the route, the purchase price was to be paid only after arrival
and examination. The carrier was an agent of the seller, and he
did not give the buyer an opportunity to make examination until
November 28. No valid delivery was made, or could have been
made, before November 28, inasmuch as an examination by the
buyer was to precede such delivery. When delivery was tendered
on November 28 the lumber was found to be such as the buyer was
at liberty to reject. He was, accordingly, authorized to go into
the market on that day and buy at the price then prevailing in
order to place himself in as good a position as he would have
been in if the seller had done his duty and had not been guilty
of a breach of contract. The buyer has a right to demand that
the seller shall place him in this position.
=Opinion No. 37.=
LIABILITY OF TRANSPORTATION COMPANY IN DELIVERING WITHOUT SURRENDER OF
BILL OF LADING.
Question—Can a transportation company be held responsible for delivering
a shipment of lumber to a consignee without surrender on the part of the
consignee of signed bill of lading, originally issued when shipment was
made?
Reply: Until lumber shipped has been completely delivered to the
person entitled to receive it, the bill of lading represents the
lumber, but no longer. The transfer of a bill of lading passes
the title of the transferor to the transferee. If, therefore, a
transportation company delivers the shipment to consignee
without a surrender of the bill of lading it is liable to a
person who has obtained a valid title to the shipment by
transfer of the bill of lading from the consignee.
=Opinion No. 29.=
IF NO SPECIFIC TIME OF SHIPMENT IS NAMED A REASONABLE TIME IS
UNDERSTOOD.
Question—On October 25th we bought of a manufacturer a carload of lumber
through their agent. On the 30th we received confirmation of the order.
Nothing was said about the time of shipment, except that in sending the
sizes on October 26th, we told them to “ship at once.” On November 1st
they wrote that they would ship it “the coming week.” No part of it has
been shipped yet. We could have disposed of the carload during this time
at a very good profit. During all this time we have been completely out
of this kind of lumber. Have we a just claim for damages?
Reply: It does not appear whether the confirmation received by
the buyers on October 30 was sent by the sellers before or after
their receipt of the instruction to “ship at once.” The only
importance of this point is this: If the sellers confirmed the
order after receiving the instruction to “ship at once,” they
were bound to ship at once. If they confirmed the order before
receiving this instruction, then the instruction formed no part
of the contract, and is not to be taken into account; in that
case the sellers were bound simply to ship the lumber within a
reasonable time—within the time within which these sizes
commonly are shipped. If they have not done so, they are guilty
of a breach of contract and the buyers may recover any damages
the breach has caused them. They are entitled to be placed by
the sellers in as good a position as they would be in if the
sellers had carried out their contract according to its terms.
The letter of the sellers of November 1, saying they would ship
the goods “the coming week,” forms no part of the contract. The
agreement was made before that letter was written, and it is
binding as originally made. The letter is of importance,
however, as showing an estimate of the sellers themselves as to
what was a reasonable date of shipment. The letter is not
binding upon the buyers, if they can prove that an earlier date
would have been reasonable; but it is binding upon the sellers,
who wrote it.
=Opinion No. 36.=
ONE WHO BUYS LUMBER IS LIABLE THOUGH HE TRANSFERS IT BEFORE DELIVERY.
Question—An individual buys a carload of lumber for future delivery and
before it is delivered he forms a partnership with two other persons and
turns the order over to the firm. Delivery of the lumber is made to this
firm. Please say whether the individual is liable, or only the
partnership. It is a limited partnership and the buyer has only a
certain definite amount at stake with it.
Reply: This is simply the case of an individual who has
purchased goods and then has sold or transferred them before
they have come into his actual possession. Such cases, that is,
of a second sale before delivery to the first purchaser, are
very common, and the original purchaser remains liable precisely
as if delivery has been made to him and he had afterward
disposed of the goods as he saw fit. In the case our
correspondent puts the seller may look to the first buyer unless
he has agreed to release him and look to the firm.
=Opinion No. 38.=
A LUMBER SALESMAN GENERALLY HAS NO POWER TO BIND HIS PRINCIPAL.
Question—One of our traveling salesmen has just sent in a larger order
than we feel safe in filling for that particular customer on the liberal
terms of credit allowed him in the same contract. Are we compelled to
fill the order, or may we reject it without incurring any legal
liability?
Reply: Ordinarily a traveling salesman is authorized merely to
take orders and submit them to his principal for acceptance or
rejection. He has no power to bind his employer irrevocably by a
contract of sale. Our correspondents are justified in refusing
to fill an order sent in by their salesman unless the latter was
expressly authorized to make a valid and binding sale upon his
employers’ behalf, or unless traveling salesmen are usually
clothed with this power. In the latter case each salesman will
be presumed to have the powers usually possessed by men of this
class, unless the buyer had notice of a limitation upon this
general and usual power in the case of the salesman with whom he
was dealing.
=Opinion No. 35.=
USING LUMBER WITHOUT CONSENT OF SHIPPER WHERE QUALITY IS DISPUTED.
Question—We shipped a carload of lumber to a party and they complained
of the quality and refused to settle in full. We insisted upon a
settlement in accordance with invoice, or re-inspection of the entire
carload by an inspector that would be satisfactory to both parties. We
sent a man to look at the lumber and found that it was put in a dry kiln
without our consent, and this, of course, prevented an inspection of the
lumber in its original condition. Are we correct now in insisting upon a
settlement in full as invoiced, and can we maintain our action in a
lawsuit?
Reply: If your lumber was received by the company and, without
authorization from you they put it in the dry kiln, so as to
prevent your examining it or taking it back, they would be
liable to you for the invoice price. They cannot accept the
lumber, use it and then refuse to pay. By their acceptance they
waive any defects in quality or quantity, which can be
ascertained upon an inspection of the lumber upon arrival. They
do not waive any defects that are what we call “latent,” that
is, that are not readily ascertainable upon an examination of
the lumber on arrival, but only show after the lumber may be put
in use. As we take it, such complaints as have been made relate
to alleged defects which they ascertained as soon as they
received the lumber. In that case they had no legal right to use
it, and if they used it, they are liable for the invoice price.
=Opinion No. 34.=
IN AN F. O. B. SALE, SHIPPING POINT, THE CARRIER IS THE BUYER’S AGENT.
Question—If I buy goods f. o. b. point of shipment and part of the goods
invoiced are lost in transit can the consignor enforce payment for the
goods not received?
Reply: When goods are bought f. o. b. place of shipment they are
delivered to the buyer at the place of shipment. Title to the
goods passes to the buyer as soon as delivery is made to the
carrier and the carrier is an agent of the buyer to bring his
goods to him. If the goods are lost on the way the buyer must
pay for them, just as if they had reached him; they have reached
his agent and have been delivered to him, and that is all the
buyer can ask. When goods are sold the presumption always is
that the buyer is to take charge of them in the place in which
they are at the time of the sale. There is no presumption that
the seller is to carry the goods to any place the buyer may
select and deliver them to the buyer there. The seller may do
this, of course, and he frequently does do it; but he is never
bound to do it unless he has expressly so agreed. If the buyer,
in any case, declared that the goods were to be brought to him
by the seller he must show some clause in the contract that has
this meaning; in the absence of such a clause the buyer, either
in person or through an agent, is to take possession of the
goods in the place they occupy at the time of the sale. The
words, “free on board,” are sufficient to prevent the seller
from making a good delivery while the goods are in his own
warehouse, as he otherwise might do. These words place upon him
the duty of taking the goods to the boat or cars and meeting the
expenses necessary actually to start them on their way; but when
this much is done the seller’s whole duty is done. The goods
then belong to the buyer and have been delivered to him; that is
all that is necessary to raise an obligation on his part to pay
for them.
=Opinion No. 33.=
BUYERS CAN INSIST THAT LUMBER, PURCHASED ON CREDIT, BE DELIVERED.
A retailer says: “Lumber was sold to us by a special written contract on
a six months’ credit, the lumber to be ordered out as fast as we saw
fit. We have taken a little more than half and only about two of the six
months have expired. We order another small shipment to be made. The
seller replies that he will send this car, but that he can make no more
deliveries unless we are ready to discount part, at least, of our bill.
He says that he has already extended credit to us as far as he feels
justified in doing. He seems to pay no attention to the contract, under
which we were entitled to order out all of the lumber at once, or in
such shipments as suited us, and were to have a credit upon the whole
bill of six months. Will he be sustained in the stand he has taken? If
we have a remedy please say what it is?”
Reply: When lumber has been sold and part of it delivered, it is
too late for either the buyer or the seller to alter the
contract without the consent of the other. If the sale is upon
credit, as in this case, the terms of credit are such as have
been agreed upon in the beginning. Either the buyer or the
seller may ask, of course, to have the terms changed before all
of the deliveries have been made, but if the other does not
agree to the change the contract must be performed as it was
made. It would be as reasonable for the buyer to refuse to
accept the remainder of the lumber unless the terms of credit
were made more favorable to him, as for the seller to refuse to
continue his deliveries as agreed unless his new proposal as to
credits were accepted. If the seller, in the case our
correspondents put, refuses to go on with the contract in its
original form, the buyers will have the same remedy they would
have had if no deliveries at all had been made. They may go into
the open market, when the time for delivery arrives, buy lumber
enough to finish out the contract, and then hold the seller for
such amount as they are compelled to pay over and above that
named in the contract. Or, if they do not choose to do that,
they may establish the amount of the loss arising from the
seller’s breach of contract in any way in which it can be shown
to the satisfaction of a jury and collect the damages so
established. Or the buyers may cancel the remainder of the
contract if they prefer that course. There is only one exception
to this rule. Any one who has bought goods on credit is bound by
an implied agreement to keep his credit good, and if he fails to
do so he cannot require the seller to deliver the goods.
Accordingly, if a buyer, before all of the lumber is delivered,
shows an inability to pay any just claim in the ordinary course
of business, when it falls due, those who have sold him on
credit may lawfully refuse to go on with the deliveries and the
buyer will have no remedy.
=Opinion No. 39.=
ONE CUSTOMER CANNOT DEMAND THAT CREDIT BE EXTENDED TO ANOTHER.
Question—Lumber corporation No. 1 bought from lumber corporation No. 2
several carloads of lumber for future delivery. Corporation No. 1,
before the agreed time of delivery, commenced proceedings of
dissolution. Out of corporation No. 1, however, a new corporation, No.
3, was formed. Corporation No. 3 now demands of corporation No. 2 that
they deliver this lumber. No. 2 declines on the ground that the
personal, as well as the financial, standing of the new corporation is
entirely changed. Do you think that corporation No. 2 has a legal right
to do this? Where the word corporation is used we mean that one company
is incorporated under the laws of one State, while the other two
companies are existing under charters from different States.
Reply: If any person or corporation has been willing to extend
credit to corporation No. 1 that same person or corporation
cannot for this reason be compelled to extend credit to
corporation No. 3, or to any other person or corporation. If a
corporation has bought goods and paid for them it may assign its
right under that contract, which is simply a right to demand
delivery of the goods to another corporation; but if it has
bought goods on credit, and has then gone into dissolution, it
cannot demand that the credit of any other corporation be
substituted for its own.
=Opinion No. 40.=
GIVING A BAD CHECK DOES NOT PREVENT DISCHARGE IN BANKRUPTCY.
Giving a worthless check for goods and disposing of them immediately is
not a ground for refusing a discharge from bankruptcy. Judge Hough of
the United States District Court has recently granted a discharge to a
party who filed a petition in bankruptcy on October 24, 1906, with
liabilities of $11,577 and no assets. His discharge was opposed by a
creditor, who said that on June 6, 1892, the debtor bought $1,964 worth
of goods, giving a check in payment, which was deposited in bank and
came back marked “no funds.” The creditor went at once to debtor’s place
of business and found that he had sold out and left the city. When
debtor’s application for a discharge came up for a hearing he excepted
to the specifications of objections, and Judge Hough sustained the
exception on the ground that the objections are not within the statutory
list.
=Opinion No. 41.=
WHAT IS CONVEYANCE ON F. O. B. SHIPMENT?
Question—What is the meaning of f. o. b. Philadelphia, Pa.? What is the
meaning of f. o. b. cars Philadelphia, Pa.? Is there any difference
between the two above? If so, what is it?
2.—In selling goods f. o. b. New Orleans, and same are delivered
alongside of steamer, does the shipper or consignee have to pay cost of
handling charges in transferring from cars to steamer; that is, on goods
shipped from New York to New Orleans.
Reply: (1) When goods are sold f. o. b. place of shipment the
meaning is that the seller, for the amount named in the
contract, will supply the goods and will bear the expense of
delivering them on board that conveyance which is to carry them
to their destination. The only difference between the two
phrases set down above is that the latter binds the seller to
deliver the goods on the cars at Philadelphia without any
expense to the buyer; while the former binds him to deliver them
at his own expense on some conveyance not yet specified, which
will carry them to the buyer.
(2) If goods are sold f. o. b. New Orleans, and they are to be
carried to the buyer at some other place in a steamer, all
expenses necessary to deliver them aboard the steamer are to be
borne by the seller. The conveyance on board which the goods are
to be delivered is that which is to take them to their
destination. If goods are to be carried to a buyer on a steamer
there is no reason why he should bind the seller to load them on
freight cars and make a tender of them there.
=Opinion No. 42.=
FAILURE TO DELIVER ONE INSTALLMENT CAUSE FOR CANCELLING ORDER.
Question—We purchased a quantity of lumber to be shipped in February,
March and April in equal monthly shipments. The first shipment has not
been made in February and we would like to know whether this entitles us
legally to cancel the entire contract or only the February lot. In other
words, does the breaking of a contract in one instance cancel the entire
contract?
Reply: When goods are to be delivered in instalments the courts
of this State hold that the seller’s failure to deliver one
instalment justified the buyer in refusing to accept that tender
and also in rescinding so much of the contract as is yet
unfulfilled. It is one contract, not several, and the seller
cannot insist on a right to deliver only such instalments as he
finds it convenient to deliver and to have them accepted. The
buyer has not agreed to pay anything at all for part of the
goods. His contract is that he will pay a certain amount for all
of them. If he is not to have all of them, it is quite
conceivable, and is often a fact that any part less than all is
of very much less than proportionate value to him; it may have
practically no value to him at all. In any event, the seller has
agreed to do a certain service and the buyer has agreed to pay a
certain sum of money. The court will not infer from that an
obligation to pay half the money for half the service or to
accept half the service on any condition, if the other half is
to be, or has been, withheld.
=Opinion No. 43.=
Question—A customer places an order with the mill for November,
December, January and February, proportionate shipments. The mills are
unavoidably delayed in executing the order, but are finally able to make
shipment of practically the whole order in February. The customer
refuses to pay invoices for all the goods shipped in February, but
claims dating on proportionate amounts in April, May and June. Is he
justly or legally entitled to the dating and could he hold the goods
subject to sellers’ order?
Reply: There seems to have been no clause in this contract
releasing the mill in case of such a delay as has occurred. In
the absence of such a clause the buyer was justified in refusing
to accept the goods when all of them were shipped in February.
He is entitled to hold the goods subject to the seller’s order,
or to return them. He cannot, however, force another contract
upon the seller than that which was actually made. The mill may
take back its goods or allow the buyer to accept them upon such
new terms as may be agreed upon. The buyer is justified in
receiving the original contract. This is upon the supposition
that the buyer has not during the past four months said or done
anything to lead the seller to suppose that he was satisfied
with the delay, that he would accept all of the goods as readily
in February as if shipment had been made in strict accordance
with the terms of sale. If he has done that he is estopped now
from making any objection to the tender.
=Opinion No. 44.=
AMOUNT OF CLAIM FOR DAMAGE AGAINST CARRIER.
Question—We made a shipment via two connecting railroads. When it
reached a junction prior to delivery at destination, i. e., a point on
the second road, was badly or entirely damaged in a wreck, and our
customer asked that we immediately replace the shipment, which we did,
and made another shipment of the same kind of lumber four days later,
but in the interim between the time of the first shipment and the time
we received the replacing order from the customer, the price advanced,
and in our second invoice we naturally charged the customer for the
advance. The claim department of the railroad now offers to settle with
us at the original invoice price of the first shipment and declines to
entertain a settlement at the advanced price. We claim that our position
is entirely legal in the matter, and that we are entitled to the
advanced price for the shipment that was lost, the same representing the
value of the goods at the time the goods were destroyed.
Reply: Usually the measure of damages in a case of this kind is
based upon the value of the goods at the time and place and in
the condition in which they ought to have been delivered; the
freight is to be deducted from this, if it has not been prepaid,
and then interest is to be added from the day on which delivery
ought to have been made to the day of payment; there is to be
added also any expense to which the owner of the goods has been
put as a necessary and natural result of the loss. What the
carrier is bound to do is to put the owner of the goods as
nearly as possible in the same position he would have occupied
if the carrier had done his full duty in the first place. If the
carrier had done his duty the owner could have sold the goods at
the market price on the day of delivery at the place of
delivery, he would have had the interest on the money
thereafter, he would have escaped all incidental expenses
arising out of the loss, and he would have been called upon to
pay freight to the carrier, if it had not been paid in advance.
There is only one exception to the rule that is at all common.
If the goods have already been sold for delivery at destination,
at a price less than that which chances to prevail when the day
of delivery arrives, and if the carrier, at the time of
shipment, had actual or constructive knowledge of this fact,
then the owner can demand only the selling price with interest.
In that case, if the carrier had done his duty, the owner would
have obtained for his goods, not the market price, but only the
contract price. Whether the carrier had or had not notice of the
sale makes a difference in this respect; that a carrier is not
to be held for a larger loss than he had in contemplation when
the freight rate was fixed and the degree of care demanded of
him was settled. If he had no knowledge of the sale, actual or
constructive, he is bound for damages based upon the market
price, as in the other case. The fact that other goods at a
different price were sent to replace the lost shipment does not
enter into the matter.
=Opinion No. 46.=
RISK IN SENDING CHECK TO DRAWER’S BANK FOR CERTIFICATION.
Question—We received a check from one of our customers and sent it to
the customer’s bank for certification. The bank failed before the end of
the next day and our check was not paid. Can we not return it to the
maker and demand the face of it from him?
Reply: If the drawer of the check in this case had sufficient
money on deposit to meet it our correspondents have no other
recourse except against the assets of the insolvent bank; the
depositor is discharged. The usual rule is that when a check is
delivered that is drawn upon a bank in the same place in which
the payee resides the drawer guarantees the solvency of the bank
during the remainder of the day on which the check was delivered
and the whole of the next day. The holder has this much time in
which to present the check and draw the money; if the bank fails
meanwhile the loss is upon the drawer of the check and the
holder takes the risk of failure after the second day. But this
rule does not apply when the holder of the check takes it to the
bank and has it certified before the end of the next day after
he receives it. Certification binds the bank and releases the
drawer. So far as the drawer and holder are concerned, the
effect is precisely the same as if the holder had drawn the
money and had then deposited it to his own credit in the same
bank.
=Opinion No. 45.=
A CONTRACT MAY BE CANCELLED WHEN ONE PARTY IS GUILTY OF BREACH.
Question—Lumber has been sold for delivery in installments running
through a considerable period. Payments are to be made in installments
also. The buyer has been very lax in this regard, however; he has not
made a single payment strictly on time, and in some cases has delayed
until the seller has been compelled to threaten suit. Is the seller
bound to go on making deliveries to the end of the time named in the
contract, getting his money whenever and however the tardy buyer sees
fit to pay it?