Chapter X: Part III: Banking, Loans, Money and Credits (3)

=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?

COMMERCIAL LAW