passes to his personal representative to be turned into money to pay
_A's_ debt, or to be distributed in the form of money, or without being
sold, to _A's_ descendant designated by law. This is known as acquiring
personal property by succession, or by operation of law. Personal
property may also be transferred in specie by will.
SALES
=202. Sale Defined.= A transfer of title of personal property is
termed a _sale_. By title is meant ownership. Mere possession of
personal property does not constitute ownership, neither does right
to possession constitute ownership. One may lease personal property,
and by means of the lease have the right to possession, while the
title or ownership is in another. One may find or borrow personal
property, obtaining possession while the title or ownership remains in
another. The transfer of the title or ownership of personal property
as distinguished from the transfer of mere possession or the right of
possession, constitutes the subject of _Sales_. A sale may be defined
to be a contract by which the title to personal property is transferred
for a consideration in money, or money's worth. This transfer of title
to personal property may be entirely independent of the transfer of
possession. One may make a sale of personal property by which the
purchaser takes the title while the possession remains in the seller,
or in some third person.
When, and under what circumstances the title passes is an important
question. A sale of personal property ordinarily gives the purchaser
the right to immediate possession of the property. The time the title
actually passes to the purchaser does not depend upon the time the
property is delivered to the purchaser, but upon the intention of the
parties to the contract of sale. A sale is a contract requiring all the
elements of a simple contract. There must be a meeting of the minds
of the contracting parties, a valuable consideration, competency of
parties, etc. (See _Elements of a Contract_, chapter on Contracts.)
_203._ _Sale Distinguished from a Contract to Sell._ A sale is a
contract by which the title passes to the purchaser at the time the
sale is made. A contract to sell is a contract by which the title
passes to the purchaser at a future time. A sale is a present transfer
of title or ownership to personal property. A contract to sell is
an agreement to pass the title or ownership to personal property to
another at a future time. The practical distinction is in determining
upon whom the loss falls in case the goods are destroyed or injured by
fire, or other accident. In case of a sale, title or ownership passes
to the purchaser, even though possession remains in the seller. If the
goods are lost by fire, without fault of the seller, the purchaser
bears the loss. In case of a contract to sell, the title or ownership
does not pass to the purchaser until the time for fulfilling the
contract has arrived, and until the conditions of the contract are
fulfilled. If the goods are lost before the contract is carried out,
the loss falls on the seller. For example, _A_, a farmer, sells ten
barrels of apples to _B_. _B_ examines the apples, selects the ten
barrels, pays _A_ the stipulated price, and says he will call for them
the following day. Before _B_ calls, the apples are destroyed by fire,
without fault of _A_. _B_ must stand the loss. The title or ownership
passed to him when the sale was made. If _B_ calls on _A_ and enters
into a contract by the terms of which _A_ agrees to deliver at _B's_
residence ten barrels of apples the following day, at an agreed price,
and the apples are destroyed by fire before _A_ delivers them, the loss
falls on _A_. This is a contract to make a sale, not a sale. Title
to the apples does not pass to _B_ until they are delivered by _A_,
according to the terms of the agreement.
Parties may agree that title may pass at a certain time, or upon the
performance of a certain condition. In this event, title does not pass
until the time mentioned arrives, or the condition is fulfilled. In
the majority of sales of personal property, the parties do not set
forth the terms and conditions fully. In the absence of an express
agreement or custom to the contrary, parties are presumed to intend the
title or ownership to pass to the purchaser at the time the sale is
made.
=204. Sale Distinguished from Barter.= A sale is an agreement to
transfer the title of personal property for a consideration in money,
or for something measured by a money standard. An agreement to exchange
goods, or an exchange of goods, is a _barter_, and not a sale. The
distinction is technical, but serves some useful purposes. If _A_,
for a consideration of $200.00, purchases a car of cabbage from _B_
in Nashville, to be delivered in Cleveland, June 20th, and the car
does not arrive, _A_ may go into the nearest market, and purchase a
car of cabbage of the same quality, and collect the difference between
the market price and contract price from _B_. If _A_ is obliged to
pay $250.00 for the cabbages, he can collect $50.00 from _B_. If, on
the other hand, _A_ agrees to give _B_ a horse for a car of cabbages,
no price having been fixed on the horse or on the cabbages, and _B_
fails, and refuses to carry out the contract, _A_ must sue _B_ on the
contract, and collect as damages such amounts as he is able to show he
lost by reason of _B's_ failure to carry out the contract.
Salesmen are commonly employed to sell goods. This means to sell for
money, and unless they are expressly authorized to barter or exchange
goods, attempted exchanges are without authority, and do not bind their
principal.
=205. Conditional Sales.= The term, _conditional sale_, has come
to have a technical meaning. Articles of merchandise, such as sewing
machines, cream separators and cash registers are commonly sold under
a special contract, by which possession is given the purchaser, and
the title by express agreement remains in the seller until the entire
purchase price is paid. The purpose of this form of contract is to
obtain security for the purchase price of the article sold. In the
absence of statutory regulations, if the purchaser does not pay the
purchase price at the agreed time, the seller may take possession of
the property. It is the custom of sellers using this form of contract
to require the purchaser to sign a contract stipulating that the
purchase price be represented by promissory notes of the purchaser,
payable in installments, and that the title is to remain in the seller
until the entire purchase price is paid. If the purchaser defaults
in any one of his installments, by the terms of the contract all the
remaining installments at once become due. This form of contract
worked many hardships. Purchasers were required to make a substantial
payment in advance. If they succeeded in paying practically all the
installments, but defaulted in one, the seller could take possession of
the property, causing the purchaser to lose all he had paid. This form
of contract proved so unconscionable in some of its workings that the
legislatures of most states have passed statutes requiring conditional
sale contracts to be filed with a public official to be enforceable,
and do not permit the seller to take possession of property without
repaying the purchaser the amount already paid less the actual damage
the property has sustained. This damage usually cannot exceed 50% of
the original selling price of the property.
