business. Can he violate the 
 special instructions and escape liability on the ground of 
 being a general agent? 
 
 5. A, as an agent, sold a sewing machine to B at an agreed 
 
 price of $30. After the machine was delivered the com- 
 pany demanded payment in the sum of $50 for the machine. 
 AVhich price must B pay? 
 
 6. A, who is an experienced man in that line, is employed to 
 
 "run" a threshing machine. His foot is crushed in the 
 machinery. Discuss his right to recover damages from the 
 owners. 
 
 7. Farmer Smith's workhand, while burning stubble, negli- 
 
 gently allowed the fire to extend to Farmer B's land, and 
 B's house is burned. Who is liable? 
 
 8. In the above question would it alter the case if the farm- 
 
 hand wilfully directed the fire toward B's house so that 
 it was consumed? 
 
CHAPTER XXIX. 
 PARTNERSHIP. 
 
 DEFINITION. Partnership is the association of two or more 
 persons for the purpose of carrying on business together and 
 dividing its profits, and sharing its losses between them. 
 
 Partnerships may be either General or Special,, and formed by 
 either, 
 
 (1) A written contract; 
 
 (2) An oral agreement; or 
 
 (3) By implication. 
 
 In any case, a partnership can be formed only by the consent 
 of all the parties thereto, and therefore no new partner can be 
 admitted into the firm without the consent of every member 
 thereof. 
 
 WHEN IS A PARTNERSHIP FORMED. The best evidence 
 of the formation of a partnership is a written contract which has 
 been entered into by the parties. Such a contract, called "Articles 
 of Co-partnership," is usually a formal document setting forth 
 the names of the parties, the kind of business, the amount of cap- 
 ital contributed by each; and generally, such agreements as they 
 may wish. 
 
 When oral contracts are made, it is sometimes difficult to deter- 
 mine whether the contract is one of partnership or of agency, 
 especially if one person does all of the work, the other furnishing 
 all of the money or other capital; and in cases of partnership by 
 implication, the acts of the parties alone can be depended upon to 
 determine whether or not a partnership exists. 
 
 EXAMPLES. A owns land; he enters into a contract with 
 (170) 
 
PARTKERSfitP. 171 
 
 B to farm that land, and deliver to him one-third of the products. 
 This is held not to he a partnership, but a mere leasing; while 
 two persons engaging in the farming of land and raising of wheat 
 together, with the understanding that the product was to he 
 divided proportionately, the contract was held to constitute a 
 partnership; and it is held as a general rule that where a person 
 receives a certain per cent of the profits as profits, he is a partner; 
 but where he receives merely a sum of money equal to a certain 
 per cent of the profits, he is not a partner. 
 
 LIABILITY OF PARTNERS. Each member of a partner- 
 ship, by entering into such partnership, makes himself liable for 
 all of the debts, if any there be, against the partnership. 
 
 It matters not that he may own but a small interest in the 
 business, he is liable nevertheless for all debts to whatever extent, 
 and his personal property may be taken and sold for partnership 
 debts if necessary to satisfy them. 
 
 This refers, however, only to the usual, or, as it is called, a 
 general partnership. A special partnership is described in the 
 next section. 
 
 SPECIAL PARTNERSHIP is a partnership formed under 
 special statute, and may consist of one or more general partners, 
 and one or more special partners. 
 
 The chief difference between a general and a special partner is 
 that the special partner may limit his liability for losses by mak- 
 ing and recording Articles of Co-partnership, in which is stated 
 the amount of stock or share which he has contributed, and for 
 which he will be liable. 
 
 Such certificate of partnership must also be published, so as 
 to give full notice to the public that such partnership is formed. 
 
 When the special partners have properly complied with the 
 law in forming the partnership, each special partner can be held 
 liable only for the amount of capital invested. 
 
 Thus, if A, as a special partner, invests $5,000, he is only 
 
172 COMMERCIAL LAW. 
 
 obliged to pay in case of loss $5,000 of indebtedness, while the 
 general partners are each liable as in ordinary co-partnerships for 
 the total indebtedness. 
 
 FIEM NAME. A firm name is often composed simply of the 
 names of the members of the co-partnership, but any designation 
 may be made, and business conducted thereunder, as "The Cali- 
 fornia Hardware Company;" but in case a fictitious name is used, 
 such as "The California Hardware Company," the partners are 
 required to publish in a newspaper, and file a certificate with the 
 County Clerk of the County where the business is conducted, 
 stating the true names in full of the members of the co-partnership, 
 under penalty of being deprived of the right to bring a suit in 
 court until such publication and filing is done. 
 
 In the case of a special partnership, it is not lawful to use the 
 name of the special partner in the firm name, unless it be accom- 
 panied with the word "limited." 
 
 This last provision is for the protection of people who might 
 give extensive credit to the firm on the supposition that the one 
 whose name so appeared was a general partner. 
 
 CLASSES OF PAETNEES. The classes of partners are: 
 
 (1) Ostensible; 
 
 (2) Dormant; 
 
 (3) Nominal; and 
 
 (4) Special. 
 
 AN OSTENSIBLE OE EEAL PAETNEE is one who allows 
 his name to be used publicly as a partner, and who is really a 
 partner. 
 
 A DOEMANT PAETNEE, as the word indicates, is a sleep- 
 ing partner, or one who is hidden, and does not take any active 
 part in the partnership, nor allow his name to appear in any way, 
 so that no one knows that he is a partner except the members of 
 the firm. 
 
 The object in concealing his identity as a partner is, of course, 
 to escape liability in case debts are created. 
 
PARTNERSHIP. 173 
 
 He is, in a sense,, a real partner in the firm, and if he is dis- 
 covered by a creditor, he can be compelled to pay any and all 
 debts of the firm in the same manner as though he had at all 
 times been known as a partner, and it makes no difference that 
 the debt was created during the time that he was dormant. 
 
 A NOMINAL PARTNEE is, as the name indicates, a partner 
 in name only, and as between the partners themselves has nothing 
 to do with the business, either to share profits or divide losses; 
 however, as the purpose of a nominal partner is for the strength- 
 ening of the credit of the firm by use of the name of some respon- 
 sible man, this man, the nominal partner, must pay the penalty, 
 should any debts or losses occur. 
 
 In brief, so far as third parties are concerned he is to all 
 intents and purposes an ostensible or real partner. 
 
 SPECIAL PARTNERS have already been discussed in dis- 
 tinguishing between special and general partners. 
 
 AUTHORITY OF PARTNERS. Each partner is a general 
 (as distinguished from special) agent for the firm, and as such 
 general agent he may bind the firm by any and all acts which he 
 may do in the carrying on of the partnership business in the ordi- 
 nary manner. 
 
 Hence, he may buy and sell goods, give warranties, appoint 
 agents, and make, accept, or endorse negotiable papers in the firm 
 name. 
 
 The following acts are forbidden him. He can not 
 
 (1) Make an assignment of partnership property; 
 
 (2) Sell the good-will of the business; 
 
 (3) Submit a claim to arbitration; 
 
 (4) Generally, do any act which would make it impossible to 
 carry on the ordinary business of the partnership. 
 
 A partner in all business transactions relating to the firm busi- 
 Minst hold the interests of the firm above his personal inter- 
 est; hence, he has no right to make a purchase with firm funds, 
 
174 COMMERCIAL LAW. 
 
 and, should the venture be profitable, appropriate the profits, and 
 if unprofitable, charge the firm with the loss. 
 
 It must be either a firm act or an individual act; and as a rule 
 he can not transact any business in opposition to the interest of 
 the firm. 
 
 PARTNERSHIP AGREEMENTS. Any agreement in re- 
 gard to the nature of the business, amount of stock to be employed, 
 the conduct of the business, or in fact anything pertaining to the 
 partrier&hip, is valid as between the partners themselves, so long as 
 it is lawful; and as between themselves a court of equity will 
 enforce all such agreements, but as against third parties no secret 
 agreements between the partners which work injury to a third 
 party, are valid. 
 
 Thus, if A holds himself out as a general partner, while as a 
 matter of fact he has a secret understanding with his partners 
 that he shall be only liable for a small proportion of the debt, he 
 is nevertheless liable as a general partner, and his secret agree- 
 ment is void, so far as the creditor is concerned, although he may 
 enforce contribution from the others. 
 
 Even where a partner acts in bad faith toward another, so long 
 as the agreement is proper and lawful, all of the partners are 
 bound by it, if third parties would be injured by a refusal to abide 
 by the act, but not otherwise. 
 
 Of course, in all cases where one partner suffers damage 
 through the act of another, he has his remedy against the other. 
 
 PROFITS. All profits made by a general partner in the 
 course of any business, usually carried on by the partnership, 
 belong to the firm; and should he engage in business adversely to 
 the interests of his firm, or use partnership funds, all profits be- 
 long to the partnership. 
 
 Partners may agree as to how profits shall be divided. Two 
 men may enter into co-partnership and agree to divide the profits 
 equally, or one may have put in more capital than the other and 
 
PARTNERSHIP. 175 
 
 they may divide it, giving one two-thirds., the other one-third of 
 the profits, or in any way that they may agree upon. 
 
 Afl we have seen, persons may enter into co-partnership with- 
 out intending, or without really knowing that they are partners, 
 under agreements for the share of profits, but a mere clerk or 
 employee, who is to be paid a commission in proportion to the 
 amount of profits made, is not a partner. 
 
 LOSSES. It is usual for partners to agree among themselves 
 that they each will pay all losses in the same proportion as they 
 divide profits. 
 
 This agreement, so far as it concerns the partners, is binding 
 upon them, but as we have noted, can not bind creditors, as the 
 law provides that each partner shall be liable for the entire indebt- 
 edness of the firm, unless he has limited his liability, as in the 
 case of a special partnership. 
 
 CAPITAL. The capital of a partnership consists of any- 
 thing and everything which is used in the conduct of the partner- 
 ship business. 
 
 It may consist of money, merchandise, store fixtures, horses, 
 wagons, hay, or even the services of one of the partners, or the use 
 of a horse and wagon. 
 
 It is frequently the case* that one partner invests a certain 
 amount of money as his pro rata of the capital, while another con- 
 tributes his skill, knowledge, and experience in the business as 
 his pro rata. 
 
 SUITS. A general partnership may sue and be sued in the 
 firm name in the same manner as an individual. 
 
 In the case of partnerships doing business under a fictitious 
 name they must, as we have seen, file with the County Clerk the 
 true names of the partners before they are allowed to bring suits, 
 while any one wishing to sue the firm, may sue it under the ficti- 
 tious name, and when the true names of the partners are discov- 
 ered, they may be inserted in the papers, 
 
176 COMMERCIAL LAW. 
 
 DISSOLUTION. A general partnership is dissolved as to all 
 the partners, 
 
 (1) By a lapse of time prescribed by agreement for its dura- 
 tion; 
 
 (2) By the expressed will of any partner, if there is no such 
 agreement; 
 
 (3) By the death of a partner; 
 
 (4) By the transfer to a third party of the interest of any 
 partner; 
 
 (5) By a judgment of dissolution. 
 
 BY AGREEMENT. In all cases where articles of co-partner- 
 ship are formally drawn up, it is customary to state the time for 
 the continuance of such partnership, and when that time elapses 
 any partner may consider the partnership at an end and demand 
 a division of the property. 
 
 Of course, if the firm continues to do business after the lapse 
 of such time, it is still a partnership. 
 
 Where a partnership is formed for a particular purpose, there 
 is an implied agreement that the partnership shall end when that 
 purpose has been accomplished. 
 
 When there is no agreement the partnership may be, as stated 
 above, dissolved by any partner by -his simply declaring that he 
 withdraws from the partnership, and demanding an accounting 
 and settlement of the affairs. 
 
 BY .DEATH. Partnership is a confidential and personal 
 relation between men. Men combine only with others whom they 
 can trust, or for whom the} have a particular liking, or in whose 
 judgment they have confidence. 
 
 Hence, when one partner dies, it would be injustice to the 
 other members to allow his heirs to take a part in the conduct of 
 the partnership business without the consent of the otliers, and 
 the law has declared that the death of one partner dissolves the 
 partnership, and there must be an accounting and a settling up 
 of the business, 
 
PARTNERSHIP. 177 
 
 TRANSFER TO THIRD PERSONS dissolves a partnership, 
 and for a similar reason, as stated in the last section. A third 
 person entering into the firm might not be a person desired by 
 the remaining members: hence when a sale is had the partnership 
 i> dissolved and a new one created,, if the business is to be further 
 conducted. 
 
 BY JUDGMENT. A court of equity is seldom called into 
 requisition to dissolve a partnership, unless the partners are 
 unable to agree upon the terms of dissolution. 
 
 A general partner, however, is entitled to judgment of disso- 
 lution under the following and similar grounds: 
 
 (1) When a partner becomes legally incapable of contracting; 
 "VHien he fails to perform his duties, or is guilty of serious 
 misconduct, such as habitual drunkenness; 
 
 (3) When there is a permanent loss in the conduct of the 
 business: 
 
 (4) Where there is serious quarreling or contentions among 
 the partners so as to render it impracticable properly to carry on 
 business. 
 
 In any of these cases the partner complaining must present in 
 his complaint to the proper court full statements of the facts upon 
 which he seeks to dissolve the partnership. In a proper case, the 
 court may appoint a receiver to settle up the business, and make 
 proper division of the proceeds, if any. 
 
 RIGHTS OF THIRD PARTIES. In the event of a dissolu- 
 tion of the firm, the parties who retire from the firm must give 
 proper notice to all creditor's of the fact of dissolution in order to 
 protect themselves from liability. 
 
 This notice is usually .given by means of an advertisement 
 inserted in a newspaper, and by changing the firm name on the 
 signs and office stationery, and sometimes by sending notices by 
 mail to the creditors of the firm. 
 
 A retiring partner is. however, liable at all times for debts 
 incurred while he was a partner in the firm. 
 12 
 
178 COMMERCIAL LAW. 
 
 Creditors may enforce their rights against the capital stock for 
 old debts, even after a new partner has come into the business. 
 
 PARTNERS' AUTHORITY AFTER DISSOLUTION. 
 When a firm has been dissolved, it is customary for one of the 
 partners to settle all outstanding accounts and collect all moneys 
 due the firm, and he is clothed with the power to do all such 
 things, and only such things, as are necessary to properly settle 
 up the business of the partnership. 
 
 In case there is a loss, he should apply the proceeds of the 
 partnership property to the settlement of all claims against the 
 firm. 
 
 If there is a surplus he should divide it amongst the partners 
 in accordance with the agreement entered into in forming the 
 partnership. 
 
 It is only after partnership assets are all exhausted that cred- 
 itors may hold the members of the firm individually liable for 
 partnership debts. 
 
 TEST QUESTIONS. 
 
 1. A allows JB to farm his land for a year, agreeing to accept 
 as rent one -third of the crop raised. Does this agreement 
 constitute a partnership? 
 
