Chapter IV: Part 4

Reply: According to this statement the shipper undertook to
carry out an order and deliver a carload of lumber. According to
the admission 2,000 feet of the carload were contrary to the
terms of the contract. Under the circumstances a carload of
lumber has not been delivered and we doubt very much if you can
find a way to compel acceptance of a carload of lumber that is
admitted on the face of it as not being strictly according to
the terms of the contract.

=Opinion No. 76.=

NECESSITY OF FOREIGN CORPORATIONS FILING CERTIFICATES.

The Association has made some inquiry regarding the necessity of so-called foreign corporations filing certificates in States other than those under whose laws the corporation was organized. If any corporate members are interested and desire information along these lines we shall be pleased to render such assistance as we can.

In some States the requirements are strict, and recently some Western States, particularly Oklahoma, have enacted legislation of much importance to foreign corporations shipping into those States.

=Opinion No. 77.=

COURSE TO PURSUE WHEN LUMBER IS REFUSED ON ARRIVAL.

Question.—We took an order from a customer for a carload of lumber to be shipped not later than September 15th. The car was shipped within the specified time but did not reach destination as promptly as it should, and our customer claims that he has been damaged to such an extent that he refuses to take in the car, saying it arrived too late for his use. The lumber is exactly in accordance with the order and is a special worked car. We will be put to some expense in disposing of this elsewhere and will probably have to sell it at a lower price. What method should we pursue?

Reply: There are three courses:

First: The shipper may store the lumber for the buyer and sue
him for the invoice price.

Second: He may retain the property as his own and recover the
difference between the market price at the time and place of
delivery and the contract price.

Third: He may sell the lumber, acting as the agent for the
purchaser and recover the difference between the contract and
the price of resale.

This last course is usually considered best because it gives the
seller the use of the money realized on the resale. Of course in
reselling the lumber care must be taken to obtain the best
possible price, and in the event of the resale the seller is
entitled to recovery from the purchaser of all the costs which
he was obliged to lay out in bringing to pass a sale of the
property in question.

=Opinion No. 78.=

A CARRIER MUST STOP GOODS IN TRANSIT IF PROPERLY ORDERED TO DO SO.

Question.—A makes a shipment to a customer in another State and several days after he receives information that leads him to believe it prudent to hold up the shipment and have the goods reconsigned to himself. He immediately takes the matter up with the initial carriers with the request that they take immediate steps to stop the shipment in transit and have same reconsigned to himself, all charges to follow. In the event that the initial carrier fails to take prompt action and it develops that the goods are delivered after the initial carrier has been notified not to deliver them, thereby causing A the loss of the value of the shipment, cannot A hold the initial carrier responsible for the value of the shipment?

Reply: When goods are sold on credit and the buyer becomes
insolvent or gives proof of insolvency, before the goods are
delivered to him, it is the right of the seller to take them
back into his own possession and refuse delivery altogether;
this is because one who buys on credit is bound by an implied
contract that he will keep his credit good and be able to pay
for the goods when the due date arrives. When the carrier is
called upon to return the goods to the seller he must act at his
own peril. If he does return them and the buyer was not
insolvent, the carrier must answer to the buyer for his damages.
On the other hand, if the carrier fails to return the goods and
the seller can show that the buyer was insolvent the carrier
must respond to the seller for the value of the goods or for
such part of it as the seller finally loses. The seller, in the
case under consideration, must first establish the fact that he
had a right, within these rules, to stop the goods. Then if he
can show also that this might have been done except for
negligence or delay on the part of the initial carrier, he can
hold that carrier liable for his loss.

=Opinion No. 79.=

ACCORD AND SATISFACTION.

Frequently inquiries are sent us inquiring as to the advisability of accepting checks marked “In full settlement of account to date,” etc. The situation is not the same in all States but usually the questions are covered in the doctrine of accord and satisfaction explained as follows:

If an account between two parties be actively and openly in dispute and the debtor sends to his creditor a remittance for a specific sum and states that such sum is offered in full settlement, and if such sum be accepted by the creditor he is bound thereby and cannot thereafter recover anything on the account from his debtor. The mere sending of a remittance, however, for an amount less than the amount due, where there is no dispute between the parties, does not affect the right of the creditor to bring suit for the balance due even though it is stated in the letter accompanying the remittance that said remittance is in full settlement.

The question as to whether a dispute is open or active can usually be easily determined. If the seller and buyer have been in correspondence regarding a dispute, that determines its activity, and if after such correspondence a remittance is made marked “In full settlement,” etc., the acceptance is binding.

=Opinion No. 80.=

ACCEPTANCE IN NEW JERSEY MAY BE AFFECTED BY STATUTE.

Our attention has been called to a law passed by the New Jersey Legislature in 1907, from which the following is quoted:

“Where the seller delivers to the buyer the goods he contracted to sell mixed with goods of a different description not included in the contract, the buyer may accept the goods which are in accordance with the contract and reject the rest, or he may reject the whole.”

