Chapter II: Part 2

Reply: 1. The law makes no distinction as to the amount of the
claim against the estate for which an executor should require
vouchers and an affidavit. The statutory provision is as
follows: “The executor or administrator may require satisfactory
vouchers in support of any claim presented, and the affidavit of
the claimant that the claim is justly due, that no payments have
been made thereon, and that there are no offsets against the
same to the knowledge of the claimant,” see Code of Civil
Procedure, Section 2718. If an executor should pay a claim of
any considerable size, without this precaution, and the claim
should afterwards turn out to be unjust, he could be, or
probably would be, required to repay the amount to the estate.

2. The laws of this State do not fix any definite time as the
limit within which an executor must make his final accounting.
Whenever a year has expired since the grant of his letters, the
surrogate may compel the executor to make an accounting of all
that has been done up to that time. If the estate is then in a
condition to be definitely settled this may be done. If there
has been any remissness on the part of the executor this may
properly be dealt with by the surrogate. If the executor has
used due diligence, and still is not ready to make a final
accounting, he may have further time, always, of course, under
the supervision of the court.

=Opinion No. 23.=

A SELLER MAY CONTRACT AGAINST LIABILITY FOR DELAY IN SHIPPING.

Question—A company in Boston sells to A in New York 800,000 feet of lumber and on the sales slip are the words, “for delivery, one cargo in June, and one in July.” The lumber was shipped in four cargoes, about 200,000 feet in each. The first two were shipped in July; the third cargo on the 18th of August, and the fourth on the 21st of August. The first two cargoes were accepted at the contract price, $27, but the customer refuses the third and fourth cargoes, claiming that we were late on the deliveries. It is a well known fact that all through this year vessels have been very hard to obtain. Has the New York dealer a right to refuse to accept the third and fourth cargoes at the contract price? The price has dropped from the spring to the present time from $27 to say $24. The customer claims the last two cargoes at the going market price prevailing at the time they arrived. Inasmuch as the cargoes cannot be sold over again, except at a less price than the New York customer offered, we were obliged to let him unload the last two cargoes. We claim that the customer has no right to deduct anything, owing to the lateness of delivery, because our orders read, “subject to delays caused by fires, strikes or other causes beyond our control.”

Reply: We suppose the clause quoted by our correspondent,
“subject to delays,” etc., is incorporated in the contract or is
so prominently printed on the order blank that the buyer cannot
fail to understand that the sale is made subject to it. If that
is true, and if it is also true that the delay in this case
actually arose from a cause beyond the control of the sellers,
then the buyer’s position was not tenable at the beginning. It
is possible, however, that the buyer can maintain his position
now by reason of the acquiescence of the sellers. The buyer had
a right to ask that a deduction in the price be made by reason
of the delay. If the sellers had refused this request and
demanded expressly that the cargo be accepted at the contract
price, or not accepted at all, they could have enforced their
demand. It does not appear very clearly what answer the sellers
made to the buyer’s request for a lower price. Our correspondent
says: “Inasmuch as the cargoes cannot be sold over again, except
at a less price than the New York customer offered, we were
obliged to let him unload the last two cargoes.” There was
plainly a dispute as to whether the delay was one which was
excusable under the terms of the contract, and, if the act of
the sellers, or their answer to the request of the buyer for a
lower price, can be construed into an acquiescence in that
request, the sellers are now bound by such acquiescence. If the
sellers have always insisted that the contract price must be
paid, that the goods must be accepted in strict accordance with
the contract, or rejected, then they are in position to collect
the full contract price for all the lumber.

=Opinion No. 24.=

WHEN LUMBER IS SOLD FOR DELIVERY THERE IS A BREACH OF CONTRACT IF NOT
DELIVERED.

Question from Buffalo, N. Y.—A sells B a carload of lumber at a given price delivered, Boston rate of freight for shipment from the West. B gives directions which are accepted by A for shipment of car to a point taking a Boston rate of freight. The lumber is shipped as per contract, and the consignee pays a sight draft with bill of lading attached according to terms. While in transit the lumber is destroyed. Is the shipper not responsible to the consignee for the lumber, as it was not delivered, as the contract called for; and after the lumber is destroyed does the consignee have an option of insisting on having the shipment replaced or canceling the order?

Reply: Our correspondent calls attention to the fact that the
contract in this case called for a delivery of the lumber at the
end of transportation. This being so, the seller was bound to
carry and deliver the lumber, as well as to furnish it. The
carrier was an agent of the seller and if the lumber is not
delivered the seller is to look to the carrier for damages,
while the buyer looks to the seller. What the seller undertook
to do in this case was to supply the lumber, to carry it, and
then to deliver it. If he fails in either point he is guilty of
a breach of contract. He has failed to deliver the lumber; the
buyer may regard this as a breach of contract, which it is, and
sue for such damages as may have come upon him as a result of
the breach. The buyer cannot compel the seller to replace this
lumber with other; but if the seller would rather do that than
pay damages, and if the buyer is willing to have it done, then,
of course, it may be done.