 2. The same parties farm the land together, A furnishing seed 
 and implements, and B doing the work, B taking one-half 
 of the crop. Is it a partnership? 
 
 3. A and B are partners in the grocery business. A buys a 
 horse and gives a note in the firm name in payment. Dis- 
 cuss the obligation of the firm to pay the note. 
 
 4. After a partnership is dissolved, one of the partners orders 
 
 a bill of goods in the firm name. Can the firm be com- 
 pelled to pay for the goods? 
 
PAKTNEKSHIP. 179 
 
 5. A and B axe engaged in the real estate business as part- 
 ners. A buys a piece of property, and immediately resells 
 it at a profit. He does not pay for the land until he is 
 paid. Must he account to B for a share of the profits? 
 
 6. A and B are partners in a grocery business. A wishes to 
 buy a large amount of flour. B objects and the flour is not 
 bought. It turns out that had the flour been purchased, 
 a large profit would have been realized. Is B liable to A 
 for the loss? Would such conduct on B ? s part justify A 
 in applying for a Decree of Dissolution? 
 
CHAPTER XXX. 
 CORPORATIONS. 
 
 DEFINITION". A corporation is a creature of the law hav- 
 ing certain powers and duties of a natural person. 
 
 Being created by law, a corporation has only such powers as 
 may be specially granted it by the law, or which are necessarily 
 implied,, and required in order to carry out such powers as are 
 expressly given. 
 
 They are divided into two classes: 
 
 (1) Sole; and 
 
 (2) Aggregate. 
 
 CORPORATIONS SOLE. These corporations are quite com- 
 mon in England and some other European countries, but are little 
 known in America. 
 
 As the name indicates, they consist of one person in whom is 
 invested an artificial being with prescribed powers and duties. 
 
 In England the sovereign is a corporation sole; also bishops 
 and other high officials in the established church. The principal 
 object in creating these certain officials corporations is that they 
 may have the power of succession; that is to say, .when the indi- 
 vidual dies, the corporation lives, and thus the new bishop or 
 church officer takes the place of the other as such official, without 
 any formal changing of title, or probating of the estate. 
 
 So it is when the sovereign dies, the next in succession is, by 
 virtue of law, considered king the instant life has departed from 
 the sovereign. 
 
 These corporations concern us, however, but little, except as a 
 matter of history. 
 
 (180) 
 
COKPORATlOtfS. 181 
 
 CORPORATIONS AGGREGATE, as the name indicates, are 
 composed of a number of persons, usually associated together for 
 the transaction of business. 
 
 CHARITABLE CORPORATIONS are such corporations 
 aggregate as are formed for assisting the indigent, or for educa- 
 tional purposes, and also what are sometimes called religious cor- 
 porations, those formed for the purpose of caring for the property 
 of churches and societies of like nature, are included under the 
 head of charitable corporations. 
 
 CIVIL CORPORATIONS include all other corporations 
 aggregate, and are further divided into two classes, public and 
 private. 
 
 PUBLIC CORPORATIONS are those which are formed for 
 governmental purposes, counties, cities, towns, school districts, 
 and townships, are common examples of public corporations. 
 
 After a city has been incorporated it has power to enact for its 
 own government such laws as do not conflict with the general 
 laws. 
 
 Hence, such a city may levy taxes within its boundaries for 
 the improvement of streets, the building of sewer systems, or sup- 
 plying the city with water, or any such like purpose. 
 
 It may also regulate the sale of foods or drinks, so far as 
 such regulations do not conflict with State or National laws. 
 
 They may sue and be sued in their corporate name. All this, 
 it will be readily seen, is of great advantage to any community. 
 
 Such corporations are formed by charter from the State Legis- 
 lature, or under general laws. 
 
 These general laws must be strictly followed in order properly 
 to form the public corporation. 
 
 PRIVATE CORPORATIONS. It is this class of corpora- 
 tions which we wish particularly to consider in our discussion of 
 the subject. 
 
 The business of private corporations comprises every line of 
 
182 COMMERCIAL LAW. 
 
 commercial enterprise, and the formation of such corporations 
 affords a means of combining individual wealth so that gigantic 
 enterprises are undertaken and carried through, which would 
 otherwise be impossible or extremely difficult. 
 
 Nearly all railroad, canal, steamboat, and other companies, 
 doing a large business, are incorporated. 
 
 Private corporations may be formed for any purpose for which 
 individuals may lawfully associate themselves. 
 
 FORMATION. Private corporations may be* formed by the 
 voluntary association of any five or more persons, a majority of 
 such persons being residents of the State in which the corporation 
 is formed. 
 
 Such formation is under general statute. Formation by char- 
 ter is superseded so far as private corporations are concerned. 
 
 ARTICLES OF INCORPORATION. The instrument by 
 which a private corporation is formed, is called "Articles of Incor- 
 poration/' Such Articles must be prepared setting forth, 
 
 (1) The name of the incorporation; 
 
 (2) Its purpose; 
 
 (3) The place where its principal business is to be transacted; 
 
 (4) The term of existence, not exceeding fifty years; 
 
 (5) The number of its directors; not less than five nor more 
 than eleven; 
 
 (6) The amount of its capital stock, and the number of shares 
 thereof; 
 
 (7) The amount of capital stock subscribed, and by whom. 
 These Articles are filed with the County Clerk of the county 
 
 in which the principal business of the company is to be trans- 
 acted, and a certified copy filed with the Secretary of State, who, 
 upon such filing, must issue to the corporation, under seal of the 
 State, a certificate to the effect that such Articles are filed. 
 
 When these proceedings are had, the company may then pro-: 
 ceed to make by-laws, elect officers, and transact business gener- 
 ally, as provided for in their Articles. 
 
CORPORATIONS. 183 
 
 Sometimes no capital stock is issued. In such case, of course, 
 this fact must be stated in the Articles. 
 
 AGREEMENTS FOR STOCK. When an undertaking of 
 great magnitude is begun, such as the building of a railroad, it is 
 usual for those who first enter into the enterprise, and who are 
 called "promoters," to circulate a paper called a subscription paper, 
 headed something like this: 
 
 "January 2d, 1897. 
 
 "We, the undersigned, hereby subscribe for, and agree to pur- 
 chase the number of shares of stock set opposite our respective 
 names at a price of $10 per share, at any time within One (1) year 
 from date hereof 7 (or, "when the total amount of 10,000 shares 
 are subscribed/' or any other like condition). 
 
 Such stock subscriptions are binding upon the signers, the 
 consideration being the detriment caused to the promoters and 
 the co-signers by reason of the withholding of money from other 
 purposes for stock payments. 
 
 However, in case of conditional agreements like the above, the 
 subscription does not become absolutely binding until the condi- 
 tion is fulfilled. 
 
 CERTIFICATE OF STOCK. Stock consists of the money 
 or property contributed in the formation of the corporation, and 
 because of many people having interests in this capital stock, the 
 stock is said to be divided into shares represented by what is called 
 a "Certificate of Stock." 
 
 These Certificates of Stock are mere pieces of paper issued to 
 each stockholder for the purpose of certifying to the number of 
 shares which he holds. 
 
 The ordinary form of a stock certificate is as follows: 
 
 Stockton, Cal., Jan. 2d, 1807. 
 No. 24. } 
 in S^are CAPITAL STOCK, $20,000.00 
 
 THIS CERTIFIES That Edward Johnson is entitled to Ten 
 
184 COMMERCIAL LAW. 
 
 (10) shares of the capital stock of THE CALIFORNIA HARD- 
 WARE COMPANY; transferable on the books of the Company 
 only by endorsement hereon and surrender of this Certificate, sub- 
 ject to the By-laws of this corporation. 
 
 R. BO YD, Secretary. 
 
 S. MAXIK, President. 
 
 J CORPORATE SEAL. $ 
 **"* **** 
 
 2000 shares, $10 each. 
 
 To this Certificate is attached a "stub" which remains in the 
 Certificate book. The "stub'"' contains the number of the Certifi- 
 cate, number of shares, date, name of person to whom it was 
 issued, etc., as a matter of memorandum for the Secretary. 
 
 This stock certificate, as has been intimated, is not the stock 
 itself, but simply the evidence of ownership of stock; hence it can 
 be changed or divided into any number of certificates of less num- 
 ber of shares, not greater in the aggregate than the number of 
 shares it certifies to. 
 
 TR ANSI 1 'Eli. A certificate of stock may pass from hand to 
 hand by endorsement in a manner similar to the transfer of 
 negotiable paper, though no holder of it can acquire any rights 
 as against the corporation until he presents the certificate to the 
 Secretary, and lias it transferred to him on the books of the cor- 
 poration. 
 
 Suppose Mr. Johnson, holder of ten shares as shown in the 
 form above, wishes to sell five shares of his stock to Andrew White. 
 He makes an endorsement upon the back of the certificate in 
 something like the following form: 
 
 "I hereby .sell, assign, and transfer to Andrew White, Five (5) 
 shares of the capital stock of THE CA'LIFOKNIA HARDWARE 
 COMPANY, represented by the within certificate, and hereby 
 appoint R. Boyd my attorney to transfer the said stock on the 
 books of said corporation. 
 "Dated January 27th, 1898. 
 
 "(Signed) Edward Johnson/ 7 
 
CORPORATIONS. 185 
 
 Andrew White then takes the certificate to the Secretary, who 
 cancels it and issues a certificate of five shares to White, and 
 another certificate of five shares to Johnson, making proper 
 entries on his own books. 
 
 CORPORATE RESIDENCE. As we have seen the Articles 
 of Incorporation are required to set forth the place where the 
 principal business of the corporation is to be carried on, and it 
 also requires that a majority of the incorporators shall be resi- 
 dents of the State in which the corporation is formed. 
 
 The reason for this is, to fix the place where the corporation 
 in -iv sue and be sued, and to determine under what law it shall 
 be governed. 
 
 In case of railroad companies and other such corporations 
 transacting business in a number of different States and terri- 
 tories, it is often important to know in case of conflict of laws, 
 under what Jaw the corporation must do business. 
 
 As a general rule the law of the place where the corporation 
 has its principal place of business governs it in the conduct of its 
 affairs, and other States recognize the rights which accrue to it 
 under the laws of its place of residence. 
 
 In case of foreign corporations having general agencies in this 
 State, the law of the State will control as to the manner of trans- 
 acting their business. A common example is that of fire and 
 life insurance companies. 
 
 POWERS. Every corporation has such power to act in the 
 business world as is expressly given it, or is necessarily implied 
 for the carrying out of the express powers, and no other or greater 
 powers. 
 
 Thus, if a corporation is given power to buy and sell real 
 estate, there is also necessarily implied the power to execute deeds 
 of real estate. 
 
 The following are the general powers given to corporations: 
 
 (1) Of succession; 
 
186 COMMEECIAL LAW. 
 
 (2) To sue and be sued; 
 
 (3) To make and use a common seal; 
 
 (4) To buy and sell property; 
 
 (5) To appoint officers and allow them compensation; 
 
 (6) To make by-laws; 
 
 (7) To admit stockholders or members; 
 
 (8) Generally, to enter into any obligations or contracts essen- 
 tial to the transaction of its ordinary affairs, or for the purposes 
 of the corporation. 
 
 PERPETUAL SUCCESSION. The word "perpetual" does 
 not mean that the corporation may never at any time be dissolved 
 or cease to exist by lapse of time. 
 
 It means simply that when a member dies, his representatives 
 at once succeed to his interest in the corporation, and the corpo- 
 ration continues to do business without any dissolution or account- 
 ing. 
 
 This is one great advantage a corporation has over a partner- 
 ship. It will be remembered that when a partner dies, the part- 
 nership is dissolved thereby. 
 
 The life of a corporation, however, is fixed at fifty years, conse- 
 quently there is no power of succession for a longer period than 
 fifty years. The company may, however, reincorporate at the end 
 of such period. 
 
 TO SUE AND BE SUED. A corporation may be sued in 
 any court, and in anj r State where it does business; and it may also 
 sue in any State, provided it has properly filed its Articles of 
 Incorporation, according to the law of that State. 
 
 TO BUY AND SELL PBOPERTY. Every corporation has 
 power to purchase, hold, and convey such real and personal estate 
 as the purposes of the corporation may require; and this law is 
 to be construed, as regards the amount of property, to be only so 
 much property as is reasonably necessary for the transaction of its 
 business, and no more. 
 
CORPOBA'TiONS. 187 
 
 The object of this restriction is to prevent, so far as possible, 
 the accumulation of immense landed estates by rich corporations 
 to the detriment of individual owners. 
 
 It sometimes happens, as in the case of a bank loaning money, 
 u'ith real estate as security, that the corporation is obliged to buy 
 a great deal more property than is actually necessary for the con- 
 duct of its business. In such cases the rule is that the corpora- 
 tion must dispose of such property with reasonable despatch. 
 
 Under the words "hold real estate" it has been decided that 
 a corporation may hold lands as trustee, and such is frequently 
 done. 
 
 TO APPOINT OFFICERS. The officers of a corporation 
 generally consist of a board of directors, with a President, Secre- 
 tary, and Treasurer, and often a managing agent, and such other 
 subordinate officers as may be necessary for the particular busi- 
 ness transacted. 
 
 Each member, or stockholder, has a right to vote in the choos- 
 ing of directors, a stockholder having one vote for each share of 
 stock he owns. 
 
 In case several officers are to be elected, a stockholder has one 
 vote for each share multiplied by the number to be elected. This 
 number he may vote all for one officer should he choose. 
 
 A stockholder may also delegate his right to vote by giving 
 authority to another to vote for him. This other is called a 
 proxy, and also the written authority which is given is called a 
 proxy, and is simply a written statement to the effect that A 
 authorizes B to vote A's shares of stock for him. 
 
 In corporations having no capital stock each member is 
 entitled to one vote only. 
 
 BY-LAAVS. Every corporation has power to make by-laws 
 which are not inconsistent with any existing law, for the manage- 
 ment of its property, the regulation of its affairs, and for the 
 transfer of stock. 
 
188 COMMERCIAL LAW. 
 
 The by-laws of a corporation, after being adopted by the cor- 
 poration, become a part of the law governing the directors and 
 other officers, and must be regarded as such. 
 
 The by-laws usually provide in detail as to the power and 
 duties of the officers, and the conduct of the business of the cor- 
 poration. 
 
 They must, in addition to being in accordance with the gen- 
 eral law, be reasonable in their application, and otherwise proper. 
 
 STOCKHOLDEKS OR MEMBERS. Any number of mem- 
 bers may be admitted into a corporation, and any number of 
 stockholders, provided that the amount of stock issued does not 
 exceed the amount provided for in the Articles of Incorporation. 
 
 Thus, if the amount of stock is 2,000 shares there may be five 
 stockholders of four hundred shares each, or there may be two 
 thousand stockholders holding one share each, or it may be 
 divided in any other manner so that no more stock is issued than 
 what is provided for. 
 