We are receiving inquiries as to the responsibility of a customer where he had used part of a shipment of lumber of one description, the customer claiming the statute above quoted permitted him to use such of the shipment as was up to grade and reject the balance. Commenting on the law above referred to where a shipment contains lumber under one description it would seem to be the law that if the consignor delivers to the consignee the goods contracted for of the same description included in the contract, the debtor, with his right of inspection must either reject or accept, and if the consignee does any act by which it could be inferred that he is exercising the right of ownership of any part of the merchandise so shipped and delivered, we believe he is liable for the entire amount of lumber shipped and received. He cannot take out what he wants of the order and reject the balance.

The New Jersey law covers mixed shipments, for instance, in a shipment of barn boards, siding and moulding, the buyer would have the right to accept either of these items without prejudicing his claim, or waiving his privilege of rejection on the other two, but where a straight car of barn boards is ordered the buyer is not privileged to use a portion of them and reject the balance as not being up to contract.

=Opinion No. 81.=

CONDITIONAL CLAUSES REGARDING TERMS ON LETTERHEADS, INVOICES, ETC.

It seems again necessary to call the attention of our members to the custom of printing a clause on the top of letter-heads used for quotation to the effect that agreements or contracts are contingent upon strikes, accident, other causes, etc. It frequently happens that this clause is so printed on the letter-head or quotation form as not to make it a part of the contract, and the following attorney’s opinion is pertinent:

When a man has a proposal to make to another in writing he begins, usually and naturally, with the name of the place from which he writes and the date. Then he makes his proposal and closes by signing his name. The paper upon which he writes may have printed at the top or somewhere in the margin the name and address of the firm; the telephone number and the number of the firm’s post office box; the cable address; a list of five or six cable codes used by the concern; names of the various articles in which it deals; facsimiles of some of its trade-marks; pictures of certain gold medals that have been awarded to its goods at fairs of one sort or another. Frequently there is much other matter. There may also be something to the effect that agreements are contingent upon strikes. Of course, the person to whom the proposition is addressed is not concerned with any of these things. What he has to read and consider is the matter found between the address and the signature, and nothing more. That is the reasonable interpretation of the matter, and, is, very naturally, the view that the courts have taken of it. In 153 Ill., 102, to quote only one case, the Supreme Court of Illinois decided that “the words ‘all sales subject to strikes and accidents,’ printed as part of the letter-head of a reply, do not form any part of the contract.” No court could very well reach any other conclusion, so far as we can ascertain, and no court has done so.

In the same manner a postscript on a letter or quotation blank is not an actual part of the contract unless it is signed.

Other members have also attempted to enforce terms printed on their invoices where such terms were not referred to in the original order or contract of sale. The following opinion will be helpful in such matters:

The question of the invoice may be settled with little difficulty. Nothing upon the invoice is binding upon the buyer, whether it is written or printed and whether it stands in the body of the document or in the margin. A contract is made by two persons, and it is binding only in so far as both have agreed to be bound by it. An invoice is made, after all the terms of the contract have been irrevocably fixed, and it is made by only one person. The seller would have things very much his own way if he could go off alone, after a contract had been made, and alter or amend or limit or explain it by his own act. He has no such power, of course, and he cannot put anything upon his invoice in writing or in print, that will bind the buyer.

=Opinion No. 82.=

INTERPRETATION OF “REASONABLE TIME,” “DUE NOTICE,” ETC.

Frequently our members ask what constitutes shipment within a reasonable time, or what is the meaning of “due notice,” etc.

The courts are always careful not to give any general definition of such words as “due,” “reasonable” and the like. What is due or reasonable notice in one case might not be so in another; and each case is made to stand on its own facts. “Due notice,” in one case or in any other, is such notice as, all of the circumstances and conditions being duly considered, would permit the person receiving the notice to do that which was required of him. Evidence is to be presented, on the one side, and on the other, to show whether due notice, within this definition, was or was not given. Due notice is sufficient notice, and that which is sufficient in one case may be too much or too little in another.

=Opinion No. 83.=

IF SHIPMENTS ARE NOT TENDERED IN TIME THE BUYER NEED NOT TAKE THEM.

Question.—In December, 1909, we placed an order for nine cars of lumber to be delivered in March, 1910. Part of the shipment was made in February and March, leaving about a third unshipped on the first of April. We wrote the sellers to cancel the order. They object to this cancellation, saying that the delay was caused by a breakdown of their mill which was unavoidable and say for this reason the order is in force, as they are ready to make delivery of the balance of the goods to-day, April 7th, one week after the contract date expired. Have we a legal right to cancel under these conditions?

Reply: The man who runs a mill is entitled to all the profit he
can make from it; but if there is an interruption of the running
it is he who must stand the loss. He cannot ask a customer to
wait for goods, at his own expense and inconvenience, until it
may be found practicable and advisable to start up the works
again. The buyers may refuse to accept the belated delivery, in
the case our correspondent puts, and may demand damages for the
sellers’ breach of contract. If a breakdown of the mill is to
excuse the seller the contract of the sale must contain an
explicit stipulation to that effect.