=Opinion No. 22.=

A LIQUIDATED DEMAND CANNOT BE SETTLED EXCEPT BY PAYMENT OF THE WHOLE
AMOUNT.

Question—An individual in Providence, R. I., who was indebted to me, forwarded a check for less than the amount of his entire indebtedness. He stated on the face of it “settlement in full.” This in nowise discharged his obligation to me and I wrote him that I would credit his check on account and requested a remittance of the balance. He takes the position that under the Rhode Island law he has discharged his indebtedness. Please advise what rights I hold in the premises.

Reply: We do not find any statute or decision in Rhode Island to
the effect that a payment of this kind constitutes payment in
full. All the reported decisions by the courts of that State we
have been able to find lay down practically the same rules upon
the subject that are enforced by the courts of New York. This
payment was made in New York, and the laws of this State govern
it in any event. The law upon the subject here (and, so far as
we can learn, in Rhode Island, too), is briefly this: If there
is no doubt, and no dispute, as to the amount due, then payment
of less than that amount will not discharge the debt, even
though the creditor agree to accept it as a discharge, if there
is no release under seal and no new consideration given. If the
debt is unliquidated, if there is a doubt or dispute as to the
amount of it, then the debtor’s offer of so much as payment in
full constitutes his estimate of the amount really due. The
creditor cannot accept the money without accepting the estimate.
The debtor has a right to go into court to have the dispute
settled, and if the creditor is unwilling to accept the
condition under which the money is sent he is bound to return
the remittance and allow the whole matter to be determined in
some authoritative way. For decisions to the effect that part
payment of a debt that is liquidated and certain is not payment
in full, even when the creditor accepts the money and uses it,
see 23 N. Y., 684; 108 N. Y., 470; 1 R. I., 496; and 8 R. I.,
381.

=Opinion No. 20.=

PRIVILEGE OF STOPPING LUMBER IN TRANSIT WHEN BUYERS BECOME INSOLVENT.

Question—When lumber has been sold and shipped, and the seller afterwards directs the carrier not to deliver it to the buyer but to return it to him, is the carrier under any obligation to return it, or must he go ahead and deliver it to the buyer, or may he exercise his own will in matter? What are the legal rights of all parties in such a case?

Reply: If one who has sold lumber on credit learns, after it has
been delivered to the carrier, that the buyer is insolvent it is
his right to demand that the lumber be not delivered to the
buyer, but be returned to him. This is known as the right of
stoppage in transit, and it is founded upon the theory that one
who buys on credit is bound by an implied contract to keep his
credit good until the date of payment arrives. In order that the
seller may be entitled to exercise this right the buyer must be
actually insolvent, that is, unable to meet his just obligations
as they fall due; the lumber must be still in the hands of the
carrier, and not yet delivered into the actual or constructive
possession of the buyer. If the lumber is represented by a bill
of lading making it deliverable to the buyer or his order that
must be still under the buyer’s control; if he has transferred
it to a third person, who has taken it for value and in good
faith, the seller’s right of stoppage is gone. If a seller who
has a right to stop the lumber attempts to exercise the right by
directing the carrier not to deliver it the carrier is bound to
obey the direction. The carrier, however, acts at his peril in
any case. If he obeys the instruction and refuses to deliver the
lumber to the buyer, and the buyer is solvent, he may bring an
action of trover against the carrier immediately. On the other
hand, if the carrier disobeys the instruction, and delivers up
the lumber, he makes himself liable to the seller, at least to
the extent of the buyer’s indebtedness for the lumber, if it is
a case in which the seller is justified in exercising his right
of stoppage in transit. Because of these difficulties of his
situation, the carrier is entitled to a reasonable time in which
to investigate the financial condition of the buyer; but if he
finally delivers the lumber to the buyer in any case in which
the seller had a right to countermand the order for their
delivery, and had done so, the carrier must answer for it.

=Opinion No. 27.=

SALES FOR FUTURE DELIVERY.

Frequently the question of credit arises after a contract for future delivery has been made, and the following may be helpful:

Question—Will you kindly give us your opinion in the following matter: A makes a sale to B of a certain quantity of lumber for future delivery, payments to be made on a credit of sixty days’ time. Before the delivery of lumber begins, A has reason to believe that the responsibility of B is not satisfactory to him and refuses to ship the lumber except for cash with discount for the difference in time. What redress has B in this matter, if he is not in a position to pay cash?

Reply: The refusal of A to ship the lumber to B under
these circumstances constitutes a breach of contract, for
B has an action against A for damages. Something more than
dissatisfaction with B’s financial responsibility is
necessary to furnish A with a valid excuse for his refusal
to ship except for cash.

=Opinion No. 30.=

IN MOST STATES A CONSIGNEE MUST BE NOTIFIED OF THE ARRIVAL OF HIS
LUMBER.

