A 543157

ARTES
LIBRARY
1817
SCIENTIA
VERITAS
OF THE
UNIVERSITY OF MICHIGAN
"PLURIBUS VELM
பாாய
TUEBOR
SI QUÆRIS-PENINSULAM-AMŒNAM.
CIRCUMSPICE
2
THE GIFT OF
Mr.D.W.Springer
:
....
..
CLEARY COLLEGE HALL, SATURDAY EV'G, FEB. 21
Herbert A. Sprague
IN IMPERSONATIONS FROM
David Copperfield.
PROGRAM.
Quartet Stars of a Summer Night.
Act I.
Messrs. Parsons, Overholt, Wilcox, Densingburg,
a. Yarmouth-The Old Ark on the Sands.
b. Home of Mr. and Mrs. Micawber.
Solo-The Flower Girl,
Act II.
Miss Parsons.
( a. Office of Wickfield and Heep.
b. Flight of Little Emily.
Solo and Quartet-The Lost Landmark.
Act III.
Mr. Dansingburg.
(a. A Winter's Night in Canterbury.
Bevignani.
į b. Mr. Micawber Aroused-The Wanderers.
Solo-Selected. Miss Conrad.
Act IV.
( a. Mr. Micawber assists at an explosion.
b. The Return of Little Emily.
Quartet-Selected.
ADMISSION 15 CENTS.

It is muitium not deport
D. W. Springs
A certificate of Deposit in a negotial le
22
note, statuch
of Limitations
promistry
to
begins
отпор
n from date of delivery.
os Curtains 36 Mitch 496.
}
HE
1937
775
-
A COMPENDIUM
OF
COMMERCIAL LAW,
Analytically and Topically Arranged,
WITH
COPIOUS CITATIONS OF LEGAL AUTHORITIES,
FOR THE USE OF
BUSINESS COLLEGES AND UNIVERSITIES, STUDENTS OF LAW,
AND MEMBERS OF THE BAR.
BY CALVIN TOWNSEND,
COUNSELLOR AT LAW,
(C
(6
AUTHOR OF ANALYSIS OF THE CONSTITUTION OF THE UNITED STATES,
ANALYSIS OF CIVIL GOVERNMENT," ETC., ETC.
12
PUBLISHED BY IVISON, BLAKEMAN, TAYLOR, & CO,
NEW YORK AND CHICAGO.

1
Entered according to Act of Congress, in the year 1871,
BY CALVIN TOWNSEND,
in the Office of the Librarian of Congress, at Washington.
"
Mr. D. W. F?
10-8-1931
PREFACE.
OR several years past the author has been engaged in a
FOR
Business University as instructor in Commercial Law.
His lectures have been given chiefly to a class of students not
intending to make the practice of the law their profession.
They do not generally enter the business institution, therefore,
having had that preliminary discipline and culture so necessary
to the student of the learned professions.
The student passes through his course of instruction at the
Business University in the course of a few months, or a year at
longest, during which time he listens to lectures of one hour
each, on commercial law, from two to three times a week. Hav-
ing no acquaintance with legal technicalities, he has to learn,
step by step, a language entirely new. Every legal term must
be fully explained, or to his mind it signifies nothing.
In lecturing to this class of pupils, the author, of course,
studied to adapt his instructions to their comprehension. He
soon found, by actual trial, that the topical or analytical
method, generally in use in our best common and higher
schools, could be used to advantage in teaching commercial
law. He found also that it was possible to use the blackboard
to good purpose in teaching the various topics of this subject,
as well as in teaching grammar, geography, algebra, and
geometry.
By the educators of to-day, there is a universal call for the
blackboard, in all didactic exercises which will admit of black-
iv
PREFACE.
board display. It is nearly as convenient in teaching other
subjects, as the map is in teaching geography. While the
teacher of to-day may be no more intelligent than the teacher
of thirty or forty years ago, it must be admitted that he greatly
excels the teacher of the past, in the art of imparting to others
what he knows himself. This, in a great degree, is attributable
to the improved method of the modern instructor.
Nothing short of critical analysis will now satisfy either
pupil or professor. To facilitate this, the blackboard has be-
come an almost indispensable agent in nearly every branch of
education. This enables the eye to see, as well as the ear to
hear, the systematic arrangement of the elements of the science
taught.
But in attempting to teach commercial law according to
the general method now in use for teaching other sciences, the
author met with a formidable difficulty. He could find no
text-book arranged with a view to such a course, or system of
instruction. True, there are many valuable and learned works
on the subject-works written by the most eminent jurists of
which the legal profession can boast-every line of which may
be regarded as authority for bench and bar. But they lack
that didactic arrangement which every educator knows to be
so essential to the class-room.
The author, therefore, prepared a few lectures on the plan
herein presented, and delivered them as an experiment to the
students under his charge. The interest created in the class
was in the highest degree satisfactory. The students no longer
tried to shirk the exercise, but were all promptly in their seats
at lecture hour. This interest continued month after month,
until it became evident, not only to the author, and to the
principal of the institution, but to those members of the legal
profession who honored the exercises with their presence, that
the method had resulted in complete success.
PREFACE.
▼
Several experienced principals of kindred business institu-
tions called on the author, for the purpose of witnessing these
blackboard exercises and listening to the lectures delivered in
connection. They expressed themselves in terms of unqualified
approval of the course pursued. They also expressed an earnest
desire that a demonstration of the plan might be made in the
presence of the International Business College Association, to
which proposition the author cheerfully assented.
In the month of June, 1870, that Association held its third
annual session in the city of Boston, at which the author was
present. A liberal allowance of time was granted him by that
body to present his method; thus enabling the members to
judge for themselves as to whether it was in any respect pre-
ferable to the usual course pursued in teaching this abstruse
subject.
The topic presented on that occasion was Contracts. It was
placed on the blackboard by analytical tables, each table being
orally explained to the Association as it was placed on the
board. This topic was chosen because it lies at the foundation
of all business transactions. It was believed that the members
could form a more correct judgment of the plan proposed, by
the discussion of that subject, than they could were one of more
limited scope selected.
After the lecture, the method proposed was elaborately dis-
cussed by the Association, and terminated in the unanimous
adoption of a resolution of appreciation and approval. This
resolution was supplemented two or three days later in the
session by another, requesting the author to complete this work
which was then in progress, as soon as possible, and tendering
a pledge to adopt and use it until such time as better works
might appear.
Under this encouragement, the work has been hurried to
completion, and is now presented to the International Associa-
vi
PREFACE.
tion of Business Colleges, as well as to the legal profession, with
the humble hope that it may be found in some degree useful to
both.
The numerous citations of legal authorities are furnished
more especially for the benefit of the professional lawyer and
law student; though they may be made useful to the general
reader and business man also. The work is chiefly a compila-
tion of legal principles, elements, and authorities; as, to a con-
siderable extent, all law books are-and the author does not
flatter himself that any just claims to originality on his part
would have produced a better, or as good a book. He asserts
no legal principle, unsupported by high judicial authority,
which, in each instance, is particularly cited.
TABLE OF CONTENTS.
Analysis.
Primary Elements.
1. PARTIES.
2. CONSIDERATION.
3. SUBJECT-MATTER.
4. MUTUAL ASSENT.
•
5. TIME.....
Secondary Elements..
1. CONDITIONS.
2. CLASSES
•
CHAPTER I.
CONTRACTS.
3. KINDS OF SIMPLE CONTRACTS
• •
4. CONTRACTS THAT MUST BE WRITTEN.
5. MUTUALITY.
6. DAMAGES..
7. CONSTRUCTION OF CONTRACTS
PAGE
1
4
4
10
16
23
26
28
28
31
32
•
36
46
85
50
51
Analysis....
CHAPTER II.
NEGOTIABLE PAPER.
Part I.-Elements.
1. PARTIES..
2. CONSIDERATION.
3. PAYABLE IN MONEY..
•
4. PAYABLE ABSOLUTELY..
5. NEGOTIABLE WORDS..
6. TIME.
•
7. AMOUNT.
•
Part II.-Classes..
1. BILLS OF EXCHANGE.
2. PROMISSORY NOTES..
3. CHECKS.
•
4. BANK BILLS.
•
•
55
61
61
63
64
65
66
67
68
70
70
•
74
77
79
viii
TABLE OF CONTENTS.
.
Part III-Incidents......
1. TO BILLS OF EXCHANGE ONLY..
2. COMMON TO BILLS AND NOTES..
CHAPTER III.
AGENCY.
Analysis..
1. GENERAL VIEW..
2. How CREATED.
3. CLASSES..
•
4. SUBJECT-MATTER..
5. PRINCIPAL.
6. AGENT.
·
7. TERMINATION.
CHAPTER IV.
PARTNERSHIP.
Analysis...
Part I.-Elements.
1. PARTIES..
2. SUBJECT-MATTER..
3. HOW FORMED..
4. CONDITIONS.
Part II-Dissolution.
1. BY ACT OF THE PARTIES.
2. BY JUDICIAL DECREE.
3. BY OPERATION OF LAW.
•
Part III.—Consequences of Dissolution..
1. WHAT POWERS CEASE.
•
2. WHAT POWERS REMAIN..
3. NEW POWERS CREATED.
4. NOTICE OF DISSOLUTION..
•
·
CHAPTER V.
CORPORATIONS.
Analysis...
1. ELEMENTS.
2. CLASSES.
•
3. How CREATED.
•
4. ORDINARY POWERS..
5. RESTRICTIONS.
6. LIABILITIES..
D
7. PERSONAL LIABILITIES OF CORPORATORS.
8. DISSOLUTION.
PAGE
80
888
80
88
125
127
128
130
136
137
143
159
165
167
168
178
179
•
. 181
185
185
187
. 189
191
. 191
192
193
•
194
198
•
201
204
207
209
217
219
223
•
•
225
TABLE OF CONTENTS.
ix
CHAPTER VI.
GUARANTY.
Analysis...
1. PARTIES..
2. CONSIDERATION.
•
3. MODE OF GUARANTY.
• •
4. ASSENT OF THE PARTIES.
5. CLASSES...
6. How EXTINGUISHED.
• •
• •
7. RIGHTS OF SURETY AGAINST PRINCIPAL..
8. RIGHTS OF SURETY AGAINST CREDITOR
9. RIGHTS OF CO-SURETIES..
10. LIABILITIES OF SURETIES GENERALLY.
Analysis......
•
PAGE
229
231
232
233
234
235
239
242
•
244
246
247
CHAPTER VII.
SALE OF CHATTELS.
Part I.-Elements
Part II.-Incidents.
248
249
255
CHAPTER
VIII.
RIGHT OF STOPPAGE in Transitu.
Analysis...
Part I.-Elements
Part II.-As to its Exercise.
CHAPTER IX.
PAYMENT.
Analysis…..
1. WHAT IS PAYMENT.
2. WHEN PART PAYMENT IS PAYMENT IN FULL.
3. WHAT IS NOT PAYMENT..
•
4. BY WHOM TO BE MADE..
5. TO WHOM MAY BE MADE.
6. MAKING PAYMENT BY LETTER.
7. APPLICATION OF PAYMENTS. .
•
CHAPTER X.
LAW OF TENDER.
Analysis...
1. ELEMENTS
2. EFFECT OF TENDER..
•
268
269
271
276
278
281
282
285
285
287
288
292
293
302
X
TABLE OF CONTENTS.
CHAPTER XI.
LIENS.
PAGE
Analysis..
1. ELEMENTS.
304
305
2. How CREATED.
307
3. KINDS.
308
4. CLASSES OF PERSONS ENTITLED TO LIEN..
312
5. How WAIVED.
313
6. HOW ENFORCED..
314
CHAPTER XII.
INTEREST
AND
AND USURY.
Analysis....
I.-Interest.
•
1. GENERAL VIEW..
2. How ESTABLISHED..
3. LESS THAN LEGAL RATE BY AGREEMENT
4. LAW OF PLACE............
5. IN WHAT CASES ALLOWABLE.
6. WHEN NOT ALLOWABLE..
7. RULES FOR COMPUTING..
II.-Usury…….
1. GENERAL VIEW..
2. ELEMENTS.
3. WHAT IS NOT USURY.
•
4. CONSEQUENCES OF
•
•
។
CHAPTER XIII
CONTRACTS OF AFFREIGHTMENT.
Analysis……….
Part I.—Charter Party….
Part II.-For Conveyance in General Ship..
Part III.-Obligations Imposed by Both Kinds..
Part IV.-General Average..
Part
V.-Salvage..
•
•
Part VI.-Dissolution of the Contract.
•
CHAPTER XIV.
Part I.-Analysis
1. ELEMENTS..
2. ORDERS
3. CLASSES.
BAILMENT.
315
315
317
•
319
319
319
320
323
325
325
325
325
327
333
335
337
340
343
349
•
353
356
358
360
363
363
TABLE OF CONTENTS.
xi
PAGE
Classes..
1. DEPOSIT.
2. MANDATE
•
•
3. GRATUITOUS LOAN.
4. PLEDGE OR PAWN.
364
364
368
376
381
Part II.-Contracts of Hire.
Analysis....
388
•
388
1. LETTING THINGS AND SERVICES.
2. ELEMENTS.
3. CLASSES
Classes....
1. HIRE OF THINGS..
391
392
394
394
394
2. HIRE OF LABOR AND SERVICES.
398
•
3. HIRE OF CUSTODY...
403
4. HIRE OF CARRIAGE OF GOODS....
412
5. COMMON CARRIERS OF PASSENGERS.
427
Analysis.
CHAPTER XV.
MARINE INSURANCE.
1. GENERAL VIEW.
2. POLICY, ELEMENTS OF.
•
3. PERILS COVERED BY POLICY..
4. PERILS NOT COVERED.
5. WARRANTY.
•
6. AS TO DISCLOSURES.
7. DEVIATION.
•
8. PRIOR, DOUBLE, AND REINSURANCE..
9. ABANDONMENT
• •
10. GENERAL AVERAGE.
11. ADJUSTMENT..
Analysis…..
CHAPTER XVI.
FIRE INSURANCE.
1. GENERAL VIEW.
•
2. POLICY-ELEMENTS
3. REPRESENTATIONS AND WARRANTY.
4. PERILS COVERED BY THE POLICY..
5. REINSURANCE..
6. ASSIGNMENT OF POLICY..
• •
7. ADJUSTMENT OF Loss.
434
436
436
444
447
449
451
453
455
457
461
462
463
464
464
469
472
473
•
474
...
475
xii
TABLE OF CONTENTS.
Analysis...
CHAPTER XVII.
LIFE INSURANCE.
1. GENERAL VIEW..
2. APPLICATION FOR POLICY
3. POLICY-ELEMENTS..
•
4. WHO HAS INSURABLE INTEREST.
·
5. ASSIGNMENT OF POLICY..
CHAPTER XVIII.
ARBITRATION.
Analysis..
I.—General View.
II.-Elements
•
III.-Proceedings of the Arbitrators.
IV.-Award.
V.-Revocation.
PAGE
477
478
•
478
480
486
•
488
489
490
493
493
•
495
499
CHAPTER XIX.
DISTRIBUTION OF ESTATES OF PER-
SONS DECEASED.
Part I.-By Will.
Analysis.
I.-General View..
II.-Kinds of Will..
IN TWO PARTS.
III.-Elements of Written Will..
IV.-Codicil...
T.-Revocation..
VI.-Probate of Will..
•
VII.-Letters Testamentary .
Part II-By Operation of Law..
Analysis....
I.-Administrator...
1. DEFINITION..
2. How APPOINTED.
•
3. WHO ENTITLED TO APPOINTMENT
5. EQUIGRADAL CASES.
501
501
502
503
503
•
•
•
510
511
• •
•
513
514
516
. 516
517
. 517
517
518
518
519
519
519
•
519
•
6. WHEN APPOINTMENT MAY BE REVOKED.
•
II.-Administrator's Powers and Duties.
1. TO GIVE BONDS....
2. TO MAKE INVENTORY.
•
TABLE OF CONTENTS.
xiii
3. THINGS TO BE INVENTORIED
4. COPIES OF INVENTORY
5. TO COLLECT DEBTS
•
6. TO PAY THE DEBTS.
7. ORDER OF PAYMENT
8. DISTRIBUTION OF RESIDUE
•
CHAPTER XX.
REAL ESTATE CONVEYANCES.
IN FOUR PARTS.
PAGE
520
520
520
520
520
521
Analysis......
1. PARTIES.
2. CONSIDERATION.
3. WORDS OF TRANSFER.
• •
4. SUBJECT-MATTER-DESCRIPTION..
5. THE HABENDUM.
6. COVENANTS...
•
7. RELEASE OF DOWER.
•
8. IN TESTIMONIUM CLAUSE.
9. EXECUTION..
10. DELIVERY.
•
Part II.-Quit-Claim Deed.
Part III.-Mortgage Deed..
1. DEFINITION.
•
522
Part I.-Full-Covenant Warranty Deed.
523
523
524
525
525
528
528
532
533
533
535
536
•
•
536
•
536
2. USUAL FORM..
• •
536
3. INSURANCE CLAUSE..
4. INTEREST CLAUSE.
Part IV.-Registry of Conveyance..
1. AS BETWEEN THE PARTIES.
•
2. AS TO THIRD PERSONS.
3. WHEN REGISTRY COMPLETE..
537
·
•
537
537
537
538
• •
538
•
Appendix-Forms..
Index.
•
540
557
TABLE OF ABBREVIATIONS.
ABB. R...
ABR
ADM..
ADMS..
AD. & EL. N. S.
AD. &. EL. R.
•
ALEYN R.
ALLEN R.
AMB. R..
•
AMER. LAW REG.
AMER. JUR...
A.
.Abbott's Reports, Dist. Ct. U. S.
Abridgment.
Admiralty.
. Administrators.
Adolphus & Ellis' Reports, New Series, Q. B.
.Adolphus & Ellis' Reports, K. B., English.
.Aleyn's Reports, K. B., English.
•
Allen's Reports, Superior Ct., Mass.
.Ambler's Reports, Chancery, English.
American Law Register, Philadelphia.
American Jurist.
ANG. & AMES, CORP.... Angell & Ames on Corporations.
ANN.
•
ANST. R....
ARB
ARK. R.
•
ATK. R...
BAC. ABRIDG..
BAIL. CH. R..
BAILM.
•
Annual.
Anstruther's Reports, Exchequer, English.
Arbitration.
.Arkansas Reports, Sup. Ct.
.Atkyn's Reports, Chancery, English.
B.
Bacon's Abridgment.
Bailey's Chancery Reports, South Carolina.
.Bailment.
BARB. R..
BARB. CH. R...
►
•
.Barbour's Sup. Ct. Reports, New York.
.Barbour's Chancery Reports, New York.
B. & AD. or ADOLPH. R. Barnewall & Adolphus' Reports, K. B., English.
BARN. & ALD. R. . . . Barnewall & Alderson's Reports, K. B., English.
BARN. & CRESS. R.....Barnewall & Cresswell's Reports, K. B., English.
BARR R...
BAY R.
BEAV. R.
BING. R..
•
BING. N. C..
BINN. R..
•
BLACK. COM..
BLACK. H. R.
•
BLACK. W. R..
•
BLACKF. R...
•
•
.Barr's Reports, Sup. Ct., Pennsylvania.
Bay's Reports, Superior Ct., South Carolina.
Beavin's Reports, Rolls Ct., English.
Bingham's Reports, C. P. and other Courts, English.
.Bingham's New Cases, English.
Binney's Reports, Sup. Ct., Pennsylvania.
Blackstone's Commentaries.
. Henry Blackstone's Reports, C. P. and Excheq., English
William Blackstone's Reports, English.
.Blackford's Reports, Sup. Ct., Indiana.
TABLE OF ABBREVIATIONS.
XV
BLATCHF. R......
BLATCHF. & HOWL.
BLIGH R..
Bos. & PULL. R..
•
Blatchford's U. S. Circuit Ct. Reports.
R..Blatchford & Howland's U. S. District Ct. Reports.
Bligh's Reports, House of Lords.
Bosanquet & Puller's New Reports, C. P., English.
Bos. R. or LAW REP... Boston Law Reporter, Monthly.
Bosw. or Bos. R.
BOUV. LAW DICT.
•
.Bosworth's Reports, New York City.
.Bouvier's Law Dictionary.
BROD. & B. or BING. R. Broderip & Bingham's Reports, C. P., English.
BROWNE R..
BRO. P. C..
BRO. CH. R..
BURR. R.
•
•
•
CAI. CAS..
CAINES R..
CALIF. R..
CAMP. R.
CAR. & P.
•
•
CAR. & KIR. R.
CARTH. R.....
CASEY R..
C. B. R...
C. C.
Сн..
•
•
CHIP. R...
CHIT. BILLS.
CHIT. PLEAD.
CHIT. R..
•
CLARK & FIN.
C. P...
• •
CIV..
Ст.
Co..
CO. LITT.
COKE R..
COM.
• • •
A
COM. DIG.
COMS. R.
CONG.
•
CONN. R.
CONTR..
•
•
COOKE'S B. L..
Cow. R..
CowP. R...
Cox R...
•
CRANCH R...
•
Browne's Reports, Pennsylvania.
. Brown's Parliament Cases.
.Brown's Reports, Chancery, English.
Burrow's Reports, K. B., English.
C.
Caines' Cases, Ct. Errors, New York.
.Caines' Reports, Ct. Errors, New York.
California Reports, Sup. Ct.
.Campbell's Reports, K. B. & C. P., English.
.Carrington & Payne's Reports, N. P., English.
.Carrington & Kirwan's Reports, N. P., English.
.Carthew's Reports, K. B., English.
. Casey's Reports, Sup. Ct., Pennsylvania.
Common Bench Reports, English.
.Circuit Court.
•
Chancery.
Chipman's Reports, Vermont.
Chitty on Bills, English.
Chitty on Pleading, English.
Chitty's Reports, K. B., English.
Civil.
Clark & Finley's Cases, House of Lords, English.
.Common Pleas.
. Court.
Company.
Coke on Littleton.
.Coke's Reports, K. B., C. P., and other Courts, English.
Commentaries or Commercial.
.Comyn's Digest, English.
Comstock's Reports, Ct. Appeals, New York.
Congress.
Connecticut Reports.
.Contracts.
.Cooke's Bankrupt Laws.
Cowen's Reports, Sup. Ct., New York.
Cowper's Reports, K. B., English.
•
.Cox's Reports, Chancery, English.
.Cranch's Reports, U. S. Sup. Ct.
Xvi
TABLE OF ABBREVIATIONS.
CRO. CAR.
CRO. JAC..
CROMP
•
Croke in the time of Charles, English.
..Croke in the time of James, English.
.Crompton on Courts.
CROMP. MEES. & Rosc. Crompton, Meeson & Rosco's Reports, English.
CUSH. R....
DALL. R....
DALY R..
DANA R.
DAVIES R.
DAY R..
·
DENIO R..
DEV. & B. R..
DICK. R..
DIG..
DOUG. R..
•
.Cushing's Reports, Sup. Ct., Massachusetts.
•
D.
Dallas' Reports, Pennsylvania.
.Daly's Reports, C. P., New York.
Dana's Reports, Ct. Appeals, Kentucky.
.Davies' Reports, U. S. District Ct., Maine.
. Day's Reports, Sup. Ct., Connecticut.
.Denio's Reports, Sup. Ct., New York.
Devereux & Battle's Reports, S. Ct., North Carolina.
.Dickens' Reports, Chancery, English.
.Digest.
Douglass' Reports, Sup. Ct., Michigan.
.Douglas' Reports, K. B., English.
DOUG. R.
DUER R..
►
.Duer's Reports, Superior Ct., New York City.
EAST R..
E. C. L. R..
ED. ON BILLS..
ENG. L. & EQ. R.
EQ. JURISP..
ERSK. INST..
ESP. R..
EXCH. R...
•
FAIRF. R.
FELL'S GUAR..
·
FONBL. EQ..
FOSTER R..
GALL. R.....
GEN. M. INS. Co..
GILL & JOHNS. R.
GILP. DIST. CT.
Gow R....
GRATT. R..
GRAY R...
GREENL. R.
•
•
E.
East's Reports, K. B., English.
•
English Common Law Reports.
.Edwards on Bills, American.
English Law & Equity Reports, American Reprint.
•
Equity Jurisprudence.
Erskin's Institutes.
Espinasses' Reports, N. P., English.
.Exchequer Reports (Hurlston & Gordon), English.
F.
.Fairfield's Reports, Sup. Ct., Maine.
.Fell on Guaranty.
Fonblanque on Equity.
.. Foster's Reports, Sup. Ct., New Hampshire.
•
G.
Gallison's U. S. C. C. Reports.
. General Marine Insurance Company.
.Gill & Johnson's Reports, Ct. Appeals, Maryland.
Gilpin's Reports, U. S. Dist. Ct., Pennsylvania.
Gow's Reports, N. P., English.
Grattan's Reports, Ct. Appeals, Virginia.
.Gray's Reports, Sup. Ct., Massachusetts.
.Greenleaf's Reports, Maine.
TABLE OF ABBREVIATIONS.
xvii
HAGG. ADM. R.
HALL R..
HAR. & JOHNS. R.
HAR. & MCHEN. R..
HARDR. R..
HAWKS R..
HAYW. R.
HEN. & MUNF. R.
HILL R..
HILT. R..
HOFF. CH. R…….
How. R..
HUMPHR. R.
•
ID.....
ILL. R.
INS..
IOWA R..
•
IRED. R..
•
JOHNS. CAS.
JOHNS. CH.
•
JOHNS. CH. DEC.
JOHNS. REP.
JURIS..
KEEN R.
KENT'S COM.
KERN. R...
K. B. R.
•
LA. R...
LD. RAYM.
LEV. R..
•
•
•
• ·
•
·
•
•
H
Haggard's Admiralty Reports, English.
Hall's Reports, Superior Ct., New York City.
.Harris & Johnson's Reports, Ct. Appeals, Maryland.
Harris & McHenry's Reports, Ct. Appeals, Maryland.
.Harder's Reports, Exchequer, English.
.Hawks' Reports, Sup. Ct., North Carolina.
•
•
.Haywood's Reports, Sup. Ct., North Carolina.
Hening & Munford's Reports, Ct. Appeals, Virginia.
.Hill's Reports, Sup. Ct., New York.
Hilton's Reports, C. P., New York City.
.Hoffman's Chancery Reports, New York.
.Howard's Reports, Sup. Ct., U. S.
.Humphrey's Reports, Sup. Ct., Tennessee.
.The Same.
I.
Illinois Reports, Sup. Ct.
.Insurance.
.Iowa Reports, Sup. Ct.
. Iredell's Reports, Sup. Ct., L. & Eq., North Carolina
J.
.Johnson's Cases, Ct. of Errors, New York.
.Johnson's Reports, Chancery, New York.
.Johnson's Chancery Decisions, Maryland.
•
Johnson's Reports, Ct. of Errors, New York.
Jurisprudence.
K.
Keen's Reports, English.
• • •
•
•
Kent's Commentaries, American.
•
Kernan's Reports, New York, Ct. of Appeals.
King's Bench Reports, English.
L.
.Louisiana Reports, Sup. Ct.
.Lord Raymond's Reports, K. B. or C. P., English.
.Levinz's Reports, K. B, English.
•
•
L. & EQ..
•
Law & Equity.
M.
MAD. R....
Maddock's Reports, English.
MAINE R. or ME. R.... Maine Reports, Sup. Ct.
MAN. & RYL. R…………
Manning & Ryland's Reports, K. B., English.
xviii
TABLE OF ABBREVIATIONS.
MANN. & GRANG. R....Manning & Granger's Reports, C. B., English.
.Marshall's Reports, Kentucky-also English.
.Martin's Louisiana Reports, Sup. Ct.
•
MARSH. R..
MARTIN LA. R..
•
MASON R. or MAS. R...Mason's Reports, Circuit Ct., U. S.
MASS. R....
.Massachusetts Reports, Sup. Ct.
MAU. & SEL. or M. & S. R.Maule & Selwyn's Reports, K. B., English.
MD. R..
Maryland Reports, Sup. Ct.
MEES. & WELSB. R....Meeson & Welsby's Reports, Exch., English.
.Meig's Reports, Sup. Ct., Tennessee.
Mercantile Law.
MEIG'S R..
MERC. LAW.
MET. KY. R.
•
METC. R.
Metcalf's Reports, Ct. Appeals, Kentucky.
Metcalf's Reports, Sup. Ct., Massachusetts.
. Michigan Reports, Sup. Ct.
Modern Reports, K. B., English.
MICH. R.
MOD. R..
•
MONROE (B.) R.
•
MOOD. & MALK. R. or
M. & M. R...
MOOD. & ROB. R..
Monroe's Reports, Ct. Appeals, Kentucky.
Moody & Malkin's Reports, N. P., English.
Moody & Robinson's Reports, C. P. & N. P., English.
MOORE & PAYNE R....Moore & Payne's Reports, C. P. &. Exch., English.
MUT..
•
.Mutual.
N.
N. C...
N. E..
NEV. & MAN. R.
NEWB. ADM. R.
N. H. R..
N. J. R.
Noy R..
N. P..
N. R..
N. S...
N. Y. R...
O. or О10 R..
OHIO ST..
OLCOTT ADM
OVER. R....
OWEN R..
PAIGE CH. R………
P. C......
PEAKE R.
New Cases, or North Carolina.
New England.
Neville & Manning's Reports, K. B., English.
.Newbury's Admiralty Reports, American.
New Hampshire Reports.
.New Jersey Reports.
.Noy's Reports, K. B., English.
.Nisi Prius Reports.
New Reports, Bosanquet & Puller's New Reports, C. P.,
English.
.New Series.
New York Reports, Ct. Appeals.
O.
.Ohio Reports, Sup. Ct.
. Ohio State Reports.
Olcott's Admiralty Reports, American.
. Overton's Reports, Tennessee.
...Owen's Reports, K. B. & C. P., English.
P.
.Paige's Chancery Reports, New York.
•
Parliament Cases.
...Peake's Reports, K. B. & C. P., English.
TABLE OF ABBREVIATIONS.
xix
PEERE WILL. R.......Peere Williams' Reports, K. B., English.
PENN. ST. R………….
PET. C. C. R..
PET. R...
•
PHILLM. R..
PICK. R.....
PLOWD. R..
PORTER R.
PRICE EXCH, R..
Q. B. R....
RAWLE R..
RAYM. LD..
R. or REP.
RICH. R......
R. I. R………..
ROB. ADM. R.
ROB. R. LA..
ROLL. ABRIDG.
ROOT R...
.Pennsylvania State Reports, Sup. Ct.
.Peters' Circuit Court Reports, U. S.
.Peters' Reports, United States.
..Phillmore's Reports, Ecclesiastical, English.
.Pickering's Reports, Sup. Ct., Massachusetts.
.Plowden's Reports, K. B., C. P., and Exch., English.
.Porter's Reports, Alabama-also Indiana
.Price's Exchequer Reports, English.
Q.
.Queen's Bench Reports.
R.
.Rawle's Reports, Sup. Ct., Pennsylvania.
.Lord Raymond's Reports, K. B. or C. P., English.
Reports.
•
Richardson's Reports, Ct. of Errors & Appeals, South
Carolina.
Rhode Island Reports, Sup. Ct.
Robinson's Admiralty Reports, English.
Robinson's Louisiana Reports, Sup. Ct.
.Rolle's Abridgment.
.Root's Reports, Sup. Ct., Connecticut.
Rr. & M. R.
•
.Ryan & Moody's Reports, N. P. & K. B., English.
SALK. R....
S.
Salkeld's Reports, K. B., English.
SAND. or SANDF. R.... Sandford's Reports, Superior Ct., N. Y. City.
SAUND. R..
SCAM..
SCOTT, J. R.
SCOTT, N. R...
S. C......
.Saunders' Reports, K. B., English.
Scammon's Reports, Sup. Ct., Illinois.
.J. Scott's Reports, C. P. & Exch., English.
.Scott's New Reports, C. P., English.
.Same Case-also Supreme Court.
S. & R. or SERG. & R... Sergeant & Rawle's Reports, Sup. Ct., Pennsylvania.
SELD. R...
SHEP. R.
·
.Selden's Reports, Ct. Appeals, New York.
.Shepley's Reports, Sup. Ct., Maine.
.Sheppard's Touchstone.
SHEP. TOUCH..
SHOW. R....
SID. R.
SIM. & STU. R..
SKIN. R....
Shower's Reports, K. B., English.
•
.Siderfin's Reports, K. B., English.
.Simmons & Stuart's Reports, English.
Skinner's Reports, K. B., English.
.E. D. Smith's Reports, C. P., New York City.
.E. P. Smith's Reports, Ct. Appeals, New York.
.Sneed's Reports, Sup. Ct., Tennessee.
SMITH, E. D. R.
SMITH, E. P. R…….
SNEED R...
XX
TABLE OF ABBREVIATIONS.
S. P....
STARK. R.
ST...
STAT.
STEW. & PORT..
STORY, CONST
STR. or STRA. R.
SUMN. R.
SUP. CT..
SUR..
SWAN R..
•
SWANT. R...
TAUNT. R....
TEX. R..
TIFF. R.
T. R...
•
VENT. R...
VERM, or VT. R..
VES. R...
VES. & BEAME'S R.
VES. JR. R.
WARE, DIST. CT....
WATT'S R......
Same Point, or Principle.
Starkie's Reports, K. B., English.
.State.
.Statutes.
Stewart & Porter's Reports, Sup. Ct., Alabama.
.Story on the Constitution.
.Strange's Reports, K. B., English.
.Sumner's Reports, Cir. Ct., U. S.
.Supreme Court.
.Surrogate.
.Swan's Reports, Sup. Ct., Tennessee.
Swanton's Reports, Chancery, English.
T.
Taunton's Reports, C. P. and other Courts, English.
Texas Reports, Sup. Ct.
Tiffany's Reports, Ct. Appeals, New York.
Term Reports, Durnford & East, K. B., English.
V.
..Ventris' Reports, K. B., C. P., & Chancery, English.
Vermont Reports, Chancery.
Vesey, Senior's Reports, Chancery, English.
Vesey & Beame's Reports, Chancery, English.
Vesey, Junior's Reports, Chancery, English.
W.
Ware's U. S. Dist. Court Reports, Maine.
Watt's Reports, Sup. Ct. Pennsylvania.
WATTS & SARG. or S... Watts & Sargeant's Reports, Sup. Ct., Pennsylvania.
WEND. R..
WHEAT. R.
WILLIS R..
WILS. R.
•
WILS. CH. R.
WOODB. & M...
YEATES R....
YELV. R.
YERG. R...
.Wendell's Reports, Sup. Ct., New York.
.Wheaton's Reports, Sup. Ct. United States.
Willis' Reports, K. B. & C. P., English.
Wilson's Reports, K. B. & C. P., English.
Wilson's Chancery Reports, English.
Woodbury & Minot's Reports, U. S. Circuit Ct.
Y.
Yeates' Reports, Sup. Ct., Pennsylvania.
.Yelverton's Reports, K. B., English.
.Yerger's Reports, Sup. Ct., Tennessee.
Topical Analysis of Contracts.
: Jealo
PRIMARY ELEMENTS.
1. PARTIES . . <
1. Conditions of Com-
petency
2. Conditions of In-
competency.
{
1. Age.
2. Rationality.
3. Corporate powers.
1. Minority.
2. Insanity.
3. Idiocy.
4. Intoxication.
5. Coverture.
6. Alien belligerency.
7. Duress, 1. Of imprisonment.
{
•
2 Of fear.
1. Benefit or injury.
2. Forbearance.
3. Transfer of chose in action
4. Mutual promises.
5. Moving from third persons
1. Valuable.
1. Express.
II. CONSIDERATION
2. Good.
2. Implied.
3. Insufficient.
·
3. Impossible.
1. Gratuitous.
2. Illegal.
имич
Reve
1. WHAT MAY BE
III. SUBJECT-MATTER 2. WHAT MUST
IV. MUTUAL ASSENT
V. TIME.
NOT BE
4. Moral.
5. Executed.
1. Illegal.
2. Immoral.
3. Impolitic.
1. In general restraint
of trade,
2. In general restraint
4. Fraud on third
persons.
of marriage.
1. Fraudulent as-
signment.
2. Fraudulent
sale.
3. Employment of
by-bidders.
4. Perversion of
insolvent laws.
5. For obstructing public jus-
6. Enjoined by law.
[tice.
7. Fraudulent on each other.
I. Proposition.
2. Acceptance.
22.
SI. Expressed.
{
2. Implied.
"
2
ર
TOPICAL ANALYSIS OF CONTRACTS.
SECONDARY ELEMENTS.
1. CONDITIONS
1. Express.
2. Implied.
3. Consistent.
4. Repugnant.
5. Copulative.
6. Disjunctive.
7. Precedent.
8. Subsequent.
9. Restrictive.
10. Unlawful.
II. KINDS
1. Contracts of Record.
2. Specialties.
3. Simple Contracts.
III. KINDS OF SIMPLE CON-
TRACTS .
1. Bilateral.
2. Unilateral.
3. Principal.
4. Accessorial.
5. Express.
6. Implied.
7. Executed.
8. Executory.
9. Verbal.
10. Written.
S 11. Joint.
12. Several.
I. For conveyance of real estate.
2. Leases of land for more than one year.
3. If not to be performed within one year from
date.
4. In consideration of marriage.
5.
IV. CONTRACTS THAT
MUST BE WRIT-6.
TEN.
Surety for others.
For the sale of goods, chattels, or things in
action for the price of fifty dollars or
more, unless-
1. The buyer receives part of the
things; or,
2. The buyer pays part of the pur-
chase-money; of,
3. The sale is by auction.
Penall
impotany
250
TOPICAL ANALYSIS
OF CONTRACTS

Insta
I. Of Assent.
2. Of Obligation.
1. An offer of reward.
V. MUTUALITY
3. Exceptions.
2. One party a minor.
3. Fraud by one party.
VI. DAMAGES.
Ra
As cra
20
Rela
beves
ве
MA
VII. CONSTRUCTION OF CON-
TRACTS.
Rency
Action
ofor
nife
Pay the 1
Pendinon:
Al
4. Under the statute of frauds.
I. Intention of the parties.
2. Favorable and liberal.
3. Doubtful terms.
4. Usual meaning.
5. Technical meaning.
6. Usage and custom.
7. Law or custom of place.
8. Time of making.
Pall
9. Whole contract to have meaning.
10. Repugnant clauses.
ふ
​ヴ
​tet
6
7.
tiv
Every let
Impertains U. J. Comé
CHAPTER I.
CONTRACTS.
§ 1. A Contract is an agreement between two or more
parties competent to contract, based on a sufficient considera-
tion, each promising to do or not to do some particular thing
possible to be done, which thing is not enjoined nor prohibited
by law.
§ 2. The Primary Elements of a Contract are: 1. The
Parties; 2. The Consideration; 3. The Subject-matter; 4. Mu-
tual assent; and 5. Time.
These are called primary elements because they are constitu-
ents, without all of which, there can be no contract. Leave out
any one, and although there may be an agreement, there is no
contract-nothing which can be enforced by action at law.
§ 3. The Secondary or Modifying Elements are
those that give to the contract its peculiar features or character.
They must not so modify the contract, however, as to contradict or
destroy any of the primary elements, or as to render them inop-
erative. For instance, if conveyance of real estate be the sub-
ject-matter of the contract, the contract must be in writing—not
by parol. To make a parol contract on that subject, is to intro-
duce a secondary element that will render the contract void; for
the statutes of most, if not of all the States, require that class
of contracts to be in writing.
Every contract must have all the primary elements, either
express or implied, and some of the secondary elements.
PRIMARY ELEMENTS.
I. PARTIES.
§ 4. No contract can exist without two or more parties. Par-
ties are, therefore, a primary and indispensable element in every
contract. The parties must be persons who are competent to
´make a contract. We will consider :
INCOMPETENCY OF PARTIES.
5
10
§ 5-1. Conditions of Competency. The conditions of com-
petency, as applicable to individuals, are: 1. Age, and 2. Ration-
ality; and 3, as to Corporations, they must possess general or
special statutory powers.
1. Age. The age of competency is fixed by the common
law and by the law of most of the States at twenty-one years.
Persons under this age are incompetent to make contracts, except)
under certain limitations, and are called minors or infants. By
the common law is meant the common law of England, which
forms the basis of our law. In some of the States, females
attain the age of majority at eighteen years.¹
1
2. Rationality.—This is another condition of competency
of the parties. Neither an infant nor an insane person is capable
of furnishing the fourth primary element-assent. But this
matter can be more easily understood when we come to consider
the conditions of incompetency, as we shall presently. The gen-
eral principle of law, however, is, that all persons not rendered
incompetent by personal disability, or by considerations of public
policy, may be parties to a contract.2
3. Corporate Powers.-These powers are conferred upon
certain bodies or associations of individuals, called corporations.
They have power to make contracts strictly within the limits
prescribed by their charters, or by special or general statute.
More will be said of corporations in another place, under the
title Corporations.
§ 6.-2. Conditions of Incompetency.-There are several con-
ditions of disability or incompetency, among which are: 1. Mi-
nority; 2. Insanity; 3. Idiocy; 4. Intoxication; 5. Coverture;
6. Alien belligeréncy; and 7. Duress.
The law considers the classes of persons to whom these disa-
bilities apply, as incompetent, because they cannot (except alien
belligerents) supply the fourth primary element. They are in- 1
capable of giving their assent to a contract.
1. Minority. Before the age of twenty-one years, the law
presumes the faculties to be immature, undisciplined, and in-
competent to guard against artifice and subtlety, and it, there-
fore, extends to all contracts, previously made, its protection and
guardianship.3
*
12 Kent's Com., Lect. 31, p. 231.... Story on Contracts, § 34....3 Co. Litt., 172, 381.
6
CONTRACTS.
The law allows to infants certain privileges, as a security
against that imposition to which they are peculiarly open from
their ignorance and inexperience, and in respect to which they
stand in need of protection and guardianship. The contract of
a minor is not absolutely void, but voidable at his own election.
The party making a contract with him cannot take advantage
of his minority, but will be bound, if of full age himself, as
though both parties were of proper age. It is at the option
of the infant only, or his representatives, to avaid the con-
tract.1
Thus, if an adult promises to marry a minor, the minor can
maintain an action for a breach of promise, although the other
party cannot.?
3
The contracts of infants are divided into two classes:
1. Those which are only voidable; and 2. Those which are
binding.
1. The general rule is that the contracts of an infant are
voidable, that is, they may be avoided or confirmed by him upon
his coming of age. The exceptions to this rule, if any, are so
few and unimportant, that it may be considered a rule of uni-
versal application. This right of election belongs exclusively to
the infant.
An infant may not only refuse to perform his executory con-
tracts during his infancy, but he may disaffirm them when he
comes of age, and leave the other party without remedy. If he
borrows money, and expends it, or purchases goods and sells
them, or makes a promissory note, he cannot be compelled to
pay, even though he has received the full benefit thereof. 5
When a contract is executed, the infant may at any time
disaffirm it. If he sells an article, he may reclaim it upon
tendering the price paid."
2. Contracts made by an infant for necessaries are binding
upon him, "since an infant must live as well as a man.” The
1 Coan v. Bowles, 1 Shower, 171; Van Bramer v. Cooper, 2 Johns. R. 279;
Hartness v. Thompson, 5 Johns. R. 160....2 Holt v. Ward, 2 Maule and Selw.
R. 205.... Zouch v. Parsons, 3 Burr. R. 1794; Whitney v. Dutch, 14 Mass.
457; 13 Mass. 239....4 Id.....5 Story, Contr. § 59; 20 Amer. Jur. 257....
6 13 Mass. R. 294.
INCOMPETENCY OF PARTIES.
t
I
law gives a reasonable price to those who furnish him with
necessaries,' 1
This class includes by far the greatest number of cases in
which an infant is liable on his contract. What may be regarded
as necessaries for one person, might be regarded as luxuries for
another. What are necessaries depend on the estate and degree,
the rank, fortune, and age of the infant.2
2. Insanity.-An insane person, or a lunatic, is one who
is crazy or deranged in intellect, and who has not the power to
reason. If the mania be permanent and general, there is
incapacity to make a contract.3
But sometimes the lunatic may have lucid or sane intervals.
If a contract be made at such a time, it will be valid, although
the party be insane immediately before or after.*
Where a contract with a lunatic has been executed, if it be
for necessaries or articles suited to the rank and station of the
party, and be entered into in good faith by the other party, a
court of law will enforce it against the insane person."
Unsoundness of mind will not vacate a contract, if unknown
to the other contracting party, and no advantage be taken;
especially if the contract be executed in whole or in part, so that
the parties cannot be restored to their original position."
6
Lunacy must be established by competent legal evidence. It
cannot be proved by hearsay and common reputation."
3. Idiocy.—An idiot differs from a lunatic in this: the
idiot is deficient in understanding; the insane person is deranged
in understanding. To constitute idiocy, the party must be in-
capable of understanding and acting in the ordinary affairs of life.
8
It is sufficient to invalidate any contract, if it clearly appear
that the party contracting did not, at the time, understand what
he was about.9
4. Intoxication.-It is now settled law, that drunkenness
is a complete defense to a contract, unless the contract be for
¹ Bacon Abr. Infancy, I. 1.... Comyn's Dig. Infant, B. 5; Carter's Rep. 215;
8 Term R. 578; Story, Contr. § 77; 2 Strange R. 1101; 1 Freeman R. 581.
3 Sentance v. Poole, 3 Car. & Payne R. 1; Hall v. Warren, 9 Ves. Jr. R. 605.
..4
4 Story, Contr. § 36……..5 McCrillis v. Bartlett, 8 N. Hamp. R. 569……..“ Mol-
ton v. Camroux, 4 Exch. R. 17; S. C., 2 Exch. R. 487.... Yates v. Read, 4
Blackf. R. 463.... Ball v. Manwin, 3 Bligh R. (N. S.), 1..
• Id.
1
8
CONTRACTS.
absolute necessaries supplied to the drunkard for his preserva-
tion. If he consumes them while drunk, or retains them after
becoming sober, he is liable.¹
This defense rests on the same principle as that of lunacy
and minority. The party intoxicated is incapable of giving
intelligent, legal assent to the terms of the contract.2
The drunkenness must, however, be so excessive and absolute
as to suspend the reason for a time, and create impotence of
mind.3
Drunkenness is no defense, however, to a criminal prosecution,
though it may operate in mitigation of sentence, and perhaps
reduce the class of the particular offense.*
5. Coverture.-The general rule of the common law is,
that a married woman cannot, during her coverture, that is,
her marriage, make an obligatory contract.5
During coverture, her legal existence is merged in that of her
husband; and neither he nor she can be sued upon her contracts,
unless they are ratified or assented to by him. Upon marriage,
all her personal estate is vested in her husband, and he assumes
jointly with her all her ante-nuptial debts."
A husband may, however, be liable for necessaries furnished
to his wife in some cases, if he does not properly provide for her
support; and this too even where he gives express orders to the
tradesman not to furnish her with them.7
But the common law has been materially changed in most of
the American States. For instance, in the State of New York,
all property owned by a woman at the time of her marriage, and
all that comes to her by gift, devise, or descent, or by her per-
sonal service, or is acquired by trade; and all the rents and
profits of such property, belong exclusively to her, and are in no
manner subject to the husband's control, nor liable for his
separate debts.
In most of the States, also, a married woman may sell and
transfer her separate property as if she were single; may invest
her earnings in her own name, sue and be sued in matters rela-
3
¹ Gore v. Gibson, 13 Mees. and Welsb. R. 623.....2 Cooke v. Clayworth, 18 Ves.
R. 15. . . .³ Id....¹ 1 Russell on Crimes, 11; State of Penn. v. McFall, Addison's
R. 257.
в
5 Marshall v. Rutton, 8 Term R. 545.... Story, Contr. § 83....
'Cromwell v. Benjamin, 41 Barb. R. 558.
•
INCOMPETENCY OF PARTIES.
9
ting to her property; and may bring suit in her own name for
injuries to her character or person.
But these provisions with reference to her control over her
own property do not give her power to make contracts that bind
her husband. In this respect the common law remains un-
changed.
6. Alien Belligerency.-An alien is a person born in a
foreign country, of foreign parents, and not naturalized within
his adopted country.
An alien enemy is one who owes allegiance to the adverse
belligerent when two countries are at war with each other.
When two nations are at war with each other, all the members
of the two nations respectively are in hostility to each other.
This attitude or condition of belligerency between the individ-
uals of the one nation and the individuals of the other, renders
the belligerent parties incompetent to carry on commerce to-
gether.
There cannot exist, at the same time, a war for arms and a
peace for commerce. The war puts an end at once to all dealing
and all communication with each other, and places every indi-
vidual of the respective governments, as well as the governments
themselves, in a state of hostility.'
It follows as a necessary consequence of this doctrine, that
all contracts with the enemy, made during war, and without
express permission, are utterly void.
2
The law declares such contracts to be illegal, on the ground
that the alien enemy is thereby enabled to withdraw from the
country its resources of defense, and to convert them to purposes
injurious to its interests.3
7. Duress.-This is another, and the last condition of in-
competency of parties, which we propose to notice. Duress is
defined to be personal restraint, or fear of personal injury or
imprisonment. In either case it is compulsion, and is inconsist-
ent with the voluntary assent which is one of the primary ele-
ments of a contract.
1. Of Imprisonment.—This is where a man actually illegally
11 Kent's Com. 67; Potts v. Bell, 8 Term R. 548....21 Kent's Com. 67.
8 Willson v. Pattison, 7 Taunt. R. 439; Brandon v. Nesbitt, 6 Term R. 23.
10
CONTRACTS.
↓
loses his liberty. If a man be illegally deprived of his liberty
until he enter into a contract, he may allege this duress in avoid-
ance of the contract. But it must be tortious and unlawful.¹
If the imprisonment be legal, it is not, in contemplation of
law, duress; and in such case his contract is as binding as
though he were at liberty.2
2. Of Fear. This kind of duress arises from fear, under
threats, of loss of life, or of bodily injury. The violence or
threats must be such as are calculated to inspire a reasonable
fear in the mind of a person of ordinary firmness, in order to
furnish ground for the avoidance of a contract.3
In all cases of duress, the threatening or imprisonment must,
of course, be the alternative held out by the other party to the
end of enforcing the making of the contract."
II.-CONSIDERATION.
J
§ 7. No valid binding contract can exist unless based upon a
sufficient consideration. It is defined to be the material cause
which moves the contracting party to enter into the contract.5
An agreement without consideration is utterly void, and no
action can be maintained upon it.
§ 8. The consideration is not expressed in all cases of con-
tracts, nor is it necessary. It may be implied in two classes of
contracts, rendering them just as valid as though expressed; and
it may be proved where it is not implied."
1. An Expressed consideration is such as is distinctly
stated in the contract, whether oral or written.
2. An Implied consideration belongs to and grows out of
j.
two classes of contracts, from their very nature. These are sealed
instruments and negotiable paper, in both of which the consid-
eration is presumed or implied.s
§ 9. Consideration is further divisible into three classes or
kinds 1. Valuable; 2. Good; 3. Insufficient.
•
:
1 6 Mass. 506; 2 Bay, S. C. R. 211; 9 Johns. R. 201; 10 Pet. R. 137.
23 Caines' R. 168; 6 Mass. 511... .31 Black. Com. 131....4 Sheppard's
Touchstone, 61....5 2 Black. Com. 443.... 6 Chitty's Contr. 27; Story's Contr
§ 427.... 21 Wend. R. 628; 9 Cow. R. 778; 7 Conn. R. 57, 291; 4 Pick. R. 71;
Story's Contr. § 428....8 Story's Contr. § 427.
CONSIDERATION.
11
S
§ 10.-1. Valuable Consideration.-A valuable con-
sideration is usually in some way pecuniary, or convertible into
money; and a very slight consideration, provided it be valu-
able and free from fraud, will support a contract.¹ This kind
is divisible into the following classes: 1. Benefit or Injury;
2. Forbearance; 3.Transfer of Choses in Action; 4. Mutual
Promises; 5. Moving from Third Persons.²
§ 11.-1. Benefit or Injury.-The principal requisite, and
that which is the essence of every consideration, is, that it should
create some benefit to the party promising; or some trouble,
prejudice, or inconvenience to the party to whom the promise is
made. Wherever, therefore, any injury to the one party or any
benefit to the other party springs from a consideration, it is
sufficient to support a contract.³
It is not necessary that the consideration and promise should
be equivalents in actual value. Were this the legal requirement,
few contracts would or could be made that would be legally
valid. Each party to a contract may ordinarily exercise his own
discretion, as to the adequacy of the consideration. If the
agreement is made in good faith, it matters not how insignificant
the benefit may apparently be to the promisor, or how slight the
inconvenience or damage appears to be to the promisee, provided
it be susceptible of any legal estimation.*
If I promise to pay you a certain sum of money provided
you will call for it at a particular time, the contract is binding;
because the condition is an inconvenience to you.5
However inadequate the consideration may be, yet if the
circumstances indicate no unfair advantage on the one side, or
no great incompetency on the other, the contract will be valid.®
Where a benefit is done to a third person, at the request of
the promisor, it is sufficient to support his promise. This is a
favor bestowed at the request or desire of the promisor, upon
another; as, for instance, extension of credit to a principal."
§ 12.-2. Forbearance.-Forbearance for a certain or reason-
able time to institute a suit upon a well founded claim, or even
1 2 How. R. 426; 1 Metc. R. 84; 12 Mass. R. 365....2 Story's Contr. § 430.
* Story's Contr. § 431; 3 Johns. R. 100.... Pierce v. Fuller, 8 Mass. R.
223....5 Train v. Gold, 5 Pick. R. 384....6 Hubbard v. Coolidge, 1 Metc. R. 93;
Johnson v. Titus, 2 Hill R. 606....79 East R. 348; 8 Johns. R. 29; 5 Mass. R. 462.
L
12
CONTRACTS.
upon one which is doubtful, is a sufficient consideration to sup-
port a promise. It is a benefit to one party, and a prejudice to
the other.¹
An agreement to forbear to sue or enforce a claim which is
utterly unfounded, and upon which there is no good cause of
action, is void for want of consideration.2
But if the claim be well founded or doubtful, forbearance to
sue it is a sufficient consideration to support the promise of a
third person, as well as that of the party liable to the suit, if the
bringing of the suit would occasion any inconvenience or injury
to such third person.³
An agreement by the holder of a promissory note to forbear
to sue the maker for a certain and reasonable time, is a sufficient
consideration for a guaranty of payment by a third person.*
§ 13. 3. Transfer of Chose in Action.-The assignment or
transfer of a chose in action is a sufficient consideration for a
promise to the assignee by the assignor, unless it be void for ille-
gality or other reason; in which case, it being good for nothing,
it would not be a sufficient consideration. If the original debtor
in such case promise to pay the assignee, the latter may main-
tain suit against the former in his own name-for the assignment
is a discharge of the debtor to the original creditor."
5
§ 14. 4 Mutual Promises.-Mutual promises are concurrent.
considerations, and will support each other. But they must be
made at the same time. If they be made at different times,
though on the same day, they will not be good considerations
for each other, because of the want of reciprocity of obligation
at the moment the contract is made."
Mutual promises of marriage are binding. The promise of
an infant to marry is a sufficient consideration for a correspond-
ing promise by an adult.
7
A promise to accept and pay for goods is a sufficient consid-
eration for a promise to sell and deliver them.8
•
3
¹ Richardson v. Mellish, 2 Bing. R. 229; 1 Cow. R. 255; 4 Johns. R. 237....
24 East R. 455; 3 Pick. R. 83; 7 Mass. R. 449, 483.... Reynolds v. Prosser,
Hardr. R. 71; 1 Sid. R. 242....4 Sage v. Wilcox, 6 Conn. R. 81; Story's Contr.
§ 438....5 Tierman v. Jackson, 5 Peters' R. 597.... 2 Kent's Com. 365; Tucker
v. Woods, 12 Johns. R. 190; Keep v. Goodrich, 12 Johns. R. 397.... Willard v.
Stone, 1 Cow. R. 22; Wightman v. Coates, 15 Mass. R. 1; 3 Mass. R. 189....
8 Appleton v. Chase, 19 Maine R. 74; Bettisworth v. Campion, Yelv. R. 134.
7
CONSIDERATION.
1.3
Where several persons mutually agree to contribute a certain
portion toward a common object, which they desire to accom-
plish, the promise of all is a sufficient consideration for the
promise of each, especially if the non-performance of one would
occasion any prejudice to the others; or if, in consequence of
such promises, liabilities be incurred within his knowledge.¹
§ 15. 5. Moving from Third Persons.-Considerations mov-
ing from third persons are sufficient to support a contract. If
one person make a promise to another for the benefit of a third,
though no consideration move from such third person, it is bind-
ing; and either the party to whom it is made, or the party for
whose benefit it is made, may maintain an action upon it."
And in such case, in order to give the third person a right of
action, no understanding or privity between such third person
and the promisor is necessary.
Thus, if I owe you, and you owe Brown, my promise to pay
Brown the amount I owe you in satisfaction of your debt, is a
promise for a sufficient consideration, and may be enforced by
Brown although made without his knowledge.
4
§ 16. 2. Good Consideration.-This is an equitable
consideration, founded on mere love, or affection, or gratitude,
and will support an executed contract, as between the parties
themselves. But it will not support an executory contract, or
one to be executed in the future. Such a consideration must be
accompanied by possession of the subject-matter by the grantee
in order to bind the grantor.5
This kind of consideration is totally void as to the creditors
of the grantor, or subsequent purchasers in good faith. The
law will not allow a person to give away his property and thus
deprive his creditors of the means of collecting their debts."
If I give you a thousand dollars, hand it over to you, and
you accept it, the transaction is binding on me.
But if I prom-
ise to do that next week, I am not bound by such a promise. If
2
1 Society in Troy v. Perry, 6 N. Hamp. R. 164; State Treasurer v. Cross, 9
Verm. R. 298; Bryant v. Goodnow, 5 Pick. R. 229; Trustees of Farmington
Acad. v. Allen, 14 Mass. R. 672; 12 Mass. R. 190.... Story's Contr. § 450....
* Tipper v. Bicknell, 3 Bing. R. (N. C.) 710....4 Wilson v. Coupland, 5 Barn. &
Ald. R. 228....59 Yerg. R. (Tenn.) 418....6 Cowp. R. 705; 9 East R. 59; 7
Term R. 475.
کے
14
CONTRACTS.
I am owing debts which I cannot pay, my creditors will have a
remedy against such a transaction.
§ 17. 3. Insufficient Consideration.-This kind of
consideration is divisible into the following classes: 1st. Gratui-
tous; 2d. Illegal; 3d. Impossible; 4th. Moral; 5th. Exe-
cuted.¹
§ 18. 1. Gratuitous.-A contract made on a promise wholly
gratuitous is void for want of consideration. There is no injury
or deprivation to the promisee, nor benefit to the promisor; and
therefore they are not regarded by the law as legal and valuable
considerations.2
Thus, a promissory note given by a father to his son, in con-
sideration of affection only, is void as between the parties.³
So, also, subscriptions to public works and charities cannot
be collected if they be merely gratuitous, and have not operated
to induce engagements and liabilities within the knowledge of
the subscriber.*
Merely gratuitous services afford no consideration on which
to raise an implied promise to pay their worth; as voluntary
assistance in saving property from fire, or the payment of the
debts of another without request, or voluntarily saving property
found afloat in a river, or beasts found straying.5
An exception to this rule exists in cases of salvage, which is
a compensation for actual services rendered in rescuing property
from destruction by the perils of the sea or by pirates."
This doctrine in reference to the insufficiency of a gratuitous
promise on which to base a legal obligation, must not be con-
founded with the obligation of a party to pay for work and labor
performed for him with his knowledge and implied consent. If
you work for me, I knowing what you are doing, and I do not
interfere to prevent you, the law raises an implied promise on
my part that I will pay you what your services are reasonably
worth. And it does not change the obligation, though you
commenced your work without my order."
§ 19. 2. Illegal Consideration.-If the consideration of a
2
•
¹ Story's Contr. § 453.... Thorne v. Deas, 4 Johns. R. 84... 3 Holiday v. At-
kinson, 5 Barn. & Cress. R. 501....4 Story's Contr. § 118, 129, 453....5 Id. § 454
... Id. § 455.... Id. § 456.
*
"
CONSIDERATION.
15
contract be tainted with illegality, it is void. A promise to do
an illegal act is likewise invalid, being the consideration on one
side.¹
1
A contract may be illegal, because it contravenes the prin-
ciples of the common law, or the special requisitions of a statute.
A contract to commit, conceal, or compound a crime, or one
made in fraud of the rights and interests of third persons, is
void. The illegality created by statute exists, when the act is
expressly prohibited, or when the prohibition is implied from
the nature and objects of the statute.2
Where the consideration is illegal, either party may take ad-
vantage of this circumstance to avoid the contract. This doctrine
rests upon grounds of public policy.³
3
§ 20.—3. Impossible Consideration.—A contract founded on
an impossible consideration is void; for the law will not compel
a man to attempt to do that which is not within the limits of
human capacity.
Chan
That is, it tÁNA.
It may be impossible either in fact or in law.
may be impossible for the party physically to perform it,-as if
he promise to go from Boston to New Orleans in three hours.
It may be not within his legal capacity,-as if he promise to
discharge a party of a debt due to a third person, without the
authority of such third person.*
The simple fact that it is quite difficult to perform the con-
tract, will not excuse its non-performance. It must be impos-
sible in the nature of the thing. A man agrees to deliver
goods of a certain quality at a certain time. It is no legal ex-
cuse that the goods cannot be obtained at the particular season
of the year when the contract is to be executed.5
§ 21.-4. Moral Consideration.-A moral obligation is not
alone a sufficient legal consideration to support either an express
or implied promise. For, although the law will not suffer any
immorality, it cannot undertake to enforce every promise which
a man of strict honor and integrity would feel himself bound to
fulfil.
*
12 Kent's Com. 466.... Id.; Story's Contr. § 458.....3 Holman v. Johnson,
Cowp. R. 343; Griswold v. Waddington, 16 Johns. R. 486; 2 Kent's Com. 467.
Harry v. Gibbons, 2 Lev. R. 161; 3 Term R. 17....5 Gilpins v. Consequa,
1 Pet. C. C. Rep. 91; 2 Black. Com. 340.
16
CONTRACTS.
A son, who was of age, was taken sick among strangers, and
was relieved by a party in attendance. The father afterwards
wrote to the party to whom the son became indebted, that he
would pay all expenses incurred. This promise was not legally
binding, inasmuch as the father was not liable for the son's debts
after he became of age.¹
A promise made by a son to pay for necessaries furnished to
a father, is void for want of legal consideration."
But if the promise were made before the care and attention
were bestowed on the sick father or son, the obligation could be
legally enforced.
A mere moral obligation without any pre-existing legal or
valuable consideration, will not support a promise. The cases
of debts barred by the statute of limitations, of debts incurred
by infants, of debts of bankrupts, which may be revived by sub-
sequent promises, have a pre-existing valuable consideration to
support them.3
§ 22.-5. Executed Consideration.-An executed considera-
tion will not generally be sufficient to support a contract. It is
something done before the obligor makes his promise, and, there
fore, cannot be a foundation for that promise, unless it has been
executed at the request (express or implied) of the promisor.
Such a request plainly implies a promise of fair and reasonable
compensation."
十
​111.-SUBJECT-MATTER.
§ 23.-1. What may be.-The subject-matter, as here intended
to be used, is the thing to be done or omitted by one or both of
the parties. One party may promise to do or not to do some-
thing, on condition that the other party will do or omit to do
something else.
Under proper legal restraints and limitations, parties are
at liberty to make any contract they please. There are certain
kinds of contracts, however, which the law does not favor, and
2 7
¹ Mills v. Wyman, 3 Pick. R. 259. ... Cook v. Bradley, Coun. R. 57; 5
Johns. R. 272....3 Ch. Justice Parker, 3 Pick. R. 207....4 3 Bingh. N. C. 10;
8 Term R. 308; 14 Johns. R. 378; 22 Pick. Mass. R. 393; 7 Johns. R. 87; 7
Cow. R. 358.
SUBJECT-MATTER.
17
which, if made, the courts will not enforce. The general rule
is, that no court will lend its aid to a man who founds his cause
of action upon an illegal or immoral act.
$24.-2. What must not be,-
1. Illegal. If the subject-matter of a contract is in direct
violation of law, it is utterly void. Contracts to do acts which
are indictable, or punishable criminally, or to conceal and com-
pound such acts, or to suppress evidence in a criminal prosecu-
tion, are void.¹
Thus, it is a good defense to an action for not supplying
manuscript to complete a work according to agreement, that the
matter of the intended publication is of an unlawful and indict-
able nature.2
A contract to indemnify a printer for publishing a libel, or to
save harmless any person for the commission of a trespass, would
be void.³
An agreement to pay a sum of money to an officer for an
escape from mere arrest, or from prison, or an agreement by a
third person to indemnify an officer for neglecting his duty in
the service of a precept, being founded on a consideration to do
an illegal act, is void.
subject-matter of
No agreements to
§ 25.-2. Immoral. All contracts the
which are contrary to good morals, are void.
do acts forbidden by the law of God, or which are manifestly in
furtherance of immorality, and tend to contaminate the public
mind, are tolerated, or can be enforced by law. A contract for
the publication or sale of obscene or libellous books and prints
is void.+
If the contract in such case has been executed, the courts will
not rescind it; and if executory, they will not enforce it.
§ 26.-3. Impolitic.-Contracts the subject-matter of which
violates the rules of public policy, are void, whether they be in
violation of law or morals, or tend to interfere with those arti-
ficial rules which are supposed by the law to be beneficial to the
interests of society, or obstruct the prospective objects flowing
indirectly from some positive legal injunction or prohibition.5
¹ Badger v. Williams, 1 Chip. R. 137....2 Gale v. Leckie, 2 Stark. R. 98.....
32 Carr & Payne R. 198.... 4 Esp. R. 97; Ryan & Moody R. 337....51 Story
Eq. Jurisp. SS 294 to 305.
2
18
CONTRACTS.
There are several classes of contracts the subject-matter of
which are regarded by the law as injurious to the interests of
the public at large, and are, therefore, void. Among these, are
those :
§ 27.-1. In General Restraint of Trade.-Al-
though founded on a legal or valuable consideration, if they
are in general or total restraint of trade, they are void.
An agreement, therefore, not to carry on a certain lawful
business anywhere, is invalid, whether it be by parol or specialty,
or whether it be for a limited or for an unlimited time.¹
But an agreement in partial restraint of trade, restricting
within certain reasonable limits or times, or confining it to par-
ticular persons, would, if founded upon a good and valuable con-
sideration, be valid.2
Such an agreement not only does not obstruct trade, but is
oftentimes necessary, as well for the advantage of the public as
of the individual.3
The limitations of such a contract must be reasonable in
regard both to time and place. If it be greater than is neces-
sary to insure the protection of the party, it is oppressive, and
therefore unreasonable."
An attorney may sell his business, goodwill, &c., and bind
himself not to practice within a hundred and fifty miles of New
York, or any other particular city, and the contract would be
valid, although it contains no limitation as to time.
5
As to whether the limitation in such contracts is reasonable,
must depend upon the particular circumstances of each case,
the nature of the trade or profession, the populousness of the
neighborhood, the mode in which the trade or profession is
usually carried on; each and all, together with the consideration,
are to be considered.
The reasonableness of the limitation is a question of law to
be decided by the court, and not of fact for the jury, and
¹ Homer v. Ashford, 3 Bing. R. 322; Pierce v. Fuller, 8 Mass. R. 223; Nobles
v. Bates, 7 Cow. R. 307; Gale v. Reed, 8 East R. 80....2 Rannie v. Irvine, 7
Mann. & Grang. 976... 3 Bunn v. Guy, 4 East R. 190; Pierce v. Woodward, 6
Pick. R. 206....4 Horner v. Graves, 7 Bing. R. 735; Mallam v. May, 11 Mees. &
Welsb. R. 695....5 Hitchcock v. Coker, 6 Adolph. & Ellis R. 455.
A
SUBJECT - MATTER.
19
must be shown affirmatively, as the legal presumption is that
all such restraints are void.¹
1
§ 28-2. In General Restraint of Marriage.-
Contracts in general restraint of marriage are void, on grounds
of public policy. If one of the parties be restrained from marry-
ing at all, or from marrying anybody, unless it be a particular
person, the contract is considered as injurious to the general
interests of society, and therefore void.²
Although the policy of the law is to encourage entire free-
dom of choice in marriage, a contract will be valid which is
made to protect the rash and hasty from the consequences of
their own folly. Thus, a legacy given to a daughter, to be paid
her at twenty-one years of age, on condition that she do not
marry before that time, is valid; for such a delay would mani-
festly enure to the benefit of the child.³
A condition not to marry against the consent of friends, or
not to marry a particular person, is valid.¹
A condition in the will of a husband that his widow shall
not marry again, or that she shall receive an annuity only while
she remains a widow, is not considered as an unreasonable
restraint of marriage, she having once been married."
But a condition that a child shall not marry until fifty years
of age, or shall not marry any person inhabiting the same
town, or county, or State, or shall not marry any person unless
he be of a particular profession or trade, is void; because it
operates as a virtual restraint of marriage generally. 6
Contracts or agreements to negotiate a marriage between
two parties for a certain compensation, are utterly void, and in-
capable of confirmation; and even money paid upon them may
be reclaimed."
2
1 Chappel v. Brockway, 21 Wend. R. 157.... Baker v. White, 2 Vern. R.
215; Atkins v. Farr, 1 Atk. R. 287; Low v. Peers, Wilm. 364.... 3 Stackpole
. Beaumont, 3 Ves. 96, 97; Scott v. Tyler, 2 Dick. R. 721, 722, 724....4 Story's
Contr. § 560; Dashwood v. Buckley, 10 Ves. R. 239....5 Harvey v. Aston, 1 Atk.
R. 379; 2 Id. 321.... Scott v. Tyler, 2 Bro. Ch. R. 488.... Boynton v. Hubbard,
7 Mass. R. 118; Cole v. Gibson, 1 Ves. R. 503; Smith v. Bruning, 2. Vern. R
392; 1 Fonbl. Eq., B. I, ch. 4, § 10.
7
20
CONTRACTS.
§ 29.-4. Fraud on Third Persons.-Where any agreement is
made which operates as a fraud on third persons, it is void.
1. Fraudulent Assignment.-The principal class of
cases to which this rule applies, are those where a debtor, on the
verge of insolvency, makes an assignment of his goods for the
benefit of himself, and without consideration to support it.
Such contracts are utterly void at common law and by the
statutes of the States generally, because they operate as a pal-
pable fraud on creditors.¹
2. Fraudulent Sale.-Contracts for the sale of prop-
erty by a debtor, which, by the agreement, is to remain in the
possession of the vendor, imply fraud against the creditors. As
far as the immediate parties are concerned, the sale is good;
but as to creditors, it would be treated merely as a fraud, unless
the sale be in good faith, or unless the subsequent possession by
the vendor appear to be merely the condition of an executory
contract.2
If the conveyance or bill of sale be conditional on its face,
and possession be not, by its terms, to be surrendered until such
condition be performed, the contract would be binding even as
against the creditors, if it be in other respects in entire good
faith, and for a valuable consideration. So also, if the transac-
tion be in good faith, and merely by way of mortgage or col-
lateral security, it would be good.³
In most of the States, however, it is provided that a chattel
mortgage, unless accompanied by an immediate delivery of the
goods and continued change of possession, is void as against
creditors and subsequent purchasers unless the mortgage or a
copy is filed, as provided, so as to give constructive notice of the
transaction.
3. Employment of By-bidders.-The secret employ-
ment of by-bidders, or puffers, whose sole office is to excite com-
petition and inflate the price by fictitious bids in sales at
auction, while, by a secret understanding with the auctioneer or
'Cadogan v. Kennett, Cowp. R. 439; Hamilton v. Russell, 1 Cranch R. 316;
Meeker v. Wilson, 1 Gall. R. 419; 2 Kent's Com. 515....2 Edwards v. Harben, 2
T. Rep. 587; Story's Contr. § 529.... Martindale v. Booth, 3 Barn. & Adolph.
R. 498.... Story's Contr. § 530.
3
SUBJECT-MATTER.
21
seller, the bidders are not to be held to their bids, is a fraud on
third persons. And the rule of law is, that if their false bid-
ding operate directly as a fraud on the mind of the vendee, he
may avoid the purchase.¹
But if a person be employed merely to bid up the subject-
matter of sale to a certain price, in order to prevent a sacrifice
of the property, and the price be afterwards raised by real bid-
ders, after one of whose bids the purchaser makes the last bid,
the sale will be valid; because there has been no fraud in pur-
pose, and no damage or fraud in fact.2
4. Perversion of Insolvent Laws.-Any contract is
void the subject-matter of which is, that one of the parties
shall withdraw all opposition to the discharge of the other under
the insolvent act. A contract to pay money in such a case is
void, as it is a fraud on the interests of other creditors. Such a
transaction will prevent the insolvent from obtaining a discharge.³
In a general compromise of debts, as the creditors all bargain
for an equality of benefit as to payment or security, any private
agreement between the debtor and any creditor who joins in the
general arrangement, that he shall receive more money or better
security than the others, is a fraud on them, and therefore void.
§ 30.-5. For Obstructing Public Justice.-Contracts which have
for their object the prevention or obstruction of public justice,
are void. (See ILLEGAL, p. 17.) Agreements the object of which
is the suppression of evidence, the stifling or compounding a
criminal prosecution, or proceedings for a felony, or a misde-
meanor of a public nature, are void.
A promise to pay certain persons if they will withdraw all
opposition to the passage of a legislative act affecting the inter-
ests of a corporation, is void, on account of the nature of the
subject-matter.*
So, a contract the subject-matter of which is, that one of
the parties shall use his personal influence to procure the pas-
sage of a certain legislative act, is void."
The promise to pay a party a certain sum of money, pro-
¹ Veazie v. Williams, 3 Story's R. 620; Howard v. Castle, 6 Term R. 912……….
2 Story's Contr. § 539………³ Bouv. Law Dict. Insolvency.....4 Pingry v. Wash
burn, 1 Aik. R. 264....5 Ross & Hawley v. Truax, 21 Barb. R. 361.
22
CONTRACTS.
{
vided he will not bid for carrying the mail on a certain mail
route, is void. Neither party is bound by such a contract.
§ 31.-6. Enjoined by Law.-A contract to do, or to omit to do,
something which the law enjoins, is void for want of considera-
tion. An agreement to do what one is already obliged to do,
can not increase the obligation to do it.¹
§ 32.-7. Fraudulent on Each Other. The effect of fraud in
making contracts is, to infuse into them a vicious element, render-
ing them voidable in many instances at the option of the party
defrauded. Fraud consists in the employment of any kind of
cunning, deception, artifice, or concealment to cheat, circumvent,
or deceive another in a business transaction.2
The party committing the fraud cannot take advantage of
his own wrong, and on that account rescind the contract, pro-
vided it is already executed."
If both parties be guilty of fraud, neither can ordinarily obtain
relief on the contract, either at law or in equity; but the courts
will leave them where it finds them.*
If a contract be essentially immoral and criminal, neither
party has any remedy against the other. Nor can money paid
thereupon be reclaimed."
If the contract does not involve any moral turpitude or
criminality, one party may, under certain circumstances, have a
remedy against the other on an executed or executory contract.
This rule is admitted on grounds of public policy.
And first, if the contract be executed, the title of either
party to relief will depend upon whether both parties are in
equal fault. If so, no relief will be granted, but they will be
left remediless-their contract will not be set aside, and money
advanced cannot be recovered."
But if the parties are not equally culpable, the rule is
directly the reverse. When one party, acting under circum-
stances of great need, or oppression, or hardship, or great in-
equality of condition, makes a contract in violation of a law or
5
1 2 Burr. R. 1012; 4 East R. 455; 3 Johns. R. 458....2 See Bouv. Law Dict.,
Fraud....3 Taylor v. Weld, 5 Mass. R. 116.....4 Story's Contr. § 489...... How
son v. Hancock, 8 Term R. 577; Worcester v. Eaton, 11 Mass. R. 376....
• Browning v. Morris, Cowp. R. 793; White v. Franklin Bank,22 Pick. R. 188
MUTUAL ASSENT.
23
rule of public policy which is intended to protect persons against
oppression, or extortion, or deceit, he is not in equal fault, and
he may recover of the other any money that he may have ad-
vanced. Or he may have his contract set aside.'
But this relief is granted on the ground that the public in-
terest, and not solely that the interest of the private individual,
requires it.2
This rule is applied in some of the States to cases of usurious
contracts, wherein it is considered that the lender has availed
himself of the necessities or urgencies of the borrower to extort
from him an unlawful rate of interest; and an action will lie,
therefore, for the excess paid beyond the principal and lawful
interest on such contract.³
IV.
MUTUAL
ASSENT.
§ 33. There can be no valid and binding contract unless the
parties thereto assent; and they must assent to the same thing,
and in the same sense. The assent consists of a proposition by
one party, and an acceptance by the other.
1. Proposition. In order to create a contract, it is essential
that there should be a reciprocal assent to a certain and definite
proposition. A mere offer not assented to, constitutes no con-
tract, for there must be not only a proposal, but an acceptance
thereof.
The proposition is a mere offer. It may come from either
party; the one offering to sell, or the one offering to buy. A
merchant has goods on his shelf. A customer calls for such as
he desires to purchase, looks at them, and asks the price.
When the merchant states his price per yard, pound, or pattern,
that is his offer or proposition. It may be the customer thinks
the price higher than he is willing to pay. So he makes an
offer, stating what he will give, or is willing to give. So far,
there is no contract made."
1 Lowell v. Boston & Lowell R. R. Co., 23 Pick. R. 32....2 St. John v. St.
John, 11 Ves. R. 535. 3 Astley v. Reynolds, 2 Strange R. 916; Vandyck v.
Hewitt, 1 East R. 98. 4 Tucker v. Woods, 12 Johns. R. 190; Jackson v. Gal-
loway, 5 Bing. R. (N. C.) 75, 76....5 Suydam v. Clark, 2 Sand. R. 133; Tuttle v
Love, 7 Johns. R. 470; Tucker v. Woods, 12 Johns. R. 190.
24
CONTRACTS.
2. Acceptance.-When either party assents to the proposition
or offer thus made by the other, the bargain is complete. If the
customer says he will take the goods at the merchant's offer, or
if the merchant says he will let the customer have them at his
offer, the bargain is struck. There has been a proposition and
acceptance. There is now a union or meeting of the minds of
the parties.
It is entirely immaterial by what signs or indications, whether
ty words, by writing, by silence, by shaking hands, or by what-
ever else such acceptance is signified, in making a bargain.
But where a promise merely is made on each side, the two
must be concurrent and obligatory at the same time upon each,
or it will be binding on neither.'
If an agreement be optional as to one of the parties, and
obligatory as to the other, it does not destroy its mutuality, if
there be a sufficient consideration on both sides. A man prom-
ised to deliver salt when called on, and the other party promised
to pay for the salt so delivered. This is mutuality, and one
promise is in consideration of the other.
2
Where the proposition is verbal, and there is no stipulation
as to time of acceptance, in order to bind, it should be accepted
on the spot, or within such reasonable time as it may be supposed
the parties under the particular circumstances contemplated.
A contract may be made in this way: One may propose cer-
tain terms, giving the other a definite time within which to
accept or reject such proposal. The party to whom the pro-
posal is made may accept it at any time within the limitation,
unless the proposition is withdrawn by the party making it. In
such case, the proposing party is bound. But if he withdraws
the offer before acceptance, he is not bound by the acceptance."
The offer and acceptance may be verbal or written; or the
one verbal, and the other written. There are some kinds of con-
tracts, however, that must be written in order to bind the parties.
These will be noticed when we treat of the various kinds of
contracts.
1 Utica & Schenectady Railroad Co. v. Brinkerhoof, 21 Wend. R. 139....
? L'Amoureux v. Gould, 3 Seld. R. 349...3 Cooke v. Oxley, 3 Term R. 653; Rout
ledge v. Grant, 4 Bing. R. 661.
MUTUAL ASSENT.
25
If the offer and acceptance are through the mail, some time
will necessarily intervene between the one and the other. Then
the question arises, when is the bargain complete ?
An offer may be made by letter by a New York merchant to
one in Liverpool, and the letter must be several days on its way.
If the offer is accepted by the Liverpool party before it is with-
drawn, this is an assent of the parties at the same time, the offer
being continuing.
By the next steamer for Liverpool, the New York merchant
may send a letter withdrawing his offer. But if the Liverpool
merchant has not received the notice of withdrawal before he
accepts the offer, the New York party is bound by his offer, and
the contract is complete. The Liverpool merchant has accepted
the offer when he has mailed a letter to that effect. In contem-
plation of law, the minds of the parties met at that moment.'
If, by some more expeditious means than the mail affords—
telegraph, for instance the New York merchant had withdrawn
his offer before acceptance, subsequent acceptance would not
bind the party offering.²
But as soon as the answer containing the acceptance is placed
in the mail, the contract is completely closed as to both parties
Although, therefore, a letter containing a retraction of the offer
be actually on the way when the letter of assent is mailed, yet
the contract is closed, unless such letter of retraction be received
prior to the mailing of the letter of assent. An acceptance by
written communication takes effect from the time when the letter
containing the acceptance is sent, and not from the time when it
is received by the other party.3
The person assenting cannot even stop his letter on the road
after it is once mailed. But a retraction takes effect when the
letter is received, and not when it is sent. The offering party
must be considered, in law, as making, during every instant of
the time his letter is traveling, the same identical offer to the
other party.*
Where an offer is made and accepted by letters, they form a
¹ Mactier v. Frith, 6 Wend. R. 103; Vassar v. Camp, 1 Kern. R. 441...2 Id...
3 Adams v. Lindsell, 1 Barn. & Ald. R. 681; Mactier v. Frith, 6 Wend. R. 103:
Averill v. Hodge, 12 Conn. R. 436....¹ Story's Contr. § 384, n.
1.
26
CONTRACTS.
valid and binding contract, although they have reference to the
future making of a formal agreement, and although the parties.
intend to have a written contract executed.'
The acceptance must be in the very terms of the proposition.
It will not do to vary them, as it then becomes another offer. If
I write you, offering to sell you a thousand bushels of good mer-
chantable wheat, and you answer that you will take it, "expect-
ing it to be of the first quality," you cannot hold me to my offer,
as you have added a new condition."
Where an offer is made in the disjunctive, an acceptance of
either branch will be binding. Thus if an offer be made to
lease a house at $600 per annum, or at $800 with the furni-
ture, either branch of the offer may be accepted. So, if an order
be sent to a merchant, by letter, for 400 or 500 bales of cotton,
the merchant may send either quantity.³
3
When a contract is complete, either party has an action
against the other if he does not fulfil or perform it according to
its terms. The only exception to this rule is where labor or
personal service is to be performed, and the party on whom the
obligation rests is prevented by sickness or death.*
V. TIME.
4
§ 34. Time enters into all contracts as a primary element.
This may be agreed upon by the parties, or it may be implied
from the nature of the contract. Everything that is yet to be
done at all is to be done now, immediately, or at some future
time. Both time expressed, and time implied, are subjects of
legal construction.
§ 35.-1. Time Expressed.-A contract to do anything within
one year from date gives the entire year exclusive of the date.
A contract to do anything within a given number of months,
is construed generally, in this country, to mean entire calendar
months, exclusive of the date of the contract. In England the
1
¹ Story's Contr. § 386; Thomas v. Derring, 1 Kean R. 729...2 Holland v. Eyre,
2 Simons & Stuart, Ch. R. 194; Routledge v. Grant, 4 Bing. R. 653; S. C., 3 Carr.
& Payne R. 267....3 Foullier de Contrat, § 27....4 Fahy v. North, 19 Barb.
R. 341.
TIME.
27=
rule is that it shall be construed to mean lunar months, unless
in the case of negotiable paper.¹
Fractions of a day are not regarded except for the purpose of
guarding against injustice.2
An agreement to do anything in a given number of days
means entire days, exclusive of the day of making the contract.
An agreement to do anything between two certain days is not
performed by doing it on either of the days named.³
In computing the time fixed by a contract for doing an act,
when the day for performance falls on Sunday it is excluded, and
the party has the next day to perform. Sunday cannot, for the
purpose of performing a contract, be regarded as a day in law,
and should, as to that purpose, be considered as stricken from
the calendar. Intervening Sundays, however, are to be counted;
and the rule is otherwise in the case of days of grace on negotia-
ble paper.*
The statutes of the different States, of course, may vary
these rules of construction.
§ 36.-2. Time Implied.-When the time of performance of
a contract is not specified, the thing to be done must be per-
formed within a reasonable time. The reasonableness of the
time, in case of a lawsuit, would be a question of fact for a jury
to decide, and not of law for the court.
What would be a reasonable time for doing one thing would
be quite unreasonable for doing another. A few weeks would
suffice for building a small dwelling-house; a few months for a
block of stores; while it would require years for the erection of
a magnificent cathedral, or such a public edifice as the capitol
at Washington.
Negotiable paper in which no time of payment is specified is
payable immediatcly.5
¹ Stackhouse v. Halsey, 3 Johns. Ch. R. 74; Parsons v. Chamberlin, 4 Wend.
R. 512 ... 2 3 Con. R. 19; 3 Denio R. 263....³ Bunce v. Reed, 16 Barb. R. 347.
4 Salter v. Burt, 20 Wend. R. 205....5 Thompson v. Ketcham, 8 Johns. R
190; Herrick v. Bennett, Id. 374.
28
CONTRACTS.
SECONDARY ELEMENTS.
§ 37. Every contract must necessarily have some of the sec
ondary or modifying elements. But it need not have all; and
indeed it cannot. The secondary elements give to the contract
its peculiarities, and settle the rules of its interpretation and
construction. Under this general division it is proposed to con-
sider the subject under the following subdivisions: 1. Condi-
tions; 2. Kinds; 3. Simple contracts; 4. Classes that must be
written; and 5. Mutuality of obligation.
I.
CONDITIONS.
§ 38. By conditions, as the word is used here, is meant terms
ór stipulations with which the parties respectively promise to
comply.
All conditions must be made at the same time as the origi-
nal contract; but they may be made by a separate instrument,
if the contract be in writing, which is then considered as consti-
tuting one transaction with the original.¹
1
§ 39. Non-performance of a condition which was possible at
the time of its making, but which has since become impossible,
is excused if the impossibility is caused by the act of God.²
Its non-performance is also excusable if the other party ac-
cepts another thing in satisfaction, or if he renders the perform-
ance impossible by his own default.³
The following classes are particularly noticeable among the
conditions, some of which, at least, are usually included in con-
tracts:
§ 40.-1. Express Conditions.-These are such as are created
by the express words of the parties. Conditions will not be
implied where the parties undertake to express them. There-
fore when the parties undertake to express them, they should
15 Serg. & Rawle R. 375; 3 Hill's R. 95; 3 Wend. R. 209....2 10 Pick. R
507.... 21 Pick. R. 389; 1 Cow. R. 339.
CONDITIONS.
29
always be stated with the utmost exactness, and in language
clear and unequivocal.'
§ 41.-2. Implied Conditions.-These are such as the law
supposes the parties to have had in mind at the time the trans-
action was entered into, though no condition was expressed.²
If I request you to labor for me a month, or to manufacture
a certain article for me, there is an implied condition that I will
pay you, if you do as I request, what the service or article is
reasonably worth.
§ 42.-3. Consistent Conditions.-These are such as agree
with all the principal parts of the contract, thus sometimes
assisting to explain ambiguous items of it.
§ 43.-4. Repugnant Conditions. This kind of condition is
inconsistent with the other conditions of the contract. In con-
struing contracts, the main object of the court or jury is to
ascertain the exact intention of the parties. The whole contract
is to be viewed in all its parts, so that if possible it may be made
consistent and effectual. A condition wholly repugnant to the
general spirit of the contract would be inoperative, and there-
fore disregarded.
§ 44.-5. Copulative Conditions.-These are composed of dis-
tinct parts, united by the copulative conjunction and, either
express or implied, all of which must be performed. If I prom-
ise to deliver to you five hundred bushels of wheat, five hundred
bushels of corn, and five hundred bushels of barley, for $2,000,
at a certain time and place, these are copulative conditions, and
I must deliver all, not either, before I can claim the money
promised.
§ 45.-6. Disjunctive Conditions.-These conditions are such
as require this or that to be done, or the doing of one or more
of several things. Take the last illustration, using or instead
of and. In such a case I perform the contract by delivering
either the wheat, the corn, or the barley. Introduce the word
and, and all things coupled together by it must be performed;
while the word or requires but one of the things to be done.
§ 46.-7. Precedent Conditions.-A precedent condition is
¹ Whiting v. Sullivan, 7 Mass. R. 107; Worthen v. Stevens, 4 Mass. R. 448.
2 Sheppard's Touchstone, 117.
30
CONTRACTS.
one which must happen or be fulfilled by the party on whom it
devolves, before the other party is bound by the contract.
Thus if a person agree to purchase the cargo of a certain ship
at sea, provided the cargo prove to be of a particular quality,
or the ship arrive before a stated time, or at a particular port,
each proviso is a condition precedent to the performance of the
contract. If the cargo fail in quality, or time of arrival, or to
reach the specified port, the contract is at an end.¹
1
§ 47.-8. Conditions Subsequent.-These are such as follow
the performance of a contract, and operate to defeat and annul
it, upon the subsequent failure of either party to comply with
it. If Brown conveys a certain piece of land on condition that
a school-house be built thereon within a certain time specified in
the conveyance, and the school-house is not built according to
the terms of the conveyance, the condition subsequent is not
complied with, and the conveyance is void.
2
§ 48.-9. Restrictive Conditions.-These are conditions of
restraint on one party in favor of the other. If I lease a house
or a farm to you for a certain time, and by the terms of the
lease you are not to underlet to any body else, this is a restrictive
condition.³
§ 49.-10. Unlawful Conditions.-These are conditions which
are contrary to, or are forbidden by law, or which require the
omission of something commanded by law to be done; or which
encourages such acts or omissions.4
Of course all conditions of this class are absolutely void.
If a person agree to pay an officer a sum of money to allow him
to escape from arrest or imprisonment, or to allow any other
person to so escape, the conditions are unlawful, and the whole
contract void.5
1 Hayden v. Stoughton, 5 Pick. R. 528; see Story's Contr. § 27....2 Brigham
v. Shattuck, 10 Pick. R. 309....3 Sheppard's Touchstone, 118....4 1 Peere Will.
Ch. R. 189.....5 Hudson v. Wilkins, 7 Greenl. R. 113; Ayer . Hutchins, 4
Mass. R. 370.
CLASSES.
31
II. KINDS.
§ 50.-Contracts are divided into three general classes:
1. Contracts of record: judgments and the like, evidenced by
record.
2. Specialties: contracts under seal, deeds, bonds, etc.
3. Simple contracts: not contracts of record or specialties.
As it is not intended to give much attention to the first two
classes, it will not be necessary to notice the various kinds that
belong to them. We will state, however, the particulars in which
they differ from the third class, or that of simple contracts.
1. Specialties do not require a consideration to be either ex-
pressed or proved to render them obligatory at law, while the
consideration is the very life of a parol agreement or simple
contract, and must be either expressed or proved. A seal
imports a consideration.
2. Specialties must be sealed and delivered; but a mutual
understanding and assent are alone necessary to complete a
parol contract.
3. The technical doctrine of estoppel obtains in respect to
specialties. Neither party can go behind the instrument, and
the recital therein of any fact precludes the right to controvert
it, unless specially authorized by statute.¹
In simple contracts, however, although an admission therein
affords evidence of its truth, it may be disproved, and evidence
may be given to disprove it."
4. At common law a specialty debt is entitled to priority
over a simple contract debt in the payment of the debts of a tes-
tator or intestate.³
In many of the American States this last rule has been
altered by statute.*
5. A parol contract is any contract not under seal nor of
record, whether it be written or verbal. Certainty and facility
•
1 2 Black. Com. 295; Cox v. Cannon, 4 Bing. N. C. 453; Beckett v. Bradley,
8 Scott's N. R. 843.... Parish v. Stone, 14 Pick. R. 201, 202....³ 2 Black. Com
465.....* See Story's Contr. §§ 2 to 8.
32
CONTRACTS.
of proof are all the advantages gained by reducing such an
agreement to writing; the liabilities of the respective parties
are not changed.¹
The student's attention is now directed to the more common
divisions of simple contracts, and it is believed that his memory
may be aided in considering them according to the following
antithetical arrangement :
III.—KINDS OF SIMPLE CONTRACTS.
$51.1. Bilateral; 2. Unilateral.-1. Bilateral. - This
literally signifies two-sided, or having two sides. A bilateral
contract is one in which both the contracting parties are bound
to fulfil obligations reciprocally towards each other; as where
you promise to build a house for me, for which I promise to
make payments by instalments or otherwise to you.
2. Unilateral.-This signifies one-sided, or having but
one side. A unilateral contract is one in which but one of the
parties makes the promise or engagement, without any express
agreement on the part of the other, even where the law attaches
certain obligations to the acceptance of the promise. A loan of
money and a loan for use are of this kind: also bills of exchange
and promissory notes.
§ 52.-3. Principal; 4. Accessorial.-1. Principal.—A
principal contract is one which a party engages or enters into
on his own account, and not for another. If I buy of you a
thousand bushels of wheat, promising to pay you at the rate of
$200 a month until I shall have paid you $2,000, this is a
principal contract.
2. Accessorial.-An accessorial contract is one that is
made for the purpose of securing the performance of a preceding
contract which is called the principal. Of this class are guaran-
ties, sureties, or new securities, and the like. If, for instance,
in the preceding illustration, Brown becomes my surety, after
making the contract with you, for the payment of the $2,000,
according to my contract with you, this is an accessorial con-
tract.
11 Chitty's Plead. (6th edit.) 307; Story's Contr. § 10.
KINDS OF SIMPLE CONTRACTS.
33
By the statutes of most of the States an accessorial contract
must be in writing, and signed by the party to be charged.
§ 53.-5. Express; 6. Implied.-1. Express.—When the
contract is formal, and stated either verbally or in writing, it is
called an express contract. A contract or agreement the terms
of which are openly and fully uttered and avowed at the time of
making, is an express contract.¹
2. Implied.-When the agreement is matter of inference
and deduction, it is called an implied contract. In an implied
contract the law only supplies that which, although not stated,
must be presumed to have been the agreement intended by the
parties.2
The law always presumes such agreements to have been
made as justice and reason would dictate, and assists the parties
to any transaction in an honest explanation of it.3
But a promise will not be implied, contravening the express
declaration of the party charged, made at the time of the sup-
posed agreement, unless such declarations be at variance with
some legal duty; and then the law will imply a promise to per-
form that duty.*
Wherever a party avails himself of the benefit of services
done for him, although without his positive authority or request,
the law supplies the formal words of contract, and presumes him
to have promised an adequate compensation.5
6
These promises of law, however, only supply omissions, and
do not alter express stipulations. The general rule is, that a
contract will be implied only when there is no express contract.
X § 54.-7. Executed; 8. Executory.-1. Executed.-An ex-
ecuted contract is one in which nothing remains to be done by
either party, and where the transaction is completed at the mo-
ment that the agreement is made; as where an article is sold,
and delivered, and payment therefor is made on the spot. It is
one in which the object of the contract is performed."
2. Executory.—An executory contract is an agreement to
1 2 Black. Com. 443....2 Id.; Church v. The Imperial Gas Light Co., 6
Adolph. & Ell. R. 859....³ Ogden v. Saunders, 12 Wheaton R. 341. 4 Whit-
ing v. Sullivan, 7 Mass. R. 107; 4 Mass. R. 448; Robinson v. Gosnold, 6 Mod.
R. 171....5 Abbott v. Hermon, 7 Greenl. R. 118. ... Cutter v. Powell, 6 Term
R. 320; Story's Contr. § 15...." Fletcher v. Peck, 6 Cranch R. 136.
*
3
34
CONTRACTS.
perform some future act; as where an agreement is made to
build a house in six months, or to do an act on or before some
future day, or to lend upon a certain interest payable at some
future time.¹
Where the contract is executory, if the agreement be that
one party shall do a certain act, or acts, for the performance of
which the other party shall pay a sum of money, the perform-
ance of the act is a condition precedent to the payment of the
money.2
§ 55.-9. Verbal; 10. Written.-1. Verbal.-A verbal con-
tract, as the term is generally understood, signifies an unwritten
contract—that is, one that is made by mere words spoken by the
parties. Without anything written between us, I promise to
deliver to you ten bushels of wheat within ten days, for which
you promise to pay me twenty dollars. This is a verbal contract,
and binding on the parties.
2. Written.—A written contract is one in which the
parties make their stipulations in writing. The written instru-
ment does not make the contract any stronger or weaker than a
verbal agreement, where the law allows the agreement to be
verbal; but the method of proving the contract is different. A
written instrument, as a general rule, furnishes the proof itself.
A written contract is always an express contract, and the law
does not imply promises or agreements that are not found in it.
Written contracts are either sealed or not sealed. One of the
most important distinctions between sealed agreements and those
of other kinds is, that a sealed agreement need not show any
consideration on its face, because the seal implies a sufficient
consideration.³
A written unsealed promise or agreement must show a con-
sideration on its face, as it will not be implied, as in the case of
a sealed agreement; or if it does not appear on its face, it will
be necessary to allege and prove it, in case of a suit at law.*
Under the statutes of most of the American States, some
¹ Plowden R. 9; 2 Black. Com. 447..
Black. Com. 447....2 Willington v. The Inhab. of West
Boylston, 4 Pick. R. 101; Hunt v. Livermore, 5 Pick. R. 395; Story's Contr.
§ 18....3 Livingston v. Tremper, 4 Johns. R. 416; Douglass v. Howland, 24
Wend. R. 35....4 People v. Shall, 9 Cow. R. 778; 21 Wend. R. 414.
KINDS OF SIMPLE CONTRACTS.
35
kinds of contracts must be written, or they will be void. These
are such as are specified in what is called the "Statute of
Frauds," which are created or enacted for the prevention of
frauds. These kinds of contracts will be noticed farther on in
this chapter.
§ 56.-11. Joint; 12. Several.-1. Joint.-A joint contract
is one in which the contractors are jointly bound to perform the
promise or obligation. They do not each promise separately as
one. Parties to a joint contract, as a general rule, must sue or
be sued together. But in case of the death of one of the par-
ties, action may be brought against the survivor. The nature
and form of a contract generally determines whether the liabili-
ties of the parties are joint or several.
Where several persons are jointly interested in the money
which is due for services rendered, or for money which is due
upon some instrument, all the parties are equally and jointly in-
terested in the whole sum and every part of it, and the claim
cannot be split up so as to authorize each person, or his assignee,
to sue separately for such share.¹
2. Several. This word, as applied to contracts, means
separate, distinct. A several contract or agreement is one in
which two or more persons promise separately, each for himself,
that he will do the whole thing promised. Persons promising
severally arc each responsible individually, and may be sued
separately, as though there were but one.
Where several persons are bound jointly, or jointly and
severally, for the payment of a sum of money, and one of them
pays the whole debt, or more than his proportion of it, he may
call upon the parties who have not paid their share, to contri-
bute, so as to make the payments of all the parties equal.²
But if there are several who are liable to contribute in such
a case, the plaintiff cannot select some of those liable and sue
them, leaving the others out of the action; at least he cannot in
New York under the code.3
1 Coster v. N. Y. and Erie R. R. Co., 6 Duer R. 43; Kirk v Young, 2 Abb. R. 453.
2 Parker v. Ellis, 2 Sandf. R. 223; Holmes v. Weed, 19 Barb. R. 128....
3 Code, N.Y., § 119.
•
36
CONTRACTS.
IV. CONTRACTS THAT MUST BE
WRITTEN.
§ 57. Some contracts are declared to be void by a statute
called the Statute of Frauds-an old English statute passed for
the purpose of preventing frauds and perjuries. The main
features of this statute have been re-enacted by all, or nearly all,
the American States.
It declares certain contracts to be void, in the absence of cer-
tain conditions at their creation. The principal condition is,
that they must be in writing, and be signed by the party execut-
ing the conveyance, or to be charged by the contract; or that
there shall be some note or memorandum of the contract, and
subscribed by the party to be charged thereby. Under this
statute are embraced the following classes of contracts:
1. For conveyance of real estate,
2. Leases of land for more than one year.
3. If not to be performed within one year from date.
4. If made upon consideration of marriage, except mutual
promises to marry.
5. To answer for the debt, default, or miscarriage of another
person.
6. For the sale of goods, chattels, or things in action, for the
price of fifty dollars or more, unless,
1st. The buyer receives a part of the thing; or,
2d. The buyer pays part of the purchase money; or,
3d. The sale is by auction.
§ 58. The above is a mere synopsis of the statute referred to,
the principal features of which, as adopted by New York and
most of the other States, are as follows:
66 'Every contract for the leasing for, a longer period than one
year, or for the sale of any lands, or any interest in lands, shall
be void, unless the contract, or some note or memorandum
thereof, expressing the consideration, be in writing, and be sub-
scribed by the party by whom the lease or sale is made.
"In the following cases, every agreement shall be void,
CONTRACTS THAT MUST BE WRITTEN.
37
unless such agreement, or some note or memorandum thereof,
be in writing, and subscribed by the party to be charged there-
with:
1. Every agreement that, by its terms, is not to be performed
within one year from the making thereof.
2. Every special promise to answer for the debt, default, or
miscarriage of another person.
3. Every agreement, promise, or undertaking, made upon
consideration of marriage, exeept mutual promises to marry.
"Every contract for the sale of any goods, chattels, or things
in action, for the price of fifty dollars or more, shall be void,
unless,
1. A note or memorandum of such contract be made in writ-
ing, and be subscribed by the parties to be charged thereby; or,
2. Unless the buyer shall accept and receive part of such
goods, or the evidences, or some of them, of such things in
action; or
3. Unless the buyer shall, at the time, pay some part of the
purchase-money."
§ 59. The statute in reference to the sale of goods by auction
reads thus:
"Whenever goods shall be sold at public auction, and the
auctioneer shall, at the time of the sale, enter in a sale-book a
memorandum specifying the nature and price of the property
sold, the terms of the sale, the name of the purchaser, and the
name of the person on whose account the sale is made, such
memorandum shall be deemed a note of the contract of sale,
within the meaning of the last section."
These provisions do not in any way dispense with the necessity
of the primary elements essential to a contract. They simply
impose additional conditions to a certain class or classes of con-
tracts, declaring how they shall be evidenced, or what shall be
the proof of their actual existence. Although these new condi-
tions are required, they must also have all the other essentials of
a valid and binding contract. We will look at these new con-
ditions in their order.
§ 60.-1. For Conveyance of Real Estate.-Contracts for the
conveyance of lands are usually, or may be, of very great import-
ance.
A wide door would be thrown open to fraud and perjury
38
CONTRACTS.
were this class of contracts left to the mere verbal understanding
of the parties, or to the memory of witnesses who might be in-
terested, or who might be bribed to testify falsely. A slight
difference of even honest opinion as to the terms of the bargain,
or a shade of variation amounting to misrepresentation, might
involve thousands of dollars.
It would by no means be safe to leave questions of boundary,
price to be paid, times and terms of payment, rights to ease-
ments, and to growing crops, to mere talk between the parties.
§ 61. There are many things which really relate to lands,
and which are growing upon them, that do not come within this
statute, and, therefore, if not for the price of fifty dollars or
more, need not be in writing. Annual crops resulting from cul-
tivation, such as corn, rye, oats, barley, wheat, potatoes, and
everything of the kind, are included in this exception. The sale
of them is not a sale of an interest in lands within the meaning
of this law.¹
§ 62.-2. Leases of Land for more than One Year.-The same
reasons, to some extent at least, apply against long verbal leases
of real estate. The same inducements to fraud and perjury
would arise as in the sale of land, though, perhaps, not in equal
degree.
Verbal leases are not limited in all the States to one year,
some allowing two, and others three years. It is a matter en-
tirely of statutory regulation.
An oral contract for the leasing of real estate for a year is
valid, although, by the terms of the agreement, the term is not
to commence immediately, or even for several months, after the
time of making the contract.2
;
The reason for this is, that the case is governed by the
statute in relation to the sale of real estate, or of some interest
therein, and that the statute as to the performance of contracts
within one year has no application to the case of the lease of
real estate.
§ 63.-3. If not to be Performed within One Year from Date.-
1 Austin v. Sawyer, 9 Cow. R. 39; Whipple v. Foot, 2 Johns. R. 418, 422;
Stewart v. Doughty, 9 Johns. R. 112; Green v. Armstrong, 1 Denio R. 550...
2 Young 0. Dake, 1 Seld. R. 463.
CONTRACTS THAT MUST
THAT MUST
39
BE
BE WRITTEN.
Time, as we have seen, is a primary element in all contracts;
but in a contract of this particular kind, as well as for leasing
land for more than one year, time becomes a very conspicuous
element. This statute renders every verbal agreement void if,
by its terms, it is not to be performed within one year from the
time when it was made.
"Experience has shown the danger which exists, and the
injuries which parties have suffered, in consequence of permit-
ting important contracts to rest in parol agreements. Transac-
tions which occurred at a remote period of time may have been
forgotten wholly or partially. Different witnesses who heard
the contract made, or who saw the same transactions, may differ
widely in their recollection of the matter. They may positively,
but honestly, disagree in their narration of the event, owing to
the fact that some of them may have forgotten what the others
distinctly recollect. Or some of the most material circumstances
may have been forgotten by all the witnesses.
"Some or all of the witnesses may not recollect the language
of the contract, but merely the impression which they received
when they heard it, and that impression may have been very in-
correct indeed. And finally, the absence or death of material
witnesses may seriously affect the rights of the litigant parties.
"Such considerations, and others of a similar character, show
the importance and propriety of this statute. But when to this
view of the matter is added, that nothing can open a wider door
for frauds and perjuries than those cases which depend upon oral
evidence of the existence of the terms and conditions of agree-
ment which were made years before the litigation arose, it will
be seen that the rights of the citizen would be most unsafe in-
deed but for the provisions of this statute."1
A verbal contract made about the middle of April by Brown
and Jones, that Jones is to take board and rooms of Brown, who
is a boarding-housekeeper, for one year from the first day of the
next May, at a certain amount per week, is void under this
statute, because the agreement is not to be performed within one
year from the making thereof."
1 1 Wait's Law and Pract. 615....2 Wilson v. Martin, 1 Denio R. 602; Spen-
cer v. Halstead, 1 Denio R. 606.
40
CONTRACTS.
A verbal agreement to work for another for several years is a
palpable instance of a void contract under this statute."
§ 64. Where an agreement is void by this statute, no action
can be maintained by either party against the other for the re-
covery of damages for the breach of the agreement by a refusal
to perform it.2
A part performance of the agreement within the year will not
render it valid, so as to give a right of action for damages for a
refusal to perform the residue of it.3
If one party has fully performed the agreement on his part
within the year, that will not render the contract binding upon
the other party.*
But the party having performed his part, and the other party
refusing to perform his, the one who has performed may recover
the actual value of such performance so far as it is completed,
whatever that value may be."
§ 65.-4. In Consideration of Marriage.-Every agreement,
promise, or undertaking, made upon consideration of marriage,
except mutual promises to marry, are void, unless made in
writing, or some note or memorandum thereof, and subscribed
by the party to be charged therewith.
This provision has reference to those contracts that are some-
times made by parties in contemplation of marriage, as to the
disposition of property belonging to either or both; or such as
are made by relatives or friends who may take an interest in the
union of the parties in marriage. All verbal promises made in
consideration of marriage are void under this statute.
§ 66.-5. Surety for others.-Every verbal contract to an-
swer for the debt, default, or miscarriage of another person, is
void under the provisions of this statute.
This clause refers not only to promises to answer for the
default and miscarriage of another person arising out of his
1 McGlucky v. Bitter, 1 E. D. Smith R. 618....2 Drummond v. Burrill, 13
Wend. R. 307; Broadwell v. Getman, 2 Denio R. 87....3 Id.; Shute v. Dorr, 5
Wend. R. 204....4 Lockwood v. Barnes, 3 Hill R. 128; Lower v. Winters, 7 Cow.
R. 263....5 Nones v. Homer, 2 Hill R. 116; Little v. Wilson, 4 E. D. Smith R
422.
CONTRACTS THAT MUST BE WRITTEN.
41
contract, but also to any default or miscarriage arising out of
his tort.
If Adams, without leave, rides to death a horse belonging to
Brown, and Clark verbally guarantees the payment of a sum of
money to Brown in satisfaction of the injury by Adams, in con-
sideration that Brown would not bring his action against
Adams, this promise is void under this statute.²
It is not always easy to determine when the undertaking is
for another person, or for his default or miscarriage. If you
and I go into a store, and I direct the merchant to let you have
goods to the amount of $100, I promising to pay him for them,
this is no promise to pay your debt, for you owe nothing; I
create the debt myself. Of course this promise need not be in
writing. It may be that you owe me for the goods; but you do
not owe the merchant.³
Had I told the merchant that I would pay for the goods if
you did not, or had I told him that I would guarantee that you
would pay for them, or had I directed him to charge them to
you, and that I would see that you paid for them; in either
case the promise must be in writing, or the merchant cannot
hold me responsible, for I assume to pay what belongs to you to
pay.
Whether the promise be made as the guaranty of a subsist-
ing debt, or in reference to a future debt, it is equally within the
statute, provided the guarantor is not to be looked to as the
original debtor.¹
The questions are:
1. To whom did the creditor originally look for the primary
fulfilment of the engagement?
2. If there be no default, who is the person solely liable? 5
If the guarantor receives no benefit therefrom and the con-
tract be separate and incidental, and conditioned upon the default
of the principal party, it must be in writing, or it will be void.
The mere fact that the promise is to pay the debt due from
• •
1 Kirkham v. Marter, 2 Barn. & Ald. R. 613; Buckmyr v. Darnall, Lord
Raym. 1085....2 Kirkham v. Marter, 2 Barn. & Ald. R. 613.. 3 Berkmyr v.
Barrell, 1 Salk. R. 27.... Peckham v. Faria, 3 Doug. R. 13; Matson v. Wha-
ram, 2 T. R. 80....5 Austen v. Baker, 12 Mod. R. 250; Darnell v. Trott, 2 Carr.
& Payne Rep. 82.
42
CONTRACTS.
$
another person, or to pay for goods to be furnished to a third
party, does not prove that the promise does not create an original
liability, since it is perfectly competent for a man to assume, for
a sufficient consideration, to pay the debt of another.
But in a contract of this character there must be a consider-
ation the same as in other contracts, even though the promise be
in writing. Putting the promise in writing does not dispense
with the necessity of this or any other element of a contract.
It must have all the primary elements, besides which, it must be
in writing.
§ 67. To save the student from confounding cases that
must, with those that need not, be reduced to writing, take the
following supposition:-I owe you $100, payable in three
months. I sell Jones fifty bushels of wheat and deliver the
same to him, for which he promises me, and he also promises
you with your assent, that he will pay the $100 which I owe
you, and you then and there discharge me. Such a transaction
need not be in writing. I have paid my debt, and Jones must
pay his,¹
Take another case: I owe you $50; Jones owes me $50; you,
Jones and I are willing to have the indebtedness shifted, you
taking Jones as your debtor in place of me. I discharge the
debt I hold against Jones, you discharge the debt you hold
against me, charging Jones on your books of account with the
amount for which you have given me credit. This transaction
is perfectly valid, though nothing is written and subscribed by
the parties to the same.
I no longer owe you anything, and Jones no longer owes me,
nor is there any debt of a third person to be paid; but Jones has
created a new debt, and has paid an old one thereby. (See last
cases cited.)
§ 68. Suppose a young man obtains a situation in a store,
bank, or as conductor on a railway, for the faithful conduct of
whom security is required by the employers. The promise to
answer for his default or miscarriage must be in writing, and
1 Barker v. Bucklin, 2 Denio R. 45; Lawrence v. Fox, 6 E. P. Smith R.
'268; Farley v. Cleveland, 4 Cow. R. 432; S. C., 9 Cow. R. 639.
CONTRACTS THAT MUST BE WRITTEN.
43
subscribed by the party becoming surety, or the undertaking
will be void.¹
Again: I deliver a canal boat at your dock-yard for repairs.
When your work is done, your bill for labor and materials is
$125. I want the boat, but you refuse to let me have it, as you
have a lien upon it, without payment of this sum. Jones offers
to become responsible for the payment of the debt to you
Whereupon you, in consideration of Jones's promise, deliver the
boat to me.
Jones pays you $50; but when the balance falls
due, Jones declines to make payment, basing his refusal on the
insufficiency of the promise, because it was not written and
signed by him. The courts decide that Jones is not liable, the
promise being merely verbal.²
§ 69.-6. For Sale of Goods, Chattels, or Things in Action, for
the price of $50 or more, unless :
1. The buyer receives a part of the things; or,
2. The buyer pays part of the purchase-money; or,
3. The sale is by auction.
It will be observed that the price of whatever is the subject-
matter of the contract must be $50 or more, or the agreement
will be valid, as it does not come under this statute. It is then
a binding contract, though verbal, just the same as though this
statute did not exist.
But if for fifty dollars or more, it is void if the contract is
merely verbal, unless the subsequent conditions of the statute are
complied with. These conditions are: 1. Purt payment; or 2.
Part delivery. If these are complied with, the necessity of the
writing no longer exists.
§ 70. If I sell you 10,000 feet of lumber in a pile, at $45 per
1,000, making the price in the aggregate $450, that contract is
void, unless one of the three following conditions accompanies
the transaction:
1st. That it be written, or some note or memorandum of it
be made and subscribed by the party to be held; or,
11 Wait's Law and Prac. 630....2 Mallory v. Gillett, 7 E. P. Smith P. 412;
see also Stern v. Drinker, 2 E. D. Smith R. 401; Larson v. Wyman, 14 Wend. R.
216.
44
CONTRACTS.
2d. That I deliver to you, and you accept, a part of the
lumber; say 100 feet, more or less; or,
3d. That you pay me a part of the purchase-money: say $10,
more or less.
The compliance with either of the foregoing conditions takes
the contract entirely out of this statute, and it now comes under
the rules of the common law; or rather it becomes a strict com-
pliance with the statute, so as to place the contract under the
common law.
By the words here, "things in action," are included all
things which would give the purchaser the right to sue for and
recover the value or possession of them in a court of law or
equity; as leases, books of account, promissory notes, &c. They
are called choses, of which there are two kinds: choses in action.
and choses in possession. Choses in action are the kind referred
to in this statute. The owner of them has a right of action or
suit in the courts, in order to reduce them to possession.
§ 71. A parol or verbal contract to sell a chose in action for
$50 or more is void, unless the evidences of the demand, or
some of them, be delivered to the buyer, or the buyer pays some
part of the purchase-money for them.¹
It is not necessary that the note or memorandum shall be
signed by both parties. It is valid as against him, if signed by
the party against whom it is sought to be enforced.²
The note or memorandum, or the agreement itself if the con-
tract is written out in full, should contain not only the names of
the buyer and seller, the article or articles sold, but the price
should also appear, if that be agreed upon.³
If the terms of the contract can be collected from the corre-
spondence of the parties, or from any two separate papers re-
ferring manifestly to the same subject, it will be a sufficient
memorandum to constitute a compliance with the statute."
§ 72.-1. What is the meaning of the terms " accept and receive
part of such goods," &c.?
Rus-
1 Artcher v. Zeh, 5 Hill R. 200....2 Davis v. Shields, 26 Wend. R. 341;
sell v. Nicoll, 3 Wend. R. 112....3 Champion v. Plummer, 1 N. R. 154; Kain v.
Old, 2 Barn. & Cress. 627 .... 4 Saunderson v. Jackson, 2 Bos. & Pul. 238;
Smith v. Surman, 9 Barn. & Cress. 561.
•
CONTRACTS THAT MUST BE WRITTEN.
45
The meaning is held to be that the purchaser must finally
appropriate to himself a part or the whole of the goods. There
must be such an actual delivery by the seller as to destroy all
further claim of lien or of stoppage in transitu on his part, and
also such an actual acceptance by the buyer as to disable him
from objecting to the quantity or quality of the goods.
If, therefore, the vendor still retain the right of lien, or of
stoppage in transitu, or if the vendee may still object to the quan-
tity or quality of the goods, the delivery and acceptance are not
such as to satisfy the requisitions of the statute.¹
The delivery must be a complete and final delivery, and the
acceptance an ultimate acceptance, so as to reduce the goods to
the actual possession of the vendee.²
It follows, therefore, that no receipt of goods by a carrier or
middleman, on their way to the buyer, is a sufficient acceptance,
unless such carrier or middleman be the general agent of the
vendee, having authority finally to accept them.3
Delivery does not imply in all cases an actual handling by
the purchaser of the things sold, or even of their bodily removal
from the place where they were when sold. Where the articles
are ponderous and bulky, it is not necessary that they be de-
livered manually, but that they be put under the absolute con-
trol and power of the purchaser, or that his authority should be
formally acknowledged. The law requires only such delivery as
is consistent with the nature and situation of the thing sold.*
As to delivery of a part of such goods, &c., if a sample be
delivered to the purchaser, it will be a sufficient acceptance to
satisfy the statute, if it be understood by both parties that the
sample is a part of the whole quantity purchased, and not other-
wise."
§ 73.-2. Payment of Part of the Purchase-Money. This is
called giving something in earnest to bind the bargain. The
only material rule as to this is, that there should be an actual'
payment of a portion of the price, in order to satisfy the terms
•
¹ Maberly v. Sheppard, 2 Mau. & Selw. R. 442; S. C., 10 Bing. R. 99. . . .² Bal-
dey v. Parker, 2 Barn. & Cress. R. 44.... Astley v. Emery, 4 Maule & Selw. R.
264; Johnson v. Dodgson, 2 Mees. & Welsb. R. 656; Story's Contr. § 790....
1 Stanton v. Small, 3 Sandf. R. 230....5 Hinde v. Whitehouse, East R. 558;
Cooper v. Elston, 7 Term R. 14; 2 Kent's Com. 501.
46
CONTRACTS.
of the statute. Earnest is only a ratification of the contract,
however, and gives the buyer a conditional right to the goods
upon payment of the whole price. But if he do not, within a
reasonable time, pay for and take the goods, the vendor may re-
sell them to another person.¹
So if time and place be appointed for payment, and the buyer
do not attend at such time and place, the seller may also resell,
although earnest has been given.”
§ 74.-3. Sale by Auction.-But the contract need not be in
writing, nor any note or memorandum of it be made and sub-
scribed by the party to be charged, provided the sale is by
auction, and the auctioneer complies with the provisions of the
statute relating to his duties. To comply with the statute, it
will be necessary that he keep a sale-book, and enter therein the
following memoranda, where the sale is for fifty dollars or
more to the same person, and in the same contract, and no part
payment or part delivery is made :
1. Specify the nature of the property sold.
2. Specify the price of the property.
3. The terms of the sale.
4. The name of the purchaser; and
5. The name of the person on whose account the sale is
made.
When these provisions of the statute are complied with, the
contract at auction is as valid as if made by the parties them-
selves in full compliance with its requirements.
V. MUTUALITY.
§ 75. The general rule in regard to contracts is, that there
must be mutuality of assent and obligation, before the parties
are bound.
§ 76.-1. Of Assent. This subject has been noticed in
treating of the primary elements; but some further notice here
seems proper, on account of the intimate relation of mutuality
1 Langfort v. Tiler, 1 Salk. R. 113; Goodall v. Skelton, 2 Hen. Black. 316....
2 Neil v. Cheves, 1 Bailey R. (S. C.) 537.
MUTUALITY OF ASSENT.
47
of assent to mutuality of obligation. A party to a contract is
not bound until he yields a full, free, and intelligent assent to
its terms. It is sometimes said that the assent need not be
mutual, but that depends on what is meant by the word mu-
tual.
If you promise to-day to pay me $1,000 for 500 barrels of
salt, if I will deliver it at a certain place within thirty days,
and I do deliver the salt within the time specified, you are
holden to pay me as you promised, though I did not promise at
the same time that you did. But yours is rather an open con-
tinuing offer, to which I subsequently assent; or it may be
regarded as a continuing request on your part that I shall fur-
nish the salt at your offer.¹
The assent may be mutual, though it be not simultaneously
given by the parties. I comply with your offer, in the above
case, before you withdraw it.
The rule of law is, that the party making such an offer may
retract it at any time previous to its acceptance by the other
party; and an acceptance subsequent to such retraction would
create no contract, although it should be within the time pre-
scribed. The ground on which this rule is founded is, that the
offer being merely gratuitous, there is no sufficient consideration
for it until it is accepted.²
§ 77. The assent must not only be mutual and free, but it
must be intelligent; that is, it must be yielded understand-
ingly, and not under a mistake of fact.
Mistakes in making contracts are of two kinds :-1. Mis-
takes in matters of law; and 2. Mistakes in matters of fact.
1. With regard to mistakes in matters of law, it is a well-
established maxim, both in law and equity, that ignorance of
law is no excuse for any breach or omission of duty. The legal
presumption is, that every man of reasonable understanding
knows the law, when he knows the facts. This reason, though
arbitrary and false, is founded upon reasons of public policy.
But the opposite rule would encourage ignorance, and rob
1 L'Amoreux v. Gould, 3 Seld. R. 349.... Eskridge v. Glover, 5 Stewart &
Porter R. (Ala.) 264; Amer. Jurist, No. 39, pp. 15, 16-32; Payne v. Cave, 3
Term R. 148.
48
CONTRACTS.
knowledge and sagacity of its fair fruits; for if a party could
claim to set aside his contract on the ground that he was not
acquainted with the legal rules governing it, it would be safer
to be ignorant than to be wise.
The law presumes, therefore, that every man who makes a
contract makes it advisedly, and with a knowledge of its legal
incidents and consequences. Whatever mistakes, therefore, a
man may make in the law relating to his contracts, they will be
binding, unless fraud or imposition be practised upon him.'
§ 78.-2. Mistakes as to matters of fact.-Where an act
is done, or a contract made, under an injurious mistake, or igno-
rance of a material fact, it is voidable."
The rule is not limited to cases where there has been a
fraudulent concealment and suppression of facts, but extends
also to cases of innocent misapprehension and mistake.3
A plain and palpable mistake or ignorance of facts will en-
title the mistaken or ignorant party to avoid the contract, and
even to recover money paid under such circumstances.*
The citizens of one country are not presumed to know the
laws of a foreign country, and ignorance or mistake with regard
to them is considered as a mistake of fact, and not of law. In
this respect the laws of each of the different States of America
are foreign laws, of which the citizens of all the others are pre-
sumed not to be cognizant."
§ 79.-2. Of Obligation.—Mutuality of obligation is gener-
ally an essential feature of executory contracts. Both parties
must be bound, or neither will be bound, is the general rule.
Every agreement should be so complete as to give either party
his action upon it. Both parties, we have seen, must assent to
all its terms."
¹ Story's Contr. § 407; Bilbie v. Lumley, 2 East R. 471; Brisbane v. Dacres, 5
Taunt. R. 143; Hunt v. Rousmaniere, 1 Peters' S. C. Rep. 15; Bank U. S. v.
Daniel, 12 Peters' Rep. 32; Shotwell v. Murray, 1 Johns. Ch. R. 512; Storrs
v. Barker, 6 Johns. Ch. R. 166; Clark v. Ducher, 9 Cow. R. 674; Mowatt v.
Wright, 1 Wend. R. 355....º Haven v. Foster, 9 Pick. R. 129; Kelly v. Solari,
9 Mees. & Welsb. 54....3 Story's Contr. & 409....4 Bell v. Gardiner, 4 Mann &
Grang. R. 11; Waite v. Leggett, 8 Cow. R. 195; Wheddon v. Olds, 20 Wend. R.
174....5 Haven v. Foster, 9 Pick. R. 112, 130; Norton v. Marden, 3 Shepley R.
45; Raynham v. Canton, 3 Pick. R. 293; Story's Contr. § 408....6 Peake R
227; 3 Term R. 653; 1 Pick. R. 278.
MUTUALITY OF OBLIGATION.
49
§ 80. The above, we say, is the general rule; to which,
however, there are some exceptions, the most usual of which
are:
3. Exceptions.-1. An Offer of Reward.-Here the perform-
ance of that for which the reward is offered, gives the legal right
to the reward, without any previous acceptance or promise of
performance.
A man, for instance, loses his pocket-book containing valu
able papers, and a thousand dollars cash. He offers a reward of
a hundred dollars for its recovery. No man is under any legal
obligation, nor has promised, to go in search of the lost treasure.
But if you do search for and find it, and restore it to the owner,
he is bound to pay the promised reward. You have done what
he requested, though he did not ask you individually.
2. One Party a Minor.-You being of full age make a con-
tract with a minor. He can sue you and recover for the non-
performance on your part of that contract. But if you sue him
for non-performance, he, with a few exceptional cases, can plead
his infancy, and thus defeat your action. You cannot set up
his minority to defeat him, but he can to defeat you.¹
1
3. Fraud. Where one of the parties to a contract has prac-
tised fraud on the other, by which the latter is injured, the in-
jured party may avoid the contract, while the other can not.
The party guilty of the fraud is not allowed to take advantage
of his own wrong. It is solely at the option of the party, there-
fore, on whom the fraud is practised, whether he will be bound
or abide by the agreement or not.²
If I sell you a horse, and knowingly misrepresent the age or
qualities of the animal, and you relying on my statement make
the purchase, you can sue me and recover for the fraud itself, or
you can ignore the contract altogether, tender a return of the
property, and collect of me the price you have paid. Or if I sue
you on the contract for the price of the horse, you can set up the
fraud in defense. The law gives you all the advantage.
4. Under the Statute of Frauds.-There are several classes of
¹ Strange R. 937; 6 East R. 307; 3 Taunt. R. 169; 5 Id. 788: 3 Barn. &
Cres, 232....2 Steele v. Brown, 1 Taunt. R. 381; Deady v. Harrison, 1 Stark.
R. 60.
4
50
CONTRACTS.
contracts, as we have seen, which are required by the Statute of
Frauds to be written, or some note or memorandum of them,
and to be subscribed by the party to be charged. If one party
signs such note or memorandum but the other does not, the
signing party is holden to its terms, although the other is not.
The party not signing is at liberty to hold, or not to hold, the
signing party to the contract.
VI.-DAMAGES.
§ 81. When a contract has been fully and fairly made, each
party is legally bound, unless provented by an act of God or a
public enemy, to his part of its performance, or to respond to the
other in damages according to the nature of the agreement.
"Perform your contract, or pay damages," is the imperative
language of the law. The law, generally speaking, knows no
other remedy than the payment of money for a breach of con-
tract, and this it requires.
Although the contract is for anything else than the payment
of money, yet the law knows no other than a money remedy. It
has no power to enforce a specific performance of the contract.
If you promise to build me a house after a certain model,
for a certain sum agreed between us, and to have the house com-
pleted by a specified time, and you do not perform according to
agreement, you are liable to me for whatever sum in damages I
can prove that I have sustained.
§ 82. If the contract, however, is for personal service, which,
from the nature of the case, can not be performed by another,
sickness or death of the promising party who was to perform the
service will excuse its non-performance.¹
This rule, however, is limited to those cases in which the ser-
vices are those of the person employed to do such labor, or to
render such services. But if one agrees to perform a piece of
work, which he can do in person, or which he can employ
another to do for him, this rule does not hold.
§ 83. If you engage to work for me a given length of time,
say one year, at a stipulated price, you must perform the entire
year's work before you can collect anything of me.
1 Wolfe, Executor, &c., v. Howes, 6 E. P. Smith R. 197; Fahy v. North, 19
Barb. R. 341.
CONSTRUCTION OF CONTRACTS.
51
It would be different were your contract to work for me a
year at a specified price per month, and to be paid monthly.
You could, in such case, sue for and recover the price of each
month's service at the end of each month.
In such case, if you should quit my service without just
cause before the end of the year, I could recoup out of your
wages such damages as were the result of the breach of the
contract.¹
§ 84. But where by the terms of a contract for work and labor
the full price is not to be paid until the work is completed, and
a complete performance becomes impossible by the repeal of a
statute authorizing the work, and under which the contract was
made, the contractor may recover for the work actually done at
the full price agreed on.²
§ 85. But in some cases the recovery of damages is an incom-
petent remedy, and the party can only have entire satisfaction by
compelling a specific performance of the agreement itself. A
money standard for damages in such cases being entirely inade-
quate, led to the establishment of a court of equity, with full
power and authority to decree specific performance where the
remedy fails at law. For example, contracts for the conveyance.
of real estate will be enforced by a court of chancery. Perform-
ance will be decreed, and conveyance compelled.
VII. CONSTRUCTION OF CONTRACTS.
§ 86.Language is not only imperfect and susceptible of
various interpretations, but is also so liable to the careless
misuse or ignorant misapplication of terms, that some rules of
interpretation and construction seem to be absolutely necessary,
in order to render agreements either intelligible or consonant with
the intentions of the parties." 3
In the construction and interpretation of contracts the courts
observe the following rules:
1 Tipton v. Feitner, 6 E. P. Smith R. 423, 429....2 Jones v. Judd, 4 Comst.
R. 411.... Story's Contr. § 632.
3
52
CONTRACTS.
§ 87.-1. Intention of the Parties. The first rule of exposi-
tion is, that the contract shall be so interpreted as to give effect
to the intention of the parties, as far as their intention is legal
and mutual. Whenever the intention can be ascertained, it will
prevail, even though it shall contradict the actual words of the
contract.¹
The object of the law in laying down rules of interpretation
is, to discover the meaning of the parties, and not to impose it;
and the expression is, therefore, wholly subservient to the mani-
fest intention.2
2. Favorable and Liberal.-The interpretation and construc-
tion of a contract should be favorable and liberal. It should
be so construed as to give it some effect, unless manifestly in-
tended to be frivolous or inconsistent, for the parties must be
supposed to have intended something by their agreement.
If the words, therefore, be susceptible of two different
senses, they are to be so understood as to have a legal and
actual operation. If their ordinary and grammatical construc-
tion would render the contract frivolous and inoperative when
such was evidently not the intention of the parties, they should
be construed according to their less obvious meaning.³
3. Doubtful Terms.--When the terms of a contract are
doubtful and indefinite, they will be limited to the subject-mat-
ter of the contract, and to its obvious nature and object.*
Where, therefore, the contract is defective in its terms, or
ambiguous, it will not be literally construed, but the law will
supply whatever is necessary to effect the evident objects of the
parties.
4. Usual Meaning.-The terms of a contract are to be inter-
preted according to their popular and usual meaning, rather
than according to their exact definition.
5. Technical Meaning.- When technical words or phrases are
used, to which custom or science has fixed a peculiar significa-
tion, they are to be interpreted according to the sense given
1 Throckmorton v. Tracy, Plowd. R. 160; Dormar v. Knight, 1 Taunt. R
417; Doe v. Worsley, 1 Camp. R. 20; Tombs v. Painter, 13 East R. 1; Quacken.
boss v. Lansing, 6 Johns. R. 49.... Id.; Story's Contr. § 634.... Id. § 640.
...41 Powell's Contr. 377.
CONSTRUCTION OF CONTRACTS.
53
them in the trade, art, business, or profession, to which they be-
long. In such cases it is necessary to give construction differing
from the ordinary or usual meaning.'
6. Usage and Custom.-In the interpretation of a contract
the usage or custom of trade may be resorted to. This may be
done to explain the meaning of terms to which a peculiar and
technical meaning is affixed; and also to supply evidence of the
intentions of the parties in respect to matters with regard to
which the contract itself affords a doubtful indication, or per-
haps no indication at all. Under this rule the term "days" in
a bill of lading was allowed to be proved to mean "working
days." 2
The usage, however, must not be inconsistent with the prin-
ciples of law, or go to defeat the essential provisions of the con-
tract. Nor must it be narrow, local, or confined, nor the private
opinion of a few. But it must be so uniform and notorious as
to afford a presumption that the parties contemplated it as a
part of the contract; and it must be applicable to all parts of
the State or country."
7. Law or Custom of Place. It is also a general rule that a
contract is to be expounded according to the law or custom of the
place where it is made, where the actual intention of the parties
in this respect is not expressly stated, but is to be inferred from
the nature, objects, and occasion of the contract."
For instance, "cotton in bales" mean compressed bales in
some places, and in others merely bags; and the meaning of the
phrase would depend upon the place where the contract for the
cotton was made.5
If a contract is to be performed in another place than that
where it is made, it must be construed according to the law of
the place where it is to be performed."
But if it is to be performed partly in one country and partly
1 Hogg v. Smith, 1 Taunt. R. 347; 5 Wheat. R. 326; 4 East R. 135....
2 Cochran v. Rethberg, 3 Esp. N. P. 121; see also 5 Adolph. & Ell. R. 303;
Robertson v. Jackson, 2 Mann. & Grang. Rep. N. S. 413.....3 Rogers v.
Mechanics' Ins. Co., 1 Story's R. 606; Renner v. Bank of Columbia, 9 Wheat. R.
581....4 Story's Conflict of Laws, § 272; Wilcox v. Hunt, 13 Peters' R. 378....
Taylor v. Briggs, 2 Carr. & Payne R. 525....6 Andrews v. Pond, 13 Peters' R
65; Prentiss v. Savage, 13 Mass. R. 23; 2 Kent's Com. 457.
5
54
CONTRACTS.
in another, each portion is to be interpreted according to the
laws of the country where it is to be performed.¹
8. Time of Making.—A contract is to be construed in refer-
ence to the time when it was made, and to contemporaneous laws.
and usages. Ancient grants are, therefore, to be expounded ac-
cording to the law of the time when they were made.2
9. Whole Contract to have Meaning.-The exposition is to be
upon the whole contract, and not upon disjointed parts taken
separately. The object of the contract and the intention of the
parties are to be gathered from a consideration of all the parts of
the agreement, and one clause is to be interpreted by another.³
10. Repugnant Clauses.-Whenever one portion of a contract
is wholly repugnant to the rest of it, and irreconcilable with the
manifest intention of the parties, as apparent upon a considera-
tion of the whole instrument, the repugnant portion will be
stricken out. Effect will be given to the general intention.*
•
Pope v. Nickerson, 3 Story's R. 485. . . .2 Coke, Litt. 8 b.; Story's Contr. § 656.
3 Id. § 657; Knower v. Emerson, 9 Pick. R. 422; Morey v. Homan, 10 Verm.
R. 565.... Cleveland v. Smith, 2 Story's R. 287.
F
Analysis of Negotiable Paper.
NEGOTIABLE PAPER.
Part I. Elements.
Part II. Classes.
Part III. Incidents.
PART 1. ELEMENTS.
PART II. CLASSES
1. Original.
1. Parties. {2. Subsequent.
II. Consideration.
III. Payable in money.
1. Contingency not admissible.
2. Contingency admissible.
IV. Payable absolutely
V. Negotiable words 1. Bearer.
VI. Time{ 1. Date.
2. Maturity.
VII. Amount
2. Order.
1. Marginal figures.
2. Written words.
3. Discrepancies.
4. Omission of words.
5. Misspelling.
1. Bills of Exchange
II. Promissory Notes.
III. Checks.
IV. Bank Bills.
1
1. Inland.
2. Foreign
Whecks Wittecation
56
ANALYSIS OF NEGOTIABLE PAPER.
PART III.
INCIDENTS
I. To bills
of Ex-
change
only
•
1. Presentation for acceptance
2. Acceptance.
3. Non-acceptance{
I. By whom.
2. To whom.
3. When.
4. Where.
5. How

1. Duties of holder.
2. Rights of holder.
5. Rights of holder if not accepted--
1. Indorsement
2. Transfer
3. Days of grace,
4, Demand
5, Law of place,
6, Payment,
I. In blank.
2. In full.
3. Conditional.
4. Qualified.
5. Restrictive.
I. How made.
Awbat
Notice
2. Before maturity.
3. After maturity.
I, By whom,
2, of whom,
3, When,
4, Where,
L5, Hrw,
1. When necessary.
1, Protest{2. When not necessary.
1. By whom.
2. To whom.
5. How.
2. Common
to bills
and notes
7, Non-payment
2. Notice
3. When.
4. Where.
8, Guaranty
3, Waiver,
S1, Payment,
12, Collection,
{2,
9, Lost bill or note,
10, Accommodation paper,
11, Usual defenses
1. Want of consideration {
2, Obtained by duress,
3, Obtained by fraud,
3་
4. Obtained by finding,
5, Obtained by larceny.
6, Misapplication,
7, Illegal consideration,
8, Lapse of time,
12, Presumptions of law,
1. Total.
2. Partial.
CHAPTER II.
NEGOTIABLE PAPER.
§ 88. Negotiable paper is used as the great instrument of
modern commerce. Without it but a small share of the present
business of the commercial world could be transacted.
By far the greater portion of this business is conducted
through the medium of bills of exchange, promissory notes,
bank checks, and bank bills, all of which are based chiefly on
the confidence of man in man.
When negotiable words are used in these instruments, there
attaches to them a transferable quality; that is, they may be
sold and passed from hand to hand under certain limitations, as
we usually pass coin or bank bills in business transactions.
§ 89. Thus the holder or assignee has the right to sue for
and recover, in his own name, the sum of money for which the
negotiable instrument is given. Certain elements are essential
to the validity of this kind of paper, which elements have been
given in the preceding analysis or table, and which must be
present in every species of negotiable paper. The absence of any
one of them will deprive it of its negotiable character; that is,
every negotiable instrument must have parties, there must be a
consideration, it must be payable in money, payable absolutely,
must have negotiable words, must be issued and payable at some
particular time, and for a specified sum or amount. It is not
absolutely necessary, however, that either the consideration or
the time, either of date or payment, be expressed. They may
be implied or proved by parol.
