deliveries to be one car a month. At the time of the purchase the buyer
is in good financial standing and signed copies of the contract are
exchanged between the buyer and seller. After three deliveries have been
made information reaches the seller that the financial standing of the
buyer has changed for the worse; that is, he has committed no act of
bankruptcy, but a commercial agency has reduced his capital and credit
rating. The seller requests the buyer to anticipate the payment of some
of the previous shipments before he will agree to make further
shipments. The buyer refuses to comply with this request and asks for
the delivery of the balance. The seller thereupon makes no further
deliveries, but when the bills for the goods delivered become due,
demands payment. The buyer refuses on the ground that the seller has not
carried out his part of the contract. On these facts please tell us what
the law in this case would be.
Reply: One who has sold goods on credit is not justified in
refusing delivery simply because the buyer’s financial standing
changes for the worse between the time of sale and the time of
delivery. In the case here put, for example, there is nothing to
show that the buyer is not now amply able to pay for the goods,
or that the contract would have been declined by the seller if
the buyer’s rating at the time had been what it is now. The
seller is entitled to refuse delivery only if the buyer, before
delivery is made, commits any act of insolvency. He need not
become a bankrupt or make an assignment for creditors. He is
insolvent, within the meaning of this rule, if he fails to pay
any just and admittedly proper debt promptly upon its due date.
As long as he is paying his bills whenever they fall due the
seller has no ground upon which to declare that he is not
“keeping his credit good,” if the buyer in this case is not
solvent, as the word is here defined, the seller need not
continue the deliveries. If the buyer is solvent the seller is
not justified in his position. In that case the buyer need not
pay for the goods already delivered until the time named in the
contract for payment arrives, and he has a valid claim for
damages arising out of the seller’s failure to make the other
deliveries in strict accordance with the contract.
=Opinion No. 91.=
A BUYER HAS A CLAIM WHEN HE ACCEPTS A DRAFT ON INFERIOR LUMBER.
Question.—We bought a car of lumber through a broker. Terms were: Sight
draft with bill of lading attached for three-fourths of the amount of
the invoice, the balance to be paid on arrival and inspection. We
accepted the draft on presentation and when the car arrived we
instructed our truckmen to draw the lumber in. Upon examination we found
that it was all more or less below grade. We wired shippers accordingly
and asked for instructions. We also wrote them a letter to the above
effect and told them that we could not use the lumber and that we would
hold it for their instructions. Do we need to keep the shipment? Can we
compel sellers to return us the amount of the draft and freight charges?
Reply: The buyers are not bound to accept any lumber not in
accordance with the order. They have a valid claim against the
sellers for the amount already paid towards the purchase of the
goods, for the amount expended for freight and for any other
useless expense to which the buyers were put as a result of the
sellers’ failure to do their contract duty. The buyers also have
a claim for damages, if any, caused by the breach of contract on
the part of the sellers. The latter were bound to supply lumber
regularly sold and accepted by the trade under the terms
covering the grade in question, and their failure so to do was
an actionable breach of contract.
=Opinion No. 92.=
CONTRACT OF SALE.
Delivery by Installments—Successive Recoveries by the Vendee Not
Permissible.
When a party contracts to deliver goods by installments, for
example—Several carloads of lumber to be shipped at different intervals
but fails to deliver one or more of such installments, the vendee may
repudiate the contract and sue for damages. If he brings the action
prior to the time for the delivery of the last installments, he can only
recover for such installments as are past due and such recovery bars him
from afterwards bringing an action and recovering thereon for the
remaining installments or deliveries.
=Opinion No. 93.=
DUTY OF VENDOR TO MINIMIZE LOSS WHEN VENDEE REFUSES TO ACCEPT GOODS.