 The stock may be assessed for the purpose of raising money to 
 pay expenses in conducting the business of the corporation. 
 
 A certain per cent of the amount of capital stock is usually 
 reckoned on levying an assessment. 
 
 The corporation has power to sell the stock of such holders as 
 do not pay all legal assessments or instalments due on stock, in 
 case it is not fully paid up at the time of delivery. 
 
 A member of a corporation, which is not formed for profit, 
 and in which he has no pecuniary interest, may be for proper 
 cause expelled from the corporation, and even in extreme cases it 
 has been held that he may be expelled even where he has some 
 pecuniary interest: hut a stockholder can not be expelled for any 
 cause, so long as he is a lawful holder of stock. 
 
 GENERAL POWERS. The powers of corporations have 
 been greatly extended in recent years, and as above stated they 
 may enter into any obligations necessary for the transaction of 
 the ordinary affairs of the corporation. 
 
CORPORATIONS. 189 
 
 Thus, they may take mortgages., or give mortgages on prop- 
 erty, may execute or accept any commercial paper, but, as stated 
 in the general discussion above, a corporation has no implied 
 powers except such as are necessary to the proper exercise of the 
 express powers herein enumerated. 
 
 And in particular, a corporation is prohibited from issuing 
 bills, notes, or other evidences of debt for circulation as money. 
 This, of course, docs not apply to .National bank notes, for National 
 banks are incorporated under the laws of the United States, and 
 governed by them, and, as we have stated in the first chapter of 
 this book, where a State law is in conflict with a law of the United 
 States, the law of the United States must control. 
 
 The statement, however, is in full force and effect so far as 
 concerns State corporations, whether banking corporations or 
 otherwise. 
 
 OFFICERS 7 DUTIES. The Board of Directors, and other 
 officers of a corporation, are the agents of the corporation in the 
 transaction of its business, and as such agents can bind the cor- 
 poration in every respect, and in a similar manner as in the case 
 of partnership, and other like agencies. 
 
 It is to be noted as a peculiar fact that a corporation can only 
 act by its agents. It is a creature of the law, "intangible and 
 incorporeal," 7 as an old law writer expresses it, and hence can only 
 transact business by and through its agents. 
 
 The directors, as such agents, have full power to transact all 
 the business of the corporation. 
 
 They are the trustees of the property of the corporation, and 
 are liable for any breach of good faith in the transaction of the 
 corporate business. 
 
 They are not liable, however, for damage caused by lack of 
 good judgment, if they have acted in good faith. 
 
 The directors of a corporation are usually elected for a speci- 
 fied time, and can not be removed from office before that time has 
 expired, except for misconduct in their official capacity. 
 
190 COMMERCIAL LAW. 
 
 Subordinate officers, such as business managers and clerks, are, 
 01 course, removable at any time by the Board of Directors, unless 
 under special contract. 
 
 LIABILITY OF STOCKHOLDERS. Each stockholder is 
 individually and personally liable for such portion of the cor- 
 porate debts as the amount of stock owned by him bears to the 
 whole of the subscribed capital stock, and to no further extent. 
 
 Thus, if A owns one-quarter of the subscribed capital stock, 
 he is liable for one-quarter the amount of any and all debts of 
 the firm. 
 
 Thus will be noticed another great advantage from a business 
 standpoint which a stockholder in a corporation has over a part- 
 ner in a partnership, the partner being liable for the entire 
 indebtedness no matter how small his interest may be. 
 
 In case of members of corporations having no capital stock, 
 each member is individually and personally liable for his propor- 
 tion of its debts and liabilities, and no further. 
 
 Thus, if there are ten members each one is liable for one-tenth 
 of the indebtedness. 
 
 DIVISION OF PROFITS. In case of gain in business, stock 
 corporations usually divide such profits on a basis of so many dol- 
 lars or cents for each share of stock subscribed. 
 
 Thus, if a dividend of $2.00 per share is declared, A, holding 
 one hundred shares, would be entitled to $200 of the profits; B, 
 holding fifty shares, would be entitled to $100. 
 
 Where there is no capital stock, in the absence of special agree- 
 ment, there would be an equal division of all profits among the 
 members. 
 
 DISSOLUTION. Corporations may be dissolved, 
 
 (1) By forfeiture; 
 
 (2) By voluntary surrender of franchise; 
 
 (3) By lapse of time. 
 
 BY FORFEITURE. There are two ways in which a cor- 
 poration may forfeit its corporate rights. 
 
CORPORATIONS. 191 
 
 (1) By non-user. 
 
 The law provides that if a corporation does not organize and 
 commence the transaction of its business within one year from the 
 date of its incorporation, its corporate powers cease, and this with- 
 out any action upon the part of the corporation or the State. 
 
 (2) By misuser. 
 
 "Tn case a corporation violates the provisions of its Articles of 
 Incorporation, or in any way illegally uses its franchise, it may be 
 dissolved by the judgment of a competent court on suit of the 
 attorney-general of the State in an action brought for such pur- 
 pose. 
 
 BY VOLUNTARY SURRENDER OF FRANCHISE. A 
 corporation may be dissolved by the Superior Court of the county 
 where its principal place of business is situated, upon its volun- 
 tary application for that purpose. 
 
 Before it can be dissolved, a petition must be prepared and 
 presented showing that at least two-thirds of the stockholders or 
 members wish to dissolve it, and that all claims and demands 
 against the corporation have been satisfied and discharged. 
 
 BY LAPSE OF TIME. A corporation is dissolved by the 
 expiration of the time limited in its Articles for its existence, and 
 if no time be limited, it is dissolved at the expiration of fifty years 
 from filing of the Articles of Incorporation. 
 
 POWERS AFTER DISSOLUTION". The Board of Direc- 
 tors are after dissolution the trustees of the creditors and stock- 
 holders or members of the corporation dissolved, and have full 
 power to settle the affairs of the corporation, and they must do 
 so in all events, except in case where a corporation is dissolved 
 under judgment of a Court, and receiver appointed by the Court 
 for that purpose; and even in any event should the directors refuse 
 or be incapable of acting, a court has power on proper application 
 to appoint a receiver to attend to the affairs of the corporation. 
 
192 COMMERCIAL LAW. 
 
 JOINT STOCK COMPANIES are associations of persons for 
 the transaction of business, and in many respects are like corpora- 
 tions. 
 
 They have, as the name indicates, a capital stock, and they 
 are managed by a Board of Directors. 
 
 They 'differ from corporations mainly in the liability of their 
 stockholders. In this respect they are like partnerships. Each 
 member is liable for all of the debts, if any, of the company. 
 
 Joint stock companies are practically obsolete. Their place 
 is taken by corporations proper, where the liability of stockholders 
 and members is limited. 
 
 TEST QUESTIONS. 
 
 1. The cashier of an incorporated bank cashes a check to 
 which the signature has been forged. Can the injured 
 party compel the corporation to bear the loss? 
 
 2. The handling of money by the cashier of an incorporated 
 bank is in the nature of a bailment. For what degree of 
 care will the cashier be responsible in the handling of the 
 corporate funds? 
 
 3. In case the directors of a corporation wilfully mismanage 
 the business so that loss occurs, what remedies, if any, have 
 the stockholders? 
 
 4. Five directors are to be elected. A has twenty shares. 
 : Explain how he may divide his vote for one or more of 
 
 the directors to be elected, 
 
CHAPTER XXXI. 
 FIKE INSUKANCE. 
 
 DEFINITION. Insurance is a contract whereby one under- 
 takes to indemnify another against loss, damage, or liability aris- 
 ing from an unknown or contingent event. 
 
 The ordinary forms of insurance are Fire Insurance, Marine 
 Insurance, Life Insurance, Health Insurance, and Accident 
 Insurance. 
 
 IXSUBABLE INTEEEST. "Every interest in property or 
 any relation thereto, or liability in respect thereof, of such a 
 nature that a contemplated peril might directly damnify the 
 insured, is an Insurable interest." 
 
 The above definition is broad enough to cover almost every 
 conceivable form of an interest in property, the only restriction 
 being that it must be such an interest as will directly injure the 
 injured in case of loss. 
 
 Thus, a partner may insure his partnership interest; a mort- 
 gagor may insure his interest; a mortgagee may insure his interest; 
 ;ilso a lessee and lessor; a trustee, and a bailee, or all of such par- 
 tics, may place insurance on the same property at the same time, 
 provided the total amount of insurance so placed is not greater 
 than the reasonable value of the property. 
 
 THE POLICY is the written instrument in which the con- 
 naci of insurance is set forth. It must contain, 
 
 (1) The names of the parties; 
 
 (2) The rate of premium: 
 
 (3) The property insured; 
 
 (4) The interest of the insured in the property; 
 
 (193) 
 
 13 
 
 OF TI 
 
194 COMMERCIAL LAW. 
 
 (5) The risks insured against; and 
 
 (6) The period during which the insurance is to continue. 
 In addition to these general items contained in the policy there 
 
 are always other agreements, statements, and conditions inserted. 
 
 Most of these conditions refer to the care of the property by 
 the insured, such as providing that he shall not store gunpowder or 
 other inflammable material within the building; that he shall not 
 leave the premises vacant except for short periods of time; that 
 he shall use all reasonable means to protect the property from fire, 
 etc. 
 
 PREMIUM. The premium is the price paid the insurance 
 company for the insurance. It is usually based on a certain per 
 cent of the amount insured for, and these rates vary according to 
 the supposed danger from fire, which of course is in some locali- 
 ties greater than in others, and would be greater in a wooden 
 building than in a brick building. 
 
 Most companies provide that in case the insurance policy is 
 canceled before the expiration of the term of its existence, 
 they will return a proportionate part of the premium. 
 
 PROPERTY INSURED. The property insured must be 
 accurately described in the policy, together with the interest of 
 the insured in the property. 
 
 The statements made by the insured as to the property insured, 
 and his interest in it, are taken as warranties against him, and if 
 he makes false statements, particularly in regard to the descrip- 
 tion of the property, the material of which it is made, its distance 
 from other buildings, and in such like matters, he can not 
 recover insurance money in case of the destruction of the property. 
 
 RISKS INSURED AGAINST. A fire insurance policy 
 covers all risk of loss by fire from whatever cause the fire may 
 have originated, unless certain causes are particularly excepted. 
 
 Fires caused by lightning are sometimes excepted, but all 
 accidental fires and fires set by incendiaries, unless set by the 
 insured himself, are included in the insurance, 
 
FIRE INSURANCE. 195 
 
 Loss or damage by water or other means used to extinguish 
 fire is also covered by the insurance policy, even though nothing 
 is said in regard to it in the policy. 
 
 If a material change is made in the risk, such as the build- 
 ing of a new room to a house, the company will not be liable in 
 case of fire for any damage, unless they have accepted the risk as 
 changed. 
 
 AMOUNT INSURED. A building may be insured for 
 $5,000, and it may be entirely destroyed by fire. If the insurance 
 company can show, however, that the building was not actually 
 worth $5,000, they will not be obliged to pay any more than the 
 actual value of the building, and it is provided in most policies 
 that the insurance company and the insured shall each appoint 
 appraisers to appraise the loss; and also that the company may 
 have the option of replacing the burned premises in the same con- 
 dition as they were before the fire, instead of paying the amount 
 fixed as the loss. 
 
 Of coarse, in the event that the building is but slightly dam- 
 aged by fire, there could be no possibility of obtaining the full face 
 of the policy, but only the proportionate amount as shown by the 
 appraisement. 
 
 INSURANCE IN SEVERAL COMPANIES. Where a 
 building is a large one, and the amount of insurance asked for is 
 consequently large, a company will sometimes refuse to insure for 
 the full amount required, on account of the heavy loss to the com- 
 pany should the building be destroyed. 
 
 It is also a matter of good business policy on the part of the 
 insured, not to insure a large building for a large sum in any one 
 company, avS the company may be irresponsible at the time of the 
 burning, or may delay or refuse payment. 
 
 Hence, for these two reasons it is customary to divide the total 
 amount of insurance among several companies, and in the event 
 of lire these companies bear their pro rata of the loss, 
 
196 COMMERCIAL LAW. 
 
 Thus, a building is insured for $50,000; $20,000 is taken out 
 with the A Company: $10,000 with the B Company* and $20,000 
 with the C Company. If the building is damaged to the extent 
 of $10,000 the A and C Companies each must pay two-fifths or 
 $8,000, and the B Company one-fifth or $2,000. 
 
 This method of pro-rating between the companies is usually 
 provided for in the contracts of insurance. 
 
 PEKIOD OF INSURANCE. This is specified in each policy 
 of insurance, and may be any length of time that the parties may 
 agree upon. 
 
 It usually, however, runs either one or three years, and in 
 order to fix the time exactly, it begins with 12 o'clock noon on a 
 certain day, and expires at 12 noon on the corresponding day one 
 or three years later. 
 
 The reason for taking an insurance for three years is that most 
 companies give an insurance for three years at the same rate and 
 for the same premium as if issued for two years. 
 
 REIXSUKANCE. It will be observed that an insurance 
 company which agrees to pay a loss in case of destruction by fire 
 is damaged in case of such destruction to the extent to which it 
 has insured the property destroyed, and hence has itself an insur- 
 able interest in the property so insured by it. Such insurance 
 company may therefore insure in some other company in favor of 
 itself to the extent of its own insurance on the building. This is 
 called reinsurance. 
 
 A company obtaining reinsurance must, of course, pay for it, 
 and hence loses money by the transaction. 
 
 The reasons for reinsuring may be that the company has dis- 
 covered some fact concerning the property which makes it a poor 
 risk; or the company may become financially embarrassed, and may 
 wish to relieve itself from some of its liabilities in order to pre- 
 serve its credit, 
 
FIRE INSURANCE. 197 
 
 ASSIGNMENT OF POLICY. It frequently happens that 
 insured property is sold, mortgaged, leased, or the like, and when 
 this is the case the insurable interest of the parties changes. 
 
 In order to avoid the necessity of canceling the policy, return- 
 ing premium, and the issuing of a new policy, and the payment of 
 a new premium, it is usually provided in the policy that it may 
 be assigned and transferred from one person to another, with the 
 consent of the company, indefinitely, so that in case of loss of 
 property, the payment may he actually made to a person who holds 
 it, after having passed through a dozen hands. 
 
 TEST QUESTIONS. 
 
 1. Suppose that A, the owner of a house, procures insurance 
 upon it, and afterwards employs B to set fire to the house. 
 If the fact becomes known can he collect the insurance? 
 
 2. Suppose A throws a pan of ashes containing live coals into 
 a barrel containing inflammable materials, and which is 
 directly against the walls of his house, and a fire is thereby 
 started which destroys the house. Will his act in so plac- 
 ing the pan of coals be such an act of carelessness as will 
 defeat his right to collect insurance? 
 