=Opinion No. 84.=

WHEN A BUYER ACCEPTS A SHIPMENT, A WRITTEN CONTRACT IS NOT NECESSARY.

Question.—A customer called at our yards and arranged to buy six cars of lumber, asking that one car be shipped at once. He took this car, but refuses to order the balance out as per agreement. He offers to pay for what he has already had, but he says we cannot hold him for any more because the contract was not in writing. Is he right?

Reply: This buyer can be held for the value of the six cars. A
written contract or memorandum is not necessary where part of
the goods have been delivered and accepted. There are three ways
in which a sale of goods for $50 or more may be made valid and
binding: (1) By a written contract or memorandum; (2) by
delivery and acceptance of part of the goods; (3) by payment of
part of the purchase price. Thus a buyer sometimes pays a small
part of the price at the time of the agreement, “to bind the
bargain,” as he says, and it has that effect.

=Opinion No. 86.=

IT IS TOO LATE TO CLAIM DAMAGE FOR DELAY IN SHIPMENT WHEN LUMBER IS
ACCEPTED.

Question.—We took an order from a customer for ten cars of lumber to be shipped one car every two weeks. The first three cars were shipped on time, but there was a lapse of four weeks before the fourth car got out and weather at the mill delayed our getting the balance out as per agreement, although we finally got off all the cars. When the delayed shipments began to arrive our customer complained of the delay, and said he would charge us back with any cost he had to allow his customer. We objected, but our customer said we agreed to time deliveries, and would hold us to same. He took in all the shipments, but now wants to charge us with a loss he claimed he allowed his customer.

Reply: If the lumber was offered to the buyer at a time later
than any date agreed upon at time of sale, the buyer could have
refused to accept it, and would have had a claim against the
seller for damages occasioned by the delay. On the other hand,
the buyer might accept the goods, notwithstanding the delay, if
he chose to do so. He had no option except one of these two,
accept the goods and pay for them, or reject them as not having
been sent in time to constitute a fulfillment of his order. He
could not accept the goods at any other than the contract price.
This is the situation in which the case would have stood if
there had been no correspondence between the ordering of the
goods and their shipment. It is barely possible that the
correspondence may contain some modification of the original
contract, introduced into it by mutual consent, which would give
the buyer the right he now claims. If the original contract was
allowed to stand as made then the buyer has mistaken his remedy
if he had any remedy at all. The goods were offered in
fulfillment of the contract. He could accept them as such, or
reject them. Having rejected them, it is possible that he would
have had a claim against the seller for failure to deliver the
goods in time. This much, however, is perfectly well settled.
The buyer had no right to the goods at all except in fulfillment
of his contract. If he accepts them, the contract is fulfilled
and he cannot turn about and demand damages because it is not
so. If he thinks the delivery is not a good one, because of
delay, let him refuse it and then say that the contract has not
been carried out. It has been or it has not been, and his
acceptance of the goods shows that it has been.

=Opinion No. 87.=

NOTICE TO AN AGENT IS NOTICE TO THE PRINCIPAL

Question.—A, a shipper in the South, ships to B, in New York, a carload of lumber at a price based on delivery f. o. b. New York City. The material is offered to B on a lighter at the agreed upon point of destination, and B, on inspecting it, comes to the conclusion that it is not what he ordered, and refuses to accept it, simply telling the railroad that the material is not what he ordered, and refuses to unload. B does not notify the shipper, A, and the latter knows nothing of B’s rejection or refusal to accept until about a month later, when he receives a notice from the railroad that B has rejected the material. A claims that B should have notified him immediately by mail or telegram that the material was not what he ordered, but B claims that he was not compelled to do so and that the fact that the railroad did not notify A until a month after was no concern of his. Is he right?

Reply: There is no rule of law known to us which would have
required the buyer to notify the seller of his determination not
to accept the goods in this case. If the buyer had taken the
goods from the carrier he would have been bound to notify the
seller of this subsequent rejection. If delivery had been made
at the shipping point instead of f. o. b. destination, so that
the carrier should have been agent of the buyer and not of the
seller, the buyer’s duty to give notice would have been the
same. As the case actually stands it is this: The seller himself
or his agent, which amounts to the same thing, tenders the goods
to the buyer and the buyer rejects them without having taken
them into his custody. The seller or his agent immediately knows
that they are rejected. How could notice add anything to that
knowledge? If it is the seller’s agent who knows, and if the
seller himself does not know, that is because the seller has not
given proper instructions to his agent or because the agent has
failed to follow them if they were given. In neither case is the
buyer to blame. He has notified the seller’s agent that the
goods are refused; that is all he can be required to do. If the
refusal is not justified the seller has his remedy, of course.
If it was justified the seller has sufficient notice of it. Our
correspondent says the seller complains because the buyer did
not notify him “immediately by mail or telegram that the
material was not what he ordered.” That is absurd in any case.
The seller knew as well as the buyer, and knew before the buyer
did whether the goods sent were such as the buyer had ordered or
not. Why should he be notified of a fact that he knew already.

