Commercial Law

by Richard D. Currier; Richard William Hill; Samuel Williston

SPECIMEN FORM OF CHECK

ILLUSTRATIONS.—To illustrate the difference between the two: Jones worked for the Baltimore & Ohio Railroad Co. He presented his bill of $100 to the proper official, and a check was issued by the railroad payable to the order of Jones for that amount. Jones took the check, indorsed it, and with it paid his grocery bill. The grocery man deposited the check in his bank, and was notified shortly thereafter that payment had been stopped on the check by the Baltimore & Ohio. They claimed a fraud had been committed, that Jones was overpaid $50, and, therefore, they refused to honor the check. The grocery man, having taken this check in the usual course of business, is what we term a "holder in due course." The N.I.L. defines a holder in due course as:

Section 52. "A holder in due course is a holder who has taken the instrument under the following conditions: (1) That it is complete and regular upon its face; (2) That he became the holder of it before it was overdue, and without notice that it had been previously dishonored, if such was the fact; (3) That he took it in good faith and for value; (4) That at the time it was negotiated to him he had no notice of any infirmity in the instrument or defect in the title of the person negotiating it."

A holder in due course, then, would be entitled to collect the full $100 from the Baltimore & Ohio. This check is governed by the law of negotiability with the result which we have just indicated. Now change the facts a trifle. Jones presented his bill to the same officer of the Baltimore & Ohio as before. The officer says that checks are made out regularly on the first of the month. It was the fifteenth, and Jones did not feel able to wait until the first of the next month. He went to a friend and told him of his claim against the Baltimore & Ohio, and said: "I will assign this claim to you for $95, and then you can present the assignment, which I will draw up and sign, to the Baltimore & Ohio on the first of the month, and get the $100." His friend agrees and advances the money. When he presents the written assignment to the proper officer on the first of the month, he is told that the railroad has discovered that Jones' claim was really good for only $50, and that is all they will pay. Although his assignment reads for $100, he can collect only $50. This illustration is governed by the law of assignability, which applies to practically all contracts, apart from commercial paper. Under the rules of assignability, a person can assign no better claim than he has, or, as is sometimes said, the assignee stands in the shoes of the assignor. Jones really had a claim of only $50 against the Baltimore & Ohio, although he claimed it was $100. He could assign no more than he really had. These two illustrations show the great difference in the result of the application of the two principles, negotiability and assignability.

THE FORMAL REQUIREMENTS OF NEGOTIABLE PAPER.—There are certain formalities which all negotiable paper must have. It must be in writing, and signed by the proper person. No form of writing is specified in the Act, and lead pencil, or even slate pencil, is as good as ink, except that in the two latter cases the ease with which these forms of writing may be altered makes them most undesirable for use. But there is no law requiring the use of ink.

MUST CONTAIN A PROMISE.—Every negotiable instrument must contain words of negotiability. These words are, "to order," "to bearer," "to holder" or their equivalent. "I promise to pay John Jones, $100," and signed "John Smith," is a promissory note, but not a negotiable promissory note, because it lacks the words to "order" or "bearer," and is a document which would, therefore, pass by the law of assignability rather than the law of negotiability. In taking negotiable paper, therefore, it is always important to see whether these words are present. If they are not, the holder will lose the peculiar advantage and rights which the holder in due course acquires by the law of negotiability. A promissory note must contain a promise and a bill of exchange must contain an unconditional order. An I.O.U. for $100 signed "John Jones" is not a promissory note, because there is no promise contained in such a document.

UNCONDITIONAL PROMISE.—All negotiable documents must be payable without reference to any contingency. A note reads: "I promise to pay to the order of John Jones $100 when I attain my twenty-second birthday" and is signed by John Jones, now twenty-one. That is not a good note because the person may not live to be twenty-two. Even if he lives to become twenty-two the note is still non-negotiable, for when it was made the contingency existed. A bill of exchange, regular in form, but adding the expression, "If the Republicans win the next congressional election," is not negotiable. The one exception, as it might appear at first sight, is a negotiable document reading: "I promise to pay to the order of William White six months after death," etc. Such a promise is not contingent. Death will arrive at some time, although it may be uncertain just when. In the other illustrations the republicans might not win the congressional election, and the person might not become twenty-two. Again, all commercial paper must be made payable in money. "I promise to pay to the order of John Jones $100 worth of tobacco," is not negotiable. "I promise to pay to the order of John Jones $100 and fifty pounds of tobacco" is not negotiable. In both cases, the medium of payment is something other than money.

INCEPTION OF THE INSTRUMENT AS AN OBLIGATION.—In our discussion of contracts, we made the statement that a legal intention to make a contract was necessary. The same is true in commercial paper. A man must intend legally to issue a negotiable instrument in order to be liable on one as maker or drawer. Thus, in the case of Walker v. Ebert, 29 Wis. 94, the defendant, a German, unable to read and write English, was induced by the payee to sign an instrument, in the form of a promissory note, relying on the false statement that it was a contract appointing the defendant agent to sell a patent right. It was held that the defendant was not liable. The instrument, though complete in form, was not the defendant's note and the plaintiff acquired nothing by his purchase of the paper.

ILLUSTRATION.—We must contrast this with another situation. Suppose I hand you a paper with a promissory note printed on it, complete in every detail except your signature. I ask you to sign it. You sign the paper, without reading it over or knowing what it is, and give it back to me. I then transfer it to a person who takes it for value, in good faith, etc., or who is, in other words, a holder in due course. The question is, are you liable on such a document? The answer is, "Of course, you are." You may say, "I did not intend to sign a promissory note." The law answers you by saying, "You were careless in signing something which you did not read over, and one is presumed to intend the consequences of his own careless acts." Our German was in a different situation. He was not careless. He could not read English and was obliged to rely upon someone to tell him what the document was, and, granting that he used due care in selecting a responsible person to explain to him the nature of the document, he had done all the law required. Had he been imposed upon, on several previous occasions, by the same person who told him what the document was, and in spite of that, had relied on him to explain this document, then, undoubtedly, the court would have held otherwise and he would have been liable on the ground that he must have intended the consequences of his negligent acts, he being deemed negligent when he trusts a person who had not only misrepresented things to him but had actually defrauded him several times.

DELIVERY.—A note found among the maker's papers, after his death, imposes no obligation either upon him or upon his estate. In other words, in addition to the intentional signing of the document, to complete its validity, there must also have been what we call delivery. This is a passing out of the possession of the maker or drawer, of the document, into the hands of some third party. Delivery may be made in three ways: (1) By intention; (2) By fraud; (3) By negligence.

A VALID DELIVERY NECESSARY.—I hand you my promissory note and you take it. That, of course, is an intentional delivery. You tell me that you have a fine watch which I decide to buy, and I give you my promissory note in payment. Afterwards, upon examining the watch, I find that it is worthless and entirely different from your description. You have secured the note from me in that case by fraud, or there is, as we say, a delivery procured by fraud. I am sitting on a bench in Central Park, and I take out of my pocket a completed promissory note and look at it and place it upon the bench. When I leave I forget it and it stays there until someone comes along and picks it up. That is a delivery by negligence. All these forms of delivery are valid, making the documents good, some in the hands of all parties, others in the hands of the holder in due course only. The N. I. L. is so clear upon this matter that reference must be made to sections 15 and 16. For this reason both of these sections are reproduced here in full:

Section 15. "Where an incomplete instrument has not been delivered it will not, if completed and negotiated, without authority, be a valid contract in the hands of any holder, as against any person whose signature was placed thereon before delivery."

Section 16. "Every contract on a negotiable instrument is incomplete and revocable until delivery of the instrument for the purpose of giving effect thereto. As between immediate parties, and as regards a remote party other than a holder in due course, the delivery, in order to be effectual, must be made either by or under the authority of the party making, drawing, accepting or indorsing, as the case may be; and in such case the delivery may be shown to have been conditional, or for a special purpose only, and not for the purpose of transferring the property in the instrument. But where the instrument is in the hands of a holder in due course, a valid delivery thereof by all parties prior to him so as to make them liable to him is conclusively presumed. And where the instrument is no longer in the possession of a party whose signature appears thereon, a valid and intentional delivery by him is presumed until the contrary is proved."

DISTINGUISHING FEATURES.—It is very important to distinguish between these two sections. Let us take for illustration the famous case of Baxendale v. Bennett, 3 Q.B.Div. 525. Here the defendant wrote his signature as acceptor on several printed blank forms of bills of exchange and left them in a drawer of his desk. The blanks were stolen, filled out, and negotiated to the plaintiff, an innocent purchaser. It was held that the plaintiff could not recover. The reason for this decision is that the document was incomplete and as the Act says: "Where an incomplete instrument has not been delivered it will not, if completed and negotiated, without authority, be a valid contract in the hands of any holder, as against any person whose signature was placed thereon before delivery." On the other hand, if I leave in my safe, checks which I have signed and made out in full and they are payable to bearer, although a thief breaks in and steals the checks from the safe, those documents will be valid in the hands of a holder in due course. The reason here is that although there has been no delivery, either by intention or by fraud or by negligence, nevertheless, the Negotiable Instruments Act has extended this theory of delivery, even further than the law went before the Act was passed, and says that when the document is in the hands of a holder in due course, a delivery is conclusively presumed.

CONSIDERATION.—Another essential in the inception of the instrument is consideration. We have already discussed this topic in the chapter on contracts. We made the statement at the beginning of this chapter that the law of negotiable paper came from the continent of Europe and was grudgingly received by the courts of England. The law of negotiable paper on the continent of Europe did not have any idea of consideration, and this is one reason why the law was reluctantly admitted to the English common law and explains the reason now why we have the doctrine of consideration in negotiable paper. It would not be safe for the student to accept all we have said in regard to consideration in the chapter on contracts and apply it to negotiable paper. The difference is at once apparent when you read Sections 24 and 28 of the Negotiable Instrument Act which read:

Section 24. "Every negotiable instrument is deemed prima facie to have been issued for a valuable consideration; and every person whose signature appears thereon to have become a party thereto for value."

Section 28. "Absence or failure of consideration is a matter of defence as against a person not a holder in due course."

So, we see, that in the general law of contracts, consideration is absolutely essential to a binding contract but in the law of negotiable paper, consideration is not absolutely essential except when you are dealing with the immediate parties. An illustration will explain this. I wish to make you a present on your next birthday which is January 12. To-day, September 15, I give you my promissory note due on your birthday for $50. This is to be my present to you. You take the note and then hold it until your birthday arrives and I do not pay it. Then you sue me on the note. You cannot recover anything because there was no consideration for the note and the absence of consideration is a perfectly good defence between you and me, whom the law calls the immediate parties. But, suppose, instead of doing this, you had kept the note about six weeks and then had taken it to your bank and asked them if they would discount the note for you and they had done so, taking it in absolutely good faith. They know me to be a responsible party, so they are willing to accept my promissory note. They knew you and they presumed that you had taken the note for a valuable consideration although, as a matter of fact, it was a gift to you. Under the circumstances, the bank is a holder in due course and when the note becomes due, if I do not pay, the bank will sue me and will collect from me because, as the Act says, "the failure of consideration is a matter of defence as against any person not a holder in due course." But the bank is a holder in due course.

ACCEPTANCE OF BILLS OF EXCHANGE.—The holder of a bill of exchange will take it, soon after receiving it, to the drawee, the person upon whom it is drawn, for his acceptance. The drawee will accept it by writing across the face of it "Accepted," signing his name and perhaps adding "Payable at the First National Bank." A form of bill of exchange, duly accepted, will be found elsewhere in this chapter. The Act provides that the acceptance must be in writing and signed, either on the document itself or on a separate piece of paper attached to the document. As soon as the drawee accepts the bill, he then becomes known, not as the drawee but as the acceptor and he is the party primarily liable on the bill, that is, he assumes responsibility for its payment. The holder has a right to demand an acceptance for the full amount of the bill and may refuse to take an acceptance for a less amount. It is not always possible for the drawee to know whether he has sufficient funds to justify an acceptance, and so the Act gives him twenty-four hours within which to make up his mind. During that time the holder is obliged to wait without taking any further action. Just as a conditional promise to pay money is not a good promissory note, just so a conditional acceptance is not looked upon as an acceptance which a party is obliged to take. There are, however, occasionally times when a person is willing to take a conditional acceptance. For example, I hold a bill of exchange for $1,000. There are three or four indorsers upon it and I take it to the drawee to have him accept. He will not accept for more than $500. Now I feel that the drawer and all of the indorsers are financially irresponsible and I would rather have the acceptance of the drawee for $500 than nothing. I am willing to take it. The question comes up as to the effect of this upon the other parties, the drawer and the indorsers. The Act covers that fully and it is important that it be kept in mind:

Section 142. "The holder may refuse to take a qualified acceptance, and if he does not obtain an unqualified acceptance, he may treat the bill as dishonored by non-acceptance. Where a qualified acceptance is taken, the drawer and indorsers are discharged from liability on the bill, unless they have expressly or impliedly authorized the holder to take a qualified acceptance, or subsequently assent thereto. When the drawer or indorser receives notice of a qualified acceptance, he must, within a reasonable time, express his dissent to the holder, or he will be deemed to have assented thereto."

NEGOTIATION.—If negotiable paper is a substitute for money, it follows that its most distinguishing characteristic is the fact that it may be transferred from one owner to another. This transfer is made in one of two ways. It may be by operation of law, or by act of the parties. By operation of law, we refer to such a case as where a person dies and his commercial paper then becomes the property of his administrator or executor. In other words, the law transfers the paper to the deceased person's legal representative. The other case, the transfer by the act of the parties is, of course, the ordinary case and the one we shall consider here. The sections in the Negotiable Instruments Act which discuss this matter are so clear that we can do no better than insert them in full at this time:

Section 30. "An instrument is negotiated when it is transferred from one person to another in such a manner as to constitute the transferee the holder thereof. If payable to bearer it is negotiated by delivery; if payable to order it is negotiated by the indorsement of the holder completed by delivery."

Section 31. "The indorsement must be written on the instrument itself or upon a paper attached thereto. The signature of the indorser, without additional words, is a sufficient indorsement."