It occasionally happens that a purchaser of a car of lumber refuses to
accept same and leaves it at the mercy of the railroad company or common
carrier. In this way demurrage piles up and other loss may arise and the
shipper hesitating, for fear of compromising himself, refuses to do
anything with the lumber on his part. This is generally a mistake
because it is the duty of the shipper to make the loss, if any, as small
as possible and it is always safe to first notify the vendee, who has
refused to receive the goods that he, the shipper, will endeavor to
dispose of them in the best possible manner and hold the vendee
responsible for any loss or damage thereby. In this case he may have to
have the goods sold elsewhere or returned to him, and it is always
advisable to endeavor to have them inspected by two or three competent
parties in order to establish the market value and to ascertain that the
defects, if any, claimed by the vendee, do not exist.
=Opinion No. 94.=
ACCORD AND SATISFACTION.
If a buyer of lumber, disputing the quantity or quality, sends a check
for an amount less than the invoice to the seller, does the seller in
accepting the same preclude himself from recovering the balance of the
account? This situation occurs, we believe, often in lumber circles and
very frequently the remittance is accompanied by a letter or some notice
written on the check to the effect that it is sent as a settlement in
full and some go so far as to add that if accepted by the creditor it
must be at his peril so far as the remainder of the invoice or account
is concerned. The law on this point is generally similar to that of the
State of New York wherein it is well settled that the acceptance or use
of such a remittance does not stop or prevent the creditor from
recovering the balance of the debt from its debtor unless there has been
an honest dispute as to the amount of indebtedness or the existence of
any indebtedness at all. This is what is termed an unliquidated account
or claim and in such a case, when one tenders an amount to be accepted
in full or rejected and the other accepts the remittance, it is a
complete accord and satisfaction. The rule is different when the amount
or debt is certain and there is only a dispute between the parties
concerning questions of shortage, quality, etc. This is what is termed a
liquidated claim and the acceptance of a remittance to be a full
settlement does not preclude the creditor from using the remittance,
crediting the same to the account of the debtor and suing for the
balance.
=Opinion No. 95.=
CANCELLING AN ORDER BEFORE SHIPMENT—EFFECT OF SAME.
Many lumbermen take orders from their customers through traveling men or
other representatives. Usually the orders are written down in a manifold
book and often are signed by the buyer. The order is usually taken
subject to confirmation by the house or home office. This acceptance or
confirmation is customarily made by acknowledgement of the order in
writing to the purchaser. The question in point is whether or not, if an
agent has taken an order as above, can the purchaser cancel the order
and his obligation to accept the lumber? In a case in this State a
purchaser of merchandise placed the order with the traveling man and
later wrote to the house cancelling the same, as he found he could buy
similar goods for less money. The purchaser wrote before the seller had
communicated any acceptance or intention to fill the order which had
been given to the seller’s representative. Some correspondence ensued in
which the seller refused to cancel the order and later shipped the goods
to the purchaser, who refused to receive them. The action resulted in a
judgment in favor of the seller, which was reversed on appeal, in which
numerous authorities were cited by the Appellate Court holding
substantially as follows—“An order or request in writing, addressed to a
dealer or his agent to ship to the writer on or before a date named,
goods of a kind specified, for which the writer agreed to pay a price
named, does not constitute a contract until accepted or acted upon by
the vendor and may be withdrawn at any time before acceptance.”
It is obvious that the result would be different were the vendor to have
signified his acceptance of the order prior to the cancelling or
withdrawal of same by the purchaser, as we would then have a valid
contract, which could not be cancelled without mutual agreement.
In this connection it might be well to add that in business transacted
by mail, the general rule is that the time of the mailing or depositing
in the mail of a letter is the presumptive time of the communicating of
the facts therein to the party to whom the letter is addressed, hence
when an order is sent by mail, another letter withdrawing the order, if
mailed prior to the mailing of the acceptance by the other party, is a
complete cancellation of the order in the first letter. In other words,
the law does not take into account the periods elapsing by reason of the
means of communication but only the acts of the parties in so far as the
time of such acts is considered to have taken place.
=Opinion No. 96.=
DISCHARGE IN BANKRUPTCY—WHAT WILL PREVENT.