=Opinion No. 88.=

ASSESSMENT OF FOREIGN CORPORATIONS.

Inquiries are frequently made at this office as to the amount of tax which a foreign corporation must pay in States where a certificate is issued to such foreign corporations, authorizing them to do business under the State statutes. In computing the assessment or tax the State auditor gets his information from the reports which ought to be filed annually. The amount of tax assessed is predicated upon the amount of capital actually employed within the State, and if no capital is employed, no tax can be legally levied.

=Opinion No. 89.=

A PRIVATE CUSTOM MAY BE ESTABLISHED TO SUPERSEDE A GENERAL CUSTOM.

It seems to be a generally accepted custom in the lumber trade that using a shipment of lumber, even though there be a dispute regarding the grade, constitutes an acceptance of the shipment as invoiced unless the shipper has authorized the purchaser to use a part or all of the lumber in dispute. Our Legal Department has received some claims for members on disputed shipments where, from an examination of the correspondence, it appeared the member had a valid claim for the full amount of the invoice. After negotiations with the buyers it developed that in past transactions allowances were made on several shipments where the grade was in dispute, after the lumber had been used. We have had occasion to go into such matters with our attorneys and the latter are of the opinion that where a sufficient number of adjustments have been made on such a basis, practically acquiescing in the buyers using a part of the lumber, would prejudice a claim on a subsequent shipment where the shipper attempted to take advantage of his right of recovery. Frequently disputed claims of this character are small and have to be tried before a local jury and our attorneys have stated that the custom of having made allowances in the past after lumber was used would have some bearing with a jury on a subsequent deal, and possibly be construed by the court as a private custom apart from the general trade custom.

=Opinion No. 90.=

AN ORDER MAY BE CANCELED ONLY WHEN BUYER BECOMES INSOLVENT.

Question.—A buyer places an order with a mill for five cars of lumber, deliveries to be one car a month. At the time of the purchase the buyer is in good financial standing and signed copies of the contract are exchanged between the buyer and seller. After three deliveries have been made information reaches the seller that the financial standing of the buyer has changed for the worse; that is, he has committed no act of bankruptcy, but a commercial agency has reduced his capital and credit rating. The seller requests the buyer to anticipate the payment of some of the previous shipments before he will agree to make further shipments. The buyer refuses to comply with this request and asks for the delivery of the balance. The seller thereupon makes no further deliveries, but when the bills for the goods delivered become due, demands payment. The buyer refuses on the ground that the seller has not carried out his part of the contract. On these facts please tell us what the law in this case would be.

Reply: One who has sold goods on credit is not justified in
refusing delivery simply because the buyer’s financial standing
changes for the worse between the time of sale and the time of
delivery. In the case here put, for example, there is nothing to
show that the buyer is not now amply able to pay for the goods,
or that the contract would have been declined by the seller if
the buyer’s rating at the time had been what it is now. The
seller is entitled to refuse delivery only if the buyer, before
delivery is made, commits any act of insolvency. He need not
become a bankrupt or make an assignment for creditors. He is
insolvent, within the meaning of this rule, if he fails to pay
any just and admittedly proper debt promptly upon its due date.
As long as he is paying his bills whenever they fall due the
seller has no ground upon which to declare that he is not
“keeping his credit good,” if the buyer in this case is not
solvent, as the word is here defined, the seller need not
continue the deliveries. If the buyer is solvent the seller is
not justified in his position. In that case the buyer need not
pay for the goods already delivered until the time named in the
contract for payment arrives, and he has a valid claim for
damages arising out of the seller’s failure to make the other
deliveries in strict accordance with the contract.

=Opinion No. 91.=

A BUYER HAS A CLAIM WHEN HE ACCEPTS A DRAFT ON INFERIOR LUMBER.

Question.—We bought a car of lumber through a broker. Terms were: Sight draft with bill of lading attached for three-fourths of the amount of the invoice, the balance to be paid on arrival and inspection. We accepted the draft on presentation and when the car arrived we instructed our truckmen to draw the lumber in. Upon examination we found that it was all more or less below grade. We wired shippers accordingly and asked for instructions. We also wrote them a letter to the above effect and told them that we could not use the lumber and that we would hold it for their instructions. Do we need to keep the shipment? Can we compel sellers to return us the amount of the draft and freight charges?

Reply: The buyers are not bound to accept any lumber not in
accordance with the order. They have a valid claim against the
sellers for the amount already paid towards the purchase of the
goods, for the amount expended for freight and for any other
useless expense to which the buyers were put as a result of the
sellers’ failure to do their contract duty. The buyers also have
a claim for damages, if any, caused by the breach of contract on
the part of the sellers. The latter were bound to supply lumber
regularly sold and accepted by the trade under the terms
covering the grade in question, and their failure so to do was
an actionable breach of contract.