Section 32. "The indorsement must be an indorsement of the entire instrument. An indorsement which purports to transfer to the indorsee a part only of the amount payable, or which purports to transfer the instrument to two or more indorsees severally, does not operate as a negotiation of the instrument. But where the instrument has been paid in part, it may be indorsed as to the residue."

NEGOTIATION BY INDORSEMENT.—Reference should be made to the several kinds of negotiation by indorsement. We have first the blank indorsement. There the person to whom the document is payable simply writes his name on the back in the same way as it appears on the front. That is, if John Jones is the payee, he writes his name across the back of the instrument "JOHN JONES." Next, there is the special indorsement. John Jones, in this case, is the payee and wishes to transfer the note to John Wanamaker. He writes across the back, "pay to the order of John Wanamaker" and signs his name, JOHN JONES. A restrictive indorsement is one where the further negotiation of the instrument is limited or restricted altogether. For example, the payee writes across the back "Pay to the order of John Jones only." That restricts the further negotiation of the instrument. Another form that is commonly used is in depositing checks in the bank in your own account; usually you indorse "for collection" and sign your name, or you indorse "for deposit only" and sign your name. This form of indorsement simply constitutes the bank your agent to make collection, but not for any other purpose except that the Act now authorizes a bank to begin suit to collect on a document indorsed in that way. Another form of indorsement, known as the qualified indorsement, is frequently used in the case where you wish to indorse without incurring the usual liability of the indorser. This is done by adding under your name the expression "without recourse." This does not mean, as is commonly supposed, that you are free from all liability as an indorser. We shall refer to this later.

THE HOLDER IN DUE COURSE.—As we have seen, the distinguishing feature of the law of commercial paper is negotiability as distinguished from assignability. The principles of negotiability are designed very largely for the protection of the person whom we call the holder in due course. It is essential then to bear in mind the condition under which a person becomes such. Section 52 of the Act defines a holder in due course as follows:

Section 52. "A holder in due course is a holder who has taken the instrument under the following conditions: (1) That the instrument is complete and regular upon its face; (2) That he became the holder of it before it was overdue, and without notice that it had been previously dishonored, if such was the fact; (3) That he took it in good faith and for value; (4) That at the time it was negotiated to him he had no notice of any infirmity in the instrument or defect in the title of the person negotiating it." Section 57 defines what the rights of this holder in due course are:

Section 57. "A holder in due course holds the instrument free from any defect of title of prior parties, and free from defences available to prior parties among themselves, and may enforce payment of the instrument for the full amount thereof against all parties liable thereon."

It is clear, then, that by this section, the Act means that the holder in due course takes free of personal defences, although he does not take free of absolute defences. It simply remains for us to consider briefly what is meant by a personal defence and what is meant by an absolute defence. We have already illustrated this in one of our cases where the note was a present. In this case, there was no consideration for the note. The boy to whom it was given could not recover, whereas when he transferred it to an innocent third party, a holder for value, he could recover. Thus we say, failure of consideration is a personal defence. Again, some person steals my check book, fills out a check, and forges my name. The check is then taken and finally gets into the hands of a person who is strictly a holder in due course. He could not recover on it, however, because forgery is a real defence. That is, no one can hold me liable on my forged check. The ordinary illustration of real or absolute defences are infancy, lunacy, illegality and sometimes fraud. Other defences are generally personal defences and do not affect the holder in due course. To put it another way, a real defence is good against the whole world; a personal defence is available only against such as are not holders in due course.

LIABILITY OF PARTIES.—The parties primarily liable on negotiable documents are, on a note, the maker; on a bill of exchange, the acceptor; and on a check, the drawer. The liability of these three parties is most concisely stated in Sections 60, 61, 62, as follows:

Section 60. "The maker of a negotiable instrument by making it engages that he will pay it according to its tenor, and admits the existence of the payee and his then capacity to indorse."

Section 61. "The drawer by drawing the instrument admits the existence of the payee, and his then capacity to indorse; and engages that on due presentment the instrument will be accepted or paid, or both, according to its tenor, and that if it be dishonored and the necessary proceedings on dishonor be duly taken, he will pay the amount thereof to the holder, or to any subsequent indorser who may be compelled to pay it. But the drawer may insert in the instrument an express stipulation negativing or limiting his own liability to the holder."

Section 62. "The acceptor by accepting the instrument engages that he will pay it according to the tenor of his acceptance; and admits: (1) The existence of the drawer, the genuineness of his signature, and his capacity and authority to draw the instrument; and, (2) The existence of the payee and his then capacity to indorse."

INDORSERS' LIABILITY.—We have not yet considered the question of the liability of persons who transfer negotiable documents. Indorsements may be made, as we have said, in two ways: either by indorsing the document, or if it is payable to bearer, by delivering it without indorsement. The liability of these two parties is stated in the Negotiable Instruments Act in Sections 65 and 66 in the following language:

Section 65. "Every person negotiating an instrument by delivery or by a qualified indorsement, warrants: (1) That the instrument is genuine and in all respects what it purports to be; (2) That he has a good title to it; (3) That all prior parties had capacity to contract; (4) That he has no knowledge of any fact which would impair the validity of the instrument or render it valueless. But when the negotiation is by delivery only, the warranty extends in favor of no holder other than the immediate transferee. The provisions of subdivision three of this section do not apply to persons negotiating public or corporation securities other than bills and notes."

Section 66. "Every indorser who indorses without qualification, warrants to all subsequent holders in due course: (1) The matters and things mentioned in subdivision one, two and three of the next preceding section; and (2) That the instrument is at the time of his indorsement valid and subsisting. And, in addition, he engages that on due presentment, it shall be accepted or paid, or both, as the case may be, according to its tenor, and that if it be dishonored, and the necessary proceedings on dishonor be duly taken, he will pay the amount thereof to the holder, or to any subsequent indorser who may be compelled to pay it."

QUALIFIED INDORSEMENT.—Section 65 speaks of delivery by qualified instrument. You will remember that we have already mentioned the indorsement in the form "without recourse." This is a qualified indorsement. The kind of liability a person incurs who indorses in that way is set forth in Section 65. This is important because the layman assumes that in indorsing "without recourse" one means to incur no liability as indorser. Such is not the case. Reread section 65, which covers the indorsement without recourse. There is liability for the things mentioned therein. Then in section 66, the last paragraph, you will notice that every indorser, who indorses without qualification "engages that on due presentment, it shall be accepted or paid, or both, as the case may be, according to its tenor, and that if it be dishonored, and the necessary proceedings on dishonor be duly taken, he will pay the amount thereof to the holder." This does not mean that the indorser will always pay, but only if the necessary steps are taken. We shall consider what these necessary steps are when we take up the subject of "protest."

CHECKS.—A check is simply a bill of exchange drawn on a bank and payable on demand. Therefore, the general principles which we have been laying down, in regard to bills of exchange and other negotiable paper, apply to checks, although, of course, the check is a more recent development in the law of commercial paper than the other two forms, namely, the promissory note and the bill of exchange. Section 186 of the Act reads: "A check must be presented for payment within a reasonable time after its issue or the drawer will be discharged from liability thereon to the extent of the loss caused by the delay."

HOLDER OF CHECK.—It is important to remember that the holder of a check has no right against the bank. Thus, if I hold John Rockefeller's check, drawn on the Institute National Bank, and I present it to the bank and the bank refuses to pay it for no reason at all, or for a purely arbitrary reason, I cannot sue the bank. The only thing I can do is to seek to get the money on the check from Mr. Rockefeller personally. This is because the drawing of a check is not the assignment of so much money to the payee named in the check. Of course, Mr. Rockefeller might sue his bank for failure to honor his check if it refuses to pay it to me for no valid reason. One further fact is important. When a holder of a check procures it to be certified by the bank, that releases all indorsers and also the drawer. And so, if I have a check drawn by Mr. Rockefeller and indorsed by six millionaires and I take that to the bank and have them certify it and then the bank fails, I have lost everything if the bank never pays anything to a depositor. By getting it certified I release Mr. Rockefeller and all of the indorsers.

THE MEANING OF PROTEST.—Protest is often used broadly to signify any dishonor of a negotiable instrument, but, of course, properly it means presentment by a notary, and his certification that an instrument has been presented for payment and has been dishonored. Protest is only necessary in regard to foreign bills. A foreign bill is one which is drawn in one State and payable in another. For this purpose the different States of the Union are foreign to each other. A bill drawn in New York payable in Boston is as much a foreign bill for this purpose as one drawn in England payable here.

WHAT MAY BE PROTESTED.—Though protest is not necessary for any other negotiable instrument except foreign bills of exchange, including foreign checks, it is convenient frequently to protest other negotiable instruments. The law provides that protest may be made of other negotiable instruments, and the certificate of protest is evidence in such cases, as well as in the case of foreign bills of exchange, of the facts which it states, namely, that the instrument has been duly presented and notice given. Statements in a certificate of protest, however, whether of foreign bills or of other instruments, are not conclusive evidence of the facts which they state. They are some evidence, but it may be shown by other evidence that the instrument was not presented, or was not presented at the time the certificate asserts, or that the notice was not given as therein asserted.

SUGGESTIONS FOR DRAWING NEGOTIABLE PAPER.—Very few suggestions are necessary in drawing checks. We almost always use the printed form. The only thing to be careful about is to draw lines through the blank spaces so that a check written for $70 may not have something else written before the word seventy, thereby raising the amount to, say, One thousand seventy, and the figures, because they are not near the dollar sign, correspondingly raised. The promissory note is frequently drawn by the parties without any printed form. In order to be negotiable, the note must bear the words "or order," or "bearer"; otherwise, it would not be negotiable, and would pass by the law of assignability without any of the advantages accruing to negotiable paper. The draft, or bill of exchange, is the document which the average layman is the least familiar with, and before drawing one, a printed form should be secured or a book on negotiable paper be consulted.

NEGOTIABILITY.—Care should be taken in the indorsement of any negotiable paper. The indorsement in blank, that is, simply writing your name upon the paper on the back, is the one commonly used, but is a dangerous one to use, if there is any possibility of the paper being lost or stolen. For example, A has a promissory note payable to his order, and he simply writes his name across the back and mails it to a person who has agreed to accept it in payment of a bill A owes him. The letter is lost, gets into the hands of X, who opens it and takes the note. Of course, the note is no good to X. X, however, takes the note to someone and persuades that person to discount the note for him. That person does it in good faith, believing X came by the note rightfully. The discounter is therefore a holder in due course, and he would be able to collect on the note. What A should have done, when he sent the note to his friend John Brown, was to have indorsed it specially, "Pay to the order of John Brown, A." Again, a person who is collecting some money for his friend receives a check payable to his order. He wants to turn the check over to his friend, and indorses it by a special indorsement. When the friend tries to collect on the check, it is returned "no funds." The friend now may hold the person responsible who indorsed the check, because an indorser guarantees the payment of the instrument if the proper steps be taken to fix his liability. Ordinarily, of course, we wish an indorser to assume this liability, but in this particular case there was no reason why this man should have indorsed the check in that way. He could have indorsed it, and added to his signature the words "without recourse," which would have relieved him from paying the instrument if the drawer did not pay it.

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CHAPTER XIII
Torts and Crimes

TORT, CONTRACT, AND CRIME DISTINGUISHED.—We have already discussed contracts in detail. The fundamental idea of contracts is that the obligation of a contract is voluntarily assumed. Although it might be difficult, at least theoretically, I may take the position that I will not enter into any contractual relationship with anyone for a month. I could do this legally, if I were willing to put up with the annoyance which I would probably suffer. But suppose I take the position that I will assault Jones and I will not pay him any damages for the injuries occasioned by my assault. My position would be wholly untenable. The contract obligation is voluntarily assumed. The law imposes the obligations or duties which exist in torts, and I must observe those duties whether I wish to or not. Similarly, one must observe all of the criminal law of the jurisdiction where he is, whether he will or not. In fact, ignorance of the law is no excuse. A man may even commit a crime, although he did not know there was a law prohibiting the act. Again, in the definition of a tort, we shall find the expression, "breach of duty imposed by law." A man arrives home late at night. He finds a person suffering from exposure at his front door. The person asks to be taken in and lodged for the night, but the householder refuses to take him in, and the man contracts pneumonia from exposure. In this case the householder is not liable. There is no duty imposed by law to be your brother's keeper. There may be a moral obligation in the case just cited, but not a legal one.

JURISDICTION.—There is another way in which a criminal action is sometimes different from an action in contract or an action in tort. A suit on a contract may be brought in any court where jurisdiction over the parties may be secured. For example, A and B make a contract in New York. The contract is broken, and six months later, A and B are both in Galveston, Texas. Either party could sue the other in the Texas court on the broken contract. The same is true in regard to most tort actions. A slanders B in New York. A little later both are in San Francisco, California. B could sue A in a California court for slander. A criminal prosecution, however, must always be brought in the State where the crime is committed, and generally in that very county of the State. Hence, if A murders B in Kings County, New York, the trial could not, under any circumstances, be held in Essex County, New Jersey, for no New Jersey court would have jurisdiction over an offense committed in New York, because the wrong is done to the people of the State of New York, and not to the people of the State of New Jersey.

TORT DEFINED.—It has been stated by the Court of Appeals of New York that no satisfactory definition of a tort can be found. It is easier, perhaps, to explain to the layman the meaning of the term "tort" by simply enumerating such things as are torts. For example, assault and battery is a tort, and so are libel, slander, false imprisonment, malicious prosecution, fraud, deceit, and negligence. Bigelow's definition is perhaps least objectionable of all of the definitions. He defines a tort as a breach of duty imposed by municipal law, for which a suit of damages will lie. Every tort involves the violation of a duty owed to the individual. For example, A owes to B the duty not to attempt with force to harm his person, or to hit him, or to touch him intentionally, or recklessly. The violation of this duty to B, by A, constitutes the tort of assault and battery. Again, A owes to B the duty not to injure B's reputation, either by spoken word or by written word, so long as B has done nothing to forfeit this right to a good reputation. The violation of this duty, on the part of A, constitutes the tort of libel or slander. So, then, it is easy to see why libel, for example, is a tort. It is a breach of duty which the law imposes upon A for which B may sue and recover damages if he is injured. The same with assault and battery, and the various other torts.

