Chapter IX: Part III: Banking, Loans, Money and Credits (2)

An indorser is usually defined to be one who writes his name on a negotiable instrument for the purpose of passing title. By so doing, he agrees to answer for the debt of another. That is, he agrees conditionally to pay the obligation of the maker of the instrument if the maker does not, and if the indorser is promptly notified of the failure of the maker to pay.

_Irregular indorser_ is the term applied to persons who sign negotiable instruments outside the chain of title. For example, if _A_ is the maker of a promissory note and _B_ is the payee, and _C_ places his signature on the back of the note, _C_ is an irregular indorser. He signs outside the chain of title. _B_ is the one who must first place his signature on the back of the note to transfer title. The courts of the different states have not been in harmony in fixing the liability of an irregular indorser. Some make his liability that of a surety, some that of a guarantor, and others that of an indorser. Many of the states at the present time have statutes regulating the making and transfer of negotiable instrument. The codes generally fix the liability of an irregular indorser to be that of an indorser.

=187. Consideration to Contracts of Suretyship.= An agreement to answer for the debt, default, or obligation of another, to be binding, must constitute a contract. It must contain all the elements of a simple contract, including a valuable consideration. A valuable consideration may be defined to be anything of benefit to the one making the promise, or anything of detriment to the one to whom the promise is made. A promise made in return for a promise, usually termed "a promise for a promise," is considered a valuable consideration as well as something of value actually given to the one making the promise. A consideration need not be adequate. It need not be commensurate with the obligation entered into. In the absence of fraud, a consideration of one dollar will support a contract for $10,000.00 as well as an actual consideration of $10,000.00. In a suretyship contract, three persons are concerned; the party owing the original debt, the one to whom the debt is payable, and the one promising to answer for another's debt. By reason of the third party to a suretyship contract, the question of consideration is sometimes confusing. If the obligation of the promisor, or the party agreeing to answer for the debt of another, is made at the same time, and is a part of the same transaction as the contract between the original debtor and his creditor, the consideration supporting the contract between the original debtor and the creditor supports the contract of the promisor. For example, if _A_ endeavors to purchase $100.00 worth of goods of _B_, and _B_ refuses to make the sale unless _C_ signs a contract of guaranty for the value of the goods, and _C_ signs such a contract of guaranty which is delivered to _B_ before the goods are delivered, the consideration, namely the receipt of $100.00 worth of goods delivered to _A_ which supports _A's_ promise to _B_, will support _C's_ promise to _B_ to pay the $100.00, if _A_ fails to pay it. If the suretyship contract is entered into after the original obligation is incurred, and independently of it, there must be a separate and independent consideration to support it. For example, if _A_ purchases $100.00 worth of goods from _B_, agreeing to pay for them in thirty days, and after fifteen days have elapsed after delivery of the goods, _B_, fearing _A_ is insolvent, asks him to furnish a guaranty of _C_, _C_ must receive a valuable consideration to support his contract of guaranty, separate and distinct from the consideration which supports _A's_ obligation to _B_.

=188. Contract of Suretyship Must be in Writing.= About 1676, the English Parliament passed a statute known as the Statute of Frauds. Among other things this statute required contracts of suretyship to be in writing to be enforceable. The statute was in part as follows, "No action shall be brought whereby to charge the defendant upon any special promise to answer for the debt, default or miscarriage of another person unless the agreement upon which action shall be brought or some memorandum or note thereof shall be in writing, signed by the party to be charged therewith or some person thereunto by him lawfully authorized."

The states of this country generally have re-enacted this statute. An oral contract of suretyship is not void. The parties may voluntarily carry it out if they choose. The law does not make it illegal. The law simply says that it is not enforceable. If an action is brought by a party on an oral contract of suretyship and the other party objects for that reason, the court will not enforce the contract. To satisfy the Statute of Frauds it is not necessary that the entire contract be in writing, but the substance must be stated, and the writing must be signed by the one promising to answer for the other's obligation.

A promise to pay one's own debt is not within the Statute of Frauds, and need not be in writing to be enforceable. If a promise is made for the primary purpose of benefiting the promisor, even though it takes care of the debt of another, it is regarded as an original promise of the promisor, and need not be in writing.

=189. General, Special, Limited and Continuing Guaranties.= Guaranties may be directed to some particular person or firm, or may be addressed to anyone who desires to accept them. An open guaranty, or one addressed to anyone is called a _general_ guaranty. A guaranty addressed to a particular person or firm is called _special_ guaranty. In case of a special guaranty, only the person to whom it is addressed can accept it. Anyone can accept a general guaranty. A letter of guaranty addressed, "to whom it may concern," is a general guaranty, while one addressed to "The _A. B._ Co.," is a special guaranty.

A guaranty limited as to time, either by specifying the date on which it is to expire, or by specifying the number of transactions or the transactions it is to embrace, is a _limited_ guaranty. If no limit of time or of number of transactions is placed therein, it continues until withdrawn by the guarantor. This is called a _continuing_ guaranty.

=190. Notice to Guarantors.= A guarantor may be entitled to two kinds of notice. He may be entitled to notice of acceptance of the guaranty, and he may be entitled to notice of default of his principal. The first is called notice of acceptance of a guaranty, the second, notice of default of a guaranty. If a person stipulates in his letter of guaranty that he requires notice of acceptance of his guaranty, the creditor must give him such notice to hold him. Without such stipulation he is not, in most jurisdictions, entitled to notice. _A_ addresses the following letter of credit to _B_:

Cleveland, O., Jan. 4, 1909.

Mr. B.

Give A credit at your store to the amount of $25.00. I will pay you if he does not.

Signed--C.

The letter of guaranty does not require _B_ to notify _C_ of its acceptance. In the Federal Courts, the rule requires notice of acceptance of guaranties. It is sound business practice always to notify a creditor of acceptance of a guaranty. If a letter of guaranty contains a stipulation that the guarantor is to receive notice of default of his principal, such notice must be given, or the guarantor will be discharged to the amount of his damage resulting from failure to receive this notice. In case of guaranties involving the payment of a definite amount at a definite time, for example, in case of guaranty of payment of a promissory note, no notice is necessary on the part of the creditor to the guarantor of the failure of the principal to pay. In other cases it may be stated as a general rule that notice should be given the guarantor of default of his principal. It is safe business policy for a creditor to give notice to a guarantor of default of payment on the part of his principal.

=191. Defense of Payment.= Suretyship obligations are obligations to answer for the debts or default of another. They may be in the form of a contract of a surety, of a guarantor, or of an indorser. Certain things constitute suretyship defenses. They apply equally to a surety, a guarantor and an indorser. If a principal debtor pays or settles the debt which another promises to pay, the promisor is thereby discharged. Payment by a principal is a complete suretyship defense. For example, _A_ owes _B_ $100.00. _C_ in writing promises to pay _A's_ debt when it is due. _A_ pays _B_. _C_ is thereby discharged.

=193. Defense of Granting Extension of Time to Principal.= If a creditor enters into a contract by which the principal is given an extension of time, the promisor is released. This does not mean mere delay in enforcing the collection of the principal debt, nor does it mean leniency of a creditor with his debtor. If, however, a creditor makes a contract based upon a valuable consideration, by which the principal debtor is granted an extension of time within which to pay his debt, the promisor is discharged. For example, if _A_ owes _B_ $1,000.00 on March 1st, and _C_ in writing promises _B_ to pay if _A_ does not, if _B_ does not collect from _A_ on March 1st, but lets the debt run until March 15th or indefinitely, _C_ is not thereby discharged. If, however, _B_ in consideration of _A's_ promise to pay him interest at a certain rate after March 1st, extends the time until April 1st, _C_ is discharged. To discharge the promisor, the agreement with the principal to extend the time of payment must be based upon a valuable consideration, and must be for a definite time.

=194. Defense of Fraud and Duress.= Fraud practiced by the creditor upon the principal or upon the promisor is a defense to the promisor. For example, if _A_ is indebted to _B_ and _C_ guarantees _A's_ debt, and if _B_ procured the contract with _A_ by fraud, or procured the guaranty from _C_, by fraud, _C_ can avoid the contract of guaranty by reason of the fraud. If the fraud is practiced by the principal upon the promisor, it is no defense to the promisor as against the creditor. For example, if _C_ guarantees _A's_ debt to _B_ and the guaranty is procured through the fraud of _A_ without _B's_ knowledge or consent, the fraud will not avail _C_ as a defense to an action brought by _B_ upon the guaranty. The same is true of duress. For a fuller explanation of fraud and duress see sections on _Fraud_ and _Duress_ under _Contracts_.

=195. Surety Cannot Compel Creditor to Sue Principal.= Unless so provided for by statute, a promisor to a suretyship contract cannot compel a creditor to sue a principal when the debt secured is due, or claim his discharge for failure on the part of the creditor to comply with this request. A few states provide by statute that a promisor may by notice compel a creditor to sue a principal upon a suretyship obligation when due, or be discharged for his failure so to do.

=196. Surety Companies.= At the present time, corporations are organized for the purpose of entering into suretyship obligations for profit. Bonds of public officials as well as of private individuals, judicial bonds given in appeal of cases at law from one court to a higher court are commonly signed by surety companies. These companies, for an agreed annual consideration called a _premium_, sign as surety these bonds for responsible individuals. Sureties were once said to be favorites of the law. This was for the reason that individual sureties signed private, official or judicial bonds as a favor to the principal, ordinarily without receiving any compensation therefore. When a liability arose the surety escaped if possible, since it was not his obligation, but another's which he was called upon to pay. The courts favored him and technical defenses were recognized which were not recognized as a defense by persons primarily liable. In the case of surety companies, however, there is no reason for this favoritism, since the surety engages in the contract for a consideration, and not as a favor to anyone. The tendency of the courts is to hold surety companies strictly to the terms of their contracts.

=197. Subrogation.= By _subrogation_ is meant the substitution of the promisor for the creditor in case the promisor to a suretyship obligation pays his principal's debt. For example, if _A_ signs a guaranty by the terms of which he agrees to pay _B's_ debt to _C_, when the debt is due if _B_ fails to pay it, and _A_ pays it, _A_ is placed in _C's_ position and may collect the debt from _B_. Any securities of _B_ that _C_ held for the debt now belong to _A_. If _C_ has a judgment against _B_ for the debt, _A_ is subrogated to the judgment and may himself enforce it.

=198. Indemnity.= The law implies a contract on the part of the principal to a suretyship contract to pay the promisor when the latter pays the suretyship obligation. For example, if _A_ guarantees _B's_ debt to _C_, as soon as _A_ is obliged to pay _C_, and does pay _C_, _A_ may sue _B_ on an implied contract of indemnity for the amount he has paid _C_.

=199. Contribution.= _Contribution_ is the term applied to the right of one of two or more co-promisors to a suretyship obligation to secure a _pro rata_ share from his co-promisors of the amount he is obliged to pay the creditor on a suretyship contract. For example, if _A_, _B_ and _C_ guarantee _D's_ debt of $150.00 to _E_, and when the debt is due, _E_ sues _A_ and collects $150.00 from him, _A_ can sue _B_ and _C_ for $50.00 each. If _A_ pays _C_ only $50.00 he can collect nothing from _B_ and _C_, since this is only his share of the debt. But if _A_ settles the debt with _C_ for $50.00, he can recover one third the amount from both _B_ and _C_. _A_ can pay the debt when it is due, without waiting for suit if he so desires, and proceed to collect one third the amount from both _B_ and _C_.

PERSONAL PROPERTY

=200. Personal Property in General.= Personal property is the term applied to property other than real estate. It may be either tangible or intangible. Personal property is sometimes divided into _chattels real_ and _chattels personal_. Chattels real are interests in real estate not amounting to ownership. Real estate mortgages and leases are common examples of chattels real. Chattels personal embrace all personal property other than chattels real. Every thing subject to ownership not connected with the land is included in the classification of chattels personal. Promissory notes, personal apparel, furniture, tools and animals are common examples. Chattels personal are of a tangible, or of an intangible nature. They are mere rights, or they are things which may be handled and used. A promissory note, a contract, or a mortgage is a right as distinguished from a thing in possession. These rights are sometimes called _choses in action_, while tangible articles of personal property, such as watches, chairs and horses are called _choses in possession_. The law relating to personal property is discussed at length under the sections on _Sales of Personal Property_, _Pledges_, _Chattel Mortgages_, _Carriers_ and _Wills_.

=201. Acquisition of Title and Transfer of Personal Property.= Title to personal property may be acquired in several ways, chief among them being by contract, by possession, by gift, and by operation of law. If _A_ purchases a carriage from _B_, the transaction is a sale of personal property and _A_ is entitled to possession of the carriage by reason of the contract. Title to the carriage is given to _A_ by contract. Title to some kinds of property is acquired by possession. Title to wild animals is acquired by possession. The same is true of fish. Title to lost property, except as against the owner, is acquired by possession. Title to property is also acquired by voluntary gift on the part of the owner.

If _A_ dies possessed of articles of personal property, the property 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_.

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.