§ 90. Negotiable paper had its origin in the custom of mer-
chants, dating back several hundred years. Its principles are
derived from mercantile usage, and have been sanctioned not only
by the enactments of Great Britain, but by most if not all the
States of the American Union.
The bill of exchange, commonly called a draft, is the oldest
kind or class of negotiable paper. This is simply a request by
58
NEGOTIABLE PAPER,
one person on another, to pay a third person a certain sum of
money mentioned in the paper. The forms of several are in-
serted here, the words to be varied according to the circum-
stances of each particular case.
$1,000.
FORM I.-INLAND BILL OF EXCHANGE.
Rochester, July 1, 1871.
At sight, pay to Louis L. Williams, or bearer, One Thousand Dol-
lars, for value received.
To A. J. Stewart,
New York,
Samuel D. Batt.
§ 91. The words "at sight" mean when it is presented to
A. T. Stewart, or when he sees the bill of exchange; that is,
when L. L. Williams, or whoever may be the bearer, shows it to
him. That is the time when he is requested to pay the sum
mentioned. If Stewart does not pay the money on seeing the
bill of exchange, he dishonors it. Then Williams returns it to
Barr, or gives him notice of its dishonor, and Barr is bound to
pay it.
$1,000.
FORM II.-INLAND BILL OF EXCHANGE.
Rochester, July 1, 1871.
At sixty days' sight, pay to the order of L. L. Williams, One Thou-
sand Dollars, value received.
To A. T. Stewart,
New York.
Samuel D. Barr.
In this last form the words "at sixty days' sight" mean
sixty days after it shall have been presented or shown to
Stewart. Now if Williams writes his name on the back of this
paper, he thereby orders Mr. Stewart to pay the thousand
dollars to the holder according to its terms.
If Mr. Stewart is willing and intends to pay the bill, he
should write across the face of it, when presented to him, the
words, "Accepted, July 2, 1871, A. T. Stewart"; taking care
USES AND FORMS.
59
to date the acceptance July 2, or any other day on which it is
presented. Such a bill of exchange or draft, on account of the
word order instead of bearer, as in No. 1, cannot be transferred
to any one else, unless Williams writes his name on the back
of it.
§ 92. Notice that these bills of exchange or drafts have all
the elements essential to negotiable paper:
1. Parties, these are, 1, the drawer, Samuel D. Barr;
2, drawee, A. T. Stewart; and 3, payee, L. L. Williams.
2. Consideration,-as indicated by the words "value re-
ceived."
3. Payable in money, as appears by the word "dollars."
4. Payable absolutely, as there is no allusion to any con-
tingency.
5. Negotiable words,-as indicated by bearer or order.
6. Time," at sight," or "at sixty days' sight."
7. Amount,-one thousand dollars.
§ 93. The foregoing are the common forms of inland bills of
exchange, for bills of exchange are of two kinds, inland and
foreign.
An inland bill of exchange is one drawn by a party residing
in the same State or country with the drawee. Barr and Stewart
both reside in the State of New York, as appears by the forms
given.
A foreign bill of exchange is one drawn by a person or
citizen of one State or country, on a person residing or doing
business in another State or country.
The States of the American Union are foreign to each other,
so far as relates to bills of exchange.¹
Foreign bills are usually drawn in sets of three, so as to pro-
vide against the danger of loss in transmission to a great dis-
tance. If one is paid the others are void. They may be sent
by different routes, or by the same route at different times.
§ 94. We give here a set of three bills, which, as we shall
see, really constitutes but one bill. A foreign bill is payable in
the currency of the country where the drawee resides. Drawn on
¹ Buckner v. Finley, 2 Peters's R. 586.
60
NEGOTIABLE PAPER.
a party residing in England, it should be made payable in pounds,
as a pound is the unit of money there; in France, it should call
for payment in francs, as a franc is the unit there. An Eng-
lishman residing in Liverpool, drawing on a merchant or bank
in Boston, would make his bill of exchange payable in dollars,
as a dollar is our unit.
1. Exchange for
£1,000.
FORM III.-FOREIGN BILL OF EXCHANGE.
New York, July 1, 1871.
Thirty days after sight of this First of Exchange,
(Second and Third unpaid), pay to the order of L. L. Williams, One
Thousand Pounds Sterling, value received, and charge to account of
Jo John Brown,
Liverpool, England.
No. 1,240.
Samuel D. Barr.
§ 95. This bill of exchange is sent out by steamer from New
York, July 2. Perhaps the vessel is lost on its passage, and the
bill never reaches Liverpool. To provide against such a contin-
gency, a second bill is drawn, bearing the same date, and is sent
by the next steamer, which second bill reads thus:
2. Exchange for
£ 1,000.
New York, July 1, 18771.
Thirty days after sight of this Second of Exchange
(First and Third unpaid), pay to the order of L. L. Williams, One
Thousand Pounds Sterling, value received, and charge to account of
Jo John Brown,
No. 1,240.
Liverpool, England.
Samuel D. Parr.
Now it is among the possibilities that this second bill shall
meet with the same fate as the first,-to provide against which, a
third is drawn, as follows:
ELEMENTS ORIGINAL PARTIES.
61
New York, July 1, 1871.
3. Exchange for
£1,000.
Thirty days after sight of this Third of Exchang
(First and Second unpaid), pay to the order of L. L. Williams, On
Thousand Pounds Sterling, value received, and charge to account of
To John Brown,
No. 1,240.
Liverpool, England.
Samuel D. Basi.
§ 96. It will be observed that the first of the set has these
words included in parenthesis: "Second and third unpaid."
This means if the second and third are not paid, pay this; and
so of the others: if the first and third are not paid, pay this
second bill; and if the first and second are not paid, pay this
third bill.
§ 97. The bill of exchange is based on this theory: that the
drawee, or the person on whom it is drawn, has in his hands
funds belonging to the drawer, or the person who draws the bill,
sufficient to pay the amount named in it. A bill ought, there-
fore, to be so drawn as to imply an order to pay the amour t
specified. And if the order shows on its face that there is no
right to order the payment of the money, it is not properly
bill of exchange.¹
PART 1.-ELEMENTS.
§ 98. Sufficient has now been said to give the student
general idea of the objects and purposes of negotiable paper
We will now look at the subject more in detail. And we wil
consider,
I.—PARTIES.
+
With reference to their responsibility, parties are of two
classes: 1. Original; and 2. Subsequent.
1. Original Parties.-The original parties to a negotiable.
instrument are those persons who are interested in it at the
¹ Little v. Slackford, 1 Moody & Mulkin R. 171.
62
NEGOTIABLE PAPER.
time when it is made. In the bill of exchange the form of
which has been given in No. 1, Samuel D. Barr orders A. T.
Stewart to pay one thousand dollars to L. L. Williams. Barr
thus admits that he owes Williams one thousand dollars. Barr
also claims that Stewart owes him at least the same amount.
But Stewart is not yet a party to the bill at the time when
drawn, nor until he accepts it.
Now if Stewart accepts this bill, he thereby not only admits
that he owes Barr the sum named, but he consents to the trans-
fer of this indebtedness from Barr to Williams. Now, after
acceptance, he owes Williams one thousand dollars, and owes
Barr a thousand dollars less than he did before acceptance. In
other words, Stewart now owes Williams instead of Barr.
But Barr, as we shall see in another place, is not wholly re-
leased from his indebtedness to Williams. He is released only
on condition that Stewart accepts and pays the thousand dollars
to Williams. Still further: Barr is wholly released, unless Wil-
liams takes the proper steps to have the draft accepted and paid;
and in case it is not paid, gives Barr the proper notice of the
dishonor of the bill. But more of that hereafter.
§ 99. The original parties, then, to a bill of exchange are: 1.
The drawer (Barr); 2. The payee (Williams); and 3. The
drawee (Stewart), who can do as he pleases about becoming a
party, for he can accept or refuse to accept the bill. But if he
accepts, he is now called the acceptor. Then the original
parties to a bill are:
ORIGINAL PARTIES
1. Drawer.
2. Payee.
3. Drawee, or acceptor.
§ 100.-2. Subsequent Parties.-If the bill of exchange is ac-
cording to the first form given, it is payable to L. L. Williams
or bearer. Now if Williams desires, he can sell and transfer it
to you or me without any formality whatever, and without
assuming any responsibility on his part. Simply to deliver it to
the purchaser is all-sufficient, whether before or after acceptance.
§ 101. If the purchaser will not take it at its face for any rea-
son, perhaps because he is not acquainted with Barr or Stewart,
or because he doubts their pecuniary ability to pay, he may
ELEMENTS-SUBSEQUENT PARTIES.
63
decline the negotiation unless Williams will indorse it. If he
does indorse it, he becomes conditionally liable for its payment.
as will be seen in treating of Indorsements. When Williams
has indorsed it, he has assumed a new relation to the paper.
He is now a subsequent party to the bill, and so is the one who
takes it. Williams is now, instead of payee, an indorser; and if
you take it of him, you are indorsee.
§ 102. But, according to Form No. 2, by which the sum is pay-
able to the order of L. L. Williams, before it can be transferred so
as to retain its negotiable character, Williams must write his name
across the back of it. By so doing he orders the money paid to
the holder. As in the other case, he is now indorser instead of
payee as when he took it, and the present holder has become
indorsee, and in reality payee, by Williams's directions or order.
If H. B. Bryant is indorsee, he may now write his name
on the back of it, and deliver it over to S. S. Packard. Now
Bryant is indorser, and Packard indorsee,—both are subsequent
parties.
§ 103. Thus this piece of negotiable paper may pass around
and into half the commercial houses of a city, and pay thousands
of dollars of debts before finding its way to Stewart's place of
business for payment. The bill is constantly growing better and
more certain of final payment the greater the number of sub-
sequent parties it has added to it, for each indorser is a new
security.
§ 104. As to the competency of the parties to negotiable
paper, the general rule of law is the same as in making other
contracts. If competent to make any other contract, they are
competent to become original or subsequent parties to negotiable
paper. This rule applies to corporations as well as natural per-
sons.
II.-CONSIDERATION.
§ 105. The element of consideration is essential to every
contract, and there can be no binding contract without it. A
bill of exchange or promissory note is a unilateral contract; that
is, a contract in which but one of the parties makes the pro-
mise. The drawer of the bill, the acceptor, and all the indorsers
are the promising party; and the maker and all indorsers of a
64
NEGOTIABLE PAPER.
promissory note are the same. But all negotiable paper of what-
ever class must be supported by a consideration, the same as all
other contracts.
But the consideration need not be expressed; that is, while
it is proper to express it, it is not absolutely necessary that it
should be. It would be advisable always to do it, as, if it is
omitted, it might cast suspicion on it, and, under some circum-
stances, render it necessary to prove the consideration. It is
always implied, however, in negotiable paper.'
"Value received" are the words usually used in this kind of
paper, as expressive of consideration. They are inserted in the
forms referred to.
As between the original parties, unless the paper is trans-
ferred, proof may be given to show failure of consideration, and
thus defeat an action brought on a bill or note.2
The legal presumption is, that in all negotiable paper there.
is a valuable consideration; and if it passes before maturity
into the hands of an innocent holder for value, the presumption
is conclusive. More will be said of this under the head of Trans-
fer in this chapter.
III.-PAYABLE IN MONEY.
§ 106. This means gold and silver coin, or, in this country,
bank bills. The negotiability is not destroyed if the instrument
is payable in national bank bills, as they are legalized national
currency. In England, paper is not negotiable if made payable
in bank bills.
Under the present laws of the United States, any indebted-
ness from one individual to another, whether it be on negotiable
paper or any other kind of contract, may be paid in United
States Treasury notes, unless the contract distinctly calls for
coin; that is, gold or silver. A decision was given by the
Supreme Court of the United States in March 1870, that the
Legal Tender Act of 1862 did not operate on, or apply to, con-
¹ Kinsman v. Birdsall, 2 E. D. Smith's R. 395; Bank of Troy v. Topping, 13
Wend. R. 557, 569; Clark v. Sisson, 8 E. P. Smith's R. 312; S. C., 5 Duer's R.
468; Safford v. Wyckoff, 4 Hill's R. 442. .2 Sawyer v. Chambers, 44 Barb.
R. 42; S. C., 43 Barb. R. 622.
ELEMENTS PAYABLE ABSOLUTELY.
65
tracts made before the passage of the Act. But that decision
was afterwards reversed by the same high tribunal in full bench;
there being but seven judges on the bench at the time of the de-
cision, and nine at the time of the reversal.
No State has the authority to pass a law impairing the obli-
gation of contracts, or to make anything but gold and silver coin
a tender in payment of debts. The Constitution of the United
States expressly forbids this. But the Federal Government can
and has done it. There can be no doubt, therefore, that under
the laws of Congress a bill of exchange payable in this country,
or a promissory note or bank check, would be regarded by the
courts as negotiable if payable in national currency, as that is
money.
A note made and payable in the State of New York, in
Canada currency, or Canada money, is not negotiable.¹
A note or bill payable in specific articles or chattels only, is
not negotiable.2
An order for goods drawn in the form of a bill of exchange
is not negotiable.³
But a note promising to pay a certain sum of money, which
promises also to pay goods on demand, is negotiable. Because
it is not optional with the maker to pay in goods, but with the
payee or holder to demand them.*
IV. PAYABLE ABSOLUTELY.
§ 107. The general rule is that there must be no condition
or contingency on which payment is to be made. If there is,
the negotiability is destroyed. It is said that negotiable paper
must be “a courier without luggage." But there are two kinds
of contingencies with reference to notes and bills,—one is, a con-
tingency sure to happen, though no one can tell when; the
other is, a contingency that may happen any time, or it may
never happen.
§ 108.-1. Contingency not Admissible.-The negotiability of
1 Thompson v. Sloan, 28 Wend. R. 71, 74...... .2 Jerome v. Whitney, 7
3 Atkinson v. Manks, 1 Cow. R. 692...
Johns. R. 322...
Wilson, 36 Barb. R. 307.
4 Hosstatter v.
5
66
NEGOTIABLE PAPER.
the paper is destroyed by the insertion of any condition that is
merely possible, but not sure, to be fulfilled. No matter what
the event may be, on the happening of which payment is to be
made, if that event may never happen, the negotiability is
destroyed.¹
For instance, an order drawn payable out of the proceeds of
certain carriages when they are sold, is not negotiable, for the
reason that the carriages may never be sold.²
A promise to pay within a certain number of days after the
maker shall marry, is not negotiable. Because it is not certain
that the event will ever happen.³
A bill or note payable out of a special fund is not negotiable,
for the fund may not be sufficient. A promise in the form of a
note payable "out of the net proceeds of ore to be raised and
sold from a certain ore bed, is not a negotiable note." "
An order by a landlord drawn on his tenant to be paid out
of the rent, is not a negotiable bill of exchange.5
§ 109.-2. Contingency Admissible.-On the other hand, if
the event on which payment depends is certain to happen,
though the time is not known, the negotiability is not affected.
The precise time when a person will die is not known. Yet the
event is sure to take place. Therefore a bill or note payable a
certain number of days after the death of the maker's father, is
negotiable."
A note payable when an infant shall become of age, Decem-
ber 1, 1862, is negotiable. For the day will come, whether the
infant lives or dies."
V. NEGOTIABLE WORDS.
§ 110. There are usually employed two words of negotiabil-
ity, one of which is generally inserted in every negotiable instru-
ment. These words are bearer and order.
4 Worden v.
6 Cole-
¹ Secord v. Burling, 5 Denio R. 444..... 2 De Forest v. Frary, 6 Cow.
R. 151...... 3 Beardsley v. Baldwin, 5 Strange R. 1151...
Dodge, 4 Denio R. 159........5 Morton v. Naylor, 1 Hill R. 583.
man v. Cooke, Willes's R. 393; Cooke v. Colehan, 2 Strange R. 1217..
• Goss v. Nelson, 1 Burr. R. 226.
ELEMENTS-TIME.
67
1. Bearer. If a bill of exchange or note is drawn or made
payable to a particular person or bearer-as William Brown or
bearer-Brown, the payee, can transfer such instrument without
indorsement, by mere delivery to the purchaser. If it has all
the other requisites of negotiable paper, the holder can sue and
recover the sum mentioned, in his own name.
Or, if it is made payable to bearer, omitting the name of the
payee, the holder can sue and recover in his own name, as he is
the bearer.¹
If it is a bill of exchange, however, it must first be pre-
sented to the drawee for acceptance, as he is not liable until ho
accepts the bill; nor is the drawer liable until the bill is pre-
sented.
2. Order. When a note or bill is payable to the payee-as
William Brown, or order-the instrument cannot be transferred so
as to retain its negotiable quality, without the indorsement of the
payee by name. By writing his name on the back of the bill
or note, he orders the sum mentioned to be paid to the holder.
Of the forms and responsibilities of indorsement, more will
be said hereafter.
VI.-TIME.
§ 111. This refers to the time of making the instrument,
which is indicated by the date; and the time of maturity, which
may be expressed or implied.
1. Date. Every written contract should be dated, and this
may be done at the beginning or at the end of the instrument.
In negotiable paper it is most usual to place the date at the
beginning, stating in figures the day and year when made, and
also the name of the town or city where made.
This may be necessary for three reasons: First. If the bill or
note is on interest, the date will be a matter of convenience in
deciding the time from which to compute it. Second. If pay-
might become a
ment should be deferred for several years, it
question whether the instrument is barred by the statute of
limitations. A proper dating would settle that question. Third.
1 Fennon v. Farmer, 1 Mason R. 252.
68
NEGOTIABLE PAPER.
As the law of the place where a contract is made governs in refer-
ence to its performance, the place should be given with the
date.
§ 112. In the absence of any agreement on the subject, a
debt is presumed to be payable at the place where it was con-
tracted, and where the creditor resides; and interest is to be
computed according to the rate allowed by the laws in force at
that place.¹
It is not absolutely necessary, however, to the validity of the
instrument that the date or place be given, as, when omitted,
proof may be given as to when made and delivered. The time
of delivery will be presumed to be the time when made."
2
§ 113.2. Maturity. The time of maturity of the in-
strument should be distinctly stated; that is, the time when it
becomes due. It may be on demand, one day after date, or any
other number of days, months, or years. But if it is intended to
give time for payment, that time should be definitely stated.
Parol evidence will not be allowed to show that a different time
was agreed upon by the parties from that mentioned, or from
that which the law presumes, or that a mistake was made as to
the time of payment mentioned.³
When no time of payment is specified in the instrument, it
is payable immediately. The law presumes that such was the
intention of the parties. If a note is payable on demand, that
means immediately; and the statute of limitations begins to run
against it from the day of its date.*
VII. AMOUNT.
§ 114. It is essential to the negotiability of an instrument
that it be made for a definite amount or a sum certain. There
must be no ambiguity or contingency as to this. An order for
the payment of a specified quantity of grain, no price being
¹ Stewart v. Ellice, 2 Paige Ch. R. 604; Smith v. Smith, 2 Johns. R. 235;
Hosford v. Nichols, 1 Paige Ch. R. 220; Taylor v. Snyder, 3 Denio R. 145………..
Mitchell v. Culver, 7 Cow. R. 336.. Fitzhugh v. Runyon, 8 Johns. R.
375; Thompson v. Ketcham, 8 Johns. R. 190..... 4 Herrick v. Bennett, 8
Johns. R. 374; Cornell v. Moulton, 3 Denio R. 12; Wenman v. Mohawk Ins.
Co., 13 Wend. R. 267.
ELEMENTS—AMOUNT.
69
fixed, is not negotiable, as there is not a sum certain men-
tioned.¹
A promise to pay another a certain sum, "and also all other
sums which may be due to him," is not a negotiable promise.²
§ 115. The amount may be, and usually is, expressed both by
figures and words; and sometimes, from the imperfect manner
of the expression, the intention has to be decided by legal con-
struction.
1. Marginal Figures. It is usual to place the amount in
figures on the left-hand margin of a bill, note, or check, either
at the upper or lower corner. This is not absolutely necessary,
but cases may occur where the figures, although no part of the
instrument, would serve to explain the misuse or misspelling of
words in the body of it.³
3
2. Written Words.-The sum for which the instrument is
given should be plainly and distinctly written out in full, in
words, in the body of it.
3. Discrepancies.-It sometimes occurs that the sum ex-
pressed by figures in the margin differs from the sum expressed
in words. When this occurs the words are accepted as expres-
sive of the sum intended.
4. Omission of Words.-Where a word or words expressive
of the amount are omitted, but were intended to have been in-
serted, the holder may insert them afterwards. A note intended
to be made payable for eight hundred dollars, but filled up as a
promise to pay "eight," omitting the words "hundred dollars,"
the latter words may be inserted by the holder. In case of suit
on such a note, it would be a question of fact for the jury to
decide as to whether the filling up was in accordance with the
intention of the parties. If it was according to their intention.
the holder will recover.*
5. Misspelling. The misspelling of a word intended to signify
the amount in a negotiable instrument, does not invalidate it;
as the word "the" for "three" placed before the word hundred
or thousand. Of course it is clumsy and unbusiness-like; but
the word would be construed to signify three.
•
¹ Lent v. Hodgman, 15 Barb. R. 274. . . . . 2 Smith v. Nightingale, 2 Stark.
3 Smith v. Smith, 1 Rhode Island R. 398...... 4 Boyd v. Bro-
R. 375..
therson, 10 Wend. R. 93: Clute v. Small, 17 Wend. R. 238.
70
NEGOTIABLE PAPER.
PART II-CLASSES.
§ 116. Having noticed the general requisites or elements of
negotiable paper, attention will now be given particularly to the
classes in common use.
The first and oldest class in use is the
bill of exchange, and to this attention is first directed.
I. BILLS OF EXCHANGE.
§ 117. We have already given the forms of this instrument,
and some of the general principles of law applicable to it. Some
general allusions have also been made to other forms of negoti-
able paper, particularly promissory notes, for the purpose of
bringing before the student the elements of negotiability.
We have seen also that bills of exchange, with regard to the
parties and places of payment, are of two kinds,-inland and
foreign.
1. Inland.—An inland bill of exchange is one, the parties to
which reside in the same State or country, or at least the
drawer and drawee, though accepted abroad.'
2. Foreign. A foreign bill of exchange is one drawn by a
person in one State or country upon a person in another State
or country; as, for example, when drawn by a person in Amer-
ica upon a resident in England, and payable by the latter, or
vice versa.²
Bills drawn in one of the several States of the Union upon
persons resident in another, are to be regarded as foreign bills,
on the ground that they answer all the purposes of remittances
and commercial facilities, equally with bills drawn upon other
countries.3
§ 118. The bill of exchange is by far the most convenient
and important instrument used in commercial transactions,-far
more convenient than the money which it in some respects
¹ Chitty on Bills, 10..
8. Rep. 586.
2 Id...
3 Buckner v. Finley, 2 Peters's U.
CLASSES-BILLS OF EXCHANGE.
71
represents. Let us see the purposes which it serves in a single
transaction, and the hazards and difficulties, as well as expense,
which must be incurred without it.
Take a supposed case. For instance, E. R. Felton has
10,000 barrels of flour in New York, for which he is in pressing
need of the money. But he cannot sell in that city for any
price which he is willing to accept. However, on sending the
Hour to John Brown, Liverpool, England, he can obtain the
New York price, besides enough to pay transportation, insur-
ance, &c., and 50 cts. profit on each barrel. That is, it will be
to his advantage $5,000 by sending the flour to Liverpool.
Felton ships the flour. It is sold for $100,000 over and
above all expenses. Brown now owes Felton this sum in gold.
But the money is in Liverpool. Felton must now pay transpor-
tation and insurance on that gold from Liverpool to New York.
The trip out and back takes one month, and he gets his money
at the end of that time, unless it is lost by the perils of the
sea.
Felton, at the very best, has lost the use of this money
for a month, which at 6 per cent. amounts to $500. He has
likewise paid, say $500 for transportation and insurance of the
money from Liverpool to New York. This is the cheapest and
most expeditious way of doing the business without the bill of
exchange.
§ 119. Now let us call to our aid the bill of exchange, by
which we shall see that Felton can obtain that $100,000 in New
York before the flour leaves the wharf. This is the method:
Felton gets the flour insured, procures a bill of lading, and con-
signs the flour to John Brown, Liverpool. He takes his bill of
lading to James Smith, a New York banker, who wants more
money in Liverpool than he has there. Felton draws his own
draft or bill of exchange on Brown of Liverpool, in favor of
Smith of New York, for $100,000; for which Smith pays Fel-
ton not only the $100,000, but a premium of several hundred
dollars on the draft.
Smith, the banker, can well afford to pay this premium. In-
deed, he will make money out of the transaction. For A. T.
Stewart has just purchased $100,000 worth of goods in Liver-
72
NEGOTIABLE PAPER.
pool or London, and must send the gold over there to pay for
them, unless he can find a man who has that amount of money
there, and who will let him have it. In other words, Stewart
wants that $100,000 in Liverpool, which did belong to Felton,
but now belongs to Smith. Stewart goes to banker Smith, and
buys that draft which Smith has just bought of Felton, and
pays for it an additional premium. It is the business of the
banker, and he charges a little more when he sells than he pays
when he buys, a bill of exchange.
+
Felton draws the bill in favor of James Smith or order, and
James Smith indorses it over to A. T. Stewart, and now A. T.
Stewart is the owner of that money in Liverpool.
It is plain that all parties are accommodated and benefited
by this transaction; and yet, not one dollar has crossed the
ocean. It would not be among the possibilities to do the im-
mense business which is now carried on in the commercial world
between merchants of different and distant nations and coun-
tries, but for the use of this instrument called a bill of ex-
change.
There would be no absolute necessity for the banker's services.
as a middleman, in this transaction, if Felton could only hap-
pen to know when he has it to sell, that Stewart wants to buy,
the draft on Liverpool. But Felton does not know Stewart, or
that he owes money in England; but he does know where to
find a banker, and he knows that bankers deal in this kind of
paper. Stewart knows the same thing. So Felton goes there
to sell, and Stewart goes there to buy. Hence the utility of the
professional banker.
Now this middleman, the banker, plays a very important
and useful part in the business world. He does not limit his
purchases of bills of exchange to the amount which he knows he
can sell to-day or to-morrow. But he buys in large numbers
and amounts, sends them forward to Liverpool, London, Paris,
or any other place on which they are drawn, collects the money
for them, and has it deposited to his credit in bank at those
places.
He thus prepares himself to draw his own bills of exchange
on those places in such sums as may chance to be wanted by his
CLASSES-BILLS OF EXCHANGE.
73
business acquaintances and customers. Thus twenty bankers
may make the necessary remittances for ten thousand importing
merchants.
§ 120. In this manner the trouble, hazard, and expense of
sending large sums of coin from one country to another, are
nearly avoided. They would be entirely avoided were the ex-
ports and imports, or sales and purchases, exactly equal in value
between the countries having commercial intercourse with each
other.
But if we export to England and France less in value of
cotton, tobacco, flour, rice, and other productions, than we pur-
chase of those countries, there must be a balance due to them.
Then "the balance of trade," as it is called, is against us. The
bankers cannot buy drafts enough of our exporters to pay all the
debts of our importers. This balance against us must be sent
over in coin. But, practically, on account of the bill of ex
change, this is but a small sum compared with the vast amoun*
of business transacted, as the exports and imports approach s
near to equality in value, with those countries.
·
Were it not for the bill of exchange the American merchant
who sends to Liverpool a thousand bales of cotton, would be
obliged to arrange for bringing back the money for which it
sells; and the English merchant who sends over here a cargo
of silks or cloths, must make provision for getting his specie
across the Atlantic; and both would be obliged to wait months
for returns.
§ 121. The inland bill of exchange is equally convenient
and useful. The foreign bill is very ancient; but the inland
bill is quite modern, dating back but two or three hundred
years. Both, in the beginning of their use, and for a long time
after, were quite restricted in their operation. At first, they
were drawn between merchants only; and this was essential to
their validity. It was also essential that a special custom
should exist for drawing and accepting them, between the towns
in which the drawer and acceptor lived; or if the parties lived
in the same town, that such a custom should exist therein.'
¹ Claxton v. Swift, 3 Mad. R. 86; Bromwich v. Loyd, 2 Lutw. R. 1586.
74
PAPER.
NEGOTIABLE
It is certain, however, that these local customs soon became
general, and that the inland or domestic bill has finally become
as great a favorite with the community as its predecessor, the
foreign bill.¹
I
Being found beneficial to men engaged in commerce, that is,
merchants, there was no reason why it should be confined to
them; and hence it soon became the common instrument of
business, favored in the courts, and improved by statutory
enactments.2
II. PROMISSORY NOTES.
§ 122. The bill of exchange, we have said, is the oldest kind
of negotiable paper; and, it may be added, is the parent of all
other kinds in use. It came into existence by the custom and
practice of merchants, long before the promissory note, having
its foundation in what is called the law merchant, which easily
grew into existence as a part of the common law of England.
It is the only kind of paper negotiable at common law. All
other kinds, the promissory note included, are negotiable by
statute only, both in England and this country.3
§ 123. While the bill of exchange and the promissory note
are now alike in the quality of negotiability, there are other
respects in which they are quite unlike. That the elements of
the promissory note may be understood, the following forms in
common use are here introduced; the words to be varied accord-
ing to the circumstances in each particular case:
FORM IV.—PROMISSORY NOte.
$1,000.
Rochester, July 1, 1871.
Three months from date, I promise to pay Robert C.
Spencer or beater, One Thousand Dollars, for value received, with interest.
James H. Goldsmith,
1 2 Black. Com. 467........2 Edwards on Bills, 51...
Bills, ch. 1, 52, 53.
8 Edwards on
CLASSES-PROMISSORY NOTES.
75
$1,000.
FORM V.PROMISSORY NOTE.
Rochester, July 1, 1871.
Sixty days after date, I promise to pay Robert C. Spencer
One Thousand Dollars, for value received, with interest.
or order.
James H. Goldsmith.
FORM VI.-PROMISSORY NOTE.
251,000.
Rochester, July 1, 1871.
Sixty days from date, we jointly and severally promise to pay Henry
B. Bryant or order, One Thousand Dollars, value received.
The original parties to a promissory note are:
1. The maker;
2. The payee.
E. R. Felton.
E. G. Folsom
The maker in the first two forms given (Forms No. 4 and 5)
is James H. Goldsmith, and the payee is Robert C. Spencer.
In Form No. 6, there are two makers, E. R. Felton and E. G.
Folsom. The payee is Henry B. Bryant. There are properly
but two original parties to this instrument,—the maker or
makers, and the payee or payees.
Notice the essential difference in the language of the bill of
exchange from that of the promissory note.
The bill is an order drawn by one person on another, to pay
a third person a specified sum of money.
The note is a promise by one person to pay another a speci-
fied sum.
In
The one orders to be paid,-the other promises to pay.
the bill, you order Smith to pay Jones,-in the note, you promise
to pay Jones yourself.
§ 124. The word "bearer" or "order" in a note has the
same effect as in a bill of exchange. If the note is payable to
the payee or bearer, it may be transferred by delivery only; but
if to payee or order, it is necessary for the payee to write his
76
PAPER.
NEGOTIABLE
name across the back of it in order to transfer it.
The payee
may indorse it whether payable to bearer or order, but when
payable to his order, he must indorse the note in order to
transfer it. By such indorsement, the original payee now
assumes a new relation to the instrument, and becomes, as
already noticed, a subsequent party.
§ 125. Before indorsing the note the money was owing to
him as payee; but now the payee has become indorser, and
the money is payable to another person, who is called the in-
dorsee. The original payee is now himself conditionally liable
to pay the money to the indorsee. The conditions of that
liability will be noticed hereafter.
The law presumes that the payee (now indorser) has parted
with the note for value, and that he has no direct interest in it,
except that the maker shall pay it at maturity, so as to save
him harmless.
§ 126. All that has been said with reference to the necessity
of primary elements of bills of exchange, or other negotiable
instruments, applies as well to promissory negotiable notes.
There must be parties, consideration, must be payable in money,
payable absolutely, contain negotiable words, and the time of
issue and maturity must be expressed or implied.
Having all these elements, the note is negotiable under the
statutes of most of the States, the same as bills of exchange.
§ 127. There is a noticeable peculiarity in Form No. 6. The
promise is "joint and several," and it is signed by two persons,
E. R. Felton and E. G. Folsom. In this form of note each
signer, no matter how many, assumes the entire responsibility of
paying the whole sum. Of course but one collection of the note
can be enforced, but the holder can sue and collect of either one,
without proceeding against the other or others, if he chooses to
do so.
Or he can sue them both or all jointly in one suit.
In other words, the signers of such a note are liable, not only
jointly, that is together, but severally or separately.
When a note reads "I promise to pay," and is signed by
more than cne person, it is a joint and several note. The holder
can sue either signer alone, or all jointly, as he chooses.
If a note reads "We promise to pay," and no words are in-
CLASSES-CHECKS.
ryry
serted indicating a several liability, it is a joint note, and all
must be joined in the suit.
III.-CHECK.
128. The next kind of negotiable paper in most common
use is the check. Merchants and business men in the daily re-
ceipt of considerable sums of money, generally practice deposit-
ing them in bank. They can call on the bank, whenever they
see fit, for any part or all of this money so deposited. They de
this by drawing their check on the bank, which is usually in form
like the following:
100.
Pay to
FORM NO. VII.-CHECK.
Rochester, July 1, 1871.
FLOUR CITY NATIONAL BANK.
Richard Nelson
or Bearer,
William W. Warner.
One Hundred Dollars.
No. 15.
Instead of the word "bearer," if the check is not to be used
immediately, or if it is to be sent to the payee by mail, it is safer
to insert the word order; as in such case, if the check miscar-
ries, or gets lost, or the letter containing it is robbed, no one can
obtain the money on it until the signature of the payee is written
on the back. Or if paid on account of a forged signature, the
bank will be the loser.
§ 129. The check is substantially in the usual form of an
inland bill of exchange, though it is not presented to the bank
for acceptance, but for payment. However, if the payee or
holder does not intend to use it soon, or if he wishes to transfer
it, and desires before doing so to secure the responsibility of the
bank in order to give the check credit at a distance, he can take
it to the bank and have it certified. This is done by one of the
bank officers who is authorized to do such business, declaring on
the face of it in writing that it is "good." This pledges the
bank to its payment according to its terms.1
1 Willets v. Phoenix Bank, 2 Duer R. 121.
78
NEGOTIABLE PAPER.
After a check is certified, no one need fear to take it at its
face, for even though it be improperly certified by the paying
teller that it is good, and in violation of his duty, the bank is
holden.¹
But should the check show on its face that it is improperly
certified, the rule would be different, as the check then gives
notice of its own defects.²
In most respects the check is analogous to an inland bill of
exchange, and indeed it is now regarded as such in nearly every
particular.3
§ 130. The indorser of a check is on the same footing as on all
other forms of negotiable paper. However, the want of prompt
presentation for payment will only exonerate the drawer so far
as it occasions actual damage to him. No damage is pre-
sumed.¹
The doctrine formerly was, that checks are always drawn
upon a bank or banker, but the later decisions hold that this is
not essential.5
All checks must be made payable immediately on present-
ment, and without days of grace. They must be presented for
payment, and not for acceptance. Otherwise they are bills of
exchange.
6
The check has all the elements of negotiable paper. The
original parties to the form, as we have given it, are:
1. The drawer-William W. Warner.
2. The drawee-The Bank.
3. The payee-Richard Nelson.
As it is drawn payable to Richard Nelson or bearer, to per-
fect its transfer to any one else it is only necessary that he should
hand it over just as he would a bank bill.
If the word order were inserted in place of bearer, the payee
must put his name on the back of it in order to transfer it to
another. The payee now becomes indorser, and the one receiv-
1 Farmers and Mechanics Bank v. Drovers Bank, 2 E. P. Smith's R. 125.
2 Claflin v. Farmers and Citizens Bank, 11 E. P. Smith's R. 143.......
3 Harkness v. Anderson, 21 Wend. R 373... 4 Murray v. Judah, 6 Cow. R.
5 Bowen v. Newell, 4
490;
Little v. Phoenix Bank, 2 Hill's R. 425....
Seld. R. 190...
6 Id.
CLASSES-BANK BILLS.
79
ing it is indorsee. Subsequent parties may be added indefinitely,
as on a bill of exchange or promissory note.
Of course the payee or anybody else may indorse the check,
though payable to bearer, and thus render himself responsible
for its payment.
IV. BANK BILLS.
§ 131. Bank notes are a species of promissory note. They
are drawn payable to the bearer on demand, and are, for many
purposes, considered and treated as cash. Being payable on
demand, and issued by a responsible association, they are not
regarded as mere securities for debts, but are, by general consent,
used as money in the ordinary course and transaction of busi-
ness.
The business of banking being regulated by law, and carried
on under such conditions and restrictions as are deemed neces-
sary for the protection of the community, a certain credit
attaches to the notes of a bank that gives them currency, and
renders them a convenient substitute for money.¹
Hence the practice is to use bank notes as though they were
money in the payment of debts, though they are not a legal
tender, and are strictly only promissory notes.2
§ 132. Of course these remarks as to bank bills not being
legal tender, are not applicable to such as are known as Treasury
Notes, issued by authority of Congress. They are a legal tender
at their face-value for all debts public and private, except
duties on imports and interest on the public debt.
But ordinary bank bills are a good tender in payment of
debts, unless they are objected to by the party to whom they are
offered, and upon the ground that they are not money.3
§ 133. Bank notes pass under the word "money" in a will,
and they are generally treated as cash.*
When payment is made in bank notes they are treated as
cash, and receipts are given as for cash.5
¹ Smith v. Strong, 2 Hill's R. 241; Safford v. Wycoff, 1 Hill's R. 13..
2 Jefferson County Bank v. Chapman, 19 Johns. R. 115; Thomas v. Dodd, 6
Hill's R. 340.
Maine R. 475.
Johns. R. 200.
39 Pick. R. 542; 7 Johns. R. 476; 8 Ohio R. 169; 11
4 19 Johns. R. 115; 7 Id. 476; 6 Hill's R. 340.... 5 12
80
NEGOTIABLE PAPER.
Sometimes payment is made in bank notes which are worth-
less; that is, the bank may have failed or suspended. The debt
thus claimed to be paid is not extinguished if the bank notes are
not paid when duly presented at the bank in a reasonable time.
But it is the duty of the person receiving them to ascertain
their value as soon as possible by presenting them to the bank.¹
Bank notes are governed by the rules applicable to other
negotiable paper, and are assignable by delivery. The holder of
a note is entitled to payment, and cannot be affected by the
fraud of a former holder, unless he is proved privy to the fraud.²
§ 134. The bona fide holder who has received them for value
is protected in their possession even against the real owner from
whom they may have been stolen. Payment in forged bank bills
is a nullity.³
But where the bank itself from which the bills purported to
have been issued receives them, and they prove to have been
forged, the rule is otherwise.*
PART III-INCIDENTS.
§ 135. Perhaps all that may be necessary has been said
about checks and bank notes, except occasionally a few words by
way of illustration. Attention is now invited to the Incidents
relating to bills of exchange and promissory notes.
We will notice first those that relate exclusively to bills of
exchange.
I. TO BILLS OF EXCHANGE ONLY.
§ 136. The form of a bill of exchange, and the nature of the
undertaking entered into by the drawer and indorser of it, show
plainly that the holder of the bill has an interest in having it
presented for acceptance without any unreasonable delay.
§ 137.-1. Presentation for Acceptance.-It has already been
stated that the theory upon which a bill of exchange is founded
.
¹ 11 Wend. R. 9; 13 Id. 101; 6 Mass. R. 182; 18 Barb. R. 545.. 2 4 Rawle,
Penn. R. 185... 32 Hawks R. (N. C.) 320 ; 3 Id. 568; 5 Conn. R. 71.......
10 Wheat. R. 333, cit. from Bouv. Law Dict., art. Bank Notes.
•
INCIDENTS-TO BILLS ONLY.
81
is, that the drawer has money in the hands of the drawee, which
the bill directs the drawee to pay over to the payee or his order.
The drawer impliedly promises that he will pay the bill if it is
dishonored by refusal to accept or pay, and he is duly notified
thereof. In making a proper presentation for acceptance, there
are several things to be considered and several steps to be taken.
1. By Whom.-The presentation should be made by the
payee, or by some person lawfully authorized to act for him.
But the holder is presumed to have the right to present the bill
for acceptance, and his presentment will be valid.¹
2. To Whom.-The presentment of a bill ought to be
made to the drawee himself, or to his duly authorized agent. If
presented to an agent, the burden of proof as to the agency will
be on the party presenting the bill.
3. When.—If a bill is drawn payable at sight, or so many
days after sight, or after demand, the presentment for acceptance is
necessary in order to fix the time when it shall be payable. In such
cases the law does not declare just when it shall be presented, but
that it must be done within a reasonable time. What is reason-
able is left to the court to determine under all the circumstances.²
But the owner of the bill should not unnecessarily delay in
making the presentation, for, if it is accepted, he thereby ac-
quires the additional security of the acceptor. If not accepted,
recourse may be had immediately to the drawer and indorsers.3
If the bill be drawn payable so many days or months after
date, the payee need not present it for acceptance until maturity,
even for the purpose of charging drawer and indorsers.
If pre-
sented on the day it is due, and acceptance be then refused, no
further demand of payment is necessary to charge drawer and
indorsers.*
The presentment for acceptance ought to be made during the
usual business hours of the day, or at least between morning
and bed-time in the evening.5
¹ Bank of Utica v. Smith, 18 Johns. R. 230; Freeman v. Boynton, 7 Mass. R.
483; Story on Bills, § 229........2 Aymar v. Beers, 7 Cow. R. 705; Sice v.
Cunningham, 1 Cow. R. 397; 2 Johns. R. 146... 3 3 Johns. R. 202; 3 East
R. 481...
Plato v. Reynolds, 13 E. P. Smith R. 586.
5 Cayuga
County Bank v. Hunt, 2 Hill R. 635; Parker v. Gordon, 7 East R. 385.
6
82
PAPER.
NEGOTIABLE
But if made at a bank, it should be made during the usual
banking hours.¹
4. Where. If the bill is addressed to the drawee at a
particular place, the presentment ought to be made at that
place. If the drawee has removed to another part of the same
city, the holder should make diligent inquiry as to his place of
business or residence, and present it there for acceptance.2
But if the bill is not addressed to any particular place, the
presentment should be made at the residence or domicil of the
drawee without reference to the place where it is payable. If
the drawee has removed to another place of residence in the
same State, the holder should make diligent search and inquiry
for him, and present the bill at his place of business or residence
for acceptance.3
5. How.-As already stated, the bill should be presented to
the drawee himself, or to his authorized agent. It should be
made in such a manner as to give the drawee an opportunity to
act deliberately.*
It should be shown to the drawee, and if desired, should be
left with him twenty-four hours, unless in the interim he either
accepts or declares his intention not to accept. The object is to
give the drawee time to look over his accounts and see whether
he has sufficient funds belonging to the drawer, so that he can
decide intelligently whether he will accept or not.³
If a bill is drawn on two persons who are not partners, it
should be presented to them both for acceptance; for in this
case neither of them has the power to bind the other."
But where a bill is drawn on a firm, an acceptance by one of
them will bind his co-partners. If the person on whom a bill is
drawn is dead, it should be presented to the legal representative,
if he lives within a reasonable distance; for although the
executor or administrator has no right to bind the estate of the
¹ Newark India Rubber Co. v. Bishop, 3 E. D. Smith R. 48....
Wolf v. Murray, 2 Sandf. R. 166; 2 Hill R. 635.
•
Denio R. 145; Anderson v. Drake, 14 Johns. R. 114.
• •
2 De
Taylor v. Snyder, 3
4 Cheek v. Roper, 5
Esp. R. 175; Chitty on Bills, 279........ 5 Edwards on Bills, 400; Bellasis a
Hester, 1 Lord Raym. 281; Ingraham v. Foster, 2 Smith's R. 242.......
• Willis v. Greene, 5 Hill R. 232; Bayley on Bills, ch. 6, § 1.
INCIDENTS-TO BILLS ONLY.
83
deceased by accepting a bill, it is incumbent on the holder to
take the proper steps to bind the indorsers.
§ 138.-2. Acceptance.-An acceptance is an engagement to
pay a bill according to the tenor of the acceptance; a general
acceptance is an engagement to pay according to the tenor of the
bill. The payee or holder may insist upon a general acceptance.
The act of accepting a bill of exchange, is like the making and
delivery of a promissory note; it is the execution of a contract, by
which the acceptor undertakes to pay the amount mentioned in
the bill to the payee or holder thereof, when the same becomes
due. The drawee is therefore no party to the instrument until
he accepts it, and then he becomes the principal debtor.²
The acceptance should be in writing, and signed by the
acceptor or by his agent. In the State of New York it must
be. According to the law merchant, any words written by the
drawee on a bill, not putting a direct negative on its request,
such as "accepted," "presented," "seen," the day of the month,
or a direction to a third person to pay it, is prima facie a com-
plete acceptance.³
The usual manner of acceptance is for the drawee to write
the word "Accepted" across the face of the bill, followed by the
date and his signature.
Having funds in his hands belonging to the drawer, it is
his duty according to mercantile usage to honor the bill by
accepting it; but he is not legally bound to do so, any more
than a debtor is bound to give his creditor a promissory note for
the amount due.*
§ 139. An unconditional promise in writing to accept a bill
of exchange, if there is no local statute to the contrary, and if
made within a reasonable time before or after the date of the
bill, describing the same in terms not to be mistaken, is a vir-
tual acceptance thereof, in favor of any person taking the bill on
the inspection and credit of the promise."
There are special statutes on the subject of acceptance of
¹ 5 Hill R. 232; Chitty on Bills, 280; Story on Bills, § 230.
on Bills, 281; 2 Burr. R. 674; Dougl. 249; 8 Esp. R. 47...
207; 15 Id. 6; Story on Bills, § 243.
•
•
2
Chitty
3 10 Johns. R.
Story on Bills, SS 113, 117, 238.
5 Greele v. Parker, 5 Wend. R. 414; S. C., 2 Id. 545,
84
NEGOTIABLE PAPER.
bills of exchange in some of the States. Of course the local
statute must be followed strictly, as it supersedes the common
law on the subject. The following are the provisions of the Re-
vised Statutes of New York, which have been in force since
1830:
§ 6. No person within this State shall be charged as an ac-
ceptor on a bill of exchange, unless his acceptance shall be in
writing, signed by himself or his lawful agent.
§ 7. If such acceptance be written on a paper other than the
bill, it shall not bind the acceptor, except in favor of a person to
whom such acceptance shall have been shown, and who, on
the faith thereof, shall have received the bill for a valuable con-
sideration.
§ 8. An unconditional promise in writing to accept a bill
before it is drawn, shall be deemed an actual acceptance in favor
of every person who, upon the faith thereof, shall have received
the bill for a valuable consideration.
§ 9. Every holder of a bill, presenting the same for accept-
ance, may require that the acceptance be written on the bill. A
refusal to comply with such request shall be deemed a refusal to
accept, and the bill may be protested for non-acceptance.
!
§ 11. Every person upon whom a bill of exchange is drawn,
und to whom the same is delivered for acceptance, who shall
destroy such bill, or refuse, within twenty-four hours after such
delivery, or within such period as the holder may allow, to return
the bill, accepted or non-accepted, to the holder, shall be deemed
to have accepted the same."
1
A holder of a bill is not obliged to receive a conditional ac-
ceptance, but if he does so he will be bound to abide by its
terms.2
If the holder receives a conditional acceptance which varies
from the tenor of the instrument, this will discharge the in-
dorsers.3
§ 140. An acceptance for honor is a conditional undertaking
11 Vol. N. Y. Stat. at Large, by Edmonds, p. 722………….
Schmoll, 5 Taunt. R. 353; Parker v. Gordon, 7 East R. 385.
Bank of State of New York, 13 Barb. R. 636; S. C., 5 Seld. R. 582.
2 Gammon v.
3 Walker v.
INCIDENTS-TO BILLS ONLY.
85
to pay the bill when it becomes due, in case the original drawee
does not.¹
This is an engagement made by a third person after protest,
supra protest, for the honor of the drawer or one of the in-
dorsers; and inures to the benefit of all the parties subsequent to
him for whose honor it is made.2
It is an acceptance made by a volunteer, who interposes in
order to promote the negotiation of the bill where the drawee's
credit is suspected, or to save the reputation and prevent the
suing of some of the parties where the drawee either can not be
found, is not capable of making himself responsible, or refuses
acceptance. When it does not specify particularly for whose
honor it is made, it is to be considered as made for the honor
of the drawer.3
An acceptor for the honor of an indorser stands in the place
of his indorsee, paying full value for the bill, and of course has a
remedy thereon against him and all the prior parties.*
The acceptor supra protest is bound to notify without delay
his acceptance to the person for whose honor it was made; and
the party paying a bill under protest, for the honor of an in-
dorser, must give him reasonable notice that he has made such
payment for his credit, or the latter will not be bound to re-
fund.5
3. Non-Acceptance.-We have seen that, generally, in present-
ing to the drawee a bill of exchange, he is not bound to accept.
Before acceptance he is not legally a party to the instrument.
If the bill is properly presented, and the drawee refuses to
accept, the bill is said to be dishonored; that is, it is discredited.
§ 141.-1. Duties of Holder.-When a bill of exchange
has been dishonored by non-acceptance, certain steps must be
taken by the holder, in order that he may have his remedy on
the drawer and indorsers.
If the instrument is a foreign bill of exchange, it must be
protested by the holder, or by some other person if he be ill or
absent, and notice thereof given to the drawer. The protest is
1 Hoare v. Cazenove, 16 East R. 391...
99........³ Id.; Smith's Merc. Law, 284..
2 Bailey on Bills, ch. 6, § 1, p.
4 Mulford v. Walcott, 1 Lord
Raym. 574; 1 Esp. R. 112...... 5 Wood v. Pugh, 7 Ohio R., part 2, p. 156.
86
NEGOTIABLE PAPER.
made by a notary public, and notice of the non-acceptance
should be immediately sent to all the parties on whom the
holder means to call for payment.¹
The inland bill stands on a different footing. Where there is
no statute requiring it, it need not be protested; but a notice of
the dishonor should be given to the drawer and indorsers.²
As the legal presumption is that the drawer has funds in the
hands of the drawee sufficient to pay the bill, it is right and
proper, in case the drawee refuses to accept the bill, that the
drawer, and indorsers, if there are any, shall have notice of
the refusal.
The payee must give this notice, or cause it to be given, at
the proper time and in the proper manner, or he may lose his
claim on them. The drawer has the right to this notice, so that
he may withdraw his funds from the drawee, or take any other
necessary steps to secure himself.
§ 142. The legal presumption is, that the drawer and in-
dorsers have been injured by the want of the proper and legal
notice that the bill has been dishonored; but this presumption,
so far as the drawer is concerned, may be rebutted by showing
that no injury has been sustained. In such case the payee will
be exonerated for not giving the usual notice.³
If the drawer has no funds in the hands of the drawee, and
he knew it at the time he drew the bill, he is not entitled to
notice.*
But it is always safer to give the usual notice; for the mere
want of funds in the hands of the drawee is not of itself sufficient
to excuse notice, if it shall appear that the drawer had good
reason to believe that the bill would be accepted and paid.
The drawer and drawee may have had extensive dealings
with each other, the balances sometimes in favor of one and
sometimes the other; or the drawer may have made frequent
consignments of goods, wares, or produce to the drawee, a part
of which may not yet have reached him."
1 Chitty on Bills, 334, 335
Wells v. Whitehead, 15 Wend.
Hughes, 17 Wend. R. 94...
•
23 Kent's Com. 93, 109; 10 Mass. R 9;
R. 527... . . . . . .3 Commercial Bank of Albany v.
4 Franklin v. Vanderpool, 1 Hall's R. 78; Coyle
v. Smith, 1 E. D. Smith's R. 400; Bickerdike v. Bollman, 1 Term R. 405...
5 Legge v. Thorpe, 12 East R. 171; Rucker v. Hiller, 16 East R. 43.

INCIDENTS-TO BILLS ONLY.
87
But the indorser must have notice, whether the drawer is
entitled to it or not.¹
Even fraud in the other parties does not deprive the indorser
of his right to the proper notice, unless he is himself impli-
cated.2
Even the death of the drawee will not dispense with notice.
of the dishonor of the bill. Nor will the death of the drawer or
indorser excuse the holder from giving notice. In such cases the
notice should be sent to the surviving representatives, if the
holder can ascertain who and where they are. He must use
due diligence for this purpose.3
§ 143.-2. Rights of Holder.-If the bill of exchange
has been properly presented as to time, place, and mode,
and the drawee has declined to accept, and the proper no-
tices of non-acceptance have been given to the drawer and
indorsers informing them of the dishonor of the bill, the holder
may look to all the parties on the bill for indemnity. And unless
there is some statute of the State directing otherwise, he may
take his own time anywhere within the statute of limitations to
enforce his remedy.
To properly perpetuate the evidences of regularity with re-
gard to all the necessary steps of demand and notice, the holder,
as before stated, should secure the services of a notary public.
The notary will keep copies of all notices, as well as the protest
in the case, and these can be used as evidence in any future suit.
The protest will be fully explained hereafter.
Nor is the holder obliged to wait before bringing suit until
the time has elapsed at which the bill is made payable. His
right of action arises at once when the bill is dishonored. The
contract is broken if the drawee refuses to accept; as it is im-
plied by the act of drawing and indorsing that the drawer and
indorser guarantee acceptance. By refusal to accept, therefore,
the right of action arises immediately, and the holder can pro-
ceed without delay.
§ 144. If a bill of exchange is left with a bank for collection,
and the bank turns it over to its notary public to take the proper
1 Ward v. Tucker, 7 Mass. R. 450...
.2 Leach v. Hewitt, 4 Taunt. R. 731
3 Cayuga County Bank v. Bennett, 5 Hill's R. 236.

88
NEGOTIABLE PAPER.
steps for presentation or payment, and there is such a failure
to perform his duties by the notary as to destroy the remedy of
the payee, the bank itself becomes liable.¹
II. COMMON TO BILLS AND NOTES.
§ 145. Having considered those Incidents belonging to bills
of exchange exclusively, attention will now be given to such as
belong in common to both bills and notes.
After a bill of exchange has been accepted, it so nearly re-
sembles a promissory note in almost every respect except its
form, that the rules of law applicable to the one are alike appli-
cable to the other.
In a promissory note the maker is the principal debtor, or
the one who is expected to pay it. On the contrary, the ac-
ceptor of a bill of exchange is the principal debtor, and the one
who is expected to, and has engaged, to pay it. The word
"maker" applies to the signer of a note only; the word
"drawer," to the signer of a bill.
§ 146.-1. Indorsement.-An indorsement is anything written
on the back of an instrument, having relation to the instrument.
The name of a person written on the back of a bill or note is an
indorsement.2
The one who writes his name there is called the indorser.
The one for whose benefit the name is written, and to whom the
bill or note is transferred, is called the indorsee.
An indorsement is generally made primarily for the purpose
of transferring the rights of the holder of the instrument to some
other person. It has, however, various results, as will soon ap-
pear, depending on the kind or character of it. There are five
kinds of indorsement: +
INDORSEMENT
1. In blank.
2. In full.
3. Conditional.
4. Qualified.
5. Restrictive.
1 Allen v. Merchants' Bank, 22 Wend. R. 315; Walker v. Bank of State of
N. Y., 5 Seld. R. 582; Commercial Bank Penn. v. Union Bank of N. Y., 3 Kern.
R. 202....
220 Verm. R. 99.
INCIDENTS-TO BILLS AND NOTES.
89
1. In Blank.-An indorsement in blank, as it is called,
is made by the indorser's simply writing his name on the back
of negotiable paper. A negotiable instrument thus indorsed is
transferable by delivery from hand to hand, like a bank bill.
There is no difference between this instrument thus indorsed,
though payable to the order of the indorser, and one that is
payable to bearer. So long as it continues in blank, it is pay-
able to bearer.¹
When, therefore, a bill or note so indorsed is transmitted
from one place to another, by mail or otherwise, the holder
incurs the risk of its being stolen or lost on the route, and after-
ward negotiated to a bona fide purchaser for value.2
When the payee of a note or bill transfers it by an indorse-
ment in blank, the indorsee is thereby authorized to fill it up
with what name he pleases; thus converting it into a full or
special indorsement.3
When a bill or note is transferred by a blank indorsement,
and the indorsee fills it up, making it payable to a particular
person, for the purpose of collection, and the instrument is
returned to him dishonored, the holder has the right to strike
out of the indorsement all but the name of the indorser, leaving
it as at first, an indorsement in blank.*
2. In Full.-When the indorsement mentions the name
of the person in whose favor it is made, it is called an indorse-
ment in full, or a full indorsement.5
After an indorsement in full, none but the indorsee or per-
son to whom it is ordered paid, can demand payment of the in-
strument. Nor can he transfer it himself as negotiable only by
adding his own indorsement in writing."
This mode of indorsement, therefore, is very generally
adopted among business men, for the purpose of insuring safety
in the transmission of negotiable paper.
Thus, where a bill is drawn in Chicago on a person in the
1 Bayley on Bills, 67........2 Peacock v. Rhodes, Doug. R. 633....
3 Lovell v. Evertson, 11 Johns. R. 52; Williams v. Matthews, 3 Cow. R. 252.
4 Bank of Utica v. Smith, 18 Johns. R. 220; 21 Wend. R. 584..
5 Bayley on Bills, 67, edit. 1826..... 6 Burdick v. Green, 15 Johns. R. 247.
"Bank of Utica v. Smith, 18 Johns. R. 231.
90
NEGOTIABLE PAPER.
city of New York, and it is necessary for the payee to send it
forward for collection, he can do so without incurring any
danger of its being lost or stolen on the way, by indorsing it in
full to the order of his correspondent in the city where it is
payable.
Davis draws a bill at Brockport on New York, payable to
the order of Patchin, and Patchin indorses it, "Pay Richard
Yates, or order," and though it should be stolen on the way to
New York, no one but Yates himself, or the person to whom he
indorses it, can demand the money on it.¹
The indorsement always follows the nature of the original
instrument, which being itself negotiable, a direction by the
payee to pay it to any person named, is a direction to pay it to
such person on his order, according to the tenor of the instru-
ment itself.²
When the payee or indorsee of a negotiable note transfers
it by an indorsement in full, or in blank, he is liable to pay the
amount to any subsequent holder or indorsee, provided the
maker does not pay it, and a proper demand is made, and due
notice of non-payment is given to such indorser. The indorser
of a promissory note does not stand in the situation of a maker
relatively to his indorsee.³
3. Conditional.—A conditional indorsement is made
subject to some condition, without the performance of which
the instrument will not be or remain valid. The payee or
indorser of an instrument may indorse it over to another, insert-
ing in the indorsement a condition making it payable upon the
happening of an uncertain event.
Here is a conditional indorsement: "Pay the within sum to
Messrs. Clark & Ross, or order, upon my name appearing in the
Gazette as ensign in any regiment of the line between the 1st
and 64th, if within two months from this date,"-signed by the
indorser. To make such an indorsement operate as a perfect
1 Chautauqua Co. Bank v. Davis, 21 Wend. R. 584... 2 Eddie v. East
India Co., 2 Burr. R. 1216; 3 Comst. R. 494.. 3 Gwinnell v. Herbert, 5
Ad. & Ellis R. 436; Dean v. Hall, 7 Wend. R. 214.
INCIDENTS - TO BILLS AND NOTES.
91
transfer of title, it must be shown that the condition has been
complied with or fulfilled."
4. Qualified. - The law attaches certain conditional
responsibilities to the indorser of negotiable instruments. But
the indorser can qualify that responsibility by the terms of his
indorsement, if he sees fit to do so.
A qualified indorsement is one which restrains, or limits, or
qualifies, or enlarges the liability of the indorser, in any manner
different from what the law generally imports as his true liabil-
ity, deducible from the nature of the instrument.2
When the payee or indorsee of a bill or note intends simply
to sell or transfer the instrument without rendering himself
liable thereon as indorser, he ought to state that fact in the in-
dorsement. This he may do by adding under his name, "with-
out recourse to me;" or by employing any other words which
show that he does not intend to incur any responsibility.3
Any form of words is sufficient to prevent liability on the
part of the indorser, if the language clearly shows that the in-
tention is to avoid responsibility. The addition of the word
"agent," or "treasurer," or "cashier," and the like, will relieve
such indorser from liability, if he is known to be acting as a
mere agent, or in an official station, for the advantage or on the
behalf of the real party in interest.*
5. Restrictive.—A restrictive indorsement is one which
restrains the negotiability of the instrument to a particular
person, or for a particular purpose."
The payee or indorsee of a bill or note, who has the absolute
property in it, may make a restrictive indorsement, which will
preclude the person in whose favor it is made from making such
a transfer of it as will give a right of action against either the
person making the indorsement, or any of the parties before
him. The following form will prevent the bill or note from
¹ Robertson v. Kensington, 4 Taunt. R. 30; Sanders v. Bacon, 8 Johns. R.
485; Taphan v. Ely, 15 Wend. R. 362.. 27 Taunt. R. 16; Chitty on Bills,
8th edit. 251..... 3 Goupy v. Harden, 1 Holt, N. P. Rep. 342; S. C., 7 Taunt.
R. 160....
4 Babcock v. Beman, 1 Kern. R. 200; S. C., 1 E. D. Smith R.
593; Mott v. Hicks, 1 Cow. R. 513; Brockway v. Allen, 17 Wend. R. 40..
5 1 Rob. R. (La.) 222.
92
NEGOTIABLE PAPER.
being further transferred: "Pay to James Smith only;" or
"Pay James Smith for my use;" or "Pay James Smith for
my account." The indorsement plainly shows that the indorser
does not intend to part with the absolute property in the in-
strument, and that it is a mere authority to receive the money
upon it.¹
§ 147.-2. Transfer.-1. How Made.-As already seen,
negotiable paper may be transferred; and this is the chief
peculiarity that distinguishes it from other contracts. In the
ordinary course of business the unqualified indorsement of a
note or bill is a double contract: First, it is a present transfer
and assignment of the paper to the indorsee; and second, it is
an executory contract by which the indorser agrees, upon cer-
tain conditions, to pay the amount of the note or bill himself.
As a regular indorsement it must operate as a transfer of the
paper; and it will operate as a collateral contract, unless a con-
trary intent is expressed in the writing of indorsement.2
A transfer, however, may be made without indorsement, or
without any collateral contract. This may be done by simple
delivery of the instrument if payable to bearer; or, if indorsed
in blank, it can be done in the same way by the indorsee, though
payable to order.³
A transfer as well as an acceptance of a bill of exchange,
supposes the existence of the bill accepted or transferred. But
a blank indorsement will operate as a transfer of a bill not yet
drawn.
§ 148.-2. Before Maturity.-The time when a bill
or note is transferred is often important in its effect upon the
rights of the purchaser or indorsee.
If a negotiable note or bill of exchange be properly trans-
ferred to an innocent holder for value before it is due, the
holder has a good title to it, and may enforce collection of it in
his own name, no matter what the rights and equities may have
been as between the original parties. Even if the instrument
1 Snee v. Prescott, 1 Atk. R. 245, 249; Sigourney v. Lloyd, 8 Barn. & Cress.
R. 622, 628; S. C., 5 Bing. R. 525; Edie v. East India Co., 2 Burr. R. 1227; An-
cher v. Bank of England, Doug. R. 637..... 2 Kern. R. 200; Edwards on
Bills (edit. 1857), p. 284, 285...
3 Id. 249.
INCIDENTS—TO
TO BILLS AND NOTES.
93
was found, having been lost by the payee, and sold to the
holder by the finder or any other person; or though it were
stolen and sold by the thief himself to the holder, if the party
purchasing it were ignorant of the felonious means by which it
was obtained, he may enforce collection in his own name. If
payable to bearer, the same rule holds without indorsement.¹
Of course neither the finder nor the thief could enforce col-
lection, for the very good reason that the instrument was not
obtained in good faith and for value.
It is generally true that a man who has no title to property
in him, can convey nothing out of him. But here, the party
purchasing for full and fair consideration, and in good faith,
takes, by force of the superior faith and sanctity attribut-
able to negotiable paper, perfect and unimpeachable title, when
he from whom he purchased had none. This is a quality in
which negotiable securities differ from all other property."
But it must be constantly borne in mind by the student,
what is perfectly familiar to every lawyer, that this sanctity
attaches only on the following conditions:
First. That the instrument is negotiable.
Second. That it is obtained in good faith.
Third. That it is obtained for value.
Fourth. That it is obtained before maturity; and,
Fifth. That the purchaser was not aware of any legal or
equitable defense.
It should be stated that where the purchaser has notice or
knowledge of the equities between the original or prior parties,
or of the insufficiency or illegality of the consideration, he takes
it subject to all such equities, and open to all such defenses,
even though he obtains it before maturity.
§ 149.-3. After Maturity.-When negotiable instru
ments are transferred after they have become due, the pur-
chaser takes them at his peril. The instrument is still nego-
tiable as before, but the party takes it subject to every defens
existing against it in the hands of the holder when it became
due.³
¹ Hall v. Wilson, 16 Barb. R. 548; Stalker v. McDonald, 6 Hill R. 93; Pea-
cock v. Rhodes, Doug. R. 633... 2 Chamberlain's Com. Law, 137.
• Williams v. Matthews, 3 Cow. R. 252.
94
NEGOTIABLE PAPER.
With this qualification negotiable paper may be transferred
as well after as before it has been dishonored. When paper
over due is transferred, it is deemed payable within a reasonable
time, upon demand; and the purchaser takes it with the usual
remedy against such indorsers thereon as have been properly
charged with notice.¹
After the instrument has matured, and remains unpaid, or
has been formally dishonored, the purchaser must take notice
that there is some reason why it is not paid. It is sufficient to
put every prudent man on inquiry,—for the legal presumption
is, that it would be paid unless there were some valid objection
to it. Of this the instrument itself gives notice.
§ 150.-3. Days of Grace. Before the payment of a
negotiable note or bill of exchange can be properly demanded of
maker or acceptor, it must be due,-must have reached ma-
turity. There is an element to be taken into account in the
computation of the time when bills and notes become due, known
as days of grace. These are certain days allowed to the acceptor
of a bill, or the maker of a note, in which to make payment, in
addition to the time contracted for as mentioned in the instru-
ment.
These are called "days of grace," because formerly they were
allowed as a matter of favor. But the custom of merchants to
allow such days of grace having grown into law, and been sanc-
tioned by the courts, all bills of exchange, by the law merchant,
are entitled to them.
§ 151. These days of grace were allowed at first on bills of
exchange only; for promissory notes were not negotiable. They
were made so by Act of Parliament in the reign of Queen Anne,
which conferred the right of days of grace on these instru-
ments. This Act has been generally adopted throughout the
United States. The days of grace allowed in this country are
three.
So that for all practical purposes, a bill or note entitled to
days of grace becomes due at the same time, and in the same
manner, as if these three days were added to the time it has to
1 Williams v. Matthews, 3 Cow. R. 252.
INCIDENTS-TO RILLS AND NOTES.
95
run, and the instrument drawn without grace. In France they
were extended to ten at one time; but by the code Napoleon all
days of grace are abolished there.
In computing the time when a negotiable bill or note becomes.
due, the days of grace must be added. It is a general rule that
notes which are not negotiable are not entitled to days of grace.
Notes not negotiable are such as are not drawn in negotiable
terms-such as are payable in chattels, and such as are not
recognized as negotiable either by statute or by custom.
§ 152. Of course the statutes of the States may vary the
general rule relating to the classes of paper on which days of
grace are allowed. In the State of New York all bills of ex-
change and drafts payable at sight anywhere within the State,
are denied days of grace. They are not allowed either on checks,
bills of exchange, or drafts, appearing on their face to have been
drawn upon any bank, banking association, or individual banker
carrying on banking business, if payable on any specified day,
or in any number of days, after the date or sight thereof.
In Massachusetts, days of grace are allowed on all bills of ex-
change payable at sight, or on a future day certain, within the
State, and on promissory negotiable notes, orders, and drafts,
payable at a future day certain within the State; but not on
bills, notes, or drafts payable on demand.
In Maine, days of grace are allowed to the drawer and ac-
ceptor of inland bills of exchange, and the maker and indorser of
promissory notes, if discounted by a bank, or left there for col-
lection. Foreign bills are governed by the usage of merchants
without any provisions of statute.
In Vermont all days of grace are taken away by statute. In
New Hampshire they are allowed to the maker of a negotiable
note.
Each State has its own statutory peculiarities, to which it
will be necessary for the reader to refer before taking any step
of importance requiring knowledge of the subject.
Days of grace are to be allowed according to the law or
usage of the place where the bill or note is to be paid.
§ 153. The maker of a note or the acceptor of a bill of ex-
change has until the third day after and exclusive of the day ex-
pressed in the instrument, in which to make payment. He has
96
NEGOTIABLE PAPER.
the whole of this third day of grace in which to pay, and no
action can be legally brought on the instrument until the next
day. Though payable at a bank, no action can legally be com-
menced on the last day of grace, even after the banking hours
of the bank where it is payable.'
If a note or bill were made payable on the first day of
October, for instance, it will not be due until the fourth day,
and action cannot be maintained on it if commenced before the
fifth.2
Sundays and holidays are to be counted in computing the
time during which bills and notes have to run, except when the
third day of grace falls on one of these days.3
§ 154. Where the last day of grace falls on a legalized holi-
day or Sunday, the bill or note becomes payable on the second
day of grace; and where a Sunday and holiday come one imme-
diately after the other, the note or bill, unless there is a local
statute to the contrary, is payable on the first day of grace.*
By New York statute, the first of January, twenty-second
of February, thirtieth of May, fourth of July, twenty-fifth of
December, any general election day, and any day appointed by
the Governor of the State or the President of the United States
as a day of fast or thanksgiving, are holidays. For all purposes
whatsoever, as regards the presenting for payment or acceptance,
and of the protesting and giving notice of the dishonor of bills
of exchange, bank checks, and promissory notes, these days are
considered the same as Sunday.
When either of those days shall occur on Sunday, the follow-
ing Monday is the holiday; and any negotiable instrument fall-
ing due and payable on such Sunday or Monday, becomes due
nd payable on the day following such Sunday or Monday. This
has been the law since April 23, 1870.5
§ 155. 4.-Demand.—In order to hold the maker of a promis-
sory note or the acceptor of a bill of exchange, no demand is
1 Smith v. Aylesworth, 40 Barb. R. 104; Osborn v. Moncure, 3 Wend. R. 170;
Oothout v. Ballard, 41 Barb. R. 33. .2 Cornell v. Moulton, 3 Denio R. 12;
McGraw v. Walker, 2 Hilt. R. 404..
3 Jackson v. Richards, 2 Caines R.
343; 12 Johns. R. 423; 3 Wend. R. 456; 4 Hill R. 129........¹ 2 Hill R. 587;
4 Wend. R. 566; 4 Hill R. 129; 8 Pick. R. 1; 20 Maine R. 264; 6 Wheat. R
102.... 5 See 1 Vol. Sess. Laws 1870, p. 841.
*
INCIDENTS-TO BILLS AND NOTES.
97
necessary. They are original parties, and are liable at all
events. The demand of payment of either of these parties is
for the purpose of holding the subsequent parties, or those who
are conditionally liable; as the drawer of a bill of exchange, or
the indorsers of a bill or note. For the purpose of holding the
parties secondarily or conditionally liable, demand must first be
made on those primarily liable.
This demand must be made by the proper person, of the
proper person, at the proper time, at the proper place, and in the
proper manner.
§ 156.-1. By Whom.-A bill or note should be pre-
sented for payment by the holder or by his authorized agent.
A person to whom a note or bill is indorsed or delivered for col-
lection is to be regarded as the holder for the purpose of making
such demand and of giving notice.¹
Whenever a negotiable bill or note comes into the hands of
any person under a blank indorsement, or when it is drawn pay-
able to bearer, he is prima facie the holder, and entitled to
demand and recover the amount due upon it.2
Where the holder dies before the instrument becomes due, it
ought to be presented by his legal representatives.
And so
where the holder has assigned his personal estate for the benefit
of his creditors, the demand should be made by his assignee.³
If the instrument is turned out on the sale of goods, or as a
collateral security, or for collection, the one receiving it is bound
to make the demand and give the necessary notices. If he does
not, he will himself be liable.*
2. Of Whom.-It has already been stated that the de-
mand should be made on the person who is the principal debtor,
and who is primarily liable for payment. The payment of a bill
of exchange, whether foreign or inland, should be demanded of
the acceptor. The payment of a promissory note should be
demanded of the maker; and of a check, of the bank or banker
on which it is drawn.
¹ Mead v. Engs, 5 Cow. R. 303; Howard v. Ives, 1 Hill R. 263; Farmers'
Bank &c. v. Vail, 7 E. P. Smith R. 485...... 2 James v. Chalmers, 5 Sandf.
R. 52; S. C., 2 Seld. R. 209; Mauran v. Lamb, 7 Cow. R. 174........³ Jones v.
Fort, 9 Barn. & Cress. R. 764; 5 Seld. R. 582. 4 Jones v. Savage, 6 Wend.
R. 658; Allen v. Suydam, 20 Wend. R. 321; 5 Seld. R. 582.
77
98
NEGOTIABLE PAPER.
If maker or acceptor be a firm, demand may be made of one
of the members, and in the case of the death of one, then of the
survivor. If there are several makers or acceptors, not partners,
demand must be made of each; and in case of death, of the per-
sonal representatives.¹
Demand may be made on the lawfully authorized agent of
the party primarily liable, in the absence of the party himself, as
the rule in reference to presentation for payment is the same as in
presentation for acceptance of a bill of exchange.2
3. When. For the purpose of charging the drawer and
indorser, the rule is that bills and notes should be presented and
payment thereof demanded on the very day they become payable,
where that is rendered certain by the terms of the instrument as
modified by the law or custom of merchants. The time can
neither be hastened nor delayed a single day."
3
In order to charge the indorser of a note payable on demand,
it is sufficient if the demand of payment be made within a
reasonable time. In such case the law does not specify exactly
what is a reasonable time, but it must be determined by the
circumstances of the case.*
4
If a note is payable on demand with interest, it is a continu-
ing security; and none of the parties are discharged for want of
demand, nor is it dishonored until actual demand and refusal to
pay.5
In case of bills of exchange, promissory notes, and other
mercantile contracts, a month is always a calendar month; so
that if dated the tenth of January and payable in one month, it
is due (the three days grace being included), on the thirteenth of
February.
6
The thirteenth day of February, in such case, is the day to
demand payment in order to charge the parties secondarily liable,
as the drawer of a bill or the indorsers of a bill or note.
In computing the time when bills and notes payable a cer-
¹ Dean, Com. Law, § 343.
495.....
.41 Cow.
2 Edwards on Bills, edit. 1857, p. 495. .
3 Farmers' Bank v. Duvall, 7 Gill & Johnson R. 78; 6 Met. R. 13. . . . . . .
6 4
R. 397; 3 Wend. R. 75... 5 Merritt v. Todd, 9 E. P. Smith R. 28, 34;
Wethey v. Andrews, 3 Hill R. 582; Weeks v. Prior, 27 Barb. R. 79....
Term R. 148.
INCIDENTS-TO BILLS AND NOTES.
99
tain number of days, months, or years after date, become due,
the rule is to exclude the day of the date from the calculation,
and include the day of payment if no days of grace are allowed.¹
A note dated the first of January, payable ten days after
date, without grace, becomes due on the eleventh-adding three
days grace, the fourteenth.2
A note dated January first, payable one year from date, be-
comes due on the same day of the month the year following;
and if entitled to days of grace, on the fourth.³
When a bill is drawn payable one month after date, the month
of date being longer than the succeeding one, the computation is
not carried into the third month. For instance, on a bill dated the
thirtieth or thirty-first of January, and payable one month after
date, the time expires on the last day of February, whether that
have twenty-eight or twenty-nine days-and adding days of
grace, it would fall due the third of March.
4
4. Where. If the note be drawn or the bill accepted,
without specifying any place of payment, the instrument should
be presented for payment to the maker or acceptor at his resi-
dence or place of business. The exceptions to this rule are the
same as those noticed in presenting a bill of exchange for accept-
ance, under the 4th division "Where," which see. If the
maker or acceptor be absent, it is sufficient if presented at his
house or place of business.
If a bill or note is payable at a particular place according to
its terms, the demand must be made at that place unless there
is some legal excuse for neglecting it. But no personal demand
in such case is necessary. If payable at a particular bank, it
will be a sufficient demand if it is left there on the last day of
grace. If no money has been left there by the maker, the note
may be returned to the holder before the expiration of the last
business hour.5
If payable at a particular place, demand may be made at
that place though it is closed, and there is no person there to
pay.
6
1 Campbell v. French, 6 Term R. 212; Chitty on Bills, 370...
Jones, 8 Mass. R. 453..
2
•
• •
Henry v.
3 Hartford Bank v. Barry, 17 Mass. R. 94.
• •
4 Wagner v. Kenner, 2 Robinson Louis R. 120.
kin, 11 E. P Smith R. 178 ..... 6 De Wolf v. Murray, 2 Sandf. R. 166.
.5 Merchants Bank v. Elder-
100
NEGOTIABLE PAPER.
It is the duty of the maker or acceptor to furnish funds at
the place, ready to pay the instrument when it falls due. It is
a sufficient demand if the holder or his agent is there with it, so
that he can receive the money and give it up.'
1
Demand must be made of the acceptor of a bill or the maker
of a note, at the place appointed for payment, or at his house or
residence; or at the regular known place of his moneyed busi
ness; or upon him personally, if no particular place be ap-
pointed. It cannot be made by letter through the post-office.2
If the party of whom demand is necessary has absconded,
that will excuse a want of demand.³
If the maker or acceptor has removed out of the State after
making the note or accepting the bill, it may be presented at his
iast place of residence.*
If there is no other evidence of the maker's or acceptor's
place of residence than the date of the instrument, the holder
must make inquiry at the place of the date; and the legal pre-
sumption is, that the maker resides where the instrument is
dated, and that he contemplates payment at that place.5
5. How. The object of demanding payment of the maker
ʊf a note and the acceptor of a bill is, not to hold them (for they
ure holden without it), but to hold the drawer of the bill,
and the indorser of the bill or note. If the proper demand is
not made, the indorsers are released, and usually the drawer of
a bill. These parties, we have seen, are only contingently liable ;
that is, they are liable if the proper demand shall be made of
the parties primarily liable, payment refused, and notice be
given to these parties of secondary liability.
Keeping the object of a demand in view, the manner of
making it will be seen to be matter of importance. If possible,
the instrument on which demand of payment is made should be
shown to the party on whom it is made. For it is a general
rule that if demand is made by one who has not the instru-
1 Troy City Bank v. Grant, Hill & Denio R. 119, 120; Nichols v. Goldsmith,
7 Wend. R. 160; Gillett v. Averill, 5 Denio R. 85... ..2 3 Kent's Com. 95;
Berkshire Bank v. Jones, 6 Mass. R. 524; Mason v. Franklin, 3 Johns. R. 202.
3 Ratcliff v. Planters' Bank, 2 Sneed R. 425; Putnam v. Sullivan, 4
Mass. R. 45... 4 Anderson v. Drake, 14 Johns. R. 114; Wheeler v. Field, 6
Met. R. 290.
5 3 Kent's Com. 96; Lowery v. Scott, 24 Wend. R. 358.
·
INCIDENTS-TO BILLS AND NOTES.
101
ment in possession, unless it be lost, the demand will be insuffi-
cient.¹
The instrument ought to be produced and exhibited to the
person of whom payment is demanded, as, if he pays it, in case
of a bill, he has a right to its delivery as a voucher in his settle-
ment with the drawer.2
Nor is the maker bound to pay his note without receiving it,
as it may be outstanding in the hands of some other person.3
It is not sufficient to make a demand in the street, unless
the party on whom it is made declines wholly to pay, or offers
something which is not a payment, and does not object to the
place on the ground that he is not there ready to pay.*
When a demand is made on a lost bill or note, it is necessary
to describe the instrument with certainty; and it would be well,
when it can be done, to show a copy of it. In making the
proper demand in such cases, a bond of indemnity must be
executed and tendered to the party on whom demand is made;
and unless this is done, the remedy on drawer or indorser will be
lost.5
As to the particular steps necessary in case of a lost note or
bill, reference must be had to the local statute where the demand
is made.
§ 157.-5. Law of Place.-A note or bill is a contract for
the payment of money. When given in one place and payable
in another, the law of the place where payable will govern as to
the rate of interest, if the rate is not expressed in the instru-
ment.6
The law of the place where an indorsement is made, is the
law which controls the rights and regulates the duties of the
parties to the bill or note."
A note or bill void where it is made is void everywhere. It
would be void in any other country, though it would be valid if
made in that country.s
¹ Musson v. Luke, 4 How. U. S. Rep. 262
Cameron, 7 Barb. R. 143, 146.
• •
•
• Bank of Vergennes v.
3 Smith v. Rock well, 2 Hill's R. 482.
4 King v. Holmes, 11 Penn. State R. 456... 5 Smith v. Rockwell, 2 Hill's
R. 482... 6 Fanning v. Consequa, 17 Johns. R. 511; Foden v. Slater, 4
Johns. R. 183........' Amayr v. Sheldon, 12 Wend. R. 439.
v. Smith, 17 Ill. R. 328.
.
8 McAllister
102
NEGOTIABLE PAPER.
So the question of the competency of any of the parties to a
bill or note is to be decided entirely by the law of the place
where the transaction takes place and the responsibility is
assumed.
Days of grace allowed on negotiable paper are to be com-
puted according to the usage of the place where payment is to
be made.¹
As a general rule, negotiable paper of every kind is construed
and governed, as to the obligation of the drawer and maker, by
the law of the country where it was drawn or made; and as to
that of the acceptor, by the law of the country where he accepts;
and as to the indorsers, by the law of the country where the in-
dorsement is made.2
158.-6. Payment.-Foreign bills, more especially those drawn
on a country at a great distance from the place of date, are
usually made, as we have already seen, in sets of three or more,
each one of the set being for the whole sum. This is done for
safety in transportation. The payment of any one of the set,
whether three or more, to the holder, or the person entitled to
receive the money, is payment of all.³
Each part should refer to all the others, to guard against the
possibility of being compelled to pay more than one.¹
Bills and notes should be paid to the holder and real proprie-
tor of the bill, or to some person authorized by him to receive
the same; it should be made to the party having the title and
possession of the instrument.5
If drawn payable to bearer, or if indorsed in blank so that
the title passes by the simple act of delivery, possession alone is
presumptive evidence of title, and a sufficient authority to de-
mand and receive payment."
Whenever the person presenting the note or bill has the
1 Vidal v. Thompson, Martin La. R. 33; Bank of Washington v. Triplett, 1
Peters' U. S. R 25..... 2 Potter v. Brown, 5 East R. 124; Slocum v. Pome-
roy, 6 Cranch R. 221; Blanchard v. Russell, 13 Mass. R. 1........³ Holds-
worth v. Hunter, 10 Barn. & Cress. R. 449; Wells v. Whitehead, 15 Wend. R.
5 Canal
597, 528.
4 Davison v. Robertson, 3 Denio Rep. 218, 228.
Bank v. Bank of Albany, 1 Hill's R. 287; Morgan v. Bank of the State of New
York, 1 Kern R. 404.. • Bank of Utica v. Smith, 18 Johns. R. 230.
•
•
INCIDENTS TO BILLS AND NOTES.
103
right to demand payment, the maker or acceptor must of course
be authorized to pay. On this account, we have seen, the
bill or note should be actually presented for payment and ready
to be surrendered up, in order to make the demand effectual.¹
The payment of a bill or note by an indorser is a satisfaction
of it only in respect to subsequent indorsers; for a bill is not
discharged and finally extinguished until paid by or on behalf of
the acceptor; nor a note, until paid by or on behalf of the
maker. Therefore when an indorser takes up a dishonored note
or bill, he is at liberty to put it again into circulation; whereas
payment by the maker of a note, or the acceptor of a bill, dis-
charges it so that it is no longer negotiable.2
Before paying a bill or note, the maker or acceptor ought to
take care and ascertain that the indorsements are genuine, and
that they are sufficient to transfer the title to the person who
demands payment. If the indorsements are in blank, it is only
necessary to know that the payee's indorsement is genuine. But
if there are several successive special indorsements, the party
paying ought to be certain that all of these indorsements are
genuine, since the holder cannot acquire any title through a
forged instrument.³
If an indorsement is in blank or a general indorsement, no
matter how many others follow, or whether the latter are general
or special, the holder takes his title through the first indorser,
and, therefore, the maker or acceptor is protected in making
payment, as though the instrument were payable to the payee or
bearer.*
The acceptor of a bill is bound to know the handwriting of
his drawer. Therefore if he accepts or pays a forged bill to a
bona fide holder for value, he is concluded by the act, and has
no remedy. If he accepts, the holder being innocent, and hav-
ing paid value, he must pay.5
Payment may be stopped by giving the proper notice to the
17 Mass. R. 483; 8 Barb. R. 408; Edwards on Bills (1857), p. 537.....
2 Havens v. Huntington, 1 Cow. R. 387.........3 Graves v. American Ex. Bank,
3 E. P. Smith R. 205; Canal Bank v. Bank of Albany, 1 Hill's R. 287.....
4 Watervliet Bank v. White, 1 Denio R. 608... 5 Godard v. Merchants'
Bank, 4 Comst. R. 147.
104
NEGOTIABLE PAPER.
bank before the check has been presented, or of a bill of ex-
change before it has been accepted, by giving notice to the
drawee. The notice in either case should be given by the
drawer.¹
The maker of a note or acceptor of a bill, payable to payee
or bearer, may make payment to any one, though a stranger,
and whether indorsed or not, provided there are no circum-
stances to excite suspicion, and the payment is made in good
faith.
§ 159.-7. Non-Payment. If the only parties to a note are the
maker and payee, the payee is not obliged to demand payment
at maturity. Days of grace, in such case, have no significance,
except as to the time when suit may be brought. Nor is the
holder of a bill of exchange obliged to demand payment of the
acceptor, if he does not seek to hold drawer or indorsers. In an
action against maker or acceptor, it is not necessary to allege or
prove that demand of payment has been made.²
The whole object of a demand, protest, and notice of non-
payment is, that the holder of the instrument may not lose his
remedy against the parties who are contingently or secondarily
liable. These parties, as we have seen, are the drawer and in-
dorsers of a bill, and the indorsers of a note. The subject of
demand has already been fully considered.
§ 160. In case of non-payment of a bill of exchange, or of an
indorsed note, certain steps are to be taken to charge the parties
who are secondarily liable. These steps are:
1. Protest.—A protest is a formal and solemn declaration
in writing, made by a notary public, giving a copy of the bill or
note, or referring to the original annexed thereto, and stating
that payment or acceptance has been demanded and refused,
the reason given for the refusal if any, and the purpose and
object of the protest. The protest must be made personally
by the notary. It cannot be done by a clerk in his service or
employ.3
1. When Necessary. This is absolutely necessary by the law
¹ Schneider v. Irving Bank, 1 Daley R. 500........2 Foden v. Sharp, 4
Johns. R. 183; Wolcott v. Van Santvord, 17 Johns. R. 248; Haxtun v. Bishop.
13 Wend. R. 13
3 Onondaga Co. Bank v. Bates, 3 Hill's R. 53.
INCIDENTS-TO BILLS AND NOTES.
105
merchant in cases of foreign bills of exchange. They must be
protested for non-acceptance, or non-payment, as the case may
be.¹
2. When not Necessary.-It is not necessary to protest an
inland bill of exchange, nor a promissory note, though it is
quite usual to do so; especially if it falls into the hands of a
bank. Either may be protested, but it is not an essential step
unless made so by statute.
The protest never comes into use until after demand and re-
fusal to accept or pay. The demand may be made, and usually
is, by a notary public; and the protest is always made by this
officer. He is a common law officer, known and recognized by
the law of nations, and has a notarial or official seal. A notarial
certificate of protest proves itself in a foreign country or State,
and is sufficient evidence of the dishonor of a foreign bill."
If there be no notary public at the place where the bill is
dishonored, it may be protested by any substantial person of the
place, in the presence of two or more witnesses; provided it is
done according to the law or usage of the place where it is
made.³
The protest should be made as of the day on which the in-
strument becomes payable; that is, on the third or last day of
grace; though it need not be drawn up and completed in form
until afterwards. It should bear date or show that the protest
was made on that day.¹
In the State of New York notaries have authority to demand
acceptance and payment of foreign and inland bills, and pay-
ment of promissory notes, and may protest the same for non-
payment, or non-acceptance in case of bills. But, as before
stated, it is not absolutely necessary to protest inland bills, nor
promissory notes, but it is proper to do it, and may be very
convenient in perpetuating evidence of the facts stated in the
protest. The next step to be taken in case of non-payment,
' Rogers v. Stevens, 2 Term R. 713; 5 Id. 239.
•
2 Nichols v. Welt, 8
Wheat. R. 333; Townsley v. Sumrall, 2 Peters' R. 179; Lonsdale v. Brown, Id.
3 Bayley on Bills, ch. 7, § 2; Chitty on Bills, 333; Story on Bills,
.3 Wend. R. 456; 4 Term R. 170.
688....
§ 276...
106
NEGOTIABLE PAPER.
whether there has been a protest or not, is, to notify the parties
who are secondarily liable.
§ 161.-2. Notice.-When an indorsed note or bill of ex-
change has been disgraced, or dishonored and protested, the
next step is to give the proper notice. The proper inquiry then,
in this place, is, by whom, to whom, when, where, and how, this
notice shall be given.
1. By Whom.-The notice should be given by the holder of
the bill or note, or by some person acting for him and by his
authority. In common practice, when the instrument is pro-
tested, the notary who makes the protest attends also to the
service of the proper notices.'
But it is not necessary that the notice should state who is
the owner of the note or bill, or at whose request it should be
given. It is immaterial to the party to be notified who the
holder or owner is, for he is equally bound by the notice, who-
ever the owner may be. It is time enough for him to ascertain
the true title of the holder when he is called upon for pay-
ment.2
However, the notice should be given by some person of suit-
able age and discretion, as the giving of it may become a matter
of legal investigation and proof.
The services of the notary are not necessary until the instru-
ment has been presented and payment refused. Then the
notary, if one is employed, should present it again, and, in case
of refusal, make a note of it as to time, &c., and add his
initials. From his note he afterwards makes up the protest.
But if he gives the notices also, they must be given without
delay.
2. To Whom.—The notices must be given to all such per-
sons as the owner of the bill or note intends to hold responsible.
He has a right of recourse to each of the parties secondarily
liable, if they are duly notified of the non-payment of the bill
or note after being properly demanded. But before they are
chargeable under the law merchant, proper notice must be given
¹ Halliday v. McDougal, 20 Wend. R. 81; Nichols v. Webb, 8 Wheat. R.
326... 2 11 Wheat. R. 431.
INCIDENTS-TO BILLS AND NOTES.
107
to the drawer or indorsers of a bill of exchange, and the in
dorsers of a bill or note.
The holder is at liberty to notify all the prior parties himself,
no matter how many indorsers, so as to avoid the hazard of some
of the parties being discharged by the omission of notice. But
if he is satisfied with the responsibility of his immediate in-
dorser, there is no necessity for his giving notice to any previous
party. If such notice be given by the other parties, the holder
may recover thereon against any of them, as though he gave it
himself.¹
If the drawer or indorser of a bill of exchange receive due
notice of its dishonor from any person who is a party to it, he
is directly liable upon it to any subsequent indorser, although he
may have received no notice of its dishonor from him.²
2
If the holder gives notice to all the parties liable to him on
the instrument, it inures to the benefit of each indorser who
stands before him.3
But it is the business of each indorser to take care of him-
self in the matter, and see that the parties responsible to him
are duly notified. His contract is to pay the bill or note on con-
dition that it is dishonored, and due notice given to him of the
fact.*
Indorsers are liable in the order of their respective indorse-
ments to all subsequent indorsers; so that the subsequent in-
dorsers must see that the preceding ones are duly notified of the
dishonor of the instrument. Suppose there are six indorsers.
The first five are liable to the sixth; the first four to fifth and
sixth; the first three to the other three, and so on; the first
being liable to all the rest.
A bill drawn by one of several partners on the firm, for
matters relating to the partnership business, if dishonored, does
not entitle the drawer to notice. And the same rule holds where
drawer and acceptor is the same person. In each of these cases,
2
¹ Mead v. Engs, 5 Cow. R. 303........ Jameson v. Swinton, 2 Campb. R.
273; Colt v. Noble, 5 Mass. R. 167; 18 Johns. R. 231..... 3 Stafford v. Yates
18 Johns. R. 231..
5 Cow. R. 303.
108
NEGOTIABLE PAPER.
the party chargeable has notice by the very act of dishonoring
the bill.¹
Where the residence of drawer or indorser is not known to
the holder, he must make due diligence to ascertain; and if mis-
led by persons who would be likely to know, he is justified in
giving notice according to his best information, though that in-
formation prove erroneous.2
3. When. The rules of law regulate the time when notice
should be given to the parties secondarily liable, of the dishonor
of a negotiable instrument. If not given within the prescribed
time, the remedy of the holder on these parties is lost.
There must be an exercise of diligence in giving the neces-
sary notice. It should be given immediately; the same day of
dishonor, if the parties may be seen without inconvenience.
Where this is not convenient, and the parties to be notified
reside in the same town or neighborhood, the notice should be
given as early as the next day.
If the dishonor takes place on Saturday the notice will be in
time if given on Monday following.³
If the dishonor occurs the third day of July, it is sufficient
to send the notice on the fifth; the fourth being a holiday.*
The same rule would apply when any legal holiday inter-
venes.
The following obstacles will excuse the want of regular
notice in the usual time, and even until the impediments are
removed:
1. Illness or death of the holder or his agent, or other acci-
dent that will necessarily prevent giving the notice.
2. Breaking out of war that shuts up the public channels of
communication.
3. Prevalence of malignant fever or other disease that puts a
stop to all business operations.
4. A flood like that which occurred in the city of Rochester
2 Seneca Co. Bank v.
Bank of Rochester v. Monteith, 1
Neass, 3 Comst. R. 442..
1 Gowan v. Jackson, 20 Johns. R. 176;
Denio R. 402...
? Howard v. Ives, 1 Hill's R. 163..... 4 Ransom v. Mack 2 Hill's R. 587:
Cuyler v. Stevens, 4 Wend. R. 566.
INCIDENTS-TO BILLS AND NOTES.
109
a few years since (March, 1865), rendering it impossible for the
inhabitants to communicate with each other.
5. Any other inevitable accident or providence which pre-
vents giving the usual notice.
In all such cases the want of notice will be legally excused
as long as the disability to give it continues.'
4. Where.—1. The notice may be given at any place, pro-
vided it be given personally.
2. If given in writing, it may be left at the place of residence
of the person to be notified.
3. A written notice may be left at his place of business.
4. If the party to be notified resides at a distance, the notice
may be given by letter properly directed, and mailed to the
post-office where he usually receives his letters.
5. When his residence, place of business, and present post-
office address are unknown, the notice may be directed to his
last known place of residence.
6. If all these are unknown, and cannot be ascertained by
diligent inquiry of persons most likely to know, want of notice
will be excused.
7. If the residence or place of business were unknown at the
time when the notice should be given, but is afterwards ascer-
tained, it should then be given.
8. When the place of business and residence are not in the
same village, city or town, the notice should be sent to the resi-
dence.2
5. Hou.-Notice of dishonor may be verbal or written. It
need not, but may be written; and this method is generally
preferable. It must, however, be precise enough, so that there
need be no mistake about what is intended. It must so describe
the instrument as to clearly identify it. It should set forth the
date, names of the payee, maker or drawer, acceptor, indorsers,
when and where payable, amount, proper presentment and de-
mand, and that acceptance or payment has been refused.
¹ Schofield v. Bayard, 3 Wend. R. 488; Patience v. Townley, 2 E. P. Smith's
R. 228........ Van Vechten v. Pruyn, 3 Kern. R. 549.
2
110
NEGOTIABLE PAPER.
If the notice contains all these items, it will be sufficient to
hold the parties secondarily liable to whom it is given.¹
If the holder and parties to be notified live in different places,
notice by mail is sufficient.
If the party to be notified resides in the same place with the
holder, the notice, unless the laws of the State provide differently,
must be given personally, or in his absence left at his place of
business or residence. By statute in New York and many of the
other States, written notice, properly addressed and sent through
the mail, is sufficient even where the holder and parties to be
notified live in the same city or village.
§ 162. Notice may be sent by a private messenger. Care
must be taken that the letter of notice is properly directed.?
The following forms of a protest and notice may give the
student a more practical idea of the requisites in such cases than
can be obtained without them :
FORM VIII.-PROTEST FOR NON-PAYMENT.
UNITED STATES OF AMERICA,
State of New York.
SS.
Be it remembered that on the first day of July, in the year
eighteen hundred and seventy-one, at the request of the First
National Bank of Rochester, I, John M. Dunning, a Notary
Public, duly admitted and sworn, dwelling in the City of
Rochester, did present the original bill, which is hereto an-
nexed, and demanded payment of the acceptor thereof, which
was refused.
I, therefore, on the same day and year above written, and
after said demand and refusal, duly notified the drawer and
indorsers of the non-payment of the same as follows:
By serving personally on L. L. Williams at his residence in
the city of Rochester.
By putting in the post-office, post-paid, in the City of
Rochester, a notice addressed to E. G. Folsom, Albany, N. Y.,
that being the reputed place of residence of the said party,
the post-office nearest thereto;
and
One for II. B. Bryant, directed to Chicago, Ill., that being
¹ Hodges v. Shuler, 24 Barb. R. 68; Cook v. Litchfield, 5 Seld. R. 279;
Cayuga Co. Bank v. Warden, 1 Comst. R. 413; Davenport v. Gilbert, 4 Bos. R.
532; 6 Id. 179... .' Eddy v. Jump, 6 Duer R. 492.
INCIDENTS-TO BILLS AND NOTES.
111
his reputed place of residence, and the nearest post-office
thereto;
One for Robert C. Spencer, directed to Milwaukee, Wis.,
that being his reputed place of residence, and the nearest post-
office thereto.
Whereupon I, the said notary, at the request aforesaid, have
this day protested, and do solemnly protest, against the drawer
and indorsers of said bill, and all others concerned, for all ex-
change, re-exchange, costs, damages, and interest incurred, by
reason of the non-payment of said bill.
In witness whereof I have hereunto subscribed my name and
affixed my seal of office.
[SEAL.]
JOHN M. DUNning,
Notary Public.
The bill should be attached by mucilage or some other ad-
hesive substance to the protest.
§ 163. Although, as has been stated, it is usual with banks
to have promissory notes and inland bills of exchange protested
for non-payment or non-acceptance, there is no legal necessity
for this, unless required by the statute of the State where the
demand is made. In case of foreign bills it must be done.
But notice must be given to the parties secondarily liable, of
the dishonor of the instrument, whether it be a promissory note
or an inland or foreign bill of exchange.
Suppose the following note to be dishonored:
1,000.
Rochester, January 10, 1871.
I promise to pay Robert C. Spencer or order, One Thousand Dollars,
Three months from date, value received.
L. L. Williams.
This note is indorsed by the payee to E. R. Felton, Felton
indorses it to E. G. Folsom, and Folsom indorses it to H. B.
Bryant, who holds it when it becomes due. It falls due the
thirteenth day of April, 1871, by the inclusion of days of grace.
On that day payment is demanded of Williams by Bryant, or
112
NEGOTIABLE PAPER.
by some one acting for him. Payment is refused, and thus the
note is dishonored.
Now who are liable to Mr. Bryant? Both the indorsers
Felton and Folsom, and the maker, Williams. Of course no
notice need be given to Williams, for he is liable at all events,
even if payment of the note had not been demanded. If Bryant
intends to hold the indorsers, he must give each the proper
notice, taking care to have a witness to the service or mailing of
the notice. If he intends holding Folsom only, he will give the
notice to him only; and Folsom must then give the notice to
Felton, if he intends to hold him.
Bryant, the owner of the note, will give the following notice,
if by letter:
FORM IX.-NOTICE OF NON-PAYMENT.
To E. G. FOLSOM :
ROCHESTER, April 13, 1871.
Take notice that I this day demanded payment of L. L.
Williams, the maker of a certain promissory note for One Thou-
sand Dollars, dated January 10, 1871, payable three months
from date, and indorsed by you, and that payment was refused.
I therefore look to you for payment of the same.
H. B. BRYANT.
Immediately after receiving this notice Folsom must give
Felton a similar notice, or he will not be liable to Folsom.
§ 164.-3. Waiver.-In transferring a bill or note by in-
dorsement, the indorser may waive demand of payment, protest,
and notice thereof, at the time of the indorsement and transfer.
The following form would be a proper waiver, and would be
conclusive against the indorser :
I hereby waive demand, protest, and notice of dishonor.
E. G. Folsom.
Even a more limited waiver than the foregoing has been
decided to be sufficient. An indorser wrote to the holder
thus:
INCIDENTS-TO BILLS AND NOTES
113
" Please not protest (describing the note), and I will waive the neces-
sity of the protest thereof.""
The court held that the word "protest," in its popular
sense, includes all the steps necessary to charge the indorser;
that it is a waiver of notice, as well as presentation and dc-
mand.¹
As a matter of prudence, especially when the indorser lives
at a distance, it is advisable for the purchaser of a bill or note
to insist on a waiver of demand, protest, and notice. It can
generally be secured without difficulty at the time of the trans-
fer.
§ 165.-8. Guaranty.-A guaranty, in its enlarged sense, is a
promise to answer for the payment of some debt, or the perform-
ance of some duty, in the case of the failure of another person,
who, in the first instance, is liable. In disposing of negotiable
paper, it is not unusual for the negotiator to guarantee its pay-
ment at maturity, or that the instrument is collectible. This
gives the purchaser all the advantages of an indorsement without
its disadvantages. The guarantor cannot claim that he is only
contingently liable; and, therefore, he is not entitled to notice
of dishonor. With reference to the responsibility assumed by
the guarantor, guaranties "elating to negotiable paper are of two
kinds guaranty of payment, and guaranty of collection.
§ 166.—1. Guaranty of Payment.—By a guaranty
of payment, the guarantor makes an absolute agreement that
the instrument shall be paid at maturity. It is no part of the
holder's agreement to give notice of non-payment.2
This doctrine, however, has this qualification in Massachu-
setts, Maine, and Pennsylvania: that the guarantor is entitled
to notice when he is, or will be, actually prejudiced by the want
of it; as, for instance, if the maker of the note, or the principal
debtor, is solvent when the debt falls due, and afterwards be-
comes insolvent. It is held in these States, that in such
¹ Coddington v. Davis, 1 Comst. R. 186.
R. 225.
Brown v. Curtis, 2 Comst.
8
114
NEGOTIABLE PAPER.
case, the guarantor is entitled to reasonable notice of non-
payment.¹
But the general doctrine is, that a guarantor of payment of
a negotiable note, is not entitled to demand and notice of its
dishonor.
The guaranty on a negotiable note is negotiable with the
note itself, unless it is made specially to the holder.2
But the guaranty itself without the note is not negotiable,
even though indorsed upon it.3
If a note or bill, the payment of which is guaranteed, is not
paid at maturity, the guarantor may be sued immediately.
Unless a guaranty is given contemporaneously with the mak-
ing of the instrument itself on which payment is guaranteed, it
must be based on some new consideration other than the one
on which the instrument was issued.
The following is a proper form of a guaranty written on the
back of the note or bill:
"! For value received I hereby guaranty the payment of the within."'
§ 167.-2. Collection.-A note or bill the collection of
which is guaranteed, must be prosecuted with all diligence
against the principal debtor, and against the indorsers, if any,
when the guaranty was given, and without avail, before an action
can be sustained against the guarantor.
He enters into no other engagement than that the debt is
collectible. That, judicially settled negatively, by prosecution
to judgment, and return of execution unsatisfied, the guarantor
must pay the debt.*
§ 168.-9. Lost Bill or Note.-No general rule can be given
by which to enable the owner of a lost bill or note which is ne-
gotiable, to recover the sum due on it. By the common law no
action on such an instrument can be maintained. It can be
1 Oxford Bank v. Haynes, 8 Pick. R. 423; Cannon v. Gibbs, 9 Serg. & Rawle
R. 202; Talbot v. Gray, 18 Pick. R. 534. 2 Ketchell v. Burns, 24 Wend.
R. 456..
•
.3 Lamorieux v. Hewit, 5 Wend. R. 307......4 4 Wis. R. 190;
25 Conn. R. 575; Loveland v. Shepard, 2 Hill R. 139; 6 Barb. 547; Blanchard
v. Wood, 26 Maine R. 358.
INCIDENTS-TO BILLS AND NOTES.
115
done only in those States where statutes have been passed to
meet the exigency. Probably all the States have acted on the
necessity of making some provisions for recovery in such cases.
As it is a matter depending entirely upon statute law, the stu-
dent will find it necessary to consult the statute of his own State,
to ascertain the necessary steps to be taken.
By the common law, as just stated, no action can be main-
tained on a lost bill or note. The authorities are clear on this
point.¹
If the bill or note is not negotiable, however, recovery must
be in the name of the original payee; and, therefore, the loss of
the instrument would be no bar to recovery, as no one else could
collect it.?
The statutes allowing collection on lost bills and notes, for
the protection of the party liable, are generally characterized for
the following provisions:
1. It must appear on the trial that the instrument belongs
to the party seeking to recover.
2. It must appear that it was lost while belonging to him.
3. The party claiming on it, must be able to prove the con-
tents of it.
4. The party seeking to recover must execute a bond to the
adverse party.
5. The penalty of the bond must be at least double the
amount of the lost instrument.
6. There must be two sureties to be approved by the court.
in which trial is had.
7. The conditions of the bond must be to indemnify the ad-
verse party against all claims by any other person on account of
the lost note or bill, and against all costs and expenses by reason
thereof.
If it does not appear affirmatively at the trial, that the in-
strument was negotiable, the plaintiff may recover without giv-
ing the bond.³
3
If the note or bill has been destroyed accidentally, the plaintiff
1 Rowley v. Ball, 3 Cow. R. 303; Kirby v. Sisson, 2 Wend. R. 550.
2 Pintard v. Tackington, 10 Johns. R. 104; McNair v. Gilbert, 3 Wend. R. 344.
•
3 Id.
116
NEGOTIABLE PAPER.
may recover without giving the bond of indemnity. But where
the holder wilfully and deliberately destroyed the bill or note
himself, he will not be permitted to prove its contents by parol.¹
If a party loses a bill or note which requires his indorsement
to render it negotiable, he may recover on it, if he can prove that
it had not been indorsed at the time of its loss, without giving
any bond of indemnity.2
Indemnity must be tendered to both indorser and maker or
drawer, in order to charge the indorser and recover against him.
Should the indorser sustain any injury through the holder's
neglect in this matter, it will be a good defense on the trial.³
What the party has a right to require before payment is
this: Whether primarily or secondarily liable, that he shall be
fully protected from all future liability arising out of the same
claim.
The English rule is this: If a negotiable bill or note be lost
at the time the party is called on to pay, the loss constitutes a
good defense. But this is not so if the paper is not negotiable.*
But the American rule varies. In some States a statute
provides for an indemnity to the party called on to pay, and
allows a recovery against him. In other States, the courts,
without statute, require the indemnity. In others, the English
*ule prevails.5
§ 169.-10. Accommodation Paper. In business transac-
tions it sometimes becomes a matter of great convenience
to one man to borrow the name and credit of another. This
may be done through the medium of what is called accommoda-
tion paper.
The maker, acceptor, or indorser, may have no interest what-
ever in the transaction by which the instrument is brought into
existence. He signs, accepts, or indorses, solely for the accom-
modation of another.
Suppose I wish to borrow a thousand dollars. William H.
Sadler has the money, and is willing to loan it; but he is not
1 Blade v. Noland, 12 Wend. R. 173..
273; Long v. Bailie, 2 Campb. R. 214......
2 Rolt v. Watson, 4 Bing. R
3 Smith v. Rock well, 2 Hill R. 482.
4 Clay v. Crowe, 18 Eng. Law & Eq. R. 514; Aranguren v. Schofield, 38
Eng. Law & Eq. R. 424... 5 3 Kent's Com. 82, n.
INCIDENTS-TO BILLS AND NOTES.
117
inclined to let me have it on my paper only. I go to Silas S.
Packard, and procure his note payable to my order for a thou-
sand dollars, and I indorse it over to Sadler; or I make my own
note, and Packard indorses it to Sadler, on which I obtain the
money.
This is an accommodation note. Packard has received
nothing for lending me the credit of his name. I am the person
benefited, and am under every obligation to save my indorser
harmless.
Now if Packard is the maker of the note and I the indorser,
as between him and me there is no consideration; and I cannot
recover of him if I pay the note at maturity. As between
Packard and Sadler the case is different. Sadler can hold him
to the payment of the note; and so could any other holder into
whose hands it might chance to fall. Packard is not bound to
me, for I am the accommodated party. It is my duty to protect
him, either by taking up the paper myself, or by furnishing him
with funds to do so.¹
If the maker, drawer, indorser, or acceptor is compelled to
pay accommodation paper, he may recover the amount with all
costs and charges of the person accommodated. But in such
case, suit must not be brought on the note or bill, which has
been paid, but for money paid by the plaintiff at the request of
the defendant; and the instrument paid would be evidence to
show the defendant's liability.2
The party who accommodates in any such case is never bound
to the accommodated party. If an indorser pays a bill or note,
generally he may afterward sell or dispose of it; for, all parties
whose names precede his are liable to him, and of course he
can transfer his right of action.
But when a payee of accommodation paper, having himself
indorsed it, takes it up at or after maturity, he cannot further
ncgotiate it. It is paid and discharged; and no subsequent
purchaser can have a right of action on it, except against the
accommodated party.
1 Thurman v. Van Brunt, 19 Barb. R. 409.. 2 Bonney v. Seely, 2 Wend.
R. 481; Ainslee v. Wilson, 7 Cow. R. 668; Suydam v. Westfall, 2 Denio R. 305.
118
NEGOTIABLE PAPER.
§ 170.-11. Usual Defenses.-Most of the defenses which
are here noticed, are valid as between the original parties only,
or in those cases where the party seeking to recover has good
reason to believe before purchasing the instrument, that the de-
fense actually exists. This statement must be taken with the
qualification, however, that the instrument is purchased before
maturity; for if taken after maturity it is legally subject to all
defenses which might be brought against it in the hands of the
holder when it became due.
Illegality on the face of a bill or note, of course, gives notice
to the purchaser to beware; for instance, if it promises usurious
interest, and is made in a State where contracts are void for
usury; or if already barred by the statute of limitations.
1. Want of Consideration.-The wunt of considera-
tion may be total or partial.
1. Total.--If the failure of consideration be total, this fact
will go to defeat any recovery on the instrument. For instance,
if a note be given to a vendor of goods, who fraudulently repre-
sented them to be of great value, when in fact they were worth-
less, the vendor cannot maintain an action on it.¹
1
A total failure of consideration, as we have said, is a perfect
defense to a bill or note; but it must be shown on the defense
that there never was any, or that if there was one, it has since
totally failed.
2. Partial.-A partial failure of consideration will not de-
feat a recovery, except so far as the failure goes. If it appears
that one-half has failed, the recovery would be for the other
half. This would be the rule on any other contract also.
If a bill or note be given for a consideration which partially
fails, the payee cannot recover the full amount. Deduction
must be made equal to the failure.2
§ 171—2. Obtained by Duress.—Duress is of two kinds;
duress of imprisonment, and duress of fear. In either case, the
party signing a bill or note under it, is deprived of that entire
freedom of action essential to the validity of a contract. Under
•
¹ Sill v. Rood, 15 Johns. R. 230; Shepherd v. Temple, 3 N. H. R. 455. ..
• Hills v. Bannister, 8 Cr w. R. 31; Spalding v. Vandercook, 2 Wend. R. 431.
INCIDENTS-TO BILLS AND NOTES.
119
duress the party does not act voluntarily, but from compulsion
or necessity. To avoid the bill or note given under duress of
imprisonment, it must appear that the imprisonment was un-
lawful.¹ 1
Duress arising from threats must be under circumstances
that would naturally lead a person of ordinary firmness and
courage to fear injury to his person, reputation, or property.
Such duress is a good defense to a bill or note.²
§ 172.—3. Obtained by Fraud.-Fraud vitiates all
contracts into which it enters This is the doctrine of the com
mon law, and has been from time immemorial. Fraud in ob-
taining a promissory note, or a bill of exchange, a check, or any
other kind of negotiable paper, is a good defense to an action
on the instrument.³
This doctrine will apply with equal force as a defense for all
parties to negotiable paper; whether maker, drawer, indorser,
or acceptor. If the obligation has been assumed through fraud-
ulent representations made by the party seeking to recover, he
will be defeated.*
§ 173.-4. Obtained by Finding.-A person finding
a bill or note, lost by the owner, does not thereby acquire any
rights to it against maker, drawer, acceptor, or indorser. He
has no more right to sue and collect it, even though he finds it
before maturity, than he would have to a watch, a roll of cloth,
or any other article, against the real owner.
Should it fall into the hands of a bona fide purchaser, how-
ever, before maturity, that purchaser would be protected in the
collection of it. But if transferred after maturity, the holder
would have no right of action on it.
§ 174.-5. Obtained by Larceny.-A person cannot
recover on a bill or note that has been stolen, even though he ob-
tained it before maturity, unless he shows that he obtained it
for a valuable consideration. The burden of proving that he
Strong v. Grannis, 26 Barb. R. 122.
3 Barber v. Kerr, 3 Barb. R. 130..
4
R. 574; Green v. Bevan, 3 Stark. R. 134;
Taunt. R. 59.
2 1 Black. Com. 131.
Rees v. Marquis Headford, 2 Campb.
6 Wend. R. 615; Noble v. Adams, î
120
NEGOTIABLE PAPER.
obtained it fairly rests with him, when once it has been proved
to have been stolen at some stage of its history.
§ 175.-6. Misapplication.-A bill or note is some-
times made for the accommodation of a party who proposes to
indorse it, to be used by the indorser for a particular purpose
understood by the original parties.
If such instrument is diverted from the original purpose and
intention of the accommodating parties, and fraudulently ne-
gotiated or put into circulation, the holder cannot recover
against the parties deceived until he shows that he received it in
good faith, in the ordinary course of business, and paid for it a
valuable consideration. When made for a special purpose, to
which it has not been applied, the holder must show that he
took it innocently and for value.¹
If the instrument be misapplied by negotiation after matu-
mity, the perversion furnishes a complete defense for all parties
except the one who is implicated in the transaction. Whatever
shows the holder of the paper to have acquired it in bad faith,
even before maturity, or with notice of facts impeaching its
validity, will defeat his right of recovery.2
§ 176.-7. Illegal Consideration. - A bill or note
illegal on its face, gives notice of itself to all the world of its
worthlessness; and whether negotiated before or after maturity,
makes no difference. For instance, a bill or note given for more
than the lawful rate of interest, in a State where the limit is
fixed by law, and penalties are imposed for taking a higher
rate, would be absolutely void from the beginning.
All contracts having for their object anything contrary to
the general policy of the common law, or to the provisions of a
statute, are void, and of course cannot be enforced.3
But, if a bill or note passes into the hands of an innocent
holder in the ordinary course of business, without notice and
for a valuable consideration, before maturity, and no illegality
1 Woodhull v. Holmes, 10 Johns. R. 231; 5 Wend. R. 506; 6 Id. 615;
Wendell v. Howell, & Wend. R. 170; Small v. Smith, 1 Denio R. 583.
• •
2 5 Wend. R. 600; 11 Johns. R. 128; 1 Denio R. 583; Edwards on Bills, 320.
3 20 Johns. R. 399; Hunt v. Knickerbocker, 5 Johns. R. 327; Whita
ker v. Cone, 2 Johns. Cas. 58.
!
INCIDENTS-TO BILLS AND NOTES.
121
appearing on its face, it is collectible, though the consideration
was in fact illegal.¹
However, if the instrument is absolutely void, as for instance,
if given for a usurious consideration, or for money lost in gaming,
under a statute forbidding these transactions and declaring
paper given on account of them void, it cannot be collected, no
matter into whose hands it may fall.2
But even in such a case, the immediate indorser is liable to
an innocent holder, on the ground that the indorsement is the
creation of a new contract.3
Bills or notes given in commercial intercourse with alien
enemies are void, and are regarded as criminal in all parties con-
cerned.¹
Recovery will not be permitted on a bill or note where its
consideration is the fruit of a positive violation of law, and the
transaction is against sound morals and detrimental to the
public interests."
Wagers on the result of a prize-fight, upon the question of
peace or war, on the result of a criminal trial, or on any event
requiring an impertinent, unjust, or indecent investigation into
the condition or affairs of individuals, are considerations of such
a character as will defeat the collection of bills or notes given
therefor, as between the immediate parties, or holders with
notice of the facts.
§ 177.-8. Lapse of Time.-The law presumes that every
reasonable and prudent man will attend to the collection of
debts due him, within a reasonable time. It also presumes that
every honest man will pay his debts as they become due, or as
soon thereafter as he can.
At the common law there was no limitation to a legal right
of action. If a party had a legal ground of complaint against
another, he might call that party into court to answer, when-
ever it suited his own convenience. This was found, however,
to be productive of great inconvenience to the defendant, as
1 Edwards on Bills, 337; Chitty on Bills, 81, 82..
6 Wend. R. 615.......
2 Vallet v. Parker,
. M'Kright v. Wheeler, 6 Hill's R. 492; Edwards v.
4 Willson v. Pateson and others, 7 Taunt
Dick, 4 Barn. & Cress. R. 212.....
R. 439..
5 3 Seld. R. 176.
122
NEGOTIABLE PAPER.
well as, in many instances, gross injustice. Witnesses might be
dead, or they might be removed to a great distance, their places
of residence might be unknown or forgotten; or papers which,
if in existence, would be important in the defense, might have
been lost or destroyed, or be beyond the reach of the defend-
ant.
To prevent these possible evils, statutes were passed by the
British Parliament several hundred years since, limiting the
time within which claims may be asserted and maintained in the
courts. These statutes are called "Statutes of Limitations."
Every State in the American Union, except Louisiana, has
passed, in substance, the English Statute of Limitations. In
most, if not all the other States, suits must be brought within
six years from the time when the cause of action accrues, in
cases of simple contract, or the action cannot be maintained,
provided objection is made in time.
§ 178.-12. Presumptions of Law. There are several pre-
sumptions of law in favor of negotiable paper and its circulation,
that the student will find it for his interest to bear in mind.
These presumptions are accepted as conclusive until facts are
proved in any given case that overthrow them. Parol testimony
may be received in court for the purpose of disproving them;
and when disproved, they must yield to the evidence in the
case.
1. The law presumes in favor of negotiable paper, a valuable
consideration, whether expressed or not, until the contrary
appears.
1
2. The law presumes the holder of negotiable paper is the
owner of it, until circumstances of suspicion are shown.²
3. In relation to indorsements and transfers, the law pre-
sumes them to have been made before the paper became due.³
4. The law presumes the holder took the paper in the usual
course of business, and for value.*
5. The law presumes that the maker of a note is the primary
...
2 3
19 Johns. R. 217; 12 Wend. 484; 13 Id. 557; 8 Cow. R. 77.
Johns. Cas. 5, 259; 18 Barb. R. 344...... 38 Wend. R, 600; 7 Paige Ch.
R. 615..... 6 Hill's R. 336; Chitty on Bills, 69; Story on Notes,
•
ᎦᎦ 7, 88.
INCIDENTS.
123
debtor, and that the indorsers are contingent or conditional
debtors.¹
6. The law presumes that the acceptor of a bill of exchange
is the primary debtor, and that the drawer and indorser are only
secondarily liable thereon.2
7. The law conclusively presumes that the maker of nego-
tiable paper intends precisely what the paper says, and parol
evidence cannot be allowed to contradict it, or that it was not to
be valid except in a certain event.3
The time of payment cannot be changed by parol evi-
dence.¹
A mistake as to the amount for which a bill or note is given,
may be shown by parol.5
§ 179-Bills and Notes not Negotiable.-Bills
and notes payable in specific articles will be considered in treat-
ing of the law of tender, which will be the subject of a chapter
by itself. But it is proper, in this place, to call the reader's
attention to a few peculiarities belonging to bills and notes which
are not negotiable.
1. They are not payable to bearer, nor to the order of the
payee, but to the payee only.
2. They are not entitled to days of grace.
3. They may be made payable in mmey or specific articles,
as goods, cattle, grain, or lumber.
4. Consideration is not implied, but must be expressed;
and in case of suit, must be alleged and proved.
5. They can not be transferred by delivery merely, like
negotiable paper, but must be assigned, like any other con-
tract.
6. When so assigned and transferred, they are taken sub-
ject to all defenses existing against them in the hands of the
payee.
7. Unless the statute specially provides otherwise, suit must
be brought in the name of the payee, but for the use of the real
party in interest or assignee.
1 1 Denio R. 116.
24 Dana's R. 352; 2 Burr. R. 674; 8 Esp. R. 47.
3 1 Cow. R. 249; 1 Hill's R. 116………. . 8 Johns. R. 189, 375.
5 3 Kern. R. 542.
124
PAPER NOT NEGOTIABLE.
8. An instrument in the form of a note, having words of
negotiability, bearer or order, is not negotiable if a seal is affixed
to the maker's signature.
9. An order for goods is not a bill of exchange.
10. Possession by a third person of a note or bill, not nego-
tiable, is not presumptive evidence of ownership, as in the case
of negotiable paper, nor that it was received by the plaintiff be
fore suit was commenced.
Topical Analysis of Agency
1. GENERAL VIEW OF THE SUBJECT.
II. HOW CREATED
1. By implication.
2. Verbally.
3. By informal writings.
4. By formal writings {1. Under seal.
2. Without seal.
I. General.
2. Special.
III. CLASSES
1. Attorneys {
1. In law.
2. In fact.
3. Professional
IV. SUBJECT MATTER {
2. Brokers.
3. Factors.
4. Auctioneers.
5. Masters of ships.
1. What may be.
2. What may not be.
1. Who may be.
2. Who may not be.
V. PRINCIPAL .
3. Liabilities
4. Rights
{
1. For acts of general agent.
2. For acts of special agent.
3. For agent's torts {2. When not liable.
torts. When liable.
4. To agent.
1. As to the agent.
2. As to third persons.
126
VI. AGENT
TOPICAL ANALYSIS
ANALYSIS OF AGENCY.
1. Who may be.
2. Who may not be.
3. Appointment.
4. Duties.
5. Classes
1. To obey instructions.
2. Skill and diligence.
3. Personal attention.
4. To act in principal's name.
5. To keep accounts.
6. Money deposits.
7. Insurance.
8. Conforming to usage of trade.
9. To make report.
10. Must have no adverse interest.
1. General,
2. Special.
3. Professional.
I. Disobedience to instructions,
2. Loss by misconduct.
3. Care of goods.
4. Betrayal of trust.
5. Not keeping accounts.
6. Mixing his with principal's property
7. Profits of agency.
1. To principal
6. Liabilities
2. To third persons
8. Misfeasance and nonfeasance.
{
1. On Contracts
2. For torts
•
{
(1. Negative.
2. Affirmative.
1. Misfeasance.
2. Nonfeasance.
I. To compensation.
2. To reimbursement.
1. As to principal
7. Rights
3. To indemnification.
4. To lien.
1. As to contracts.
·
2. As to third persons 2. As to torts.
8. Extent of authority {
1. Of general agent.
2. Of special agent,
1, By whom executed.
9. Execution of authority 2. In what manner.
3. In what time.
VII. TERMINATION
By either 1. By principal
party. 12. By agent.
I. By revocation.
2. By change of condition.
3. By marriage.
1. By lapse of time,
2. Completion of subject-matter,
3. Extinction of subject-matter,
I. Principal.
2. By operation 4. Insanity of either party 2: Agent.
of law
2.
1. Principal.
5. Bankruptcy of either party 2. Agent.
I. Principa!,
6. Death of either party 2. Agent.
{
CHAPTER III.
AGENCY.
I.--AGENCY IN GENERAL.
§ 180. Agency consists in the substitution of one person
by and for another, for the transaction of business by the former
for the latter.
Agency is founded upon a contract, either express or im-
plied, by which one of the parties confides to the other the
management of some business to be transacted in his name, or
on his account, and by which the other assumes to do the busi-
ness, and to render an account of it.'
§ 181. A large proportion of the business of life, and espe-
cially of commercial business, must necessarily be transacted
through the medium of agency. No man can individually trans-
act the business of an extensive and complicated commercial
establishment. Each must have its head or leading mind; but
that mind cannot act, except by proxy, at distant and various
places at the same time.
There may be concentrated in the hands of a single man, a
sufficient amount of wealth to conduct a business requiring the
attention and skill of a hundred or a thousand persons. But
these persons, stationed, it may be, at remote points or in distant
countries, must act under the guidance of the home authority
and supervision.
It is needless to speculate on what would be the result to the
business world, were it suddenly to become the law that nothing
should be done by agency for the next ten or twenty years.
A
single month's experience under such a state of affairs would
doubtless cause a commercial crash throughout the world. It
would soon be seen how dependent capital is for its active use-
fulness, upon the industry of the toiling agent. Not a town,
1 2 Kent's Com. 612.
128
AGENCY.
nor a county, nor a State, nor a nation, could hold together for
a twelve-month without the interposition of agency.
§ 182. The theory of the law is, that whatever business a
man may do for himself, he may employ another to do for him.
And whatever is done for him, and by his authority, is to be
accepted as though he did it for himself. To repudiate any
thing, therefore, done through an agency authorized by himself,
is to repudiate his own doings.
But to hold a man responsible for what is done by another,
it must clearly appear to have been done by his authority. As
this authority is essential to the establishment of a responsible
agency, it is proper to inquire how an agency may be created.
II.-HOW CREATED.
§ 183.-1. By Implication.-An express agreement with a
person that he is to become the agent of another, is not neces-
sary in order to establish an agency. It may be inferred from
the relation of the parties to each other, and the nature of the
employment. An agency may be established by acts or words
which are calculated to lead the world to believe that one person
is employed by another as his agent.
But these acts and words must proceed from the employer,
or the party to be held responsible as principal. The question
is, what had those who dealt with the supposed agent a right to
believe, from the representations of the supposed principal?
Whether the agent in such case really had authority, as such,
will not decide the question of the employer's responsibility;
but whether he had furnished reason to believe the agency ex-
isted.¹
1
By permitting another to hold himself out to the world as
agent, or by subsequently ratifying or confirming his acts, the
principal adopts his acts, and will be bound by them.
1 Johnson v. Jones, 4 Barb. R. 369; Whilbeck v. Schuyler, 44 Barb. R. 469.
2 2 Kent's Com. 614; Rushby v. Scarlett, 5 Esp. R. 76.
HOW AGENCY CREATED.
129
§ 184.-2. Verbally.-A person may be employed verbally to
transact business for another. For the ordinary purposes and
business of commerce, this is regarded as quite sufficient.¹
No set form of words is necessary for this purpose. Simply
employing a man for the transaction of business, with as little
formality as a farmer would hire a laborer on his farm, is suffi-
cient, unless the nature of the business be such as to require the
agent to execute an instrument under seal.'
A verbal creation of agency is sufficient to authorize the
agent to make a contract even in those cases where the contract
itself must be in writing.
§ 185.-3. By Informal Writings. These may consist of
letters exchanged between the principal and agent, which go to
show that the latter was employed by the former, either for the
transaction of a particular kind of business, or of business in
general for the principal.
If with the full knowledge of what an agent has done, or one
who assumed to act as such, the presumed principal ratifies the
act, such ratification is equivalent to an original authority. The
intention to ratify may be inferred from the silence of the prin-
cipal who may have received a letter from the acting agent in-
forming him of what has been done on his account.³
Notes and memoranda made by the parties in their diaries.
or business books, in the presence of each other, would be suffi-
cient to constitute an agency.
§ 186.-4. By Formal Writings.-When the agency is created
by formal writings, it may be done under seal, or without seal.
1. Under Seal.-The creation of an agency must be un-
der seal, or by sealed authority, where the execution of the trust
confided requires the execution of a sealed instrument; as, for
instance, the conveyance of real estate. Authority to make a
deed must be equal in form and solemnity to the deed itself.
Where the conveyance must be under seal, the authority to make
it must be under seal.*
12 Chitty's Com. Law, 104; 11 Mass. R. 27.
54, 168; 12 Id. 525; 14 Serg. & Rawle R. 331.
2 1 Wend. R. 424; 9 Id.
3 Story on Agency, § 258;
12 Johns. R. 300; 3 Cow. R. 281....... 4 1 Term R. 207; 5 Binn. R. 618; 5
Mass. R. 40; 9 Wend. R. 68; 1 Seld. R. 394.
9
130
AGENCY.
2. Without Seal.-The appointment of an agent may
be by formal writing without seal. By such a mode of appoint-
ment, the agent may be authorized to transact any and all busi-
ness for his principal which itself does not require a sealed
instrument.
III.-CLASSES.
§ 187. The classes of agency will be considered under the
following divisions and subdivisions :
1. General. A general agency is a power exercised by a gen-
eral agent. A general agent is one who is authorized to trans-
act for his principal all the business of that principal, of a
particular kind, and growing out of a particular employment.
He is competent to bind his principal generally, so long as
he keeps within the general scope of his authority, though he
acts contrary to the private instructions given by the principal.
This rule is necessary to prevent fraud and encourage confidence
in dealing.'
2. Special. A special agency is an authority exercised by a
special agent. A special agent is one who is appointed for a
special purpose, having special and limited powers. He cannot
bind his principal, if he exceeds his authority. The authority
and powers given by the principal must be strictly followed.²
Whoever deals with an agent constituted for a special pur-
pose, deals at his peril, when the agent passes the precise limits
of his power; though if he pursues the power as exhibited to
the public, his principal is bound, even if private instructions
had still further limited the special power.³
In dealing with a special agent, the party interested should,
for his own protection, inquire fully into the extent of the
agent's authority, as he will have no claim on the principal for
what is done beyond the authority given to the agent.
§ 188.-3. Professional.-Professional agents are such as
12 Kent's Com. 620; 15 East R. 400; 23 Wend. R. 22; Meig's Tenn. R. 502.
2 Munn v. Commission Company, 15 Johns. R. 44; Johnson v. Stewart,
3 Conn. R. 172; Andrews v. Kneeland, 6 Cow. R. 354; Gordon v. Buchanan, 5
Yerg. (Tenn.) R. 71…………. .32 Kent's Com. 621.
CLASSES OF AGENCY AND AGENTS.
131
are usually licensed by proper authority, and hold themselves
out as ready, for a compensation, to transact a particular kind
of business for others, and who may be presumed to possess the
requisite skill, and whom the law therefore holds responsible for
its exercise. Among this class of agents are the following:
1. Attorney.-An attorney is one who acts instead of,
or in place of another. Of course this is a definition that will
apply to agency of any kind; for agents act instead of their
principals. But an attorneyship is an agency of a peculiar
character-especially that kind assumed by the legal profession.
It is represented by a class of persons supposed to be learned in
the laws of the land. Attorneys are of two kinds―attorneys
in law, and attorneys in fact.
1. Attorneys in Law. An attorney in law is a well-known
officer of the courts, who has pursued a regular course of pro-
fessional study, been examined as to learning and ability, and
admitted to the bar. Thus his fitness for the profession is
judicially recognized. By taking his stand in the forum, he
becomes vested with special rights, and assumes corresponding
responsibilities.
1. He is intrusted with the management of causes before
judicial tribunals, acting in such cases under the authority of his
client who is in reality his principal.
2. He is authorized by his relation to his principal, to bind
him in all matters relating to the case in which he is em-
ployed.
3. He is under the most sacred obligation to keep the secrets
of his client communicated to him, relating to the cause in which
he is engaged. If the client be guilty of a capital crime, and
he confesses it to his attorney, no revelation of the secret will be
allowed to the client's harm. The lips of the attorney are
sealed.
4. He is sworn to be true to his client, and true to the court
in which he practices.
5. He is bound to exercise care, skill, and fidelity, in the
business with which he is intrusted, and to communicate to his
client frankly as to the progress of his cause at the bar.
6. He is bound to pay over promptly on demand, any moneys
132
AGENCY.
that come into his hands belonging to his client, except a suffi-
cient amount to pay his own reasonable charges.
7. While he is responsible for any want of care in the trans-
action of business intrusted to him, he is not responsible for
mere errors of opinion on questions of law submitted to him.
2. Attorneys in Fact.-Properly and strictly speaking, an
attorney in fact, can hardly be regarded as a professional agent,
though for convenience, he is classed here as such. He is one
who is specially authorized to do some particular act for an-
other, particularly signing the name of his principal, and affix-
ing his seal if necessary.
The authority under which he acts is called a Power of At-
torney. Any person of ordinary capacity may be authorized to
act as an attorney-in-fact, it not being necessary that he should
be a member of the bar. He must follow his power of attorney
to the strictest letter. This kind of attorneyship may be ex-
tended so as to include all agents employed in any particular
business.¹
2. Broker. A broker is one who engages in the negotia-
tion of contracts relative to property of any kind. He does not
have the custody or possession of the property, in the sale of
which he is engaged.
In some respects a broker is the agent of both parties. In
the beginning of the negotiation, however, he is only the agent
of the party by whom he is employed. After the contract has
been definitely settled, as to terms, he becomes the agent of the
other party also.²
He does not himself settle and fix the terms of the contract,
but acts as a middle-man between the parties or principals. But
after the terms are settled, he may bind both parties by signing
the contract.
If he is intrusted with discretion in the sale of property, he
must not conceal his agency for one of the parties, from the
other. He must not conceal his true position under false pre-
tences.
It is easy to see that if he were intrusted by one party, for
¹ Story on Agency, § 25..
2 Bouv. Law Dict. Broker: 13 Metc. R. 463.
CLASSES OF AGENCY AND AGENTS.
133
instance, with the sale of ten thousand bushels of wheat, and at
the same time by the other party for the purchase of this quan-
tity of wheat, he might easily defraud both. The one instructs
him to sell at the highest possible price, and the other to buy at
the lowest possible price. He will not be allowed to be both
buyer and seller, where the interests of others are involved.
3. Factor.-A factor is a person to whom goods are con-
signed for sale by a merchant residing abroad or at a distance
from the place of sale. He usually sells in his own name, with-
out disclosing that of his principal. He has the actual posses-
sion of the goods.
It is usual for the factor to advance money on the goods.
He, therefore, has a special property in them, and a general lien
upon them. If the factor owes the person to whom he sells, the
buyer has a right to set off his claim against the debt created by
the sale. But the factor, like other agents, must act within the
general scope of his authority, or the principal will not be
bound.
The general duties of a factor are:
1. To procure the best intelligence of the state of trade at
his place of residence; of the course of exchange; of the quan-
tity and quality of goods at market; their present price; and
the probability that they may rise or fall.
2. To pay exact obedience to the orders of his employers; to
consult their advantage in matters referred to his discretion; to
execute their business with all the dispatch that circumstances
will admit; to be early in his intelligence, distinct in his ac-
counts, and punctual in his correspondence.
3. The factor is bound to take due and proper care of the
goods with which he is intrusted; such a degree of care as a
prudent man would take of his own property; see that the
property is protected by an available insurance; that in the im-
portation and exportation of goods, proper entries are made at
the custom-house, and that the duties are duly paid thereon.
4. In the sale of the goods, a factor should not only observe
the instructions of his principal, but when left to exercise hist
own judgment and discretion in the disposal of them, he should
use his utmost skill and knowledge, and sell for the best prices,
184
AGENCY.
and for ready money, or customary credit. But when he sells
on credit, he should be very careful to deal with persons of known
responsibility. A factor cannot be both buyer and seller.¹
Opinion will never justify a factor in acting contrary to or-
ders, though necessity sometimes will. If he be limited to sell
at a fixed price, and the goods be perishable, and he has no
opportunity to consult with the principal, he may sell them for
ready money, under the price, in order to prevent a total loss.²
4. Auctioneer.-A regularly appointed auctioneer is one
who puts up goods or real estate for sale at public auction, to
be struck off to the highest bidder. He is considered in law for
certain purposes as an agent of both buyer and seller. In most
if not all the States, he acts under a regular license issued
by State authority, and must also pay license to the United States.
If he does not disclose the name of the owner of the prop-
erty at the time of the sale, he is himself personally liable for
the completion of the contract. He has not only possession but
a special property in the goods sold, and can maintain an action
for the price against the purchaser. He also has a lien on the
goods for the charges of the sale and his commission, and the
auction duty.
He may sue the buyer for the purchase-money; and if he
gives credit to the vendee, and makes delivery without payment,
it is at his own risk.³
The auctioneer usually has a hammer or gavel in his hand
when conducting sales, and after receiving what he believes to be
the highest bid which can be obtained, he strikes a light blow
on the stand or table before him, indicating the acceptance of
the bid or offer. Hence sales by auction are said to be "sales
under the hammer."
A bidding at auction may be retracted at any time before the
hammer falls. Every bidding is nothing more than an offer on
one side, which is not binding on either side until assented to,
and that assent is signified on the part of the seller by knocking
down the hammer.*
1 Comyn on Contracts, 759, and the authorities there cited... ...2 Id. 760.
3 2 Kent's Com. 536.. 4 Payne v. Cave, 3 Term R. 148; 2 Kent's
Com. 537.
CLASSES OF AGENCY AND AGENTS.
135
If the owner employs puffers to bid for him at auction, it
has been held to be a fraud on the real bidders. It would be
contrary to good faith, as persons resort to an auction under a
confidence that the articles set up for sale will be disposed of to
the highest real bidder. All secret dealing on the part of the
seller is deemed fraudulent.'
An auctioneer may sell at the highest price bid for the goods,
under the usual conditions of sale, though he have the owner's
express directions not to let them go under a larger sum named.
However, if the owner had directed him to set the goods up at a
particular price, and no lower, he must obey.²
5. Master of a Ship.-The master or captain of a ship
is its highest officer in authority, and the law imposes upon him
grave responsibilities, and invests him with extraordinary
powers.
He is clothed with the power and discretion requisite
to meet the unforeseen and distressing vicissitudes of the voyage;
and he ought to possess moral and intellectual, as well as busi-
ness qualifications, of the first order. His authority at sea is
necessarily summary, and often absolute; and if he chooses to
perform his duties, or to exert his power in a harsh, intemperate,
or oppressive manner, he can seldom be resisted by physical or
moral force."
He must watch for the preservation of the health and com-
fort of the crew, as well as for the safety of the ship and
cargo.*
Among his responsible duties are the following:
1. He has the general care, supervision, and command of the
vessel and crew.
2. It is his duty to see that the ship is kept sea-worthy, in
good repair, that it is properly navigated, and he must attend to
the loading and unloading.
3. He must perform the services of a faithful agent for all
parties concerned in the welfare of the ship-the owners, the
shippers, the insurers, and all whose property is on board.
4. He must see that the ship is provided with all the neces-
1 2 Kent's Com. 537...... L Comyn on Contr. 765.....
159...... 4 Id.
3 3 Kent's Com
136
AGENCY.
sary requisites for safe navigation, as well as with a proper sup-
ply of stores, provisions, &c.
5. He must proceed on the voyage marked out by the owners,
and he must, as far as possible, strictly obey their instruc-
tions.
6. In time of war he may be called to the performance of
special duties arising out of the new condition of things. He
must refrain from every thing that will expose the ship to
seizure and confiscation.
The master of a ship is clothed with ample authority to
enable him to discharge these important trusts:
1. He has the right to control the crew, and use all necessary
force to secure obedience to all reasonable demands.
2. He may take life, if necessary, to suppress mutiny on ship-
board.
3. He may punish summarily all acts of insolence and dis-
obedience, and such offenses as may endanger the safety of the
ship; though he is liable criminally for any abuse of this
authority.
4. He may sell or mortgage the ship in case of necessity--
may charter her for a voyage, or for longer service. He may
raise money for supplies or repairs, and render the owners
responsible for the same, unless they are where he can consult
them.
5. The captain has a lien upon the freight earned by his
ship, and a right to retain it to indemnify him for money ad-
vanced for necessary repairs and supplies, and seamen's wages.¹
6. Unlike other agents, he can, if necessary, substitute
another in place of himself, who will be clothed with all the
powers and become responsible for the performance of all the
duties of a master appointed by the owners.
IV.—SUBJECT-MATTER.
§ 189. The subject-matter of an agency, is the thing or
things to be done by the agent, or the business to be trans-
acted.
19 Mass. R. 545.
PRINCIPAL OF AGENCY.
137
1. What may be.-As to what may be the subject-matter of
agency, the general rule is, that whatever a man may do in his
own right, in the commercial and business sense of the term, he
may accomplish through the instrumentality of others, to whom
he may choose to delegate authority for such a purpose.¹
Although, as stated, this is the general rule, it is not with-
out exceptions. Therefore, let us inquire,
2. What may not be.-While a person may himself do an
unlawful act, he can not delegate authority to another person to
do it. Such an appointment and authority would be utterly
void. It imports neither duty nor obligation, nor responsibility,
on either side, although it might involve both in punishment."
If the thing to be done is of a personal nature, implying
personal confidence in the person to do it, such power is inca-
pable of being delegated. If, for instance, a man has a power
given him by the owner to sell an estate, or to make leases for
him, he can not delegate this authority to another; for it is a
personal trust. If an executor, by will, has power given him to
sell property; or if a person is vested with a power of appoint-
ment or distribution of property; in either case, the power must
be executed by him personally, and cannot be delegated to an-
other.3
This doctrine applies to factors, brokers, and all others, in
whom is necessarily reposed a personal trust and confidence.
Their authority and power can not be the subject-matter of a
new agency, without the consent of the principal.*
V.-PRINCIPAL.
§ 190. The principal, as we have seen, is the one for whom
the business is to be transacted.
1. Who may be.-In general it may be stated as a rule of
the common law, that whenever a person has a power, as owner,
or in his own right, to do a thing, he may do it by an agent.
¹ Bac. Abr. Authority, A.
2 Fitzherbert's Case, 5 Coke R. 80; Story
on Agency, § 11.. 3 Bac. Abr. Authority, D; 1 Roll. Abr. Authority, C; 2
Atk. R. 88; 2 Ves. R. 643; Story on Agency, § 13.
4 Catlin v. Bell, 4
Camp. R. 183; 6 Taunt. R. 146; 1 Bell's Com. 388.
-
15
138
AGENCY.
Every person, therefore, of full age, and not otherwise disabled,
has a complete capacity for this purpose.¹
2. Who may not be. - Infants, married women, lunatics,
idiots, alien belligerents, and such as are incapable of making
legal contracts, are generally incapable of acting as principals
in the appointment of agents. Infants and married women,
however, are not wholly incapable, but may become principals
under certain circumstances.
Thus, for example, an infant may authorize another person
to do any act which is for his benefit, but he cannot authorize
him to do an act which is to his prejudice.2
In many of the American States, by local statute, married
women are not bound by the doctrines of the common law; but
may transfer and dispose of their own separate property, as
though they were single. In such States, they may doubtless
act as principals in the creation of an agency relating to their
own property; especially by the consent of the husband, or if
specially authorized by statute.
§ 191.-3. Liabilities.-When an agent acts within the limits
of his authority, the principal becomes liable to third persons,
as though he transacted the business himself. He is entitled to
all the advantages arising from the execution of the agency, and
he is subject to all the disadvantages.³
The liabilities of the principal depend, however, on the char-
acter of the agency. For convenience, the liabilities may be
classed as follows:
1. For acts of general agent.
2. For acts of special agent.
3. For agent's torts, when and when not.
4. To agent.
1. For Acts of General Agent. - The principal is
responsible to third persons for all acts of a general agent, when
he keeps within the usual and ordinary scope of the business in
which he is employed; and this is the rule of law, though he
*
¹ 1 Coombe's Case, 9 Coke R. 75, b....
Coke R. 75, b... ... Tucker v. Moreland, 10 Peters' R
58, 69; 2 Kent's Com. Lect. 31; Story on Agency, § 6........³ Id. § 442.
PRINCIPAL'S LIABILITIES.
139
violates private instructions given by the principal, provided the
person with whom he deals is ignorant of such violation.¹
Private instructions and restrictions by the principal to a
general agent, do not adversely affect persons dealing with the
agent in ignorance of them. They in no manner limit the prin-
cipal's liability.2
It is a universal rule based upon principles of policy, pro-
priety and justice, that if a principal puts his agent in a condi-
tion to impose on innocent third persons, by apparently pursuing
his authority, the principal will be bound by his acts, and he
must lose instead of such third person.³
3
If a principal is carrying on any kind of public business, and
he employs an agent to do labor, the principal will be liable to
any person who suffers a loss from want of skill, or for the
negligence of the agent in the discharge of that business.*
A principal is responsible for the fraud of his agent in the
transaction of the principal's business.5
An insurance company is liable for the fraudulent represen-
tations made by its general agent, in procuring insurances and
premium notes."
If an agent or attorney transcends the limits of his authority,
and the person with whom he deals has notice of this, sufficient
to put him on inquiry, he cannot hold the principal respon-
sible."
2. For Acts of Special Agent.-A special agent, as
heretofore observed, is one whose authority is confined to a par-
ticular or individual instance. He can bind his principal no
further than his special and expressed authority extends. The
special authority must be strictly followed.
8
Whoever deals with an agent constituted for a special pur-
pose, deals at his peril, when the agent passes the precise limits
¹ Munn v. Commission Company, 15 Johns. R. 44; Jeffrey v. Bigelow, 13
Wend. R. 518........2 Johnson v. Jones, 4 Barb. R. 369; Tradesmen's Bank v.
Astor, 11 Wend. R. 87........3 Dunning v. Roberts, 35 Barb. R. 463; North
River Bank v. Amayr, 3 Hill's R. 263... 4 Brady v. Little Miami R. R. Co.,
v. Davis, 2 Hill's R. 452...
•
• •
34 Barb. R. 249.
5 Bank of U. S.
• Devendorf v. Beardsley, 23 Barb. R. 657...
279; Beach v. Vandewater, 1 Sand. R. 265...
8 Wend. R. 494.
Stainer v. Tyson, 3 Hill's R.
8 2 Johns. R. 494; 5 Id. 48;
140
AGENCY.
of his power. If he pursues the powers as exhibited to the pub-
lic, his principal is bound, even if private instructions had still
further limited the special power.¹
192.-3. For Agent's Torts.-A tort is defined to be a
private or civil wrong or injury, independent of contract. It is
an act committed by one without right, whereby another receives
some injury directly or indirectly, in person, property, or reputa-
tion. A person under personal disability to make a contract, is
liable for the commission of a tort. Assault, fraud, slander, and
wilful trespass, are torts.2
There are cases when a principal is liable for the torts com-
mitted by his agent, and others where he is not.
1. When Liable.-A principal is liable for the fraud of his
agent if committed while transacting the principal's business,
although he neither authorizes nor knows of the fraudulent con-
duct of the agent.3
If the agent is in the regular prosecution of the business of
his agency, the principal is liable for his negligence or unskill-
fulness which produces injury to others. The principal is in all
cases liable for torts whenever he directs them, or gives orders
which cannot be executed without committing them.
He is liable civilly for the misfeasance, negligence or omission
of duty by his agent, in the course of his agency, even though
he knows nothing of it, or forbids his agent.*
Masters of merchant vessels and of steamboats are respon-
sible as principals and common carriers, for the misfeasance and
negligence of the servants under them."
One who directs his servant to remove snow and ice from the
roof of his building, is responsible for an injury received by a
passenger in the street from such snow and ice, whether the
negligence was that of the servant or of a stranger whom he em-
ployed, or who volunteered to assist him."
2. When not Liable.-A principal who neither authorizes
1 2 Kent's Com. 621...... Bouv. Law Dict. Tort...... 8 Udell v. Ath-
erton, 7 Hurls. & Norm. R. 172.. 4 20 Barb. R. 507; 7 Cush. (Mass.) R.
385...
•
5 2 Kent's Com. 633, note a..... • Althorf v. Wolfe, 8 E. P.
Smith's R. 355.
PRINCIPAL'S RIGHTS.
141
nor ratifies a wilful trespass committed by his agent, is not liable
therefor.¹
When a tort is wilful on the part of the agent, the principal
can not be held responsible. If a painter, for instance, takes the
job of painting a room, and employs workmen to do it, and they
wilfully bespatter the walls, the principal is not liable. The
action must be brought against the immediate authors of the
mischief.2
If a servant wilfully drives his master's carriage against
another's person or property, without the direction or sanction of
the principal, the servant alone is liable. The doctrine of the
law is, that the principal can not be held liable for a wilful,
unauthorized trespass of the agent.³
§ 193.-4. To Agent.-The liabilities of the principal to
the agent are :
1. To reimburse him for all his advances, expenses, and dis-
bursements lawfully incurred about the agency.
2. To pay the agent interest upon such disbursements when-
ever it may fairly be presumed to be due to him.
3. To pay the agent his commissions or salary as agreed
upon, or according to the usage of trade, except the agency be
gratuitous.
4 To indemnify the agent when, without his own default, he
has sustained damages in following the directions of the prin-
cipal.¹
§ 194.-4. Rights.—The rights of the principal relate either
to the agent, or to third persons with whom the agent deals on
account of his principal.
1. As to Agent.-The rights of the principal in relation
to his agent are :
1. To call the agent to an account at any time in relation to
the business of the agency.
2. If the agent violates his agency obligations, either by ex-
ceeding his authority, or by positive misconduct, or by mere
Vanderbilt v. Richmond Turnpike Co., 2 Comst. R. 479.
2 Garvey
v. Dung, 30 Howard's Rep. 315........3 Foster v. Essex County Bank, 17 Mass.
Rep. 479..
4 Story on Agency, SS 324, 335, 336, 338, 339; 9 Metc. (Mass.)
Rep. 212.
142
AGENCY.
negligence or omissions in the discharge of his functions as
agent, or in any other manner, and any loss or damage falls on
his principal, the principal will be entitled to full indemnity.
3. Where both principal and agent may maintain a suit
against a third person for any matter relating to the agency, the
principal has the right to sue in his own name in preference to
the agent.
4. The principal, in such cases, may by his own intervention,
intercept, suspend, or extinguish the right of the agent under the
contract.¹
5. The principal may generally countermand the authority
of the agent any time before a contract has been completed in
which he is acting for the principal, except where the agent's
authority is coupled with an interest.²
§ 195.-2. As to Third Persons.-The rights of a
principal in relation to third persons are:
1. To all the advantages and benefits of the acts and con-
tracts of his agent, and to all remedies which he would have
were the transactions by himself personally.3
There are the following exceptions to the foregoing rule :
First. When the contract instrument is under seal, and made
exclusively by the agent and third person.
4
Second. When exclusive credit is given to the agent, and the
principal cannot be regarded as a party to the contract."
Third. Where the agent has a lien on the property equal to
its full value, the principal can not sue without the agent's
consent.6
2. If the principal gives notice to the third person or debtor,
not to pay money to the agent, unless the agent has a superior
right from a lien or otherwise, the amount of any payment after-
wards made to the agent may be recovered by the principal from
the debtor.7
3. Money paid by an agent may be recovered by the princi-
pal under any of the following conditions:
1 Bouvier's Law Dictionary, title Principal, and the authorities there cited.
2 Comyn on Contracts, 764.
4 Id. § 422.. ....5 Id. § 423..
3 Story on Agency, SS 418, 420.
• Id. §§ 403, 407, 408, 424......
" Id. § 429; 15 East's R. 65; 6 Cow. R. 181, 186.
AGENT— WHO MAY BE.
143
First, where the consideration fails;
Second, where the money is paid by an agent through mis-
take;
Third, where money is illegally extorted from an agent in
the course of his employment;
Fourth, where the money of the principal has been fraudu-
lently applied by the agent to an illegal and prohibited pur-
pose.¹
1
4. When goods are intrusted to an agent for a specific pur-
pose, a delivery by him for a different purpose, or in a manner
not authorized by the commission, may be reclaimed by the
owner.2
5. The principal may recover for any injury or tort to his
property or rights in the course of an agency.
6. If both the agent and third person have been parties to
the tort, the principal can proceed and recover against either or
both of them.3
VI.—AGENT.
§ 196. An agent is a person who undertakes to transact some
business, or to manage some affair, for another, by the authority
and on account of the latter, and to render an account of it.ª
4
As some persons are competent and others incompetent to act
as agents, we will inquire who may be and who may not be
agents.
1. Who may be.-In legal contemplation, the act of an agent
within the scope of his authority, is not properly his own act,
but the act of his principal. A person may be competent, there-
fore, to act as agent in making a contract for another, though he
have no legal capacity to make the same contract on his own
account.
Infants or minors are not personally bound, as a general rule,
by their contracts; but they are competent to act as agents for
¹ Paley on Agency, 336, 337.....
A
23 Pickering's Mass. Rep. 405..
Story on Agency, § 436; 3 Maule and Selwyn's Rep. 562......
more, Agency, 67; 2 Bouv. Inst. 3.
+
4 1 Liver
:
144
AGENCY.
others, and if properly appointed, may make contracts as bind-
ing on their principals as though they were of full age.
Married women are competent to act as agents for third per-
sons, and even for their own husbands; and if a husband permits
his wife to act in any particular business, he is bound by her
acts and admissions in reference to such business.¹
Persons attainted or outlawed are competent to act as agents
for others; and doubtless a contract made by an agent who is
an alien enemy, would be binding on the principal, if the real
parties were citizens of countries at peace with each other.
2. Who may not be.-Incompetency can arise only from
natural defects or infirmities, or from positions of adverse inter-
est. Insanity, idiocy, and extreme imbecility are barriers, of
course, to competency; and so is extreme childhood. In such
cases, doubtless, courts and juries would disincline to presume
agency.
A person is incompetent to act as agent in a matter where
his own interests are adverse to those of his principal. Without
inquiring after actual fraud in such case, the transaction would
be declared void by the courts, on the ground that the agent is
in a situation of trust, which will not allow him to deal with his
own property when his principal has reason to believe he is deal-
ing with another's.2
§ 197.-3. Appointment.-In order to legally act as agent of
another, the agent must receive, either formally or informally,
an appointment as such.
Of course the appointment of all agents must be made di-
rectly or indirectly by the principal, or under his authority. As
a general rule, it is made directly by the principal, in some man-
ner, in business of limited extent, over which he can conveniently
exercise the immediate supervision.
But, in enterprises of broader range, requiring the employ-
ment of a great number of persons operating at various and dis-
tant points from each other, necessitating promptness, skill, and
discrimination in hiring and discharging, it becomes necessary
L
1 Riley v. Suydam, 4 Barbour's Rep. 222; Hopkins v. Mollinieux, 4 Wend.
Rep. 465........ Conkey v. Bond, 34 Barb. Rep. 276, 288; Darby v. Pettee, 2
Duer's Rep. 109.
i
DUTIES OF AGENT.
145
that the trust of employing and dismissing agents be confided
to those who are themselves but agents.
§ 198. The general rule of law is, that an agent cannot dele-
gate his authority in such manner as to employ another agent to
take his place. His own is but a delegated power, and he has
no more power to substitute another, than he has to create the
original agency, unless he has special authority to do so, or the
agency is of such a character as to absolutely require it.
The agency is a personal trust; and the principal might be
unwilling to extend the same confidence to one employed by his
agent, as he has in the agent whom he has himself employed.
Therefore this rule, that an agent cannot employ an agent, does
not apply to the employment of one whose powers and duties
are merely mechanical. It applies only to those cases involving
personal confidence in the skill, discretion, judgment, and integ-
rity of the agent.'
But there are cases where an agent has the right to employ
a sub-agent. A principal may employ an agent, and give him
authority to substitute another in his place, and if the author-
ity is exercised by the substitute of such agent, he will then be
an agent for the principal, who will be liable for his acts
as much as though personally employed by the principal him-
self.2
If a principal should order his goods to be sold by an agent
at public auction, and the sale can only be made by a licensed
auctioneer, the authority to substitute the auctioneer in the
agency, so far as the sale is concerned, is implied by law.³
The master of a ship has the power of appointing another
person as master, and of delegating his authority to him, in
cases of necessity or emergency, and when it may be for
the welfare of the ship, and the due accomplishment of the
Voyage.4
3
§ 199.-4. Duties.-We have seen that, generally speaking,
there are two classes of agents: general and special. True, we
1 Commercial Bank v. Norton, 1 Hill's Rep. 501; Grinnell v. Buchanan, 1
Daly R. 539..... 2 Wright v. N. Y. Central R. R., 28 Barb. Rep. 80.....
Story on Agency, § 14; Laussatt v. Lippincott, 6 Serg. & Rawle's Rep. 386
4 Story on Agency, § 36.
•
10
146
AGENCY.
have for convenience, and on account of peculiarities belonging
to them, added a third division-professional agents. These
are in reality, however, but a subdivision of special agents, and
are not recognized by the legal profession. They are such as
are licensed by proper authority, and hold themselves out as
ready, for a compensation, to transact a particular kind of busi-
ness for others, and who may be presumed to possess the requi-
site skill, and whom the law, therefore, holds responsible for its
exercise.
But all agents are responsible to their principals for care and
fidelity in the following particulars:
1. To Obey Instructions.-It is the duty of the agent,
if his authority is limited by instructions, to faithfully follow
those instructions in all cases to which they ought properly to be
applied. In case of damage to the principal arising out of dis-
obedience to instructions, the agent will be personally liable.¹
2
In cases of extreme necessity and unforeseen emergency, he
would be excused for deviating from instructions. An unavoid-
able calamity, or overwhelming force or accident (not the fault
of the agent), will also excuse a deviation.3
An agent is not obliged to obey instructions when told to do
an illegal or immoral act, such as smuggling goods, purchasing
or selling libellous books or indecent pictures.
2. Skill and Diligence. The agent is under obliga-
tion to exercise reasonable skill and ordinary diligence, and is
liable to his principal for want of their exercise. By this is to
be understood such skill and diligence as are adequate to the
ordinary performance of the task required.*
3. Personal Attention.-As an agency implies personal
confidence in the agent, it is his duty to execute its functions
personally, and not delegate the duties to another.5
4. To Act in Principal's Name.-Unless the agent
has an interest in the subject-matter of his agency, the business
should be transacted in the name of the principal. But when
¹ Manella v. Barry, 3 Cranch's Rep. 415........2 Story on Agency, § 193.
3 2 Term Rep. 188
4 Chapman v. Walton, 10 Bing. R. 57; 12
5 4 Campb
Martin's R. 365; 1 Cow. R. 645; Story's Agency, § 184.
R. 184.
:
DUTIES OF AGENT.
147
the authority is coupled with an interest in the property itself,
the business may be done in the name of the agent.¹
5. To Keep Accounts.—It is the duty of the agent
where the business admits of it or requires it, to keep regular
accounts of all his transactions on behalf of his principal, and
vouchers as to payments, disbursements, and receipts; and to
render these accounts to his principal at all reasonable times.
2
6. Money Deposits.—It is the agent's duty to deposit
the money of his principal, from time to time, with a bank or
banker, and in the name of the principal. Should he deposit it
in his own name, contrary to instructions or the general usage of
business, he would be responsible to his principal in case of the
failure of the bank or banker.3
7. Insurance.-It is the duty of the agent to insure the
property of his principal :
1. Where the principal so directs and furnishes the funds to
do it.
2. Where the course of dealing has been such between them,
that the one has been used to sending orders for insurance, and
the other to comply with them. Unless notice be given to the
contrary, the agent's duty is to insure, even if there are no effects
in his hands.
3. In all cases where the agent has expressly contracted to
procure insurance.
4. When the merchant abroad sends bills of lading to his
correspondent here, and ingrafts on them an order to insure. If
they are accepted, the condition is, that the agent must see to
the insurance.
5. The agent is bound to insure where the general usage of
trade requires it.*
8. Usage of Trade. In the absence of instructions, it is
the duty of the agent to conform to the known usage of trade, or
mode of transacting business applicable to the particular agency,
if there be any such established usage or mode.
Voluntary
1 Story's Agency, § 150 ....
4 Sto
.2 Smith's Merc. Law, 47, 48, 49; 8 Ves. R. 49.
3 Wren v. Kirlen, 11 Ves. R. 378; Story's Agency, § 200...
ry's Agency, § 190.
148
AGENCY.
departures will be at the peril of the agent, and involve him in
full responsibility for any loss occasioned thereby.¹
9. To make Report.-It is the duty of the agent to keep
his principal apprised of his doings, and to give him notice within
a reasonable time of all such facts and circumstances as may be
important to his interests. If by neglect of the agent the prin-
cipal suffers loss, he is entitled to be indemnified by the agent.
10. Must have no Adverse Interest.-It is the duty
of the agent to have no interest touching his agency, adverse to
the interest of his principal. The principal bargains for the
exercise of the disinterested skill, diligence, and zeal of the
agent, for his own exclusive benefit.²
§ 200.-5. Classes.- Agents are generally of two classes,
general and special. For convenience a third is added in this
chapter-professional.
1. General.-A general agent is a person who is author-
ized by his principal to execute all deeds, sign all contracts, or
purchase all goods required in a particular trade, business, or
employment. He is a general agent in that trade, business, or
employment.
2. Special. A person who is authorized by his principal
to execute a particular deed, or to sign a particular contract, or
to purchase a particular parcel of merchandise, is a special
agent.3
3. Professional.-See division III, Classes, this chapter.
§ 201.-6. Liabilities.-The liabilities of agents for the exer-
cise of their agency are-first, to their principals; and second, to
third persons.
1. To Principal.-The liabilities of agents are suggested
by a consideration of their duties, which have already been
noticed. A few classes only will be named; but these of such a
general character as will enable the student to infer others.
1. Disobedience to Instructions.-The agent renders himself
liable for any disobedience to instructions by his principal, if
loss ensues in consequence, though he intended it for the benefit
of his principal. This rule is liable to such exceptions only as
¹ Story on Agency, $3 96, 185, 199.
2 Id. § 210.... 3 Id. § 17.
DUTIES OF AGENT.
149
were given under the head of Duties of agents. It is almost
universal in regard to agents who receive hire or reward for their
service.¹
2. Loss by Misconduct.-The responsibility of an agent is
not confined to the loss of his commission, but extends to the
amount of the damage which the principal suffers, either by
direct injury occasioned to his own property, or by his being
obliged to make reparation to others.²
3. Care of Goods.-A factor is bound to keep the goods of
his principal with the same care and attention that a man of
average prudence would bestow upon his own.³
4. Betrayal of Trust.-If an agent is employed at a stipu-
lated salary, to procure articles for his principal, he has no right
to sell his own articles under the name of another person, with
whom he clandestinely engages in a partnership.
In such case,
he would be compelled to account to his principal for the
profits.¹
4
5. Not Keeping Accounts.-An agent is liable to his princi-
pal for not keeping clear and accurate accounts, and not com-
municating the results thereof from time to time; and a refusal
to render such accounts lays the agent open to the most un-
favorable presumptions and suspicions.5
6. Mixing his with Principal's Property.—It is the duty of
an agent to keep the property of his principal separate, not to
mix it with his own, so as to render it impossible to distinguish
which belongs to the one, and which to the other. If the agent
does so mix them, the entire property will belong to the prin-
cipal."
7. Profits of Agency.-The agent is liable to the principal
for every sort of profit and advantage arising from the agency;
and if he clandestinely speculates with his principal's effects,
whatever is gained thereby belongs to the principal. But if the
agent loses in such speculation, the loss is his own."
•
15 Dunlap's Paley on
1
¹ Paley on Agency, by Dunlap, 6; Leverick ". Meigs, 1 Cow. R. 645.
"Dunlap's Paley, 7; 4 Term R. 490.. 3 Dunlap's Paley on Agency, page 15,
note 3..
4 Massey v. Davies, 1 Ves. jr. 289.
Agency, 47; Pope v. Barret, 1 Mason, 119, 127.
mentaries, 405; Lupton v. White, 15 Ves. R. 442..
Agency, 51; Massey v. Davies, 2 Ves. jr 317
6 2 Blackstone's Com-
'Dunlap's Paley on
150
PAPER
8. Misfeasance and Nonfeasance.
Whenever an agent
violates his duties or obligations to his principal, whether it be
by exceeding his authority, or by positive misconduct, or by
mere negligence or omissions in the proper functions of his
agency, or in any other manner, and any loss or damage thereby
falls on his principal, he is responsible therefor, and bound to
make a full indemnity.'
§ 202.-2. To Third Persons.-The liabilities of agents
to third persons are either on contracts, or for torts.
1. ON CONTRACTS.-First. Negative.-An agent is not liable
to third persons, in making contracts for his principal
First. When he executes a deed or other instrument, in the
name of his principal.
Second. When he makes an oral or verbal contract, as agent
for another, and at the same time names his principal.
Third. When, in making a contract, no credit is given to
himself as agent, but the credit is exclusively given to his prin-
cipal.2
Second. Afirmative.—First. It is a general rule that an
agent who executes an instrument must execute it in the name
of his principal, so as to give a right of action thereon against
him, if he would avoid personal responsibility; and if it be a
contract by deed, then it must be in the name and be the deed
of the principal, or the agent is personally responsible, and he
alone.3
Second. Wherever a person assumes to act as the agent of
another, if he does not possess authority from the principal, or
if he exceeds his authority, he will be personally responsible
therefor to the person with whom he is dealing for or on account
of the principal.*
Third. If the agent, at the time of making the contract,
does not disclose the fact of his agency, but treats with the
• Story's
Story's Agency, § 217; Dodge v. Tileston, 12 Pick. R. 328..
Agency, § 263; Lloyd's Paley on Agency, 368, 369; 4 Wend. R. 285......
•
3 Stone v. Wood, 7 Cow. R. 453; Story on Agency, § 278...... 4 Livermore on
Agency, 255, 256; Sumner v. Williams, 8 Mass. R. 178; 2 Kent's Com., Lecture
41; 7 Wend. R. 315.
DUTIES OF AGENT.
151
other party as though he were principal, he will render himself
personally responsible.¹
Factors, brokers, or other agents, buying goods in their own
names for their principals, are responsible to the seller in every
case where the agency is not disclosed.²
2
Fourth. It is a general rule that agents or factors, acting for
merchants resident in a foreign country, are held personally
liable upon all contracts made by them for their employers; and
this without any distinction, whether they describe themselves
in the contract as agents or not. In such cases, it is presumed
that the credit is given to the agents or factors.3
And in such cases, the ordinary presumption is, not only that
the credit is given to the agents, but that it is exclusively given
to them, to the exoneration of their employers.*
Fifth. An agent contracting as such, will be personally re-
sponsible in all cases where he makes the contract in his own
name, or voluntarily incurs a personal responsibility, either ex-
press or implied.5
as
Sixth. Persons contracting as agents are ordinarily held per-
sonally responsible, where there is no other responsible principal
to whom resort can be had. A person signed a note "
guardian for A. B." He was held personally liable on the note;
for he could not make his ward personally liable therefor, nor
his ward's assets. 6
Seventh. In the ordinary dealings of home factors in buying
and selling goods, generally the agent is jointly liable with the
principal. In case of a purchase by such a factor, he as well as
his principal is deemed liable for the debt; and, in case of a
sale by such a factor, the buyer is liable both to the principal
and the factor for such a debt.7
Eighth. A ship-master contracting within the ordinary scope
of his powers and duties, is generally personally responsible, as
¹ 13 Johns. R. 58, 77; 2 Livermore on Agency, 245, 246, 247, 257; 17 Wend.
R. 40, 43…….. 2 Story on Agency, § 266; Lloyd's Paley on Agency, 371, 372.
3 Paterson v. Gandasequi, 15 East's R. 62; Smith on Mercantile Law,
66, 78; 2 Livermore on Agency, 249; Story on Agency, § 268... . . . .¹ Id…. . . . . .
5 Id. SS 156 to 159; 11 Serg. & Rawle's R. 129.....
5 Mass. R. 299; Forster v. Fuller, 6 Mass. R. 58....
Story on Agency, § 293.
4
6 Thacher v. Dinsmore,
.1 Bell's Com. § 418;
152
AGENCY.
well as the owner, upon all contracts made by him for the em-
ployment, and repairs, and supplies of the ship.¹
1
2. FOR TORTS.-1. Misfeasance.-There are two classes of
torts: Misfeasance, or positive wrong; and Nonfeasance, or
omission of duty, on the part of agents. The principal may be
liable to third persons for both misfcasance and nonfeasance of
his agent; but the agent is generally liable to third persons for
misfeasance only. He is liable to his principal for both, when
done or omitted in violation of the authority of his agency.2
The agent is always liable personally to third persons, for his
own misfeasance and positive wrong;-but not generally for
nonfeasance in the course of his employment.3
No authority whatever from a principal or any other superior,
can furnish to any party a just defense for his own positive torts
or trespasses; for no man can authorize another to do a positive
wrong.¹
An action brought against an agent for a misfeasance, is not
brought against him as agent, but as a wrong-doer.5
An agent cannot shelter himself from personal responsibility,
where he directly and knowingly co-operates in a deceit, or mis-
representation, or fraud, to the injury of a third person, although
authorized to do so by his principal; for it is an illegal act, and
contrary to sound morals."
2. Nonfeasance.-Although the books lay it down with ab-
solute positiveness, that an agent is never liable to third persons
for nonfeasance in the exercise of his agency, yet they give a
number of cases where he is held liable. For instance, deputy
postmasters are presumed to be liable for negligences and omis-
sions of official duty."
In Story on Agency, § 314, the learned author says: "It is
plain that, if no remedy in such case would lie against the deputy
postmasters, the injured party would be utterly without redress;
¹ Story on Agency, § 294, and numerous authorities there quoted.
2 Id. § 308
•
•
3 Lloyd's Paley on Agency, 396 to 399.... 4 Story on
Agency, § 309; Perkins v. Smith, 1 Wilson's R. 328... 5 Paley on Agency,
by Gow, 313; 12 Modern Rep. 488....
1 Story's Eq. Juris. §§ 191, 192, 204...
R. 378.
•
Story on Equity Pleadings, § 232;
McMillan v. Eastman, 4 Mass
RIGHTS OF AGENTS.
153
for the government cannot be presumed to intend to indemnify
the public at large, against the misfeasances and negligences of
all their subordinate officers."
A ship-master is an agent appointed by the owners of the
ship; yet the law holds him liable, not only for his own negli-
gences and nonfeasances, but for the negligences, nonfeasances,
and misfeasances of the subordinate officers and others employed
by them.¹
§ 203.-7. Rights.-There are certain rights which belong to
an agent in the exercise of his agency, as to his principal, and
also as tɔ third persons.
1. As to Principal.-The rights of the agent as to his
principal necessarily grow out of their business relations. They
are:
1. To Compensa'ion.—It is a general rule that an agent is
entitled to compensation for his services as such, unless the
agreement or presumption is, that he undertakes to perform
them gratuitously.
In the ordinary course of commercial agencies, a compensation
is always understood to belong to the agent, in consideration of
the duties and responsibilities which he assumes, and the labor
and services which he performs. This compensation is some-
times called a commission; and in such cases it is the allowance
of a percentage upon the actual amount or the value of the bus:-
ness done; as, for example, the value of the goods bought or sold
in the course of the agency.
This compensation or commission, so far as the amount is
concerned, may be determined by the usage of trade at the
place, or by the agreement of the parties.²
If there is no usage of trade, nor agreement, a reasonable
compensation will be allowed by the court or jury.³
3
Extra commissions are sometimes allowed, either by positive
agreement or by the usage of trade. These are called commis-
sions del credere, or commissions of trust, which are extra allow-
ances paid to factors, in consideration of their undertaking to
1 Paley on Agency, by Lloyd, 398; Story on Agency, § 315; 9 Wend. R. 1.
.2 Story on Agency, § 327...
3 Id.
154
AGENCY.
།
be responsible for the solvency of the purchasers, and the punc-
tual payment of the debts created by the sale of the goods."
An agent cannot recover commissions for his services in any
illegal transaction, whether prohibited by law, or by morals, or
public policy. An agent employed to purchase an office in the
customs, or to assist in smuggling, or to sell smuggled goods,
cannot recover for services.2
2. To Reimbursement.—It is the right of the agent to be re-
imbursed by his principal for all advances, expenses, and dis-
bursements, made in the course of his agency, on account of, or
for the benefit of, the principal.3
3. To Indemnification.-If an agent has, without his own
default, incurred losses or damages in the course of transacting
the business of his agency, or in following the instructions of his
principal, he will be entitled to full compensation therefor.*
4. To Lien.-In many instances the agent has an established
right, called the right of lien. A lien is defined to be a right in
one man to retain that which is in his possession belonging to
another, until certain demands of the person in possession are
satisfied.
Liens are of two sorts: particular and general. A particu-
lar lien is the right to retain a thing for some charge or claim
growing out of, or connected with, that identical thing; such as
for labor or services, or expenses, bestowed upon that thing.5
The law favors this kind of lien, and it is the more common sort
belonging to agents.
A general lien is a right to retain a thing, not only for
charges and claims specifically arising out of, or connected with
that identical thing, but also for a general balance of accounts
between the parties, in respect to other dealings of the like
nature."
Particular liens arise in various ways: First, by ex-
1 Lloyd's Paley on Agency, 41, 42, 111, note....
2 Waldo v. Martin, 4
Barn. & Cress. R. 312; Story on Conflict of Laws, SS 244 to 256; Story on
Agency, § 330..... 3 Livermore on Agency, ch. 9, § 2, pp. 11 to 33.
4 Ramsay v. Gardner, 11 Johns. R. 439..
Bevans v. Waters, 3 Carr. & Payne's R. 520..
Story on Agency, § 354.
.5 2 Kent's Com., Lecture 41;
6 2 Kent's Com., Lect. 41;
RIGHTS OF AGENTS.
155
press contract; secondly, by an implied contract, resulting
from the usage of trade, or the manner of dealing between the
parties; or thirdly, by mere operation of law, from the legal
relation and acts of the parties, independently of any contract.¹
In cases of agency, there generally exists a particular right
of lien in the agent for all his commissions, expenditures, ad-
vances, and services, in or about the property or thing intrusted
to his agency, whenever they were proper, or necessary, or inci-
dent thereto.
This is strictly true in all cases of mere private agency, un-
less there is some private agreement, express or implied, or
some usage of trade or business, which repels or excludes the
lien.
Thus, for example, attorneys, bankers, brokers, factors, car-
riers, packers, dyers, shipwrights, wharfingers, commission
merchants, auctioneers, supercargoes, and masters of ships have
all a lien on the papers, documents, goods, merchandise, and
other property committed to their care in the course of their
agency, for the sums due to them for their commissions, dis-
bursements, advances, and services, in and about the same.²
2. As to Third Persons.-This subject is divisible into,
first, the rights of agents founded on contracts made by them
in the character of agents, as against third persons; and second,
the cases in which they acquire rights founded on the torts of
third persons to them, in the course of their agency.
1. As to Contracts.-First. Where the contract is made in
writing expressly with the agent, and imports to be a contract
personally with him, although he is known to act as agent, the
agent has a right of action in his own name. For example, a
promissory note, given to an agent as such, for the benefit of his
principal, the promise being to pay the money to the agent, by
name, gives the agent the right to recover in his own name.
Second. Where the agent is the only known or ostensible
principal, and, therefore, in contemplation of law the real con-
tracting party, he may sue in his own name. For instance, if
an agent sells the goods of his principal in his own name, and
1
Story on Agency, § 355.
referred to.
2 Id. § 373, and numerous authorities there
156
AGENCY.
as if he were owner, he may sue in his own name for the price,
although the principal may do the same.¹
The same rule holds if the agent purchases in his own name.
He can bring an action for delivery or warranty, as though he
were the only party.”
Third. Where by the usage of trade, or the general course
of business, he is authorized to act as owner, or as a principal
contracting party, although known as agent, he may bring suit
in his own name. If he has a special property in the subject-
matter of the contract, and not a bare custody thereof, or where
he has an interest in it, or a lien upon it, he may in all such
cases sue upon the contract.³
In all these cases the agent acquires personal rights, and may
maintain an action on the contract, without any distinction,
whether his principal is or is not entitled also to similar rights
and remedies on the same contract.*
2. As to Torts.-Factors and other agents, in virtue of their
possession of the property of their principals, are entitled to
maintain actions of trespass and trover against third persons for
any torts or injuries affecting that possession."
If an agent is induced by the fraud, deceit, or misrepresenta-
tions of third persons, to purchase goods for his principal, or to
sell goods for his principal, and thereby he sustains a personal
Loss, he will be entitled to maintain a suit against such third
person for such wrongful act or deceit.
The remedy of agents for mere torts is confined to cases
where the right of possession is injuriously invaded, or where
they incur a personal responsibility, or loss, or damage, in con-
sequence of the tort."
§ 204.-8. Extent of Authority.-The extent of an agent's
authority depends upon the nature and character of his agency,
and upon whether he is a general or a special agent.
1. Of General Agent.-A general agent, we have seen,
2 Id....... 8 1
1 12 Wend. R. 413; 5 Maule & Selwyn's R. 383...
Livermore on Agency, 215 to 219; Joseph v. Knox, 3 Campb. R. 320; Story on
Agency, SS 393, 397.. ...4Story on Agency, § 393... 5 Solomons v. Bank
of England, 13 East's R. 135; 9 Barn. & Cress. 208; Story on Bailment, §§ 93,
152... Story on Agency, SS 415, 416.
1
EXECUTION OF AGENT'S AUTHORITY.
157
is one who is appointed to act in his principal's affairs generally,
either in some particular branch of business, or in his general
business. In such case the principal will be bound by the acts
of his agent within the scope of the general authority conferred
on him, although he violates, by those acts, his private instruc-
tions, which are given by the principal.'
Strangers are governed, and have a right to be, by the acts of
the parties, not by any private communication passing between
them. Whatever amount of authority a principal by his acts
and public declarations confers upon a general agent, he will be
bound by, as against all who base their action upon such acts and
declarations.2
2. Of Special Agent.-A special agent's authority ex-
tends just so far, and no farther, than the special instructions of
his principal, relating to the business of the agency. If a special
agent exceeds his special and limited authority, the principal is
not bound by his acts. His acts, in such case, become mere
nullities, so far as the principal is concerned; unless, indeed,
he has held the agent out as possessing a more enlarged au-
thority.3
§ 205.-9. Execution of Authority.-In considering the exe-
cution of the authority of the agent, the following divisions are
adopted by Paley:
1. By whom executed.
2. In what manner.
3. In what time.
1. By whom executed.-An agency is but a delegated
authority; and a delegated authority can be executed only by
the person to whom it is given; for the confidence being per-
sonal, cannot be assigned to a stranger.
Therefore if an agent be appointed to sell, he cannot depute
the power to a clerk or under-agent, notwithstanding any usage
of trade, unless by express assent of the principal.*
It is a general rule of the common law, that where an author-
1 Story's Agency, § 126........2 Dean's Com. Law, § 87....
Agency, § 126........4 Gow's Paley on Agency, 148.
3 Story's
158
AGENCY.
ity is given to two or more persons to do an act, the act is not
valid to bind the principal, unless all of them concur in doing
it; for the authority is construed strictly, and the power is un-
derstood to be joint and not several.¹
Yet this seems to be a general rule only, and not invariable.
Public confidence and the general convenience of trade, some-
times require a more liberal interpretation of the rule. In case
of a joint consignment of goods for sale to two factors, whether
partners or not, each is understood to possess the whole power
over the goods for the purposes of the consignment.2
On the other hand, such joint factors are co-obligors, and, as
such, are jointly accountable and answerable for one another,
for the whole.³
2. In what Manner.-If an agent is authorized to
make a contract in writing for his principal, it must, in general,
be personally signed by him, and it cannot be signed by his
clerk, either in his own name as agent, or in the name of the
principal, so as to bind the latter.
In general, in order to bind the principal so as to make it his
contract, it must purport on its face to be the contract of the
principal, and his name must be inserted in it, and signed to it,
and not merely the name of the agent, even though the latter
be described as agent in the instrument. It must be done in the
name and as the act of him who gives the authority.*
Where an interest is to pass by an instrument, it must
in terms purport to be conveyed by him, in whom alone that
interest is vested. This is regularly true in regard to all solemn
instruments under seal.
A more liberal exposition, however, is allowed in cases of
unsolemn instruments, and especially of commercial and mari-
time contracts, which are usually drawn up in a loose and in-
artificial manner.5
In such cases, in furtherance of the public policy of encou-
raging trade, if it can, upon the whole instrument, be collected,
¹ Sutton v. Cole, 3 Pick. R. 232; 12 Mass. R. 185; Story on Agency, § 42.
2 Story on Agency, § 44........3 Godfrey v. Saunders, 3 Wilson's R.
Story on Agency, § 147; Kent's Com., Lecture 41..... 58
94, 114...
Pick. R. 56.
TERMINATION OF AGENCY.
159
that the true object and intent of it are to bind the principal,
and not merely the agent, courts of justice will adopt that con-
struction of it, however informally it may be expressed.¹
The same principles of construction will apply to cases
where bills are drawn, accepted, or indorsed by agents. If,
from the nature and terms of the instrument, it clearly appears,
not only that the party is an agent, but that he means to bind
his principal, and to act for him, and not to draw, accept, or
indorse the bill on his own account, that construction will be
adopted, however inartificial may be the language, in further-
ance of the actual intention of the instrument.
But if the terms are not thus explicit, although it may ap-
pear that the party is an agent, he will be deemed to have con-
tracted in his personal capacity. And there is no difference on
this point, whether the instrument be a deed or an unsealed con-
tract.2
"If one who is not duly authorized to act as agent, assumes
to act as such, and uses such terms as legally import the under-
taking of principal only, the contract is void."
With regard to the form to be observed in the execution of
an authority, it is an established rule, that an act done under
power of attorney, must be done in the name of the person who
gives the power, and not in the attorney's name.³
3. In what Time.-It is necessary to the validity of the
execution of an agency, that it take place during the contin-
uance of the authority. Whatever is done after the termination
of the agency, or of the agent's authority, is entirely void. As
to the means and modes of the termination of an agency, we
shall learn in the next and last division of the subject.
VII. TERMINATION.
§ 206. The dissolution or termination of an agency may
take place in two different ways: first, by the act of the prin-
cipal or agent; and secondly, by operation of law.
1 Story on Agency, § 154.
Story on Agency, § 155....
2 Bowen v. Morris, 2 Taunt. R. 374, 387;
3 Gow's Paley on Agency, p. 152.
160
AGENCY.
1. By Either Party.-Either party, that, is, either the prin-
cipal or the agent, may put an end to the agency.
1. The Principal. The principal may terminate the
agency-1. By Revocation; 2. By Change of Condition; or 3.
By Marriage, if a female.
1. By Revocation.-As a general rule the principal has the
right to determine or revoke the authority given to his agent at
his own mere pleasure. This rule strictly applies in all cases
where the authority has not been actually exercised at all by the
agent.
So if the agent's authority has been put in execution only
in part, but not to such an extent as to be binding between the
parties, the preliminary steps only having been taken, the prin-
cipal may terminate the agency by revocation.
When the agent's power is revoked, that necessarily revokes
the authority of any sub-agent which he may have appointed.¹
So far as the agent himself is concerned, the revocation takes
place from the time it is made known to him; and as to third
persons, when it is made known to them, and not before.
Until, therefore, the revocation is made known, it is inopera-
tive. If known to the agent, as against his principal, his rights
are gone; but as to third persons who are ignorant of the re-
vocation, his acts bind both himself and his principal.²
There are several modes of revoking the authority. It may
be, first, by express formal declaration, publicly made known;
secondly, by an informal writing, or by parol; or, third, it may
be implied from circumstances.
What circumstances will or will not amount to a revocation,
or to notice of revocation, cannot be stated with any definite cer-
tainty. But there are some acts which will admit of no doubt.
For example, if the principal appoints another person to do
the same act, this will ordinarily be construed to be a revocation
of the power of the former agent.
If the principal should himself collect the debts which an
agent had been authorized to collect, this would be an implied
revocation. So would the withdrawal of vouchers or instru-
12 Livermore on Agency, 307, 308... 2 2 Kent's Com., Lecture 41:
Story on Bailments, § 208; Story on Agency, § 470.
TERMINATION OF AGENCY.
161
ments, negotiable or otherwise, placed in the hands of an agent
to be used in the course of his agency.¹
The doctrine in reference to revocation does not apply where
the agent's authority is coupled with an interest.
2. Change of Condition.-A change of the principal's con-
dition may terminate the agency, provided that condition is
such as to be incompatible with his power as principal. For in-
stance, were he interdicted from acting for himself, and placed
under guardianship, his power as principal must cease.²
3. By Marriage.—The power of constituting an agent is
founded on the right of the principal to do the business him-
self; and when that right ceases, the right of creating or of
continuing the appointment of an agent for the same purpose,
must cease also. The derivative authority can exist no longer
than the original.
Thus, if an unmarried woman should, as principal, execute a
power of attorney, or give any other authority to an agent, and
afterwards she should marry, the marriage would amount to a
revocation of the power in those States where the common law
prevails. For, at common law, a married woman has, in general,
no right to authorize an agent to do any act in her name, or to en-
gage in any contract for her, or to dispose of any of her property.³
This common law rule, however, has been very much changed
by the statutes of a large number of the American States; to
which the reader must refer for minute information.
2. Agent. The agent can terminate the agency by renun-
ciation. The renunciation may be before any part of the author-
ity is executed, or when it is in part executed. But in either
case, if the agency is founded in a valuable consideration, the
agent, by renouncing it, makes himself liable for the damages
which his principal may sustain thereby.
But wherever the agent renounces his agency, he is bound to
give notice thereof to his principal.*
§ 207.-2. By Operation of Law. - An agency may be ter-
¹ Story on Agency, § 475....
2 Id. § 484... . ...
3 2 Livermore on
4 Story on
Agency, 307; 5 East's R. 206; Story on Bailment, § 206..
Agency, § 478.
11
162
AGENCY.
minated by operation of law. This may arise in various
ways.
1. By Lapse of Time.-This is by the expiration of the
time for which the agency was created. If created for a year, it
terminates when that year expires.
So if a person were about to depart on a voyage, and should
appoint an agent to manage his affairs until his return home,
the authority would expire by its own limitation, on the prin-
cipal's return.
2. Completion of Subject-Matter.- If an agent is
authorized to make sale of a ship, or of anything else, and the
sale is made, the agency has its natural termination.
3. Extinction of Subject-Matter.-In the case just
supposed, if the ship is lost, wrecked, sunk, or otherwise de-
stroyed, after the agency is created, it is manifest that there is a
physical impossibility of doing the act.
as,
EXTINCTION of the principal's power over the subject-matter—
if the principal sells the ship himself—this terminates the
agency. So if in any other manner the principal's power over
the subject-matter becomes extinct, the agency over it also
ceases.¹
4. Insanity of either Party.—1. Principal. — By
either party here is meant either principal or agent. If a prin-
cipal should become insane, that would operate as a suspension
or revocation of the authority of his agent during the contin-
uance of the insanity; for the principal himself, during his
insanity, could not personally do a valid act; and of course his
agent cannot, in virtue of a derivative authority, do any act for
and in the name of his principal, which he could not lawfully do
by himself.
This is clear where the insanity or lunacy of the party is
established under an inquisition, or where he is put under guar-
dianship.2
2. Agent.--The case of the insanity of the agent would seem
to constitute a natural, nay, a necessary revocation of the au-
thority; for the principal cannot be presumed to intend that
1 Story on Agency, § 500.... • Id. § 481, and note.
TERMINATION OF AGENCY.
163
acts done for him, and to bind him, shall be done by one who is
incompetent to understand, or to transact the business which he
is employed to execute. The exercise of sound judgment and
discretion would seem to be required in all such cases, as pre-
liminaries to the due execution of the authority.
5. Bankruptcy.-1. Principal.-The bankruptcy of the
principal operates as a revocation of the authority of his agent,
touching any rights of property of which he is divested by the
bankruptcy; for the bankrupt thereby ceases to be the owner,
and consequently is incapable of personally passing any title to
it; and the act of his agent cannot have any higher validity.
But as to other rights and property which do not pass by
the bankruptcy, but remain personally in the bankrupt, such as
he holds as trustee, or as guardian, or as executor, the authority
of his agent will not be suspended or revoked by his bank-
ruptcy.¹
This doctrine, however, does not apply where the agency is
coupled with an interest; for that may still be executed, not-
withstanding the bankruptcy, or even insanity or marriage; as
it may be executed in the name of the agent, as well as in the
name of the principal.
2
2. Agent. The bankruptcy of the agent will amount to a
revocation or termination of his authority to receive any money
from the purchaser, or from other persons, on account of his
principal. This arises from the presumption that the confidence.
of the principal in the agent is destroyed.
But this does not revoke or suspend the power of the bank-
rupt agent to act as agent for another by doing a merely formal
act, which passes no interest; such, for example, as executing a
deed in the name of another.3
6. Death of either Party.-1. Principal.-As the act
of an agent is to be generally done in the name of, as well as by
the authority of the principal, the authority must necessarily
cease at the death of the latter. And it makes no difference that
the authority is declared to be irrevocable; for if it be not cou-
pled with an interest, though irrevocable by the party, it is re-
32 Kent's Com., Lecture
1 Story on Agency, § 482.
41; Story on Agency, § 486.
2 Id. § 486.
164
AGENCY.
voked by death. As a dead man can do nothing, so he can
authorize nothing.
If the agent's authority is coupled with an interest, and he
has the legal title in the property, he is capable of transferring
it in his own name, notwithstanding the principal's death."
1
This authority arising from an interest in the subject-matter
of the agency, is illustrated in the cases of factors, supercargoes,
and masters of ships, all of whom generally do business in their
own names, and usually have a personal interest coupled with
their authority.2
2. Agent.-The death of the agent of course puts an end to
the agency itself, and if an end to the agency, then any sub-
agency must likewise terminate. The agency cannot be exer-
cised by the agent's legal representatives, as executors or admin-
istrators, for the agency was a matter of personal trust and con-
fidence on the part of the principal.³
¹ Story on Agency, § 489………. 2 Id. § 497....……… .³ Id. § 49C.
1
Topical Analysis of Partnership.
IN THREE PARTS,
PART I. ELEMENTS.
PART II. DISSOLUTION.
PART III. CONSEQUENCES OF DISSOLUTION,
PART I. ELEMENTS.
1. Competency.
1. Ostensible.
2. Nominal,
2. Classes of partners
I. PARTNERS
3. Joint tenants.
II. SUBJECT-MATTER.
3. Dormant.
4. Special.
4. Relations to each other.
5. Powers of each to bind all.
6. Liabilities to third persons.
7. Rights against third persons.
III, HOW FORMED . .
IV. CONDITIONS
1. By written articles.
2. By parol agreement.
3. By implication.
1. Partnership name.
2. Duration.
3. Individual contributions.
4. Profit and loss.
5. Responsibility 1. Partnership.
6. Interest in stock.
2. Individual.
166
TOPICAL ANALYSIS OF PARTNERSHIP.
PART II. DISSOLUTION.
I. BY ACT OF PARTIES.
11. BY JUDICIAL DECREE
III. BY OPERATION OF
LAW..
1. By mutual consent.
2. By express renunciation.
3. By tacit renunciation.
4. Assignment of one partner's interest.
5. By lapse of time.
6. By implied limitation.
1. When business proves impracticable.
2. Gross immorality of a partner.
3. Habitual absence of a partner.
4. Inability of partners to act.
1. Change of condition of a partner.
2. By marriage.
3. Sale on execution.
4. Bankruptcy.
5. War between countries of parties.
6. Death of one partner.
PART III. CONSEQUENCES OF DISSOLUTION.
1. WHAT POWERS CEASE
II. WHAT POWERS RE-
MAIN
III. NEW POWERS CRE-
ATED.
IV. NOTICE OF DISSO-
LUTION
1. Use of partnership property for trade.
{2. Use of
2. Of one to bind all in new deal.
I. To collect debts.
2. To adjust accounts.
3. Joint funds to pay partnership debts.
I. Tenancy in common.
2. When dissolution by death.
3. Surviving partner.
4. Partner's lien.
1. When necessary.
2. When not necessary.
I. By ostensible partner 3. To whom necessary.
2. By dormant partner. {
3. By nominal partner.
4. How given
•
4. To whom not necessary
1. When necessary.
2. When not necessary.
1. By newspapers.
12. By circulars.
CHAPTER IV.
PARTNERSHIP.
§ 208. A partnership is a contract between two or more com-
petent persons to contract, by which they join in common either
their whole substance or a part of it, or unite in carrying on
some commerce, or some work, or some other business, that they
may share among them all the profits or loss, which they may
have by the joint stock which they have put into the partner-
ship.¹
By this definition, the following elements are expressed or
implied: 1. Partners; 2. Subject-matter; 3. How formed; and
4. Conditions.
But as the partnership must have a termination, either by
the will of the parties, or by operation of law or judicial decree,
and as certain consequences result from such termination, the
subject will be treated under the following general divisions:
1st. Elements; 2d. Dissolution; and 3d. Consequences of Dis-
solution.
PART I.—ELEMENTS.
§ 209. As a partnership is the result of a peculiar kind of
contract, it must necessarily have all the elements of a contract.
There must be parties, consideration, subject-matter, &c. The
parties to a partnership are the partners of the company; and
they, as one person, have the power of transacting business with
other parties.
By the foregoing topical analysis, the parties, or partners,
are first to be considered.
1 Domat, Civ. Law, B. 1, title 8, § 1.
168
PARTNERSHIP.
I.—PARTNERS.
§ 210.-1. Competency. The general rule of the common
law is, that every person of sound mind, capable of carrying on
ordinary business, may enter into a contract of partnership."
The conditions that render a person incompetent to enter
into any other contract, would doubtless render him incompetent
to enter into a contract of partnership. The contract of an
infant is generally voidable. He may avoid it on coming of
age.
An infant may be a partner. But, speaking generally,
whilst he is an infant, he incurs no liability and is not responsible
for the debts of the firm; and when he comes of age, or even
before, he may if he chooses, disaffirm past transactions.
If an infant, however, engages in a partnership, he must at
or within a reasonable time after his arrival of age or before,
notify his disaffirmance thereof; otherwise he will be deemed to
have confirmed it, and, will be bound by subsequent contracts
made on the credit of the partnership.³
The essence of a contract of partnership, like that of other
contracts, consisting in consent, it follows that if a person is
incapable of giving consent, he is not bound by the contract.
Hence persons of unsound mind, or otherwise incapable, cannot
become partners.*
5
By the common law, a married woman is incapable of form-
ing a partnership, since she is disabled generally to contract, or
engage in trade, but the recent statutes in many of the States
removing the disabilities of married women are sufficiently broad
to enable them to enter into a copartnership.
§ 211.-2. Classes of Partners.-Partners are classed as fol-
lows:
+
2 Holmes
1 Story's Eq. Juris. §§ 222-239; Story on Partnership, § 7....
v. Blogg, 8 Taunt. R. 35; Id. 508; Story on Partnership, §7; 2 Kent's Com.,
Lecture 41.
Thompson v. Lay, 4 Pickering's Rep. 48; 2 Kent's Com.,
Lecture 31. 4 Story on Partnership, § 8......5 2 Kent's Com., Lecture 28.
PARTNERS.
169
1. Ostensible.-Those whose names are made known, and
appear to the world as partners, and who in reality are such, are
ostensible partners.¹
2. Nominal.-Nominal partners are those who appear, or
are held out to the world as partners; but who have no real
interest in the firm business.2
They have no actual interest in the business or profits, and,
therefore, they are not partners as between themselves and the
other partners; but as to third persons, they assume the respon-
sibilities of partners by voluntarily suffering their names to
appear as such, thus lending the partnership the sanction of
their credit.
į
3. Dormant.-Dormant partners are those whose names
are not known, or do not appear as partners, but who, neverthe-
less, are silent partners, and partake of the profits, and thereby
become partners, either absolutely and to all intents and pur-
poses, or, at all events, in respect to third persons.³
The dormant or concealed partner, is a real partner as to
actual participation in its benefits; but endeavors to avoid its
risks and liabilities by keeping the fact of his interest concealed.
His name does not appear in the firm. In the view of the world
he takes no interest in its concerns, although really he is a mem-
ber of the firm and liable for the copartnership debts.
linibo 4. Special. Special partners are those who supply a cer-
tain amount of capital, and who, if they comply with certain
statutory requirements, are not liable for the debts of the firm,
assuming the copartnership articles so provide, beyond the
amount which they contribute to the capital.
It is said that a partner embraces the character of both a
principal and agent. So far as he acts for himself and his own
interest in the common concerns of the partnership, he may
properly be deemed a principal; and so far as he acts for his
partners, he may as properly be deemed an agent.*
The principal distinction between him and a mere agent is,
1 3 Kent's Com., Lecture 43......' Montague on Partnership, ch. 2, §§ 1, 2 ;
3 Kent's Com., Lecture 43.... 3 Id.; Story on Partnership, § 80......¹ Bar-
ing v. Lyman, 1 Story's Rep. 371; Story's Agency, § 1.
170
PARTNERSHIP.
that he has a community of interest with the other partners in
the whole property and business and responsibilities of the
partnership; whereas an agent, as such, has no interest in
either.¹
§ 212.-3. Joint Tenants.-Partners are not mere part owners
of the property held in partnership, like tenants in common, who
each have a distinct though undivided interest in the property.
In such cases, neither can transfer or dispose of the whole
property, nor act for the others in relation thereto; but merely
for his own share, and to the extent of his own right or in-
terest.
But partners are joint tenants, without the right of survivor-
ship, and each partner has the entire possession, as well of every
parcel as of the whole.2
Were partners joint tenants with the right of survivorship
instead of without, on the death of one of the partners, the other
would succeed to his entire interest.
So that partners are neither tenants in common, nor, strictly
speaking, joint tenants with full common law rights. But a
partner may dispose not only of his proportional interest in the
joint stock, but also of the interest of all his co-partners.
A partnership differs from a joint tenancy in two important
particulars. First, joint tenants cannot dispose of the interest
of each other in the joint property, but each has the sole power
of disposing of his own interest.
Whereas in the cases of partnership, each partner is not only
a joint owner with the others of the partnership property, but
he also has full power to dispose of the entire right of all the
partners therein for the purposes of the partnership, and in the
name of the firm.
In the next place, there is no survivorship in cases of part-
nership, as there is in a joint tenancy. The share of the
deceased partner does not survive, but goes to the legal repre-
sentatives of the deceased partner.3
As between the partners themselves, there is no difference
whether the partnership property, held for the purposes of trade
¹ Story on Partnership, § 1... 2 Id. § 89.....
3 Id. § 90.
PARTNERS.
171
or business consists of personal or movable property, or of real
or immovable property, or of both, so far as their ultimate
rights and interests therein are concerned.
The title, however, of real estate may stand in the name of
one, or of all, the partners; and in case it stands in the name of
all, the sale and transfer can be perfected only by all joining in
the conveyance. While, on the contrary, any one of the partners
can sell the whole of any goods or articles belonging to the part-
nership.¹
§ 213-4. Relations to each other.—A partnership, in a cer-
tain sense, although composed of two or more persons, on account
of their peculiar business relations to each other, are in law but
one individual.
The creation of a partnership clothes the partners with rew
powers, and devolves upon them new duties, having reference
both to the partnership fund, and to their duties, rights and
remedies as against each other.
The partnership foundation rests in the mutual respect, con-
fidence, and belief in the entire integrity of each partner, and
his sincere devotion to the business and true interests of the
partnership.
Good faith, reasonable skill and diligence, and the exercise
of sound judgment and discretion, are naturally if not neces-
sarily, implied from the very nature and character of the rela-
tion of partnership.
Hence, if the partnership suffers any loss from the gross
negligence, unskilfulness, fraud, or wanton misconduct of any
partner in the course of the partnership business, he will ordi-
narily be responsible to the other partners for all losses, and
injuries, and damages sustained thereby, whether directly, or
through their own liability to third persons.2
He is responsible for any damages arising from any breach
of the stipulations contained in the articles of partnership, to the
other partners.3
In all purchases and sales made on account of the partner-
ship, every partner is bound to act expressly for the benefit of
1
¹ Story on Partnership, § 91.…………. ', Story's Agency, §§ 182-189...
8 Ta.
172
PARTNERSHIP.
the partnership; and therefore he has no right, and cannot,
consistently with his duty, voluntarily place himself in a situa-
tion in which his bias, as well as his interest, is in opposition
to the interest of the partnership.'
A partner has no right to engage in any other business or
speculation, which will deprive the partnership of the skill,
diligence, industry or capital which he is bound to employ
therein.2
He has no right to deal on his own private account, in any
matter or business, which is obviously at variance with, or ad-
verse to the business or interests of the partnership. He has
not a right to prefer his own individual interest to that of the
and
firm, or to take away the profits of a bargain from the firm,
appropriate them to his own private advantage.3
The contract must be entirely voluntary among the members;
and, therefore, no stranger can be introduced into the firm with-
out the concurrence of the whole firm.¹
In all ordinary matters relating to the partnership, the pow-
ers of the partners are equal or co-extensive, and neither has the
right to "exclude another from an equal share in the manage-
ment of the concern, or from the possession of the partnership
effects.5
A partnership can exist only by the voluntary contract of the
parties. Therefore, when it is once formed, no third person can
be afterwards introduced into the firm, as a partner, without the
concurrence of all the partners who compose the original firm.
The personal representatives of a deceased partner do not suc-
ceed to the state and condition of that partner.º
214.-5. Power of Each to Bind All.-By virtue of this
business relation, each partner is constituted a general agent for
the others, as to all matters within the scope of the partnership
dealings, and has all the authority necessary for carrying on the
partnership. He has authority in behalf of the firm, to trans-
fer, pledge, exchange, or apply, or otherwise dispose of the part-
nership property and effects, for any and all purposes within the
2
¹ Story's Partn., § 175. . . . . . .² Id. § 176.
238; 1 Hill's R. 234; 16 Ohio R. 166.
•
3 Id...... 47 Pick. R. 235,
5 Collyer's Partn., § 190; 2 Paige,
Ch. R. 310....
•
6 Putnam v. Wise, 1 Hill's R. 234; Story's Partn., § 5.
PARTNERS.
173
scope and objects of the partnership, and in the course of its
trade and business.¹
The partnership is responsible for acts done by any partner,
touching the partnership business, and to any acknowledgments,
representations, declarations, admissions, or undertakings of any
partner relating thereto. The representation of any fact, or a
misrepresentation of any fact, made in any partnership trans-
action, by one partner, will bind the firm.2
So the acknowledgment of one partner during the continuance
of the partnership, of a debt, as due by the partnership, will
amount to a promise, binding on the firm.
The admission of any fact, by one partner, material as evi-
dence in a suit, will, under the like circumstances, be deemed the
admission of all the partners.³
A notice to or by one of a firm, is deemed a notice to or by
all of them.¹
The frauds committed by one partner in the course of the
transactions and business of the partnership, bind the firm, even
when the other partners have not the slightest connection with,
or knowledge of, or participation in the fraud."
5
A release by one partner binds all the partners, because, as a
debtor may lawfully pay his debt to one of them, he ought also
to be able to obtain a discharge upon due payment."
The compromise of a debt, by taking less than its nominal
amount, may fairly be deemed within the discretion confided to
each partner.?
Each partner may enter into any contracts or engagements
on behalf of the firm in the ordinary trade and business thereof;
as, for example, by buying, or selling, or pledging goods, or by
paying, or receiving, or borrowing moneys, or by drawing, or
negotiating, or indorsing, or accepting bills of exchange, and
promissory notes, and checks, and other negotiable securities, or
by procuring insurance for the firm, or by doing any other acts
• ·
11 Kent's Com., Lect. 43; Story on Agency, SS 37, 39, 124.
Partn., § 107... 31 Barn. & Cress. R. 248; 8 Id. 36.
107... 5 Gow's Partn., ch. 2, § 2, p. 35......
Johns. R. 68.
•
▾ Story on Agency, § 115.
•
2 Story's
4 Story's Agency,
• Pierson v. Hooker, 3
174
PARTNERSHIP.
which are incident or appropriate to such trade or business, ac-
cording to the common course or usages thereof.¹
The partner should do all these acts in the name of the firm;
otherwise he will not bind the firm, but render himself person-
ally liable.2
The power of one partner extends to assignments of property
of the firm, as a security for antecedent debts, as well as for
debts thereafter to be contracted on account of the firm.³
Where a firm is engaged in the business of factors, one part-
ner, in the name of the firm, may bind the co-partners by a
guaranty of the solvency of purchasers, although there is no such
stipulation in the articles of co-partnership.*
It must be remembered that the power of each partner to
bind all the others in a contract or engagement, or by admission,
depends on his keeping entirely within the scope of the partnership
business. Outside of that, he has no power.
One partner cannot without the assent of the other partners,
bind the firm by a conveyance under seal, or by any contracts to
the validity of which a seal is necessary.
To be valid, the partner's authority must be exercised only
in cases within the scope of the ordinary business and transac-
tions of the firm. If one partner should, in the name of the firm,
make purchases of goods, not connected with the known business
of the firm, such purchases would not bind the partnership."
For instance, a partner in a dry goods establishment, wholly
unconnected with navigation, could not bind the other partners
in the purchase of a ship. One of a firm carrying on the busi-
ness of tallow-chandler, would have no right to purchase a cargo
of flour, or of pepper, or of coffee, or of other things, and could
not bind the partnership by such transactions."
Where it is not in the common course of a partnership busi-
ness to give letters of guaranty or credit, if one partner should
give such a letter of guaranty or credit, it would not be binding
on the firm, although given in the name thereof.³
ities cited...
¹ Kent's Com., Lect. 43; Story on Agency, § 102, and the numerous author-
31 Metc. R. 515; Story on Agency, § 101...
5 Watson's Partn., ch. iv, pp. 186, 194, 2d
8 Hope v. Cust, 1 East's
2 Id..
Hope v. Cust, 1 East's R. 48....
edit...... 6 Story's Partn., § 112.
R. 48; 3 Campb. R. 478.
" Id..
PARTNERS.
175
A partner has no power or authority to submit or refer to
arbitration, any matters whatsoever, concerning or arising out
of the partnership business. It is not within the scope of the
ordinary business of the firm.¹
One partner cannot bind the firm by contract with a third
person who knows that the partner is perpetrating a fraud on
the firm; or if he knows that the partner is acting without
authority.2
A clear misapplication or perversion of the partnership cre-
dit by one of the partners, will not bind the firm. For example,
if he should make a negotiable security in the name of the part-
nership, and dispose of it to a third person who knew that the
proceeds were to be applied in fraud of the firm, or for purposes
not within the scope of the partnership business, it would not be
binding on the firm.³
4
Should one partner release a partnership debt for the purpose
of discharging his own private debt, his creditor knowing all the
circumstances, such release would be inoperative. Of course
there may be circumstances to excuse such a transaction, and
that would rebut any presumption of fraud. The other partners
may have, by express consent or by fair implication, authorized
such a transaction.
§ 215.-6. Liabilities to Third Persons.-We have seen that
all the partners of a partnership are liable for the lawful acts or
contracts of any of the partners, within the scope of the part-
nership business. Persons who are not actual partners as be-
tween themselves, may nevertheless become liable to third per-
sons as such, by acting in such a manner as to give the world the
impression that they are partners.
If a person permits his name to be used as a member of the
firm, even though he has no interest whatever in the business,
he will be held liable as a partner. He will be held to the pay-
ment of such debts as were contracted on the faith of his connec-
tion with the partnership.5
1
2 Collyer's
¹ Comyn's Digest, Arbitrament; Story on Agency, $114..
Partn., B. 3, ch. 1, pp. 259 to 282, 2d edit..………. 3 Story's Partn., § 131..
15 Cow. R. 489; 7 Wend. R. 326...... 5 Burns v. Rowland, 40 Barb. R. 368.
176
PARTNERSHIP.
If one's name is not used as a member of the firm in its
business, but he holds himself out as such, or permits others to
do so with his knowledge, he will be held liable.'
A nominal partner is not liable if no credit is given on his
responsibility, and he is not known to the creditor at the time
the debt is created.2
Dormant partners, if discovered, are equally liable with those
who are held out to the world as partners, on all contracts made
during the time of their participation in the profits of the busi-
ness. The principle on which this doctrine rests is that, as they
have the benefit of a share in the profits, which are a part of the
fund to which the creditor looks for payment, they shall be bound
by the burdens.3
Persons who share the profits of the concern or business, are
liable as partners to third persons. If, however, they have not
held themselves out as partners, nor allowed themselves to be so
held out, they may show that they sustain no such relation; and
that any profits which they receive, are as servants, agents, fac-
tors, brokers, or other persons receiving such share in lieu of
wages or commission, for their labor, trouble, or service.¹
4
The firm may be made liable for wrongs committed by one
partner, while engaged in the partnership business; as where he
injures a third person by negligence in driving a coach, the prop-
erty of the firm.5
No arrangement between the parties themselves can limit or
prevent their ordinary responsibilities to third persons, unless the
third persons assent to the arrangement.
Each partner is liable to third persons to pay the whole part-
nership debts; and as to the proportion that each shall pay, is
a matter wholly among themselves. No matter what the private
agreement may be between the members of the firm, each is liable
to third persons for the payment of the partnership debts, to the
full extent of his own property.7
3 16
¹ 1 Brod. & Bing. R. 9........2 10 Barn. & Cress. R. 128, 140......
Johns. R. 40; 16 East's R. 174; Collyer's Partn. § 18.. 4 Collyer's Partn.,
SS 25, 39; Story's Partn., SS 33, 34, 49, 55........5 Collyer's Partn., § 458; 12
N. H. R. 276.. • Collyer's Partn., § 386. 19 East's R. 516; 5 Term
R. 601; 6 Serg. & Rawle, 333.
• •
PARTNERS.
177-
§ 216.-7. Rights against Third Persons.-It is a general rule
of law that partners, in their collective capacity, are entitled to
the same remedies (as to third persons), to be administered in
the same way as individuals have for the assertion of their
rights, and the redress of their wrongs.¹
1
There are some exceptions to this rule; but they are of a
character too abstruse to receive attention in a work intended, as
this is, chiefly for the use of the business student, instead of the
professional reader. These exceptions relate mostly to cases.
where a firm is partly composed of a common partner in
another firm, and where the interests of the two happen to
come in collision.
But the general rule is, as above stated, that partners in their
collective capacity may bring any suits which it would be com-
petent for an individual to institute, to enforce their rights
against third persons.
Where a firm is plaintiff in a suit brought on an unwritten
contract, it is entirely at their option whether or not to join
with them in the action, dormant or nominal members of the
partnership.2
In New York State all the partners, except the special,
should be joined as plaintiffs.
If the action, however, is brought on a written contract, in
which the dormant or nominal partners are named as payees,
they may be joined as plaintiffs in the action.3
A partnership has the legal power of redress wherever by
third persons a joint injury or damage is done to the property,
or rights, or interests of the firm. And it makes no difference
whether they arise from misfeasance, malfeasance, negligence or
omission of duty, or by positive conversion of the property of the
firm.¹
If the injury is done to some, and not to all of the partners,
they alone may bring an action therefor, without joining the
others. Words spoken of one partner by third persons, which
¹ Gow's Partn., ch 3, § 1, pp. 117, 118, 3d edit.
2 3 Cow. R. 85; 6
Pick. R. 348, 352; 14 East's R. 210........ 3 Collyer's Partn., B. 3, ch. 5, § 1.
4 Addison v. Overend, 6 Term R. 766; 5 East's R. 407; 7 Term R.
275, 279.
12
178
PARTNERSHIP.
impute insolvency in trade, give the injured member of the firm
a right of action alone.¹
An action may be maintained by the firm for any defama-
tion of the firm, or for any libel upon the company; for this is,
justly and properly speaking, a joint tort and injury, applicable
to their collective rights and interests.²
2
The same principle will apply to any other wrong done by
third persons, affecting the partnership trade or business; such
as obstructing their business and employment, seducing persons
from their service, or wrongfully soliciting and inducing their
customers to withdraw their patronage from them by fraud, or
threats, or otherwise; for in all such cases a joint damage is
done to the firm.³
If one partner should collude with a third person to defraud
the partnership by wrongfully using the partnership name, or
negotiating the securities, or applying the property thereof for
improper purposes, a court of equity would, by an injunction,
restrain him from so doing.*
A court of equity will restrain a third person by injunction,
who is injuring the partnership by vending an article of trade
similar to that manufactured by the partnership, falsely, under
the name of the partnership, and as if manufactured by the
same, and thus misleading the public, and diverting the patron-
age and custom from the partnership."
II. SUBJECT-MATTER.
§ 217. But little need be said on this element of Partnership.
By the Subject-matter of partnership is meant the business in
which the partners are engaged.
It is not confined to commercial business. It may exist in
any kind of legitimate, lawful business. Attorneys, physicians,
conveyancers, mechanics, owners of a line of stage-coaches, arti-
18 Carrington & Payne R. 708..
Puller R. 150; Story's Partn., § 257.
Lithebye, 2 Saunders' R. 115, 116..
•
2 Cook v. Batchelor, 3 Bosanquet &
3
Story's Partn., § 258; Coryton v.
4 1 Story on Eq. Jurisp., §§ 667, 669 ;
2 Id., §§ 930, 935..... 5 2 Story on Eq. Jurisp., § 951; Story's Partn., § 259
HOW FORMED.
179
sans, farmers, merchants and bankers, may unite in a partner-
ship for the transaction of business.'
1
There may be a partnership to trade in land, limited to pur-
chasing, and the profit and loss divisible, according to stock.
The essence of any partnership association is, that the partners
may be jointly concerned in profit and loss, or in profit only, in
some honest and lawful business, not immoral in itself, nor pro-
hibited by the law of the land; and this is a principle of uni-
versal reception.2
The contract must be for the common benefit of all the par-
ties to the association; and though the shares need not be equal,
yet, as a general rule, all must partake of the profit in some
ratable proportion; and that proportion, as well as the mode of
conducting the business, may be modified and regulated by pri-
vate agreement, at the pleasure of the parties.³
If there be no such agreement on the subject, and no evidence
to the contrary, the general conclusion of the law is, that the
partnership losses are to be equally borne, and the profits equally
divided. This would be the rule, even though the contribution
between the parties consisted entirely of money by one, and en-
tirely of labor by another."
4
III. HOW FORMED.
§ 218. The partnership may be formed by contract in writ-
ing, sealed or without seal, or by parol, or by the manner of doing
business by the parties.
1. By Written Articles.—If the amount invested is large, the
business of the partnership complicated, or the partnership is to
be of long continuance, it will be advisable, and probably most
advantageous to all concerned, that regular, formal articles be
adopted. By reducing the contract of partnership to writing,
there will be less liability to mistakes, misunderstandings, dis-
3
¹ Goedle v. Bimele, 14 Howard R. 589; Fromont v. Coupland, 2 Bing. R.
170........2 Biggs v. Lawrence, 3 Term R. 454; Griswold v. Waddington, 16
Johns. R. 489; Kent's Com., Lect. 43.... Collyer's Partn., p. 11; Gow's
Partn., p. 9; Story's Partn., §§ 23, 24.
Gould v. Gould, 16 Wend. R. 263..
4 Peacock v. Peacock, 16 Ves. R. 49;
5 Kent's Com., Lect. 43, p. 29.
180
PARTNERSHIP.
putes, and perhaps lawsuits, than if confided to the memory of
the parties.
If the partnership is for the purchase and sale of real estate,
it is nearly if not quite indispensable that the contract should
be in writing.
We have seen that each of the partners is liable for all the
debts and obligations of the firm. This is the general rule of
the common law, that the responsibility of partners is co-
extensive with the indebtedness of the firm.
But by the statutes of some of the States, there may be
created special or limited partnerships, in which there are general
partners who are liable generally for the entire debts of the firm,
while there may be special partners who are not liable beyond
the amount of capital which they put into the business. The
articles of partnership in all such cases must be in writing.
2. By Parol. The mutual assent of all the parties is essen-
tial to the formation of any partnership; but, usually, this
assent may be signified by parol as well as by written stipula-
tions. In case the contract is by parol, it may be proved by the
same kind of evidence as any other parol contract.
3. By Implication.-A partnership may exist by implication,
even where the partners themselves hardly realize that they are
in partnership. As to whether they will, or will not, be held
liable as partners, will depend on their acts before the world.
Indeed, though they have no agreement between themselves as
partners, they may be held liable as such to third persons. A
participation in the loss or profit, or holding themselves out to
the world as partners, so as to induce others to give credit on
that assurance, renders them responsible as partners.¹
The question in such cases is, not so much whether one
really is a partner, as what has he given others reason to believe
in the matter. If you give me reason to believe that you are a
partner in a certain firm, and I trust that firm on your account,
and afterwards it fails in my debt, either you or I, it is clear,
must suffer. It is a well-recognized rule of law that, wherever
one of two innocent persons must suffer from a false con-
1 McIver v. Humble, 16 East's R. 173; Olmsted v. Hill, 2 Arkansas R. 346;
Story's Partn., §§ 64, 65.
CONDITIONS
181
fidence reposed in a third, he who has been the cause of that false
confidence or trust, ought to suffer rather than the other.¹
IV. CONDITIONS.
§ 219.-1. Partnership Name.-The parties to a partnership
may give it just such a name as they please, and all contracts
and obligations, or notes made with such firm, or given to it,
may be prosecuted in the names of the individuals constituting
the partnership."
In New York the use of fictitious names in the firm name is
prohibited by statute; and the designation " & Company" or
"&
"& Co." must represent an actual partner or partners, other
than those whose names are stated.
§ 220.-2. Duration.-As partnerships are formed by the
voluntary consent of the parties, they may be for life, or for a
specific period of time, or conditional, or indefinite in their dura-
tion, or for a single adventure or dealing; and are, therefore,
dependent on the mutual will or pleasure of the parties.3
The period may be fixed by express stipulation, or it may be
implied from circumstances. If no particular period is fixed by
the parties, it is deemed to exist during their mutual pleasure
only, and, of course, may be dissolved by either of them by with-
drawal from the firm.*
When a particular term is fixed, it is presumed to endure
until that period has elapsed; when no term is fixed, it may
endure for the life of the parties, unless previously, dissolved by
some act or notice of one of the parties, or by operation of
law.
But in no case will the law presume that the partnership is
intended to continue beyond the life of the parties; and, there-
fore, if such is the object, it must be provided for by some
express stipulation. That is, without a stipulation in the con-
tract authorizing it, in case of the death of one of the partners,
1
¹ Story on Partnership, § 64; 3 Kent's Com., Lecture 43........2 Crawford
v. Collins, 30 Howard's Rep. 398..
'2d edit.; 3 Kent's Com., Lecture 43..
229, 307, 308.
3 Watson on Partnership, ch. 7, p. 379,,
4 Peacock v. Peacock, 16 Ves. Rep
182
PARTNERSHIP.
his executors or administrators, or other legal representatives,
could not succeed to the partnership.'
§ 221.—3. Individual Contributions. Every partnership pre-
supposes that there must be something brought into the com-
mon stock or fund by each party." But it is not necessary that
each should contribute, or contract to contribute, money, goods,
effects, or other property, towards the common stock; for one
may contribute labor or skill, and another may contribute
property, and another money, according as they shall agree.³
Sometimes partners contribute labor and skill only, being
engaged in business requiring no money investment. In such
case the partnership extends to the profits only; as, for instance,
factors, brokers, or other agents.* But all must contribute
something, and thus join together either money, goods, labor or
skill.5
§ 222.-4. Profit and Loss.-Every partnership implies, in
the absence of all stipulations to the contrary, that partners are
liable to share losses in the same proportion as they are entitled
to share profits.
A stipulation may indeed exist, that one of the partners shall
bear all the losses, and that both shall share the profits. But
this is to be understood, that all the losses are first to be
deducted from all the profits; and that if profits accrue from
one species of things, and losses from another, only what remains
after all the losses are deducted is to be deemed profits."
If there are any profits, each shares his proportion of losses,
even in such a case. But the one exempt from losses would not
be liable for them beyond the absorption of the profits. He can
lose nothing; though he may make nothing.
8
Under such a stipulation, if the totality of the profits ex-
ceeds the totality of the losses, the partner takes his share of the
But if, on the contrary, the totality of the losses ex-
excess.
49;
¹ Crawshay v. Maule, 1 Swant. Rep. 521; Story on Partnership, § 64......
Kent's Com., Lecture 43, 3d vol.
3 Peacock v. Peacock, 16 Vesey,
Meyer v. Sharpe, 5 Taunton's Rep. 74; Dobb v. Halsey, 16 Johnson's Rep. 34..
4 Collyer on Partnership, B. 1, ch. 1, § 1........5 Id.; Story on Partner-
7 Domat,
ship, § 15....... 6 Watson on Partnership, ch. 1, pp. 59, 60.....
B. 1, title 8, § 1, art. 7, 8; Story on Partnership, § 20...
8 Id. § 21.
1
CONDITIONS.
183
ceeds that of the profits, the partner has neither profit nor
loss.¹
Hence, to constitute a partnership, it is not necessary that
the partners shall equally share the profits and losses. It is
sufficient if they are to share in the profits of the business, after
a deduction of the losses; or in other words, that they should
share in the net profits according to their respective proportions.
It is, therefore, competent for the partners by their stipula-
tions to agree that the profits shall be divided, and if there be
no profits, but a loss, that the loss shall be borne by one or more
of the parties exclusively, and that the others shall, as between
themselves, be exempted therefrom.²
They may stipulate that one or more partners shall take a
greater proportion of the profits than the others, and shall, if
there be no profits, share a less proportion of the losses, or even
be wholly exempted therefrom.³
The reason of this is, that the inequality of skill, of labor, or
of experience, which the different partners may bring into the par-
ticular business, may not only justify, but positively require this
inequality of compensation and of exemption from loss, as a
matter of justice and equity between the parties.¹
But in the absence of all precise stipulations between the
parties as to their respective shares in the profits and losses, and
in the absence of all other controlling evidence and circumstances,
the rule of law is that they are to share equally of both loss and
profit.
5
The circumstance that each partner has brought an unequal
amount of capital into the common stock, or that one or more
bas brought in the whole capital, and the others have only
brought industry, skill, and experience, does not furnish any
ground of difference as to the distribution. The silence of the
partners settles the matter between them."
§ 223.-5. Responsibility.-On entering into a partnership,
each partner, assumes a twofold responsibility; first, a partner-
1 Story on Partnership, § 22.
Barn. & Alder. Rep. 954, 964..
2 Id. § 23..
4
Gilpin v. Enderby, 5
Story on Partnership, § 23..
6 Watson
5 Kent's Com., Lecture 43; Gould v. Gould, 6 Wend. Rep. 263..
on Partnership, ch. 1, pp. 56–60.
184
PARTNERSHIP.
ship responsibility; and second, an individual responsibility.
He not only becomes jointly liable, but severally liable to pay
all the debts of the firm.
1. Partnership.—The property of the partnership is first
liable for the debts of the company, after the payment of which,
if there is anything left, on the partnership being dissolved, the
funds or other effects are subject to a division among the part-
ners or their representatives, according to agreement.'
2. Individual.-If a partnership consists of a large unin-
corporated association, or joint-stock company, trading upon a
joint stock, it is usually regulated by special agreement; but
the established law of the land, even in reference to such part-
nerships, is the same as in ordinary cases, and every member of
the company is liable for all the debts of the concern.2
Where executors, in pursuance of the direction of a will, con-
tinue the business for the benefit of an infant, the whole estate,
and not merely the capital embarked, is liable for the expenses,"
in case the testator by the will manifests such intention.
Any stipulation between the members of the partnership,
that they, or either of them, are not to assume personal respon-
sibility, will not relieve them from it as to third persons.*
Though the law allows parties to regulate their concerns as
they please in regard to each other, they cannot, by arrangement
among themselves, control their responsibility to others; and it
is not competent for a person who partakes of the profits of a
trade, however small his share of those profits may be, to with-
draw himself from the obligations of a partner.5 Each individual
member is answerable to the whole amount of the debts, without
reference to the proportion of his interest, or to the nature of the
stipulation between him and his associates.
Nor can a partner exonerate himself from existing engage-
ments of the company, by assigning or selling out his interest in
the concern.6
•
¹ Kent's Com., vol. iii., p. 24, Lecture 43........2 Id. p. 26, vol. iii…………..
4 The King v.
3 McNeillie v. Acton, 21 English Law and Equity Rep. 271..
Dodd, 9 East's Rep. 516; Hess v. Werts, 4 Serg. & Rawle Rep. 356....
Hesketh v. Blanchard, 4 East's Rep. 144. 6 Perring v. Hone, 2 Carr. &
Payne R. 401.
DISSOLUTION.
185
+
§ 224.-6. Interest in Stock.-We have seen in another place,
that partners are joint tenants of their stock-in-trade, but with-
out the right of survivorship; that is, without the right of the
surviving partner to take the whole, in case of the death of his
co-partner.
On the death of one partner, his representatives become
tenants in common with the survivor. But the right to reduce
choses in action to possession, belongs exclusively to the surviv-
ing partner, for the interest of all parties concerned.¹
But no partner has an exclusive right to any part of the joint
stock, until a balance of accounts be struck between him and his
co-partners, and the amount of his interest accurately ascer-
tained.
The interest of each partner in the partnership property,
therefore, is his share in the surplus, after the partnership
accounts are settled, and all just claims satisfied.2
PART II.—DISSOLUTION.
xxx
§ 225. By reference to the foregoing analysis, it will be seen
that there are three general methods of dissolving a partnership:
1. By act of the parties; 2. By judicial decree; 3. By opera-
tion of law. It is proposed to consider these in their order.
1.-BY ACT OF PARTIES.
§ 226. There are several methods of dissolving partnership
by act of the parties; and these modes are,
1. By Mutual Consent. In respect to all partnerships, whether
they are for a limited period or at will, it is very clear that they
may at any time be dissolved by the mutual pleasure of all the
parties clearly expressed.3
2. Express Renunciation.-If no certain limit is fixed to a
partnership as to duration, it is deemed to be a mere partnership
¹ Buckley v. Barber, 1 English Law and Equity Rep. 506.
Com. 37........³ Story on Partnership, § 268.
22 Kent's
186
PARTNERSHIP.
at will, and may be dissolved at the pleasure of one or more of
the parties; for in such cases, as the contract subsists only dur-
ing the pleasure of all the partners, it is naturally dissolved by
the pleasure of any one or more of them, like every other contract
existing at the mere will of the parties.¹
3. Tacit Renunciation.-As to a dissolution by tacit renuncia-
tion, or by implication from circumstances, it may arise in vari-
ous ways, as by the withdrawal of a partner from the business
of the partnership, and engaging in other concerns;
Or by his refusal to act with the other partners in the busi-
ness;
2
Or by his assigning over his share in the partnership;
Or by his doing any other act utterly inconsistent with the
continuing relation of the partnership.³
4. Assignment of one Partner's Interest.-It is well established,
that if one partner makes a voluntary assignment of all right,
title, and interest in the partnership property and effects, this
will at once dissolve the partnership, and convert the assignee or
purchaser into a tenant in common with the other partners.*
Such an act by one of the parties operates as a dissolution,
not as a continuance of the partnership, with one member
dropped and another substituted; for the purchaser is not
obliged to become a partner, nor are the other partners obliged
to admit him as such." 5
5. Lapse of Time.-A partnership for a definite period of
time, naturally expires when that period has elapsed; that is, it
expires by its own limitation, which was fixed by the parties at
its creation."
6. By Implied Limitation.—A partnership may expire by its
own implied limitation, whenever the event has occurred which
the parties naturally or necessarily contemplated as its just ter-
mination. This may arise in two ways:
1. By the extinction of the thing which constituted the sole
subject-matter of the partnership.
¹ Story on Partnership, § 269.
Ketchum v. Clark, 6 Johnson's Rep.
144; Rodrigues v. Hefferman, 5 Johnson's Chancery Rep. 417........3 Story on
Partnership, § 272........4 Marquand v. President and Directors of N. Y. Man-
ufacturing Co., 17 Johnson R. 525..
6
... Story on Partnership, § 267.
5 Id.; Story on Partnership, § 308...
DISSOLUTION.
187
For instance, two persons buy a ship, to be employed by
them for their joint and mutual profit as partners. The ship is
afterwards lost or destroyed. This would work a complete dis-
solution of the partnership.
2. By the completion or accomplishment of the entire busi-
ness for which the partnership was formed.
If two persons should hire a ship for a particular voyage,
upon their joint account and for their mutual profit, and the
voyage should be completed, and the business thereof closed, the
partnership so formed would be dissolved by the occurrence of
the event, which it was originally intended by the parties should
terminate it."
II. BY JUDICIAL DECREE.
§ 227. Courts of equity have power to interfere and dissolve
partnerships for just and reasonable causes; among which are
the following:
1. When Business proves Impracticable.-It will be a suffi-
cient ground to decree a dissolution, that there exists an im-
practicability in carrying on the undertaking for which the part-
nership was formed. This may take place:
2
1. From the inability of one or all of the partners for carry-
ing into effect the terms of the original contract; as, for instance,
where the conduct of the parties rendered it impossible to carry
on an opera house on the terms originally stipulated in the
partnership contract.³
2. From the undertaking itself being in its character vision-
nry, or its operations absolutely impracticable; as, where the
partnership is to work a mine, which turns out to be wholly un-
productive, and ruinous in its expenses; or for the introduction
of a supposed newly invented machinery or manufacture, which
proves to be a mere delusion, or incapable of being put into
1 Post v. Kimberly, 9 Johnson's Rep. 470; Story on Partnership, § 28; Gow
on l'artnership, chap. 5, § 1. .......2 Collyer's Partn., B. 2, ch. 3, § 3, pp. 199,
200, 2d edit.; Gow's Partn., ch. 5, § 1, pp. 226, 227, 3d edit.
8 Waters v.
Taylor, 2 Ves. & Beame's R. 299; 16 Johns. R. 438, 491.
•
188
PARTNERSHIP.
}
successful operation; or for any other scheme of trade or opera-
tion which is a mere bubble, or wild speculation, or is founded
in fundamental errors.¹
-
2. Gross Immorality of a Partner. Courts of equity will
promptly interfere, and decree a dissolution, for any gross mis-
conduct, abuse of authority, gross want of good faith or dili-
gence by one of the parties; such as is and must continue to be
productive of serious and permanent injury to the success and
prosperity of the business of the partnership, and ruinous to its
interests.2
To this catalogue of reasons for the dissolution of a partner-
ship by a court of equity, may be added habitual intoxication,
gross extravagance, and rash and reckless speculation in the con-
duct of the business of the partnership.3
3. Habitual Absence.-Long absence by one of the partners
in the public service, or protracted absence abroad for mere per-
sonal or private objects, or his change of domicil to another State.
or country, or his voluntary engagement in any other incom-
patible pursuits, will justify a court of equity in dissolving a
partnership.*
In all such cases, if the business and interest of the partner-
ship will be thereby materially obstructed, or suspended, or
interfered with to the prejudice of the other partners, it will fur-
nish a just and reasonable cause for a court of equity to dissolve
the partnership.5
4. Inability of Partners to Act.-A partnership may be dis-
solved by a court of equity on account of the inability or inca-
pacity of one partner to perform his obligations and duties, and
to contribute his skill, labor, and diligence in the promotion and
accomplishment of the objects of the partnership.
If by the terms of the partnership, one is to furnish the
capital, or a large portion of it, and the other is to furnish the
skill and diligence as the active partner, and after the business
Waters v. Taylor, 2
13 Kent's Com., Lect. 43; Baring v. Dix, 1 Cox R. 213; Pierce v. Piper, 17
Ves. R. 1, 11, 15, 16... 2 1 Story's Eq. Juris., § 673;
3 2 Bell's Com., B. 7, ch.
4 Whitman v. Leonard, 3 Pick. R. 177, 179.
Ves. and Beame's R. 299.
edit...
§ 298.
• •
2, pp. 634, 635, 5th
6
Story's Partn.,
DISSOLUTION.
189
has commenced, the capitalist is unable to furnish the money,
or the other party is stricken with palsy or any other disease,
which should permanently incapacitate him from performing the
required duties, in either case a court of equity would dissolve
the partnership.¹
III.—BY OPERATION OF LAW.
§ 228. A partnership may be dissolved by mere operation
of law. This is divisible into several heads.
1. By Change of Condition of Partner. -Whenever the
state or condition of a partner is so changed as to render him
incapable of acting in his own right, the partnership is dis-
solved by operation of law. For instance, if he become insane,
idiotic, a spendthrift, or from excessive weakness or vice he is
placed under guardianship; this implies personal incapacity to
act and bind himself in partnership transactions."
2. Marriage. The marriage of a female partner will, by
the common law, dissolve the partnership by mere operation of
law. By marriage, all her personal property and effects are
transferred to, and belong to her husband in his own right,
unless there be some reservation or valid contract to the con-
trary.3
Also the marriage creates a positive personal incapacity on
her part, any further to enter into or to bind herself by any
contract.¹
4
This doctrine is essentially modified by the statutes of many
of the States of the American Union.
3. Sale on Execution. -All the right, title, and interest of
any partner in the partnership goods and effects, may be sold
under a separate judgment and execution against him. The
execution may be levied on the whole of the tangible goods and
effects of the partnership, or upon a part thereof. In each case
¹ 3 Kent's Com., Lect. 43; Story's Partn., § 292....
dington, 16 Johns. R. 438, 491; Story's Partn., § 303.
pp. 442, 443, 444: 2 Story's Eq. Jurisp.. § 1367..
dington, 15 Johns. R. 57, 82.
2 Griswold v. Wad
3 1 Black. Com.
4 Id.; Griswold v. Wad
190
PARTNERSHIP.
it is good to the extent of the partner's right, title, and interest
in the stock against whom the levy is made.¹
The purchaser in such case does not become a partner, in
place of the one whose interest is sold; but he becomes a tenant
in common with the other partners, by mere operation of law, to
the extent of the interest which he has purchased. But this
proceeding works a dissolution of the partnership."
4. Bankruptcy. The bankruptcy or insolvency of one of the
partners dissolves the partnership of which the bankrupt is a
member. All his property, by operation of law, passes into the
hands of the assignee immediately upon the declaration of his
bankruptcy, and the proceeds are distributed among his credit-
ors. The assignees in bankruptcy have no authority whatever
to enter into engagements in any trade or business with the as-
sets of the bankrupt.3
5. War between Countries of Parties.-The dissolution of a
partnership in consequence of a public war between the countries
of which the partners are respectively subjects, is a necessary
result of principles of public law well established.
By a declaration of war, the respective subjects of each coun-
try become positive enemies to each other.
They can carry on no commercial or other intercourse with
each other; can make no valid contracts with each other; can
institute no suits in the courts of either country; can hold no
communication even of an amicable nature with each other; and
their property is mutually liable to capture and confiscation by
the subjects of either country.*
6. Death of one Partner.-The death of any one partner will
operate as a dissolution of the partnership, however numerous
the association may be, not only as to the deceased partner, but
as between all the surviving partners.
The reason is that the personal qualities, skill, diligence, and
superintendence of each one of the partners are justly presumed
2 Id.....
3 Cowp. R. 445; 5 Ves.
15 Id., 57, 82; 16 Id., 491..
155, 161; The Julia, 8 Cranch R.
1 Story's Partn., §§ 261, 263, 311.....
R. 295; 15 Id., 217, 223; 17 Johns. R. 525;
4 Potts v. Bell, 8 Term R. 561; 8 Cranch R.
181, 194; 15 Johns. R. 57; 16 Id., 438; 7 Peters R. 586: Story's Partn.,
§ 315.
CONSEQUENCES OF DISSOLUTION.
191
to enter into and to constitute a material consideration with all
the other partners for engaging in the partnership.¹
The dissolution takes effect, in respect as well to the other
partners as to third persons, from the time of the death,
without any consideration whether they have notice thereof or
not.
It is competent, however, for the parties to vary this general
result of law by an express agreement that the death of one shall
not operate as a dissolution.
PART III-CONSEQUENCES OF DIS-
SOLUTION.
§ 229. When a partnership is dissolved, whether by act
of parties, judicial decree, or by operation of law, there is at
once a modification of the powers of the several persons hitherto
constituting the partnership. They can no longer act jointly as
one person. There are certain powers that cease; certain
others that remain; and still others that are created by the
dissolution. We will inquire,
I. WHAT POWERS CEASE.
§ 230.-1. Use of Partnership Property for Trade. When a
partnership has been dissolved, none of the former partners can
make use of the joint property in the way of trade, or in any
way inconsistent with the purpose of settling the affairs of the
partnership, and winding up the concern.
2. Of One to Bind All in New Deal. The power of one
partner to bind the firm, by any new contract, ceases imme-
diately on the dissolution of the partnership, provided the dis-
1 3 Kent's Com., Lecture 43; Watson's Partn., ch. 6, pp. 358, 359, 2d edit.;
Pearce v. Chamberlain, 2 Ves. R. 33; 8 Peters R. 586, 594........2 Burwell v.
Manderville's Executors, 2 Howard's Sup. Court R. 560, and the cases there
cited.
192
PARTNERSHIP.
solution be occasioned by death, or bankruptcy, or by operation
of law.
One partner cannot indorse bills and notes previously given
to the firm, nor renew a partnership note, nor accept a bill
previously drawn on it, so as to bind it. He cannot impose new
obligations on the firm, nor vary the form or character of those
already existing.' He cannot indorse a note in the name of the
firm, even to pay a prior debt of the firm."
II.-WHAT POWERS REMAIN.
§ 231. But on the dissolution of a partnership, each partner
has still certain powers remaining.
1. To Collect Debts.-Either of the former solvent and com-
petent partners can collect and receive payment of debts due to
the firm.3
2. To Adjust Accounts.-Each of the partners, unless there
is some stipulation to the contrary, has the right to adjust un-
liquidated accounts, and give acquittances and discharges.*
3. Joint Funds to Pay Partnership Debts.- No one partner
has any right or share in the partnership property, except what
remains thereof after the full discharge and payment of all the
debts and liabilities of the partnership; and therefore, each
partner has the right to have the same applied to the discharge
and payment of all such debts and liabilities, before any one of
the partners, or his personal representatives, or his individual
creditors, can claim any right or title thereto.5
Each partner, upon the dissolution of the partnership, has a
perfect right to require that the partnership funds shall be di-
rectly and regularly applied to the discharge of the partnership
debts and liabilities; and after these are discharged, to have his
share of the residue of the partnership funds."
1 Torry v. Baxter, 13 Vt. R. 452; Woodworth v. Downer, Id. 522.
Humphries v. Chastain, 5 Georgia R. 166; Fellows v. Wyman, 33 N. H. R. 351.
4 Fox v. Hanbury, Cowper's R. 445.
3 Story's Partn., § 328.
5 Story's Partn., § 97.
•
6 Gow's Partn., ch. 5, § 2, pp. 235, 236,
3d edit.
CONSEQUENCES OF DISSOLUTION.
193
It is a right belonging to each individual member, after the
partnership is dissolved, to claim a priority of payment of the
partnership debts from the partnership fund, in opposition and
preference to the separate creditors of each partner.'
III. NEW POWERS CREATED.
§ 232. While several of the powers possessed by partners
during the partnership, cease at its dissolution, other powers
take their places, which enable the parties to close up the part-
nership concern. The partners now assume a new relation to
each other.
1. Tenancy in Common.-While the partnership continues,
the partners are one; but on its dissolution, they become dis-
tinct persons, and are tenants in common of the joint stock.
Each now owns an undivided interest, and can dispose of only
his separate interest, and he has no power even over that except
subject to the partnership rights, as before stated. For the pur-
pose of securing these rights, the partnership may be said, in a
qualified sense, to continue until its prior concerns are all
wound up.
2. When Dissolution by Death.-We have seen that the death
of one of the partners, by operation of law, dissolves the part-
nership. It puts an end to its existence from the moment of
the occurrence of that event, whether known or unknown, or
whether third persons have, or have not, notice thereof. The
personal representatives of the deceased partner become tenants.
in common with the survivors, of all the partnership property
and effects in possession."
3. Surviving Partner.-Although as to future dealings, the
partnership is terminated by the death of one partner, yet for
some purposes it may be said to subsist, and the rights, duties,
powers, and authorities of the survivors remain, so far as is
necessary to wind up and settle the affairs of the partnership.3
The ordinary rule is that upon the dissolution of a partner-
¹ Story's Partn., §§ 97, 326..
2 Gow's Partn., ch. 5, § 4, p. 351, 3d edit.
3 Evans v. Evans, 9 Paige R. 178; Story's Partn., § 328.
13
194
PARTNERSHIP.
ship by death, the surviving partners are entitled to close up the
affairs of the firm.¹
They have, therefore, a right to receive the debts due to the
partnership, and, on the other hand, to apply the partnership
assets and effects in discharge of the debts and obligations due
by it. The surviving partners have the sole and exclusive right
to reduce choses in action to possession, for the purposes above
named. A final settlement of the firm's affairs upon a dissolu-
tion may be compelled by either partner or the representatives of
a deceased partner.
2
4. Partner's Lien.-Each partner has a specific lien on the
present and future property of the partnership, not only for the
debts and liabilities to third persons, but also for his own amount
or share of the capital, stock, and funds, and for all moneys ad-
vanced by him for the use of the firm. The partner has the
right to insist on, and enforce this lien after the dissolution of
the partnership, not only to protect himself, but to discharge the
debts of the concern.s
3
IV. NOTICE OF DISSOLUTION.
§ 233. So far as its own members are concerned, the disso-
lution of a partnership becomes immediately effective; and
neither has any right to make any new contracts on the partner-
ship account. But as to third persons, the element of notice
comes in for consideration.
We have seen that there are four kinds of partners, osten-
sible, dormant, nominal, and special; and that there are three
modes of dissolving a partnership: by acts of the parties; by
judicial decree; and by operation of law. Whenever a notice
of the dissolution of a partnership becomes necessary, it is to be
given for the protection from responsibility of the retiring part-
ner, for future contracts made by those who remain in the same
business. We will consider the necessary notice.
1. By Ostensible Partner.-It will be remembered that
ostensible partners are those in whose names the business is
1 Evans v. Evans, 9 Paige R. 178.... 2 Wood v. Braddick, 1 Taunt. R.
104; Hutchinson v. Smith, 7 Paige R. 26………………..³ Gow's Partn., ch. 5, § 2, pp.
235, 236, 3d edit.
CONSEQUENCES OF DISSOLUTION.
195
transacted, and who hold themselves out to the world in reality
as the partners.
1. When Necessary.--Of course the retiring partner is
not, by his retirement, exonerated from the prior debts and lia-
bilities of the firm. The ostensible partner should give notice of
his retirement, in order to avoid liabilities for any future con-
tracts or obligations assumed by those remaining in the same
business.
The same principle holds with reference to the dissolution of
a partnership by act of the parties. Until due notice is given
of the dissolution, each partner will remain liable for the acts
and contracts of the others in relation to the partnership, so far
as they respect persons who have previously dealt with the firm,
or have known the names of the partnership, or have given crc-
dit thereto; although not to mere strangers who do not fall
under the like predicament.¹
2. In what Cases not Necessary.-In cases of dis-
solution of a partnership by death of one of the parties, or bank-
ruptcy of one of them, duly declared by public proceedings, no
notice whatever is necessary to be given to third persons, in or-
der to exempt their estates from all responsibility for the acts
and contracts of the other partners, since the partnership is
thereby dissolved by mere operation of law.²
In no case of dissolution of partnership by mere operation of
law, is it necessary to give notice.³
3. To Whom Necessary.—The notice should be given
to all persons who have previously been in the habit of dealing
with the firm, so as to bring the knowledge of the retirement of
the partner, or the dissolution of the firm, home to those who
have been its creditors; so that if new credit is given, actual
notice may be proved or inferred.*
4. To Whom not Necessary. It is not necessary to
give notice to those who have had no previous dealings with
the firm, and no knowledge of who are or have been partners
therein. In such cases, unless the ostensible partner, who has
2 Id. § 336; 3 Kent's Com.,
1 Story's Partn., §§ 128, 129, 160, 162..
Lect. 43......
4 Story's Partn. § 161.
3 Id..
196
PARTNERSHIP.
retired, suffers his name still to appear as one of the firm, so as
to mislead the public, he will not be liable to mere strangers,
though no notice is given of his retirement. They do not give
credit on his account.¹
2. Dormant Partner. This partner is one whose name is not
known, or does not appear as a partner, but who nevertheless is
a silent partner, and partakes of the profits of the partnership,
and who is liable to third persons like other partners, if his in-
terest becomes known. There are cases when it is necessary,
and others when it is not necessary, for a dormant partner to
give notice of his retirement, or of the dissolution of the part-
nership.
1. When Necessary. If the connection of a dormant
partner becomes generally known, notice of dissolution, or of his
retirement, will be just as necessary for his protection, as though
he were an ostensible partner. And even if his connection be
known to but a few persons dealing with the firm, notice to those
few is necessary; for they may otherwise give credit to the firm
on account of his supposed connection with it.2
2. When not Necessary.-When it is not known that
a dormant partner has any connection with the firm, of course.
no credit is given on his account. In such case, on his retire-
ment, he ceases to participate in the profits, and by operation of
law, his responsibility ceases, whether any notice is given or not.
In other words, no notice is necessary.3
3. Nominal Partner. The rules in reference to the necessity
of giving notice in the case of a nominal partner, are the same as
in the case of an ostensible partner. They are the same also as
to when it is not necessary.
4. How Given. The notice of a dissolution of a partnership
or the withdrawal of a partner may be,
1. By Newspapers.—On the dissolution of a partnership,
public notice in the newspapers should be given, published in
13 Kent's Com., Lect. 43; Brown v. Leonard, 2 Chitty R. 120; Ketchum v.
Clark, 6 Johns. R. 144, 148.......2 Newmarch v. Clay, 14 East's R. 239; Story's
Partn., § 159... 8 3 Kent's Com., Lect. 43; Story's Partn., § 159.
CONSEQUENCES OF DISSOLUTION.
197
the vicinity of the place of business. This is sufficient notice to
all persons who have had no previous dealings with the firm.'
2. By Circulars.-Those who have formerly dealt with
the firm, are entitled to actual notice of the dissolution. If they
do not receive such notice, they will be entitled to hold all the
partners for the engagement of one of them given in the partner-
ship name.2
The most convenient method, probably, of giving actual
notice, is by letter or circulars sent by mail. Of course a verbal
notice would answer every purpose.
¹ Peake's Nisi Prius Cases, 42, 154; 3 Espinasse's R. 108, 248; Lansing v
Gaines, 2 Johns. R. 300...... 2 Ketchum v. Clark, 6 Johns. R. 144
:
Topical Analysis of Corporations
I. ELEMENTS..
1. The State.
1. Parties {2. Corporators.
2. Corporators. Article
Articles & Aversation
2. Charter, or authority aut
3. Franchise.
4. Perpetuity.
5. Acceptanee-of Charter.
6. Corporate name.
1. Quasi.
Sole.
II. CLASSES
1. Religious.
3. Aggregate
2.
1. Eleemosynary.
1.
Lay 22. Civil 12 Public.
(2.
III. HOW CREATED.
1. By prescription.
2. By charter.
3. By general statute.
4. Conformity to statute.
IV. ORDINARY POWERS.
1. Perpetual succession.
2. To fill vacancies
3. To elect officers.
4. To sue and be sued.
5. To receive and convey.
6. To make contracts.
7. To make by-laws.
8. To remove officers and members.
9. To hold property as trustees.
1


TOPICAL ANALYSIS ANALYSIS
OF CORPORATIONS. 199
V. RESTRICTIONS
VI. LIABILITIES .
1. As to banking powers.
2. Receiving by will.
3. As to corporate powers.
4. Modes of making contracts.
5. As to period of existence.
1. For acts of agents.
2. On implied promise.
3. For injuries and negligence.
4. For trespass.
5. For taxes.
6. To visitation.
VII. PERSONAL LIABILITIES OF CORPORATORS.
VIII. DISSOLUTION.
1. By statute.
2. By loss of integral parts.
3. By surrender of franchise.
4. Forfeiture of charter.
5. Consequences of.
CHAPTER V.
CORPORATIONS.
§ 234. A corporation is a body, created by law, composed of
individuals united under a common name, the members of which
succeed each other, so that the body continues the same, not-
withstanding the change of the individuals who compose it, and
is, for certain purposes, considered as a natural person.¹
An association of natural persons, having no corporate pow-
ers, does business to great disadvantage. It is wholly deficient
in that coercive authority which gives power and efficiency to
the rules and regulations of a corporate body. Should the privi-
leges and immunities of an association of individuals become the
subject of controversy, there exists no ability of making any de-
fense. When the members who compose it are dispersed by
death, or otherwise, such an association has not the power to
transfer their privileges to other persons.
Suppose a grant of land should be made to twenty indi-
viduals not incorporated, the right to the land cannot be assured
to their successors, without the inconvenience of making frequent
and numerous conveyances.²
The student must be careful not to confound a corporation
with a partnership. A partnership is merely the result of a
voluntary contract between two or more persons, for joining
together their money, goods, labor, and skill, upon an agreement
that their gain or loss shall be shared in certain proportions. It
rests on no public sanction or authority, nor is any charter or
license necessary. While a corporation cannot exist and carry
its purposes into effect without the special authority of the laws
of the land.
We will first consider the elements which are necessary to the
existence of a corporation.
1 Brown's Civil Law, 99; 2 Kent's Com. 215.
Corp. 6, 7.
1
2 Ang. & Ames'
ELEMENTS.
201
1
I.—ELEMENTS.
§ 235-1. Parties.-As a corporation is the result of a con-
tract, as seen by its charter, like all other contracts it must have
parties. These are,
1. The State.-Corporations cannot exist except by the
authority of the sovereign power; in this country, the State or
national legislature. A corporation has been defined to be a
franchise; and whether this be a full definition or not, a fran-
chise is of the very essence of a corporation; and in this coun-
try no franchise can be held which is not derived from the law
of the State.¹
2. Corporators. These are the individuals who compose
the corporation. They and their successors, however numerous,
are considered in law but as one moral person, capable under an
artificial form, of taking and conveying property, contracting
debts and duties, and of enjoying a variety of political and civil
rights.2
§ 236.-2. Charter, or Authority.—A charter is defined to be
a grant made by the sovereign authority, either to the whole
people, or to a portion of them, securing to them the enjoyment
of certain rights.3
As used here, it is simply the act of the legislature creating
a corporation. The peculiarities of the charter will depend upon
the peculiarities of the corporation intended to be created by it.
The charter, of course, particularizes the rights and privileges
granted to the corporation.
§ 237.-3. Franchise. This is a special privilege con-
ferred by government on individuals, and which does not belong
to the citizens of the country generally by common right. With-
out obtaining some special privileges or rights not otherwise
enjoyed, individuals could see no object in becoming members of
a corporation. A corporation would be a useless association
without its franchises.
1 Bank of Augusta v. Earle, 13 Peters' U. S. Cond. R. 519......
Com. 267... * 1 Story's Const., § 161.
* 2 Kent's
202
CORPORATIONS.
§ 238.-4. Perpetuity.-One of the peculiar properties of a
corporation is the power of perpetual succession; for, in judg-
ment of law, it is capable of indefinite duration. The rights
and privileges of a corporation do not determine, or vary, upon
the death or change of any individual members. They continue
as long as the corporation endures. Corporations are sometimes
said to be immortal. All that this means, or can mean, is that
it has capacity to take in perpetual succession so long as the
corporation exists. Immortality is a misnomer, when applied to
corporations generally.'
§ 239.-5. Acceptance of Charter.-Something more than
the mere grant of a charter is necessary to create a corporate
body. It is necessary that the charter should be accepted, in
order to give it full force and effect. The government cannot
compel persons to become incorporated without their consent.
The intention of a grant of incorporation is, to confer some
advantage upon the grantees. But, as the grant may be coun-
terbalanced by the conditions which accompany it, the grant
must be accepted by a majority, at least, of those who are in-
tended to be incorporated. "Even the crown cannot oblige a
man to be a corporator without his consent."
A grant of incorporation is, in fact, in the nature of a con-
tract between the government and its subjects, the latter of
whom (the corporators) undertake, in consideration of the privi-
leges bestowed, to do what the government is interested in having
done. The terms offered by the government may, therefore, be
acceded to or refused by the intended body corporate; and if
not acceded to, they have no binding effect.2
The acceptance of the charter may, however, be inferred from
the acts of a majority of the corporators, thus dispensing with
a written acceptance, or even a vote to that effect.³
It has been held that grants beneficial to corporators may be
presumed to have been accepted, and an express acceptance is
not necessary.
4
1 2 Kent's Com. 269; Ang. & Ames' Corp. 4, 5. . . . . .
2 Dartmouth College,
4 Wheat. 518; 1 Greenl. (Me.) R. 79; Fire Department v. Kip, 10 Wend. 266.
3 Bank of U. S. v. Dandridge, 12 Wheat. R. 71...... 4 Charles River
Bridge v. Warren Bridge, 7 Pick. R. 344.
ELEMENTS.
203
As before stated, the charter once accepted is regarded as a
contract between the State and the corporators.¹
As it is to be regarded a contract, no subsequent legislation
can impair its obligations or change its terms, unless the right
is reserved in the charter itself. This has led very generally to
the introduction of a provision into acts of incorporation, reserv-
ing to the granting power the right to alter, amend, or repeal
the act at pleasure.
General acts of incorporation by the legislatures of the sev-
eral States are now becoming common, under which companies
may organize at pleasure, and thus derive all the benefits of an
incorporation without the necessity of special legislation.
A charter must be accepted, if at all, as it is offered, and
without condition. There can be no partial acceptance.²
Not only must a charter be accepted unconditionally, but it
cannot be accepted for a limited time. And if it has once been
received, though but for an hour, or even a moment, it is conclu-
sive and obligatory on the corporators.3
§ 240.-6. Corporate Name. It is necessary that every cor-
poration should have a name, by which it is to sue and be sued,
and do all legal acts, and under which it is to transact its busi-
As a general rule corporations must take and grant by
their corporate name.
ness.
Without a name, they could not perform their corporate func-
tions, and a name is so indispensable a part of the constitution
of a corporation, that if none be expressly given, one may be
assumed by implication.*
A misnomer in a grant by statute, or by devise, to a corpora-
tion, does not avoid the grant, though the right name of the
corporation be not used, provided the corporation really intended
it to be made apparent."
A corporation has no power to change its name.
14 Wheat. 518...
6
2 Wilcock's Munic. Corp. 30; Rex v. Passmore, 3 Term
R. 240; Rex v. Cambridge, 3 Burr. 1656..... 3 Rex v. Bazey, 4 Mau. & Sel. R.
255.... 41 Black. Com. 474, 475; 1 Kyd on Corp. 234, 237, 250, 253.
•
•
5 Vansant v. Roberts, 3 Md. R. 119..
6 10 Ad. & El. N. S. 839, 844.
204
CORPORATIONS.
II.-CLASSES.
§ 241.-It is usual to recognize but two classes of corpora-
tions: sole, and aggregate; but for convenience, it is proposed
to divide them into three kinds: Quasi, Sole, and Aggregate.
§ 242.-1. Quasi.-There are some persons and associations
who have a corporate capacity only for particular, specified ends;
but who can in that capacity sue and be sued as an artificial
person. These are properly quasi corporations.'
Thus, in New York, by statute, each county, and the super-
visors of a county, the loan officers and commissioners of loans,
each town, and the supervisors of towns, the overseers of the
poor, and superintendents of the poor, the commissioners of
common schools, the commissioners of highways, and trustees of
school districts, are all invested, for the purpose of holding and
transmitting public property, with corporate attributes under
certain limitations.
The supervisors of the county can take and hold lands for
the use of the county; and all these several bodies of men are
liable to be sued, and are enabled to sue in their corporate capa-
city. Every county and town is a body politic for certain pur-
poses; and this is no doubt the general provision in this country,
and especially in the northern States, in respect to towns.2
§ 243.-2. Sole.-A corporation ole consists, as its name
implies, of a single person, or one person, to whom and his suc-
cessors belongs that legal perpetuity, the enjoyment of which is
denied to all natural persons. Individuals having perpetual
succession, and the capacity of suing and being sued in their
political character, have, uniformly, in the books of English law,
been called corporations.³
The King of England is an example of a sole corporation,
and so also, it is considered, are the bishops and vicars in that
country.
Sole corporations, it is believed, are not common in the
United States. In those States, however, where the religious
1 The Commonwealth v. Green, 4 Wharton's R. 531, 598.
Com. 278..... .³ 1 Kyd, 20.
•
* 2 Kent's
*
CLASSES.
205
establishment of the Church of England was adopted, when they
were colonies, together with the common law on that subject,
the minister of the parish was seized of the freehold, as parson
or rector of the church, in the same manner as in England. The
right of his successors to the freehold being thus established, it
was not destroyed by the abolition of the regal government, nor
can it be divested even by an act of the State legislature.
There are very few points of corporation law applicable to
sole corporations. They cannot take personal property in suc-
cession; their corporate capacity of taking property being con-
fined altogether to real estate.
This should be observed; that the word "successors," in
making conveyance to a corporation sole, is generally as neces-
sary for the succession of the property, as the word "heirs" is
to create an estate of inheritance in a private individual.2
§ 244.-3. Aggregate.-But little has been said in reference
to quasi and sole corporations, as corporations aggregate are the
only kind in which the student of commercial law will be likely
to feel much interest. Besides, all commercial corporations are
of this kind, though all of this kind are not commercial.
The definition given at the beginning of this subject applies
almost exclusively to corporations aggregate. It consists, as its
name suggests, of several persons who are united in one society
or association, which is continued by a succession of members.
Aggregate corporations are divisible into-1. Ecclesiastical or
religious; and 2. Lay; and lay corporations are divisible into-
1. Eleemosynary; and 2. Civil; and civil corporations are divis-
ible into-1. Private; and 2. Public.
§ 245.-1. Religious.-In England, this class of aggregate
corporations is called ecclesiastical. Here they are called relig-
ious corporations. This is the description given to them in the
statutes of New York, Ohio, and other States, providing gener-
ally for the incorporation of religious societies, in an easy and
popular manner, and for the purpose of managing, with more
facility and advantage, the temporalities belonging to the church
and congregation.3
1 Ang. & Ames on Corporations, 19, 20, 21.
21.... 22 Kent's Com. 278
3 Id. 274
206
CORPORATIONS.
§ 246.—2. Lay.—The word lay, as applied to corporations,
means, simply, not ecclesiastical. Hence, a lay corporation is
one of a temporal, and not of a religious or ecclesiastical char-
acter. Lay corporations, we have seen, are divisible into elee-
mosynary and civil.
1. ELEEMOSYNARY.-An eleemosynary corporation is a pri-
vate charity, constituted for the perpetual distribution of the
alms and bounty of the founder.
In this class are ranked hospitals for the relief of poor, sick,
and impotent persons, and colleges and academies established for
the promotion of learning and piety, and endowed with property
by public and private donations.¹
2. CIVIL.—This word is used in various senses; especially in
contradistinction to military or ecclesiastical, to natural or for-
eign. Thus we speak of a civil station as opposed to a military
or an ecclesiastical station; a civil death as opposed to a natural
death; and a civil war as opposed to a foreign war.
Civil cor-
porations are such as are erected for a variety of purposes of a
temporal character, and are divisible into private and public.
1. Private.—A private corporation is one that is founded by
private enterprise or charity. If the foundation be private, the
corporation is private, however extensive the uses may be to
which it is devoted by the founder, or by the nature of the
institution.
&
A bank, for instance, whose stock is owned by private per-
sons, is a private corporation, though its object and operations
partake of a public nature, and though the government may
have become a partner in the association by sharing with the
corporation in the stock."
The same thing may be said of insurance, canal, bridge,
turnpike, and railroad companies. The use may, in a certain
sense, be called public, but the corporations are private, equally
as if the franchises were vested in a single person.3
¹ 1 Black. Com. 471; 1 Kyd on Corp. 25-27; 1 Lord Raym. 6, 8; 1 Ves. 537;
9 Ves. jr. 405; 1 Burr. R. 200; Phillips v. Bury, 2 Term R. 353; Dartmouth
College v. Woodward, 4 Wheaton R. 681.. 2 United States Bank v. Plant-
ers' Bank, 9 Wheaton R. 907
3 Bailey v. Mayor of New York, 3 Hill's
R. 531
HOW CREATED.
207
A hospital founded by a private benefactor is, in point of
Iaw, a private corporation, though dedicated by its charter to
general charity. A college, founded and endowed in the same
manner, is a private charity, though, from its general and
beneficent objects, it may acquire the character of a public in-
stitution.'
2. Public. Public corporations are such as are created by
the government for political purposes, as counties, cities, towns,
and villages. They are invested with subordinate legislative
powers, to be exercised for local purposes connected with the
public good; and such powers are subject to the control of the
legislature of the State.2
III.-HOW CREATED.
§ 247. There are several modes by which corporations are
created.
1. By Prescription.-A right by prescription is a presumptive
right. It is a right arising from immemorial and long-continued
enjoyment. The theory of prescription is, that the right has
been enjoyed from a period of time "whereof the memory of man
runneth not to the contrary." A corporation may exist by pre-
scription; such, for example, as the corporation of the city of
London, and others which have enjoyed and exercised corporate
privileges from time immemorial. They are in the eye of the
law well founded; for though no legal charter can be shown, yet
the legal presumption is, there once was a charter, which, owing
to the accidents of time, is lost or destroyed.³
It may be considered well settled, too, that a corporation
may exist in this country by prescription. In Massachusetts,
where no act of incorporation could be found of a parish which
had existed more than forty years, evidence was admitted to
prove its incorporation by reputation.*
2 The
¹ Dartmouth College v. Woodward, 4 Wheaton R. 518; The Case of St.
Mary's Church, 7 Serg. & Rawle, 559; 2 Kent's Com. 275, 276......
People v. Morris, 13 Wend. R. 325; 2 Kent's Com. 275...
4
. Dillingham v. Snow, 7 Mass. R. 547.
31 Kyd, 41.
208
CORPORATIONS.
In another case in the same State, parol proof, tending to
show the existence of an act incorporating a town with the
ordinary powers and privileges, was deemed admissible at the
expiration of thirty years.¹
It may, indeed, be safely relied on as a sound proposition,
that when an association of persons has for a long time acted
as a corporation, has been uniformly recognized as such, and
rights have been acquired under them as a corporation, the law
will countenance every presumption in favor of its legal corporate
existence.2
§ 248.-2. By Charter. In this country a charter can be
granted by a direct act of legislation only. A grant of corporate
powers and privileges is contained in the charter; that is, when
the corporation is created by charter, and is, in reality, the con-
tract between the State and the corporators. It is a contract as
much as a grant of land is a contract. The charter is the
instrument giving the corporators their peculiar rights and dis-
tinctive privileges beyond those enjoyed by other individuals.
In England it is granted by the sovereign, or parliament.
The charter is to the corporation what the constitution is to
the State-its fundamental law. No powers can be exercised by
the corporation not expressly given by the charter, or impliedly
conferred, as necessary to carry into effect those which are ex-
pressly given.
§ 249.-3. By General Statute. The practice is now becom-
ing quite common in many of the States of the American Union
of passing general acts of incorporation, under which companies.
may organize, and thus derive all the benefits of an incorporation
without the necessity of special legislation granting a special
charter in each case.
The various acts of incorporation of private companies for
banking, manufacturing, literary, charitable, and insurance pur-
poses; for turnpikes, and railroads, and toll bridges; and for
many other objects upon which private industry, skill, and spec-
ulation can be freely and advantageously employed, constitute a
4
Stockbridge v. West Stockbridge, 12 Mass. R. 400.... 2 Hagarstown
Turn. Co. v. Greeger, 5 Har. & Johns. (Md.) R. 122; Ang. & Ames' Corp. 45.
ORDINARY POWERS.
209
mighty mass of charters which occupy a large part of the vol-
umes of the statute law in almost every State.¹
§ 250.-4. Conformity to Statute.-These general statutes,
allowing persons of not less than a given number to organize
themselves into an association for the purpose of promoting cer-
tain objects definitely named in the legislative acts, invest the
association with corporate powers and privileges as effectively as
though acting under a special charter.
But before becoming a corporation in the full legal sense,
there must be a strict and full compliance with all the conditions
of the statute under which the corporation assumes existence.
Where the corporators are in the actual possession and enjoy-
ment of the corporate rights granted, it is held that, presump-
tively, they are rightfully in such possession and enjoyment; and
even the precedent conditions are presumed to have been com-
plied with as against all except the sovereign power, the gov-
ernment.2
IV.-ORDINARY POWERS.
§ 251. In constituting a body corporate, a legal or artificial
person is substituted for a natural person; and where a number
of natural persons are concerned, there is given to them the
property of individuality. The common law of every State or
country annexes to this local or artificial person, when created,
certain incidents or attributes; and, both by the laws of England
and the United States, there are several powers and capacities
which tacitly, and without any express provision, are considered
inseparable from every corporation.3 We will arrange these in
the following order:
§ 252.-1. Perpetual Succession.-It is not meant by the
power of perpetual succession that a corporation may exist for-
ever; but that it may take in perpetual succession as long as it
does exist. The actual period of time for which it may exist,
1 2 Kent's Com. 272…………. 2 Tar River Nav. Co. v. Neal, 3 Hawks (N. C.)
R. 520.....
3 Ang. & Ames on Corp., ch. iii, p. 64.
14
210
CORPORATIONS.
depends on the conditions of its charter. Many private cor-
porations created by statute are limited in duration to a few
years.
Some corporations are without any limitation as to time, and
are, consequently, capable of continuing so long as a succession
of individual members of the corporation remains and can be
kept up. No changes, if within the conditions of the charter,
destroy their identity.
With reference to its perpetuity, a corporation may be com-
pared to a river. Although changes may take place along its
shores, portions of the banks may be washed away and new por-
tions may be formed, islands may sink and new ones appear,
the stream may have rolled on for ages, and a thousand times its
waters may have been emptied into the ocean, yet it is the
same identical stream through all the changes of time. We still
call it the St. Lawrence, the Rhine, or the Jordan.
So with a corporation. Of all the original corporators of
the Banks of England and Amsterdam, not one remains on earth
among the living. Generation after generation of the corpora-
tors have passed away, and yet they are the Banks of England
and Amsterdam still.
§ 253-2. To Fill Vacancies.-All aggregate corporations,
as they are composed of several individuals, have the power
necessarily implied of filling vacancies, by electing members in
the room of such as are removed by death or otherwise. This,
of course, is necessary to their continuance of existence as a cor-
porate body.¹
1
As to the power of admitting members, reference must be had
to the provisions and spirit of the charter, and the particular
nature and purpose of the corporation.
In religious and literary corporations, the number of mem-
bers is often limited by charter, and whenever there is a vacancy,
it is usually filled by a vote of the company.
As regards trading and joint-stock corporations, no vote of
admission is requisite; for any person who owns stock therein,
either by original subscription or by conveyance, is in general
1 Ang. & Ames' Corp. 65.
ORDINARY POWERS.
211
:
entitled to, and cannot be refused, the rights and privileges of a
member.¹
A person becomes a member of a mutual insurance company
by the insurance of his property, payment of premium and
deposit money, thus rendering himself liable to be assessed ac-
cording to the rules of the corporation.2
The same principle prevails in these incorporated societies as
in the community at large-that the acts of the majority, in
cases within the charter powers, bind the whole. The majority
here means the major part of those who are present at a regular
corporate meeting.3
§ 254.-3. To Elect Officers.-It is not necessary that the
power to elect officers should be expressly conferred by charter.
This power is necessarily incident to every corporation. And,
unless it is expressly lodged in other hands, as a board of direc-
tors, for instance, it must be exercised by the company at large.
This power may be taken from the body at large, either by
charter or by general statute, and given to a board of directors,
or to any other select body. The corporation may make a by-law
creating such a select body, if not inconsistent with the charter,
to whom they may delegate the power of electing not only the
officers, but the members also.*
When no other method is specified for electing officers, either
by charter or by general statute, they are to be elected by the
body at large, by virtue of their incidental authority.5
§ 255.-4. To Sue and be Sued. - Corporations have a
capacity to sue and be sued by their corporate name. But in-
dividual members of a corporation cannot, by a bill in equity,
sue for corporate claims, unless the corporation after demand
improperly refuses to sue.
Private moneyed corporations are not only liable to be sued
like individuals for breach of contract, but for neglect, and mal-
feasance, and breaches of duty, and in actions of trespass and
1 Gray v. Portland Bank, 3 Mass. R. 364; The King v. Bank of England,
Doug. 524.....
...2 Sullivan v. Mass. Mut. Fire Ins. Co., 2 Mass. R. 315.....
3 2 Kent's Com. 293......47 Cow. R. 402; 12 Mod. R. 225.
225.... 5 Ang. &
Ames' Corp. 72, 73; Newling v. Francis, 3 Term R. 189; 3 Burr. 1837; 4 Burr.
2209... 6 Hersey v. Veazie, 24 Maine R. 1.
212
CORPORATIONS.
trover, for damages resulting from trespasses and torts committed
by their agents under their authority; and the authority of
such agents need not be under seal.¹
1
A foreign corporation, in the character of its members as
aliens (unless alien enemies), may sue in the United States courts.
They may sue upon a mortgage taken upon lands as security for
a debt. The corporations of one State may make contracts, and
sue in their corporate name in another State.²
2
§ 256.-5. To Receive and Convey. It was incident at
common law to every corporation to have a capacity to purchase
and alien lands and chattels, unless they were specially restrained
by their charters, or by statute. This was understood to be the
law in England until it was taken away, as to religious cor-
porations, by several restraining statutes, in the reign of Eliza-
beth.3
These restrictions as to religious corporations seem to be rec-
ognized in this country, even where the disabling acts of Eliza-
beth have not been re-enacted; that is, that no religious cor-
poration can sell in fee any real estate without an order from the
chancellor. This limitation of the corporate power to sell is
confined to religious corporations. All others can buy and sell
at pleasure, except so far as they may be specially restricted by
their charters or by statute.
Corporations have a fee-simple for the purpose of alienation,
but they have only a determinable fee for the purposes of enjoy-
ment.*
On the dissolution of the corporation, the reverter is to the
original grantor or his heirs; but the grantor will be excluded
by the alienation in fee, and in that way the corporation may
defeat the possibility of a reverter.5
1 Yarborough v. The Bank of England, 16 East's R. 6; Townsend v. Susque-
hanna Turnpike, 6 Johns. R. 90; Gray v. Portland Bank, 3 Mass. R. 364; 3 Peters'
U. S. R. 398; 19 Pick. R. (Mass.) 516.......2 Portsmouth Livery Co. v. Watson,
10 Mass. R. 91; Lathrop v. Commercial Bank of Scioto, 8 Dana, 114; Bank of
Augusta v. Earle, 13 Porter's R. 519-591......3 2 Kent's Com. 281.
4 The
People v. Mauran, 5 Denio R. 389; Nicoll v. N. Y. & Erie R.R., 2 Kern. 121.
5 Bingham v. Welderwax, 1 Comst. R. 509; Preston on Estates, vol. 2,
p. 50; 2 Kent's Com. 282.
•
i
ORDINARY POWERS.
213
In this country, the only legal check to the acquisition of
lands by corporations, consists in those special restrictions con-
tained in the acts by which they are incorporated, and which
confine the capacity to purchase real estate to specified and
necessary objects; and in the force to be given to the exception
of corporations out of the statute of wills, which declares that
all persons other than bodies politic and corporate, may be devi-
sees of real estate.¹
If a corporation is limited to the purchase of lands of a spe-
cific yearly value, say £200, and the value be within the sum
prescribed when purchased, but afterwards, by good husbandry,
or extraneous causes, they rise in value, the title of the corpora-
tion is not thereby affected. The yearly value at the time of
the purchase is all that the limitation requires.2
In the State of Pennsylvania, all conveyances by deed or
will, of lands, tenements, or hereditaments, made to a body cor-
porate, or for the use of a body corporate, are held by the courts
to be void, unless sanctioned by charter or act of assembly.
The general inference from the statutes creating corpora
tions, and authorizing them to hold real estate to a certain
limited extent, is that they cannot take and hold real estate for
purposes foreign to their institution.³
A corporation may take a mortgage upon land by way of
security for loans made in the course and according to the usage
of its lawful operations, or in satisfaction of debts previously
contracted in the course of its dealing. Such acts are generally
provided for in the charters of incorporation. And without such
a special authority it would seem to be implied in the reason and
spirit of the grant, if the debt was, in good faith, created in the
regular course of business.*
§ 257.-6. To make Contracts. It was an ancient and
technical rule of the common law that a corporation could not
¹ 32 Hen. VIII, c. 1; 2 Kent's Com. 282
. Bogardus v. Trinity Church,
3 First
4 2 Kent's Com. 283; Silver
4 Sandf. Ch. R. 634; 2 Kent's Com., 10th edit. 283, notes (b) and 2.
Parish in Sutton v. Cole, 3 Pick. R. 232...
Lake Bank v. North, 4 Johns. Ch. R. 370; Baird v. Bank of Washington, 11 Serg.
& Rawle, 411.
214
CORPORATIONS.
manifest its intentions by any personal act or oral discourse, and
that it spoke and acted only by its common seal.¹
Afterwards the rule was relaxed, and for the sake of con-
venience, corporations were permitted to act, in ordinary mat-
ters, without deed, so as to retain a servant, cook, or butler.²
It was settled several years ago, in this country, that when-
ever a corporation aggregate acts within the range of the legiti-
mate purpose of its institution, all parol contracts made by its
authorized agents are express and binding promises; and all
duties imposed upon them by law, and all benefits conferred at
their request, raise implied promises, for the enforcement of
which an action will lie.³
It is now also the settled law in the United States, that a
bank and other commercial corporations may bind themselves
by the acts of their authorized officers and agents, without the
corporate seal."
The acts of the board of directors, evidenced by a written
vote, are as completely binding upon the corporation, and as
complete authority to their agents, as the most solemn acts done
under the corporate seal. With respect to banks, from the
very nature of their operations in discounting notes, receiving
deposits, paying checks, and other ordinary contracts, it would
be impracticable to affix the corporate seal as a confirmation of
each individual act.
Every corporation created by statute, must act as the statute
prescribes; and it is a settled doctrine that a corporation may
be bound by contracts not under its corporate seal, and by con-
tracts in the ordinary discharge of the official duty of its officers
and agents."
Although a corporation can appear only by attorney, the
authority of that attorney need not be under seal; and the ac-
tual production of any warrant of attorney to appear in court,
is not necessary in the case of a corporation more than in the
case of an individual.
6
¹ Davies' R. 121, Dean and Chapter of Fernes.
Saund. R. 305.
•
•
2 Plowden's R. 91; 2
3 Bank of Columbia v. Patterson, 7 Cranch R. 299; Many
4 Fleckner v.
». Beekman Iron Co., 9 Paige, 188; 2 Kent's Com. 289, 290....
United States Bank, 8 Wheat. R. 338.......5 2 Kent's Com. 290.
...6 Id. 291.
ORDINARY POWERS.