 3. A, in applying for insurance, describes his property as being 
 
 a house containing brick flues, or chimneys. His state- 
 ment is true, but it is also true that one flue, which is con- 
 stantly used, is made of tin. A fire occurs by reason of 
 defects in this tin flue. Will the representations made be 
 such a material concealment of facts in this case as will 
 relieve the insurance company from paying the loss? 
 
CHAPTER XXXII. 
 MARINE INSURANCE. 
 
 DEFINITION. Marine insurance is an insurance against 
 risks connected with navigation to which a ship, cargo, freight- 
 age, profits, or other insurable interest may be exposed during a 
 certain voyage or a fixed period of time. 
 
 The subject in general may be treated exactly as in case of 
 fire insurance. The insurable interest may be of the same nature, 
 and, as is stated in the definition, the ship or any part of its cargo 
 may be insured. 
 
 THE RISK. A marine insurance usually covers what are 
 generally termed "perils of the sea/' such as damage from rocks, 
 shoals, collisions, piracy, or barratry, the latter being a violation 
 of duty on the part of the master of the vessel, which results in 
 injury to the cargo. 
 
 Loss by fire is also insured against, as well as incidental loss 
 or damage caused by water or other fluid used in extinguishing 
 the fire. 
 
 The time of insurance is a matter of agreement between the 
 parties. It is usually either for a specified time agreed upon, or 
 for a particular voyage, and when it is for a particular voyage the 
 voyage must be accurately determined in the policy; and if, in 
 such case, a deviation is made which results in damage, which 
 would otherwise have been avoided, the insurance company will 
 not be liable unless it is made in good faith upon reasonable 
 grounds of necessity. 
 
 WARRANTIES. The warranties in the case of marine insur- 
 ance are of much more importance generally than in the case of 
 
 (198) 
 
MARINE rXSt'EASCE. 199 
 
 fire insurance, and the law especially provides that in all cases 
 there is an implied warranty that the ship is seaworthy. 
 
 A ship is seaworthy when reasonably fit to encounter the ordi- 
 nary perils of the voyage contemplated by the parties to the policy. 
 
 Thus, ir seems not only that a ship itself should be in proper 
 condition., but that it be properly laden, provided with a competent 
 master, a sufficient number of competent officers and seamen, and 
 all necessary equipments, such as ballast, cables, anchors, food, 
 water, fuel, and lights. 
 
 Such seaworthiness is in itself an insurance against the ordi- 
 nary perils of the sea and damages of navigation. The insurance 
 policy does not cover this. It is only the extraordinary perils 
 which are insured against. 
 
 in the case of fire insurance, fraud in the nature of conceal- 
 ing any facts material to the risk, will avoid the policy in so far 
 as it may be affected thereby. 
 
 JUSIS OF IXSUBAXCK. The policy may be what is called 
 an "open" 7 policy, that is, one in which the value of the thing 
 insured is not agreed upon, but is left to be ascertained in case of 
 loss, and in such case the value is to be based on the value at the 
 time the insurance was effected; or it may be a "valued" policy, 
 that is, one in which it is agreed that the value of the ship or cargo 
 shall be fixed at a specified sum. 
 
 In sur-li cases the rule of payment for loss is different from 
 that of fire insurance. 
 
 The com pan}' in case of loss only pays the proportion of loss 
 which the amount named in the policy bears to the valuation; 
 e. #., if a cargo is valued at $20,000, and it is insured for $10,000, 
 and the cargo is entirely destroyed or lost, the insurance company 
 must pay $10,000, which is one-half of the valuation; but if only 
 one-half of the cargo is destroyed, the company will only be re- 
 quired to pay one-half of the amount insured for, or $5,000. 
 
 "When the ship and cargo are so badly damaged as to reduce the 
 
200 COMMERCIAL LAW. 
 
 parts remaining to less than half the original value, the owner 
 may "abandon" or relinquish to the insurance company all claim 
 upon the thing insured, and demand insurance from the company 
 as for a total loss. 
 
 The abandonment, however, must be neither partial nor con- 
 ditional, and must be made within a reasonable time after informa- 
 tion of the loss, and upon notice given to the insurer, either oral 
 or in writing. 
 
 In legal effect an abandonment is equivalent to a transfer by 
 the insured of his interest to the insurer, with all chances of re- 
 covery and indemnity. 
 
 The abandonment when once made and accepted, is irrevoca- 
 ble, unless it can be shown that the loss did not exceed one-hall 
 of the subject matter of the insurance. 
 
 Of course, an insured need not abandon the property unless he 
 chooses, but the insurer must accept an abandonment in proper 
 case unless by his contract he has declined to do so. 
 
 TEST QUESTIONS. 
 
 1. A vessel runs on the rocks and finally becomes a total loss. 
 
 The owners of the cargo abandon it to the insurance com- 
 pany, and are paid as for a total loss. The company suc- 
 ceeds in saving three-fourths of the cargo, before the ship 
 breaks up. Could either party claim the abandonment 
 void on the ground that not more than one-half of the 
 cargo was destroyed? 
 
 2. A ship and cargo are regularly insured and start on a voy- 
 
 age. Her drunken captain causes the vessel to be run 
 upon shoals where ship and cargo are lost. Discuss the 
 right of the insured to recover insurance money. 
 
CHAPTER XXXIII. 
 LIFE AND ACCIDENT INSURANCE. 
 
 DEFINITION'.- -Life insurance is a contract by which one 
 party, called the insurer,, agrees to pay a sum of money to another 
 when a certain person, called the insured, dies, or reaches a certain 
 age. 
 
 The insured may have the policy made payable to himself, and 
 if he reaches a certain age it is paid to him. If he dies before 
 that time it belongs to his estate. 
 
 Generally, however, there are three parties to the insurance, 
 the insurer, the insured, and a third party, called the beneficiary, 
 to whom the money is to be paid on the death of the insured. 
 
 INSUBABLE INTEREST. Every person has an insurable 
 interest in the life and health 
 
 (1) Of himself; 
 
 (2) Of any person on whom he depends wholly or in part for 
 education or support; 
 
 (3) Of any person under a legal obligation to him for the pay- 
 ment of money, or respecting property or services, of which death 
 or illness might prevent or delay the payment; or 
 
 (4) Of any person upon whose life any estate or interest vested 
 in him depends. 
 
 Thus, a sister, mother, brother, wife, or other relative, or any 
 one in fact, whether a relative or not, has an insurable interest in 
 the life of one whom he depends upon in any degree for his sup- 
 port or education. 
 
 So a partner may have an insurable interest in the life of his 
 
 (201) 
 
202 COMMERCIAL LAW. 
 
 partner; a creditor in the life of his debtor; a tenant for the life 
 of another, in that other's life. 
 
 It does not matter whether the relations of debtor and cred- 
 itor, or husband and wife, or other relation continue, or whether 
 the dependent state continues after the insurance is taken out or 
 not, it is sufficient if the relation exists at the time of taking out 
 the insurance. 
 
 This is, in this respect, unlike fire insurance, where it will be 
 remembered that the interest must exist at all times during the 
 life of the policy. 
 
 In case where a creditor takes out a policy upon the life of his 
 debtor, and the debtor dies, he may claim the full amount of the 
 policy, and the amount of the debt in addition; but where the 
 debtor takes out a policy on his own life, made payable to the 
 creditor, merely as security, the creditor must return whatever 
 surplus there may be, if any, of the proceeds of the policy, to the 
 estate of the debtor. 
 
 The poli.cy of insurance may pass by transfer, will, or succes- 
 sion to any person, whether he has an insurable interest or not, 
 and such person may recoA 7 er upon it whatever the insured might 
 have recovered. 
 
 APPLICATION FOR POLICY. The law allows insurance 
 companies great latitude in regard to the contract, and hence the 
 various insurance companies have their own rules and regulations 
 regarding the procuring of insurance. 
 
 In all of them, however, the applicant for insurance must 
 answer in writing a long list of questions in regard to his personal 
 habits, as to the use of intoxicants and tobacco, opium and other 
 injurious poisons, and regarding the present state of his health, 
 and whether he has had illness, and its nature; also as to the 
 number of brothers and sisters he has, their ages and state of 
 health, the ages of his parents, if living, and their age at their 
 death, if dead; the ages at death of his grandparents, and many 
 
LIFE AXD ACCIDENT INSURANCE. 203 
 
 other questions which will guide the company in the issuance of 
 a policy. 
 
 A company is not obliged to insure all applicants, but only 
 those whose health, habits, and family records are such as render 
 them what is called a "good risk." 
 
 Each company in addition to requiring the applicant to answer 
 the questions, requires him to pass a physical examination by 
 some physician designated by the company. 
 
 If the report of the physician is favorable, and the questions 
 are satisfactorily answered, a policy will be issued. 
 
 The answers made by the insured, if he is accepted, form a 
 part of the contract of insurance, and if he has made materially 
 false statements, the policy may be avoided by the company. 
 
 THE POLICY. As stated in the previous section, the law 
 allows great latitude to the insurance companies, and they may 
 issue policies containing about such provisions and statements as 
 they choose, and these vary materially with different companies. 
 
 There are usually precisions to the effect that the policy will 
 become void if a person travels to great distances from his resi- 
 dence without permission of the company^, or removes from the 
 temperate to the torrid or frigid zones, or otherwise exposes him- 
 self to great changes of climate. 
 
 Policies usually provide that a person must not change his 
 occupation to a more dangerous one without consent of the com- 
 pany, and in cases where persons in dangerous occupations, sucE 
 as miners or po^ der makers, are insured at all, it is only at a high 
 rate of premium. 
 
 The premium on the policy is always to be paid in advance, 
 and the policy usually provides, in case this is not done, that the 
 policy shall lapse and become null and void. 
 
 In addition to these statements, the policy contains the names 
 of the insured and the beneficiary, and the amount of premium. 
 
204 COMMERCIAL LAW. 
 
 KINDS OF INSURANCE. Insurance companies have mul- 
 tiplied rapidly in recent years, and plans of insurance have multi- 
 plied nearly as rapidly. 
 
 What are known as "straight life" companies agree to pay a 
 certain amount at the death of the insured on condition of pay- 
 ment of certain premiums. 
 
 An ''endowment" insurance is a plan by which premium is to 
 be paid for a certain number of years, and at the end of that time 
 the face of the policy is to be paid to the insured himself. 
 
 This plan amounts to a mere investment of small sums for a 
 certain time, to be returned with interest. 
 
 There are also various fraternal associations which provide 
 insurance under a great variety of plans, under the general term 
 of "the assessment system.'' 
 
 Such societies usually have no surplus, but depend on a large 
 number of members paying each small assessments for the pay- 
 ment of their death losses. 
 
 ACCIDENT INSURANCE. This is a class of insurance, as 
 the name indicates, where persons are indemnified by insurance 
 companies in case of accident, such as the loss of an arm or hand, 
 or the injury to an eye. 
 
 There are companies who make a special business of insuring 
 travelers by rail, or otherwise, against accident. The policy usu- 
 ally contains a long list of injuries, with a corresponding list of 
 amounts which will be paid; e. g.: 
 
 Loss of forefinger $200 
 
 Loss of hand 300 
 
 Loss of arm 400 
 
 Loss of eye 300, etc. 
 
 providing in all cases that the aggregate shall not exceed a certain 
 sum agreed upon in the policy. 
 
 Such policy usually provides also for a certain sum weekly in 
 the nature of benefits while the insured is disabled by reason of 
 the injury. The time is usually limited to a certain number of 
 weeks. 
 
LIFE AND ACCIDENT INSURANCE. 205 
 
 PAYMENT OF LOSS. The policy usually provides that in 
 >f death, insurance money is to be paid within a certain time, 
 upon proper proofs of death or injury being presented. 
 
 A life policy usually provides that an investigation concerning 
 the cause of death may be made, and if it be found that the de- 
 ceased was killed in a duel, or that he died by his own hand, they 
 may refuse to pay the money. 
 
 The courts, however, have generally held that a person who 
 commits suicide is not in his right mind, and that the beneficiary 
 must, not suffer for the act of an insane person; hence they have 
 held that such conditions in a policy are void, except where it 
 can be plainly shown that there was criminal intent on the part 
 of the insured to defraud the company. 
 
 So in the case of accident policies, provisions are made that in 
 negligence or wilful design to injure himself, on the part 
 of the insured, the policy shall be void. 
 
 Ordinarily, then, the policy is payable within a limited time 
 after the death of the insured, or his disability, and payment can 
 be enforced by resort to the Courts, if refused. 
 
 TEST QUESTIONS. 
 
 1. A obtains insurance upon his life in favor of a child, which 
 he states is his own, and which is depending upon him for 
 support. At A"? death it is discovered that A was not the 
 father of the child. Can the insurance company refuse 
 payment on that ground? 
 
 2. A sou is beneficiary under a policy of insurance on his 
 father's life, taken out while the son was dependent upon 
 the father for support, in course of time, the father be- 
 comes dependent upon the son for support. What effect 
 will this have upon the validity of the insurance? 
 
206 COMMEKCIAL LAW. 
 
 3. In answering the usual questions on application for insur- 
 ance, a man states that his grandfather died of pneumonia. 
 It afterwards appears that in fact the grandfather died of 
 smallpox. Will such a misstatement invalidate the pol- 
 icy? 
 
CHAPTER XXXIV. 
 
 EEAL PROPERTY. 
 
 
 
 DEFIXITIOX. Real property consists of land and every- 
 thing that is contained on or in the land, and affixed permanently 
 thereto. 
 
 Hence under the above definition, all minerals, oils, and water, 
 including streams flowing through the land, are a part of the 
 realty; so also are houses, barns, fences, and other like improve- 
 ments placed in a permanent manner on or in the soil. 
 
 All treeo are a part of the realty; but it is held that crops of 
 grain are personal property. 
 
 HISTORY. Most of the nations of Europe, including Eng- 
 land, were at some time conquered by force of arms, and as land 
 began to be tilled and become more valuable, it was then taken 
 away from weaker nations and divided by the conqueror amongst 
 his favorites. These in turn divided their holdings under some 
 sort of rent, usually under agreement that the rentor should serve 
 in the army when called upon; and so under this system, which 
 came to be known as the "feudal system," the land was all owned 
 by the king or ruler, and all others simply had rights in the prop- 
 erty in the nature of leases. 
 
 A similar theory has been extant in the United States since 
 the Revolutionary "NVar. though it differs in this, that the United 
 States Government has made actual sales of government land to 
 purchasers, giving them full title. 
 
 As between individuals, however, a right to real property is 
 not always an absolute ownership. These rights are called 
 estates, 
 
 (207) 
 
208 COMMERCIAL LAW. 
 
 KINDS OF ESTATES. Estates in real property, in respect 
 to the duration of their enjoyment, are either, 
 
 (1) Perpetual estates; 
 
 (2) Estates for life; 
 
 (3) Estates for years; or 
 
 (4) Estates at will. 
 