=206. Sale Distinguished from a Bailment.= Possession of personal
property is frequently given another, for the purpose of having work
performed on it, to be used by another, to secure a debt, or to be
protected or preserved without transfer of title. Such a transaction is
called a _bailment_. It is discussed more at length under a separate
chapter. A bailment does not constitute a sale, in that there is no
transfer of title, or ownership of the personal property, possession
of which is given to another. For example, _A_ hires the use of a
horse and carriage from _B_, a liveryman, for two days. _A_ secures
possession of the horse and carriage. He has the right to retain
possession of them for two days, and has the right to use them for the
purpose hired. He cannot sell them, however, nor can he do anything
inconsistent with _B's_ ownership. This transaction is a bailment.
=207. What May Be the Subject of a Sale.= Any article of personal
property having a present existence may be sold. It matters not,
whether it is a chose in possession, or chose in action. By _chose
in possession_ is meant a tangible piece of personal property as
distinguished from a mere right. A horse, plow, chair or desk is an
example of a chose in possession. A promissory note, a contract or
mortgage is an example of _chose in action_. Either may be the subject
of a sale. The distinction between a sale or present transfer of title
to personal property, and a contract to make a sale, must be borne in
mind. If _A_ sells his horse to _B_ for $100.00, in the absence of any
agreement as to delivery the title to the horse passes to _B_ as soon
as the contract is made. This transaction is a sale. If _A_ promises to
sell his horse to _B_ the second of next month, if _B_ will agree to
pay him $100.00 when the horse is delivered the second of next month,
and _B_ so agrees, the contract is not a sale, but a contract to make
a sale. Articles of personal property, to be made or manufactured, are
not the subject of a sale.
Business men commonly make contracts to sell goods in the future which
they do not have in stock, but expect to manufacture, or purchase
elsewhere. Such contracts are not sales. The title to the goods does
not, and cannot pass to the purchaser when the contract is made. They
are mere agreements to make sales in the future. They are treated the
same as ordinary contracts, not as present sales. If the goods are
destroyed before they are completely manufactured, the seller stands
the loss, since the title has not passed from him. If a person agrees
to sell in the future goods to be manufactured, and fails to deliver
the goods specified in the contract, the buyer has the usual remedy. He
may purchase the goods in the market nearest the place of delivery at
the time of delivery, and sue the seller for the difference between the
contract price and the market price. The buyer is not obliged actually
to purchase the goods to enable him to bring suit against the seller.
He may bring a suit against the seller for the difference between the
price he contracted to pay for the goods and the market price at the
time and place of delivery. Crops to be grown are not the subject of
present sale. Crops planted, but not matured, may be sold. Title to the
crops at the present stage of their existence passes to the buyer.
=208. Statute of Frauds, or Contracts of Sale Which Must Be in
Writing.= One section of the English Statute of Frauds applied to
sales. This statute was passed in England about 1676. The seventeenth
section, which applies to sales of personal property, is as follows:
And be it further enacted by aforesaid authority, that from and after
the four and twentieth day of June, no contract for the sale of any
goods, wares or merchandise for the price of ten pounds sterling, or
upwards, shall be allowed to be good except the buyer shall accept
part of the goods so sold, and actually receive the same, or give
something in earnest to bind the bargain, or in part payment, or
that some note or memorandum in writing of said bargain be made, and
signed by the parties to be charged by such contract, or their agent
thereunto lawfully authorized.
The states, generally, have a statute modelled after this section of
the English statute, and providing that contracts for the sale of
personal property, the price of which exceeds fifty dollars, shall not
be enforceable unless a memorandum of the contract be made and signed,
except there be a delivery of at least a part of the property, or
except something be paid by the purchaser to bind the bargain. Some of
the states have no statute of frauds containing a provision relating
to the price of the goods. In many of the states, the valuation fixed
by statute exceeds fifty dollars. Where the statute exists, contracts
which are not in writing are not void. They are merely voidable. The
parties may voluntarily carry them out if they so choose. The law does
not prohibit them, but if one party refuses to recognize the contract,
the other party cannot enforce it by an action at law. A portion of
the fourth section of the English Statute of Frauds provides that
contracts, by their terms not to be performed within one year from
the time of the making thereof, must be in writing to be enforceable.
The states, generally, have a similar statutory provision. This
statute applies to sale of personalty as well as to real estate. If
the contract can be performed within one year, it is not within the
provisions of the statute.
=209. Delivery of Personal Property Sold.= In the absence of any
express agreement to the contrary, there is an implied agreement, on
the part of the seller, to deliver personal property sold, when the
purchaser pays the price. By delivery is meant placing the personal
property at the disposal of the purchaser. It must be borne in mind
that in a contract of sale of personal property, title or ownership
passes to the purchaser at the time the sale is made, even though
possession remains in the seller. This gives the seller the right to
obtain possession of the goods upon paying the price. If the goods
are destroyed without fault of the seller after the sale, and before
delivery, the loss falls on the buyer. If _A_ offers to sell _B_ his
wagon for $100.00, and _B_ accepts, nothing being said about delivery,
the title to the wagon passes at once to _B_. If it is destroyed
without fault of _A_, the loss falls on _B_, even though _B_ has not
paid the price or received possession of the wagon. _B_ is entitled to
possession of the wagon when he pays _A_ $100.00. _A_ is not obliged to
give _B_ possession of the wagon, even though _B_ is the owner of it,
until he receives the price, $100.00.
In the above example there is no stipulation about delivery. The
parties make a sale, agreeing upon the price and thing to be sold,
nothing being said about the delivery. The law in such cases impliedly
requires the seller to deliver when the price is paid, and not until
then. In many contracts, however, the time, place, and manner of
delivery are stipulated in the contract. Sometimes usage and custom
supply these things when the parties do not expressly so stipulate.