Under the amendment to the National Bankruptcy Law as amended in
February, 1903, the rules relating to discharge of bankrupts, are
somewhat changed. Many parties are interested ofttimes in preventing the
discharge of a bankrupt for no other reason than that they are creditors
who believe that the bankrupt has not been honest in his dealings and
irrespective of motives of personal enmity feel that the welfare of the
business community is served by preventing the bankrupt from being
discharged and re-entering into business. Probably the act that will
prevent a discharge that most often appeals to the creditor is that the
bankrupt obtained goods on a false statement in writing. This, if shown,
will prevent the discharge, the law reading in this respect, as follows:
“Obtained property on credit from any person upon materially false
statement in writing made to such person for the purpose of obtaining
such property on credit.” It is obvious that the party who urges this
objection must be the one who has been injured thereby.
Other debts not dischargeable in bankruptcy are taxes levied by the
United States, the State, county, district or municipality in which
bankrupt resides, and others of no practical interest to merchants. In
addition to the above are those debts which have not been duly scheduled
by the bankrupt in the proceeding in time for proof and allowance, with
the name of the creditor if known to the bankrupt, unless such creditor
had notice or actual knowledge of the proceedings in bankruptcy; or were
created by his fraud, embezzlement, misappropriation, or defalcation,
while acting as an officer or in any fiduciary capacity.
=Opinion No. 97.=
SALES—OF AN INDEFINITE QUANTITY.
A purchaser of a quantity of merchandise ordered by letter two hundred
to three hundred tons of a certain article to be delivered within the
following six months as wanted. The vendor duly acknowledged receipt of
the order and accepted same, stating that they would deliver a certain
quantity in the immediate future and balance as ordered within the
following six months. Thereafter, the vendor delivered a certain portion
of the merchandise for which it was paid with the exception of one
installment, which the vendee refused to pay for alleging that the
vendor had refused to deliver further installments. The purchaser sued
the vendor for damages for breach of contract in failing to deliver the
balance of the contract. The Court held that by the terms of the order
the vendor could not insist on the purchaser taking more than the two
hundred tons but the purchaser on his part could insist within the six
months period upon the vendor delivering the remaining hundred tons, it
appearing that two hundred tons had been already delivered. In fact, it
was an option which the vendee could enforce but not the vendor.
The above is a brief outline of an action decided in the Appellate Court
in New York and applies as well to an executory sale of lumber, many
similar orders being placed among lumbermen.
=Opinion No. 98.=
LIABILITY OF BANK FOR FAILURE TO GIVE NOTICE OF PROTEST TO ENDORSER UPON
NOTE RECEIVED FOR COLLECTION.
That it is the legal obligation of a bank, which receives a note for
collection to use all diligence to give notice of its dishonor to all
endorsers is set forth in a decision of the Appellate Division of the
New York Supreme Court (Howard vs. Bank of Metropolis, 95 App. Div.
342).
One H., who was the owner of a promissory note made by one S., and
indorsed by G., delivered the note to a bank for collection and left
with it a card giving G.’s full name and address, stating that he wished
the note carefully protested as he expected to hold the endorser, the
maker not being responsible, and that he would not be in the city when
the note fell due. The maker of the note having failed to pay it when
due, the bank sent it to its Notary for protest, but failed to deliver
to the Notary the card bearing the name and address of the endorser, and
informed the Notary that the endorser’s address was unknown. The Notary
made out two notices of protest, one directed to H. and the other to G.
Both notices were placed in an envelope and sent to H., who did not
receive them, being out of town.
The Court held the bank responsible and in rendering its opinion
referred to a prior New York case entitled First National Bank vs.
Fourth National Bank (77 N. Y. 320) and quoted “it is the duty of an
agent who receives negotiable paper for collection, in case such paper
is not paid, so to act as to secure and preserve the liability thereon
of all the parties prior to his principal, and if he fails in this duty
and thereby causes loss to his principal, he becomes liable for such
loss.”
=Opinion No. 99.=
ACCOUNTS STATED.
The Settlement of Accounts and Striking of a Balance Between
Parties—What It Consists Of.