Question—Is a railroad company obliged to notify the consignee of the arrival of lumber when it is billed and the bill of lading reads: “Order of shipper, notify consignee,” and if the carriers fail to notify the consignee, have they the right to charge demurrage or storage for the lumber so held? Would it make any difference if the lumber were billed direct to the consignee and were not an “Order notify shipment?” Have the courts made any rulings of this matter, and where can we find them?

Reply: A railroad company is, of course, bound to comply with
the undertaking set forth in its own bill of lading. If it
accepts goods to be carried and delivered under a bill which
expressly directs it to “notify the consignee” there is no
ground upon which it can escape its obligation actually to
notify the consignee except the impossibility of finding him by
the ordinary means. If the consignee can readily be found the
carrier has not fulfilled the task which it has expressly and in
definite terms undertaken to fulfill until it has found him and
notified him. It has no right to charge demurrage or storage
until such notification has been duly given. If the consignee
cannot be found by the exercise of reasonable diligence then the
attempt to find him will serve the carrier as well as an actual
notification. If the bill of lading does not, in express terms,
direct the carrier to notify the consignee this duty still rests
upon the carrier by common law as it is interpreted in this
State. In some States (Massachusetts, for example) the carrier
is not bound to notify the consignee of the arrival of his goods
unless the contract of carriage expressly so directs. But in New
York the courts hold that this is one of the carrier’s duties,
as carrier, without any special stipulation regarding it. This
is the rule, as the courts of New York have announced it. “The
rules as to the delivery of goods at their place of destination
by a carrier that prevail in this State are as follows: If the
consignee be present upon the arrival of the goods, he must take
them without unreasonable delay. If he be not present, but live
at or in the vicinity of the place of delivery, the carrier must
notify him of the arrival of the goods, and then he has a
reasonable time to remove them. If he be absent, unknown, or
cannot be found, then the carrier can place the goods in its
freight house, and if the consignee does not call for them in a
reasonable time, its liability as a common carrier ceases.”

=Opinion No. 25.=

OBTAINING CERTIFICATES PERMITTING FOREIGN CORPORATIONS TO DO BUSINESS IN
NEW YORK.

A previous opinion contained some information regarding foreign corporations obtaining certificates to do business in New York. The following additional information, from our attorney in New York, Mr. Eustace Conway, 15 William Street, regarding amendments effective November 1st, will be interesting:

There went into effect on November 1st, 1906, various important amendments to the corporation Tax Law. The annual franchise tax is placed on a different basis from what it has been heretofore for foreign corporations, and the license tax which foreign corporations have to pay for doing business in this State is also changed as to its method of determination. Under the new law the measure of amount of capital stock employed in this State (on which the tax of ⅛ of 1 per cent. is to be paid for this corporation license to do business here) is to be such a proportion of the issued capital stock as the gross assets employed in any business within this State bear to the gross assets wherever employed in business. As no action shall be maintained in any of the courts of this State by such foreign corporation without obtaining a receipt for this license fee, it is important to foreign corporations expecting to do business here to comply with the statute and take out the certificate. This tax, of course, is only to be paid once for the license, unless later an increased amount of capital stock is employed in the State, but this is not likely to occur. The annual franchise tax is, of course, a different tax, but it is based on the same proportion, except that the amount of dividends is also to be considered.

=Opinion No. 26.=

THE NEW JERSEY LIEN LAW PROTECTS MATERIAL MEN.

Question—Please state whether or not, under the laws of the State of New Jersey, a seller of building materials comes in under the mechanics’ lien law the same as the man selling his labor.

Reply: Persons furnishing materials for the erection of a
building are called “material men” in the Mechanics’ Lien Law of
New Jersey, and they have a lien which is protected like that of
a laborer. The first section of the law provides that “every
building hereafter erected or built within this State shall be
liable for the payment of any debt contracted and owing to any
person for labor performed or materials furnished for the
erection and construction thereof, which debt shall be a lien on
such building, and on the land whereon it stands.” It is further
provided, in a later section, that “whenever any master-workman
or contractor shall, upon demand, refuse to pay any person who
may have furnished materials used in the erection of any such
house or other building—it shall be the duty of such—material
man to give notice in writing,” etc. As a result of this notice
his lien attaches and his claim is protected.

=Opinion No. 21.=

OBLIGATION OF CARRIERS AS TO NOTICE OF ARRIVAL TO CONSIGNEE.

Question—Is a railroad company, which has accepted lumber for transportation to a certain point, legally obligated to notify the consignee at the respective point of the arrival of lumber?

Reply: The law relating to the obligation of a railroad company
to notify the consignee of the arrival of the lumber at the
point of destination is not uniform in all the States. The rule
adopted in New York and in most of the States is that the
carrier must give notice of arrival to the consignee, and that
until notice is given, or a reasonable effort to give notice is
made, the carrier’s liability as carrier continues in force.

=Opinion No. 28.=

BUYERS’ POSITION WHERE, ON ARRIVAL, LUMBER IS NOT IN ACCORDANCE WITH
CONTRACT.

Question—A has sold to B a carload of lumber to be delivered on or before November 24, payment cash promptly after arrival and examination. The lumber arrives on the 24th, and A gives on that day to B an examination order for the lumber, which examination order B accepts. B uses proper diligence in trying to examine, but, owing to congestion of cars at the depot the lumber is not unloaded for several days, and he can only examine it on the 28th. He finds it to be of a quality inferior to the grade contracted for and rejects it, and his rejection is sustained by arbitration. B claims the right to go into the market on the 28th, buy a carload of lumber of the grade contracted for and demand from A the difference between the contract price and the price paid by him on the 28th. A maintains that he can only be held responsible for the difference between the contract price and the ruling market value on November 24, the last date stipulated in the contract. Who is right?

Reply: This lumber was sold for delivery at the buyer’s end of
the route, the purchase price was to be paid only after arrival
and examination. The carrier was an agent of the seller, and he
did not give the buyer an opportunity to make examination until
November 28. No valid delivery was made, or could have been
made, before November 28, inasmuch as an examination by the
buyer was to precede such delivery. When delivery was tendered
on November 28 the lumber was found to be such as the buyer was
at liberty to reject. He was, accordingly, authorized to go into
the market on that day and buy at the price then prevailing in
order to place himself in as good a position as he would have
been in if the seller had done his duty and had not been guilty
of a breach of contract. The buyer has a right to demand that
the seller shall place him in this position.

=Opinion No. 37.=

LIABILITY OF TRANSPORTATION COMPANY IN DELIVERING WITHOUT SURRENDER OF
BILL OF LADING.

Question—Can a transportation company be held responsible for delivering a shipment of lumber to a consignee without surrender on the part of the consignee of signed bill of lading, originally issued when shipment was made?

Reply: Until lumber shipped has been completely delivered to the
person entitled to receive it, the bill of lading represents the
lumber, but no longer. The transfer of a bill of lading passes
the title of the transferor to the transferee. If, therefore, a
transportation company delivers the shipment to consignee
without a surrender of the bill of lading it is liable to a
person who has obtained a valid title to the shipment by
transfer of the bill of lading from the consignee.

=Opinion No. 29.=

IF NO SPECIFIC TIME OF SHIPMENT IS NAMED A REASONABLE TIME IS
UNDERSTOOD.

Question—On October 25th we bought of a manufacturer a carload of lumber through their agent. On the 30th we received confirmation of the order. Nothing was said about the time of shipment, except that in sending the sizes on October 26th, we told them to “ship at once.” On November 1st they wrote that they would ship it “the coming week.” No part of it has been shipped yet. We could have disposed of the carload during this time at a very good profit. During all this time we have been completely out of this kind of lumber. Have we a just claim for damages?

Reply: It does not appear whether the confirmation received by
the buyers on October 30 was sent by the sellers before or after
their receipt of the instruction to “ship at once.” The only
importance of this point is this: If the sellers confirmed the
order after receiving the instruction to “ship at once,” they
were bound to ship at once. If they confirmed the order before
receiving this instruction, then the instruction formed no part
of the contract, and is not to be taken into account; in that
case the sellers were bound simply to ship the lumber within a
reasonable time—within the time within which these sizes
commonly are shipped. If they have not done so, they are guilty
of a breach of contract and the buyers may recover any damages
the breach has caused them. They are entitled to be placed by
the sellers in as good a position as they would be in if the
sellers had carried out their contract according to its terms.
The letter of the sellers of November 1, saying they would ship
the goods “the coming week,” forms no part of the contract. The
agreement was made before that letter was written, and it is
binding as originally made. The letter is of importance,
however, as showing an estimate of the sellers themselves as to
what was a reasonable date of shipment. The letter is not
binding upon the buyers, if they can prove that an earlier date
would have been reasonable; but it is binding upon the sellers,
who wrote it.

=Opinion No. 36.=

ONE WHO BUYS LUMBER IS LIABLE THOUGH HE TRANSFERS IT BEFORE DELIVERY.

Question—An individual buys a carload of lumber for future delivery and before it is delivered he forms a partnership with two other persons and turns the order over to the firm. Delivery of the lumber is made to this firm. Please say whether the individual is liable, or only the partnership. It is a limited partnership and the buyer has only a certain definite amount at stake with it.

Reply: This is simply the case of an individual who has
purchased goods and then has sold or transferred them before
they have come into his actual possession. Such cases, that is,
of a second sale before delivery to the first purchaser, are
very common, and the original purchaser remains liable precisely
as if delivery has been made to him and he had afterward
disposed of the goods as he saw fit. In the case our
correspondent puts the seller may look to the first buyer unless
he has agreed to release him and look to the firm.