CRIME DEFINED.—A tort, as we have indicated, is a breach of duty owed by A to B. A crime is also a breach of duty, but in this case, A is an individual citizen, and B is a sovereign State. C murders D. When C is prosecuted, the action will read, "The people of the State of New York against C." In other words, the crime is a wrong to the State, and so a crime has been defined as an act or omission which is forbidden by law, to which a punishment is annexed, and which a State prosecutes in its own name. Murder, manslaughter, arson and forgery are all crimes. We may correctly also add assault and battery, thus suggesting the fact that the same act may be both a crime and a tort, because the assault is a wrong against the individual and against the State. The individual will sue in a civil court, to recover pecuniary damages, in an ordinary suit of tort, while the State, for the same offense, through the district attorney's or prosecutor's office, will criminally proceed against the guilty party. We shall now consider briefly some of the more important torts and crimes.

ASSAULT AND BATTERY.—Assault is an attempt, real or apparent, to do injury to the person of another. Battery is a completed assault. It is not necessary that a person have the actual ability to carry out the threat to constitute an assault. For example, to point an unloaded revolver at a person is an assault. While the definition might convey the impression that force was necessary, this is not strictly true, because deception sometimes may be the equivalent of force. For example: Assault and battery is committed where a person administers a drug to someone under the belief that he is taking an entirely different kind of drug. Certain assaults, although technically such, are excusable or justifiable. Formerly a school teacher had the right of corporal punishment without being liable for assault and battery. By statute this right is generally taken away now. A parent, however, may inflict corporal punishment on his child without any civil liability. Courts generally assign as the reason for this, the fact that it would not be conducive to the welfare of the family to have children sue their parents, and the further fact that the child's rights are protected by giving him the right to have his parent arrested and punished criminally for an assault. While it was held formerly that a husband had the right to beat his wife, no modern court has upheld this view.

SELF-DEFENSE.—Another case where assault is justified is in the case of self-defense. It is common saying that a man's house is his castle, and the right of self-defense is founded on the right of self-preservation. So that it follows that a man may use force in protecting both himself and his property. A greater amount of force is ordinarily permitted in the protection of the person than of property. In using force, however, such force only as is reasonably necessary may be used. For example, a man attempts to take my watch from my pocket. I strike his arm to prevent it, and do so successfully. Thereafter, as soon as the man's back is turned, I jump on him and assault him, injuring him severely. I would be liable in this case because more force than is necessary for the protection of my property was used.

LIBEL AND SLANDER.—These two terms are frequently combined under the one term of defamation which is defined as a false imputation upon one's character or reputation. Slander is oral defamation, and libel is written defamation. The action of slander is very technical. Perhaps there is no better summary than that given by the United States Supreme Court in the case of Pollard v. Lyon, 91 U. S. 225, as to what statements are slanderous per se. "Slander," the court says, "may be divided into five classes, as follows: (1) Words falsely spoken of a person which impute to the party the commission of some criminal offense involving moral turpitude, for which the party, if the charge is true, may be indicted and punished. (2) Words falsely spoken of a person which impute that the party is infected with some contagious disease, where, if the charge is true, it would exclude the party from society; or (3) Defamatory words falsely spoken of a person, which impute to the party unfitness to perform the duties of an office or employment of profit, or the want of integrity in the discharge of the duties of such an office or employment. (4) Defamatory words falsely spoken of a party which prejudice such party in his or her profession or trade. (5) Defamatory words falsely spoken of a person, which, though not in themselves actionable, occasion the party special damage." A libel is any writing, picture, print or effigy which tends to hold one up to the contempt, scorn, ridicule, or disgrace of his fellow men. We see then, that many statements which would not be slanderous would be libelous.

PRINCIPLES COMMON TO BOTH LIBEL AND SLANDER.—Certain principles are common to both libel and slander. There must be a publication in either case. To say to a school teacher, in a room where he and the speaker are the only persons present, that he is a fool, would not be slanderous. There is no publication. To write a letter to a minister calling him a thief and a crook would not be libelous because there would be no publication. After he had opened the letter and read it, should he show it to any of his friends, he would have made the publication, and impliedly have consented to its publication. Whether to send statements like this on a postal card constitutes a publication or a libel is an open question, as also is the question whether the dictation of false statements to a person's stenographer constitutes publication to some third person.

PRIVILEGE.—Certain clearly slanderous or libelous statements may, nevertheless, not be actionable, because they are absolutely or qualifiedly privileged. Such is the case of any speech made by a member of Congress, or a member of the State Legislature on the floor of the legislative hall. Such statement, however, made from the stump during a political campaign, would not be privileged. The first is what we call an absolute privilege. There is a certain class of privilege which we speak of as qualified privilege. Newspapers, for example, are permitted to comment by way of criticism on any matters of current interest, provided a reasonable limit is not exceeded. It would not be permissible for a newspaper to pick out John Jones, a wholly retiring and inconspicuous citizen of a town, and make statements about him which hold him up to ridicule, because the public welfare does not call for such action. However, were John Jones running for public office, it would be proper for a newspaper to make comment upon his record, and such statements would have a qualified privilege, although subjecting him to ridicule. A member of the legislature on the floor of the legislature could make statements concerning the same John Jones and never be liable because of his absolute privilege. We must assume, that, with each case mentioned, the statement made is false, in order to have it constitute libel or slander. In other words, truth is a defense to an action for defamation. A person has no right to a false character, and to speak the truth about him does not, therefore, constitute a tort.

FRAUD OR DECEIT.—In order to establish the tort of fraud, it is necessary to prove the following five allegations: (1) that A makes a false statement of a material fact; (2) with knowledge of its falsity; (3) with the intent that it should be acted upon; (4) that the other party believed it to be true; and, (5) acted upon it to his damage. The absence of any one of these five elements will prevent the action of fraud from existing. The action of fraud is most important not only in torts, but also it plays a large part in the law of contracts, and the law of sales, as to both real property and personal property. A stock broker says to Mr. Jones: "My house is offering the best bargain in oil stocks which has been on the market for five years. Aetna Oil Mining Stock at $5 a share is the best buy on the curb to-day. There is no doubt the company will pay 10% in dividends in the first year." Green, relying on this representation, purchases 100 shares of the stock. The stock, thereafter, steadily declines, and never pays a dividend. Has he cause of action for fraud? Clearly not, because there has been no false statement of material fact. These statements about the future earning capacity are seller's talk, or the salesman is merely puffing his wares. Both these expressions are common in the reports and for a mere statement of opinion, no action of fraud lies. It must be a statement of fact. Supposing the same broker had said to his customer, "Aetna Oil Company has paid 10% dividends for the last ten years," and such statement afterwards was found by the purchaser to have been false. An action of fraud would lie, because the dividend record of a company is in the past, and it is not opinion, but fact. Again, suppose the statements to have been the same as in the second illustration, and that they were altogether false, but within three months, through a sudden change in conditions, the affairs of the company were greatly improved, the stock went up in value, and began to pay large dividends. Again, there would be no cause of action, because the fifth element, that of damage, would be lacking. Again, suppose the purchaser, after learning from the broker about the past dividend record, should say, "I will give you my answer to-morrow." Meanwhile, he looks up in a financial paper the dividend record and discovers the statements to be false. He then purchases the stock. Here he would have no cause of action, although he might be damaged, for the reason that by making his own investigation, he has clearly shown that he has not relied on the statement made by the broker, and the fourth element of the action of fraud is missing. In all of these situations, the court assumes that it is dealing with a person of ordinary intelligence, and it does not require the very highest degree of caution on the part of the person claiming to be defrauded, nor will it aid the defrauded person if he does not exercise an ordinary degree of care in safeguarding his rights and forming his judgment in the particular transaction. In laying down this rule, the court does not require that a person must make his own private investigation ordinarily, but he may rely upon the statement made to him. For example, in a Massachusetts case, a real estate broker, in selling a piece of property to a purchaser in a suburban town adjoining Boston, told him that forty trains per day stopped there. The statement was false, the purchaser could have easily inquired at the railroad ticket office, which was only a short distance from the real estate agent's office, but he did not do so. It was held that he could recover in an action of fraud. Were it not so, the courts would, in practice, be laying down the rule that one must assume everyone a liar. On the other hand, had this same purchaser been defrauded by the same real estate dealer a half-dozen times before, then he would not be acting as a reasonably careful man in relying on a statement of this kind. Under these circumstances, the ordinary prudent man would make his own investigation.

FALSE IMPRISONMENT.—A person under ordinary conditions, enjoys the full right of freedom of locomotion. The invasion of that right we call false imprisonment. It is immaterial how trivial the imprisonment may be, for merely locking a person in a room for five minutes as a joke would be enough to give rise to cause for action. The amount of damages which the jury might allow under the circumstances would, of course, be another matter. Many of the principles mentioned in assault and battery are applicable in this tort. Certain persons have a right to imprison other people, and it is not false imprisonment. The sheriff of the county, with a warrant for my arrest, may imprison me, and, of course, I have no action for false imprisonment. He is acting under regular process from the court. A man commits a serious crime in my presence. I lock him in a room until I can call an officer. This is not false imprisonment. The right of a private citizen to make an arrest and not be liable for false imprisonment is stated as follows in Section 183, of the New York Code of Criminal Procedure:

A private person may arrest another: (1) For a crime, committed or attempted in his presence; (2) When the person arrested has committed a felony, although not in his presence.

This is typical of the rule as it exists, with slight modifications, in most of the States. While mere words alone will not constitute an assault, it has been held that mere words will constitute false imprisonment. While a person may be justified in arresting someone else, yet, for the abuse of that privilege, the same as using greater force in self-defense than is necessary, the action of false imprisonment will lie. The man whom I arrest for committing a very serious crime in my presence, I lock in my house and keep there a month, feeding him on bread and water. I am guilty of false imprisonment because while I had a right to arrest him, it was my duty to turn him over to the proper authorities just as soon as possible. In a case, such as this, a month is, of course, an unreasonable time.

NEGLIGENCE.—To say that negligence is failure to use due care is a poor attempt at definition, but it is practically all that can be said. The common law maxim, "sic utere tuo ut alium non laedas" (so use your own as not to injure another), is at this basis of the law of negligence. At the outset, we must be careful to distinguish between "accident" and "negligence." I am walking on a street and slip on a banana skin, and in falling, knock down a passing pedestrian. This is an accident. With my office window overlooking the street, in a banana-eating contest, I eat fifteen bananas, and throw the skins out of the window on the sidewalk. The street is not well lighted. A passerby falls and is injured. This is negligence, and I would be liable.

CONTRIBUTORY NEGLIGENCE.—Negligence must be proved in order to entitle the injured party to recover. The court will not presume negligence merely because an injury takes place. Again, I repeatedly warn a motorman and conductor on a trolley car that I wish to get off at a certain station. Both parties forget the request, and the car goes by the station at the rate of fifteen miles an hour. I think I can get off safely, and attempt to do so. In doing so, I slip and break a leg. Although the two employees of the trolley company were negligent, for not attending to their business, I am guilty of contributory negligence in trying to get off a rapidly moving car, and cannot recover. Contributory negligence is a bar to recovery.

STANDARD OF CARE.—The standards of care to be applied in negligence vary from time to time. What would have been due care on the part of a railroad company fifty years ago, would probably, in few cases, be held to be due care to-day. This is so, because of the improvements which have been made in mechanical devices in the past fifty years. Again, in order to make a cause of action for negligence, there must be some causal relation between the negligent act and the injury. Granting that the man who slipped on the banana skin, which I threw from my office window, had sued me for damages because of his broken leg, it would not follow that I would be liable to the same man five years later, for the reason that an insurance company denied him a policy because of stiffness in the same broken leg, caused by the fall on the banana skin. The law looks not at the remote, but at the proximate, cause of the injury.

ILLUSTRATION.—The owner of lands owes a duty to persons coming upon that land, and the failure to perform that duty is negligence. Here, again, we have to consider who the person is. I enter Wanamaker's store to make a purchase. In going from the second to the third floor, I trip on a defective nosing on the stairway. This has been out of order for some time, and the floor walker was aware of that fact. I have a cause of action against Wanamaker's store for failure, on their part, to exercise due care in having the premises reasonably safe for the use of customers. Suppose, in making a purchase in that same store, in the basement, I see an open door leading into the engine room where the heat generator is located. Being interested in heating appliances, I go into the room, although there is a sign above the door "no admittance." I fall in an unguarded hole in the floor, which has been open for a long while, and the existence of this hole is known to the management. I cannot recover because I am a trespasser. I am in a place where I had no right to be, and, as to trespassers, the owner of property owes no duty, except to refrain from wilful attempts to injure such a person. I may not set a trap in my back yard to catch a trespasser, although I owe no duty to him to have the back yard safe for his use. A peculiar variation in this rule has been made by some States, in the so-called turn-tables cases. Railroads maintain turn-tables in their yards for the purpose of reversing locomotives and other cars. While children, coming upon the premises, are trespassers, nevertheless, many courts have held that such things are what might be called "attractive nuisances," and in such cases the owner of property is under special duty to use care even as to trespassers, to see that they are not injured. These are merely a few of the general principles of the law of negligence as applied by the courts.

CAPACITY OF PARTIES IN TORT ACTIONS.—We discussed the question of the capacity of parties in making a contract. There is not as much qualification upon a party's liability for tort as for contract. To-day, generally, a married woman is liable for her torts, the same as any one else. A corporation is liable for its torts committed by its agents or servants in the scope of their employment. An infant is held responsible for his torts. It is sometimes said that a person is liable for his torts from the cradle to the grave. This is not strictly true. If a baby two years old puts his finger in my eye, injuring it, he would clearly not be liable. But a person of tender years is liable for his torts, whenever he has sufficient intelligence to know what he is doing. Some courts place the age at seven years, while others consider each individual case and the degree of intelligence possessed by the infant.

THE CRIMINAL LAW.—A crime is a wrong which the State recognizes as injurious to the public welfare, and punishes in a criminal action in its own name. There are certain leading principles of the American system of criminal law which must be kept in mind.