 PEKPETUAL ESTATES, sometimes called estates in fee 
 simple, are those in which there is a full and complete ownership 
 in the property. 
 
 A person, then, who has a perpetual estate may sell, mortgage, 
 lease, or otherwise encumber the property; may cut wood upon it, 
 or, in general, do any and all acts in regard to it which can be 
 conceived of, so long as he does not injure the property of his 
 neighbor in so doing. 
 
 The word "perpetual" does not mean that he must hold it for- 
 ever, but that it is hie absolutely, and he may hold it for an indef- 
 inite time. 
 
 In case of his death, the property descends to his heirs. If 
 he leaves no heirs, and no will directing its distribution to other 
 parties, the property reverts to the state, and is sold, and the pro- 
 ceeds applied to the public school fund of the state. 
 
 ESTATES FOR LIFE. As the name indicates, an estate for 
 life is an interest in real property, giving the use of such prop- 
 erty during the person's life who thus holds it. 
 
 A person may have an estate for life, and at his death the 
 property then revert? to whomever held the full ownership or per- 
 petual estate. 
 
 In other words, a life estate is a part of a perpetual estate. The 
 holder of a life estate may use the property in all ordinary ways, 
 but he has no power to sell the land, or to mortgage, or even lease 
 it, except for a period not longer than his own life. 
 
 In the case of a perpetual estate, as we have noticed, the owner 
 may do any act, even to chopping down all timber or burning aU 
 buildings on his property if he chooses. 
 
REAL PROPERTY. 209 
 
 The holder of a life estate, however, must not cut timber, more 
 than he needs for his use, nor burn nor destroy any buildings, or 
 in any way injure the property. 
 
 If he does, he is said to be guilty of "waste," and is liable for 
 all damage to the holder of the perpetual estate. 
 
 "Waste" may be even committed by negligently allowing 
 buildings or fences to fall down for want of proper and ordinary 
 repairs. 
 
 The holder of a life estate is not bound to make extraordinary 
 repairs, such as building a new house. He is bound to pay all 
 taxes during the time he holds the property. 
 
 While the life estate terminates at the moment of death of the 
 person holding it, nevertheless his heirs are entitled to any crops 
 which may be growing on the land as result of his labors, and may 
 enter the land for the purpose of removing them. 
 
 ESTATES FOE YEAKS. This is a very common form of 
 estate, and is granted under what is commonly known as a lease. 
 
 The holder of a perpetual estate, or an owner, is said to lease 
 land to another, or give him an estate for years in it. 
 
 The holder of an estate for years has the same right to use the 
 land as the holder of an estate for life. 
 
 There is one important difference which is to be noted between 
 a holder of a life estate and a holder of an estate for years, and 
 that is in regard to the crops or emblements, as they are called,, 
 which may remain at the expiration of the term. 
 
 In the case of the estate for life, the heirs of the life estate 
 holder may claim them after his death. 
 
 This is so for the reason that he does not know the hour of his 
 death, and could not be expected to do otherwise than provide 
 for future crops at all times, while in the case of a tenant for 
 years, he knows definitely when his lease will expire, and if he 
 bus crops in, and which mature after the expiration of his lease, 
 it is his own fault, and he must suffer for it. 
 
 14 
 
210 COMMERCIAL LAW. 
 
 Of course,, he may especially agree, under his contract for 
 leasing, that he may be allowed to remove emblements after the 
 expiration of his lease. A lease of farming land is limited by 
 statute to ten years, and a lease of city lots to twenty years. 
 
 ESTATES AT WILL. An estate at will is created when the 
 owner oi real property permits another to occupy it without any 
 lease or agreement to pay rent, and such tenant merely takes care 
 of the land for the owner. 
 
 It is often created simply by neglect of the owner, as where a 
 tenant holds over after the expiration of his lease, or where a 
 tenant takes possession without any authority whatever. 
 
 In such estates the owner may terminate the holding at any 
 time, without notice. 
 
 REVEBSTONS AND REMAINDERS. A reversion is the 
 residue of an estate left in the grantor or his successors, and com- 
 mences where a particular estate ends; as an owner of land gives 
 B an estate for life in the land. When B dies the land reverts 
 to the owner. So if A has a life estate he may lease the land for 
 a year, and at the end of the year, if A is alive, the land reverts 
 to him. 
 
 When a future estate, other than a reversion, is dependent on 
 a precedent estate it may be called a remainder; e. g., A, the full 
 owner, may grant an estate for life to B, and at the same time 
 grant to C an absolute ownership or perpetual estate, to begin 
 after B's death. That is, A has a perpetual estate; he gives part 
 of it to B and the remainder to C. 
 
 EASEMENTS are such burdens or rights attached to land 
 adjoining other land, as incidents or appurtenances; as the right 
 of way over the land of a neighbor to reach a highway, the right 
 of using a wall as a party wall and as support for a building, a 
 wall which is placed on the line dividing property belonging to 
 two persons. 
 
 Other easements are: The right of pasture; the right of fish- 
 
REAL PROPERTY. 211 
 
 ing; the right of taking game; the right of having water flow with- 
 out disturbance. 
 
 These rights are obtained either by long usage,, or custom, or 
 -o.it attached to land by statute. 
 
 It is to be noted that while the right of taking game is granted, 
 still if an owner of land posts notices forbidding '^hunting, 7 ' any 
 one who enters upon land for such purpose is liable, not for the 
 shooting of game, but for the trespass upon the land. 
 
 STREAMS. A person having an estate in land may use the 
 water of a stream flowing through the land, or on its boundaries, 
 for all purposes which he may desire, such as the watering of 
 scock and irrigation of the land, so long as he does not use it 
 to the injury of others, such as using all of the water in the 
 stream, or contaminating it with rubbish which would be carried 
 to the land of others to their injury. 
 
 So, also, he may not change the course of the stream unless he 
 returns it to the natural channel before it leaves his land. 
 
 in case of a stream forming a boundary, if it is a navigable 
 stream, his title extends only to high water mark; but if the stream 
 be not navigable, his title extends to the middle of the stream. 
 
 The reason for this difference is that the navigable waters are 
 public property. 
 
 HI Gil Yf AYS. The state, county, or municipal government 
 rnay designate such roads and streets as may be proper for the 
 convenience of the public, and set them apart for public use. 
 
 All such lands so set apart are termed highways. Roads are 
 often made along the boundaries between lands owned by differ- 
 ent persons, each owner conveying the right of way to a certain 
 part. 
 
 In such cases, each land-owner owns the land as before to 
 the middle of the highway, and in case the highway is ever aban- 
 doned by the public, the full ownership reverts to him. 
 
 As the land is only given for the use of the public, the owner 
 
212 COMMERCIAL LAW. 
 
 has the right of pasturage or of cutting trees upon it, or doing 
 any other act in relation to it which does not affect its use as a 
 public highway. 
 
 EMINENT DOMAIN. The original and ultimate right to 
 all property, real and personal,, is in the state. 
 
 Under what is called Eminent Domain, the state may acquire 
 title to private property for public use. Thus it may acquire 
 property for road purposes, for toll bridges, or ferry purposes, for 
 wharves, chutes, or piers, for reclamation purposes, sewerage pur- 
 poses, telegraph lines, electric light lines, canals, reservoirs, dams, 
 ditches, and various like public uses. 
 
 Before any private property can be appropriated to public use, 
 under the right of eminent domain, a proper proceeding must 
 be brought, showing, 
 
 (1) That the use to which, it is to be applied is a use author- 
 ized by law; 
 
 (2) That the taking is necessary to such use; 
 
 (3) If already appropriated to public use, that the public use 
 to which it is to be applied is a more necessary public use. 
 
 As in the case with highways, when such public use is aban- 
 doned, the land so taken reverts to the former owners. 
 
 In all cases where land is taken under the right of eminent 
 domain, reasonable compensation must be given to the owner of 
 the land so taken. 
 
 This is determined usually by appraisers, who are presumed 
 to be disinterested parties. 
 
 TEST QUESTIONS. 
 
 1. A leases a vineyard for one year, which expires October 
 15th. It being an unusually "late year" all of the grapes 
 arc not fit for picking when the lease expires. May he 
 
OF 
 
 (JNIVERSIT 
 
 REAL PROPERTY. 
 
 enter the premises and remove them after the expiration 
 of the lease? 
 
 2. A, the owner of land bounded by a navigable stream, at- 
 tempts to prohibit fishing in the stream. May he do so? 
 
 3. If a person who has an estate for years buys the perpetual 
 
 estate in the same property, does that thereby terminate 
 his estate for years? 
 
 4. A has an estate for life. May he sell his right to the estate, 
 
 and to its use and occupancy until his death? 
 
CHAPTER XXXV. 
 DEEDS. 
 
 DEFINITION. A deed is a written instrument by which 
 the title to real property is transferred from one person to another. 
 The essentials are as follows: 
 
 (1) A sufficient writing; 
 
 (2) Proper parties, grantor and grantee; 
 
 (3) A thing to he granted; 
 
 (4) A consideration; 
 
 (5) Execution, i. e., signing; 
 
 (6) Acknowledgment; 
 
 (7) Delivery and acceptance; 
 
 (8) Recording. 
 
 These will be considered in their regular order. 
 
 A SUFFICIENT WKITIXG. In order that the deed may 
 be a good contract, the writing should be clear and distinct, and 
 the language free from uncertainty. 
 
 It is not necessary that there should be strict observance of 
 the rules of grammar, as long as the intention is clear. 
 
 It may be as other contracts, either written or printed, or in 
 any way engrossed upon an impressible substance, but it must be 
 complete before it is delivered. 
 
 Any alterations or filling out of the blanks after delivery, will 
 not give life to the deed, and where alteration is made before 
 delivery, it should be noted by the officer who takes the acknowl- 
 edgment. 
 
 (214) 
 
DEEDS. 215 
 
 PARTIES. To make a valid deed there must be, of course, 
 a competent grantor. He must own the property and have the 
 capacity to convey it. 
 
 A> we have seen under the general discussion of contracts, 
 any person can make a deed who is not an infant, of unsound 
 mind, or deprived of civil rights. 
 
 As to grantees, the same rules exist in regard to competency, 
 except that a person under disability may accept gifts of land, 
 or any conveyance which docs not require action upon his part; 
 so if there is any condition imposing duties on the grantee, he 
 can not be compelled to perform them, if under disability. 
 
 The names of the grantor and grantee must be written in 
 the deed. They are necessary in order to render the parties cer- 
 tain. 
 
 In deeds of property owned by both a husband and wife (called 
 community property), both must sign the deed to make the con- 
 veyance valid. 
 
 In case of the separate property of either, only the one who 
 owns it need sign the deed. It is customary, however, to require 
 the signature of each party to all deeds of real estate sold by either 
 husband or wife. 
 
 A deed to a fictitious person would be absolutely void. 
 
 THIXG GE AX TED. There can, of course, be no convey- 
 ance unless there is something to convey. The property must 
 be sufficiently described in the deed so as to be capable of being 
 easily identified. 
 
 A grantor should state in the deed the nature of his interest, 
 whether it be a full ownership, or a half of a certain property, or 
 all of it, or as the case may be. 
 
 THE COXSIPFUATIOX must, as in other contracts, be 
 either good or valuable. It is not absolutely necessary that a con- 
 sideration be expressed in the deed, although it is proper and may 
 save trouble to do so. 
 
 It is quite customary in real estate conveyances to place a 
 
216 COMMERCIAL LAW. 
 
 nominal sum in the deed as consideration, such as $5, the real 
 consideration not being named, and it is held that where such 
 nominal sum is stated, the parties will be allowed to prove, if 
 necessary at any future time, what the real consideration was. 
 
 EXECUTION. By the execution of a deed is meant the 
 signing of the instrument by the grantor, and subsequent acknowl- 
 edgment. 
 
 The grantor should sign his name in exactly the sanie manner 
 as it is written in the body of the deed. 
 
 His signature need not be witnessed, although it is customary 
 to have two witnesses who sign their names as witnesses to his sig- 
 nature. 
 
 Where it is impossible or inconvenient for a grantor to sign 
 his own name, he may give a power of attorney to an agent to 
 sign his name for him, and this power of attorney must be exe- 
 cuted in all respects with the same formalities as the deed itself, 
 and must be recorded before the deed is recorded, in order that 
 the chain of title may be in order and unbroken. 
 
 ACKNOWLEDGMENT is simply stating before some prop- 
 erly authorized officer, by the person who executes the deed, that 
 he has executed the deed, and that the signature is "his signature, 
 cr words to that effect. 
 
 The officer then endorses upon the deed his certificate, to the 
 effect that the person whose name appears as a signature, acknowl- 
 edged to him that he did execute the deed. 
 
 The proof or acknowledgment of a deed, or other like instru- 
 ment, may be made before a County Clerk, a County Eecorder, a 
 Court Commissioner, a Notary Public, or a Justice of the Peace. 
 
 The object of acknowledgment is simply for the purpose of 
 proving the execution. 
 
 The deed is valid as between the parties if it is not acknowl- 
 edged, but it can not be recorded unless acknowledged, and hence 
 it is not valid as against third parties having no notice of its exist- 
 
DEEDS. 217 
 
 ence. A married woman may acknowledge a deed in the same 
 manner and with the same effect as if unmarried. 
 
 DELIVERY AXD ACCEPTANCE. These acts are abso- 
 lutely essential to the validity of a deed. As long as it remains in 
 the possession of the grantor, it is mere waste paper, and so it is if 
 it should be stolen, and by the thief delivered to the grantee. 
 
 The grantor, or his duly authorized agent, alone may deliver 
 the deed. The rule is the same in regard to acceptance. Only 
 the grantee or his duly authorized agent may accept the deed. 
 
 The delivery of the deed, as in case of delivery of any personal 
 property, may be either actual or constructive, that is, it may be 
 actually placed in the hands of the grantee, or it may be placed 
 under the control of the grantee, where he can readily reduce it 
 to actual possession. 
 
 Delivery should not be made until after acknowledgment, in 
 order that the grantee may be fully protected by being able to 
 record the deed. 
 
 DELIVERY IX ESCROW. A deed may be deposited by the 
 grantor with a third person to be delivered to the grantee 011 the 
 performance of a condition, and when the condition is performed 
 and the deed delivered by the depositary, it will take effect. 
 While in the possession of the third person and subject to the con- 
 dition, it is called an escrow. The delivery to the depositary is 
 called a delnery in escrow. 
 
 When final delivery is made by the depositary to the grantee, 
 the deed becomes effective from the time it was delivered to the 
 depositary. 
 
 EXAMPLE. A person in expectation of death sometimes 
 delivers a deed of his property in escrow, to be delivered to the 
 grantee at his death. When he dies, and the depositary delivers 
 the deed, the title of the grantee becomes complete from the time 
 of the first delivery. 
 
 The form of a deed in escrow is not necessarily different from 
 
218 COMMERCIAL LAW. 
 
 that of other deeds, but it is best to accompany the deed by a 
 memorandum in writing, signed by the grantor, explaining the 
 nature of the deed. 
 