When a time, place, or manner of delivery by the seller is stipulated
in a contract, either by express agreement, or by usage and custom,
title to the property usually does not pass to the buyer until the time
has elapsed, and until the seller has delivered according to the manner
stipulated, or has tendered delivery.
A stipulation in a contract of sale that the seller shall deliver at a
particular time or place, or in a particular manner is deemed to show
an intention on the part of the parties that title shall not pass until
the seller has so delivered. If the seller refuses to accept the goods
or pay the price, an offer to deliver by the seller is equivalent to
a delivery. The seller, on the other hand, is not obliged to give up
possession of the goods until he receives the agreed price. If the
seller agrees to give the buyer credit, this rule is not applicable.
If no time of delivery is mentioned, delivery must be made within a
reasonable time, depending upon the circumstances connected with the
particular contract. When delivery is to be made in installments,
failure to pay for one installment ordinarily entitles the seller to
refuse to deliver the balance, or if the seller refuses, or fails
to deliver the first installment, the buyer may refuse to accept
subsequent installments. The buyer is not obliged to accept anything
except the article ordered. If more or less is tendered him, he is not
bound to accept. If he accepts more or less, he is bound to pay the
reasonable value of the same. If no place of delivery is mentioned,
the presumption is that delivery is to be made at the place where the
property is located at the time the sale is made.
The mere fact that delivery is to be made in the future does not
prevent title from passing at the time the sale is made. There must
be something in addition to the fact of future delivery to delay the
passing of the title until the time of delivery. If _A_ purchases an
automobile from _B_, making the selection, delivery to be made the
following Thursday, title passes at once to _A_. If the automobile
is destroyed by fire, or injured without _B's_ fault, the loss falls
on _A_. If, however, _B_ is to do anything with the property, or is
himself to make delivery, this shows an intention on the part of the
parties that title is not to pass until delivery is made.
=210. When Title Passes.= The question of when title to personal
property, the subject of a sale, passes to the purchaser is important
in determining upon whom the loss falls, if the property is destroyed,
stolen, lost or levied upon by judgment of attaching creditors.
Title or ownership to property sold does not depend upon possession.
Personal property may be sold, and title or ownership may pass to the
purchaser, while the seller still has possession, as well as the right
to possession. The general rule is that title or ownership of personal
property sold passes to the purchaser at the time the parties to the
sale intend it to pass. If their intention is expressed, it governs,
and the question is settled. In the great majority of sales, however,
the parties do not expressly determine when title shall pass and this
must be presumed from the circumstances.
For example, if _A_ offers _B_ $20.00 for a certain harness which is
selected, and _A_ accepts the offer, nothing being said about the
delivery or payment, or when title or ownership shall pass to _A_, the
law presumes it to be the intention of the parties that title shall
pass when _B_ accepts _A's_ offer--and from that time, the harness
belongs to _A_. _B_, however, has the right to retain possession of
the harness until _A_ pays him the purchase price of $20.00. When _A_
offers _B_ the $20.00 at the place where the harness was located when
the sale was made, _B_ must give _A_ possession. _B_ is not obliged
to deliver at any other place. If, however, _A_ offers _B_ $20.00 for
_B's_ harness, which is determined upon and selected, _B_ to deliver
same at _A's_ place of business the following evening, this shows an
intention on the part of the parties that the title is not to pass to
_A_ until _B_ delivers the property to _A_ the following evening. A
tender or offer by _B_ to deliver the property to _A_ the following
evening, passes title and places the property at _A's_ risk. If,
however, delivery is to be made merely in the future, not requiring
the seller to take the property to any particular place, the fact that
delivery is to be made in the future does not prevent title passing to
the purchaser at once.
If _A_ purchases _B's_ harness for $20.00, the harness having been
selected, delivery to be made in five days, title passes at once to
_A_.
[Illustration: COOK COUNTY BUILDING, CHICAGO, ILL.
Holabird & Roche, Architects, Chicago, Ill.
Building Completed in 1907. Cost, $5,000,000. Length, 380 ft.; Width,
160 ft.; Height, 204 ft. Eleven Stories, with Sub-Basement Connecting
with Tunnel System and Electric Railroad Service Underlying Business
Portions of City. Walls, Gray Vermont Granite; Spandrel Sections,
Green Terra-Cotta. The Corinthian Columns on the Exterior are 94 ft.
Long and 9 ft. in Diameter. General Interior Plan is that of Letter
E. Building Contains its Own Electric-Light and Steam-Heating Plants.
City Hall, Shown at Left, is Practically a Duplicate of the Old County
Building Replaced by this New Structure, and will Itself be Replaced by
a Similar Building. Photographed June, 1907, 17 Months after Excavation
was Started.]
_A_ is obliged to offer _B_ $20.00 at the expiration of five days, and
_B_ must give possession to _A_. If the article sold is to be prepared
for delivery, or any work is to be performed on it by the seller before
delivery, title does not pass until this work has been completed. If
the goods are to be weighed or measured to determine the quantity or
price, title does not pass to the purchaser until this has been done.
Probably, if the goods are determined upon, and the entire mass is sold
and delivered to the seller who is to weigh or measure it to determine
the quantity only, the title passes upon delivery.
If the contract, sale provides that goods are to be delivered to
a carrier, delivery to the carrier passes title to the purchaser.
Delivery to the carrier must be made so as to protect the interests and
rights of the purchaser. The goods must be properly packed, and the
proper kind of a bill of lading taken.
If goods are sold upon approval, or upon trial, they must be approved
or tried before title passes.
If a portion of goods in mass or bulk is sold and the mass or bulk
contains different qualities, the portion purchased must be separated
and selected before the title passes. If a portion of goods in bulk
is purchased, the bulk being of the same quality, separation of the
portion sold is sufficient to pass title. Some courts even hold that
separation is not necessary to pass title, if the bulk is of the same
quality. Title to goods to be manufactured does not pass until the
goods are manufactured and tendered.
=211. When Payment of Price Must Be Made.= Parties to a contract of
sale may expressly agree upon a time of payment of the article sold.
In this event, the time agreed upon prevails. In the absence of an
agreed time of payment, the law presumes that payment is to be made at
the time and place of delivery. The seller may retain possession of
goods sold, until he receives payment of the agreed price, even though
title has passed to the purchaser. If the sale is made on credit, the
purchaser cannot be required to pay until the time for which he was
to be given credit has expired. In the absence of an agreed time for
payment, payment must be made at the time of delivery of the goods.
If the seller reserves any control over the goods, title remains in
him. For example, if he is to ship the goods to another, and if he
takes the bill of lading in his own name instead of the name of the
purchaser, title remains in the seller.
=212. Effect of Fraud Upon a Contract of Sale.= Fraud has been
defined by a prominent author to be "A false representation of facts,
made with a knowledge of its falsehood, or recklessly, without belief
in its truth, with the intention that it should be acted upon by the
complaining party, and actually inducing him to act upon it." If a
party innocently makes a representation, even though it proves to be
false, the representation is not fraudulent unless the party making the
representation should have known, or could easily have discovered, its
falsity.
If _A_ endeavors to buy goods from _B_, and tells _B_ that he is worth
$5,000.00, when in fact he is worth nothing, and _B_ relying upon _A's_
statement, sells the goods to _A_, _B_ is entitled to rescind the
contract by reason of the fraud. He may sue and recover the price of
the goods, or he may retake the goods from the buyer. (See _Rescission_
under chapter on Contracts.) If the goods have been sold to a third
party who purchases for value and without notice of the fraud, the
original seller cannot take the goods from him. A sale procured through
fraud is voidable, and not void. The seller may avoid the sale if he
chooses. That is, title vests in the purchaser subject to being retaken
by the seller, if he chooses, when he discovers the fraud. If a third
person innocently purchases the goods before the original seller
rescinds the contract, the last purchaser's title cannot be disturbed.
The seller may permit the purchaser to keep the goods, and bring an
action for damages based upon deceit.
One kind of a sale frequently induced by fraud is void, absolutely,
and not voidable. If a person fraudulently induces another to believe
that the purchaser is someone else, and purchases goods under this
representation, no title passes from the seller, and he may recover the
goods from an innocent purchaser.
=213. Rule of Caveat Emptor, or Let the Purchaser Beware.= One
who purchases chattel property from anyone except the grower or
manufacturer of the article in question, which is inspected by the
purchaser, or may be inspected by the purchaser, purchases at his own
risk. If the article turns out to be of poor quality or worthless,
in the absence of fraud or warranty, the purchaser has no redress.
This rule is called the _rule of Caveat Emptor_, (let the purchaser
beware). Its purpose is to decrease litigation, and make men rely upon
their own judgment. If a purchaser is unwilling to rely upon his own
judgment, he must exact a warranty from the seller. In the absence
of warranty or fraud, the purchaser must abide by the result of his
purchase. If the article purchased has defects apparent to anyone
upon inspection, the purchaser cannot complain. He should have seen
the defects. If the defects are not apparent upon inspection, he must
bear the loss. He should have required the seller to warrant the goods
against latent defects, if he was unwilling to purchase on his own
judgment. In all sales by an owner, however, title to the goods is
impliedly warranted, and in case of sale of goods grown or manufactured
by the seller, there is an implied warranty against latent defects. In
all other sales, the purchaser buys at his own risk, and has no redress
against the seller unless the latter warrants the goods. Warranties are
discussed in the following section.
=214. Express Warranty.= Contracts of sale often contain collateral
agreements called _warranties_. Warranties are either express or
implied. An _express_ warranty is an agreement in addition to the
ordinary agreement to transfer a certain chattel for a consideration
in money or money's worth, by which the seller agrees that the thing
sold is of a certain quality, or is in a certain condition. An express
warranty is not an essential part of a contract of sale. That is,
a sale containing no collateral promise to the effect that certain
conditions or terms of the contract are warranted, may be made. If the
contract of sale does not expressly state that the seller warrants
certain terms or conditions, or does not contain words of similar
meaning, the contract of sale is without express warranty. An express
warranty, by express agreement, adds something to the contract of
sale. This additional agreement, called an express warranty, enables
the purchaser to recover damages from the seller for failure of the
warranty, when he might not be able to have any redress if the sale
were made without warranty. Express warranties may be made orally, or
in writing.
If the seller, in making the sale expressly states that he warrants
certain terms of the contract, or uses language which means that he
intends to warrant certain terms of the contract, there is an express
warranty. _A_ sells a wagon to _B_ and warrants that it will carry
6,000 lbs. of stone. If it fails to carry this amount, _B_ can recover
from _A_ on this warranty. If _A_ had sold the wagon to _B_ without
this stipulation, and it had failed to carry 6,000 lbs. of stone, _B_
would have no redress.
A seller is permitted to express his opinion relative to the quality of
the article which is the subject of the sale without making a warranty.
This is called "trade talk," or "puffing." A seller is permitted
to express his own opinion relative to the quality of goods he is
endeavoring to sell, without having his words amount to a warranty,
but if he makes positive assertions, his words will be construed as
a warranty. Such expressions as, _This is first class_, and _This is
equal to any on the market_, are usually regarded as "trade talk" and
not as warranties.
=215. Implied Warranties.= Some contracts of sale carry with them
_implied warranties_. These warranties are common to all sales of the
particular class in question. Implied warranties cannot be said to be
in addition to the contract of sale, but are impliedly a part of the
contract. The most common implied warranties are warranties of title,
warranties of wholesomeness in sale of food, warranties in sales by
sample, warranties of merchantability, and warranties of fitness of
goods to be used for a particular purpose.
=216. Implied Warranty of Title.= In every sale, in the absence of an
express stipulation to the contrary, there is an implied warranty of
title. This means that the ownership is in the seller, and that he has
the right to sell the property, and that it is free from incumbrances.