215
The board of directors of a corporation, for all business pur-
poses, are the corporation; and they may authorize a committee
to sell or mortgage real estate, and that power implies an author-
ity to affix the corporate seal.¹
Finally, corporations can now be bound by contracts made
by their agents, though not under seal, and also on implied con-
tracts to be deduced by inference from corporate acts, without
either a vote, or deed, or writing. This is a doctrine generally
established in the courts of the several States, with great clear-
ness and solidity of argument.2
§ 258.-7. To make By-Laws.-The power to make by-laws
is either expressly given or tacitly annexed, as being necessarily
incident to corporate bodies, to enable them to fulfill the pur-
poses of their institution; and when the objects of the power, and
the persons who are to exercise it, are not specially defined in
the charter, it is necessarily limited in its exercise to those pur-
poses, and resides in the body politic at large. If the power to
pass by-laws be given to the directors, this will authorize a
majority of them to pass such laws.³
3
It is usual, in the charter creating the corporation, to vest
the power of making by-laws in a select body; as, for instance,
in a board of trustees or directors.*
These corporate powers of legislation must be exercised rea-
sonably and in sound discretion, and strictly within the limits of
the charter, and in perfect subordination to the constitution and
general laws of the land, and the rights dependent thereon.
Subject to these limitations, the power to make by-laws may
be sustained and enforced by just and competent pecuniary pen-
alties.5
§ 259.-8. To Remove Officers and Members. The power of
amotion or disfranchisement of members for reasonable cause is
a power necessarily incident to every corporation. The power of
5
1 Burrill v. Nahant Bank, 2 Metc. R. 163.... 2 Eastman v. Coos Bank, 1
N. H. R. 26; Maine Stage Company v. Longley, 14 Maine R. 444; Hayden v.
Mid. Turnpike Co., 10 Mass. R. 397; Mott v. Hicks, 1 Cow. R. 513; Danforth v.
Schoharie Turnpike Co., 12 Johns. R. 227..... 3 Cahill v. Kalamazoo Mut.
Ins. Co., 2 Doug. Mich. R. 124. 4 Ang. & Ames' Corp., 3d edit. 10....
King v. Westerood, 7 Bing. R. 1; Westervelt v. Corporation of the City of
New York, 2 Hoff. Ch. ; 2 Kent's Com. 296.
*
216
CORPORATIONS.
amotion, it is now held, is incident and necessary for the good
order and government of corporate bodies, as much as the power
of making by-laws. But this power must be exercised discreetly,
and only for good cause; and it must be for some offense that has
an immediate relation to the duties of the party as a corporator.
As to offenses which have no immediate relation to his cor-
porate trust, but which render a party infamous and unfit for
any office, they must be established by indictment and trial at
law before the corporation can expel for such a cause.¹
If there be no special provision in the charter on the subject,
the power of removal of a member for just cause resides in the
whole body.2
But a select body of the corporation may possess the power,
not only when given by charter, but in consequence of a by-law
made by the body at large; for the body at large may delegate
their powers to a select body, as the representative of the whole
community.3
Disfranchisement applies to members, and amotion, to the
officers only. If an officer be removed for good cause, he may
still continue to be a member of the corporation.*
Disfranchisement is the greater power, and more formidable
in its application; and in joint-stock or moneyed corporations,
no stockholder can be disfranchised, and thereby deprived of his
property or interest in the general fund, by any act of the cor-
porators, without at least an express authority for that purpose.5
§ 260-9. To Hold Property as Trustees.-A corporation
being merely a political institution, it has no other capacities or
powers than those which are necessary to carry into effect the
purposes for which it was established. It was formerly under-
stood that a corporation could not be seized of lands to the use
of another, and that it was incapable of any use or trust. But
at this day, the only reasonable limitation is, that a corporation
cannot be seized of land in trust, for purposes foreign to its
institution.
1 The Commonwealth v. St. Patrick Society, 2 Binney's R. 441..
King v. Lyme Regis, Doug. R. 149. .
15 Ill. 110...
Case, 11 Co. 99.
3
? The
3 Burr. R. 1837; People v. Higgins,
5 Id. 405; Bagg's
4 Ang. & Ames on Corp. 404, 3d edit.
RESTRICTIONS.
217
Corporations have been declared by the highest judicial
authority capable of taking and holding property as trustee.
Many corporations are made trustees for charitable purposes,
and are compelled in equity to perform their trusts. Corpora-
tions are deemed competent to perform the duties of trustees,
and to be proper and safe depositories of trusts.¹
L
V.—RESTRICTIONS.
§ 261. Having considered the ordinary powers of a corpora-
tion, it will be next in order to notice the restrictions under
which they must transact their business.
§ 262.-1. As to Banking Powers.-A corporation has no other
powers than such as are specifically granted by the act of incor-
poration, or are necessary for the purpose of carrying into effect
the powers expressly granted.²
Therefore, where no authority is given in the charter, or in
the act of incorporation, or by any general statute, no incorpo-
ration can issue bills, discount notes, receive deposits, or loan
money.3
§ 263.-2. Receiving by Will.-Corporations are excepted out
of the statute of wills in England, and in New York and most
of the other States; and it has been decided that they cannot
be directly devisees at law."
But the weight of English and American authorities is in
favor of the doctrine that corpórations may become devisees of
property for charitable uses.5
§ 264.-3. As to Corporate Powers.-The rule in regard to
these powers is, that they must be construed strictly. A corpo-
ration is bound to show its authority for the business it assumes
to do. No rule of law comes with a more reasonable application,
considering how lavishly charter privileges have been granted.
• •
12 Kent's Com. 279...... 2 People v. Utica Ins. Co., 15 Johns. R. 358; New
York Firemen's Ins. Co. v. Ely, 2 Cow. R. 678..
3 ld...... 4 Jackson v.
Hammond, 2 Caines' Cases in Error, 337....
Phila. v. Elliott, 3 Rawle's R. 170.
5 Mayor and Corporation of
218
CORPORATIONS.
As corporations are the mere creatures of law, established for
special purposes, and derive all their powers from the acts creat-
ing them, it is perfectly just and proper that they should be
obliged strictly to show their authority for the business they
assume, and be confined in their operations to the mode, and
manner, and subject-matter prescribed.¹
The powers of a corporation are also strictly confined to the
jurisdiction creating it. Hence where one State authorized the
erection of a bridge, one end of which extended into another
State, the corporation could not collect toll of those who passed
only the part of the bridge situated in the other State.²
§ 265.-4. Modes of Making Contracts.-The members of a
corporation aggregate cannot separately and individually give
their consent in such a manner as to oblige themselves as a col-
lective body; for in such case it is not the body that acts. Being
lawfully assembled, they represent but one person, and may con-
sequently make contracts, and, by their collective consent, oblige
themselves thereunto.³
And though all the members of a corporation were to cove-
nant in behalf of it, under their private seals, binding themselves
and their heirs that the corporation should do certain acts, it
would be only a personal, and not a corporate contract.*
The great number of the members of which corporations
aggregate usually consist, renders their undoubted rights of con-
tracting by vote, extremely inconvenient; and accordingly their
usual mode of contracting is through the intervention of agents,
duly authorized for that purpose. These are either persons spe-
cially appointed and authorized for the occasion, or, as is more
common, the general officers and boards, as directors, managers,
&c., existing within the corporation-elected, it is true, by the
members, but usually deriving their ordinary powers from the
charter, or act of incorporation.
The charter frequently prescribes their mode of action; and
1 2 Kent's Com. 299.
• •
326; 2 Kent's Com. 299.
Com. 475; 10 Mass. R. 403.
13 Mass. R. 406.
2 Middle Bridge Corporation v. Marks, 26 Maine R.
•
3
Ayliffe's Civil Law, tit. 35, B. 2, p. 198; 1 Black.
4 Tileston and others v. Newell and others,
LIABILITIES.
219
we need hardly add, that where this is the case, its injunctions
must be rigidly pursued.¹
In general, the only mode in which a corporation aggregate
can act or contract is through the intervention of agents, either
specially designated by the act of incorporation, or appointed and
authorized by the corporation in pursuance of it.²
3
2
It is an old rule of the common law that such a corporation
cannot lay a fine, acknowledge a deed, or appear in a suit, except
by attorney or agent. Corporations with power to sue and be
sued, perform the necessary services incident to such business,
by agents.*
§ 266.-5. As to Period of Existence.-Some charters are
limited, and others unlimited, as to the period of time for which
the corporation may continue to exist. Those of limited dura-
tion, of course cease to exist at the expiration of the time for which
they were created, unless the charter shall be renewed. One of
unlimited duration, by the terms of its charter may continue in-
definitely, so long as it lives in obedience to the terms of its
charter.
VI. LIABILITIES.
§ 267. By the act of incorporation certain liabilities must be
assumed by the institution, some of which are imposed by the
common law, some by the charter, and others by general sta-
tute. Among the liabilities of corporations are:
§ 268-1. For Acts of Agents.-Corporations are liable not
only for contracts made by their properly authorized agents, and
within the scope of the agent's authority, but for trespasses and
torts committed by such agents under the authority of the cor-
porations; and the authority need not be under seal.5
Corporations can appoint agents, whose acts and contracts,
•
•
¹ Ang. & Ames' Corp., 2d edit. 166, 167........2 Co. Lit. 66 b.
myn's Dig., Attorney, C. 2..
b……….
8 Co-
8 Porter (Ala.) R. 404
• •
4 The Planters & Merchants' Bank v. Andrews,
5 Yarborough v. Bank of England. 16 East's R. 6;
Townsend v. Susquehanna Turnpike, 6 Johns. R. 90 ;. 3 Peters' U. S. R. 398.
220
CORPORATIONS.
*
within the limits of their authority, are binding on the corpora-
tion by which they are appointed.'
§ 269.-2. On Implied Promises. As we have already seen,
the doctrine formerly was, that corporations could be bound only
as they spoke and acted by a common seal; and of course, there-
fore, by express contract. But that view of the subject is now
completely exploded, especially in this country.
The law is well settled in the United States, that a corpora-
tion can render itself liable on an implied promise, the same as
a natural person. The courts of highest authority have repeat-
edly decided, that promises might as well be implied from the
acts of corporations, and from the acts of their agents, as if they
were individuals.2
If a person assumes to act as an agent of a corporation, but
without legal authority, and under that assumed agency makes
a contract, and the corporation receives the benefit of it, and
uses the property acquired under it, such acts will ratify the
contract, and render the corporation liable thereon.3
§ 270.-3. For Injuries and Negligence.- Corporations are
liable for negligence, malfeasance, and breach of duty, the same
as individuals. As natural persons are liable for the wrongful
acts and neglect of their servants and agents, done in the course
and within the scope of their employment, so are corporations
upon the same grounds, in the same manner, and to the same
extent.
A bank, for instance, is liable for the fraud or mistake of its
cashier or clerk in the entries in its books, and in the false ac-
counts of deposits, and for improperly refusing by its directors,
to permit an individual to subscribe for, or to transfer stock.¹
4
1 2 Kent's Com. 289; Bank of Columbia v. Patterson, 7 Cranch's R. 299;
Eastman v. Coos Bank, 1 N. H. 26; 2 Kent's Com. 291, and the numerous au-
thorities there cited..... 2 Bank of Alexandria v. Bank of Columbia, 5
Wheat. R. 326; Fleckner v. U. S. Bank, 8 Wheat. R. 357; Bank of U. S. v.
Dandridge, 12 Wheat. R. 68; Dunn v. St. Andrew's Church, 14 Johns. N. Y. R.
118...... 3 Episcopal Charitable Society v. Episcopal Church in Needham, 1
Pick. (Mass.) R. 372; Bank of Columbia v. Patterson, 7 Cranch, 299; Randall
v. Vanvechten, 19 Johns. R. 60........4 Salem Bank v. Gloucester Bank, 17
Mass. R. 1; Manhattan Co. v. Lydeg, 4 Johns. R. 377; Union Bank v. McDon
ough and others, 5 Louisiana R. 63.
LIABILITIES.
221
§ 271.-4. For Trespass.- Generally a corporation is civilly
responsible for damages occasioned by an act, as a trespass, or a
tort, done at its command, by its agent, in relation to a matter
within the scope of the purposes for which it was incorporated.'
But it is not responsible for unauthorized and unlawful acts
even of its officers, though done under color of office. To fix the
liability, it must either appear that the officers were expressly
authorized to do the act, or that it was done in good faith in
pursuance of a general authority, in relation to the subject of it,
or that the act was adopted or ratified by the corporation.2
The officers or agents are liable to the corporation for all
damages occasioned by their violation of the duties and obliga-
tions which they owe to their principal, whether it consists in
positive misconduct, or neglect, or omissions.³
§ 272.-5. For Taxes.-Corporations are liable to pay taxes,
the same as individual owners of property. There is no reason
why they should not be subject to the same burdens, in the
character of owners or occupiers of lands and houses, to which
individuals are subject in the same character; and such has
always been the understanding.¹
Where village taxes are directed to be made upon the free-
holders and inhabitants of the village, according to law, a
moneyed or stock corporation having its office within the bounds.
of such village, is an inhabitant within the meaning of the act."
§ 273.-6. To Visitation.-Corporations are liable and subject
to visitation. This consists of an authority to inspect the
actions and regulate the behavior of the members who partake
of the franchise.
The visitation of civil public corporations is by the govern-
ment itself, through the medium of the courts of justice. If the
corporation is public, in the strict sense, the government has the
sole right, as trustee of the public interest, to inspect, regulate,
control, and direct the corporation, and its funds and franchises,
1
Ang. & Ames on Corp., 2d edit. 250; 3 Starkie R. 50; 1 Adolph. & Ellis,
526; 2 Wend. R. 452; 7 Cow. R. 485... Ang. & Ames on Corp., 2d edit.
251; Thayer v. Boston, 19 Pick. (Mass.) R. 516, 517
Corp. 251; Franklin Ins. Co. v. Jenkins, 3 Wend. R. 130.
317... 5 Ontario Bank v. Bunnel, 10 Wend. R. 186.
3 Ang. & Ames on
41 Kyd on Corp
222
CORPORATIONS.
because the whole interest and franchises are given for the public
use and advantage. Such corporations are to be governed accord-
ing to the laws of the land. The validity and justice of their
private laws are examinable in the courts of justice; and if there
be no provision in the charter how the succession shall continue,
the law supplies the omission, and says it shall be by election.
But private and particular corporations, founded and en-
dowed by individuals for charitable purposes, are subject to the
private government of those who are the efficient patrons and
founders. If there be no visitor appointed by the founder, the
law appoints the founder himself, and his heirs, to be the visitors.
This visitorial power arises from the property which the
founder assigned to support the charity; and as he is the author
of the charity, the laws give him and his heirs a visitorial
power; that is, as already stated, an authority to inspect the
affairs of the institution.¹
This power is judicial and supreme, but not legislative. The
visitor is to judge according to the statutes and rules of the
college, hospital, or other institution subject to his visitation.
The decision of the visitor, whoever he may be, is final, and
without appeal, because the doctrine is that the founder reposes
in him entire confidence that he will act justly.
In most cases of eleemosynary establishments, the founders
do not retain this visitorial power in themselves, but assign or
vest it in favor of some certain specified trustees or governors of
the institution. It may be inferred from the nature of the duties
to be performed by the corporation or trustees for the persons
interested in the bounty, that the founders or donors of the
charity meant to vest the power of visitation in such trustees.2
But it is now settled that the trustees or governors of a
literary or charitable institution are not placed beyond the reach
of the law. In cases of gross fraud, or abuse of trust, the court
of chancery will interfere and take away the trust, and vest it in
other hands.3
Strictly speaking, the visitorial power, in this country, ap-
1 2 Kent's Com. 201.
•
2 Id.; Dartmouth College v. Woodward. 4
Wheaton R. 518.... 3 Attorney-General v. Governors of the Foundling
Hospital, 2 Vesey, jr. 42; 4 Wheaton, 676.
•
A
PERSONAL LIABILITIES OF CORPORATORS. 223
plies only to eleemosynary corporations. Civil corporations,
whether public, as the corporations of towns and cities, or pri-
vate, as bank, insurance, manufacturing and other companies of
the like nature, are not subject to this species of visitation.
They are subject to the general law of the land, and amenable to
the judicial tribunals for the exercise and the abuse of their
powers.
It is well understood that the court of chancery has a juris-
diction over charitable corporations for breaches of trust. Any
corporation, however, may be inspected, controlled, and held
accountable in chancery, for an abuse of such trusts. With that
exception, the rule is understood to be, that all corporations are
amenable to the courts of law, and there only, according to the
course of the common law, for nonuser or misuser of their fran-
chises.¹
VII. PERSONAL LIABILITIES OF
CORPORATORS.
§ 274. One of the peculiar features of a private corporation.
is the irresponsibility of the members who compose it for the
company debts. No rule of law is better settled than that, in
general, the individual members of a private corporate body are
not liable for the debts, either in their persons or in their prop-
erty. Creditors can only look to the assets of the company.
If the treasurer of a corporation gives his note in that
capacity, for the proper debt of the corporation, he is not per-
sonally liable.³
In reference to the irresponsibility of the stockholders in
private corporations aggregate, we have stated the common law
doctrine. This doctrine, however, has nothing to do with the
statutory enactments in the several States of the Union. The
1 2 Kent's Com. 304, 305; Attorney-General v. Utica Insurance Company, 2
Johns. Ch. R. 384-390; 1 Vesey, 468; Ang. & Ames on Corp., 3d edit., ch. xix.
2 Ang. & Ames on Corp., 2d edit. 470 3 Man v. Chandler, 9 Mass.
R. 335.
224
CORPORATIONS.
statute books of many of the States will show that an opinion
has strongly and extensively prevailed, that the common law
relative to commercial corporations, is not adequate to their
proper regulation and government.
One of the most material alterations of the common law in-
troduced for the better regulation of such corporations, and for
the security of their creditors, is that of making each mem-
ber personally liable in his private estate for the company
debts.'
The practice which of late has been, and is being, so exten-
sively adopted, of making the members of corporations person-
ally liable for the debts of the company, originated in a general
distrust of the community of companies incorporated for carry-
ing on trade.²
In several of the States the members of corporations are now
held by statute to a personal responsibility more or less exten-
sive, for the debts of the companies in which they are the own-
ers of stock. It is not practicable, within the limits of this work,
to cite, or even to refer, to all the statutory enactments imposing
these various degrees of liability. The student will be obliged
to consult the statutes of the States for the necessary informa-
tion on the subject. But it is proper to say that the common
law doctrine in reference to personal responsibility, has been
overturned in nearly, if not all, the States of the Union. This
is particularly true as to manufacturing companies.
In ordinary partnerships, the reader is aware, no participator
in the profits can shield himself from liability for the whole
amount of the debts of the company. And the tendency of
modern legislation is to hold the stockholders of incorporated
companies to much the same strict responsibility.
By the common law, as already stated, the members of private
aggregate corporations assume no individua' responsibility as to
the corporate debts. But the corporation only can be sued for
their collection. But a very different rule prevails with regard
to the responsibility of members of quasi corporations, such as
counties, towns, or cities, incorporated by statute. Against them
1
¹ Ang. & Ames' Corp., 2d edit. 478.
• Id.
DISSOLUTION.
225
no private action will lie, unless given by statute; and if a power
to sue them is given by statute, each inhabitant is liable to satisfy
the judgment.'
In Massachusetts, by immemorial usage, the inhabitants of
towns charged by law with the performance of duties, are held to
be individually liable in their property, though sued by a collec-
tive name as a corporation. The same rule applies to parishes
and school districts.2
The same doctrine is held in the State of Connecticut—that
the individual property of the citizen of a village or city, is liable
on execution for the debts of the corporation.3
It seems that this is the generally accepted doctrine relating
to the individual responsibility of members of quasi corporations
throughout New England, and has been supported by a long and
uniform line of judicial decisions.*
But this personal responsibility does not extend to the mem-
bers of voluntary associations of ecclesiastical societies, unless so
subjected by the charter provisions. They are private, and not
municipal or quasi corporations, compelled by law, like towns,
cities, and school districts, to assume duties and contract debts."
This whole subject of personal responsibility of members of
corporations depends so much upon local statutes that it would
be unprofitable to pursue the subject further in this place.
5
VIII. DISSOLUTION.
§ 275. It remains to speak of the dissolution of corporations,
which may take place in various ways.
§ 276-1. By Statute. In respect to public or municipal
corporations, which exist only for public purposes, as counties,
cities, and towns, the legislature, under proper limitations, have
a right to change, modify, enlarge, restrain, or destroy them;
1 Ang. & Ames' Corp., 2d edit. 499
3 16 Connecticut R. 368.
leaf; 5, 6, & 10 Conn. R....
2 Kent's Com., p. 278, note c.
2 Gaskill v. Dudley, 6 Metc. 546.
47 Mass. R. & 14 Id.; 19 Pick.; 1 Green-
5 Jewett v. The Thames Bank, 16 Conn. R. 511;
15
226
CORPORATIONS.
securing, however, the property for the uses of those for whom
it was purchased.
A public corporation, instituted for purposes connected with
the administration of the government, may be controlled by the
legislature, because such a corporation is not a contract within
the purview of the Constitution of the United States.
A private corporation, whether civil or eleemosynary, is a con-
tract between the government and the corporators, and the legis-
lature cannot repeal, impair, or alter the rights and privileges
conferred by the charter, against the consent, and without
the default of the corporation, judicially ascertained and de-
clared,¹
The doctrine with regard to private corporations is, that the
legislature can alter, amend, or repeal a charter, or legislate a
corporation out of existence, in those cases only where the orig-
inal charter, or the act of incorporation, reserves that right. The
practice is now very general for legislatures to reserve to them-
selves these powers in granting charters.
§ 277.-2. By Loss of Integral Parts.-Many aggregate cor-
porations are composed of distinct parts, which are called integral
parts, without any one of which the corporation would not be
complete, although none of them by themselves are a corpora-
tion. Thus, where a corporation consists of a mayor, aldermen,
and commonalty, the mayor, the aldermen, and the commonalty
are three integral parts; but neither of them has any corporate
capacity, distinct from the other two. Therefore the mayor
cannot, in his political character of mayor, take in succession
anything as a sole corporation; nor can the aldermen, as a select
body, take anything to them and their successors as an aggregate
corporation.2
It follows, therefore, that the loss of any one of these integral
parts, if permanent and continued, must result in the dissolution
of the corporation.³
When legally assembled, the majority of voices govern; but
every integral part must be present at a corporate assembly by a
2
12 Kent's Com. 305, 306.... Ang. & Ames on Corp., 2d edit. 58
* Rex v. Bellringer, 4 Term R. 823; 6 Term R. 278; Rex v. Morris, 4 East, 26 :
7 Cowen R. 410; 1 Rolle's Abridg. 514, I, 1 ; 2 Kent's Com. 388.
痛
​DISSOLUTION.
227
majority at least of its proper members, though the major part
of all present, when assembled, are competent to do a corporate
act.¹
If a private corporation consist of so many brothers and so
many sister's, and all the sisters die, the whole is dissolved, and
all acts done, and all grants afterwards made by the brothers,
are void; because the brothers and sisters are integral parts of
the corporation, and it cannot subsist by halves.
The dissolution of a corporation from the loss of an integral
part, whether the head officer or a select body, results from the
incapacity of the corporation, in its imperfect state, to act, or to
restore itself by a new election. Wherever, therefore, the corpo-
ration may restore itself by a new election, though until the new
election the rights of the corporators may be suspended, yet they
are not extinguished.2
§ 278.-3. By Surrender of Franchise.-Another mode in
which a private corporation may be dissolved is by the surrender
of its franchise into the hands of the government.³
But although a corporation aggregate may surrender, and in
that way dissolve itself, yet the surrender must be accepted by
government, which acceptance must be made by some solemn act
to render it complete.*
§ 279.-4. Forfeiture of Charter.-A corporation may become
dissolved by a forfeiture of its charter; and this may be done
by misuser or nonuser. If a manufacturing corporation, for
instance, having a charter of twenty years' duration, were to
become incompetent to act on account of the loss of all its funds
within the time, such corporation would be deemed dissolved."
It is a general rule, however, that a corporation is not to be
deemed dissolved by reason of any misuser or nonuser of its
franchises, until the default has been judicially ascertained and
determined. 6
•
517....
1 St. Mary's Church in Philadelphia, 7 Serg. & Rawle (Penn.) R. 517………….
2 Ang. & Ames on Corp., 2d edit. 654.... 37 Mass. R. 185; 16 Mass. R. 86,
87; 7 Conn. R. 45, 46, 52; 19 Johus. R. 456; 9 Ohio R. 203; 16 Maine R. 224;
8 Peters' R. 281... 4 Town v. Bank of River Raisin, 2 Doug. (Mich.) R. 530;
...5 Briggs v. Penniman, 1 Hopkins R. 300.....
2 Kent's Com. 311.
6 Peter v. Kendal, 6 Barn. & Cress. 703; Slee v. Bloom, 6 Johns. Ch. R. 379:
6 Cowen's R. 26; S. P., 9 Cranch's R. 51.
228
CORPORATIONS.
§ 280.-5. Consequences of.-According to the old settled
law of the land, where there is no special statute provision to the
contrary, upon the civil death of a corporation, all its real estate,
remaining unsold, reverts back to the original grantor and his
heirs. The debts due to and from the corporation are all extin-
guished. Neither the stockholders, nor the directors or trustees
of the corporation, can recover those debts, or be charged with
them, in their natural capacity. All the personal estate of the
corporation vests in the people, as succeeding to this right and
prerogative of the crown at common law."
The rule above stated was the common law doctrine for ages;
but it has now become obsolete and odious. The sound doctrine
now is, as shown by statutes and judicial decisions, that the
capital and debts of banking and other moneyed corporations
constitute a trust fund and pledge for the payment of creditors.
and stockholders; and a court of equity will lay hold of the
fund, and see that it be duly collected and applied. The death
of a corporation no more impairs the obligation of contracts than
the death of a private person.²
1 Edmunds v. Brown & Tillard, 1 Lev. R. 237; Coke Litt. 13 b; 3 Burr. R.
1868; 1 Black. Com. 484; 2 Kyd on Corp. 516........2 Wood v. Dummer, 3
Mason's R. 309; Mumma v. The Potomac County, 8 Peters' R. 281; 2 Kent's
Com, 10th edit. 307, note b.
Topical Analysis
OF
Guaranty and Surety.
1. PARTIES.
II. CONSIDERATION.
III. MODE OF GUARANTY {
1. Principal debtor.
2. Creditor.
3. Guarantor.
§ 1. Advantage to promisor.
2. Detriment to promisee.
1. Written.
2. Unwritten.
IV. ASSENT OF THE PARTIES.
V. CLASSES.
VI. HOW EXTINGUISHED
I. Collateral-contemporaneous.
2. Collateral-subsequent.
3. New and original consideration.
4. Indorsement for previous debt.
5. Of payment of note.
6. Negotiability of guaranty.
7. Of personal integrity.
8. Continuing guaranty.
1. By lapse of time.
2. Notice.
3. Acts of the parties.
4. Payment.
5. Compromise.
6. Release.
7. Merger.
8. Extension of time to principal.
9. Alteration of contract.
10. Fraud on guarantor.
II. Delay in collecting of principal.
230
TOPICAL ANALYSIS OF GUARANTY.
VII. RIGHTS OF SURETY
1. On default of principal.
AGAINST HIS PRIN-2. May compromise.
CIPAL .
3. May recover actual payments only.
I. One satisfaction only.
VIII. RIGHTS OF SURETY! 2. Discussion.
AGAINST CREDITOR
3. To principal's and surety's deposit.
4. Of subrogation.
I. Equalization.
IX. RIGHTS OF CO-SURE- 2. Contribution.
TIES.
3. With regard to interest.
4. As to costs.
X. LIABILITIES OF SURETIES GENERALLY.
+
CHAPTER VI.
GUARANTY AND SURETY.
§ 281. A guaranty is a promise to answer for the payment
of some debt, or the performance of some duty, in case of the
failure of another person, who is, in the first instance, liable for
such payment or performance.¹
Being a contract, of course a guaranty must have all the ele-
ments of a contract. But these need not be treated here in
detail, as they have already been considered elsewhere in this
work.
Attention is invited to the discussion of that class of contracts
to which there is a third party, who assumes an obligation for
one of the other two parties.
1.-PARTIES.
§ 282. Before the relation of principal and guarantor can
exist, there must be a contract in existence, or there must be one
about to be created, and to which there must be the usual par-
ties already, before the third party assumes his responsibility in
the transaction. In cases of guaranty, therefore, there must be
three parties-1. The Principal Debtor; 2. The Creditor; and
3. The Guarantor.
Guaranty is distinguished from suretyship, in being a second-
ary obligation; while suretyship is a primary obligation. Guar-
anty is an undertaking that the debtor shall pay; suretyship,
that the debt shall be paid.²
1. Principal Debtor.—The undertaking of the guarantor is on
behalf of this debtor, and it relates entirely to the principal
¹ Fell's Guar., ch. 1, § 1. ... 2 Bouv. Law Dict., Guaranty.
232
GUARANTY.
obligation. As the guarantor's contract is accessorial, it must
be no larger than the principal contract which it comes in to
sustain. It furnishes better security that a promise already
made by the principal debtor shall be performed by him.
2. Creditor. The creditor is the other party to the original
contract. Between him and the debtor there already exists a
certain executory contract.
3. Guarantor. He steps in as a third party, and promises
that the principal contract shall be performed by the debtor as
he has already promised.
II. CONSIDERATION.
§ 283. A contract of guaranty, like other contracts, must be
based on a sufficient consideration. That consideration must
always be based on at least one of the following elements:
1. Advantage to Promisor; or
2. Detriment to Promisee.
It is a seeming exception to this statement, in the case of a
guaranty, as the advantage or benefit, instead of accruing to the
party promising, is wholly for the advantage of the party on
whose behalf the promise is made. But the exception is merely
apparent; for the guarantor, in a certain sense, takes the place
of the debtor, who enjoys the advantage of the promise, without
which consideration, it may reasonably be presumed, the new
relation would not be assumed by him.
It is not necessary that any actual advantage shall accrue to
the party promising; it will be sufficient that any damage, or
any possibility of loss, may be occasioned to the promisee.¹
All guaranties must have a consideration to support them,
none being presumed as in the case of negotiable paper. In a
written guaranty, the consideration must be expressed.2
v
1 3 Bur. R. 1663; Forth v. Staunton, 1 Saund. 211; Neratt & Wallace, 3
Term R. 24.
23 Johns. R. 310; 7 Wend. R. 240; 24 Id. 35; 21 New York
R. 257.
MODE OF GUARANTY.
233
III.-MODE OF GUARANTY.
§ 284. The mode of the undertaking may be written or un-
written. Certain classes of contracts must be written, and others
need not be.
1. Written. Those that must be in writing to be valid, are
such as are specified by a certain statute usually called the
"Statute of Frauds," which is a statute for the prevention of
frauds in the making of contracts.
Among other things that statute declares, in substance, that
every special promise to answer for the debt, default, or mis-
carriage of another person, shall be void, unless such agreement,
or some note or memorandum thereof, be in writing, and sub-
scribed by the party to be charged thereby.
A statute of similar terms and scope, which is the same as
the English statute, has been adopted by all, or nearly all, the
States of the American Union.
2. Unwritten. In the foliowing cases, a promise in the nature
of a guaranty is good and valid, though it is not reduced to
writing.
Where there is a pre-existing liability; that is, a liability
before the new promise is made.
1. Where the principal debtor is discharged by the new
promise being made.¹
1
An entry of such discharge in the creditor's books is held to
be sufficient proof
2
This may be done by agreement to that effect, as it is the
substitution of a new obligation for an old one."
2. Where the principal obligation is void or not enforceable
when the new promise is made, and this is contemplated by the
parties. But if not so contemplated, then the new promise is
void. 1
3. Where the promise does not refer to the particular debt,
or where this is unascertained.5
¹ 3 Bing. N. C. 889; 5 Chandl. Wisc. 61; 28 Vt. 135; 29 Id. 169; 5 Cush.
Mass. 488; 8 Gray, Mass. 233; 8 Johns. N. Y. 376... 2 Hill, So. Car. 41.
* 1 Allen's R., Mass. 405........4 1 Burr. 373.
• •
5 1 Wils. 305.
234
GUARANTY.
In these three classes the principal obligation ceases to exist
after the new promise is made.
4. Where the new promise is in consideration of property
placed by the debtor in the promisor's hands.¹
5. Where the promise is made to the debtor, not the creditor;
because this is not the debt of "another" than the promisee. If
I promise you that I will pay a debt which you owe to another,
that promise is good though unwritten.²
6. Another case where the promise need not be in writing is
where the creditor surrenders a lien on the principal debtor's
property, which the promisor acquires or is benefited by.³
3
7. An unwritten guaranty may be given for a liability there-
after to be incurred, and will attach when the liability occurs.
But the credit in such case must be given to the promisor ex-
clusively.
२
IV. ASSENT OF PARTIES.
§ 235. We noticed in treating of Contracts that one of the
primary elements is mutual assent. The minds of the parties
must meet, or there can be no contract. The elements of this
assent consist of—
1. Proposition; and
2. Acceptance.
Not only is it necessary that the consent of the party to be
charged as guarantor be signified, but it is equally necessary to
obtain the consent of the one to whom the promise is offered.
If the promisee's consent is not obtained, the contract is incom-
plete.
A simple proposal cr offer to guarantee, therefore, does not
bind the party offering, until he has notice of its acceptance.*
He has the right to know whether he sustains. the relation of
guarantor for the principal debtor or not. If the guaranty is
11 Gray R., Mass. 391; 41 Me. 559.... 2 1 Gray, Mass. 76....
3 Fell's Guar., ch. 2; 7 Johns. N. Y. 463; 21 N. Y. R. 412.
Finckler, Crompt. Mees. & Roscoe's R. 692.
*
4 Mozly v.
CLASSES.
235
prospective, and is to attach to future transactions, it is the duty
of the creditor to give the guarantor notice that his proposition
of guaranty has been accepted and acted upon.'
This doctrine is illustrated in the case of Mozley v. Finckler,
which originated from the following proposition :
"GENTLEMEN: Mr. France informs me that you are about
publishing on arithmetic for him and another person, and I have
no objection to being answerable as far as £50."
Although this proposition was acted upon, the proposing
party was not notified of its acceptance, and, therefore, was held
not liable.
However, if an absolute guaranty is given, no notice is neces-
sary. Take the following instance:
ROCHESTER, October 18, 1870.
In consideration that Erastus Corning furnishes to Samuel
D. Barr two thousand dollars' worth of merchandise at four
months' credit, I will be responsible for the payment of the same.
H. B. BRYANT.
This is an unqualified guaranty, on which Mr. Corning has
the right to act without notifying Mr. Bryant of its acceptance.2
V. CLASSES.
§ 286. A large proportion of the guaranties assumed or under-
taken are reduced to writing, although, as we have seen, a verbal
guaranty is valid in several classes of cases. But every guaranty
must be supported, like other contracts, by a consideration. The
first two of the three following classes of cases come within the
Statute of Frauds, and of course must be written—the third
does not.
1. Collateral-contemporaneous.-These are cases in which the
guaranty or promise is collateral to the principal contract, but
1 Lee v. Dick, 10 Peters, 482; Adams v. Jones, 12 Peters, 207.
v. Young, 2 H. Black. 613.
2 Oxley
236
GUARANTY.
is made at the same time, and becomes an essential ground of
the credit given to the principal or direct debtor.
Here is not, nor need be, any other consideration than that
moving between the creditor and original debtor.'
2. Collateral-subsequent.-Cases in which the collateral under-
taking is subsequent to the creation of the debt, and was not the
inducement to it, though the subsisting liability is the ground
of the promise, without any distinct and unconnected induce-
ment.
Here must be some further consideration shown, having an
immediate respect to such liability; for the consideration for the
original debt will not attach to this subsequent promise.²
3. New and Original Consideration.-Cases in which the
promise to pay the debt of another arises out of some new and
original consideration of benefit or harm moving between the
newly contracting parties, need not be in writing.³
The eminent jurist who is the author of the foregoing classi
fication, defines in the same case the word collateral thus:
If the whole credit is not given to the person who comes in
to answer for another, his undertaking is collateral.
4
4. Indorsement for Previous Debt.-I owe you a debt, say of
$1,000, and you are urging payment, and I offer Brown as
surety, whom you are willing to accept and give me further
time, and we arrange it in this way:
I give you my note, payable to you, or order, six months
after date, value received, and before delivery, Brown indorses it
in blank. Brown has now become responsible to you on my ac-
count. But the precise character of his liability depends on the
State in which the transaction takes place.
In some of the States Brown is held liable as joint
promisor or maker; in others, as guarantor or surety.
•
¹ Leonard v. Vredenburgh, 8 Johns. R. N. Y. 29......2 Fish v. Hutchinson,
2 Wils. 94; Charter v. Beckett, 7 Term R. 201, 3 Classificatiou by Ch. J.
Kent, 8 Johns. R. 29.... 4 6 Mod. R. 249; 2 Term R. 80......5 Sylvester
v. Downer, 20 Vt. R. 355.. 6 McGuire v. Bosworth, 1 La. R. 243.....
↑ Robinson v. Abell, 17 Ohio R. 36.
•
CLASSES.
237
The only safe rule to adopt is to regard the liability of such
an indorser, the same as the liability of other indorsers, so far
as notice of protest is concerned, and give notice of protest in
all cases where the apparent relation of the party to the note is
that of indorser.
In the State of New York, he ranks now clearly as an
indorser, and hence is discharged by any such laches on the part
of the holder as discharges other indorsers.'
5. Of Payment of Note.-The guaranty of the payment of a
bill or note should be substantially thus: Value received, 1
guaranty the payment of the within note. This is now regarded,
generally, by the courts, as an absolute undertaking; and if the
instrument is not paid at maturity, the guarantor is liable at
once, and is not entitled to notice of non-payment. It is no part
of the holder's agreement to give such notice.²
In Massachusetts, Maine, and Pennsylvania, the doctrine is
that the guarantor is entitled to reasonable notice of non-pay-
ment, unless the principal debtor is insolvent when the note or
bill falls due.3
But if the guaranty is that the note or bill is collectible, re-
course must be had to all prior parties before the guarantor is
liable.4
6. Negotiability of Guaranty.-Whether a guaranty of a nego-
tiable note is itself negotiable, so that it can be sued in the
name of the holder of the note, can hardly be regarded as settled
beyond dispute. If it is written on the note itself, Judge Story
holds, in his work on Bills, § 458, that it is negotiable. In Ver-
mont, a guaranty is negotiable equally with the note upon which
it is indorsed. In New York, the same doctrine is held."
5
¹ Dean's Com. Law, § 376; Hall v. Newcomb, 7 Hill's R. 416; Spies v. Gil-
more, 1 Comst. R. 321........ Walton v. Mascall, 13 Meeson & Welsby, 72,
452; Cooper v. Paige, 24 Maine R. 73; Grover v. Hoppoch, 2 Dutcher's N. J. R.
191; Brown v. Curtis, 2 Comst. R. 225..... 3 Oxford Bank v. Haynes, 8 Pick.
R. 423; Cannon v. Gibbs, 9 Serg. & Rawle, 202........4 Loveland v. Shepard,
2 Hill's R. 139; Taylor v. Bullen, 6 Cowen R. 624; Cumpston v. McNair. 1
Wend. R. 457.. 5 Partidge v. Davis, 20 Vt. R. 499.
son's Exec'rs, 26 Wend. R. 425.
•
.6 Laren v. Wat-
238
GUARANTY.
***
Many of the authorities go so far as to maintain that the
guaranty is negotiable even if written on a separate paper.¹
7. Of Personal Integrity.-A guaranty may be given for the
personal integrity of one who occupies a position of trust and
confidence, who has the custody of money or other valuable
property, such as agents, clerks, cashiers, or officers holding
public positions. This cannot be determined at pleasure by giv-
ing notice.²
8. Continuing Guaranty. This is a guaranty extending for a
definite or indefinite period of time, and continuing beyond a
single transaction, or a specified number of them. Whether a
guaranty is to be construed as continuing, depends on the inten-
tion of the parties as inferable from the language of the guar-
anty.
If the language is explicit, that will determine the construc-
tion—but when ambiguous, parol evidence may be given to show
the intention.
It is a general rule that the construction is to be favorable
to the sureties, though there must be no departure from the rules
of law for the purpose of favoring them.
The words “all liabilities to be incurred” create a continuing
guaranty. The words "all liabilities incurred" may be ex-
plained as referring to future liabilities, by parol evidence show-
ing that there were no existing liabilities."
The following was decided to be a continuing guaranty: "I
will be responsible for what stock A. has had, or may want
hereafter, to the amount of five hundred dollars." The guar-
antor in such case is not liable beyond $500 balance, which is
found on final settlement, even though the business might have
amounted to thousands, and the principal debtor owes much
more than the sum named.
The following also: "For any goods he hath or may supply
Smith, 64.
¹ Adams v. Jones, 12 Peters' R. 207; Walton ». Dodson, 3 Carr. & Payne's R.
163; Bradly v. Cary, 8 Green. 234; McLaren v. Watson. 26 Wend. R. 425....
2 4 Russell, 581; 2 Simmons' R. 253... 3 Agawam Bank v. Strever, 4 E P.
Smith, 502... 4 Gates v. McKee, 3 Kern. R. 233; Ringe v. Judson, 10 E. P.
HOW EXTING UISHE D.
239
W. P. with, to the amount of £100." This was held to be a
continuing guaranty to the extent of the sum named.'
The following was held not to be a continuing guaranty, but
confined to a single transaction: "We consider Mr. J. V. E.
good for all he may want of you, and we will indemnify the
same."
VI. HOW EXTINGUISHED.
§ 287. There are several methods by which the liability of a
guarantor or surety may be extinguished. Some of these modes
will be considered; and,
1. By Lapse of Time.-If by the terms of the guaranty it is
to continue for a definite period of time, the guaranty is extin-
guished by the completion of that period to which it is limited.
The general rule as to the extent and construction of an
engagement to guarantee, or other security of like nature, may
be laid down thus: that no party shall be bound beyond the
extent of the agreement, which shall appear, from the expression
of the security, and the nature of the transaction, to have been
in his contemplation at the time of entering into it.²
2
A deputy postmaster was appointed by the Postmaster Gen-
eral for six months, and the guaranty was conditioned for the
faithful execution of the office by the deputy during all the time
that he should continue postmaster. He was continued in the
office after the expiration of the six months, after which he be-
came a defaulter. The surety was sued on his guaranty, but the
court held that the time was limited to six months, the time
recited in the bond, and the guaranty had expired by lapse of
time.3
2. Notice. If there is no limit as to time, and the debtor and
creditor are having a general running account or deal under
a guaranty, the guarantor may extinguish his liability for future
¹ Mason v. Pritchard, 12 East's R. 227.
2 Saund. 403, 411; Fell's Guar., ch. 5, § 1.
Lord Arlington v. Merricke,
3 Id.
•
240
GUARANTY.
purchases, by giving notice that he will no longer be respon-
sible.
3. Acts of the Parties.-Any alteration of the agreement be-
tween creditor and debtor discharges the surety.'
Where a person becomes surety in a note for another, to be
used for a particular purpose, neither the principal nor his rep-
resentative can divert it or the proceeds to another purpose,
without the surety's assent. And if he do so divert it, neither
he nor any one with notice of the diversion, can maintain an ac-
tion upon it."
4. Payment. The guaranty may be extinguished by the pay-
ment of the debt, either by the principal debtor, or by the guar-
antor. If there is other deal between creditor and debtor than
that to which the guaranty applies, payments by the debtor may
be made to apply on such, instead of on the indebtedness which
is the subject of the guaranty. In other words, the law leaves
this matter to debtor and creditor, and gives the surety no rights
as to the application of such payments.3
5. Compromise.—A guaranty may be extinguished by com-
promise. A compromise consists in receiving a less amount than
the debt; but in full satisfaction of it.
A compromise between principal debtor and creditor dis-
charges the surety, unless he has previously, by part payment
and giving security for the balance, so made the debt his own as
to enable the creditor to hold him for any balance over and above
what he received from the compromise.*
6. Release. A guaranty may be extinguished by release of
the guarantor. A release ought always to be under seal, and it
should definitely describe the subject-matter to which it is in-
tended to refer.
If the release is under seal, the consideration is implied, and
no proof of it need be given."
But the student should bear in mind that if the release is
not under seal, and not founded on any consideration, it is en-
2 10 Johns. R. 198;
¹ 11 Wend. R. 312; 3 Paige, 614; 15 Wend. 329.
4 Beav. 379, 384.. ... . . . 3 Collins v. Gwynne, 9 Bing. R. (English) 544; Schroep-
pel v. Shaw, 5 Barb. 580; S. C., 3 Comst. 446.. .4 Dean's Com. Law, § 382.
5 Pratt v. Crocker, 16 Johns. R. 270.
HOW EXTINGUISHED.
241
1
tirely void. Such a release, referring to the guaranty only, will
not discharge the principal debtor.
7. Merger. This is the payment of one debt by the creation
of another in the form of higher security. A promissory note,
for instance, will become extinguished or merged in a new con-
tract under seal, and no suit at law can be maintained on the
note afterwards. Then, again, a sealed instrument becomes
merged in a judgment obtained on it, and no suit can be main-
tained on the instrument after such judgment is rendered.
A man borrows money, for which he gives a promise in writ-
ing to repay the money by a day named. Now, if he afterwards.
executes a bond, or a bond and mortgage for the payment of the
same money, the simple promise first made becomes merged and
extinguished."
Therefore there cannot be a contract under seal, and a simple
contract between the same parties, and for the payment of the
same debt. There will be a merger of the simple contract,
whether the parties wish it or not, for the two contracts are
incompatible, and the higher must prevail.³
If the principal debtor enters into the higher security, and
the creditor accepts it, it extinguishes the guaranty; that is, if
it is not received as collateral security to the former obli-
gation.
8. Extension of Time to Principal.--If this is done without
the consent of the surety or guarantor, the guaranty is extin-
guished, and the guarantor discharged.*
The agreement to extend, however, must be based on a valid
consideration, or the security is not discharged; for the agree-
ment to extend would not be binding.5 Extension for a single
day releases surety."
9. Alteration of Contract.-Any alteration of the contract
without the consent of the guarantor or surety, extinguishes the
1 Crawford v. Millspaugh, 13 Johns. R. 87; Seymour v. Minturn, 17 Johns.
169; Dewey v. Derby, 20 Johns. 462. 2 Schack v. Anthony, 1 Maule &
3 Price v. Moulton, 10
Sel. R. 573; Roosevelt v. Mark, 6 Johns. Ch. 266..
Com. Bench R. 561, 574.... 4 Reynolds v. Ward, 5 Wend. 501...
12 Wheaton R. 556; Hall v. Constant, 2 Hall, 185...
3 Denio, 512; Bangs v. Strong, 7 Hill's R. 250.
Fellows v. Prentiss,
16
242
GUARANTY.
guaranty. It is substituting a new contract for the old one, and
one to which the surety has not consented.¹
10. Fraud on Guarantor.-If fraud is practised upon the
guarantor by the creditor, so that he is deceived in the transac-
tion in which he becomes surety, it operates as a discharge or
extinguishment of the guaranty.
To have this effect, the fraud may either be practised by the
creditor, or by the principal debtor with the knowledge or assent
of the creditor. So, also, if the debtor's original obligation can
be avoided by fraud, the surety may avail himself of that fact in
defense."
11. Delay in Collecting.-If a creditor delays, neglects, or
refuses to collect his demand of a solvent principal, after a re-
quest by the surety that it shall be done, and the principal sub-
sequently becomes insolvent, this will discharge the surety.³
3
But when a surety claims to be discharged on account of
mere delay in prosecuting the principal, he must show that some
injury has resulted to him in consequence.*
A surety will not be discharged by the neglect of the creditor
to collect the debt of the principal, on being requested by the
surety to do so, unless it appears that the principal was, at the
time of the request, solvent and able to pay his debts. A cred-
itor is not bound to pursue an insolvent principal at the direc-
tion of the surety.5
VII.-RIGHTS OF SURETY AGAINST
PRINCIPAL.
HIS
§ 288. A surety has no right of action against his principal
debtor, until he has paid the demand either in mcney, or has in
1 Ludlow v. Simond, 2 Cai. Cas. 1; 11 Wend. R. 312; 3 Paige, 614; 15
Wend. R. 329.... 2 Stone v. Compton, 5 Bing. N. C. 142........
3 King v.
Baldwin,. 17 Johns. R. 384; Pain v. Packard, 13 Johus. R. 174; Manchester, &c
v. Sweeting, 10 Wend. R. 162; 14 Wend. 165; Herrick v. Borst, 4 Hill's R. 650.
.4 People v. Berner, 13 Johns. R. 383; Herrick v. Borst, 4 Hill's R. 650
5 Merritt v. Lincoln, 21 Barb. R. 249, 4 Hill, 650.
RIGHTS OF SURETY AGAINST PRINCIPAL. 243
some other manner satisfied the indebtedness for which he is
holden.¹
1
But an extinguishment of the debt by giving a negotiable
note, if received in satisfaction of a judgment against the princi-
pal, or a conveyance of land, will enable a surety to recover the
amount paid.2
He can recover no more than the amount actually dis-
charged."
When a surety pays the debt for which he is bound, he has
a right to all the collateral securities in the hands of the creditor,
which have been placed there by the principal debtor on account
of the debt."
Where a creditor receives from his principal debtor collateral
security of sufficient value to pay the debt, the surety is dis-
charged if the security be surrendered without his consent.5
If the contract of indemnity is broken by the principal debtor,
and the surety becomes liable, he may pay the debt without suit,
and recover against his principal."
The law implies a promise to indemnify, in favor of a surety
against his principal, if none is expressed.
§ 289. When one person becomes surety for another, the law
gives him certain rights of which he may avail himself, in case
of necessity, for his own protection. These arise-
1. On Default of Principal.-No right accrues to the surety
against the principal debtor, until the default of the debtor. If
the debtor is approaching insolvency, the surety can take no
step by which to protect himself until the debt becomes due,
and the debtor has failed to pay. When this state of things
exists, the surety may, if he choose, pay the debt, and be subro-
gated to all the rights of the principal debtor.
When the contract has been broken, and the surety has be-
¹ Powell v. Smith, 8 Johns. R. 249; Elwood v. Deifendorf, 5 Barb. 398; 21
Id. 161.... .2 Witherly v. Mann, 11 Johns. R. 518; Bonney v. Seeley, 2 Wend.
R. 481..
3 Id.....
* Schroeppel v. Shaw, 3 Comst. 446; Goodyear v.
Watson, 14 Barb. N. Y. 481; Clason v. Morris, 10 Johns. R. 524; Ontario Bank
v. Walker, 1 Hill's R. 652; Cory v. White, 3 Barb. N. Y. 12; 1 Comst. 595.
5 Pitts v. Congdon, 2 Comst. R. 352.. • Mauri v. Heffernan, 13
'Holmes v. Weed, 19 Barb. N. Y. 128; Jones v. East
•
Johns. R. 58...
Society, Id. 21, 161.
244
GUARANTY.
come liable, he may pay the money without suit, and recover it
from the principal.¹
If the creditor accepts the note of the surety, as payment of
the debt, the surety may recover of the principal, even though
the note is unpaid.²
2. May Compromise.-A surety satisfying the debt by paying
less than its amount, is entitled to recover the amount paid;
not the amount extinguished by that payment.3
3. May Recover Actual Payments.-It makes no difference
whether a surety pays voluntarily the debt of his principal, or is
compelled to do so through legal proceedings; in either case, he
is entitled to recover of his principal all he pays for him, includ-
ing interest and costs.*
VIII-RIGHTS OF SURETY AGAINST
CREDITOR.
§ 290. The relation of surety and creditor gives to the surety
certain rights against the creditor in case of the default of the
principal debtor. One of these rights, as we have seen, is to
compel the creditor to proceed against the principal debtor on
the maturity of the claim, provided the debtor is solvent; and
if the creditor does not so proceed, and the debtor afterwards
becomes insolvent, the surety is discharged. (See Delay in Col-
lecting, p. 242.)
1. One Satisfaction Only.-When the principal debtor fails to
pay the debt, the creditor may proceed against him alone, or
against him and the sureties together, until he obtains complete
satisfaction. But if the debt is paid by one, either voluntarily
ɔr by compulsion, the creditor can proceed no further; for he is
entitled to but one satisfaction.
2. Discussion. This is a proceeding, on the part of the
surety, by which the property of the principal debtor is made
1 Mauri v. Heffernan, 13 Johns. R. 58..... 2 Witherby v. Mann, 11 Johns.
R. 518; 10 Wend. R. 501; 5 Barb. N. Y. 398..... 3 Bonney v. Seeley, 2
Wend. R. 481.. .4 Mott v. Hicks, 1 Cow. R. 515.
I
RIGHTS OF SURETY AGAINST CREDITOR. 245
liable before resort can be had to the sureties; it is called the
benefit of discussion. If the creditor has a personal remedy
against the surety, and also a fund to which he may resort for
payment, but to which the surety can not, equity will, upon the
surety's indemnifying the creditor against the consequences of
all risk, delay, and expense, compel the creditor first to apply the
fund towards the satisfaction of his debt, before proceeding per-
sonally against the surety.'
3. Of Principal's and Surety's Deposit.-If property belong-
ing to the principal, and property belonging to the surety, be
deposited with the creditor, as a security for his debt, the surety,
on offering to pay the creditor what shall be found due to him
upon account stated, may in equity insist upon the property of
the principal being first applied in satisfaction of the creditor's
debt.2
4. Subrogation.—This is a right possessed by the surety when
securities have been placed in the hands of the creditor for the
payment of a debt guaranteed by the surety. It is that change
which puts another person in the place of the creditor, and
which makes the right, the mortgage, or the security which the
creditor has, pass to the person who is subrogated to him—that
is to say, who enters into his right."
A surety paying the debt of his principal, is entitled to stand
in the place of the creditor, and to be subrogated to all his rights
against the principal, and to have every remedy, which the cred-
itor possesses, to enforce payment from the principal.*
Therefore, when a creditor takes a mortgage from the princi-
pal, he does it not only for his own security, but for the indem-
nity of the surety; and if, with knowledge of the surety's rights,
he afterwards does any act calculated to impair the security, he
will, to that extent, lose his right to call on the surety.5
•
Wright v. Simson, 6 Vesey, 714; Wright v. Nutt, 1 H. Black. 136, note.
2 Hayes v. Ward, 4 Johns. Ch. R. 123……. 3 Bouvier's Law Dict., art.
Subrogation........¹ Hayes v. Ward, 4 Jobns. Ch. 123........5 N. Y. State
Bank v. Fletcher. 5 Wend. R. 85; Van Horne v. Everson, 13 Barb. N. Y. 526.
246
GUARANTY.
IX.-RIGHTS OF CO-SURETIES.
§ 291. When several persons become obligated for a principal
debtor, they have rights and liabilities as to each other, which
the law clearly defines.
1. Equalization.-If two sureties agree that they will equally
bear and pay the losses and damages which may be sustained in
consequence of one of them becoming special bail for a third
person, and they afterwards equally contribute to the payment
of the debt, and one of them is refunded the amount paid by
him, he is answerable to the other for the half of the money re-
ceived by him.¹
1
2. Contribution.-One of several co-sureties who pays the
debt, may call upon the other sureties for contribution, whether
they were bound jointly or severally, and whether by the same
or by different instruments; and although they became sureties
at different times.2
The right of one surety to contribution from his co-surety, in
the absence of an express agreement between them, arises from
payment by him of a demand against the principal, which they
were equally under obligation to pay.3
3. With Regard to Interest.-Although the debt was on in-
terest which is paid by a surety, he cannot recover from his co-
surety interest on the money paid by him.
4. As to Costs.-A surety is not entitled to recover costs of
his co-surety, for defending an action brought against him by
the creditor. There is no privity of contract between the sure-
ties, and neither can be said to have paid money at the request
of the others.
1 Smith v. Hicks, 5 Wend. R. 48; Smith v. Hicks, 1 Wend. R. 202....
Tobias v. Rogers, 3
2 Norton v. Coons, 3 Denio R. 130; 2 Selden R. 33..
Kern. R. 59...... Gillett v. Rippon, 1 Moody & Malkin R. 406.
LIABILITIES OF SURETIES GENERALLY. 247
X.--LIABILITIES OF SURETIES GEN-
ERALLY.
§ 292. Sureties are never held responsible beyond the clear
and absolute terms and meaning of their undertakings; and pre-
sumptions and equities are never allowed to enlarge, or in any
degree to change their legal obligations.¹
A surety has a right to stand upon the very terms of the
agreement. Any change in the agreement between the principal
debtor and his creditor, or if there is any deceit or fraud between
them, which makes the contract different from that assented to
by the surety, will discharge him.²
The test is not whether any alteration of the contract between
principal and creditor is prejudicial to the surety; his liability
depends solely and strictly upon an observance of the precise
contract which he has made.³
1 Leggett v. Humphries, 21 Howard R. U. S. 66; Ludlow v. Simonds, 2
Caines' Cases, 1; Walsh v. Bailie, 10 Johns. R. 180; Robinson v. Frost, 14 Barb.
N. Y. 536.... .. McWilliams v. Mason, 6 Duer R. 276......
3 Wright
v. Johnson, 8 Wend. R. 512; Hunt v. Smith, 17 Wend. 422; 6 Hill's R. 540; 15
Wend. R. 329.
• •
Topical Analysis of Sale of Chattels.
PART I. ELEMENTS.
PART II. INCIDENTS.
Į
PART I. ELEMENTS
PART II. INCIDENTS.
1. Parties
1. Vendor.
2. Vendee.
2. Subject-matter
1. Must have actual existence; or,
2. Potential existence.
3. Must be definitely described.
3. Price or equivalent.
4. Mutual assent
1. Express.
2. Implied.
1. Actual.
IV Delivery 12. Constructive.
21 Warranty $1. Express.
{2. Implied.
without
Lille
3 When either party may rescind.
4. Fraud on third persons.
5. When sate voidable~

6- When sale void
C
1. Mistakes.
2. Fraud.
1. Statute of frauds.
-
2. No title.
Retime
[rept

سائر
:
CHAPTER VII.
SALE OF CHATTELS.
§ 293. A sale or exchange is a transmutation of property
from one person to another, in consideration of some price or
recompense in value.¹
The rules of law applicable to exchanges are the same as
those applicable to sales.
If it be a commutation of goods for goods, it is more properly
an exchange. But if it be a transferring of goods for money, it
is called a sale.2
According to the topical analysis, we are to consider-1. The
Elements; and 2. The Incidents.
PART I-ELEMENTS.
§ 294.-1. Parties.-Parties competent to contract are neces-
sary in this kind of contract as in all others. In every sale
there must be at least two parties. The party who sells a thing
is called the vendor. The party who purchases it is called the
vendee.
*
As a general rule, all persons are competent to be either
buyers or sellers. The exceptions are such as are noticed in
treating of Contracts, under the division of Parties.
295.-2. Subject-matter. This is the thing bought and
sold. Any object recognized as property may be the subject-
matter of sale and purchase. If a man has in himself the right
12 Black. Com. 446; Shep. Touch. 224; 4 Barn. & Cress. R. 246...
? Bate. Com. Law, § 163.
250
SALE OF CHATTELS.
or title to a thing, as a general rule he may dispose of it by
sale to whomsoever and however he pleases.¹
The subject-matter must have an actual or potential exist-
ence.
1. Actual Existence.-If the subject-matter of sale be in
existence, and only constructively in the possession of the seller;
as, for instance, being in the possession of his agent abroad, it is
nevertheless a sale, though a conditional or imperfect one, de-
pending on the future actual delivery. But if the article intended
to be sold has no existence, there can be no valid contract of sale.
Thus, if I sell you my horse, and it turns out that the horse
was dead at the time of the bargain, though the fact was
unknown to us both, the contract is necessarily void.²
2. Potential Existence.-The thing need not have ac-
tual existence. It is sufficient that the thing contracted for has a
potential existence; and a single hope or expectation of means
founded on a right existing, may be the object of sale; as, for
instance, the cast of a fisherman's net, or fruits or animals not
yet in existence, or the good-will of a trade. The grain expected
to grow on a field owned by the vendor, the milk that his cow
may yield during the coming season, or the future wool that
may grow upon the sheep owned by the vendor, is a subject of
sale.
3
But a mere possibility or contingency, not coupled with any
interest in, or growing out of property, as a grant of the wool of
the sheep the grantor may thereafter buy, is void as a sale.*
The subject-matter of a purchase may be partly destroyed at
the time of the bargain, without the knowledge of the parties,
so as to greatly diminish its value, and totally unfit it for the
purposes of its purchase. For instance, Brown, at New York,
sells to Smith his house and lot in Albany; but the house was
destroyed by fire a few hours before the sale, of which both par-
ties were ignorant. Of course the land remains.
The foundation of the contract in such case fails, provided
¹ Bate. Com. Law, § 166..... 2 Hitchcock v. Giddings, 4 Price's R. 135;
Allen v. Hammond, 11 Peters' U. S. R. 63... 32 Kent's Com., Lect. 39,
note a.
•
.4 Id.; Grantham v. Hawley, Hob. R. 132; 5 Maule & Selw. R.
228.
ELEMENTS.
251
the house, and not the ground on which it stood, was the essen-
tial inducement to the purchase.¹
Sometimes the title to the subject-matter proves in part de-
fective, and it becomes a question as to when the purchaser is
at liberty to rescind the contract. The good sense and equity
of the law on this subject is, that if the defect of title, whether
of lands or chattels, be so great as to render the thing sold unfit
for the use intended, and not within the inducement to the pur-
chase, the purchaser ought not to be held to the contract, but
be left at liberty to rescind it altogether."
to
If there be a failure of title to part, and that part appears
be so essential to the residue that it cannot reasonably be sup-
posed the purchase would have been made without it, the con-
tract may be dissolved in toto. Coming under this rule would
be the loss of a mine, or of water necessary to a mill, or of a
valuable fishery attached to a tract of poor land, and by the loss
of which in either case the residue of the land is of but little
value.'
If by failure of title in part the object of the purchase is
defeated, the vendee may rescind the bargain altogether; but if
the defect is not so great as to justify rescinding the contract
entirely, there may be a just abatement of the price; and this
doctrine applies to unsoundness and defects in personal pro-
perty.*
3. Must be definitely described.-The thing sold
must be specifically identified, definitely described, and separated
from other goods of similar character. To make a sale perfect,
the parties must have agreed, the one to part with the title to a
specific article, and the other to acquire such title. An agree-
ment to sell a hundred bushels of wheat, hereafter to be meas-
ured out of a heap, does not change the property. The matter
is too indefinite. In case of fire or flood, the purchaser could not
direct his efforts to the saving of his property in particular;
4
1 Strickland v. Turner, 14 Eng. L. & Eq. R. 471; 16 Td. 562; 20 Id. 533; 38
Id. 8.
2 Parkham v. Randolph, 4 How. U. S. R. 435; 2 Kent's Com.,
pp. 475, 476.
Pringle v. Witten, 1
Bay's R. 256; Gray v. Handkinson, Id. 278; Marvin v. Bennett, 8 Paige's R.
•
35 Binney's R. 355, 363
312.
252
SALE OF CHATTELS.
nor could he maintain trespass, or trover, or replevin against a
party who should invade the whole in the heap.
In order to change the title to the property, and vest it in
the purchaser, the hundred bushels of wheat must be measured
out, and placed by itself."
§ 296.-3. Price or Equivalent. The price is an essential in-
gredient in the contract of sale. It.must be real, and not merely
nominal, and fixed, or be susceptible of being ascertained in the
mode prescribed by the contract.
The price must be an actual or serious price, with an inten.
tion on the part of the seller to require its payment. If, there-
fore, one should scil a thing to another, and by the same agree-
ment he should release the buyer from the payment, this would
not be a sale, but a gift.
2
As to the quantum of the price, that is altogether immaterial,
unless there has been fraud in the transaction. The price, how-
ever, must be certain or determined; but it is sufficiently certain
if it be left to a third person. An agreement to pay for goods.
what they are worth is sufficiently certain. If nothing is said
as to price the law implies an agreement by the purchaser to
pay what the article is worth.
3
The price must consist in a sum of money, which the buyer
agrees to pay to the seller; for if paid for in any other way, the
contract would be an exchange or barter, and not a sale.¹
Adequacy of price in a sale is not necessary to its perfection.
The law allows parties to make their own contracts, and affix
their own prices to articles sold. It will enforce the contract, if
legal, however inadequate the price, provided every part of the
agreement is entered into in good faith, and in the absence of all
fraud or mistake. The slightest consideration is sufficient to
support the most onerous obligation. The contract of sale can
be impeached only by showing fraud, mistake, or illegality in
its concoction, or non-performance of the stipulations on the
part of the promisee.5
§ 297.-4. Mutual Assent. This is requisite to the creation
13 Johns. R. N. Y. 179; 15 Id. 349; 2 New York R. 258; 5 Taunt. 176; 7
4 Pick. Mass.
Ohio R. 127; 3 New Hamp. R. 282; 6 Pick. R. Mass. 280
179...
8 Coxe, N. J. R. 261..
v. Boorman, 21 Wend. R. 588.
4 Bouv. Law Dict., art. Sale..
5
Oakley
ELEMENTS.
253
of a contract of sale, as of every other contract; and it consists
of a proposition on one side, and an acceptance on the other;
and not until these take place, can there be a sale, and these
may be express or implied.
1. Express.-An express offer and acceptance may be
verbal, when not forbidden by the statute of frauds; or they
may be by letter.
The proposition may proceed from either
one, and be withdrawn any time before acceptance by the
other.
Thus, I propose to exchange horses with you, and to give you
a specific sum as the difference. You have the privilege of
reserving your determination until a day agreed. Before that
day I give you notice that I withdraw my offer. As you have
not accepted it, there is no sale, and the negotiation is at an
end.¹
The same may be done by letter, as is very common in mer-
cantile transactions. A proposition is made by letter. The
contract is complete when the answer containing its acceptance
is dispatched by mail or otherwise, provided it be done with duc
diligence after receiving the letter containing the proposal, and
before the offer is withdrawn. Putting the answer by letter con-
taining the acceptance in the mail, and thus placing it beyond
the control of the party, is valid as a constructive notice of ac-
ceptance.
An offer by letter, or by a special agent, is an authority re-
vocable in itself, but not to be revoked without notice to the
party receiving it; and never after it has been executed by
an acceptance. There would be no certainty in making con-
tracts through the medium of the mail, if the rule were other-
wise.2
2. Implied.-Sale and purchase may be implied by the acts
of the parties. When a party, by his acts, approves of what has
been done, as, if he knowingly uses goods which have been left
at his house by another who intended to sell them, he will by
that act confirm the sale.³
1 Eskridge v. Glover, 5 Stew. & Port. 264.
Barn. & Ald. 681.... 8 Bouv. Law Dict., art. Sale.
•
2 Adams v. Lindsell, 1
254
SALE OF CHATTELS.
From what has been said in reference to the necessity of
mutuality of assent in the sale of property, it may be inferred
that stolen property cannot be legally transferred by sale. The
person from whom it is stolen, gives no title, and the thief ac-
quires none.
It is a maxim of the common law that a sale imports nothing
more than that the bona fide purchaser succeeds to the rights
of the vendor. If the vendor has none, he cannot convey any to
others.
It has been repeatedly decided by our courts that the English
law of the market overt has never been adopted in this country;
and consequently, as a general rule, the title of the true owner
cannot be lost without his own free act and consent.'
The English market overt is an open or public market, ap-
pointed by law or custom for the sale of goods and chattels at
stated times in public. It is an open, public, and legally con-
stituted market.?
All contracts of sale for anything vendible made in market
overt, is binding, and sales pass the property though stolen, if it
be an open and proper place for the kind of goods, and the con-
tract be fairly and legally made between sun and sun.³
The owner of lost or stolen goods there, if he desires to pro-
tect hiraself, must resort to the market overt, and give notice.
of his ownership, and forbid the sale. Otherwise he is bound
by it.
But, as already stated, in this country there are no such
markets.*
Consequently no such opportunity is afforded the owner to
appear in public, and assert his claim. The law will not, in this
country, allow any property to be acquired by another in goods
or chattels without the assent of the owner. The sale of stolen
goods can in no case be valid.
Goods were stolen from a party in New York, forwarded to
Baltimore, and there sold at auction. The proceeds, without
notice, had been paid over to the thief in the usual course of
· Dame v. Baldwin, 8 Mass. R. 518; 1 Johns. R. 479; Hosack v. Weaver, 1
Yeates R. 478; 5 Serg. & Rawle, 130...
35 Coke's R. 83..
•
2 Jervis, C. J., 9 J. Scott's R. 601.
4 10 Pet. 161; 2 Kent's Com. 324.
INCIDENTS - DELIVERY.
255
business. Yet the auctioneers were held liable to the owner for
the value of the goods.¹
But this rule of protection to the true owner, fails in its
application to negotiable paper taken before it is due, bona fide,
and for a valuable consideration; also cash and bank bills.2
Having considered the elements of a valid sale, we will now
notice some of the incidents that often attend the transfer, as
well as some others that render the sale void.
PART II.-INCIDENTS.
§ 298.-1. Delivery.-Delivery of the thing sold may be ac-
tual or constructive.
When the terms of sale are agreed on, and the bargain is
struck, and everything that the seller has to do with the
goods is complete, the contract of sale becomes absolute, as
between the parties, without actual payment or delivery, and
the property and the risk of accident to the goods, vest in the
buyer.3
The buyer is entitled to the goods on payment or tender of
the price, and not otherwise, when nothing is said at the sale as
to the time of delivery, or the time of payment; and payment
must be made in a reasonable time, or the vendor is released
from the contract.*
The payment or tender of the price is, in such cases, a condi-
tion precedent implied in the contract of sale, and the buyer
cannot take the goods, or sue for them, without payment; for,
though the vendee acquires a right of property by the contract
of sale, he does not acquire a right of possession of the goods
until he pays or tenders the price."
But if the goods are sold upon credit, and nothing is agreed
1 Hoffman v. Carow, 22 Wend. R. 285.
•
•
2 Saltus v. Everett, 20 Wend.
R. 267; Kingsbury v. Smith, 13 N. Hamp. R. 109; Robinson v. Dauchy, 3 Barb.
S. C. R. 20; McMahon v. Sloan, 12 Penn. R. 229........ 3 2 Black. Com. 448;
Hinde v. Whitehouse, 7 East's R. 571... .. Conway v. Bush, 4 Barb. S. C.
R. 564........5 Langfort v. Tiler, 1 Salk. R. (K. B.) 113; Hob. R. 41.
256
SALE OF CHATTELS.
1
upon as to the time of delivering the goods, the vendee is imme-
diately entitled to the possession, and the right of possession and
the right of property vest at once in him.'
This right of possession, however, is not absolute, but is liable
to be defeated, if the purchaser becomes insolvent before he ob-
tains possession.2
If the seller has even dispatched the goods to the buyer, and
insolvency of the buyer occurs, the seller has a right, in virtue
of his original ownership, to stop them in transitu; for though
the property is vested in the buyer, so as to subject him to
the risk of any accident, he has not an indefeasible right to
the possession; and his insolvency, without payment of the
price, defeats the right, equally after the transit has begun as
before the seller has parted with the actual possession of the
goods.3
Where no time is agreed on for payment, it is understood to
be a cash sale, and the payment and the delivery are immediate
and concurrent acts, and the vendor may refuse to deliver
without payment, and if the payment be not immediately made
may rescind the contract.
If it is the intention of the parties that credit shall be given,
of course the precedent condition of payment is waived, and the
right of property passes.5
Delivery of goods to a servant or agent of the purchaser, or
to a carrier or master of a vessel, when they are to be sent by a
carrier or by water, is equivalent to delivery to the purchaser;
and the property, with the correspondent risk, immediately vests
in the purchaser, subject to the vendor's right to stoppage in
transitu.
6
A delivery to any general carrier, where there are no specific
directions out of the ordinary usage, is a constructive delivery
¹ Kimbro v. Hamilton, 2 Swan, 190; Cartland v. Morison, 32 Me. R. 190;
Hall v. Robinson, 2 Comst. 293.... .2 Hanson v. Meyer, 6 East's R. 614;
Bloxam v. Sanders, 4 Barnew. & Cress. 941........32 Kent's Com. 493........
• Comyn's Dig., tit. Agreement...... 5 Haswell v. Hunt, cited by Bulwer, J.,
5 Term R. 231; Harris v. Smith, 3 Serg. & Rawle R. 20; 6 Cow. R. 110; S. P.,
1 Denio R. 51..
Evans v. Marlett, 1 Ld. Raym. 271; Dawes v. Peck, 8
Term R. 330; 1 Johns. R. 15.
•
INCIDENTS—WARRANTY.
257
to the vendee; and the rule is the same whether the goods be
sent from one inland place to another, or beyond sea.¹
§ 299. Symbolical delivery will, in many cases, be sufficient
and equivalent in its legal effects to actual delivery. The delivery
of the key of the warehouse in which goods sold are deposited,
or transferring them on the warehouseman's or wharfinger's books
to the name of the buyer, is a delivery sufficient to transfer the
property.2
If the vendor takes the vendee within sight of ponderous
articles, such as logs lying within a boom, and shows them to
him, it amounts to a delivery, though the vendee should suffer
them to lie within the boom, as is usual with such property,
until he have occasion to use them.³
Delivery of a sample has been held sufficient to transfer prop-
erty, when the goods could not actually be delivered until the
seller had paid the duties, that fact being known and understood
at the time, and when the buyer accepted of the sample as part
of the quantity purchased.*
§ 300. The place of delivery is frequently a point of conse-
quence in the construction of a contract of sale. If no place be
designated by the contract, the general rule is that the articles
sold are to be delivered at the place where they are at the time
of the sale. The store of the merchant, the shop of the manu-
facturer or mechanic, and the farm or the granary of the farmer,
at which the commodities sold are deposited or kept, must
be the place where the demand and delivery are to be made,
when the contract is to pay on demand, and is silent as to the
place. This appears to be the general doctrine on the sub-
ject.5
§ 301.-2. Warranty.-A warranty is either express or im-
-plied; and as to the subject-matter, it refers either to the title
of the article sold, or to the quality thereof.
1. Express warranty is one by which the warrantor cove-
12 Kent's Com. 499..
·
21 Atk. 171; 7 Term R. 71; 1 East's R. 194.
3 Jewett v. Warren, 12 Mass. R. 300... 4 Hinde v. Whitehouse, 7
East's R. 558.. 52 Kent's Com. 505; Lobdel v. Hopkins, 5 Cow. R. 516;
Goodwin v. Holbrook, 4 Wend. R. 380; Bronson v. Gleason, 7 Barb. S. C. R. 472.
17
258
SALE OF CHATTELS.
nants or undertakes to insure that the thing which is the subject
of the contract of sale is, or is not, as there mentioned; as that
a horse is sound; that he is but five years old. It must be
made at the time of the sale.
Every affirmation made by the vendor, at the time of the sale,
and in relation to the subject-matter, amounts to a warranty, pro-
vided it be so intended and understood. No particular words are
necessary to constitute it. Any affirmation or expression other than
the mere expression of an opinion, which operates or may operate
as an inducement to the contract, is binding upon the vendor.¹
2. Implied warranty is one which, not being expressly
made, the law implies by the fact of sale. In every sale of a
chattel, whether the possession be at the time in the vendor or
another person, there is a warranty of title."
If the seller expressly affirms that the chattel not in his pos-
session is his, he is bound to answer for the title; for the vendee
has nothing else to rely on, the property being out of posses-
sion.3
If the seller has possession of the article, and he sells it as
his own, and not as agent for another, and for a fair price, he is
understood to warrant the title.*
§ 302. With regard to the quality or goodness of the article
sold, the seller is not bound to answer, except under special cir-
cumstances, unless he expressly warrants the goods to be sound
and good, or unless he makes a fraudulent representation, or
uses some fraudulent concealment concerning them, and which
amounts to a warranty in law.5
The common law very reasonably requires the purchaser to
attend, when he makes his contract, to those qualities of the
article he buys, which are supposed to be within the reach of his
observation and judgment, and which it is equally his interest
and his duty to exert. This distinction between the responsi-
1 Bate. Com. Law, § 175; Story's Contr., $$ 827, 828... .2 10 Barn. &
Cresw. 249; Peake, 94. Formerly the doctrine was otherwise, when the ven-
dor had not possession at the time of sale. In such case there was no implied
4 Medina v.
warranty... 2 Pasley v. Freeman, 3 Term R. 57, 58..
Stoughton, 1 Ld. Raym. 523; 1 Salk. R. 210; 2 Kent's Com. 478........5 2
Kent's Com. 478.
INCIDENTS—WARRANTY.
259
bility of the seller as to title, and as to the quality of goods sold,
is well established in the English and American law."
If a purchaser orders goods of a certain character, and relies
on the judgment of the seller, or if goods of a certain described
quality are offered for sale, and when delivered they do not an-
swer the description directed, or which was given on being offered
for sale, the purchaser is not holden. They are not the articles
There is an implied war-
which the vendee agreed to purchase.
ranty in either case supposed, that the article shall answer the
character called for, or be of the quality described, and saleable
in the market, and under that denomination.2
When goods are discovered not to answer the order given for
them, or to be unsound, the purchaser ought immediately to re-
turn them to the vendor, or give him notice to take them back,
and thereby rescind the contract; or he will be presumed to
acquiesce in the quality of the goods.3
On the sale of provisions for immediate domestic use, there
is an implied warranty that they are wholesome; but if they are
sold for merchandise, and not for immediate consumption, there
is no implied warranty of soundness.¹
$303. The common law, as now generally understood, im-
plies a warranty-
1. Of title, whether the goods sold are at the time of sale in
the possession of the vendor or of a third person, unless the con-
trary be expressed.
2. Of the merchan'able quality of the goods, when an exami-
nation of them is, from their nature or situation at the time of
sale, impracticable."
3. That the goods shall prove to be such as are ordered, when
to be manufactured or procured and furnished to order."
• •
1 2 Black. Com. 451; Bacon's Abridg., tit. Action on the Case; E. Parkinson
v. Lee, 2 East's R. 314; Defreeze v. Trumper, 1 Johns. R. 274; Dean v. Mason,
4 Conn. R. 428; Emerson v. Brigham, 10 Mass. R. 197; Swett v. Colgate, 20
Johns. R. 196..... 2
. Laing v. Fidgeon, 6 Taunt. R. 108; Weall v. King, 12
East's R. 452; Hastings v. Lovering, 2 Pick. R. 214.
32 Kent's Com. 480;
Fisher v. Samuda, 1 Campb. N. P. R. 190. 4 Osgood v. Lewis, 2 Harr. &
Gill, 495; Van Bracklin v. Fonda, 12 Johns. R. 468; Moses v. Mead, 1 Denio R.
378; Hart v. Wright, 17 Wend. R. 267..... .5 10 Barn. & Cresw. R. 249;
Peake, 94; 5 Taunt. 657; Carth. 90; Story's Contr., § 833... 6 2 Kent's Com.
479, and cases cited in note; 23 Wend. R. 350; Story's Contr., § 834..
'Story's Contr., SS 835. 836.
260
SALE OF CHATTELS.
4. That they shall be free from all latent defects-First, when
it is understood that the buyer does not rely on his own judg-
ment, but on that of the seller.
Second, when the seller, as in the case of a manufacturer or
producer, has it in his own power to provide against the exist-
ence of defects.¹
5. That they shall correspond to the sample, in kind and
quality, when the goods are sold by sample.²
In every case of warranty, the warranty operates as a condi-
tion of sale, if the vendee chooses so to regard it. And, there-
fore, upon finding that the thing is not what he bargained for—
not what it was represented to be-he may, at his option, either
return the thing to the vendor (if he do so within a reasonable
time), thereby rescinding the contract, and then recover back the
price, if the money has been paid, or he may keep the thing,
thereby affirming the contract, and sue for damages consequent
upon the breach of the warranty, in which case he may recover
the amount of the loss sustained.³
If the price has not been paid, and the vendee is sued there-
for, the breach of warranty may be given in evidence in mitiga-
tion of damages, so as to avoid circuity of action."
The object of a general warranty is to protect against defects
which may not be apparent to the vendee. He seeks by it to
save the necessity of any very strict scrutiny, and to throw upon
the vendor the risk of all defects which are not open to the com-
mon observer.
As to all those which are patent and apparent upon the most
careless inspection, they are not covered by the warranty, as they
are not supposed to have entered into the mind of the parties
when it was required and given. For instance, on the sale of a
race-horse, the purchaser was told that he was a crib-biter, and
had a splint, all which was apparent, it was held that a warranty
that the horse was sound limb and wind, at the time of the sale,
did not extend to these defects.5
1
¹ Story's Contr. § 837..
Law, § 178.... 31 Term R.
12 Wend. R. 566; 18 Id. 426; 21
183; Bate. Com. Law, § 180.
R. 606.
2 Id. § 838; 2 Kent's Com. 481; Bate. Com.
133; 3 Ad. and Ell. 103; 7 Gill and Johns. 407;
Id. 342... . . . 42 B. and Adolph. 456; 12 Wheat.
5 Margetson v. Wright, 5 Moore and Payne
•
:
!
INCIDENTS - FRAUD ON THIRD PERSONS. 261
§ 304.-3. When Either Party may Rescind. The parties
to a sale may, of course, make their own terms, provided
there is nothing illegal in the case. And if one party breaks
his promise, which is the consideration of the other's promise,
the other party being no longer bound, is at liberty to rescind
the sale. If a sale is made, for instance, upon the terms that
the thing is to be delivered whenever required by the vendee,
and that payment is to be made at some future time named, a
refusal by the vendor so to deliver, gives the vendee the right to
rescind.
So, if a thing is sold, to be delivered at a future time, pay-
ment to be made whenever required by the vendor, if the vendee
refuse to pay when so required, or within a reasonable time, the
vendor has the right to rescind.¹
If payment is to precede delivery, if the vendee do not pay
for and take away the goods, even though earnest money has
been given, the vendor may rescind the sale, and sell to any
other person, having first requested the vendee to pay and take
the goods away.2
If I agree to pay you a certain price for goods belonging to
you, and you agree to take it, and nothing more is said, this is
an agreement to be completed at the present time. You are to
let me have them now, and I am to pay for them now. Yet if
nothing is done, except our talk, and we separate, the agreement
becomes void and unavailable, such separation being equivalent
to a mutual consent to rescind the sale.³
This is understood to apply to all cases where, and only
where, from the conduct of the parties, their intention to rescind
the sale may be fairly implied.*
§ 305.-4. Fraud on Third Persons.-Between vendor and
vendee, the title of property is determined by their agreement.
But as between these parties and third persons, if possession is
not changed on change of title by sale, and the change of posses-
¹ Bate. Com. Law, 194, 195........2 Salk. 113;
edit. 1858), 598, 599; 7 East, 558; 2 H. Bl. 316. ....
4 Long on Sales, 43; Bate. Com. Law, § 197.
Smith's Merc. Law (Amer.
32 Bl. Com. 447....
262
SALE OF CHATTELS.
sion continued, the presumption of law is entirely against the
genuineness and honesty of the sale.
The following section of the statute of the State of New
York is really a complete expression of the sense of the commer-
cial world, and of the jurisprudence of this country. And the
same statute in substance may be found in the statute books of
most, if not all, the States of this Union.
66
Every sale made by a vendor of goods and chattels in his
possession or under his control, and every assignment of goods.
and chattels, by way of mortgage or security, or upon any condi-
tion whatever, unless the same be accompanied by an immediate
delivery, and be followed by an actual and continued change of
possession of the things sold, mortgaged, or assigned, shall be
presumed to be fraudulent and void, as against the creditors of
the vendor, or the creditors of the person making such assign-
ment, or subsequent purchasers in good faith:
"And shall be conclusive evidence of fraud, unless it shall
be made to appear, on the part of the persons claiming under
such sale or assignment, that the same was made in good
faith, and without any intent to defraud such creditors or pur-
chasers.'
>>1
The law abhors all deceptive appearances. It holds that
appearances must not only agree with the real state of things,
but the real state of things must be honest, and consistent with
public policy.
And as the vendor's continuance in possession is, as to third
persons, a deceitful appearance of ownership, by which he is
enabled to practise deceit upon them-to hold property as his
own, and yet to shield himself from the responsibility of owner-
ship by a secret agreement with another-so, therefore, in such
case the law does not stop to inquire whether there be actual
fraud or not, but, as a necessary protection to third persons, at
once pronounces the sale, presumptively, a fraud in itself, not-
withstanding the vendor's possession may be perfectly consistent
with the agreement of sale.
2
¹ N. Y. Rev. Stat., Vol. II, Part II, Title II, § 5...... 2 Kent's Com. 523,
524; 1 Cranch, 209; Bate. Merc. Law, § 199.
INCIDENTS FRAUD ON THIRD PERSONS. 263
But if one takes immediate possession of a thing bought by
him, he will hold it against all others, even other purchasers.
And, therefore, when the same chattel is sold to two different
persons, by conveyances equally valid, the law gives it to him
who first lawfully takes possession.¹
§ 306. In many respects the decisions in different States have
been in conflict with each other, as to how far the question of
fraud on creditors is a question of law, to be determined by the
court, and how far a question of fact, to be left to a jury. But,
to a great extent, this conflict of opinion has grown out of the
difference in the exact language of the different statutes under
which the decisions have been rendered.
But modern decisions have, in general, held that an uncon-
ditional sale, where the possession does not accompany the sale,
is, with respect to creditors, presumptively a fraud in itself, and
should be so determined by the court as a matter of law.³
The reason of the rule that a sale of chattels must be accom-
panied and followed by the possession of the vendee, in order
that it may be valid as to third persons, properly applies to sales
of personal property only. And as thus understood, the true
and equitable distinction seems to be, between cases in which
the property is, and cases in which it is not, at the time of sale,
capable of delivery. In the latter class of cases, the title of the
vendee is complete, provided he takes possession within a reason-
able time after it becomes practicable for him to do so; and if
he does not, the same inference of legal fraud arises as if the
property had been originally capable of immediate delivery, and
the possession had remained unchanged.³
The delivery of a deed of transfer of a ship at sea passes the
title to the vendee, subject only to be defeated by his negli-
gence in not taking possession of her within a reasonable time
after her return to port.*
•
2
12 Aik. 115; 4 Binn. 258; 10 Serg. & R. 419; 6 Whart. 53.
Cranch, 309; 2 Term R. 587; 2 Munf. 341; 3 Id. 1; 3 Eq. R. S. C. 229; 1 Id.
346; 4 McCord, 294; 8 Serg. & R. 510; 9 Johns. 337; 2 Vermont, 181; 5 Id.
231, 531; 6 Id. 521... 3 Bate. Com. Law, § 202; 1 Gallis, 419; 1 Peters,
449; 4 Dall. 358; 1 Pick. 288.... 4 White v. Cole, 24 Wend. 116; 7 Greenl.
241; 1 Pick. 389; 2 Pick. 602; 9 Pick. 4; 15 Mass. 477.
264
SALE OF CHATTELS.
§ 307.-5. When Voidable.-A sale may be voidable, either
by the acts of the parties, or one of them, as in the case of
Mistake or Fraud.
į
§ 308.-1. Mistakes.-To render a contract voidable on
account of a mistake, the mistake must be confined to matters
of fact affecting the inducement to the contract; and it must
be such as works an injury. For a mistake without injury
to any one is too unreal to be brought within the legal
mind. There can be no mistake as to matters within one's own
knowledge.¹
Mistake as to the subject-matter of a contract, however, is a
very possible thing in the eye of the law; and, therefore, in gen-
eral, such mistakes render the contract voidable, at the option of
the party who makes the mistake.2
But such party, upon discovering his mistake, and upon de-
termining to avoid the contract, should give notice to the other
party without any unnecessary delay; for otherwise his assent to
the transaction may be subsequently implied, notwithstanding
the mistake.³
But a distinction must be understood between mistakes which
are matter of law and those which are matter of fact. The law
recognizes no such thing as mistakes of law. Every person is
supposed to know the law; and any other doctrine than this
must overturn the foundations of every system of jurispru-
dence. Therefore, ignorance or mistake as to matters of law,
which every person of discretion not only may, but is bound and
presumed to know, is no sort of defense-not even in criminal
cases.¹
Judge Story places the reason of this distinction between
mistakes of fuct and mistakes of law in a very clear light in the
following language: As every man is presumed to know the
1 Story's Contr., note to § 407; Bate. Com. Law. § 14 .......29 Mees. &
Wels. R. 54; 4 Man. & Grang. 11.. 31 Ad. & Ell. R. 40; 5 Mees, & Welsb.
81; S. C., 3 Nev. & Man. 834; 3 Stark. R. 25; 9 Paige, 591; 3 Story R. 695, 698.
44 Black. Com. 27; Bate. Com. Law, §§ 8, 15; 2 East's R. 471; 5 Taunt
143; 12 East's R. 38; 4 Bing. 11.
INCIDENTS- WHEN VOID.
265
K. 8. 9.
تک
law, and to act upon the rights which it confers, when he knows
the facts, it is a culpable negligence in him to do an act or make
a contract, and then set up his ignorance as a defense. But no
person can be presumed to be acquainted with all matters of
fact, nor is it possible by any degree of diligence to acquire that
knowledge; and, therefore, an ignorance of facts does not import
culpable negligence.¹
2
§ 309.-2. Fraud.-By fraud is meant here wilful deceit.
It is a universal principle of law that where one party is guilty of
fraud in the making of a contract, such contract is voidable, at
the option of the party defrauded. Both at law and in equity,
fraud avoids the contract from the beginning at the option of the
person defrauded, and this whether the fraud has been committed
by one of the contracting parties upon the other, or by both upon
persons not parties thereto; for the law will not sanction dis-
honest practices or suffer any person to acquire a right or interest
by means thereof.³
Fraud may show itself in various ways; as by stratagems,
devices, misrepresentations, and concealments, respecting the
subject-matter or the consideration of a promise or engagement.
But whatever mode or form in which it appears, the effect is the
same; it annihilates the possibility, undermines the foundation,
and, therefore, in law, annuls the evidence of any agreement.
Where one of the parties is deceived by the other, there is, at
most, in so far as the party so deceived is concerned, but a mere
outward appearance, which is neither morally nor legally binding
as to him.
It is therefore a universal rule of law that where one is guilty
of fraud in making a contract, such contract is voidable, at the
option of the party deceived.*
Thus, selling an unsound article, knowing it to be unsound,
for a sound price, is actionable; and the ground of action is the
deceit practiced on the buyer.5
So if a person, having the legal title to property, stands by
and acquiesces in the sale of it by one who claims or has color of
1 1 Story's Eq., § 140..... 2 Bate. Com. Law, § 169; 1 Burr. 390; 3 Id.
1909; 1 Taunt. 381..
3 Camp. 319; Bate. Com.
Serg. & Rawle, 483.....
•
3 3 Coke's R. 77; 1 Burr. 390; 1 Bl. 193; 2 Id. 465;
Law, § 169. . . . . . . .¹ 3 Camp. 319; 5 Greenl. 227; 4
5 McCord's R. 169; Bate. Com. Law, § 170.
266
SALE OF CHATTELS.
title, that person will thence be estopped from asserting his title
against the purchaser.¹
This rule applies with equal force to cases of misrepresenta-
tion of material facts by a third person in the presence of the
seller, when such misrepresentation is either intended or in its
nature calculated to deceive the buyer.2
Nor is it material, nor does it change the case, that such
third person is not benefited by the deceit, or that he does not
collude with him who receives the benefit.3
Upon the same doctrine, the third person is also responsible
to the seller, if the fraud be practiced upon him instead of the
buyer.4
§ 310.-6. When Void.-1. Statute of Frauds.—If I
call on you at your place of business, and ask you the price of an
article which you have for sale, and you say "forty dollars," and
I say I will take it at that price, to which you further respond
that I can have it, the sale is complete. I have now to pay you
for it, and you to deliver it to me.
If you refuse to let me have it after this bargain, on my offer-
ing you the price, I can sue you and recover either the article
itself or the value of it. If I decline to take it and pay for it,
you can tender to me the article, and bring suit against me for
the price agreed, and recover the amount.
Were it not for a statute called the Statute of Frauds, such
a bargain would be binding on the parties, though the price
were a hundred or five hundred dollars or more. This statute
covers several other subjects besides that of sales. It is taken,
in substance, from an old English statute passed in the time of
Charles II, and, in spirit, has been adopted in nearly all the
American States. So far as it relates to sales, and that is the
only feature of it now to be considered, we will give it as adopted
in the State of New York, which will be found to correspond
very nearly to the statutes on this subject in other States.
Every contract for the sale of any goods, chattels, or things
in action, for the price of fifty dollars or more, shall be void,
unless—
? Bate.
11 Vern. R. 136; 12 Ves. 85; 1 Johns. Ch. R. 354; 6 Id. 166....
Com. Law, § 170.. 3 Medbury v. Watson, 6 Metcalf, 246; 3 T. R. 51.....
41 East, 318; 17 Mass. R. 182; 6 Johns. 181; 6 Cowen's R. 346; 2 Wend. 385.
INCIDENTS-WHEN VOID.
267
1. A note or memorandum of such contract be made in writ-
ing, and be subscribed by the parties to be charged thereby, or
their lawful agent; or
2. Unless the buyer shall accept and receive part of such
goods, or the evidences, or some of them, of such things in action;
or
3. Un'ess the buyer shall, at the time, pay some part of the
purchase-money.'
In reference to the note or memorandum in writing, it has
been decided that in order to bind the party to be charged there-
with, it must be subscribed by such party underneath, or at the
end of such note or memorandum.2
As the object here is simply to call attention to those sales
that are void by the statute of frauds, and not how they may be
taken out of the statute, a consideration of the latter subject
more appropriately belongs in another place. (See Contracts.)
2. No Title.-It is a general rule applicable to property
other than negotiable securities, that the vendor or pledgor can
convey no greater right or title than he has. A transfer by a
thief of stolen property, other than negotiable paper, is void,
and the real owner can take his property wherever he may find
it. But where the owner of property confers upon another an
apparent title to or power of disposition over it, he is estopped
from asserting his title under some circumstances, as against an
innocent third party who has dealt with the apparent owner in
reference thereto without knowledge of the claims of the true
owner.
1 Rev. Stat. N. Y., by Edmonds, Vol. II, p. 140.
Seld. R. 9; Davis v. Shields, 26 Wend. R. 341.
•
2 James v. Patten, 2
Topical Analysis
OF
Right of Stoppage in Transitu.
IN TWO PARTS.
PART I.
ELEMENTS.
PART II. AS TO ITS EXERCISE.
PART I. ELEMENTS
PART II. AS TO ITS
EXERCISE
1. Parties {
1. Vendor.
2. Vendee.
2. Subject-matter.
3. Indebtedness for subject-matter.
4. Subject-matter in transit.
5. When the right)
arises.
1. In case of vendee's insolvency.
2. In case of vendee's embarrassment.
3. Misrepresentations of vendee.
1. By whom may be exercised.
2. When may be exercised.
3. How to be exercised.
4. Rights of parties after its exercise {
5. When right ceases.
1. Of vendee,
2. Of vendor.
The 29/
CHAPTER VIII.
RIGHT OF STOPPAGE IN TRANSITU.
§ 311. The vendor's right of stoppage in transitu is one
which he has when he sells goods on credit to another, of resum-
ing the possession of the goods, while they are in the hands of a
carrier or middle-man, in their transit to the consignee or vendee,
and before they arrive into his actual possession, or to the des-
tination which he has appointed for them, on his becoming
bankrupt or insolvent.¹
The right exists only as between the vendor and vendee ;
and, as the property is vested in the vendee by the contract of
sale, it can be revested in the vendor during its transitus to the
vendee, under the existence of the above-named circumstances."
If the representations of the purchaser prove to be false, or
if he is so embarrassed as to render it probable that he is not
able to pay his debts, in either case it furnishes ground for this
proceeding, the same as though he were insolvent.³
PART 1-ELEMENTS.
§ 312. It will be seen at once, according to the foregoing
definition, that there must exist certain elements or conditions
before this right can be supported. These will be considered
under the following divisions and subdivisions:
§ 313.-1. Parties. The parties to a contract in which the
right of stoppage in transitu may be exercised are-1. The
Vendor, or the Consignor, being the party who sells the prop-
erty; and 2. The Vendee, or Consignee, the party who buys it.
12 Kent's Com. 540.....
v. Inglis, 3 East's R. 381..
2 Id.; Hodgson v. Loy, 7 Term R. 440: Bohtlingk
321 Verm. R. 129; 14 B. Mon. R. (Ky.) 324.
270
RIGHT OF STOPPAGE IN TRANSITU.
§ 314-2. Subject-Matter. The subject-matter is the thing
or things bought by the vendee of the vendor. It extends to all
kinds of goods, and even money, when it is remitted on a par-
ticular account, and for a special purpose.
§ 315.-3. Indebtedness for Subject-Matter. To give the
right of stoppage in transitu, there must be an indebtedness;
that is, the vendee must owe the vendor for the property which
is the subject-matter. A general indebtedness growing out of
other transactions between the parties, does not give this right;
but it must be for the price of the chattels themselves. They
cannot be detained for money due for other accounts.'
The right is very analogous to the common law right of lien.
The right of lien enables the vendor to detain the goods before
he has relinquished the possession of them, but not afterwards.
The right of stoppage is the right of the vendor to repossess the
goods any time before the vendee has acquired possession, and to
retain them until the price be paid.
§ 316.-4. Subject-Matter in Transit.-The goods or subject-
matter must be on their way to their destination, or to the place
to which they were ordered to be sent. This is one of the neces-
sary conditions of this right. The property must be in the hands
of the common carrier, or of some middle-man, who is possessed
of it for the purpose of transmission to the vendee or consignee.
Before they are started, the vendor has the right of lien;
but after they are started, his right of lien is gone, and now this
right of stoppage exists until they have come into possession of
the vendee. The transitus is not at an end until the goods have
reached the place of destination named by the vendee."
§ 317.-5. When Right of Stoppage Arises.-But the mere
fact that the goods are sold on credit does not give this right of
stoppage. Indeed, so far as that alone is concerned, it would go
to defeat the right. Something else must combine with the
credit which goes to endanger the rights of the vendor. At least
one of the following circumstances must exist in addition to the
credit, to give the vendor this right :
1. Insolvency of the Vendee.-This right of stoppage
grows out of the credit system of transacting business. This
12 Kent's Com. 541.... 2 Coates v. Raliton, 6 Barn. & Cress. R. 422.
AS TO ITS EXERCISE.
271
system subjects the vendor to the possible loss of his goods sold,
on account of the insolvency of the vendee.
After having sold the goods, if the vendor learns of the ven-
dee's insolvency, he may exercise this right. It would be unjust
in the extreme that the goods which the vendor had sold in the
full belief of the vendee's solvency, should go into the hands of
the vendee's creditors to pay their debts."
2. In Case of Vendee's Embarrassment.—If the
vendee is greatly embarrassed pecuniarily, which fact was un-
known to the vendor at the time of the sale, this is good ground
for stoppage, and the right arises on this coming to the knowl-
edge of the vendor subsequently.
To give this right, it is sufficient to show with reasonable
certainty, that is, a probability, that the vendee is embarrassed,
and not able to make full or general payment of his debts. The
admissions of the vendee are sufficient to authorize the vendor to
exercise the right of stoppage in transitu.?
3. On Misrepresentation by Vendee.—If the ven-
dee is guilty of misrepresentations as to his circumstances, under
which the vendor sells the goods confiding in the truth of the
statements, the right of stoppage in transitu arises on the dis-
covery by the vendor of the falsity of the representations.3
PART II.-AS TO ITS
EXERCISE.
§ 318.-1. By whom may be Exercised.-The right extends
to every case in which the consignor is substantially the vendor.
A factor or agent who purchases goods for his principal, and
makes himself liable to the original vendor, is so far considered
in the light of a vendor to his principal, as to be entitled to stop
the goods.¹
A principal who consigns goods to his factor upon credit, is
entitled to stop them if the factor becomes insolvent. A person
who consigns goods to another, to be sold on joint account, is
1 2 Kent's Com. 540...... 2 Secomb & Co. v. Nutt, 14 B. Monroe's (Ky.) R.
324.. 3 Fitzsimmons v. Joslin, 21 Verm. R. 129... .4 D'Aquila v. Lam-
bert, Amb. R. 399; Feise v. Wray, 3 East's R. 93.
272
RIGHT OF STOPPAGE IN TRANSITU.
likewise to be considered in the character of a vendor, and enti
tled to exercise this right.'
§ 319.-2. When may be Exercised. The right may be exer-
cised any time after it has arisen, and before it has ceased.
If the vendee has become insolvent, or pecuniarily embar-
rassed so as to render it improbable that he can pay his debts,
or if he has made false representations in the purchase, the right
of stoppage will continue until the end of the journey of the
goods is reached, and they have arrived to the possession, or
under the direction of the vendee himself."
If the goods have arrived at the port of delivery, and they
are lodged in a public warehouse for default of payment of
duties, the right of stoppage may still be exercised. They are
not deemed to have come to the possession of the vendee. If the
goods remain in the custom-house, the right of stoppage still
exists and may be exercised, though the vendee has paid the
freight.3
As a general rule, no agreement made between the consignee
and his assignee can defeat or affect this right of the consignor.
The consignor's right to stop in transitu is paramount to the
carrier's right to retain as against the consignee.*
The right of stoppage by the vendor is not gone, even though
the goods be levied on by execution, at the suit of a creditor of
the vendee, if the vendor exercises it before the transitus is at
an end. The vendor's lien has preference; it is the elder lien,
and cannot be superseded by the attachment of a creditor.5
A factor, having only authority to sell, and not to pledge the
goods of his principal, cannot deprive the consignor of this right
by indorsing or delivering over the bill of lading as a pledge to a
third person.
6
The delivery of a shipping note by the consignee to a third
person, with an order to the wharfinger to deliver the goods to
•
¹ Kinloch v. Craig, 3 Term R. 119; Newsom v. Thornton, 6 East's R. 17;
Fenton v. Pearson, 15 East's R. 419...... 2 Buckley v. Furniss, 15 Wend. R.
137; Covell v. Hitchcock, 23 Wend. R. 611...... 3 Donath v. Broomhead, 7
Barr's R. 301..... 4 Oppenheim v. Russell, 3 Bos. & Pull. 42........5 Smith
v. Goss, 1 Camp. N. P. R. 282; Buckley v. Furniss, 15 Wend. R. 137....
6 Newsom v. Thornton, 6 East's R. 17.
AS TO ITS EXERCISE.
273
such third person, does not so pass the property as to deprive
the consignor of the right of stoppage.¹
The goods are always to be deemed in transit while they are
in the possession of the carrier as carrier, even though he may
have been appointed by the vendee.
They are also in transit while they are in any place of deposit
connected with their transmission and delivery, and until
their arrival at the actual or constructive possession of the
vendee.
They may be stopped as long as the transit continues, whether
by land or water, and whether in the hands of the carrier, a
warehousekeeper, wharfinger, or any other middle-man con-
nected with the transportation.
§ 320.-3. How to be Exercised. The vendor's right is so
strongly maintained, that while the goods are on the transit, and
the insolvency of the vendee occurs, the vendor may take them
by any means not criminal.²
It is not requisite that the vendor should obtain actual pos-
session of the goods before they come to the hands of the vendee;
nor is there any specific form requisite for the stoppage of goods
in transitu.
But a demand of the goods of the carrier, or notice to him to
stop the goods, or an assertion of the vendor's right by an entry
of the goods at the custom-house, or a claim and endeavors to
get possession, is equivalent to an actual stoppage of the
goods.3
Notice to the carrier on the part of the vendor or his author-
ized agent is sufficient. The notice is to be given to the person.
who has the immediate custody of the goods. If a servant has
the custody of the goods, and notice be given to his principal, it
must be in time to enable him, with reasonable diligence, to pre-
vent a delivery to the consignee. If the vendee takes the goods
from the carrier before they have arrived at their destination,
with or without his consent, the transit is at end.¹
2 Snee
¹ 1 Carr. & Payne's R. 53; Tucker v. Humphrey, 4 Bing. R. 516....
v. Prescott, 1 Atk. R. 245..... 3 Walker v. Woodbridge, Cook's B. L. 494;
Litt v. Cowley, 7 Taunt. R. 169; Newhall v. Vargas, 13 Maine R. 93.....
'Whitehead v. Anderson, 9 Mees. & Welsby, 519.
274
RIGHT OF STOPPAGE IN TRANSITU.
A demand of the vendee, before the right of stoppage is de-
termined, is not sufficient; it must be made of the carrier or
middle-man.¹
§ 321.-4. Rights of Parties after its Exercise. The law
clearly defines the rights of the parties after the vendor has ex-
ercised this right of stoppage in transitu.
1. Vendee.-If the vendee sees fit to tender to the vendor
the price of the property, the vendor must give it up. He can-
not hold it for money due on other accounts. The right of stop-
page
does not rest upon the ground that the contract is rescind-
ed; but that the vendor has an equitable lien.2
The right of stoppage assumes the continuance of the con-
tract; and, therefore, the vendee or his assigns may recover the
goods on payment of the price.³
2. Vendor. The stoppage of the goods by the vendor does
not diminish his right to sue for and recover the value or the
price of the goods, provided he is ready to deliver them to the
vendee on payment.*
The vendor can sell the goods to pay himself, if the vendee
does not pay the debt. But in such case, if the goods bring
more than the debt, the balance belongs to the vendee. If they
bring less than the debt, the vendor has a right of action against
the vendee for the balance.
The effect of the exercise of this right is to repossess the par-
ties of the same rights which they had, not before the goods were
sold, but before the vendor resigned his possession of the goods,
after they were sold."
§ 322.-5. When the Right Ceases.-The right of stoppage by
the vendor ceases when the goods have fairly reached the posses-
sion of the vendee. In other words, when the transitus ends,
this right of stoppage ends."
The point of inquiry is, whether the property is to be consid-
ered as still in its transit; for if it has once fairly arrived at its
¹ Mottram v. Heyer, 5 Denio R. 629.
2 Hodgson v. Loy, 7 Term R. 445.
3 2 Kent's Com. 541..... 4 Kymer v. Suwercropp, 1 Campb. R. 109.
5 6 East's R. 27; Q. B. Rep. 389; 14 Maine R. 314; 5 Ohio R. 98; 20
6 Snee v. Prescott, 1 Atk. R. 248; 3 Term R
Conn. R. 53; 10 Tex. R. 2.
466; 8 Taunt. R. 83; 4 Bing. R. 516.
AS TO ITS EXERCISE.
275
destination, so as to give the vendee the actual exercise of do-
minion and ownership over it, the right is gone.¹
In the following cases the courts have decided that the right
of stoppage in transitu had ceased:
1. The delivery of the key of the vendor's warehouse to the
purchaser.2
2. Payment of rent to the vendor for the goods left in his
warehouse."
3. Suffering the goods, by agreement, to remain, free of rent,
in the vendor's warehouse for a limited time."
4. Lodging an order from the vendor with the keeper of the
warehouse for the delivery of the goods."
5. Delivering to the vendee a bill of parcels, with an order on
the storekeeper for the delivery of the goods."
6. Demanding and marking the goods by the agent of the
vendee, at the inn where they have arrived at the end of the
journey.7
7. Suffering the goods to be marked and resold, and marked
again by the under purchaser.s
8. If the vendee intercepts the goods on their passage to him,
and takes possession as owner, the delivery is complete, and the
right of stoppage is gone."
After actual delivery the goods become identified with the
vendee's property, and cannot, in contemplation of bankruptcy,
be restored to the seller; nor can he interfere and reject the
goods, though in their transit, after an act of bankruptcy has
been committed; for this would be to give preference among
creditors.10
¹ Wright v. Lawes, 4 Esp. R. 82..
Mangles, 1 Campb. R. 452.
•
•
2 3 Term R. 468...
3 Hurry v.
4 Barrett v. Goddard, 3 Mason's R. 107.......
7 Ellis v. Hunt, 3 Term R. 464...
5 Harmon v. Anderson, 2 Campb. R. 243...... 6 Hollingsworth v. Napier, 3
Caines' Rep. 182..
8 Stoveld v.
Hughes, 14 East's Rep. 308.......' Secomb v. Nutt, 14 B. Mon. (Ky.) 324......
10 Smith v. Field, 5 Term R. 402.
Topical Analysis of Payment.
I. WHAT IS ..
II. PART PAYMENT.
III. WHAT IS NOT.
IV. BY WHOM ..
1. How usually made.
2. How by chattel mortgage.
3. Paying third persons at creditor's request.
4. Exchange of indebtedness.
5. Money or things accepted.
6. By mail at creditor's request.
7. Note against third person.
8. Allowance of account.
1. General rule.
2. Before maturity.
3. At inconvenient place.
4. By chattel.
5. By service.
6. By note of third person.
7. Disputed cases.
8. Unliquidated demands.
9. Compromise.
I. Promise to transfer accounts.
2. Gratuitous receipt.
3. Debtor's note.
4. Debtor's or third person's check.
5. By letter without authority.
6. Part payment after maturity.
7. Counterfeit money.
8. Forged paper.
9. Bills on broken banks.
1. Debtor.
2. Co-debtor.
3. Debtor's agent.
A
TOPICAL ANALYSIS OF PAYMENT.
277
V. TO WHOM .
I. Creditor.
2. Partner.
3. Executor.
4. Creditor's agent.
5. Creditor's attorney.
6. Creditor's apparent clerk.
I. Safe remittance.
2. When at debtor's risk.
VI, BY LETTER .
3. When at creditor's risk.
4. How directed.
1. Debtor may direct.
2. When creditor may direct.
3. Limitation of creditor's power.
4. When neither party directs.
5. Evidence of either party's intention.
VII. APPLICATION OF 6. Time of making.
7. Cannot change after making.
8. Bank deposits.
9. How the court
will direct .
1. According to intention of the parties,
2. Demands certain have preference.
3. So as to relieve surety,
4. In the order of maturity.
5. Rules as to interest.
CHAPTER IX.
PAYMENT.
It will be convenient to treat the subject of Payment under
the following divisions and subdivisions:
I. WHAT IS PAYMENT?
§ 323. In business transactions generally, this is not a very
difficult matter to settle. We will consider it under the follow-
ing subdivisions :
1. How Usually Made.-Debts are usually paid in money, un-
less the agreement is to pay in something else. By money is
usually understood the common currency of the country in daily
business use, whether gold, silver, or bank bills. Even if the
contract is to pay in specific articles, as in the case of a chattel
note, if default is made in such payment, the damages will have
to be paid in money.
--
§ 324.-2. How by Chattel Mortgage. The agreement, as
above stated, may be to pay in something else than money. Or
the circumstances of the case may be such that the creditor may
take chattels in lieu of money. For instance, on failure to pay a
chattel mortgage, the mortgagee may take possession of the
property mortgaged; and this will constitute payment to the
extent of the value of the chattels.
If a part of the mortgaged property sells for enough to pay
the debt, interest, and costs, this is equivalent to payment of
the debt, and the mortgagee's title to the remaining chattels is
extinguished.2
¹ Case v. Boughton, 11 Wend. R. 106....
2 Charter v. Stevens, 3 Denio
R. 33.
WHAT IS PAYMENT.
279
§ 325.-3. Paying Third Persons at Creditor's Request.-If
money which is due on a contract is applied by the debtor to
purposes authorized by the creditor, such application is equiva-
lent to payment on the contract, and it operates as an extinguish-
ment of the demand partially or entirely, according to the
amount paid or so applied.'
§ 326. 4. Exchange of Indebtedness.-If you hold my note
for a hundred dollars, and you agree to take goods for it of the
firm of which I am a member, and I agree to deliver them, to
which the other members consent, the agreement is valid; and
if the goods are delivered according to agreement, the firm can
charge them to me. This is a payment of the note.2
Again, you hold my note for one hundred dollars. You owe
the firm, consisting of myself and my partner, the same amount.
If we all agree to apply your indebtedness to the firm in payment
of the note against me, it operates at once as a complete satis-
faction and payment of the note.³
Once more suppose I owe you a hundred dollars, and we
both keep accounts at the FIRST NATIONAL BANK OF ROCHES-
TER. You request me to pay what I owe you into the bank to
your credit. I do so by asking the bank to charge me with that
sum and to give you credit for it. That is payment of my debt
to you just as soon as the amount is transferred from my account
to yours, although no money passes between us. If the bank
fails with the accounts thus adjusted, you must lose that hun-
dred dollars, and not I. The failure of the bank does not revive
my liability.¹
§ 327.-5. Money or Things Accepted. The debt will not be
extinguished unless the creditor accepts the money or thing of
value which is delivered by the debtor, or which is offered. It
is no payment unless the creditor consents to receive it.5
§ 328.-6. By Mail, at Creditor's Request.-If I owe you a
sum of money, and you request me to send it to you at your res-
idence by mail, and I do so send it, that is payment. But this
•
1 Brady v. Durbrow, 2 E. D. Smith, 78. . . . . . .2 Evans v. Henderson, 17 Wend.
R. 190..
3 Davis v. Spencer, 10 E. P. Smith, 386.... 4 Eyles v. Ellis,
4 Bing. R. 112; Bolton v. Richard, 6 Term R. 139; Badenham v. Purchas, 2
Barn. & Ald. R. 47.
5 Kingston Bank v. Gay, 19 Barb. 459.
280
PAYMENT.
is on the supposition that I have been careful about the mail-
ing. If I deliver the letter containing the money to the post-
master, properly directed to you, at your usual place of resi-
dence, or at such place as you may have appointed, this is
payment. If the money miscarries, it is your loss, as you have
made the mail your agent in its transmission, assuming yourself
all the risk.
But if I hand the letter to some other person in the street,
having addressed it to you in a large city, without giving
street and number on it, or otherwise specifying your house or
place of business, and the money is lost, this will be no pay-
ment, unless you gave me the address yourself.'
§ 329.-7. Note against Third Person. In the sale of a chat-
tel, if the note of a third person be accepted for the price, it is
good payment.2
It is a general rule that the giving of a note or bill by the
debtor to his creditor for goods sold, or for an existing debt, is
not to be regarded as payment of the indebtedness unless there
is an express agreement that it shall have that effect. It
merely operates to extend the time of payment, and if the note
is not paid when due, the creditor may sue on the original
demand and surrender the note.
An agreement to receive a particular note in payment for
goods is valid payment. In such case, the delivery of the note.
is a full payment of the debt; and whether the note is after-
wards paid or not, the vendor cannot rescind his contract by re-
turning the note and claiming the value of the goods sold.5
§ 330-8. Allowance of Account.-If the parties meet to-
gether and state an account, and various pecuniary claims are
made and allowed on both sides, and a balance is struck and
paid over, and the account settled, these allowances in the ac-
count are payments in contemplation of law."
I Warwick v. Noakes, Peake, 67; Hawkins v. Rutt, Id. 186; Gorden v.
Strange, 1 Exch. R. 477.... .2 3 Cow. R. 272; 1 Dev. & B., note c, 291....
3 Comyn's Dig., Merchant (F), 30 N. H. 540; 27 Alab. N. S. 254; 2 Duer N. Y.
133.........41 Barn & Ald. 14; 7 Barn. & C. 17... . . ...
E. D. Smith, 106; Whitbeck v. Van Ness, 11 Johns. R. 409.
v. How, 10 C. B. R. 290.
•
Ferdon v. Jones, 2
6 Colander
WHEN PART PAYMENT IS PAYMENT.
281
II-PART
PAYMENT.
§ 331.-1. General Rule.-As a general rule, part payment,
where the exact amount of indebtedness is known and admitted
by the parties, will not amount to a discharge of the entire debt
or demand, except in case of a release under seal. It makes no
difference that the creditor agrees to receive a part for the whole,
and even gives a receipt for the whole demand.¹
§ 332.-2. Before Maturity.-Yet there are cases where, by
agreement of the parties, part payment may operate as an ex-
tinguishment of the whole demand. For instance, if I owe you
a thousand dollars, to be paid one year hence, and you agree to
accept eight hundred dollars, or even a less sum, in full satisfac-
tion, if I will pay you now, and I do pay you the sum which you
specify, this is a valid payment of the entire demand. This is
in consideration that I pay the debt before maturity.²
§ 333.-3. At Inconvenient Place.--If there is a place speci-
fied for payment, and the creditor desires to have that place
changed to where it will be more convenient for him to receive
it, or where it will be more inconvenient for the debtor to pay it,
this will be a good consideration to make part payment a pay-
ment in full, if the parties so agree.³
334.-4. By Chattel.-Suppose Jones owes Smith a hundred
dollars, and Smith agrees to take a chattel in full satisfaction of
the demand, this will be a valid payment, though the article
transferred is not of half the value of the indebtedness.¹
§ 335-5. By Service.-Services may be rendered at any
price agreed upon between the parties; and whatever their na-
ture and value, if the creditor consents to accept them of the
debtor as payment in full of the debt, they are a complete and
valid discharge of the debt.5
§ 336-6. By Note of Third Person.-If a debtor, at the re-
quest of the creditor, or on his promise to accept it in full pay-
¹ Dederick v. Leman, 9 Johns. R. 333; Mechanic's Bank v. Hazard, 13 Johns.
R. 353; Seymour v. Minturn, 17 Johns. R. 169. ... 2 Brooks v. White, 2
Metc. 283; Smith v. Brown, 3 Hawks, 580....
3 Id.
4 Andrew v.
Boughey, Dyer, 75, a; Sibree v. Tripp, 15 Mees. & Wels. 35, Parke, B.; Brooks
v. White, 2 Metc. 285, 286.... 5 Blinn v. Chester, 5 Day, 359.
•
282
PAYMENT.
ment, procures the note of a third person, and delivers it to the
creditor, this will be a good discharge, even though the note of
the third person is for a less amount than the debtor is owing
the creditor.¹
§ 337.-7. Disputed Cases.-If there is a dispute in reference
to the amount due from the debtor to the creditor, a settlement
may be made on the creditor's agreement to take less than he
actually claims. In such cases, if the debtor gives and the
creditor receives the debtor's note for a less sum than the cred-
itor claims, in full satisfaction, this will be a good payment of
the debt.2
§ 338.--8. Unliquidated Demands.-If the creditor's claim is
unliquidated, and it is adjusted between him and the debtor, or
by their agents, and payment is made of the amount agreed on,
on such adjustment, this is a good payment of the whole claim,
and is conclusive unless there is some mistake or error.3
§ 339.-9. Compromise.-A mutual agreement by various
creditors with each other to receive from a debtor a sum less
than their respective claims, or such an agreement by a single
creditor with his debtor, upon the faith of which other creditors
are induced to make a similar compromise, is binding.*
III.-WHAT IS NOT.
§ 340. Having considered What is Payment, and when Part
Payment is regarded by the law as payment in full, attention
will now be given to some of those transactions which are often
erroneously regarded as payment.
§ 341.-1. Promise to Transfer Accounts.-A mere promise
to make a transfer of the credit from one account to another is
not equivalent to an actual transfer. Therefore if I owe you a
sum of money, and direct my banker to place a like sum of
25
¹ Boyd v. Hitchcock, 20 Johns. R. 76; Kellogg v. Richards, 14 Wend. R. 116;
Le Page v. McCrea, 1 Wend. R. 164; Steinman v. Magnus, 11 East's R. 390.
2 Sibree v. Tripp, 15 Mees. & Wels. 23.. 3 Harris v. Story, 2 E. D.
Smith, 363; Longridge v. Dorville, 5 Barn. & Ald. 117; Palmerton v. Huxford,
4 Denio R. 166.. 4 Williams v. Carrington, 1 Hilt. 515.
WHAT IS NOT PAYMENT.
283
money to the credit of your account at a future day, and the
banker promises to do so, but becomes bankrupt before the time
arrives, this is no payment of my debt to you.¹
§ 342.-2. Gratuitous Receipt.-Suppose you owe me a
thousand dollars on a note, and I tell you that I will make you
a present of that amount, and direct you to get the proper re-
ceipt stamp for that sum, and to draw up a receipt for the
amount, with interest, which you do, and I then sign the receipt
and hand it to you, this does not constitute a payment of the
note.2
§ 343.
-3. Debtor's Note. - Taking a note either of the
debtor or a third person, for a pre-existing debt, is no payment,
unless it be expressly agreed to take the note as payment, and to
run the risk of its being paid; or unless the creditor parts with
the note, or is guilty of laches in not presenting it for payment
in due time. He is not obliged to sue upon it. He may return
it when dishonored, and resort to his original demand. It only
postpones the time of payment of the old debt until a default is
made in the payment of the note.3
§ 344.-4. Debtor's or Third Person's Check.-Taking a
check is not, in general, payment of the debt for which it is
given, if the check is not paid by the drawee on presentment.*
The check of a third person, received on the surrender of a
note, without an express agrement that it shall be received in
payment, is not payment, if the check is dishonored. The bare
fact of the old note being given up, is not conclusive that the
check was received absolutely.5
§ 345.-5. By Letter without Authority.-Sending money by
letter is always hazardous either to debtor or creditor. If the
creditor has not given any instructions on the subject, and there
is no authority by custom or usage to justify the debtor in send-
ing the money by mail, and a loss occurs, the debtor must bear
it; since it is his duty to pay the money directly to the creditor.
¹ Pedder v. Watt, 2 Peake, 41...
2 Foster v. Dawber, 6 Exch. 839.....
3 Toby v. Barber, 5 Johns. R. 68; Van Eps v. Dillaye, 6 Barb. 244; Herring v.
Sanger, 3 Johns. Cas. 71; Murray v. Gouverneur, 2 Johns. Cas. 438..
4 People v. Howell, 4 Johns. R. 296; Strong v. Stevens, 4 Duer, 668.
5 Olcott v. Rathbone, 5 Wend. R. 490.
284
PAYMENT.
If he risks the mail as his agent for the purpose of transmission,
he must take the risks which flow from his election.¹
§ 346.-6. Part Payment after Maturity. After a debt is due
and payable, the general rule is that a part payment of the
amount is no discharge of the entire debt or demand, even
though the creditor agrees to receive a part for the whole, and
gives a receipt for the whole demand.²
§ 347.-7. Counterfeit Money.—If a creditor receives in pay-
ment counterfeit bank notes, or other bills or notes which prove
to be of no value, it is no payment; and he may resort to the
original debt, and collect it, although the debtor paid the notes
in good faith, supposing them to be genuine.³
3
Although both parties believe the bank bill to be genuine, so
that there is neither fraud nor deception, yet, in contemplation
of law, there is no payment. But the person receiving the coun-
terfeit bills, within a reasonable time after discovering their
character, should return them. A delay of three months would
be unreasonable.*
§ 348.-8. Forged Paper.-The same rule holds with refer-
ence to forged negotiable paper of any kind. It is no payment,
though believed by both parties to be genuine. The rule as to
prompt return when the discovery is made that the paper is
forged, is the same as in the case of bank bills.5
§ 349.-9. Bills on Broken Banks.-Bank bills are regarded
as money only so long as the bank from which they are issued
continues to redeem them. When a bank stops payment, its
bills cease to be a representative of the legal currency of the
country, whether the holder is aware of the suspension or not.
If such bank bills are received in payment, and at the time of
such payment the bank has stopped payment, and is insolvent,
although the failure is not known at the place of payment, the
loss falls on the party paying, and not on the party receiving the
bills."
1
•
2 Dederick v. Leman, 9
¹ Kington v. Kington, 11 Mees. & Wels. 233.....
Johns. R. 333; Mechanic's Bank v. Hazard, 13 Johns. R. 353; 17 Johns. 169.
3 Markle v. Hatfield, 2 Johns. R. 455....
.......4 Thomas v. Todd, 6 Hill's
R. 340; Baker v. Bonesteel, 2 Hilt. 397; Jones v. Ryde, 5 Taunt. R. 488.......
5 Id..... 6
Lightbody v. Ontario Bank, 11 Wend. R. 9; S. C., 13 Wend. R.
101.
BY WHOM AND TO WHOM MAY BE MADE.
285
The rule as to returning such bills is the same as that in
relation to forged paper.¹
IV. BY WHOM.
§ 350. It may not be thought of importance to inquire, By
whom may payment be made? Yet, as part payment may be
construed into an acknowledgment of the balance of a claim or
demand, the rights of a debtor might be compromised by a pay-
ment being made by a person acting without authority. Again,
the statute of limitations begins to run from the date of the last
payment; so that if a claim were soon to be barred by it, it
might be revived by an unauthorized payment, and thus be kept
alive for another six years.
§ 351.-1. Debtor.-When the debtor himself makes pay-
ment, there can be no dispute that it has been made by the
proper person.
§ 352.-2. Co-debtor.-In case there are several persons held
responsible for the payment of a debt, payment by any one of
them is payment for all; and the creditor has no further claims
against any of them.2
§ 353-3. Debtor's Agent.-Whatever a man does through
the agency of another, the agent having proper authority of
course, has the same legal effect as though done by himself. A
payment may be made in the same manner that any other lawful
act may be performed by an agent. Payment by an agent dis-
charges the principal. A partial payment to operate as a revival
of the debt must be made by the debtor or his agent.
3
V. TO
WHOM.
§ 354. It may often become a question, To whom may the
debtor make payment? This may be done to either the creditor
himself, or to any one properly standing in his place.
§ 355.-1. Creditor.-A payment to the creditor of course
discharges the indebtedness.
¹ Camidge v. Allenby, 6 Barn. & Cress. 373.......2 Thorne v. Smith, 10 C.
B. 659......3 2 Kent's Com. 619.
286
PAYMENT.
§ 356.-2. Partner.-If the indebtedness is to a partnership,
payment to any one of several partners will be sufficient to dis-
charge the partnership debt. And any one of the partners may
give a release of any claim or demand which the firm has against
any person, on payment or satisfaction of such claim or de-
mand.¹
§ 357.-3. Executor.-A payment made to one of several ex
ecutors is a good and valid payment of the debt in favor of the
estate which the executor in part represents.2
§ 358-4. Creditor's Agent.-Unless the principal has coun-
termanded or revoked the agent's authority before payment is
made to him, a payment made to an agent in the ordinary course
of business is a good and valid payment to the principal.³
§ 359.-5. Creditor's Attorney.-A payment to the attorney
of a plaintiff in a cause in court is, in contemplation of law, a
valid and binding payment to the plaintiff himself. This is not
so, however, if the payment is made to an agent of the attorney.*
An attorney has no right, unless by express anthority, to re-
ceive anything but money for a debt due his client; nor has he
a right to compromise by taking less than the full amount in
complete satisfaction.5
§ 360.-6. Creditor's Apparent Clerk.-Payment made to a
person found in a merchant's counting-room, in possession of the
merchant's account books, and apparently intrusted with the
conduct of the business, is a good payment to the merchant him-
self, although the party receiving the money has in fact no au-
thority to receive it, and is not in the merchant's employment.
In such case, the debtor has a right to suppose that the mer-
chant has the control of his own premises, and that he will not
permit persons to come there and intermeddle with his business
without his authority."
¹ Pierson v. Hooker, 3 Johns. R. 68; Bulkley v. Doyton, 14 Johns. R. 387.
2 Can v. Read, 3 Atk. 695; Priest . Watkins, 2 Hill's R. 225; 7 Hill,
3 Favenc v. Bennett, 11 East's R. 36; Hornby v. Lacy, 6 Mau. & Sel.
166; Drinkwater v. Goodwin, Cowp. 251.... 4 Yates v. Freckleton, 2 Doug.
623; Powell v. Little, 1 W. Black. R. 8; Branch v. Burnley, 1 Call. 147...
181.
5 Jackson v. Bartlett, 8 Johns. R. 361; Kellogg v. Gilbert, 10 Johns. R. 220.
.6 Barrett v. Deere, M. & M. 201; Wilmot v. Smith, Id. 238; S. C., 3 Carr.
& Payne, 453; Wait's Law and Prac., vol. 1, 1066.
SENDING MONEY BY LETTER.
287
VI. BY LETTER.
§ 361. Sending money by the mail is a common method of
making payment; and since the adoption of the money-order
system by our government, for sending small sums it is nearly, if
not entirely and infallibly, a safe medium of transmission. The
sum transmissible by this means cannot, at present, exceed fifty
dollars.
But frequently the debtor incloses a bill of five or ten dollars
or more in his letter.
§ 362.-1. Safe Remittance.-If the bank-note safely reaches
its destination, and the creditor acknowledges its receipt, this, of
course, is just as valid a payment as though the money were
handed personally by the debtor to the creditor. But losses will
sometimes occur; and then the question arises as to which party
shall bear the loss.
$ 363.-2. When at Debtor's Risk. It is the duty of the
debtor to pay the money to his creditor. If he sees fit to send
it by private hands, he can do so at his own risk, unless he has
been instructed by the creditor to send it by the particular per-
son intrusted with it. If the creditor has given no instructions
to the debtor to send the money by letter-and there is no cus-
tom or usage so well settled as to justify sending by mail-in
case of loss, the debtor must bear it. In such case, if he sends
by letter, he makes the mail his own agent, and he assumes all
the risk.¹
$364.-3. When at Creditor's Risk.-But, on the contrary,
if the creditor gives express directions to the debtor to send the
money by letter, the debtor will be discharged on proof that he
did inclose the money properly, and that he properly directed
the letter to the creditor according to the creditor's instructions.
§ 365.-4. How Directed.-The letter should be plainly and
legibly directed to the creditor at his place of residence, and
handed to the postmaster or some one in charge of the office.
Or probably it would answer, if there is proof that the letter was
dropped into the usual letter-box attached to the office.
1 Kington v. Kington, 11 Mees. & Wels. 233.
288
PAYMENT.
It should be addressed to the creditor's place of residence, or
place of business; and if he resides in a large city, the street
and number of such place should be superscribed on the letter,
unless the creditor has given some other place in his instruc-
tions.¹
VII. APPLICATION OF.
§ 366. Partial payments are sometimes made by the debtor
who is indebted on several different accounts or classes of debts
to the same creditor. In such cases it becomes a question as to
the debt to which the payment shall be applied. The rules of
law on this subject, however, are tolerably well settled, and will
be stated under the following heads:
§ 367.-1. Debtor may Direct. The debtor has the right at
the time he makes the payment to apply it to whichever account
he chooses; and the creditor, if he receives the money, is bound
to make the application according to the debtor's directions. If
he receives the money at all, he must receive it strictly subject
to those directions.2
If money is sent by a debtor to his creditor, with notice of
the account on which it is paid, and the creditor refuses to accept
on those terms, but he does receive and retain the money, this
will be conclusive upon him, and the appropriation made by the
debtor will be enforced by law.³
§ 368.-2. When Creditor may Direct. If the debtor gives
no directions about it at the time of the payment, and no par-
ticular intention on his part can be inferred, the creditor may
apply the payment to whichever of the demands he may choose
This is a general rule; and it extends even so far as to allow th
creditor to apply the payment on a claim already barred by the
statute of limitations, though it does not revive the balance of
the debt, or take it out of the operation of the statute.*
1 Warwicke v. Noakes, Peake, 67; Hawkins v. Rutt, Id. 186; Gordon v.
Strange, 1 Exch. 477...... ? Allen v. Culver, 3 Denio R. 284; Hall v. Constant,
2 Hall, 185, 189.
3 Reed v. Boardman, 20 Pick. 441, 446......
Fowkes, 5 Bing. N. C. 455; 15 Mees. & Wels. 300.
4 Mills v.
APPLICATION OF PAYMENT.
289
If some of the debts are secured, but others are not, and the
debtor makes a general payment, without directing any special
appropriation of the money, the creditor may apply the money
to those debts which are not secured, and still retain his rights
as to the secured debts.¹
If some of the items would be barred by the statute of limita-
tions, as above stated, the creditor may apply a general payment
to them, and sue upon those not barred by the statute.²
§ 369.-3. Limitation of Creditor's Power. There is one
limitation upon the right of the creditor to appropriate a pay-
ment as he pleases; and that is, where some of the debts are
legal, and others of them arise out of illegal transactions; in
such case, even a general payment will not authorize the creditor
to apply the money to the illegal transaction, and then recover
the amount of the legal debts.3
§ 370.-4. When Neither Party Directs. If neither party
makes a specific appropriation of the money paid, the law will
appropriate it as the justice and equity of the case may require,
taking into the account all the circumstances of the transaction.
The intention of the parties will be regarded if it can be
ascertained.
§ 371.-5. Evidence of Either Party's Intention.-The inten-
tion of the parties may be inferred by circumstances. For in-
stance, if the debtor were to make a payment, and, at the time,
should deny the existence of one debt, but acknowledge another,
and the sum which he paid should agree with the latter in
amount, this would be conclusive evidence that the latter was
the debt which he intended to pay.
Again, if one debt is due, and another is not yet due, and the
payment is general, the legal presumption is that the money paid
is to be applied on the debt due in preference to the other.
Otherwise it must be presumed that the debtor intends to make
a deposit instead of a payment.*
1 Clark v. Burdett, 2 Hall, 197, 200; 5 Denio R. 470, 475; Hutchinson v.
Bell, 1 Taunt. 558..
2 Williams v. Griffith, 5 Mees. & Wels. 300; 1
Wait's Prac., 1171.
3 Wright v. Laing, 3 Barn. & Cress. 165...
Baker v. Stackpoole, 9 Cow. R. 420; Stone v. Seymour, 15 Wend. R. 19; S. C.,
8 Id. 403.
290
PAYMENT.
The intention of the creditor may be apparent from any one
of several circumstances. He may make a verbal statement at
the time; the wording of a receipt given; the rendition of an
account in which the payment is credited or included; or any
other act may manifest his intention, and induce the belief that
a particular application is made.¹
§ 372.-6. Time of Making.-The creditor may make the
application of the payment at any time before the demand is re-
duced to a verdict, even if the clection is made at the trial, as it
may be, if the creditor so elects.2
§ 373.-7. Cannot Change after Making. But when the
creditor has once made the application or appropriation of the
money, he will be bound by his election, and will not afterwards
be permitted to change it.³
3
§ 374.-8. Bank Deposits. Where a person is indebted to a
bank upon a note, and he makes a general deposit of a sum of
money in such bank, without appropriating it to the payment of
such note, the bank has a right, at any time after the note be-
comes due, to appropriate it to the payment of the note.
And if the bank sues the debtor and recovers judgment on
the note, the same right of applying the deposit money to pay-
ment of the judgment still exists, and continues until the judg-
ment is discharged.
1
§ 375.-9. How the Court will Direct. When suit is brought
by the creditor against the debtor, and the intention of the par-
ties cannot be ascertained with respect to the application of
general payments which have been made, it devolves on the
court to make such application. The court will act on the fol-
lowing rules, whenever called to make the application of pay-
ments:
1. According to Intention of the Parties.-If
the intention of the parties can be ascertained or inferred from
the circumstances of the case, the court will not depart from
that understanding. But where this can not be inferred, the
¹ Allen v. Culver, 3 Denio R. 285, 291..
.2 Id. 284; Pattison v. Hull, 9
3 Simson v. Ingham,
Cow. R. 747; Bosanquet v. Wray, 6 Taunt. R. 597.
2 Barn. & Cress. 65; Mayor of Alexandria v. Patten, 4 Cranch, 317; Van Rens
selaer v. Roberts, 5 Denio, 470........4 Marsh v. Oneida Central Bank, 34 Barb
R. 298.
APPLICATION OF PAYMENT.
291
application will be made according to the presumed intention,
founded on reason, probability, and the justice of the case.
2. Demands Certain have Preference.-If some
demands are certain, liquidated, or capable of being reduced to
certainty, the application will be made to such, in preference to
claims for uncertain or unliquidated amounts.'
3. So as to relieve Surety.-The court will so apply a
general payment as to relieve a surety, when some of the debts
are secured and others are not secured.2
4. In the order of Maturity.-If some debts have
been due longer than others, the application of a general pay-
ment will be made in the order of their maturity, so as to first
extinguish those which first became due.³
5. Rules as to Interest.-When the indebtedness is on
interest, the rules in reference to the application of payments are
somewhat different in different States. As laid down by Chan-
cellor Kent, of New York, they are thus in that State :
1. When partial payments have been made, apply the pay-
ment, in the first place, to the discharge of the interest then due.
2. If the payment exceeds the interest, the surplus goes to-
wards discharging the principal, and the subsequent interest is
to be computed on the balance of principal remaining due.
3. If the payment be less than the interest, the surplus of
interest must not be taken to augment the principal; but inter-
est continues on the former principal until the period when the
payments, taken together, exceed the interest due, and then the
surplus is to be applied towards discharging the principal, and
interest is to be computed on the balance of the principal, as
aforesaid.+
The same rules prevail in the State of Massachusetts. The
courts have established the same rules in Virginia, North Caro-
lina, Maryland, Kentucky, and South Carolina.º
1 Ramsour v. Thomas, 10 Ired. R. 105, 168.
R. 747; Dows v. Morewood, 10 Barb. 183.
•
• •
.2 Pattison v. Hull, 9 Cow.
3 Wheeler v. Cropsey, 5 How.
R. 288; Hunter v. Osterhoudt, 11 Barb. 33; Allen v. Culver, 3 Denio R. 284;
Webb v. Dickinson, 11 Wend. R. 62.
41 Johns. Ch. 17...
5 4 Mass.
6 For Virginia, see Hen. & Munf.
R. 103; 17 Id. 417, 418; 1 Pick. R. 194.
431; North Carolina, see 1 Hayw. 279; 2 Id. 17; Id. 151; Maryland, see 4 Har.
& McHen. 94; Kentucky, see 4 Hall's Law Journ. 122; South Carolina, 2 Nott
& McCord, 395, 397.
Topical Analysis of the Law of Tender.
1. ELEMENTS
1. Debtor.
1. Parties. {2. Creditor.
2. Indebtedness
3. Subject-matter
4. Offer of payment.
1. Money
2. Chattels .
•
1. Money
2. Chattels .
II. EFFECT OF TENDER
I. Of money.
2. Of chattels.
1. Domestic coin.
2. Foreign, coin.
3. Legalized paper.
4. Bank bills.
1. Portable.
2. Ponderous.
I. By whom.
2. To whom.
3. Amount.
4. When.
5. Where.
6. How.
I. By whom.
2. To whom.
3. Time and Place.
4. Disjunctive Conditions
5. Quantity.
6. Quality.
7. Manner of tendering.
CHAPTER X.