(1) A man is presumed to be innocent until the contrary is shown, and a jury, to be justified in bringing in a verdict of guilty, must be satisfied beyond a reasonable doubt, of the guilt of the accused. The rule in civil cases is that the jury must find for the plaintiff or defendant by a preponderance of evidence. Thus, it is possible for a person to secure a verdict in a civil action for damages for assault and battery, while with the same evidence, a jury would not be justified, in a criminal action in convicting the defendant.

(2) In general, no person may be tried for a criminal offense, of any magnitude, until he has been indicted by a grand jury. The grand jury is generally twenty-four men, and hears the case against the prisoner only as presented by the prosecutor or district attorney. If the grand jury believes the evidence to be sufficient to warrant a trial before the petit jury, they bring in a true bill, and then the trial takes place before the petit jury of twelve men, in open court. The prisoner is entitled to counsel, at the State's expense, if he is not able to furnish his own.

(3) The prisoner may not twice be put in jeopardy for the same offense.

(4) A person may not be tried under an "ex post facto" law.

An "ex post facto" law is one which makes an act, which was innocent when committed, a crime. Such laws are unconstitutional. This term is never used in civil law, but the term "retroactive statute" expresses the same idea. Thus, a statute passed January 15, 1920, providing that all contracts made since January 1, 1919, must be witnessed by three witnesses, would be a "retroactive statute" and not valid.

CRIMINAL RESPONSIBILITY.—As a general rule, if a person, when a crime is committed, has sufficient mental capacity to understand the nature of the particular act constituting the crime, and the mental capacity to know whether it is right or wrong, he is liable criminally, whatever may be his capacity in other respects. As in contracts, or torts, there is a special rule in regard to infants. The English common law, which is pretty generally followed in this country, is that a child under the age of seven is conclusively presumed incapable of committing a crime. This is because of the fact that at common law, a criminal intent was necessary in all crimes, and an infant under seven was presumed not sufficiently advanced to be able to form a criminal intent. Between the ages of seven and fourteen, there is a presumption of incapacity to commit a crime, the presumption being very strong near seven, and rather weak near fourteen. Between the ages of fourteen and twenty-one, the presumption is that the infant is capable of committing a crime. As a general rule, one person is not liable for the crimes of another, unless he participated in them, directly or indirectly. A partner, therefore, is not liable, criminally, for the acts of his partners, merely because they are his partners. Neither is a principal or master liable for the criminal acts of his agent or servant, merely because the relationship is that of principal and agent or master and servant. We will consider briefly a few of the more important crimes.

HOMICIDE.—Homicide is the killing of a human being, and is divided into excusable, felonious, and justifiable homicide. The distinction between excusable and justifiable homicide is very slight and perhaps of little utility. Where either exists, a homicide takes place under such circumstances that the party cannot strictly be said to have committed the act wilfully and intentionally, or if he does commit it with full intention, under such circumstances of duty as to render the act performed not a felonious homicide. A felonious homicide is committed wilfully and under such circumstances as to render it punishable. Murder is the wilful killing of any person with malice aforethought. In some States, by legislative enactments, murder is divided into degrees, as murder in the first degree and murder in the second degree. The penalty for murder in the first degree is death, or in a State where capital punishment is abolished, life imprisonment. There are various other distinctions between these two forms of murder which must be ascertained from the statutes themselves.

MANSLAUGHTER.—Manslaughter is the unlawful killing of another without malice, either express or implied. Manslaughter is also frequently divided into different degrees, and the punishment varies accordingly. A reference to the State statutes is necessary, as in murder, to know what the local law is.

BURGLARY.—Burglary, as a common law offense, is the breaking and entering of a dwelling house of another, in the night time, with the intent to commit a felony therein, whether the felony be actually committed or not. But in most jurisdictions the offense has been extended by statute so as to include breaking and entries which were not burglary at common law. Unless changed by statute, it must be committed in the night time, and there must be both a breaking and an entering. Breaking a window, taking a pane of glass out, or bending the nails, is a breaking. Cutting a wire netting on a screen door is also a breaking. In such cases a screen door is not to be considered as a mere protection against flies and mosquitoes, but as a part of the building. As to whether opening a door or a window, already partly open, constitutes a breaking, the cases are in conflict. Without the intent to commit a felony, breaking and entering is a bare trespass, which would not be a crime. The felonious intent must exist at the time of the breaking and entering. Hence, if it can be proved satisfactorily to a jury, that a man broke into a house for a night's lodging only, he would not be guilty of burglary. As in homicide, reference must be made to the local statutes for the actual definition of burglary and its punishment in that jurisdiction.

FORGERY.—Forgery is the false making of an alteration of a writing to the prejudice of another man's right. Forgery may be committed of any writing, which, if changed, would operate as the foundation of another man's liability. Hence a check may be forged, an assignment of a legal claim, an indorsement on any negotiable document, an acceptance of a bill of exchange, a letter of recommendation, a railroad pass or railroad ticket. The penalty for forgery and various other acts of which it may consist, are so purely statutory as to make any further comment useless.

LARCENY.—Larceny is the felonious taking of the property of another, without his consent and against his will, with the intent to convert it to the use of the taker. The taking must be with criminal intent, but not necessarily for the sake of gain, although the property must be of some value, however slight. The taking must be against the consent of the owner, and if the consent is given, although obtained by fraud, the crime is not larceny. Larceny relates only to personal property. Hence the statement made falsely concerning A: "you are a thief. You stole my marle" (marle being a kind of earth), is not slander, because it is not a charge of a crime involving moral turpitude, as real property is not the subject of larceny. Larceny is generally divided into petty larceny and grand larceny, the difference between the two being generally the amount involved, which varies with the local legislation.

ROBBERY.—Robbery, at common law, is the taking, with intent to steal, of personal property in possession of another, from his person or in his presence, by violence or by putting him in fear. In a majority of jurisdictions, statutes have been enacted defining robbery substantially in accord with the common law. It is not necessary that the property taken should be the property of the person from whom it is taken. As in other crimes, there must be a criminal intent, and so where, in an indictment, the offense was charged as robbery, but as proved was, at most, an improper and rude act, and intended only as a joke, it was held that no robbery had been committed.

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CHAPTER XIV
Miscellaneous

INSOLVENT DEBTORS—"GRAB LAW."—When a debtor is insolvent there are several things that he may do. In the first place he may do nothing. He may let his creditors try to get any money out of him if they can, and in general let the creditors take the laboring oar. Where there is no bankruptcy law prevailing, either State or Federal—and that was the situation in many of the States of the Union prior to the passage of the present National bankruptcy law—a debtor might get along that way for a long time. That is one thing he might do.

COMPOSITION WITH CREDITORS.—The second thing the debtor may conceivably do is to try to make a composition with his creditors. Though it is the law that receiving a smaller sum will not discharge a liquidated and undisputed debt for a larger amount, even if it is so agreed, an exception is made in the case of a composition where a number of creditors agree that each of them will take a smaller sum for his claim. The debtor may try to get his creditors to do that, and occasionally he succeeds.

GENERAL ASSIGNMENTS.—A third thing which he may do is to make a general assignment of all his property to trustees in trust to pay his creditors ratably. Such an assignment is not valid in Massachusetts, though in most States it would be, if free from fraudulent incidents. In Massachusetts it would not prevent his creditors, or any one of them, from attaching his property just as if it had not been assigned, but if creditors assent to the assignment then, to the extent of their claims, the assignment becomes valid. In other States the assent of creditors is presumed if the assignment is not fraudulent, and therefore without any actual assent the situation is the same as in Massachusetts after assent of all the creditors.

FRAUDULENT INCIDENTS IN GENERAL ASSIGNMENTS.—In every State a general assignment under certain circumstances will be regarded as fraudulent against creditors. Such a conveyance may be treated as void by the creditors, and the property conveyed seized by them as if the debtor had made no conveyance. Some of these incidents which may make a general assignment fraudulent may be noted. If the assignor was solvent when the conveyance was made, the transaction is fraudulent, for if he has sufficient assets to pay his debts, the only object the assignment can have is to prevent them from being paid at once, and compel the creditors to wait until the assignees under the deed realize upon the property, that the debtor holds, at better advantage than if a forced sale were made at once. If the assignees are given unlimited power to continue business it is also fraudulent, since the business would in effect be carried on at the risk of the debtor. The debtor being insolvent will lose nothing if the business proves unprofitable whereas if profitable there may be a surplus after the payment of the debts. A provision authorizing continuance of business so far as is necessary to dispose of property on hand, or to work up raw material on hand, is generally upheld. A provision authorizing sales upon credit is often, though not uniformly, held fraudulent, since it permits the assignees to defer the settlement of the estate. The most important provisions likely to be attacked as fraudulent, however, are provisions in regard to preferences. Aside from bankruptcy statutes, it is lawful for a debtor who has insufficient means to pay all of his creditors, to pay some in full, though this results in the total exclusion of others. Accordingly a general assignment of a debtor's property on a trust, that the assignees shall pay in full certain named creditors and pay the remaining creditors ratably out of the residue, has generally been upheld though statutes in some States have altered the law in this respect. A kind of preference which is generally deemed fraudulent, however, is one which is made conditional on the creditors giving the debtor a discharge. A general assignment, unlike a bankruptcy law, or a composition, does not free the debtor from liability for so much of his debt as remains unpaid. Debtors have sometimes sought to avoid this result by making a general assignment of their property in trust for ratable distribution among such creditors as should give the debtor a full release and discharge of all claims. Such a provision, attempting, as it does, to impose as a condition of a creditor's sharing, that he should take his share in full satisfaction of his claim, is almost universally held to make a general assignment fraudulent. Under the bankruptcy law, a general assignment may within four months be set aside by bankruptcy proceedings; but a creditor who has once assented to a general assignment cannot thereafter join in a bankruptcy petition against that debtor.

BANKRUPTCY.—The fourth and most important way, however, now, of settling the estates of insolvent persons is provided by statute. The Federal Constitution gives Congress power to pass uniform laws on the subject of bankruptcy throughout the United States, and the Supreme Court has held that when the Federal Government has not taken advantage of this privilege given by the Constitution, States have power themselves to enact bankruptcy laws. In some States there were such laws, but in many there were not. The Federal law now supersedes all State laws on the subject. It was passed in 1898, and under that law the debtor may either become a bankrupt by his own voluntary petition, or his creditors may petition him into bankruptcy if he commits what is called an "act of bankruptcy." This is true, at least, if the debtor is an individual, or is a moneyed business or commercial corporation (except railroads, insurance companies, and banking corporations). When corporations of the excepted class become insolvent, their affairs are settled by still a fifth method—receivership. A special privilege, also, is given to wage earners and farmers. They may, if they choose, become voluntary bankrupts, but are not liable to involuntary proceedings.

PETITIONS IN BANKRUPTCY.—Suppose a debtor wishes to become bankrupt himself. He files a petition in the United States District Court, which is the court of bankruptcy jurisdiction, and is immediately adjudicated a bankrupt. If his creditors want to make him a bankrupt it is necessary that three of them, having claims amounting to not less than $500 in the aggregate, should join, unless there are less than twelve creditors in all. In that event one creditor only may petition. This petition must set forth (1) the creditors' claims, (2) the fact that the debtor has committed an act of bankruptcy, and (3) the fact that he owes debts aggregating $1,000 or more. However slight his indebtedness, if he cannot pay it, a man may be a voluntary bankrupt, but he must owe at least $1,000 to be liable to involuntary proceedings.

ACTS OF BANKRUPTCY—FRAUDULENT CONVEYANCES.—Now what are the acts of bankruptcy which render a debtor liable to a petition by his creditors? In the first place a fraudulent conveyance is an act of bankruptcy. Reference to a fraudulent conveyance by general assignment has been made; but there are many kinds of fraudulent conveyances. If a debtor who is insolvent, or who is made insolvent through a gift made by himself, should give away a portion of his property, that would be a fraudulent conveyance, irrespective of the debtor's intent, because the necessary effect of the gift would be to hinder, delay and defraud his creditors. It would be a fraudulent conveyance for a debtor to seek to conceal his property from his creditors by putting it in the hands of some kind friend to hold for him until his creditors should cease to be so troublesome as at the present time. It would be a fraudulent conveyance for a man who is pressed by creditors to turn himself into a corporation for business purposes, and assign all his property to that corporation. This transfer to a corporation, even though done openly, would necessarily hinder and delay his creditors.

PREFERENCES.—As has already been said, paying one creditor to the exclusion of others is not a fraudulent conveyance, but it is a preference, and a preference is a second act of bankruptcy. Either for the debtor to give a preference himself or to allow a creditor to get a preference, by legal proceedings, is an act of bankruptcy. Any transfer made by an insolvent debtor, to pay or to secure in whole or in part a previously existing debt, is a preference.

GENERAL ASSIGNMENTS.—A general assignment, whether fraudulent or not, is an act of bankruptcy. The consequence is, therefore, that if a debtor makes a general assignment, his creditors have the choice of letting it stand and having the estate settled under the general assignment, or of setting it aside and having bankruptcy proceedings.

RECEIVERSHIPS.—Still another act of bankruptcy is the appointment of a receiver on account of insolvency. There, also, the creditors virtually have an option of letting the receivership stand and having the receiver take charge of the distribution of the assets, or of petitioning the debtor into bankruptcy and having the bankruptcy court take charge.

ADMISSION OF INABILITY TO PAY DEBTS.—One further act of bankruptcy is an admission by the debtor of his inability to pay his debts and his willingness to be adjudicated a bankrupt. An act of bankruptcy can form the basis of a petition only within four months after its commission.

INSOLVENT DEBTORS USUALLY COMMIT ACTS OF BANKRUPTCY.—Now an insolvent debtor cannot very well avoid committing one of these acts of bankruptcy. He can avoid making a fraudulent conveyance, but he will find it pretty hard to avoid making a preference. He need not, it is true, pay any of his debts, and it is not a preference to pay money out for present consideration, or to transfer property for present consideration, as to make a mortgage for a new loan; but it will be hard for him to prevent creditors from getting a preference by legal proceedings, at least if the debtor has any assets at all; for if the debtor does not pay any of his creditors, some of his creditors will sue him, get execution, and endeavor to levy it on the debtor's property.