This, of course, does not prevent the seller from disposing of just
what interest he has in the property if he expressly so contracts.
For example, if _A_ negotiates the sale of a horse to _B_, and tells
_B_ that he has purchased the horse a few days previously from _C_,
and does not know whether there are any incumbrances on the horse,
but will sell what interest he has, and if _B_ purchases on these
representations, he cannot sue _A_ on an implied warranty of title if
it subsequently develops that _D_ has a mortgage on the horse. If,
however, _A_ offers to sell _B_ a horse, saying nothing about the
matter of title, and _B_ purchases the horse, and later is obliged to
yield possession to _C_, who holds a mortgage, _B_ may recover the
purchase price of the horse from _A_ upon an implied warranty.
Formerly, a distinction was drawn between sales of property in the
possession of the seller, and of property in the possession of some
third person, making the seller not liable upon an implied warranty
in the latter case. At present, however, the tendency of the courts
is to make the seller liable upon an implied warranty, regardless
of whether the property is in his possession, or in the possession
of a third person at the time the sale is made. When a person sells
chattel property, not as owner, but in an official capacity, or as
an agent, there is no implied warranty of title. Common examples of
this principle are sales by a pledgee, mortgagee, sheriff, guardian,
administrator, assignee, or trustee in bankruptcy.
=217. Implied Warranty of Wholesomeness in Sales of Food.= In the
sale of articles to be used for food, there is an implied warranty
that the article sold is wholesome and fit for the purpose which it is
sold. This rule is based upon the principle of public policy, that it
is the duty of the state to protect life and health. _A_, a grocer,
sold canned tomatoes to _B_, for use in _B's_ family. The tomatoes
contained poisonous adulteration. _A_ was held liable in damages to
_B_, for breach of implied warranty of wholesomeness of the article
sold for food. Some jurisdictions hold that this rule does not apply in
sales of food, where the article is not sold to a consumer. That is, if
the article is sold by a wholesaler to a jobber, or to a retailer, the
warranty does not apply, but where it is sold by anyone to a consumer,
it does apply.
=218. Implied Warranty in Sales by Sample.= When goods are not
inspected by the buyer, but a sample is furnished him, from which he
purchases, there is an implied warranty that the goods sold correspond
with the sample. The fact that a sample of goods is exhibited by the
seller and examined by a purchaser does not necessarily mean that
a resulting sale is one by sample. The sample exhibited may not be
claimed by the seller to represent in every respect the article to be
furnished, or the purchaser may not desire to purchase according to the
sample. To constitute a sale by sample, a sample must be exhibited by
the seller upon a representation that it is a sample of the goods to be
sold. If exhibited for any other purpose, the resulting sale will not
be a sale by sample. The purchaser must make the purchase relying upon
the sample, and with the understanding that the goods are to correspond
with the sample. If the goods are present at the time the sale is made,
and the purchaser inspects them, or has the opportunity to inspect
them, in the absence of fraud, he cannot claim that the sale is by
sample.
=219. Implied Warranty of Merchantability.= Where goods which
have not been inspected or selected by the purchaser are ordered
to be delivered in the future, there is an implied warranty that
they are of average quality. This is called an _implied warranty of
merchantability_. _A_ ordered a "Buckeye" mowing machine of _B_, to
be delivered the following week. _B_ delivered a machine which would
not cut grass. _B_ was held liable to _A_ upon an implied warranty
of merchantability. If _A_ had inspected the machine, and made the
purchase upon his own selection, in the absence of fraud on the part of
_B_, _A_ would have no redress. But, in case the article is purchased
without opportunity for inspection, to be manufactured or delivered in
the future, there is an implied warranty that the article is an average
one of its kind.
=220. Implied Warranty of Fitness of Goods for the Purpose for Which
They are to Be Used.= When a purchaser makes known to a seller the
purpose for which the article is to be used, and the seller is himself
the manufacturer or grower of the article, there is an implied warranty
that the article is fit for the purpose for which it is to be used.
This applies only to articles to be manufactured or delivered in the
future, and not to articles inspected and selected by the purchaser.
If _A_ goes to _B_, a manufacturer, and tells him he desires to have
manufactured an instrument to hold liquid soap suitable for the use
of workingmen in shops, and _B_ agrees to manufacture and sell such
an article, there is an implied warranty on _B's_ part that the
soap-holders will be suitable for the purpose for which they are to
be used. If, however, _A_ furnishes _B_ plans for the manufacture
of a liquid soap-holder, and orders a quantity, there is no implied
warranty on _B's_ part that the articles will be fit for the purpose
intended. _A_ in this case relied upon his own judgment. _B's_ contract
is fulfilled when he furnishes the article according to _A's_ plans.
The work must, of course, be done in a workmanlike manner, free from
defects of material and workmanship. This implied warranty of fitness
of an article for the purpose for which it is to be used, applies only
where the purchaser reveals the purpose of the article to the grower or
manufacturer who agrees to furnish such an article. It does not apply
to articles furnished according to furnished plans, or to articles
selected by the purchaser.
=221. Remedies for Breach of Warranty.= In case of breach of
warranty, the purchaser may bring a suit for damages against the
seller, or he may promptly return the goods, and recover the purchase
price. The latter remedy is called _rescission_. In case of breach of
an express warranty, in most jurisdictions the remedy is the same as
for breach of implied warranty. In some states, however, the seller is
not permitted to return the goods and sue for the purchase price, but
is restricted to an action for damages.
=222. Seller's Lien, Delivery to Carriers, and Stoppage in Transitu.=
In case of sales for cash, the seller has the right to retain
possession of the goods until he receives payment of the purchase
price. If the goods are sold on credit, or if the seller agrees to
deliver at a certain place, the seller must comply with his contract.