THE LAW OF TENDER.
§ 376. A Tender is an offer made by a debtor to deliver some-
thing to a creditor, which offer is made in pursuance of some
contract or obligation, and under such circumstances as to re-
quire no further act from the party making it to complete the
transfer.¹
Another definition is, an offer to do or perform an act which
the party offering is legally bound to perform to the party to
whom the offer is made.
For instance, if I owe you one hundred dollars, and wish to
make a tender of that sum, so as to prevent suit or the recovery
of costs against me if I am sued, or to save the accumulation of
interest, I offer you the money in payment, at the same time
showing it to you, and expressing verbally my willingness to pay
the debt. This would be a tender.
I.—ELEMENTS.
377. This subject, like every other, is constituted of certain
elements; and by the definition already given, it appears that
the elements of tender consist of parties, indebtedness, subject-
matter, and offer of payment or performance.
§ 378.-1. Parties.-These are debtor and creditor; or the
party who is under obligation to do something for another, and
the other who has the right to require the doing of it.
$379.-2. Indebtedness.-A tender admits an indebtedness
to the extent of the sum tendered or offered in payment.2
1 See Bouv. Law Dict.
23 Ta nt. R. 95; 6 Pick. R. 340.
294
THE LAW OF TENDER.
Unless allowed by provisions of statute, a tender cannot be
legally made to an action for general damages when the amount
is not liquidated, or capable of ascertainment by calculation.'
In this country cases of accidental or involuntary trespass
form an exception, in part by usage and in part by statutory pro-
vision. This seems to be settled in some States, and probably
would be held generally."
§ 380.-3. Subject-matter. The subject-matter, at least in
the sense of the term as used in this connection, is either money
or chattels.
1. Money.-A party owing a sum of money to another
may make a lawful tender, under the present laws of the United
States, in either of the following kinds of currency :
1. DOMESTIC COIN.-Gold or silver coin of the United States,
struck at the mint, is lawful tender.3
2. FOREIGN COIN.-Gold coins of Great Britain and France,
of certain specified fineness, are lawful tender according to
weight. The following silver coins are also included by act of
Congress as legal tender, according to weight and quality: The
Spanish pillar dollars, and the dollars of Mexico, Peru, and Bo-
livia, at 100 cents each; also the five-franc pieces of France, at
93 cents.*
3. LEGALIZED PAPER.-Treasury notes and fractional cur-
rency issued by authority of the United States general govern-
ment are lawful tender.5
4. BANK BILLS.-Bank bills are a good tender, unless they
are objected to by the creditor. They are in no sense a legal
tender; that is, they cannot be such in any such sense as the
other three kinds of funds referred to. The other kinds are legal
tender whether objected to or not.
The bank bill constitutes a large part of the currency of the
country, ordinarily passes as money, and when tendered, it is the
duty of the creditor to make it known if he objects to the kind
11 Parsons' Contr. 149; 2 Burr. R. 1120; 2 Ad. & E. R. 82; 19 Vt. R. 592.
.2 13 Wend. R. 390; 2 Conn. R. 659; Brown v. Neal, 36 Maine R. 407.
3 U. S. Stat. at Large, 250, § 16, passed 2d of April, 1792.... . . . .4 5 Id.
607... 5 Act of Congress, 25th Feb. 1862, Laws of Cong. 1862, ch. xxxiii;
also June 30, 1864, Laws of Cong. 1864, ch. clxxii.
ELEMENTS.
295
of currency. If he does not, he cannot afterwards raise the
objection.'
By not objecting, the creditor waives any objection that he
might have made; especially if he puts his objection to taking
the money on some different ground.2
2. Chattels.-With reference to the law of tender, it will
be convenient to divide chattels into two classes: portable, and
ponderous. This division is justified on the ground that the
act of tendering the one class of chattels may be very different
from what the law requires in tendering the other, as will be
seen presently.
1. Portable.-Articles or chattels of this class, as the word
implies, are such as may be conveniently handled and moved
from place to place.
2. Ponderous.—Articles or chattels of this class are such as
are not conveniently handled and moved from place to place, on
account of great weight or bulk; as saw-logs, bales of cotton,
barrels of flour, &c.
§ 381.-4. Offer of Payment.—A proper legal offer or tender
of payment of course includes the manner of making the offer.
It is a good defense to any future action on the claim, when and
only when it is properly done. If the tender is to be made in
money, the rules of law governing the act are very different from
those governing a tender of chattels.
These will, therefore, be more conveniently considered sepa-
rately.
382.-1. Money.-When a debt is payable in money, of
course nothing else is, or can be, lawfully tendered in discharge
of the obligation. In making a tender of money, we will consider
the necessary steps to be taken, under the following divisions:
1. By whom to be made; 2. To whom; 3. Amount; 4. When ;
5. Where; and 6. How.
1. By Whom.-A tender made by the debtor himself, to the
amount of the indebtedness, admits of no question as to its being
made by the right person.
1
But it may be made as well by a third person, at the debtor's
¹ U. S. Bank v. Bank of Georgia, 10 Wheat. R. 333, 347..
Knaggs, 8 Ohio R. 172; Snow v. Perry, 9 Pick. R. 542.
2 Wheeler v.
296
THE LAW OF TENDER.
request, and it will be sufficient. Even if made by a stranger,
without the knowledge or request of the debtor, but assented to
by him subsequently, it is a ratification of the agency, and the
tender is good.¹
If there are several debtors, a tender by all or any of them is
sufficient. The rule is the same whether the debtors are jointly,
or jointly and severally liable. If an agent is furnished with a
specific sum of money for the purpose of making a tender, and
he, at his own risk, tenders a greater sum, such tender is valid.²
Any one may make a valid tender for an idiot; and the
reason of the rule has been held applicable to a tender for an
infant by a relative who was not his guardian.³
A tender may be made by an inhabitant of a school district,
on behalf of such district, without any express authority; and
this, if ratified by the district, is a good tender*
2. To Whom. The proper person to whom to make the
tender is the creditor, or some one who properly represents him.
The tender may be made to any person who is actually author-
ized to receive the money.5
Tender to the merchant's clerk for goods previously bought
there is good, although the claim had been left with an attorney
for collection."
The tender in such a case would be valid even though the
clerk had been forbidden to receive the money.7
Tender to the attorney of the creditor with whom the claim
is left for collection is valid.s
If the creditor knows the day on which payment is to be
made, and voluntarily absents himself from home on that day,
under circumstances indicating an intention to avoid the debtor,
a tender by the latter to any proper member of the family whom
he may find at the creditor's house at that time, will be good."
¹ Harding v. Davies, 2 Carr. & Payne's R. 78; Read v. Goldring, 2 M. & Selw.
86....
. . .² Id. . . . . . . .³ Co. Litt. b; Brown v. Dysinger, 1 Rawle, 408..
4 Kincaid v. Brunswick, 2 Fairf. R. 188.....
R. 477; Hornby . Cramer, 12 How. R. 490....
475; McIneffe v. Wheelock, 1 Gray R. 600.
5
•
Goodland v. Blewith, 1 Campb.
6 Hoyt v. Byrnes, 2 Fairf. R.
. Moffat v. Parsons, 5 Taunt.
R. 307.... 8 Watson v. Hetherington, 1 Carr. & Kirwan's R. 36..
9 Judd v. Ensign, 6 Barb. R. 258; Smith v. Smith, 25 Wend. R. 405; S. C., 2
Hill, 351.
ELEMENTS.
297
A tender to an assignee of a debt or demand is a good tender.
If the money be due to several jointly, it may be tendered to
either of them.¹
3. Amount. The whole sum must be tendered, as the cred-
itor is not bound to receive a part of his debt.2
But this does not necessarily mean the whole that the debtor
owes to the creditor; for he may owe many distinct debts; and
if they are perfectly separable, as so many notes, or sums of
money otherwise distinct, the debtor has a right to elect such as
he is willing to acknowledge and pay, and make a tender of them.
And if the tender be for more than the whole debt, still it is
valid; unless it be accompanied with a demand of the balance,
and the creditor objects for that reason.³
the
3
4. When.-At common law, the tender must be made on
very day the money is due, provided that day be made cer-
tain by the contract.*
But the statutes and usages of our States generally permit
the tender to be made after that day, but before the action is
brought; and in some States it may be made after the action is
brought. It cannot generally be made before the debt is due, as
the creditor is not then obliged to accept it.
If a debt is drawing interest, no tender made before maturity
is good, unless the tender also includes interest up to the time
of maturity of the debt.5
A tender before an action is actually commenced is sufficient,
even though the demand is in the hands of an attorney who has
made out the papers for commencing the action, and has also
placed them in the hands of the sheriff for service; and it is not
necessary to tender any costs. This is especially the case where
the debtor does not know at the time of making the tender, that
costs have been incurred."
1
5. Where.-If a contract provides in express terms that a
¹ Douglass v. Patrick, 3 T. R. 683........2 Dixon v. Clark, 5 Com. Bench R.
365.... 3 Astley v. Reynolds, 2 Str. R. 916; Douglass v. Patrick, 3 T. R. 683;
Black v. Smith, Peake, N. P. 88..
4 City Bank v. Cutter, 3 Pick. R. 414;
5 Id. 187; Id. 240; Gould v. Banks, 8 Wend. R. 562....
4 Halsted R. 120; Saunders v. Frost, 5 Pick. R. 267.
Barb. R. 331; Johnson v. Comstock, 6 Hill's R. 10.
5 Tillou v. Britton,
6 Hull v. Peters, 7
298
THE LAW OF TENDER.
sum of money shall be paid at a particular place, a tender at that
place is sufficient, but is not valid at any other. But where no
place of payment is mentioned, and the debt is due in money,
the debtor is bound to seek the creditor wherever he may be
within the State, and tender payment there.'
If no place has been appointed for the payment of money,
the general rule is that a tender to the creditor, wherever he may
be found, will be valid.2
And this is the rule even as to rent, which may always be
paid on the land, though a personal tender to the creditor is
equally valid.3
It is a well-settled principle, as to rent payable in money or
kind, that where the contract is silent as to the place of pay-
ment, a tender on the land is good; and it is not required of the
lessee to make a tender to the person. The reason is that rent
issuing out of the land, savors so far of the realty, that it is pay-
able on the leased premises.*
6. How-To make a tender of money valid, the money must
be actually produced and proffered, unless the creditor expressly
or impliedly waives this production.5
It is not enough that the party has the money in his pocket,
and says to the creditor that he has it ready for him, and asks
him to take it, without showing the money. Under such cir-
cumstances, a creditor is not bound to say whether he will take
the money or not, until it is actually produced and offered
to him."
It is not sufficient for the debtor to say that he is ready to
pay, without offering to do so; and if, at the time of making an
offer to pay a specified sum, he retains the money in a bag on
his arm, instead of offering it to the creditor, the tender is in-
sufficient."
As a general rule, unless the demand consists of negotiable
¹ Littell v. Nichols' Admrs., Hardin R. (Ky.) 66.....
Morse, 8 Johns. R. 474..
2 Slingerland v.
3 Hunter v. Le Conte, 6 Cow. R. 728..
4 Walter v. Dewey, 16 Johns. R. 222, 224..
R. 637..
•
•
6 Id........." Id..
•
8
5 Bakeman v. Pooler, 15 Wend.
Sucklinge v. Coney, Noy's R. 74; 10
East's R. 101; Dickinson v. Shea, 4 Esp. 68; 3 Carr. & Payne R. 342; Breed v.
Hurd, 6 Pick. R. 356.
ELEMENTS.
299
paper, the tender must be made without any conditions, terms,
or qualifications, and without any protest against his liability for
the debt. He is not allowed to deny his liability to the amount
of what he tenders.'
When it is said that no condition must be annexed to the
tender, it properly means, no condition which the creditor can
have any good reason for objecting to. He would have the right
to object to the condition, that he must give the debtor a receipt
in full of all demands. Such a condition would vitiate the
tender.2
An exception to the rule that tender must be unconditional,
arises where the debt is upon negotiable paper. The indorser
of a note may insist upon the surrender of the note to him, as a
condition of payment.3
By a tender is meant, not merely that the debtor was once
ready and willing to pay, but that he has always been so, and
still is. The effect of it will therefore be destroyed if the cred-
itor can show a demand by him of the proper fulfilment of the
contract, at the proper time, and a refusal by the debtor.*
§ 383-2. Chattels.-The things to be tendered may not
be money, but some specific article or chatte'. It may be con-
sidered as settled that acts which would constitute a sufficient
tender of money, will not always have this effect in relation to
cha'tels.
The application of the law to this subject may be most easily
understood, by considering the matter under the following divi-
sions: 1. By whom the tender to be made; 2. To whom to be
made; 3. Time and place of making; 4. Disjunctive condi.
tions; 5. Quantity; 6. Quality; and 7. Manner of tendering.
1. By whom.
2. To whom.
With regard to the parties by whom, and to whom, the ten-
der is to be made, and the authority of agents to make or receive
1 Wood v. Hitchcock, 20 Wend. R. 47; 4 Camp. R. 156; 2 Carr. & Payne R.
50; 3 Bing. R. 304.. 2 Glasscott v. Day, 5 Esp. R. 48; Thayer v. Brackett,
12 Mass. R. 450..
3 Wilder v. Seelye, 8 Barb. R. 408...
4 Dixon v.
Clark, 5 Com. Bench R. 365; Cotton v. Godwin, 7 Mees. & Wels. R. 147.
• • •
300
THE LAW OF TENDER.
a tender, the rules of law are much the same as to chattels, as
they are in regard to tender of money.
3. Time and Place.-Where a contract is made, by the terms
of which the debtor is to deliver certain specific articles at a cer-
tain time, and at a certain place, he must make the tender at
the time and place mentioned, without any previous demand.
If he neglects to do so, he becomes liable to pay the amount in
money. A legal tender of the chattels at the time and place is a
full and complete discharge of indebtedness, although the cred-
itor was not there to receive them. The creditor can maintain
no action on the contract thereafter.'
When portable articles are to be delivered in payment of a
chattel note, on or before a specified day, but no place of pay-
ment is specified, the residence of the creditor is the place of
payment.2
If the chattels are the production of the debtor as manufac-
turer, and no place of payment is specified, the debtor's place of
business is the place of payment.
If ponderous articles are the subject-matter of the tender,
and no place is mentioned, but the time is specified, the debtor
or maker of the note ought to seek the creditor or payee before
the day of payment, and ascertain where he will have the ar-
ticles delivered. If a reasonable place is named, the debtor is
bound to deliver them at that place."
But the place of delivery in the case of ponderous, bulky
articles, should be reasonably convenient to both parties.*
Bulky articles will not be permitted to be brought into court,
as lighter or smaller articles might, even where the defense is
tender.5
If the creditor refuses or neglects to appoint a place, or pur-
posely avoids receiving notice of a place, the debtor may appoint
18 Johns. R. 474; Mitchell v. Merrill, 2 Blackf. R. 87; Coit v. Houston, 3
Johns. Cas. 243; Barns v. Graham, 4 Cow. R. 452.. 2 La Farge v. Ricket,
.8 4 Cow. R. 452.
Bixby v. Whitney, 5 Greenl. R.
5 Shotwell v. Wendover, 1 Johns.
5 Wend. R. 187; Goodwin v. Holbrook, 4 Wend. R. 377.
4 Howard v. Minor, 20 Maine R. 325;
192; Bean v. Simpson, 16 Maine R. 49..
R. 65.
ELEMENTS.
301
any place with a reasonable regard to the convenience of the
other party, and there deliver the articles."
If no expression used by the parties, and nothing in the
nature of the goods or the circumstances of the case controls the
presumption, then the place where the promise was made, is the
place where it should be performed. If the creditor sues the
debtor for non-performance in such case, he must show, either
that he was there ready to receive the chattels, or that the
debtor was unable to deliver them at that time and place.²
4. Disjunctive Conditions.—Where the promise is in the
alternative, or the conditions are disjunctive, either to pay a
specified sum, or to deliver certain chattels, at a particular time,
the right of election belongs to the promisor; and he may pay
the money or deliver the chattels at his option. But he must
pay the money or make the delivery before the day for perform-
ance has passed.³
But if that day is permitted to pass, without any election
of the promisor, this right of election is gone, and the promisee
now has an absolute right to the money, and may maintain an
action for its recovery.*
If the debtor fails to make a tender of chattels when he is
bound to, he is holden for the money.5
5. Quant 'ty. A contract to deliver a particular quantity of
chattels, at a specified time and place, requires the promisor, as a
general rule, to deliver the entire quantity at that time. The
contract is broken, unless the party promising makes a tender of
all the articles promised, and within the time. He cannot
recover in such case for a delivery of a part of them, though
accepted.
6. Quality. If a contract is to deliver goods or wares which
are articles of merchandise, and belong to a certain trade, this
will be construed to mean goods or wares of the kind, fashion,
and quality in common use in that trade, and not such as are
1 Smith v. Smith, 25 Wend. R. 405; Howard v. Minor, 20 Maine R. 325.
21 Parsons on Contr. 163.. 3 Plowman v. Riddle, 7 Ala. R. 775;
Stewart v. Donelly, 4 Yerg. R. 177; Gilman v. Moore, 14 Vt. R. 457...
♦ Id.... ... .5 Townsend v. Wells, 3 Day's R. 327..
7 Cow. R. 231.
•
•
6 Davenport v. Wheeler,
302
THE LAW OF TENDER.
antiquated and unsalable. The tender of an inferior quality is
not valid.¹
The kind and quality of the goods must be such as would be
requisite to make a sale of them legal. If a statute requires all
leather to be stamped in a particular manner, a tender of leather
not stamped will be invalid.²
7. Manner of Tendering.—Where the article to be tendered
is not separate, but mixed with other articles of like kind, there
must be such a separation as will enable the creditor to take his
own. It should be done in such a manner that the creditor need
not do anything more than to accept the property to vest the
title in him.³
The tender must be such as to vest the property in the cred-
itor. The articles should be so set apart and designated, as to
enable the payee to distinguish and know them from all others.
The absence of the payee will not dispense with such designa-
tion and separation by the debtor. The fact that the debtor had
the articles at the time and place, ready to be delivered if the
other party had been present, is not alone a sufficient tender to
vest the property in the other party, or to bar an action on the
contract.¹
Like a tender of money, a tender of chattels ought to be with-
out qualifications or conditions, or it will be invalid. A tender
by an agent, for instance, is not valid, if he will not deliver the
chattels to the other party, unless he will deliver up and cancel
the contract, even though the chattels were at the right place,
and at the right time."
11.-EFFECT OF TENDER.
§ 384. The effect of a tender of money is very different from
that which follows the tender of chattels.
1. Of Money.-The tender of money does not extinguish the
debt. Its only effect is to stop the accumulation of interest, and
¹ Dennett v. Short, 7 Greenl. R. 150........2 Elkins v. Parkhurst, 17 Vt.
R. 105.....
3 Barns v. Graham, 4 Cow. R. 452...... 4 Smith v. Loomis, 7
Conn. R. 110..
5 Robinson v. Batchelder, 4 N. H. R. 40.
EFFECT OF TENDER.
303
to protect the debtor from subsequent costs.
be kept good; that is, it must be continued;
brought into court in case the debtor is sued.
of tender will be unavailing.'
The tender must
and it should be
If not, the plea
If a party intends to avail himself of a tender of money in
case he is sued, he must show not only that the money was
properly tendered, but that it has been kept good; or in other
words, that the debtor was not only willing to pay at the time of
tendering the money, but that he always has been, and now is,
ready and willing to pay it.²
2. Of Chattels.-A debt payable at a certain time and place
in specific articles or chattels, is completely and fully discharged
or paid by a legal tender of the articles at the time and place,
and no action can be thereafter maintained on the contract.³
The debt being paid, the property of the goods has passed to
the creditor, and he may retain them as his own, and they are
now at his risk.¹
After the proper tender of chattels, the debt being dis-
charged, and the title to the property being in the vendee, if the
chattels are not taken possession of by him, but remain in the
possession of the vendor, the latter is responsible only as bailee.
Raymond v. Bearnard, 12 Johns. R. 274; Manny v. Harris, 2 Johns. R. 24.
2 Wilder v. Seelye, 8 Barb. R. 408; 10 Mod. R. 81; 23 Barb. R. 490.
•
3 Mitchell v. Merrill, 2 Blackf. R. 87; Smith v. Smith, 7 Conn. R. 110.
4 Rix v. Strong, 1 Root R. 55.
Topical Analysis of Liens.
I. ELEMENTS.
I. Parties.
2. Indebtedness.
3. Subject-matter.
4. Possession by bailee.
5. Bailee's right to possession.
1. By common law.
1. By Law
II. HOW CREATED .
2. By usage
2. By statute law.
3. By maritime law.
1. Of trade.
2. Between the parties.
III. KINDS.
3. By agreement of the parties.
1. General:
2. Special or particular.
IV. CLASSES OF PERSONS GENERALLY ENTITLED TO LIEN.
V. HOW WAIVED.
VI. HOW ENFORCED.
1. By express contract.
2. By neglect.
3. By new agreement.
4. By allowing change of possession.
5. By surrendering possession.
CHAPTER XI.
LIENS.
§ 385. A Lien is a right vested in one man to retain posses-
sion of the property of another until some charge upon it or
some pecuniary claim on account of it has been satisfied,'
The elements of a valid lien consist of—1. Parties; 2. In-
debtedness; 3. Subject-matter; 4. Possession by the Bailee or
Creditor; and 5. The Bailee's or Creditor's right to possession.
I.—ELEMENTS.
§ 386.-1. Parties.-The parties are-1. The bailee or credi-
tor, to whom something is due; and 2. The bailor or debtor,
who owes the creditor this claim or sum of money. It is not
always the case that the creditor is a bailee, nor that the debtor
is a bailor; but generally the parties may be thus known.
When these terms are not applicable, the parties may properly
be known as creditor and debtor, with few exceptions; and when
exceptions occur, other terms will be employed.
§ 387.-2. Indebtedness.-No lien can exist in favor of a ven-
dor or bailee without a present debt, charge, or claim, which
properly attaches to the property on which the lien rests.2
It is not necessary in all cases that the owner of the property
to which the lien attaches shall have voluntarily created indebt-
edness, or expressly sanctioned the act which brings it under the
lien. If goods are lost at sea, and come into the possession of a
person by finding, and the finder incurs expense and trouble
about them, he has a lien upon them for salvage. It does not
¹ Parson's Laws of Business, p. 112.
3
2 Bouv. Law Dict., art. Lien.
3 Hartford v. Jones, 2 Salk. Rep. 654; Hamilton v. Davis, 5 Burr. Rep
2732; Baring v. Day, 8 East's Rep. 57.
20
306
LIENS.
apply, however, to cases of finding upon land, unless authorized
by statute, as in case of estrays.¹
§ 388.-3. Subject-matter. Of course there must be some-
thing to which the lien attaches. This is called the subject-
matter. It must be capable of identification. If the lien is
upon money, for instance, in the hands of an individual, the
party claiming the lien must be able to show that the money
has been kept as a distinct fund.2
§ 389.-4. Possession by Bailee.-Possession is necessary to
create a lien, except in cases where it arises from a particular
contract, as in the case of a chattel mortgage, or from a levy,
when it is supposed to be in the actual possession of the officer
levying; and as a general rule, where the holder of the lien parts
with the possession of the property to which it is attached, his
lien is lost. The lien simply extends to the detention of the
property. It does not authorize the person holding it to sell it
without the consent of the owner.
Possession is not only essential to the creation, but also to
the continuance of the lien; and when the party voluntarily
parts with the possession of the property upon which the lien
has attached, he is divested of his lien. If the lien were to
follow the goods after they had been sold and delivered, the
incumbrance would become excessively inconvenient to the free-
dom of trade and the safety of purchasers.3
§ 390.-5. Bailee's Right to Possession. The validity of a
lien not only depends on possession, but the right to possession.
No lien exists where the party claiming it acquires possession by
wrong or by misrepresentation.*
For example, no lien exists where the act of the servant de-
livering the property is totally unauthorized, and the pledge of
it is tortious against the owner, whether delivered as a pledge or
for the execution of the purposes of a trade thereupon.5
1 Nicholson
3 Sandf. 132.
•
Chapman, 2 H. Black. Rep. 254.
2 Grinnell v. Suydam,
3 Jones v. Pearle, 1 Str. R. 556; Sweet v. Pym, 1
* 2 Term Rep. 485; 1 Campb. 12..
4; 2 Kent's Com. 639..
Ch. 111; 6 East, 17; 4 Esp. 174 · 5 Term. 604
East's R.
Б
55 Ves.
•
HOW CREATED.
307
II.-HOW CREATED.
§ 391. A lien may be created either by operation of law, by
usage, or by agreement of the parties. We will consider these
in their order of statement:
§ 392.-1. By Law.--A lien may be created by force of the
common law, or by statute law, or by maritime law.
1. By Common Law.-This is a lien recognized by the
common law without any reference to provisions of statute. As
distinguished from the other classes, it consists in a mere right
to retain possession until the debt or charge is paid. It gener-
ally arises in cases of bailment.
2. By Statute Law.-This class of liens includes some
of those which subsist at common law, but have been extensively
modified by statutory regulations, as well as those which subsist
entirely by force of statutory regulations.
3. By Maritime Law.-This kind of lien does not nec-
essarily include or require possession. The word lien is used in
maritime law, not in the strict legal sense in which it is under-
stood in courts of common law, in which case there can be no
lien where there is no possession, actual or constructive.¹
A distinction is made in the United States between qualified
maritime liens which depend upon possession, and absolute mari-
time liens which do not require nor depend upon possession."
§ 393.-2. By Usage.-Liens attach to property from two
kinds of usage-1. Of trade generally; 2. Between the parties.
1. Of Trade. This usage, to create a lien, must be so
general that the party delivering the goods may be presumed to
have known it, and to have made the right of lien a part of the
contract.3
The lien must be for a general balance arising from transac-
tions of a similar character between the parties, and that the
debt must have accrued in the business of the party claiming the
lien.*
2. Between the Parties.-This lien requires proof of
¹ 22 Eng. L. & Eq. 62...
Whitaker on Liens, 33.
7 How. 729.
3 3 Bos. & P. 50......
310
LIENS.
an additional value to the goods of another, has a Lien upon the
property for his reasonable charges, and a right to retain such
property until such charges are paid.'
Thus, a wharfinger or a warehouseman has a Lien upon the
goods deposited with him for his charges."
Tailors, dyers, millers, printers, and whoever take property in
the way of their trade or occupation, to bestow labor or expense
upon it, have cach a Particular Lien for their customary com-
pensation, unless there is some express or tacit understanding
between the parties inconsistent with the exercise of the right.3
Liens, in whatever way acquired, or however created, whether
by operation of law, usage, or by the express agreement of the
parties, are either General or Special. These are the two general
terms under which all liens are included.
Originally, under the common law, the right of lien existed
in but few cases. The liens of tavern keepers, common carriers,
warehousemen, ferrymen, and farriers, and other bailees for hire,
or such liens as were held by vendors and salvors, were the only
liens which the common law gave; and these were given only
because these classes of persons were often obliged to be at una-
voidable expense and trouble.*
To these may be added liens by express contract.
Liens arise in several of the States under statute on the
property of the judgment debtor, on the rendition of judgment
in a court of record. In other States the lien does not attach
until the execution is put into the hands of the sheriff; and, in
still others, not until an actual levy is made."
The right of lien also arises under attachment after levy.
But the statutes are so various on the subject of liens, either by
judgment, execution, or attachment, that the student will find
it necessary to consult the statute of his own State as to the
matter, for the information which he may desire.
1 Wilson v. Martin, 40 N. Hamp. R. 90; Close v. Waterhouse, 6 East's R.
523; Grinnell v. Cook, 3 Hill's R. 491; Oaks v. Moore, 24 Maine R. 214.......
2 Boardman v. Sill, 1 Campb. R. 409; Low v. Martin, 18 Ill. R. 288; Story on
Bailm., § 453.. 3 Houck on Liens, § 5; Addison on Contr. 1174; Gilman v.
Brown, 1 Mason's R. 117; Cowell v. Simpson, 16 Ves. R. 275; 2 Kent's Com.
638... 4 Houck on Liens, § 3........5 See Bouv. Law Dict., art. Lien, for a
full synopsis of the law of lien in the several States on rendition of judgment.
KINDS.
311
There is a kind called Maritime Lien, as already mentioned,
the particular character and nature of which are defined and
governed by maritime law. This law relates particularly to the
affairs and business of the sea, to ships, their crews and naviga-
tion, and to the marine conveyance of persons and property.¹
As already stated, this kind of lien does not necessarily in
clude or require possession.
The shipper of goods has a lien upon the ship for the valu
of the goods sent, which can be enforced in admiralty."
The owner of a ship has a lien on the cargo carried for the
freight earned, whether reserved by the bill of lading or not.³
A Master's Lien on an English vessel is recognized by the
admiralty courts of the United States. He has the same rights,
liens, and remedies for the amount of his wages which are ex-
tended by English law or custom to any seaman not being a
master, for his wages.*
But in the United States, and on a United States ship, the
master has no lien for his wages.5 The master has a lien, how-
ever, on the freight for disbursements on account of it.
6
The seamen have a lien on ship and freight both, for wages.
And this lien follows, no matter into what hands they may fall.'
By virtue of express statutes in nearly all the States, me-
chanics and material-men, or persons furnishing labor or mate-
rials for the erection of houses or other buildings, are entitled
to what, in common parlance, is known as a Mechanic's Lien.
This lien gives a preference over other creditors in the payment
of debts, out of houses and buildings so erected, and to the land,
to a greater or less extent, on which the buildings stand. The
right is based solely upon the statutory enactments of the differ-
ent States, securing to the laborer or material-man compensation
for his work or materials. S
It partakes of the character of a particular or special lien at
•
•
¹ Bouv. Law Dict., art. Maritime Law..
21 Blatchf. & H. Adm. 300;
Olcott Adm. 43; 1 Blatchf. C. C. 173; 1 Sumn. C. C. 551.
3 12 Mod. R.
447; 6 East's R. 622; 4 Camp. R. 298; 7 Taunt. R. 14; 4 Mass. R. 91; 6 Pick.
Mass. R. 248; 18 Johns. R. N. Y. 157; 5 Wend. R. 315.. 4 22 Boston Law
Reporter 150..... 5 2 Paine's C. C. 201; 8 Serg. & R. 18; 3 Mass. C. C. 91; 14
Penn. St. R. 34; 18 Pick. 530..... 6 14 Mass. R. 91; 5 Wend. R. 315……….
2 Sumn. C. C. 443... .8 Houck on Liens, § 8.
312
LIENS.
common law. The principle embraced in the statutes is founded
upon this consideration of natural justice-that the party who
has enhanced the value of real estate, by incorporating therein
his labor or materials, shall have a preferred claim on the prop-
erty for the value of such labor or materials.¹
Many of the States have made full provisions, by statute, for
the liens of the repairers of domestic ships and builders of ships
and steamboats, and even of canal-boats.
IV.-CLASS OF PERSONS GENERALLY
ENTITLED TO LIEN.
§ 398. The student should understand that the existence of
a lien does not prevent the party entitled to it from pursuing
any remedy which he may have at law, and collecting the debt
or claim in that manner.
When articles are subject to a particular lien, and part of
them have been given up and part retained, the articles unde-
livered may be held for the payment for all the labor, skill, or
expense laid out upon the whole, under the same contract, as it
constitutes but one debt.2
The following classes of persons are generally entitled to the
right of lien :
1. Bailees, who perform labor and services upon the thing
bailed, at the request of the bailor.³
2. Innkeepers, upon the baggage of their guests, whom they
have accommodated.
3. Common carriers, upon the goods carried, for the amount
of their freight and disbursements.
4. Vendors, on the goods sold, for the payment of the price,
where no credit has been promised expressly or by implication.
5. Agents or factors have a lien upon the goods of their prin-
cipals for advancements made for their benefit.
6. All persons whom the law compels to receive property for
any legal purpose, and bestow labor or expense upon it.'
¹ Houck on Liens, § 9.
32 Kent's Com. 635.
•
2 McFarland v. Wheeler, 26 Wend. 467, 480.
4
2 Kent's Com. 634.
HOW WAIVED.
313
V.-HOW WAIVED.
§ 399. A party may have the right of lien, but, neglecting to
enforce it, may lose the right. There are several ways by which
a lien may be waived or lost.
1. By Express Contract.-Parties have the control of their
own property, and the right to direct their own business as they
please, and, of course, can make an agreement that no lien shall
exist, though the law would give a lien but for such agreement.
The lien is destroyed when a factor makes an express stipu-
lation, on receiving the goods, to pay over the proceeds. Such a
contract is inconsistent with the right of lien.¹
The right of lien is to be deemed waived when the party
enters into a special agreement, inconsistent with the existence
of the lien, or from which a waiver of it may fairly be inferred,
as when credit is given by extending the time of payment, or
distinct and independent security for payment is taken.²
2
2. By Neglect. Where the right of lien exists, and is in-
tended to be relied upon by the party owning it, he should dis-
tinctly assert it, whenever he intends to rely upon it. If, for
instance, when the goods are demanded of him, he claims to re-
tain them on some other ground, never mentioning his lien, he
is considered as having waived it, and the owner of the goods.
may sue him and recover, without having first tendered to him
the amount of his lien.³
3. By New Agreement.-If a debt is already secured by a
lien upon property, and the parties come to a new arrangement
with each other, agreeing that the debt shall be paid in a par-
ticular manner, the lien is gone.*
4. By Allowing Change of Possession.-Any change of the
character in which the party claiming the articles under lien
holds them, if voluntarily made, results in the loss of the right
of lien. If, for instance, a party having a lien on goods causes
them to be taken in execution at his own suit, his right of lien
•
2 Gilman v. Brown, 1 Mason's R.
1 Walker v. Birch, 6 Term R. 258..
191... ...³ Saltus v. Everett, 20 Wend. R. 267; 1 Camp. R. 410; 7 Ind. R. 21.
4 Pinnock v. Harrison, 3 M. & W. 532.
314
LIENS.
is gone. For the nature of the possession and the character of
his claim are so altered by this voluntary act as to be entirely
inconsistent with the further existence of the lien.'
5. By Surrendering Possession.-If a party who has a right
of lien upon property in his possession voluntarily parts with the
possession of the property, the lien is gone.2
But a common carrier does not lose his lien when he has been
induced to deliver the goods to the consignee upon a false and
fraudulent promise made by him that he would pay the freight
as soon as the goods were delivered.³
If the price is not paid in such case, the carrier may sue in
replevin and recover the goods.*
But if the possession of the property is once fairly and volun-
tarily surrendered by the party having a lien on it, the right of
lien is gone, and it does not revive, although he may afterwards
regain possession of the property."
But if the property is stolen, or taken away by a trespasser,
or is obtained by fraud, the lien is not extinguished."
VI. HOW ENFORCED.
§ 400. As to the proceeding by which a lien may be enforced,
nothing need be said here, except that it depends entirely upon
the nature and character of the lien-whether an innkeeper's,
factor's, forwarder's, common carrier's, or whether it arises from a
mortgage, attachment, judgment, or execution, or by whatever
means it originates. The enforcement of it depends entirely
upon its peculiarities; and the limits within which this work
is intended to be brought will not admit of directions in each
particular case.
¹ Jacobs v. Latour, 5 Bingh. 130...
2 McFarland v. Wheeler, 26 Wend.
•
467; Sweet v. Pym, 1 East, 4.......3 Bigelow v. Heaton, 6 Hill's R. 43………..
• Id..... 5 Sweet v. Pym, 1 East's R. 4........ Wallace v. Woodgate, Ryan
& Moody, 194; S. C., 1 Carr. & Payne's R. 574.
• •
Topical Analysis of Interest ano Usury.
I. General view.
2. How established.
3. Less than legal rate, by agreement.
1. Where contract made.
4. Law of place
I. INTEREST. 5. Allowable.
2. Where contract to be performed.
3. When no place specified for performance.
1. By special agreement.
2. On cash advances.
3. After maturity of claim.
4. Accounts.
{
1. After liquidation.
2. Running, when.
3. By custom.
5. On goods sold for cash,
6. On judgments.
7. For labor and services, when.
8. By partners, when.
9. On policy after loss.
10. On bills and notes after due.
11. Interest on intercst.
1. When principal not due, unless agreed
2. When no agreement to pay.
6. Not Allowable
•
3. On unliquidated demands.
4, Board and lodging.
5. Labor and services.
7. Rules for computing.
316
TOPICAL ANALYSIS OF INTEREST, ETC.
II. USURY
1. General view.
2. Elements
3. What is not .
4. Consequences of {
1. Loan of money.
2. More than legal rate.
3. Agreement absolute.
4. Absolute promise to pay principal.
5. Interest reserved at date of contract
6. Must be corrupt intent.
1. Compound interest.
2. Expenses for negotiating loan.
3. Interest in advance.
4. Charges for hazard.
5. Post-obit obligations.
6. For use of goods and chattels,
7. Loan of animals.
8. Borrower making present to lender
9. Extra interest in alternative.
10. Sale of valid paper below par.
11. Mistake in computing interest.
12. Exchange of notes.
13. Loan of one's credit.
14. Sale or exchange of property.
1. Effect on remote securities.
2. Statutory penalties.
1
CHAPTER XII.
INTEREST AND USURY.
1.-INTEREST.
§ 401-1. General View.-Interest is a compensation paid
by the borrower to the lender for the use of money, and by a
debtor to his creditor in recompense for his detention of the
debt.
As commerce cannot exist without mutual and extensive
credit, the allowance of moderate interest tends greatly to the
benefit of the public, especially in a commercial and trading
country.¹
Unless money can be borrowed, trade can hardly be carried
on; and if no premium were allowed for the hire of it, few per-
sons would care to lend it; or at least the ease of borrowing at
short warning, which is the life of commerce, would be entirely
at an end.
Thus, in the dark ages of monkish superstition and civil
tyranny, when interest on money was laid under a total interdict,
commerce was also at its lowest ebb, and fell entirely into the
hands of the Jews and Lombards. But when men's minds began
to be more enlarged, when true religion and real liberty revived,
commerce grew again into credit; and again introduced with
itself its inseparable companion, the doctrine of loans upon
interest.
As to any scruples of conscience, since all other conveniences
of life may either be bought or hired, there seems to be no
greater oppression in taking a recompense or price for the hire
of this, than of any other convenience.
To demand an exorbitant price is equally contrary to con-
science, for the loan of a horse, or the loan of a sum of money;
1 2 Black. Com. 455.
318
INTEREST.
but a reasonable equivalent for the temporary inconvenience
which the owner may feel by the want of it, and for the hazard
of losing it entirely, is not more immoral in one case than it is in
the other. Indeed, the absolute prohibition of lending upon.
any, even moderate interest, introduces the very inconvenience
which it seems meant to remedy. The necessity of individuals
will make borrowing unavoidable.
Without some profit allowed by law, there will be but few
lenders; and those principally bad men, who will break through
the law and take a profit, and then will endeavor to indemnify
themselves from the danger of the penalty, by making that profit
exorbitant.
A capital distinction must therefore be made between a
moderate and exorbitant profit; to the former of which we
usually give the name of interest; to the latter, the truly odious
appellation of usury. The former is necessary in every civil
state, if it were but to exclude the latter, which ought never to
be tolerated in any well-regulated society.'
The exorbitance or moderation of interest for money lent,
depends upon two circumstances: first, the inconvenience of
parting with it for the present; and second, the hazard of losing
it entirely. The degree of inconvenience depends entirely on the
quantity the individual lender has on hand, and the means he
may have at his command to obtain more; and this last depends
somewhat on the amount of money in the country compared with
what is wanted for business purposes.
As to the hazard of losing entirely the sum lent, this will
depend on the character of the security given for it. The better
the security, the less the hazard, and the lower the interest, so
far as it depends on the hazard. A man might be willing to
lend on good personal responsibility, say at ten per cent. On
first-class mortgages, he might be willing to accept seven per
cent; the difference of hazard being three per cent. But he will
lend to the Government for six per cent, the hazard
ing at all.
being noth-
Thus reasons one of the most eminent of English jurists on
1 2 Black. Com. 455, 456.
LAW OF PLACE.
319
this complicated subject; from which we can infer the necessity
and propriety of bringing this whole matter under statutory
regulation, as to the rate per cent to be charged for the use of
money loaned.
§ 402.-2. How Established.-When and where there are no
statutory regulations on the subject, the parties are at liberty to
agree upon such a rate of interest as they may choose. But the
legislatures of all, or nearly all the States of the American
Union, have imposed restrictions upon the lender, restraining
him from taking interest for money lent, beyond a certain limit
prescribed by legislative enactment. In other words, the rate of
interest is established by statute.
The sta-
§ 403.-3. Less than Legal Rate by Agreement.
tutes of the States generally apply to every case in which interest
is recoverable, whether on bonds, bills, notes, judgments, and
accounts stated, as well as all other demands of whatever name
or nature. But the parties may, if they choose, stipulate for a
lower rate of interest than that fixed by statute; and if they do
so, the agreement will settle as to the amount recoverable.
§ 404.-4. Law of Place.-A contract may be made contain-
ing a stipulation that it shall be executed at the place or in the
State where it is made, or that it shall be executed in another
place or State than that in which it is made; or it may contain
no stipulation whatever in reference to the place of its execution.
With reference to interest these features of the contract will
govern the rate, when there is no stipulation between the parties.
1. Where Contract Made.—It is a general rule that
the law of the place where contracts are made, if such contracts
are purely personal, will govern as to their construction and
validity.
In the absence of any agreement on the subject, a debt is
presumed to be payable at the place where it was contracted,
and where the creditor resides, and interest is to be computed
according to the rate allowed by the laws in force at that place.¹
2. Where Contract to be Performed.-But if a
¹ Pomeroy v. Ainsworth, 22 Barb. 120; Balma v. Wombough, 38 Barb. 352;
Stewart v. Ellice, 2 Paige's R. 694; Smith v. Smith, 2 Johns. R. 235; Hosford v.
Nichols, 1 Paige's R. 220.
320
INTEREST.
contract is made in the State of New York which is to be per-
formed in Massachusetts, and it is made with reference to the
laws of Massachusetts, the contract will be construed according
to the laws of that State. If interest is stipulated to be paid in
such contract, the rate will be six per cent, although by the laws
of New York it is seven¹
3. Where no Place Specified for Performance.-
If no place of performance of a contract is expressly stated, nor
in any way implied from the terms of the agreement, the law of
the place where it is made will govern."
If a contract is to be performed partly in one country, and
partly in another, each portion is to be interpreted according to
the laws of the country where it is to be performed." These
rules, of course, govern with reference to the payment of interest,
as well as with regard to any other features of the contract.
As there are some claims and demands that do not draw in-
terest, it will be well to inquire on what classes it is allowable.
§ 405.-5. Allowable.-Interest is allowable on all the follow-
ing classes of claims :
1. By Special Agreement.-The right to interest in
all cases arises where the debtor at the time of contracting the
debt expressly promises to pay it. As interest is lawful within
the limits fixed by statute, it is perfectly competent for the par-
ties to agree on its payment to that extent; and of course this
depends on the statute of the State where the contract is made.
2. On Cash Advances.--Where, in the usual course of
business, from the nature of the transaction, it becomes neces-
sary for one party to make advances of money for the other, and
the money is advanced, as in the case of a forwarding merchant,
the party so advancing is entitled to charge interest from the
time such advances are made, if the other party knows that such
is the ordinary usage.*
It is a general rule of law that interest is allowable on cash
advanced by one person for another, although the advances rest
in the form of a mutual, current, unliquidated account.5
3 Id..
• •
Fanning v. Consequa, 17 Johns. R. 507; Faden v. Slater, 4 Johns. R. 183.
4 Meech v.
.2 Balma v. Wombough, 38 Barb. 352..
Smith, 7 Wend. R. 315........5 Rensselaer Glass Factory v. Reid, 5 Cow. R
588; Trotter v. Grant, 2 Wend. R. 413, 415.
WHEN ALLOWABLE.
321
3. After Maturity of Claim.-From the time a de-
mand becomes due and payable, interest is recoverable until the
principal is paid.' Hence it is recoverable against one who has
collected money and converted it to his own use, from the time
the money ought to have been paid.2
Also a party who receives money belonging to another, but
refuses to pay it over, is liable for interest, although he has a
set-off, and the precise amount due from him is not liquidated
until after commencement of suit.3
If a sheriff is in default for not paying over money pursuant
to an order of court, he is liable for interest on the amount from
the time when demand was made under such order.¹
If a sheriff retains money collected on execution beyond the
return day, he is liable to pay interest.5
So if a constable does not return an execution within the
time fixed by the statute, the judgment creditor may maintain
suit against the constable, and recover not only the amount of
the execution, but interest from the time of the rendition of the
judgment on which the execution was issued."
4. Accounts.-In ordinary cases of book account, interest
is not collectible. But there are cases where interest attaches
even to book account; as, for instance :
1. After Liquidation.-Interest is due on a balance of book
account from the time that it is liquidated; that is, from the
time the parties have looked over their accounts, and come to
agreement as to the sum or amount due. The balance is con-
sidered liquidated also, when the account is rendered, provided
no objections are made to it."
But this rule is to be taken with this qualification; that the
interest is chargeable on a balance of accounts, only from the
time that the party against whom the charges are made, has
notice of the deficiency against him.8
¹ Williams v. Sherman, 7 Wend. R. 109..
2
• • •
People v. Gasherie, 9 Johns.
R. 71... 3 Greenly v. Hopkins, 10 Wend. R. 96.... 4 Slingerland v.
Swart, 13 Johns. R. 255.
•
5 Crane v. Dygert, 4 Wend. R. 675..
• Thomas v. Weed, 14 Johns. R. 255.
7 Walden v. Sherburne, 15 Johns.
R. 409; Beers v. Reynolds, 12 Barb. R. 288; S. C., 1 Kern. 97.........8 Kane v
Smith. 12 Johns. R. 156.
21
322
INTEREST.
2. Running, when.-As already stated, interest is not gen-
erally collectible on an open running book account for goods
sold. But there are instances where it may be recovered; as
where the time is specified for which credit is to be given, and
that time has expired; or where there is an express or implied
agreement that interest shall be allowed.¹
1
It is not necessary to prove an express agreement, in such
cases, to pay interest. It may be inferred from the course of
dealing between the parties; and the agreement would be im-
plied, if interest has been charged and allowed before, and under
like circumstances.2
3. By Custom.-Where it is the uniform practice of the
creditor to charge interest, and this is known to the debtor or
customer at the time of his deal with the creditor, interest may
be chargeable on book account.
So where this is the general usage in any particular trade or
branch of business (to charge interest), all parties having knowl-
edge of this usage are presumed to make their contracts and
purchases with reference to it.3
5. On Goods Sold for Cash. If goods are sold on
the terms of cash payment, and they are not paid for at the time
of the sale, the purchase price will draw interest from the date
of the transaction.*
And a sale is always presumed to be for cash unless it is
proved that credit was to be given.
6. On Judgments.-Every judgment rendered by a court.
of competent jurisdiction, and which has been perfected, bears
interest from the time of its rendition."
7. For Labor and Services, when. - Interest is
recoverable in case of a special contract for labor and services,
where the compensation is agreed upon at a specific sum per
month. If payment is not made in accordance with the agree-
ment, the balance due at the end of each month draws interest. 6
1 Esterly v. Cole, 3 Comst. R. 502; S. C., 1 Barb. 235... .. 2 Id......
Esterly v. Cole, 3 Comst. R. 502; and S. C., 1 Barb. R. 235.
Gibbs, 1 Hall's R. 602..
4 Metc. Mass. R. 317..
11 Wend. R. 477.
•
•
4 Sewall v.
5 4 Dall. R. 251; 5 Binn. R. 61; 3 Wend. R. 496;
6 Still v. Hall, 20 Wend. R. 51; Feeter v. Heath.
WHEN NOT ALLOWABLE.
323
8. By Partners, when.—If a partner withdraws funds
from the partnership belonging to the firm, or uses such funds
in his own private trade or speculations, he must not only account
for all the profits arising from such speculations, but he will be
liable for interest on the money so withdrawn.¹
9. On Policy after Loss.-When a loss occurs under
a policy of insurance, the loss to the amount of the policy be-
comes a claim against the insurance company, in favor of the
policy holder, as soon as the money is due according to the terms
of the policy. The policy bears interest from the time it is
due.2
10. On Bills and Notes after Due.-If promis-
sory notes and bills of exchange do not specify the payment of
interest, interest is not allowable until maturity. But from the
time they become due they bear interest whether it is so specified
or not. If payable with interest, they bear interest from date,
unless some other time is specified, from which interest begins.3
11. Interest on Interest.-As a general rule, interest
on interest, or compound interest, is not allowable. Though, a
contract is not usurious, nor is it void, because of a stipulation
for the payment of compound interest. But the courts will not
enforce its payment, when the agreement is made before any in-
terest has accrued.*
But if there is a debt already due which has accumulated in-
terest, and is not paid, an agreement between the parties may be
made that principal and interest shall be added together, and
that they shall become a new principal and draw interest. An
obligation for the payment of interest on such a debt will be sus-
tained by the courts either of law or equity.5
§ 406.-6. Not Allowable.-There are certain classes of claims
and demands on which no interest is payable, a few of which will
be noticed.
1. When Principal not Due, unless Agreed.-
Stoughton v. Lynch, 1 Johns. Ch. 467; S. C., 2 Johns. Ch. 209; Ames v.
Downing, 1 Bradf. 321.. 2 Vandenheuvel v. United Ins. Co., 1 Johns. R.
406, 413.. ..3 Kennerby v. Nash, 1 Starkie N. P. R. 452.
Ch. 13; 6 Id. 313... 5 Kellogg v. Hickok, 1 Wend. R. 521;
Corning, 1 Barb. R. 627; Mowry v. Bishop, 5 Paige's Ch. R. 98.
4
1 Johns.
Townsend v.
324
INTEREST.
Unless there is a special agreement to that effect, interest is not
collectible until the principal becomes due. For instance, a
note payable in ten annual installments with interest, the first
payment to become due on the first day of June, 1848, does not
draw interest annually on the whole sum. In such case the in-
terest on each installment only is payable as it falls due.¹
2. When no Agreement to Pay.-Unless there is an
express agreement to pay interest on items for freight, wharfage,
or storage, it cannot be collected by forwarding and commission
merchants; or unless that is a custom, and known to the party
charged, they can collect it on cash advances only."
It is a well-settled rule of law that interest is not recoverable.
where there is no agreement to pay it, unless the creditor's de-
mand is either liquidated, or capable of being ascertained by
computation merely, or can be determined by reference to the
ordinary rates of the market.³
3
If a note is made payable on demand, it does not bear interest
from its date, but from the time payment is demanded, as it is
not due until that time.¹
3. On Unliquidated Demands. - Interest is not
allowable on unliquidated accounts for goods sold and delivered,
unless there is an express or implied agreement to pay it, if no
time is specified for the payment.5
Accounts which consist of items on the part of the creditor,
and only of credits and payments on the part of the debtor, are
unliquidated accounts, and do not bear interest without an
agreement for interest, either express or implied."
4. Board and Lodging.-Interest is not allowable
upon unliquidated demands for board and lodging, where no
price or time of payment is agreed upon between the parties, nor
any inference can be drawn from facts and circumstances, and no
proof can be furnished of usage on the subject.7
•
1 French v. Kennedy, 7 Barb. R. 452; Bander v. Bander, 7 Barb. 560; S. C.,
5 How. R. 41.
2 Trotter v. Grant, 2 Wend. R. 413.
3 McMahon v.
N. Y. & Erie R. R. Co., 6 E. P. Smith, 463
4 Bishop v. Sniffin, 1 Daly,
155; Herrick v. Woolverton, 42 Barb. R. 50; Wait's Law & Prac., vol. 2, 1089,
note 267........ McKnight v. Dunlop, 4 Barb. R. 36; Van Buren v. Van
Gaasbeck, 4 Cow. R. 496; Newell v. Griswold, 6 Johns. R. 45; Tucker v. Ives,
6 Cow. R. 193.... Wood v. Hickok, 2 Wend. R. 501..... 7 Holmes v.
5
Rankin, 17 Barb. R. 454.
ELEMENTS.
325
5. Labor and Services.-Interest is not recoverable on
an unliquidated account for work, labor, and services.'
7. Rules for Computing.-As to the rules for computing in-
terest, see chapter on PAYMENT, tit. Rules as to Interest, which
it is unnecessary to repeat in this place.
II.-USURY.
§ 407. We have seen that interest to a certain limit defined
by statute, at this day, is lawful. But the payment of money
for the use of money formerly was called usury, and was against
the common law and the statutes of Great Britain; and it was
forbidden by the laws of King Alfred. The taking of interest
was forbidden under severe penalties. As all interest was un-
lawful, it was called by the odious name of usury. But since
interest to a certain extent is now lawful, a distinction is recog-
nized between interest and usury.
§ 408.—1. General View.— Usury is defined to be the excess
over the legal rate of interest charged to a borrower of money to
be paid to the lender for its use. A shorter definition may be
given thus usury is unlawful interest. And, as already stated,
originally the word was applied to all interest reserved for the
use of money, as it was forbidden by law.
§ 409.-2. Elements.-Several circumstances must combine
to constitute usury, which we call elements, as there can be no
usury without them. These elements are:
1. Loan of Money.-In substance and effect the loan
must be of money, and not of goods and chattels, or choses in
action, unless such things are intended as a mere cover for a loan
of money. For instance, I wish to obtain of you a thousand
dollars for one year, and you are willing to let me have it, but
not at the legal rate of interest. But you offer to let me have
the sum if I will take a quantity of goods, which you fictitiously
value at four hundred dollars, and take my note due in one year
for fourteen hundred dollars. I accept the offer and obtain the
¹ Rensselaer Glass Factory v. Reid, 5 Cow. R. 588; Doyle v. St. James'
Church, 7 Wend. R. 178.
326
USURY.
money. The presumption of law in such case is that the trans-
action is usurious.
If goods are forced upon me as a condition of letting me have
the money, and they are taken at a price beyond their value, this
is usury.¹
Another case will illustrate this principle. If I apply to you
for a loan of money, and you make as a condition of the loan
that I shall buy of you at par several shares in an insurance
company, when in fact the shares are below par, the transaction
is usurious.?
The loan in such cases is really a disguised loan of money
only.
2. More than Legal Rate.-Another element in usury
is, that more than the legal rate of interest must be reserved by
the lender. The object of the various statutes of the States on
this subject is to guard against this. The taking more than the
legal rate enters into the definition of usury, and there can be no
usury without it.3
3. Agreement Absolute.-The agreement to take un-
lawful interest must be unqualified and absolute, or it will be no
usury. If the lender stipulates for the chance of an advantage
beyond the legal interest, the contract is usurious.ª
4. Absolute Promise to Pay Principal. There
must be a contract for the return of the principal at all events;
for if the return of the principal with interest, or the principal
only, depend upon a contingency, there can be no usury.5
5. Interest Reserved at Date of Contract.—To
render a contract usurious, the unlawful interest must be reserved
at the time of the agreement. No subsequent reservation, or
arrangement for a usurious security, will invalidate the original
claim. For instance, where a debt or note is originally free from
usury, and valid, and a subsequent note or security is given,
which includes a usurious premium for forbearance, the latter
note or security is void, and cannot be enforced. But the original
¹ Blydenburg on Usury, 42...
536.....
•
2 Eagleson v. Shotwell, 1 Johns. Ch. R.
3 Woodruff v. Hurson, 32 Barb. 557; Morgan v. Mechanic's Bank,
19 Barb. 584...... 4 Thomas v. Murray, 34 Barb. R. 157........5 Bouvier's
Law Dict., tit. Usury, 3.
WHAT IS NO T.
327
debt or note is not affected by the subsequent agreement for
usury, and the amount may be recovered by action.'
6. Must be Corrupt Intent.-To constitute usury,
there must be an unlawful or corrupt intent confessed or proved.
The party must intentionally take or reserve, directly or indirectly,
as interest, or as a compensation for giving time of payment,
more than the legal rate of interest.²
To render a contract usurious, both parties must be cognizant
of the facts which constitute the usury. If a negotiable note,
therefore, tainted with usury in the hands of the original payee,
is transferred to an innocent holder, and he receives new security
for it or for the debt from the maker, and gives up the note
without knowledge of the usury, the new security is not
usurious.3
§ 410.-3. What is Not.-Having briefly considered those
elements or circumstances which are necessary to enter into
the contract in order to constitute usury, let us look at some of
those transactions which may seem to have a color of usury, but
which the courts decide not to be usurious.
1. Compound Interest.-This is interest upon interest.
For instance, a note for one thousand dollars with interest at 7
per cent, at the end of one year would amount to one thousand
and seventy dollars. If now the seventy dollars be added to the
one thousand, and the aggregate becomes a new principal, there
is a principal of one thousand and seventy dollars drawing inter-
est. So, at the end of the second year, there would be an accu-
mulation at compound interest of $144.90, instead of $140,
which would be the accumulation at simple interest; the differ-
ence between the two methods being $4.90. The compound in-
terest method is not allowed by law, though if agreed to between
the parties, it is not usury, nor even if it is paid. But the
courts will not enforce a contract for the payment of compound
interest, the uniform current of decisions being against it.*
But though the courts will not sanction a contract for com-
¹ Rice v. Welling, 5 Wend. R. 595; Swartwout v. Payne, 19 Johns. R. 294;
Hammond v. Hopping, 13 Wend. R. 505..... 2 Woodruff v. Hurson, 32 Barb.
R. 557; 19 Id. 584
3 Aldrich v. Reynolds, 1 Barb. Ch. 43.. . . . . . .4 1
•
Johns. Ch. 14; 13 Vermont R. 430.
•
328
USURY.
pound interest, it is not usurious, and does not, therefore, incur
the penalties attached to usury.'
2. Expenses for Negotiating Loan.-A lender,
whether a banker or broker, may charge in addition to the inter-
est, a reasonable sum for his trouble and services, without being
liable for usury.³
If I take a journey to your house, at your request, and under
your promise to pay my expenses, with a view of settling a de-
mand which I hold against you, and expenses are included in a
security which I take for the debt, this transaction is not
usurious.3
If I intrust you with money, as my agent, to invest at legal
interest, and you loan it to Mr. Jones, exacting a bonus for your-
self as a condition of making the loan, which is done without my
knowledge or authority, this does not constitute usury on my
part, nor does it affect the security in my hands.*
But if the money loaned belongs to you, the lender, the tak-
ing of more than the legal rate of interest by you, will make the
note void in the hands of any future holders, when the excess
taken is for commission in obtaining the loan, or for subse-
quently renewing it.5
3. Interest in Advance.-It is not usury to take in-
terest in advance, at the time of the loan, on discounting com-
mercial paper, upon the full amount for which it is made, where
it has not longer to run before maturity than is usual with paper
discounted by bankers.
Interest in advance is allowed to be taken for the benefit of
trade, when the instrument discounted is such as will, and
usually does, circulate or pass in the course of trade. It must,
therefore, be a negotiable instrument, and payable at no very
distant day, for without these qualities it will not circulate in
•
1 Tylee v. Yates, 3 Barb. R. 223; Kellogg v. Hickock, 1 Wend. R. 521;
Townsend v. Corning, 1 Barb. R. 627.... 2 Nourse v. Prime, 7 Johns. Ch.
69; Trotter v. Curtis, 19 Johns. R. 160; Suydam v. Westfall, 4 Hill's R. 211.
3 Harger v. McCullough, 2 Denio R. 119.... 4 Condit v. Baldwin,
7 E. P. Smith, 219; S. C., 21 Barb. 181; Barretto v. Snowden, 5 Wend. R. 181;
Coster v. Dilworth, 8 Cow. R. 299; Crane v. Hubbel, 7 Paige, 413; Bell v. Day,
5 Tiff. 165........5 North v. Sergeant, 33 Barb. 350...... 6 Marvine v. Hy-
mers, 2 Kern. 223.
•
WHAT IS NOT.
329
1
the course of trade.
Under these limitations, the taking of
interest in advance, either by a bank, or incorporated company
without banking powers, or by individuals, is not usurious.¹
4. Charges for Hazard.-If money is lent on an ad-
venture or hazard, at a higher rate than legal interest, this is
not usury.
The law is well settled that no contract is usurious
where the lender runs the hazard of losing all his money, both
principal and interest, as in the case of bottomry.
For instance, a ship going in the fishing trade to New-
foundland, which voyage must be performed in eight months,
the lender gives the borrower fifty pounds, for which sixty
pounds is to be paid on the return of the ship. But if by
leakage or tempest she should not return in eight months,
then the borrower is to pay only fifty pounds, and if she never
returns, then he is to pay nothing. So the lender runs the
hazard of receiving no interest, and possibly neither principal
nor interest. This is not usury.²
The American law on this subject is equally clear, that if
money is loaned at a risk, and the interest is to be paid out
of the profits, or not at all, it is not usury.³
Under the following circumstances, a contract to pay more
than the legal rate of interest, is not usurious: the lender
becoming a partner with the borrower, and assuming the part-
nership responsibility to the creditors of the firm.
5. Post-obit Obligations. - This is an obligation to
pay a certain sum of money contingent upon the death of a
person; as, for instance, where a sum of money is borrowed
upon the condition that the borrower is to pay a much larger
sum when the death of his father takes place, into the possession
of whose property he (the borrower) will come. Though this
class of contracts is of a questionable character, and has often
been disputed with success, and though the courts have some-
times relieved against such bargains, yet they have never been
pronounced usurious, however gross and extortionary they may
¹ N. Y. Firemen's Ins. Co. v. Ely, 2 Cow. R. 703, 704; Manhattan Co. v. Os-
good, 15 Johns. R. 162; 4 Wend. R. 652..
2 Sharpley v. Hurrel, Croke
Jac. 208; Blydenburgh on Usury, 34... . Hall v. Daggett, 6 Cow. R. 653;
Quackenbush v. Leonard, 9 Paige, 334; Pomeroy v. Ainsworth, 22 Barb. R. 118.
330
USURY.
have been. They are looked upon merely as unconscionable
bargains, against which relief can be obtained in a court of
equity only.'
1
6. For Use of Goods and Chattels.-There can be
no usury in the loan of chattels, whatever may be the percentage
upon their value agreed to be paid for their use, unless such loan
is intended as an indirect loan of money.
Where no such intention exists, a contract providing that the
chattels loaned shall, when returned, have a certain fixed value,
or that the borrower may, at his election, pay that amount in
cash, and the sum agreed to be paid for the use of the chattels
exceeds the legal rate of interest upon such fixed value, the con-
tract is not usurious.²
A loan of goods or choses in action, unless intended as a mere
cover for a loan of money, is not within the statutes against
usury; nor is a loan of stock or of grain, which is to be returned
in kind, usurious.³
3
7. Loan of Animals.—A sale of cows on a contract to
return double the number, and of the same description, at the
end of four years, is not usurious. So of a sale of sheep, of
which double the number is to be returned in three years.5 A
contract is not usurious for the letting of sheep, the like num-
ber and quality to be returned, with fifty cents a head annually
for the time they are so let, although this is more than the legal
rate of interest on the value of the sheep."
8. Borrower making Present to Lender.—If the
borrower makes the lender a gift, and it is entirely voluntary,
the amount may be included within the note given for cash bor-
rowed, and it will not be usurious. But such a transaction is
open to suspicion, and there must be very clear evidence that the
act was purely voluntary on the part of the borrower.7
9. Extra Interest in Alternative. - Where the
1 Matthews v. Lewis, 1 Anstr. 7; Butty v. Lloyd, 1 Vern. 141; Berney v. Pitt,
2 Vern. R. 44; Wharton v. May, 5 Ves. Jr. R. 27. . . . . . . 2 Bull v. Rice, 1 Seld.
R. 315.... 3 Dry Dock Bank v. American Life Ins. Co., 3 Comst. 344; Pom-
4 Spencer v. Tilden, 5 Cow. R. 144.
eroy v. Ainsworth, 22 Barb. R. 119.
•
•
• •
6 Hall v. Haggart, 17
5 Holmes v. Wetmore, 5 Cow. R. 149.
Wend. R. 280...... 7 Woodruff v. Hurson, 32 Barb. R. 557.
WHAT IS NOT.
331
payment of more than the legal rate of interest depends upon
the will of the borrower, as where he may discharge himself
from it by prompt payment of the principal, it is considered in
the light of a penalty, but does not make the contract usu-
rious.¹
10. Sale of Valid Paper below Par.-The sale of
a note, bond, or other security, in good faith, at a greater than
legal discount, is not of itself a loan, and, therefore, not usu-
rious, although indorsed by the seller, thus making himself re-
sponsible."
2
A sale of a note which is valid in the hands of the vendor
may be made for any price the vendor chooses to accept, and it
is no usury.3
But if the instrument is created with a view to evade the
laws against usury, and is afterwards sold for a less amount than
the interest, the transaction is considered a loan, and it would
therefore be usurious.*
11. Mistake in Computing Interest. -It may
happen that a mistake occurs in the computation of interest, and
that, in consequence, the lender takes more than the legal rate.
Such a mistake will not be chargeable as usurious; for it is the
illegal agreement or intention, with the taking of illegal rates,
that constitutes usury.
5
12. Exchange of Notes. -If two persons exchange
with each other notes of equal amounts for the purpose of rais-
ing money by a sale of the notes, each note is a valid considera-
tion for the other; and a sale of either at a discount greater
than the legal rate, does not render it usurious in the hands of
the purchaser.
This class of cases must not be confounded, however, with
another and somewhat similar class, which is usurious. For in-
•
•
16 Cow. R. 6'3; 9 Paige's Ch. R. 339; Wells v. Girling, 4 Moore, 78......
29 Pet. 103; 1 Iowa, 30; 6 Ohio St. 19; 10 Md. 57; Crane v. Hendricks, 7 Wend.
R. 569.
3 Elwell v. Chamberlain, 4 Bosw. 320.
4 2 Johns. Cas. 60;
3 Id. 66; 15 Johns. R. 44; 12 Serg. & R 46; 6 Ohio St 19.
v. Hurson, 32 Barb. 557; Marvine v. Hymers, 2 Kern. 223.
Titus, 6 Seld. 198; S. C., 13 Barb. 45; Rice v. Mather, 3 Wend. 62; Odell v.
Greenly, 4 Duer, 358.
5 Woodruff
•
•
6 Cobb v.
332
USURY.
stance, you apply to me for the loan of a thousand dollars. But
instead of letting you have the money for your note to that
amount, I give you my note for yours to the amount which we
intend shall be, and which is, used by you to raise the money.
If, in the exchange of our notes, the amount to be paid by you
is greater than that to be paid by me, the transaction is usu-
rious.¹
13. Loan of One's Credit.-Upon a loan of one's
credit, if made in good faith, the vendor may reserve or secure
to himself more than legal rate of interest, without rendering
the agreement usurious. A loan of the credit of the vendor
must not, however, be connected with a loan of money by him
in the transaction, or it will be usurious.2
14. Sale or Exchange of Property.—A loan of
money, connected with a sale of property by the borrower to the
lender, which property is at a price altogether above its real
value, and a note or bond being given for the money, including
the price of the property sold, is a usurious transaction.³
But if the contract is, in form, one of sale or exchange, and
the value secured to the vendor is only the price of the thing
sold or exchanged by him, there is no usury, though the price is
very much above the real valuc.*
An illustration of this principle may be given as follows: I
wish to borrow of you a thousand dollars. You can not, or do
not, wish to let me have the money. But you have wheat for
sale, the market price for which is $1.50 per bushel. You are
not willing to sell for that, believing it will soon bring a higher
price. I offer you, and you accept, my note on interest, payable
in one year, for $1,120, for seven hundred bushels of wheat,
which is at the rate of $1.60 a bushel for the wheat, or 10 cents
a bushel above the present market price. Such a transaction, it
is believed, would not be usurious, though I take the seven hun-
dred bushels of wheat to market and obtain but $1,050 for it.
¹ Schermerhorn v. Talman, 4 Kern. 93; 3 Comst. 344; Thomas v. Murray, 34
Barb. 157; Gillett v. Averill, 5 Denio, 85: Blodgett v. Wadham, Hill & Denio,
65.... 2 Leavitt v. De Launy, 4 Comst. 363; Ketchum v. Barber, 4 Hill, 224;
S. C., 7 Hill, 444; More v. Howland, 4 Denio R. 264........³ Rose v. Dickson, 7
Johns. R. 196.. 4 Dry Dock Bank v. American Life Ins. Co., 3 Comst. 344.
CONSEQUENCES OF.
333
§ 411.-4. Consequences of.-1. Effect on Remote Se-
curities.-If a contract is usurious, one of the consequences
resulting is, that any and all securities, however remote, to en-
force the contract, are made to follow the destiny of the contract,
and are unavailable for any purpose. A mortgage, for instance,
taken on a loan of money, which includes also a former usurious
loan, is absolutely void.¹
1
If I owe you a thousand dollars, now due, and in considera-
tion of your putting off payment six months, I promise to pay
you twenty-five dollars besides the interest, this contract is void.
But it does not invalidate the original contract. I still owe you
the thousand dollars."
2. Statutory Penalties.-The statutes of most of the
States attach penalties, more or less severe, to the taking of
usury. The following is the rate of interest allowed by law in
each State, and the penalty in each for usury:
Alabama, 8 per cent. Interest forfeited if contract usurious.
Arizona, 10 per cent., where no rate fixed. May agree for any rate.
Arkansas, 6 per cent. Parties may contract for any rate not exceeding 10
Usurious contracts are void both as to principal and interest.
per cent.
California, 7 per cent.
Colorado, 10 per cent.
Connecticut, per cent.
in excess of legal rate.
Parties may agree for any rate.
No usury laws; any rate agreed upon is legal.
Penalty for usury is forfeiture of interest taken
Dakota Territory, 7 per cent. Parties may contract for a higher rate not
to exceed 12 per cent.
Excess over 12 per cent. forfeited.
Delaware, 6 per cent. Penalty for usury, forfeiture of a sum equal to the
money lent.
District of Columbia, 6 per cent. May contract in writing for 10 per cent.
or less rate. Usurious contracts forfeit whole interest.
Florida, 8 per cent. No usury laws.
Georgia, 7 per cent. Eight per cent. may be lawfully charged. Usurious
contract forfeits excess of interest.
Idaho, 10 per cent. Parties may agree in writing for any rate not exceed-
ing 1½ per cent. per month. Usury forfeits three times excess of interest.
Illinois, 6 per cent. May charge 8 by written contract. Usury forfeits
entire interest.
1
Indiana, 6 per cent. May charge 8 by written agreement.
8 usurious and illegal, as to excess above 6 per cent. only.
Excess over
Iowa, 6 per cent. Ten may be charged by written contract. Usury for-
feits 10 per cent. upon the contract and interest.
Kansas, 7 per cent. May charge 12 by written contract. Excess over legal
rate applicable toward the extinguishment of the debt. No other penalty.
Kentucky, 6 per cent. Contracts for the greater rate are void for the
excess only.
1 Jackson v. Packard, 6 Wend. R. 415.
•
2 Vilas v. Jones, 1 Comst. R. 274.
334
USURY.
Louisiana, 5 per cent. Eight per cent. may be charged. Usury forfeits
the entire interest.
Maine, 6 per cent. Any rate may be agreed on in writing. No usury laws.
Maryland, 6 per cent. Usury forfeits excess over legal rate.
Massachusetts, 6 per cent. Any rate of interest may be contracted for in
writing. No usury laws.
Michigan, 7 per cent. The parties may contract in writing for not exceed-
ing 10 per cent. Usurious interest forfeits the excess.
Minnesota, 7 per cent.
contract in writing. Usury
10.
Ten per cent. and no more may be charged by
forfeits the whole interest.
Mississippi, 6 per cent.
cent. Parties may contract in writing for as much as
Excess over 10 per cent. is not collectible; and on contracts after Novem-
ber 1, 1880, whole interest will be forfeited if more than 10 per cent. be con-
tracted for.
Missouri, 6 per cent. Ten per cent. may be charged by written contract.
Usury forfeits interest at 10 per cent.
cent. Any rate legal. No usury laws.
Ten per cent may be contracted for.
Montana Territory, 10 per cent.
Nebraska, 7 per cent.
whole interest and costs.
Usury forfeits
Any rate by written agreement legal. No usury laws.
Usury forfeits three times the excess over
Nevada, 10 per cent.
New Hampshire, 6 per cent.
legal interest. No other penalty.
New Jersey, 6 per cent.
New Mexico, 6 per cent.
Usury forfeits all interest and costs.
Twelve per cent may be charged. Usury forfeits
interest in excess of the lawful rate.
New York, 6 per cent. Usurious contracts void. No corporation can plead
usury. Where advances of $5,000 or more are made on bills of lading, nego.
tiable instruments, etc., as collateral, the parties may agree in writing on any
rate of compensation.
North Carolina, 6 per cent. Eight per cent. may be stipulated for. Usury
forfeits entire interest.
Ohio, 6 per cent. Parties may contract in writing for 8 per cent. No
penalty is attached for the violation of the law. Usury forfeits excess over 6
per cent.
Oregon, 8 per cent. Ten per cent. may be contracted for. Usury forfeits
the original sum lent.
Pennsylvania, 6 per cent.
Rhode Island, 6 per cent.
South Carolina, 7 per cent.
No usury laws. More cannot be recovered.
Any rate legal.
as 10. Usury forfeits all interest.
Parties may contract in writing for as much
Tennessee, 6 per cent. Excess, if paid, may be recovered back.
Texas, 8 per cent. By contract in writing as much as 12 may be charged.
Usury forfeits whole interest.
Utah Territory, 10 per cent. Any rate may be agreed on in writing.
Vermont, 6 per cent. Only excess is forfeited.
Virginia, 6 per cent., except on loans to certain corporations. Usury for-
feits whole interest.
Washington Territory, 10 per cent. Any rate may be agreed on in writing.
West Virginia, 6 per cent. Excess of interest cannot be recovered if usury
is pleaded. Companies may borrow at higher rates.
Wisconsin, 7 per cent. Ten per cent. may be charged in written contract.
Usury forfeits all interest.
Wyoming Territory. Any rate may be agreed upon in writing. In the
absence of any agreement as to the rate, it is 12 per cent.
Topical Analysis
Он
Contracts of Affieightment.
IN SIX PARTS.
PART I. BY CHARTER-PARTY.
PART II. FOR CONVEYANCE IN GENERAL SHIP.
PART III. OBLIGATIONS IMPOSED BY BOTH KINDS.
PART IV. GENERAL AVERAGE.
PART V. SALVAGE.
PART VI. DISSOLUTION OF THE CONTRACT.
1. Parties.
1. Owner.
2. Freighter.
3. Carrier or charterer.
PARTI. CHAR-
TER-PARTY.
PART II. FOR
CONVEYANCE
IN GENERAL
SHIP.
2. Description. {
3. Covenants of
the owner.
4. Merchant's
covenants.
1. Of the ship
2. Of the voyage.
1. Conditions of the ship.
2. Properly furnishing the ship,
3. Time of sailing,
4. Safe delivery of the cargo.
5. Exemptions.
1. As to time of loading and unloading
2. Demurrage.
3. Payment of freight.
1. General definition.
}
1. What It Is.
2. Form of.
3. Who to hold coples of
2. Bill of lading 4. How far negotiable.
5. Mode of transfer.
6. Obligation of assignee.
7. Effect of transfer.12. When done in bad faith.
1. When done in good faith.
336
CONTRACTS OF AFFREIGHTMENT.
PART III. OBLIGA-
TIONS IMPOSED
BY BOTH KINDS
1. Duties of mas-
ters and owners.
1. Preparation for the voyage.
2. Commencement of the voyage.
3. Course of the voyage.
4. Completion of the voyage.
PART IV. GENER-
AL AVERAGE.
1. As to lading the ship.
2. Duties of char-
terers.
1. Primage.
2. Paying charges.
2. Average,
3. Demurrage.
4. Freight.
I. Definition.
2. In what cases may be required.
3. What goods contribute.
4. What goods exempt from.
5. Mode of contribution.
6. Payment of.
I. Definition.
1. Civil.
2. Kinds.
2. Military.
PART V. SALVAGE 3. Who entitled to.
PART VI. DISSO-
LUTION OF THE
CONTRACT.
4. Who not entitled to.
5. Upon whom chargeable.
6. Rules of allowance.
7. How forfeited.
1. By act of the parties.
1. By war.
2. Interdiction,
2. By operation of law.
•
3. Blockade.
4. Embargo, when.
CHAPTER XIII.
CONTRACTS OF AFFREIGHTMENT.
PART I.—BY CHARTER-PARTY.
§ 412. Contracts of affreightment fall under the general de-
nomination of contracts with carriers, being contracts for the
carriage of goods in vessels.¹
The contract by charter-party is defined to be that "by
which an entire ship, or some principal part thereof, is let to a
merchant in consideration of the payment of freight, for the con-
veyance of goods, on a determined voyage to one or more places.
It is an instrument in writing generally, and not usually under
seal, in modern practice. In this kind of contract there are;
112
§ 413.-1. Parties. The parties are-1. The Ship Owner,
who stands responsible for the ship, and, as will be seen pre-
sently, enters into certain stipulations, and assumes certain obli-
gations with reference to the ship; 2. The Freighter, or Merchant,
who seeks to employ the ship in the transportation of his goods, in
consideration of the freight which he pays the owner for its use;
and 3. The Carrier, a kind of middle-man, who hires the ship of
the owner, and receives the goods of the freighter or merchant.
Of course he sustains certain relations to both the other parties.
The Carrier, as above defined, is only a possible party, as
more generally there are only the first two parties above named.
Sometimes the owner of the vessel runs it himself, in which
case he assumes all the duties of the common carrier in regard
to the goods which he carries.
The carrier or merchant, when he hires the ship and becomes
the lessee, is called the charterer.
§ 414-2. Description.-There should be a full and minute
description in a charter-party:
¹ Smith's Merc. Law, p. 345....
* Abbott's Shipping, par 3, ch. i.
338
CONTRACTS OF AFFREIGHT MENT.
1. Of the Ship.—The ship may, of course, be known by
its name; but it should be described generally, and particularly
as to its tonnage or capacity;' should designate particularly
what parts of the ship are let, and what parts, if any, are reserved
to the owner, or to the master, to carry goods, or for the purpose
of navigation.
2
2. Of the Voyage.-The charter-party should describe
the voyage with proper particularity for which the ship is hired."
§ 415.-3. Covenants of the Owner.-In the charter-party,
the owner of the ship makes certain covenants, which usually
include the following:
1. Conditions of the Ship.-The covenant with regard
to this is, substantially, that the ship shall be tight, stanch, and
seaworthy, and furnished with the proper necessaries. This is
usually inserted in the charter-party; but it is equally implied
by law, even though there be no charter-party.3
2. Properly Furnishing the Ship.-He likewise
covenants to properly furnish the ship with all necessaries for
her voyage, including men, victuals, and stores, to the best of
the owner's endeavors.
3. Time of Sailing.-Another of the covenants of the
owner is that the ship shall be ready by a certain day to receive,
and shall wait a certain time to ship her cargo, and shall sail at
a particular time for her destined port. If no particular time be
mentioned, the law implies that she shall sail within a reasonable
time.*
4. Safe Delivery of Cargo. The owner also promises
to deliver the goods safely at the destined port. It may of course
comprise any other engagements which the merchant thinks
proper to exact, and the owner to concede.5
5. Exemptions.-There are certain perils for which the
ship-owner does not mean to hold himself responsible, and against
which he stipulates not to insure.
1 Perkins v. Hill, 2 Woodb. & M. 158; Lamb v. Parkman, U. S. D. C. Mass.,
20 Law Rep. 186... 2 3 Kent's Com. 202...
•
Raym. 909; Lyon v. Mells, 5 East's R. 428.
Bingh. N. C. 29; Clipsham v. Vertue, 5 Q. B. 265...
p. 347.
3 Coggs v. Bernard, 2 Ld.
4 McAndrews v. Adams, 1
' Smith's Merc. Law,
BY CHARTER-PARTY.
339
These are usually the acts of God, or public enemies, deten-
tions and restraints of kings, princes, rulers and republics, fire,
the dangers and accidents of the seas, rivers and navigation, and
all other unavoidable dangers and accidents."
§ 416.-4. Merchant's Covenants. In consideration of the
covenants and agreements on the part of the owner of the ship,
the merchant or charterer assumes certain obligations. These
are:
1. As to Time of Loading and Unloading.-
The merchant usually covenants to load and unload within a
specified time, as may be required on his part, and agreed to on
the part of the owner.
2. Demurrage. If the merchant detains the ship for a
longer time than is specified, which he sometimes obtains liberty
to do, he agrees to pay a daily sum for such detention, which, as
well as the delay itself, is called demurrage. This is often, and
indeed generally, a matter of contract, but not necessarily so.²
The stipulations must of course be strictly performed on both
sides. With respect to the time allowed for loading and unload-
ing, it is held that the merchant must pay demurrage for any
delay beyond the arranged period, even though not attributable
to his fault, but to some unforeseen impediment to her loading
or unloading, such as the crowded state of the docks; for he has
expressly engaged and is bound by the terms of his own positive
contract.3
But when the detention was occasioned by ice, which pre-
vented the ship from sailing after she was loaded, it was held
that demurrage was not payable, since to render the freighter
liable to it, the delay should have been for the purpose of
loading.¹
5
The same principle prevails where the owners interrupt the
unloading by their wrongful interference. So a delay in starting
by tempestuous weather will not be chargeable upon the char-
terer.6
1 Kent's Com., 10th edit., p. 285, note a.
29 Wheat. R. 362; 3 Johns.
R. 342........ Barker v. Hodgson, 3 M. & S. 267; Barret v. Dutton, 4 Camp.
33, 335, n.; 3 Taunt. R. 387....
5 Benson v. Blunt, 1 Q. B. 870.
4 Pringle v. Mollet. 6 M. & W. 80..
•
6 Jamieson v. Laurie, 6 Bro. P. C. 474.
340
CONTRACTS OF AFFREIGHT MENT.
3. Payment of Freight.-It should be stated distinctly
and precisely how much is to be paid for the ship; whether by
the ton, and if so, whether by ton of measurement, or ton of
capacity of carriage, or in one gross sum for the whole burden;
and when the money is payable, and how; that is, in what cur-
rency or at what exchange, especially if it be payable abroad.'
PART 11-CONTRACT FOR
ANCE IN A GENERAL
CONVEY-
SHIP.
§ 417.-1. General Definition. We have seen that if one or
more merchants contract for the ship exclusively, it is said to be
a chartered ship. Notice that this relates to the ship only. But
if the master and owners of a ship engage with separate mer-
chants to convey their goods to the place of her destination, then
the contract is said to be for conveyance in a general ship.
It is usual to advertise the general ship in the newspapers, or
in cards or handbills; and it is said that care should be taken to
insert nothing in these advertisements which it is not the ship-
owner's intention to make strictly good; since it is not clear
that some of the terms of such advertisement may not be looked
upon as incorporated into the contract.²
2. Bill of Lading.-But the instrument to which reference is
generally had for the terms of such a contract is the Bill of
Lading. This leads to the inquiry:
§ 418-1. What is a Bill of Lading.-A bill of
lading is defined to be "a memorandum or acknowledgment in
writing, signed by the captain or master of a ship or other vessel,
that he has received in good order on board of his ship or vessel,
therein named, at the place therein mentioned, certain goods
therein specified, which he promises to deliver in like good order
(the dangers of the sea excepted) at the place therein appointed
for the delivery of the same, to the consignee therein named, or
to his assigns, he or they paying freight for the same.
¹ Parsons' Merc. Law, p. 359, 2d edit.... 2 Abbott, part 3, ch. ii; 5 B. &
Ad. R. 797.... 31 Term R. 745; Abbott's Shipping, 216.
FOR CONVEYANCE IN GENERAL SHIP. 341
It should contain the name of the shipper or consignor, the
name of the consignee, the names of the vessel and her master,
the places of shipment and destination, the price of the freight,
and, in the margin, the marks and numbers of the things
shipped.¹
R. C. S.
Liverpool,
Pks.
1
01200
England.
Weight.
.240 lbs.
2. FORM X.-BILL OF LADING.
поги
Shipped, In good order and well conditioned, by E. G. FOLSOM,
on board the skip calied the Morning Star, whereof
James Fosters Master, lying in the port of
New London, and bound for Liverpool, England,
Ten (10) Pkgs. Musc. marked and numbered as in
the marzin, and are to be delivered in the like order
and condition at sail port of Liverpool, England,
the dangers of the sear only excepted, unto Robert
C. Spencer or his assigns, he or they paying freight
of two dollars each,
with ten cents piimage and average accustomed.
Ju witness whereof, the Master or Purser
"
"C
•
.310
.286
(C
•
.228
.315
(C
•
.294
(C
.312
3
4.
5.
6
N
ry
8.
•
9.
10.
• •
·
(C
.272 for the sail packages the
•
•
345
322
(6
С6
dute, one
бет
of
said Ship hath affirmed to two Bills of Lading, both of this tenor and
of which being accomplished, the other to stand voil.
Dated at New London, Conn., the first day of July, 1871.
James Foster, Master.
3. Who to Hold Copies of Bill of Lading. The
master signs the bill of lading, as according to the foregoing
form, and delivers it to the holder of the receipt given by him
for the goods when shipped, upon having that receipt given up
to him.
Several copies of the bill of lading are usually made out, cf
which the merchant sends one or two to the person for whom the
goods are destined, and retains one for himself. The master
must also take care to have one made out for his own use.
¹ Bouvier's Law. Dict., Bill of Lading.
342
CONTRACTS OF AFFREIGHTMENT.
4. How far Bill Negotiable.-The bill of lading, as
will be seen by reference to it, is made out for the delivery of the
goods to some person, Robert C. Spencer for instance, or his
assigns. Robert C. Spencer can, therefore, by naming an assign,
transfer his right to the goods to the person so named.'
5. Mode of Transfer.-The mode of appointing an
assign is by indorsing and handing over to him the bill of lading,
which is thus a negotiable instrument; accordingly it is the
common practice of merchants to negotiate the bill of lading,
and by such assignment the property in the goods is held to
pass to the indorsee of the bill of lading.²
6. Obligation of Assignee.-If there be any condi-
tion, either in the bill of lading or the indorsement thereof; for
example, if the goods are to be delivered, provided Robert C.
Spencer pay a certain draft, all subsequent indorsees take sub-
ject to that condition, and have no title until it is complied
with.3
7. Effect of Transfer.—We have seen that by the gen-
eral custom of merchants, a bill of lading is transferable by
indorsement; and the right of property in the goods thereby
passes to the indorsec. Strictly speaking, however, the indorse-
ment or transfer of a bill of lading amounts to no more than a
symbolical delivery of the goods; that is, it can operate no
further than a direct delivery of the goods would have done.*
It does not constitute an absolute title in itself, unless the
consignee himself possesses such title.5
But it makes an essential difference whether the assignee acts
in good or in bad faith, towards the shipper or owner of the
goods, in the matter of the transfer of the bill of lading.
1. When Done in Good Faith. If the consignee of the
goods, Robert C. Spencer, named in the bill of lading, should
become insolvent, without having paid for the goods, yet his
assignment made for a valuable consideration, and without notice
to the assignee, S. S. Packard for instance, that the goods were
1 Smith's Merc. Law, p. 353, Amer. edit..
Burr. R. 2046; Caldwell v. Ball, 1 Term R. 205;
R. 745..
3 Barrow v. Coles, 3 Camp. R. 92...
5 1 Pet. 445; 12 Pick. 297, 307; 15 Mass. R. 528; 5
•
Wright v. Campbell, 4
Hibbert v. Carter, 1 Term
4 6 East's R. 41.....
Taunt. R. 558.
OBLIGATIONS IMPOSED BY BOTH KINDS. 343
not paid for, or that they were paid for by bills sure to be dis-
honored, the goods will pass absolutely to Packard. The con-
signor, E. G. Folsom, might have exercised the right of stoppage
in transitu, as against Spencer; but he cannot as against
Packard.¹
2. When Done in Bad Faith.-If the assignee of the bill of
lading has not acted bona fide, that is, in good faith; for in-
stance, if he knew that the consignee was insolvent, and he, the
assignee, assisted to defraud the owner or consignor of the price
of the goods, he, the assignee, stands in the same situation as
the consignee, and the consignor retains his right to stop the
goods in transitu.²
The foregoing observations regarding the negotiation of the
bill of lading by a consignee, apply to the case of consignment
of goods to a purchaser; for, where they are consigned to a
factor, his power of altering the property in them, by indorse-
ment of the bill of lading, is less extensive; since, though he may
bind his principal by a sale of the bill of lading, his usual em-
ployment being to sell, yet he cannot by a pledge thereof, for
that is not within the scope of his authority.³
PART III.-OBLIGATIONS IMPOSED BY
BOTH KINDS.
§ 419. The attention of the student is now called to the
obligations which the two sorts of contracts of affreightment
equally impose. This will necessitate, to some extent, a repeti-
tion of the topics already considered, though not a repetition of
much of the matter.
Let it be borne in mind that there are two kinds of contracts
of affreightment; the one by charter-party, and the other by
bill of lading. The former relates to the ship; the latter, to the
goods or cargo carried in the ship.
1 Newson v. Thornton, 6 East's R. 17; Salomons v. Nisson, 2 Term R. 674.
2 Cumming v. Brown. 9 East's R. 506.... 3 Nowson v. Thornton, 6
East's R. 17; Martini v. Coles, 1 M. & S. 140.
344
CONTRACTS OF AFFREIGHT MENT.
K
But there are certain duties and obligations devolving upon
the respective parties to the two kinds of contracts, and common
to both. These will be considered under the following heads :
§ 420.-1. Duties of Masters and Owners.-In considering the
duties of masters and owners, we will notice—
1. Preparation for the Voyage.-As heretofore
stated, the vessel must be tight, stanch, and strong, and fur.
nished with proper necessaries. This the law requires, whether
inserted in the charter-party or not.¹
1
There is in every contract of affreightment an implied war-
ranty of the seaworthiness of the vessel. It is the duty of the
owner of the vessel when he charters her, to put and keep her in
a suitable condition to transport her cargo. The owner is also
bound to furnish sufficient men and stores, unless the contrary
be in terms provided for, or results from the nature of the ex-
press contract.2
If the usage or law of the country requires that the ship
should have a pilot, there must be one on board, as there must
also when the ship comes in the course of her voyage to any
place where there is an establishment of pilots, and it is possible
to procure one before she enters on the difficult part of the navi-
gation.3
The goods are to be taken by the master or owner, whose re-
sponsibility commences with their receipt from the shipper, and
stored carefully on board; and all things necessary for that
purpose, such as ropes, for instance, must be provided by the
master, since, if the goods be injured, in consequence of improper
stowage, he and his owners are responsible.*
When goods are shipped under the common bill of lading,
it is presumed that they are shipped to be put under deck, as
the ordinary mode of stowing cargo.5
The master must also have on board the proper manifest and
other documents necessary for the protection of the vessel, and
1 Coggs v. Bernard, 2 Ld. Raym. 909; Lyon v. Mells, 5 East, 428...
'Putnam v. Wood, 3 Mass. R. 481; Goodrich v. Lord, 10 Id. 483; Ripley v.
Scaife, 5 B. & C. 167..
Headlam, 2 B. & Ad. 380..
3 Law v. Hollingworth, 7 T. R. 160; Phillips v.
4 Goff v. Clinkard, c ted 1 Wils. 282.
'Vernard v. Hudson, 3 Sumn. 405; Creery v. Holly, 14 Wend. R. 26.
OBLIGATIONS IMPOSED BY BOTH KINDS.
345
must carry no false papers or contraband goods, whereby she
may be forfeited.¹
He must give a receipt for the cargo to the shipper, and sign
the bills of lading as he may direct, on having that receipt re-
turned to him. If, by agreement, the master is to proceed to a
particular place for the cargo, he must use due diligence, or the
freighter may be discharged.²
2. Commencement of Voyage. The proper clear-
ances being obtained, the ship must set sail at the stipulated
time; or if no time for sailing has been expressly agreed upon,
it must sail within a reasonable time; for upon general prin-
ciples, in all contracts by charter-party, where there is no express
agreement as to time, it is an implied stipulation that there
shall be no unreasonable or unusual delay in commencing the
voyage."
3. Course of the Voyage. -All things being in readi-
ness, and the sail having properly commenced, the ship must
proceed to her destined port without deviation. If she deviate
unnecessarily, and be lost, the master and owners are responsible,
although the loss be by the act of God or the public enemy."
The master is to use every effort to convey the cargo safely
to its destination. If, by reason of a storm or some other unex-
pected cause, it becomes impossible to do so in his own vessel,
he is to do what a prudent man would think most for the benefit
of all concerned; what that may be, it is impossible to antici-
pate. If practicable, he may transship for the place of destina-
tion, as that is in furtherance of the original purpose."
If transshipment is impracticable, return or a safe deposit may
be expedient."
If possible, the merchant should be consulted in such case."
Sometimes a sale of the cargo may become necessary; but that
is the very last thing the master should think of, because it can
be justified only by that necessity which supersedes all human
1 Smith's Com. Law, Am. edit., p. 357....
124; Smith's Merc. Law, p. 358..
38; 8 Id. 124..
716..
•
2 Freeman v. Taylor, 8 Bingh.
3 M'Andrew v. Adams, 1 Bingh. N. C.
Davis v. Garrett, 6 Bingh.
4 Parker v. James, 4 Camp. 112;
5 Shipton v. Thornton, 9 Ad. & E. 314
another, 10 East, 426.
•
1 2 Stark. 1.
• Liddard v. Lopes &
346
CONTRACTS OF AFFREIGHTMENT.
laws. If he sell without necessity, the owners of the ship as well
as himself will be answerable to the merchant,¹
In cases of necessity or calamity during the voyage, the mas-
ter is by law created an agent from necessity, for the benefit of
all concerned; and what he fairly and reasonably does under
such circumstances, in the exercise of a sound discretion, binds
all the parties interested in the voyage, whether owners, or
shippers, or underwriters."
The authority of the master extends to hypothecate the
cargo, or even sell a part of it where it is necessary to do so for
repairs, in order to the preservation of the entire venture.³
4. Completion of the Voyage.-On the completion
of the voyage, the master must have the vessel properly moored,
report his ship and crew, exhibit his manifest and other papers
to the proper officers, and deliver up the cargo to the consignees
named in the bill of lading, on payment of the freight and other
charges in respect thereof. These other charges are primage and
average, which will soon be explained. The master need not, in
general, part with the goods until all charges are paid.*
The manner of delivering up the goods, and consequently the
period at which the master ceases to be responsible for them, de-
pend, in the absence of agreement, on the custom of the place.5
In the absence of any custom at the place of delivery, or any
express agreement, the master is not bound to deliver goods to
the consignee personally. It is sufficient if he lands them at
some usual place of delivery, and gives notice thereof to the con-
signee, which, in the case of carriers by ships or boats, comes in
lieu of the personal delivery usually required of other common
carriers.6
All these duties which the law imposes upon the ship-owner
and his agents, are, after all, no more than consequences of the
general rule, that common carriers are responsible at common
1 Freeman v. East India Co., 5 B. & A. 617; Wilson v. Dickson, 2 B. & A. 2.
3 United Ins. Co. v.
2 Jordan v. Warren Ins. Co., 1 Story's R. 353..
Scott, 1 Johns. R. 106; 9 Johns. R. 29..
360..
•
•
4 Smith's Merc. Law, Amer. edit.,
•
5 Wardell v. Mourillyan, 2 Esp. 693...... 6 Chickering v. Fowler,
4 Pick. 371; Ostrander v. Brown, 15 Johns. 39; Gibson v. Culver, 17 Wend. R.
305; Fisk v. Newton, 1 Denio R. 47; Smith's Merc. Law, Amer. edit., 361.
OBLIGATIONS IMPOSED BY BOTH KINDS.
347
law for every casualty except the act of God and the public
enemy. Their common law liability, however, is frequently nar-
rowed by their own express stipulations in the charter-party, or
the bill of lading, and is sometimes modified by legislative en-
actment.
Masters and owners of vessels employed in the transportation
of property, are liable as common carriers, in respect to foreign
as well as internal voyages.¹
There is no distinction, whether the navigation be upon the
ordinary rivers, or the great rivers and lakes of this country."
There is no act of Congress on this subject, and no legisla-
tion, it is believed, in but two of the States. In Massachusetts
and Maine, the responsibility of the owner of a vessel, for the act
of the master, is limited by statute, to the amount of the owner's
interest in the ship and freight.³
§ 421.-2. Duties of Charterer.-As the merchant or charterer
is one of the parties to the contract of affreightment, and as the
contract is executory, of course there are certain duties devolving
upon him in its execution. We will consider—
1. As to Lading the Ship.-The merchant who has
taken a ship to freight must lade her within the stipulated time;
and if no time be stipulated expressly, he must do it in a rea-
sonable time.*
He must lade the ship with the stipulated cargo, and must
put on board no contraband goods, whereby she may be subject
to forfeiture. For a default in any of these particulars, he will
be liable to make good the injury sustained in consequence.5
2. Paying Charges. It is the duty of the merchant
also to pay the charges due on his commodities. These are-
1. Primage.—This is a duty payable to the master and
mariners of the ship or vessel-to the master for the use of his
cables and ropes to discharge the goods of the merchant—to the
mariners for lading and unlading in any port or haven.º
Elliott v. Russell, 10 Johns. 1; Kemp v. Coughtry, 11 Johns. 107; McGregor
v. Kilgore, 6 Ohio, 358; Dunrish v. Wade, 2 Scam. 289; Gordon v. Buchanan,
5 Yerg. 71; Id. 427..
2 McArthur v. Sears, 21 Wend. R. 190.....
Smith's Merc. Law, p. 362, note *
* Wooley v. Reddelien, 5 M. & Gr
316..
5 Smith v. Elder, 3 Johns. R. 105... 6 Abbott's Shipping, 270.
348
CONTRACTS OF AF FREIGHTMENT.
This payment appears to be of very ancient date, and to be
variously regulated in different voyages and trades. It is some-
times called the master's hat-money."
2. Average.-Average, in the sense here intended, consists
of several small charges, such as towage, beaconage, pilotage,
and the like. This must not be confounded with General
Average, which will be noticed presently.
3. Demurrage.-There are usually a certain number of days,
called lay-days, allowed the merchant, to load and unload the
vessel; and if the time is extended beyond that which is stipu-
lated, he is to pay a certain sum per day during the delay. This
sum, as well as the delay itself, is called demurrage; and may
become due, either by the ship's detention for the purpose of
loading or unloading the cargo, either before, or during, or after
the voyage, or in waiting for convoy. This subject has been
noticed ante, p. 339.
2
4. Freight. This is the payment made for the conveyance
of the merchandise to its destination.³
It denotes the price of carriage; not of receiving goods to be
carried; and therefore, though a merchant may, of course, con-
tract to pay a sum of money to a ship-owner for taking goods on
board, yet such payment is not, strictly speaking, freight.“
Hence it follows that no freight becomes due, unless the car-
riage of the goods be completely performed.
5
The compensation for carrying the goods is usually fixed by
contract between the parties; though it is not necessary that it
should be so, for the law implies the owner's promise to pay the
carrier a reasonable reward."
The carrier has a right to demand prepayment of the freight;
but having received them without prepayment of his hire or
freight, the law gives him a right to demand his compensation
on the delivery of the goods at the place of destination.' And
this right is secured by a lien given him on the property, so that
' Chitty's Com. Law, 431...
8
2 Lawes on Charter-Parties, 130.......
.4 Andrew v. Moorhouse, 5 Taunt. R
5 Mashiter v. Bullar, 1 Camp
3 Lewis v. Marshall, 7 M. & Gr. 729..
435; Blakely v. Dickson, 2 Bos. & Pul. 321.....
R. 84; Crozier v. Smith, 1 M. & Gr. 497...
R, 81, 129...... .' Story on Bailm., § 586..
2 Ld. Raym. 909-918; 2 Show.
8 Edwards on Bailm., 541.
GENERAL AVERAGE.
349
he may refuse to deliver the property until the hire or freight is
paid.¹
It is usual for bills of lading to state that the goods are to be
delivered to the consignee or his assigns, he or they paying
freight; and then the fact that the consignor is also liable to
pay the freight makes no difference.2
Where goods are sent by general ship, the amount of freight
depends on the agreement of the parties, or the value of the
service performed, estimated according to the usage of trade in
like cases. If there be a charter-party, and a gross sum is to
be paid for the whole or part of a ship, it becomes due, al-
though the merchant do not provide a complete lading.3
PART IV.-GENERAL AVERAGE.
§ 422.-1. Definition.-The rule is this: If many interests or
properties are in peril, and one or more of them is wholly or par-
tially sacrificed for the purpose of saving the rest, all that is
thereby saved must contribute toward indemnifying the owner of
that which was sacrificed.
He is not to be indemnified in full; for then he would be
better off than those who contribute. He would gain by the
fact that, in a common peril, his property was selected to be
made the price of the common safety. But there is no reason
why he should gain; justice is perfectly satisfied if he is made
to suffer no more than the rest do. This end is attained by the
law of general average, because it adds together the whole loss,
and considers it the loss of all who were in peril, and, by the loss
of the property sacrificed, were saved from it, and therefore as-
sesses the whole amount of the loss ratably upon the whole prop-
erty that is saved (as well as what is lost); and in this way
every one interested loses an equal proportion of that which was
successfully sacrificed for the common good."
4
If, for example, the ship and the whole cargo were worth
1 4 Cow. R. 470; 18 Johns. R. 157; 17 Id. 234........2 Story on Bailment,
§ 589; 2 M. & S. 303; 17 Johns. 234..... 3 Smith's Merc. Law, Amer. edit.,
p. 368..
4 Parsons' Merc. Law, p. 477, 2d edit.
350
CONTRACTS OF AFFREIGHTMENT.
$100,000, and that which was cast overboard was worth $20,000,
the loss being a fifth, each will contribute a fifth part of the
value of what he has saved, which will make in all $16,000 ;
and by this contribution, those who, having lost the $20,000, in
recovering $16,000, will remain losers only of a fifth part, like
the rest.¹
But notice the loss must have been voluntarily incurred.
Masts and sails destroyed in consequence of carrying an un-
usual press of canvas are not usually subjects of general
average.2
But they are so if cut away and abandoned for the preser-
vation of the ship.³
§ 423.-2. In what Cases may be Required. The principle of
the obligation to contribution in case of loss is the common risk
in which all the parties participate, and the necessity of the loss
for the common good. Therefore, as respects a loss by a jettison
of goods, in order to establish a claim for general average, the
jettison must have been made with a view to the common good,
the preservation of the ship, and under the pressure of a danger
which was neither willingly encountered by the ship-owner or
master, nor in anywise aggravated or increased by the conduct
or fault of the shipper.
It is only when jettison is so made-that is, without any fault
in the owner or master, or in the shipper himself-that either
can claim contribution of the other, as for a loss by the peril of
the sea.
If the jettison can be traced to the fault of any party con-
cerned, he alone should bear the loss; if to the fault of the ship-
owner or master, be must bear it; if to a risk which the shipper
assumed, then the loss is with him; for the loss must follow the
risk, and the one is common only when the other is common.*
To justify a case of jettison on which to found general aver-
age, it must take place with order and without confusion, and
with deliberate intention. It must be the effect of judgment and
will, and with a view to the safety of the ship and cargo."
1 Bat. Com. Law, 525.
Whitmore, 4 M. & S. 141.
• •
2 Covington v. Roberts, 2 N. R. 378; Power v.
3 Burkley v. Presgrave, 1 East, 220....
5 3 Kent's Com.,
4 Bat. Com. Law, pp. 525, 526; 17 Howard's U. S. R. 111.
Lect. 47.
GENERAL AVERAGE.
351
§ 424.-3. What Goods Contribute.-As we have seen, the
loss must not only be voluntary, but it must be for the purpose,
and with the intention, of saving something else. And this in-
tention must be carried into effect; for only the interest or prop-
erty which is actually saved can be called to contribute for that
which was lost.¹
If goods are put on board a lighter to relieve the ship, and,
the boat being in peril, some of the goods are jettisoned, the
whole ship and cargo should contribute.²
The general doctrine is that all the merchandise, of whatever
kind or weight, or to whomsoever belonging, contributes. Goods
of the government are liable to contribute with those of other
shippers. The contribution is made, not on account of incum-
brance to the ship, but of safety obtained; and, therefore, bullion
and jewels put on board as merchandise contribute according to
their full value.3
§ 425.-4. What Goods Exempt from.-The wearing apparel,
jewels, and other things belonging to the persons of passengers
or crew, and taken on board for private use, and not as merchan-
dise for transportation, and the provisions and stores for the
crew, do not contribute in a case of general average.
£
The common rule is, that what articles pay freight must con-
tribute, and what goods pay no freight, pay no average; and
that articles must contribute according to their value, and not
according to weight.5
Instruments of defense, as well as provisions, do not con-
tribute, because they are necessary to all; and yet, if they are
sacrificed for the common safety, they are to be paid for by con-
tribution; nor do the wages of seamen contribute to the general
average, except in the single instance of the ransom of the ship.
They are exempted lest the apprehension of personal loss should
restrain them from making the requisite sacrifice, and the hard-
ships and perils they endure will entitle them to an exemption
from further distress."
'Scudder v. Bradford, 14 Pick. R. 13.
•
33 Kent's Com., Lect. 47..
•
•
.. Lewis v. Williams, 1 Hall, 430.
4 Abbott on Shipp., part 3, ch. 8, sec.
14; Brown v. Stapyleton, 4 Bingham, 119... 5 Mayens on Insurance, vol. i,
62, 63........ 1 Emerigon, 642; 3 Kent's Com., Lect. 47.
352
CONTRACTS OF AFFREIGHT MENT.
§ 426-5. Mode of Contribution.-As a general rule, the goods.
sacrificed, as well as the goods saved, if the vessel arrives at the
port of destination, are to be valued at the clear net price they
would have yielded, after deducting freight, at the port of dis-
charge; and this rule is founded on a plain rule of equity. The
person whose loss has procured the safe arrival of the ship and
cargo should be placed on equal ground with those persons whose
goods have safely arrived, and that can only be by considering
his goods to have arrived also.
The owners of the ship contribute according to her value at
the end of the voyage, and according to the net amount of the
freight and earnings. The value of the vessel, if lost, is esti-
mated according to her value at the port of departure, making a
reasonable allowance for wear or tear on the voyage up to the
time of disaster; and the practice in this country is, to ascertain
the contributory value of the freight, by deducting one-third of
the gross amount."
1
As to losses of the equipment of the ship, such as masts,
cables, and sails, it is usual to deduct one-third from the price
of the new articles; for being new, they will be of greater value
than the articles lost.²
§ 427.-6. Payment of.-As to the payment of the average,
each individual is undoubtedly entitled to sue for the amount of
his share when adjusted; but the English practice usually is, in
the case of a general ship, where there are many consignees, for
the master, before he delivers the goods, to take a bond from the
different merchants for payment of their portions of the average
when the same shall be adjusted.
The captain may either retain the goods until the amount
contributable is paid,³ or he may make the giving of the average
bond a condition of the delivery; and it is held to be a reason-
able condition in support of a right founded on commercial
usage.¹
4
13 Mason's R. 439....
•
2 Abbott on Shipp., 5th Amer.
Johns. R. 323; 2 Barn. & Cres. 805; 3 Kent's Com., Lect. 47....
Ellis, 11 Ill. R. 579..
4 Cole v. Bartlett, 4 La. R. 130.
edit., 607; 11
.3 Gillett v
SALVAGE.
353
PART V.-SALVAGE.
§ 428.-1. Definition.-Salvage is a compensation for service
rendered in saving property or rescuing it from impending peril
on the sea, or when wrecked on the coast of the sea, or, in the
United States, on a public navigable river or lake, where inter-
State or foreign commerce is carried on.¹
A salvor is a person who, without any particular relation to
the ship in distress, proffers useful service, and renders it with-
out any pre-existing contract making the service a duty.2
§ 429.-2. Kinds.-Salvage is of two kinds, civil and mili-
tary.
1. Civil.-Civil salvage is that which is payable for prop-
erty saved at sea in case of shipwreck or other inevitable acci-
dent.
2. Military.-Military salvage is payable for property
saved at sea, in cases of recapture from a public enemy.³
§ 430.-3. Who Entitled to.—In order to give a title to salvage,
the property must be effectually saved. It must be saved by the
instrumentality of the asserted salvors, or their services must
contribute in some certain degree to save it.*
The property saved must be brought by the salvors to some
port of safety, and it must be there in a state capable of being
restored to the owner, before the service can be deemed com-
pleted. The salvors will then be entitled to their salvage or
compensation.5
A passenger or an officer, acting as such, for extraordinary
exertions beyond the line of his duty, has been deemed entitled
to a liberal compensation as salvage."
So, also, in a case of extraordinary peril, it is admitted that
great exertions and personal hazard may exalt a pilotage ser-
1 Bouv. Law Dict., art. Salvage; 1 Sumn. C. C. 210, 416; 12 How. 466; 5
McLean C. C. 359..... 2 The Neptune, 1 Hagg. Adm. Rep. 236; Hobart v.
Drogan, 10 Peters, 108, 212……. 3 Bateman's Com. Law, § 842.
4 4
Wash. C. C. 651... 5 1 Sumn. C. C. 417; 1 W. Rob. Adm. 174; 3 Id. 71
Newman v. Walters, 3 Bos. & Pul. 612.
23
354
CONTRACTS OF AFFREIGHTMENT.
vice into something of a salvage service, and salvage will be al-
lowed.¹
1
Seamen may be entitled to salvage for peculiar services, sacri-
fices and hardships. The character of seamen creates no inca-
pacity to assume that of salvors; and were it otherwise, it would
be mischievous to the interests of commerce, inconsistent with
natural equity, and would be tempting the unfortunate mariner
to obtain by plunder and embezzlement, in a common calamity,
what he ought to possess upon principles of justice.
The allowance of salvage in such cases is and ought to be lib-
eral—not less in any case than the wages would have amounted
to; and even an additional recompense should be made in cases
of extraordinary danger and distinguished gallantry, where the
service was much enhanced by the preservation of life and the
great value of the property at stake.²
The court of admiralty has no power of remunerating the
mere preservation of life; but when connected with the preser-
vation of property, it forms a high ingredient of merit in the al-
lowance of salvage.3
§ 431.-4. Who Not Entitled to.-In general, neither the
master, nor a passenger, seaman, or pilot, is entitled to compen-
sation, in the way of salvage, for the ordinary assistance he may
have afforded a vessel in distress, as it is no more than a duty.
The salvor, generally, is one who is under no legal obligation to
render service, and who has no relation to the ship in distress.*
§ 432.-5. Upon Whom Chargeable.—As salvage is founded
on the protection afforded to the lives and property of others on
the sea, or when wrecked on the coast of the sea, it is justly
chargeable upon those who receive the benefit, and who would
have sustained the loss if it had not been prevented by the exer-
tions of the salvors.
§ 433.-6. Rules of Allowance.-The guiding rules in deter-
mining the amount of reward that ought to be allowed are:
1 Sir William Scott, in the Joseph Harvey, 1 Rob. Adm. R. 306; The Freder-
ick, 1 W. Robinson, 16………. 2 The Two Catharines, 2 Mason's Rep. 319; 3
Kent's Com., Lect. 47.
.1 Hagg. Adm. R. 83.. .4 The Neptune, 1
Hagg. Adm. R. 236; Hobart v. Drogan, 10 Peters, 108, 212; 3 Kent's Com.,
Lect. 47.
•
SALVAGE.
355
1. Enterprise in the salvors in going to assist a vessel in dis-
tress, and in risking their own lives to save the lives and prop-
erty of their fellow-creatures.
2. The degree of danger from which the property is rescued ;
as, whether it were in imminent peril, and almost certain to be
lost, if not at the time rescued and preserved.
3. The degree of labor and skill which the salvors incur and
display, and the time occupied.
4. The value of the goods rescued.
Where all these circumstances concur, a large and liberal
reward ought to be given; but where none, or scarcely any of
them take place, the compensation can hardly be called a salvage
compensation.'
The amount to be allowed, as we have seen, varies according
to the labor and peril incurred by the salvors, the merit of their
conduct, the value of the ship and cargo, and the degree of
danger from which they were rescued.
The courts are liberal in the allowance of salvage in merito-
rious cases, as a reward for the service, and as an incentive to
effort; and the allowance fluctuates between one-half, one-third,
and one-fourth of the gross or net proceeds of the property saved ;
but one-third has been the most usual rate.
Adequate remuneration, in view of all the circumstances, is
the true principle."
There is no statute law for the regulation of salvage in the
United States, except in cases of recapture. In the case of
shipwrecks, or derelicts at sea, and rescue, and most other cases,
the law has not fixed any certain rate of salvage; but it is left
to the sound discretion of the court of admiralty, under all the
circumstances.3
§ 434.-7. How Forfeited.-Embezzlement of any of the
goods saved works a forfeiture of the salvage of the guilty
party.+
Fraud, negligence, or carelessness in saving and preserving
¹ Sir John Nickoll, 3 Hagg. Adm. R. 117; Id. 90, 203..
2 Post v. Jones,
19 How. U. S. Rep. 150; The Waterloo, 1 Blatch. & Howl. Adm. R. 114;
Schooner John Wurts, 1 Olcott, Adm. 462... 33 Kent's Com., Lect. 47.
4 Ware's Dist. Ct. R. 280; 1 Sumn. C. C. 328.
356
CONTRACTS OF AFFREIGHTMENT.
the property, or any gross misconduct on the part of the salvors
in connection with the property saved, will work a total forfeiture
of the salvage, or a diminution of the amount.¹
PART VI.-DISSOLUTION OF THE
CONTRACT.
§ 435. The contract may be dissolved without execution, in
either of the following ways:
§ 436.-1. By the Act of the Parties Themselves.-This, as
in the dissolution of most contracts, is done simply by the par-
ties agreeing to the dissolution.
§ 437.-2. By Operation of Law. It is dissolved by opera-
tion of law under the following circumstances:
1. By War.-The breaking out of hostilities between the
country to which the ship belongs and that to which she is
bound, rescinds the contract of affreightment.
2. Interdiction.-If the exportation of the articles of
which the cargo is to consist be prohibited by government, the
contract of affreightment is dissolved."
But such a prohibition by a foreign government is no excuse
for the non-performance of an engagement to lade a vessel with
a cargo of the goods, the exportation of which is prohibited; for
one nation will not enforce the merely positive regulations of
another, if inconsistent with its own.³
3. Blockade.-It is illegal, as contrary to the law of
nations, to attempt to enter a blockaded port in violation of the
blockade; and after a notification of such blockade, the act of
sailing with the intention of violating the blockade is illegal.*
But the mere act of sailing to a port which is blockaded at
the time the voyage is commenced, without any premeditated
intention of breaking the blockade, if it shall be found to con-
tinue in force when the ship arrives off the port, is not illegal ;
1 ¹ 2 Cranch, 240; 1 W. Rob. Adm. 497; 2 Id. 470; 3 Td. 122; 2 Eng. L. & Eq.
R. 554; 6 Wheat. 152; 19 Boston Law Rep. 490.......2 Barker v. Hodgson, 3 M.
& S. 267..
3 Bright v. Page, Abb., p. 2, c. xi; 3 B. & P. 295; 16 East's
4 The Neptune, 2 Rob. 110; Medeiros v. Hill, 8 Bingh. 231.
R. 201.
•
DISSOLUTION OF THE CONTRACT.
357
.
for it may be of the first importance to neutral merchants to
possess the opportunity of introducing their goods at the earliest
moment after the blockade has been relaxed.¹
4. Embargo, when.-The contract of affreightment is
not dissolved by an embargo, if it is but a temporary suspension,
and not a total interdiction of commerce.2
But it would be a dissolution of the contract by operation of
law, if the embargo were intended as a hostile measure against
the country to which the ship belongs, and the object of the
voyage should thereby be lost.3
¹ Medeiros v. Hill, 8 Bingh. 231; The Shepherdess, 5 Rob. 264.
ley v. Clark, 3 T. R. 259..
3 Touteng v. Hibbard, 3 B & P. 291.
.2 Had-
Topical Analysis of the Law of Bailment.
IN TWO PARTS.
PART I.
I. Parties.
1. Bailor.
2. Bailee.
2. Subject-matter.
I. ELEMENTS..
1. Ordinary.
3. Great.
3. Degrees of diligence.2. Slight.
4. Restoration.
II. ORDERS .
¡II. CLASSES..
ORDER I-CLASS I-
DEPOSIT.
5. Conditions.
1. For the exclusive benefit of the bailor, or
of some person other than the bailee.
2. For the exclusive benefit of the bailee.
3. For the benefit of both parties, or of one of
them, and a third party.
I. Deposit.
2. Mandate.
}
1. Order.
3. Gratuitous loan.} 2. Order.
4. Pledge.
5. Hiring.
} 3.
3. Order.
1. Depositor.
1. Parties. {2. Depositary.
2. Subject-matter.
3. Trust gratuitous.
4. Trust voluntarily assumed.
5. Degree of diligence.
6. Use of deposit by bailee.
7. Each party's interest in subject-matter.
8. Demand by depositor.
9. Return of deposit.
10. When failure to return excused.
II. Depositary's right to reimbursement.
12. Revocation.
TOPICAL ANALYSIS OF BAILMENT.
359
ORDER I-CLASS 2—
MANDATE.
ORDER II-CLASS 3-
GRATUITOUS LOAN.
ORDER III-CLASS 4—
PLEDGE OR PAWN.
1. Parties.
2. Essentials of the con-
tract.
3. Consideration.
4. Mandatary's liabilities.
5. Degree of diligence.
1. Mandator.
2. Mandatary.
1. Subject-matter.
2. Undertaking gratuitous.
3. Undertaking voluntary.
S 1. For nonfeasance.
2. For misfeasance.
6. When mandatary responsible for skill.
7. When mandatary not responsible for skill.
8. Misuser by mandatary.
9. Mandatary's interest.
10. Mandatary to render account.
II. Disbursements by mandatary.
12. Restoration.
13. Dissolution of the contract.
1. Parties. {1, Lenrrower,
2. Subject-matter.
3. Gratuitous.
4. Use by borrower.
5. Limitation of borrower's right.
6. When use personal.
7. Obligations of borrower.
8. Diligence required.
9. Expenses incident.
10. Who to bear loss.
II. Obligations of lender.
12. Restitution by borrower.
13. Revocation.
I. Parties.
§ 1, Pledgeor,
2, Pledgee,
2. Security for debt.
3. Subject-matter.
4. Delivery of pledge.
5. Special property in pledgee.
6. Pledgee entitled to increase.
7. When pledgee may use the pledge.
8. Expenses incurred.
9. Waiver of pledgee.
10. Responsibility for loss.
II. Pledgee's right of sale.
12. Pledgee to account.
13. Pledgeor's right of redemption.
14. How the con-
tract extinguished.
1. By payment of the debt.
2. By giving higher security.
3. By operation of law.
4. By destruction of the pledge.
5. By release or waiver by pledgee.
¡
CHAPTER XIV.
BAILMENT.
§ 438. A Bailment consists in the delivery of something of
a personal nature by one party to another, to be held according
to the purpose or object of the delivery, and to be returned or
delivered over when that purpose is accomplished.'
The subject will be divided into two parts, embracing five
Elements, three Orders, and five Classes.
A bailee may accept the trust gratuitously, or he may do it
for a compensation. Part I will include those cases of bailment
in which the bailee accepts the trust without reward, or expecta-
tion of it.
Part II will include those cases of bailment, in which respon-
sibility, care and labor are assumed on the part of the bailee, in
consideration of compensation or reward, promised expressly or
impliedly by the bailor.
PART I.
A contract of bailment, whether it comes under Part I or
Part II, must have all the elements essential to a contract.
There must be parties, consideration, subject-matter, and mu-
tual assent in every case of bailment; and other elements will
appear, depending on the peculiar form of the contract, as we
shall see in treating of the classes of bailments in detail.
1.-ELEMENTS.
§ 439. We will consider the elements of a contract of bail-
ment in the following order:
¹ Prof. Parker, Dane Law School, Harvard College, 1851.
ELEMENTS.
361
1. Parties. The parties to a bailment are, speaking gen-
erally, the bailor, and the bailee.
The party who delivers the thing to the other, is called the
bailor; the one receiving it, is called the bailee.
§ 440.-2. Subject-matter.-This is the thing passing from
the hands and possession of the bailor, to the possession of the
bailee, and in relation to which the trust is undertaken; and it
may include the personal services of those who are hired.
§ 441.-3. Degrees of Diligence.-The degrees of diligence
here referred to are to be exercised by the bailee in his care of the
property bailed. The degree required by law depends entirely
upon the Order to which the bailment belongs. While there
are infinite shades of care and diligence, from the slightest mo-
mentary thought to the most vigilant anxiety, there are but
three degrees reckoned as being of much practical importance.
These degrees are-1. Ordinary Diligence; 2. Slight Dili-
gence; and 3. Great Diligence.
1. Ordinary Diligence.-This, in the legal sense, is
that degree which men of common prudence generally exercise
about their own affairs in the age and country in which they
live.¹
The customs of trade and the course of business have an
important influence in determining what is ordinary diligence.
If a chaise, for instance, were left during the night under an open
shed, and were stolen, the bailee might not be liable for the loss,
if such was the usual practice of the town or place. In some
times and places, men intrusted with money might find it neces-
sary to go armed; when at other times and places, such a pre-
caution might be wholly unnecessary.²
The nature, bulk, and value of the articles are also to be con-
sidered.³ A man would not be required to take the same care of
a bag of oats, as of a bag of gold; of a bale of cotton, as of a
box of diamonds or other jewelry. The value is especially to be
considered. That which is of great value would require more
care than if of little value.*
¹ Vaughan v. Menlove, 3 Bing. N. C. R. 468, 475; Batson v. Donovan, 4 Barn.
& Ald. 21, 30.
.2 Story on Bailm., § 14...... 3 Jones on Bailm. 38, 39.
4 Story on Bailm., § 15.
•
362
LAW OF BAILMENT.
2. Slight Diligence.-This is that kind which persons
of less than common prudence, or indeed of any prudence at all,
take of their own concerns."
3. Great Diligence.-This is extraordinary diligence,
or that which very prudent persons take of their own con-
cerns.2
§ 442. There are degrees of negligence that correspond t
these degrees of diligence.
Ordinary negligence may be defined to be the want of
ordinary diligence; Slight negligence, the want of great dili-
gence; Gross negligence, the want of slight diligence. For he
who is only less diligent than very careful men, cannot be said
to be more than slightly inattentive; he who omits ordinary
care, is a little more negligent than men ordinarily are; and he
who omits even slight diligence, fails in the lowest degree of
prudence, and is deemed grossly negligent."
4
§ 443.-4. Restoration. This, according to the definition of
most law writers, is one of the elements of bailment, though
there are some bailments, as Judge Story holds, in which it is
not included. But it is admitted that in most cases, if not all,
it is an element of this kind of contract. This is a condition,
express or implied, that the goods shall be re-delivered to the
bailor, as soon as the time or use for which they were bailed
shall have elapsed, or be performed."
§ 444.-5. Conditions.-As a general rule, the law does not
dictate to the parties to a contract, in reference to the words
which they shall employ in making it, nor the terms by which
they shall bind themselves. These are left wholly to the parties.
The law simply seeks to ascertain their intentions, and these
become the conditions of the contract. The law then gives a
name to the contract, in accordance with the conditions. These
conditions also determine the rights of the parties; or, rather,
the rights of the parties grow out of them.
1
2
¹ Story on Bailm., § 16. . . . . . . .² Id.. . . . . . . .³ Jones on Bailm., 8, 9; Story on
Bailm., § 17........4 Story on Bailm., § 2........5 Id.
ORDERS-CLASSES.
363
II. ORDERS.
§ 445. Bailments may be properly divided into three kinds,
or Orders, as we prefer to call them. The word Orders is used
here to avoid confounding this division with that of Classes.
ORDER I.
This Order includes those Classes of bailments in which the
trust is exclusively for the benefit of the bailor, or of a third
person.
ORDER II.
This Order includes those bailments in which the trust is
exclusively for the benefit of the bailee.
ORDER III.
This Order includes those bailments in which the trust is for
the benefit of both parties, or of both or one of them and a third
party.
III.-CLASSES.
§ 446. The three Orders include five Classes; and these
Orders and Classes cover the entire law of Bailments.
1st Class.-This embraces Deposits, and comes under the
first Order.
27 Class.-This embraces Mandates, and also comes under
the first Order.
3d Class.-This Class embraces Gratuitous Loans, and is in-
cluded in the second Order.
4th Class.-This Class includes Pledges, or Pawns, and comes
under the third Order.
5th Class.-This includes Hiring, and Letting to Hire, and
also comes under the third Order.¹
1
1
¹ Eng. Month. Mag. for April, 1839, p. 216, 217; Story on Bailm., § 3
364
LAW OF BAILMENT.
It will be necessary now to examine these Classes, and the
law relating to them, in detail. It will soon appear that the
legal responsibility attaching to the parties depends much upon
the Order into which the Class of bailment falls.
ORDER 1.-CLASS I.
DEPOSIT.
§ 447. A deposit is commonly defined to be a naked bailment
of goods to be kept for the bailor, without recompense, and to
be returned when the bailor shall require it.¹
A deposit differs from what is called in the civil law a
mutuum; for in the latter case the identical thing lent is not
to be returned, but another thing of the same kind, quality,
nature, or value. Thus, for example, when the loan is of money,
wine, or other things that may be valued by number, weight, or
measure, and are to be restored only in equal value or quantity,
it is a mutuum.
In a mutuum the property passes immediately from the
mutuant, or lender, to the mutuary, or borrower; and the iden-
tical thing lent cannot be recovered or remanded."
But in the case of a mere deposit, the property is not trans-
ferred or alienated; but it remains in the depositor; and the
depositary h the mere possession or custody of the thing.3
§ 448.-1. Parties. The partics to a deposit are the deposi-
tor, or party who makes the deposit; and the depositary, or the
party who takes charge of the deposit.
The deposit may be made by and between any persons who
are capable of making a valid contract; but not by and between
those who are incapable.
Infants, married women, and other persons laboring under
personal disability, cannot bind themselves, either as depositors,
or as depositaries, although other persons may be bound to them.
1 Jones on Bailm., 36, 117; Kent's Com., Lect. 40; Story on Bailm., § 4.
•
2 1 Bell's Com., § 197, 4th edit. . . . . . . .³ 1 Bell's Com., § 199, 4th edit.;
1 Bell's Com., p. 257, 258, 5th edit. ; 2 Kent's Com., Lect. 40.
DEPOSIT.
365
If an infant receives a deposit, he is bound to restore it, if it
is in his possession or under his control; but he is not responsi-
ble if he loses it.' He may become responsible for any wilful
wrong he does to it; but he is not responsible on his contract,
unless it be a necessary contract, and manifestly for his benefit.²
On the other hand, an infant may make a deposit; and in
such a case, all the obligations of a depositary are binding upon
the other party, until the infant repudiates the contract, or re-
calls the thing deposited.³
§ 449.-2. Subject-Matter. This is limited to personal or
movable property, and is inapplicable to real or immovable prop-
erty. Debts, choses in action, and other instruments and evi-
dences of debts, may become the subject-matter of a deposit.*
5
§ 450.-3. Gratuitous. The custody of the deposit must be
gratuitous. This results from the definition given. Care should
be taken not to confound cases where a compensation is allowed,
with cases of pure deposit. The responsibility of the bailee
becomes changed at once, and materially increased, when he is
paid for care and attention over the goods left with him.
Indeed it ceases to be a deposit.
§ 451.-4. Trust Voluntarily Assumed.-As a general rule,
the trust must be undertaken voluntarily, as well as without
recompense. It arises from the consent and agreement of the
parties. In every case, there must be a voluntary undertaking;
for it is not in the power of a bailor to force
any custody of his goods.
upon another
person
Therefore a person to whom a valuable picture is sent as a
deposit will not be answerable, if he has no knowledge of the
fact, and has not assented to receive it."
§ 452.-5. Degree of Diligence. The depositary entering
into the undertaking purely for the benefit of the depositor, and
without compensation, is answerable for slight diligence only,
and is responsible only for gross neglect.
1 Mills v. Graham, 4 Bos. & Pull. 140, 144.
SS 240, 241..... 3 Story on Bailm., § 50.
•
•
But in every case,
21 Story on Eq. Jurisp.,
1 Bell's Com., § 199, 4th
edit.; Id., p. 258, 5th edit........52 Kent's Com., Lect. 40.
Bailm., § 44.
•
Lethridge v. Phillips, 2 Stark. R. 544.
•
•
6 Story on
8 Doorman
•
v. Jenkins, 2 Adolph. & Ellis R. 256; Foster v. Essex Bank, 17 Mass. R. 500;
Edson v. Weston, 7 Cow. R. 278.
366
LAW OF BAILMENT.
good faith requires that he should take reasonable care of the
deposit. What is reasonable care must materially depend upon
the nature, value, and quality of the thing, the circumstances
under which it is deposited, and sometimes upon the character
and confidence, and particular dealings of the parties.' What is
gross negligence is ordinarily a matter of fact for a jury to decide,
and not of law for the court.2
§ 453-6. Use of Deposit by Bailee.-As a general rule, the
depositary has no right to use the thing deposited, unless there
be an express or implied consent on the part of the depositor."
There may be cases, however, where this rule will not hold; as,
for instance, where the use of the thing may be necessary for the
due preservation of the deposit. If the subject-matter were a
horse, the depositary would certainly be at liberty to use him, so
far at least as to preserve his health. Reasonable care would
require his use to this extent.*
If a milch cow were deposited, the milking of the cow would
not injure, but promote the health of the animal; and this
would not render the depositary liable to an action."
On the other hand, if diamonds and jewels were deposited,
it might be deemed an abuse of trust to wear them, or to suffer
them to be worn by the family of the depositary, even although
the use might be of no injury; for it would subject the deposit
to undue perils and chances of loss.
6
·
Both
§ 454.-7. Each Party's Interest in Subject-Matter.
the depositor and depositary have an interest in the thing depos-
ited. The general owner by virtue of his ownership, and con-
sequent right of possession, may maintain a suit against a
stranger, for an injury to it, or conversion of it."
7
It is a general rule, that either the bailor or bailee may, in
such case, maintain a suit for redress; and a recovery of damages.
•
1 Tompkins v. Saltmarsh, 14 Serg. & Rawle, 256; Lafarge v. Morgan, 11
Martin R. 462; Story on Bailm., § 11.
Ellis R. 256
31 Bac. Abridg.,
4 Story on Bailm., § 89.....
Id.; Jones on Bailm. 81, 82
.2 Doorman v. Jenkins, 2 Adolph. &
Bailment, D; Jones on Bailm. 81, 82.
5 Jones on Bailm. 81, 82; Story do., § 89.
1 2 Black. Com. 453; Bac. Abridg.,
Bailment, A BC: Thorp v. Burling, 11 Johns. R. 285; Brownell v. Manchester,
1 Pick. R. 232.
DEPOSIT.
367
by either of them, will be a full satisfaction, and may be pleaded
in bar of any subsequent suit by the other.'
It is not necessary that the depositor shall have absolute title
to the thing deposited; a mere special property is all that is
essential; and even a bare possession of a personal chattel is
sufficient to enable him to deposit it, and to give him the ordi-
nary rights against the depositary.2
As to whether a depositary has a special property in the thing
deposited, there is a conflict of authority. But there is no dif-
ference of opinion as to his right to protect his possession against
all wrong-doers, and against all persons except the depositor or
real owner. In fact, the possession of the depositary is, for many
purposes, deemed in law to be the possession of the depositor,
for the better security of his right, and the enlargement of his
remedies.³
§ 455.-8. Demand by Depositor. The depositor can not
maintain an action against the depositary, unless there has been
some wrongful conversion, or some loss by gross negligence on
his part, until a demand has been made upon the depositary, and
he has refused to re-deliver the deposit.*
A demand and refusal is ordinarily evidence of conversion;
unless the circumstances constitute a just excuse, or a justifica-
tion of the refusal.5
§ 456.-9. Return of Deposit. The depositary is bound to
restore the deposit, the individual thing itself, upon demand by
the bailor, from whom he received it, unless another person ap-
pears to be the right owner. But if he delivers it to the bailor
in good faith, not knowing the claim of the true owner, he is
not liable to the latter. The bailee has a good defense against
the bailor, if the bailor had no valid title, and the bailee, on de-
mand, delivers the goods bailed to the righful owner.
6
¹ Bac. Abridg., Trespass, C, 2; Id., Trover, C; Nicollo v. Bastard, 2 Cromp.;
Mees. & Rosc. 659, 660; 2 Saund. R. 47.
2 Armory v. Delamirie, 1 Str. R.
+ Brown v. Cook, 9 Johns. R. 361;
5 Green v.
3 Id..
505; 2 Kent's Com. 566..
Hosmer v. Clark, 2 Greenl. R. 308; Story on Bailm, § 107.
Dunn, 3 Camp. R. 215; Magee v. Scott, 9 Cush. R. 148; Wilson v. Anderton, 1
Barn. & Adolph. 450.
6 King v. Richards, 6 Wharton R. 418; Bates v.
Stanton, 1 Duer R. 79.
•
368
LAW OF BAILMENT.
He is to deliver it in the state in which he received it, and
with the profits or increase, if any, which it has produced; and
if he fails in either of these respects, he becomes responsible.¹
§ 457.-10. When Failure to Return Excused.—In either of
the following instances, a failure to return the thing deposited
will be excused:
1. Where it is destroyed by an accident.
2. Where it perishes by its own inherent defects.
3. Where the loss is owing to its own perishable quality.
4. Where the loss is owing to the slight or ordinary neglect
of the depositary.
§ 458.-11. Depositary's Right to Reimbursement.—The de-
positary is generally entitled to be reimbursed all the necessary
expenses to which he has been subjected for the preservation of
the deposit.2
§ 459.-12. Revocation.-A bailee without hire may termi-
nate his custody at any moment, giving reasonable opportun-
ity to the owner to remove the goods. If after he has offered to
deliver them and made an actual tender to the owner, the owner
refuses to take them away, the bailee may lawfully place them
off from his premises, and is not responsible for their subsequent
loss.3
ORDER I-CLASS II.
MANDATE.
§ 460. This is the second class of bailments. Mandate is
an undertaking by one party, without recompense, to do some act
for another in respect to the thing bailed.*
1. Parties. In this as in every other contract, there must be
parties. The employer is called the mandator.
The person
employed is called the mandatary.
¹ Game v. Harvie, Yelv. R. 50; Coggs v. Bernard, 2 Lord Raym. 909.......
2
Story on Bailm., § 121..
³ Roulston v. McClelland, 2 E. D. Smith, 60.
42 Kent's Com., Lect. 40.
MANDATE.
369
C
§ 461.-2. Essentials of the Contract. From the very terms
of the definition, three things are necessary to create a mandate.
First. That there should exist something which should be the
subject-matter of the contract, or some act or business to be
done.
Second. That it should be to be done gratuitously.
Third. That the parties should voluntarily intend to enter
into the contract.¹
1. Subject-Matter.-It must respect an act to be done
at some future time, and not one already completed. For in-
stance, if I should request you to lend Brown a hundred dollars,
at my risk, and you lend it accordingly, it is properly a mandate,
and I am responsible accordingly.
But, if unknown to me, you have already lent Brown the
hundred dollars, then the like contract does not arise. It would
also be a mandate, if I request you to give time to Brown at my
risk, on what he now owes you.2
It must respect some certain thing; for if the thing be wholly
uncertain, it is impossible that any contract can arise. The very
vagueness of it prevents the law from acting upon it. If I
charge you to buy something for me, not specifying what, on a
particular evening at a fair, as it is wholly uncertain what you
are to buy, no contract arises. If I ask you to carry something
for me to Brown, and nothing is ever delivered or designated to
you to be carried, there is no contract.³
It must be an act of such a nature, that it may properly be
deemed the act of the mandator, through the instrumentality of
the mandatary, or his agent.*
So, the act to be done must be of a nature capable of being
done, and not be a vain or absurd act.5
If the thing to be done concerns merely the interest of the
mandatary, no contract arises. As, if I direct you to invest your
money in a particular fund, it is mere advice or recommenda-
tion.
1
2. Undertaking Gratuitous.—It is of the very es-
§ 149.
Story on Bailm., § 144.
3 Id., § 146...
2 Id., § 145, and the authorities there cited.
4 Id., § 147.
5 Id., § 148..
6 Id.,
24
370
LAW OF BAILMENT.
sence of this class of contracts, that whatever the mandatary
promises, should be promised to be done gratuitously. If any
compensation is to be paid, it falls into another class of con-
tracts; that is, the contract of hire. It matters not in this par-
ticular, whether the compensation is express or implied; whether
it is certain or uncertain in amount. If, however, there is a
mere honorary payment, not as a compensation, but as a mark
of respect and favor, this will leave it still a mandate.¹
3. Undertaking Voluntary.-There must be a volun-
tary intention on the part of both parties to enter into the con-
tract. If there be any constraint or duress, any substantial
mistake, any fraud or imposition, any misconception of the real
intention on either side, the contract does not arise.2
§ 462.-3. Consideration.-We have seen that one leading
feature of a mandate is, that the thing to be done must be done
gratuitously. This is said to be the very essence of the contract.
Then it becomes a question, whether the mandator can recover
damages of the mandatary for non-performance, if there is no
consideration.
But there is a consideration. There is a something delivered
by the mandator to the mandatary. The mandator parts with
the possession. The mandatary accepts it under the trust im-
posed. He enters upon the performance of what he has pro-
mised, and the very possession of the article itself becomes the
consideration. Here is a delivery and a receipt for a particular
purpose; elements of trust and confidence; acts on one side in
consideration of undertakings on the other; and in case these are
not performed, the mandator has subjected himself to incon-
venience on the promise of the mandatary, by which he suffers
lamage.
On the other hand, a mere naked promise, without delivery
of the thing to the mandatary by the mandator, would not be
binding. This brings us to consider the liabilities of the man-
datary a little more minutely.
§ 463.-4. Mandatary's Liabilities.-1. Nonfeasance.-
The modern decisions of the highest courts in this country, and
1
¹ Story on Bailm., § 153..
.2 Id., § 155.
MANDATE.
371
also in England, hold that the mandatary is not liable to the
mandator on his simple, gratuitous promise. In other words,
he is not liable for non-performance of that for which he is to
receive no reward, or not doing that which he has promised to
do. But he is responsible for attempting to do it, and doing it
amiss. He is responsible for a misfeasance, but not for a non-
feasance, even though special damages result.
2. Misfeasance. This is the performance of an act in
an improper manner, which might lawfully be done, if done
properly, by which another person receives an injury.
It seems to be settled that there is a distinction between mis
feasance and nonfeasance in the case of mandates. In the casc
of misfeasance, the common law gives a remedy for the injury
done, and to the extent of that injury.'
A man undertook to carry for another, gratis, several hogs-
heads of brandy from one cellar and deposit them in another;
and he did it so negligently that one of the casks was broken in
and the brandy lost. He was held responsible for the damage.²
If the mandate has been executed on the part of the man-
datary, as, if he has delivered the thing to the mandatary which
is the subject of the mandate, in such cases there arises, from
such delivery and receipt, a sufficient consideration to support
the contract, and to found an action for any negligence or omis-
sion, in the due execution of the mandate.³
3
It is not necessary to constitute a sufficient consideration to
support the contract that the bailee should derive some benefit
from it. It will be sufficient if the bailor, on the faith of the
promise, parts with some present right, or delays the present use
of some right, or suffers some immediate prejudice or detriment,
or does some act at the bailee's request.*
If a mandatary should undertake to carry, or to pay, or to
transmit money for a mandator to a particular place, there to be
paid on a particular day, and the money should be delivered to
him for that particular purpose, he would be bound by his receipt
15 Term Rep. 143; 4 Johns. N. Y. 81; 2 Johns. Cas. N. Y. 92; 1 Esp. 92.
2 Coggs v. Barnard, 2 Lord Raym. 919, 920..... 3 Williamson v.
Clements, 1 Taunt. R. 523; Longridge v. Dorville, 5 Barn. & Ald. 1171; Story
on Bailm., § 177…….. 4 See authorities last cited.'
372
LAW OF BAILMENT.
of the money to carry, pay, or transmit the money accordingly.
If he should omit to do so, he would be responsible to the man-
dator for his negligence; for the delivery of the money to him
would constitute a sufficient consideration for his undertaking.
It would also be on his part an inception or part execution of
the mandate.¹
§ 464.-5. Degree of Diligence.-A mandatary, according to
the very definition of the contract, is not to be benefited in any
way whatever; or, at least, he is to receive no recompense for
his care and trouble. The undertaking is wholly gratuitous, and
for the benefit of the mandator. He is, therefore, held only to
the exercise of slight diligence, and is responsible only for gross
neglect.²
3
This is the doctrine of the common law universally applied to
mandates. The question whether there has been gross negli-
gence or not, seems in general to be a matter of fact for the jury
upon all the circumstances, rather than of law for the court.*
§ 465.-6. When Mandatary Responsible for Skill.-The un-
dertaking of a mandatary being to do something, to render some
service often in some special capacity, may not unfrequently re-
quire the possession and exercise of such knowledge and skill as
is not possessed by men generally. What degree may be required
of the mandatary depends on his situation or occupation, and
the nature or character of the service to be rendered.
If a clerk in the custom-house, familiar with the manner of
doing business there, should undertake gratuitously to enter a
parcel of goods for exportation for a merchant, and should make
the entry under a wrong denomination, in consequence of which
the parcel is seized, he would be held liable for the loss.5
§ 466.-7. When Mandatary not Responsible for Skill.-If a
person is employed who is known to possess no particular knowl-
edge or skill, but who undertakes to do the best he can under
the circumstances, all that can fairly be required of him is the
Miss. R. 528..
1 Jenkins v. Motlow, 1 Sneed's R. 248; Kirtland v. Montgomery, 1 Swan's R.
457. ...2 Doorman v. Jenkins, 2 Adolph. & Ellis, 256; 11 Wend. R. 25; 24
3 Id..... 4 Id.; S. C., Nev. & Mann. 170; Vaughan v.
Menlove, 3 Bing. N. C. 468, 475; Beardslee v. Richardson, 11 Wend. R. 25.
5 Shields v. Blackburne, 1 H. Black. 158.
MANDATE.
373
exercise, to the best of his ability, of the judgment, knowledge,
and capacity he possesses.
For instance, a merchant undertakes gratuitously to enter a
parcel of goods for another, together with a parcel of his own of
the same sort, at the custom-house for exportation, and makes
an entry under the wrong denomination, in consequence of which
both parcels are seized. As he takes the same care of the goods
bailed as he takes of his own, and is not of a profession or em-
ployment to imply skill in what he undertakes, he is not liable
for the loss.¹
§ 467.-8. Misuser by Mandatary. If a mandatary violates
his trust by a misuser of the property, or does any other act in-
consistent with his contract, or in fraud of it, he will clearly be
liable for all losses and injuries resulting therefrom. He is not
bound to suggest wise precautions against accident or loss; but
he is not at liberty to expose the property to injury or loss by
hazards inconsistent with his duty.2
And in case of misuser, especially such misuser as amounts
to evidence of conversion, it is perhaps strictly true that every
subsequent loss and injury, whether it be by accident or other-
wise, will be at the risk of the mandatary.3
4
§ 468-9 Mandatary's Interest. In general a mandatary
cannot be said to have any special property in the thing com-
mitted to his possession, unless he has incurred expenses about
it, for which he has a lien. In this respect he stands in the same
situation as a depositary. But although he has not a special
property in the thing bailed, it does not follow that he may not
have an action for any tort done to the thing while in his pos-
session, especially if he is liable over to the bailor in such case.
The mandatary has such a right of action, flowing from his pos-
sessory title.
6
5
§ 469.-10. Mandatary to Render Account.-The mandatary is
bound to render to the mandator, upon request, a full account of
his proceedings; to show that the trust has been duly performed;
4
2 Jones on Bailm. 101, 114,
¹ Shields v. Blackburne, 1 H. Black. 158.
115, 116........³ Ulmer v. Ulmer, 2 Nott & McCord, 489; Catlin v. Bell, 4
Camp. 183; 2 Kent's Com., Lect. 40... Story on Bailm., §§ 93 to 93 h. ;
$ 150.
5 Booth v. Wilson, 1 Barn. & Ald. 59; Sutton v. Buck, 2 Taunt.
302; Coggs v. Bernard, 2 Lord Raym. 909..
6 Story on Bailm., § 151.
374
LAW OF BAILMENT.
or, if ill performed, to offer a justification or legal excuse for such
ill performance. If by his fraud or gross negligence, or misuser,
the mandatary has made himself liable in damages, he must pay
these damages.¹
Of course in rendering an account, the mandatary is entitled
to deduct and receive an allowance for all expenses and charges
to which he has been necessarily subjected in performing the
trust.2
§ 470.-11. Disbursements by Mandatary.-Although a man-
datary, as such, is not entitled to any compensation for his ser-
vices, his actual disbursements and expenses about the thing
may, nevertheless, be recoverable. This is naturally implied in
the undertaking; because a gratuitous act would otherwise be-
come a burden.³
3
If a party requests a friend to receive his goods, and enter
them at the custom-house, and pay the duties thereon, an im-
plied obligation arises to reimburse to him the amount of the
duties, and the other incidental expenses and charges upon the
entry.
If a party requests a friend to carry goods in a stagc-coach to
another town, for which goods carriage-hire is usually paid, a
like duty to pay the bill is presumed.*
5
§ 471.-12. Restoration. The mandatary is also bound to
restore the thing itself to the mandator, with all its increments,
earnings and gains derived from it. If animals are to be re-
stored, their young also belong to the mandator. If gold or
silver coins have been delivered, to be let at interest, and to be
specifically returned, the interest is to be accounted for as well
as the principal. If a vehicle has been delivered to be let for
hire, the mandatary must account for the hire earned as well as
for the vehicle itself."
If there are joint mandataries, each is responsible for the
whole in substance. If there are joint mandators, the account
must be rendered to them all jointly."
1
¹ Story on Bailnı., § 191........2 Id., § 193.
Mandat, note 68 to 78; Story on Bailm., § 154. .
Pothier's Contrat de
Story on Bailm., § 197.
4
5 2 Kent's Com., Lect. 40; Story on Bailm., § 194..
* Id., § 195.
6 Id.
•
MANDATE.
375
§ 472.-13. Dissolution of the Contract.-The contract may
be dissolved in several ways:
1. It may be dissolved by the renunciation of the mandatary
at any time before he has entered upon its execution, in which
case the property is to be restored to the mandator.¹
2
2. It may be dissolved by the death of the mandatary; for
being founded in personal confidence, it is not presumed to pass
to his personal representatives, unless there is some special stip-
ulation to that effect. But this applies principally where the
mandate remains wholly unexecuted; for if it be in part exe-
cuted, there may, in some cases, arise a personal obligation on
the part of the representatives to complete it.³ As, for example,
if Smith has bought books for Brown at his request, to be sent
to Brown at Washington, and before they are sent to Washington,
Smith dies, the representatives of Smith are bound to send them."
3. If there are joint mandataries, the death of one of them dis-
solves the contract as to all; especially whenever the bailment
is of such a nature as to require the united advice, confidence.
and skill of all, and may, therefore, be deemed a joint personal
trust to all."
4. The death of the mandator, in like manner, puts an end
to the contract.6
5. The contract of mandate may be dissolved by a change of
the state of the parties. As, if either party, being a female,
marries before the execution of the mandate; or if either party
becomes insane, or non compos mentis, or is put under guardian-
ship, the mandate is dissolved.7
6. It may cease also by a revocation of the authority, either
by operation of law, or by the act of the mandator. It ceases
by operation of law, when the power of the mandator ceases over
the subject-matter. As, if he be a guardian, it ceases as to his
ward's property by the termination of the guardianship. So, if
he sells the property, it ceases upon the sale, if it is made known
to the mandator."
¹ Pothier's Contrat de Mandat, note 38 to 46.
41; Story on Agency, SS 488, 491, 492, 493, 494..
Story on Agency, SS 465, 466.
tit. 3. § 40...
500, 481
•
5 Id...
8 Id., § 500..
S
22 Kent's Com., Lect.
32 Kent's Com., Lect. 41;
42 Kent's Com., Lect. 41; Ersk. Inst., B. 3,
6 Id., § 203.. Story on Agency, §§ 488 to
ད
97 Ves. jr. 276.
376
LAW OF BAILMENT.
In general, every mandator may revoke a mere authority at
his own will. This revocation may be express or implied. Im-
plied, when the mandator appoints another person to do the
same act. Or if the mandatary is appointed to act during the
absence of the mandator, the return of the mandator operates as
a revocation, if it is clear that such is the intention, although it
is not expressly limited to the return.²
ORDER 11.-CLASS III.
GRATUITOUS LOANS.
Lending for use for a certain time, a thing to be used by the
borrower without paying for the use, is defined to be a bailment.
§ 473.-1. Parties. The parties to this class of contracts are
called the Lender and the Borrower.
The parties must have legal capacity, as in all other con-
tracts. Idiots, lunatics, married women, persons under duress,
&c., are incompetent; though a married woman may become a
party by the consent of her husband; in which case it binds
him, but not her. In respect to minors, the contract is not
absolutely void; but it is voidable at his election.³
§ 474.-2. Subject-Matter. Of course there must be a thing
to be lent, called the subject-matter; and it is confined exclu-
sively to goods and chattels, or personal property, and does not
extend to real estate. The contract must be of a legal nature;
for if it is immoral, or against law, it is utterly void."
4
§ 475.-3. Gratuitous.-The thing must be lent gratuitously;
for if any compensation is to be paid in any manner whatsoever,
it falls under the denomination of hire. Therefore if Smith
lends his oxen to Brown for a week, under an engagement that
Brown is to lend Smith his horses in return for another week,
this is not a gratuitous loan, but a contract for hire."
1 Copeland v. Merc. Insur. Co., 6 Pick. 193.
Mandat, n. 119; Story on Bailm., § 208...
229, 302, 380.. Id., § 223...
2 Pothier's Contrat de
3 Story on Bailm., §§ 50, 16%,
.* Id., § 224.
5 Id., § 229..
GRATUITOUS LOANS.
377
§ 476.-4. Use by Borrower. Whatever it is, it must be
lent for use, and for the use of the borrower. It is not material
whether the use be exactly that which is peculiarly appropriate
to the thing lent, as a loan of a bed to lie on, or a loan of a horse
to ride. It is equally a loan, if the thing is lent to the borrower
for any other purpose, as, for instance, to pledge as a security on
account of the borrower.¹
§ 477.-5. Limitation of the Borrower's Rights.-The rights
of the borrower are strictly confined to the use actually or im-
pliedly agreed to by the lender, and cannot be lawfully exceeded.2
The use may be for a limited time, or for an indefinite time. If
for an indefinite time, but at the mere pleasure of the lender, it
is a bailment at will, but still a loan.³
The borrower has the right to use the thing during the time
and for the purpose which was intended between the parties.
But it is confined strictly to this, and any excess will make the
borrower responsible. If, therefore, Smith lends Brown his horse
to ride from Boston to Salem, Brown has no right, however
urgent his business may be, to ride the horse to Newburyport."
And in such a case, if he rides the horse to Newburyport, and
any accident occurs to the horse, although it be by inevitable
casualty, he will be responsible for the loss.
If a man lends another a horse to go westward, or for a
month, and the borrower goes northward, or keeps the horse
above a month, if any accident happens on the northern journey,
or after the expiration of a month, the borrower will be charge-
able, because he has made use of the horse contrary to the trust
he was lent under.5
§ 478.-6. When Use Personal.-A gratuitous loan is to be
considered as strictly personal, unless from other circumstances.
a different intention may fairly be presumed. Thus, if Smith
lends Brown his jewels to wear, this will not authorize Brown to
lend them to Jones to wear. So, if Smith lends Brown his horse
¹ Story on Bailm., § 225..
Bailm., § 227.
• •
2 2 Kent's Com., Lect. 40....
3 Story on
4 Jones on Bailm. 68; Wheelock v. Wheelwright, 5 Mass
Coggs v. Bernard, 2 Lord Raym. 909, 915, 916; Vaughan v.
Menlove, 3 Bing. N. C. 468.
R. 104..
5
• •
378
LAW OF BAILMENT.
to ride to Boston, this will not authorize Brown to allow Jones
to ride the horse to Boston.¹
1
In cases of mere gratuitous loan, the use is to be deemed
strictly a personal favor, and confined to the borrower, unless a
more extensive use can be implied from the attendant circum-
stances.2
§ 479.-7. Obligations of Borrower. The borrower pays
nothing for the use of the thing. This reasonably brings him
under obligations to the lender. He is bound to take proper care
of the thing borrowed; to use it according to the intention of
the lender; to restore it at the proper time; and to restore it in
the proper condition.3
§ 480.-8. Diligence Required.-As the loan is gratuitous,
and exclusively for the benefit of the borrower, he is, upon the
common principles of bailment, bound to extraordinary dili-
gence; and, of course, he is responsible for slight neglect in rela-
tion to the thing loaned.*
The same care must be extended to such accessory things as
belong to the principal thing, and as were delivered with it.
Thus, if a man borrows a watch, with seals to it, he will be
responsible for any loss or injury occasioned by his slight neglect,
as well to the seals as to the watch." 5
§ 481.-9. Expenses Incident.-If, in using the thing, the
borrower is put to any expense, this must be borne by himself.
Thus, for example, if a horse is lent to a friend for a journey, he
must bear the expenses of his food during that journey, and of
getting him shod, if he should chance to require it; for it is a
burden naturally attendant upon the use of the horse."
But if there are any extraordinary expenses incurred in the
journey, as for curing the horse of a distemper, in such a case
the borrower is entitled to a remuneration from the lender."
§ 482.-10. Who to Bear Loss.-The borrower, generally, is
exempted from all liability for losses by inevitable accident, or
1 Story on Bailm., § 234..
•
•
2 Bringloe v. Morrice, 1 Modern R. 210;
Scranton v. Baxter, 4 Sandf. 8... 3 Story on Bailm., § 236..
• • •
4 Jones
5 Jones
6 Id., §§ 256, 273.
↑ Id.,
on Bailm. 64, 65; Vaughan v. Menlove, 3 Bing. N. C. 468, 475.
on Bailm. 66; Story do., §§ 238, 260...
§ 256.
GRATUITOUS LOANS.
379
by casualties that could not be foreseen or guarded against. Un-
der the head of casualties may be enumerated, theft without the
fault of the borrower, or robbery, fire, the fall of edifices or ruins,
shipwreck, or lightning; losses by pirates, by enemies, by mobs,
sudden inundations, sudden sickness, and even by the frauds
of strangers, against which the borrower could not protect him-
self.¹
2
But in all these cases, there must be no default on the part
of the borrower; for if they are traceable to his default, his
responsibility remains. Thus, if a borrower is imprudent enough
to leave the high road, and pass through some thicket or unfre-
quented path; or to travel at a very unreasonable hour, or on a
road notoriously frequented by robbers, without proper precau-
tions, and a robbery takes place, he will be liable for the loss.³
So, if he rides a borrowed horse on a dark and improper road,
and the horse falls, and is killed by accident; or if he puts the
horse into an improper pasture, and he is stolen by robbers, the
borrower will be responsible for the loss; for accident or irresist-
ible attack will not excuse his own rashness.¹
If a lady borrows jewels to wear at a ball, and by her impru-
dence they are lost by robbery; or if she exposes them to any
other undue perils by leaving them in an improper place, the
loss, although by accident, will be her own.5
If a man borrows jewels to wear to a mask or ball, and after-
wards goes with them to a theatre or to a gaming-house, and the
jewels are there lost or stolen, he will be responsible therefor;
for the loss may justly be attributed to his own rashness or ncg-
ligence.
6
But if the jewels were used in a suitable manner, and left
only in suitable places, then the loss must fall on the lender.
So, in the case of a borrowed horse for a journey, if the borrower
rides him by the usual roads, and at the proper hours, and in
the usual manner, if the horse be stolen by robbers in passing by
the road through the forest, or if he should fall and be killed,
2 Id.
3 Pothier on Oblig., note
4 Jones on Bailm. 67,
1 Story on Bailm., §§ 25, 26, 28, 29, 30; Jones on Bailm. 66, 67..
67, 68, 69; Story on Bailm., SS 93, 94, 184, 185...
142; Jones on Bailm. 68; 2 Kent's Com., Lect. 40.
68; Story on Bailm., §§ 93 to 96...... 5 Jones on Bailm. 68, 69... . . . . .ɓ Id.:
Scranton v. Baxter, 4 Sandf. 8.
6
380
LAW OF BAILMENT.
the borrower, if he has used all proper care and diligence, will
not be responsible for the loss.'
§ 483.-11. Obligations of Lender. The lender is under ob-
ligation to allow the borrower to use and enjoy the thing loaned,
during the time of the loan, according to the original intention,
without any molestation or impediment, under the peril of dam-
ages. He is bound to abstain from doing any act by which the
thing loaned may be less useful to the borrower. 2
Under the Roman law, if the thing loaned had been lost by
the borrower, and he had paid the lender the full value thereof,
and the thing was afterwards found and restored to the lender,
the lender must either return the price paid, or the thing itself.
Judge Story says that the common law, for the most part, recog-
nizes the same principle.3
4
§ 484.-12. Restitution by Borrower. The borrower is to
make restitution of the thing lent, at the time, and in the place,
and in the manner contemplated by the contract. He must also
make a like return of all the increments and offspring of the
thing lent. If no particular time is agreed on, then the party
is to return it in a reasonable time.
5
As the bailment is merely gratuitous, the lender may termi-
nate it whenever he pleases. But if he does so unreasonably,
and it occasions any injury or loss to the borrower, the latter
may, perhaps, have a suit for damages, where the object of the
bailment has been partly accomplished; or, if he retains the
thing, and a suit is brought by the lender, he may insist upon
the unreasonableness of the demand, or the injury to himself;
and thus, perhaps, he may recover in the damages whatever he
has lost, and repel any claim for a large compensation on account
of his delay and refusal to return the thing bailed when it was
demanded of him."
If the borrower does not return the thing at the proper time,
he is deemed to be in default; and then he is responsible for all
losses and injuries, and even for all accidents."
1 Story on Bailm., § 342...... 2 Id., §§ 257, 271... ...3 Id., § 276......
4 Id., §§ 255, 257.. .5 Booth v. Terrell, 16 Georgia R. 25..... .. Story on
Bailm., § 258
•
•
1 Jones on Bailm. 70; 2 Kent's Com., Lect. 40; Clapp v.
Nelson, 12 Texas R. 373.
PLEDGE OR PAWN.
381
§ 485.-13. Revocation.-How far the lender may revoke the
loan at his own mere pleasure, has been considered; and it
seems that, by the common law, all such loans are deemed pre-
carious, and during the mere will of the lender.' But there are
also revocations implied by law, as by a change of the state or
condition of the parties. Thus the death of the borrower will
ordinarily operate as a revocation of the loan; for it is presumed
to be a matter of personal confidence and benefit.
The general analogy of the common law leads to the conclu-
sion that the death of either party amounts to a revocation of a
gratuitous loan. Thus, if a woman, after a bailment made by
her, or to her, contracts marriage, that terminates the bailment 2
ORDER III.-CLASS IV.
PLEDGE OR PAWN.
3
§ 486. This is a bailment of personal property, as a security
for some debt or engagement. It will be treated under the fol-
lowing divisions:
§ 487.-1. Parties.-The parties are the pledgeor, or pawnor,
being the party who delivers the thing in pledge; the pledgee,
or pawnee, is the party who receives the thing in pledge. The
pledgeor obtains credit by delivering the thing in pledge; and
the pledgee secures his debt by receiving the thing in pledge.
§ 488.-2. Security for Debt.-The pledge or pawn, accord-
ing to the definition, is delivered for the purpose of securing
some debt, or the performance of some engagement. The pledge
covers not only the debt, but the interest upon it, and all the
necessary expenses that may have attended the possession of the
pledge; and the lien may, by agreement, be created so as to
cover subsequent advances. The goods or things pledged are to
be kept until the debt or engagement is discharged.5
4
¹ Putnam v. Wiley, 8 Johns. R. 432; 9 Cow. R. 687; 1 Term R. 480..
2 Story on Agency, §§ 402, 480, 500; Story on Bailm., § 277.
3 Story on
•
Bailm., § 286
4 Kent's Com., Lect. 40, p. 807, 10th edit.
•
on Bailm. 117.
5 Jones
25
382
LAW OF BAILMENT.
The pawnee or pledgee, however, cannot retain the pledge,
independent of a special agreement, for any other debt than that
for which the chattel was specifically given; and good faith re-
quires the restoration of it, without deduction on account of any
cross demand.¹
§ 489.-3. Subject-Matter.-Any tangible, personal property
may be pledged. Hence, not only goods, chattels, and money,
but also negotiable paper, may be put in pledge. So may choses
in action, patent-rights, coupon bonds, and manuscripts of vari-
ous sorts.2
Stocks of incorporated companies, such as bank, railroad, in-
surance, and the like, in which the owner holds the scrip or cer-
tificate of the company, that he is the owner of a certain number
of shares, may be pledged. The method of pledge in such cases
is to deliver the scrip, or company's certificate, to the pledgee,
accompanied by a power of attorney to the pledgee, authorizing
the transfer on the books of the company.
Things not at present in existence, cannot become a technical
pledge at the common law; but there may be a hypothecary
contract, which will attach as a lien or pledge to them, as soon
as they come into existence. A brickmaker, for instance, stipu-
lates with the lessee of a brickyard, in which he manufactures
brick, that he should retain the bricks to be made there, as
security for the advances to the lessee. The bricks are pledges
under the contract as fast as they are manufactured.³
§ 490.-4. Delivery of Pledge.-It is of the essence of the
contract, that there should be an actual delivery of the thing to
be pledged. Until the delivery of the thing the whole rests in
an executory contract, however strong may be the engagement
to deliver it; and the pledgee acquires no property in the
thing.5
What will amount to a delivery is, in many cases, matter of
¹ Jarvis v. Rogers, 15 Mass. R. 389.....
2 1 Ves. Ch. 278; 2 Taunt. 268;
5 Mass. R. 389, 534; 7 Maine R. 28; 4 Denio N. Y. 227; Story on Bailm., § 290.
3 Story on Bailm., § 290; Macomber v. Parker, 14 Pick. 497, 505..
Story on Bailm., SS 290, 297: 2 Caines' Cas. in Err. 200, 202; 2 Pick. R. 610; 2
5 Portland Bank v. Stubbs, 6 Mass. R. 422; 15
Kent's Com., Lect. 40..
Mass. R. 352, 477.
PLEDGE OF PAWN.
383
law. There need not be an actual manual delivery of the thing.
It is sufficient if there are any of those acts or circumstances
which, in construction of law, are deemed sufficient to pass the
possession of the property.
Thus goods at sea may be passed in pledge by a transfer of
the muniments of the title; as by a transfer of the bill of lading,
or by a written assignment thereof. So goods in a warehouse
may be transferred by a symbolical delivery of the key thereof.'
§ 491-5. Special Property in Pledgee.-The pledgee has at
common law a special property in the pledge, and is entitled to
the exclusive possession of it during the time and for the objects
for which it is pledged. His special property is sufficient for
him to support an action against any wrong-doer. He has, more-
over, a right to action, because he is responsible to the pledgeor
for the proper custody of the bailment. The pledgeor also may
have his action against the wrong-doer, resting on the ground of
his general property. A judgment for either pledgeor or pledgee
is a bar against a similar action by the other.
2
§ 492.-6. Pledgee Entitled to Increase.-By the pledge of a
thing, not only the thing itself is pledged, but also, as accessory,
the natural increase thereof. As, if a flock of sheep are pledged,
the young, afterwards born, are also pledged.3
§ 493-7. When Pledgee may Use the Pledge. The follow-
ing are the guiding rules under this head:
1. If the pledge or pawn is of such a nature, that the due
preservation of it requires some use, such use is not only justi-
fiable, but it is indispensable to the faithful discharge of the duty
of the pawnee.*
2. If the thing is of such a nature that it will be worse for
the use, such, for instance, as the wearing of clothes which are
deposited, there the use is prohibited to the pawnee or pledgee."
3. If the pawn is of such a nature that the keeping is a
charge to the pawnee, as, if it is a cow or a horse, the pawnee
?
¹ Atkinson v. Maling, 2 Term R. 462; Jewett v. Warren, 12 Mass. R. 300;
Badlam v. Tucker, 1 Pick. R. 389, 396; 20 Id. 405; 9 Id. 347, 349........ Bouv.
Law Dict., Pledge... .³ Story on Bailm., § 292.......
3
4 Jones on Bailm. 81.
Coggs v. Bernard, 2 Lord Raym. 909, 916; Mores v.
62 Salk. R. 522;
Conham, Owen R. 123, 124.
384
LAW OF BAILMENT.
may milk the cow and use the milk, and ride the horse, by way
of compensation.'
4. If the use will be beneficial to the pawn, or it is indiffer-
ent, it seems the pawnee may use it; as, if the pawn is a setting
dog, it may well be presumed that the owner would consent to
the dog's being used in partridge shooting, and thus confirmed
in the habits which make him valuable. So books, which will
not be injured by a moderate use, may be read, examined, and
used by the pawnee.³
1
2
5. If the use will be without any injury, and yet the pawn will
be exposed to extraordinary perils, the use is impliedly inter-
dicted. In such case, if the goods are used, it will be at the
risk of the pledgee. Thus, if chains of gold, ear-rings, brace-
lets, or other jewels, be left in pawn with a lady, and she wear
them at a public place, and be robbed of them on her return
home, she must make them good.5
§ 494.-8. Expenses Incurred. In regard to the expenses
which have been incurred by the pledgee about the pledge, if
they are necessary for the protection of the property, the pledgeor
is bound to reimburse them to the pledgee. If they are merely
useful, then the pledgeor is not bound to reimburse them, un-
less incurred by his own expressed or implied authority. If, for
instance, a horse is pawned, and he meets with an injury by ac-
cident, the expenses of his cure seem justly chargeable upon the
pawnor, as they are incurred for his ultimate benefit.
6
So, if a ship which is pledged is injured by a storm, and ex-
penses are necessary to preserve her from absolute foundering,
such expenses seem properly to fall on the owner.
§ 495.-9. Waiver of Pledgee. The pledgee may forfeit
his title to the pledge as such, by delivery back to the pledgeor
by consent of the pledgee, of the thing pledged. This will ter-
minate his title. However, if the thing is delivered back to the
1 Mores v. Conham, Owen R. 123, 124.
son v. Patrick, 4 Watts R. 414..
Jones on Bailm. 81....... ..¹ Id
358..
....
•
•
2 Jones on Bailm. 81; Thomp-
3 Mores v. Conham, Owen R. 123, 124;
5 Id..... 6 Story on Bailm., §§ 357,
" Id.; also SS 121, 121a, 154, 197, 256, 273, 306, 388, 389..
8 Homes v. Crane, 2 Pick. R. 607; Jarvis v. Rogers, 15 Mass. R. 389, 397; 12
Pick. R. 76, 81.
PLEDGE OR PAWN.
385
owner, for a temporary purpose only, and it is agreed to be re-
delivered by him, the pledgee may recover it against the owner,
if he refuses to restore it after the purpose is fulfilled.'
§ 496.-10. Responsibility for Loss.-As the bailment is for
the mutual benefit and interest of both parties, the law requires
that the pawnee should use ordinary diligence in the care of the
pawn; and consequently he is liable for ordinary neglect in
keeping the pawn.²
The defaults by which the pawnee may render himself respon-
sible are not only those which consist in acts of commission, but
also in omissions of duty; for the pawnee is bound to apply all
proper care for the preservation of the pledge. He is not, therc-
fore, less liable, if by his neglect he suffers a mirror which is
pawned to him to be ruined or lost, than he would be if he had
broken it by an improper use, or even by a mere wilful act.³
§ 497.-11. Pledgee's Right of Sale. The right to sell the
pledge when there has been a default in the pledgeor in comply-
ing with his engagement, results from the contract of pledge.
Such a right does not divest the general property of the pawnor,
but still leaves in him the right of redemption.*
But if the pledge is not redeemed within the stipulated time
by a due performance of the contract for which it is security, the
pawnee has then a right to require a sale to be made thereof, in
order to have his debt or indemnity."
5
If there is no stipulated time for the payment of the debt,
but the pledge is for an indefinite period, the pawnee has a right,
upon request, to insist upon a prompt fulfilment of the engage-
ment; and if the pawnor neglects or refuses to comply, the
pawnee may, upon due demand and notice to the pawnor, re-
quire the pawn to be sold."
When the debt falls due and remains unpaid, although the
pledgee has his remedy, he does not own the property pledged
any more than he did before. He may proceed personally against
1 Roberts v. Wyatt, 2 Taunt. R. 268.
•
•
2 Jones on Bailm. 75; 2 Kent's
Com., Lect 40; Goodall v. Richardson, 14 New Hampshire Rep. 567; Exeter
Bank v. Gordon, 9 New Hamp. R. 66.
8 Story on Bailm., § 342...
* Id., §§ 308, 310........52 Kent's Com., Lect. 40; Story on Bailm., §§ 308,
310.... 2 Kent's Com., Lect. 40; Story on Bailm., §§ 308, 310; Story's Eq.
Jurisp., SS 1031 to 1033; Brownell v. Hawkins, 4 Barbour Sup. Ct. R. N. Y. 491.
386
LAW OF BAILMENT.
the debtor, and collect his debt out of his property, or he may
proceed against the pledge, and take the necessary steps to apply
it on his debt.
Having properly made demand of the pledgeor, and been re-
fused, he may adopt either of two modes to collect his debt-
1. He may file his bill in equity, asking a decree of sale, and
thus foreclose the equity of redemption of the pledgeor; or,
2. He may adopt the more summary method of selling with-
out judicial process, upon merely giving reasonable notice to the
debtor to redeem. The notice, however, is indispensable.'
If the pledge is negotiable paper, the right of sale does not.
arise; but collections may be made and applied on the debt.'
§ 498.-12. Pledgee to Account. It is the duty of the
pledgee or pawnee to render a strict account of all the income,
profits, and advantages derived by him from the pledge, in all
cases where such an account is within the scope of the bailment.
If, for instance (when slavery existed), the pawn were a slave,
the profits of his labor were to be accounted for. If the pawn
consists of cows, horses, or other cattle, the profits of their labor
are to be accounted for, if within the contemplation of the
parties.
3
In rendering an account of the profits, the pawnee is at lib-
erty to charge all the necessary costs and expenses to which he
has been put, and to deduct them from the income or profits.*
If he has sold the pledge, he is bound to account for the
proceeds, and to pay over to the pledgeor or pawnor the surplus
beyond his debt, or other demand, and the necessary expenses
and charges.5
§ 499.-13. Pledgeor's Right of Redemption. If the pledge
is conveyed by way of mortgage, the legal title passes to the
mortgagee, unless the pledge is redeemed at the stipulated time.
The pledgee's title in such case becomes absolute at law, and the
pledgeor, at law, has no remedy. In equity, however, he has the
right to redeem.
1 De Lisle v. Priestman, 1 Brown's Rep, Pa. 176..... ..2 Wheeler v. New-
bold, 16 New York R. 192... 3 Geron v. Geron, 15 Alabama R. 562; Story
on Bailm., §§ 329, 330, 331, 343........42 Kent's Com., Lect. 40, Story on
Bailm., § 357.
Story on Bailm., § 343.
5
PLEDGE OR PAWN.
387
If, however, the transaction is not a transfer of ownership,
but a mere pledge, as the pledgeor has never parted with the
general title, he may at law redeem, notwithstanding he has not
strictly complied with the conditions of the contract.¹
If a clause is inserted in the original contract, providing that
if the terms of the contract are not strictly fulfilled at the time
and in the mode prescribed, the pledge shall be irredeemable, it
will not be of any avail. For the common law deems such a
stipulation unconscionable and void upon the ground of public
policy, as tending to the oppression of debtors.2
But there is no doubt that a subsequent agreement to that
effect, or a subsequent waiver of the right to redeem, if made
under proper circumstances, would be held binding between the
parties.3
§ 500.--14. How Contract of, Extinguished.-There are sev-
eral modes of extinguishing the contract of pledge; as,
1. By payment or discharge of the debt.
2. By taking a higher or different security, with no agreement
to retain the pledge for that also.
3. By extinction of the debt by operation of law.
4. By destruction of the thing pledged.
5. By any act of the pledgee amounting to a release or waiver
of the pledge.*
1
¹ Comyn's Dig., Mortgage, B; Story on Bailm., §§ 287, 345, 308, 311..
2 Cortelyou v. Lansing, 2 Caine's Cas. in
.3 Stevens v. Bell, 6 Mass. R. 339..
Err. 200; 2 Kent's Com., Lect. 40.
* Dean's Com. Law, § 468.
Topical Analysis of the Law of Bailment.
PART II.
ORDER III-CLASS 5.
CONTRACTS OF HIRE.
1. Letting things for compensation.
1. GENERAL DIVI-
SION.
2. Letting services for com-
pensation, consisting of
1. Work, or care and attention.
2. Carriage of goods.
II. ELEMENTS
III. CLASSES.
ORDER III-CLASS I.
HIRE OF THINGS.
I. There must be a thing in existence, the subject-
matter of the contract,
2. It must be a thing capable of being let,
3. The bailee should have a right to use, enjoy, and
possess it, during the period for which it is let,
4. There should be a price for the hire,
5. The contract must be one of legal obligation
between the parties,
1. Hire of things,
2. Hire of labor and services,
3. Hire of custody,
4. Hire of carriage of goods,
5. Hire of carriage of passengers,
1. Rights and du-
ties of the letter.
2. Rights and du-
ties of hirer.
1. As to delivery of the thing.
2. Consequences of non-delivery,
3. Not to interfere in use of the thing.
4. No right to deprive hirer of liberty to use.
5. Warrants title.
6. His rights in the property.
1. Special property in hirer.
2. Use by hirer.
3. Degree of diligence.
4. His responsibility for losses.
5. His responsibility for acts of servants,
6. His duty as to animals.
7. Use of the thing hired.
8. Restitution.
9. Payment of hire..
3. Extinguishment of the contract,
TOPICAL ANALYSIS OF BAILMENT.
389
ORDER III-CLASS 2.
HIRE OF LABOR
AND SERVICE.
ORDER III-CLASS 3.
HIRE OF CUSTODY.
1. General definition.
2. Special property in bailor
3. Elements of
the contract.
4. Obligations
and duties of
employer.
S
1. That there should be work to be done.
2. That it should be done for a price or
reward.
3. That there should be a lawful contract.
1. To pay the price or compensation.
2. To pay for all proper new and acces-
sorial materials.
3. To do everything on his part to en-
able the workman to execute his en-
gagement.
4. To accept the thing when it is finished.
5. Must not conceal defects.
6. Must practice no fraud on bailee.
5. Losses, by whom to be borne.
6. Obligations
and duties of
the workman.
1. To do the work.
2. To do it at the time agreed on.
3. To do it well.
4. To use employer's materials in a proper
manner.
5. To exercise proper care and diligence
about the work.
7. Responsibility for skill by workman.
8. Degree of skill.
9. Part performance.
1. Agistors.
2. Warehousemen.
3. Forwarding merchants.
4. Wharfingers.
5. Factors and other bailiffs.
1. Their duties.
6. Innkeeper3
2. Their liabilities.
3. Their rights.
4. Guest, who is.
ORDER III-CLASS 4.
HIRE OF CARRIAGE
OF GOODS.
1. By private carriers.
2. Common car-
riers.
1. Who are common carriers.
2. Their duties and obligations.
3. Their liabilities,
4. When the liability begins.
5. When the liability ends.
6. Special contracts by.
7. Special notices by.
8. Effect of fraud by hirer.
9. When non-delivery of goods ex-
cusable,
10. General rights of.
11. The doctrine of average.
390
OF BAILMEN T
TOPICAL ANALYSIS
1. Who are.
ORDER III-CLASS 5.
COMMON CARRIERS
OF PASSENGERS.
2. Their duties and 1. As to passengers personally.
12. As to baggage of passengers.
obligation.
3. Liabilities of..
4. Rights of..
5. Duties of passen-
gers.
1. As to passengers personally.
2. As to baggage of passengers
1. As to accidents.
2. Fare in advance.
3. Lien on baggage.
4. Rules and regulations.
1. Submission to rules.
2. Showing tickets.
3. Surrender of tickets
PART II.
ORDER III.-CLASS 5.
CONTRACTS OF HIRE.
§ 501. In Part I, those cases of bailment have been treated
in which the bailee accepts the trust gratuitously, neither receiv-
ing nor expecting any compensation for services. This included
two Orders, and four Classes. The first Order, as we have seen,
includes all that kind of bailments which are for the exclusive
benefit of the bailor, or of some person other than the bailee.
The second Order includes all such as are for the exclusive
benefit of the bailee.
The Classes included in these Orders are-Deposits, Man-
dates, Gratuitous Loans, and Pledges or Pawns.
The third Order includes those bailments which are for the
benefit of both parties, or one of them, and a third party. The
fifth Class, Contracts of Hire, are embraced in this Order, and
constitute Part II. Part II, it will be remembered, includes
those cases of bailment, in which responsibility, care, and labor
are assumed on the part of the bailee, in consideration of com-
pensation or reward, promised expressly or impliedly by the
bailor.
I. GENERAL DIVISION.
§ 502.-1. Letting Things for Compensation. This is a
contract whereby the use of a thing is allowed by the bailor to
the bailee for a compensation to be paid by the bailee. The bai-
lee pays the bailor.
* The term Order is purely arbitrary, adopted by the author merely for convenience in
teaching. The other divisions and subdivisions on the subject of Bailment, accord substan-
tially with the method adopted by Judge Story.
392
LAW OF BAILMENT.
2. Letting of Services for Compensation. Here the bailor
pays the bailee. The bailor hires the labor and services of the
bailee, and promises to pay him a compensation. This is divisi-
ble into two Classes:
1. Work to be Done, or care and attention to be be-
stowed, on the goods bailed by the bailee for compensation.
2. Carriage of Goods from one place to another by the
bailee for compensation.'
§ 503. There are several ingredients, says Judge Story, which
are the essence of this kind of contract. These ingredients are
called in this work, Elements, the substance of which has been
given in their order, in the foregoing tabulation. They will be
considered here more fully and in detail.
11. ELEMENTS.
1. There should be a Thing in Existence which may be the
Subject-matter of the Contract.
This element scarcely requires any comment; for, unless
there is a thing in existence, to which the contract can attach,
and which necessarily constitutes its basis, the parties have acted
under a mistake, and ought not to be bound by the bargain.
Thus, for instance, if the thing which is the intended subject of
the contract, has perished; as, if a horse, the intended subject
of the hire, is dead at the time when the contract is entered into,
the contract becomes a nullity.2
The thing
2. It should be a Thing Capable of being Let.
which is the subject-matter, is personal or movable property.
This may include choses in action, and written securities, as well
as goods and chattels. The use of the former on hire, is prob-
ably rare, though the carriage of them is a very common busi-
ness of bailees for hire.³
3. The Bailee should have a Right to Use, Enjoy, and Possess it
during the Period for which it is Let.-The thing must not only
¹ Story on Bailm., § 372. . . .
Jones on Bailm. 89, 90...
2 Coggs v. Bernard, 2 Lord Raym 909, 913;
3 Story on Bailm., § 373.
HIRE OF THINGS.
393
be personal or movable property, but it must be let to the bailee,
for a certain time, and for certain purposes, either expressed or
implied; and there must be a right in the bailee to use the
thing, or to have the possession or enjoyment of it for those pur-
poses, during the contemplated period of the bailment.¹
As to the nature or the time of the use or enjoyment of the
thing, it may be expressed, or it may be implied from circum-
stances. Whether it is expressed or implied, the same legal
result takes place. The bailee must not exceed the proper use
or enjoyment of the thing, cither in time, or mode, or extent.
If he does, he will become responsible for the tortious conversion
of the property, and generally for all losses consequent thereon,
or subsequent thereto.²
4. There should be a Price for the Hire. This is one of the
elements of the contract, for if no hire is to be paid, it becomes
a gratuitous loan. It is not necessary that a specific price should
be expressly agreed on; for it may be tacitly implied.
When the labor is to be performed by an artisan, if no ex-
press price is agreed on, he is tacitly presumed to engage for the
usual price paid for the like service at the same place, according
to the general custom of the trade; or, which is the same thing,
to pay what they are fairly worth there. So, in cases of hiring
the use of a thing, in the absence of positive engagements, it is
presumed that the customary price is that which is agreed to be
given; and if no price is fixed by custom, then a reasonable
price is to be allowed.³
5. There should be a Contract possessing a Legal Obligation
between the Parties.-In other words, it must have all the ele-
ments of a regular legal contract.
1. It must be a bailment which is not prohibited by law.
2. There must be parties competent to contract.
3. There must be a free and voluntary consent of the parties.
We will now consider the rights, duties, and obligations of
the parties, resulting from the contract of bailment for hire.
For convenience, the subject is divided into several classes or
kinds.
1
§ 375.
Story on Bailm., §§ 373, 395, 396, 397........2 Id., also § 413..
8 Id.,
394
LAW OF BAILMENT.
III.-CLASSES.
ORDER III.-CLASS 1.
HIRE OF THINGS.
The bailor in this kind of bailment is called the Letter, and
the bailee is called the Hirer.
§ 504.-1. Rights and Duties of the Letter. 1. As to
Delivery of the Thing.-The delivery of the thing, being
essential to the bailment, must be made by the letter, unless
otherwise agreed. It should be with the proper accompaniments;
as, if a horse is let to ride, it should also be with a suitable sad-
dle and bridle; and the delivery should be at the expense of the
letter, and at the place where the thing is, and at the time spe-
cified.¹
2. Consequences of Non-delivery.-In case of non-
delivery by the letter according to agreement, a right of action
accrues to the hirer. The hirer is not obliged to accept it, if it
has become injured or broken, or has been essentially changed
from what it was at the time of hiring. The hirer, in such case,
may insist on rescinding the contract.2
3. Not to Interfere in Use of the Thing.—The
letter is bound to refrain from every obstruction to the use of the
thing by the hirer. If he lets the chattel, he has no right to
resume the possession and use of it himself, during the time for
which it was let. If he is bound to keep it in repair during the
time of the bailment, he may temporarily, for this purpose, re-
sume possession; but he must then return it.³
4. No Right to Deprive Hirer of Liberty to
Use. The letter has no right to do anything which will deprive
the hirer of the thing during the time for which it is bailed.
As, if he sells the thing bailed, or suffers it to be rightfully
attached, so that the hirer is deprived of the use of it. This
would be a violation of the contract.
5. Warrants Title.-It is implied by law that the letter
warrants the title and right of possession to the hirer.¹
16. His Rights in the Property.-The letter to hire
¹ Story on Bailm., § 384..
2 Id..... ³ Id……….
4 Id., § 387.
HIRE OF THINGS.
395
has an absolute property in the price, and retains a general prop-
erty as owner in the chattel.
§ 505.-2. Rights and Duties of Hirer. The duties, rights,
and obligations of contracts of this kind are reciprocal between
the parties. From the foregoing enumeration of the duties of
the letter, it may be inferred that the hirer has certain rights,
and assumes certain obligations with regard to the thing bailed.
1. Special Property in Hirer.-By the common law,
in virtue of the bailment, the hirer acquires a special property in
the thing, during the continuance of the contract, and for the
purposes expressed or implied by it.' Hence he may maintain.
an action for any tortious dispossession of it, or any injury to it,
during the existence of his right.2
2. Use by Hirer.—The hirer also acquires the right, and
the exclusive right, to the use of the thing during the time of
the bailment; and the owner has no right to disturb him in the
lawful enjoyment of it during this time. Nor can a creditor of
the bailor attach it, and take it from the custody of the bailee,
during the time.³ And if, during that time, the thing is rede-
livered to the owner for a temporary purpose only, he is bound
to deliver it back afterwards to the hirer.*
3. Degree of Diligence.-The hirer is bound to the
exercise of ordinary diligence, and of course is responsible for
ordinary negligence. This naturally arises from the fact that
the contract is for the mutual benefit of the parties.
He is bound to bestow the same degree of diligence that all
prudent men use in keeping their own goods, and to restore the
article in as good condition as he received it, unless it be deteri-
orated by internal decay or by external means, without his de-
fault; and if the article be injured or destroyed without any
fault or neglect on the part of the person who takes on hire, the
loss falls upon the owner, for the risk is with him.5
If a horse is hired and becomes lame without any fault of the
hirer, so that he is unable to perform the journey home, the
1
¹ 1 Bell's Com., § 198, 4th edit.; 1 Bell's Com., p. 255, 5th edit. and note.
.2 2 Saund. R. 47; Sudden v. Leavitt, 9 Mass. R. 104, 265; 3 Camp. R.
187... 8 Hartford v. Jackson, 11 New Hamp. R. 145..
..4 Roberts v.
Wyatt, 2 Taunt. R. 268........5 4 Term R. 581; 3 Camp. 5, note; 13 Johns. R.
211.
396
LAW OF BAILMENT.
extra expenses incurred by the hirer, as well as the charges for
doctoring the horse, must be borne by the owner.¹
2
4. His Responsibility for Losses.-The hirer is re-
sponsible for all such injuries as are shown to come from the
omission of ordinary diligence; or, in other words, for ordinary
negligence. If a man hires a horse, he is bound to ride it moder-
ately, and to treat it as carefully as any man of common discre-
tion would his own, and to supply it with suitable food. If he
does so, and the horse in such reasonable use is lamed or injured,
he is not responsible for any damages. If two persons jointly
hire a horse and chaise on joint account, both are answerable for
any misconduct or negligence of either in driving, and for any
other want of proper care.
4
3
5
5. His Responsibility for Acts of Servants.-
The hirer is not only liable for his own personal default and
negligence, but for the default and negligence of his children,
servants, and domestics, about the thing hired. If, therefore, a
hired horse is ridden by the servant of the hirer so immoderately
that he is injured or killed thereby, the hirer is personally respon-
sible.6
If the servant of the hirer carelessly and improperly leaves
open the stable-door of the hirer, and the hired horse is stolen,
the hirer is responsible therefor."
If ready furnished lodgings are hired, and the hirer's servants,
children, guests or boarders, negligently injure or deface the fur-
niture, the hirer is responsible therefor.8
6. His Duty as to Animals. It is the duty of the
hirer of a horse to supply him with suitable food during the
time of the hiring; and, therefore, any neglect on his part, in
this particular, will make bim responsible to the owner for the
damage sustained thereby."
If a hired horse is exhausted, and refuses its feed, the hirer
1 ¹ Harrington v. Snyder, 3 Barb. S. C. R. 380.
13 Johns. R. 211; Story on Agency, $$ 452 to 461..
v. Chamberlain, 4 Esp. R. 229..
2 Millon v. Salisbury,
3 Id..
4 Davy
6 1 Black.
• •
.5 2 Kent's Com., Lect. 40..
Com. 430, 431; 1 Bell's Com., p. 455, 5th edit.; 1 Bell's Com., § 389, 4th edit...
"Jones on Bailm., 89; Salem Bank v. Gloucester Bank, 17 Mass. R. 1...
• Jones on Bailm., 89; Story on Bailm., § 400..
Brod. & Bing. 359; S. C., 5 Moore R. 74.
• Handford v. Palmer, 2
HIRE OF THINGS.
397
i
is bound to abstain from using the horse; and if he pursues his
journey with the horse, he is liable for all the injury occasioned
thereby.'
2
3
7. Use of the Thing Hired.-There is, on the part
of the hirer, an implied obligation, not only to use the thing with
due care and moderation, but also not to apply it to any other
use than that for which it is hired. Thus, if a horse is hired as
a saddle-horse, the hirer has no right to use the horse in a cart,
or to carry loads, or as a beast of burden. If a carriage and
horses are hired for a journey to Boston, the hirer has no right
to go with them on a journey to New York.
4
In the absence of any agreement as to the number of persons
who are to ride in a hired carriage, the hirer is authorized to
carry such number only as the vehicle was made for, not exceed-
ing, of course, the ordinary load adapted to the team drawing
the same.6
And it may be generally stated, that if the thing is used for
a different purpose from that which was intended by the parties,
or in a different manner, or for a longer period, the hirer is not
only responsible for all damages, but, if a loss afterwards occurs,
although by inevitable casualty, he will generally be responsible
therefor."
In short, such a misuser is deemed a conversion of the prop-
erty, for which the hirer is generally held responsible to the let-
ter, to the full extent of his loss.s
6
8. Restitution.—The hirer is under an implied obligation
to restore the thing hired, when the bailment is determined. He
is bound to restore it to the owner; and if by any negligence or
wrongful act it is delivered to some other person, and thereby is
¹ Bray v. Mayne, 1 Gow's R. 1; 1 Bell's Com., p. 455, 5th edit.
inson v. Varnett, 16 Texas R. 382; 7 Id. 561; 14 Georgia, 260, 137.
3 Mills v. Ashe, 16 Texas, 295; Trotter v. McCall, 26 Miss. 413.
•
•
2 Rob-
4 Lockwood
v. Bull, 1 Cowen R. 322...... 5 Rotch v. Hawes, 12 Pick. R. 136; 3 Id. 492; 5
Mass. R. 104.. 6 Harrington v. Snyder, 3 Barb. Supreme Ct. R. N. Y. 380.
7 Mayor v. Howard, 6 Georgia 219; Hooks v. Smith, 18 Ala. 338; Story
•
on Bailm., § 509; Jones do. 68, 69, 121.
v, King, 2 Camp. R. 335; 2 Stark. R. 311...
Benje v. Creagh, 21 Ala. 151.
8 2 Saund. R. 47; Wilkinson
9 Syeds v. Hay, 4 Term R. 264;
398
LAW OF BAILMENT.
lost to the owner, he will be responsible therefor.
ered to another person, it amounts to a conversion.¹
If it is deliv-
So, the hirer is to restore it in as good condition as he re-
ceived it, unless it has been injured by some internal decay, or
by accident, or by some other means, wholly without his de-
fault.2
9. Payment of Hire.-The hirer must pay the price for
the use of the thing. This is one of the elements of the contract,
as we have seen. If no hire is to be paid, it becomes a gratui-
tous loan, and, of course, is governed by very different principles
of law.3
§ 506.-3. Extinguishment of the Contract.-Mr. Justice Story
says that “according to the general principles of the Roman and
foreign law, the contract may be dissolved or extinguished in
respect to future liabilities in various ways:
1. By the mere efflux of time, or the accomplishment of the
object; for which the thing is hired.
2. By the loss or destruction of the thing by any inevitable
casualty.
3. By a voluntary dissolution of the contract by the parties;
and,
4. By operation of law, as where the hirer becomes proprietor,
by purchase or otherwise, of the thing hired.
ORDER III.-CLASS II.
HIRE OF LABOR AND SERVICES.
-
§ 507-1. General Definition. This kind of hiring pre-
sumes that the principal materials entering into the composition
of the thing, have been provided by the bailor or hirer, and that
work and services are to be bestowed by the bailee or workman
for compensation.
1 Stephenson v. Hart, 4 Bing. R. 476; Stephens v. Ellwall, 4 Maule & Selw.
2 Cooper v. Barton, 3 Camp. R. 5; Millon v. Salisbury, 13 Johns.
3 Story on Bailm., § 374.
•
259.
R. 211..
HIRE OF LABOR AND SERVICES.
399
§ 508.-2. Special Property in Bailee.- Bailees for hire of
labor and services, like bailees for hire of things, have, or at least
may have, a special property in a thing about which the labor
and services are to be performed.¹
Hence, where a bailee of yarn was to procure it to be made
into cloth for a commission, it was held that he had a special
property in the yarn, and that he might maintain an action
against any one who should wrongfully take it from his own pos-
session, or from that of his servant, to whom he had delivered it
to be woven.2
§ 509.-3. Elements of the Contract.-Judge Story says that
in contracts for work, it is of the essence of the contract,
1. That there should be work to be done.
2. That it should be to be done for a price or reward; and,
3. That there should be a lawful contract between parties
capable of, and intending to contract.
§ 510.-4. Obligations and Duties of Employer.—The obliga-
tions and duties on the part of the employer are principally
these:
1. To pay the price or compensation.
2. To pay for all proper new and accessorial materials.
3. To do everything on his part to enable the workman to
execute his engagement.
4. To accept the thing when finished. But care is to be taken
that the materials are not extravagant, and that the claims are
not beyond the fair scope of the engagement.
5. Besides these duties, the employer is bound to good faith
and honesty in his conduct.
6. He must not conceal defects, or practice fraud upon the
other party; and he must conform to all the special stipulations
contained in his contract.³ 3
§ 511-5. Losses, by Whom to be Borne.-If, while the
work is doing on a thing belonging to the employer, or after it is
finished, but before it is delivered to the employer, the thing
perishes by internal defect, by inevitable accident, or by irresist-
1 Eaton v. Lynde, 15 Mass. R. 242..
R, 101........8 Story on Bailm., § 425.
2 Id.; Barker v. Roberts, 8 Greenl.
400
LAW OF BAILMENT.
ible force, without any default of the workman, it becomes a
question as to who shall suffer the loss.
The following are the rules on this subject, as given by Mr.
Bell, and indorsed by Judge Story:
1. If the work is independent of any materials or property of
the employer, the manufacturer has the risk, and the unfinished
work perishes to him.
2. If he is employed in working up the materials, or adding
his labor to the property of the employer, the risk is with the
owner of the thing with which the labor is incorporated.
3. If the work has been performed in such a way as to afford
a defense to the employer against a demand for the price, if the
accident had not happened, as if it were defectively or improperly
done, the same defense will be equally available to him after the
loss.¹
4. If the thing of the employer on which the work is done,
and for which materials are furnished, is, by accident, and with-
out any fault of the workman, destroyed or lost before the work
is completed, or the thing is delivered back, the loss must be
borne by the employer, and he must pay the workman a full
compensation for the work already done, and the materials found,
although he has derived no benefit therefrom.2
Thus, where a ship was accidentally destroyed by fire, while
she was in the dock of a shipwright undergoing repairs, it was
held that the shipwright was entitled to full compensation for
all his work and labor done, and materials found and applied
thereto, before the loss.3
§ 512.-6. Obligations and Duties of the Workman.-The
workman is bound-
1. To do the Work.-In regard to the obligation to do
the work, it may be generally stated that it will be sufficient if
the workman does the work by the means of other persons, or
sub-agents, if the work be such as may ordinarily be done by
others in an equally satisfactory manner.
But where the work is one of art, in the execution of which
¹ 1 Bell's Com., p. 456, 5th edit.; Story on Bailm., § 426... 2 3 Burr. R.
1592; Gillett v. Mawman, 1 Taunt. 137... › Menetone v. Athawes, 3 Burr.
R. 1592.
HIRE OF LABOR AND AND
401
SERVICES.
the genius, talent, and skill of the particular artist may fairly be
presumed to be contracted for, such, for example, as with a
painter to paint a ceiling or a portrait, he is not allowed to sub-
stitute another person without the consent of the employer.¹
2. To do it at the Time Agreed on.-In respect to
the time when the work is to be finished, the duty is, in general,
imperative; and if not finished within the time, the employer is
entitled to recover his damages for the non-execution. And the
time need not, in all cases, be expressly stipulated; it is suffi-
cient if it may be reasonably inferred from the nature of the
contract.
2
Thus, if the contract is to build a hut or stall for an ap-
proaching fair, the work is necessarily understood to be finished
in season for the fair.³
3. To do it Well.-If it be badly or unskilfully done, or
with improper materials, the person who undertakes the job is
liable for all damages. For he undertakes for reasonable skill
in planning and execution.*
4. The Workman is bound to employ the materials fur-
nished by the employer in a proper manner.
5. To Exercise Proper Care and Diligence
about the Work.-It is wholly immaterial whether the de-
fects in the execution of the work have arisen from the fault of
the bailee himself, or from the fault of the persons employed by
him; or whether the materials have been unskilfully used, or
have been spoiled, so as to be unfit for the purposes intended.5
§ 513-7. Responsibility for Skill by Workman.-The gen-
eral rule is that where the contract is of mutual benefit, there
ordinary diligence only is required. And this is the degree of
diligence, therefore, which applies to contracts of this sort."
Thus, a watchmaker having a watch left with him for repairs,
is obliged to use ordinary diligence in keeping it; and if he
omits it, and the watch is lost, he is liable for the value in
damages.
7
¹ Pothier's Contrat de Lonage, note 420, 421..... 2 Id., note 423, 424.
3 Id., note 424.
4 Id., note 425, 427, 428; 2 Kent's Com., Lect.
•
40.. 5 Story on Bailm., § 428..... 6 Jones on Bailm., 91, 94; Story on
Bailm., §§ 398, 429. 7 Clark v. Earnshaw, 1 Gow R. 30.
26
402
LAW OF BAILMENT.
So, a workman is bound not only to guard the thing bailed
against ordinary hazards, but also to exert himself to preserve it
from any unexpected danger to which it may be exposed.'
2
Different things may require very different care. The care
required in building a common doorway is quite different from
that required in raising a marble pillar, although both might
come under the description of ordinary care.3
§ 514.-8. Degree of Skill.-Where skill, as well as care, is
required in performing the undertaking, there, if the party pro-
fesses skill in the business, and he undertakes for hire, he is
bound not only to ordinary care and diligence in securing and
preserving the thing, but also to the exercise of due and ordinary
skill in the employment of his art or business about it; or, in
other words, he undertakes to perform it in a workmanlike
manner.
The workman, in such cases, must be understood to have
engaged to use a degree of diligence, and attention, and skill,
adequate to the due performance of his undertaking."
If he has not the proper skill, or if, having it, he omits to
use it, or if he omits in other respects the proper degree of dili-
gence and attention required for the work, he will be responsible
for the damages sustained thereby by his employer."
It is the party's own fault if he undertakes without having
sufficient skill, or if he applies less than the occasion requires.
Where a person is employed in a work of skill, the employer
buys both his labor and his judgment. He ought not to under-
take the work if he cannot succeed; and he should know whether
he can or not."
8
The degree of skill and diligence which is required rises in
proportion to the value, the delicacy, and the difficulty of the
operation. Thus, an artisan, employed to repair a very delicate
mathematical instrument, is expected to exert more care and
more skill than he would about common instruments.
2 Story on Bailm., § 15.
·
•
4 Jones
• •
•
5 Jones on
¹ Leck v. Maestaer, 1 Camp. R. 138......
31 Bell's Com., p. 458, 5th edit.; 1 Bell's Com., § 394, 4th edit.
on Bailm. 91; 2 Kent's Com., Lect. 40; 1 Bell's Com. 459...
Bailm. 22, 53, 62, 97, 98, 120, 121; 1 Carr. & Payne, 352; S. C., 2 Carr. & Payne,
61 Bell's Com., p. 456, 5th edit..... Duncan v. Blundell, 3
378...
Stark. R. 6...... • Story on Bailm., § 15; Jones on Bailm., pp. 38, 39.
•
HIRE OF CUSTODY.
403
§ 515.-9. Part Performance.-Cases sometimes happen where
the work fails of completion through the default or neglect of
the person employed. As to how far he is liable, depends on
the nature of the contract into which he has entered.
If he is employed to work by the day, he will be entitled to
recover what his work is fairly worth, after deducting all dam-
ages occasioned by his default. But if his work is done under
an entire contract, special in its provisions, he will have to abide
by its precise terms.
A builder enters into a contract to erect a building upon the
land of another. The performance is to precede payment, and is
a condition thereof. The builder substantially fails to perform
on his part; but performs so far that the owner and employer
occupies and enjoys the erection. The employer, in such a case,
may retain without compensation the benefits of a partial per-
formance, when, from the nature of the contract, he must receive
such bencfits in advance of a full performance, and is, by the
contract, under no obligation to pay until the completion of the
performance.¹
Where work is done under a special contract at estimated
prices, and there is a deviation from the original plan by the
consent of the parties, the estimate is to control so far as it ex-
tends, and for the extra labor the bailee is to receive what it is
shown to be worth.
ORDER III.—CLASS III.
HIRE OF CUSTODY.
§ 516. This kind of contract is a hiring of care and attention.
All classes of persons who assume this responsibility (of bestow-
ing care and attention for reward) are bound to the exercise of
ordinary diligence; for the contract is one of mutual interest,
falling, as it does, into Order III. To this class belong :
¹ Smith v. Brady, 17 New York R. 173.
son Canal Company, 4 Wend. 285.
2 Dubois v. Delaware & Hud-
404
LAW OF BAILMENT.
1
§ 517.-1. Agistors.-An agistor is one who takes in horses
or other animals to pasture at certain rates. If a man takes in
a horse, or other cattle, to graze and depasture in his grounds,
which the law calls agistment, he takes them upon an implied
contract to return them on demand to the owner. He is not,
like an innkeeper, bound to take all horses offered to him, nor is
he liable for any injury done to such animals in his care, unless
he has been guilty of negligence, or from his ignorance negli-
gence may be inferred.2
The agistor does not insure the safety of the cattle agisted,
but he is merely responsible for ordinary negligence. It will,
however, be such negligence, for an agistor or his servants to
leave open the gates of his field; and, if in consequence of such
neglect, the cattle stray away, and are stolen, he will be respon-
sible for the loss.¹
The agistor has also, in virtue of his custody, such a posses-
sion and title that he can maintain trespass or trover against a
wrong-doer for any injury to their possession, or any conversion
of the property."
An agistor of cattle has no lien for their keeping, except by
special agreement.
6
The agistor is not only responsible for reasonable diligence,
but also for reasonable skill in his business; and ignorance of
his proper duty is treated as negligence."
§ 518.-2. Warehousemen.-A warehouseman is a person who
receives goods and merchandise to be stored in his warehouse for
hire.
He is bound to use ordinary care in preserving such goods
and merchandise, and his neglect to do so will render him liable
to the owner.8
The warehouseman's liability commences as soon as the goods
edit.
2 Holt, 457......
•
¹ Cro. Car. 271; 2 Black. Com. 452...
3 Jones on
Bailm. 91, 92; Holt, 547... 4 Jones on Bailm. 92; 1 Bell's Com., p. 458, 5th
5 Sutton v. Buck, 2 Taunt. R. 309; Burton v. Hughes, 2 Bing. R.
Goodrich v. Willard, 7 Gray, 183: 35 Maine, 155; 3 Hill N. Y. 485.
'Story on Bailm., § 443... 8 1 Peake, 114; 1 Esp. 315; Story on
Bailm., § 444; Jones on Bailm. 49, 96, 97; 7 Cow. R. 497; 12 Johns. R. 232; 2
Wend. R. 593.
173.
HIRE OF CUSTODY.
405
arrive, and the crane of the warehouse is applied to raise them
into the warehouse.¹
If the goods are injured or destroyed by rats while in the cus-
tody of the warehouseman, he is not responsible, if he has exer-
cised ordinary care in preserving them.2
He is not liable for thefts, unless occasioned by his want of
proper care.³
§ 519.-3. Forwarding Merchants.-This is a class of busi-
ness men well known in the United States, and usually combine
in their business the double character of warehousemen and
agents, for a compensation, to ship and forward goods to their
destination. This class of persons is especially employed upon
our canals and railroads, and in our coasting navigation by steam
vessels, and other packets.*
Their liability is like that of warehousemen and common
agents, and is governed by the general rule; and, of course, they
are responsible for ordinary care, and skill, and diligence.5
Hence it is, that a person who receives goods in his own store,
standing upon his own wharf, for the purpose of forwarding
them, is deemed but a mere warehouseman, and is responsible
for ordinary diligence only, even though he holds himself out to
the public as ready and willing to take goods for persons gener-
ally, or storage, and to forward them to their destination."
But, as already stated, the warehouseman may also combine
the character of forwarder. The responsibilities of the two
characters are very different. Hence, it may become an import-
ant question as to which character he acts in, and which respon-
sibility he assumes. A common carrier or forwarder is liable for
a higher degree of care and diligence than the warehouseman.
For instance, the former is liable for losses by fire, unless occa-
sioned by inevitable casualty. But the latter (warehouseman)
is not liable in case of such loss, unless he has been guilty of or-
dinary negligence.7
•
2 Peake R. 114; Cowp. R. 479; 13 Johns. R. 211; Story
• ·
•
42 Kent's Com., Lect. 40...... 5 Id.; Platt
¹ 4 Esp. 262.
on Bailm. § 444.. 3 Id.
v. Hibbard, 7 Cow. R. 497; 1 Bing. R. 34; 2 Wend. R. 593; 1 Term R. 27; 5
Term R. 389; 3 Hill R. 545.
•
6 Platt v. Hibbard, 7 Cow. R. 497; Roberts
v. Turner, 12 Johns. R. 232; Brown v. Dennison, 2 Wend. R. 593.
on Bailm., §§ 446, 528, 536: Forward v. Pittard, 1 Term R. 27.
7
•
•
Story
406
LAW OF BAILMENT.
Suppose Jones owns a warehouse, and is also engaged in car-
rying goods from a place two hundred miles cast, and it is neces-
sary that they shall be deposited in his warehouse, to await
opportunity to send them on west. Before Jones, the carrier
and warehouseman, has an opportunity to forward them, they
are destroyed by an accidental fire.
If the owner of the goods can hold Jones as a common car-
rier, Jones must pay for the goods; but if Jones' responsibility
is that of a warehouseman, he will be exonerated. In such a
case as this, it was held that he was not liable, because his duty
as carrier had ceased, and his duty as warehouseman had com-
menced before the loss.¹
So, in this country, proprietors of a railroad who transport
goods over their road, and deposit them in their warehouse with-
out charge, until the owner or consignee has a reasonable time to
take them away, have been held not liable, as common carriers,
from the loss of the goods from the warehouse, but as deposita-
ries, liable for ordinary care only.2
The same rule has been laid down although the goods be de-
stroyed by an accidental fire in the warehouse, before the owner
or consignee has reasonable time to take them away.3
4
Warehousemen are not only responsible for losses which arise
by their negligence, but also for losses occasioned by the innocent
mistake of themselves and of their servants, in making a delivery
of the goods to a person not entitled to them. For it is a part
of their duty to retain the goods until they are demanded by the
true owner; and if, by mistake, they deliver the goods to the
wrong person, they will be responsible for the loss, as upon a
wrongful conversion.5
§ 520.-4. Wharfingers.—A wharfinger is one who owns or
keeps a wharf for the purpose of receiving and shipping mer-
chandise to or from it for hire.
¹ Garside v. Trent & Mersey Navigation Co., 4 Term R. 581; 1 Bell's Com.,
pp. 464, 465, 5th edit.. ... Thomas v. Boston & Providence R. R. Co., 10
Metcalf R. 472; Smith v. Nashua & Lowell R. R., 7 Foster, 91; Richards v.
Mich. Southern R. R. Co., 20 Ill. R. 404...
Norway Plains v. Boston &
Maine R. R., 1 Gray, 263....
361..
4 Willard v. Bridge, 4 Barbour S. C. R. N. Y.
5 Lubbock v. Inglis, 1 Stark. R. 104; Story on Bailm. §§ 414, 561,
570.
HIRE OF CUSTODY.
407
He stands in the situation of an ordinary bailee for hire, and,
therefore, like a warehouseman, is responsible for ordinary neg-
lect, and is required to take ordinary care of the goods intrusted
to him as such.¹
1
He is not, like an innkeeper or carrier, to be considered an
insurer, unless he superadd the character of carrier to that of
wharfinger.2
The responsibility of a wharfinger begins when he acquires,
and ends when he ceases to have custody of the goods in that
capacity. When he begins and ceases to have such custody de-
pends, generally, upon the usages of trade and of the business.
When goods are delivered at a wharf, and the wharfinger has
agreed, expressly or by implication, to take the custody of them,
his responsibility commences. But a mere delivery at the wharf,
without such assent, does not make him liable.3
When the goods are in the wharfinger's possession, to be
sent on board of a vessel for a voyage, as soon as he delivers the
possession and the care of them to the proper officers of the
vessel, although they are not actually removed, he is, by the
usages of trade, deemed exonerated from any further responsi-
bility.*
The wharfinger does not, however, discharge his duty by de-
livering them to one of the crew, but should deliver them to the
captain of the vessel, or some other person in authority on board
of it.5
A wharfinger has a general lien upon all goods in his posses-
sion for the balance of his account. He has also a lien on a
vessel for wharfage.7
§ 521-5. Factors and Other Bailiffs.-These agents are gen-
erally held liable only for a reasonable exercise of skill, and for
ordinary care and diligence in their vocation. They are, con-
¹ 2 Barbour R. 328; 4 Ind. R. 368; 10 Vermont R. 56; Peake, 119; 4 Term,
581; 2 Stark. R. 400... .1 Stark. 72; 4 Campb. 225; 5 Burr. 2825; 12
Johns. R. 232; 7 Cow. R. 497.......³ 3 Campb. 414; 4 Id. 72; 6 Cow. R. N. Y.
757; 2 Stark. 400
46 Esp. 41; Story on Bailm., § 453; Abbott's Shipp.
51 Carr. & P. 638; 10 Bingh. 246; 2 Carr. & Marsh. 531; 7 Scott,
61 Esp. 109; 3 Id. 81; 6 East's R. 519.
7 Ware's Dist. Ct.
354; Gilp. Dist. Ct. 101; 1 Newb. Adm. 553..
on Agency, SS 182 to 186.
226..
876.
•
•
•
•
8 Jones on Bailm. 98; Story
408
LAW OF BAILMENT.
sequently, not liable for any loss by theft, robbery, fire, or
other accident, unless it is connected with their own negli-
gence.
I
If there is any loss occasioned by their negligence, or mistake,
or inadvertence, which might have fairly been guarded against
by ordinary diligence, they will be held responsible therefor; and
they will be held responsible for any misfeasance of which they
may be guilty."
§ 522-6. Innkeepers.—An innkeeper is the keeper of a com-
mon inn for the lodging and entertainment of travelers and pas-
sengers, their horses and attendants, for a reasonable compensa-
tion. He has certain duties to perform, assumes certain liabili-
ties, and is invested with certain legal rights, all growing out of
the peculiarities of his position and of his relations to the public.
We will consider-
3
1. Their Duties.—An innkeeper is bound to take in all
travelers and wayfaring persons, and to entertain them, if he can,
for a reasonable compensation; and he must guard their goods
with proper diligence. If he receives the guest, the custody of
the goods may be considered as an accessory to the principal con-
tract, and the money paid for the apartments as extending to
the goods belonging to the guest.*
An innkeeper is not only under obligation to receive and
entertain travelers, but he must furnish for them reasonable ac-
commodations.5
2. Their Lidbilities.—If an innkeeper improperly re-
fuses to receive or provide for a guest, he is liable to be indicted
therefor."
The liability of an innkeeper is the same in character and
extent with that of a common carrier.7
He is responsible for the acts of his domestics and servants,
as well as for the acts of his guests, if the goods are stolen or
1 Jones on Bailm. 98...
2 Ulmer v. Ulmer, 2 Nott & McCord, 489; Story
3 Thompson v. Lacy, 3 Barn. &
on Agency, SS 182, 183, 184, 185, 188...
Ald. R. 283; Grinnell v. Cook, 3 Hill's R. 485...... 4 Jones on Bailm. 94;
Story on Bailm., § 470... 5 8 Mees. & Wels. Exch. R. 269.....
•
6 Rex v.
Ivens, 7 Carr. & Payne R. 213....... 79 Pick. Mass. R. 280; 7 Cush. R. 417;
9 Humphr. Tenn. R 746; 23 Vt. R. 177; 14 Ill. R. 129.
HIRE OF CUSTODY.
409
lost.¹ He will be excused, however, when the loss is the fault of
the guest."
The innkeeper is bound to take, not ordinary care merely,
but uncommon care, of the goods, money, and baggage of his
guests, and he is responsible for the acts of his servants and
domestics, as we have seen.
The traveler does not indeed pay in money for the safety of
his trunk; but in paying for his refreshments, this is a part of
the consideration, that his baggage and goods may be safe.3
Nor can the innkeeper avoid this responsibility by a refusal
to take any care of the goods, because there are suspected per-
sons in his house, for whose conduct he cannot consent to be
answerable; for the law will not permit him thus to escape from
his liability.*
If an innkeeper has suitable room, he is not at liberty to
refuse to receive a guest, who is ready and able to pay him a
suitable compensation.5 On the contrary, he is bound to receive
him, and if upon false pretences he refuses, he is liable to an
action."
It is not necessary to prove that the goods have been lost by
the negligence of the innkeeper; for it is his duty to provide
honest servants, and keep honest inmates, and to exercise an ex-
act vigilance over all persons coming into his house, as guests or
otherwise.7
It is not necessary that the goods should be in his special
keeping. It is sufficient that they are in the inn, under his im-
plied care.8
Rigorous as these rules may seem, and hard as they may be
in particular instances, they are founded on the great principle
of public utility, to which all private considerations ought to
yield. For travelers, who must be numerous in a rich and com-
mercial country, are obliged to rely almost implicitly on the
good faith of innkeepers, whose education and morals are none
2
17 Cush. R. 417...... Story on Bailm., § 483; 4 Maule & Sel. 306.......
3 Jones on Bailm. 94; Lane v. Cotton, 12 Mod. R. 487; Story on Bailm., § 464.
4 Jones on Bailm. 94..... 5 Bennett v. Mellor, 5 Term R. 274; Rex
v. Kilderby, 1 Saund. R. 312.
•
7 Jones on Bailm. 95; 5
ments, 4 Maule & Selw. 306, 310.
6 Rex v. Ivens, 7 Carr. & Payne's R. 213.
Term R. 276........8 Id.; Burgess 2. Cle
*
410
LAW OF BAILMENT.
of the best, and who might have frequent opportunities of asso-
ciating with ruffians and pilferers, while the injured guest would
seldom or never obtain legal proof of such combinations, or even
of their negligence, if no actual fraud had been committed by
them.¹
The doctrine in reference to the liability of an innkeeper for
the safety of his guest's goods, baggage, &c., is very broad and
comprehensive. He is prima facie liable for any loss not occa-
sioned by the act of God or the public enemies; although he
may be exonerated where the guest chooses to have his goods
under his own care.2
It has been laid down in Massachusetts, that innkeepers are
regarded as insurers of the property committed to their care, and
are bound to make restitution for any injury or loss, not caused
by the act of God, or the common enemy, or the neglect or fault
of the owner of the property.³
3
This doctrine clearly makes the innkeeper liable for losses by
robbery or burglary by persons from without, and also for losses
occasioned by rioters and mobs.*
It is not necessary that the goods should be inside of the inn,
in order to charge the innkeeper for their loss. If they are de-
livered at the usual place for such goods at the inn, this is suffi-
cient. Thus, if wheat in a sleigh is put into an outer house,
appurtenant to the inn, and used for such purposes, and after-
wards it is stolen, the innkeeper is liable for the loss.5
So, if a horse is delivered to a hostler at an inn to be fed,
and he takes off the saddle and bridle, and deposits them in a
barn belonging to the inn, and they are stolen, the innkeeper
will be responsible for the loss."
3. Their Rights. He may refuse to receive a guest who
conducts himself disorderly, and in a noisy manner.
He may
compel such a person to leave the inn, even after he has been
received as a guest.7
¹ Jones on Bailm. 95, 96; Mason v. Thompson, 9 Pick. R. 280.....
mond v. Smith, 8 Barn. & Cress. 9; Mateer v. Brown, 1 Califor. R. 221..
2 Rich-
³ Mason v. Thompson, 9 Pick. R. 280, 284; Manning v. Wells, 9 Humphr. Tenn.
R. 746........4 26 Vermont R. 317; 1 Califor. R. 221..
•
55 Term R. 273;
1 Bell's Com., p. 469, 5th edit.. 6 Hallenbake v. Fish, 8 Wend. R. 547..
'Howell v. Jackson, 6 Carr. & Payne, 742; 7 Id. 213; 6 Id. 634.
HIRE OF CUSTODY.
411
He has a lien upon the goods of his guest for his board and
lodging, and liquors supplied him.¹
He has a lien on the goods brought by his guest to the inn,
although they are only hired by the guest, of a third party, pro-
vided that fact be not known to the innkeeper.2
If the horses of a traveler be left with an innkeeper in his
inn, he has no lien on the horses for their keep, when the owner
or traveler neither asks for or receives any accommodation or
entertainment for himself, and puts up at a different place.
3
4. Guest, who is.-It may sometimes become a ques-
tion as to whether a person has become a guest at an inn, so
as to avail himself of the rights of that relation to the inn-
keeper.
As inns are established for passengers and wayfaring men, a
neighbor or friend, who is no traveler, but comes to the inn at
the request of the innkeeper, and lodges there, is not deemed a
guest.*
But where a traveler comes to an inn, and is accepted, he
instantly becomes a guest."
If a traveler leaves his horse at an inn without asking or
receiving entertainment for himself, and lodges elsewhere, he will
not be deemed a guest.
6
7
The length of time that a man is at an inn makes no
difference; whether he stays a week, or a month, or longer; so
always that he retains his character as a traveler." If he
still is in reality a traveler, the making of a special agree-
ment with the innkeeper for the price of his board by the week,
will not change his character as a guest, and make him a mere
boarder.8
But if a person comes upon a special contract to board, and
sojourn at the inn, he is not, in the sense of the law, a guest;
¹ Grinnell v. Cook, 3 Hill's R. 485; Dunlap v. Thorne, 1 Rich. R. 213; 7
Carr. & Payne, 67... 2 Johnson v. Hill, 3 Stark. 172.... .. Ingallsbe v.
•
Wood, 33 N. Y. 577..
Inns & Innkeepers, C, 5.
3 Hill's Rep. 485....
•
›
4 Calye's Case, 8 Coke's R. 32, 33: Bac. Abridg.,
....5 Id......
Ingallsbe v. Wood, 33 N. Y. 577;
¹
Story on Bail., § 477........8 Berkshire Woolen
Co. v. Proctor, 7 Cush. R. 417.
412
LAW OF BAILMENT.
but he is deemed a boarder. The innkeeper would have no lien
on his goods for his board."
A person who keeps a mere private boarding-house, or lodg-
ing-house, is in no just sense an innkeeper.3 The law imposes.
no obligation upon a lodging-house keeper to take care of the
goods of his lodgers. The rights, duties, responsibilities, and
remedies applying to the innkeeper and his guest, and to the
boarding-house keeper and his boarder, are wholly different in
their origin, nature and character. The latter are mainly gov-
erned by the contract into which the parties enter, while the
former are left to the principles of the common law.
In most of the States of the Union, there are statute regula-
tions applying to inns and taverns, which of course modify the
requirements of the common law. In order to constitute them
inns, taverns, or hotels, they must be licensed by commissioners
of excise or other authority; and the special privileges thus
conferred constitute the keeping a public-house a kind of per-
sonal trust, which cannot be assigned, so as to convey any rights
and privileges to the assignee.5
ORDER III-CLASS IV.
HIRE OF CARRIAGE OF GOODS.
§ 523.-1. By Private Carriers.-This kind falls into the
third Order and fourth Class, as all contracts relating to the hire
of things, or of services do. But little need be said here on the
subject of carriage of goods for reward, as this division does not
include common carriers, but simply private persons who may
occasionally carry goods by contract from one place to another.
As to contracts of this sort or kind, there does not seem to be
any material distinction, varying the rights, obligations, and
¹ Bac. Abridg., Inns & Innkeepers, C, 5..
2 Ewart v. Stark, 8 Rich, 423.
•
3 1 Bell's Com., p. 469, 5th edit.; 1 Id., §§ 402, 403, 4th edit....
Holder v. Soulby, 8 J. Scott, N. S. 254; E. C. L. R. 98.
Law, § 480.
.5 Dean's Com.
•
HIRE OF CARRIAGE OF GOODS.
413
duties of the parties from those of other bailees for hire. Every
such private person is bound to ordinary diligence, and to a rea-
sonable exercise of skill; and of course he is not responsible for
any losses not occasioned by the ordinary negligence of himself
or of his servants.2
He will not, therefore, be liable for any loss by thieves," or for
any taking from him or his servants by force; or where the
owner accompanies the goods to take care of them, and is him-
self guilty of negligence.*
This is the general rule; and it applies to all cases where
he has not assumed the character of common carrier, unless,
indeed, he has expressly, by the terms of his contract, taken
upon himself any such risk."
Thus, a private person, who has undertaken the carriage of
goods for hire, and warranted that they shall go safe, will be
held liable upon his undertaking for any loss within the scope
of his contract, although not as a common carrier. G
But even an express undertaking by a private person to carry
goods safely and securely, is but an undertaking to carry them
safely and securely, free from any negligence of himself or of his
servants; and it does not insure the safety of the goods against
losses by thieves, or any taking by force."
This doctrine relates solely to private persons, or such as are
private carriers, not being common carriers for hire. If they are
gratuitous carriers, they are not liable, except for their own
fraud or gross negligence, like all other gratuitous mandataries.s
2. Common Carriers.-The duties, liabilities, and legal obli-
gations of common carriers are much broader than those of pri-
vate carriers; and it therefore becomes necessary to inquire-
1 Story on Bailm., SS 495, 496; Gordon v. Hutchinson, 1 Watts & Serg. 285.
2 Hodgson v. Fullerton, 4 Taunt. R. 787; 6 Taunt. R. 577; 2 Marsh. R.
293; 1 Wend. R. 272; 19 Wend. R. 234, 239... 3 Fay v. Steamer New
World, 1 Califor. 348..
4 Brind v. Dale, 8 Carr. & Payne, 207, 209, 211; 7
Cush. 159..
6 Fish
5 White v. Winnisimmet Co., 7 Cush. R. 159.
v. Chapman, 2 Kelly, 349; Robinson v. Dunmore, 2 Bos. & Pull. R. 417; Jones
on Bailm. 98; Story on Bailm., §§ 33, 34, 35, 68 to 72, 444 to 450.
↑ Brind
v. Dale, 8 Carr. & Payne, 207, 209, 211.
Jones on Bailm. 62, 63; Beau-
champ v. Powley, 1 Mood. & Rob. 38; Story on Bailm., § 457, note 7, 7th edit.
by Bennett.
• ·
414
LAW OF BAILMENT.
§ 524.-1. Who are Common Carriers.-To bring a
person within the description of a common carrier, he must ex-
ercise his business as a public employment; he must undertake
to carry goods for persons generally; and he must hold himself
out as ready to engage in the transportation of goods for hire as
a business, and not as a casual occupation.¹
They are such as carry goods or any articles for hire indiffer-
ently for all persons who choose to employ them. Their occupa-
tion may include the carrying of money also."
;
Common carriers are of two kinds: 1. Carriers by land
2. Carriers by water. Of the first kind are stage-coach proprie-
tors, railway companies, truckmen, wagoners and teamsters, car-
men and porters, and express companies, whether such persons
undertake to carry goods from one portion of the same town to
another, or through the whole extent of the country, or even from
one state or kingdom to another.
Of the second kind are the owners and masters of every kind
of vessel and water craft, who set themselves before the public
as the carriers of freight of any kind for all who choose to em-
ploy them, whether the extent of their navigation be from one
contincnt to another, or only in the coasting trade; or whether
employed in lading or unlading goods or in ferrying, with what-
ever mode of motive power they may adopt.³
3
§ 525.-2. Their Duties and Obligations.-One of
the duties of a common carrier is to receive and carry all goods
offered for transportation by any persons whatsoever upon re-
ceiving suitable hire. This is the result of his public employ-
ment as a carrier. If he will not carry goods for a reasonable
compensation, upon a tender of it, and a refusal of the goods, he
will be liable to an action, unless there is a reasonable ground for
the refusal.4
A common carrier has no right to charge one person any
higher rates than he charges another."
¹ Satterlee v. Groat, 1 Wend. R. 272; 2 Story R. 17; Fish v. Chapman, 2 Kelly
(Ga.) R. 353..
Vend. R. 335.
•
•
2 Kemp v. Coughtry, 11 Johns. R. 109; 2 Wend. R. 327; 6
Story on Bailm., SS 494-496; 1 Salk. 249; 2 Georgia R.
348; 14 Ala. N. S. 261....... 4 Bac. Abridg., Carriers, B; Boulston v. Sandi-
ford, Skin. R. 279; 2 Shower's R. 327; 1 Saund. R. 312; 5 Bing. R. 217, 224;
Id. 212; 19 Wend. R. 234, 239, 251, 261, 271, 272
5 Crouch v. London &
Northwestern Railway Co., 25 Eng. Law and Eq. R. 287.
•
HIRE OF CARRIAGE OF GOODS.
415
Another duty of carriers is to take the utmost care of goods
from the moment of receiving them, and to obey the directions
of the owner in respect to them;
1
To carry them safely to the proper place of destination," by
the usual and ordinary route;
3
And to make a right delivery of them there, according to the
usage of trade or the course of business.*
A railway company has no right to open a parcel, to ascertain
whether it contains other parcels addressed to different persons.5
It is not sufficient to carry the goods to the place of destina-
tion, and there place them on a wharf; but due notice should
be given to the consignee of their arrival, and the goods placed
in a safe custody, so that he may, upon such notice, remove them
in a reasonable time."
The common carrier is bound to provide suitable vehicles for
the transportation, with all reasonable equipments, and servants
to take care of them."
If the carriage is to be by water, the common carrier is
bound to provide a ship, tight, stanch, and strong, and suitably
equipped for the voyage, with proper officers and a proper
crew;
8
To proceed without deviation to the proper port;
To expose the goods to no improper hazards;
And to guard against all injuries incident to the property, by
reasonable care in preserving the goods from the effects of storms,
of bad air, of leakages, and of embezzlements.'
In short, every carrier is bound to all the diligence which
prudent and cautious men, in the like business, usually employ
for the safety and preservation of the property confided to their
charge.
1
¹ 1 Bing. R. 34; S. C., 7 Moore's R. 283; 31 Maine R. 283...
2 11 Johns.
R. 107; 8 Carr. & Payne, N. P. R. 207; S. C., 2 Mood. & Rob. R. 80; 14 Wend.
R. 225... 37 Blackf. R. 497.
•
Term R. 531; 6 Bing. R. 716.
Eng. Law & Eq. R. 287..
•
· •
•
•
4 7 Moore's R. 283; S. C., 1 Bing. R. 34; 5
• ·
5 2 Carr. & Kirwan N. P. R. 789; S. C., 25
6 11 Clark & Fin. R. 45, 70; 14 Georgia R. 277.
113 Wend. R. 611, 626 to 628; 5 East's R. 428..
.85 East, 428;
1 Str. R. 128; 4 Binn. R. 127; 9 Bing. R. 457; 13 Wend. R. 611, 627, 628.
9 Abbott on Shipp., p. 3, ch. 3, §§ 1 to 12, 5th edit.; 5 East's R. 428; Story on
Bailm., § 509, 516.
416
LAW OF BAILMENT.
If the carrier deviates from the voyage, he is responsible for
all losses, even from inevitable casualty; for under such circum-
stances the loss is traced back through all the intermediate
causes to the first departure from duty.'
In these cases, however, the loss is supposed to be one which
might not have occurred unless from the default, or misconduct,
or deviation of the carrier; for there is, or at least may be, an
exception in cases where the same loss must certainly have oc-
curred from the same cause, if there had been no such default,
misconduct, or deviation.2
§ 526.-3. Their Liabilities.-The liabilities of com-
mon carriers for the safety of the goods entrusted to their care
are very broad indeed. In the comprehensive language of the
common law, they are responsible for all losses, except those oc-
casioned by “the act of God, or of the king's enemies." This is
English phraseology. In this country, instead of "the king's
enemies," we should say, the public enemies.
By the phrase "the act of God," is meant a natural neces-
sity, as winds, and floods, and storms, and lightnings, earth-
quakes, and tempests, which arise solely from natural causes,
and not accidents arising from the negligence of man.³
By the phrase "the public enemies," is meant public enemies
with whom the nation itself is at open war, and not merely
robbers, thieves, and other private depredators, however much
they may be deemed, in a moral sense, at war with society.
Losses, therefore, which are occasioned by robbery on the
highway, or by the depredations and violence of mobs, rioters,
and insurgents, and other felons, are not deemed losses that will
excuse the carrier.¹
4
But losses by pirates on the high seas are deemed within ex-
cusable limits; for they are universally treated as the enemies
of all mankind, and are subject to punishment."
1 Story on Bailm., § 413 a to 413 d, 509, 515; 6 Bing. R. 716; 12 Connect. R.
410; 4 Whart. R. 204..
v. Mitchell, 3 Hill's R. 545.
·
2 Story on Bailm., § 413 a to 413 d, 415; Powers
3 Jones on Bailm. 103 to 107, 122; 12 Mod.
R. 480; 1 Term R. 33; 26 Maine R. 181; Williams v. Grant, 1 Connect. R. 487;
6 Gratt. R. 189; 1 Term R. 27.
• •
4 Morse v. Slue, 1 Vent. R. 190, 238; 1
Esp. R. 127; 4 Doug. R. 287; 3 Doug. R. 389; Jones on Bailm. 103 to 107.
5
Story on Bailm., §§ 25, 512, 526.
HIRE OF CARRIAGE OF GOODS.
417
The carrier is not liable for goods lost by jettison—that is,
the casting out of a vessel, from necessity, a part of the lading
which will not float on the seas. This, of course, is limited to
cases of danger well founded, and not from groundless timidity.
It must be a case of extremity, when the ship is in danger of
perishing by the fury of a storm, or is laboring upon rocks or
shallows, or is closely pursued by pirates or enemies.'
If the residue of the cargo be saved by such sacrifice, the
property saved is bound to pay a proportion of the loss."
3
2
It seems there are certain "perils of the sea" which excuse
the common carrier in case of losses. On the western waters
the phrase perils of the sea includes perils of the river.*
The phrase "perils of the sea," in order to excuse the carrier,
must be understood to include such losses only to the goods on
board as are of an extraordinary nature, or arise from some irre-
sistible force, or from inevitable accident, or from some over-
whelming power, which cannot be guarded against by the ordi-
nary exertions of human skill and prudence."
6
A loss by ordinary wear and tear in the course of the voyage
is not a loss by the perils of the sea. So, a loss occasioned by
the ignorance or inattention of the master and mariners is not
deemed a loss by the perils of the sea.7
Losses by collision of ships at sea, without any negligence on
the part of the injured or lost vessel, are deemed losses by a
peril of the sea, or by inevitable casualty.
8
The carrier is liable for any loss occasioned by accidental
fire, wholly without any negligence on his part.⁹
In respect to the property carried, it matters not whether it
be money, or goods, or other movable merchandise. The carrier
is equally responsible for each." But this supposes that the car-
2 Id.
• •
31 Connect. R. 487......
8 Buller
1 Bouvier's Law Dict., Jettison.....
4 8 Ala. R. 176....
5 Story on Bailm., §§ 516 to 519; 11 Peters' R. 213; 3
Kent's Com., Lect. 48; 2 Sumner's R. 197; 6 Johns. R. 160........6 Whitesell
v. Russell, 8 Watts & Serg. R. 44; 1 Sumner's R. 218; 8 Pet. R. 557....
¹ 3 Kent's Com., Lect. 48; 3 Esp. R. 127; S. C., 4 Doug. R. 287...
v. Fisher, 3 Esp. R. 67; 4 Taunt. R. 126; 21 Wend. R. 190..
33; 5 Term R. 389; 4 Bing. New Cas. 314, 332; Story on Bailm., §§ 507 a to
511; 19 Wend. R. 234, 246, 248; 5 Mich. R. 368.....
Carth. R. 485; 2 Wend. R. 327.
•
91 Term R.
10 11 Johns. R. 107;
27
418
LAW OF BAILMENT.
rier is accustomed to carry money as well as goods on hire, or
that it is the known usage of the trade or business to take
both; or that the owner has knowingly taken money on hire
in the particular case.¹
If it is known that he does not carry money, but goods
only, then he will not be liable for money which is carried with-
out his consent or sanction, and is lost.2
The carrier is not responsible for losses occurring from nat-
ural causes, such as frost, fermentation, evaporation, or natural
decay of perishable articles, or the natural and necessary wear
in the course of transportation, provided he exercises all rea-
sonable care to have the loss or deterioration as little as prac-
ticable.³
Railway companies, steamboats, and other carriers who al-
low express companies to carry parcels and packages on their
cars, or boats, or other vehicles, are liable as common carriers
to the owners of the goods for all loss or damage which occurs,
without regard to the contract between them and such express
carriers.*
Railways, steamboats, packets, and other common carriers of
passengers, are responsible for the baggage of such passengers
intrusted to their care as common carriers of goods; and such
responsibility continues until the delivery of the same to the
passenger or to his order."
5
§ 527.-4. When the Liability Begins.-To render
a carrier responsible, there must be an actual delivery to him,
or to his servants, or to some other person authorized to act
in his behalf; and as soon as such delivery is complete, the
responsibility of the carrier, as such, commences.º
A contract with a common carrier for the transportation of
property being one of bailment, it is necessary, in order to charge
him for its loss, that it be delivered to and accepted by him.
¹ 2 Wend. R. 327; S. C., 6 Wend. R. 335; 15 Ind. R. 346..
souri R. 513
•
Penn. R. 424.
• •
2 20 Mis-
3 Buller's Nisi P., p. 69; Story on Bailm., § 492 a; 6 Watts'
46 Howard's R. 344; 23 Vermont R. 186........51 C. B. R.
839; 2 Bos. & P. R. 416; 4 Bingh. R. 218; 6 Hill's R. 586; 26 Wend. R. 591;
10 N. H. R. 481..
6 Bell's Com., p. 464, 5th edit.; Id.. § 397, 4th edit.: 8
Adolph. & Ellis' R. 109; Blanchard v. Isaacs, 3 Barbour, N. Y. 538; 7 Hill's
R. 47.
HIRE OF CARRIAGE OF GOODS.
419
But such acceptance may be either actual or constructive. For
instance, if it be the constant usage and practice for a carrier
to receive and carry property left at a particular place, with-
out any special notice of such deposit, a delivery at such place
will be a sufficient delivery to charge the carrier, although no
express notice was given to him, or to his agent, of such de-
posit.'
The liability of the carrier attaches from the time of his ac-
ceptance of the goods, whether that acceptance is in a special
manner or according to the usage of their business.²
But an acceptance in some way, either actual or constructive,
is indispensable.³
It is in many cases the usage of the masters and owners of
ships to receive goods on the quay, or beach, or in their boats, or
at the wharf, or the warehouse of the shipper or his agent, or to
take them at other special places, into the custody of the mate
or other proper officer of the ship. In all such cases their liabil-
ity as carriers commences at the instant of such acceptance of
the goods.*
4
§ 528.-5. When the Liability Ends.-As soon as
the goods arrive at their proper place of destination, and are de-
posited there, and no further duty remains to be done by the
carrier, his responsibility as such ceases."
After a sufficient time has elapsed for the owner to receive
them in business hours, the carrier may put them in a warehouse,
after which he is responsible for ordinary care only.º
The carrier is, as a general rule, bound to give notice to the
consignee, or use reasonable diligence to notify the consignee, of
the arrival of the goods."
So long as the carrier retains the possession of the goods, or
is to perform any other duty, either by custom or contract, as
carrier, he is responsible for their safety. But when the transit
4
1 Merriam v. Hartford & N. H. Railroad Co., 20 Connect. R. 350......2 Dale
v. Hall, 4 Wils. R. 281; 2 Maule & Selw. R. 172; Lakeman v. Grinnell, 5 Bos.
R. 625.... 3 Abbott on Shipp., p. 3, ch. 3, § 2, 5th edit.; Story on Bailm.,
SS 445 to 449, 451 to 453; Packard v. Getman, 6 Cow. R. 757...... Robinson
v. Dunmore, 2 Bos. & Pull. R. 419; Fitchburg Railroad v. Hanna, 6 Gray's R.
539...... Story on Bailm., §§ 445 to 453, 546, 547, 548; 6 Casey R. 247 ....
610 Metc. R. Mass. 472; 27 N. H. R. 86; 4 Term R. 581; 32 N. Hamp. 523.
'Redfield, Railw., § 130.
420
LAW OF BAILMENT.
is ended, and the delivery is either completed or waived by the
owner, the responsibility of the carrier ceases.¹
In case of the death, absence, or refusal of the consignee to
receive the goods, the carrier should relieve himself of them, by
placing them in store with a responsible person in the same
business as the consignee, at the place of their consignment;
and the person so receiving them becomes the agent or bailee of
the owner of the property."
As to the delivery of the goods, the general rule is that the
carrier, unless exonerated by special contract, is bound to deliver
them within a reasonable time, and that reasonable time must
depend upon the circumstances of each particular case. If goods
are shipped for a voyage at sea, for instance, then the delivery is
to be within a reasonable time after the arrival of the carrier-
ship; and there is an implied undertaking to specd the ship
with reasonable diligence on the voyage.3
If goods are to be transported by land from one place to
another, then the goods are to be put upon their transit, and
forwarded within a reasonable time, and delivered in the usual
time after their arrival. Hence, if by reason of any accident or
misfortune, not amounting to an inevitable casualty, or the act
of God, or the public enemy (such as the accumulation of an
extraordinary amount of freight beyond the capacity of the car-
rier's means to convey, or a heavy snow-storm), the goods are
retarded or obstructed in their transit, the carrier will not be
responsible for damages occasioned by such delay, if he has used
due and reasonable diligence in the transportation.*
If goods are to be transported by canal, and by reason of ice.
the canal-boat is retarded, or obstructed, or stopped altogether
in her passage, the carrier will not be liable for any loss to the
shipper occasioned thereby, if he has used reasonable diligence,
unless there was an express contract to deliver by a certain time."
§ 12, 5th edit...
•
¹ Marsh on Insur., B. 1, ch. vii, § 5, p. 252; Abbott on Shipping, P. iii, ch. iii,
2 Fisk v. Newton, 1 Denio R. 45. ....³ Hand v. Raynes,
Parsons v. Hardy, 14 Wend. R. 215; Bowman v. Teall, 23
4 Parsons v. Hardy, 14 Wend. R. 215; 1 Jones' (N. C.) R.
217; Bing. New Cas. 314, 329, 330; 23 Wend. R. 306; 6 Whart. R. 505...
4 Whart. R. 204;
Wend. R. 366.
6
5 Parsons v. Hardy, 14 Wend. R. 215...... Harmony v. Bingham, 2 Kern. R.
5
99.
HIRE OF CARRIAGE OF GOODS.
421
Such an accident may, indeed, if unavoidable, be deemed to
be the act of God.¹
Care must also be taken to deliver the goods to the right
person, as well as at the proper time, and at the proper place.
If the carrier delivers the goods to the wrong person, although
done by his own innocent mistake, or by his being imposed upon,
he will be liable to the true owner for the whole value of the
goods so lost. Indeed, such a wrongful delivery is in the com-
mon law treated as a conversion of the property.”
2
§ 529.-6. Special Contracts by.-We have seen what
are the responsibilities of the common carrier by the common law;
that is, where no contract of a special character is made between
bailor and bailee. It was formerly a question of doubt whether
the common carrier on land, exercising as he does a public em-
ployment, has the right to limit his common law liabilities. It
is now settled affirmatively in England, however, beyond further
controversy.*
3
It is also now the admitted doctrine in America that it is
competent for a carrier, by an express contract, to decline to
carry goods as a common carrier, and to assume to carry them
only as a special carrier, and, therefore, subject only to the duties
and liabilities imposed by his express contract.5
On this ground, if an owner of goods send them by an express
messenger, and that express messenger make a special contract
with the carrier, in its nature a valid one, the owner of the goods
is bound by this special contract; or, in other words, the obliga-
tions of the carrier are limited by this special contract, even in
an action by the owner."
>
Still, however, it is to be understood that common carriers
cannot by any special agreement exempt themselves from all
responsibility, so as to evade altogether the salutary policy of the
common law.7
1 Low v. Moss, 12 Illinois R. 477.... 24 Bing. R 476; 3 Brod. & Bing.
R. 177; Peake's R. 149; Powell v. Myers, 23 Wend. R. 591, 595....
3 Story
on Bailm., §§ 549, 554.. 4 Austin 7. Manchester &c. Railway Co., 11 Eng.
Law and Eq. R. 512; 10 Com. B. R. 454; 5 East's R. 507; 8 Taunt. R. 146.
5 Parsons v. Monteath, 13 Barb. R. 358; Moore v. Evans, 14 Barb. R. 524;
6 New Jersey Steam Navigation
1 E. D. Smith's R. 139; 4 Sandf. R. 136...
Co. v. Merchant's Bank, 6 Howard (U. S.) R. 344.
E
711 Harris (Penn.) R. 526.
422
LAW OF BAILMENT.
The American courts have, with great unanimity, declared
that carriers ought not to be allowed, by a special contract,
to discharge themselves from loss by their own negligence or
fraud.¹
In New York State and some others, however, it has been
held that common carriers by direct, unequivocal language to
that effect, may by special contract limit their liability for
ordinary and even gross negligence.
2
A stipulation in a bill of lading that the ship-owner is "not
accountable for leakage or breakage," does not exempt him from
liability for a loss by these means, arising from his own gross
negligence.³
§ 530.-7. Special Notices by.-These are generally
given by common carriers, when given at all, for the purpose of
narrowing their common law liabilities.
But in America, although there is some conflict of opinion,
the weight of authority preponderates decidedly the other way;
that is, against the binding character of these notices, even
though brought home to the owner of the goods.+
In New York, the decisions have been not only against the
validity of these notices, but, where goods are carried by land,
against the validity of special contracts as shields against the
common carrier's liability at common law. The courts of this
State hold that all such notices and special contracts are against
the policy of the law, and are, therefore, utterly void.5
According to a later decision in the State of New York, it is
held that, although a notice brought home to the other party,
will not have the effect to restrict the liability of the common
carrier, yet that it is competent for the common carrier, by en-
tering into a special contract, to limit it within narrower bounds
than those prescribed by the law.
•
¹ Reno v. Hogan, 12 B. Monroe's R. 63; 4 Sandf. R. 136; Laing v. Colden, 8
Barr (Penn.) R. 479; 7 Hill's R. 292.... 2 Maynard et al. v. Syracuse, etc.,
R.R. Co., 71 N. Y. 186... 3 Phillips v. Clark, 2 J. Scott (N. S.), 156; Story
on Bailm., §§ 549, 550a.
4 Moses v. Boston and Maine Railroad, 4
Foster's R. 71; 26 Verm. R. 256; 10 Olio R. 145; 32 N. Hamp. R. 523; 4
Bosworth, 226; 6 Mich. R. 244..
5 Hollister v. Nowlen, 19 Wend. R.
234; Cole v. Goodwin, 19 Wend. R. 251; also see 21 Wend. R. 153, 354; 25
Wend. R. 459.
•
HIRE OF CARRIAGE OF GOODS.
423
The power of limiting by a special contract, stands now,
therefore, admitted; but that by notice, though brought to the
knowledge of the owner, is denied.
The whole difficulty relates to carriage by land. For carriage
by water is accompanied by a bill of lading, specifying the risks
from which the carrier chooses to exempt himself, and this bill
of lading has been held to constitute a special contract, and to
afford protection to the carrier according to its terms.'
There is a class of cases, however, in which the carrier may
limit his liability by a general notice. The kind of goods which
he is accustomed to carry being generally known in the com-
munity where he does business, he may give a general notice
that he will not be answerable for goods of a different kind, or
of a higher value, such as money and jewelry; or that if he un-
dertakes the carriage of them, he shall be paid a higher compen-
sation. After having given such a general notice, he will not be
liable over a certain amount, if the value is not made known to
him at the time of the delivery, and a premium for insurance of
safety paid him, if such notice is brought home to the knowl-
edge of the owner. The notice constitutes a special agreement in
such cases; and the owner must disclose the value and pay the
premium, at his peril.2
These notices by the carrier, by mere advertisement, however
public they may be, will have no effect, except upon those to
whom knowledge of them is directly or constructively brought
home.3
It will not be sufficient that the notice has been publicly
posted up in the carrier's office, in writing or in print, unless the
party who is to be affected by it is proved to have read it; or
unless other circumstances are adduced which establish his
knowledge of it.¹
If the notice is published in a newspaper, it is not sufficient
proof, unless accompanied by some evidence that the party is
1 Swindler v. Millard, 2 Rich. (S. C.) 286... .2 Orange County Bank v.
Brown, 9 Wend. R. 85-115..... Davis v. Willan, 2 Stark. R. 279; Gibbon
v. Paynton, 4 Burr. R. 2302; Roskell v. Waterhouse, 2 Stark. R. 462; 12 C. B.
R. 313..
4
* Clayton v. Hunt, 3 Camp. R. 27; 2 Id. 415; 32 Penn. State
R. 213.
424
LAW OF BAILMENT.
accustomed to read the paper, so as to lay a foundation for pre-
suming knowledge.¹
§ 531-8. Effects of Fraud by Hirer.-The owner
of the goods is bound to observe good faith toward the carrier,
and to pack his goods, and put them in a fit condition for the
journey; and if he does not, he must bear any loss arising from
his own neglect.
2
It is the duty of every person sending goods by a carrier, to
make use of no fraud or artifice to deceive him, whereby his risk
is increased, or his care and diligence may be lessened.3
If there is any such fraud or unfair concealment, it will ex-
empt the carrier from responsibility under the contract; or, more
properly speaking, it will make the contract a nullity.*
Thus, where notes to the amount of £100 were packed in an
old mail-bag, and stuffed with hay to give it a mean appearance,
and in this state were delivered to a carrier, and the bag arrived
safe, but the notes were stolen; this concealment was held to be
such a fraud on the carrier, as to discharge him from all respon-
sibility for the loss.5
Wherever the owner represents the contents of a package to
be of a particular value, he will not be permitted, in case of a
loss, to recover from the carrier any amount beyond that value."
The owner must not do or say anything tending to mislead
or deceive the carrier as to the value of the goods. Adopting
any disguise for his box, the labeling it as containing articles of
a different nature and inferior value from its real contents, will
prevent a recovery in case of loss. A traveler's trunk was lost
containing $11,250 cash. It was sought to be recovered as bag-
gage. But the court decided that it did not fall within the
common understanding of the term baggage; and that an at-
tempt to have it carried free of reward, under cover of baggage,
was an imposition upon the carrier; that he was thereby de-
4 Bat-
1 Leeson v. Holt, 1 Starkie's R. 186; Rowley v. Horne, 3 Bing. R. 2; Munn
v. Baker, 2 Stark. R. 225. . . . . . .
....2 Story on Bailm., § 563.
3 Edwards v.
Sherratt, 1 East's R. 604: Coxe v. Heisley, 7 Harris (Penn.) R. 243
son v. Donovan, 4 Barn. & Ald. R. 21; 2 Kent's Com., Lect. 40.
v. Paynton, 4 Burr. R. 2298; Relf v. Rapp, 3 Watts & Serg. R. 21.
5 Gibbon
6 Tyly
v. Morrice, Carth. R. 485; Riley v. Horne, 5 Bing. R. 217; Chicago & Aurora
R. R. v. Thompson. 19 Ill. R. 578.
HIRE OF CARRIAGE OF GOODS.
425
prived of his just compensation, besides being subjected to un-
known hazards.'
But in the absence of all disguise or concealment by the
owner, he is not obliged to disclose the superior value contained
in the trunk or box; but it is the duty of the carrier to inquire;
and in case he does not, he will be chargeable for the full value.2
§ 532.-9. When Non-delivery of Goods Excus-
able.—The following are valid and legal excuses on the part of
the common carrier for the non-delivery of the goods:
First. When they have been lost by the act of God.
Second. When they have been lost from robbery by the pub-
lic enemy.
Third. When they have been lost by perils against which
the carrier did not expressly nor impliedly insure.³
Fourth. When the goods are lost by being thrown overboard
to lighten a ship or boat, and for the purpose of preserving life,
if the case is one of necessity.*
Fifth. Where the goods have perished by some internal de-
fect, without any fault on the side of the carrier; for his liability
does not extend to such cases."
Sixth. Where the loss is occasioned by the illegal act of the
shipper or owner."
Seventh. Where the goods are delivered, with consent of the
shipper, to another carrier; or where the carrier receives subse-
quent directions as to the place of delivery, and conforms thereto."
Eighth. When the goods are rightfully stopped in transitu,
by the vendor or consignor.
8
§ 533.-10. General Rights of.-1. In virtue of the
delivery of the goods, the common carrier acquires a special
property in them, and may maintain an action against any per-
son who displaces that possession, or does any injury to them."
1 Orange County Bank v. Brown, 9 Wend. R. 85... . Walker v. Jackson,
10 Mees. & Welsb. 161; Brooke v. Pickwick, 4 Bing. R 218; 8 Pick. R. 182; 9
Wend. R. 25, 115, 19 Wend. R. 234, 251.. 3 Story on Bailm. §§ 570, 571,
573....
107, 103
.4 12 Čoke's R. 63; Aleyn's R. 93; 1 Caines' R 43; Jones on Bailm.
5 Story on Bailm., §§ 492 a, 576..
Id., §§ 269, 541, 542.... 8 Id., § 580.
•
•
* Id., §§ 492, 578.
9 Bac. Abridg., Con
tract, C; Jones on Bailm. 80; Wilbraham v. Snow, 1 Vent. R. 52; S. C., 2 Saund.
R. 47 b. 47 c, and note.
426
LAW OF BAILMENT.
This right arises from the carrier's general interest in convey-
ing the goods, and his responsibility for any loss or injury to
them during their transit.¹
2. Having once acquired the lawful possession of the goods,
for the purpose of carriage, the carrier is not obliged to restore
them to the owner again, even if the carriage is dispensed with,
unless upon being paid his due remuneration; for by receiving
them, he has already incurred certain risks.²
3. A carrier is in all cases entitled to demand the price or
hire of carriage before he receives the goods; and if it is not
paid, he may refuse to take charge of them. If, however, he
takes charge of them without the hire being paid, he may after-
wards recover it.³ This, however, is subject to any deduction for
damages to the goods through his fault."
4. The carrier is also entitled to a lien on the goods for his
hire, and to his advances to others for freight and storage, and is
not compellable to deliver them until he receives it, unless he has
entered into some special contract by which it is waived."
§ 534.-11. The Doctrine of Average.-Sometimes
it becomes necessary in carriage of goods by water to throw the
goods, or some part of them, overboard for the common benefit,
or to make some other positive sacrifice, or to incur extraordinary
expenses, with a view to the good of the cargo. When these
nccessary sacrifices of the goods of one or more are made, the law
allows a compensation to those whose goods have been sacrificed,
and have incurred the loss or expense. The losers may demand
a pro rata contribution from all other persons deriving a benefit
therefrom, according to their interest, toward the loss or expense.
This, in cases of accidents at sea, is called a general average,
or general contribution, in which ship, cargo, and freight are
compelled to contribute, according to their value, to repay the
common loss."
2 Bradhurst v.
1 Wilbraham v. Snow, 2 Saund. R. 47 b, 47 c, and note...
Columbia Ins. Co., 9 Johns. R. 17; Herbert v. Hallett, 3 Johns. Cas. 93........
3 Wright v. Snell, 5 Barn. & Ald. R. 353; Jackson v. Rogers, 2 Show. R. 327.
4 Fitchburg Railroad v. Hanna, 6 Gray, 539; Bancroft v. Peters, 4 Mich.
R. 619.
5 White v. Vann, 6 Humph. R. 70; Sodergren v. Flight, 6 East's
R. 622; Hutton v. Bragg, 2 Marsh's R. 345; Hunt v. Haskell, 24 Maine R. 329.
6 Story on Bailm., § 583.
COMMON CARRIERS OF PASSENGERS.
427
ORDER III.-CLASS V.
COMMON CARRIERS OF PASSENGERS.
§ 535.-As Common Carriers of passengers assume extra-
ordinary responsibilities, and as a person is not a common carrier
who permits a neighbor or stranger occasionally, either gratui-
tously or for reward, to take a scat in his carriage for purposes of
travel, it may be well to inquire what constitutes a common car-
rier within the meaning of the law.
§ 536.-1. Who are. They are such as carry persons for
hire, holding themselves out to the public for that purpose, un-
der the offer to carry all who apply to be carried by means of
their conveyances.¹
The most usual of this class of carriers are the proprietors of
stage-coaches, omnibuses, street cars in cities, railroads, and
steamboats.
§ 537.-2. Their Duties and Obligations.—And,
1. As to Passengers Personally.-1. A common car-
rier of passengers is bound, absolutely and irrespective of any
question of negligence, to provide safe and roadworthy ve-
hicles.2
He is bound to provide coaches reasonably strong and suffi-
cient for the journey, with suitable harness, trappings, and equip-
ments; and to make proper examination thereof previous to
each journey.³
3
The proprietor of a ship, who carries passengers for hire, is
bound to see that his ship is strong, stanch, and seaworthy.*
2. With regard to stage-coaches, the carrier of passengers is
bound to provide careful drivers, of reasonable skill and good
2
1 19 Wend. R. 239; 10 N. IIamp. R. 486; 15 Illinois R. 472; 3 Brod. & B.
54; 9 Price, Exch. 403........ Alden v. New York Central R. R. Co. 12 E. P.
Smith, 102; Caldwell v. Murphy, 1 Duer, 233.. 3 Bremner v. Williams, 1
Carr. & Payne's R. 414; 3 Bing. R. 321; 13 Wend. R. 611, 627, 628......* Story
on Bailm., § 524; Amies v. Stevens, 1 Str. R. 160.
428
LAW OF BAILMENT.
habits, for the journey; to employ horses that are steady,
and not vicious, or likely to endanger the safety of the pas-
senger.'
The stage proprietor is bound not to overload the coach
either with passengers or luggage; and he is to see that the
weight is suitably adjusted so that the coach is not top-heavy,
and made liable to overset.2
3. The common carrier of passengers is bound to carry them
whenever they offer themselves, and are ready to pay for their
transportation. This results from his setting himself up, like an
innkeeper, and a common carrier of goods, for a common public
employment on hire. He is no more at liberty to refuse a passen-
ger, if he has sufficient room and accommodations, than an inn-
keeper is to refuse a suitable room and accommodations to a
guest.³
3
4. Carriers of passengers are bound to carry for the whole
route for which they stipulate, and according to their public
advertisements, and the general usage and custom of their busi
ness.*
1
But they are not bound to carry persons of offensive and dis-
orderly conduct, or those infected by contagion, or otherwise so
offensive in character, health or habits, as to be unsuitable com-
panions for other passengers."
5. In the next place, railway carriers are generally bound
to run trains according to their advertised time tab'es."
6. Passenger carriers are bound to stop at the usual places,
and to allow the usual intervals for refreshment of the passen-
gers; and they cannot at their mere caprice vary or annul these
accommodations; for every passenger is understood to contract
for the usual reasonable accommodations."
¹ Waland v. Elkins, 1 Stark. R. 272; 2 Camp. R. 79; 1 Carr. & Payne's R.
636; 13 Peters' R. 181; 13 Connect. R. 319; 1 Duer R. 233; 3 Bing. R. 321......
2 Long v. Horne, 1 Carr. & Payne's R. 612; Israel v. Clark, 4 Esp. 259; 2 Esp.
533; 11 Gratt. R. 798.. 3 Bretherton v. Wood, 3 Brod. & Bing. R. 54; S. C., 9
Price R. 408; S. C., 6 Moore's R. 141; Massiter v. Cooper, 4 Esp. R. 260.
• •
•
41 Campb. 167; Story on Bailm., § 600; 19 Wend. R. 534; 8 Eng. Law &. Eq.
R. 332..
5 2 Sumn. C. C. R. 221; 8 N. H. 523.. • Hodges' Railway,
€19; Denton v. Great Northern Railway Co., 34 Eng. L. & Eq. R. 154.....
5 Petersel. Abridg., Carriers, p. 48, note; Story on Bailm., § 597.
COMMON CARRIERS OF PASSENGERS.
429
7. They are bound to make use of all the ordinary precau-
tions for the safety of passengers on the road.¹
8. The coach proprietors are bound to carry the passengers
to the end of the journey, and to put them down at the usual
place of stopping; and if that is an inn-yard, it is not sufficient
If
to put them down on the outside of the gateway of the inn.
the custom of the coach is to carry the passengers to their own
houses or lodgings in a particular place, that must be con-
formed to.2
2. As to the Baggage of Passengers.-1. The
term baggage includes such articles of necessity or personal con-
venience as are usually carried by passengers for their personal
use, and not merchandise or other valuables, although carried in
the trunks of passengers, which are not designed for any such
use, but for other purposes, such as sale and the like."
2. The common carrier of passengers is bound to receive and
take care of the usual luggage or baggage which it is customary
to allow every passenger to carry for the journey.*
3. The general tendency of the legal decisions is, that as to
the baggage of passengers, the proprietors of the media of con-
veyance are held to the duties and responsibilities of common
carriers. This doctrine now seems firmly established in England
and America, that the responsibility of coach proprietors, carry-
ing passengers with their baggage, stands, as to their baggage,
upon the ordinary footing of common carriers."
§ 538.-3. Liabilities of.-1. As to Passengers Per-
sonally.-Passenger carriers are not held to the same strict
and severe responsibility for injuries that occur to passengers, as
for damage and loss to property, as they cannot exercise the
same control over persons as they can over inanimate objects.
But they are bound to the very highest degree of care and
watchfulness in regard to all their appliances for the conduct of
their business; so that so far as human foresight can secure the
11 Bell's Com., p. 462, 5th edit.
R. 419.
3
Story on Bailm., § 499.
2
Dudley v. Smith, 1 Camp. R. 167.
4 Robinson v. Dunmore, 2 Bos. & Pull.
' Story on Bailm., § 599; Brooke v. Pickwick, 4 Bing R. 218,
222; 2 Camp. R. 80; 2 Wend. R. 327, 341; 6 Id. 335; 6 East's R. 564; 13
Wend. R. 611, 627, 628; 9 Wend. R. 85, 114 to 119; 19 Wend. 234, 251; 21
Wend. R. 354; 26 Wend. R. 591.
430
LAW OF BAILMENT.
safety of passengers, there is an unquestionable right to demand
it of all who enter upon the business of passenger carriers.'
If the common carrier fails to provide coaches reasonably
strong, suitable harness, and other equipments necessary for the
safe transportation of the passenger, and damage or injury oc-
curs to them on account of this neglect, he will be responsible to
the full extent thereof.2
The proprietors, common carriers, are liable to passengers for
the misconduct of their servants employed in the business. If
the driver of a stage-coach is guilty of any rashness, negligence,
or misconduct, or if he is unskillful, or deviates from the
acknowledged custom of the road, the proprietors will be re-
sponsible for any injury resulting from his acts.³
3
In case of the death of a passenger by the culpable negligence
of a passenger-carrier, the living representatives have a right of
action against the carrier. The courts hold that the jury are to
estimate the damages, in such cases, as they would for an injury
to health, by the probable accumulations of the deceased had he
survived or not been injured."
Where a passenger is injured by the default of the carrier,
the latter is liable not only for the damages which the former
has sustained up to the time of trial, but all prospective damages
likely to accrue from the injury, as he can have but one action."
The liability of carriers for injury to their passengers, espe-
cially where there is gross negligence, seems not to be dependent
on the fact of compensation for the passage being paid to the
carrier. In the Supreme Court of the United States it was de-
cided, that where a passenger was riding gratuitously at invita-
tion of the president of a railroad, and was injured by a collision
arising from the negligence of the defendants' servants, the com-
pany were liable for the injuries.
6
2. As to Baggage of Passengers.—1. A common car-
rier by land or by water is regarded as an insurer of the baggage
12 Esp. 533; 17 Illinois R. 496........2 Aston v. Heaven, 2 Esp. R. 533;
Sharp. Grey, 9 Bing. R. 457.... 3 Stokes v. Saltonstall, 13 Peters' R. 181;
13 Connect. R. 319; 11 Gratt. R. 708... 4 Redfield on Railways, § 152, and
cases there cited.. .5 11 Add. & E. 301; 18 Vermont R. 252; 2 Barb. N. Y
282; 10 La. Ann. R. 33.
•
..... Philadelphia & Reading Railroad Co. v. Derby
14 Howard (U. S.) R. 468; Nolton v. Western Railroad, 15 New York R. 444.
COMMON CARRIERS OF PASSENGERS.
431
of his passengers, and he is responsible for any loss which is not
occasioned by inevitable accident, or by the enemies of the
country.¹
2. To render common carriers of passengers liable for the loss
of baggage, it is not necessary that anything should be paid spe-
cifically for baggage, because the payment of the passenger's
fare includes the carriage of his baggage.2
3. When a passenger is received on board, he is entitled to
have his baggage safely kept although he has not paid his fare.
4. "The obligation of a railroad company undoubtedly is to
take whatever is delivered and received as baggage from a pas-
senger, in the baggage-car of a passenger train in which the pas-
senger takes his passage, and take it along with the passenger,
and deliver it to him at the place of destination, in the usual
manner of transporting and delivering baggage. And in this
respect the obligation is the same, whether the baggage is within
the quantity allowed to a passenger to be carried without any
charge other than the ordinary fare of the passenger, or whether
it is an extra quantity for which an additional charge is made.
If it is taken as the baggage of the passenger, whether ordinary
or extra, it is to be carried with the passenger, unless there is
some agreement to the contrary. Any other rule would be pro-
ductive of great inconvenience and hardship, if not loss, and
would frequently subject travelers to intolerable delays and
annoyances." +
5. A carrier of passengers is liable for such baggage as his
passengers carry on their journey for their own personal conve-
nience, and within reasonable limits. But he is not liable for
such articles as the passenger intends to present to his friends."
6. A carrier must deliver his passenger's baggage to him at
his place of destination, and the forgetfulness of the passenger
to claim it there is no excuse; and if the baggage is lost by
reason of its being carried further by another carrier whose route
¹ Hollister v. Nowlen, 19 Wend. R. 234; Cole v. Goodwin, Id. 251; Camden
R. R. & Tr. Co. v. Burke, 13 Wend. R. 611, 629; Camden R. R. & Tr. Co. v.
Belknap, 21 Id. 354........º Powell v. Myers, 26 Wend. R. 591....
8 Van
Horn v. Kermit, 4 E. D. Smith, 453..... 4 Glasco v. N. Y. Central R. R. Co.,
36 Barb. 562, 557.. .5 Nevins v. Bay State Steamboat Co., 4 Bos. 225.
432
LAW OF BAILMENT.
is a continuation of the one traveled over by such passenger, the
carrier will be liable for the loss.¹
7. A common carrier cannot screen himself from liability by
a notice, whether the notice is brought home to the owner of the
goods or not. A notice is no evidence of assent on the part of
the owner, and he has a right to rely on the common law liability
of the carrier, who cannot relieve himself from that liability by
any act of his own.²
8. But it is competent for a common carrier of goods and the
owner of them to limit the carrier's common law liability by
making an express contract to that effect.3
But even an express contract to excuse him from liability or
loss arising from his own fraud or gross negligence would not be
enforced, because it would be contrary to good morals.*
§ 539.-4. Rights of.-1. As to Accidents.-As carriers
of passengers are compelled by law to assume extraordinary re-
sponsibilities, the law clothes them with rights commensurate
with these responsibilities, and for their protection. Passenger
carriers, not being insurers of the persons of their passengers, are
not responsible for accidents, where all reasonable skill and dili-
gence have been employed. When everything has been done
which human prudence, care, and foresight can suggest, accidents
may happen."
2. Fare in Advance.-Carriers of passengers have a
right to demand and to receive their fare at the time when the
passenger engages his seat; and if the passenger refuses to pay
it, the carriers may fill up the place with other passengers, who
are ready to make the proper deposit.
3. Lien on Baggage. The passenger carrier has a lien
upon the luggage or baggage of the passenger for his fare or pas-
2 Nevins v. Bay State Steamboat
1 Cole v. Goodwin, 19 Wend. R. 251.....
Co., 4 Bosw. 225; 19 Wend. 251; Camden Co. v. Belknap, 21 Wend. R. 354; 21
Id. 153; Alexander v. Greene, 3 Hill's R. 9; 7 Id. 533... a1 Kern. R. 485;
Parsons v. Monteath, 13 Barb. 353; Moore v. Evans, 14 Id. 524; 20 New York
R. 173........4 Stoddard v. Long Island R. R. Co., 5 Sandf. R. 180....
5 Stokes v. Salstonstall, 13 Peters' R. 181, 192, 193; Crofts v. Waterhouse, 3
Bing. R. 319, 321; Christie v. Griggs, 2 Camp R. 79.. 6 Ker v. Mountain,
1 Esp. R. 27; Story on Bailm., § 603.
COMMON CARRIERS OF PASSENGERS.
433
sage money, but not a lien on the passenger, or the clothes he
has on.¹
4. Rules and Regulations.-Carriers of passengers
by water have a right to make all reasonable and needful rules
and regulations, not only for their own interests in the due man-
agement of their business, but for the accommodation of passen-
gers. They are not bound to admit passengers on board who
refuse to obey such reasonable rules and regulations, or who may
be guilty of gross and vulgar habits of conduct, or who make
disturbances on board, or whose characters are doubtful, or dis-
solute, or suspicious, or whose characters are unequivocally bad.²
§ 540.-5. Duties of Passengers.-In traveling by public con-
veyance, there are certain duties devolving upon the passenger.
1. Submission to Rules.-Passengers are bound to
submit to all such reasonable regulations and rules as the car-
riers may adopt for the convenience and comfort of the other
passengers, as well as for their own proper interests.³
2. Showing Tickets.-Passengers are bound to conform
to a regulation of the company requiring passengers to exhibit
their tickets, when requested by the conductor; and if they do
not so conform, they may be legally ejected from the train, no
unnecessary violence being used.*
3. Surrender of Tickets. The regulation is reason-
able and valid, and should be obeyed, requiring passengers on a
railroad to surrender their tickets before reaching their destina-
tion, without receiving any check or evidence of a payment of
the fare.5
1
¹ Story on Bailm., § 604; Wolf v. Summers, 2 Camp. R. 631.
2 Jencks
v. Coleman, 2 Sumner's R. 224, 225; 15 Illinois R. 472; Day v. Owen, 5 Mich R.
520......
3 Galena &c. R. R. Co. v. Yarwood, 15 Illinois R. 472; Day v. Owen,
5 Mich. R. 570........4 Hibbard v. New York & Erie R. R., 15 New York R
455.. 5 Vedder v. Fellows, 20 New York R. 126.
28
*
Topical Analysis of Marine Insurauce.
1. GENERAL VIEW.
1. Insurer.
1. Parties. {1, Insured.
2.
2. Subject-matter.
3. Premium.
II. POLICY-ELEMENTS 4. Risk .
III. PERILS COVERED
1. When it begins.
2. When it ends.
5. Mutual assent.
6. Amount insured
7. Term of the risk.
1. Perils of the sea.
2. Collision.
3. Fire.
{
4. Piracy, robbery, and theft.
5. Barratry.
1. By valued policy.
2. By open policy.
6. Capture, arrest, and detention.
7. All other perils.
COV-1. By implication.
12. By memorandum.
IV. PERILS NOT
ERED.
V. WARRANTY.
{
(I. Implied.
2. Express.
1. Duty to make.
VI. AS TO DISCLOSURES 2. Effect of misrepresentation.
VII. DEVIATION..
3. Effect of concealment.
4. What need not be made.
I. Unnecessary.
2. Necessary.
A
TOPICAL ANALYSIS OF MARINE INSURANCE. 435
VIII. PRIOR, DOUBLE, AND REINSURANCE.
IX. ABANDONMENT.
X. GENERAL AVERAGE.
XI. ADJUSTMENT.
1. Prior.
2. Double.
3. Reinsurance.
I. Necessity of.
2. Right of.
3. Exercise of the right of.
4. Of cargo.
5. Of freight.
6. Revocation of.
CHAPTER XV.
MARINE INSURANCE.
I. GENERAL VIEW.
§ 541. Marine Insurance is a contract whereby one party, for
a stipulated sum of money called a premium, undertakes to in-
demnify the other party against certain perils, or sea risks, to
which his ship, freight, and cargo, or other interest, or some of
them, may be exposed, during a certain voyage, or a fixed period
of time.¹
This is a concise and comprehensive definition of the contract
of marine insurance. The student will observe that it has all
the elements belonging to contracts of any and every description,
the language being varied only so as to apply to the subject-
matter.
II.-POLICY-ELEMENTS.
§ 542. The instrument in which the contract is expressed is
called a Policy of Insurance. But no instrument is essential
to the validity of the contract; for if the proposals of the insured
are written in the usual way in the proposal book of the insurers,
and signed by their officer with the word "done" or "accepted,"
or in any way to indicate that the bargain is made, it is valid,
although no policy be delivered.2
The application of insurance is usually made in writing. The
policy need only be signed by the insurer; for the obligations
on the part of the insured are conditions merely on the perform-
ance of which his right to indemnity depends. The policy itself
13 Kent's Com. 253.
2 Parsons on Merc. Law, 403; Kohne v. Ins Co.
of North America, 1 Wash. C. C. 93; Blanchard v. Waite, 28 Maine, 51; Loring
*. Proctor, 26 Maine, 22.
POLICY
437
- ELEMENTS.
contains an acknowledgment of the premium. It is perfect and
binding as soon as the terms are agreed on, and the policy signed
by the designated officer, without actual delivery. Even if the
terms of the policy be agreed on in writing, equity will enforce
the execution of the policy or payment, though a loss occurs in
the meantime.¹
1
§ 543.-1. Parties. The parties are the Insurer, or the one
who assumes the risk; and the Insured, or the person who owns,
or has an insurable interest in the thing insured.
1. Insurer.-This, as we have said, is the party who as-
sumes the risk. Any person may become an insurer who is capable
of making contracts generally, unless prohibited by statute; and
formerly it was done by individuals only. But at the present day
it is done mostly, if not exclusively, by incorporated companies.
Any individuals, or companies, or partnerships, may lawfully
become insurers. In New York and other States, marine insur-
ance is prohibited to all persons and companies residing in any
foreign country, acting by agent here.²
2. Insured. All persons, whether aliens or natives, may
be insured, with the exception of alien enemies, for it is a con-
tract authorized by the general law and usage of nations.
This statement must be taken, however, with these qualifica-
tions: First, that the insured must be interested in the property
at the time of the loss; and, second, the interest must be an
insurable interest. A mere indebtedness to a party on account
of property gives the creditor no insurable interest; as if one re-
paired a house or ship; but if the creditor has a lien on the
property, this is an insurable interest. A lender on bottomry or
respondentia may insure the ship or goods.³
An individual or a company, having already insured property,
has an insurable interest to the extent of the liability assumed,
and may cause the property to be reinsured by another individual
or company. This is often done by companies who wish to close
their accounts, to lessen their risks, or to get rid of some special
risk.¹
1 Motteux v. The London Ass. Co., 1 Atk. 545; 4 Cow. 646; 1 Pick. 278.
23 Kent's Com. 256.. 3 Harmon v. Vanhatton, 2 Vern. 717;
Kenny v. Clarkson, 1 Johns. 385.
•
4 Parsons on Merc. Law, 422.
-
438
MARINE INSURANCE.
§ 544.-2. Subject-Matter.—The subject-matter, the second
clement of a contract or policy of insurance, is the property in-
sured, including the interest of the insured party in it.
The description of the property must be such as will dis-
tinctly identify it, as by quantity, marks, and numbers, or a re-
ference to the fact of shipment, or the time of shipment, or the
voyage, or the consignee; or in some similar and satisfactory
way; and no mere mistake in a name, or elsewhere, vitiates the
description if it leaves it sufficiently certain.'
If the ship be specified in the policy, it becomes part of the
contract, and no other ship can be substituted without necessity;
but the cargo may be shifted from one ship to another, if it be
done from necessity, and the insurer of it will still be liable."
2
An insurance on the body of the ship, except when varied by
special agreement, sweeps in, by the comprehensiveness of the
expression, whatever is appurtenant to the ship.3
Profits are, equally with freight, a proper subject of insur-
ance.*
4
The proper subject of insurance is lawful property engaged
in a lawful trade; and if the voyage, as originally insured, be
lawful, a subsequent illegality does not affect it, if the loss be
not tainted with such illegality. The property of enemies, and
a trade carried on with enemies, do not come within this defini-
tion.
An insurance on a voyage undertaken in violation of a block-
ade, or of an embargo, or of the provisions of a treaty, is illegal,
whether the policy be on the ship, freight, or goods, embarked
in the illegal traffic. Any illegality in the commencement of an
entire voyage will render the whole illegal, and destroy the policy
intended for its protection."
It is a clear, settled, and universal principle, that an insur-
ance on property, intended to be imported or exported, contrary
to the law of the place where the policy is made or sought to be
enforced, is void. The illegality of the voyage in all cases avoids.
1 Murray v. Col. Ins. Co., 11 Johns. 302; Serbe v. Merch. Ins. Co., 6 La. 185;
Ballard v. Merch. Ins. Co., 9 La. 258; 6 East, 382, 386; Parsons' Merc. Law,
chap. xviii, § 12..... Salisbury v. Marine Ins. Co., 23 Mis. 553
Craufurd v. Hunter, 8 Term R. 13...
Kent's Com. 257.
2
• •
3 3
5 Wilson
•
v. Marryatt, 8 Term R. 31; Bird v. Appleton, Id. 562; 3 Kent's Com. 262.
POLICY-ELEMENTS.
439
the policy; and the voyage is always illegal when the goods or
trade are prohibited, or the mode of its prosecution violates the
provisions of a statute.'
The insurance, however, by a neutral, of goods usually denom-
inated “contraband of war," is a valid contract. It is merely
a commercial adventure which no neutral nation is bound to
prohibit, and which only exposes the persons engaged in it to
the penalty of confiscation. Such goods are liable to seizure in
transitu by the belligerent cruisers, and so far it is a case of im-
perfect right.2
A policy usually adds to the description of the property,
"lost or not lost." This phrase makes the policy retrospective;
and attaches it to the property, if that existed when, by the
terms of the policy, the insurance began, whether this were for
a voyage or for a certain time, although it had ceased to exist
when the policy was made.3
§ 545.-3. Premium.—The premium is the consideration of
the contract of insurance. It is due when the contract of insur-
ance is completed; but in practice in this country the premium
in marine insurance is usually paid by a premium note on time,
which is given at or soon after the delivery of the policy. If the
policy acknowledges the receipt of the premium, if it is not paid,
this receipt will be no bar to an action for it.
The premium is not due unless the risk is incurred, whether
this be caused by the non-sailing of the ship, or by the insured
not having goods on board; or not so much cargo as he is in-
sured for; or by any error or falsity in the description which
prevents the policy from attaching.*
If the premium be not earned, or not wholly earned, it must
be returned in whole or in part by the insurers if it has been
paid.5
It is, however, an invariable rule, that if the whole risk
attaches at all, that is, if there be a time, however short, during
13 Kent's Com. 262.
R. 297..
•
2 Barker v. Blakes, 9 East's R. 203; 4 Conn.
3 Paddock v. Franklin Ins. Co., 11 Pick. R. 299; March v. Pigot,
•
5 Burr. 2802.
4 Tyric v. Fletcher, Cowper, 666; Waddington v. United
Ins. Co., 17 Johns. 23; Foster v. United States Ins. Co., 11 Pick. 85..