PROCEDURE AFTER ADJUDICATION.—If a debtor has once been adjudicated a bankrupt, it makes no difference whether it was on a voluntary petition or an involuntary petition; the matter goes on in both cases the same way. The first thing, after the adjudication, is, that the referee, a sort of subordinate judge, requires the bankrupt to submit schedules of his assets and of his creditors. The debtor is induced to make these schedules as complete as possible, for the following reasons: if the schedule of assets is knowingly incomplete, the debtor is committing a crime and is likely to be shut up in jail. If the schedule of his creditors is incomplete, any creditor who is left out or whose address is so incorrectly given that the creditor does not get notice of the proceedings in time to prove his claim, is not affected by the discharge; and as the debtor wants a discharge from as many debts as possible, he, of course, will make his schedule of creditors as complete as possible. From this schedule of creditors, the referee sends notices out to all the creditors to meet and choose the trustee. The creditors meet and choose a trustee, who then endeavors to collect the assets of the estate, and under the direction of the court, pays dividends from the assets to the creditors.

PROPERTY WHICH THE TRUSTEE GETS.—The question may be asked: "What property does the trustee get?" He gets all tangible property that the debtor could transfer at the moment of his bankruptcy. He gets intangible property, patents, trademarks, copyrights, seats on the stock exchange, and good-will of a business, with the exception that the debtor still retains the right to carry on his old business himself, in the future, in his own name. The trustee gets rights of action of the bankrupt, except personal rights of action, as they are called. These consist of rights of action for personal injuries, as for assault, or for personal injury by negligence. A right of action for breach of promise of marriage also would not pass to the trustee in bankruptcy. Not only does a trustee get this tangible and intangible property, but he gets also a right to recover any property fraudulently conveyed by the bankrupt, which is not in the hands of a bona fide purchaser, even if the fraudulent conveyance was made years before, provided the statute of limitations has not completely run against it. Any preference, also made within four months before the filing of the petition in bankruptcy, may be recovered from the preferred creditor, if he had reasonable cause to believe, when he received it, that he was getting a preference, but not otherwise. The trustee in bankruptcy gets the debtor's life insurance policies, except in so far as they are made exempt by statute. Life-insurance policies, in favor of a beneficiary other than the insured himself, are exempt, though if the premiums were paid by the debtor while insolvent, the premiums so paid within the past six years may be recovered, and the beneficiary would in effect have to pay those premiums back in order to hold the policy. Even if the policy runs to the insured himself, in his own name, he has the privilege, under the bankruptcy act, to redeem it from the trustee in bankruptcy by paying its cash surrender value. Property acquired by the bankrupt, after the beginning of bankruptcy proceedings, does not pass to the trustee. The bankrupt's property passes free of attachment or judgment liens, secured by creditors within four months prior to the beginning of bankruptcy proceedings. This has no bearing on a case, where, prior to bankruptcy, money has been actually collected by legal proceedings, but only to cases of seizure under legal proceedings which are still pending at the time the petition is filed. If a debtor becomes bankrupt, within four months after his property is attached, the attachment is dissolved. If the debtor does not become bankrupt until after four months, the attachment is a valid lien on the property attached, and so far as the property is sufficient to pay the creditor, he can collect his claim from it, even though the debtor becomes bankrupt before the creditor finally gets judgment and collects his claim.

PROOF OF CLAIMS.—The trustee collects all this property and tries to reduce it to cash, as fast as he can, and while this is going on, creditors will also be proving their claims. It is only claims which exist at the time of filing the petition which are provable, but the debts need not be due at the time of the bankruptcy; it is only essential that they shall be in existence. Interest is added or rebated, as the case may be, to the date of filing the petition. That is, if you have a non-interest-bearing note falling due July 1, and the debtor becomes bankrupt May 1, the face of the note will be proved less a rebate of two months' interest to May 1, because the present value of the note on May 1 is what is provable. On the other hand, if the note had been due on April 1, interest would be added up to the date of filing the petition, and if the note was an interest-bearing note, of course the interest would be provable up to May 1, even if the note did not fall due until July 1 or later. Debts, arising subsequently to the date of filing the petition, must be enforced against the bankrupt's assets acquired after his bankruptcy. Claims for tort are not provable, that is, claims for injuries to person or property not arising out of contact. But a judgment for tort, obtained before the filing of the petition, is provable. There has been a good deal of trouble in regard to what are called contingent claims. The commonest instance is the indorser's liability on a note which is not yet due when the indorser becomes bankrupt. At the time of filing the petition, the indorser's liability is contingent on the possibility that the maker may not pay the note at maturity, and that notice of dishonor will be given to the indorser. Creditors, who have received a preference, cannot prove claims unless they have surrendered, within four months of the bankruptcy, any preference which they have received with reasonable cause to believe that it was a preference. Secured creditors can realize on their security and then prove for the balance of their claims. A few claims are given priority over others and paid in full before any dividend to other creditors. The most important claims of this sort are the wages of workmen, clerks or servants earned within three months of the bankruptcy and not exceeding the sum of $300.

LEASES.—Leases belonging to the bankrupt pass to the trustee in bankruptcy, if he wants them, but the trustee in bankruptcy need not take any kind of property which seems more burdensome than beneficial to him, and as a trustee would have to pay, the rent under a lease in full, if he took it, he frequently will prefer to abandon it. The landlord can prove for rent, which is already accrued, but he cannot prove for rent which has not already accrued, even though part of the period for which the rent is claimed has elapsed, unless there is a special covenant in the lease. If the trustee in bankruptcy assumed the lease, then, of course, the landlord would look to the trustee for the rest of the term. If the trustee did not assume the lease, the landlord would have his option of doing either of two things: he could leave the bankrupt in the premises and have a right of action against him for the rent, from time to time, as it accrued, or he could eject the tenant; but if he ejected the tenant he could not hold him for rent. Generally he would eject a bankrupt tenant rather than let him stay.

SET-OFF.—Set-off may be made by a debtor of the estate who also has a claim against the estate. He does not have to prove his claim, taking a dividend on it and then paying, in full, the debt which he owes to the estate. He may set one off against the other, but he is not allowed to acquire claims for the purpose of set-off within four months prior to bankruptcy. Otherwise, one owing money to an insolvent debtor, could buy up at a discount claims against the debtor, equal in amount to his indebtedness to the bankrupt.

EXAMINATION AND DISCHARGE OF BANKRUPT.—The bankrupt may be examined by any creditor with a view to the disclosure of his assets. This is a most important right. Finally, if in every respect, he obeys the bankruptcy law, the debtor gets a discharge. Grounds for refusing him a discharge are, that he has made a fraudulent conveyance; that he has obtained credit by false representation; that he has failed to keep books of account for the purpose of concealing his financial condition; that he has committed an offence punishable by the bankruptcy law, as making a false oath or refusal to disclose his property or to submit to examination; and finally a debtor who has already been discharged in bankruptcy within the previous six years cannot, as a voluntary bankrupt, again obtain a discharge. These are reasons for refusing a discharge altogether, but even though a discharge is granted, certain liabilities are not discharged. Claims for obtaining property by false pretences, or for false representations, are not discharged. Claims for defalcation or embezzlement, as a public officer or as a fiduciary, and claims for wilful and malicious injury to the property of another, are not discharged. Nor are taxes or claims for alimony or for the support of a wife or dependent children.

COMPOSITION IN BANKRUPTCY.—At common law it was necessary to have the consent of all a debtor's creditors in order to make the composition operative as against all of them. In bankruptcy there is a special provision for composition, and with the approval of the court, a composition may be declared binding, not only as against those who have assented to it, but as against all creditors having provable claims, if a majority in number and amount of the creditors, taking part in the bankruptcy proceedings, assent to the discharge.

INSURANCE.—Insurance is a contract whereby, for an agreed premium, one party undertakes to compensate the other for loss on a specified subject from specified perils. Policies of insurance are as various as the contracts which they cover. In 1779, Lloyd's adopted a standard form of marine policy, which, with some changes, is in practically universal use in the British world. A standard form of fire policy has been adopted by many of the fire insurance companies in the United States.

POLICY PROVISIONS.—Certain terms occur frequently in insurance law, with which one should be familiar. A valued policy is one upon which a definite valuation is put, by agreement of both parties, on the subject matter of the insurance written on the policy; for example, a policy "insuring the S.S. George Washington, valued at $1,000,000." An open policy, on the other hand, is one in which a definite sum is written on the face of the policy, but instead of agreeing as to the value of the property insured, indicates the limit of recovery in case of the destruction of the property. Floating policies are such as cover articles which cannot be designated with certainty, as for example, a constantly changing stock of goods. In life insurance there are many kinds of policies. Probably the most common is the regular life, under which the insured pays certain fixed premiums throughout life, and the beneficiary receives the amount of the policy only upon the death of the insured. Life insurance policies in which the investment feature is prominent, are generally called endowment policies, and they require the insured to pay a certain premium, annually, for a certain number of years. If the insured dies before premium payments cease, under the terms of the policy, the beneficiary receives the full amount of the policy. If the insured lives beyond the stated period, he is entitled to receive the amount written on the face of the policy or he may be allowed to receive a paid-up policy for some specified sum. A policy of reinsurance is simply a contract made by one insurance company with another, whereby the first reinsures with the second some individual risk which it has itself accepted and insured.

ELEMENTS OF CONTRACT.—In order that the contract of insurance shall be valid, it must possess all the essential elements of the ordinary contract. Although there is a certain element of chance in an insurance contract, it is always held that it is not in the nature of a gambling contract. A peculiar feature of this contract is that it is one of the utmost good faith, and requires that each party shall disclose to the other all material facts in his knowledge that may affect the making of the contract.

INSURABLE INTEREST.—An essential element in the law of insurance is that of insurable interest. By this term we mean that interest of the insured, which is exposed to injury by reason of the peril insured against. Such interest does not necessarily need to be a legal right, but only such as to justify a reasonable expectation of financial benefit, which will be derived by the continued existence of the person or property insured. While it is difficult to define accurately an insurable interest in property, Section 2546 of the California Civil Code defines it thus: "Every interest in property, or any relation thereto, or liability in respect thereof, of such a nature that a contemplated peril might directly damnify the insurer, is an insurable interest." In life insurance, an insurable interest is requisite, but this interest, if existing at the time the policy is issued, is sufficient, although such interest subsequently terminates. Every person has an insurable interest in his own life, or he may procure insurance on the life of another, when so related to that other, either by reason of blood, marriage, or commerce, that he has well-grounded expectation of deriving benefit from that other's life, or suffering detriment through its termination. It is well settled that a creditor has an insurable interest in the life of his debtor. The courts are not clear as to just how much this interest is, but it will not be allowed to greatly exceed the sum of the debt. The relationship between the insured and the insurer is governed, to a very large extent, by the law of agency.

SURETYSHIP AND GUARANTY.—Suretyship has been defined as an accessory agreement by which one binds himself for another who is already bound. A surety is a person who is liable to perform any act, that his principal is bound to perform, in the event that his principal fails to perform as agreed. Where there is more than one surety, the parties are known as co-sureties. The distinction between the contract of suretyship and that of guaranty is not altogether clear, and frequently not observed by the courts. So far as the distinction can be defined, we may say that if the parties undertake to pay money, or to do some other agreed act, in case the principal fails to perform his part, then they are sureties. On the other hand, if they assume performance, only in the event that the principal is unable to perform, then they are guarantors. The principles which apply to both, are, in many respects, similar. The terms used by the parties are not necessarily conclusive as to whether it is a suretyship or guaranty relationship. For example, in the case of Saint v. Wheeler, etc., Mfg. Co., 95 Ala. 362, where a contract was under seal by which the parties "guarantee," along with one of their number, to pay absolutely and irrespective of solvency or insolvency, all damages which might result, etc., it was held that the contract was one of suretyship, and not of guaranty, although they had used the express term "guarantee" in the language of the contract.

QUALIFICATION OF A SURETY.—A surety may be distinguished from an indorser in that the undertaking of the surety is absolute, whereas that of the indorser is conditional. The Negotiable Instruments Act provides that a general indorser "engages that on due presentment, it (the instrument) shall be accepted or paid, or both, as the case may be, according to its tenor, and that if it be dishonored, and the necessary proceedings on dishonor be duly taken, he will pay the amount thereof to the holder, or to any subsequent indorser who may be compelled to pay it." Hence, if an indorser is not notified, or if the instrument is not protested, if that is necessary, he is discharged.

PRINCIPAL AND SURETY.—Ordinarily, the relationship of principal and surety is entered into under the terms of a contract, the chief object of which is the creation of the relationship. As a general rule, any person who is capable of making a contract may be surety. Formerly, it was sometimes said that an infant was absolutely unqualified to make a contract of this kind, but now his contracts of suretyship are held to be voidable, the same as his other contracts. In some states a married woman is still prevented by statute from becoming a surety for her husband. Like ordinary contracts, a contract of suretyship must be supported by sufficient consideration. It is ordinarily a collateral engagement to pay a debt of another, and hence, comes under the section of the Statute of Frauds which requires a contract to answer for the "debt, default, or miscarriage of another," to be in writing.

SURETYSHIP LIABILITY.—The general extent of the suretyship liability is measured by the contract of the principal, which he guarantees. If no cause of action can be maintained against the principal on the contract, it follows necessarily that the surety is not liable. The tendency of the courts is to favor the surety. His obligation is ordinarily assumed without any pecuniary compensation, and it is accordingly said that his liability is "strictissimi juris," (strictly construed by the law). A surety has the right, then, to insist upon the very letter of his contract, and if there is a reasonable doubt as to whether his contract requires the doing of certain acts or not, that doubt should be resolved by the court in favor of the surety. Consequently, a surety will not ordinarily be held liable for any default of the principal, which occurred prior to the surety's contract to be such. The death of the surety does not necessarily terminate his liability, and his personal representatives will be responsible for the carrying out of his contract, especially where the contract reads that the surety "binds his heirs, executors and administrators."