=Opinion No. 92.=

CONTRACT OF SALE.

Delivery by Installments—Successive Recoveries by the Vendee Not Permissible.

When a party contracts to deliver goods by installments, for example—Several carloads of lumber to be shipped at different intervals but fails to deliver one or more of such installments, the vendee may repudiate the contract and sue for damages. If he brings the action prior to the time for the delivery of the last installments, he can only recover for such installments as are past due and such recovery bars him from afterwards bringing an action and recovering thereon for the remaining installments or deliveries.

=Opinion No. 93.=

DUTY OF VENDOR TO MINIMIZE LOSS WHEN VENDEE REFUSES TO ACCEPT GOODS.

It occasionally happens that a purchaser of a car of lumber refuses to accept same and leaves it at the mercy of the railroad company or common carrier. In this way demurrage piles up and other loss may arise and the shipper hesitating, for fear of compromising himself, refuses to do anything with the lumber on his part. This is generally a mistake because it is the duty of the shipper to make the loss, if any, as small as possible and it is always safe to first notify the vendee, who has refused to receive the goods that he, the shipper, will endeavor to dispose of them in the best possible manner and hold the vendee responsible for any loss or damage thereby. In this case he may have to have the goods sold elsewhere or returned to him, and it is always advisable to endeavor to have them inspected by two or three competent parties in order to establish the market value and to ascertain that the defects, if any, claimed by the vendee, do not exist.

=Opinion No. 94.=

ACCORD AND SATISFACTION.

If a buyer of lumber, disputing the quantity or quality, sends a check for an amount less than the invoice to the seller, does the seller in accepting the same preclude himself from recovering the balance of the account? This situation occurs, we believe, often in lumber circles and very frequently the remittance is accompanied by a letter or some notice written on the check to the effect that it is sent as a settlement in full and some go so far as to add that if accepted by the creditor it must be at his peril so far as the remainder of the invoice or account is concerned. The law on this point is generally similar to that of the State of New York wherein it is well settled that the acceptance or use of such a remittance does not stop or prevent the creditor from recovering the balance of the debt from its debtor unless there has been an honest dispute as to the amount of indebtedness or the existence of any indebtedness at all. This is what is termed an unliquidated account or claim and in such a case, when one tenders an amount to be accepted in full or rejected and the other accepts the remittance, it is a complete accord and satisfaction. The rule is different when the amount or debt is certain and there is only a dispute between the parties concerning questions of shortage, quality, etc. This is what is termed a liquidated claim and the acceptance of a remittance to be a full settlement does not preclude the creditor from using the remittance, crediting the same to the account of the debtor and suing for the balance.

=Opinion No. 95.=

CANCELLING AN ORDER BEFORE SHIPMENT—EFFECT OF SAME.

Many lumbermen take orders from their customers through traveling men or other representatives. Usually the orders are written down in a manifold book and often are signed by the buyer. The order is usually taken subject to confirmation by the house or home office. This acceptance or confirmation is customarily made by acknowledgement of the order in writing to the purchaser. The question in point is whether or not, if an agent has taken an order as above, can the purchaser cancel the order and his obligation to accept the lumber? In a case in this State a purchaser of merchandise placed the order with the traveling man and later wrote to the house cancelling the same, as he found he could buy similar goods for less money. The purchaser wrote before the seller had communicated any acceptance or intention to fill the order which had been given to the seller’s representative. Some correspondence ensued in which the seller refused to cancel the order and later shipped the goods to the purchaser, who refused to receive them. The action resulted in a judgment in favor of the seller, which was reversed on appeal, in which numerous authorities were cited by the Appellate Court holding substantially as follows—“An order or request in writing, addressed to a dealer or his agent to ship to the writer on or before a date named, goods of a kind specified, for which the writer agreed to pay a price named, does not constitute a contract until accepted or acted upon by the vendor and may be withdrawn at any time before acceptance.”

It is obvious that the result would be different were the vendor to have signified his acceptance of the order prior to the cancelling or withdrawal of same by the purchaser, as we would then have a valid contract, which could not be cancelled without mutual agreement.

In this connection it might be well to add that in business transacted by mail, the general rule is that the time of the mailing or depositing in the mail of a letter is the presumptive time of the communicating of the facts therein to the party to whom the letter is addressed, hence when an order is sent by mail, another letter withdrawing the order, if mailed prior to the mailing of the acceptance by the other party, is a complete cancellation of the order in the first letter. In other words, the law does not take into account the periods elapsing by reason of the means of communication but only the acts of the parties in so far as the time of such acts is considered to have taken place.

=Opinion No. 96.=

DISCHARGE IN BANKRUPTCY—WHAT WILL PREVENT.