5. Taylor v. Sumner, 4 Mass. 56.
440
MARINE INSURANCE.
which the insurers might, in case of loss from a sea peril, be
called on for the whole amount they insure, there is to be no re-
turn of premium.'
If the policy be effected by an agent who is responsible for
the premium, and the insurance is neither authorized nor con-
firmed by the principal, there is no return of premium for this.
cause, if the principal might have adopted the insurance and
made it obligatory on the insurers, at a time when the property
insured was at risk.2
546.-4. Risk.-This is another of the essential clements
of a contract of insurance. It consists of a possible contingency,
or event, on the happening of which the amount for which in-
surance is effected, or a part of the amount proportioned to the
loss incurred, becomes a claim against the insurer in favor of the
insured.
1. When it Begins.-As to when the risk begins, de-
pends upon the words of the policy. The insurer may take and
modify what risk he pleases. The policy may be on a voyage
out, or on a voyage in; or on the whole complex voyage out and
in; or it may be for a port of the route, or for a limited time,
or from port to port, in an intermediate stage of the voyage.
If insurance on a ship be from such a place, the risk does not
commence until the vessel breaks ground. If at and from, it
then includes all the time the ship is in port after the policy is
subscribed, if the ship be at home; and if abroad, it commences
only from the time she has been safely moored twenty-four hours.
after her arrival.³
3
But if a ship be expected to arrive at a foreign port, and be
insured at and from that place, or from her arrival there, the
risk attaches from her first arrival.*
If the policy does not state the place of commencement of
the risk, the port where the ship was at the time of the execu-
tion of the policy, where she was laden and whence she sailed on
the voyage, may be proved, and will be deemed the place at
which the policy attached 5
1 Mut. Marine Ins. Co. v. Swift, 7 Gray, 256..... 2 Hagedorn v. Oliverson,
2 M. & S. 485; Routh v. Thompson, 13 East, 274. 3 Garrigues v. Coxe, 1
Binn. R. 592..... 4 Motteaux v. London Assurance Co., 1 Atk. R. 548..
Folsom v. Merc. Mut. Marine Ins. Co., 38 Maine R. 414.
POLICY-ELEMENTS.
441
The risk upon the cargo is subject to much modification by
the agreement of the parties, but it usually commences from the
loading thereof aboard the ship.'
2. When it Ends.-The risk is usually made to con-
tinue until the vessel has been anchored for twenty-four hours in
safety, and no longer; and the rule has been applied, though
the loss proceeded from a cause, or death wound, existing before
the ship's arrival.²
But the risk continues during quarantine, though after the
twenty-four hours.3
If the injury happened during the risk, it is no objection to
a recovery that its extent was not ascertained until after the ex-
piration of the risk.*
If the policy be to a country generally, as to Jamaica, the
risk ends at the first port made for the purpose of unload-
ing, after the vessel has been moored in safety for twenty-four
hours."
If the policy contains a liberty to touch, stay, and trade, or
to touch and stay, or if there be a known usage of trade, the
risk will be prolonged according to that usage, or to the terms
of the policy, and intermediate voyages may be covered by the
insurance."
As to the cargo, if the policy, as is usual, covers the risk
upon the goods until safely landed, the risk continues during
their passage to the shore, and until all the goods are landed."
§ 547.-5. Mutual Assent. As in other contracts, mutual
assent consists simply in a proposition, or application on one
side, and an acceptance on the other. (See Contracts, Mutual
Assent.)
§ 548.-6. Amount Insured.-This may be agreed upon by
and between the parties to the insurance, or it may be left an
open question to be settled in case of loss, as to the value of the
property lost.
1. By Valued Policy.-This is where the value has
•
3 Kent's Com. 309; Tonge v. Watts, Str. R. 1251.. 2
1 Term R. 252.
Faith, 15 Q. B. 649.
3 Waples v. Eames, Str. R. 1243…….
5
•
Lockyer v. Offley,
Leigh v. Mather, 1 Esp. N. P. R. 412.
igon, 72; 3 Kent's Com. 309..
•
4 Knight v.
6 2 Emer-
• •
7 Garduer v. Smith, 1 Johns. Cas. 141.
442
MARINE INSURANCE.
been set on the ship or goods insured, and inserted in the policy
in the nature of liquidated damages. It is held that every pol-
icy on profits, of necessity, must be a valued one, because with-
out the valuation, it would be extremely difficult to ascertain
the amount to be recovered. A loss on the profits must be regu-
lated by the loss of the property from which the profits were to
arise.¹
1
If a cargo be lost on the voyage, the whole amount of the
valued profits is recoverable, without showing that there would
have been any ultimate profits if the loss had not happened.²
The value in the policy is, or ought to be, the real value of
the ship, or the prime cost of the goods, including the incidental
expenses of them previous to the shipment, and the premium of
the insurance. It means the amount of the insurable interest,
and if the insured has some interest, and there is no fraud, the
valuation in the policy is conclusive between the parties; for
they have, by agreement, settled the value, and not left it open
to future inquiry and dispute as between themselves.3
If the valuation should, however, be grossly erroneous, there
is no doubt it would raise a strong presumption of fraud, and
either the valuation or the policy would be set aside. A valua-
tion, fraudulent in fact, as respects the insurer, or so excessive
as to raise a necessary presumption of fraud, entirely vacates the
policy, and discharges the insurer.*
In settling all losses, total or partial, the valuation of the
property in the policy is to be considered as correct in the ad-
justment of the loss, and the true measure and basis of the
valuation according to the contract of indemnity. The adjust-
ment is to be the same as if the goods had actually cost, or the
ship and freight were actually worth, the sum at which they
were valued.5
The student must bear in mind that a valued policy has
nothing to do with settling the actual loss that may have occur-
red, any further than to assume the valuation in the policy as
1 Roccus, n. 31, 36; 3 Kent's Com. 273.... 2 Patapsco Ins. Co. v. Coul-
ter, 3 Peters' R. 222.. 3 Shawe v. Felton, 2 East's R. 109; 2 Manning &
Granger, 593..... 4 Lewis v. Rucker, 2 Burr. R. 1171; Forbes v. Aspinall, 13
East's R. 323; Wolcott v. Eagle Ins. Co., 4 Pick. R. 429; 6 Cranch, 206....
53 Kent's Com. 274.
POLICY-ELEMENTS.
443
the basis on which to ascertain the loss. The valuation simply
fixes the price of the whole subject at risk; but it does not
admit that the property on which the valuation was made, was
on board the vessel.¹
If, therefore, certain articles be comprised in a valuation,
and part are safely landed before the ship is lost, the valuation
must be opened, and the claim of the insured reduced in the
proportion to which the articles actually lost bore to the valua-
tion of the whole at the commencement of the risk.²
2. By Open Policy.-In an open policy, where the value
insured is to be determined by evidence, the value of the proṛ-
erty—whether ship or goods-which is insured, is their value
when the insurance took effect, including the premium of insur-
ance, as the law of insurance intends indemnifying the insured,
as accurately as may be, for all his loss.3
If a ship be insured, its value throughout the insurance is
the same as at the beginning, without allowance for the effect of
time upon it. And all its appurtenances, in a mercantile sense
of this phrase, enter into this value.5
1
While the value does not vary with time, the interest of the
insured at the time of the loss is that on which he founds his
claim.6
§ 549.-7. Term of the Risk.-In speaking of the Risk, when
it begins, and when it ends, perhaps the term of the risk was
sufficiently noticed incidentally, to render further comment un-
necessary. Of course, the term of the risk depends on the lan-
guage of the policy. It may be on time—that is, for so many
days, months, or years; or it may be for a particular voyage, in
which case the period of time will be altogether uncertain.
When the insurance is for a particular term of time, the day
and hour at which it commences and ends will be definitely spe-
cified in the policy. In such case, the place either of departure
or of destination is quite immaterial, and no questions of devia-
tion can arise. In this kind of policy a clause is often inserted,
¹ Haven . Gray, 12 Mass. Rep. 71.... 2 Benecke on Indemnity, 146; 3
Kent's Com. 275........3 Shawe v. Felton, 2 East's Rep. 109; 7 Johns. R. 343.
.4 Snell v. Delaware Ins. Co., 4 Dall. R. 430.... 5 Kemble v. Bowne,
Parsons on Merc. Law, ch. 18, § 2.
1 Caines, 80; 2 East's Rep. 109...
444
MARINE INSURANCE.
providing that if the vessel be at sea at the expiration of the
time, the policy shall continue in force until she arrives at her
port of destination."
In the other kind of policy, on the ship for a particular
voyage, great nicety is required in accurately describing the
voyage. This includes not only a statement of the time and
places at which the risk is to begin and end, but also usually the
intermediate places at which the vessel may be allowed to call.²
The ship may be insured for an entire voyage or for any part
of a voyage. The clause, "at and from" a certain port, covers
all risks while taking in the cargo at the port designated; but
when insured "from" the port, before the risk begins the ship
must break ground.
The risk on the cargo is generally limited to continue until
it shall be discharged and safely landed.
III.—PERILS COVERED.
§ 550. Having considered the elements of a contract or policy
of marine insurance, we will now notice the perils which are
usually covered by the policy.
The policy usually enumerates, as the causes of loss against
which it insures, Perils of the Sea, Fire, Piracy, Theft, Barratry,
Capture, Arrests, Detentions, and All other Perils.
It is a universal rule that the insurers are liable only for
extraordinary risks. The very meaning of "seaworthiness,"
which the insured warrants, is that the ship is competent to
encounter with safety all ordinary perils. If she be lost or in-
jured, and the loss evidently rose from an ordinary peril, as
from common weather, or the common force of the waves, the
insurers are not liable, because the ship should be able to
withstand these assaults.3
§ 551-1. Perils of the Sea.-By this phrase is meant all
the perils incident to navigation, and especially those arising
from wind and weather, the state of the ocean, and its rocks
¹ Dean's Com. Law, § 562.
18, § 13.
2 Id. 563.... 3 Parsons' Com. Law, ch.
PERILS COVERED.
445
and shores. But the insurers take upon themselves only so
many of these as are "extraordinary.”¹
Destruction by worms is not covered by the phrase "perils
of the sea;" for this danger is known to exist in all waters,
and in certain waters, at certain seasons, the danger is very
great; and it is the duty of the party insured to guard against
this danger.
If a vessel be not heard from, it will be supposed, after a
reasonable interval, that she has perished. The presumption of
law will be, that she was lost by an extraordinary peril of the
sea, and, of course, the insurers will be answerable for her. But
this presumption may be rebutted by any sufficient evidence.
§ 552.-2. Collision.-Collision is a peril of the sea. The in-
surers are held only for the loss sustained by the ship which
they insure, and not for damage to the other ship, no matter
which ship may be in fault."
§ 553.-3. Fire.-The insurers are held in cases of destruction
by fire only when it is caused by something extraordinary, and
not belonging to the inherent qualities of the thing which takes
fire. In case the subject-matter of insurance were hemp put
on board in a state liable to effervesce, and it did effervesce,
and generate the fire which consumed it, the insured could not
recover,
If the master and crew of a ship burn it and the cargo,
to save them from falling into the hands of an enemy, the in-
surers are liable; for the act of burning in such case is a duty
owing to the State."
5
In cases where the insurers are liable for goods consumed by
fire, they are also liable for goods damaged by throwing water
on them to extinguish the fire.
6
§ 554.-4. Piracy, Robbery, and Theft.-Piracy and robbery
are most usually committed by strangers to the ship; they may,
however, be committed by the crew; and the insurers are an-
•
2 Brown v. Neilson, 1
3 Gen. M. Ins. Co. v.
1 The Schooner Reeside, 2 Sumn. 567, 571.
Caines, 525; Parsons on Com. Law, ch. 18, § 14.
Sherwood, 14 Howard's R. 351; Matthews v. Howard Ins. Co., 13 Barb. 234.
4 Boyd v. Dubois, 3 Camp. 133.
5 Gordon v. Rimmington, 1
Camp. 123..... 6 Case v. Hartford Ins. Co., 13 Ill. Rep. 680; Hillier v. Alle-
gheny Co. Mut. Ins. Co., 3 Barr, 470.
•
446
MARINE INSURANCE.
swerable for such a loss, unless it arose from the fault of the
owner. Insurers generally limit their responsibility, so far as
thieves are concerned, to "assailing thieves," so as to avoid lia-
bility for theft by the crew. This excludes theft without vio-
lence, and, perhaps, all theft by those lawfully on board the
vessel as part of the ship's company.¹
But if, after shipwreck, the property is stolen, the in-
surers are liable, and would probably be so if there were no
insurance against theft, if this was a direct effect of the wreck-
ing.2
§ 555.-5. Barratry.-This means a fraudulent breach of duty
on the part of the master, in his character of master, or of the
mariners, to the injury of the owner of the ship or cargo, and
without his consent, and it includes every breach of trust com-
mitted with dishonest views.3
To trade with an enemy without leave of the owner, though
it be intended for the owner's benefit, or for a neutral to resist
search, though his motive be to serve the owner, or for a letter
of marque to cruise and take a prize, though done for the benefit
of the owner, if the ship be lost by reason of the acts, are all of
them acts of barratry.
So, sailing out of port in violation of an embargo, or without
paying the port duties, or to go out of the regular course upon
a smuggling expedition, or to be engaged in smuggling against
the consent of the owner, are all of them acts of barratry, equally
with more palpable and direct acts of violence and fraud; for
they are willful breaches of duty by the master, in his character
of master, to the injury of the owner.*
If the ship be barratrously taken out of her course, that
act takes the whole property from the possession of the insured,
and produces a total loss."
But it is requisite that the loss resulting fronı barratry must
actually happen during the continuance of the voyage; and if
the ship be not seized for a smuggling act until she has been
2
•
¹ Phillips on Insur., § 1106...... Magoon v. New Eng. Mar. Insur. Co., 1
Story, 157, 164…………. 3 Cowp. 155; Earle v. Rowcroft, 8 East, 126..
R. 1173; Knight v. Cambridge, Cowp. R. 143; 1 Term
5 Dixon v. Reid, 5 Barn. & Ald. 597.
4 Stamma v. Brown, Str.
R. 127; 3 Id. 277...
PERILS NOT COVERED.
447
moored twenty hours in safety at the port of destination, the
insurer is discharged.¹
§ 556.-6. Capture, Arrest, and Detention. The phrase
which refers to these perils, is usually in these words: "Against
all captures at sea, or arrests, or detentions of all kings, princes,
and people." This refers only to the acts of government for
government purposes, whether right or wrong. An arrest in the
domestic port, after the voyage commenced, justifies an abandon-
ment; but if made before the risk commenced, the contract is
discharged.²
§ 557.-7. All Other Perils. This phrase means all other
perils of a kind similar to those already enumerated. Prac-
tically it has but a very limited operation. Although it has
been declared to be substantial and material, it might be difficult
to hold an insurer liable on tenable grounds, under this clause,
when he would not have been liable under any of the enumerated
perils.3
IV. PERILS NOT COVERED.
§ 558.-1. By Implication.-The insurer undertakes only to
indemnify against extraordinary perils of the sea, and not
against those ordinary ones to which every ship must inevitably
be exposed; but it is often difficult to discriminate between
damage occasioned by the ordinary service of the voyage, and
which falls upon the owner, and by a peril of the sea, for which
the insurer is responsible.
Damages resulting from the ordinary employment of the ship,
or the inherent infirmity of the article, as the loss of an anchor
by the friction of the rocks, or the wear and tear of the equip-
ment of the ship, or her destruction by worms, or the diminu-
tion of liquids by the ordinary leakage to which they are natur-
ally subject, or hemp taking fire in a state of effervescence, may
}
¹ Lockyer v Offley, 1 Term R. 252; 3 Kent's Com. 305, 306.......2 3 Kent's
Com. 303..... Moses v. Sun Mut. Insur. Co., 1 Duer, 159.
448
MARINE INSURANCE.
be mentioned as instances of losses which are not within
the policy, because they are not losses attributable to acci-
dent.¹
§ 559.-2. By Memorandum.-To prevent disputes respect-
ing partial losses, arising from the perishable quality of the'
goods insured, or from trivial subjects of difference, it has been
a general practice to introduce into policies a stipulation, by way
of memorandum, that upon certain enumerated articles, the
insurer should not be liable for any partial loss whatever, and
upon others, for none under a given rate per cent.
This memorandum clause usually declares that the enumer-
ated articles, and any other articles that are perishable in their
own nature, shall be free from average under a given rate unless
general, or the ship be stranded.
In consequence of this exception, all small partial losses,
however inconsiderable, are to be borne by the general aver-
age, provided they were incurred in a case proper for such
average.
Though a total loss may exist, in certain cases, when the
voyage is defeated, yet in case of perishable articles within the
memorandum, the insurer is secure against all damage to them,
whether great or small, whether it defeats the voyage, or only
diminishes the price of the goods, unless they be completely and
actually destroyed, so as no longer physically to exist.²
If there be a total loss of the voyage by reason of the ship-
wreck, or any other casualty, and there be no other means to
forward the cargo, there is no distinction between the memoran-
dum articles and the rest of the cargo. The total loss applies
equally to the whole.³
The settled rule in this country is that if the goods arrive at
the port of destination in specie, though of not the slightest
value, there is no total loss. At an intermediate port, there is a
total loss, when the goods are so much damaged as to be inca-
pable of reaching the port of destination in specie, or are in such
13 Kent's Com. 30..... 23 Kent's Com. 295, 296; Maggrath v. Church,
1 Caines' R. 196; 3 T. 108; Saltus v. Ocean Insur. Co., 14 Johns. R. 138; 8
Cranch's R. 39; 1 Wheat. R. 219
.3 Cologan v. London Assurance Co.. 5
Maule & Selw. 447; Moreau v. U. S. Insur. Co., 1 Wheat. R. 219.
1
WARRANTY.
449
a state that the health of the mariners and the safety of the
vessel will not admit of their further transportation.¹
V.-WARRANTY.
§ 560. Warranty enters into and becomes a part of every
marine insurance, constituting one of the motives, in the Mutual
Assent of the parties. Warranties are divided into two classes:
implied and express.
§ 561.-1. Implied.-An implied warranty is such as the
law annexes to a contract, and which necessarily results from the
nature of the transaction.
There is, in every policy, an implied warranty that the ship
is seaworthy when the policy attaches. This means that the
vessel is competent to resist the ordinary attacks of wind and
weather, and is competently equipped and manned for the
voyage, with a sufficient crew, and with sufficient means to sus-
tain them, and with a captain of general good character and
nautical skill.2
It is also an implied condition that the goods, tackel of the
ship, etc., shall be properly stowed, and that there should be a
pilot on board of competent skill. This warranty of seaworthi-
ness relates to the commencement of the risk, and the warranty
is not broken if she becomes unseaworthy afterwards.³
Unseaworthiness, arising after the commencement of the
voyage, and produced by a peril insured against, does not, of it-
self, discharge the insurer. It imposes upon the assured the
duty of using reasonable diligence to repair it, and a negligence
in that respect may discharge the insurer from any loss arising
from the want of such diligence. 4
1
Hugg v. Augusta Ins. Co., 7 How. U. S. Rep. 595; Wadsworth v. Pacific
Ins. Co., 4 Wend. Rep. 33.... 2 Law v. Hollingworth, 7 Term Rep. 160;
Silva v. Low, 1 Johns. Cas. 184; Walden v.
Wilkie v. Geddes, 3 Dow's Rep. 57;
Firemen's Ins. Co., 12 Johns. Rep. 128....
Serg. & Rawle, 25; Holdsworth v. Wise, 1
Ins. Co. v. Ogden, 20 Wend. Rep. 287...
3 Peters v. Phoenix Ins. Co., 3
Manning & Ryland, 673; American
4 Paddock v. Franklin Ins. Co., 11
Pick. Rep. 227; Copeland v. N. E. Marine Ins. Co., 2 Metcalf's Rep. 432; 3 Kent's
Com., Lect. 48.
7
29
450
MARINE INSURANCE.
The standard of seaworthiness has been gradually raised
within the last thirty years, from a more perfect knowledge of
ship-building, a more enlarged experience of maritime risks, and
an increased skill in navigation. Seaworthiness is to be meas-
ured by the standard in the ports of the country to which the
vessel belongs, rather than that in the port or country where the
insurance was made.¹
§ 562.-2. Express.-Every warranty, as we have seen, is
part of the contract. An express warranty is a particular stipu-
lation introduced into the written contract by the agreement of
the parties.
An express warranty in a contract of insurance must be
strictly complied with; and the assured is not permitted to
allege, in excuse for non-compliance, that the risk was not there-
by affected, since the parties have agreed that the stipulated fact
or act shall be the basis of the contract, unless compliance is
rendered illegal by a subsequent statute."
An express warranty differs from a representation in this re-
spect that it is in the nature of a condition precedent, and
requires a strict and literal performance. Whether the thing
warranted be material or not, and whether the loss happened by
reason of a breach of the warranty, or did not, is immaterial. A
breach of it avoids the contract from the beginning.3
A clause is frequently inserted in policies, that if the vessel,
upon a regular survey, be declared unseaworthy, by reason of her
being unsound or rotten, the insurers shall be discharged. This
clause is intended to save the underwriters from the vexatious
and difficult investigation of the latent defects of a ship to which
the disaster was to be attributed. It is sufficient if the survey
be made within a reasonable time after the termination of the
voyage; and if the survey states that the vessel was condemned
solely on account of rottenness existing at the time of the survey,
it is a conclusive bar to the assured.*
The most usual express warranties are, that the ship was safe
•
•
3 De
13 Kent's Com., Lect. 48.. 21 Phillips' Ins., §§ 755, 769..
Hahn v. Hartley, 1 Term Rep. 343: Barker v. Phoenix Ins. Co., 8 Johns. Rep.
307...... 4 Steinmetz v. United States Ins. Co., 2 Serg. & Rawle, 296: Brande-
gee v. National Ins. Co., 20 Johns. Rep. 328; 3 Cow. Rep. 96
AS TO DISCLOSURES.
451
at such a time, or would sail by such a day, or would sail with
convoy, or a warranty against illicit and contraband trade, or
that the property insured is neutral."
VI.-AS TO DISCLOSURES.
§ 563. All the writers who have treated of the contract of
insurance agree that it is eminently a contract of good faith,
which is peculiarly enjoined upon the insured, as he possesses an
entire knowledge of all those circumstances which combine to
form the contract, and is bound to communicate the facts and
objects which are to determine the will of the insurer.2
§ 564.-1. Duty to Make.-It is the duty of the insured to
communicate every species of intelligence which he possesses
which may affect the mind of the insurer, either as to the point
whether he will insure at all, or as to the rate of premium.3
The applicant for insurance on a vessel at sea should disclose
all material facts known to him relating to the present safety of
it, or at the date of the last intelligence. The general rule is,
that all facts material to the risk, and known to the one party
and not to the other, must be disclosed when the policy is to be
affected; and they must be fully and fairly disclosed.*
While contraband trade is perfectly lawful, the risk is greatly
enhanced that the ship engaged in it will be taken. A ship may
break through a blockade if it can, or carry arms or munitions of
war to a belligerent. But then it is perfectly lawful, also, for
the State whose enemy is thus aided to catch, seize, and condemn
the vessel that does this, if it can. The vessel takes upon itself
this risk; and it is not covered by a common policy unless the
purpose is disclosed."
The intention to incur the risk of contraband trade should be
communicated; and if it is not, and a loss follows, the insurers
are discharged."
13 Kent's Com. 289...
Rep. 37; 3 Kent's Com. 285.
2 Id. 282.
4 Id. 286;
5 Pond v. Smith, 4 Conn. R. 297.
•
• • • • •
3 Lynch v. Hamilton, 3 Taunt.
Ely v. Hallett, 2 Caines' Rep. 57.
6 Parsons' Merc. Law, ch. 18,
§ 21.
452
MARINE INSURANCE.
§ 565.-2. Effect of Misrepresentation.—A positive misrepre-
sentation to the underwriter of a fact material in relation to the
risk, or material in the mind and judgment of the insurer, will
avoid the policy. It will avoid it, though the loss arise from a
cause unconnected with the misrepresentation, or even though it
happen through mistake, neglect, or accident, and without any
fraudulent intention.
If the misrepresentation be by fraudulent design, it avoids
the policy, without staying to inquire into its materiality. But
if it was caused by mistake or oversight, it does not affect the
policy, unless it is material, and is not true in substance; and in
that case it will vitiate the policy without assuming the ground
of fraud, for it is not the contract the party undertook to make.
If the representation of the property insured greatly overrate
the value, it will avoid the policy, whether the misrepresentation
be through ignorance or design.¹
A representation to the first underwriter, in favor of the risk,
extends to all subsequent underwriters, and on the ground that
they subscribed upon their confidence in his judgment and
knowledge of the risk, and are, therefore, entitled to avail them-
selves of all the conditions upon which he subscribed. This rule
is strictly confined to the representations made to the first, and
not extended to intermediate underwriters.
Nor does the foregoing rule apply to a subsequent under-
writer on a different policy, though on the same vessel, and
against the same risks.³
§ 566.-3. Effect of Concealment.-Concealment is the sup-
pression of a fact not known to the other party, referring to the
pending bargain, and material thereto; and the effect of it is
not removed by a result which shows that the circumstances to
which it refers do not enter into the risk.*
5
A concealment discharges the insurers. To have this effect,
it must continue until the risk begins, and then be material.
If the concealment by the insured arose from the master's
concealment from his owner, the insurers are not discharged."
¹ Catron v. Tenn. Ins. Co., 6 Humphrey's Rep. 176; 4 East's Rep. 596; 1 Pe-
ters' Rep. 170..... 2 Brine v. Featherstone, 4 Taunt. Rep. 869..
3 El-
ting v. Scott, 2 Johns. Rep. 157. .
* 2 Duer on Ins. 702...
Hoyt v. Gilman, 8 Mass. Rep. 336..
6 4 Mason, 74; 12 Wheat. 408.
DEVIATION.
453
Generally, the insured who procures insurance through an
agent is liable for that agent's concealment, although unknown
and unauthorized by him.'
§ 567.-4. What Need not be Made.-The applicant for in-
surance need not state to the insurer things which the latter
ought to know, and might be presumed to know.
These are, in general, all those things which the insured
learns by means which are quite as open to the insurer as they
are to him-as general facts widely published, and known by
others long enough to justify the inference that all interested in
such matters are acquainted with them."
Things resting upon general rumor, which rumor is known
to the whole community, need not be stated.3
Also facts of science; as the position of a port, the peculiar
dangers or liabilities of any well-known navigation, the preva-
lence of winds, currents, or weather of any particular description
at a certain place, or in a certain season, need not be stated.¹
VII.-DEVIATION.
§ 568. A deviation is a turning aside from the course of the
voyage as described or implied in the policy or contract of insur-
ance. These deviations are of two classes: 1. Such as are Unne-
cessary; and 2. Such as are Necessary.
§ 569.-1. Unnecessary. The policy relates only to the
voyage described in it, and to the route proper for the voyage
insured; and if the vessel departs voluntarily, and without ne-
cessity, from the usual course of the voyage, the insurer is dis-
charged; for it is a variation of the risk, and the substitution
of a new voyage.
The meaning of the contract of insurance for the voyage is,
that the voyage shall be performed with all safe, convenient,
and practicable expedition, and in the regular and customary
1 Stewart v. Dunlop, 4 Brown, P. C. 483
2 Elton v. Larkins, 8 Bing.
3 Alsop v. Com-
R. 198; Green v. Merchant's Ins. Co., 10 Pick. R. 402.......
mercial Ins Co., 1 Sumn. 451...
De Longuemere v. N. Y. Fire Ins. Co.,
10 Johns. R. 120; Kingston v. Knibbs, 1 Camp. 508, note.
454
MARINE INSURANCE.
track. In the case of an unjustifiable deviation, the insurer is
discharged; not indeed from loss accruing previous to the devi-
ation, but from all subsequent losses. These are clementary
principles in the law of insurance, and pervade the institutions
of
every country on the subject.'¹
The shortness of the time, or of the distance of the deviation,
makes no difference on the contract; if voluntary and without
necessity, it is the substitution of another risk, and determines
the contract.2
So strictly has this doctrine been maintained, that where a
vessel, having liberty in sailing down the Frith of Forth to touch
at Leith, touched at another port in its stead, equally in her
way, it was held to be a fatal deviation, though neither risk nor
premium would have been increased if it had been permitted.³
The law requires the voyage, so far as requires the under-
writer, to be performed with reasonable diligence; and every
unnecessary delay, in or out of port, or in commencing the voy-
age insured against, will amount to a deviation.*
§ 570.-2. Necessary. If the ship quits, from necessity,
the course described in the policy, she must pursue such new
voyage of necessity, in the direct course, and in the shortest
time, or it will amount to a deviation.
All permissions given by the policy out of the ordinary course
and incidents of the voyage are to be construed strictly. If the
vessel have liberty to carry letters of marque, she may deviate.
for the purpose of defense, but not for the purpose of capture.
6
It has been held that the letter of marque authorized the
chasing and capturing of hostile vessels in sight, in the course of
the voyage, without its amounting to a deviation. And if the
hostile vessel is captured, the master may make the victory
effectual, and man out the prize, and the delay for such purposes
is not a deviation.
19 Mass. R. 447; Condy's Marshall, 184, 185; 1 Phillips on Ins. 181, 1st
edit.; 3 Kent's Com. 312... 2 Fox v. Black, and Townson v. Guyon, cited
in Beawes, vol. i, 306; 9 Mass. R. 449; 2 Wash. Cir. Ct. R. 254; 7 Cranch, 20;
1 Doug. 291; 3 Kent's Com. 313... 3 Elliott v. Wilson, 7 Bro. P. C. 459.
4 Juratt v. Ward, 1 Camp. N. P. R. 263; Oliver v. Md. Ins. Co., 7
Cranch's R. 487; Earl v. Shaw, 1 Johns. Cas. 317; Mount v. Larkins, 8 Bing. R.
108.... Б Doug. R. 284... 6 Parr v. Anderson, 6 East's R. 202.
PRIOR, DOUBLE, AND
455
REINSURANCE.
If liberty be given to chase and capture, that will not permit
the insured vessel to convoy the prize into port, unless it can be
done without a deviation from the course contemplated by the
terms of the policy.¹
The object of the deviation must be considered, in order to
determine its effect upon the policy. It must be commensurate
only with the necessity that produces it; and that necessity will
justify a deviation on account of a peril not insured against.²
And when the deviation is governed by that necessity, as a
deviation from stress of weather, or to procure necessary repairs,
or to join convoy, or to avoid capture or detention, it works no
injury to the policy.³
VIII.-PRIOR, DOUBLE, AND REIN-
SURANCE.
§ 571.-1. Prior. Marine policies generally provide for
prior insurance by a clause to the effect that the insurers shall
be liable only for so much of the property as is not covered by a
prior insurance. The second covers only what the first leaves;
the third what the second leaves, and so on. As soon as the
whole value of the property is covered, the remainder of the
policy covering it and subsequent policies has no effect.¹
Sometimes the policy provides that the insured shall recover
only the same proportion of the whole loss which the amount
insured in that policy is of the whole amount insured by all the
policies on the whole property.5
When a prior policy is deducted, from this deduction is taken
the amount of the premium paid for the insurance.
6
It sometimes happens that the property is increased in value
¹ Lawrence v. Sydebotham, 6 East's R. 45; Ward v. Wood, 13 Mass. R. 539.
Scott v. Thompson, 4 Bos. & Pull. 181; Robinson v. Marine Ins. Co.,
2 Johns. R. 89.
•
2d edit., 480-576 . .
11 Johns. 233.
3 Condy's Marshall, 202 b to 213; Phillips on Ins., vol. i,
4 Perkins v. New Eng. Mar. Ins. Co., 12 Mass. R. 214;
Lucas v. Jefferson Ins. Co., 6 Cow. R. 635; Howard Ins.
Co. of N. Y. v. Scribner, 5 Hill, 298........6 2 Phillips' Ins., § 1257.
456
MARINE INSURANCE.
after the first insurance is effected. But in settling with a
second, only the actual amount covered by the first is de-
ducted.¹
A subsequent policy may be suspended by the fact that prior
policies cover all the property, and when any of these prior poli-
cies is exhausted, the next policy begins to take effect."
Where no provision is made in the policies as to priority, all
are insurers alike, but altogether only of the whole value at risk.
The insured, therefore, may recover of any one insurer at his
election, and this insurer may compel the others to contribute to
him in proportion to their respective insurances.³
4
3
§ 572.-2. Double.-A double insurance consists of two in-
surances for the benefit of the same person, on the same subject,
and for the same entire risk. If there be double insurance,
either simultaneously or by successive policies in which priority
of insurance is not provided for, all are insurers, and are liable
pro rata.
But there is no double insurance, unless all the policies in-
sure the very same subject-matter, and, taken together, exceed
its whole value.5
Nor is there double insurance as to any particular one of
these policies, unless the whole amount insured by all, exceed
the value that is insured by that policy."
In cases of double insurance, the law will not permit the re-
ceipt of a double satisfaction in the event of loss. Each under-
writer is bound to contribute ratably his proportion of it. If
one insurer pays the whole of the loss, he can recover against
the others their ratable proportion or contribution.
§ 573.-3. Reinsurance. The interest which the insurer
acquires in the safety of what he insures, is of itself an insurable
interest. This is termed a reassurance, or reinsurance, when
the first insurer obtains insurance for his own indemnity on the
property which he has insured. This is lawful, and is often
1 Murray v. Ins. Co. of Penn., 2 Wash. C. C. 186; McKim v. Phoenix Ins. Co.,
Id. 89..... 2 Kent v. Manufacturers Ins. Co., 18 Pick. 19; Parsons' Merc. Law,
ch. 18, § 4......³ Id.; 6 Cow. R. 635; 4 Yeates, 161; Thurston v. Koch, 4 Dall. 348.
4 4 Dall. 348; 11 Johns. R. 233...... 5 Perkins v. N. Eng. Mar. Ins.
Co., 12 Mass. R. 214; Columbian Ins. Co. v. Lynch, 11 Johns. R. 233..
6 8 Johns. 229: Minturn v. Columbian Ins. Co., 10 Johns. R. 75.
.
ABANDONMENT
457
done by companies who wish to close their accounts, or to secure
themselves against some special risk.'
The object of reassurance is indemnity to the first insurer.
If he can get reassurance for less than he insured, he makes a
gain of the difference. If he gives to be reassured just the
sum he received, of course he gains nothing by the trans-
action. If he gives a higher premium, as insurers will some-
times do to cover a dangerous risk, he becomes a loser by his re-
assurance.
IX.-ABANDONMENT.
§ 574. This signifies the transfer by the insured, to the in-
surer or underwriter, of his, the insured's, interest, in the subject
insured, or the proceeds of it, or claims arising from it, so far as
the subject is insured by the policy.
The object of abandonment by the insured, is to recover the
whole value of the subject of the insurance. It is, therefore,
requisite only where the subject itself, or remains of it, or claims
on account of it, survive the peril which is the occasion of the
loss.2
The abandonment transfers all that remains of the property
to the insurers. If nothing remains, or if that which remains
have no value, there need be no abandonment, and this is an
actual, total loss.
The insured never need make an abandonment if he chooses
not to do so. And if from such choice or neglect he makes none,
his claim against the insurers is still perfect, but is now to be
settled as a partial loss.³
3
§ 575.-1. Necessity of. If a ship be completely wrecked
and reduced to "a mere congeries of planks and iron," or if she
has not been heard from for a sufficiently long time, there need.
1 Porton's Merc. Law, ch. 18, § 5.
E. 198; Bouv. Law Dict., Abandonment.
Met. 451; 8 Johns. R. 244; 2 Burr. 1211;
22 Phillips' Ins. 1507; 36 Eng. L. &
3 Smith v. Manuf. Ins. Co., 7
Parsons' Merc. Law, ch. 18,
•
§ 24
458
MARINE INSURANCE.
not be an abandonment, and the insured may claim as for a total
loss, without one.¹
In either case, or in any other case, if the insurers pay a total
loss, they are entitled to whatever shall come to hand of the
property insured. And it is usual, and we think more proper, to
abandon in both of these cases.2
§ 576.-2. Right of. If the damage by a
If the damage by a peril insured
against, exceed one half of the value of the property insured,-
whether ship, goods, or perhaps freight - the insured may
abandon the property to the insurers, and claim as for a
total loss. The loss must exceed, and not merely equal, one
half.3
There may be a separate abandonment of part of the cargo
insured where a part only of it is lost, or damaged above half
its value, provided the insurance was originally upon each article
separately, but not if it be upon different kinds of goods indis-
criminately, or as one entire parcel. The value here meant is
the market value at the time of the disaster which occasioned
the loss.
The amount of injury done to the ship is determined by the
expense of the repairs at the port of necessity, including that of
getting the ship afloat if stranded.
In cases of partial loss, by the established usage of this
country, an allowance of "one-third new for old," is always
made. This means that if a new thing were given for an old one,
because the old one had been injured, the insurer would be more
than indemnified. The sails, for example, might be so new that
they had lost little of their value; or so old that they were of no
value. To avoid inquiring into each case, usage has adopted as
a fair average, to apply to all cases, that the thing injured has
lost one-third of its value. When it is replaced by repairs, the
insurer, therefore, pays one-third of the cost of repairs, and the
insurers pay two-thirds.
Policies generally provide that there shall be no total loss by
' Brown v. Neilson, 1 Caines, 525; Green v. Brown, 2 Str. 1199; 2 Dall. 280;
Gordon v. Bowne, 2 Johns. R. 150...
Houstman v. Thornton, Holt, N. P. 242.
9 Johns. 1; 6 Duer, 282.
•
2 Parsons' Merc. Law, ch. 18, § 24;
36 Mass. 479, 482; 16 Pick. 303;
ABANDONMENT.
459
abandonment, unless the injury exceed fifty per cent., when "es-
timated as for a partial loss;" that is, one-third off.
The following classes of losses must be included in computing
the fifty per cent. :
A loss by jettison.¹
A loss by salvage, or by general average contribution."
A loss by wages of sailors paid while they assisted in making
repairs.3
The cost of navigating the vessel from the port of distress to
the port of repairs, if the vessel has to go out of its way to
reach it.'
An insurance on a ship must not be confounded with the in-
surance on the cargo. A total loss of the cargo may take place
either from its destruction, or from the incapacity of the ship to
perform the voyage. A temporary hindrance of the voyage will
not amount to a total loss of the cargo unless it be of a perish-
able nature. It must not, therefore, be assumed that if the
voyage is lost, the cargo may be abandoned. If the ship be
weather-bound or driven back by storms, so that the cargo is so
damaged that it cannot be sent on with safety, the right of
abandonment is complete.5
In this country the right to abandonment is recognized only,
as to the ship, when, for all useful purposes to the owner for the
voyage, it is gone from his control; and the time of her restora-
tion so that he can resume the voyage is uncertain and unreason-
ably distant t; or the risk and expense are disproportioned to the
expected benefit and object of the voyage. In such case, it is
clear that the right of abandonment exists."
§ 577.-3. Exercise of the Right of.-As an abandonment
has the effect of an absolute transfer of the property to the in-
surers, and is intended for this purpose, it can be made only by
one who is possessed of such a title to the property, or such an
interest therein, as would enable him to make a valid transfer.
The proper and safe way to make the abandonment is to do
it in writing, and to use the word "abandon," or "abandon-
•
1 15 Wend. R. 453.
472........4 8 Gray, 22..
Taunt. 383...
•
6 Johns. R. 219; 11 Pick. 90.. 3 21 Pick.
5 Germon v. Royal Exchange Assurance, 6
6 Peele v. Merchants' Ins. Co., 3 Mason's R. 27-36.
460
MARINE INSURANCE.
ment," in the writing. It must be distinct and unequivocal,
and state, at least in a general way, the grounds of the aban-
donment. The letter of abandonment must state the cause of
the loss, and the cause stated must be a peril within the
policy.'
The abandonment may be made on information of any kind,
if it be entitled to weight and credence. So even a general
rumor, without specific intelligence to the insured, will authorize
an abandonment, if the rumor seems to be well grounded and
altogether credible.2
If the insurers pay as for a total loss, they succeed to all the
rights of the insured with respect to the property.3
By the abandonment, both the owner and the master become,
to some extent, the trustees and agents of the insurers, in respect
to the property abandoned; and are bound to act, in relation to
it, with care and honesty.*
§ 578.-4. Of Cargo.-Goods are totally lost if destroyed, or
if so injured as to have little or no value for the purpose for
which they are intended; or if the voyage upon which the in-
surance on the goods was effected, is entirely broken up. But a
mere delay gives no right of abandonment."
In addition to all this, the fifty per cent. rule is applicable to
goods in this country; subject, however, to the important quali-
fications, that it does not apply if any substantial portion of the
goods arrives at their destination uninjured; or if the goods are
insured "free from average." And the rule of abandonment,
salvage, and transfer to the insurers, is the same in relation to
goods as to the ship.
§ 579.-5. Of Freight. The assured has the right of aban-
doning the freight when there has been a constructive total loss
of the ship; and he has sustained a total loss of the freight, if
he abandons the ship to the underwriters on the ship, when the
case justifies it; for after such abandonment, he has no longer
¹ Bullard v. Roger Williams Ins. Co., 1 Curtis, C. C. 152..
Ches. Ins. Co., 3 Gill & J. 450...
2 Bosley v.
3 Merchants' & Manuf. Ins. Co. v. Duffield,
2 Handy, 122; 4 Amer. Law Reg. 662; 19 How. 312; 8 Johns. 237..
4 Curcier v. Phil. Ins. Co., 5 Serg. & R. 113; Lee v. Boardman, 3 Mass. R. 238.
5 Manning v. Newnham, 3 Doug. 130........ 2 M. & S. 240; 5 Duer,
342, 365.
•
GENERAL
461
AVERAGE.
the means of earning the freight, or of receiving it if earned, for
the freight goes to the underwriters on the ship.'
§ 580.-6. Revocation of.-An acceptance of an abandonment
makes it irrevocable, except with the consent of the insurers.2
But the insurers may assent; and the assured may, by his
acts, revoke his abandonment, and then the insurers, by words,
or by their silence, assent. As, if the ship be sold as a wreck,
and he buys it himself, and treats it as his own, by selling it as
his own, or sending it on another voyage."
When an abandonment has been properly made, no subse-
quent events can annul it. But if, for example, a vessel is
stranded and in a dangerous position, and the owner hearing of
it, abandons, and the next hour he hears of her safety, by reason
of a favorable change of wind, or some unexpected deliverance,
it may be said that he had not in fact a right of abandonment
at the time he made it. The subsequent facts did not take the
right away, but only proved that it never existed. This conclu-
sion may seem to conflict with the rule that the right to abandon
depends upon the appearance of things at the time; this is,
however, their appearance when carefully and wisely considered;
and such events would go to show that there had not been a
careful and wise consideration of all facts and possibilities. For
if it was certainly justified at the time, and then well made, it
cannot be in the power of any mere change of circumstances to
annul it.¹
X.-GENERAL AVERAGE.
§ 581. This subject has been considered in another place in
this work, in connection with the law of shipping and affreight-
rent. But it may be well to give here the rule of general
average.
The rule is this: If many interests and properties are in
peril, and one or more of them is wholly or partially sacrificed
¹ Benson v. Chapman, 6 Manning & Granger, 810; 3 Kent's Com. 332.....
2 King v. Middleton Ins. Co., 1 Conn. R. 184.
Cas. 39; 10 Johns. R. 177; 12 Id. 25.
3 Abbott v. Sebor. 3 Johns.
4 Parsons' Merc. Law, chap. xviii,
$ 25.
462
MARINE INSURANCE.
for the purpose of saving the rest, all that is thereby saved must
contribute towards indemnifying the owner of that which was
sacrificed.¹
He is not to be indemnified in full, for then he would be
better off than those who contribute; he would gain by the fact
that, in a common peril, his property was selected to be made
the price of the common safety. But there is no reason why he
should gain; justice is perfectly satisfied if he is made to suffer
no more than the rest.
The essentials of a general average loss, all of which must be
present to bring it under the rule, are:
1. A common peril impending at the time.
2. A voluntary loss or sacrifice of some property, for the pur-
pose of saving other property.
3. The success of this endeavor.2
XI.-ADJUSTMENT.
§ 582. Adjustments of insurance losses, with all their inci-
dents of general average, salvage, and the like, are usually made
in all commercial cities, by persons whose profession it is to
make them, and usually in a similar form, although the law
prescribes no particular form or method.
They are instruments of much importance, because they
generally are made, and ought always to be made, at the first
port of discharge after the loss occurs; and an adjustment made
there in good faith, with a sufficient knowledge of the circum-
stances, and by persons properly employed to make it, is binding
on all interests and parties.3
If no repairs are actually made, but the loss which calls for
repairs is to be adjusted, the third off-new for old—as a rule
that prevails to some extent, is to be deducted from the esti-
mated cost of repair, in the same way in which it would have
been from the actual cost.4
3 Newman v.
4 Parsons'
1 Parsons' Merc. Law, chap. xviii, § 26... 2 Id……….
Cazalet, Park on Ins. 900; Strong v. New York Fireman's Ins. Co.. 11 Johns. R.
323; 20 Pick. 411; Depau v. Ocean Ins. Co., 5 Cow. R. 63..
Merc. Law, chap. xviii, § 28; 11 Pick. 90; 12 Id. 279; 16 Id. 303; 1 Gray, 158.
15 Wend. R. 453; 6 Duer's R. 282.
Topical Analysis of Fire Insurance.
1. GENERAL VIEW.
11. POLICY-ELEMENTS
1. Parties
•
1. Insurer.
ناح
2. Insured.
2. Subject-matter.
3. Premium.
4. Risk.
5. Mutual assent.
6. Amount insured.
7. Term of insurance.
III. REPRESENTATIONS AND WARRANTY.
1. Stock company.
2. Mutual company.
3. Stock and mutual company
IV. PERILS COVERED.
I. Total destruction.
2. Partial destruction.
3. Damages from contiguous firee.
V. REINSURANCE.
VI. ASSIGNMENT OF POLICY.
VII. ADJUSTMENT OF LOSS
1. Proof and notice of loss.
2. Prior and subsequent insurance.
3. Oath of insured.
CHAPTER XVI.
FIRE INSURANCE.
1.-GENERAL VIEW.
§ 583. By Fire Insurance, the underwriter or insurer, in con-
sideration of the premium, undertakes to indemnify the insured
against all losses in the subject-matter of the insurance, happen-
ing by means of an accidental fire within a specified period of
time.¹
II. POLICY.
§ 584. The policy, as stated in regard to marine insurance,
is the written instrument in which the contract is expressed, and
is called a policy of insurance. The elements of a policy of fire
insurance are the same as in marine insurance.
§ 585.-1. Parties.-These are the insurer and the insured.
1. Insurer.-The insurers are generally insurance compa-
nies, organized under a charter or a general statute, for the
transaction of this particular kind of business. These companies
are stock. or mutual, or partly stock and partly mutual.
1. Stock Companies.-These are companies in which certain.
persons own the capital, and take all the profits by way of divi-
dends. The stock company will generally insure very nearly the
full value of the property insured.
2. Mutual Companies.-In mutual companies, every one in-
sured becomes thereby a member, and the net profits, or a certain
proportion of them, are divided among all the members in such
manner as the charter or by-laws of the company may direct.
13 Kent's Com. 370.
POLICY-ELEMENTS.
465
Insurance in these companies is generally much cheaper than in
the stock companies.
For example, if the insurance is effected for seven years,
which is a common period, an amount or percentage is charged,
about the same as or a little more, than is charged by the stock
companies. But a small part of this, however, is taken in cash.
For the rest, a premium note or bond is given, promising to pay
whatever of the amount may be needed for losses which shall
occur during the period for which the obligation is given.
More than this, therefore, the insured cannot be bound to
pay, and it frequently happens that no assessment whatever is
demanded; in fact, sometimes a part of the money paid by him
is refunded when the insurance expires, because not needed to
pay losses.
The disadvantage of these companies is that the premiums
paid and premium notes constitute the whole capital, or fund,
out of which losses are to be paid for. These companies are
generally restricted by their charters from insuring more than a
certain moderate proportion, as from one-half to three-fourths,
of the assessed value of the property.
3. Partly Stock and Partly Mutual.—Sometimes companies
are both the stock and mutual united. In such case there is a
capital stock provided, as a permanent guaranty fund, over and
above the premiums received, and a certain part or proportion
of the net profits is paid by way of dividend upon this fund, and
the residue divided among the insured.¹
2. Insured.-The insured must have an insurable interest
in the property insured. If policies were without interest, they
would be peculiarly hazardous, by reason of the temptation
which they would hold out to the commission of arson, and they
would fall within the general prohibition of the statute against
wager policies. A policy would be void, in which the insured
had no legal interest at the time of insuring and at the time of
loss.
A creditor may have a policy on the house and goods of his
debtor, upon which he has a lien or mortgage security, for that
gives him a sufficient interest. So, a trustee, or agent, or factor,
¹ Parsons' Merc. Law. chap. xix, § 1.
30
466
FIRE INSURANCE.
who has the custody of goods for sale on commission, may insure,
and a bona fide equitable interest may be insured.'
A person having an interest in the rent of buildings, may
insure the rent from loss by fire within the prescribed period, and
the claim would be for the loss of so much rent as would have
arisen between the time of the fire, and the end of the given
period, if the peril had not intervened. And as in the case of
marine insurance, if the policy be for whom it may concern, it
will cover any interest existing at its date.²
2
§ 586.-2. Subject-matter.-This kind of insurance is some-
times made to indemnify against loss by fire, of ships in port;
more often of warehouses, and mercantile property stored in
them; still more frequently of personal chattels in stores, or
factories, in dwelling-houses, or barns, as merchandise, furniture,
books, and plate, or pictures, or live stock. But by far the most
common application of this mode of insurance is to dwelling-
houses.3
§ 587.-3. Premium.-A policy of insurance always expresses
the consideration, called the premium, which is a certain amount.
or a certain rate upon the value at risk, paid wholly in cash, or
partly so and partly by promissory note or otherwise.
By the charters of mutual fire insurance companies, the
insured building is usually subject to a lien for the pre-
mium.
The amount of premium paid or required is intended to be
proportioned precisely to the probabilities of loss by fire; some
kinds of property being much more hazardous than others, or
much more exposed to destruction.
§ 588.-4. Risk.-The risk taken is that of damage or de-
struction by fire. Therefore the insurers are not liable if the
property be destroyed or injured by the indirect effect of exces-
sive heat, or by any effect which stops short of ignition or com-
bustion, when this heat is purposely applied, and the injury is
caused by the negligence of the person in charge of it.*
¹ Lucena v. Crawford, 3 Bos. & Pull. 75, 95, 98; Locke v. North American
Ins. Co., 13 Mass. R. 67; 10 Pick. 40...... 27 Wend. R. 72; 3 Kent's Com.
372...
3 Parsons' Merc. Law, ch. xix, § 1... 4 4 Camp. 360; 6 Taunt
426; 2 Marsh. 130.
POLICY-ELEMENTS.
467
If property be destroyed by lightning, the insurers are not
liable, unless ignition actually takes place.¹
An explosion caused by gunpowder is a loss by fire."
A policy against fire is strictly a policy on time, and the
commencement and termination of the risk are stated with
precision.
The policy usually contains the exception of damage by fire
happening by "invasion, foreign enemy, or any military or
usurped power whatsoever." It is also sometimes added, "or
by riot or civil commotion"; for the words "usurped power"
mean invasion from abroad, or an internal rebellion, and not the
power of a common mob.3
§ 589-5. Mutual Assent.-There are two steps to be taken
usually in completing a fire insurance. First, there is the appli-
cation which should be made in writing, and this application is
according to a peculiar form, prescribed by the rules of the com-
pany. This is more generally the case with the mutual com-
panies.
This application contains certain definite statements, relating
to those matters which affect the risk. In these forms of appli-
cation, sundry questions are put, quite numerous and specific,
and such as experience has suggested as best calculated to elicit
all the information needed by the insurers, for the purpose of
estimating accurately the value of the risk they undertake.
Specific answers must be given to all these questions. The
application, with all these statements, questions and answers, is
expressly referred to in the policy, and made a part of the con-
tract.¹
The truth of the statements thus made becomes a condition
precedent to the right of indemnity in case of loss.5
Second, there is the acceptance of the application on the
assumed truth of these statements, and the issue of the policy
of insurance by the proper officers of the company. If the state-
ments are false, or any material part of them, the policy is void;
¹ Babcock v. Montgomery Co. Mut. Ins. Co,, 6 Barb. R. 637; 4 Comst. 326,
14 New Hamp. 341. ...2 10 Cush. Mass. R. 356.
33 Kent's Com. 372.
•
47 Watts & S. 348: 10 Met. 211; 6 Cush. 448.
533; 16 Wend. R. 481.
5 13 Conn. R
468
FIRE INSURANCE.
for the risk is another one, and not the one which the company
assumes.
In regard to the execution of a fire policy, and what is ne-
cessary to constitute such execution, there is no material differ-
ence between the law of fire insurance, and that which is appli-
cable to marine insurance. When the offer to insure has been
accepted, and the applicant has complied with all the conditions
imposed, the risk commences, although the policy has not been
issued.¹
Where the offer of the company by letter to insure is accepted
in due season, the contract is complete by a deposit of their let-
ter of acceptance in the mail before the building is burned, or
before the other party has withdrawn his offer.?
Fire insurance is not so often done through the agency of a
broker as marine insurance is; nor is it so usual to give a note
for the whole premium, and pay nothing down, as in marine in-
surance.
§ 590.-6. Amount Insured.- Valuation, precisely as it is
understood in a marine policy, seldom enters into a fire policy—
never, perhaps, in a policy made by any of those mutual com-
panies, who now do a very large part of the insurance of this
country. And quite seldom is a building valued when insured
by a stock company.
If a loss happens, whether total or partial, the insurers are
bound to pay only so much of the sum insured as will indemnify
the assured.3
If a building is insured for a thousand dollars, for instance,
the damage to it by fire may be much less than that sum—say
two or three hundred dollars. The actual damage is all that
can be recovered.
Again, if the actual damage is much more, say two or three
times the amount insured, the company cannot be held to pay
any more than the sum insured, as mentioned in the policy or
contract of insurance.
If the property is appraised by the parties before insurance,
and is insured for a larger amount than the company's charter
¹ Parsons' Merc. Law, ch. xix, § 1, note 1.......2 Id., 9 Howard, 390.....
3 Niblo v. North American Fire Ins. Co., 1 Sandf. R. 551.
POLICY-ELEMENTS.
469
will permit-say they are limited to three-fourths, and they insure
property valued at $4,000 for $3,500, they are compellable to
pay but $3,000 in case of its total destruction by fire. The
party insured will not be allowed to show that the property was
really worth more than $4,000.¹
On the other hand, the valuation, if not fraudulent, is con-
clusive against the insurers, and they will not be allowed to
show that the property destroyed was worth less.2
There is nothing to prevent the parties from making a valued
policy, if they see fit to do so; but it should be expressly stated
in the policy that the sum insured is to be taken as the valuation
in case of loss.³
-as
It is not uncommon for companies who insure chattels
plate, pictures, stationery, books, or the like-to agree on what
shall be the value in case of loss.
The value which the insurers on goods must pay (except
when the value is liquidated before insurance) is their value at
the time of the loss.*
§ 591-7. Term of Insurance.-As stated in treating of
Risk, a policy against fire is strictly a policy on time, and the
commencement and termination of the risk are stated with pre-
cision. The careful business man will exercise care that his
policy is renewed at or before the time of its expiration, as the
company is not liable a day beyond.
III.—REPRESENTATIONS AND
WARRANTY.
§ 592. The insured is bound in good faith to disclose to the
insurer every fact material to the risk, and within his knowledge,
and which, if stated, would influence the mind of the insurer in
making or declining the contract.5
Holmes v. Charlestown Mut. Fire Ins. Co., 10 Met. R. 211......
•
•
• • •
2 Borden
•
v. Hingham Mut. Fire Ins. Co., 18 Pick R. 523; 4 Met. R. 206; 8 Johns. R. 229 ;
34 Maine R. 487; 10 Cush. R. 350
3 Laurent v. Chatham Fire Ins. Co., 1
Hall's R. 41; Wallace v. Ins. Co, 4 La. R. 289. .... 4 Parsons' Merc. Law, ch.
xix, § 8...... 5 Columbian Ins. Co. v. Lawrence, 2 Peters' Sup. Court Rep. 25.
•
470
FIRE INSURANCE.
1. Representation.—If there be a representation of facts, it is
sufficient if the same be fairly made and substantially true; and
if the representations be referred to in general terms in the
policy, and not spread out at large on the face of the instrument,
it is only a representation, and does not amount to the technical
warranty.¹
A policy containing a clause prohibiting the use of the build-
ing for storing therein goods denominated in the memorandum
annexed to the policy as hazardous, the keeping of such goods
as oil, or spirituous liquors, by a grocer, in ordinary quantities,
for his ordinary retail trade, was held not to be, under the cir-
cumstances, a storing of them within the policy.2
A representation that ground contiguous to the building in-
sured is vacant, does not amount to a warranty that it shall
continue during the continuance of the risk. Nor does it pre-
vent the insured from erecting a building upon it, provided he
had not already formed and concealed that intention, and that
the erection was not, in point of fact, in any way the cause of
the loss.³
If it is represented at the time of the insurance that the
building is connected with another building or on one side only,
and before the loss happens it becomes connected on two sides,
this does not avoid the policy, unless, in point of fact, the risk
thereby becomes increased.*
A representation, in the law of insurance, differs from a
warranty in that it is not a part of the contract. If made after
the signing of the policy or the completion of the contract, it
cannot, of course, affect it. If made before the contract, and
with a view to effecting insurance, it is no part of the contract ;
but if it be fraudulent, it makes the contract void. And if it
be false, and known to be false by him who makes it, it is his
fraud.
To have this effect, however, it must be material; and there
is no better test or standard for this than the question whether
¹ Jefferson Ins. Co. v. Cotheal, 7 Wend. R. 72; 2 Hall's N. Y. R. 589; 13
Wend. R. 92.
១
. Langdon v. New York Equitable Ins. Co., 1 Hall's R. 226.
4 Stetson v.
•
3 Stebbins v. Globe Ins. Co., 2 Hall's N. Y. R. 632...
Mass. Fire Ins. Co., 4 Mass. R. 330; 3 Kent's Com. 373, 374.
POLICY-ELEMENTS.
471
the contract would have been made had not the statement been
made, and been believed by the insurers. If the answer is that
the contract would not have been made if the statement had not
been made, it is material; otherwise, not.¹
The representation may be oral or in writing; but if in writ-
ing, it may be more certainly and precisely proved.²
In a marine policy, a material misrepresentation avoids the
policy although innocently made; in a fire policy it has this
effect only when it is fraudulent. This distinction seems to rest
upon the greater capability, and, therefore, greater obligation,
of the insurer against fire, to acquaint himself fully with all the
particulars which enter into the risk. For he may do this either
by the survey and examination of an agent, or by specific and
minute inquiries.³
Concealment is the converse of representation. The insured
is bound to state all that he knows himself, and all that it im-
ports the insurer to know for the purpose of estimating accu-
rately the risk he assumes. A suppression of the truth has the
same effect as an expression of what is false. And the rule as to
materiality and a substantial compliance is the same.
Reasonable grounds of apprehension of loss from existing
facts known to the insured, and denoting impending danger,
must be stated to the insurer, or the policy will be void, even
though there was no intentional fraud in the case.5
2. Warranty. A warranty is a part of the contract; it must
be distinctly expressed, and written either in or on the policy,
or on a paper attached to the policy, or, as has been held, on a
separate paper distinctly referred to and described as a part of
the policy. Then, it operates as a condition precedent; and if
it be broken, there is no valid contract; nor can it be helped by
evidence that the thing warranted was less material than was
supposed, or, indeed, not material at all.º
¹ Clark v. Manuf. Ins. Co., 2 Woodb. & M. 472; Nicoll v. Amer. Ins. Co., 3
Id. 529 Parsons' Merc. Law, § 6, chap. xix. . . . . . . .22 Duer on Ins. 489....
3 Burritt v. Saratoga Co. Mutual Ins. Co., 5 Hill's R. 188; 2 Comst. 49; 10 Met.
R. 214. 4 Daniels v. Hudson River Fire Ins. Co., 12 Cush. R. 416; Parsons'
.5 Bufe v. Turner, 6 Taunt. R 338; 12 La. R
Merc. Law, § 6, chap. xix.
134... 6 Parsons' Merc. Law, § 6, chap. xix.
472
INSURANCE.
FIRE
When the policy contains a warranty or condition appearing
upon the face of it, although written in the margin or trans-
versely, or on a subjoined paper referred to in the policy, it must
be strictly complied with.'
Any statements made, either in the application for insurance,
or on a separate paper with reference to the insurance, and for
the purpose of obtaining it, and which are distinctly referred to
in the policy, and declared to be warranties or conditions on
which the policy is made, are regarded as positive warranties.
The word warranty need not be used, if the language is such
as to import unequivocally the same meaning. And an indorse-
ment made upon the policy before it is executed, may take effect
as a part of it.²
IV. PERILS COVERED.
§ 593. We will classify the perils covered by the fire policy
of insurance, under three heads: 1. In cases of Total Destruc-
tion; 2. Partial Destruction; and 3. Damages from Contiguous
Fires.
§ 594.-1. Total Destruction.-In cases of total destruction
of the property insured, if there was a fair and honest valuation
at the time of insurance, and the company insured within the
limits of their charter, there can hardly be room for much con-
troversy. The insurers pay in all such cases the whole amount
which is lost by the fire, provided only that it does not exceed
the amount which they have insured.³
3
The rule applicable to marine losses, of deducting from ex-
penses of "new for old," in cases of partial loss, does not apply
to fire policies. And in cases of total loss of the subject insured,
there is no other rule than an indemnity to the insured for his
actual loss, to be found by the jury.
1 Worseley v. Wood, 6 Term R. 710; Fowler v. Etna Fire Ins. Co., 6 Cow.
R. 673; S. C., 7 Wend. R. 270.......2 Id.; Roberts v. Chenango County Mutual
Ins. Co., 3 Hill's R. 501.
3 Liscom v. Boston Mutual Fire Ins. Co., 9 Met.
R. 211; 3 Cush. R. 267.
•
•
4
Brinley v. National Ins. Co., 11 Met. R 195.
REINSURANCE.
473
§ 595.-2. Partial Destruction.-But losses by fire are seldom
total losses; and the valuation in the policy simply fixes a maxi-
mum, beyond which the underwriters are not to be liable. It is
not a conclusive ascertainment of the value of the property in-
sured. Policies against fire are generally open policies in this
country, unless otherwise expressed.'
In cases of partial destruction of property insured, the in-
surers are liable to the full extent of the loss, provided it does
not exceed the sum for which the contract was made.
§ 596.-3. Damages from Contiguous Fires.-Where an ex-
traordinary fire occurs, the insurers are liable for the direct effects
of it, as where furniture or pictures are injured by the heat, al-
though they do not actually ignite."
The insurers are also liable for the injury from the use of
water applied for the purpose of extinguishing fire.3
They are also liable for injury to, or loss of goods caused by
their removal from immediate danger of fire; but not from a
mere apprehension from a distant fire, even if the apprehension
be reasonable; and not if the loss or injury might have been
avoided by even so much care as is usually given in times of so
much excitement and bustle.*
The insurers are liable for injury or loss sustained by the
blowing up of buildings to arrest the progress of a fire."
Insurers are liable where a house actually on fire is blown up
by gunpowder, although the policy provides that they shall not
be liable for a loss for an explosion of gunpowder. This clause
is construed to mean "fire originating from the explosion of
gunpowder.
6
V. REINSURANCE.
§ 597. Reinsurance is equally lawful in fire policies as in
marine policies, and in general is governed by the same rules.'
13 Kent's Com. 375, note a....... 2 Case v. Hartford Fire Ins. Co., 13 Ill. R.
676; Scripture v. Lowell Mut. Fire Ins. Co., 10 Cush. R. 356.......³ Id………………….
4 Case v. Hartford Fire Ins. Co., 13 Ill. R. 676; Babcock v. Montgomery Co. Mut.
Ins. Co., 6 Barb. R. 640: 3 Barr, 470; 34 Penn. State R. 96......5 City Fire Ins.
Co. v. Corlies, 21 Wend R. 367; 9 Paige, 568..... 6 Greenwald v. Ins. Co.,
District Ct. Phila., 7 Amer. Law Reg. 282; Parsons' Merc. Law, § 7, ch. xix.
.¹ Id., ch. xix, § 4
•
474
FIRE INSURANCE.
Suppose the Etna Fire Insurance Company, Hartford, were
to take a risk on John Brown's block of buildings, in New York,
to the amount of $100,000. If Brown's block burns so as to be
completely destroyed, and the building is worth $100,000 or
more, the insurers are liable for that sum to Brown. Therefore
the Ætna Fire Insurance Company have an insurable interest in
Brown's block to the sum of $100,000.
The Etna makes an arrangement with the Phoenix Fire In-
surance Company to take one half this risk. This is called re-
insurance. The Etna may desire to do this for two reasons:
first, they may not wish to carry so heavy a risk on a single build-
ing or block; and, second, the Phoenix may be willing rather
than not to get the risk, to take it for a less rate of premium
than the Ætna has received; so the Etna has a clear gain of the
difference.
There is another consideration greatly to the advantage of
the original insurers: fires are often extinguished before having
done damage to the full amount of the insurance. In such cases
the reinsurers pay to the original insurers the first loss, if it does
not exceed the amount of such reinsurance. If it does exceed it,
the reinsurers pay to the extent of their insurance.
A reinsurer is entitled to make the same defence and the
same objections which might be asserted by the original insurers
in a suit on the same policy.'
If the reinsured party defends the case in the first instance,
he is entitled to recover of the reinsurers the entire loss sus-
tained by him, and all the costs and expenses which he has in-
curred, provided they are reasonable in their nature, unless there
was no ground of defense, or the reinsurer did not sanction the
contestation either expressly or by implication.2
VI. ASSIGNMENT OF POLICY.
§ 598. Fire policies usually contain a prohibition against the
assignment of them without the previous consent of the insurers.
1 New York Mar. Ins. Co. v. Protection Ins. Co., 1 Story R. U. S. 458.……..
Id., 3 Caines, 190; Parsons' Merc. Law, § 4, ch. xix.
ADJUSTMENT OF LOs s.
475
But without this clause, they are assignable in equity, like any
other chose in action; though, to render the assignment of any
value to the assignee, an interest in the subject-matter of the
insurance must be assigned also, for the assignment covers only
such interest as the assured had at the time of the assign-
ment.¹
This restriction upon the assignments of the policy applies
only to transfers before a loss happens, and it applies only to
voluntary sales, and not to sales on execution.2
In practice, care should be taken to have all such transfers
regularly made and notified, and the consent obtained fully au-
thorized, and duly indorsed or certified, and all the rules or
usages of the insurers in this respect complied with.³
VII.-ADJUSTMENT OF LOSS.
§ 599. When a loss of property insured against fire actually
takes place, adjustment of the loss necessarily follows. Let us
consider :
1. Proof and Notice of Loss.-When the policy requires a
certificate of the loss, the production of it is a condition prece-
dent. And it must be such a certificate as is required; but a
substantial compliance with its requirements is sufficient.*
If, by the terms of the policy, the notice is to be given to the
insurance company forthwith, there must be no unreasonable or
unnecessary delay. And all the circumstances of the case are
considered in determining whether there is due diligence or
laches.5
The provisions in the policy relating to the notice to be given
are made a part of the contract, and are to be as faithfully and
circumstantially pursued as the nature of the case and situation
of the party will permit. The courts in some States are very
¹ Marshall on Insurance, 800... 2 Brichta v. Lafayette Ins. Co., 2 Hall's
N. Y. R. 372; 10 Pick. R. 40; 3 Kent's Com. 375..... 8 Parsons' Merc. Law,
$ 9, ch. xix.... 4 Norton v. Rensselaer & Saratoga Ins. Co., 7 Cow. R. 645;
17 Wend. R. 359; 9 Barb. R. 191... 5 Inman v. Western Fire Ins. Co., 12
Wend. R. 452.
476
FIRE INSURANCE.
strict, and in others very liberal, in their construction of this
class of provisions.
2. Prior and Subsequent Insurance. It is usually stipulated
in the policy that in case of any prior or subsequent insurance
on the same property, and of which due notice has been given,
and a loss occurs, the assured is not to recover beyond such
ratable proportion of the damages as the amount insured by the
policy shall bear to the whole amount insured, without reference
to the dates of the different policies.¹
There is a wide difference between the principle of adjust-
ment of a marine policy and of a fire policy. In the former, if a
proportion only of the value is insured, the insured is considered
as his own insurer for the residue, and only an equal proportion
of the loss is paid.
Thus, if on a ship valued at $10,000, $5,000 be insured,
there is a loss of one-half; the insurers pay only one-half of the
sum they insure, just as if some other party had insured other
$5,000.
But in a fire policy, the insurers pay in all cases the whole
amount which is lost by the fire, provided only that it does not
exceed the amount which they insure.2
3. Oath of Insured. The loss is to be certified upon oath,
and the certificate of a magistrate, or notary, or some one au-
thorized to administer oaths, is made necessary to be procured
in favor of the truth and fairness of the statement of the loss;
and the strict and literal compliance with the terms of these
conditions is held indispensable to a right of recovery.3
If there be any fraud or false swearing by the assured in the
exhibition of his proofs of loss, he forfeits his claim to recovery.
The courts are strict in holding the assured to the utmost candor
and good faith in rendering to the insurer the amount of his
loss; and a false and fraudulent exaggeration of the amount of
the property lost avoids the policy, and destroys the right to
recover.¹
13 Kent's Com. 376.. 2 Liscom v. Boston Mut. Fire Ins. Co., 9 Met. R.
33 Kent's Com.
211; Trull v. Roxbury Mut. F. Ins. Co., 3 Cush. R. 267....
376; Worseley v. Wood, 6 Term R. 710; 1 Green's N. J. R. 110; 7 Cow. R. 462.
4 12 La. R. 344; Howard v. City F. Ins. Co., N. Y. Superior Court, May,
it
1843.
Topical Analysis of Life Insurance.
1. GENERAL VIEW.
I. Proposition by applicant.
2. Statement as to general health of life proposed.
3. Questions to applicant by insurer.
II. APPLICATION 4. Answers by applicant and others.
5. Statement of friend of life-assured.
III. POLICY-ELE-
MENTS.
IV. WHO HAS IN-
SURABLE
TEREST.
6. Medical examination.
7. Physician's report.
I. Parties.
2. Premium.
3. Subject-matter-life insured.
4. Sum insured.
5. Restrictions
on life - in-
sured.
6. Conditions of
forfeiture.
7. When due.
1. Travel.
2. Occupation.
3. Personal Habits.
4. Military and naval service.
1. Suicide or duel.
5. Manner of death. 2. By the hands of justice.
3. In violation of law.
1. Falsity of answers.
2. Non-payment of premium.
I. The life-insured,
2. Creditor of life-insured.
3. Partnership creditor.
4. Wife in husband.
IN-
5. Husband in wife.
6. Parent in child.
7. Child in parent.
8. Sister in brother, when.
9. One person in another, when.
V. ASSIGNMENT OF POLICY.
CHAPTER XVII.
LIFE INSURANCE.
I. GENERAL VIEW.
$ 600. This is a contract whereby the insurer, in considera-
tion of a sum in gross, or of periodical payments, undertakes to
pay a certain sum, or an annuity, depending upon the death of
a person whose life is insured. The insurance is either for the
whole term of life, or for a limited period.
II.—APPLICATION.
§ 601. The application is such an essential part of a contract
of life insurance, and preceding, as it does, the completion of the
contract, and, in fact, being the first step to be taken, we propose
to look at it in detail. And we will do so under the following
divisions :
§ 602.-1. Proposition by Applicant.-A formal proposition
is made in the application by the person who applies for insur-
ance either on his own life or on the life of another. This pro-
position gives the name, age, and residence of the person pro-
posing and proposed, and also the sum or amount for which
insurance is asked. The proposition also contains a declaration
that the proposer has an interest in the life of the proposed to
the amount of insurance asked.
§ 603.-2. Statement as to General Health of Life Proposed.—
As life insurance companies do not generally insure any person
who is supposed not to be healthy, the application usually con-
tains a statement as to the general health of the life proposed
to be insured. This statement covers not only the present con-
dition of health, but the further statement that the person pro-
posed usually enjoys good health.
APPLICATION.
479
§ 604.-3. Questions to Applicant by Insurer. -- Every life
insurance company furnishes blank applications to be filled out
by the applicant. To these applications certain questions are
annexed by the insurers, which relate, with great minuteness
and detail, to every topic which can affect the probability of
life.
They also relate to the age, present and past habits of the
party to be insured, whether he has had the ordinary contagious
diseases of childhood, whether he has ever been vaccinated, had
the small-pox, yellow fever, rheumatism, or any of a long cata-
logue of diseases specifically named. Also, he is critically ques-
tioned in reference to the longevity of the ancestors of the party
proposed, and the diseases of which they died.
These questions are not, perhaps, precisely the same given
out by any two companies. But there is something like uni-
formity in their substance, and the intention is the same—to
ascertain the probabilities of life. Each company has the right
to ask just such, and as many questions as it pleases.
§ 605-4. Answers by Applicant and Others.-The rules, as
to the obligation of answering these questions, and as to the
sufficiency of the answers, must be the same in life insurance as
in fire or marine insurance; or rather, must rest upon the same
principles.¹
In life policies, the questions which must be answered are so
minute, and cover so much ground, that no difficulty often arises
except in relation to the answers.
Perfect good faith should be observed in giving these an-
swers, for the want of it will taint the policy; and the presence
of it goes far to protect it.
Most of the life policies provide that if the statements in the
application are untrue, the policy shall be void. Then the
stipulations are considered warranties, and if untrue, even in a
point immaterial to the risk, avoid the policy.2
Nearly all life policies are given upon the supposition that
the health of the life-insured is good when the policy is issued.
But this does not mean perfect health. It means reasonably
1 Parsons' Merc. Law, § 1, ch. xx... 2 Miles v. Conn. Mut. Life Ins. Co.
3 Gray's R. 580.
480
LIFE INSURANCE.
good health; and the warranty is not broken by the presence of
a disease which does not tend to shorten life; such as dyspepsia
—unless it were organic, or had increased to that extreme degree
which would make it necessarily dangerous.¹
If the insurers were to contest the claim on the ground that
the insured was not in good health at the time the contract of
insurance was made, the burden is on them to prove this.2
If the answer is that the life-insured is a person of sober and
temperate habits, unless the word "abstinence" or something
equivalent is used, the insurers have no right to say that any one
is not temperate who does not drink enough to affect his health.
There is clearly a broad distinction between temperance and total
abstinence.³
§ 606.-5. Statements of Friends of Life-insured. These
may be made as answers to questions in the application, or by
affirmative voluntary statements without connection with ques-
tions. They should be made in the same good faith as is required
of the applicant.
§ 607.-6. Medical Examination.- Usually the physician is
employed by the company, and there is a distinct catalogue of
questions annexed to the application, for him to answer after
careful examination. These questions all relate to the pro-
babilities of life, and are of a very definite and searching char-
acter.
§ 608.-7. Physician's Report. The report of the physician
to the company for whom he is acting, consists of the answers to
the catalogue of questions furnished him. The policy is issued,
if it be issued, upon the strength of the statements contained in
the answers to questions by the assured, his friend, his medical
dviser, and the report of the physician of the company.
III. POLICY-ELEMENTS.
The elements of a life policy are much the same as policies
for other modes of insurance.
' Watson v. Mainwaring, 4 Taunt. R. 763... 2 Trenton Mut. Life & Fire
Ins. Co. v. Johnson, 4 N. J. R. 573.
3 Parsons' Merc. Law, § 6, ch. xx.
•
POLICY-ELEMENTS.
481
609.-1. Parties.-These are the insurer and the insured.
The party insured is not necessarily the life that is insured. If
I take out a policy on your life, having an interest in your life,
and that policy is payable to me at your death, I am the insured,
though it is your life that is insured. In other words, your life
is the subject-matter, the same as my house is the subject-matter
in a fire policy.
Ş 610.-2. Premium.-This is the consideration in the contract.
If the insurance be for one year only, or less, the premium is
If for more than a
usually paid in money, or by a note at once.
year, it is usually payable annually. But it is common to pro-
vide or agree that the payment may be made quarterly, with
interest from the day when the whole is due.¹
If a premium of $100 were due January 1, 1871, and but
$25 are actually paid, and a note were given for the balance
payable quarterly, and the person whose life is insured dies in a
month or two, $75 being due, this sum would be deducted from
the amount insured.
Some companies take what are called premium notes of the
insured, to the amount of one-third or one-half the premium
due, requiring the interest, however, on such notes to be paid in
advance. As a general rule, these premium notes are not ex-
pected to be paid, unless the necessities of the company require
that they shall, which is altogether unlikely. They are expected
to be covered by dividends on what is actually paid.
Sometimes the insured is not prepared to pay the premium
when it falls due. The agent of the company offers to wait a
few weeks or months, which offer is accepted. This transaction,
when made in good faith, is a waiver of prompt payment, and
the agent is personally responsible to the insurance company, and
the party accommodated is personally liable to the agent. Such
a transaction is a payment of the premium, by legal construc-
tion.2
The premiums, after the first, must be paid on the days when
they fall due. If no hour be mentioned, it is believed the in-
surer would have the whole day, even to midnight.
1 Parsons' Merc. Law, § 2, ch. xx.
But it
2 Sheldon v. Conn. Mutual Life Ins
Co., 25 Conn. R. 207; Bouton v. Amer. Mut. Life Ins. Co., Id. 542.
31
482
LIFE INSURANCE.
is better, for safety, to pay within the usual hours of busi-
ness.
In some policies a certain number of days is allowed for the
payment of the premium. In such cases, if the loss happen after
the premium is due and unpaid, and during this number of days,
and before they have expired, but after the loss, the premium
is paid within the time so allowed, the insurers will be
bound.¹
Practically, the utmost care is requisite on the part of the
assured, to pay his premium before, or as soon as it is due. This
is the only proper and safe course.2
§ 611.-3. Subject-matter-Life Insured.-This, of course, is
the life-insured. It depends on the conditions of the subject-
matter, as to what the price will be for insurance. The condi-
tion that chiefly modifies the price is, the age of the party at the
time his life is insured. After a certain age, usually about four-
teen, as the age increases the price for insurance increases. The
price, however, continues the same through the entire time for
which the life is insured; but the price is graduated according
to the age at the time the insurance is taken, or the risk as-
sumed.
Every life insurance company has its table of rates, graduated
on this principle; that is, the age of the life proposed. It is
based on the theory that the longer you have lived, the shorter
time you have yet to live; and, therefore, the sooner the policy
will become a claim against the insurers. This is a principle
that does not enter into the contracts or policies of other kinds
of insurance at all. A house may never burn; a ship may never
be wrecked at sea-but human beings are sure to die, though
not within five, ten, or twenty years. The probabilities as to
how long you will live, depend, in a great degree, upon how long
you have lived.
Another modification of price in the subject-matter, at least
with many companies, is sex. They charge a little more for in-
suring the lives of females between fifteen and forty-five or fifty,
than males of corresponding ages.
¹ McDonnell v. Carr, Hays & Jones' R. (Irish) 256; Parsons' Merc. Law, § 2,
ch. xx.
. Id.
POLICY-ELEMENTS.
483
Some occupations become an element in the subject-matter
of life insurance, and essentially modify the price or premium to
be paid. An engineer, or fireman, or conductor, on a railroad, is
more exposed to death than persons of many other occupa-
tions; and, therefore, higher prices are charged for insuring their
lives.
§ 612-4. Sum Insured.-This is definitely named in the
policy, as the amount at risk, which is to be paid to the party
interested when the policy shall become a claim.
§ 613-5. Restrictions on Life-Insured.-The insurers usu-
ally impose in the policy a large number of restrictions upon the
life-insured,
1. Travel. Not all policies, but a large proportion of
them, impose restrictions with regard to travel, or place of tem-
porary sojourn. The life-insured is not permitted to go beyond
certain limits; especially during certain seasons of the year, with-
out the consent of the company previously obtained and indorsed
on the policy.
But there is nothing to prevent the parties from making a
bargain permitting the life-insured to pass beyond these bounds,
either in consideration of new and further payments, or of the
common premium.
2. Occupation.-Certain trades or occupations, as of per-
sons engaged in making gunpowder, or as engineers or firemen
about steam-engines, are considered extra-hazardous, and they
are therefore usually prohibited, unless an extra premium is
paid.
3. Personal Habits.-Of course a company insuring can
impose on the life-insured as many legal restrictions as it pleases.
One of the conditions on which the policy by its own terms is to
be void, usually is, if the life-insured shall become so far intem-
perate as to impair the health seriously and permanently.
Whether he had become so intemperate would, doubtless, be a
question of fact for a jury to find, and on the finding of which,
the policy would be void.
4. Military and Naval Service. — Another restric-
tion usually introduced into life policies is that the life-insured
shall not, without the previous consent of the insurers obtained
484
LIFE INSURANCE.
and indorsed on the policy, enter into any military or naval
service whatsoever, the militia not in actual service excepted. A
violation of this restriction will avoid the policy.
5. Manner of Death.-The policies usually impose
conditions in reference to the manner in which death is pro-
duced, the death being traceable immediately to the intentional
wrong of the life-insured.
These are by-
1st, Suicide or Duel.-The clause respecting duelling is
plain enough; and no one can die in a duel without his own
fault.
In regard to the expression in the policy, "death by his own.
hands," the courts construe it to mean self-destruction by some
intelligent and voluntary act.
An eminent jurist uses this language: "We are of opinion.
that the general principles of the law of contracts, and of the
law of insurance particularly, would lead to the conclusion that
' death by his own hands,' but without the concurrence of a re-
sponsible will or mind, would not discharge the insurers, without
a positive provision to that effect. We should put such a death
on the same footing with one resulting from a mere accident,
brought about by the agency, but without the intent of the life
insured." 1
2d, By the Hands of Justice.--Our policies always insert
this exception, and death by the hands of justice is a complete
discharge of all obligations on the part of the insurers. Indeed
the policy could not be enforced even were this restriction not
imposed. Farther, Lord Chancellor Lyndhurst of England held,
in delivering the judgment of the House of Lords, that "a policy
expressly insuring against such a risk would be void on the
plainest principles of public policy, as taking away one of the
restraints operating on the minds of men against the commission
of crime."
3d, In Violation of Law.-It sometimes happens that a
criminal is killed when acting in open violation of the laws of
the land. He may be engaged in burglary, arson, or even lar-
ceny, and receive his death wound from the hands of the owner
1 Parsons' Merc. Law, § 3, ch. xx.
POLICY-ELEMENTS.
485
of the property whose rights are being invaded. It would be
absurd, and a premium on crime, to pay for a life-insured that
had thus recklessly and wickedly exposed itself to death. It
would be scarcely less preposterous than paying for a life for-
feited under sentence of a judicial tribunal.
§ 614.-6. Conditions of Forfeiture. There are usually sev-
eral conditions of forfeiture of the policy, named in the instru-
ment itself, in addition to those which more properly come under
the head of Restrictions, of which we have already spoken.
1. Falsity of Answers.—As already stated, the appli-
cation for insurance has annexed thereto a catalogue of questions,
to which the life-insured, the applicant, or friends of the life-
insured, are to make answers. The policy is issued upon the
answers made; and if these answers are in any respect false and
fraudulent, the policy is null and void.
2. Non-payment of Premium.-Another of the con-
ditions of forfeiture of a life policy is the failure to pay the pre-
mium or premiums as they fall due, according to the tenor of
the policy. In such cases, a neglect to pay at the time specified
would result in the termination of the contract of insurance.
But a policy forfeited by non-compliance of the insured with
its precise terms may be revived by an unconditional acceptance
on the part of the insurers of their premiums.¹
لل.
§ 615.-7. When Due.-As to when the policy becomes a
claim, or falls due, depends upon the conditions of the policy
itself. They are generally payable in a certain time mentioned
in the instrument, usually sixty or ninety days, after due notice
and proof of the death of the life-insured. What are such notice.
and proof is usually regulated by the rules of the insurers, which
are generally made a part of the contract.
But in the absence of this, the usage of the insurers in this
respect is not binding unless known to the insured before he
took the policy; nor can the by-laws of the company be referred
to unless the policy is in terms made subject to them, or in some
way has made them a part of the contract contained in the
policy.2
1 Wing v. Harvey, 27 Eng. L. & Eq. R. 140........2 Taylor v. Etna Life Ins.
Co., 13 Gray's R. 434.
486
LIFE INSURANCE.
IV. WHO HAS INSURABLE IN-
TEREST.
§ 616. Every one insured in any way must have an interest
in the subject-matter of the insurance. The law will not permit
this, more than any other kind of insurance, to be a mere gam-
bling contract. There must be a legal interest, and not merely
an interest created in the nature of a bet. If I have no legal
present interest in your life, but were allowed to effect an insur-
ance on it, this is a mere wager. I bet the premium against the
sum insured that you will die within a time specified in the
policy. If you live, the insurers have won the bet; if you die
within the time, I have won the bet.
The inquiry then arises who has a legal insurable interest in
the life of another? or what constitutes a sufficient interest?
§ 617.-1. The Life-Insured. The law presumes any one to
have sufficient interest in his own life to make it the subject of a
legal insurance. In case of his death, the amount will go to his
legal representatives like any other property, unless otherwise
directed by his will.
§ 618.-2. Creditor of Life-Insured.-An existing debt gives
the creditor an insurable interest in the life of his debtor, to the
amount of the indebtedness; because the means by which the
debt is to be paid may materially depend on the life of the
debtor.¹
§ 619.-3. Partnership Creditor.-A creditor of a firm has an
insurable interest in the life of one of the partners thereof,
although the other partner may be entirely able to pay the debt,
and the estate of the life-insured is perfectly solvent.²
§ 620.-4. Wife in Husband.-By the statutes of nearly all
the States of the American Union, the wife is allowed an insur-
able interest in the life of her husband, on the most liberal
terms. And in case the insurance becomes due and payable, it
goes to her for her own use free from the claims of the represent-
atives of her husband or of any of his creditors.
¹ Ellis on Ins., p. 125; 2 Park on Ins., 8th edit. 915........2 Morrell v. Tren-
ton Mut. Life & Fire Ins. Co., 10 Cush. R. 282.
POLICY-
487
ELEMENTS.
1
But this exemption does not apply where the amount of pre-
mium annually paid out of the property of the husband exceeds
a certain sum named by statute. The premium so allowed to
be paid varies in different States, ranging from $100 to $500.
§ 621-5. Husband in Wife, when.-The husband has an
insurable interest in his wife's life only when there is an actual
pecuniary interest. If an annuity were payable to her during
her life, and this had been legally assigned to him either before
or after marriage, this would doubtless furnish an insurable in-
terest. Or, if he were infirm and dependent on her for a support,
the existence of an insurable interest would doubtless arise.
§ 622.-6. Parent in Child.-A father has an insurable in-
terest in the life of his minor son.¹
1
On the same principle, a mother would have an insurable in-
terest in the life of her son or daughter, especially if she were
dependent, or were likely to become dependent on the life-assured
for support.
§ 623.-7. Child in Parent.-A child has an insurable inter-
est in the life of a parent. The parent being under a legal obli-
gation to provide for the necessities of the child to save it from
public charity, gives the child an insurable interest. But there
is an interest quite beyond this, which the courts seem strongly
inclined to favor. They place insurable interest on strong moral
considerations, and the force of natural affection between near
kindred, operating often more efficaciously than those of positive
law.3
§ 624.-8. Sister in Brother.-A sister's interest in the life
of a brother is of such a character, or it may be, as to give an
insurable interest.*
§ 625.-9. One Person in Another, when.-One person in no
way related to another by ties of family or kindred, so that the
law may infer an insurable interest, has no such insurable inter-
est unless it arises from a pecuniary relationship. Where one
person has a direct legal, pecuniary interest in the life of another,
that interest is insurable.
¹ Loomis v. Eagle Life & Health Ins. Co., 6 Gray's R. 396; Mitchell v. Union
Life Ins. Co., 45 Me. R. 104
.º Lord v. Dall, 12 Mass. R. 115, 118.......
* 6 Gray's R. 396..
4 Id.
488
LIFE INSURANCE.
The necessity of an interest in the life insured, in order to
support the policy, prevails generally in this country, because
wager contracts are almost universally held to be unlawful,
either in consequence of some statute provision, or upon princi-
ples of the common law.¹
V.-ASSIGNMENT OF POLICY.
§ 626. It has never been questioned in this country that
policies of life insurance are assignable. A policy valid in its
inception is a chose in action, and governed by the principles
applicable to other agreements involving pecuniary obligations.2
The assignee of a policy is entitled, on the death of the life-
insured, to recover the full sum insured without reference to the
amount of the consideration paid by him for the assignment.3
A large proportion of the life policies which are effected are
made for the purpose of assignment; that is, for the purpose of
enabling the insured to give this additional security to his cred-
itor.*
It is an important question, What constitutes an assignment?
The general answer must be, Any act distinctly importing an as-
signment. And, therefore, a delivery and deposit of the policy,
for the purpose of assignment, will operate as such, without a
formal written assignment. So will any transaction which gives
to a creditor of the insured a right to payment out of the insur-
ance.5
13 Kent's Com. 369... 2 Ashley v. Ashley, 3 Simons' R. 149; St. John
v. Amer. Mut. L. Ins. Co., 3 Kern. R. 31... .3 St. John v. Amer. Mut. L. Ins.
4 Parsons' Merc. Law, § 5, ch. xx.
Co., 2 Duer's R. 419; 3 Kern. R. 31.
•
.5 Cook v. Black, 1 Hare. 390; N. Y. Life Ins. Co. v. Flack, 3 Md. R. 341
Topical Analysis of Arbitration.
1. GENERAL VIEW.
I. Parties.
2. Controversy.
3. Subject-matter.
II. ELEMENTS .
4. Submission.
III. PROCEEDINGS OF
THE ARBITRATORS.
IV. AWARD..
V. REVOCATION .
5. Arbitrators.
1. By parol,
2. By writing. {2. usualed.
Mutual bonds.
3. Under the statute.
4. By rule of court.
5. By deposit of notes.
1. To fix time and place of hearing.
2. To notify the parties.
3. Oath of arbitrators.
4. Hearing evidence.
5. Adjournments.
6. Discretion allowed.
7. Hearing of counsel.
1. When to be made.
2. By whom made.
3. What to include.
4. What not to include.
5. Certainty.
6. Form of.
7. Delivery of.
8. Effect of.
9. How may be impeached.
I. When the power exists.
2. When the power does not exist.
3. Consequences of revocation.
4. Manner of.
5. By operation of law.
CHAPTER XVIII.
ARBITRATION.
1.-GENERAL VIEW.
§ 627. An Arbitration is an investigation and determination
of a matter or matters of difference between contending parties,
by one or more unofficial persons, chosen by the parties, and
called arbitrators or referees.¹
There are cases in which it is expedient to submit a matter
in controversy to arbitrators selected by the parties rather than
litigate it in the courts. Especially is this true in controversies
between friends, family disputes, cases of long and involved
transaction, which cannot be conveniently investigated in court,
and wherever a judicious arbitrator may act the part of a
pacificator.
In all ordinary cases a single arbitrator, of such a character and
capacity as to control the confidence of both parties, familiar with
the law and the rules of evidence, is, in many respects, the most
convenient, efficient, and satisfactory tribunal for arbitration.
Wherever, for reasons growing out of the peculiar nature or
circumstances of the case, it seems desirable to the parties to have
as arbitrators one or more practical men, conversant with mat-
ters of the same nature with that which is to be passed upon, it
is still desirable that a chairman should be selected having the
qualifications above referred to.2
By the terms of the definition given, there must be two or
more persons engaged in the controversy, who consent to arbi-
trate, and they are the parties in the arbitration.
II.—ELEMENTS.
§ 628.-1. Parties. The parties to an arbitration are the
persons involved in the controversy.
1 Bouv. Law. Dict.... 2 Chamberlain's Com. Law, chap. xviii, § 1.
ELEMENTS.
491
Any person who is capable of making a valid and binding
contract with regard to the subject may, in general, be a party
to a reference or arbitration. Every one is so far, and only so
far, bound by the award as he would be by an agreement of the
same kind made directly by him. For example, the submission
of a minor is not void, but voidable.
Where there is a capacity to contract and a liability to pay,
there is generally a power to arbitrate.¹
At common law it is entirely voluntary, and depends upon
the agreement of the parties, to waive the right of trial in court
by a jury.2
The guardian of an infant may submit claims in behalf of
his ward to arbitrators, and the award will bind the infant, even
after he attains his full age.3
An attorney has power to submit to arbitration the claims
of his client already in suit by direction of the client.*
Corporations may submit demands to arbitration in the same
manner as individuals, unless there is something in their charter
or some statute which prohibits them; and the submission need
not be under the corporate seal; it may be done by resolution."
§ 629.-2. Controversy. Of course there must be a matter
of controversy between the parties. If there were no difference
between the parties, of course there would be nothing on which
to arbitrate. It is introduced here only because it is a necessary
element of the subject.
§ 630.-3. Subject-Matter.-Generally, any matter may be
determined by arbitration which the parties may adjust by
agreement, or which may be the subject of a suit at law.
Crimes, however, cannot be made the subject of arbitration."
But in most of the States, the matter is regulated by statute,
as to what may be the subject of arbitration. They generally
include all controversies which might be the subject of an action
at law or a suit in equity. Some of them, as New York, exclude
questions concerning title to real estate, whether in fee or for
life, and the exclusion is imperative. Therefore the submission
11 Comb. R. 183. . . . . . . .2 Id…
3 Weed v. Ellis, 3 Caines' R. 253..
Filmer v. Delber, 3 Taunt. R. 486; Wilson v. Young. 9 Barr, 101.
Brady v. Mayor &c. of Brooklyn, 1 Barb. 584..
•
6 Bouv. Law. Dict.
492
ARBITRATION.
of a claim to a freehold estate in real property in New York is
not merely voidable, but is absolutely void, and incapable of
ratification.¹
§ 631.-4. Submission. There are several modes of submit-
ting questions for arbitration :
1. By Parol.-Submission by parol is not uncommon;
but it is generally regarded as the least desirable. This mode is
where the agreement to refer proceedings to referees, and their
final finding and award, are all by words exchanged between the
parties, without writing.
This exposes the parties as well as the arbitrators to all the
uncertainties which attend parol evidence, and unless the award
satisfies all parties, it is not the end, but merely the beginning
of litigation. Such an award concerning real estate is void.²
2. By Writing.-This may be done, either by mutual
arbitration bonds, specifying the terms of submission, the mat-
ters submitted, the form and nature of the award, the time when
it is to be made, and the authority to enter judgment on the
award, if that is the intention of the parties; or the submission
may be by a simple written agreement without seal.
3. Under the Statute.-Another mode of submission
is for the parties to bring themselves strictly within the statute
regulation of their State. And this must be done, provided they
wish to avail themselves of the provisions of the statute. They
can easily refer to the statute, and, if they desire, avail them-
selves of its provisions.
4. By Rule of Court.-Suppose an action between the
parties is pending in court, and the parties agree to take it be-
fore arbitrators or referees, the court will make an order accord-
ingly. In such case the names of the arbitrators are entered
upon the records of the court, and the action is continued to
await the award, when judgment will be entered according to the
award. The clerk issues a rule of reference on the application
of either party, and the rule is handed to the arbitrator, or if
more than one, to the chairman of the board of arbitrators.
5. By Deposit of Notes.-Sometimes a submission is
¹ Weed v. Peck, 12 E. P. Smith, 42.... * Chamberlain's Com. Law, § 1,
ch. xviii
PROCEEDINGS
493
OF ARBITRATORS.
accompanied by the execution of promissory notes by both par-
ties, if each claims a balance due; or by the party who admits
something due, but denies the full amount claimed by the other.
The note or notes being made for all that is claimed, the arbi-
trators are directed to indorse down to an amount which equals
the sum found to be due to the opposite party, and deliver the
note to him at the time of the award. Such a note is valid, and
an action may be maintained upon it.¹
§ 632.-5. Arbitrators.—They are the persons to whom the
controversy is referred for arbitration by consent of the parties.
Usually a single arbitrator is selected, or the parties each
appoint one, with a stipulation that if they do not agree, another
person, called an umpire, named or to be selected by the arbi-
trators, shall be called in, to whom the matter is to be referred.2
Any person selected may be an arbitrator, notwithstanding
natural incapacity or legal disability to make contracts, as in-
fancy, coverture, or lunacy.³
3
Even if a person is disqualified on account of interest in the
controversy, he may act as arbitrator, provided the interest is
known to the parties at the time of making the submission.*
?
III. PROCEEDINGS OF THE ARBI-
TRATORS.
§ 633. The arbitrators always proceed on the reference as
judges, and not as agents, of the parties appointing them. The
law defines with tolerable precision the steps which they are to
take.5
§ 634.-1. To Fix Time and Place of Hearing.—This is the
first thing to be done; and, as far as may be, the convenience
of the parties should be consulted.
§ 635.-2. To Notify the Parties.-Notice of the time and
place of hearing is essential to the validity of the proccedings;
1 Shephard v. Watrous, 3 Caines' R. 166; Battey v. Button, 13 Johns. R. 187.
2 Caldwell, Arb. 99; 2 Vern. 485; 16 East, 51..
3 Watson, Arb.
71; Russell, Arb. 107.
251; 2 E. D. Smith, 32.
4 9 Bingh. 672 ; 2 Vern. 251; 4 Mod. 226; 27 Me.
5 1 Ves. Ch. 226.
•
494
ARBITRATION-
and unless the parties expressly agree to waive such notice, or
unless it is clearly implied from the submission that they waive
it, the award will be void without the notice.¹
There is no legal rule declaring what is a sufficient notice of
hearing, and that matter is left to the sound discretion of the
arbitrators.2
§ 636.-3. Oath of Arbitrators.-As a general rule, the arbi-
Crators ought to be sworn before hearing the case. They must
be if the statute requires it, unless the parties themselves waive
the oath, either by express agreement, or by going on with the
proceedings without objection on that account. In such case the
arbitrators will have jurisdiction precisely as though they had
been regularly sworn.³
If no provision is made for entry of judgment on the award,
it is a mere common law submission, and the parties may waive
the administration of an oath to the arbitrators, and the award
will be valid.*
§ 637.-4. Hearing Evidence. It depends on the statute of
the State in which the arbitration is held, as to whether the arbi-
trators have power to swear the witnesses examined before them
on the hearing. If the statute authorizes it, of course they may
do so.
But if the arbitration is not held under some statute, it is a
common law proceeding; and the arbitrators have no power to
administer oaths to the witnesses.5
In such case, the witnesses may be sworn by some justice of
the peace, or some other officer authorized to administer oaths.
The witnesses may be examined without any oath whatever, if
no objection is made at the time of hearing on account of the
want of an oath."
6
§ 638-5. Adjournments.-Arbitrators have the power to
adjourn from time to time, so that they do not extend the time
beyond that appointed for the delivery of the award.
1 Elmendorf v. Harris, 23 Wend. R. 628, 632; 6 Cow. R. 103; 8 Bosw. R.
313.. .....2 Elmendorf v. Harris, 23 Wend. R. 628.... 3 Howard 7. Sexton,
•
1 Denio R. 440; Browning v. Wheeler, 24 Wend. R. 258.....
Sexton, 4 Comst. R. 157..
Gilbert, 4 Denio R. 347, 348.
4 Howard v.
5
People v. Townsend, 5 How. R. 315; Cope v.
6
Biggs v. Hunsell, 16 Com. Bench R. 562.
AWARD.
495
§ 639.-6. Discretion Allowed.-In investigating matters in
controversy, the arbitrators are allowed the greatest latitude of
discretion.'
They are judges both of law and fact, and are not bound by
the rules of practice adopted by the courts.²
They may decide according to justice and honesty, and need
not follow the law. The award will be set aside only when it
appears that they meant to be governed by the law, but have
mistaken it.³
§ 640.-7. Hearing of Counsel.-In arbitrations the parties
have the right to the aid of counsel, the same as they would
have in a court.
IV.—AWARD.
The award is the final closing up of the proceedings of the
arbitrators. It is their decision.
§ 641.-1. When to be Made.-Where no time is limited for
making an award, the arbitrators may make it any time, and it
will be valid.*
But where arbitration bonds limit the time within which the
award must be made, there may be a valid enlargement or ex-
tension of the time by a written sealed agreement between the
parties.5
If a submission be made by mutual bonds, and a time is spe-
cified in the bonds within which the award is to be made, there
may still be a valid extension of the time by a written unsealed
agreement between the parties.
If there be an unauthorized extension of the time for the
hearing, and the parties afterwards voluntarily proceed with the
hearing, by taking part in the proceedings, this will be a waiver
of the objection that might have been made."
¹ 13 East's R. 251; 9 Bingh. R. 679; 6 Cow. R. 193; 1 Hill's R. 319; 7 Id.
463; 6 Pick. R. 148... ......21 Taunt. R. 52; 6 Id. 255; 13 East's R. 358; 7
Metc. R. 316.... .39 Ves. 364; 14 Id. 271; 3 East, 18; 13 Id. 351; 6 Pick.
148..
422 Wend. R. 126.
5 Freeman v. Adams, 9 Johns. R. 115.
• •
6 Bloomer v. Sherman, 5 Paige, 575..
•
78 Taunt. R. 694.
496
ARBITRATION.
§ 642.-2. By Whom Made.-It will depend on the language
and provisions of the statute as to whether a less number than
all the arbitrators can make an award. If it is a common law
arbitration, or if the statute is silent on the subject, all the arbi-
trators must join in the award, or it will be void, unless it is
expressly provided in the submission that a less number may
make the award.'
§ 643.-3. What to Include.-It is the duty of the arbitrators
to pass on all matters submitted to them. If an award does not
embrace all the matters within the submission which were
brought to the notice of the arbitrators, it is altogether void.²
§ 644.-4. What not to Include. The award will be void
unless it conforms to the terms of submission. For that reason
it ought never to include any matters but those submitted by
the parties for adjudication; for if it embraces matters not in-
cluded in the submission, it will, as a general rule, invalidate the
entire award.³
§ 645.-5. Certainty.-An award ought always to be certain
in the sense that it is so expressed, that no reasonable doubt can
be entertained as to the meaning of the arbitrators, the effect of
the award, or the rights and duties of the parties under it. The
terms of the award ought to be clear and intelligible, so that
whoever reads it may comprehend it.*
An award must be so plainly expressed as to leave no uncer-
tainty as to how it is to be executed. Each party ought not
only to know what he is required to do, but he ought also to
know what he may compel the other party to perform.
5
An award ought to be sufficiently certain to enable the
courts to know what matters have really been adjudicated and
decided, so that if suit is thereafter brought upon the same
matters, the arbitration can be plead in bar. The object of a
submission, and the policy of the law in favoring arbitrations, is
because the final settlement of disputes is favored; and if the
¹ Green v. Miller, 6 Johns. R. 39; Cope v. Gilbert, 4 Denio R. 347.......
2 Houston v. Pollard, 9 Metc. R. 164; Moore v. Cockcroft, 4 Duer's R. 133;
Wright v. Wright, 5 Cow. R. 197. 3 Hill v. Thorn, 2 Mod. R. 309; Culver
4 Gratz v.
v. Ashley, 17 Pick. R. 98; Prat' ". Hackett, 6 Johns. R. 14.
Gratz, 4 Rawle, 411.
Schuyler v. Van Der Veer, 2 Caines' R. 235.
AWARD.
497
decision were not certain as well as final, the object of the law
would not be accomplished.'
§ 646.-6. Form of.-The common law does not require that
an award shall be in any particular form. If the submission is
a verbal one, and it is not required that the award shall be in
writing, a verbal award is valid.2
If the bond of submission provides that the award shall be in
writing, under the hands and seals of the arbitrators, an award
under their hands, but without seals, is bad.3
An award need not be sealed unless the submission stipulates
for that. The mere fact that the submission is sealed is not
material.¹
§ 647.-7. Delivery of.-Where the delivery of an award is
to take place by a certain time by the terms of the submission,
the arbitrators must complete it and have it ready for delivery
to the parties at that time, or it will be void, unless there has
been a valid extension of the time for such delivery. It must be
ready for delivery to both parties at that time; and if it is not,
the award is void. It is of no consequence that it was ready for
delivery to one of the parties, if it was not ready for both.5
§ 648.-8. Effect of.-After a fair and legal submission and
award, the parties are precluded from ever again litigating on
the original matters submitted, unless there has been corrupt or
improper conduct on the part of the arbitrators.6
After a proper submission and a valid award on a matter by
an arbitrator, such award is a bar to any action upon the matter
so submitted, even though the award has not been performed."
An award settles and quiets forever all questions and matters
fairly within the meaning and intention of the submission; and
this is so, even though the arbitrators neglected to pass upon
some of the matters submitted to them. Such would be the
effect of a judgment, and there is no difference in that respect
between an award and a judgment.8
11 Wait's Law & Prac. 1025..
2 Valentine v. Valentine, 2 Barb. Ch.
4 Owen v. Boerum, 23
430....... 3 Stanton v. Henry, 11 Johns. R. 133...
Barb. 187..
5 Pratt v. Hackett, 6 Johns. R. 14........." Shephard v.
Watrous, 3 Caines' R. 166..... 'Brazill v. Isham, 2 Kern. R. 9; S. C., 1 E.
D. Smith's R. 437........8 Lowenstein v. McIntosh, 37 Barb. R. 251; Fidler v.
Cooper, 19 Wend. R. 285; Smith v. Van Nostrand, 5 Hill's R. 419.
32
498
ARBITRATION.
§ 649.-9. How may be Impeached.-An award may be reg-
ular in form, and apparently valid, so far as the instrument
shows, and yet it may be liable to be set aside or held to be void.
Where the conditions of the submission include the authority to
enter judgment by some court upon the award, grounds may be
presented to the court which will warrant it in setting the award
aside. The following are among the reasons for setting the
award aside :
First. Where the award has been procured by corruption,
fraud, or other undue means.
Second. Where there was evident partiality or corruption in
the arbitrators, or either of them.
Third. Where a postponement was improperly refused.
Fourth. Where pertinent and material evidence was rejected.
Fifth. In cases of gross misbehavior on the part of the arbi-
trators, to the injury of the complaining party.
Sixth. Where the arbitrators exceeded their powers, or their
award is not definite as to the subject-matters submitted.¹
Seventh. An award may be impeached which is made without
any notice of hearing to the losing party.²
Eighth. It will be set aside for misconduct, corruption, or
irregularity of the arbitrators, which may have injured one of
the parties.3
Ninth. When the arbitrators acknowledge that they have
made a mistake or error in their decision.*
But it is a general rule that the courts will not inquire at all
into the merits of the matters arbitrated, but only take into
consideration such legal objections as appear on the face of the
award, and such as go to the misbehavior of the arbitrators."
The court will incline to that view which will render the
award valid, instead of that which would declare it void; and
it will be liberally construed, for the purpose of upholding it."
¹ Butler v. Mayor of New York, 7 Hill's R. 329; Briggs v. Smith, 20 Barb.
R. 409...... 2 23 Wend. R. 628; 6 Cow. R. 103........32 Eng. L. & Eq. 184.
4 Bouv. Law Dict.
52 Burr. R. 701; 2 Johns. R. 62; 3 Id. 367:
•
10 Johns. R. 143; 9 Id. 212..
6 Jackson v. Ambler, 14 Johns. R. 96, 103.
REVOCATION.
499
V. REVOCATION.
A revocation of submission to arbitration is the act of with-
drawing the assent which the party, or either of them, has given
for that purpose.
§ 650.-1. When the Power Exists.-By the rules of the
common law, either party may revoke his submission to arbitra-
tion at any time before the award is actually made.¹
1
A mere parol submission, not in writing, is a common law
arbitration, and consequently either party may revoke his sub-
mission at any time before the award is actually made."
§ 651.-2. When the Power does not Exist.-If the arbitra-
tion is founded on a statute, with a provision for entering a
judgment thereon, it is clear that there can be no revocation by
either party unless it is done before the cause is finally submitted
to the arbitrator for decision.
There may be a written submission which will be regarded
as one at common law instead of a statutory arbitration; as, for
instance, where the entry of judgment is not provided for.
§ 652.-3. Consequences of Revocation. A mutual agree-
ment between parties to submit their matters in difference to
arbitration is a valid contract; and the mutual promises form a
sufficient legal consideration to sustain an action.
If either party revokes the submission, he will be liable to an
action for the breach of his contract, and will be subject to the
payment of the damages sustained by the opposite party.³
The expenses paid for witnesses, and all other costs and
damages incurred in preparing for the arbitration, are proper
items of damages.*
§ 653.-4. Manner of.-The manner of revoking the submis-
sion depends materially upon the form in which the submission
is made. If the submission is by parol, the revocation may be
by parol; but if the submission is in writing or under seal, then
8
1 Allen v. Watson, 16 Johns. R. 205; Milne v. Gratrix, 7 East's R. 608;
Green v. Pole, 6 Bing. R. 443; Marsh v. Packer, 20 Vt. R. 198..
.• Cope v.
Gilbert, 4 Denio R. 347; Wells v. Lain, 15 Wend. R. 99, 104; French v. New,
20 Barb. R. 481, 486.... 3 Curtis v. Barnes, 30 Barb. R. 225...
Allen v. Watson, 16 Johns. R. 205.
4 Id.:
500
ARBITRATION.
the revocation must be in writing or under seal, as the case may
require. Where a submission is under seal, a parol revocation
is a nullity.¹
§ 654.-5. By Operation of Law.-The death of either party
would amount to a revocation of a submission made out of court,
unless special provision is made for that event in the agreement.
The revocation takes place in such case by mere operation of
law.2
1 Van Antwerp v. Stewart, 8 Johns. R. 125..... 2 McIntire v. Morris, 14
Wend. R. 90.
Distribution of Estates of Persons Deceased.
IN TWO PARTS.
PART I. BY WILL.
PART II. BY OPERATION OF LAW.
I. GENERAL VIEW.
II. KINDS
PART I. BY WILL.
SI. Unwritten.
2. Written.
1. Competency.
2. Incompetency.
1. Devisee.
2. Legatee.
1. Testator.{
1. Parties.
2. Donee. {2:
3. Executor.
III. ELEMENTS OF WRIT-
TEN WILL.
IV. CODICIL.
V. REVOCATION..
VI. PROBATE OF A WILL.
2. Subject-matter. 1. Personal property.
3. Execution.
2. Real estate.
1. Signing by testator.
2. Declaration by testator.
3. Attestation.
4. Law of place.
1. By subsequent instrument.
2. By destruction of the will.
3. By marriage.
4. By alteration of estate.
5. By codicil.
6. By subsequent will.
VII. LETTERS TESTAMENTARY.
CHAPTER XIX.
DISTRIBUTION OF ESTATES OF PERSONS
DECEASED.
PART 1-BY WILL.
I.--GENERAL VIEW.
§ 655. A Will is a disposition of real and personal property
to take effect after the death of the testator.
When the will operates on personal property, it is sometimes
called a testament, and when upon real estate, a devise.
is
But the more general, and the more popular denomination
of the instrument, embracing equally real and personal estate,
that of last will and testament.¹
The form of a will is not material, provided it sufficiently
manifests the intention of the testator; that is, no technical
words or arrangement of words is required. He may put his will
in any language he may choose.2
II-KINDS.
§ 656. Wills are of two kinds, unwritten or nuncupative,
and written.
1. Unwritten. This is a will made by words spoken, disposing
of personal property only, and done only in cases of last extrem-
ity, or when the testator is in expectation of immediate death.
It must be made in the presence of witnesses, and should after-
wards be reduced to writing.
At common law a will of chattels was good without writing.
In ignorant ages, there was no other way of making a will but
14 Kent's Com. 500........2 Green v. Skipworth, 1 Phillim. Eccl. R. 58;
Redfield on Wills, ch. vi, § 1.
ELEMENTS OF WRITTEN WILL.
503
by words or signs. But in later times letters have become so
generally cultivated, and reading and writing so widely diffused,
that verbal, unwritten, or nuncupative wills are confined to ex-
treme cases, and held to be justified only on the plea of necessity.
In almost all the States, the privilege of making a nuncu-
pative will is now only allowed to soldiers and seamen in actual
service.¹
2. Written. At the present day all wills except those made
by soldiers and sailors as already stated, in the last extremity,
are required by law to be in writing.
Formerly, at the common law, all wills might be made ver-
bally; but it was found that the temptation to set up and prove
a false and fraudulent will was too great to be resisted, and the
frauds and perjuries to which such wills gave occasion, induced
the enactment of the statute, 29 Charles II, ch. iii, which pre-
scribed the formalities of a will, and required that it should be
in writing. There were certain exceptions in favor of the soldier
and sailor, as already stated.
A will, like every other business paper or document, is con-
stituted, when complete, of certain elements, the consideration
of which, in their order, is a convenient method of understanding
the subject.
III-ELEMENTS OF WRITTEN WILL.
§ 657.-1. Parties.-As in a contract, there are parties to a
will, though their interests are not created in the same way, the
consideration being absent, or of so different a character as to
have no resemblance the one to the other. The parties to a will
are:
1. The Testator, or the person who makes the will;
2. The Donee, or the person who receives property by the
will; and
3. The Executor, or the person to whom the execution of the
will is committed by the testator.
1 27 Alabama R., N. S. 296, 596; 26 N. H. R. 372; 9 N. Y. R. 196; 2 R. I. R.
133; Redfield on Wills, ch. vi, § 2.
504
DISTRIBUTION OF ESTATES BY WILL.
1. Testator.-This is the party who makes the will, by
which property is conveyed to others. Persons may own prop-
erty, and have the legal power to convey by will; or they may
labor under some legal disability which will render the will void
if they attempt to make one.
1. Competency.—The general rule is that all persons, with cer-
tain exceptions, are competent to dispose of their property by will.
2. Incompetency.-But the persons capable of executing
wills are best defined by stating the exceptions, or such as labor
under incapacity, all others being competent.
1. Of these, aliens form one class who are incompetent to
devise real estate.
2. Persons deprived of understanding cannot make wills; such
as idiots and lunatics, and even infants are among this class. In
N. Y. State infants cannot devise real estate, but a male of 18 years
age and a female of 16 may make a will of personal property.
3. A married woman cannot make a will without the express
consent of her husband, or by authority of statute.
of
4. Persons deprived of their free will by being under duress,
whether of unlawful restraint, or of fear, are incapable of making
a will.
The question, Who may make a will? most frequently arises
and is discussed with reference to the mental capacity of the
testator. Some persons are affected with a superstitious dread
of any business transaction that implies that in the course of a
few years they may die. So they put off the matter of making
their will, until, on account of disease or age, their competency
may be called in question by interested parties.
To establish the testator's competency, it must appear that
he possessed mind and memory sufficient at the time of making
his will, to enable him to understand the nature and conse-
quences of his testamentary act.
Extreme old age raises some doubt of capacity, but only so
far as to excite the vigilance of the court.¹
But no just inference can be made upon the question of ca-
pacity, from age merely, short of some extreme period; but, as
is well said, "If a man in his old age becomes a very child again
¹ Phillim. R. Eccl. 449.
ELEMENTS OF WRITTEN WILL.
505
in his understanding, and is become so forgetful that he knows
not his own name, he is then no more fit to make his testament
than a natural fool, or a child, or lunatic." 1
Great age alone does not constitute testamentary disqualifi-
cation; but, ɔn the contrary, it calls for protection and aid to
further its wishes. When a mind capable of acting rationally,
and a memory sufficient in essentials, are shown to have existed,
and the last will is in consonance with definite and long-settled
intentions, is not unreasonable in its provisions, and has been
executed with fairness, its validity will be favored by the courts.?
A person eighty years of age, with energies greatly impaired;
another eighty-six years old, and afflicted with disease; and an-
other person ninety years old, but of sound mind, were each held
to possess sufficient mental capacity to make a valid will.³
Testaments of chattels might, at common law, be made by
infants of the age of fourteen if males, and at twelve if females.
But it has been changed by English statute within a few years,
and the testamentary power of infants is abolished.
On this point the laws of the several States differ. In Vir-
ginia, for instance, no person under eighteen years of age can
make a will of chattels. By the statutes of New York, a female,
sixteen years of age, and a male at eighteen, can make a will of
personal property.*
2. Donee.-The donees are the parties who receive by the
will; and are either devisees, or legatees.
1. A devisee is one to whom a devise is made, and a devise is
a gift of real property by a person's last will and testament.
2. A legatee is a person to whom a legacy is given by will,
and a legacy is a term commonly applied to money or personal
property, although sometimes used with reference to a charge
upon real estate.
In general, any person who is capable of acquiring property
by his own labor or industry, unless he is prohibited by some
statute or is under some common law disability, is capable of
receiving as devisee or legatee of a will.5
11 Williams' Law, Exrs. 36; Griffiths v. Robins, 3 Mod. 191; Potts v. House,
6 Ga. R. 324...... 2 Maverick v. Reynolds, 2 Bradf. Sur. 360.... .. 2 Redfield
on Wills, ch. iii, § 13.... 44 Kent's Com. 506....... 5 Story Eq. Jurisp.,
§ 1146, 1160.
506
DISTRIBUTION OF ESTATES BY WILL.
Married women, infants, and persons of non-sane memory,
may be devisees, or legatees, for the devise or legacy is without
consideration. A devise to the heir-at-law is void, if it gives
precisely the same estate that he would take by descent if the
particular devise to him was omitted out of the will. The title
to descent has, in that case, precedence to the title by devise.¹
Corporations are excepted out of the English statute of wills,
and so they are in many, if not all, of the statutes of the Amer-
ican States. Corporations cannot take by will unless expressly
authorized to do so by their charters.
A will should not be written by a legatee or devisee, nor
should the writing of it be procured by any one who is to be
largely benefited by its provisions, as this would naturally tend
to excite suspicion, and would invite a critical inquiry into all
the circumstances under which it was made.2
3. Executor.*-An executor is a person to whom the testator
commits by his last will the execution of that will and testament.
The appointment by the will of an executor is almost uni-
versal, although not indispensable to the making of a will; and
it may be performed either by express words, or such as strongly
imply the same.ª
Generally speaking, all persons who are capable of making
wills, and many others besides, may be executors. An alien
friend, an infant, or a married woman, may be an executor.
Persons attainted, outlaws, insolvents, and persons of bad moral
character, may be qualified as executors.
Idiots and lunatics cannot be exccutors, and an executor who
¹ Hurst v. Earl of Winchelsea, 1 Wm. Blacks. R. 187..
.2 Duffield v.
Robeson, 2 Harring. 384; Tomkins v. Tomkins, 1 Bailey, 92; Crispell v. Dubois,
4 Barb. 393; 17 Id. 236; Breed v. Pratt, 18 Pick. R. 115, 117..
stone's Com. 503.
•
▲ Id.
32 Black-
* The author is aware that the inclusion of executor among the parties
to a will is open to criticism. The executor is not necessarily a party in the
same sense as the testator or devisee; yet there is a sense in which he is prop-
erly a party; and that is much the same sense as an attorney-in-fact is a party
in the power of attorney under which he acts. The executor is included as a
party for convenience of classification, more than in obedience to strict legal
definition.
Of course an executor may be a party in the fullest sense of the word; for
he may be one of the devisees, or even the principal devisee of the will.
ELEMENTS OF WRITTEN WILL
507
becomes non compos may be removed by the proper authority,
which is the court having jurisdiction of the will.¹
The executor acts as the personal representative of the de-
ceased, having his means, for the purpose of discharging his
liabilities, or executing his contracts, and of carrying into effect.
his will. The executor is liable so far as the means of the tes-
tator are adequate to the payment of the debts. He is not liable
personally, unless he gives a promise to that effect in writing,
signed by himself.
The duties of the executor begin at the death of the testator.
They may be stated thus:
1. The burial of the deceased in a suitable manner.
2. He should offer the will for probate as soon as convenient;
and in proving the will, filing bonds, giving notice, making and
returning an inventory, and the like, he must conform to the law
of the State and the rules of the probate.
He will obtain at the office of the court sufficient information
on all these points.
3. He must collect the property, and, after paying the debts,
he must distribute or dispose of the remainder as the will directs.
4. He must render his account from time to time, until a
final settlement of the estate is made. He will be directed at
the probate office when and how to file his accounts.
§ 658.-2. Subject-Matter. The subject-matter of a will is
either personal property, or real property; or to speak a little
more accurately, it is both personal and real.
1. Personal Property.-If a will is made for the pur-
pose of disposing of personal property only, the statutes of the
American States generally require but little formality.2
There have been cases where a will, defectively executed as a
will of real and personal estate, has been admitted to probate;
that is, officially accepted, as a valid will of the personal estate.³
3
But the presumption is always against an imperfect paper
operating as testamentary, even where the law of the State re-
quires no particular formalities in the disposition of personal
property. And where the paper, on its face, is equivocal, in
11 Salk. R. 36....
Owen, 2 Humph. R. 202.
2 Redfield on Wills, ch. vi, § 1.........³ Guthrie v.
508
DISTRIBUTION OF ESTATES BY WILL.
order to be treated as testamentary, it must clearly appear that
it was intended by the maker to operate as a disposition of his
estate after death.¹
As the statutes on this subject are so very different in the
different States, it can serve no good purpose to notice it farther
in this place.
2. Real Estate.-The word devise, as we have seen, re-
lates to the conveyance by will of real estate only.
By the rule of English law, the testator must be seized of
the lands devised at the time of making his will. Therefore
lands purchased after the execution of the will, do not pass by
it. The testator must likewise continue seized at the time of
his death.
But the statutes of some of the States make devises prospec-
tive. For instance, the statutes of New York declare every es-
tate and interest devisable, that is descendible to heirs; and that
every will made in express terms, of all the real estate, or in any
other terms denoting the testator's intent to devise all his real
property, shall be construed to pass all the real estate which he
was entitled to devise at the time of his death.
The law in Massachusetts, Vermont, Pennsylvania, and Vir-
ginia, is the same as in New York. The last will extends pro-
spectively, and carries all the testator's lands existing at his death,
if so evidently intended. This prospective effect is also given to
wills in Kentucky, Maine, Alabama, Connecticut, North Carolina,
Illinois, and Ohio. In Ohio, the statute declares that every
species of property may be devised.²
A joint tenant has not an interest which is devisable, the
surviving joint tenant taking by prior right. A devisee is not
permitted to sever the joint-tenancy.3
§ 659.-3. Execution.-The will must be executed with due
formality; and this is generally, if not universally, a matter of
statutory regulation and requirement.
The execution generally consists of three distinct acts:
First. Signing by the testator;
Second. Declaration by the testator; and
¹ Bartholomew v. Henley, 3 Phillim. R. 318..
.3 Id. 513; Co. Litt. 185, b.
2
4 Kent's Com., 510, 512.
ELEMENTS
509
OF WRITTEN WILL.
Third. Attestation by the witnesses. Of course, where there
are statutory regulations, they must be strictly complied with.
1. Signing by Testator.-The first step in the proper
execution of a will is, that the testator shall affix his signature
at the end of it. The law presumes that he knew the contents,
and that it was read over to him, or that he read it himself.
But this presumption may be repelled, and positive and satisfac-
tory proof required, if a doubt be thrown over the case.¹
The testator may make his mark, and, if duly witnessed, it
is a sufficient signing.
If the signature is really made by another person guiding the
testator's hand, and he assents to the guiding, or afterwards.
acknowledges it, it is sufficient.
The signature may be made by a third person at the testa-
tor's request, and it will be sufficient. Thus : E. N. for R. D.
at his request.2
2. Declaration by Testator.-In the State of New
York, and probably in other States, when the testator signs or
acknowledges the will, he is to declare the instrument to be his
last will. This is called the publication of the will.
This declaration need not be in the precise words of the sta-
tute. Words equivalent in general import, or any words and
acts combined which amount to a declaration on the part of the
testator, of his intention to execute the instrument as his last
will and testament, are sufficient.3
3. Attestation.-As to the number of witnesses required
to attest a will, the requirements of different States are different.
In New York, the testator is to subscribe the will at the end of
it, in the presence of at least two witnesses. The witnesses are
to write their names as witnesses. They are to write their re-
spective places of residence opposite their respective names. If
they omit to thus write their residences, they each forfeit fifty
dollars-though the omission does not invalidate the will, nor
the attestation.
1 Billinghurst v. Vickers, 1 Phillimore, Eccl. R. 187; Day v. Day, 2 Green's
Ch. R. 549.
2 Vernon v. Kirk, 30 Penn. State R. 218; Abraham v. Wil-
kins, 17 Ark. R. 292; Meehan v. Rourke, 2 Bradf. R. 385; Robins v. Coryell, 27
Barb. R. 556.. 3 Torry v. Bowen, 15 Barb. R. 304; Nipper v. Groesback,
22 Id. 670; Rundebaugh v. Shelley, 6 Ohio R. (N. S.) 307.
510
DISTRIBUTION OF ESTATES BY WILL.
Unless the local statute expressly requires it, it is not essen-
tial that the very act of signing be seen and noticed by the wit-
nesses. The testator's statement that the signature is his,
accompanied by the request that the persons to whom the state-
ment is made should attest it as witnesses, is sufficient.¹
Three witnesses are required under the English statute. The
like number is required in Vermont, New Hampshire, Maine,
Massachusetts, Rhode Island, Connecticut, New Jersey, Mary-
land, South Carolina, Georgia, Alabama, and Mississippi.
Two witnesses only are requisite in Pennsylvania, Delaware,
Virginia, Ohio, Illinois, Indiana, Missouri, Tennessee, North
Carolina, and Kentucky.
4. Law of Place. The general doctrine of international
law is, that wills concerning land must be executed according to
the prescribed formalities of the State in which the land is situ-
ated.
But wills of chattels, executed according to the laws of the
place of the testator's domicil, will pass personal property in all
other countries, though not executed according to their laws.
The status or capacity of the testator to dispose of his per-
sonal estate by will, depends upon the law of his domicil.²
IV.
CODICIL.
§ 660. A codicil is an addition or supplement to a will, and,
to be valid, must be executed with the same formalities as the
will itself.
The witnesses may be the same, or different ones, from those
who attested the will. A will may have several codicils; but
each must be executed with the same formalities, and attested
by the requisite number of witnesses. When there are several
codicils, the later ones operate to revive and republish the earlier
ones.³
All codicils are part of the will, and are to be so construed.*
1 Chamberlain's Com. Law, 858... 24 Kent's Com. 513;
Bland, 2 Burr. R. 1079; Doe v. Vardill, 5 Barn. & Cress. R. 438...
Robinson v.
..³ 3 Bingh.
R. 614; 12 J. B. Moore, 2..... 4 4 Brown Ch. R. 55; 8 Cow. R. 56; 3 Sandf
4 Kent's Com. 531.
R. 11;
REVOCATION.
511
A codicil duly executed, and attached or referring to a paper
defectively executed, has the effect to give operation to the whole,
as one instrument.¹
It is not necessary that the codicil should be on the same
piece of paper as the will, in order that it should operate as a
republication of the will, if it expressly refers to the prior in-
strument.2
A will made by a minor, or a person of unsound mind, or a
married woman, and which is, on that account, of no validity,
may be rendered valid and effective by a codicil republishing it,
executed after such disability is removed.
V. REVOCATION.
§ 661. A will duly made according to law, and which is valid
in all respects as to its execution, never takes effect until after
the death of the testator; and it can be revoked at any time at
his pleasure.3
The following are among the modes of revoking a will:
1. By Subsequent Instrument.-The revocation of a will may
be accomplished by making and executing another instrument
in the same manner as the will; that is, with the same formali-
ties. A second will is a revocation of a former one, provided it
contains words expressly revoking it, or makes a different and
incompatible disposition of the property.*
2. By Destruction of the Will.-The testator can revoke his
will at any time, by burning, canceling, tearing, or obliterating
the same, or by causing it to be done in his presence and by his
direction.
The testator, to revoke a will, must have the same degree of
competency which is necessary to make one.
3. By Marriage.-A will made by a single or unmarried
woman is revoked by her marriage. This is an old and settled
rule of law. Marriage leaves the will no longer at the wife's
16 Johns. Ch. R. 374, 375; 14 Pick. R. 543; 16 Ves. Ch. 167.
R. 590; 7 Id. 346; 3 Zabr. (N. J.) R. 447.
•
3 4 Kent's Com. 520.
•
21 Hill's
▲ Id. 528.
512
DISTRIBUTION OF ESTATES BY WILL,
control. It is against the nature of a will, to be absolute during
the testator's life, and therefore it is revoked in judgment of law
by the marriage.
1
In the State of New York, if a man makes his will, and
afterwards marries and a child is born, this works a presumptive
revocation of the will, both as to real and personal estate. But
this presumption may be rebutted by circumstances.2
By a later provision of the New York statutes, if the will
disposes of the whole estate, and the testator afterwards marries,
and has issue born in his lifetime, or after his death, and the
wife and child are living at his death, the will is deemed to be
revoked; unless the issue be provided for by the will, or by a
settlement, or unless the will shows an intention not to make
any provision.
No other evidence to rebut the presumption of such revoca-
tion is to be received.³
The testator may, if he pleases, devise all his estate to
strangers, and disinherit his children. This is the law in all the
States except Louisiana. Children are deemed to have sufficient
security in the natural affection of parents, that this unlimited
power of disposition will not be abused.
By the statute laws of nearly all the States, children born
after the making of the will, and in the lifetime of the father,
will inherit in like manner as if he had died without making a
will, unless some provision be made for them in the will, or
otherwise, or they be particularly noticed in the will.
4. By Alteration of Estate.-Any alteration of the estate or
interest of the testator in the lands devised, by the act of the
testator, is held to be an implied revocation of the will. This is
on the ground, principally, of its being evidence of an alteration
of the testator's mind.
A sale of the estate devised, operates, of course, as a revoca-
tion; for the testator must die while owner of the estate, or the
will cannot have effect upon it.
A valid agreement or covenant to convey lands, which equity
will specifically enforce, will also operate in equity as a revoca-
¹ Forse and Hembling's Case, 4 Co. 60, b; 4 Kent's Com. 527........24
Johns. Ch. R. 506...... 3 4 Kent's Com. 527.
PROBATE OF WILL.
513
tion of a previous devise of the same. The estate, from the timc
of the contract, is considered the real estate of the vendee.¹
Either an intention to revoke, or an alteration of the estate
without such an intention, will work a revocation.2
The law requires that the same interest which the testator
had when he made the will, should continue to be the same in-
terest, and remain unaltered to his death. The least alteration
in that interest is a revocation.3
5. By Codicil.-The cases are very rare where a codicil re-
vokes a will entirely. To do so, it must revoke it in terms un-
equivocal, or dispose of the subject-matter in a manner wholly
different from the will.*
The codicil, so far as it is inconsistent with the will, operates
as a revocation.5
If a testator were to devise his real estate to Allen, and sub-
sequently, by codicil, were to acknowledge Brown to be his next
of kin and heir-at-law of all his real and personal property, this
would operate as a revocation."
6. By Subsequent Will.-An instrument duly executed as a
last will, and which is complete in itself, and adequate for the
disposition of the entire estate, will be construed as revoking all
former wills, although no words to that effect are used, and not-
withstanding it disposes of most of the estate by a residuary
clause.7
VI. PROBATE OF A WILL.
§ 662. The probate of a will consists of the proof before an
officer authorized by law, that an instrument offered to be proved
or recorded, is the last will and testament of the deceased person
whose testamentary act it is alleged to be.
This is done in a court whose jurisdiction is generally limited
3 4 Kent's
• •
¹ 4 Kent's Com. 528; Mayer v. Gowland, Dickens' R. 563; Walton v. Walton,
7 Johns. Ch. R. 258.
Com. 529, 532....
2 Dister v. Dister, 3 Lev. R. 108.
Brant v. Wilson, 8 Cow. R. 56...
Larabee, 28 Vt. R. 274.
Nickson, 9 Jur. N. S. 451..
Simmons, 26 Barb. R. 68.
5 Larabee v.
6 Case cited by Redfield on Wills, Parker v.
In re Fisher, 4 Wis. R. 254; Simmons v.
33
514
DISTRIBUTION OF ESTATES BY WILL
to the examination and disposition of matters relating to the es-
tates of persons deceased. In some of the States this court is
called the Surrogate's Court; in some others, the Widow's and
Orphan's Court; and in others, the Court of Probate.
The proof of the will is a judicial proceeding, and the probate
a judicial act. The party propounding the instrument is termed
the proponent, and the party disputing, the contestant.
In the United States, generally speaking, proofs are not
taken until citation or notice has been issued by the judge of the
court, to all the parties interested, to attend.
On the return day of the citation, the witnesses are examined,
and the trial proceeds before the court. If the judge, when both
parties have been heard, decides in favor of the will, he admits
it to probate. If against the will, he rejects it, and pronounces
sentence of intestacy.
The powers and duties of this court are very nearly the same.
all over the country. From the decrees or decisions of the judge
an appeal may generally be taken by a party who thinks himself
aggrieved, to a higher court, or a court having the right of
review.¹
1
On the investigation the alleged will may be contested on
any ground tending to impeach its validity:
As, that it was not executed in due form of law, and accord-
ing to the requisite statutory solemnities; or,
That it was forged, or was revoked, or was procured by force,
fraud, misrepresentation, or undue influence over a weak mind;
or,
That the testator was incompetent by reason of idiocy, lunacy,
or any other disability.²
VII.-LETTERS TESTAMENTARY.
§ 663. This is a document which gives the executor author-
ity to proceed to execute the will according to its terms. It is
granted by the judge having jurisdiction of the probate of wills,
2 Bouv. Law. Dict., art. Probute of
1 Parsons' Laws of Business, 646..
Will.
LETTERS
515
TESTAMENTARY.
under his hand and official seal, making known that at a certain
date the last will and testament of the testator (naming him)
was duly proved before him;
That the probate and grant of administration were within
his jurisdiction; and he, the judge, accordingly certifies "that
the administration of all and singular the goods and chattels,
and credits of the said deceased, and any way concerning his
will, was granted to the executor named in the said will," he
having been already sworn well and faithfully to administer the
same, and to make a true and perfect inventory, &c., and to ex-
hibit the same, &c., and also to render a just and true account
thereof.¹
Letters testamentary are granted in case the deceased left a
will, or died testate. But letters of administration are granted
in case he died intestate, or without having made a will or pro-
vided an executor.
But in regard to all matters coming properly under the heads.
of letters testamentary or letters of administration, there is little
or no difference in the law relating to them.
Letters may be revoked by the court which made the grant,
or on appeal to a higher tribunal, reversing the decision by which
they were granted. Special or limited administration will be
revoked on the occasion ceasing which called for the grant.
An executor or administrator will be removed when the let-
ters were obtained improperly.2
The student will readily see the necessity of Letters Testa-
mentary. This is the judicial authority under which the execu-
tor acts. Were the will subjected to no judicial investigation,
the door would be wide open to the grossest frauds. Any one
might assume to act as executor, and any instrument, however
unfairly obtained, and even were it the basest forgery, might be
used for the distribution of estates amounting to hundreds of
thousands.
¹ Bouv. Law Dict., art. Letters Testamentary. . . . .
2 Id.
Distribution of Estates of Persons Deceased.
PART II. BY OPERATION OF LAW.
I. ADMINISTRATOR.
II. ADMINISTRATOR'S POWERS
AND DUTIES.
I. Definition.
2. How appointed.
3. Who entitled to appointment.
4. Order of precedence.
5. Equigradal cases.
6. When appointment may be revoked.
1. To give bonds.
2. To make inventory.
3. Things to be inventoried.
4. Copies of inventory.
5. To collect debts.
6. To pay the debts.
7. Order of payment.
8. Distribution of residue.
PART II.
BY OPERATION OF LAW.
§ 664. When a person owning property dies, leaving no valid
will, his estate is distributed among his heirs according to the
statute of the State in which he resided at the time of his de-
cease. This is called the distribution of estates of persons
deceased, by operation of law. This distribution must be made,
however, through and by a person properly appointed by legal
authority, who is called an administrator. The appointment,
powers, and duties of the administrator will be considered under
the following divisions and subdivisions:
I. ADMINISTRATOR.
§ 665.-1. Definition.-An administrator on the estate of a
person deceased is one who is authorized to manage and distri-
bute according to law the estate of an intestate, or of a testator
who has no executor.
An intestate is a person who, having lawful power to make a
will, has made none, or one which is defective. In such case, he
is said to have died intestate, and his property descends to his
heirs-at-law according to the statute of distributions.
sons.
§ 666.-2. How Appointed. The administrator is appointed
by the court having jurisdiction over the estates of deceased per-
The court does it with deliberation, and will hear and
consider any objections to the person proposed as administrator,
and, if legally disqualified, the appointment will not be made.
To guard against imposition or mistake in issuing letters of
administration prematurely, the judge of the court is required to
have satisfactory proof that the person of whose estate adminis-
tration is claimed, is dead, and died intestate; and when appli
cation is made to administer, by any person not first entitled,
there must be a written renunciation of the party having the
518
DISTRIBUTION OF ESTATES BY LAW.
prior right to administer, or a citation to show cause is to be
first issued to all such persons, and duly served or otherwise
published.
The appointment must be legally made, and with the consent
of the person appointed. In general, anybody is legally compe-
tent to be administrator who is himself competent to make a
contract. The exceptions are made by statute; as, for instance,
in New York, improvident persons, drunkards, gamblers, and
the like, are disqualified.
§ 667.-3. Who Entitled to Appointment. This is a matter
very much regulated by statute. But persons holding certain
relations to the intestate are considered as entitled to the ap-
pointment to administer the estate in established order of pre-
cedence.
§ 668.-4. Order of Precedence.-The order of precedence
is also a matter of statutory regulation. In New York, and
probably in most of the States, it is thus:
Administration is to be granted to the husband on the wife's
personal estate; and in other cases to the widow and next of
kin, or to some one of them, if they, or any of them, will accept.
in the following order:
1. To the widow.
2. To the children.
3. To the father.
4. To the brothers.
5. To the sisters.
6. To the grandchildren.
7. To any other of the next of kin who would be entitled to
a share in the distribution of the estate.
In New York, if none of the relatives, or guardians of infant
relatives (for the guardians of minors who are entitled may ad-
minister for them), will accept the administration, then it is to
be given to the creditors of the deceased. The creditor first ap-
plying, if otherwise competent, is to be preferred. If no creditor
applies, then any other person may be appointed who is legally
competent.
§ 669.-5. Equigradal Cases.-Under the English law, and
the law of New York (and it is presumed that the law of the
ADMINISTRATOR'S POWERS AND DUTIES.
519
other States is much the same), the surrogate has the discretion
to select among the next of kin any one in equal degree, in ex-
clusion of the rest, and to grant to such person sole administra-
tion.¹
When there are several persons of the same degree of kindred
to the intestate entitled to administration, they are preferred in
the following order:
First. Males are preferred to females.
Second. Relatives of the whole blood to those of the half
blood.
Third. Unmarried are preferred to married women; and
when there are several persons equally entitled, the surrogate
may, in his discretion, grant letters to one or more of them.
§ 670.-6. When Appointment may be Revoked.-If letters
of administration should happen to have been unduly granted,
they may be revoked; and administration may be granted upon
condition, or for a limited time, or for a special purpose; as for
the collection and preservation of the goods of the deceased.2
II.-ADMINISTRATOR'S POWERS AND DUTIES.
§ 671. As before stated, an administrator derives all his au-
thority from the court by which he is appointed. His duties
and powers are then substantially similar to those of an executor;
excepting that he must distribute and dispose of the estate as
the law directs, since he has no will to guide him. Among the
steps to be taken, he is
§ 672.-1. To Give Bonds.-The administrator must enter
into a bond before the judge of the court, with sureties for the
faithful execution of his trust; and being thus duly appointed,
it is his duty to proceed forthwith to administer on the estate of
the intestate.
$ 673.-2. To Make Inventory.-He is to make an inventory
of the goods and chattels of the intestate, in the presence and
with the assistance of appraisers, who are to be appointed by the
court, and who are to be duly sworn.
¹ Sheldon v. Wright, 1 Seld. R. 497.
2
Coope v. Lowerre, 1 Barb. Ch.
R. 45; McMahon v. Harrison, 10 Barb. R. 659: 2 Seld. R. 443.
520
DISTRIBUTION OF ESTATES BY LAW.
§ 674.-3. Things to be Inventoried.-By the common law,
and by the laws of some of the States, the things to be invento-
ried are
First. The interest of the deceased in leases for years.
Second. Things annexed to the freehold, for the purpose of
trade or manufacture.
Third. Growing crops raised annually by labor and cultiva
tion, excepting grass and fruit not gathered.
Fourth. Rents accrued, debts and things in action, though
secured by mortgage.
Fifth. All movable property and effects.
§ 675.-4. Copies of Inventory.-Two copies of this inventory
are to be made, and one copy is to be lodged with the judge of
the court, under the attestation of the administrator's oath, and
the other is to be kept by him.
This inventory is intended for the benefit of the creditors and
next of kin, and the administrator will be obliged to account for
the property mentioned in it. He will also be obliged to show
good cause for not collecting the debts that are mentioned to be
due, unless he had the precaution to note them in the inventory
as "desperate."
§ 676.-5. To Collect Debts.-After completing the inven-
tory, the duty of the administrator is to collect the outstanding
debts, and convert the property into money.
§ 677.-6. To Pay the Debts.-It is also the administrator's
duty to pay the debts of the intestate. He must sell the personal
property, so far as it may be necessary for this purpose, begin-
ning with articles not required for immediate family use, and
if it is insufficient, may apply to the court to mortgage or sell
the real estate.
§ 678.-7. Order of Payment.-In paying the debts, the order
prescribed by the rules of the common law is, to pay-
First. Funeral charges, and the expense at the probate office.
No more will be allowed for funeral charges than are absolutely
necessary, regard being had to the degree and condition in life
of the deceased.¹
Second. Debts due to the State.
¹ Hancock v. Podmore, 1 Barn. & Adol. R. 260.
ADMINISTRATOR'S POWERS AND DUTIES. 521
Third. Debts of record, as judgments, recognizances, and
final decrees.
Fourth. Debts due for rent, and debt by specialty, as bonds
and sealed notes.
Fifth, and lastly. Debts by simple contract.
Of course this order of payment of intestate's debts may be,
and is, varied more or less by the statutes of the States, to which
the student is referred. In fact the whole matter of administra-
tion is subject to modification by the local statutes.
§ 679.-8. Distribution of Residue.-After payment of all the
debts of the deceased, if there is anything left, it is the duty of
the administrator to divide it among the surviving relatives
according to the statute of distributions of the State. In this
matter, as in the performance of many of his duties, the admin-
istrator will act under the directions of the court. In most of the
States, all the necessary forms or instruments are given to appli-
cants at the office of the court 1
2 Kent's Com., Lect. 37.
Analysis of Real Estate Conveyances.
IN FOUR PARTS.
PART I. FULL-COVENANT WARRANTY DEED.
PART II. QUIT-CLAIM DEED.
PART III. MORTGAGE DEED.
PART IV. REGISTRY OF CONVEYANCES.
PART I.-FULL-COVE-
NANT WARRANTY
DEED.
I. Parties
2. Consideration.
3. Words of transfer.
4. Subject-matter-de-
scription.
5. The habendum.
6. Covenants.
7. Release of dower.
8. In testimonium clause.
9. Execution..
{
1. Grantor.
2. Grantee.
1. Natural boundaries.
2. Artificial boundaries.
3. Lines and courses.
4. Lines of contiguous lands.
5. Courses and distances.
1. Of Seizen.
2. Of right to convey,
3. Against Incumbrance.
4. Quiet enjoyment.
5. Warranty and defense.
1. Signing.
2. Sealing.
3. Attestation.
4. Acknowledgment,
10. Delivery
{
1. Absolute.
2. Conditional,
PART II.-QUIT-CLAIM DEED.
1. Definition.
PART III.—MORTGAGE | 2. Usual form.
DEED.
PART IV.-REGISTRY
OF CONVEYANCE.
3. Insurance clause.
4. Interest clause.
1. As between the parties.
2. As to third 1. Having knowledge of the transfer.
2. Having no knowledge of the transfer,
persons.
3. When registry complete.
CHAPTER XX.
REAL ESTATE CONVEYANCES.
§ 680. A deed is a written instrument under seal, containing
a contract or agreement, which has been delivered by the party
to be bound, and accepted by the obligee or covenantee.¹
But the definition of a deed as used in this connection is, a
writing under seal by which lands, tenements, or hereditaments
are conveyed for an estate not less than a freehold, or not less
than an estate for life in real property.
The deed of real estate, considered here, is that formal in-
strument by which one person transfers land to another, either
absolutely or conditionally. This includes the ordinary warranty
deed, with or without full covenants; a quit-claim deed, with or
without covenants; and the mortgage deed.
Deeds are usually written, or partly written and partly
printed, on paper or parchment, and generally this is required
by express statutory enactment.
PART 1.-FULL COVENANT WAR-
RANTY DEED.
§ 681. The warranty deed, or the deed with warranty, will
be considered first, as it is first in importance, and usually em-
braces the entire interest in the property of the party making
the conveyance. The elements will be noticed in the following
order :
§ 682.-1. The Parties.-The parties are the grantor, or the
party who makes the conveyance; and the grantee, who receives
the conveyance. They must be definitely described.
1. Grantor.-The elements of competency as grantor, are
the same that are required to make any other valid, binding con-
1 ¹ 2 Black. Com. 295.
524
ESTATE CONVEYANCES.
REAL
tract. He must be of lawful age, and possess a sound mind.
(See Contracts, p. 5.)
The deed of an infant, however, as in other contracts, is not
absolutely void, but voidable only. He may, therefore, when he
arrives at lawful age, either confirm or annul the conveyance.
His conveyance, however, valid from the beginning, can only be
made by his guardian, under the proper authority of the court
having jurisdiction of such matters.
Idiots and lunatics are personally incapable of making a valid
conveyance of their property, and, as in the case of infants, it
must be made by guardians.
Married women, except by authority of statute, are inca-
pable of conveying real estate. But, in most of the States,
there are statutes authorizing married women, under certain re-
strictions, to convey real estate which they own in their own
right.
One partner cannot convey the real estate belonging to the
partnership, unless authorized by special power of attorney by
the other partners to do so. Their several seals and signatures
must appear.
2. Grantee.-Any natural person is competent to be the
grantee of a deed of conveyance of real estate. The disabilities
that attach to grantors do not attach to grantees.
$683.-2. Consideration.-The next element of a deed is the
consideration, which, as in all other contracts, is held to be
essential to a good and absolute deed. As between the parties.
themselves, a gift or voluntary conveyance is valid; but it is
liable to be questioned in certain cases, when the rights of cred-
itors and subsequent purchasers are concerned.'
The consideration of a deed must be good, or valuable, and
not partaking of anything immoral, illegal, or fraudulent. It is
a universal rule that it is unlawful to contract to do that which
it is unlawful to do.²
A good consideration is founded upon natural love and affec-
tion between near relatives by blood.3
A valuable consideration is founded on something deemed
valuable in a pecuniary sense, as money, goods, services; and
14 Kent's Com. 462...
.......2 Id. 464...
•
3 Id.
WARRANTY DEED-ELEMENTS.
525
to these must be added, though depending on a different idea,
marriage.
The receipt of the consideration money is very generally men-
tioned in the deed; but the grantor is not bourd by this receipt.
It is a general rule that all written receipts of money are open to
evidence. The grantor may sue for the whole or any part of the
consideration money of which he has acknowledged the receipt,
if he can prove that the money has not been paid to him. But
even if the consideration has not been paid, it does not in any
manner affect the validity of the deed.¹
1
§ 684.-3. Words of Transfer. These words are usually in-
serted immediately preceding the description of the subject-
matter, or land conveyed. They are usually "give, grant, sell
and convey." It is, perhaps, best to use them, because it is
usual, although other words would doubtless answer every legal
purpose.2
By the laws of New York, the word "grant" is substituted
in place of all the useless phraseology in the old forms of con-
veyance.
§ 685.-4. Subject-Matter.-The subject-matter is the land
conveyed, and the rights passing with it. The description of
the land should be minute and accurate to an extreme degree.
Properly described, not one square inch of the earth's surface
can be confounded with any other square inch. The importance.
of accuracy of description is apparent where the price of land is
high, as in large cities, in some of which hundreds of dollars are
paid for a square foot. There are several modes of description,
some of which are preferable to others:
1. Natural Boundaries.-A natural boundary is a
natural object remaining where it was placed by nature. To
this the highest regard is paid. A river or stream is a boundary
of this kind, and the centre of the stream is the line.³
3
2. Artificial Boundaries.-An artificial boundary is
one erected by man. Of this class are monuments and walls
fixed at the angles of the line or lines. In such case the con-
1 2 Johns. R. 177; Dorr v. Munsell, 13 Johns. R. 430; Barnum v. Childs, 1
Sandf. R. 58........2 Parsons' Laws of Business, 439...... 3 12 Johns. R.
252; 20 Id. 91; 6 Cow. R. 579; 4 Pick R. 268.
526
REAL ESTATE
ESTATE CONVEYANCES.
necting lines are always presumed to be straight, unless described
to be otherwise.'
3. Lines and Courses.-Lines actually run, and courses
actually marked at the time of the conveyance, are boundaries
to which there can be little liability to mistake.
4. Lines of Contiguous Lands.-If the lines and
courses of an adjoining tract are called for, the lines will be ex-
tended to them, if they are sufficiently established, and no other
departure from the deed is required; marked lines prevailing
over those which are not marked.
5. Courses and Distances.-As to courses and dis-
tances, preference will be given to the one or the other according
to circumstances.2
If there be nothing to control the course and distance, the
line is run by the needle."
3
Known and fixed monuments control courses and distances.
The line of another tract of land, referred to in the deed as a
matter of description, controls course and distance; and it makes
no difference whether a marked or an unmarked line."
ra
4
If the particular description of land in a deed by metes and
bounds be uncertain and impossible, a general description in the
same conveyance will govern.5
So, the certainty of metes and bounds will include and pass
all the lands within them, though they vary from the given
quantity expressed in the deed.
The least certain and material parts of the description must
yield to those which are the most certain and material, if they
cannot be reconciled; though in construing deeds, the courts
will give effect to every part of the description, if practi-
cable.
The mention of number of acres, after a certain description
by metes and bounds or other known specification, does not
amount to breach of covenant, though the number of acres fall
short of the given quantity. Where the boundaries are definite,
.2 1
116 Pick R. 235; 3 Ohio R. 382; 2 Washburn, Real Prop. 632....
Greenleaf on Evidence, § 301, n.
Pernam v. Wead, 16 Mass. R. 131;
4 Jones' Law R. (N. C.) 496....
3 Jackson v. Cary, 2 Johns. Cas. 350;
Clark v. Wethey, 19 Wend. R. 320..
5
Sawyer v. Kendall, 10 Cush. R. 241.
WARRANTY DEED-ELEMENTS.
527
the buyer takes the risk of the quantity, if there be no admix-
ture of fraud in the case.¹
If a highway is named as one of the boundaries, the law pre-
sumes it to be the intention of the grantor to convey to the
centre of the highway, if his own title extends so far.2
Where the estate is described as bounded by, or on, a river,
brook, artificial pond, the sea, a harbor or creek, the grant ex-
tends to the thread of the river or stream, and to low-water
mark of the sea or tide-water. (The thread of a stream is the
line in which the water would run last if exhausted.) This has
generally been held to be so, even where the side lines are de-
scribed as running to and from monuments on the bank of the
river, or at the high-water line of the sea, and when the quantity.
of land would be obtained without going beyond such bank or
high-water line.3
Land bounded by the great inland lakes, or by a natural
pond, does not come under the same rule. If land be described
as bounded upon a building, the line extends only to the eaves,
or the outermost limits of the building.¹
Some things will pass by the conveyance of land as incidents.
appendant or appurtenant thereto. This is the case with a right
of way or other easement appurtenant to land.5
If a house or store be conveyed, everything passes which
belongs to, and is in use for it, as an incident or appurtenance.
If the land be sold without any reservation of the crops in
the ground, the law is strict as between vendor and vendee, that
the conveyance carries with it whatever is attached to the soil,
be it grain growing, or anything else. The exceptions to the
rule rest upon reservations to be made by the vendor at the time
of the transfer.
"Together with all the appurtenances thereunto belonging,
14 Kent's Com. 466, 467...
Newhall v. Ireson, 8 Cush. R. 595.
""
2 Phillips v. Bowers, 7 Gray's R. 21, 24;
3 Coldspring v. Tolland, 9 Cush. R.
492; Knight v. Wilder, 2 Cush. R. 199, 210; Mayhew v. Norton, 17 Pick. R.
357; 7 Pick. R. 195...
Fowle, 8 Cush. R. 150.
12 Mass. R. 157.....
•
•
4 Carbrey v. Willin, 7 Allen's R. 364, 370; Millet v.
5 Kent v. White, 10 Pick. R. 138; Story v. Odin,
6 United States v. Appleton, 1 Sumner's R. 492......
7 Crews v. Pendleton, 1 Leigh's Virg. R. 297; Bank of Penn. v. Wise, 3 Watts'
R. 394; 4 Kent's Com. 468.
528
ESTATE CONVEYANCES.
REAL
is a phrase generally introduced into the deed. It has long been
used in the forms of deeds, and does no harm; but it is without
the least legal signification. For everything that would be in-
cluded in such an expression will pass as appurtenances without
it.¹ 1
All easements upon lands of a stranger, such as rights of
way, drainage, light and air, which have been used by the
grantor in connection with the estate, will pass by a conveyance,
though not expressly mentioned.2
§ 686.-5. The Habendum.-This clause of a deed commences
with the words "To have and to hold." It follows the granting
part, and the description of the land, and defines the extent of
the ownership in the thing granted to be held and enjoyed by
the grantee. It is not an essential part of the deed, and at most
but serves to qualify, define, or control it.'
It has degenerated into a mere useless form; and the prem-
ises now contain the specification of the estate granted, and the
deed becomes effectual without any habendum.*
The words "heirs and assigns" usually follow the habendum
clause; and it is well that they should always be inserted in the
deed, although by the statutes of many of the States, these
words or any other words of inheritance are no longer requisite
to convey an estate in fee."
5
But it can do no harm to use these words, and may be of
importance; for by the common law the word "heirs" is neces-
sary to create an estate in fee simple; a fee simple being a pure
inheritance, clear of any qualification or condition, and it gives
the right of succession to heirs, if of the blood of the first pur-
chaser, or of the person last seized."
6
§ 687.-6. Covenants.-Perhaps the nature of the covenants
of a full-covenant warranty deed will be more easily understood
by inserting them here, in the language generally employed in
deeds for that purpose. They follow the habendum clause, and
read thus:
1 Brown v. Thissell, 6 Cush. R. 254....... 2 Underwood v. Carney, 1 Cush.
R. 285; Mendell v. Delano, 7 Met. R. 176, and cases there cited; Chamberlain's
Com. Law, 696... 3 Coke, Litt. 6 a, 290..... 4 4 Kent's Com. 468......
5 Id. 8.... 6 Id. 5.
WARRANTY DEED-ELEMENTS.
529
"And the said party of the first part, for himself and his
heirs, does covenant to and agree with the said party of the
second part, his heirs and assigns-
"1. That he is lawfully seized of the premises aforesaid;
"2. That he has good right to convey the same;
"3. That they are free from all incumbrances;
“4. That the party of the second part shall quietly enjoy the
same; and
66
5. That the said party of the first will forever warrant
and defend the said premises, with the appurtenances, unto the
said party of the second part, his heirs and assigns, against the
lawful claims of him and his heirs, executors and administrators,
or any other person or persons claiming or to claim title to the
same or any part thereof."
We will very briefly notice these covenants in the above order
of arrangement:
1. Of Seizen.-This is a declaration and an assurance to
the grantee that the grantor has the very estate, both in quan-
tity and quality, which he professes to convey. A covenant of
seizen, of whatever form, is broken at the time of the execution.
of the deed, if the grantor does not own the premises attempted
to be conveyed. In such case the grantee would have a right of
action against the grantor, without waiting until he is ousted
from the premises.¹
This covenant in a deed also extends to and includes every-
thing which properly belongs to the realty, and which would
pass if it belonged to the grantor; for instance, a fence. If it
did not belong to the grantor, the covenant is broken, and the
grantee can sue and recover of the grantor.²
2. Of Right to Convey.-This is something more than
the covenant of seizen, as it includes the capacity of the grantor
to convey, which is equivalent to an assurance that he labors
under no legal disability to make the conveyance.3
This covenant is broken at the moment of the conveyance, if
at all, and the grantee need not wait until he is disturbed before
bringing suit against the grantor.*
¹ 4 Johns. R. 72; McCarty v. Leggett, 3 Hill's R. 134; Abbott v. Allen, 14
Johns. R. 248..
2 Mott v. Palmer, 1 N. Y. R. (1 Comst.) 564....
Jones' R. 195; 2 Bulstr. R. 12; Croke Jac. 358…..
3 T.
4 5 Taunt. R. 426.
34
530
CONVEYANCES.
REAL ESTATE
3. Against Incumbrance.-An incumbrance is any
right to, or interest in, land which may subsist in third persons.
to the diminution of the value of the estate, but consistent with
the passing of the fee by deed of conveyance.¹
A public highway, a private right of way, a claim of dower,
an outstanding mortgage other than such as is to be paid by the
grantee, and liability under the tax laws, are held to be incum-
brances within the meaning of the covenant against incum-
brances, contained in warranty deeds."
The mere existence of an incumbrance constitutes a breach
of this covenant whether the grantee knew of it or not.3
An outstanding judgment against the grantor, at the time
of executing the deed, which, by the statute of the State, is an
incumbrance on the land, is a breach of this covenant; and the
grantee, if he chooses, may pay it off, and recover back the
amount on the covenant.*
The three foregoing covenants, seizen, right to convey, and
that the land is free from incumbrance, are personal covenants,
not running with the land, nor passing to the assignee. If not
true, there is a breach of them as soon as the deed is executed,
and they become choses in action, which are not technically
assignable."
In this part of the deed, clauses are sometimes inserted, de-
signed to involve the grantee in obligations and implied cove-
nants. And, wherever the language used shows an intention.
that the grantee should perform certain acts for the benefit of
the grantor or of any third person, and the grantee accepts the
deed, the law implies a promise on his part to perform; and an
action may be maintained against him."
The most common illustration of an implied promise, raised
by the acceptance of a deed by a grantee, is, where a deed
conveying an estate subject to a mortgage contains the words,
after recital of the incumbrance, "which the said party of
12 Greenl. Ev., § 242..
2 Bouv. Law Dict., art. Incumbrance...
8 27 Vt. R. 739........4 7 Johns. R. 358; Hall v. Dean, 13 Johns. R. 105..
+
5 4 Kent's Com. 471; Bradshaw's Case, 9 Co. 60; Hamilton v. Wilson, 4 Johns.
R. 72; 3 Met. R. 390; 2 Johns. R. 1..
R. 353, 357; Pike v. Brown, 7 Cush. R. 133;
6 Western R. R. v. Babcock, 6 Met
Felch v. Taylor, 13 Pick. R. 133.
WARRANTY DEED-ELEMENTS.
531
the second part is to assume and pay," or words equivalent
thereto.¹
If the conveyance is simply made "subject to" the mortgage
referred to, without any words implying or expressing that the
grantee is to pay it, he does not become personally responsible
for its payment; though, of course, the premises are holden.³
If it is intended that the grantee shall be holden to pay the
incumbrance, it will be proper to insert immediately following
the habendum clause, thus: "He and they assuming and paying
the amount due on a certain mortgage" (here giving date of
mortgage, parties to it, time of recording, and amount due),
"and forever saving said grantor and his heirs and assigns
harmless therefrom, and from all loss, cost, and damages arising
thereout." 3
4. Quiet Enjoyment.-This is an assurance against the
consequences of a defective title, and of any disturbances there-
upon. This covenant extends to possession only, and is broken
only by an entry and expulsion of the grantee, or by actual dis-
turbance of the possession.*
5. Warranty and Defense. This is the most im-
portant of all the covenants named, and is an undertaking to
indemnify the grantee against all existing claims, lawfully held
by other parties, and which may, in the future, be presented.
It runs with the land, and its benefits pass to the successive
grantees. Where the land passes through several hands, each
grantee can maintain an action for breach of this covenant
against any of the preceding grantors, either one of which he
may single out at his pleasure.5
The suit for breach of this covenant should be brought by
the owner of the land, and as assignee of the covenant at the
time it is broken." 6
If a grantor sells under this covenant, having a defective
title at the time of sale, but afterwards perfects his title to
2
1 Chamberlain's Amer. Com. Law, 699...... Strong v. Converse, 8 Allen's
R. 557........3 Chamberlain's Com. Law, 699... 43 Johns. R. 471; 5 Id.
120; 15 Id. 483.......52 Washburn's Real Prop. 659; 4 Sneed's R. (Tenn.) 52.
64 Johns. R. 89; 19 Wend. R. 334; 2 Mass. R. 455; 7 Id. 444; 3 Cush.
R. 219 12 N. H. R. 413.
532
REAL ESTATE
ESTATE CONVEYANCES.
the land, this transaction inures to the benefit of the grantee's
title.¹
The last two covenants here noticed, that is, the covenant of
quiet enjoyment, and the covenant of warranty, are prospective,
and an actual ouster or eviction is necessary to constitute a
breach of them.2
These covenants are, therefore, in the nature of real cove-
nants, attaching to the property itself, and they run with the
land conveyed, and descend to heirs, and vest in assignees or
purchasers.3
§ 688.-7. Release of Dower.-Dower, as usually understood
in this country, is that provision which the law makes for a
widow out of the lands or tenements of her husband, for her
support and the nurture of her children.*
4
It exists where the husband is seized of an estate of inherit-
ance, and dies in the lifetime of his wife. In that case she is at
common law entitled to be endowed, for her natural life, of the
third part of all the lands whereof her husband was seized, either
in deed or in law, at any time during the coverture, and of which
any issue that she might have had, might by possibility have
been heir.5
With some modifications, these common law principles re-
lating to dower have been adopted as a part of the jurisprudence
in most of the States of the American Union."
In the common forms of deeds of conveyance, there is usually
a form in blank, to be filled by the conveyancer, immediately
after the covenants, for the release of dower. If dower is to be
released to the grantee, the wife must join with her husband in
the deed, and there must be apt words of grant, showing an in-
tention on her part to relinquish her dower.
It is almost a matter of course, in this country, for the wife
to unite with her husband in all deeds and mortgages of his
lands, the release of dower containing apt words of grant or re-
lease on her part. The statutes usually require her acknowledg-
1 11 Johns. R. 91; 13 Id. 316; 14 Ta. 193; 9 Cow. R. 271; 1 Ohio R. 190; 3
Id. 107; 3 Pick. R. Mass. 52.... 21 Mass. R. 464; 2 Hill's R. 105.......
34 Kent's Com. 471....
4 Coke, Litt. 30, a; 2 Black. Com. 130; 4 Kent's
Com. 35........5 Id.
•
•
6 4 Kent's Com. 37.
WARRANTY DEED-
533
ELEMENTS.
ment, private and apart from her husband, according to certain
forms prescribed.
There is no right of dower where the seizen of the husband
has only been instantaneous, as where the same transaction in
which he acquires title takes the estate out of him; as where he
purchases land, and at the same time mortgages back to secure
the purchase-money, the wife will only become entitled to dower,
subject to this purchase-money mortgage.'
§ 689.-8. In Testimonium Clause. This is the concluding
clause of the deed, and is substantially according to the follow-
ing:
"In testimony whereof, the said party of the first has here-
unto set his hand and seal the day and year first above written."
§ 690-9. Execution. This act consists of signing, sealing,
attesting, and, for the purpose of fitting it for registry, acknowl-
edging the deed.
1. Signing. This means, properly, that the seller or
grantor should write his name in the usual way, in the proper
place, and with ink. If the grantor cannot write his
may merely make his mark thus:
his
name,
JOHN SMITH.
mark.
he
2. Sealing.-The seal is properly a piece of paper wafered
If there
on, or sealing wax pressed on at the right of the name.
are more signers than one, a seal should be placed opposite of
each name, including the wife's name releasing her dower.
In the New England States generally, and in New York,
nothing else but a seal satisfies the legal requirement In many
of the Southern and Western States, a scrawl, intended for a
seal, usually made by writing the word "Seal" within a square
or diamond, is regarded in law as a seal.²
3. Attestation.-It is usual and proper that the execu-
tion of the deed should be attested by witnesses. In some of the
States, two witnesses are required by statute. In New York,
one is enough. In the greater number, witnesses are not abso-
1 Gammon v Freeman, 31 Maine R. 243; Eslava v. Lepretre, 21 Ala. R. 504;
Holbrook v. Finney, 4 Mass. R. 563; 14 Id. 351; Stow v. Tifft, 15 Johns. R. 458;
15 Peters' U. S. R. 21.
2 Parsons' Laws of Business, 434.
534
CONVEYANCES.
REAL ESTATE
lutely required by the statutes, nor by strict law of any kind ;
but even there it is usual and safer to have them.'
The witness to a deed should be of sufficient age and under-
standing, but may be a minor. He should have no interest in
the deed. Hence a wife is not a proper witness of a deed to her
husband.2
4. Acknowledgment.-Although neither witnessing nor
acknowledging is an essential part of the execution of a deed, so
as to pass the property as between grantor and grantee, yet,
where the statutes, as they do in most of the States, require both
to be done before the deed can be recorded, for this purpose
they become a necessary part of the execution.
The deed will pass the title to the land without these steps,
as against the grantor and his heirs and devisees; but it will be
void as to subsequent purchasers and mortgagees in good faith,
whose deeds or mortgages are first recorded. Notice of the deed.
to the subsequent purchaser or mortgagee, previous to his pur-
chase, will destroy his pretensions to good faith. For the regis-
try is only constructive notice, and cannot be superior to actual
notice, of the rights of the grantee.
By the statute law of every State in the Union, all deeds and
conveyances of land are required to be recorded, upon previous
acknowledgment or proof.³
The acknowledgment is made by the grantor before a person.
qualified by law to receive acknowledgments, the grantor exhib-
iting the deed to such officer, and stating that its execution is
his free act and deed. The officer then affixes to the deed his
certificate of the acknowledgment, giving the date, and signs it
officially. Justices of the peace, notaries public, commissioners
of deeds, mayors and recorders of cities, and, usually, judges
of the supreme and county courts, are authorized to do this
business.
As the statutes of the several States differ somewhat from
each other with regard to the officers before whom acknowledg-
ments of deeds and mortgages may be taken, so as to prepare
them for recording, it will be necessary to consult the local stat-
utes on the subject in order to be sure that the instrument is
¹ Parsons' Laws of Business, 434.
2 Id………. 3 4 Kent's Com. 456.
WARRANTY DEED-ELEMENTS.
535
fitted for record before its acceptance by the grantee or mort-
gagee.
The register has no right to put the deed or mortgage on
record, unless it is properly acknowledged. The business man
should be exceedingly cautious, therefore, that this part of the
execution has been properly performed in every particular; for
the record is no notice to third persons, if the acknowledgment
is found to be defective.
If the land conveyed is situated in another county from that
in which the acknowledgment is taken, so that it is necessary to
have the instrument recorded there, the county clerk's certifi-
cate, of the county where taken, is necessary, to verify the official
character and the genuineness of the signature of the officer be-
fore whom it is taken. These remarks apply, however, only to
cases where the officer is a commissioner of deeds, justice of the
peace, or county judge not of the degree of counsellor-at-law.
If the land is situated in another State, the acknowledgment
should be made before a commissioner of deeds appointed by
that State, residing in the State where the instrument is executed.
Where the instrument has been otherwise properly executed
except the acknowledgment, the statute of the State in which
the execution takes place must be consulted as to the necessary
steps to be taken to authenticate it for record.
§ 691.-10. Delivery. The deed must be delivered—that is,
handed over by the grantor or some person acting in his behalf,
to the grantee or some one acting for him. It must be done in
such a manner as to deprive the grantor of the right to recall it
at his option. The delivery may be absolute, or conditional.
1. Absolute.-An absolute delivery is one which is com-
plete upon the actual transfer of the instrument from the pos-
session of the grantor.
2. Conditional.-A conditional delivery is one which
passes the deed from the possession of the grantor, but is not to
be completed by possession in the grantee or his agent, until the
happening of a specified event. As, if I am grantor, and you
grantee, the deed is delivered to Brown, to be handed over to
you on your paying five thousand dollars. In such case, the
deed is called an escrow. An escrow has no effect as a deed,
536
CONVEYANCES.
REAL ESTATE
until the condition is performed; and it takes effect only from
the second delivery, when the transmission of title becomes com-
plete.¹
But to complete a delivery, whether absolute or conditional,
acceptance must take place, which may be presumed from the
grantee's possession of the deed.²
PART II.—QUIT-CLAIM DEED.
§ 692. The elements of a quit-claim deed, including release
of dower, are the same as those of a warranty deed, with the ex-
ception of the covenants. The language of the two instruments.
is much the same, with the exception just stated, as will be seen
by reference to the forms of blanks which are in common use.
The operative words are "remise, release, and forever quit-
claim." 3
Covenants of warranty against incumbrance are sometimes
added.
PART III-MORTGAGE.
§ 693.-1. Definition.-A mortgage is the conveyance of an
estate by way of pledge for the security of debt, and to become
void on the payment of it. The mortgagor remains the actual
owner, until he is debarred by his own default or by judicial
decree.
The parties to a mortgage are generally called the mortgagor
and mortgagee. The mortgagor is the one who makes the mort-
gage, and the mortgagee, the one to whom the mortgage is
made; the former being the grantor, and the latter the grantee.
§ 694.-2. Usual Form.-The usual form of a mortgage is a
deed, with terms purporting to convey the land absolutely, fol-
lowed by other terms, expressing that the conveyance is to be
•
121 Wend. R. 267; 1 Barb. R. N. Y. 500; 6 Wend. R. 666...
Mass. R. 518; 2 Ala. R. 136; 11 Id. 412... 3 Thornton's Conv. 44.
2 4 Pick.
REGISTRY OF
537
void if the grantor pays a certain sum. This condition is called
the defeasance.
A power of sale, in case of default, is usually inserted, which
enables the mortgagee to enforce payment.
The mortgage may be made either with or without a personal
promise to pay the debt. If no such promise is expressed, the
mortgage does not render the mortgagor liable for the sum se-
cured, but only gives a lien on the property. It is usual, not
only to insert a covenant in the mortgage to pay the debt, but
to give a bond or note for it, and to recite the fact in the mort-
gage, and state that the mortgage is given as collateral to the
personal security.
§ 695.-3. Insurance Clause.-Where a considerable part of
the value of the mortgaged premises consists in buildings, it is
usual to provide that the mortgagor shall keep them insured in
a specified sum and assign the policy to the mortgagee. This is
called the insurance clause.
§ 696.-4. Interest Clause.-A mortgage in which the prin-
cipal or interest is payable in instalments, may contain a provi-
sion that in case of any default, the mortgagee may elect to
require payment of the whole interest and principal at once.
This provision is usually termed an interest clause. (See Ab-
bott's Clerk's and Conveyancer's Assistant, 3d ed., p. 545.)
PART IV.-REGISTRY.
§ 697. After proper execution and delivery, every deed and
mortgage should be recorded. For this purpose there are regis-
try laws in every State, and registry offices or buildings, gener-
ally secure from fire, where the records of real estate titles are
kept. For safety of the partics interested, every instrument con-
veying real estate should be recorded in the proper office imme-
diately after the transfer of the papers. We will consider the
effect of registry.
698-1. As between the Parties. As between the imme-
diate parties to the conveyance, registry is not necessary to con-
vey the title. The deed is perfectly good without it, as against
538
REAL ESTATE CONVEYANCES.
the grantor and his representatives. Yet there are other reasons.
why every prudent business man will have this class of papers.
recorded. It secures him against the loss of his papers, their
destruction by robbery or fire, and, in case he wishes afterwards.
to dispose of his interest, he can point to a complete chain of
title on the record.
§ 699.-2. As to Third Persons.-These are of two classes,
so far as their interests are concerned, in the genuineness of the
grantor's title to the premises. They are these :
1. Having Knowledge of the Transfer.-We have
said that a deed not recorded is just as good as if it had been
recorded, as against the grantor and his heirs or representatives.
It is also good against any parties, or the heirs of any parties,
who take the land from the grantor by a subsequent deed, even
for a full price, if they have knowledge or notice, at the time of
their purchase, of the existence of the prior and unrecorded deed.
2. Having no Knowledge of the Transfer:
But if the deed or mortgage is not recorded, and no notice is
given to the purchasing party of its existence, and he has no
knowledge of it, he will be protected in the purchase of the
premises though they may have been previously conveyed to
another.
Thus, the leading object of the registry appears to be, to give
notice to all whom it may concern, of the exact condition of the
grantor's title. The registry gives certainty and notoriety to the
title, and the purchaser can ascertain about it before he takes it.
§ 700.-3. When Registry Complete.-Every properly ex-
ecuted and acknowledged deed and mortgage is considered as
recorded as soon as it is in the hands of the recording officer;
and therefore he generally minutes upon it the day, hour, and
minute when it was received by him.
This may be very important; for if I make my deed and de-
liver it to you, and you present it for record five minutes past
noon, and my creditor attaches the same estate at four minutes
past noon of the same day, you lose the land and my creditor
gets it. But you save it, if you present it to the office three
minutes and fifty seconds after noon.
REAL
539
ESTATE CONVEYANCES.
NOTE. As to the forms of deeds, it will be necessary for the student to con-
sult the statute of the State in which the deed is to be made. In some of the
Western States, very short forms, consisting of but five to eight lines exclusive
of the description, are used and authorized by statute. The forms which are
given in this work are such as are generally used in the State of New York,
and which would probably be regarded as valid anywhere, though in some
States unnecessarily lengthy.
APPENDIX.
THIS work has already been extended quite beyond the limits
originally designed by the author. As stated in the Preface, its
chief purpose is to teach the subjects embraced in it. In adher-
ing to this purpose, it is thought unnecessary to include more
than a very limited number of Forms-simply sufficient to illus-
trate the subjects embraced in the text. Should it hereafter be
thought essential to the usefulness of the work, other forms can
at any time be added.
Books of Forms can be found on the shelves of every lawyer's
library, and Blank Forms in nearly every bookstore. Anything
like an extended variety included here, would swell the book to
a size altogether objectionable in the minds of those classes of
persons for whose use it is chiefly intended.
FORMS.
NO. XI.-INLAND BILL OR DRAFT.
$1,000.
ROCHESTER, July 1, 1871.
Thirty days after sight, pay to the order of EDWARD C. TOWNSEND, one
thousand dollars, value received, and charge the same to account of
ROBERT C. SPENCER.
IVISON, BLAKEMAN, TAYLOR & Co.,
New York.
[For Form of Foreign Bill, see page 60.]
$300.
NO. XII.-NOTE NEGOTIABLE BY INDORSEMENT ONLY.
ROCHESTER, July 1, 1871.
Six months after date, I promise to pay to the order of G. A. GASKILL, three
hundred dollars, with interest.
LOUIS L. WILLIAMS.
$1,000.
NO. XIII.-NOTE NEGOTIABLE WITHOUT INDORSEMENT.
ROCHESTER, July 1, 1871.
Sixty days after date, I promise to pay HENRY B. BRYANT, or bearer, one
thousand dollars, value received.
WILLIAM JACKSON.
1
APPENDIX.
541
$1,000.
NO XIV. -JOINT AND SEVERAL NOTE.
ROCHESTER, July 1, 1871.
Three months after date, we jointly and severally promise to pay ROBERT
C. SPENCER, or bearer, one thousand dollars, value received.
HENRY B. BRYANT,
CALVIN TOWNSEND.
$500.
NO. XV.-NOTE NOT NEGOTIABLE.
ROCHESTER, July 1, 1871.
Ten days after date, I promise to pay JULIUS L. TOWNSEND, five hundred
dollars, value received.
EDWARD C. TOWNSEND.
NO. XVI.—PROTEST OF PROMISSORY NOTE.
STATE OF NEW YORK,
Monroe County.
}
SS.:
I, JOHN M. DUNNING, one of the Notaries Public in and for the County
aforesaid, duly commissioned and sworn, Do hereby Certify, that on the first day
of July, in the year of our Lord one thousand eight hundred and seventy-one,
at the request of RICHARD NELSON, I did present the original note which is
hereunto annexed, and demanded payment thereof of the Maker, which was
refused.
Whereupon I, the said Notary, did PROTEST, and by these Presents do pub-
licly and solemnly Protest, as well against the Maker and Indorser of the said
note, as against all others whom it doth or may concern for Exchange, Re-
exchange, and all Costs, Damages and Interest, already incurred or to be here-
after incurred, for want of payment of the said note.
And I do further Certify, That on the same day and year above written, due
notice of the foregoing Protest (by notice partly printed and partly written.
signed by me) was given to the Indorser thereon by depositing notice in the
Post Office at Rochester, N. Y., postage paid, directed as follows:
ROBERT C. SPENCER,
Milwaukee,
Wisconsin,
the above-named place being the reputed place of residence of the person to
whom the notice was directed, and the. Post Office nearest thereto.
Thus done and Protested, in the City of Rochester, the day and year first
above mentioned.
In Testimony Whereof, I have hereunto set my hand and affixed my seal
of office.
JOHN M. DUNNING,
Notary Public.
542
APPENDIX.
$500.
(NOTE PROTESTED.)
ROCHESTER, June 28, 1870.
For value received, I promise to pay GEORGE BROWN or order, five hundred
dollars, with interest, one year from date.
EDWARD P. HEALD.
The above note is supposed to be indorsed across the back by GEORGE
BROWN, the payee, and delivered to ROBERT C. SPENCER, who indorses his
name on the back also, and sells it to RICHARD NELSON. If NELSON intends to
hold BROWN, the first indorser, responsible, the proper notice must be served
on him.
[For Form of Protest of a Bill of Exchange, see page 110.]
NO. XVII.—NOTICE GIVEN ON THE DISHONOR OF THE NOTE.
ROCHESTER, N. Y., July 1. 1871.
Please Take Notice, That a promissory note, made by EDWARD P. HEALD,
dated June 28, 1870, payable to GEORGE BROWN or order, one year from date,
for five hundred dollars, with interest, and indorsed by you, was this day PRO-
TESTED for non-payment, the same having been duly presented and payment
demanded, which was refused. The holder, therefore, looks to you for payment
thereof.
TO ROBERT C. SPENCER,
Milwaukee,
Wisconsin.
Yours, &c.,
JOHN M. DUNNING,
Notary Public.
$500.
NO. XVIII. JUDGMENT NOTE.
For value received, I promise to pay to SILAS S. PACKARD, or order, five
hundred dollars, three months from date; and I hereby nominate, constitute
and appoint the said SILAS S. PACKARD, or any attorney-at-law of this State,
my true and lawful attorney, irrevocable, for me and in my name to appear at
any court of record of this State, at any time after the above promissory note
becomes due, and to waive all process and service thereof, and to confess judg-
ment in favor of the holder hereof, for the sum that may be due and owing
hereon, with interest and costs, and waiving all errors, &c.
In Witness Whereof, I have hereunto set my hand and seal, at Rochester,
N. Y., this first day of July, 1871.
Sealed and delivered
JOHN B. STILLMAN.
SEAL.
in presence of
JULIUS L. TOWNSEND.
NOTE.-In some of the Western States, judgment can be entered on such a note as the
above, if not paid at maturity.
APPENDIX.
543
No. 10.
NO. XIX.-BANK CHECK.
ROCHESTER, N. Y., July 1, 1871
STAMP.
$100.
FIRST NATIONAL BANK,
Pay to ROBERT C. SPENCER, or Bearer, One Hundred Dollars
LOUIS L. WILLIAMS.
NO. XX.-ASSIGNMENT OF JUDGMENT.
This Indenture, Made the first day of July, in the year of our Lord one
thousand eight hundred and seventy-one, between JOHN C. BRYANT, of the City
of Buffalo, State of New York, of the first part, and WILLIAM H. SADLER, of
the City of Baltimore, State of Maryland, of the second part,
Whereas, The said party of the first part, on the first day of May, in the year
one thousand eight hundred and seventy-one, recovered judgment in the
Supreme Court of the State of New York, at the Court-house in the City of
Rochester, in the State aforesaid, against JOHN R. CARNELL, of the City of Troy.
State of New York, for the sum of Eleven Hundred Dollars damages, and the
costs of suit, One Hundred and Fifteen Dollars :
Now this Indenture Witnesseth, That the said party of the first part, in con-
sideration of one thousand and one hundred dollars to him duly paid, has sold,
and by these presents does assign, transfer, and set over unto the said party of
the second part, and his assigns, the said judgment and all sum and sums of
money that may be had or obtained by means thereof, or on any proceedings to
be had thereupon. And the said party of the first part does hereby constitute
and appoint the said party of the second part, and his assigns, his true and
lawful attorney, irrevocable, with power of substitution and revocation, for the
use, and at the proper costs and charges of the said party of the second part, to
ask, demand and receive, and to sue out executions, and to take all lawful ways
for the recovery of the money due or to become due on the said judgment; and
on payment, to acknowledge satisfaction or discharge the same. And Attorneys
one or more under him for the purpose aforesaid, to make and substitute, and
at pleasure to revoke; hereby ratifying and confirming all that my said attorney
or substitute shall lawfully do in the premises. And the said party of the first
part does covenant that there is now due on the said judgment the sum of
twelve hundred and twenty-nine dollars and seventeen cents, and that he will
not collect or receive the same, or any part thereof, nor release or discharge the
said judgment, but will own and allow all lawful proceedings therein, the said
party of the second part saving the said party of the first part harmless of and
from any costs in the premises.
In Witness Whereof, The party of the first part has hereunto set his hand
and seal the day and year first above written.
Sealed and delivered
in presence of
HENRY C. SPENCER.
JOHN C. BRYANT.
SEAL.
544
APPENDIX.
STATE OF NEW YORK,
Monroe County,
}
SS.:
On this first day of July, A. D. 1871, before me, the subscriber, a Notary
Public in and for said County, personally appeared JOHN C. BRYANT, to me
known to be the same person described in and who executed the above instru-
ment, and acknowledged that he executed the same.
JOHN M. DUNNING,
Notary Public.
NO. XXI.-BILL OF SALE.
Know all Men by these Presents, That I, LEVI A. GRAY, of the City of Port-
land, State of Maine, of the first part, for and in consideration of the sum of five
hundred dollars, to me in hand paid, at or before the ensealing and delivery of
these presents, by JOHN R. CARNELL, of the City of Troy, State of New York,
of the second part, the receipt whereof is hereby acknowledged, have bargained,
sold, granted and conveyed, and by these presents do bargain, sell, grant and
convey, unto the said party of the second part, his executors, administrators and
assigns, the following personal property, to wit: One hundred cane-bottom,
black-walnut chairs, twenty-two white-wood bureaus, twelve mahogany sofas,..
six maple round tables, nine mahogany bedsteads, and fourteen cherry marble-
top washstands, now in my warehouse in the City of Portland aforesaid.
To Have and to Hold the same unto the said party of the second part, his.
executors, administrators and assigns, forever. And I do for myself, my heirs,
executors and administrators, covenant and agree, to and with the said party of
the second part, to warrant and defend the said articles of furniture hereby sold
unto the said party of the second part, his executors, administrators and assigns,
against all and every person and persons whomsoever.
In Witness Whereof, I have hereunto set my hand and seal the first day
of July, in the year one thousand eight hundred and seventy-one.
Signed, sealed and delivered
in the presence of
C. TOWNSEND.
LEVI A. GRAY.
SEAL.
NO. XXII.-ORDINARY MONEY BOND.
Know all Men by these Presents, That I, SILAS S. PACKARD, of the City of
New York, am held and firmly bound unto HENRY B. BRYANT, of the City of
Chicago, State of Illinois, in the sum of two thousand dollars, to be paid to the
said HENRY B. BRYANT, or to his certain attorney, executors, administrators or
assigns.
For which Payment well and truly to be made, I bind myself and my heirs
executors or administrators, jointly and severally, firmly by these presents.
APPENDIX.
545
Sealed this first day of July, in the year of our Lord one thousand eight
hundred and seventy-one.
The Condition of this Obligation is such, That if the above bounden SILAS S.
PACKARD, his heirs, executors, or administrators, shall and do well and truly
pay, or cause to be paid unto the above-named HENRY B. BRYANT, or his certain
attorney, executors, administrators or assigns, the sum of one thousand dollars,
in four equal annual installments of two hundred and fifty dollars each, with
interest on each installment, on the first day of July of each year, until the
whole sum of one thousand dollars and interest is paid, without fraud or delay
then the preceding obligation to be void, otherwise to remain in full force and
virtue.
Sealed and delivered
in presence of
LOUIS L. WILLIAMS.
SILAS S. PACKARD.
SEAL.
NO. XXIII. INDEMNITY BOND.
Know all Men by these Presents, That we, LOUIS L. WILLIAMS, of the City
of Rochester, and JOHN C. BRYANT, of the City of Buffalo, both of the State of
New York, are held and firmly bound unto SILAS S. PACKARD, of the City of
New York, in the sum of one thousand dollars, to be paid to the said SILAS S.
PACKARD, or to his certain attorney, executors, administrators or assigns; for
which payment, well and truly to be made, we bind ourselves, our and each of
our heirs, executors and administrators, jointly and severally, firmly by these
presents. Sealed with our seals. Dated the first day of July, one thousand
eight hundred and seventy-one,
Whereas, The above bounden LOUIS L. WILLIAMS did obtain judgment in
the Supreme Court of the State of New York, at the Court-house in the City of
Rochester, June 1st, 1871, against H. E. HIBBARD, of the City of Boston, Mas-
sachusetts, for the sum of four hundred dollars damages and costs, whereupon
execution has been issued, directed and delivered to the said SILAS S. PACKARD,
Sheriff, commanding him that of the goods and chattels of the said H. E.
HIBBARD, he should cause to be made the damages and costs aforesaid. And
Whereas, certain goods and chattels that appear to belong to the said H. E.
HIBBARD are claimed by WILLIAM R. KIMBERLY, of the City of Philadelphia,
Pennsylvania:
Now, Therefore, The condition of this obligation is such, that if the above
bounden LOUIS L. WILLIAMS and JOHN C. BRYANT shall well and truly save,
keep and bear harmless, and indemnify the said SILAS S. PACKARD, and all and
every person and persons aiding and assisting him in the premises, of and from
all harm, let, trouble, damage, costs, suits, actions, judgments and executions,
that shall or may at any time arise, come, or be brought against him, them, or
any of them, as well for the levying and making sale under and by virtue of
such execution, of all or any goods and chattels which he or they shall or may
35
546
APPENDIX.
judge to belong to the said WILLIAM R. KIMBERLY, as well as in entering any
shop, store, building, or other premises, for the taking of any such goods and
chattels, then this obligation to be void, else to remain in full force and virtue.
Sealed and delivered
in presence of
WILLIAM C. WHITNEY.
LOUIS L. WILLIAMS.
SEAL.
JOHN C. BRYANT.
SEAL.
NO. XXIV.—BOTTOMRY BOND.
Know all Men by these Presents, That I, JAMES WILSON, now Master and
Commander of the ship called the Lizzie Printz, of the burden of about one
thousand tons, now lying at the port of Philadelphia, State of Pennsylvania,
am held and firmly bound unto WILLIAM R. KIMBERLY, of the same place, in
the sum of eight thousand dollars, money of the United States, to be paid to the
said WILLIAM R. KIMBERLY, or to his certain attorney or assigns, for which
payment I bind myself, my heirs and personal representatives, and also the said
ship, her tackel, apparel, and furniture, firmly by these presents. Sealed with
my seal at Philadelphia, this first day of July, A. D. 1871.
Whereas, The above bounden JAMES WILSON has been obliged to take up
and borrow, and has received of the said WILLIAM R. KIMBERLY for the use of
the said ship and for the purpose of fitting the same for sea, the sum of four
thousand dollars, money of the United States, which sum is to be and remain as
a lien and bottomry on the said ship, her tackle, apparel, and furniture, at the
rate or premium of thirty per cent. for the voyage, in consideration whereof all
the risks of the seas, rivers, enemies, fires, pirates, &c., are to be on account of
the said WILLIAM R. KIMBERLY. And for the better security of the said sum
and premium, the said Master doth by these presents hypothecate and assign
over to the said WILLIAM R. KIMBERLY, his heirs, personal representatives, and
assigns, the said ship, her tackle, apparel, and furniture.
And it is Hereby Declared, That the said ship Lizzie Printz is thus hypothe
cated and assigned over, for the security of the money so borrowed and taken
up as aforesaid, and shall be delivered for no other use or purpose whatever
until this bond is first paid, together with the premium hereby agreed to be
paid thereon.
Now the condition of this obligation is such, that if the above bounden
JAMES WILSON shall well and truly pay, or cause to be paid, unto the said
WILLIAM R. KIMBERLY, his certain attorney or assigns, the just and full sum
of four thousand dollars, money of the United States as aforesaid, being the sum
borrowed, and also the premium as aforesaid, at or before the expiration of
twenty days after the arrival of the said ship at the port of Philadelphia, then
APPENDIX.
547
.
this obligation and the said hypothecation to be void and of no effect, otherwise
to remain in full force and virtue.
Sealed and delivered)
in presence of
ROBERT C. SPENCER,
EDWARD C. TOWNSEND.
JAMES WILSON.
SEAL.
NO. XXV.-POWER OF ATTORNEY.
Know all Men by these Presents, That I, CHARLES R. LAKIN, of the City of
Bangor, State of Maine, have made, constituted, and appointed, and BY THESE
PRESENTS do make, constitute and appoint WILLIAM R. KIMBERLY, of the City
of Philadelphia, State of Pennsylvania, my true and lawful attorney, for me and
in my name, place and stead, to collect one thousand dollars and the interest
thereon, due me on two certain promissory notes for the sum of five hundred
dollars each, with interest; the one dated July 1, 1870, payable three months
from the date thereof, to me or my order; and the other bearing same date,
payable to me or my order six months from date, both made by JAMES STIL-
WELL and indorsed by GEORGE BANCROFT.
Also to settle and adjust various items of Book Accounts existing between
me and the said JAMES STILWELL, giving and granting unto my said attorney
full power and authority to do and perform all and every act and thing what-
soever requisite and necessary to be done in and about the premises, as fully to
all intents and purposes as I might or could do if personally present, with full
power of substitution and revocation, hereby ratifying and confirming all that
my said attorney or his substitute shall lawfully do or cause to be done by virtue
thereof.
In Witness Whereof, I have hereunto set my hand and seal the first day
of July, one thousand eight hundred and seventy-one.
CHARLES R. LAKIN.
SEAL.
Sealed and delivered
in presence of
EDWARD PLYMPTON.
STATE OF NEW YORK,
County of Monroe.
}
SS.:
Be it Known, That on the first day of July, one thousand eight hundred and
seventy-one, before me personally appeared CHARLES R. KIMBERLY above
named, who is to me known to be the person described in and who executed
the above Letter of Attorney, and acknowledged the same to be his free act and
deed.
In Testimony Whereof, I have hereunto subscribed my name, the day and
year last above written.
JOHN M. DUNNING,
Notary Public.
548
APPENDIX.
NO. XXVI.
CHATTEL MORTGAGE.
As to whether it is necessary to record a chattel mortgage, and where it is
to be recorded, and the effect of such record, can be ascertained only by consult-
ing the statute of the State in which it is made.
TO ALL TO WHOM THESE PRESENTS SHALL COME:
Know Ye, That I, JAMES H. GOLDSMITH, of the City of Detroit, State of
Michigan, am indebted unto JACOB M. HOWARD, of the same place, in the sum
of eight hundred dollars, being for borrowed money.
Now for securing the payment of the said debt, and the interest thereon from
the date hereof, to the said JACOB M. HOWARD, I do hereby sell, transfer, and
assign to the said JACOB M. HOWARD the property described in the following
schedule, viz. :
One yoke of oxen, four cows, eighty sheep, two span of horses, the one eight
years old each, and the other seven years old each, and one span of mules; also
one lumber wagon, one carryall wagon, one cart, and one mowing machine; all
being now on the farm belonging to me in the town of Ypsilanti, in the County
of Washtenaw, and State aforesaid:
Provided Always, and this Mortgage is on the express condition, that if the
said JAMES H. GOLDSMITH shall pay to the said JACOB M. HOWARD the sum of
eight hundred dollars, with interest thereon as follows, viz.: two hundred dol-
lars in two months; two hundred dollars in four months; two hundred dollars
in six months; and the further sum of two hundred dollars in eight months,
from the date hereof, which the said JAMES H. GOLDSMITH hereby agrees to
pay, then this transfer to be void and of no effect; but in case of non-payment
of the said debt and interest, at the times above mentioned, then the said JACOB
M. HOWARD shall have full power to enter upon the premises of the said party
of the first part, or any other place or places where the goods and chattels afore-
said may be, to take possession of said property, to sell the same, and the avails
(after deducting all expenses of the sale and keeping of the said property) to
apply in payment of the above debt, and in case the said JACOB M. HOWARD
shall at any time deem it necessary for his safety, it shall be lawful for him to
take possession of such property, and to sell the same at public or private sale,
previous to the time above mentioned for the payment of said debt, applying
the proceeds as aforesaid, after deducting all expenses of the sale and keeping
of the said property. If from any cause said property shall fail to satisfy said
debt, interest, costs and charges, I covenant and agree to pay the deficiency.
In Witness Whereof, I have hereunto set my hand and seal the first day
of July, in the year of our Lord one thousand eight hundred and
seventy-one.
JAMES H. GOLDSMITH.
SEAL.
}
Sealed and delivered
in presence of
E. P. HEALD.
APPENDIX.
549
NO. XXVII.-SUBMISSION TO ARBITRATION.
Know all Men by these Presents, That whereas a controversy is now existing
between JOHN MASON, of the City of Rochester, and LOUIS L. WILLIAMS, of the
same place, touching an alleged indebtedness of the latter to the former.
Now, Therefore, We, the said JOHN MASON and LOUIS S. WILLIAMS, do
hereby submit the said controversy to the decision and arbitration of NELSON
L. BUTTON, JOHN B. LOOMIS, and DANIEL HOLBROOK, all of the City of Ro-
chester, or any two of them; and we do covenant each with the other, that we
will in all things faithfully keep, observe, and abide by, the decision and award
that they, or any two of them, may make in writing, in the premises, under
their hands, ready to be delivered on or before the first day of October next.
And it is further agreed by the parties hereto, that the party that shall fail
to keep, abide by, and observe the decision and award to be made according to
the foregoing submission, shall pay to the other the sum of five hundred dollars,
as fixed liquidated damages, and not as a penalty.
Executed mutually by the parties to this submission this first day of
July, one thousand eight hundred and seventy-one.
n presence of CALVIN TOWNSEND.
JOHN MASON.
SEAL.
LOUIS L. WILLIAMS.{
SEAL.
NO. XXVIII.-AWARD OF ARBITRATORS.
To all whom these Presents may Concern, We, NELSON L. BUTTON, JOHN B.
LOOMIS, and DANIEL HOLBROOK, to whose arbitration and award was submitted
the matters in controversy existing between JOHN MASON and LOUIS L. WIL-
LIAMS, of the City of Rochester, as appears more fully by their written submis-
sion, bearing date the first day of July, one thousand eight hundred and seventy-
one.
Now, Therefore, Know ye, that we, the said arbitrators, having been first
duly sworn according to law, and having heard the proofs and allegations of
the parties, and examined the matters in controversy by them submitted, do
make, publish and declare this our award in writing; that is to say, we find
that LOUIS L. WILLIAMS is indebted to JOHN MASON in the just and full sum
of seven hundred and twenty-five dollars.
And we direct and award that LOUIS L. WILLIAMS, within ten days after
service upon him of notice of this award, pay to the said JOHN MASON the said
sum of seven hundred and twenty-five dollars, together with the costs of this
arbitration.
550
APPENDIX.
In Witness Whereof, We have hereunto subscribed these presents this
twenty-fifth day of September, one thousand eight hundred and
seventy-one.
In presence of C. TOWNSEND.
NELSON L. BUTTON.
SEAL.
JOHN B. LOOMIS.
SEAL.
DANIEL HOLBROOK.
SEAL.
NO. XXIX.-A WILL.
I, HENRY BARLOW, of Rochester, State of New York, being of sound mind
and memory, and considering the uncertainty of this frail and transitory life, do
therefore make, publish and declare this to be my last WILL AND TESTAMENT,
that is to say:
First.-After all my lawful debts are paid and discharged, I give and be-
queath unto my wife, MARY BARLOW, the dwelling-house and land connected
therewith, which we now occupy as a homestead, and all the furniture, includ-
ing the piano, pictures, ornaments, carpets, and all other things used by us in
housekeeping in connection therewith; also twenty-five shares in the Flour City
National Bank.
Second. I give to my son SAMUEL, all my real estate in the town of Pitts-
ford, Monroe County, N. Y., and all the stock and implements used for farming
purposes in connection with the same.
Third.-I give to my daughter JULIA, five thousand dollars in cash for her
sole use, and for the use of her heirs, free from the control of her husband.
Fourth.-The residue of my property, real and personal, I give and bequeath
to my unfortunate invalid son WALTER.
Fifth.-I hereby appoint my son SAMUEL to be executor, and my wife MARY
to be executrix, of this my last Will and Testament, hereby revoking all former
Wills by me made.
In Witness Whereof, I have hereunto subscribed my name and affixed
my seal the first day of July, in the year of our Lord one thousand
eight hundred and seventy-one.
HENRY BARLOW.
SEAL.
The above written instrument was subscribed by the said HENRY BARLOW
in our presence, and acknowledged by him to each of us; and he at the same
time declared the above instrument, so subscribed, to be his last Will and Tes
tament; and we, at his request, have signed our names as witnesses hereto, in
APPENDIX.
551
his presence and in the presence of each other, and written opposite our names
our respective places of residence.
JOHN M. DUNNING, 10 Elizabeth Street, Rochester.
CALVIN TOWNSEND, 21 Plymouth Avenue, Rochester.
NELSON L. BUTTON, 27 Tremont Street, Rochester.
Whether a will requires a seal or not depends entirely on the statute of the
State in which it is made. In the State of New York it does not require a seal.
XXX.—WARRANTY DEED-FULL COVENANT.
This Indenture, Made this first day of July, in the year of our Lord one
thousand eight hundred and seventy-one, between RICHARD NELSON, of the
City of Cincinnati, Ohio, of the first part, and HENRY C. SPENCER, of the City of
Washington, District of Columbia, of the second part, Witnesseth, That the said
party of the first part, in consideration of the sum of five thousand dollars to
him duly paid, has sold, and By these Presents does grant and convey to the
said party of the second part, his heirs and assigns, All that Tract or Parcel of
Land situate in the City of Washington aforesaid, known, bounded and de-
scribed as follows, viz. :
[Here describe the land.]
With the Appurtenances, And all the estate, title and interest therein of the said
party of the first part. And the said RICHARD NELSON does hereby covenant
and agree to and with the said party of the second part, his heirs and assigns,
that at the time of the ensealing and delivery of these presents, he is the lawful
owner and is well seized of the premises above conveyed, free and clear from all
incumbrances; that the premises thus conveyed in the quiet and peaceable pos-
session of the said party of the second part, his heirs and assigns, he will forever
Warrant and Defend against any person whomsoever lawfully claiming the
same or any part thereof.*
In Witness Whereof, The party of the first part has hereunto set his hand
and seal the day and year first above written.
Sealed and delivered
in presence of
}
E. G. FOLSOM.
STATE OF NEW YORK,
Monroe County.
}s
SS.
RICHARD NELSON.
SEAL.
On this first day of July, in the year one thousand eight hundred and
seventy-one, before me, the subscriber, personally appeared RICHARD NELSON,
to me known to be the same person described in and who executed the within
instrument. and acknowledged that he executed the same.
JOHN M. DUNNING,
Commissioner of Deeds.
* Any of these covenants may be omitted at the pleasure of the parties.
552
APPENDIX.
NO. XXXI.-
QUIT-CLAIM DEED.
This Indenture, Made this first day of July, in the year of our Lord one
thousand eight hundred and seventy-one, between SAMUEL D. BARR, of Penn
Yan, County of Yates, and State of New York, of the first part, and ANDREW
J. RIDER, of the City of Trenton, State of New Jersey, of the second part, Wit-
nesseth, That the said party of the first part, in consideration of the sum of one
thousand dollars to him in hand paid by the said party of the second part, the
receipt whereof is hereby confessed and acknowledged, has bargained, sold,
remised and Quit-Claimed, and by these presents does bargain, sell, remise and
quit-claim unto the said party of the second part, and to his heirs and assigns
forever, all the following described piece or parcel of land, viz. :
[Here describe the land.]
Together with all and singular the hereditaments and appurtenances thereto
belonging, or in anywise appertaining, and the reversion and reversions, re-
mainder and remainders, rents, issues, and profits thereof, and all the estate,
right, title, interest, claim and demand whatsoever, of the said party of the first
part, either in law or equity, of, in and to the above bargained premises, with
the said hereditaments and appurtenances, to have and to hold the said prem-
ises above described to the said party of the second part, his heirs and assigns,
to the sole and only proper benefit and behoof of the said party of the second
part, his heirs and assigns forever.
!
In Witness Whereof, The party of the first part has hereunto set his hand
and seal the day and year first above written.
Sealed and delivered
in presence of
E. G. FOLSOM.
SAMUEL D. BARR.
SEAL.
[Certificate of Acknowledgment.]
NO. XXXII.-MORTGAGE-INTEREST AND INSURANCE CLAUSE.
This Indenture, Made this first day of July, in the year of our Lord one
thousand eight hundred and seventy-one, between HENRY B. BRYANT, of the
City of Chicago, State of Illinois, of the first part, and LOUIS L. WILLIAMS, of
the City of Rochester, State of New York, of the second part, Witnesseth, That
the said party of the first part, in consideration of the sum of six thousand dol-
lars, has sold, and By these Presents does grant and convey to the said party of
the second part, his heirs and assigns, All that Tract or Parcel of Land situate
in the City of Rochester aforesaid, known, bounded and described as follows,
viz. :
[Here describe the premises.]
This Grant is intended as a security for the payment of the sum of six thousand
dollars, with interest, as follows, viz. One thousand dollars, with interest on
the same, on the first day of July in each year until the whole sum of six
APPENDIX.
553
thousand dollars and interest shall be paid, according to the condition of a Bond
this day executed and delivered by the said HENRY B. BRYANT to the said
party of the second part; and this conveyance shall be void if such payment be
made as herein specified. And in case default shall be made in the payment of
the principal sum hereby intended to be secured, or in the payment of the in-
terest thereof, or any part of such principal or interest, as above provided, it
shall be lawful for the party of the second part, his executors, administrators or
assigns, at any time thereafter, to sell the premises hereby granted, or any part
thereof, in the manner prescribed by law, and out of all the moneys arising from
such sale to return the amount then due for principal and interest, together
with the costs and charges of making such sale, and the overplus, if any there
be, shall be paid by the party making such sale, on demand, to the said HENRY
B. BRYANT, his heirs or assigns.
INTEREST CLAUSE.*—And it is hereby expressly agreed, That should any
default be made in the payment of the said interest, or of any part thereof, on
any day whereon the same is made payable as above expressed, and should the
same remain unpaid and in arrears for the space of thirty days, then and from
thenceforth, that is to say, after the lapse of the said thirty days, the aforesaid
principal sum of six thousand dollars, with all arrearage of interest thereon,
shall, at the option of said party of the second part, his executors, administrators
or assigns, become and be due and payable immediately thereafter, althoughı
the period above limited for the payment thereof may not then have expired,
anything herein before contained to the contrary thereof in anywise notwith-
standing.
INSURANCE CLAUSE.*—And it is also agreed by and between the parties to
these presents, that the said party of the first part shall and will keep the build-
ings erected and to be erected upon the lands above conveyed, Insured against
Loss and Damage by Fire, by insurers, and in an amount approved by the said
party of the second part, and assign the policy and certificate thereof to the said
party of the second part; and in default thereof, it shall be lawful for the said
party of the second part to effect such insurance, as mortgagee or otherwise, and
the premium or premiums paid for effecting and continuing the same shall be a
lien on the said mortgaged premises, added to the amount secured by these
presents, and payable on demand, with interest at the rate of seven per cent.
per annum.
In Witness Whereof, The party of the first part has hereunto set his hand
and seal the day and year first above written.
Sealed and delivered Į
in presence of
WILLIAM A. FADDIS.
HENRY B. BRYANT.
SEAL.
[Certificate of Acknowledgment.]
*Clauses that may be omitted at the option of the parties.
554
APPENDIX.
NO. XXXIII.-BOND SECURED BY MORTGAGE.
Know all Men by these Presents, That I, HENKY B. BRYANT, of the City of
Chicago, State of Illinois, am held and firmly bound unto LOUIS L. WILLIAMS,
of the City of Rochester, State of New York, in the sum of twelve thousand
dollars, to be paid to the said LOUIS L. WILLIAMS, his executors, administrators,
heirs or assigns, for which payment I hereby bind myself, my heirs, executors
and administrators firmly by these presents.
Sealed with my seal this first day of July, in the year one thousand eight
hundred and seventy-one.
The Condition of the above Obligation is such, That if I, the said HENRY B.
BRYANT, or my heirs, executors or administrators, shall pay, or cause to be paid,
unto the said LOUIS L. WILLIAMS, the sum of six thousand dollars, with interest
as follows, viz.: One thousand dollars, with interest on the same, on the first
day of July in each year, from the date hereof, until the whole sum of six
thousand dollars and interest shall be paid, then the above obligation shall be
void, otherwise it shall remain in full force.
Witness,
ELIZABETH PRINTZ.
HENRY B. BRYANT.
SEAL.
Instead of a bond like the foregoing to accompany the mortgage, a note like
the following may be given :
$6,000.
Secured by Mortgage.
NO. XXXIV.-MORTGAGE NOTE.
For value received, I promise to pay LOUIS L. WILLIAMS or order, six
thousand dollars, as follows: One thousand dollars, with interest on the
same, on the first day of July each year hereafter until the whole sum
shall be paid.
HENRY B. BRYANT.
ROCHESTER, July 1, 1871.
When a mortgage has been paid, it should be discharged, and the instrument
discharging it should be recorded. As to the form necessary for this purpose,
the statute of the State in which the mortgage is recorded must be complied
with. It usually prescribes the formalities also, to be adopted to prepare the
instrument for record.
The following form of discharge is sufficient in several of the Western States,
and also in Massachusetts, to be written on the mortgage, and recorded on the
margin of the record also:
NO. XXXV.-MORTGAGE DISCHARGE.
ANN ARBOR, MICHIGAN, July 1, 1872.
I have received full satisfaction of the debt secured by this mortgage, and
hereby cancel and discharge the same.
JAMES H. GOLDSMITH.
APPENDIX.
555
The form of mortgage herewith given is on premises situated in the State
of New York, and the following form of Discharge is sufficient for that State :
NO. XXXVI.-MORTGAGE DISCHARGE.
I, LOUIS L. WILLIAMS, of the City of Rochester, State of New York, hereby
certify that a certain mortgage, bearing date the first day of July, in the year
of our Lord one thousand eight hundred and seventy-one, made and executed
by HENRY B. BRYANT to me, and recorded in the Office of the County of Monroe,
in Liber 104 of Mortgages, upon page 176, on the 1st day of July, 1871, is paid,
ratisfied, and discharged.
Dated the 10th day of December, 1872.
In presence of
GEORGE W. ELLIOTT.
LOUIS L. WILLIAMS.
Mortgages are assignable. The following form of Assignment is sufficient
when indorsed on the mortgage:
NO. XXXVII.-ASSIGNMENT OF MORTGAGE.
In consideration of one thousand dollars, to me in hand paid by GEORGE
SMITH, of the City of Rochester, State of New York, I do hereby sell, assign,
transfer, and set over unto the said GEORGE SMITH the within indenture of
mortgage, together with the bond accompanying the same, for his use and
benefit, hereby authorizing him to collect the money due on the same in my
name or otherwise, but at his own cost and charges, covenanting that the sum
of one thousand dollars, besides interest, is now due thereon.
Executed this 10th day of July, 1871.
In presence of
SAMUEL D. Barr.
LOUIS L. WILLIAMS.
SEAL.
[Here follows the Acknowledgment.]
NO. XXXVIII.-LEASE.
A Lease, Made and executed between LOUIS L. WILLIAMS, of the City of
Rochester, State of New York, of the first part, and JOHN D. ODELL, of the City
of Toronto, Canada, of the second part, the first day of July, in the year of our
Lord one thousand eight hundred and seventy-one.
In Consideration of the rents and covenants hereinafter expressed, the said
party of the first part has demised and leased, and does hereby demise and lease
to the said party of the second part, the following premises, viz. :
The two-story brick dwelling-house, known as Number 10 Elizabeth Street,
in the City of Rochester aforesaid, with the privileges and appurtenances, for
556
APPENDIX.
and during the term of three years and nine months from the date hereof, which
term will end April 1st, 1875. And the said party of the second part covenants
that he will pay to the party of the first part, for the use of said premises, the
yearly rent of six hundred dollars, to be paid quarterly in advance, on the first
days of July, October, January and April of each year.
* Also that this lease shall not be assigned, nor the said premises, or any
part thereof, underlet, without the written consent of the said party of the first
part, or his legal representatives, under penalty of forfeiture.
And that all repairs of a temporary character, deemed necessary by said party
of the second part, shall be made at his own expense, with the consent of the
said party of the first part, or his legal representatives, and not otherwise.
And Provided said party of the second part shall fail to pay said rent, or any
part thereof, when it becomes due, it is agreed that said party of the first part
may sue for the same, or re-enter said premises, or resort to any legal remedy.
The party of the second part agrees to pay all yearly city and county taxes
to be assessed on said premises during said term.
The party of the second part covenants that at the expiration of said term, he
will surrender up said premises to the party of the first part in as good condition
as now, necessary wear and damage by the elements excepted.
Witness the hands and seals of the said parties, the day and year first
above written.
In presence of
CHARLES B. LAKIN.
LOUIS L. WILLIAMS.
SEAL.
JOHN D. ODELI..
SEAL.
NO. XXXIX.-SHORT LEASE FOR ONE YEAR.
I, GEORGE W. ELLIOTT, of the City of Rochester, State of New York, hereby
lease to JULIUS L. TOWNSEND, of the same place, for the term of one year, to
commence on the first day of January next, the dwelling-house numbered 18
Washington Street, in the City of Rochester aforesaid, with the appurtenances,
for the yearly rent of four hundred dollars, to be paid quarterly, one hundred
dollars each payment, on the first days of April, July, October and January.
Said JULIUS L. TOWNSEND agrees to pay GEORGE W. ELLIOTT said rents at
the times above specified, and to surrender the premises at the expiration of the
term in as good condition as reasonable use will allow, fire and unavoidable
casualties excepted.
In Witness Whereof, the said parties have hereto set their hands this 15th
day of December, A. D. 1871.
GEORGE B. ELLIOTT,
JULIUS L. TOWNSEND.
* Either or both of the clauses following this star, may be omitted at the pleasure of the
parties.
#
INDEX.
[The reference figures apply to sections, except when otherwise indicated by a mark for pages.]
A.
Abandonment to Insurer.
What it signifies, 574. What the object of, 574. Necessity of, 575. Right
of, 575.
"Oue-third new for old," meaning of, 575. When the right
of, complete, 576. Who has the right of, 577. How it should be done,
577.
Of cargo, 578. Of freight, 579. Revocation of, 580. When may
be annulled, 580.
Acceptance of Charter.
Necessary to give it effect, 239. How may be inferred, 239. Must be un-
conditional, 239.
Acceptance of Proposition.
When it completes contract, 33. When should be signified, 33. How may
be signified, 33. Must be in the terms of the proposition, 33. When
the law presumes, 33.
Acceptance of Bill of Exchange.
Presentation for, 137. How to be made, 138. Effect of, 138. Makes ac-
ceptor the principal debtor, 138. Drawee's duty as to, 139. When
promise of, equivalent to, 139. What kind of, holder may demand, 139.
For honor, 140. Object of accepting for honor, 140. What is such
acceptance, 140.
Acceptor.
What should be satisfied of, before paying, 158. What he is bound to
know, 158. When he may make payment to any one, 158.
Accommodation Paper.
Its nature and uses, 169. Duty of party accommodated, 169. Rights of the
accommodating party, 169. If accommodating party pays, how he must
bring suit, 169.
Act of God.
Meaning of, 526. Common carriers are not liable for loss by, 526. Illustra
tions of loss by, 526.
Act of Man.
Wherever traceable, carrier liable for loss, 526. But not for loss by public
enemies, 526.
Act of Incorporation.
What is a general, 249. Done by general statute, 249. For private com
panies, 249. What is now generally introduced into, 276.
558
INDEX.
Agency.
What it is, 180. What founded on, 180.
modes of creating, 183, 184, 185, 186.
Advantages of, 181. Different
Classes of, 187. Limits of au-
Agent.
thority by general, 187; By special, 187. What may be, and what
may not, 189.
Various modes of terminating, 206, 207. Subject-
matter of, 189.
!
What is an, 196. Who may be, 196. Who may not be, 196. Appointment
of, 197. By whom appointed, 197. When he may, and when not
delegate his authority, 198. Duties of, 199. Must obey instructions,
199. When may deviate from instructions, 199. What skill and dili
gence, bound to exercise, 199. To act in principal's name, 199. When
may act in his own name, 199. Bound to keep accounts, 199. To
deposit principal's money, 199. To insure principal's property, when,
199. How governed by usage of trade, 199. To make report to prin-
cipal, 199. Must have no interest adverse to principal's, 199. Liabili
ties of, to principal, 201. To third persons, 202. First, on contracts,
202. Second, for torts, 202. Rights of, as to principal, 203. As to
third persons, 203. Extent of authority of general agent, 204. Of
special agent, 204. Execution of authority of, by whom, 205. In what
manner, 205. In what time, 205.
Alien.
What is, 6.
Alien Belligerency.
Condition of incompetency to make contracts, 6.
Analysis of.
Contracts..
Negotiable Paper..
•
PAGE
1, 2, 3
55, 56
Agency.
•
.125, 126
Partnership..
.165, 166
Corporations.
.198, 199
Guaranty..
.229, 230
Sale of Chattels ..
.248
Right of Stoppage in transitu.
268
Payment....
276, 277
The Law of Tender...
292
Liens..
Interest and Usury.
•
Contracts of Affreightment..
The Law of Bailment, Part I..
66
Marine Insurance.
•
Part II...
Fire Insurance.
Life Insurance.
•
Arbitration...
Distribution of Estates of Persons Deceased, Part I..
(6
Real Estate Conveyances.
Part II..
•
•
..304
.315, 316
335, 336
...358, 359
.388, 389, 390
.434, 435
.463
.477
489
•
.501
.516
522
INDEX.
559
Animals.
No usury attaches to loan or sale of, 410. When pledgee may use pledgeor's,
493. When pledgeor liable for expenses incurred for, 494.
Application of Payments.
When debtor may direct as to, 367. When creditor may direct, 368. Limit-
ation of creditor's power as to, 369. Rule governing when neither party
directs, 370. Evidence of either party's intention as to, 371. Time of
making, 372. Cannot change after making, 373. Rules followed by
the courts in making, 375.
Application for Marine Insurance.
Generally made in writing, 542. What facts should disclose, 564, 565.
What need not contain, 567.
Application for Fire Insurance.
What it usually embraces, 589. Questions and answers contained in, 589.
Becomes part of the contract of insurance, 589.
Application for Life Insurance.
What it generally contains, 602. Statement as to health, 603. Contains
questions to be answered by the applicant, 604. Importance of correct
answers in, 605, 614. Medical examination attached to, 607, 608.
Arbitration.
General view of the subject of, 627. Elements of, 628-632. Proceedings
of arbitrators on, 633-639. Award in cases of, 641-649.
award in cases of, 650-654.
Articles of Copartnership.
Revocation of
In what cases should be adopted, 218. Advantages of having, 218.
Assent, Mutual.
Required in all contracts, 33. Of what it consists, 33. Immaterial how
indicated, 33. May be verbal or written, 33.
Assignment of Policy.
When may be made, 598, 626. What is, 626.
Attorney.
What is, 188. Kinds of, 188. Duties and rights of attorneys-in-law, 188,
What is an attorney-in-fact, 188. What his authority called, 188.
Who may be such attorney, 188. Need not be a member of the bar,
188.
Auction Sales.
Terms need not be written and signed by parties, 57, 74. Duties of auc-
tioneer in such cases, 74.
Authority.
Limit of, by general agent, 187. By special agent, 187. One who deals
with agent having special authority should know its extent, 187.
Upon what, extent of, depends, 204. When special agent exceeds,
principal not bound, 204.
560
INDEX.
Average, General.
Definition of, 422. In what cases may be required, 423. What goods con-
tribute, 424. What goods exempt from, 425. Mode of contribution
under, 426. Payment of, 427. Rule of, as to carriers, 534. Rule of, in
marine insurance, 581.
B.
Baggage.
Innkeepers bound to take care of, for guests, 522. Cannot avoid responsi
bility by refusal to take care of, 522. Bound to take extraordinary care
of, 522. What is, for travelers, 537, 538. What is not, 537. Common
carriers bound to receive and take care of, 537. Proprietors of lines of
conveyance are liable for, as common carriers, 537. Common carrier,
insurer of, 538. Payment of fare includes payment for, 538. Passenger
entitled to have it safely kept if fare is not paid, 538. Common carrier
cannot screen himself from loss of, by giving notice, 538.
Bailment.
In what it consists, 438.
Degrees of diligence
contract falls, 441, 446.
by classes, 446.
Deposit, definition of, 447.
required, 452. Duties
Return of deposit, 456.
Mandate, definition of, 460.
Must have all the elements of a contract, 438.
required, depending on the orders into which the
What is meant by orders, 445. What is meant
Requisites of, 447-451. Degrees of diligence
of depositary, 453. Demand by depositor, 455.
Depositary's rights, 456. Revocation of, 459.
Essentials of the contract of, 461. Considera-
tion in case of, 462. Mandataries' liabilities, 463. Diligence required,
464. Responsibility for skill, 465, 466. Misuser by mandatary, 467.
Mandatary's interest, 468. He must render account to mandator, 469.
Disbursements by mandatary, 470. Restoration by mandatary, 471.
How contract of, dissolved, 473.
Security for debt, 488.
Pledgee has special
When he may
How he may
Pledgee's
Gratuitous Loans, 476. Duties and rights of lender and borrower, 475-484.
Revocation of contract of, 485.
Pledge or Pawn, definition of, 486. Parties to, 487.
Subject-matter, 489. Delivery of pledge, 490.
property in, 491. Has the right to the increase, 492.
use the pledge, 493. His rights as to expenses, 494.
forfeit his title to pledge, 495. Diligence required, 496.
right of sale, 497. Must render account, 498. Pledgeor's right of
redemption, 499. How contract of, extinguished, 500.
Hire of Things, 501. Letting things for compensation, 502. Letting services
for compensation, 502. Elements of this contract, 503. Rights and
duties of letter of things, 504. Rights and duties of hirer, 505. Ex-
tinguishment of the contract, 506.
Hire of Labor and Services, definition of, 507. Special property in bailee,
508. Elements of the contract, 509. Obligations and duties of em-
ployer, 510. By whom losses to be borne, 511. Obligations and duties
of the workman, 512. His responsibility for skill, 513, 514. Part per-
formance, 515.
INDEX.
561
Hire of Custody, definition of, 516. Agistors, 517. Warehousemen, 518.
Forwarding merchants, 519. Wharfingers, 520. Factors and other
bailiffs, 521. Innkeepers, who are, 522. Their duties, liabilities, and
rights, 522.
Hire of Carriage of Goods, by private carriers, 523. Their powers and
duties, 523. Common carriers, who are, 524. Their duties and obliga-
tions, 525. Their liabilities, 526. When their liability begins, 527.
When their liabilities end, 528. Special contracts by common carriers,
529. Special notices by, 539. Effects of fraud by hirer, 531. When
non-delivery of goods by common carrier excused, 532. General rights
of common carriers, 533. The doctrine of average relating to common
carriers, 534.
Common Carriers of Passengers, who are, 536. Their duties and obliga-
tions, 537. Liabilities of, 538. Rights of, 539. Duties of passengers,
540.
Bank Bills.
See Negotiable Paper, page 88.
Barratry.
What is, 555. Produces total loss of property insured, 556. Must happen
during continuance of voyage, 556.
Bills and Notes.
Analysis of, pages 55, 56.
General principles and definitions of, SS 88-97.
Origin of bills, 90, 122. Forms of, 90-95. Meaning of words “at sight,”
91. Elements of, 98. Original parties to, 98. Drawer admits he owes
payee, 98.
Drawer claims that drawee owes him, 98. Acceptor of bill
admits he owes drawer, 98. Subsequent parties, 100, 101. Are condi-
tionally liable, 101, 102. Consideration essential to bill or note, 105.
But need not be expressed, 105. Is implied, 105. Bill or note must be
payable in money, 106. What is meant by money, 106. Treasury
notes are money, 106. They are lawful tender, 106. Payable in Canada
currency, not negotiable, 106. Nor in specific articles, 106. Nor is an
order for goods, 106.
Must be Payable Absolutely, 107. What contingency not admissible, 108.
What contingency admissible, 109. Negotiable words, 110. Effect of
the words "or bearer," 110. Of the words "or order," 110.
Time as an element of, 111. Date not essential to validity of, 111. Pre-
sumption as to date, 111. Maturity of, 112. Presumption as to ma-
turity, 112.
Amount essential to, 114. How expressed, 115. Effect of marginal figures,
written words, discrepancies, omission of words, misspelling, 115. Kinds
of bills, 117. Convenience and use of bills, 118-121. Original parties
to bill, 99. Subsequent parties, 100.
Incidents to bills, 136. Presentation for acceptance, 137. Acceptance of,
138. Manner of accepting, 138. Acceptance for honor, 140. Object of
such acceptance, 140. Non acceptance, 140. Duties of holder if not
accepted, 141. Rights of holder if not accepted, 122, 143. Forms of
notes, 123. Original parties to notes, 123. Elements of notes, 126.
36
562
INDEX.
Joint and several note, 127. Payable on demand with interest, con-
tinuing security, 156.
Check, form of, 128, 129. Effect of certifying, 129. Indorsement of, 130.
Usually presented for payment and not for acceptance, 130.
Bank Bills, 131-134.
legal tender, 132.
Incidents Common to
Kinds of, 146.
Used as money, 131. Are not money, 131. Are not
Are assignable by delivery, 132.
Bills and Notes, 145.
Indorsement, what is, 146.
Transfer, how made, 147. Before maturity, effect of, 148. After maturity,
effect of, 149. Caution required by purchaser of mature note or bill,
149.
Days of Grace, what are, 150. To whom allowed, 150. Origin of, 150, 151.
How computed, 151. What notes not entitled to, 151, 152. Number
of, 151. Prescribed by statutes of different States, 152. How Sundays
and holidays counted, 153, 154.
Demand not necessary to hold maker of note or acceptor of bill, 155. Ne-
cessary to hold subsequent parties only, 155, 159. Object of, to hold
secondary parties, 159. By whom, of whom, when, where, and how,
to be made, in order to hold subsequent or secondary parties, 156.
Waiver of, 164.
Law of Place, where made, governs as to what, 157. If void by, void every-
where, 157. So of acceptors and indorsers, 157.
Payment, of one of a set of foreign bills, payment of all, 158. To whom
payment may be made, 158. Effect of, by indorser, 158. Indorser's
rights after making, 158. Steps to be taken in case of non-payment,
160.
Protest, what is, 160. When necessary, 160. When not necessary, 160.
By whom made, 160. Not necessary until demand and dishonor, 160.
Object of, 160. Form of, 162. Waiver of, 164.
Notice, to follow the protest, 161. By whom, to whom, when, where, and
how to be given, 161. What will excuse as to time of giving, 161.
Diligence to be exercised in giving, 161. Must be given to secondary
parties, to hold them, 163. Form of, 163. Waiver of, 164. Form of
waiver, 164.
Guaranty, what is, 165. Of payment, 166. When notice in case of, not
necessary, 166. When notice of dishonor in cases of, necessary, 166.
General doctrine as to notice, 166. Form of, 166. Of collection, 167.
Duty of holder of such guaranty, 167. Limit of guarantor's liability,
167. Nature of his engagement, 167.
Lost Bill or Note, remedy thereon, 168. No remedy at common law, 168.
Remedy by statute only, 168. General requirements by statute, 168.
Accommodation Paper, what is, 169. Object of, 169. Duty of the accom-
modated party, 169. Rights of the party accommodating, 169.
Usual Defenses, as between original parties, 170. As to other parties, 170.
Want of consideration, total or partial, 170. Obtained by duress, 171.
By fraud, 172. By finding, 173. By larceny, 174. When bill or note
misapplied by accommodated party, 175. Illegal consideration, 176.
Lapse of time, 177.
INDEX.
563
Presumptions of Law, valuable consideration, 178. That holder is owner,
178. That indorsements and transfers were made before maturity, 178.
That holder received the paper in usual course of business, 178. That
maker of note and acceptor of bill are the primary debtors, 178. That
indorsers are secondarily liable, 178. A mistake as to time of payment
cannot be shown by parol, 178. As to amount, can, 178.
Bills and notes, not negotiable, 179. Their general features, 179.
Bill of Exchange.
See Bills and Notes.
Bill of Lading.
Form of, 418. Who to hold
How transferred, 418. Obli-
What is, 418. What it should contain, 418.
copies of, 418. How far negotiable, 418.
gation of assignee to, 418. Effect of transfer, 418.
Bill of Sale.
Form of, see Appendix.
Blockade.
Sailing with intention to violate, illegal, 437. Attempt to break, dissolves
contract of affreightment, 437.
Boarder.
Difference between, and guest, 422.
Boarding-House Keeper.
Difference between, and innkeeper, 423. Does not assume the legal respon-
sibilities of an innkeeper, 522.
case, if any, 522.
Borrower of Property.
Governed by the contract made in the
Right to use thing borrowed, 476. Limitation of his right, 477. When use
by, strictly personal, 478. Obligations of, 478. Diligence required of,
480. Generally exempt from loss by inevitable accident, 482. Resti-
tution by, 484.
By-Bidders.
Employment of, at auction sales, is fraud on purchasers, 29. When is not
fraud, 29.
By-Laws of Corporations.
By whom made, 258. Power to make, must be reasonably exercised, 258.
Power to make, usually vested in a select body, 258. A majority of
such body can make, 258.
Carriers, Private, 523.
C.
Carriers, Common, of Goods.
Who are, 524. Kinds of, 524. Who are, by land, 524. Who are, by water,
524. Their duties and obligations, 525. When obliged to receive
goods for transport, 525. Has no right to charge one more than an-
other, 525. Their liabilities, 526. Not liable for loss by jettison, 526.
What kind of property, liable for loss of, 526. When the liability
begins, 527. When it ends, 528. Special contracts by, 529. Special
564
INDEX.
notices by, 530. Effect of such notices, 530. Effects of fraud by hirer,
531. When non-delivery of goods excusable, 532. The doctrine of
average, 534.
Carriers of Passengers, Common.
Who are, 536. Their duties and obligations, 537. Liable for personal
safety of passengers, 537. Liable for baggage of passengers, 537.
What the term baggage includes, 537. Liabilities further, 538. Rights
of, as to accidents, 539. As to fare in advance, 539. As to lien on bag,
gage, 539. Duties of passengers, 540.
Charter of Corporation.
Definition of, 236. By whom granted, 236. What determines the peculiar-
ities of, 236. Particularizes the privileges of the corporation, 236.
How granted in this country, 248. What is contained in, 248. Is a
contract, 248. Is the fundamental law of the corporation, 248. How
may be forfeited, 279.
Check.
Form of, 128. When the word order instead of bearer should be inserted
in, 128. Usually presented for payment, not acceptance, 129. When
should be certified, and how, 129. Bank holden, after being certified,
129. Is analogous to inland bill of exchange, 129. Responsibility of
indorser of, 130. Elements of, 130. How transferable, 130.
Choses in Action.
Transfer of, sufficient consideration to support a contract, 13. What are,
70. How transferred by parol, 71. How in writing, 71.
Classes of Persons generally entitled to lien, 398.
Common Carrier. See Carriers, Common.
Communications. What the duty of the insured to make, 564.
Concealment.
Effect of, in negotiating insurance, 566. Discharges the insurers, when, 566.
Insured is liable for agent's, even if unknown to him, 566.
Conditions of, Competency.
Age, rationality, corporate powers, 5. Incompetency, 6.
Conditions of Contracts.
Must be included when contract made, 38. Performance of, excused if
impossibility arises from the act of God, 39. Express, 40. Implied, 41.
Consistent, 42. Repugnant, 43. Copulative, 44. Disjunctive, 45. Pre-
cedent, 46. Subsequent, 47. Restrictive, 48. Unlawful, 49.
May be expressed or
What is a good,
Elements of, 283
Consideration.
What is, 7. Indispensable to all contracts, 7, 66.
implied, 8. Classes of, 9. What is a valuable, 10.
16. Insufficient, 17. Necessary in a guarantee, 283.
In bailment, delivery and acceptance of the thing is, 462.
INDEX.
565
Consignor.
When may stop goods in transitu, 318. His right paramount to carrier's
right, 319. Copy of bill of lading to be given to, 418.
Construction of Contracts.
Constructive Delivery.
Rules of, 86.
Under statute of frauds, 72. What is, 298, 299. Rule as to ponderous arti-
cles, 299. May be made by sample, 299.
Continuing Security.
Note payable on demand with interest is, 156. Not dishonored until demand
and refusal to pay, 156.
Contract.
What is, 1. Primary elements of, 2. Parties to, 4. Competency of parties
to, 5. Incompetency of parties to, 6.
Consideration of, 7. Expressed, 8. Implied, 8. Valuable, good, and insuf-
ficient, 9-22.
Subject-matter of, 23.
What may be, 23.
may be, 23. What may not be, 24-32.
Mutual Assent in making, 33, 76, 77. What it consists of, 33, 76, 77. When
complete by letter, 33. Offer and acceptance must be in terms iden-
tical, 33.
Time as an element of, 34
-
Expressed, 35.
Meaning of the word month,
How Sunday is reckoned, 35.
35. Fractions of a day disregarded, 35.
Meaning of "reasonable time," 36. What time implied when no time
specified for payment of negotiable paper, 36.
Conditions of, 38. When performance of, prevented by act of God, 39. Ex-
press, what are, 40.
Implied, 41.
Copulative, 44. Disjunctive, 45.
strictive, 48. Unlawful, 49.
Consistent, 42. Repugnant, 43.
Precedent, 46. Subsequent, 47. Re-
Classes of, 50. Kinds of simple, 51-56. That must be written, or are void,
57-71. Meaning of delivery under the statute of frauds, 72. Payment
of part of the purchase-money, meaning of, 73. Rules of law as to sales
by auction, 74.
Effect of mistakes in making, 77. Mistakes of law, 77. Mistakes of fact, 78.
Mutuality of Obligation, general rule, 79, 80. Exceptions to the rule, 80.
Damages for breach of, 81. When, for personal service, 82. When sickness
or death will exonerate a party, 82. When contract must be completely
performed before can be claimed, 83. When performance excused by
repeal of statute relating to subject-matter, 64. When damages inade-
quate remedy, 85.
Construction of. Rules relating to, 86, 87.
Contribution.
Surety who pays a debt may call on his co-surety to contribute his share,
291. Upon what this right founded, 291, 422, 423. Cannot recover
interest or costs, 291. Meaning of, under general average, in contracts
of affreightment, 422. In what cases may be required, 423. What
goods may be compelled to make, 424. What goods exempt from, 425.
Mode of making, 426. Payment of, 427.
566
INDEX.
Corporation.
What is, 234. Who are the parties to, 235. The charter of, 236. The
franchise of, 237. Perpetuity of, 238. Charter of, must be accepted by
majority of corporators, 239. Nature of grant of incorporation, 239.
Corporate name, 240. Classes of, 241. Quasi, 242. Sole, 243. Aggre
gate, 244. Divisions of aggregate, 244–246.
How Created, 247. By prescription, 247.
By charter, 248. By general
statute, 249, and conformity to statute, 250.
Ordinary Powers of, 251. Perpetual succession, 252. To fill vacancies, 253.
To elect officers, 254. To sue and be sued, 255. To receive and convey.
256. To make contracts, 257. To make by-laws, 258.
To make by-laws, 258. To remove offi-
cers and members, 259. To hold property as trustees, 260.
Restrictions, 261. As to banking powers, 262. Receiving by will, 263. As
to corporate powers, 264. Modes of making contracts, 265. As to
period of existence, 266.
Liabilities of, 267. For acts of agents, 268. On implied promises, 269. For
injuries and negligence, 270. For trespass, 271. For taxes, 272. To
visitation, 273.
Personal Liabilities of Corporators, 274.
Dissolution of, 275. By statute, 276. By loss of integral parts, 277. By
surrender of franchise, 278. Forfeiture of charter, 279. Consequences
of, 280.
D.
Damages. Remedy by, 81.
Days of Grace.
What they are, 150. Origin of, 151. How computed, 151, 153. Generally
governed by statute, 152. How Sundays and holidays are counted,
154. Rule by N. Y. statute, 154.
Debt.
How payment usually made, 323. When paid by chattel mortgage, 324.
May be paid by exchange of indebtedness, 326. Not paid unless
money or things accepted, 327. When paid by mail, 328. When note
or bill of third person is payment of, 329. When paid by allowance of
account, 330. When part-payment is full payment of, 331-339.
What is not payment of, 341-349. By whom may be paid, 351-353. To
whom may be paid, 355–360. When paid by letter, 362–365.
Debtor, Principal.
Surety no right of action against, until he has satisfied the debt, 288. Must
be default of, before surety is liable, 289.
Deception.
How it affects contracts, 32. The party practising, cannot take advantage
of his own wrong, 32. If both parties to a contract practice, the courts
will relieve neither, 32. Right of stoppage in transitu arises when sale
on credit is made in consequence of, 317. Avoids policy of marine in-
surance, 565. Discharges the insurers, 566.
When insurers discharged
INDEX.
567
by practice of, in fire insurance, 592. Works forfeiture of life insurance
policy, 614.
Deed of Real Estate Conveyance.
What is, 686. Full-covenant warranty, 687. Essentials or elements of,
688-691. Form of, see Appendix.
Quit-Claim, elements of, 692.
Mortgage, definition of, 693. Usual form, 694. Also see Appendix. Insur-
ance clause in, 695. Interest clause in, 696.
Defenses, Usual to Negotiable Paper.
Want of consideration, 170. Obtained by duress, 171. Obtained by fraud,
172. Obtained by finding, 173. Obtained by larceny, 174. That it has
been misapplied, 175. Illegal consideration, 176. Lapse of time, 177.
Delivery.
Owner of ship promises to make safe, of goods at destined port, 415. Must
be made in cases of pledge, 490. What amounts to, is matter of law,
490. Constructive or symbolical, 490. The letter must make, in the
hire of things, 504. If not made, hirer has right of action, 504. Obli-
gations of common carriers as to, 525. What is not a sufficient, by car-
riers, 525. Responsibility of carrier begins when made to, 527. Within
what time carrier to make, 528. Carriers of passengers bound to make,
of passenger's baggage, 538.
Of a Deed, how made, 691. Kinds of, of a deed, 691.
Demurrage.
What is, 416. Is to be paid by charterer of ship, 421.
Deposit.
In bailment, definition of, 447. Legal doctrine concerning, 448-459.
Deviation.
What is a, 568. Effect of unnecessary, in a sea voyage, 420. When unne-
cessary, made, insurer discharged, 569. Shortness of time or distance
of, immaterial, 569. When necessary, excusable, 570. All permissions
to make, construed strictly, 570.
Discussion.
What is, 290. When surety entitled to benefit of, 290.
Dissolution of Partnership.
Methods of, 225. By act of parties, 226. By judicial decree, 227. By oper-
ation of law, 228. Consequences of, 229. What powers cease on, 230.
What powers remain on, 231. What powers created by, 232. Notice
of, 233.
Dissolution of Corporations.
May be by statute, 276. By loss of integral parts, 277. By surrender of
franchise, 278. By forfeiture of charter, 279. Consequences of, 280.
Dormant Partner.
Who is, 211, 233. His responsibility, 211. How he may avoid liability,
211. When necessary for him to give notice on dissolution of partner-.
ship, 233.
568
INDEX.
Double Insurance.
What is, 572. Does not afford double satisfaction in case of loss, 572. If
one insurer pays whole loss, in case of, other insurers must contribute,
572.
Drawee.
In bill of exchange, who is, 98. After he accepts bill, is called the acceptor,
99. After acceptance, becomes principal debtor, 98. Is presumed to
owe the drawer of a bill, 137. Bill should be presented to, 137. How,
should accept, 138. Demand of payment should be made on, 156.
Object in demanding payment of, 156. What, should be satisfied of
before paying bill, 158. Is bound to know handwriting of his drawer,
158.
Drawer.
Of a bill, contingently liable, 141, 142. Holder of bill may look to for in-
demnity, if bill dishonored, 143. May be sued when his bill is dis-
honored, 143.
E.
Effects of Partnership.
How disposed of after dissolution, 231. Effects of corporations, 234. How
disposed of after dissolution, 280.
Embargo.
When it dissolves contract of affreightment, 437.
Equity.
Courts of, have power to dissolve partnerships for reasonable causes, 227.
What will justify court of, for interfering, 227. Court of, will seize
assets of corporations on their dissolution, to pay their debts, 280.
Exceptions.
To rule requiring mutuality of obligation in contracts, 80.
F.
Factor.
Who is a, 188. Usually sells in his own name, 188. Has possession of
goods of principal, 188. His duties and liabilities, 188. Has a lien on
the goods of his principal, £98. For what degree of skill and diligence,
held liable, 521. For what, not held liable, 521.
'False and Fraudulent Representations.
Fire.
How affecting contract, 32. Made to guarantor, extinguishes contract or
guaranty, 287. When made by vendee, give right of stoppage in tran-
situ to vendor, 317. Effect of, in marine insurance, 565. Effect of, in
life insurance, 614.
How far insured against in marine insurance, 553. Marine insurers liable
for damages caused in extinguishing, 553.
INDEX.
569
Fire Insurance.
What is, 583. Elements of policy in, 585. Representations and warranty
of insured, 592. Perils covered by, 593. Reinsurance, what is, and
law relating to, 597. Assignment of policy of, 598. Adjustment of
loss, 599.
Forbearance.
Sufficient consideration in contract, 12. Money paid for, beyond lawful
interest, is not usury, 400.
Fraud.
On third persons, renders contract void, 23. In what, consists, 32. Effect
of, when parties practice on each other, 32. As between original par-
ties, good defense to bill or note, 172. Extinguishes contract cf guar-
anty, 287. In sale of chattels, renders contract void at the option of
party defrauded, 309. How may show itself, 309. Sale of chattels
under Statute of Frauds, 310. On vendor, gives right of stoppage in
transitu, 317. Effect of, in marine insurance, 565. Effect of, in life
insurance, 614.
Frauds, Statute of.
>.
What is, 57. What contracts void by, 57. Sales, when void by, 69. Mean-
ing of the word "delivery" under, 72. Meaning of "part-payment
under, 73. Contracts of guarantee under, must be written, 284.
Freight.
Precaution necessary as to payment of, 417. What is, 421. Does not be-
come due until carriage of goods performed, 421. Is usually fixed by
the parties, 421. May be demanded by carrier in advance, 421, 433.
Or, on delivery, 421. Is secured by lien on goods, 421, 433. Carrier
may refuse to deliver goods until paid, 421. How amount of deter-
mined, when goods sent in general ship, 421. Common carriers no
right to charge one higher rates of, than another, 525. Is a proper
subject of marine insurance, 544. The right of abandonment of, 579.
Funds of Partnership.
Must be applied to payment of partnership debts, 231. Each partner's right
to his share of, after such payment, 231.
General Average.
G.
What is, 422. In what cases may be required, 423. What goods must
contribute to, 424. What goods exempt from, and why, 425. On what
principle contribution to, made, 426, 434. How payment of enforced.
427.
General Lien.
Definition of, 396. Who have a, 396. On what, is founded, 396.
Guarantor.
Of payment of note, liability of, 166. Of collection of note, liability of, 167.
When his right of action arises, 288. Rights of, 289. May recover
actual payments made for his principal, 289. Rights of against cred
itor, 290.
570
INDEX.
Guaranty.
What is a, 281. Must be based on a sufficient consideration, 283. What is
the consideration in cases of, 283. Modes of making contract of, 284.
When must be in writing, 284. When need not be written, 284. Con-
sent of party promised, necessary, 285. Classes of, 286. How far nego-
tiable, 286. Classification of with reference to Statute of Frauds, 286.
How contract of extinguished, 287.
Guest.
Innkeepers obliged to provide for, 522. Innkeeper responsible for acts of
his, 522. General obligations of innkeepers to, 522. Who is a, 522.
Difference between, and boarder, 522.
Hire of Things.
Nature of the contract, 502.
duties of the letter, 504.
ment of contract of, 506.
Hire of Labor and Services.
H.
Elements of the contract, 502. Rights and
Rights and duties of hirer, 505. Extinguish-
General definition of, 507. In whom special property of materials used,
508. Elements of the contract of, 509. Obligations and duties of em-
ployer, 510. Losses, by whom to be borne, 511. Obligations and duties
of the workman, 512. Responsibility for skill by workman, 513. De-
gree of skill, 514. Cases of part performance, 515.
Hire of Custody.
Nature of the contract, 516. Classes of bailees in this contract, agistors,
517. Warehousemen, 518. Forwarding merchants, 519. Wharfingers,
520. Factors and other bailiffs, 521. Innkeepers, 522.
Hire of Carriage of Goods. See Common Carriers.
Hire of Carriage of Passengers.
What they assume, 535. Who are, 536. Their duties and obligations, 537.
Liabilities of, 538. Rights of, 539.
Holder of Bill. See Bills and Notes.
Holder of Lost Bill or Note. See Lost Bill or Note.
Husband and Wife.
Principle lying at the foundation of the relation, 5. Wife's legal existence
merged in husband, 5. Husband liable for necessaries of wife, 5.
Rights of wife by statute in many of the States, 5.
Immorality.
What contracts void for, 25.
Indorsement.
I.
What is, in blank, 146. In full, 146. Con-
Restrictive, 146. Follows the nature of
The law presumes, to have been made
What is, 146. Kinds of, 146.
ditional, 146. Qualified, 146.
the instrument indorsed, 146.
before due, 178.
INDEX.
571
Indorser.
In order to hold, upon whom demand must be made, 155, 156. By whom
to be made, to hold, 156. When demand to be made, to hold, 156.
Where and how to be made, to hold, 156. Object of making demand
is to hold, 156, 159. When protest necessary in order to hold, 160.
When no protest necessary to hold, 160. Notice necessary to hold, 161.
By whom, to whom, when, where, and how notice must be given to
hold, 161.
Infancy. See Minority.
Infant.
Privileges allowed to, 6. Contract made by, voidable, 6. How contracts
made by, divided, 6. What contracts made by, binding on him, 6.
Exception in favor of, as to necessity of mutuality of obligation, 81.
Innkeeper.
Who is, 522. Duties of, 522. Liabilities of, 522. Rights of, 522.
Insolvent Law.
Contracts in perversion of, void, 29. Why such contracts are void, 29.
Insurable Interest.
What it may cover in marine insurance, 544. What, may not cover, 644.
Who may have in life insurance, 616–625.
Insurance, Marine.
Definition of, 541. Policy, elements of, 542–549. Parties, 543. Subject-
matter, 544. Premium, 545. Risk, 546. Mutual assent, 547. Amount
insured, 548. Term of the risk, 549. Perils covered, 550-557. What is
meant by "perils of the sea," 551. Perils not covered, 558. Warranty,
560-562. Duty of insured as to disclosures, 563-565. Effect of con-
cealment, 566. What disclosures need not be made, 567. What is
meant by deviation, 568. Effect of unnecessary deviation, 569. Limits
as to necessary deviation, 570. Prior, double, and reinsurance, 571–573.
Abandonment, which see. General Average, which see. Adjustment,
which see.
Insurance, Life. See Life Insurance.
Insurance, Fire. See Fire Insurance.
Interest.
What is, 401. How established, 402. Less than legal rate by agreement,
403. Law of place, how governs rate of, 404. In what cases allowable,
405. When not allowable, 406. When usurious, see Usury
Inventory.
Administrator's duty to make, 679. Things to be included in, 680. Copies
of, to be made, 681.
J.
Jettison.
Loss by, when establishes claim for general average, 423. How it must
take place to justify the claim to general average, 423, 424. One of the
items to be computed to justify abandonment, 576.
572
INDEX.
Joint Tenants.
How far partners are, 212.
Justice, Public.
Contracts that impede or obstruct, are void, 30. Examples of contracts that
obstruct, 30.
Letter.
· L.
Contracts may be made by, 33. When contract made by, complete, 33.
Cannot be stopped when once mailed, 34. Sending money by, without
authority, is at risk of one who sends, 345. When money sent by, is
at debtor's risk, 363. When at creditor's risk, 364. IIow should be
directed, 365.
Letter to Hire.
Lien.
Rights and duties of the, 504.
What is, 385. Parties to, 386. Must be an indebtedness, 387. Must be
something to which, attaches, 388. Possession generally requisite to,
389. Bailee's right to possession essential, 390. How created, 392, 393,
394. Classes of persons generally entitled to, 393. What is a general,
396. What is a special or particular, 397. How waived, 399. How
enforced, 400. Agent has right of, when, 203. Innkeepers have, on
goods of guest, 522. Common carrier entitled to, on goods carried, 533.
Life Insurance.
What is, 600. Application for, 601, 602. Statements as to health of life
proposed for, 603. Questions for applicant to answer, 604. What the
questions relate to, 604 Answers to questions, 605. Statement of
friends of life-insured, 605. Medical examination, 607. Physician's
report, 608. Policy, elements of, 609-615. Who has insurable interest
in cases of, 616-625. Assignment of policy, 626.
Lightning.
When loss by, is covered by fire insurance, 588.
Loan of Money.
Must be for, to establish usury, 409. See Usury.
410. At compound interest, not usury, 410.
not sanction, at compound interest, 410.
Loan for Use.
Loss.
At a risk is not usury,
The courts, however, will
Defined to be a bailment, 473. Must be gratuitous, 475. Must be for use
of the borrower, 476. Limitation of borrower's rights, 477. Strictly
personal, 478. Obligations of borrower, 479. Diligence required, 480.
Expenses incident, 481. Who to bear loss, 482. Obligations of lender,
483. Restitution by borrower, 484. Revocation of the, 485.
Adjustment of, in marine insurance, 582. When ought to be made, 582.
Adjustment of, in case of repairs, 582. Adjustment of, in fire insurance,
599. Proof and notice of, 599. Principle of adjustment of, in fire in-
surance, 599. Necessity of candor and good faith by insured, in case
of, 599.
INDEX.
573
Loss, Total.
Of cargo justifies abandonment, 578. Also of freight, 579.
Lost Bill or Note.
Remedy in cases of, 168. Statutory provisions relating to, 168.
Mandatary.
M.
What is a, 460. Liabilities of, 463.
When responsible for skill, 465.
Misuser by, 467. Interest of, 468.
469. Entitled to recover for disbursements, 470. Bound to make res-
toration, 471.
Degrees of diligence required of, 464,
When not responsible for skill, 466.
Must render account to mandator,
Mandate.
What is, 460. Parties to, 460. Essentials of contract of, 461. Considera-
tion, 462.
Mandator.
Who is, 460. May require account to be rendered by mandatary, 468.
Restoration must be made to, 471.
Mandate Contract.
Modes of dissolution of, 472.
Marine Insurance. See Insurance, Marine.
Maritime Loans.
Charges for hazard in case of, not usurious, 410.
Marriage.
Merges wife's rights in husband, 6. Statutory provisions in regard to, 6.
Contracts in consideration of, must be in writing, 65. Mutual promises
of, need not be in writing, 65. Of female principal, terminates agency,
206. Of a female partner, dissolves partnership, 228. Of a single
woman, revokes will previously made, 667.
Master of Ship.
Bill of lading to be signed by, 418. Bill of lading to contain name of, 418.
Must have bill of lading for his own use, 418. Must have on board,
proper documents, &c., 419. Must give receipt to shipper, 419. Duties
of generally, 419, 420. Responsibility of, on receiving goods, 420. Are
liable as common carriers, 420.
Memorandum.
In writing required by Statute of Frauds, what, 57. Must be subscribed
by the party to be charged thereby, 57. Classes of contracts in which,
necessary, 57. For what, inserted in marine insurance policy, 559.
What, usually declares in marine insurance policy, 559. The legal
effect of, 559. Effect of, in cases of partial loss, 559. In cases of total
loss, 559.
Merchant.
Covenants of, under contract of affreightment, 416. Duties of, 421.
574
INDEX.
Merger.
What is, 287. Legal doctrine relating to, 287.
Misfeasance.
Difference between and nonfeasance, 202. Agents liable for, 202.
Mistake.
As to matters of law, does not invalidate contract, 77. As to matters of
fact, when renders contract voidable, 78. As to law of foreign country,
is mistake of fact, 78. As to the laws of different States, mistake of
fact, 78.
Money.
The law knows no other remedy than payment of, 81. When payment of,
inadequate in form of damages, 85. What is included in the term,
106,380. What is not included in the term, 106. When principal may
recover of third persons, if paid to agent, 195.
Month.
What it is, in mercantile contracts, 196.
Moral Consideration.
Not sufficient to support an express or implied promise, 21.
Mortgage, Chattel.
When may be taken in payment of debt, 322. For form of, see Appendix.
Mortgage, Real Estate.
What is a, 693. Usual form of, 694. See Appendix for form of. What
usually inserted in, 694. Insurance clause in, 695. Interest clause in,
696. Registry of, 697. Object of registry of, 698-700.
Mutual Insurance Companies, Fire.
Nature and character of, 585.
N.
Necessaries.
Infants liable for contracts for, 6. What they are, 6. A husband liable for,
furnished for his wife, 6.
Negligence.
Different kinds of, in bailment, 442. Depositary liable for gross, 452. Man-
datary liable for gross, 464. If loan gratuitous, borrower liable for
slight, 480. Pawnee liable for ordinary, 496. Hirer of things liable
for ordinary, 505. Factors liable for ordinary, 521.
Negotiable Paper. See Bills and Notes.
Nominal Partner.
Who is, 211. No interest in the partnership business, 211.
Nonfeasance.
Difference between and misfeasance, 202. When principal liable for agents',
202.
Non-performance of Contract.
What excuses, 82, 84.
Notes.
Exchange of, how affects usury, 410. See Bills and Notes.
INDEX.
575
Notary Public.
Protest made by, 160. Demand of bill or note made by, 160. Is a common
law officer, 160. Has a notarial seal, 160. Has authority to demand
acceptance and payment of bills and notes, 160. May give the neces-
sary notice to parties contingently liable, 161.
Notice.
Of non-acceptance of bill of exchange should be given to persons contin-
gently liable, 141. Legal presumption, if not given, 142. Of dishonor
of bill or note, 161. By whom, to whom, when, where, and how to be
given, 161. When want of excused, 161. May be verbal or written,
161. May be sent by private messenger, 162. Form of, of non-payment
of note, 163. Waiver of, 164. Of dissolution of partnership, 233. For
what purpose given in such case, 233. How given in such case, 233.
To whom to be given, 233. When necessary, and when not, 233. Com-
mon carrier cannot screen himself from liability by giving, 538.
Obligations.
O.
Of insured to deal in good faith with marine insurer, as to disclosures, 563.
The same in fire insurance, 592. To make correct answers to questions
on application for life insurance, 614.
Ostensible Partner.
Who is, in a partnership, 211. When necessary for, to give notice on dis-
solution of partnership, 233. In what cases not necessary for, to give
such notice, 233. To whom necessary to give the notice, 233. To
whom not necessary to give the notice, 233.
Owner of Goods.
How bound to deal with carrier, 531.
P.
Particular Lien.
What is, 397. Is favored by law, 397. Various matters to which, applies,
397.
Parties to Contracts.
Who are, or who may be, 4. Conditions of competency of, 5. Conditions
of incompetency of, 6.
To negotiable paper, original, 98, 99. Subsequent, 100. See Bills and Notes.
Partners.
Classes of, 211. How far are joint tenants, 212. Rights of each to dispose
of partnership property, 212. Relations of, to each other, 213. Power
of each to bind all, 214. Liabilities of, to third persons, 215. Rights
of, against third persons, 216. Contributions of, 221. Responsibility
assumed by, 223. What powers of, cease at dissolution of partnership,
230. What powers of, remain at dissolution, 231. New powers of,
created at dissolution, 232. Rights of surviving, on dissolution by
death of one, 232. Lien of, on dissolution, 232. Notices to be given by,
on dissolution, 233.
576
INDEX.
Partnership.
What is a, 208. Parties to, their competency and incompetency, 210. Legal
assent necessary, 210. Classes of partners to, 211. Relations of part-
ners to each other in a, 213. The powers of each partner to bind all in
a, 214. Limitation of this power, 214. How far acknowledgment of
one partner binds the, 214. Liabilities of partners in a, 215. Subject
matter of a, 217. Shares of partners in, need not be equal, 217. How
formed, 218. Limited, how formed, 218. The name of, 219. Duration
of, 220. Individual contributions in, 221. Profit and loss in, how
shared, 222. Responsibility of partners in, 223. How may be dissolved,
226. How, by act of parties, 226. How, and for what causes, by judi-
cial decree, 227. What will dissolve a, by operation of law, 228. Con-
sequences of dissolution of, 229. What powers cease at dissolution of,
230. What powers remain at dissolution of, 231. What new powers
created at dissolution of, 232. Notice to be given on dissolution of,
233.
Part-Payment.
When may be payment in full, 332.
Payee.
One of the original parties to bill or note, 99, 123.
Payment.
If bill or note payable
to, or bearer, may be transferred by delivery, 124. If to, or order, it
can be transferred only by indorsement, 124. When conditionally
liable for payment of bill or note, 125.
What is, how usually made, and how may be made, 323-330. What is not,
341-349. By whom may be made, 350-353. To whom may be made,
354-360. When money may be sent by letter to make, and at whose
risk, 361–365. Application of partial, 336, 366. Who may direct as to
application of, 367, 368. How the law will apply, when neither party
directs, 370. Cannot change after making application of, 373. How
courts will direct application of, to be made, 373.
Performance of Contract.
As to time, 35. How time computed as to, 35. Rule of law as to Sundays,
35. When to take place if no time is mentioned, 36. Reasonableness
of time a question of fact for jury, 36. When condition precedent
governs the, 46.
Perils of the Sea.
What is meant by the phrase, 551. What is covered in marine insurance
by, 551-553. What is not covered by, 551.
Personal Liability.
When agent may assume, 199. Assumes when he does not obey instruc-
tions of principal, 199, 201.
Place of Delivery.
Of chattels, 383. Difference as to, whether portable or ponderable articles,
383. Where, by master or owner of ship, on contract of affreightment,
420. By common carrier of goods, 525, 528.
INDEX.
577
Pledge, or Pawn.
What it is, 486. What it is for, 488. Kind of property that may be pledged,
489. Necessity of delivery of, 490. Special property in, 491. Who
entitled to increase of, 492. When pledgee may use, 493. When
pledgeor bound to reimburse pledgee for expenses of, 494. How
pledgee may forfeit title to, 495. Responsibility for loss of, 496.
Pledgee's right of sale of, 497. Pledgee to account for all income and
profits of, 498. Pledgeor's right of redemption of, 499.
Policy. See Marine Insurance, Fire Insurance, Life Insurance.
Powers of Corporations. See Corporations.
Power.
Of each partner to bind all, 214. Ordinary, of corporations, 251. Of corpo-
rations, limited in making contracts, 265.
Powers of Corporations.
Enumerated, 251. How restricted, 265.
Premium Notes.
Premium in marine insurance usually paid by, 545. Premium in fire insur-
ance sometimes paid in part by, 587. Amount of outstanding, usually
deducted from claim when policy becomes due, 610. Amount of, which
some companies take, 610.
Price or Equivalent.
Essential ingredient in contract of sale, 296. Must be actual, 296. Must
consist of money, 296. Adequacy of, not essential, 296.
Primage.
What is, 421. What sometimes called, 421.
Principal.
Contract, what is a, 52. How it differs from accessorial contract, 52. In
contracts of agency, who is, 190. Who may be, 190. Who may not be,
190. Liabilities for general agent, 190. For acts of special agent, 191.
When liable for agent's torts, 192. When not liable for agent's torts,
192. Liabilities to agent, 193. Rights of, as to agent, 194. Rights of,
as to third persons, 195.
Profits.
Community of, essential to partnership, 208. How partners share in, 222.
Not necessary to a partnership that each partner shall share equally
in, 222. Law relating to, in partnership, 222. Proper subject of insur-
ance, 544.
Promise.
Without consideration is void, 7. On each side must be concurrent to sup-
port each other, 14. One may be a consideration for another, 14. Mu-
tual promises of marriage are binding, 14. A naked promise to do
something in the future is void, having no consideration, 16, 18. Gra-
tuitous service does not raise an implied, 18. Exception in case of
salvage, 18. Classes of, that must be in writing, 57-69. When to
accept a bill equivalent to actual acceptance, 139.
37
578
INDEX.
Promissory Note.
Negotiable by statute only, 122. Forms of, in common use, 123. See Ap
pendix. Original parties to, 123. Definition of, 123. Wherein like
bill of exchange, 123. Wherein unlike, 123. When transferable by
delivery, 124. When must be indorsed by payee before transfer, 124.
Proposition.
One of the elements of mutual assent, 33. If verbal, when to be accepted,
33. If made by letter, when considered accepted, 33.
Protest.
What is a, 160. When necessary, 160. When not necessary, 160. By
whom made, 160. On what day to be made, 160. Notice to follow,
161.
Public Policy.
Contracts violating the rules of, void, 26, 27, 28.
Q.
Qualified Indorsement.
What is a, 146. Words generally used in making, 146.
Questions.
To be answered in applying for life insurance, 604. What they relate to,
604. Each company may ask such as they see fit, 604. Answers to,
by applicant, 605. Good faith to be observed in answering, 605.
R.
Railroad Company.
As to baggage, 538. Are bound to run trains according to their time tables,
537. Are bound to stop at usual intervals, 537. Are bound to furnish
usual reasonable accommodations, 537.
Redemption.
Pledgee's right of, 499.
Registry of Deeds and Mortgages.
Necessity and utility of, 698, 699. When complete, 700. Importance of,
700.
Reinsurance.
What interest in marine insurance, subject of, 573. Object of, 573. What
rules governed by in fire insurance, 597. Object and advantage of, in
fire insurance, 597.
Representations.
When false in purchase on credit, give right of stoppage in transitu, 317.
False, will avoid policy of marine insurance, 565. When they do not
avoid policy of fire insurance, 592. How, differ from warranty in fire
insurance, 592.
Requisites.
Of negotiable paper, 98–114.
INDEX.
579
Rescind Contract.
Risk.
Party guilty of fraud cannot, 32. Party defrauded may, 32.
In marine insurance, what the, 546. When it begins, 546. When it ends,
546. In fire insurance policy, what is, 588.
Rules and Regulations.
Carriers of passengers have the right to make, 539. Passengers bound to
submit to all reasonable, 540.
S.
Sale.
What is, 293. Exchange, not, 293. Parties to,.294. What may be subject-
matter of, 294 Price or equivalent in, 296. Mutual assent in, 297.
Express or implied assent in, 297. Delivery in cases of, 298. When
delivery may be made to servant, or carrier, 298. What symbolical
delivery in, 299. Place of delivery in cases of, 300. Warranty in, 801.
Quality of subject of, 302. When warranty in case of, implied, 303.
When either party in case of, may rescind, 304. Effect of fraud on
third persons in, 305. When void, 307. Mistakes in, 308. Difference
as to mistakes of law, and of fact in, 77, 78, 308. Effect of fraud as
between the parties to, 309. Under Statute of Frauds, 310.
Sale by Auction.
How affected by by-bidders, or puffers, 29. When need not be in writing,
74. What auctioneer's duty in such cases, 74.
Salvage.
Definition of, 428. Kinds of, 429. Who entitled to, 430. Who not entitled
to, 431. Upon whom chargeable, 432. Rules of allowance as to, 433.
How forfeited, 434.
Salvor.
What is a, 428. Who entitled to become, 430. Who not entitled to become,
431.
Satisfaction of Mortgage. See Appendix.
Seaworthiness.
What is included in, 415. Included in covenant of owner of ship, 415. Im
plied by law that ship-owner shall be held responsible for, 415.
Securities.
How affected by usury, 411. Originally valid, are not affected by subsequent
usury, 411.
Silence or Concealment.
What it is, and effect of in marine insurance, 566.
Statute of Frauds.
What is the, 57. What it includes, 57. Principles on which founded, 63.
Test of contract coming within, 66, 67, 68. Kind of delivery required
by, 73. Sale by auction, when valid under, 74.
580
INDEX.
Statute of Limitations.
On what principle founded, 177. What evils intended to prevent, 177.
How long continues to run, 177.
Stock.
Insurance companies, what, 585.
Stoppage in transitu.
What is, and the right of, 311.
ments of, 312. By whom the
right of may be exercised, 319.
When the right of arises, 311, 317. Ele-
right of, may be exercised, 318. When
How right of to be exercised, 320.
Rights of parties after, 321. When right of ceases, 322.
Subrogation.
What is, and who has right of, 290.
Supra Protest.
What is, 140. For what, acceptance of this kind made, 140. What notice
acceptor, bound to give, and to whom, 140.
Sureties.
Their rights as to each other, 291.
Surety.
Rights of, against his principal, 288, 289. Rights of, against creditor, 290.
Rights of against co-surety, 291.
T.
Tender.
What is a, 376. Elements of law of, 377.
what kind of money may be made, 380.
By whom, to whom, when, where, and
tels, law relating to, 383.
Time.
Title.
When made, of money, 380. In
How far bank bills a, 380, 381.
how to be made, 382. Of chat-
Enters into all contracts as an element, 34. When expressed in months,
meaning of, 35. When expressed in days, meaning of, 35. Implied,
36. Meaning of "reasonable," when applied to, 36. Referring to date
of note or bill, 111. Referring to maturity of note or bill, 113. For
presentation of bill of exchange for acceptance, 137. When notice of
non-acceptance to be given, 141, 143. Of transfer of bill or note, as
affecting rights of holder, 147, 148, 149. As to days of grace, 150, 151,
152, 153.
When demand of payment to be made, 156. Of making
protest, 160. Of giving notice of non-payment and protest, 161. Of
making tender of money, 382. Of making tender of chattels, 383.
Warranty of, by vendor of chattel, 301.
Tort.
What is a, 192. When committed by agent, in what cases principal liable
for, 192. When principal not liable for, of agent, 192. When agent
liable to principal for, 202. Factors and other agents have right of
action for, when, 203.
INDEX.
581
Trade.
Contracts in general and partial restraint of, 27.
Transfer of Bills and Notes.
How liability of indorser avoided by, 147. How made, 147. Rights of
purchaser if made before maturity, 148. How purchaser takes, if made
after maturity, 149.
Transfer of Negotiable Paper.
How made, 147. Effect of, before maturity, 148. Effect of, after maturity,
149.
U.
Usury.
What is, 407. Elements of, 409. There must be a loan of money, 409.
Lender must reserve more than legal rate of interest, 409. Agreement
to pay, must be absolute, 409. Absolute promise to pay principal, 409.
Unlawful interest must be reserved at date of contract, 409. Must be
corrupt intention of the parties, 409. What is not, 410. Compound
interest is not, 410. Expenses paid for negotiating loan, not, 410. In-
terest in advance, not, 410. Charges for hazard, not, 410. Post-obit
obligations for more than lawful interest, not, 410. Can be no, for use
of chattels, 410. Nor for use of animals, 410. Borrower making present
to lender, not, 410. Extra interest in alternative, not, 410. Sale of
valid paper below par, not, 410. Mistake in computing interest, not,
410. Exchange of notes, not, 410. Sales of one's credit for reward,
not, 410. Sale or exchange of property, not, 410. Consequences of,
411. How affects remote securities, 411. Penalties for, in different
States, 411.
Vendee.
V.
After acquiring possession of goods by, vendor cannot stop them in transitu,
315. Indebtedness of, must be for the thing stopped in transitu, 315.
Insolvency of, gives right of stoppage in transitu to vendor, when, 317.
Embarrassment of, when gives to vendor right of stoppage in transitu,
317. When right of stoppage in transitu arises from misrepresentations
by, in the purchase, 317. If he makes tender of price to vendor, right
of stoppage ceases, 321. When right of stoppage against, ceases, 322.
See Sale of Chattels.
Vessel or Ship.
Owner of, stands responsible for, in contract of affreightment, 413.
charter-party, should be a full description of, 414.
In
Covenants of Owner of, in charter-party, 415. As to conditions of the, 415.
As to properly furnishing, 415. As to time of sailing, 415. As to safe
delivery of cargo of, 415.
Covenants of Merchant with regard to time of loading and unloading the,
416. As to paying demurrage, 416. As to payment of freight, 416.
582
INDEX.
Contract for Conveyance in a general, 417. Generally contained in bill of
lading, 417. What is a bill of lading, 418.
Duties of Masters and Owners of, 420. As to preparation for voyage, 420.
As to commencement of voyage, 420. As to course of voyage, 420. As
to completion of voyage, 420.
Duties of Charterer of, 421. As to lading the, 421. As to paying charges,
421.
W.
Waiver.
Of demand, notice, and protest, 164. Of lien, how may be, 399. Of pledge
by pledgee, how, 495.
Warranty.
Kinds of, in sale of chattels, 301. Express, what is, 301. Implied, what is,
301. Of title, when implied, 301. With regard to quality, when, 302.
What purchaser may do on discovery of failure of, 302. Of title and
right to possession, by letter to hirer, 504. Enters into all contracts of
marine insurance, 560. What is an implied, in marine insurance, 561.
What is an express, in marine insurance, 562. How differs from repre
sentation, 562. In fire insurance, 592. Deed of, 686–690.
INDEX TO FORMS.
Acknowledgment...
Arbitration Award..
Arbitration Submission..
Assignment of Mortgage..
Assignment of Judgment.
Attorney, Power of...
•
•
Bill of Exchange, Inland.
Bill of Exchange, Foreign.
Bill of Lading...
Bond, Ordinary Money.
Bond of Indemnity..
Bond, Bottomry..
•
•
• •
[Reference to the page.]
PAGE
.544, 547, 551
.549
.549
.555
543
•
Bond, Secured by Mortgage....
Chattel Mortgage.
Check.
Deed, Warranty.
·· •
Deed, Quit-Claim..
•
•
Discharge of Mortgage..
Guaranty of Note.
Judgment Note..
•
•
•
Judgment, Form of Assignment of..
Lease of House....
Lease of House, Short Form of..
Mortgage, Chattel...
Mortgage, Real Estate..
Mortgage Note...
Mortgage, Discharge of.
Note, Promissory..
•
Note, Negotiable without Indorsement..
Note, Negotiable by Indorsement only..
Note, Joint and Several..
•
Note, not Negotiable...
Note, Guarantee of...
Notice of Non-payment of Note.
Power of Attorney.....
Protest for Non-payment of Bill..
Protest of Note....
Quit-Claim Deed..
Waiver of Demand, Protest and Notice..
Warranty Deed...
Will…… .
•
•
.547
.58, 540
.60, 61
.341
544
.544
.546
..554
.548
77, 543
.551
.552
554, 555
114
542
.543
.555
556
.548
552
.554
.554, 555
.74, 75
.540
.540
.541
.541
.114
112, 542
.547
.110
.541
.552
.112
•
.551
..550
•
GLOSSARY.
Abandonment.-The relinquishment or surrender of rights or property by
one person to another. Generally used in reference to the risks of marine
insurance.
Alien.-Foreign; a foreigner; one of foreign birth, or one born in a foreign
country.
Alien-Belligerency.-The relation of an alien to a country or its people,
against whom his own country is at war.
Amotion.-Removal; a taking away; a turning out.
Bona Fide.-In good faith; honestly.
Choses in Action.-Personal things of which the owner has not the posses-
sion, but merely a right of action for their possession.
Choses in Possession.-Personal things of which one has possession.
Collateral. That which is by the side, and not the direct line. That which
is additional to, or beyond a thing.
Common Law.-That system of law, or form of the science of jurisprudence,
which has preɣailed for ages in England, and in the United States, in con-
tradistinction to other great systems, such as the Roman or Civil Law. It
is the unwritten law, as distinguished from the written or statute law. See
Statute Law.
Contingency.-That which may possibly come to pass; an event which may
occur; a possibility; a casualty.
Contingent.-Possible, or liable, but not certain to occur.
Court.-A tribunal established for the administration of justice between
parties.
Court of Equity.-A court of chancery, having powers to afford relief in
many respects beyond the jurisdiction of courts of law.
Donee.-One to whom a gift is made, or a bequest is given.
Dormant.—Sleeping; silent; not known; not acting.
Duress.-Personal restraint, or fear of personal injury or imprisonment.
Element. One of the simplest parts or principles of which anything consists;
one of the fundamental or essential ingredients.
Eleemosynary.-Relating to charity, alms, or almsgiving; intended for the
distribution of charity; as an eleemosynary corporation, college, or hospital.
Estate. The degree, quantity, nature, and extent of interest which a person
has in real property.
GLOSSARY.
585
Estoppel.-A preclusion of a person, arising from previous conduct, from
asserting a fact inconsistent therewith. A man is estopped from contra-
dicting what he has once avowed. A conclusive admission, which cannot
be denied or controverted.
Equity.-A branch of remedial justice, by and through which relief is afforded
to suitors in the courts of equity. See Court of Equity.
Executed. As applied to contracts, signifies already done, or accomplished,
or performed.
Executor.—One who is appointed by a testator, or by the court, to carry into
effect the provisions of a will.
Executory.-Yet to be performed.
Factor.-An agent employed to sell goods or merchandise consigned or deliv.
ered to him, by or for his principal, for a compensation commonly called
factorage or commission.
Fraud.—Intentional and successful employment of any cunning, deception, or
artifice, used to circumvent, cheat, or deceive another.
Gratuitous.-Given without an equivalent or recompense; granted without
claim or merit.
Impolitic.-Not politic; contrary to the dictates of policy; unwise; impru-
dent; indiscreet.
Intestate.-Dying without having made a valid will.
Intestate.-A person who dies without making a valid will.
In Toto.-In the whole; altogether; entirely.
In Transitu.-In a state of transition; going from one place to another.
Jettison.-The voluntary throwing goods overboard at sea, in case of extreme
peril, in order to lighten the ship and preserve it.
Joint Tenants.-Two or more persons to whom are granted lands or tene-
ments to hold in fee-simple, fee-tail, for life, for years, or at will. The right
of survivorship belongs to an estate thus held.
A
Judgment Note.-A note given in the usual form, and containing in addi-
tion a power of attorney to the payee, or other person, to appear and confess
judgment for the sum therein contained, against the maker.
Jurisdiction.-The authority by which judicial officers take cognizance of,
and decide causes.
Law-Merchant.-The general body of commercial usages in matters rela-
tive to commerce.
Lien.-A hold or claim which one person has on the property of another, as a
security for some debt or charge.
Maturity.-Arrival of the time fixed for payment; termination of the period
which a demand has to run; becoming due.
Merger.-The absorption of a thing of lesser importance by a greater, whereby
the lesser ceases to exist, but the greater is not increased. For instance, a
note on which judgment is recovered, is absorbed by, and merged in the
judgment.
586
GLOSSARY.
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..
Misfeasance. The performance of an act which might lawfully be done, but
is done in an improper manner, by which another person receives an injury.
Mitigation.-Reduction; diminution; lessening the amount of a judgment,
penalty, or punishment.
Negotiable.-Applied to a contract, the right of action on which is capable
of being transferred by delivery, or indorsement and delivery.
Negotiation.-The deliberation which takes place between the parties touch-
ing a proposed contract.
Nominal.-Existing in name only.
Nonfeasance.—The non-performance of some act which ought to be per-
formed.
Notary Public.-A public officer before whom acknowledgments of deeds
and other instruments are made.
Overt.-Open to view; apparent; not covert or secret; manifest.
Parole, or Parol.—A French word signifying by word, or speech; not writ-
ten; especially not written and sealed.
Politic.-Pertaining to, or promoting a policy; well-advised; according to
good policy.
Post-Obit.-A compound word applicable to any obligation, promising to pay
unusual interest by the promisor, on the death of some one from whom he
has expectations of property.
Prima Facie.-On the first view of the matter.
Protest.-A notarial act, made by a notary public for want of payment of a
promissory note, or for want of acceptance or payment of a bill of exchange.
Quasi.-As if; in a manner; in some respects.
Real Estate.-A term which is applied to land in its most enlarged significa-
tion, including everything that legally passes with it in making conveyance
of the land.
Recoupement.-The right of the defendant, in the same action, to claim
damages of the plaintiff.
Renunciation.-The act of giving up a right.
Rescind.-To cut off; to abrogate; to vacate.
Revocation.—The recall of a power or authority conferred, or the vacating
of an instrument previously made.
Secondarily.-A term applied to the liability of an indorser of a note, or the
drawer of a bill, signifying that he is only conditionally liable; the maker
of the note or acceptor of the bill being primarily liable, or first liable.
Specialty.—A writing sealed and delivered containing some agreement.
Statute Law.-A law established by act of the legislative power.
The
written will of the legislature, expressed according to the forms necessary
to constitute it the law of the State. The written law of a State, in contra-
distinction to the common, or unwritten law. See Common Law.
GLOSSARY.
587
Subrogation.—The act of putting one thing in place of another, or one
person in place of another. The substitution of one creditor to the rights
and securities of another. It gives the substitute all the rights of the party
for whom he is substituted.
Tacit. That which, although not expressed, is understood from the nature of
the thing, or from the provision of the law; implied.
Tenants in Common.-Persons holding lands and tenements by several
and distinct titles, and not by a joint title, but occupy in common, the only
unity recognized between them being that of possession.
Tenor.-General drift or course of thought; purport; intent; in some in-
stances, an exact copy.
Tenure.—The mode in which one holds an estate in lands.
Testator.-The person who has made a valid will.
Tort.-A private or civil wrong or injury. A wrong independent of contract.
Valid.-Of binding force; strong; effectual.
Vendee.—One who purchases a thing; one to whom a thing is sold.
Vendor.—A vender; a seller; the one who sells a thing.
Void.—That which has no force or effect.
Voidable.-That which has some force or effect, but which, in consequence
of some inherent quality, may be legally annulled or avoided.
Waiver.-The relinquishment or refusal to accept of a right.
Warranty.-A covenant of security; a promise or stipulation by deed; in-
surance against defects; assurance.
Wharfinger.-One who owns or keeps a wharf for the purpose of receiving
and shipping merchandise to or from it for hire.

UNIVERSITY OF MICHIGAN
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