=Opinion No. 38.=

A LUMBER SALESMAN GENERALLY HAS NO POWER TO BIND HIS PRINCIPAL.

Question—One of our traveling salesmen has just sent in a larger order than we feel safe in filling for that particular customer on the liberal terms of credit allowed him in the same contract. Are we compelled to fill the order, or may we reject it without incurring any legal liability?

Reply: Ordinarily a traveling salesman is authorized merely to
take orders and submit them to his principal for acceptance or
rejection. He has no power to bind his employer irrevocably by a
contract of sale. Our correspondents are justified in refusing
to fill an order sent in by their salesman unless the latter was
expressly authorized to make a valid and binding sale upon his
employers’ behalf, or unless traveling salesmen are usually
clothed with this power. In the latter case each salesman will
be presumed to have the powers usually possessed by men of this
class, unless the buyer had notice of a limitation upon this
general and usual power in the case of the salesman with whom he
was dealing.

=Opinion No. 35.=

USING LUMBER WITHOUT CONSENT OF SHIPPER WHERE QUALITY IS DISPUTED.

Question—We shipped a carload of lumber to a party and they complained of the quality and refused to settle in full. We insisted upon a settlement in accordance with invoice, or re-inspection of the entire carload by an inspector that would be satisfactory to both parties. We sent a man to look at the lumber and found that it was put in a dry kiln without our consent, and this, of course, prevented an inspection of the lumber in its original condition. Are we correct now in insisting upon a settlement in full as invoiced, and can we maintain our action in a lawsuit?

Reply: If your lumber was received by the company and, without
authorization from you they put it in the dry kiln, so as to
prevent your examining it or taking it back, they would be
liable to you for the invoice price. They cannot accept the
lumber, use it and then refuse to pay. By their acceptance they
waive any defects in quality or quantity, which can be
ascertained upon an inspection of the lumber upon arrival. They
do not waive any defects that are what we call “latent,” that
is, that are not readily ascertainable upon an examination of
the lumber on arrival, but only show after the lumber may be put
in use. As we take it, such complaints as have been made relate
to alleged defects which they ascertained as soon as they
received the lumber. In that case they had no legal right to use
it, and if they used it, they are liable for the invoice price.

=Opinion No. 34.=

IN AN F. O. B. SALE, SHIPPING POINT, THE CARRIER IS THE BUYER’S AGENT.

Question—If I buy goods f. o. b. point of shipment and part of the goods invoiced are lost in transit can the consignor enforce payment for the goods not received?

Reply: When goods are bought f. o. b. place of shipment they are
delivered to the buyer at the place of shipment. Title to the
goods passes to the buyer as soon as delivery is made to the
carrier and the carrier is an agent of the buyer to bring his
goods to him. If the goods are lost on the way the buyer must
pay for them, just as if they had reached him; they have reached
his agent and have been delivered to him, and that is all the
buyer can ask. When goods are sold the presumption always is
that the buyer is to take charge of them in the place in which
they are at the time of the sale. There is no presumption that
the seller is to carry the goods to any place the buyer may
select and deliver them to the buyer there. The seller may do
this, of course, and he frequently does do it; but he is never
bound to do it unless he has expressly so agreed. If the buyer,
in any case, declared that the goods were to be brought to him
by the seller he must show some clause in the contract that has
this meaning; in the absence of such a clause the buyer, either
in person or through an agent, is to take possession of the
goods in the place they occupy at the time of the sale. The
words, “free on board,” are sufficient to prevent the seller
from making a good delivery while the goods are in his own
warehouse, as he otherwise might do. These words place upon him
the duty of taking the goods to the boat or cars and meeting the
expenses necessary actually to start them on their way; but when
this much is done the seller’s whole duty is done. The goods
then belong to the buyer and have been delivered to him; that is
all that is necessary to raise an obligation on his part to pay
for them.

=Opinion No. 33.=

BUYERS CAN INSIST THAT LUMBER, PURCHASED ON CREDIT, BE DELIVERED.

A retailer says: “Lumber was sold to us by a special written contract on a six months’ credit, the lumber to be ordered out as fast as we saw fit. We have taken a little more than half and only about two of the six months have expired. We order another small shipment to be made. The seller replies that he will send this car, but that he can make no more deliveries unless we are ready to discount part, at least, of our bill. He says that he has already extended credit to us as far as he feels justified in doing. He seems to pay no attention to the contract, under which we were entitled to order out all of the lumber at once, or in such shipments as suited us, and were to have a credit upon the whole bill of six months. Will he be sustained in the stand he has taken? If we have a remedy please say what it is?”

Reply: When lumber has been sold and part of it delivered, it is
too late for either the buyer or the seller to alter the
contract without the consent of the other. If the sale is upon
credit, as in this case, the terms of credit are such as have
been agreed upon in the beginning. Either the buyer or the
seller may ask, of course, to have the terms changed before all
of the deliveries have been made, but if the other does not
agree to the change the contract must be performed as it was
made. It would be as reasonable for the buyer to refuse to
accept the remainder of the lumber unless the terms of credit
were made more favorable to him, as for the seller to refuse to
continue his deliveries as agreed unless his new proposal as to
credits were accepted. If the seller, in the case our
correspondents put, refuses to go on with the contract in its
original form, the buyers will have the same remedy they would
have had if no deliveries at all had been made. They may go into
the open market, when the time for delivery arrives, buy lumber
enough to finish out the contract, and then hold the seller for
such amount as they are compelled to pay over and above that
named in the contract. Or, if they do not choose to do that,
they may establish the amount of the loss arising from the
seller’s breach of contract in any way in which it can be shown
to the satisfaction of a jury and collect the damages so
established. Or the buyers may cancel the remainder of the
contract if they prefer that course. There is only one exception
to this rule. Any one who has bought goods on credit is bound by
an implied agreement to keep his credit good, and if he fails to
do so he cannot require the seller to deliver the goods.
Accordingly, if a buyer, before all of the lumber is delivered,
shows an inability to pay any just claim in the ordinary course
of business, when it falls due, those who have sold him on
credit may lawfully refuse to go on with the deliveries and the
buyer will have no remedy.

=Opinion No. 39.=

ONE CUSTOMER CANNOT DEMAND THAT CREDIT BE EXTENDED TO ANOTHER.

Question—Lumber corporation No. 1 bought from lumber corporation No. 2 several carloads of lumber for future delivery. Corporation No. 1, before the agreed time of delivery, commenced proceedings of dissolution. Out of corporation No. 1, however, a new corporation, No. 3, was formed. Corporation No. 3 now demands of corporation No. 2 that they deliver this lumber. No. 2 declines on the ground that the personal, as well as the financial, standing of the new corporation is entirely changed. Do you think that corporation No. 2 has a legal right to do this? Where the word corporation is used we mean that one company is incorporated under the laws of one State, while the other two companies are existing under charters from different States.

Reply: If any person or corporation has been willing to extend
credit to corporation No. 1 that same person or corporation
cannot for this reason be compelled to extend credit to
corporation No. 3, or to any other person or corporation. If a
corporation has bought goods and paid for them it may assign its
right under that contract, which is simply a right to demand
delivery of the goods to another corporation; but if it has
bought goods on credit, and has then gone into dissolution, it
cannot demand that the credit of any other corporation be
substituted for its own.

=Opinion No. 40.=

GIVING A BAD CHECK DOES NOT PREVENT DISCHARGE IN BANKRUPTCY.

Giving a worthless check for goods and disposing of them immediately is not a ground for refusing a discharge from bankruptcy. Judge Hough of the United States District Court has recently granted a discharge to a party who filed a petition in bankruptcy on October 24, 1906, with liabilities of $11,577 and no assets. His discharge was opposed by a creditor, who said that on June 6, 1892, the debtor bought $1,964 worth of goods, giving a check in payment, which was deposited in bank and came back marked “no funds.” The creditor went at once to debtor’s place of business and found that he had sold out and left the city. When debtor’s application for a discharge came up for a hearing he excepted to the specifications of objections, and Judge Hough sustained the exception on the ground that the objections are not within the statutory list.

=Opinion No. 41.=

WHAT IS CONVEYANCE ON F. O. B. SHIPMENT?

Question—What is the meaning of f. o. b. Philadelphia, Pa.? What is the meaning of f. o. b. cars Philadelphia, Pa.? Is there any difference between the two above? If so, what is it?

2.—In selling goods f. o. b. New Orleans, and same are delivered alongside of steamer, does the shipper or consignee have to pay cost of handling charges in transferring from cars to steamer; that is, on goods shipped from New York to New Orleans.

Reply: (1) When goods are sold f. o. b. place of shipment the
meaning is that the seller, for the amount named in the
contract, will supply the goods and will bear the expense of
delivering them on board that conveyance which is to carry them
to their destination. The only difference between the two
phrases set down above is that the latter binds the seller to
deliver the goods on the cars at Philadelphia without any
expense to the buyer; while the former binds him to deliver them
at his own expense on some conveyance not yet specified, which
will carry them to the buyer.

(2) If goods are sold f. o. b. New Orleans, and they are to be
carried to the buyer at some other place in a steamer, all
expenses necessary to deliver them aboard the steamer are to be
borne by the seller. The conveyance on board which the goods are
to be delivered is that which is to take them to their
destination. If goods are to be carried to a buyer on a steamer
there is no reason why he should bind the seller to load them on
freight cars and make a tender of them there.

=Opinion No. 42.=

FAILURE TO DELIVER ONE INSTALLMENT CAUSE FOR CANCELLING ORDER.

Question—We purchased a quantity of lumber to be shipped in February, March and April in equal monthly shipments. The first shipment has not been made in February and we would like to know whether this entitles us legally to cancel the entire contract or only the February lot. In other words, does the breaking of a contract in one instance cancel the entire contract?