SURETY'S OBLIGATION UNDER NEW CONTRACT.—It frequently happens that the principal's contract is not completed, and a renewal is necessary. The question arises whether the surety's obligations are continued under the new contract, the same as under the old. The principle which the courts apply is that if the renewal amounts to an entirely new contract, then the surety's obligation is at an end. But if the renewal is simply a part of the original contract, and does not call for any new contract, his obligation continues under such renewal. As the contract between the principal and surety is of a more or less confidential character, the law requires, as we have mentioned in insurance, the exercise of the utmost good faith on the part of the principal. Hence, if a surety, before entering into his contract, applies to the principal for information about any material matter pertaining to the contract, the principal is bound to give full information as to every fact within his knowledge, and if he does anything to deceive the surety, he vitiates the contract. Another application of the same principle is found in the rule that the principal must not do any act injurious to the surety or inconsistent with his rights. Consequently, if the principal makes any arrangement with his principal debtor, by which the risk of the surety is materially increased, or the terms of the contract are altered or varied or the time of payment is extended, the surety in any of these cases would be released from any liability unless he is consulted and gives his assent to such changes in his contract. It is necessary that the new contract, which the principal makes, be a valid contract in order to release the surety. Hence, if the principal makes a contract extending the time of the payment on the obligation six months, and that is all there is to the contract, such extension agreement would be invalid because of lack of consideration, and the surety in such case would not be discharged from his liability under the old contract. If the obligation which the surety undertakes to pay is a promissory note, an agreement by the principal to extend the time of payment, would not, of itself, release the surety, there being no consideration. A part payment made by the maker, before the note was due, for which an extension of time to pay the remainder is granted, would be binding, because such part payment, before a note is due, constitutes good consideration for an agreement to extend the time to pay the balance, and consequently the surety is discharged.

NEGLIGENCE OF THE CREDITOR.—It is generally true that the creditor is under no obligation to be diligent in the pursuit of the debtor. Consequently, a mere negligence of the creditor, to sue or otherwise attempt to collect a claim against his debtor, although there is a surety for the creditor, does not relieve the surety of his liability. Mere delay, then, in proceeding against the principal debtor, does not release the surety, unless there is between the creditor and principal debtor a valid and binding agreement, under which a delay does prejudice the surety.

DISCHARGE OF SURETY.—A surety is discharged by the payment or performance, by the principal, of the condition in the agreement. It is even held that the surety is discharged if a tender of payment has been made to the principal, after the debt is due, and it is refused by him. In such a case, the tender amounts practically to a payment of the debt and a new loan creating a new contract. It sometimes occurs that the creditor has collateral security for the payment of the debt, or secures control of money or property of the debtor and which he may lawfully apply to the debtor's obligations under certain circumstances. The principal may voluntarily surrender or dispose of these securities. In such a case, the surety is discharged from liability to the extent of the value of the securities disposed of or surrendered. Of course, the surety is not discharged where the principal takes additional securities, or if some securities are given up and sufficient are retained by the principal to pay the debt, the surety is not relieved and cannot complain, for the reason that he has not been injured.

RIGHTS OF SURETY.—It is a well established rule of law that where the surety is obliged to make good on his contract he is entitled to relief, the law implying a promise on the part of the principal to reimburse the surety for any damages which he suffers. Of course, this assumes that the surety was legally bound to pay the debt. If he pays it because it is a moral obligation or for any other reason which the law does not recognize as legally binding, he is not able to compel the principal to reimburse him.

RIGHT OF CONTRIBUTION.—One of the peculiar remedies, which the courts of equity have developed, is that of contribution. This right is frequently used in the law of suretyship. When one of two or more sureties, for the same obligation, has paid more than his share of the debt, he is entitled to be reimbursed for the excess by his co-sureties. This right is known as the right of contribution. As has been said before, a surety, if he pays when he is not legally bound to do so, must stand the loss himself; and the same is true where he is one of several co-sureties. Thus, if one co-surety pays a debt, which is barred by the statute of limitations, he would not, in that case, be entitled to contribution from his other co-sureties.

SURETY COMPANIES.—Surety companies conduct such a large business at the present time that a word should be said about them in connection with this topic. The surety company is a corporation, and its powers are, of course, defined by its charter, and the laws of the State in which it is incorporated. In general, surety companies are authorized to guarantee performance of contracts and to execute bonds and undertakings required by the courts. One tendency is noticeable in recent years. The kind of suretyship, we have been referring to, is generally that in which the surety is an individual, who undertakes his task for no consideration, and for that reason, as we have said, the courts construe the contract of suretyship strictly in favor of the surety. More and more, now, the practice of the individual becoming a surety is decreasing, and in his place the surety companies offer their services in a more satisfactory manner, under modern business conditions, but with the striking difference, that the surety company offers its services only for pay, which will net the company a profit. Hence, the rule that the contract should be construed strictly in favor of the surety does not fit the case of the surety company which is paid for its services. In the case of the American Surety Co. v. Paulu, 170 U. S. 133, and in many other cases, the rule is laid down, that the contract will be construed against the surety company and in favor of the indemnity which the obligee has reasonable grounds to expect. So, it has been held that a surety company will not be relieved on its contract, by an extension of time to the principal, and that there is no presumption that the surety was injured by the extension unless the injury is actually proved.

PATENTS.—The policy of encouraging monopolies, while generally frowned upon, finds two exceptions in the law of patents and copyrights. Consequently, the Federal Constitution gives the exclusive right to Congress to "promote the progress of science and useful arts by securing for limited times, to authors and inventors, the exclusive right to their respective writings and discoveries." The patent office is located in Washington, and here the Commissioner of Patents has his official office, and applications for all patents are made through him, and he is authorized to establish regulations for the granting and issuance of patents. The duration of a patent right depends, of course, upon the statute. At the present time, the period is seventeen years, and at the end of that time, the person holding the patent must yield up his monopoly and all that pertains to it. A patent is in the nature of a contract, and the United States Supreme Court has said "The true rule of construction in respect to patents and specifications, and the doings generally of inventors, is to apply plain and ordinary principles to them, as we have endeavored to on this occasion, and not, in this most meta-physical branch of modern law, to yield up to subtleties and technicalities, unsuited to the subject, and not in keeping with the liberal spirit of the age, and likely to prove ruinous to a class of the community so inconsiderate and unskilled in business as men of genius and inventors usually are." A distinction is usually made between pioneer patents, and patents which are merely improvements on one already issued. The former are always given a liberal interpretation, while the latter should be strictly construed.

ELEMENT OF NOVELTY.—It is the element of novelty which gives rise to the right to a patent. It is not possible to discuss in this limited space, the countless decisions upon this point. A thing may be novel and entitled to a patent, although very old. Some lost art of the Egyptians is re-discovered by an American. Although the idea is several thousand years old, to all practical purposes it is new, and the inventor would be entitled to a patent. Like any other property, an inventor's right may be lost by abandonment. Thus, where an inventor taught a large number of people, with no suggestion that the thing was an experiment, and received pay for his instruction, the court held that this constituted an abandonment of his claim, and he was not entitled to a patent.

INFRINGEMENTS.—A suit may be maintained by the owner of a patent against one who infringes, and as this is a matter under the United States laws, all patent suits are tried in the Federal courts. A patent right is personal property, and upon the death of the owner, goes to his personal representative. Patent rights, like other personal property, may be assigned and sold.

SALE OF PATENTED ARTICLES.—In recent years, many cases have arisen over the question whether the manufacturers of patented articles are entitled to impose conditions respecting the use of their manufactured articles by purchasers. Early cases seem to support the view that, as the theory of a patent was that of a monopoly, these conditions would be upheld even after the patented articles came into the hands of a purchaser. Decisions of the United States Supreme Court, however, have tended the other way. So, attaching a notice to a patented article, stating that the article is licensed for sale and use at a specified price, and that the purchase is an acceptance of these conditions, and that in the case of a violation of this restriction, all rights revert back to the patentee, cannot convert an otherwise apparently unqualified sale into a mere license to use the invention. In Bauer v. O'Donnell, 229 U. S. 1, the Supreme Court said: "The right to vend conferred by the patent law has been exercised, and the added restriction is beyond the protection and purpose of the act. This being so, the case is brought within that line of cases in which this court, from the beginning, has held that a patentee, who has parted with a patented machine, by passing title to a purchaser, has placed the article beyond the limits of the monopoly secured by the patent act."

COPYRIGHTS.—A copyright is the exclusive privilege of printing, or otherwise multiplying, publishing and selling copies of literary or artistic productions. The nature of a copyright is thus defined by the United States Supreme Court, in the case of Caliga v. Newspaper Co., 215 U. S. 158: "Statutory copyright is not to be confounded with the common law right. At common law, the exclusive right to copy existed in the author until he permitted a general publication. Thus, when a book was published in print, the owner's common law right was lost. At common law, an author had a property in his manuscript, and might have an action against any one who undertook to publish it without authority. The statute created a new property right, giving to the author, after publication, the exclusive right to multiply copies for a limited period. This statutory right is obtained in a certain way, and by the performance of certain acts which the statute points out. That is, the author having complied with the statute, and given up his common law right of exclusive duplication, prior to general publication, obtained by the method pointed out in the statute an exclusive right to multiply copies and publish the same for the term of years named in the statute. Congress did not sanction an existing right; it created a new one."

PROPERTY RIGHT IN IDEAS.—The doctrine that a person has a property right in his ideas has never been recognized, either by common law or by statute. To illustrate: If A, in the course of a conversation with B, gives his idea of what would be a brilliant thought to work up into a detective story, and B, possessing some literary ability, takes the idea and writes a successful detective story, he is entitled to the profits secured from the sale of the book, and there is nothing that A can do about it. The idea which A handed to B has been put by B into such form that it is practicable to allow B to copyright it, and protect his property right in the story. There is no practical way to protect a mere idea.

EFFECT OF COPYRIGHT STATUTES.—One must bear in mind the effect of copyright statutes on common law rights. At common law, an author has a property in his manuscript, and may obtain redress for any attempt to deprive him of it, and the copyright act provides that nothing in the act shall limit the right of the author, at common law, or in equity, to prevent the copying, publication or use of an unpublished work, without his consent and it gives him the right to damages should this be done. At common law, the author of any literary composition had an absolute property right in his production, and he could not be deprived of it so long as it remained unpublished. Interesting questions have arisen in regard to the nature of the property rights in letters. The question as to the rights of the sender and the recipient are frequently troublesome. The rights of the writer consist in the power to make or restrain a publication by the recipient, but he cannot prevent a transfer. The rights of the recipient are those of unqualified title in the material on which they are written. He has the right to keep them, to read them, and show them to a limited circle of friends, somewhat in the same way as a family picture album might be used.

PROPERTY RIGHT IN INFORMATION OR NEWS.—Another interesting question is as to whether there can be any property right in information or news which has been collected at great expense by the Associated Press or some similar organization. The most important case on this question is that of the International News Co. v. the Associated Press, 248 U. S. 215. The Associated Press, organized in New York, is a corporation created for the purpose of collecting news and distributing it to about 950 newspapers at an annual expense of about $3,500,000. The International News Service was a corporation organized in New Jersey to collect and sell news to a chain of newspapers. The complaint was made by the Associated Press that the International News Service was engaged in pirating its news in three ways: (1) By bribing employees of newspapers, published by complainant's members, to furnish Associated Press news to defendant, before publication, for transmission by telegraph and telephone to defendant's clients, for publication by them; second, by inducing Associated Press members to violate its by-laws and permit defendant to obtain news before publication; and, third, copying news from early editions of complainant's newspapers, and selling it, either bodily or after rewriting it, to defendant's customers. The court held that news should be regarded as quasi-property, and that it was unfair competition in business for the International News Service to take from newspapers, which are members of the Associated Press, news furnished by it, and refused to modify the injunction issued by the District Court restraining any taking or using of the Associated Press news, either bodily or in substance, from bulletins issued by the Associated Press, or any of its members, or from editions of its newspapers, until its commercial value to the complainant and all of its members had passed away.

APPLICATION FOR COPYRIGHT.—The formality of securing a copyright is comparatively simple. The register of copyrights, in the library of Congress at Washington, furnishes a blank which the applicant fills out and returns, giving the required information, and on or before the first day of publication, the applicant must send two copies of the copyrighted book to the library of Congress. The copyright is good for twenty-eight years, with a right to renewal. The works for which copyrights may be secured may be classified as: (a) Books, including composite and cyclopedic books, directories, gazetteers, and other compilations; (b) periodicals, including newspapers; (c) lectures, sermons, and addresses, prepared for oral delivery; (d) dramatic or dramatic-musical compositions; (e) musical compositions; (f) maps; (g) works of art, models or designs for works of art; (h) reproductions of a work of art; (i) drawings or plastic works of scientific or technical character; (j) photographs; (k) prints and pictorial records. There are certain things, which, while technically they are under the classification we have given, are not subject of copyright. The opinions handed down by the judges of all of our courts, although they are in the form which would ordinarily permit copyright, are not subject of copyright because of the general principle of law that a judge receives a stated annual salary and cannot, therefore, have any pecuniary interests in the fruits of his judicial labors. This does not mean, however, that the opinions of the United States Supreme Court, for example, are not to be found in a copyrighted book. The Supreme Court Reporter, which is one of the systems of reporters published by the West Publishing Co. as a purely commercial enterprise, is copyrighted by that company. This is because of the fact that the editorial staff of the West Publishing Co. prepares a syllabus for each opinion, an exhaustive index in each volume, and a table of cases, and all of this matter arranged by that company, is subject to copyright, and they have the right to use the opinions of the Supreme Court the same as any other publisher would have. Again, a copyright might be refused on the grounds that the book on which the copyright was sought was an immoral or obscene writing, and therefore not entitled to protection of the copyright law. The word "Copyrighted" accompanied by the name of the copyright proprietor should appear on the page opposite the title page, or if the article copyrighted is a picture, the act provides that the device, accompanied by the initials or the symbol of the copyright proprietor, shall appear on the article.