 RECORDING. The County Recorder of every county is 
 required to keep books called record books, in which he must 
 record or copy, word for word, and figure for figure, every instru- 
 ment properly deposited with him for record. 
 
 This copying of instruments into these record books is called 
 "recording." 
 
 The Recorder keeps separate books for separate instruments. 
 11 is his duty to record documents in the order in which they were 
 received; so for the purpose of determining which of two docu- 
 ments has been first recorded, an instrument is deemed to be 
 recorded as soon as it is placed in the Recorder's office. 
 
 It is the Recorder's duty to indorse upon each instrument 
 offered for record, the exact time, day, hour, and minute, at which 
 the instrument was offered. 
 
 After the contents of the instrument are properly copied in 
 the record book, the Recorder must further endorse on the deed 
 the number of the volume, and the page at which the record of 
 the deed may be found. 
 
 The original deed may then be returned to the person who 
 desires its recordation. 
 
 EFFECT OF RECORDING. As we have seen, as between 
 parties thereto, and to any one having knowledge of the transac- 
 tion, a deed is valid after delivery is had, whether it is recorded or 
 not, but as regards subsequent purchasers, mortgages, and persons- 
 having judgment liens against the property, an unrecorded deed 
 is void. 
 
 It will be observed therefore that it is of the highest impor- 
 tance that a purchaser should record his deed immediately upon 
 receiving it. 
 
 If he does this, the law presumes by that act that the world has 
 
DEEDS. 219' 
 
 notice of the transaction,, and no one can claim to be ignorant of 
 it; and any judgment rendered against the grantor after such 
 recording, or any second sale made by him in .fraud of the first one, 
 would be absolutely Aoid as against the rights of the grantee. 
 
 FORMS OF DEEDS. The common la\v provided very 
 lengthy and cumbersome forms for transfer of real property,, and 
 had a variety of deeds containing different warranties and con- 
 ditions. 
 
 Our modern statutes have simplified these forms to a great 
 extent. The following form is prescribed as sufficient by the Civil 
 Code of California: 
 
 "I, A B, grant to C D all that real property situated in San 
 Joaquin County. Slate of California, bounded and described as 
 follows: Being the West One-half of Section Two, Township One 
 Xorth, Eange Three Fast, M. D. B. & M., containing Three Hun- 
 dred and Twenty (320) acres of land, more or less. 
 
 "WITNESS My hand this 1st day of July, 1898. 
 
 "A B." 
 
 It will be noticed that the above form omits the recital of a 
 consideration, as the recital of a consideration is unnecessary in 
 any kind of a written contract. Jt may be proved orally. 
 
 It also omits any statement regarding a seal, seals being prac- 
 tically abolished. 
 
 In writing out deeds, however, many add a clause to the effect 
 that the grantor will warrant and defend the title. 
 
 This he is bound to do, however, in any event, so that there is- 
 no longer any distinction between warranty deeds and others. 
 
 QUIT-CLAIM DEED. This is a form of deed given for the 
 purpose of removing a cloud upon the title, or making the record 
 clear. 
 
 The person giving the deed may not even claim any interest, 
 but he may at some time have had some interest which is not prop- 
 erly released; hence for the purpose of disclaiming any title to the 
 
220 COMMEECIAL LAW. 
 
 property, he gives what is called a Quit-claim Deed; e. g., A may 
 have owned a small interest in certain land upon which there was 
 a mortgage. When the mortgage was foreclosed, he was not prop- 
 erly served with notice of the proceedings. Ten years pass, and 
 while he is, as a matter of law, debarred from making any claim 
 to the land, still the record is not perfect, and in order to release 
 his apparent claim, he will sign a quit-claim deed. 
 
 The operative part of a quit-claim deed is about as follows: 
 a l, A B, have remised, released, and quit-claimed, and do 
 hereby remise, release, and quit-claim unto C 13 all that tract of 
 land described as follows:'' etc. 
 
 As a matter of course, a person who gives a quit-claim deed 
 does not give any covenants or warranties in regard to the prop- 
 erty. 
 
 TEST QUESTIONS. 
 
 1. A executes a power of attorney to B to sell land. B has 
 
 the power of attorney recorded. Before B sells the land, 
 a judgment is recorded against the land and against A. 
 Would the purchaser take the land subject to the judg- 
 ment lien, or free from it? 
 
 2. A executes a deed of certain property to B. Afterwards A 
 
 executes another deed of the same property to C. Illus- 
 trate different circumstances under which either B or C 
 might lawfully claim the ownership of the land. 
 
 3. A attempts to deliver a deed of property to B at a distance 
 
 by sending the deed by mail. The deed is lost, and never 
 reaches B. Is the delivery complete? 
 
 4. A executes a deed of certain land to B. There is a house 
 
 on the land, but it is not mentioned in the deed. Will the 
 deed pass title to the house? Discuss fully. 
 
CHAPTER XXXVI. 
 MORTGAGES. 
 
 DEFIXITIOX. As has been before observed, under the com- 
 mon law* system, mortgages were regarded as conditional sales. 
 The actual title to the property passed, with a mere right of buy- 
 ing back. 
 
 Under our modern system this is not the case. A mortgage is 
 denned as follows: "Mortgage is a contract by which specific prop- 
 erty is hypothecated for the performance of an act without neces- 
 sity of a change of possession." 
 
 A mortgage can be created, renewed, or extended only by a 
 writing executed with the formalities required in the case of a 
 grant of real property. 
 
 It will thus be seen from the definition that a mortgage is a 
 mere lien upon property, independent of possession, the evidence 
 of the lien being the writing. 
 
 The modern theory of mortgages, of course, does not prohibit 
 a person from making a conditional sale of his real estate should 
 he see fit. 
 
 PARTIES. The parties to a mortgage are the mortgagor, the 
 one who executes the mortgage, and the mortgagee, the one to 
 whom it is executed. 
 
 As in other contracts, all competent persons may be parties to 
 a mortgage. 
 
 In case of mortgage of community property, both husband 
 and wife must sign the mortgage. In case of the separate prop- 
 erty of either, only the one whose property is mortgaged need 
 sign. 
 
 (221) 
 
222 COMMERCIAL LAW. 
 
 It is customary, however, for each to sign all mortgages made 
 by either. 
 
 FORM. OF MORTGAGE. As in the case of a grant of real 
 property, tjie common law form of mortgage was a very cumber- 
 some one. 
 
 The following is the modern form of mortgage of real estate: 
 
 THIS MORTGAGE, Made the 1st day of July, in the year 
 1898, by A B, of Stockton, San Joaquin County, California, mort- 
 gagor, to C D, of the same place, mortgagee, 
 
 WITNESSETH: That the mortgagor mortgages to the mort- 
 gagee all that certain property described as being Section Four (4), 
 Township One (1) South, Range Two (2) Fast, M. D. B. & M., 
 and containing Six Hundred and Forty (640) acres of land, as 
 .security for the payment to him of Two Thousand ($2,000.00) 
 Dollars on the 1st day of July, 1899, according to the terms of a 
 certain promissory note, a copy of which is as follows: 
 $2,000.00 
 
 Stockton, Cal., July 1st, 1898. 
 
 One year after date I promise to pay to C D, or order, Two 
 Thousand ($2,000.00) Dollars, with interest thereon at the rate of 
 Ten (10) per cent per annum. 
 
 A B. 
 
 IN WITNESS WHEREOF, I have hereunto set my hand thip 
 1st day of July, 1898. 
 
 Signed and delivered in the presence of 
 
 A B. 
 
 Besides the above, there may be additional clauses to the effect 
 that the mortgagor will pay all taxes, except what is assessed on 
 the mortgage itself, and will keep buildings insured on mortgaged 
 property, and assign the policy of insurance to the mortgagee. 
 
 WHAT MAY BE MORTGAGED. Any interest in real prop- 
 erty, which is capable of being transferred by deed, may be mort- 
 gaged. 
 
MORTGAGES. 223 
 
 An estate for years, or for life, can therefore be mortgaged as 
 veil as a perpetual estate. 
 
 In such cases, however, should the mortgagee foreclose, he can 
 only get such interest in the land as his mortgagor had, and not 
 an absolute title. 
 
 EEXTS AND PROFITS. The mortgagor, being usually in 
 possession of the mortgaged property, is entitled to the rents and 
 profits from the mortgaged premises until the time the mortgage 
 is foreclosed. 
 
 After the mortgage is foreclosed, the mortgagee is entitled to 
 the rents and profits from the date of the decree of foreclosure, 
 and if he is in possession, he is entitled to the rents and profits of 
 the land accruing after his entry into possession. 
 
 In cases \vhere the land has been leased by the mortgagor, the 
 lessee must pay the rent to the mortgagee from the time he becomes 
 entitled to possession of the land. 
 
 ASSIGNMENT OF THE MORTGAGE. An assignment of 
 a mortgage may be made either by writing on the back of the 
 mortgage itself a statement to the effect that the mortgage is 
 assigned and transferred from the holder to another, together 
 with the delivery of the instrument to that other, and any instru- 
 ment of indebtedness which there may be, such as a promissory 
 note; or a formal written assignment may be made by a separate 
 instrument, and acknowledged arid recorded in like manner as the 
 original mortgage. 
 
 The following is the ordinary form of assignment: 
 
 KNOW ALL MEN BY THESE PRESENTS, That I, A B, 
 of Stockton, California, have granted, bargained, sold, and 
 assigned, and by these presents do grant, bargain, sell, and assign 
 unto C D, of the same place, a certain mortgage bearing date 
 the 1st day of July, 1897, executed by E F to said A B to secure 
 the payment of the sum of Eight Hundred ($800.00) Dollars, 
 together with a promissory note therein described, and all moneys 
 
224 COMMERCIAL LAW. 
 
 due, or to become due thereon which said mortgage was recorded 
 in the office of the County Eecorder of the County of Butte, State 
 of California, in Book 10 of Mortgages, page 400, on the 5th day 
 of July, 1897. 
 
 IN WITNESS WHEREOF, I have hereunto set my hand the 
 a Oth day of July, 1898. 
 
 A. B. 
 
 RELEASE OF MORTGAGE. A recorded mortgage may be 
 discharged by an entry on the margin of the record thereof, signed 
 by the mortgagee, or his personal representative, or assignee, 
 acknowledging the satisfaction of the mortgage, in the presence 
 of the Recorder, who must certify to the acknowledgment in form 
 substantially as follows: 
 
 "Signed and acknowledged before me this 1st day of Septem- 
 ber, in the year 1898. 
 
 "A B, County Recorder." 
 
 Or where it is inconvenient for a mortgagee personally to 
 visit the Recorder's office, he may execute a release of the mort- 
 gage by a separate instrument, which must be acknowledged and 
 recorded in like manner as the mortgage. 
 
 The release of mortgage thus made may be in the following 
 form: 
 
 KNOW ALL MFA T BY THESE PRESENTS, That that cer- 
 tain mortgage made by C D, of San Joaquin County, California, 
 the party of the first part, to A B, of the same place, the party of 
 the second part, and recorded in the office of the County Recorder 
 of the County of Santa Clara, State of California, in Volume 40 
 of Mortgages, at page 251, on the 20th day of September, 1897, 
 together with the debt thereby secured, is fully paid, satisfied, 
 and discharged. 
 
 IN WITNESS WHEREOF, T have hereunto set my hand the 
 1st day of October, 1898. A. B. 
 
 A partial release of mortgage may be made; that is, the release 
 may be made so as to specify that a certain portion of the land 
 described in the mortgage is released. 
 
MORTGAGES. 225 
 
 This is frequently done when a portion of the mortgage debt 
 has been paid. 
 
 ACKNOWLEDGING AND RECORDING. These subjects 
 hnve been fully discussed under the chapter on deeds. 
 
 The execution of a mortgage is acknowledged in the same 
 manner, and the mortgage is recorded in the same manner as in 
 the case of a deed. 
 
 The effect of recording a mortgage is to give notice to the 
 world that there is a lien to the extent of the mortgage debt, upon 
 the property mortgaged. 
 
 When an assignment is recorded, its effect is to protect the 
 pur chaser of the mortgage from the possibility of the mortgagee's 
 making a second sale of the mortgage debt. 
 
 The effect of recording a release of mortgage is to give notice 
 that the land is freed from the lien of the mortgage. 
 
 PRIORITY OF MORTGAGES. As has been intimated, a 
 mortgage which is first duly acknowledged and recorded has 
 priority over any subsequent liens or incumbrances. 
 
 It is not uncommon for two mortgages to be given with the 
 same piece of property as security, and even a greater number 
 may be given upon the same property. 
 
 In such cases the mortgage which is recorded first, must be 
 paid first, and when foreclosure is had, if there is any surplus 
 after paying the first mortgagee, the next in rank as regards time,, 
 takes his turn at the surplus, and so on in the order of time, if 
 there is any surplus remaining, until the last mortgage is satisfied. 
 
 It makes no difference what the actual date of the several 
 mortgages may be. The record books are conclusive, and a pur- 
 chaser or mortgagee will be protected in relying upon them. 
 
 In general, then, the rule is that whatever is of record first 
 has precedence. There is an exception, however, in the matter 
 of taxes. Legally levied taxes, as a matter of public policy, must 
 be paid in preference to other liens. 
 15 
 
226 COMMERCIAL LAW. 
 
 SALE OF MORTGAGED PROPERTY. Property which is 
 mortgaged is nevertheless the subject of conveyance by deed. 
 
 The conveyance,, however, does not destroy the lien of the 
 mortgage. The mortgage iien follows the property into whoseso- 
 ever hands the property may pass as owner, and before he can have 
 an absolute title, he must pay off the mortgage. 
 
 It is customary, however, in cases of sale of mortgaged prop- 
 erty, for the purchaser either to pay of! the mortgage, or execute 
 a new one binding himself to pay the debt. 
 
 Where no such arrangement is made, the parties usually recite 
 in the mortgage that "this conveyance is made subject to that 
 certain mortgage bearing date," etc. (Describing the mortgage.) 
 
 In this manner the records are made to show the exact con- 
 dition of the 3 and as regards title. 
 
 FORECLOSURE. In case the mortgage debt is not paid 
 when it is due, the holder of the mortgage may commence an 
 action in court for the enforcement of his lien against the property, 
 and may obtain a judgment decreeing the foreclosure of the mort- 
 gage, and sale of the mortgaged property. 
 
 A commissioner is appointed by the court to sell the property, 
 which he must do at public auction, to the highest bidder. The 
 proceeds of the sale are first applied to the expenses thereof and 
 costs of foreclosure, and then to the satisfaction of the mortgage 
 debt. 
 
 If there be any surplus remaining it must be paid to the mort- 
 gagor. If there be a deficiency, an additional judgment, called a 
 deficiency judgment, is entered against the mortgagor personally 
 for the amount of the deficiency, and any other property which 
 he has (not exempt) may be sold to satisfy the deficiency. 
 
