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.

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.

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

Page

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.