Under the amendment to the National Bankruptcy Law as amended in February, 1903, the rules relating to discharge of bankrupts, are somewhat changed. Many parties are interested ofttimes in preventing the discharge of a bankrupt for no other reason than that they are creditors who believe that the bankrupt has not been honest in his dealings and irrespective of motives of personal enmity feel that the welfare of the business community is served by preventing the bankrupt from being discharged and re-entering into business. Probably the act that will prevent a discharge that most often appeals to the creditor is that the bankrupt obtained goods on a false statement in writing. This, if shown, will prevent the discharge, the law reading in this respect, as follows: “Obtained property on credit from any person upon materially false statement in writing made to such person for the purpose of obtaining such property on credit.” It is obvious that the party who urges this objection must be the one who has been injured thereby.

Other debts not dischargeable in bankruptcy are taxes levied by the United States, the State, county, district or municipality in which bankrupt resides, and others of no practical interest to merchants. In addition to the above are those debts which have not been duly scheduled by the bankrupt in the proceeding in time for proof and allowance, with the name of the creditor if known to the bankrupt, unless such creditor had notice or actual knowledge of the proceedings in bankruptcy; or were created by his fraud, embezzlement, misappropriation, or defalcation, while acting as an officer or in any fiduciary capacity.

=Opinion No. 97.=

SALES—OF AN INDEFINITE QUANTITY.

A purchaser of a quantity of merchandise ordered by letter two hundred to three hundred tons of a certain article to be delivered within the following six months as wanted. The vendor duly acknowledged receipt of the order and accepted same, stating that they would deliver a certain quantity in the immediate future and balance as ordered within the following six months. Thereafter, the vendor delivered a certain portion of the merchandise for which it was paid with the exception of one installment, which the vendee refused to pay for alleging that the vendor had refused to deliver further installments. The purchaser sued the vendor for damages for breach of contract in failing to deliver the balance of the contract. The Court held that by the terms of the order the vendor could not insist on the purchaser taking more than the two hundred tons but the purchaser on his part could insist within the six months period upon the vendor delivering the remaining hundred tons, it appearing that two hundred tons had been already delivered. In fact, it was an option which the vendee could enforce but not the vendor.

The above is a brief outline of an action decided in the Appellate Court in New York and applies as well to an executory sale of lumber, many similar orders being placed among lumbermen.

=Opinion No. 98.=

LIABILITY OF BANK FOR FAILURE TO GIVE NOTICE OF PROTEST TO ENDORSER UPON
NOTE RECEIVED FOR COLLECTION.

That it is the legal obligation of a bank, which receives a note for collection to use all diligence to give notice of its dishonor to all endorsers is set forth in a decision of the Appellate Division of the New York Supreme Court (Howard vs. Bank of Metropolis, 95 App. Div. 342).

One H., who was the owner of a promissory note made by one S., and indorsed by G., delivered the note to a bank for collection and left with it a card giving G.’s full name and address, stating that he wished the note carefully protested as he expected to hold the endorser, the maker not being responsible, and that he would not be in the city when the note fell due. The maker of the note having failed to pay it when due, the bank sent it to its Notary for protest, but failed to deliver to the Notary the card bearing the name and address of the endorser, and informed the Notary that the endorser’s address was unknown. The Notary made out two notices of protest, one directed to H. and the other to G. Both notices were placed in an envelope and sent to H., who did not receive them, being out of town.

The Court held the bank responsible and in rendering its opinion referred to a prior New York case entitled First National Bank vs. Fourth National Bank (77 N. Y. 320) and quoted “it is the duty of an agent who receives negotiable paper for collection, in case such paper is not paid, so to act as to secure and preserve the liability thereon of all the parties prior to his principal, and if he fails in this duty and thereby causes loss to his principal, he becomes liable for such loss.”

=Opinion No. 99.=

ACCOUNTS STATED.

The Settlement of Accounts and Striking of a Balance Between Parties—What It Consists Of.

Upon merchandise accounts which embrace many items or cover transactions running through a long period it is often wise to strike a balance or to bring about an agreement between the creditor and debtor as to the exact amount owing thereon. The value of such arrangement becomes of great moment when at a later date attempt is made to enforce collection of the account. It obviates the necessity proving various material matters such as the delivery of the various items charged to the debtor; that they were accepted by the debtor; that they were of the kind called for by the contract of sale; that there was a full number or count; that the agreed prices were as charged. The fixing of a balance upon a running account is legally known as the _stating of an account_ and an account so fixed is an “account stated.”

A running account becomes an “account stated” by agreement either express, or implied by acquiesence, between the parties, that a definite amount or sum is owing from one to the other. No particular form of words is essential and neither must it be in writing, although a written expression is of more ready proof and, therefore, preferable. An express admission, either verbally or by letter, of the correctness of an account constitutes an account stated.—(Vernon v. Simmons, 7 N. Y. Supp. 649.)

In the above case the debtor retained accounts received from his creditor without objection or replying and subsequently acknowledged orally the receipt of the letter containing them and promising to pay later on, and it was held that the creditor could sue upon an account stated. It is not necessary that the account should be signed by the parties to make it an account stated. It is enough that it has been examined and accepted by the party and this acceptance need not be expressed; it may be implied from circumstances such as keeping it without objection beyond a reasonable time. As to what is an unreasonable time depends on circumstances largely and it has been held that two months was sufficient, although generally a longer time would be more conclusive. This acquiesence, however, may be explained by the debtor, which would nullify the apparent acceptance, but without such satisfactory explanation the situation is prima facie against him. Where the indebtedness has been expressly denied, the retention of the account does not bind the debtor.—(Austin v. Wilson, 11 N. Y. Supp. 565.)

In bringing an action on an account stated if the plaintiff is defeated through failure to prove the agreement as to the amount or the fact that an “account was stated;” he would not be debarred from bringing another action to recover for the various items comprising the account.

=Opinion No. 101.=

ACCEPTANCE OF GOODS—WHEN SUFFICIENT TO BIND PURCHASER.

It is a daily occurrence in the lumber trade that a purchaser finds some objection to the quality or quantity of lumber shipped to him on order. Frequently in such case, without any communication with the shipper a purchaser feels warranted in using such portion of the lumber as suits him, relying on an assumed right to lay aside the balance for the account of the shipper, with the idea that he may reject it entirely or obtain some reduction in the price. The general rule laid down by the courts in cases of this sort is as follows: Where the vendee of goods, purchased without warranty, after full opportunity for an inspection, accepts them without objection when delivered, he cannot, in an action against him to recover the price defend upon the ground that they did not conform to the contract of sale.—(Smith vs. Coe, 170 N. Y. 162.)

If the purchaser, upon the receipt of the goods, makes objection to the quality, but, without the express permission of the seller, uses a portion, it is held that by so doing he tacitly waives his objection and his acts amount to an acceptance of the entire lot.—(Coplay Iron Co. vs. Pope, 108 N. Y. Appeals, 232.)

In the above case, which involved a transaction in pig iron, the purchaser complained of the shipment and upon being sued for the purchase price set up a claim for damages by reason of the alleged defective quality and it was held “where after discovery or opportunity to discover any defect in goods delivered under an executory contract of sale, the vendee neither returns or offers to return the property nor gives the vendor notice or opportunity to take it back, in the absence of a collateral warranty or agreement as to quality, he is conclusively presumed to have acquiesced and may not thereafter complain of the inferior quality.”

When a car constitutes but a portion of the order, which was in the nature of one contract for a number of cars, the purchaser cannot object to the quality and retain the initial car and decline to receive the balance of the shipment. The contract of sale being an indivisible one in law, the purchaser by his acceptance of the initial shipment and failure to return it, is conclusively presumed to have acquiesced in the quality of the lumber offered him and waived any objection to the remainder of the shipment order provided it is the same as the first car.

In the case of Weil vs. The Unique Electric Device Co., Reported in 39 Misc. (New York 1902), page 527, a vendor sought to recover the stipulated purchase price of certain merchandise sold to the defendant, consisting of some 3,000 electric batteries, of which 1,000 were delivered and paid for, but the purchaser refused to accept the balance on the ground that the quality was not according to the agreement. The court held that the contract of sale was an entire one and it was the duty of the purchaser to receive balance of the order, provided they were of similar quality to the lot already delivered. That when the purchaser received the first lot and found them unsatisfactory, it was its duty to rescind the sale and return, or offer to return the goods; and its failure so to do was an acquiesence on its part of the quality of the goods in question.

The above discussion leaves for further consideration the question when a purchaser though bound to take goods and chargeable with their full price, may hold the seller liable for damages for breach of express or implicit warranty.

=Opinion No. 102.=

CONTRACT OF SALE—STATING ESTIMATES OF MAXIMUM AND MINIMUM AMOUNT.

It is the custom of many merchants, with a view doubtless of securing the best possible terms and yet to leave a loophole, whereby they can take only such an amount as they desire, to give the vendor a general idea of their requirements.

In Heisel vs. Volkman, reported in Volume 55, New York Appellate Division, page 607, a dealer wrote to a manufacturer of certain kinds of merchandise asking for “prices for supplying our requirements,” stating “we estimate our yearly requirements at from five to ten million pieces. Are confident that they will not be less than the smaller amount and reasonably certain that they will come up to or exceed the larger one,” to which the manufacturer replied, “I would be willing to make a yearly contract with you from five to ten million pieces, etc.” The purchaser did not take the minimum amount of five million pieces during the period in question and the manufacturer sued to recover the purchase price of the difference, having, of course, done what was necessary in respect to making a tender of delivery. The court held that the purchaser was obligated to take and pay for at least five million pieces, even if his requirements for the year fell substantially short of that amount and that the seller in making his price had a right to rely upon the minimum amount stated by the buyer.

Attention is called to this for the reason that the same rule would apply to a transaction in lumber and because many of the trade are in the habit of making contracts upon similar conditions and referring in elastic terms to their probable requirements.

=Opinion No. 103.=

CERTIFICATION OF CHECK—RELEASES THE MAKER.

Attention is called to the fact that under the law of New York State the procuring of the certification of a check by the holder from the bank or banker upon which it is drawn is equivalent to the acceptance of a bill of exchange and releases the drawer.—(Meurer vs. Phœnix National Bank, 94 App. Div. (N. Y.) 331.)

=Opinion No. 104.=

SALES—STOPPAGE IN TRANSIT.

The right to stop a shipment in transit is based on the existence of a lien in favor of the seller, which continues until the goods have reached the actual physical possession of the buyer. So long as the goods are in the hands of a carrier the seller may, given the proper conditions, reclaim the goods. This is so even if the carrier is one designated or selected by the purchaser. A fraudulent sale of the goods by the purchaser to third parties will not defeat the right of stoppage, nor will seizure under attachment or execution issued against the purchaser provided the right is exercised before the transit is at an end.

=Opinion No. 105.=

FOREIGN CORPORATION LAWS.

Necessity of Filing Certificates, Etc., in West Virginia, Indiana, Tennessee, Mississippi, Kentucky, Ohio, Michigan, New York.

One of our members recently had an attorney examine the corporation laws of several States and give an opinion concerning the advisability of filing corporate certificates, securing so-called licenses, etc., in the various States wherever the member was making sales. The States referred to are West Virginia, Indiana, Tennessee, Mississippi, Kentucky, Ohio, Michigan and New York. This information may be helpful to other members, and a copy of the opinion follows:

WEST VIRGINIA.—Every corporation whose principal place of business is located out of the State must pay an annual license tax as follows: If the authorized capital is not more than $25,000, $20; not more than $100,000, $50; not more than $1,000,000, $50; an additional forty cents on each $1,000 in excess of $100,000. No other taxes are assessed unless it has personal or real estate in West Virginia. Such foreign corporations may be authorized to hold property and do business in the State by certificate of the Secretary of the State that they have filed with him a copy of their articles of association, which certificate with a copy of the charter must be filed with and the certificate recorded by, the Clerk of the County Court of such county in which their business is conducted. A foreign corporation obtaining the above mentioned certificate authorizing to hold property and do business in West Virginia has the powers, rights and privileges and is subject to the same regulations, restrictions and liabilities that are conferred by statutes of West Virginia on domestic corporations.

Every foreign corporation which shall do business in the State without having obtained such certificate and having it filed and recorded according to law shall be guilty of misdemeanor, and upon conviction shall be fined not less than $50, nor more than $1,000 for each month its failure so to comply shall continue.

INDIANA.—Every foreign corporation, except railroad and telegraph companies, built before March 15, 1901, and insurance companies must maintain a public business office in Indiana and must designate a representative in Indiana on whom service of process may be had. Such foreign corporations are subject to the liabilities, restrictions and duties imposed upon domestic corporations. They must before being permitted to do business in Indiana file in the office of the Secretary of State certified copy of its articles of incorporation, and a statement sworn to by the principal or agent in Indiana of the proportion of the capital stock of such corporation represented by its property located and business transacted in Indiana, and must pay in the office of the Secretary of State upon such proportion incorporation fees equal to those required of domestic corporations. The Secretary of State shall then issue a certificate authorizing such corporation to do business. Until this law is complied with, demands of a foreign corporation, whether arising out of contract or tort, cannot be enforced in the courts of Indiana, and such corporation is subject to a fine of not less than $1,000. Fee for filing articles of incorporation of a corporation with capital stock of $10,000 or under is $10, over $10,000, one-tenth of one per cent. upon authorized capital. No annual State tax on corporation as such.

TENNESSEE.—Foreign corporations must file in the office of the Secretary of State a copy of its charter and cause an abstract of same to be recorded in the office of the Register of each county in which such corporation purposes to carry on its business or to acquire and own property. Penalty for failure to do so shall subject the offender to a fine of not less than $100 nor more than $500. They must pay in the office of the Secretary of State a tax or license of $100 to exercise such privilege.

MISSISSIPPI.—Foreign corporations may sue and be sued and are liable to be proceeded against by attachment or otherwise, as individual non-residents are liable. The acts of their agents shall have the same force as the acts of agents of private persons within the scope of their power. They cannot recover on any contract made in the State or cause action originating therein which is in violation of laws or policies of States. No general statutes about taxation of foreign corporations. Subject governed in main by common rule as to taxes, but they are required to file with the Secretary of State certified copy of their charter for record, for which a graduated fee is fixed.

KENTUCKY.—If the corporation be organized under the laws of another State a board shall fix the value of the capital stock determined from the amount of the gross receipts of the corporation in Kentucky and elsewhere the proportion which the gross receipts in Kentucky bear to the entire gross receipts. The same proportion of the value of the entire capital stock, less the assessed value of tangible property in the State, shall be the correct value of the corporation franchise for taxation. Reports must be made and failure is a misdemeanor punishable by a fine of $1,000 and $50 for each day.