 EQUITY OF REDEMPTION A judgment debtor, or any 
 one, as redemptioner, may redeem the property from the purchaser 
 at the foreclosure sale, within twelve months after the sale, upon 
 paying to the purchaser the amount of the purchase price, with 
 
MORTGAGES. 227 
 
 interest at the rate of one per cent per month in addition thereto 
 up to the time of redemption, together with any assessments or 
 taxes which the purchaser may have paid since his purchase, and 
 interest on such payments,, if any. 
 
 After the property has been once redeemed, it may be again 
 redeemed within sixty days, by a third party, upon his paying sim- 
 ilar interest and costs; and within sixty days after such redemption 
 it may be further redeemed, and so on indefinitely so long as one 
 whole year does not elapse from the time of the first redemption, 
 or sixty days from the time of any preceding redemption. 
 
 In case such times do elapse, however, without redemption, the 
 purchaser is entitled to an absolute conveyance from the commis- 
 sioner, called a commissioner's deed. 
 
 If the debtor redeem the property himself, the effect of the 
 sale is terminated, and he is restored to his estate, and the person 
 to whom the payment is made, must execute and deliver to him 
 a certificate of redemption, which must be acknowledged and 
 recorded. 
 
 TEST QUESTIONS. 
 
 1. A has a first and second mortgage on his property; he 
 
 wishes to sell the property. May he do so? 
 
 2. A deeds property to B for $1,000 cash, subject to a mort- 
 gage of $2,000. At foreclosure sale the property brought 
 $2,000. Does B lose his $1,000 and the land also? 
 
 3. A rents a house and lot from month to month. During his 
 
 tenancy a mortgage on the property is foreclosed. He is 
 not notified of any change of possession, and continues to 
 pay to the original landlord for some time after the fore- 
 closure. What remedy has the new owner for the loss of 
 the rents? 
 
228 COMMERCIAL LAW. 
 
 4. A mortgage is given to secure the payment of a promissory 
 
 note; the note is fully paid. Can the mortgage lien be 
 then enforced? 
 
 5. A note is given, secured by mortgage; the mortgage is 
 released. Does this release cancel the debt? 
 
CHAPTER XXXVII. 
 LAXDLOKD AND TEXAXT. 
 
 EXPLANATION. Under the law of real property the land- 
 lord is the owner or one entitled to the possession of land, and 
 the tenant is one having an estate for years in the land. 
 
 The term ''estate for years/' however, is rarely used in common 
 parlance. 
 
 TVe speak of the tenant as a rentor or lessee of real property. 
 
 A lease is the contract entered into hetween the landlord and 
 the tenant, and which prescribes the conditions of the tenancy. 
 
 Under the statute of frauds, a lease for a longer period than one 
 year must be in writing, otherwise it can be avoided at the option 
 of either party. 
 
 A written lease may be acknowledged and recorded in like 
 manner as a deed or a mortgage. 
 
 It is customary in cases of written leases to have them exe- 
 cuted in duplicate that each party may have a copy. 
 
 .V lease should be signed by both parties to the agreement. 
 As we have stated before, under the head of statute of limitations, 
 a lease of farming lands is only valid for a period of ten years, and 
 a lease of city lots for a period of twenty years. 
 
 The reason for these restrictions is that it is a matter of public 
 convenience and policy that the ownership and possession of prop- 
 erty should pass from hand to hand at reasonable intervals of 
 time, and the above-named periods have been fixed arbitrarily as 
 the periods proper in each case as specified. 
 
 (229) 
 
230 COMMERCIAL LAW. 
 
 TERM, DEFINED. The term is the time fixed by the con- 
 tract for the running of the lease, having a precise beginning and 
 ending, but the period need not be definitely fixed by the contract 
 if it is specified in such a manner as can be made certain; as t<: dur- 
 ing A's minority." Where farming land has been rented from 
 year to year, and the lessee remains in possession thereof after the 
 expiration of the hiring, and the lessor accepts rent from him, the 
 contract is presumed to be renewed on the same terms and for the 
 same time, not to exceed a month, if the rental is payable monthly, 
 nor in any case not to exceed one year. 
 
 In the hiring of lodging or dwelling houses for an unspecified 
 term, it is presumed to be made for such a length of time as the 
 party adopts lor the estimation of the rent. 
 
 Thus, a hiring at a monthly rate is presumed to be for one 
 month. 
 
 THE RENT. When there is no usage or contract to the con- 
 trary, rents are payable at the termination of the holding, when 
 it does not exceed one year. 
 
 If the holding is by the day, week, month, quarter, or year, 
 rent is payable at the termination of the respective periods, as it 
 successively becomes due. 
 
 It frequently is specified by the contract, however, that rent 
 shall be payable in advance, and in such case it must be paid in 
 advance. 
 
 In case no amount is specified in the contract a reasonable 
 amount is presumed. 
 
 LANDLORD'S RIGHTS AND DUTIES. The lessor of a 
 building intended for occupation of human beings must, in the 
 absence of an agreement to the contrary, put it into a condition 
 fit for such occupation, and repair all subsequent dilapidations 
 thereof, which render it untenantable, except such injuries to the 
 premises as may have resulted from the ordinary negligence of the 
 lessee. 
 
 The landlord has no right to interfere with the tenant in any 
 
LANDLORD AND TENANT. 231 
 
 way during his tenancy, unless the tenant is violating the provi- 
 sions of the lease, or i committing waste upon the property, but 
 the right is often reserved in the lease, by the landlord, that he 
 shall be allowed to enter the premises at any time for the purpose 
 of viewing them to satisfy himself that the conditions of the lease 
 are being property carried out by the tenant. 
 
 A landlord may, during the continuance of the lease, sell or 
 mortgage the property, but the purchaser in case of sale takes the 
 property subject to the tenant's rights, and can not arbitrarily 
 remove him in violation of the lease. 
 
 TEXAXT'S RIGHTS. A tenant is entitled to the full use 
 oi' land for the purpose for which it was leased. He is bound not 
 to commit wa.-te, or do any act which will permanently injure the 
 property. 
 
 He may cut wood for his own use while a tenant. At the 
 expiration of his lease he mast deliver up the property. 
 
 In case, however, there are growing crops, planted by him, 
 which by reason of an unusually late season or other circumstance 
 beyond human control, were not fit to remove at the expiration of 
 the lease, he has the right of reentry at proper season for the pur- 
 pose of removing such crops. 
 
 As regards repairs in lease of a dwelling house, if within a 
 reasonable time after notice to the lessor of dilapidations which 
 he ought to repair, he neglects to do so, the tenant may repair the 
 same himself, where the cost of such repairs does not exceed one 
 month's rent of the premises, and he may deduct such cost from 
 the rent; or he may vacate the premises and be relieved from 
 further payment of rent. 
 
 ASSIGXMENT AND SUULETTIXG. Unless the contract 
 of leasing otherwise provides, a tenant has a right to assign his 
 leasehold interest in the property to the full extent of his own 
 term. 
 
 Such assignment does not relieve the tenant from liability 
 
232 COMMERCIAL LAW. 
 
 under the lease, unless assented to by the landlord, and the 
 assignee accepted as a new tenant. 
 
 A tenant is said to '"sublet" when he still holds possession of 
 the premises, but rents to others a portion of them. By so doing 
 he does not release himself from any part of his obligations under 
 the lease. 
 
 In legal effect he becomes landlord of the part sublet, and the 
 person who rents from him, his tenant. 
 
 FIXTURES are anything affixed to leased premises for pur- 
 poses of trade, manufacture, ornament, or domestic use. 
 
 Formerly a great deal of discussion was had as to what were 
 iixtures, it being held that anything firmly affixed to the realty 
 became a part thereof, and could not be removed. 
 
 The law is now settled under the definition above given. Any 
 article belonging to the classes enumerated may be removed from 
 the premises at any time during the continuance of the tenant's 
 term if the removal can be effected without injury to the premises, 
 unless the thing has by the manner in which it is affixed become 
 an integral part of the premises; though even a partition placed in 
 a building may be removed, if its removal will not weaken the 
 walls or leave them in a damaged condition. 
 
 Such articles as counters, show cases, shelving, and window 
 shades are common examples of what constitutes fixtures. 
 
 EVICTIOX. Where property is leased for a stated time, it 
 is the duty of the tenant to vacate at the expiration of that time 
 without notice. 
 
 Where, however, it is rented for an indefinite time from year to 
 year, six months' notice is required to terminate the holding; and 
 where it is rented for an indefinite time from month to month, a 
 notice of not less than one month must be given, for such termina- 
 tion. 
 
 So where the renting is by the week, a week's notice must be 
 given. 
 
LAXDLOKD AND TENANT. 233 
 
 When these notices have been properly given, or when by the 
 terms of the lease the tenant should deliver possession, and also 
 where he has violated the conditions of his lease in not paying 
 rent, the landlord may, in a summary manner, proceed to eject 
 him. 
 
 This is dene by giving a three days' notice, called a "Xotice to 
 Quit." This notice must describe the premises, state the amount 
 of rent due, and demand possession within three days. 
 
 If such notice is not complied with, the landlord may bring 
 suit, obtain judgment, and through the officers of the law, take 
 forcible possession of the premises, eject the tenant, and remove 
 his furniture and belongings from the premises. 
 
 it is no defense against eviction for the tenant to plead that 
 the person from whom he leased is not the owner of the property, 
 or that his title is defective. 
 
 Having recognized the landlord as a landlord, for the purpose 
 of securing possession of the premises, he can not deny the land- 
 lord's authority, for the purpose of avoiding payment of his rent. 
 
 TEST QUESTIONS. 
 
 1. Discuss the obligation oi' a tenant to repair a barn which 
 
 has been blown down by a strong wind. 
 
 2. A tenant ruts a doorway through a partition and hangs a 
 
 door therein. May he take the door with him when leav- 
 ing the premises? 
 
 o. A tenant is in possession for an indefinite period. He 
 plants crops, but before they are matured, the owner sells 
 the land. The new owner evicts the tenant. Who may 
 harvest the crop? 
 
 4. In a lease of a house and lot nothing is said regarding the 
 time of payment. What is the presumption as to payment, 
 as to whether monthly, yearly, or in advance, or otherwise? 
 
MAXIMS OF JURISPRUDENCE. 
 
 One must not change hii purpose to the injury of another. 
 
 Any one may waive the advantage of a law intended solely for 
 his benefit. But a law established for a public reason can not be 
 contravened by a private agreement. 
 
 One must so use his own rights as not to infringe upon the rig-Ms 
 of another. 
 
 He who consents to an act is not wronged by it. 
 
 Acquiescence in error takes away the right 01 objecting to it. 
 
 No one can take advantage of his own wrong. 
 
 He who has fraudulently dispossessed himself of a thing may be 
 treated as if he still had possession. 
 
 He who can and does not forbid that which is done on his behalf 
 is deemed to have bidden it. 
 
 No one should suffer by the act of another. 
 
 He who takes the benefit must bear the burden. 
 
 One who grants a thing is presumed to grant also whatever is 
 essential to its use. 
 
 For every wrong there is a remedy. 
 
 Between those who are equally in the right, or equally in the 
 wrong, the law does not interpose. 
 
 Between rights otherwise equal, the earliest is preferred. 
 
 No man is responsible for that which no man can control. 
 
 The law helps the vigilant, before those who sleep on their rights. 
 
 The law respects form less than substance. 
 
 That which ought to have been clone is to be regarded as done, in 
 favor of him to whom, and against him from whom, performance 
 is due. 
 
 That which does not appear to exist is to be regarded as if it did 
 not exist. 
 
 The law never requires impossibilities. 
 
 The law neither does nor requires idle acts. 
 
 The law disregards trifles. 
 
 Particular expressions qualify those which are general. 
 
 (234) 
 
MAXIMS OF JUJilSfRTDEXCK. 235 
 
 The greater contains the less. 
 
 Superfluity does not vitiate. 
 
 That is certain which can be made certain. 
 
 Time does not confirm a void act. 
 
 An interpretation which gives effect is preferred to one which 
 makes void. 
 
 Interpretation must be reasonable. 
 
 Where one of two innocent persons must suffer by the act of a 
 third, he by whose negligence it happened, must be the sufferer. 
 
GLOSSARY. 
 
 ABANDONMENT. in Marine Insurance, the giving up by the owner 
 
 to the insurer of partly destroyed property. 
 ACCEPTANCE. -The act of a drawee in writing 1 the word "accepted," 
 
 or other words, across the face of a Bill of Exchange, by which 
 
 he agrees to pay the bill. 
 ACCEPTOR. One who accepts by writing on the face of a bill his 
 
 acceptance. 
 
 ACCOMMODATION PAPER. Negotiable paper, for which no consid- 
 eration passes between the original parties; being given as an 
 
 accommodation without intention of enforcing payment. 
 ACCOKD. An agreement to accept something less or different from 
 
 what is named in a contract. 
 ACKNOWLEDGMENT. The stating before a competent officer that 
 
 one's own signature to a document is genuine. 
 ACTION is a proceeding in a Court, by which one party prosecutes 
 
 another for the enforcement of his rights, or the redress or pre- 
 vention of a wrong. 
 ACT OF GOD. Damage which is caused by irresistible cause, such as 
 
 lightning, or earthquake, is said to be caused by "Act of God." 
 AFFREIGHTMENT. The hiring of a ship for the transportation of 
 
 goods. 
 AGENCY. Relation existing between two parties whereby one acts 
 
 for the other in dealing with a third person. 
 
 AGENT. A person who is employed to transact business for another. 
 ANTE-DATED. Dated at a time earlier than the actual date. 
 APPRAISEMENT. Valuation of property by persons appointed for 
 
 that purpose. 
 APPURTENANCES. In the law of real property, articles such as 
 
 door keys, belonging to the realty. 
 ARBITRATION. Settling a dispute by persons agreed upon for that 
 
 purpose. 
 ARTICLES OF CO-PARTNERSHIP. The written contract by which 
 
 a partnership is formed. 
 
 (236) 
 
GLOSSARY. 237 
 
 ASSETS. Property not exempt from execution, which may be applied 
 
 to the payment of debts. 
 ASSIGNEE. A person who takes charge of a bankrupt estate, for 
 
 the purpose of dividing- it amongst his creditors; also any one to 
 
 whom an instrument is assigned. 
 ASSIGNMENT. The act of transferring a. bankrupt's property to 
 
 an assignee; or the transferring- of any property from one person 
 
 to another. 
 
 ASSIGNOR. One who assig-ns property. 
 AWARD. The decision of arbitrators. 
 
 BAILMENT. The delivery of personal property in trust for a speci- 
 fied purpose, to be returned after the purpose is accomplished. 
 BANKRUPT. 1. One who is unable to pay his debts in the ordinary 
 
 manner. 
 