But if the purchaser becomes insolvent before the goods are delivered,
the seller may retain possession until paid. He is not obliged to
deliver goods on credit, even though such is his contract, if the
purchaser subsequently becomes insolvent. The right of a seller to
retain possession of goods until the purchase price is paid is called
_the seller's lien_. This lien is lost by the seller's delivery of the
goods to the purchaser. If the possession is obtained by fraud on the
part of the purchaser, it is regarded as no possession, and the seller
may still enforce his lien by retaking possession of the property.
Where goods are ordered by a person in one town from a person in
another town, necessitating delivery by a carrier, in the absence of
express stipulation to the contrary, title to the goods passes to the
vendee upon delivery of same by the vendor to the carrier. If _A_, in
Cleveland, orders a car of pine lumber from _B_, in Milwaukee, for
$1,500.00, title to the lumber passes to _A_ when _B_ delivers the
lumber to the transportation company in Milwaukee. If _A_ orders the
lumber delivered F. O. B. Cleveland, title does not pass to _A_ until
the lumber reaches Cleveland. If _A_ orders the lumber, agreeing to pay
$1,500.00 for the same, "freight allowed" to Cleveland, title passes
to _A_ when _B_ delivers the lumber to the transportation company
in Milwaukee, even though _B_ must allow _A_ to deduct the freight
from the purchase price of $1,500.00. This question is important in
determining upon whom the loss falls in case of damage of the goods
while in the hands of the transportation company. The one who has the
title at the time the loss occurs must stand the loss. Such party may
recover from the transportation company. This question is discussed in
the chapter on Carriers.
While a seller loses his lien by delivery of possession of the goods
to the purchaser, if the goods are delivered to a carrier and the
purchaser becomes insolvent before the carrier delivers the goods to
him the seller may stop delivery of the goods, and retake possession
even though title has passed to the purchaser. The seller's lien in
this event revives. By _insolvency_ is meant inability to pay one's
debts. The right of a seller to stop a carrier from delivering goods to
a vendee, in case of insolvency of the latter, is called _stoppage in
transitu_. This question is also discussed in the chapter on Carriers.
A seller may enforce his lien by keeping the goods, and suing the
purchaser for damages, or by selling the goods at private or public
sale, with notice to the purchaser of the time and place of sale, and
then by suing the original purchaser for the difference between the
amount he receives for the goods on resale, and the amount the original
purchaser agreed to pay. The seller may, of course, hold the goods and
demand the original purchase price of the purchaser, and not yield
possession until he receives the purchase price.
=223. Remedies of Seller.= The seller's lien described in the
previous section is one of the remedies of a seller. If the purchaser
refuses to accept the goods, the seller may keep or resell the goods,
and if he receives less than the original purchaser agreed to pay, he
may recover the difference as damages from the original purchaser. For
example, _A_ agreed to manufacture and deliver a specially constructed
cash register for _B_ for $500.00. When it was completed, _B_ refused
to accept same. _A_ sold it for $200.00, the fair market price, and
recovered from _B_, $300.00 as damages for _B's_ breach of contract.
If the purchaser accepts the goods and fails to pay for them when due,
the seller may sue and recover the entire purchase price, together with
damages and expenses which are necessarily connected therewith.
=224. Remedies of Purchaser.= Where title has not passed to the
purchaser, if the seller refuses or fails to deliver goods according to
the contract of sale, the purchaser may go into the market at the time
and place of delivery and purchase goods, and if obliged to pay more
than the original contract price, he may recover the excess from the
seller. For example, suppose _A_ purchases five hundred pounds of lard
of _B_ for $60.00, _B_ agreeing to deliver the lard October 30th, at
Chicago. If _B_ fails to deliver the lard in Chicago, October 30th, _A_
may purchase lard of the same quality in Chicago, and if he is obliged
to pay $90.00 for the same, he may recover $30.00 damages from _B_. If
there is no market at the place of delivery mentioned in the contract,
the purchaser may purchase at the nearest market. If the purchaser
makes the purchase for a particular purpose, which he makes known to
the seller at the time the sale is made, and he is specially damaged
by reason of the failure of the seller to keep his contract, special
damages may be recovered for losses arising by reason of the special
circumstances. If title to the goods has passed to the purchaser,
in case the seller refuses to deliver them, the purchaser may bring
an action of _replevin_ to recover their possession. Replevin is a
possessory action. (See chapter on Courts and Legal Remedies.)
QUIZ QUESTIONS
BANKING, LOANS, MONEY, AND CREDITS
1. Define a _bank_.
2. Classify banks.
3. How are national banks created?
4. What are state banks?
5. Define and distinguish _banks of discount_, _banks of cirrculation_,
and _banks of deposit_.
6. Are most banks incorporated companies?
7. What are the powers of an incorporated bank?
8. Do banks have the power to deal in real estate?
9. Do banks have the power to collect commercial paper?
10. What are _bank deposits_?
11. Is a bank required to receive deposits from any one who tenders
them?
12. What name is applied to the person authorized to receive bank
deposits?
13. Do savings banks permit their customers to draw their deposits by
check?
14. Distinguish _general_ and _special deposits_.
15. Define _check_.
16. What kinds of banks do a checking business?
17. By what process may a depositor withdraw money from a savings bank?
18. Define a _paid voucher_.
19. When do banks return checks to their customers?
20. When are checks payable?
21. What should a customer do with paid checks when they are received
from his bank?
22. When must checks be presented for payment?
23. Is a bank required to pay the checks of its depositors?
24. If a bank refuses to pay a check what, if anything, must the holder
do to hold the maker liable?
25. Are national banks permitted to make loans on real estate?
26. Are savings banks permitted to make loans on real estate?
27. Define _credit_.
28. By what means is credit information furnished?
29. Distinguish _credit_ and _capital_.
30. Are forged negotiable instruments void or voidable?
31. Is a bank liable for paying forged checks, or must the depositor
whose signature is forged stand the loss?
32. If a forgery is not reported by a depositor until six months after
it was committed, who must stand the loss?
33. Is a bank liable if it pays a _bona fide_ holder a check payable to
bearer?