SUBJECTS OF COPYRIGHT.—In the classification we have just given, mention is made of lectures, sermons, etc., as being the subject of copyright. It is held, however, that a lecture, delivered orally to a class of students, is not published to the extent that the instructor loses his right to it, although the students may be allowed to make notes for their own use. In the same way, the artist does not lose his common law copyright by an exhibition of his pictures in his studio or in a public gallery where they are placed for sale. Similarly the public presentation of a dramatic production does not deprive the owner of his rights in it. The reason for this is that at common law the public performance of a play does not mean an abandonment to the public generally.

TRADE MARKS AND TRADE NAMES.—A trade mark or trade name is a mark or symbol which the tradesman puts upon his goods, so that they may be identified and known by the public generally. A trade name differs from a trade mark in that it is descriptive of the manufacturer himself, and involves the individuality of the maker. Statutes will be found covering the registration of trade marks and trade names, but the protection which the law affords the owner of these is not confined to a statute alone. It is generally held that a trade mark, subject to some qualifications, arises without the aid of any statute.

SUBJECT MATTER OF TRADE MARK OR TRADE NAME.—The question as to what is the subject-matter of a trade mark or a trade name, can only be determined by a careful reading of the cases. A trade mark may consist of a name, a symbol, a letter, some arbitrary form, or a newly-coined word. Pictures of animals, coats of arms, and the like, are frequently used. No trade mark can be obtained by the mere use of a color or generally a geographical term, nor can a trade mark be obtained from the form of a package in which goods are packed, and generally, mere letters and numbers cannot form a trade mark, although the arbitrary combination of numbers, such as "Babbitt's 1776" may be a valid trade mark.

NAMES NOT VALID TRADE MARKS.—Generic names, and merely names of articles, are not valid trade marks, as "Extract of Wheat," and "New York Cough Remedy." A trade name of a firm, a corporate name, or the name of a publication, although they are not strictly trade marks, are, nevertheless, of the same nature as a trade mark, and will be protected in the same manner.

UNFAIR COMPETITION.—The most common way in which trade marks and trade names become the subject of litigation, is in connection with unfair competition. By this term we mean, ordinarily, the imitation by one person, for the purpose of deceiving another, of the name, device, or symbol used by a business rival. The courts act in such cases upon the theory that the public should be protected, and should not have other goods pawned off on it in place of something else which a person thinks he is getting. This matter of unfair competition is the subject of much litigation in the courts, and one or two illustrations will show how the question arises. For example: In an English case, decided in 1897, the plaintiff had manufactured and sold a relish which was made under a secret recipe and was sold under the name "Yorkshire Relish." The defendant then put a sauce on the market resembling it, and sold it under the name of "Yorkshire Sauce." The court held that the plaintiff was entitled to an injunction. In the case of the International Silver Co. v. the Rogers Co., 66 N. J. Equity 119, the court enjoined the use of the word "Rogers" in the corporate title of the William H. Rogers Corporation, on the ground that its use was a part of the proceedings by which the public were deceived. In this case a manufacturer of silverware, in Plainfield, N. J., was attempting to trade upon the reputation of the "1847" brand of plated silver made by the Rogers Company of Connecticut, which company was at the time of the action, a constituent part of the International Silver Co. The Connecticut Company had built up a large and good reputation by a long period of sales of its silverware to the public under its trade devices, and the use of its business name. The New Jersey Company was simply attempting to trade on that reputation, which is almost always the case in unfair competition.

CONFLICT OF LAW.—Although we have referred to the uniform legislation in the various topics of commercial law which we have been considering, there is still much in the subject of conflict of law which concerns the student of commercial law. International law is commonly divided into two branches, public and private. Public is that which regulates the political intercourse of nations with each other; private, that which regulates the comity of States in giving effect in one to the municipal laws of another relating to private persons. Conflict of law is one division of the broader subject of international law and is frequently called private international law. In the sense in which we are now using the term, the various States of the Union are considered as foreign to each other. The problems embraced in this topic and their bearing on commercial law may be more fully appreciated if we take a simple illustration. A stock broker with offices in New York City seeks to sell the stock of a new oil mining company to a purchaser in Indiana. The sale is one which is not allowed by the Indiana "blue sky" law. New York has no such law. The sale is effected by means of circulars and correspondence between the New York broker and the Indiana purchaser. Is this transaction to be governed by the law of Indiana or of New York? Its validity will depend upon our answer to that question and this is the type of question one has to answer on the subject of conflict of law. With approximately forty different "blue sky" laws in the country at present, and the great number of stock transactions carried on between the States, the importance of this topic may be appreciated. Again, even where we have a uniform act as, for example, the Uniform Negotiable Instruments Act, there are still differences in the law in some States. Each statute must be interpreted by the courts, and although the judges are sincere in their efforts, it can not be expected that we will always have a uniform interpretation of the same act by the courts in each and every jurisdiction of the United States.

FUNDAMENTAL PRINCIPLES.—There are several fundamental principles we should keep in mind before we turn to the specific branches of commercial law as affected by our topic. The term comity is one of common use in conflict of law and is defined as the recognition which one nation or State allows within its territory to the legislative, executive, or judicial acts of another nation or state. Comity is not a matter of right, but a courtesy, and one country may exercise its right and prohibit citizens of other countries from suing in its courts. Of course the various States of the United States are not as completely free in this matter as separate countries, because of the provision in the Federal Constitution guaranteeing to the citizens of each State all the privileges and immunities of citizens in the several States. There are still many questions which are not affected by the Federal Constitution. For example, a suit is brought in New Jersey upon a contract of suretyship made in New York by a wife for her husband. There is a statute in New Jersey prohibiting a married woman from doing this. New York has no such statute. Shall the New Jersey court enforce the contract which the parties made in New York but which they could not have made in New Jersey? Under the principle of comity a New Jersey court has held valid such a contract. Again, it is entirely conceivable that a person living in Turkey might make a binding contract to marry three women at the same time. Suppose the Turk before the time for performing the contract arrives, comes to New York and then refuses to marry the three women. Could they sue him for a breach of contract in the New York court? Clearly not. Here they would be asking the New York court to enforce a contract which while admittedly valid, when made in Turkey, is decidedly against the public policy of any monogamous country. Comity being a courtesy, not a right, would not require a New York court to recognize the Turkish contract. In our illustration of the wife acting as surety, no question of public policy was involved and hence there was no impropriety in New Jersey recognizing as valid her contract, although such a contract could not have been made within the State of New Jersey.

CONFLICT OF LAW AS RELATING TO THE STATUS OF PROPERTY.—As we have pointed out heretofore, property is divided into real property and personal property. Reference should be made to the distinctions between these two kinds of property as described in a preceding chapter. Suppose A dies intestate in Texas owning real property in New York. The law relating to the descent of real property is different in Texas from that in New York. A's heirs wish to know by which law this New York real estate will be governed. It is almost universally recognized that all matters concerning the title and disposition of real property are determined by what is known as the lex loci rei sitae, that is, the law of the place where the property is situated. Accordingly the heirs in Texas would be governed by the law of the State of New York and, similarly, if A had also owned property in Illinois, that property would be governed by the Illinois law. Suppose, also, A had owned $50,000 worth of stock in various corporations and he kept one-half of this stock in his safe deposit box in Galveston and the other half in New York City. While the dominion of a State over personal property within its borders is complete, nevertheless by virtue of the principles of comity, the rule has been recognized almost from time immemorial that personal property is governed by the law of the domicile of the decedent at the time of his death. Hence A's stocks (and bonds for that matter) would be divided according to the law of Texas whether they were in his safe deposit box in Galveston, New York City, or Chicago. It follows, when no rights of creditors intervene, that the law of the domicile of the testator will control in regard to his will of personal property, and the law of the place where the real property is situate will control in regard to it.

CONFLICT OF LAW AS RELATING TO CONTRACTS.—It is a general principle of contract law that the construction and validity of a contract is governed by the lex loci contractus, the law of the place where the contract is made. When the contract is made in one jurisdiction and is to be performed in another, the question becomes more difficult. The Supreme Court of the United States, in Scudder v. Union Nat. Bank, 91 U. S. 406, has laid down the following rules in reference to the law governing contracts in cases in which the place of making and the place of performance are not the same. "1. Matters bearing upon the execution, interpretation and validity are determined by the law of the place where the contract is made; 2. Matters connected with the performance are regulated by the law of the place where the contract by its terms is to be performed; 3. Matters relating to procedure depend upon the law of the forum (i. e., the court where the case is heard)." These three general rules have been adopted and applied by many jurisdictions in a long line of cases involving every conceivable kind of contract. But perhaps it is even more generally stated, when the contract is to be performed in a place other than the place where it is made, that the law of the place where the contract is to be performed will determine the validity, nature, obligation and effect of the contract, or, in other words, in case of conflict the lex loci solutionis (the law of the place of performance) will prevail over the lex loci contractus. Although these statements at first seem somewhat contradictory, we may always apply another rule which is a sound test for the determination of the proper law to be applied. We may properly say that the intention of the parties should control and it is generally agreed that the law of the place where the contract is made is, prima facie, that which the parties intended to govern the contract, and in the absence of a contrary intention ought to control. It frequently happens that a contract made in one State is sued upon in the courts of another State. The law governing the procedure in the trial of this case will be the law of the forum, that is of the State where the case is tried, regardless of what the law may be on the same matter in the State where the contract was made. There may be, for example, a peculiar rule as to a wife's being able to testify on the contract in question. This rule will be enforced by the court although no such rule existed in the State where the contract was made. There is no great hardship in the application of such principles because the courts of the State where the contract was made are open to the parties, and if they wish to avail themselves of the services of a court in a different jurisdiction they must take it as they find it with its rules of procedure.

ILLUSTRATION.—There is another type of contract which involves the question of conflict of law to which attention should be called. The facts in the case of Fonesca v. Cunard Steamship Company 153 Mass. 553, illustrate this point. A passenger on one of the steamships of the Cunard Steamship Company bought a ticket in Liverpool for Boston and on the ticket was a clause providing that the steamship company should not be liable for any damage to a passenger's baggage during transit, regardless of whether the steamship company was negligent in handling the baggage. When the passenger arrived in Boston, and her trunk was delivered, it was found that the contents had been damaged by sea water due to the steamboat company negligently leaving a porthole open. The passenger sued, and the Massachusetts court held there could be no recovery for the damage, for, although such a clause exempting a carrier for his negligence was not valid under the Massachusetts law (and in fact the law of practically all American jurisdictions), nevertheless, since the law of England permits such a clause, and this was an English contract, the ticket having been bought in Liverpool, the passenger was bound by the terms of her contract. There are many kinds of contracts of transportation of baggage, of passengers and of telegraph messages, involving the carrying out of such contracts in many different States. Not all of the decisions in the various States of this country are harmonious. We must expect to find many such problems in business and the answer is often one that requires most careful study on the part of a lawyer.

CONFLICT OF LAW AS RELATING TO NEGOTIABLE PAPER.—There is not so large a field for questions of conflict of law to come up in negotiable paper as in some of the other topics we have been considering. Forty-seven States have now passed the Uniform Negotiable Instrument Law. But, as we have pointed out, the interpretation of this law in the various States is not invariably uniform. Suppose a promissory note has six indorsers. Every indorsement is governed by the law of the State where it was made, and should there be a different law in this matter, we would at once have a question in conflict of law. Again, in determining the negotiability of a document made in one place and payable in another, we have a further question in conflict of law. The authorities do not agree here although perhaps we may say the majority hold that the law of place or payment controls. These problems will be considered in the text-book on Negotiable Instruments.

CONFLICT OF LAW AS RELATING TO INTEREST AND USURY.—We find a variety of usury laws throughout the United States. Some few States allow the lender to charge any rate of interest. Others allow a fixed rate, usually 6%, and provide that the lender forfeits both principal and interest if he charges more. Still others allow a fixed rate and provide that interest only is forfeited if a higher rate is charged. It is easy to see that a contract made in one State may be sued upon in another State and the usury laws of the two States may be entirely different. We may say as a general rule that usury laws do not offend any principles of public policy. There is nothing wrong in asking a New York court, where the legal rate of interest is 6%, to enforce a contract made in a State where a higher rate is allowed. On the other hand, no New York court would allow citizens of New York simply to date a contract Boston, Massachusetts, and provide for a 10% interest rate, thereby hoping to evade the New York Usury law, when, except for the date on the contract, it was in reality wholly a New York contract.

