Lumber Legal Opinions

by Unknown

Question.—If a bill of lumber is sold on credit and before delivery to the customer the seller considers he has good reason to question the purchaser’s ability to settle when the bill is due, can the seller withhold the delivery and demand either better terms or cash without making him liable for the non-fulfillment of the contract?

Reply: A man who has bought goods on credit is bound, as the courts phrase it, “to keep his credit good.” If he does not do that the seller need not ship the goods; if he has shipped them and then finds that the buyer has not kept his credit good, he may stop the goods and take them back into his own possession at any time before they have actually been delivered to the buyer or his agent. In making his decision the seller must, of course, take his own risks. He has entered into a contract and he must fulfill it or pay the resulting damages unless he has a legal excuse for refusing to go on with it. It is not sufficient that, as the question says, “the seller considers he has good reason to question the purchaser’s ability to settle”; nor that the seller has good grounds for believing that the buyer’s credit is impaired. It is not a question of any man’s belief, but a question of fact. The goods must be shipped unless the buyer is actually insolvent. This does not mean that he must have made an assignment or gone into bankruptcy or made any other public acknowledgment of the fact that he is insolvent. It means he has become unable to pay his debts as they fall due. The seller must be able to show that at least one debt has fallen due against the buyer and that he has not paid it promptly. Of course, it must be a debt the validity of which the buyer himself does not dispute upon any tenable ground. If he has paid his debts as they fell due he has “kept his credit good,” no matter what any one may suspect as to the future; if he has failed to pay any just debt promptly he has not kept his credit good. If the seller has no right to refuse delivery of the goods altogether he has no right to demand better terms than his contract gives him.

Opinion No. 67.

DISCOUNT MUST BE IN ACCORDANCE WITH THE CONTRACT.

Question.—We sold to a concern and the terms of sale were “2 per cent. discount for cash in ten days or sixty days net.” The buyer in his settlements has taken fifteen to twenty days’ time and has deducted 2 per cent. discount and has added 6 per cent. per annum for the extra days beyond ten. We claim that this settlement is entirely wrong, and if he wishes the discount in full he must send a check within ten days after the date of the bill.

Reply: No debtor is to be excused from paying the full amount of his debt except in strict accordance with some provision to that effect in his contract. Here is a debtor who would have been bound to pay the full amount immediately if there had been no special provision to the contrary. Any such provision as there may be is a kind of grace to him and it is not to be extended beyond the strict terms in which it is expressed. He may take 2 per cent. off if he pays at any time within ten days. When the ten days are passed the contract stands precisely as if it had said nothing at all about discount for payment within ten days. This debtor had no right to deduct the 2 per cent. He is trying to take an advantage which his contract does not give him. If he were asked to point out a clause in the contract giving him a right to take off the discount later than the tenth day, of course, he could not do it.

Opinion No. 69.

A BILL OF LADING TO ORDER RETAINS TITLE TO THE GOODS.

Question.—If a shipper sells a carload of lumber f. o. b. shipping point with draft attached to bill of lading and bills the car to his own order, notify the purchaser, and if the car should be wrecked in transit or should never reach its proper destination, would the buyer who bought the car f. o. b. be compelled to pay the draft and take up the bill of lading and seek recourse against the carriers? Should the shipper bill a car to the order of a bank, notify the f. o. b. purchaser and sell the draft and bill of lading to the bank outright, would the purchaser be compelled to pay for same?

Reply: When a sale is made f. o. b. shipping point the seller can make a valid delivery at that point. If he delivers the goods to a carrier there, takes a bill of lading making them deliverable to the buyer and forwards it to the latter, his full duty is done and the goods are at that moment, in legal effect, delivered to the buyer; they are actually delivered to the buyer’s agent, the carrier, and that is equivalent to a delivery to the buyer himself. This is the kind of delivery the seller is at liberty to make, under the contract, but he may not do so. He might, conceivably, carry the goods in his own arms to the buyer, or he may deliver them to one who is unquestionably his own agent. In either of these cases delivery to the buyer does not occur until the goods reach their destination. If A ships goods to the place in which B resides and takes the bill of lading to his own order the goods are not in any sense delivered to B or to his agent. They are A’s goods. He can stop them where he will and take them back into his own possession. When they reach their destination he can take charge of them or have them delivered to anyone he may choose to name. Those goods could be seized by a creditor of the seller and they could not be seized by a creditor of the buyer. If they are lost in transit it is the seller’s loss. A seller must either deliver the goods or retain them. He cannot do both. He cannot deliver them so as to make the buyer liable in case of loss and still retain them so that they will be his, to do with as he will if there is no loss. The same result follows if the bill of lading is sold to a bank. A bill of lading represents goods in transit and transfer of the bill transfers the goods. The direction to the carrier to “notify” one person or another is of no importance. Goods may be consigned to B and the carrier, for one reason or another or for no reason at all, may be directed to “notify” X or Y or Z of the fact that they have arrived. Notification is not to be substituted for delivery.