 2. A person who is declared by a competent Court to be unable 
 
 to pay his debts. 
 BARRATRY. Any breach of duty committed by a master of a vessel, 
 
 or his officers, by which a ship or cargo is injured. 
 BARTER. An exchange of g-oods, distinguished from sale, where 
 
 goods are exchanged for money. 
 BENEFICIARY. The person to whom a life insurance policy is made 
 
 payable. 
 BILL OF EXCHANGE. A negotiable instrument ordering- the person 1 
 
 addressed to pay a third person a definite sum of money, at a 
 
 specified time. 
 BILL OF LADING. A written contract by a carrier, evidencing- the 
 
 transaction of sending goods by him. 
 BLANK ENDORSEMENT. A writing on the back of a negotiable 
 
 instrument of the endorser's name only. 
 BOND. 1. A written instrument binding the maker to pay money, 
 
 as penalty for breach of an undertaking. 
 
 2. A very formal negotiable instrument, issued by a munici- 
 pality. 
 BOTTOMRY BOND. An instrument in the nature of a mortgage, 
 
 given on a vessel to secure a loan. 
 BY-BIDDER. In auction sales, a person employed to bid to raise 
 
 the price of articles to be sold, without any intention of buying. 
 BY-LA WS.-^-The rules made by a corporation for the management 
 
 of its prhate affairs. 
 CAPITAL STOCK. Whatever is contributed to a corporation as its 
 
 working property. 
 
238 COMMERCIAL LAW. 
 
 CAVEAT EMPTOR. meaning, "Let the purchaser beware," applies to 
 the case of a purchaser who has an opportunity to inspect an 
 article before buying it. 
 
 CERTIFICATE OF DEPOSIT. A certificate issued by a bank, stat- 
 ing that the holder has certain money deposited in the bank, 
 payable to his order. 
 
 CERTIFICATE OF STOCK. A paper issued by a corporation as evi- 
 dence of the number of shares of the capita] stock which a 
 holder has. 
 
 CERTIFICATION. The signature of a banker written across the 
 face of a check, with or without other words, to indicate that 
 the check is good, and will be paid by the bank. 
 
 CHARTER. To hire a vessel, or part of it. 
 
 CHARTER PARTY. The written contract by which the vessel is 
 hired. 
 
 CHATTEL MORTGAGE. A mortgage of personal property, by which 
 it is held as security for the performance of some act. 
 
 CHECK. A written order drawn upon a bank, or a banker, for the 
 payment of money. 
 
 CIVIL CODE. A body of laws, enacted by the Legislature, relating 
 to civil contracts. 
 
 COMMON CARRIER. One who undertakes for hire, and as a busi- 
 ness, to carry passengers or freight. 
 
 COMMON LAW. The ancient law of England, originating in mere 
 customs. 
 
 CONDITION PRECEDENT. An act, which must be performed by 
 one party to a contract, before the other party need do any act. 
 
 COMPLAINT. The written statement of a plaintiff in an action. 
 
 CONSIDERATION. The inducement for entering into contracts. 
 
 CONSIGNOR. A person who ships goods. 
 
 CONSIGNEE. One to whom goods are shipped. 
 
 CONVEYANCE. 1. Carrying anything by land or water. 
 
 2. A written instrument by which an estate in real property 
 is transferred from one person to another. 
 
 CO-PARTNERSHIP. An association of persons for the transaction 
 of business, and division of losses and profits. 
 
 CORPORATION. An artificial being having powers and duties of 
 a natural person. 
 
 COUNTER CLAIM. A claim set up as a defense to a suit, by which 
 the defendant claims something from the plaintiff. 
 
X I\K 
 
 GLOSSARY. 239 
 
 COVENANT. Any agreement contained in a contract in. regard to 
 
 real property. 
 DAMAGES. Compensation awarded to one person to be paid by 
 
 another for injuries inflicted. 
 DECEDENT. A dead person. 
 
 DECREE. A judgment rendered by a court of equity. 
 DEFENSE, A legal reason given by a defendant, tending to show 
 
 that there is no cause of action against him. 
 DEFENDANT. The party sued in an action. 
 DEMAND. The act of asking for payment. 
 DEPOSIT. A kind of bailment where goods are merely left for safe 
 
 keeping. 
 
 DEPONENT. One who makes an affidavit. 
 DEVIATION. In marine insurance, a departure from the regular 
 
 course of the voyage insured for, without necessity. 
 DEVISE. A gift of real estate by will. 
 DIES NOX. (No days.) Holidays, or days when Courts do not 
 
 transact business. 
 
 DISABILITY. Legal incapacity to contract. 
 
 DISAFFIRM ANC I-:. The act of making void a voidable contract. 
 DISHONOR. The refusal of the debtor in a negotiable instrument 
 
 to pay it when due. 
 DIVIDEND. 1. The profits of a corporation distributed among its 
 
 stockholders. 
 
 2. The proceeds of a bankrupt's estate divided among credit- 
 ors. 
 
 DRAFT. An inland bill of exchange. 
 DRAWEE. One who is ordered to pay a sum of money named in a 
 
 bill of exchange. 
 
 DRAWER. The person who makes, or draws, the bill of exchange. 
 DURESS. Unlawful restraint of person or property. 
 1 \\SEMENT. A privilege of using another's land, such as right of 
 
 way. 
 
 EMBLEMENTS. Growing crops of any kind. 
 EMINENT DOMAIN. The right of the government to take private 
 
 property for public use. 
 ENDORSE. To put one's name on the back of an instrument in 
 
 writing. 
 
 ENDORSEE. The person in whose favor the endorsement is made. 
 ENDORSER. The one who makes the endorsement. 
 
240 COMMERCIAL LAW. 
 
 EQUITY OF REDEMPTION. The right of a mortgagor, or others, 
 
 to redeem mortgaged property after foreclosure. 
 ESCHEAT. The reverting- of land to the state at the death of the 
 
 owner without heirs or will. 
 ESCROW. Any written instrument delivered to a third party to be 
 
 held and delivered at some future time to the grantee or other 
 
 person designated. 
 
 ESTATE. The interest of a person in real property. 
 EXECUTION. 1. A writ issued to a peace officer commanding him 
 
 to enforce a judgment. 
 
 2. The signing- of any legal document so as to make it valid, 
 
 particularly of a deed or mortgage. 
 
 FEE SIMPLE. An absolute or perpetual estate in lands. 
 "I'TRM. The members of a partnership collectively. 
 FORECLOSURE. The proceedings in a suit to enforce the lien of a 
 
 mortgage, tog-ether with the sale of the mortgaged premises. 
 FRANCHISE. A special privilege conferred by the government; as, 
 
 the right to build a railroad through city streets. 
 FRAUD. Deceit practised upon another to his injury. 
 FREEHOLD. Any estate of inheritance, or a life estate. 
 FREIGHT. 1. The price paid a carrier for shipping goods. 
 
 2. The goods themselves while in transit. 
 GENERAL AVERAGE. A contribution by owners of a vessel and 
 
 cargo on account of loss sustained by a person whose property 
 
 has been sacrificed for the common safety. 
 GOOD WILL. The expectation of continued public patronage of a 
 
 business house. 
 
 GUARANTOR. One who agrees to be responsible for the perform- 
 ance of some act by another. 
 GUARDIAN. One appointed to have the care and custody of the 
 
 person or property of an incompetent person. 
 GUEST. A person who is received and furnished entertainment at 
 
 an inn. 
 
 IDIOT. One without reasoning powers from birth. 
 INCAPACITY. Lack of legal qualifications to do business. 
 INCORPORATE.- To form a corporation. 
 INFANT. A person under age; in case of males, under 21 years; 
 
 females, under 18 years. 
 INJUNCTION. A writ or order of a Court or Judge commanding a 
 
 certain person to refrain from doing some act. 
 INSANE PERSON. One who has lost his reason. 
 
GLOSSARY. 241 
 
 INSOLVENT. A person unable to pay his debts in the usual course 
 
 of business. 
 I! ABLE INTEREST. That interest which a person has in 
 
 property, or another's life, which, if the property is destroyed, 
 
 or the person dies, would result in pecuniary loss to him. 
 i\M "RANGE. A contract by which a person, called the insurer, 
 
 agrees to indemnify another, called the insured, against loss 
 
 from specified causes, 
 
 INVALID. Not enforceable under the law. 
 JOINT STOCK COMPANIES. An association of persons similar to 
 
 partnership, but having capital stock, and a. Board of Directors 
 
 like a corporation. 
 JUDGMENT. The sentence of the law given by a Court ag-ainst thS 
 
 partj" who is defeated in the trial of a case. 
 JUDGMENT DEBTOR. The person ag-ainst whom the judgment is 
 
 rendered. 
 JURISDICTION. The extent, cither in territory or kind of property, 
 
 over which a Court has authority. 
 LANDLORD. 1. The keeper of an inn or hotel. 
 
 2. One who rents lands or houses. 
 LAW MERCHANT. The old English law in regard to commercial 
 
 transactions. 
 
 LEASE. The instrument by which an estate for years is given. 
 LEGAL TENDER. Anything 1 which is designated by law as lawful 
 
 money for the payment of debts. 
 
 LETTER OF CREDIT. A general letter drawn by a banker author- 
 izing certain banks to pay to the holder any amount of money 
 
 up to a limit, and draw drafts upon the bank which issues the 
 
 letter for the amounts advanced. 
 LIEN. The right to retain the property of another as security for 
 
 the payment of a debt. 
 LUNATIC. A person who has lost his reason, but has occasional 
 
 lucid intervals. 
 
 MATURITY. The time at which commercial paper becomes due. 
 MINOR. A person under age. (See Infant.) 
 M1SUSER. Wrongful using of a franchise. 
 MONTH. In the law of contracts, a calendar month. 
 MORTGAGE. A written contract by which a person, called a mort- 
 gagor, creates a lien on his property to secure a debt, owed by 
 
 him, to another, called the mortgagee. 
 
 16 
 
242 COMMERCIAL LAW. 
 
 MUNICIPAL. Relating to a city. 
 
 MUNICIPAL LAW. The law of any city, state or nation. 
 
 NEGOTIABLE PAPER. Certain written instruments, which, under 
 certain conditions, may be transferred by endorsement, and give 
 the holder full power of collection. 
 
 NOTARY PUBLIC. An officer invested with power to administer 
 oaths, take acknowledgments, protest negotiable instruments, 
 etc. 
 
 ORDINANCE. A law passed by a city council, or board of super- 
 visors of a county. 
 
 OUTLAWED. A debt which remains uncollected beyond the time 
 allowed by law for collection. 
 
 PARTNERSHIP. An association of persons in business, under agree- 
 ment to contribute capital, and divide losses and gains. 
 
 PARTY WALL. A wall placed on the line between two adjoining 
 estates for the purpose of supporting a building on either side. 
 
 PERILS OF THE SEA. All dangers naturally pertaining to naviga/- 
 tion. 
 
 PLEDGE. A delivery of personal property, by a person called the 
 pledgor, to secure the payment of a debt, to a person called the 
 pledgee. 
 
 POLICY. The contract of insurance. 
 
 POST-DATED, Bearing a later date than that at which an instru- 
 ment was actually made. 
 
 POWER OF ATTORNEY. A written instrument by which an agent 
 is appointed. 
 
 PREMIUM. The price paid for insurance. 
 
 3 RESUMPTION. An inference of law, from certain facts, of the 
 existence of other facts. 
 
 PRINCIPAL. 1. A sum of money bearing interest. 
 2. A person who employs an agent. 
 
 PROMISSORY NOTE. A promissory note is an unconditional prom- 
 ise in writing by a person to pay a certain sum of money, gen- 
 erally "to bearer" or "to order' of some one named therein, at a 
 specified time. 
 
 PROTEST. A. formal declaration in writing by a notary public, of 
 his demand, and the refusal of a debtor to pay the amount of a 
 note, or bill. 
 
 PROXY. A writing by which one authorizes another to vote in his 
 place; used by corporations. 
 
 Also the one who represents the other. 
 
GLOSSARY. 243 
 
 PUFFER. (See By-Bidder.) 
 
 RATIFICATION. Agreeing to be bound by the terms of a voidable 
 contract. 
 
 REAL ESTATE. Land, or anything affixed thereto or contained 
 therein. 
 
 RECEIPT. A written acknowledgment of money or property re- 
 ceived. 
 
 RECEIVER. A person appointed by a Court to take charge of prop- 
 erty, such as the property of a bankrupt, or of a dissolved cor- 
 poration. 
 
 RELEASE. An instrument similar in form to a deed, used to evidence 
 the extinguishment of a debt. 
 
 REMEDY. The legal method of enforcing' rights or redressing 
 wrongs. 
 
 RENT. The sum paid for the use of real property. 
 
 RECISS1OX. The abrogating, or making void, of contracts. 
 
 RESPOXDEXTIA BOXD. A bond in the nature of a mortgage, given 
 for a loan upon the cargo of a vessel. 
 
 REMA1XDER. An estate which takes effect after another's estate 
 is terminated. 
 
 SALVAGE. Compensation for saving a vessel from wreck. 
 
 SET-OFF. (See Counter Claim.) 
 
 STATUTE. An act passed by a Legislature. 
 
 STATUTE OF FRAUDS.- -A statute requiring certain contracts to 
 be made in writing. 
 
 STATUTE: OF LIMITATIONS. A statute limiting the time within 
 which actions can be brought upon a debt, or other demand. 
 
 SUBJECT MATTER. The thing concerning which a contract is 
 made. 
 
 SUBROGATION. The substituting of one person in another's place, 
 as substituting a new creditor. 
 
 SUIT. An action on a claim in a Court of justice. 
 
 SURETY. One who promises in writing to answer for the debt, de- 
 fault, or miscarriage of another. 
 
 SlfeREXDER VALUE. The sum which an insurance company will 
 pay for an unexpired policy. 
 
 TEXANT. One who has possession of lands of another temporarily. 
 
 TEXDER. An offer to carry out the terms of a contract. 
 
 TRUSTEE. One who holds property for the benefit of another. 
 
 USURY. Illegal interest. 
 
244 COMMERCIAL LAW. 
 
 VALUED POLICY. An insurance policy which fixes the value of the 
 property insured. 
 
 VENDEE. One to whom anything is sold. 
 
 VENDOR. The person who sells. 
 
 VOID. Without any legal effect. 
 
 VOIDABLE. That which may be made void at the option of one of 
 the parties to a contract. 
 
 WAIVER. A relinquishment of a right. 
 
 WARRANTY. A statement, as a fact, of some material matter con- 
 cerning an article offered for sale. 
 
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 ~ 'jp* 
 
 THIS BOOK IS DUE ON THE LAST DATE 
 STAMPED BELOW 
 
 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 
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 OVERDUE. 
 
 OCT 12 1935 
 
 OCT ,_ 
 
 
 C 13 7935 
 
 
 OCT 22 1935 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 LD 21-100m-7,'33 
 
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