Reply: When goods are to be delivered in instalments the courts
of this State hold that the seller’s failure to deliver one
instalment justified the buyer in refusing to accept that tender
and also in rescinding so much of the contract as is yet
unfulfilled. It is one contract, not several, and the seller
cannot insist on a right to deliver only such instalments as he
finds it convenient to deliver and to have them accepted. The
buyer has not agreed to pay anything at all for part of the
goods. His contract is that he will pay a certain amount for all
of them. If he is not to have all of them, it is quite
conceivable, and is often a fact that any part less than all is
of very much less than proportionate value to him; it may have
practically no value to him at all. In any event, the seller has
agreed to do a certain service and the buyer has agreed to pay a
certain sum of money. The court will not infer from that an
obligation to pay half the money for half the service or to
accept half the service on any condition, if the other half is
to be, or has been, withheld.

=Opinion No. 43.=

Question—A customer places an order with the mill for November, December, January and February, proportionate shipments. The mills are unavoidably delayed in executing the order, but are finally able to make shipment of practically the whole order in February. The customer refuses to pay invoices for all the goods shipped in February, but claims dating on proportionate amounts in April, May and June. Is he justly or legally entitled to the dating and could he hold the goods subject to sellers’ order?

Reply: There seems to have been no clause in this contract
releasing the mill in case of such a delay as has occurred. In
the absence of such a clause the buyer was justified in refusing
to accept the goods when all of them were shipped in February.
He is entitled to hold the goods subject to the seller’s order,
or to return them. He cannot, however, force another contract
upon the seller than that which was actually made. The mill may
take back its goods or allow the buyer to accept them upon such
new terms as may be agreed upon. The buyer is justified in
receiving the original contract. This is upon the supposition
that the buyer has not during the past four months said or done
anything to lead the seller to suppose that he was satisfied
with the delay, that he would accept all of the goods as readily
in February as if shipment had been made in strict accordance
with the terms of sale. If he has done that he is estopped now
from making any objection to the tender.

=Opinion No. 44.=

AMOUNT OF CLAIM FOR DAMAGE AGAINST CARRIER.

Question—We made a shipment via two connecting railroads. When it reached a junction prior to delivery at destination, i. e., a point on the second road, was badly or entirely damaged in a wreck, and our customer asked that we immediately replace the shipment, which we did, and made another shipment of the same kind of lumber four days later, but in the interim between the time of the first shipment and the time we received the replacing order from the customer, the price advanced, and in our second invoice we naturally charged the customer for the advance. The claim department of the railroad now offers to settle with us at the original invoice price of the first shipment and declines to entertain a settlement at the advanced price. We claim that our position is entirely legal in the matter, and that we are entitled to the advanced price for the shipment that was lost, the same representing the value of the goods at the time the goods were destroyed.

Reply: Usually the measure of damages in a case of this kind is
based upon the value of the goods at the time and place and in
the condition in which they ought to have been delivered; the
freight is to be deducted from this, if it has not been prepaid,
and then interest is to be added from the day on which delivery
ought to have been made to the day of payment; there is to be
added also any expense to which the owner of the goods has been
put as a necessary and natural result of the loss. What the
carrier is bound to do is to put the owner of the goods as
nearly as possible in the same position he would have occupied
if the carrier had done his full duty in the first place. If the
carrier had done his duty the owner could have sold the goods at
the market price on the day of delivery at the place of
delivery, he would have had the interest on the money
thereafter, he would have escaped all incidental expenses
arising out of the loss, and he would have been called upon to
pay freight to the carrier, if it had not been paid in advance.
There is only one exception to the rule that is at all common.
If the goods have already been sold for delivery at destination,
at a price less than that which chances to prevail when the day
of delivery arrives, and if the carrier, at the time of
shipment, had actual or constructive knowledge of this fact,
then the owner can demand only the selling price with interest.
In that case, if the carrier had done his duty, the owner would
have obtained for his goods, not the market price, but only the
contract price. Whether the carrier had or had not notice of the
sale makes a difference in this respect; that a carrier is not
to be held for a larger loss than he had in contemplation when
the freight rate was fixed and the degree of care demanded of
him was settled. If he had no knowledge of the sale, actual or
constructive, he is bound for damages based upon the market
price, as in the other case. The fact that other goods at a
different price were sent to replace the lost shipment does not
enter into the matter.

=Opinion No. 46.=

RISK IN SENDING CHECK TO DRAWER’S BANK FOR CERTIFICATION.

Question—We received a check from one of our customers and sent it to the customer’s bank for certification. The bank failed before the end of the next day and our check was not paid. Can we not return it to the maker and demand the face of it from him?

Reply: If the drawer of the check in this case had sufficient
money on deposit to meet it our correspondents have no other
recourse except against the assets of the insolvent bank; the
depositor is discharged. The usual rule is that when a check is
delivered that is drawn upon a bank in the same place in which
the payee resides the drawer guarantees the solvency of the bank
during the remainder of the day on which the check was delivered
and the whole of the next day. The holder has this much time in
which to present the check and draw the money; if the bank fails
meanwhile the loss is upon the drawer of the check and the
holder takes the risk of failure after the second day. But this
rule does not apply when the holder of the check takes it to the
bank and has it certified before the end of the next day after
he receives it. Certification binds the bank and releases the
drawer. So far as the drawer and holder are concerned, the
effect is precisely the same as if the holder had drawn the
money and had then deposited it to his own credit in the same
bank.

=Opinion No. 45.=

A CONTRACT MAY BE CANCELLED WHEN ONE PARTY IS GUILTY OF BREACH.

Question—Lumber has been sold for delivery in installments running through a considerable period. Payments are to be made in installments also. The buyer has been very lax in this regard, however; he has not made a single payment strictly on time, and in some cases has delayed until the seller has been compelled to threaten suit. Is the seller bound to go on making deliveries to the end of the time named in the contract, getting his money whenever and however the tardy buyer sees fit to pay it?

Reply: If a seller agrees to deliver the goods at certain times,
and the buyer agrees to pay for them in installments at given
dates, each promise is a consideration for the other. If either
the buyer or the seller fails to do his full duty under the
contract he is in no position to demand that the other shall do
what he has agreed to do. In other words, as soon as either is
guilty of any breach of the contract the other may declare the
whole agreement at an end; he may refuse to do anything further
under the contract himself, and may demand damages of the person
who was guilty of the breach. If a buyer fails to meet any
payment promptly when it is due, the seller, if he chooses to do
so, may immediately rescind the contract and bring suit for the
unpaid installments and for damages. If he had not this
privilege he might be compelled to go on for months delivering
his goods to one who had already shown his unwillingness or
inability to make good his promise of payment.

=Opinion No. 47.=

LUMBER ON A CONSIGNEE’S SIDE-TRACK IS IN CUSTODY AND AT THE RISK OF THE
CONSIGNEE.

Question—When does the railway’s liability end and the consignee’s begin on lumber delivered in cars on the consignee’s side-tracks; i. e., if a carload was burned in forty-eight hours after being placed for the consignee, would the loss fall on the transportation company or the consignee?

Reply: When a carload of merchandise is delivered upon the
consignee’s own side-track and the consignee has notice, express
or implied, of that fact, then all liability of the railroad
company for the safety of the merchandise ceases at once. The
goods are still in the company’s cars, but that is not
sufficient to make the company liable, for the cars themselves
are in the custody of the consignee and upon his premises. The
goods have been delivered to the consignee, and that is the last
of the duties the carrier undertook to perform. A railroad
company cannot be expected, and in some cases would not be
allowed, to place its watchmen in private freight yards and to
extend over and through those yards its system of protection
against fire. When cars containing goods have been delivered
upon the consignee’s premises the goods themselves have been
delivered there. The carrier is no longer liable, either as
carrier or as warehouseman and the courts have so decided.

=Opinion No. 48.=

WHERE A SELLER REFUSES TO MAKE DELIVERIES, BUYER CAN PROTECT HIMSELF.

Question—A places a contract with B for future delivery of lumber beginning in October; B, for certain reasons, does not care to deliver this contract. A has the opportunity to buy the identical goods for the same delivery from competitors at the same price, after being notified by B that he does not care to deliver this contract. Does the fact that A has the opportunity to cover himself on the same conditions release B of damages arising from non-delivery of the contract, or can A wait until the time of delivery before buying goods in the open market against the contract of B which the latter refuses to deliver?

Reply: If B is under contract to deliver goods to A in October,
and if, before October, he notifies A that he does not intend to
fulfill his contract obligation, A may accept that statement as
final and protect himself at once. He may make other
arrangements for an October delivery and compel B to pay the
loss, if any, or he may sue at once for breach of contract. The
buyer is not bound to pursue this course, however. He may act
upon the supposition that, upon further consideration of the
matter, the seller will conclude to do his duty after all; and
so the buyer, A in this case, may wait till the time arrives for
the October delivery, and may then buy goods to replace those
that the seller ought to have delivered, holding the seller
liable for the loss, if any, or he may then sue for breach of
the contract. If this costs the seller more than the other plan
might have cost him, the fault is his own. He will not be heard
to complain because the buyer has taken it for granted that he
really would perform his contract obligation when the time
arrived, in spite of his previous statement that he did not
intend to do so.

=Opinion No. 49.=

ALL CONDITIONS OF A CONTRACT MUST ACTUALLY BE EMBODIED IN THE CONTRACT.

Question.—The following is a general form that is frequently printed across the top of the letter heads of manufacturers: “All agreements are contingent upon fires, strikes, delays of carriers, accident and other contingencies beyond our control.” What effect does this have on a contract when such letter heads are used when quoting prices and when accepting the order?