34. Under what laws are national banks created?
35. Does the United States Constitution expressly provide for the
creation of national banks?
36. What United States officer has supervision over national banks?
37. Are national banks furnished with circulating notes? If so, in what
amounts?
38. In case of the bank's insolvency, what is the liability of national
bank stockholders?
39. What rate of interest can national banks charge?
40. Can national banks buy and sell bonds?
41. What penalty is imposed upon national banks for usury?
42. Define and distinguish _savings banks_ and _trust companies_.
43. Are clearing houses banks? What are the functions of clearing
houses?
44. In what two ways is the term _money_ used?
45. What is _legal tender_?
46. Are silver certificates legal tender?
47. Define _discount_.
48. Distinguish _discount_ and _purchase of negotiable paper_.
49. Are banks permitted to purchase negotiable paper at a profit in
excess of legal rates of interest?
50. Are individuals and business concerns permitted to purchase
negotiable paper at a profit in excess of legal rates of interest.
51. Define _exchange_.
52. Distinguish _foreign_ and _domestic exchange_.
53. Define _interest_.
54. Define and give an example of _usury_.
55. What is the usual penalty for usury?
INSURANCE
1. Define _insurance_.
2. Are insurance companies controlled by the legislatures of the states?
3. May an individual or a partnership enter into insurance contracts?
4. Is insurance business interstate commerce if transacted between
citizens of different states?
5. May one state exclude insurance companies of another state from
transacting business within its territory?
6. Does an insurance contract require all the elements of an ordinary
contract?
7. In what way does an insurance contract differ from an ordinary
contract?
8. How many parties are there to an insurance contract?
9. Define _underwriters_.
10. Define _beneficiary_.
11. Name the principal kinds of insurance written at the present time.
12. Define and give an example of _insurable interest_.
13. Must an insurance contract be in writing to be binding?
14. Are insurance contracts within the Statute of Frauds?
15. Define _binder_.
16. Define _warranty_ as used in an insurance contract.
17. Distinguish warranty as used in insurance contracts from warranty
as used in contracts of sale.
18. Define _representation_ as used in connection with insurance
contracts.
19. Distinguish _warranty_ and _representations_.
20. Does breach of warranty avoid a contract of insurance?
21. Does breach of representation discharge an insurance contract?
22. Define _life policy_.
23. Define _term policy_.
24. Define _tontine policy_.
25. Define _marine insurance_.
26. What implied warranty enters into a policy for marine insurance?
27. Define _general average_.
28. Define _standard policy_.
29. If a policy of insurance contains no stipulation relative to
suicide, and the insured takes the policy intending to commit
suicide, and does commit suicide, is the policy enforceable?
30. If an insurance policy contains a suicide clause, and the insured
commits suicide while insane, is the policy enforceable?
31. May an insurance company stipulate against suicide in such a manner
as to avoid the policy if the insured suicides when insane?
32. Define and distinguish _fidelity_ and _casualty insurance_.
33. What is _re-insurance_?
34. Is a company writing a policy of re-insurance liable to the party
originally insured?
35. May a company re-insure at greater risk than it itself has
insured? 36. Can a fire insurance policy be assigned before a loss
has occurred?
37. Can a fire insurance policy be assigned after a loss has occurred?
38. Can a life insurance policy be assigned at any time?
39. Define and distinguish _open_ and _valued policies_.
40. Define _other insurance_.
41. What limit, if any, is placed upon the amount of life insurance a
person may take?
42. May a person insure personal property for more than its actual
value?
43. If a person insures his house in three different companies for
two-thirds of its value in each company, in case of loss how much
an he recover, if anything, on each policy?
SURETYSHIP
1. Define _suretyship_.
2. Is a suretyship obligation a contract?
3. What contracts is the term _suretyship_ used to designate?
4. How many parties are there to a suretyship contract?
5. Define _principal_.
6. Give an example of a suretyship contract.
7. Define _promisor_.
8. Define _creditor_ to a suretyship contract.
9. Give the different technical names that may be applied to a promisor
of a suretyship contract depending upon the nature of the
liability.
10. Define _surety_.
11. Give an example of a contract of a surety.
12. Is the liability of a surety conditional upon that of his principal.
13. Define _guarantor_.
14. _A_ promises a creditor of _B_ to pay _B's_ debt if _B_ does not.
Is _A's_ contract that of a surety or of a guarantor?
15. In commercial practice what form of suretyship contract is most
frequently used, that of a surety or of a guarantor?
16. Define _indorser_.
17. Is an indorser's contract found outside of negotiable instruments?
18. Is an indorser bound by any implied contract?
19. What are the warranties of an indorser?
20. Is consideration a necessary element of a contract of suretyship?
21. If a suretyship contract is part of the transaction which it
secures must it be supported by a separate consideration?
22. Must any contracts of suretyship be in writing?
23. Is an oral contract of suretyship illegal?
24. What is meant by the Statute of Frauds as applied to suretyship
contracts?
25. Define _general guaranty_.
26. Define _limited guaranty_.
27. Define _special guaranty_.
28. Define _continuing guaranty_.
29. What kinds of notice may a guarantor be entitled to?
30. When, if at all, is a guarantor entitled to notice of default of
his principal?
31. When, if at all, is a guarantor entitled to notice of acceptance of
his guaranty by a creditor?
32. If _A_ is surety for _B_ upon _B's_ debt to _C_ of $100.00 and _B_
settles his debt with _C_ for $50.00, can _C_ hold _A_ for the
balance?
33. If _A_ guarantees _B's_ debt to _C_ of $100.00 due one year and
with interest at 6%, and _B_ without _A's_ consent reduces the
interest to 5%, is _A_ thereby discharged?
34. If _A_ guarantees _B's_ debt to _C_ of $100.00 payable in one year,
and _C_ without _A's_ consent extends the time of payment six
months upon _B's_ agreement to pay 6% interest, is _A_ thereby
discharged?
35. Is fraud practiced by the principal upon the promisor to a
suretyship contract, a defense to the promisor in an action brought
by the creditor?
36. In the absence of special statute can a promisor to a suretyship
contract compel by notice a creditor to sue a principal?
37. Are surety companies favorites of the law?
38. Define _subrogation_.
39. Give an example of _subrogation_.
40. Define _indemnity_ as applied to a suretyship contract.
41. _A_ guarantees _B's_ debt to _C_ of $100.00 upon a promissory note.
_B_ defaults and _A_ pays the debt. _A_ then sues _B_ for $100.00
upon the promissory note. Is this an example of indemnity or
subrogation? May _A_ sue _B_ for $100.00 independently of the
promissory note?
42. Define _contribution_.
43. _A_, _B_, and _C_ guarantee _B's_ debt to _E_ of $300.00. _D_ sues
_A_ and collects $100.00. Can _A_ sue _B_ and _C_ for $33.33 each?
PERSONAL PROPERTY
1. Define _personal property_.
2. Classify personal property.
3. Distinguish _chattels real_ from _chattels personal_.
4. Define and give an example of _chose in action_.
5. Define and give an example of _chose in possession_.
6. How may title to personal property be acquired?
7. May a person obtain title to personal property by finding it?
8. How can personal property be transferred?
9. Upon death of the owner, to whom does title to personal property
pass?
SALES
1. Distinguish ownership and possession of personal property.
2. May title and possession of personal property be in different places?
3. Define _sale_.
4. How does a sale differ from a contract to sell?
5. _A_ promises to deliver a car of coal to _B_ the following month in
consideration of _B's_ promise to pay _A_ $300.00 upon delivery of
the coal. Is the transaction a sale or a contract to sell?
6. In a contract to sell, if the property is destroyed by fire before
the property is delivered, who stands the loss?
7. Distinguish _barter_ from _sale_.
8. _A_ agrees to deliver to _B_ one hundred bushels of apples for
twenty tons of coal at $5.00 per ton. Is the transaction a
_sale_ or a _barter_?
9. Define _conditional sale_.
10. At the present time is a vendor of a conditional sale contract
permitted to take possession of the property after 90% of the
purchase price has been paid.
11. _A_ leaves his automobile at _B's_ shop for repairs. Is this
transaction a sale?
12. Distinguish _sale_ from _bailment_.
13. What kinds of personal property may be the subject of a sale?
14. May personal property to be manufactured be the subject of a
present sale?
15. What is meant by the Statute of Frauds as applied to sales?
16. What contracts of sales must be in writing?
17. When must personal property sold be delivered?
18. In the absence of any express agreement as to delivery, when and by
whom must personal property be delivered?
19. If a sale is made in which delivery is to be made in the future may
title pass to the purchaser at once?
20. When does title pass to the purchaser in a sale of personal
property?
21. Does the fact that delivery is to be made in the future, of itself,
prevent title passing to the purchaser at the time the sale
is made?
22. _A_ sells a desk to _B_ for $10.00, agreeing to revarnish the desk
and deliver same to _B_ the following Saturday. When does title to
the desk pass to _B_?
23. What, if anything, does intention of the parties have to do with
the passing of title to the purchaser?
24. In the absence of an express agreement when must the purchase price
be paid?
25. Is the seller permitted to retain possession of the property sold
until he receives the purchase price?
26. _B_, by means of fraud, purchases a bicycle from _A_. _B_ sells it
to _C_, who does not know of the fraud. Can _A_ recover the bicycle
from _C_?
27. _A_ purchases a bicycle from _B_ telling _B_ that he is _C_. _B_
knows _C_ by reputation and thinks that he is selling to _C_.
_A_ sells the bicycle to _D_. Can _B_ obtain possession of the
bicycle from _D_?
28. Define _Caveat Emptor_.
29. Does the rule of _Caveat Emptor_ apply if the seller expressly
warrants the goods sold?
30. Define _express warranty_.
31. _A_ sells a horse to _B_ assuring _B_ that the horse is perfectly
sound. The horse has blemishes. Does _A_ warrant the horse?
32. Define _implied warranty_.
33. Enumerate the most common implied warranties.
34. Does an implied warranty of title accompany every sale?
35. _A_ purchases an automobile at a sheriff's sale. The automobile is
mortgaged. May the mortgagee take the auto from _A_? If so, can _A_
recover on an implied warranty from the sheriff?
36. What is meant by _implied warranty of wholesomeness of food_?
37. Does this warranty extend to any purchaser?
38. Give an example of an implied warranty in a sale by sample.
39. Does the implied warranty of merchantability apply when the goods
are selected and inspected by the purchaser?
40. Give an example of a sale in which there is an implied warranty of
fitness for the purpose for which the goods are to be used.
41. Does this implied warranty exist if the goods are constructed and
furnished according to a model furnished by the buyer?
42. Define _rescission of a contract_.
43. May a contract of sale be rescinded for breach of warranty?
44. Generally, what is a purchaser's remedy for breach of warranty?
45. Define _lien_.
46. Give an example of seller's lien.
47. Define _stoppage in transitu_.
48. _A_, in Cleveland, orders goods of _B_ in Chicago. _B_ delivers the
goods to the Adams Express Company, addressed to _A_. The goods
are lost in a railway wreck. Who must bear the loss, _A_ or _B_?
49. _A_ sells a carriage to _B_. _B_ refuses to pay for the same. If
_A_ has not delivered the carriage to _B_ may he sue _B_ for
damages?
50. _A_ purchases a carriage from _B_. _A_ tenders the price, but _B_
refuses to deliver the carriage. May _A_ obtain possession of the
carriage by legal action?
51. May _A_ sue _B_ for damages for refusing to deliver the carriage?
[Illustration: A CORNER IN THE NEW YORK EXECUTIVE OFFICE OF THE WESTERN
ELECTRIC COMPANY
Occupying a Part of One Floor of the Marshall Field Building]
COMMERCIAL LAW