---

INDEX

• *A., E., [277], [280]

• Acceptance, [32]
• Accommodation Bills, [357]
• Accounting, [133]
• Adequacy of Consideration, [57]
• Administrators, [68], [340]
• Advertisements, [36]
• Agency, [122], [141]
• Agency, Irrevocable, [148]
• Airplanes, [12]
• Alteration, [72]
• Alteration of Written Contracts, [113]
• Aliens, [77], [84]
• Analysis of Indenture, [219]
• Anti-Trust Act, [206]
• Architect's Certificate, [87]
• Articles of Partnership, [175]
• Assault and Battery, [408]
• Assets, Division of, [186]
• Assets of Partnership, [186]
• Assignment of Duties, [107]
• Assignment of Future Claims, [110]
• Assignment of Rights, [106]
• Assignments, [105]
• Assignments, Forged, [242]
• Assignments, General, [425], [430]
• Assignments, Meaning of, [105]
• Assignments, Partial, [109]
• Assignments by Unauthorized Agent, [243]
• Assumption of Mortgage, [314]
• Attachment, [369], [374]
• Attachment of Stock, [248]
• Attorney, Powers of, [105], [125]
• Auction Sales, [39]
• Authority of Agent, [132]
• Avoidance, [81]
• 
  
• Bailment, [262]
• Bank Accounting, [228]
• Bank Officers, Liability of, [226]
• Bank President, [227]
• Bankruptcy, [66], [95], [247], [428]
• Bankruptcy, Composition in, [437]
• Barred Debts, [64], [65]
• Beneficiary, [75]
• Bids, [40]
• Bilateral Contracts, [26], [108]
• Bills and Notes, [378]
• Bills of Exchange, [392]
• Bills of Lading, [270], [347]
• Blue Sky Laws, [229]
• Bonds, [216], [217]
• Breach of Contract, [92]
• Breach of Warranty, [281]
• Building Contracts, [87]
• Burglary, [422]
• 
  
• Capacity, Lack of, [244]
• Capacity of Parties, [74], [77], [264]
• Carriers, [267], [344]
• Certificate of Architect, [88]
• Certificates, Forged, [241]
• Certificates, Unindorsed, [256]
• Certificates, Lost, [255]
• Chattels, [291]
• Chattels, Leases of, [291]
• Chattel Mortgage, [291]
• Checks, [112], [382]
• Claim, Liquidated, [59], [112]
• Claim, Proof of, [434]
• Claim, Unliquidated, [112]
• C. O. D., [270]
• Commercial Law, [7]
• Common Carriers, [344]
• Common Law, [9]
• Competition, Unfair, [457]
• Composition in Bankruptcy, [437]
• Composition with Creditors, [425]
• Conditional Contracts, [86]
• Conditional Promise, [35]
• Conditional Sales, [289]
• Conflict of Laws, [336], [458]
• Consideration, [57], [390]
• Consignments, [290]
• Construction of Wills, [334]
• Contract, Agency by, [125]
• Contract to Sell, [261]
• Contracts, [24], [299], [462]
• Contracts:
• Bilateral, [26], [108]
• Breach of, [92]
• Building, [87]
• By Correspondence, [48]
• By Mail, [48]
• Definition of, [24]
• Discharge of, [110]
• Drafting, [114]
• Enforceability, [57]
• Formal, [25]
• Gambling, [102]
• Illegal, [101]
• Implied, [41]
• Informal, [25]
• In Restraint of Trade, [101]
• Installment, [91]
• Liquidated, [58], [59]
• Of Employment, [88]
• Performance, [86]
• Quasi, [115]
• Sealed, [27]
• Simple, [29]
• To Sell, [261]
• Termination, [86]
• Unenforceable, [26]
• Unilateral, [26]
• Unliquidated, [59]
• Void, [26], [81]
• Voidable, [26], [66], [78], [81]
• Written, [38], [72], [113]
• Contractors, [161]
• Contribution, [446]
• Contributory Negligence, [416]
• Conveyances, Fraudulent, [429]
• Copyright, [450]
• Corporations, [85], [86], [192]
• By-Laws, [207]
• Citizenship of, [196]
• Creation of, [194]
• De Facto, [201]
• De Jure, [201]
• Directors, [212]
• Foreign, [209]
• Indenture, [217]
• Joint Stock, [168]
• Kinds of, [194]
• Liability of, [205]
• Liability of Directors, [224]
• Liability of Officers, [224]
• Management of, [210]
• Powers of, [197], [221]
• Stockholders, [208]
• Correspondence, Contracts by, [48]
• Counter Offer, [43]
• Courts, [20], [21]
• Creation of Corporations, [194]
• Creditors' Rights, [186]
• Criminal Law, [205], [405], [419]
• Cumulative Dividends, [223]
• Cumulative Voting, [213]
• Curtesy, [300], [336]
• 
  
• Death, [44], [375]
• Debts, [64], [65]
• Deceit, [412]
• Deeds of Trust, [317]
• De Facto Corporation, [201]
• Default, [301]
• Defective Goods, [282]
• Definition of Agency, [122]
• Definition of Contracts, [24]
• Definition of Law, [7]
• Definition of Partnership, [164]
• De Jure Corporation, [201]
• Delectus Personarum, [173]
• Delivery, [272], [388]
• Delivery, Lack of, [244]
• Destruction of Goods in Transit, [362]
• Directors, [212], [221]
• Directors, Election of, [212]
• Directors, Liability of, [224]
• Directors, Powers of, [197], [221]
• Disability, [124]
• Discharge of Contracts, [110]
• Dividends, [222]
• Divine Law, [7]
• Division of Assets, [186]
• Dower, [300], [335]
• Drafting Contracts, [114]
• Drafts, [381]
• Drunkards, [77], [79], [82]
• Due Course, Holders in, [383], [396]
• Duress, [99]
• Duties, Assignment of, [107]
• 
  
• Easements, [14]
• Employment Contracts, [88]
• Enforceability of Contracts, [57]
• Equitable Title, [284]
• Equity of Redemption, [308]
• Entity Theory, [193]
• Estates and Trusts, [321]
• Escheat, [319]
• Estoppel, [128], [130]
• Executors, [68], [254], [340]
• 
  
• Fact, Mistakes of, [100], [116]
• False Imprisonment, [414]
• Fidelity, [133]
• Fiduciary Duties, [104]
• Firm Name, [176]
• Firm Property, [186]
• Forbearance, [63]
• Foreclosure, [316]
• Foreign Corporations, [209]
• Forged Assignments, [242]
• Forged Certificates, [241]
• Forgery, [367], [423]
• Formal Contracts, [25]
• Forms:
• Check, [382]
• Draft, [381]
• Promissory Note, [379]
• Will, [328]
• Fraud, [96], [97], [98], [99], [412]
• Frauds, Statute of, [67]
• Fraudulent Conveyances, [429]
• Fraudulent Sales, [285]
• Full Payment, [112]
• Future Claims, [110]
• Gambling Contracts, [102]
• Garnishment, [373]
• General Agents, [141]
• General Assignments, [425], [430]
• Gifts, [261], [293], [324], [376]
• Goodwill, [178]
• Guarantee, [36], [68], [440]
• Guaranty (see Guarantee).
• 
  
• Holder in Due Course, [383], [396]
• Homicide, [421]
• Husband and Wife, [249]
• 
  
• Illegal Contracts, [101]
• Illegal Object, [172]
• Illegality, [104]
• Implied Authority, [137]
• Implied Contracts, [41]
• Implied Warranty, [277]
• Impossibility, [100]
• Imprisonment, False, [414]
• Inability, [94]
• Incapacity, [244]
• Indentures, [219]
• Independent Contractors, [161]
• Indorsement, Qualified, [399]
• Indorser, [398]
• Infancy, [66]
• Infants, [11], [20], [26], [66], [77], [78], [79]
• Informal Contracts, [25]
• Inheritance Tax Laws, [377]
• Insane, [80]
• Insanity, [44], [77], [79]
• Insolvency, [95]
• Insolvent Debtors, [425]
• Inspection, [273], [278]
• Installment Contracts, [91]
• Insurance, [86], [438]
• Insurance Policy, [36]
• Intent, [30]
• Interest, [466]
• Interpleader, [256]
• Interpretation, [155]
• Irrevocable Agencies, [148]
• Issue of Stock, [215]
• 
  
• Joint Stock Corporations, [168]
• 
  
• Knowledge of Illegality, [104]
• 
  
• Lack of Capacity, [244]
• Lack of Delivery, [244]
• Lands, [69]
• Larceny, [423]
• Law, Common, [9]
• Law, Definition of, [7]
• Law of Partnership, [163]
• Law, Source of, [10]
• Law, Systems of, [9]
• Law, Where to Look for, [11]
• Lawrence v. Fox, [75]
• Lawyers, [17]
• Leases, [435]
• Leases of Chattels, [291]
• Legal Duty, [62]
• Legal Title, [284]
• Liability of Agent, [144]
• Liability of Bank Officers, [226]
• Liability of Directors, [224]
• Liability of Officers, [224]
• Liability of Partnership, [165]
• Libel, [409]
• Limitations, Statute of, [63]
• Limited, [190]
• Limited Partnership, [188]
• Liquidated Claims, [61], [112]
• Liquidated Contracts, [58], [59]
• Liquidation of Partnership, [188]
• Lost Certificates, [255]
• 
  
• Magazine Subscription, [55]
• Mail Contracts, [48]
• Manslaughter, [422]
• Marriage, [69]
• Married Women, [82], [83]
• Master and Servant, [121], [149]
• Meeting of Stockholders, [208]
• Mistake, [100], [116]
• Misstatements of Opinion, [97]
• Moral Law, [7]
• Mortgage, Assumption of, [314]
• Mortgage Deed of Trust, [218]
• Mortgages, [291], [304]
• Mortgages, Chattel, [291]
• 
  
• Necessaries, [80]
• Negligence, [281], [416]
• Negligence, Contributory, [416]
• Negligence of Agent, [160]
• Negotiable Instruments Act, [378]
• Negotiable Paper, [378], [465]
• Negotiability, [364], [380], [394], [403]
• Newspaper Subscriptions, [55]
• Non-Assignable Rights, [106]
• Novation, [108]
• 
  
• Offer and Acceptance, [32], [51]
• Open Receipts, [371]
• Operation of Law, [147]
• Opinion, [97], [275]
• Options, [34], [35], [94]
• Oral Agreements, [38]
• Ownership of Stock, [240]
• Ownership, Rights of, [259]
• 
  
• Part Payment, [65]
• Partial Assignments, [109]
• Parties, Capacity of, [74], [77], [264]
• Partner by Estoppel, [171]
• Partner, Powers of, [177]
• Partner, Secret, [190]
• Partner, Silent, [190]
• Partnership, [163], [188]
• Past Consideration, [61]
• Patents, [448]
• Performance, [87]
• Performance Excused, [87]
• Performance of Contracts, [86]
• Performance, Specific, [303]
• Personal Property, [258], [259]
• Photographs, [15]
• Power of Attorney, [105], [125]
• Powers of Corporations, [197], [221]
• Powers of Partners, [177]
• Preferences, [430]
• Principal and Agent, [121]
• Principal, Liability of, [142]
• Principal, Rights of, [142]
• Principal Undisclosed, [141]
• Privilege, [411]
• Probate of Wills, [331]
• Promise, Conditional, [35]
• Promise to Marry, [69]
• Promissory Note, [379]
• Promoters, [202]
• Property, Personal, [258], [259]
• Property, Real, [259], [276], [298]
• Proof of Claims, [434]
• Prospectus, [230]
• Protest, [401]
• Proxy, [144], [214]
• 
  
• Qualified Indorsements, [399]
• Quasi Contracts, [115]
• 
  
• Railroad Commissions, [345]
• Ratification, [81], [128], [142]
• Real Estate, [69], [298]
• Real Property, [259], [276], [298]
• Receipt in Full, [113]
• Receipt of Acceptance, [53]
• Receipts, [59]
• Receipts, Trust, [355]
• Receipts, Warehouse, [370]
• Receiverships, [430]
• Reimbursement, [136]
• Rejection, [42], [43]
• Releases, [59]
• Renunciation, [113], [147]
• Repudiation, [95]
• Restraint of Trade, [101]
• Revival of Debts, [66]
• Revocation, [42], [146], [330]
• Rewards, [46]
• Rights, Non-Assignable, [106]
• Rights of Ownership, [259]
• Robbery, [424]
• 
  
• Safe Deposit Companies, [372]
• Sale of Goods, [71]
• Sales Act, [287]
• Sales, Fraudulent, [285]
• Sales of Land, [69]
• Sales of Personal Property, [260]
• Sealed Contracts, [27]
• Sealed Powers of Attorney, [126]
• Seals, [27]
• Searches, Title, [319]
• Secret Partner, [190]
• Securities, [231]
• Self-Defense, [409]
• Set-Off, [436]
• Servant, Master and, [121], [149]
• Service of Agent, [132]
• Sherman Anti-Trust Act, [206]
• Shipper's Load and Count, [361]
• Side Compensation, [134]
• Silence Gives Consent, [53]
• Silent Partners, [190]
• Simple Contracts, [29]
• Slander, [409]
• Source of Law, [10]
• Special Agents, [141]
• Spent Bills, [363]
• Specific Performance, [303]
• Statute of Frauds, [67]
• Statute of Limitations, [63]
• Stock, Attachment of, [248]
• Stock Certificate, Theft of, [244]
• Stock, Dividends on, [222]
• Stock Held in Trust, [250]
• Stock, Issue of, [215]
• Stock, Ownership of, [240]
• Stock, Power to Sell, [251]
• Stock, Transfer of, [238]
• Stockholders, [208]
• Stoppage in Transit, [284]
• Surety Companies, [446]
• Suretyship, [440]
• Systems of Law, [9]
• 
  
• Tenders, [40]
• Termination of Agency, [145], [147]
• Termination of Contract, [86]
• Termination of Partnership, [185]
• Termination of Offer, [44], [45]
• Testamentary Capacity, [325]
• Theft of Stock Certificate, [244]
• Title, [265], [276]
• Title Searches, [319]
• Torrens Law, [317]
• Torts, [142], [205], [405]
• Torts of Agent, [142]
• Trade Marks, [456]
• Trade Names, [456]
• Trade, Restraint of, [101]
• Transit, Goods in, [362]
• Transit, Stoppage in, [284]
• Transfer of Property, [96]
• Transfer of Stock, [238]
• Trust, Deeds of, [317]
• Trust Receipts, [355]
• Trustee, [250], [251], [252], [253], [340]
• Trustee in Bankruptcy, [432]
• Trusts, [339]
• Trusts, Voting, [215]
• 
  
• Ultra Vires, [199]
• Unauthorized Assignment, [243]
• Unconditional Promise, [385]
• Undue Influence, [99]
• Undisclosed Principal, [141]
• Unenforceable Contracts, [26]
• Unfair Competition, [457]
• Uniform Partnership Act, [164]
• Uniform Transfer of Stock, [238]
• Unilateral Contracts, [26]
• Unindorsed Certificate, [256]
• Unliquidated Claim, [112]
• Unliquidated Contracts, [59]
• Use of Language, [51]
• Usury, [466]
• 
  
• Vendor's Lien, [304]
• Void Contracts, [26], [81]
• Voidable Contracts, [26], [66], [78], [81]
• Voting Trusts, [215]
• 
  
• Warehouse Receipts, [370]
• Warehousemen, [344]
• Warehouses, [344]
• Warranty, [144], [274]
• Warranty, Breach of, [281]
• Warranty, Implied, [277]
• Warranty of Agent, [144]
• Wife, Husband and, [249]
• Wills, [322]
• Witnessed Power of Attorney, [126]
• Workmen's Compensation Act, [154]
• Writing, [67], [72]
• Written Contracts, [38], [72], [113]
• Written Contracts, Alteration of, [113]

Transcriber's Note

Minor inconsistencies in punctuation or hyphenation have been corrected.