Upon merchandise accounts which embrace many items or cover transactions
running through a long period it is often wise to strike a balance or to
bring about an agreement between the creditor and debtor as to the exact
amount owing thereon. The value of such arrangement becomes of great
moment when at a later date attempt is made to enforce collection of the
account. It obviates the necessity proving various material matters such
as the delivery of the various items charged to the debtor; that they
were accepted by the debtor; that they were of the kind called for by
the contract of sale; that there was a full number or count; that the
agreed prices were as charged. The fixing of a balance upon a running
account is legally known as the _stating of an account_ and an account
so fixed is an “account stated.”
A running account becomes an “account stated” by agreement either
express, or implied by acquiesence, between the parties, that a definite
amount or sum is owing from one to the other. No particular form of
words is essential and neither must it be in writing, although a written
expression is of more ready proof and, therefore, preferable. An express
admission, either verbally or by letter, of the correctness of an
account constitutes an account stated.—(Vernon v. Simmons, 7 N. Y. Supp.
649.)
In the above case the debtor retained accounts received from his
creditor without objection or replying and subsequently acknowledged
orally the receipt of the letter containing them and promising to pay
later on, and it was held that the creditor could sue upon an account
stated. It is not necessary that the account should be signed by the
parties to make it an account stated. It is enough that it has been
examined and accepted by the party and this acceptance need not be
expressed; it may be implied from circumstances such as keeping it
without objection beyond a reasonable time. As to what is an
unreasonable time depends on circumstances largely and it has been held
that two months was sufficient, although generally a longer time would
be more conclusive. This acquiesence, however, may be explained by the
debtor, which would nullify the apparent acceptance, but without such
satisfactory explanation the situation is prima facie against him. Where
the indebtedness has been expressly denied, the retention of the account
does not bind the debtor.—(Austin v. Wilson, 11 N. Y. Supp. 565.)
In bringing an action on an account stated if the plaintiff is defeated
through failure to prove the agreement as to the amount or the fact that
an “account was stated;” he would not be debarred from bringing another
action to recover for the various items comprising the account.
=Opinion No. 101.=
ACCEPTANCE OF GOODS—WHEN SUFFICIENT TO BIND PURCHASER.
It is a daily occurrence in the lumber trade that a purchaser finds
some objection to the quality or quantity of lumber shipped to him on
order. Frequently in such case, without any communication with the
shipper a purchaser feels warranted in using such portion of the lumber
as suits him, relying on an assumed right to lay aside the balance for
the account of the shipper, with the idea that he may reject it entirely
or obtain some reduction in the price. The general rule laid down by the
courts in cases of this sort is as follows: Where the vendee of goods,
purchased without warranty, after full opportunity for an inspection,
accepts them without objection when delivered, he cannot, in an action
against him to recover the price defend upon the ground that they did
not conform to the contract of sale.—(Smith vs. Coe, 170 N. Y. 162.)
If the purchaser, upon the receipt of the goods, makes objection to the
quality, but, without the express permission of the seller, uses a
portion, it is held that by so doing he tacitly waives his objection and
his acts amount to an acceptance of the entire lot.—(Coplay Iron Co. vs.
Pope, 108 N. Y. Appeals, 232.)
In the above case, which involved a transaction in pig iron, the
purchaser complained of the shipment and upon being sued for the
purchase price set up a claim for damages by reason of the alleged
defective quality and it was held “where after discovery or opportunity
to discover any defect in goods delivered under an executory contract of
sale, the vendee neither returns or offers to return the property nor
gives the vendor notice or opportunity to take it back, in the absence
of a collateral warranty or agreement as to quality, he is conclusively
presumed to have acquiesced and may not thereafter complain of the
inferior quality.”
When a car constitutes but a portion of the order, which was in the
nature of one contract for a number of cars, the purchaser cannot object
to the quality and retain the initial car and decline to receive the
balance of the shipment. The contract of sale being an indivisible one
in law, the purchaser by his acceptance of the initial shipment and
failure to return it, is conclusively presumed to have acquiesced in the
quality of the lumber offered him and waived any objection to the
remainder of the shipment order provided it is the same as the first
car.
In the case of Weil vs. The Unique Electric Device Co., Reported in 39
Misc. (New York 1902), page 527, a vendor sought to recover the
stipulated purchase price of certain merchandise sold to the defendant,
consisting of some 3,000 electric batteries, of which 1,000 were
delivered and paid for, but the purchaser refused to accept the balance
on the ground that the quality was not according to the agreement. The
court held that the contract of sale was an entire one and it was the
duty of the purchaser to receive balance of the order, provided they
were of similar quality to the lot already delivered. That when the
purchaser received the first lot and found them unsatisfactory, it was
its duty to rescind the sale and return, or offer to return the goods;
and its failure so to do was an acquiesence on its part of the quality
of the goods in question.
The above discussion leaves for further consideration the question when
a purchaser though bound to take goods and chargeable with their full
price, may hold the seller liable for damages for breach of express or
implicit warranty.
=Opinion No. 102.=
CONTRACT OF SALE—STATING ESTIMATES OF MAXIMUM AND MINIMUM AMOUNT.
It is the custom of many merchants, with a view doubtless of securing
the best possible terms and yet to leave a loophole, whereby they can
take only such an amount as they desire, to give the vendor a general
idea of their requirements.
In Heisel vs. Volkman, reported in Volume 55, New York Appellate
Division, page 607, a dealer wrote to a manufacturer of certain kinds of
merchandise asking for “prices for supplying our requirements,” stating
“we estimate our yearly requirements at from five to ten million pieces.
Are confident that they will not be less than the smaller amount and
reasonably certain that they will come up to or exceed the larger one,”
to which the manufacturer replied, “I would be willing to make a yearly
contract with you from five to ten million pieces, etc.” The purchaser
did not take the minimum amount of five million pieces during the period
in question and the manufacturer sued to recover the purchase price of
the difference, having, of course, done what was necessary in respect to
making a tender of delivery. The court held that the purchaser was
obligated to take and pay for at least five million pieces, even if his
requirements for the year fell substantially short of that amount and
that the seller in making his price had a right to rely upon the minimum
amount stated by the buyer.
Attention is called to this for the reason that the same rule would
apply to a transaction in lumber and because many of the trade are in
the habit of making contracts upon similar conditions and referring in
elastic terms to their probable requirements.
=Opinion No. 103.=
CERTIFICATION OF CHECK—RELEASES THE MAKER.
Attention is called to the fact that under the law of New York State the
procuring of the certification of a check by the holder from the bank or
banker upon which it is drawn is equivalent to the acceptance of a bill
of exchange and releases the drawer.—(Meurer vs. Phœnix National Bank,
94 App. Div. (N. Y.) 331.)
=Opinion No. 104.=
SALES—STOPPAGE IN TRANSIT.
The right to stop a shipment in transit is based on the existence of a
lien in favor of the seller, which continues until the goods have
reached the actual physical possession of the buyer. So long as the
goods are in the hands of a carrier the seller may, given the proper
conditions, reclaim the goods. This is so even if the carrier is one
designated or selected by the purchaser. A fraudulent sale of the goods
by the purchaser to third parties will not defeat the right of stoppage,
nor will seizure under attachment or execution issued against the
purchaser provided the right is exercised before the transit is at an
end.
=Opinion No. 105.=
FOREIGN CORPORATION LAWS.
Necessity of Filing Certificates, Etc., in West Virginia, Indiana,
Tennessee, Mississippi, Kentucky, Ohio, Michigan, New York.
One of our members recently had an attorney examine the corporation laws
of several States and give an opinion concerning the advisability of
filing corporate certificates, securing so-called licenses, etc., in the
various States wherever the member was making sales. The States referred
to are West Virginia, Indiana, Tennessee, Mississippi, Kentucky, Ohio,
Michigan and New York. This information may be helpful to other members,
and a copy of the opinion follows: