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Title: Lumber Legal Opinions
Author: Anonymous
Language: English
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LUMBER
LEGAL OPINIONS
[Illustration]
1910
PUBLISHED BY
NATIONAL WHOLESALE LUMBER DEALERS ASSOCIATION
66 BROADWAY, - NEW YORK
OFFICERS 1910–1911
President ROBERT W. HIGBIE
First Vice-President FRED R. BABCOCZ
Second Vice-President FRANKLIN E. PARKER
Treasurer FRED’K W. COLE
Secretary E. F. PERRY
BOARD OF TRUSTEES
Terms expire in 1911
LEWIS DILL Baltimore, Md.
C. H. PRESCOTT, Jr. Cleveland, O.
G. F. CRAIG Philadelphia, Pa.
A. L. STONE Cleveland, O.
W. W. KNIGHT Indianapolis, Ind.
W. E. LITCHFIELD Boston, Mass.
W. W. REILLEY Buffalo, N. Y.
Terms expire in 1912
R. D. BAKER Pittsburg, Pa.
G. C. EDWARDS Ottawa, Ont.
F. W. COLE New York City
R. H. DOWNMAN New Orleans, La.
F. E. PARKER Saginaw, Mich.
R. W. HIGBIE New York City
HORTON CORWIN, Jr. Edenton, N. C.
Terms expire in 1913
F. R. BABCOCK Pittsburg, Pa.
N. H. WALCOTT Providence, R. I.
T. J. MOFFETT Cincinnati, O.
F. S. UNDERHILL Philadelphia, Pa.
L. L. BARTH Chicago, Ill.
J. V. STIMSON Huntingburg, Ind.
W. A. GILCHRIST Memphis, Tenn.
PREFACE
In presenting “Lumber Legal Opinions” to our members and to some of our
friends whom we particularly desire to become members of our
Association, not only for the good their co-operation will do us, but
for their own benefit as well, we desire to say that this compilation is
based upon the practical working out of specific cases for our members
during the past few years. An examination will, we think, prove the work
to be practical and dependable, and generally to express good common
sense, and consequently good law. You will, we hope, find it worth your
careful study and guidance. In some instances the opinions may be
affected by court decisions of the respective States; some of these
decisions are specifically referred to, but, as a rule, it has been our
aim to secure opinions covering a general situation.
This gives us an opportunity to remind you of the special work which
this Association is constantly undertaking for its members and
especially that it is worthy of your earnest co-operation and special
effort to bring in new members, so that the influence of the
organization may be enlarged and made in every way worthy of its name.
* * * * *
[Sidenote: Purpose of the Association]
The Charter defines the Purpose of the Association to be “to protect the
members against unbusinesslike methods in the wholesale and retail
trade; to foster such trade and commerce; to reform abuses in such trade
or business; to secure freedom from unjust or unlawful exactions; to
diffuse accurate information among its members as to the standing of
merchants and others by and with whom said trade or business is
conducted, and as to other matters to produce uniformity and certainty
in the customs and usages of said trade and of those engaged therein; to
settle differences between its members, and to promote a more large and
friendly intercourse between them.”
[Sidenote: Bureau of Information or Credit Department]
The Charter and By-Laws of the Association defines the duty of this
Bureau to be as follows: “To diffuse accurate information as to the
standing of merchants.” There are in the records of this Bureau at the
present time 28,000 reports showing the financial condition of an equal
number of buyers of lumber. In addition to these financial statements
all of these buyers of lumber are rated by the Bureau as to their credit
standing as well. It is the unanimous opinion of our members who use
this Bureau that the reports are superior to those of any other
mercantile agency or other source of information. The Bureau makes a
specialty of securing reports only on lumber buyers or users, and it
therefore furnishes more complete and reliable reports as to moral and
financial standing and business methods than any other agency. A system
is also a part of the Bureau whereby important information is sent to
each subscriber without the subscriber making special request therefor;
in other words, it is the aim of the Bureau to keep its subscribers
fully and promptly advised of all important business changes.
[Sidenote: Legal and Collection Department]
In connection with and as a part of the Bureau of Information there has
been established a legal and collection department. This department
handles commercial claims, past due accounts, etc., sent to it with
promptness and at a minimum cost when compared with the usual methods
employed by attorneys and the courts; also has on file much information,
including legal opinions and court decisions which are furnished upon
request without charge.
[Sidenote: Railroad and Transportation Bureau]
The Railroad and Transportation Committee through its Bureau is in a
position to be of the greatest service to our members, because of the
intimate knowledge which our Traffic Manager has of all matters that
have to do with our relations with the railroads.
Information and assistance covering a wide range of transportation
subjects is being constantly rendered. There are also on file complete
lumber tariffs which are kept up to date, and this enables our members
to obtain correct information as to rates, routing, etc. Upon request,
shipments are traced and prompt deliveries effected. The above services
are furnished to our members entirely free of charge.
This Bureau also investigates and collects claims for loss or damage in
transit, overcharges in rates, weight, mis-routing, etc. For these
services a nominal charge is made based on the actual amount collected.
The manager of this Bureau has had years of experience and possesses
intimate knowledge of the methods pursued by the various claim
departments of the railroads and he is therefore in a position promptly
to collect any just claims and frequently has been able to collect
claims which our members have been unable to collect themselves. In this
connection it may be well to state that all shippers of lumber are
entitled to free allowances in weight of five hundred pounds for car
stakes used on flat and gondola cars, and this Bureau has secured many
refunds on past shipments for members who have not been allowed this
free weight. The Bureau is also in a position to compel the railroads
not now making the allowances, to do so.
[Sidenote: Arbitration]
The By-Laws define the duties of the Arbitration Committee to be “to
settle differences between our members.” The services of this committee
are at the disposal of our members at the actual cost of the expenses of
three selected men from among the members of this committee who
thoroughly understand the customs of the lumber trade. Any member who
avails himself of the services of this committee consequently obtains at
an actual cost the services of a jury of experts, with the result that
differences are settled fairly, equitably and promptly and without any
annoyances and undue expenses.
[Sidenote: Legislation Committee]
“To reform abuses” and “to secure freedom from unjust or unlawful
exactions” is jointly the work of several Committees. For freedom from
unjust and burdensome laws and for laws granting us security and
reasonable opportunity in the conduct of our business, we look to the
Legislation Committee, whose duty it is to scrutinize acts affecting the
trade, to oppose those which oppress, and to favor and forward those
which assist.
[Sidenote: Forestry and Conservation]
“To foster such trade and commerce” by perpetuating the raw material
which forms the basis of all lumber business, we have our Forestry
Committee. The people of this country, with its tremendous sources of
timber supply, must be educated to grasp the possibility of a future
famine, and needful legislation must be enacted to reduce the problem of
reforestation to a practical business proposition before the scarcity of
timber shall enhance the values of stumpage to the point of placing
trees as a crop in the same class with grain and cotton. The Advisory
Forestry Committee links our Association with the country at large in
this movement.
[Sidenote: Fire and Marine Insurance]
The services performed by the members of these committees in past years
have most fully justified their existence in the reduction which has
been obtained not only for our members, but for all lumbermen both in
fire insuring companies as well as in marine insuring companies. These
savings amount annually to a sum which is estimated at more than one
million dollars in premiums.
[Sidenote: Hardwood Inspection]
Our Association stands for not only a national but an international set
of rules to govern the grading and inspection of hardwood lumber. In all
lines of business nothing is more desirable and necessary than
uniformity. It is the aim of the Hardwood Inspection Committee to secure
the adoption of a reasonable and universal set of rules for the
inspection of hardwood lumber.
[Sidenote: Management]
The Active Management of the Association is in the hands of a board of
twenty-one trustees, operating with the Officers and the Executive
Committee, through the Secretary and his assistants.
[Sidenote: Headquarters]
The offices of the Association are at 66 Broadway, New York, centrally
located in the business section of the city. Members have the
unrestricted privilege of using these offices as the headquarters for
receiving mail and telegrams, and for business conferences.
[Sidenote: Membership]
The four hundred Lumbermen who are members are ready and willing to
testify to the advantages to be derived from connection with this
Association. Coming from 28 States and Canada, they are qualified by
numbers and ability to cope with all questions affecting the manufacture
and wholesale distribution of lumber.
Membership in our Association is restricted to legitimate manufacturers
of lumber and wholesale dealers in lumber who are in good standing in
the trade.
There is no initiation fee. The annual dues are $50.00, with a charge of
$50.00 additional to those who desire the benefits of the Bureau of
Information. The Collection Department and Transportation Bureau are
open to all members without charge other than the very moderate fees
scheduled for actual work performed.
[Illustration]
These opinions and abstracts were compiled, and arranged under the
supervision of the LEGAL DEPARTMENT, BUREAU OF INFORMATION, W. W.
Schupner, Department Manager.
INDEX
The cross index is arranged so as to bring out the several points in
each opinion or extract. The number at the left, following each opinion
or extract, indicates the number of such opinion or extract referred to
in the index. The first number after the subject gives the number of the
opinion and the second the page number, for example: after “acceptance
of checks sent in full settlement” appear 18–21, denoting that the
information can be obtained from opinion 18 on page 21. The other
figures after the same subject indicate the other opinions and pages
where similar information is given.
* * * * *
=First number gives number of opinion; second number gives page number.=
_Agent._
Authority of salesman to bind principal, 35–36
Carrier as agent—see common carriers
License in New York City, 3–17
May receive notice for principal, 88–74
See also certificate to do business.
_Acceptance of_
checks sent in full settlement, 18–21, 20–28, 51–49, 66–60, 80–68,
95–77
delayed shipments avoids claim for delay, 87–73
draft does not avoid claim for inferior lumber, 92–76
less than invoice price, 109–89
offer constitutes valid contract, 72–65, 96–79
order through salesman, when it is complete, 96–78
shipment affected by statute (New Jersey), 81–69
shipment affected by warranty, 62–57, 102–83, 108–89
shipment unless promptly rejected, 62–57
shipment validates verbal contract, 65–59, 86–72
shipment when it is all or partially used, 34–36, 90–75, 102–83
shipment when it is retained, 6–17, 31–48
shipment when it is used may depend on a private custom, 90–75
Acceptance necessary to make valid contract, 72–65, 96–79
Accord and satisfaction, 18–21, 20–28, 51–49, 66–60, 80–68, 95–78
Accounting by executor, 23–26
Accounts stated—what does it consist of and what advantage, 101–82
Assignment for creditors voided by bankruptcy, 14–22
Assignment of account by foreign corporation (New York), 63–58
_Banking._
Certification of check releases maker, 45–43, 104–85
Liability of bank for failure to give notice of protest to endorser
of note, 99–81
Protest not always necessary, 52–50
_Bankruptcy._
Avoids assignment of creditors, 14–22
Discharge not prevented by giving bad check, 41–39
Discharge, what will prevent it, 97–79
_Bill of Lading._
in name of buyer may not release seller, 53–51
may be required for surrender of shipment, 29–34
stipulation as to delivery, 11–20
stipulation as to notice of arrival, 25–31
to order retains title, 70–62
Breach of contract—see contracts.
Buyer’s position when lumber offered is not as per contract, 37–33
Cancelling contract when one party guilty of breach, 5–14, 47–44,
67–61, 71–64
Cancelling order by purchaser before accepted by seller’s home office,
96–79
Cancelling order for non-delivery or delay, 43–41, 84–71
Carload of lumber must all be in accordance with order to fulfill
contract, 76–66
Certification of check binds bank and releases maker, 45–43, 104–85
Certificate for individual to do business in New Jersey or New York,
10–22
_Certificate to do Business._
Indiana, 106–86
Kentucky, 106–87
Maryland, 55–52
Michigan, 106–88
Mississippi, 106–87
New Jersey, 17–18, 64–58
New York, 17–19, 26–32, 63–57, 106–88
Ohio, 106–87
Pennsylvania, 19–24
Tennessee, 106–87
West Virginia, 106–86
Change in original order no excuse for refusing shipment, 1–13
Checks sent in full settlement, etc., 18–21, 20–28, 51–49, 66–60,
80–68, 95–77
_Common Carriers._
Agent for buyer, 33–77, 53–51, 70–62, 88–74
Agent for seller, 22–28, 37–33, 70–62, 88–74
Can insist upon acceptance of delayed delivery, 13–47, 56–53
Claim for loss or damage, 13–47, 46–42, 56–53, 59–54, 73–65
Liability as warehouseman, 8–16, 48–44
Liability for delay, 13–47
Liability for delivery without surrender of Bill of Lading, 29–34,
58–54
May return rejected shipment to consignor, 58–54
Must deliver shipment as directed, 11–20, 61–56
Not always compelled to notify consignor that shipment is rejected by
consignee, 61–56
Not bound to act as intermediary, 58–54, 61–56
Notice to, when loading complete, 8–15
Obligation to send notice of arrival, 8–16, 25–31, 28–33, 48–44
Should pay value at destination for lumber lost, 59–55, 73–65
Stopping shipments in transit, 27–29, 79–68, 105–85
When can charge demurrage, 25–31
When liability begins and ends, 8–16, 48–44
Conditional clauses on letter-heads, orders, etc., 24–27, 110–48,
50–46, 82–70
Confirmation of order by home office, 65–59, 96–78
Confirmation as to time of shipment, 36–35
_Contract._
Acceptance of offer constitutes valid contract, 72–65, 96–79
Against liability for delay in shipping, 24–26
Breach for failure to make good delivery, 6–18, 37–33
Breach for non-delivery, 22–28, 30–30, 39–38, 43–41, 84–71
Conditions must all be part of contract, 24–27, 50–46, 110–48, 82–70
Incomplete when only part of car as per order, 76–66
May be cancelled when one party guilty of breach, 5–14, 47–44, 67–61,
71–64
May be void if a mistake in it is obvious, 72–65
Should be in writing and signed, 65–59
Valid by acceptance of offer, 72–65, 96–79
Conveyance in F. O. B. shipment, 42–40
Corporations (foreign) see certificate to do business.
Credit cannot be demanded when business transferred, 40–39
Credit must be kept good, 30–30, 39–38, 47–44, 67–60, 71–64, 79–68,
91–75
Custom—private and general—as to using a shipment, 90–74
Damage claim against carrier, amount of claim, 13–47, 46–42, 56–53,
59–54, 73–65
Damage in transit, who responsible, 8–15, 54–51
Delay beyond shipper’s control, 50–46, 84–71
Delay by carrier, liability for, 13–47
Delay in shipment, liability for, 24–27, 50–46, 84–71
Delayed delivery, acceptance of, avoids claims for damages, 87–73
Delayed delivery by carrier should be accepted, 13–47, 56–53
Delayed delivery need not be accepted as fulfilling contract, 84–71,
87–73
_Delivery._
Delayed, liability for, 24–27, 50–46, 84–71
In installments, 5–14, 43–41, 44–41, 47–44, 86–72, 102–83
Liability for non-delivery, 22–28, 30–30, 39–38, 43–41, 49–45, 91–75
May be stopped when buyer becomes insolvent, 27–29, 71–64, 79–68
May not affect original purchaser, 38–35
Delivery must be complete, 31–48, 76–66
Delivery must be made by carriers as directed, 11–20, 61–56
Not in accordance with contract, 37–33
On consignee’s side-track, 48–45
What constitutes, on F. O. B. sales, 8–15, 37–33, 42–40, 53–50, 70–62
Demand that shipment be returned cannot be enforced, 6–18
Demurrage—see common carriers.
Discount must be in accordance with terms, 18–21, 57–53, 69–61
Draft (accepted) with Bill of Lading does not avoid claim for inferior
lumber, 92–76
Draft with Bill of Lading to order, 70–62
Due notice, what does it mean, etc., 83–71
Endorser on note entitled to notice of protest, 99–81
Executor, time for accounting, 23–26
False statement may prevent discharge in bankruptcy, 97–79
Fire delaying shipment, seller’s liability, 50–46
F. O. B.—what constitutes delivery, 8–15, 37–33, 42–40, 31–48, 53–50,
70–62
Foreign corporations—see certificates to do business.
Freight as a consideration for passing title, 9–23, 53–50, 54–51
Freight rate advance, 110–48
Fraud, statute of, 65–59
Indefinite quantity, order for, 98–80, 103–84
Indiana—necessity of foreign corporations filing certificates, 106–86
Insolvents, shipments to, can be stopped, 27–29, 71–64, 79–68
Insolvency, cause for declining further shipments, 67–61, 71–63, 91–75
Inspection on arrival—privilege of, 62–57, 92–76, 102–83
_Installment Shipments._
Acceptance of one installment validates verbal contract, 86–72
Contract for delivery, not separable, 5–14, 93–77, 102–83,
(see Minnesota case), 107–88
Cancelling for non-payment, 47–44, 71–64
Cancelling order for non-delivery, 43–41
Delay in shipment, 44–41
Using one installment may constitute waiver of objection to
subsequent installments, 102–83
Invoice terms not effective unless part of contract, 82–70
Judgment in one state ground for suit in another, 60–55
Kentucky, necessity of foreign corporations filing certificate, 106–87
Loss for non-delivery of lumber, 49–45
Loss for reselling shipment refused on arrival—method of recovery,
1–13, 5–14, 78–67, 94–77
Lost shipment, amount of claim against carrier, 59–55, 73–65
Maryland, necessity of foreign corporations filing certificate, 55–52
Maximum and minimum amounts in contract of sale, 98–80, 103–84
Measure of claim against carrier, 13–47, 46–42, 56–53, 59–54, 73–65
Michigan, necessity of foreign corporations filing certificate, 106–88
Mississippi, necessity of foreign corporations filing certificate,
106–87
Mistake must be obvious to avoid contract, 72–65
New Jersey—certificate for individual dealing under assumed name, 10–22
New Jersey lien law, 21–32
New Jersey—necessity of foreign corporations filing certificate, 17–18,
64–58
New Jersey statute affects acceptance, 81–69
New York City license for agent, 3–17
New York State certificate for individual dealing under assumed name,
10–22
New York—necessity of foreign corporations filing certificate, 17–19,
26–32, 63–57, 106–88
Non-suit for foreign corporations—see certificates to do business.
_Notice._
As to non-delivery, 49–45
Of arrival by carrier, 8–16, 25–31, 28–33, 48–44
To agent is notice to principal, 88–74
To carrier when loading complete, 8–15
To carrier as to measure of damages, 46–43
What constitutes reasonable notice, 83–71
Offer accepted constitutes valid contract, 72–65, 96–79
Offer may be withdrawn until accepted, 96–79
Ohio—necessity of foreign corporations filing certificate, 106–87
Order, confirmation by home office, 65–59, 96–78
Partial payment validates verbal contract, 65–59, 86–72
Partial shipments—see installment shipments.
Pennsylvania—necessity of foreign corporations filing certificate,
19–24
Postscripts on letters or contracts should be signed, 82–70
Principal bound by notice to agent, 88–74
Principal not always bound by salesman’s act, 35–36
Prompt rejection of shipment necessary to avoid acceptance, 62–57
Protest not always necessary, 52–50
Quantity, order for indefinite quantity, 98–80, 103–84
Railroads—see common carriers.
Reasonable time for shipment, unless otherwise agreed, 36–35
Reasonable time, what does it mean, 13–47, 62–57, 83–71
Refusal of seller to make deliveries, 49–45
Refusing shipment on arrival, 1–13, 5–14, 56–52, 78–67, 94–77
Refusing to send shipping instructions for lumber ordered, 12–20
Rejection of shipment by notice to railroad, 88–74
Rejected shipment may be returned to consignor by carrier, 58–54
Rejection of shipment, carrier not always compelled to notify
consignor, 61–56
Rejection of shipment must be prompt, 62–57
Reselling lumber refused on arrival, 1–13, 5–14, 78–67, 94–77
Retaining lumber shipped constitutes acceptance, 6–17, 34–36
Sales in installments—see installment shipments.
Sales on credit, 30–30, 39–38, 40–39, 47–44, 67–60, 71–64, 79–68, 91–75
Sales of indefinite quantity, 98–80, 103–84
Salesman’s order, when accepted, 96–79
Salesman’s power to bind principal, 35–36
Selling lumber refused on arrival, 1–13, 5–14, 78–67, 94–77
Shipping instructions for lumber ordered, refusal to send, 12–20
Stated accounts, advantage of, 101–82
Statement of assets, etc., if false, may prevent discharge in
bankruptcy, 97–79
Statute of fraud, 65–59
Stopping shipment in transit, 27–29, 71–64, 79–68, 105–85
Storing lumber refused on arrival, 1–13, 5–14, 78–67
Strike delaying shipment, seller’s liability, 50–46
Suit can be instituted in one state on judgment obtained in another
state, 60–55
Suit by foreign corporation may not be maintained because of failure to
file certificate—see certificate to do business.
Taxes of foreign corporations, 89–74.
See also certificate to do business.
Tender in fulfillment of contract should be accepted or rejected as a
whole, 31–48
Tennessee—necessity of foreign corporations filing certificate, 106–87
Terms of sale must be part of contract, 82–70.
See also conditional clauses on letter-heads, etc.
Terms of sale should stipulate discount, 18–21, 57–53, 69–61
Time of shipment, confirmation of, 36–35
Time of shipment, reasonable unless otherwise agreed upon, 36–35
Title, during transit (carrier’s assumption), 61–56
Title, not affected by freight payment, 9–23, 53–50, 54–51
Title, when it passes, 8–16, 22–28, 31–48, 48–45, 53–50, 54–51, 70–62
Title, transfer after purchase holds original buyer, 38–35
Using lumber shipped constitutes acceptance, 34–36, 90–75, 102–83
Verbal contract, when valid, 65–59, 86–72
Warehouseman, carriers’ liability as, 8–16, 48–44
Warranty may survive acceptance, 62–57, 102–83, 108–89
West Virginia—necessity of foreign corporations filing certificate,
106–86
CHOICE OF REMEDIES WHEN LUMBER IS REFUSED ON ARRIVAL.
Recently a member took an order from a dealer in Pennsylvania for a car
of lumber, and after order had been forwarded to the mill, the buyer
requested that a change be made in a certain size included in the order,
which our member advised would be made if shipment had not already gone
forward from the mill. It developed, however, that shipment had been
made and that it was too late to alter any part of the original order.
Upon arrival the buyer refused to accept the lumber on the ground that
it was not as ordered.
In connection with this case we have the following opinion from an
experienced attorney:
Seller has the choice of one of three things, viz.: First, he
may store or retain the property for the vendee and sue him for
the entire price. Second, he may sell the property, acting as
the agent for this purpose of the vendee, and recover the
difference between the contract price and the price of resale.
Third, he may keep the property as his own and recover the
difference between the market price at the time and place of
delivery and the contract price. Usually, the best course to
pursue would be to elect the second remedy, to wit: that of
acting as agent for buyer and dispose of the carload of lumber
and recover the difference between the contract price and the
price of resale. By proceeding in this manner, they may have the
use of the price realized from the sale, and they have done all
that good faith required to the end that any loss sustained be
reduced to a minimum. Of course, the seller on the resale must
dispose of the goods in good faith and the best mode calculated
to produce their value, whether it be public auction or by
broker, or any other mode that can or could be easily adopted.
=Opinion No. 1.=
A metropolitan dealer writes:
We took an order in writing from a party for 25,000 feet of lumber,
5,000 feet to be delivered the latter part of May, June, July, August,
and until all should be taken. Buyer accepted the delivery of the
shipments until June, when he refused the shipment, writing us a letter,
as trade was dull, to please not ship any more goods on account of order
until he notified us. We immediately wrote him that we should insist on
his living up to the terms of the contract. We had our truckman make
note of the fact that he tendered the goods at their factory and that
they refused to receive them. Now, can we sue and collect for these
goods, and in the future if they refuse to receive them after tendering
them can we sue? If we should instruct our truckman to leave these goods
on the sidewalk in front of their place of business, could we sue,
claiming this was a proper delivery and collect for same?
Reply: When goods are to be delivered in a number of
instalments, as in this case, the buyer’s refusal to accept
delivery of any one instalment is a breach of the whole
contract; the seller may declare the contract at an end, from
that moment, and may sue and recover any damage that the breach
of contract may have caused him. The seller has the choice of
three remedies. He may keep the goods as his own and sue for the
damages; he may hold the goods as agent of the buyer, informing
the buyer that they will be delivered to him upon his demand,
and sue for the contract price of the goods; or he may sell the
goods, for account of the buyer, giving the latter prior notice
of the time and place of sale and then hold the buyer for any
deficiency. A delivery of the goods upon the sidewalk in front
of the buyer’s place of business would be of no advantage to the
seller and it might make him liable for that part of the goods
if the buyer neglected to take charge of them. The seller cannot
sue for the price of each instalment, when it has been tendered
and refused. This would be to put the buyer to the expense of
defending a number of suits, all arising out of one contract,
and this the law does not sanction. Though it calls for delivery
at different times, the contract is one and not several, and it
may be made the basis of only one action. Suit may be brought as
soon as there is a breach of it, it is true, but that suit must
be for all the loss arising by reason of the buyer’s
unjustifiable act, not simply for the value of the single
instalment tendered and refused. When any suit is brought the
court will assume that it is for all the loss arising out of the
contract and further suits upon the same cause of action will be
barred.
=Opinion No. 5.=
INTERPRETATION OF “F. O. B.” SHIPPING POINT OR DESTINATION.
As there seem to be many opinions on the question of “ownership in
transit,” or delivery of lumber F. O. B., and as the association has
received numerous inquiries from members covering various phases of the
subject, the question has been submitted by the association to Mr.
Walter W. Ross, General Counsel to the Car Stake and Equipment Complaint
Executive Committee, and an experienced railroad attorney, for opinion.
While it must be conceded that such an opinion can cover only a specific
case, it will probably be of value to many of our members when the
question of ownership in transit arises, and if followed, if adopted as
a practical solution, will help to bring about a better understanding
between shipper and buyer, always keeping in mind however, that the laws
differ in various States.
His opinion is as follows:
If A sells lumber to B and the contract of sale provides that A
shall deliver the lumber free on board (F. O. B.) cars at a
certain point, the title to the lumber remains vested in A, the
seller, until he has delivered the lumber at the point agreed
upon to the buyer or his agent the carrier.
If the lumber is damaged while in the possession of the carrier
in transit to the point of agreed delivery, the question of the
loss is between the seller A and the carrier. If the lumber is
damaged after delivery at the point agreed upon, but while in
possession of the carrier the question of loss is between the
buyer and the carrier.
The question arises what constitutes delivery f. o. b. In the
case of shipment of lumber by rail it is customary for the
shipper to load the lumber properly on the car. It has been held
by some of the courts that it is not necessary for the shipper
having completed the loading to give formal notice of delivery
to the carrier in order to place the consignment in the
possession of the carrier—(but it is safer to notify the carrier
of such fact thereby eliminating a possible controversy). If the
sale is f. o. b. point of shipment the delivery by the seller to
the carrier is delivery to the buyer and from that time the
carrier until it has performed its contract of transportation is
the agent of the buyer. This principle of law is subject to the
exceptions arising under the law of stoppage in transit, as for
instance if the buyer becomes insolvent after the shipment has
been made—but before arrival at destination.
It has been held that the liability of the carrier begins as
soon as the consignment has been placed in its possession, even
though the bill of lading has not been issued.
The question also arises when does the liability of carrier as
such terminate by delivery to the consignee.
The general rule is that when the carrier has placed the car of
lumber on the track which is the usual and customary place for
the consignee to unload and consignee has had reasonable
opportunity to unload, then its liability as carrier terminates
and it is liable only as a warehouseman while the consignment
remains on such track, which means that the carrier is required
to exercise only the degree of care which an ordinarily prudent
person would exercise to protect his property from loss or
destruction. In some states the statutes provide, or the courts
hold, that the carrier having placed the car in such position
for unloading by the consignee, it is then the duty of the
carrier to send due notice of that fact to the consignee; and
until such notice and reasonable opportunity has been given, the
carrier’s liability as such continues. In other states the
carriers are not required either by statute or rule of the
courts to give such notice of arrival of consignments, it being
held to be the duty of the consignee to keep himself informed as
to the time of arrival of his freight. This rule is gradually
being superseded in most states by the more reasonable rule that
it is the duty of the carrier to send due notice to consignee of
arrival of freight.
=Opinion No. 8.=
BUYING AND SELLING AGENT NEEDS NO LICENSE IN NEW YORK CITY.
Very often out of town members who contemplate opening an office in New
York City, inquire as to whether it is necessary to obtain a license in
order that their agent may legally represent them. The following appears
to cover the ground:
Question from Baltimore, Md.—I am acting here as a buying and selling
agent for a lumber company outside of the State, they supplying me with
the money with which to buy the lumber to ship to them on their orders,
and I crediting them with the proceeds of the sales of lumber shipped to
me to sell for their account, my compensation being a commission on the
sales and purchases. Under these conditions I do not pay a license here
in Baltimore, but as I expect shortly to move the office to New York, I
will thank you to let me know if I would require a license to conduct
this business in that city, and if so, where should I apply for same?
Reply: No license is required in New York City in order to carry
on such a business as our correspondent describes. One who
simply buys and sells here, as agent, need not make a report or
pay a fee to any public officer. But if at any time he carries
on a general mercantile business, as agent, he must register and
pay a fee. The statute is as follows: “Any person now carrying
on or conducting a general mercantile or manufacturing business
within this State, or hereafter commencing such business at or
in a fixed location as agent or manager for another or others,
shall—at the commencement of such business, file a sworn
statement, verified by such agent and principal or principals,
in the county clerk’s office of the county within which said
business is carried on, stating the nature of the business and
the full name and residence of such principal or principals.”
The fee is $1.00, and failure to file the statement is a
misdemeanor.
=Opinion No. 3.=
RETAINING LUMBER SHIPPED CONSTITUTES ACCEPTANCE.
The acceptance of lumber, where the grade is disputed, is the subject of
the following correspondence:
Question.—We recently shipped a car of lumber to a dealer, who claims
that same is not up to the grade bought. We have asked him to return
shipment and guaranteed to replace same with material that was
absolutely right. He refuses to do so, and states that he will not
return it until he receives lumber to replace the lot he refused to
accept. We have sold this car to another party, who asks for delivery.
We believe that the original purchaser is making an unjust claim. Can we
demand that the lumber be shipped back to us, as the party has refused
to accept same and has not paid for it? In case he refuses to return it
are we under any obligation to make a second delivery?
Reply: The purchaser in a case of this kind has no right to any
material that previously belonged to the seller except under the
contract which he has with the seller. When the seller sends the
purchaser any lumber and the purchaser keeps it, he keeps it
either wrongfully or else as being in compliance with his
contract. But the courts will not allow any man to claim, for
his own advantage, that he is a wrong-doer when there is a
possible and reasonable explanation of his act which makes it
lawful. For this reason, among others, a buyer of lumber when
there has been no warranty of quality, who retains the lumber
sent to him, and refuses to return it, is always held to retain
it as being perfectly satisfactory and in compliance with the
contract. Any complaint he may make about the delivery is of no
importance; it is his act that counts. The courts will insist
upon taking the most charitable view of his conduct, whatever he
may say, and the most charitable view is that he is doing right,
and not wrong, and is keeping the lumber because it is a good
delivery under the contract. Our correspondents can demand that
the lumber be returned if they choose to do so, but they cannot
enforce the demand. If the buyer does return the lumber, in
answer to such a demand, he will have a claim against the
sellers for another delivery, and a valid one under the
contract, or for a breach of the contract in failing to make a
good delivery in the first place. If no such demand is made, or
if it is made and not complied with, the buyer can be compelled
to pay the contract price of the goods on the theory that his
holding them is an acceptance under the contract. It is idle for
him to say that he does not accept them; keeping them is
acceptance. No second delivery need be made unless the first
delivery is promptly and properly refused and returned.
=Opinion No. 6.=
OBTAINING CERTIFICATES PERMITTING FOREIGN CORPORATIONS TO DO BUSINESS
AND MAINTAIN AN ACTION IN NEW YORK OR NEW JERSEY.
Almost every State in the Union, and especially the States of New York,
New Jersey, Pennsylvania, Massachusetts, Connecticut, etc., require
foreign corporations, that is, corporations formed under the laws of
other States, to procure a license or certificate to do business within
such State, and in default thereof penalties or fines are imposed.
In considering the necessity of such license the first question is to
ascertain whether the corporation is transacting its business in a
manner which could be interpreted as “doing business” in its legal
sense, and this means generally filling all orders obtained in that
State when more than two or three incidental orders have been obtained
or the maintaining of a place of business in such State. The
difficulties in obtaining the certificates are not great but the details
are technical and the expense ranges from $10 upwards, depending upon
the laws under which the company is incorporated, there being
retaliatory laws in some States. The average expense is about $25, and
the certificates are generally good for an indefinite period; the only
annual requirements being a formal report which does not involve the
giving of the details of the corporation’s business and there is no
annual taxation unless the corporation has both property and is doing
business within such State.
In many cases where valid claims exist in favor of a corporation of
another State against a New York debtor, a serious obstacle arises where
the foreign corporation has not obtained a certificate to do business in
this State, and, therefore, cannot maintain the action. By the statutes
as last amended this prohibition covers also any one to whom such
foreign corporation has assigned the claim for collection. The
provisions of the New York corporation law in this matter are easily
complied with. There has to be a sworn copy of the charter of such
foreign corporation and the designation of some person on whom process
can be served.
The objection to complying with the statute in this respect is the
possible liability to taxation after the corporation gets its name on
the State Register. All that is taxable in New York State is the amount
of capital used in the State, and this would be so small as to be
unimportant provided, of course, that the proper returns to the tax
departments at Albany and New York are made out each year. This, we
understand can be done in ordinary cases, at a charge of $10, for the
two reports, one to Albany and one to New York, and this sum is a very
small tax to pay for what must be the advantages of selling lumber and
maintaining the legal rights connected with such sales in New York
State.
=Opinion No. 17.=
A CARRIER IS BOUND TO DELIVER LUMBER AS DIRECTED.
Question.—My shipper consigns me a car of lumber and marks the bill of
lading “via P. R. R. delivery.” If this car arrives by the C. R. R. of
N. J., can I be compelled to accept same from them, or does my original
contract entitle me to insist on P. R. R. delivery?
Reply: One of the important and imperative duties of a carrier
is to deliver the lumber as he is directed to deliver it. A
direction to deliver it to a specified connecting carrier or
delivery concern cannot be fulfilled by delivering it to
another, any more than a direction to deliver it to a certain
consignee can be carried out by delivery to another individual.
If the carrier makes a wrong delivery, as here described, he is
guilty of conversion. The consignee is not bound to accept the
lumber from the connecting carrier to whom it has been wrongly
delivered. He may sue the original carrier for the value of the
lumber as soon as he learns that a different delivery from that
directed by the bill of lading has been made.
=Opinion No. 11.=
IF A BUYER REFUSES TO TAKE LUMBER ORDERED THE SELLER HAS A CHOICE OF
REMEDIES.
Question.—Some time in March last we received an order for two cars of
32–inch lath. A few days after the order came to hand we received a
letter from our customer requesting us to defer shipment on account of
the threatened strike in the coal regions, which request was complied
with. The difficulties between the miners and operators have of course
been adjusted and operations were resumed some time ago, but our
customer has so far failed to furnish shipping directions for the lath,
which we had cut especially for his order and piled on our docks ready
for shipment at the time his request was received to hold the order.
Would we not be justified in loading this stock up and putting cars in
transit in accordance with the original order and insisting upon
acceptance of same upon arrival?
Reply: This buyer has not, in our opinion, lost his right to
select the route by which the goods shall be shipped to him.
There is no question that his delay in giving such instructions
has been unusually great, but the sellers on their part have
given no indication of an objection to such delay. It is clearly
their right now to demand that he send shipping instructions
immediately and to inform him that they will send the goods by a
route of their own selection if he does not name a route by
return mail; then, if the buyer does not reply, or if he refuses
to issue shipping instructions, or undertakes to repudiate the
contract, the sellers will have a choice of three remedies: They
may ship the goods to him by any suitable carrier and compel him
to pay for them; they may inform him that the goods are held
subject to his order, to be shipped in whatever manner and at
whatever time he may select, and then compel him to pay for
them, or they may name a time and place at which the goods will
be sold at auction for his account, giving him sufficient
opportunity to be present at the sale, and may then sell them at
such time and place, holding him liable for the necessary
expenses of advertisement and sale and for any amount, by which
the selling price may be less than the contract price.
=Opinion No. 12.=
UNDER CERTAIN CONDITIONS THE ACCEPTANCE OF PART OF A DEBT DOES NOT
RELEASE THE REMAINDER.
Question.—One of our customers recently sent us a check for less than
the amount of his bill, saying in his letter that he was remitting the
full amount due us. If he had taken advantage of the regular discount on
his last purchase (which he did not do) the amount now due us would have
been within a few dollars of the size of the check, but even then the
check would not represent the exact amount due to us. He does not say in
so many words that he is claiming a discount, just sends the check and
writes, “enclosed please find amount of my bill to date.” Something of
this kind happens rather frequently, and we would like you to advise us
whether we must forego using that check until we can write and
straighten out the matter with him. More is due to us than he has paid
us, and it seems a hardship that we should be kept out of even this part
of our claim during the week or month which it may take to have a full
understanding with our customer.
Reply: The creditor, in a case of this kind, is justified in
cashing the check and still demanding the amount yet due; this
amount he can recover by suit if it is not paid voluntarily. The
buyer, it seems, was not entitled to a discount, and he has not
made a specific claim to any. Being indebted to a certain amount
he simply sends a check for part of that amount. He does not say
that he claims a discount. If this check for less than the full
amount due had been accompanied by a demand that it be either
accepted as payment in full, or else returned, a different
question might have arisen; but even then the check might safely
have been cashed under the facts of this case. This case is
simply that of a man who owes $100 and who sends his creditor a
smaller amount. The proper course for the creditor is to accept
what is sent as a payment upon account and still maintain his
claim for what is yet due.
=Opinion No. 18.=
BANKRUPTCY AVOIDS AN ASSIGNMENT FOR CREDITORS.
Question.—We made a sale to a firm who became embarrassed and offered a
compromise to their creditors. We accepted the settlement offered, 25
per cent. cash and 25 per cent. by note at one year. The note given us
was not paid and after some delay the concern now goes into bankruptcy.
Please inform us whether our claim in the bankruptcy proceedings would
be the note only or the full amount due under the original sale?
Reply: The compromise in this case, in so far as it has not been
carried out, will probably be set aside and all the bankrupt’s
estate be held liable to his creditors under the bankruptcy
proceedings. It has been held that “an adjudication of
bankruptcy at the instance of the bankrupt’s creditors on the
ground of a general assignment, avoids such assignment and
subjects the property assigned to the jurisdiction of the
bankruptcy court to be administered under the Bankruptcy Act
which the creditors have invoked.”
Opinion No 14.
AN INDIVIDUAL MAY TRANSACT BUSINESS UNDER A CORPORATE TITLE IN NEW
JERSEY.
Frequently the question arises regarding a person’s legal right to start
business under a corporate title; for instance, as “Can John Smith
conduct business as the Pine Lumber Company,” etc.
Question from New Jersey.—A person wishes to start a lumber business in
New Jersey. Can he adopt a style such as “The Crescent Lumber Company”
without being incorporated, the manager being the sole proprietor? Is
there anything necessary to be done in such a case beyond hanging out
his sign at his place of business?
Reply: In New York no person is now allowed to establish a
business under any name, corporate or individual, except his own
name, until he has first placed on record in the county clerk’s
office, in the county in which the business is to be carried on,
a statement of the facts. So far as we can find, however, there
is no similar statute in New Jersey. It is a comparatively
recent law in this State and there are not many other States
that have adopted it. The public cannot be misled to its
detriment by such a method of doing business as our
correspondent proposes, and there is no common law rule against
it. If any creditor supposes that the business is being carried
on by a corporation he will not be harmed by the mistake,
because the liability of an individual owner, or of a firm, is
greater than that of the stockholders of a corporation. A
creditor who learns that his business belongs to an individual,
instead of a corporation, will be benefited by the knowledge,
not damaged. If there should be a statute just enacted requiring
registration, the county clerk will know of it.
=Opinion No. 10.=
WHETHER FREIGHT IS PREPAID OR ALLOWED DOES NOT AFFECT TITLE TO LUMBER.
Question.—A dealer in Buffalo sells a car of lumber to a dealer in
Baltimore with the understanding that freight is to be allowed from
Buffalo to Baltimore. Please state whether there is any distinction as
to the ownership of the lumber in transit, whether the Buffalo dealer
prepays the freight in Buffalo or allows the Baltimore dealer to deduct
the amount of freight in settlement. If the freight is prepaid in
Buffalo at the time of shipment, and the lumber be lost in transit prior
to delivery, is the ownership of the lumber vested with the Buffalo or
the Baltimore dealer?
Reply: If lumber is sold with an understanding that the seller
is to pay the freight, it makes no difference at all, as to
ownership during transit, whether freight is prepaid and
included in the price, or whether it is deducted from the price
and left for the buyer to pay. A seller is not bound to carry
the lumber to its destination and deliver it there unless he has
expressly agreed to do so. This is true whether the seller pays
the freight or not; in either case a valid delivery,
transferring risk and title, may be made, if the seller so
chooses, at the beginning of the transportation unless the
seller has agreed to deliver the goods elsewhere.
=Opinion No. 9.=
OBTAINING CERTIFICATES PERMITTING FOREIGN CORPORATIONS TO DO BUSINESS IN
PENNSYLVANIA.
A recent attorney’s opinion contained some valuable information
regarding the filing of certificates in New York State, permitting
foreign corporations to transact business in that State and maintain an
action. We have been asked for information regarding the requirements of
the Commonwealth of Pennsylvania in this matter and our attorney at
Philadelphia, William S. Furst, Stephen Girard Building, has forwarded
the following opinion.
Herewith follows an opinion embodying the essential points in re
foreign corporations doing business in the State of Pennsylvania.
The Act of Assembly approved April 22, 1874, provides that no foreign
corporation (this includes corporations created by other States) shall
do any business in this Commonwealth until such corporation shall have
established an office and appointed an agent for the transaction of its
business therein, and it shall not be lawful for any such corporation
to do any business in this Commonwealth until it shall have filed in
the office of the Secretary of the Commonwealth a statement under seal
of such corporation, and signed by the President or Secretary thereof,
showing the title and object of said corporation and the name of its
authorized agent, with a penalty attached thereto for violation, that a
person shall be guilty of a misdemeanor, etc.
The words “doing business” do not include a sale in a foreign State,
although the goods are delivered in this State, or taking orders, or
making sales by salesmen through agents going into Pennsylvania from
another for that purpose.
In short, a foreign corporation engaged in strictly interstate
commerce, may advertise its goods, send agents to solicit orders, take
orders, make contracts of sale respecting the same, and ship them to
customers in Pennsylvania, without violating the act, and may sue to
recover the price of any merchandise without filing the statement
required by the act, although the foreign corporation in question has
no office or place of business in Pennsylvania and no part of its
capital invested here.
A foreign corporation, which has not complied with the Act above
stated, but has an office or place of business in Pennsylvania, or any
of its capital invested within the State, cannot enforce contract
rights in the courts of Pennsylvania.
It has been recently decided by the Supreme Court of the State of
Pennsylvania (the court of last resort) that a foreign corporation
which invests most of its capital in the State of Pennsylvania for a
period of six months while constructing a railway, employs large
numbers of men, but does not file a statement in the office of the
Secretary of the Commonwealth, as required by the provisions of the Act
until two months after completion of the work, cannot recover for labor
and materials furnished in doing such work.
With respect to the taxes imposed upon foreign corporations doing
business in the State of Pennsylvania, the Act of May 8th, 1901,
provides that all foreign corporations shall pay to the State Treasurer
for the use of the Commonwealth a bonus of one-third of one per centum
upon the amount of their capital actually employed or to be employed
wholly within the State, and a like bonus upon each subsequent increase
of capital so employed. This is not an annual tax. It has been defined
to be the price paid the Commonwealth for the privilege conferred on
such corporation by its charter. It is therefore in no sense a tax, and
the payment thereof does not relieve any corporation from any tax to
which it is otherwise subject.
Respecting the taxation of foreign corporations, they are taxable like
domestic corporations on so much of their capital stock as is invested
within the Commonwealth under the provisions of the Act of Assembly
approved June 8th, 1898. The tax is imposed annually at the rate of
five mills upon each dollar of the actual value of the whole capital
stock of all kinds invested or represented by capital invested within
the State.
The tax is settled by the accounting officers upon the basis of a
report required to be made by all companies subject to the tax, and
particularly upon the appraisement of the value of the stock contained
in such report. The report is filed between the first and fifteenth of
November in each year.
Foreign corporations are also obliged to file a bonus report annually,
from which should appear whether there has been any increase in the
amount of the capital actually invested within the State, so that the
proper bonus charges may be made upon any such increase as above
stated.
=Opinion No. 19.=
PAYMENT OF CLAIMS BY AN EXECUTOR—TIME FOR FINAL ACCOUNTING.
Occasionally the question arises as to what length of time an executor
has to close an estate, and the following, particularly the second
section, may be helpful:
Question—Can an executor pay a bill of $10 or less, or what is the
largest amount he can pay, without having the claim verified before a
notary, according to law?
2.—Within what time do the laws require that an executor’s accounts
shall be made up and ready for final settlement?
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?
Reply: Any provision that is intending to form part of a
contract ought to be introduced into it in express terms or else
referred to so that there can be no mistake regarding it. In the
particular case under consideration the clause should be
incorporated in the contract or acceptance, or the contract
should state that the sale is made subject to the terms and
conditions printed across the top of the paper. Either one of
these would be a simple, easy procedure and would remove all
doubt. A contract usually begins with the name of the place and
a date, or with the names of the parties; and it ends with one
or more signatures. Both parties are bound by all that lies
within these limits and by everything beyond that is referred to
as forming part of the agreement; but neither party is, as a
rule, expected to look anywhere else—even around the margins of
the same paper—to ascertain his rights and liabilities. It may
be possible, in some cases, to make a provision printed on the
margin of the paper containing the contract part of the contract
itself, but there is always more or less doubt upon this point,
and no doubt should be left where it is so easy to make the
meaning plain. If the marginal printing is to be useful at all
it will be mainly in connection with a statement that the
contract was made subject to a certain usage of the business, or
a certain custom of that particular house, and that this custom
was well known to the buyer; as proof of this fact the words
across the top of the paper would be useful.
=Opinion No. 50.=
A CARRIER IS LIABLE FOR ANY LOSS CAUSED BY HIS DELAY IN DELIVERING
GOODS.
Question.—Inform us what recourse we would have against a railroad for a
shipment of lumber from Buffalo to New York, which has already been on
the road eighteen days, as shown by the shipping documents, and has not
arrived yet. In the meantime the market dropped some 10 per cent. in
price. This lumber was bought f. o. b. Buffalo.
Reply: A carrier is bound, not only to deliver the lumber
entrusted to him for carriage, but to deliver it with reasonable
promptness. The courts recognize the fact that promptness of
delivery has an importance second only to the fact of delivery
itself. What is to be held as constituting reasonably prompt
delivery is to be decided in accordance with nature of the goods
and all the circumstances of the particular case; it is such
delivery as carriers of the kind in question, carriers by rail
or vessel, as the case may be, ordinarily make in handling goods
of the same kind as those in question. When the time arrives for
delivery to be made, under this rule, and the goods are not
delivered the consignee is entitled to sue for their value at
destination on the day on which delivery ought to have been
made. If the carrier is able to deliver the goods, and offers to
do so, at any time before he has been required to pay for them
as goods lost, the consignee cannot refuse to accept them and
still recover their full value. He is bound to accept the goods
whenever they are tendered, no matter how great the delay may
have been; but in such a case he still has a valid claim for any
loss he may have sustained as a result of the delay. His damages
are at least as great as that amount by which the market value
of the goods on the day of delivery is below their market value
on the day on which delivery ought to have been made; to this is
to be added any other loss or expense brought upon him as a
direct result of the carrier’s delay.
=Opinion No. 13.=
THERE IS NO REMEDY AFTER ACCEPTING LUMBER.
Question.—I purchased some lumber from a party in New York State at a
given figure f. o. b. shipping point, and had it forwarded by the
railroad company according to my instructions. Upon arrival my customer
reported to me a shortage of several hundred feet, of which I in turn
notified the party from whom I bought. He stated that he hardly thought
such a shortage was possible and asked me to retally the lumber. I
communicated with my customer, who told me that the shortage reported
was correct, and that he had used up the lumber as he was in need of the
lumber, although I requested him to hold it intact. My customer in
settling with me deducted for the full amount of the shortage, whereas
the party who sold to me refuses to accept settlement on this basis,
offering me an affidavit from his shipper that the quantity alleged to
have been shipped by him was correct. Am I compelled according to the
New York court rulings to remunerate the party who sold to me as per his
invoice? He claims that the lumber ceased to belong to him when he
placed it at the railway company’s depot subject to my instructions. For
this reason he demands full payment. I am in a position to furnish an
affidavit from the party to whom I sold the lumber to the effect that
the shortage actually occurred at destination, although the lumber was
received in good condition.
Reply: This lumber was sold f. o. b. shipping point and it is
true, as the seller says, that title passed to the buyer at that
point. This fact, however, does not excuse the seller for
delivering short count or tally, if he made such delivery. He
undertook to deliver a certain quantity of goods at the shipping
point, and his contract obligation was not fulfilled unless he
delivered that quantity. It does not appear, however, that the
contract was such as to allow the buyer to accept less than the
quantity sold at a pro rata price. As the contract is described
to us, it was a sale of a definite quantity for a stipulated
price, with no other provision. That being the case, the buyer,
when tender was made to him had no choice other than to accept
the tender as satisfactory, or else to reject it and claim
damages for breach of contract. He did accept the goods and he
used them. It is too late now for him to say that the tender was
in any respect unsatisfactory. The buyer might have rejected the
goods on account of short tally, and then he could either have
claimed damages for breach of contract, as we have suggested, or
he could have communicated with the seller, offering to take the
shipment at less than the contract price—could have made a new
contract, in short. He did neither. He accepted the goods. He
will not be heard now to say that they were, in any respect, not
such goods as the contract called for. Our correspondent can be
compelled to pay for these goods the full contract price, and
the person to whom he sold them can be compelled to do the same.
=Opinion No. 31.=
PROPOSED FREIGHT RATE ADVANCE.
In view of the agitation regarding the proposed advance in freight rates
it is suggested that our members protect themselves as fully as possible
in making quotations. It is believed advisable to use a clause either
printed or stamped on the letter-head or quotation stating substantially
the following:
“All quotations made and orders accepted are based on present
freight rates.”
Where this clause is used it should be printed or stamped in such a way
that it becomes a part of the quotation or correspondence. Stamping the
clause on the margin of a letter-head is considered inadvisable.
=Opinion No. 110.=
ACCEPTANCE OF AN AMOUNT OFFERED AS “PAYMENT IN FULL” MAY OR MAY NOT
CANCEL THE DEBT.
Question—A customer sends me a check for a certain amount and inserts
the following on the face of his check: “In full to June 1.” Does my
indorsement give my receipt in full to this date or not? Can I indorse
his check and write him a letter advising him that I am using the check
only to apply on the account?
Reply: Suppose A owes B a certain sum of money and there is no
doubt or dispute as to the amount actually due. Then if A pays
to B less than the amount, in cash or by check, saying at the
time, “this I tender as payment in full,” B may keep the money
or cash the check without losing the right he previously had to
demand what was still due and unpaid. No man, without the
consent of his creditor, can discharge the whole of his debt by
paying part of it, if the amount is liquidated and certain.
Suppose, however, that there has been no agreement as to the
amount due or that there is an honest and well-founded dispute
concerning the matter. Then when the debtor sends any reasonable
amount, with a statement that it is tendered and is to be
accepted, if at all, as payment in full, that is his estimate of
the sum due. The creditor cannot accept the tender without
accepting the estimate; if he does accept the tender the amount
due is thereby agreed upon and fully paid. If the creditor is
not willing to accept the tender as payment in full he must
return it. Then an agreement may be reached as to the amount
actually due, or if the two cannot agree the matter may be left
to the courts. The debtor has this privilege, in a case of this
kind, because it would be unfair to him to allow the creditor to
keep what the debtor honestly believed to be the whole sum due,
and still allow him to sue for more, when, if he had brought his
suit in the first place it is possible he might not have been
able to recover even as much as the debtor has already paid him.
=Opinion No. 51.=
PROTEST IS NOT NECESSARY TO HOLD PARTIES PRIMARILY LIABLE.
Question—Is it necessary, or is it in any way helpful to have a note or
an accepted draft protested, regard being had only to the maker of the
note or the acceptor of the draft?
Reply: The object of a protest is to inform a person who is
secondarily liable upon a bill or note that the person primarily
liable has been properly called upon and has refused to pay the
amount. There could be no object in conveying formal information
of this kind to the parties primarily liable, because they know
what the facts are, they know, that is, that demand has been
duly made of them and that they have failed to comply with it.
Accordingly it is held that protest and notice are not necessary
to charge the maker of a promissory note or the acceptor of a
bill of exchange. We believe this to be the sound rule in all
cases.
=Opinion No. 52.=
F. O. B. SHIPMENTS.
Question.—Please advise us, what the position of a shipper is who takes
an order for a full carload of material at a price including freight to
destination, but where the shipper takes out a bill of lading in the
name of the buyer. The shipper claims he simply guarantees freight to
destination, and having the bill of lading issued in the name of the
buyer places the risk of loss or damage in transit on the buyer.
Reply: A buyer of goods takes title to them wherever they may be
at the time of the sale unless the contract provides otherwise
or unless the seller by some act of his own reserves the title
to himself during transportation. A mere agreement on the part
of the seller to pay the freight is not sufficient to rebut the
presumption that title was to pass on delivery to the carrier.
When goods are sold f. o. b. destination the seller undertakes
to carry them to their destination and there deliver them. They
are his goods, and the risk is his, until he has tendered
delivery at that place; this is true because the buyer cannot be
compelled to accept a tender made at any other place; but a mere
agreement that, for a given price, the seller will furnish the
goods and pay freight upon to a given place, does not make him
liable for their delivery in that place. If he was bound to
deliver them at destination the contract would say nothing about
freight; an obligation on the seller’s part to deliver the goods
at destination is, in itself, an obligation to pay freight upon
them or to carry them himself, and it is not for the buyer to
choose which he shall do. If the agreement to pay freight did
place the risk on the seller during transportation he could not
escape that obligation by his own act in taking out a bill of
lading in a particular form. If he was at liberty, under the
contract, to deliver the goods at the shipping point, however,
he could increase his obligation by his own act, and taking the
bill of lading to his own order would, if not otherwise
explained be sufficient for this purpose. In this case the bill
of lading was taken in the name of the buyer, and that is
consistent with the seller’s claim that a valid delivery could
be and was made at the shipping point and the carrier was an
agent of the buyer.
=Opinion No. 53.=
PAYMENT OF FREIGHT NOT ALWAYS TRANSFER OF TITLE.
Question.—Please advise us if in selling lumber freight paid to
destination we are liable for damage in transit. As we understand it,
when we sell lumber delivered at destination we are liable, but when we
sell it freight paid the buyer is liable.
Reply: The person who owns goods while they are in transit must
bear the expense of damage or loss if they are not insured. If
the goods have been sold the title during transit may be either
in the seller or the buyer. It is sometimes perfectly clear that
title is in one or the other, while in some cases it is a very
difficult question. Payment of freight is one item to be taken
into consideration, but it is generally not alone absolutely
conclusive of the question one way or the other. Our
correspondent is correct in saying: “When we sell goods
delivered at destination we are liable.” It is equally correct
to say: “When we sell them, otherwise than for delivery at
destination the buyer is liable.” It is not always true,
however, that the buyer is liable when the seller pays the
freight. Goods that had not been ordered, for example, or goods
slightly different from those ordered might be sent in the
expectation that the buyer would accept them. In such a case the
seller would probably prepay the freight but title would remain
in him, and the risk would be his, until the buyer had received
the goods and accepted them. If the contract requires the seller
to pay freight that is good evidence, if there is nothing on the
other side to offset it, that title and risk are to be in the
buyer during transit; this is so because if the seller was bound
to deliver the goods at the buyer’s end of the route he would be
bound to pay the freight, as a part of this obligation, and
would not separately agree to pay the freight. If the contract
is silent on that subject the mere fact that the seller pays the
freight is not sufficient to show that he reserves title. All
the facts of the case are to be taken into consideration, the
presumption being that title passes when the goods are
delivered, properly directed, to the carrier. If the buyer
claims that title did not pass to him at that instant the burden
of proof is on him, and the mere fact that the seller paid the
freight is not alone sufficient to overcome the presumption.
=Opinion No. 54.=
FILING CERTIFICATES IN MARYLAND.
Some of our members have recently received communications from the
Secretary of State of Maryland calling their attention to a law which
went into effect in Maryland June 1st, 1908, regarding filing
certificates permitting foreign corporations to transact business. The
Secretary of State’s letter reads in part as follows:
“The name of your company appears on the records of this office as a
Foreign Corporation doing business in Maryland. As the recently enacted
Act of the Legislature repeals the law under which you are authorized
to transact business in this State, it will be necessary for you to
comply with the provisions of the new law, a copy of which I enclose
herewith, together with a blank form, convenient for use in connection
therewith.”
Our attorney at Baltimore writes as follows regarding the necessity of
complying with the provisions of the law above referred to:
“It is not necessary for a foreign corporation who maintains no office
or agency, or has no assets in this State, to file a certified copy of
its charter, the required certificate under the act and the franchise
tax. A foreign corporation under the facts above stated may send any
number of salesmen for the purpose of making sales in this jurisdiction
without having to comply with the foreign corporation law.”
=Opinion No. 55.=
RAILROADS CAN INSIST ON ACCEPTANCE OF DELAYED SHIPMENTS.
Question.—I shipped a carload of lumber to a customer consigned to
myself and it was apparently lost in transit. The delay caused my
customer to cancel this order with me, whereupon I notified the railroad
that I would not accept delivery and would hold it responsible for not
only the value of the car, but any damages resulting to me. The car has
just turned up and the railroad insists that I must take it and put in
claim for loss. Am I compelled to accept the car?
Reply: If the road offers to deliver the lumber now the
consignee should accept it. A carrier is not a dealer, and goods
tendered by it cannot be refused, however late the tender may
be, or however seriously the goods may be damaged, provided they
are recognizable as the goods actually shipped and have any
value at all. The consignee cannot leave them in the hands of
the carrier and demand full value for them. He must accept them
and do the best he can with them. His acceptance of them does
not relieve the carrier of its liability, and the consignee is
entitled to recover all loss caused by delay, or by damage to
the goods, as soon as the loss has been ascertained. If the
market price has declined since the day on which delivery should
have been made that difference in value is to be included in the
damages; usually that is the principal part of the loss, and
frequently it is the whole of it.
=Opinion No. 56.=
QUESTION OF DISCOUNT.
Question.—I take an order from my customer, the terms of payment being
stated 2 per cent. 10 days. The buyer makes settlement in 20 days and
claims that he is entitled to the discount by paying interest for the
extra time which he has taken over and above the ten days. On the other
hand, I claim that the bill not having been paid within the discount
period becomes net, and that face amount of the bill therefore becomes
due on the eleventh day Which is right?
Reply: If a contract of sale gives the buyer no right to a
discount he has no such right. If the contract does give him a
right to a discount, upon certain terms, he must comply
absolutely with those terms in order to entitle himself to the
discount. The situation is just this: A seller who is entitled
to demand the full face of his bill, says to the buyer, “I will
deduct part of the amount if you will do a certain thing at a
certain time in a certain way.” The buyer cannot fail to do the
thing so specified at the time and in the manner named, and
still claim a discount as if he had done it. The buyer is
entitled to no discount at all in the case here put.
=Opinion No. 57.=
LUMBER MAY BE RETURNED TO THE CONSIGNOR IF THE CONSIGNEE WILL NOT ACCEPT
IT.
Question.—We ordered a carload of lumber from a shipper in the South and
advanced $200 on account before the shipment arrived at its destination.
This shipper received from the railroad company a bill of lading in his
name marked “non-negotiable,” which he indorses to us and mails to us
and notifies the railroad by letter that the shipment is for us. On
arrival we find that the lumber is not in accordance with our order and
we refuse to accept it, whereupon the railroad stores it for account of
the owner. We notified the railroad that we would release the car to the
shipper upon the latter paying to us the $200 advanced. The railroad has
since delivered the car back to the shipper on the latter’s instructions
by their giving the railroad the usual bond, which the railroad insisted
upon having, and we still retain the original bill of lading indorsed to
our order. We put in a claim against the railroad company for the $200
advanced, taking the position that they had no right to deliver the car
to the shipper without the bill of lading or an order from us. The
railroad refuses to pay our claim, saying that the bill of lading was a
non-negotiable one, and inasmuch as the shipper took it out in his own
name he had a right to regain possession of the car, and that we waived
our rights, although retaining the bill of lading, by refusing to accept
the lumber on arrival. We did not pay the freight. What course can we
pursue to recover the $200 advanced?
Reply: If a consignee refuses to accept goods shipped under a
non-negotiable bill of lading they may be returned to the
consignor. The carrier is not bound to act as agent or
intermediary for the settlement of any differences between the
two. Here our correspondents have simply extended a credit of
$200 to the shipper. If he does not voluntarily meet the
obligation the amount may be recovered by suit.
=Opinion No. 58.=
RAILROADS MUST PAY VALUE AT DESTINATION FOR DAMAGES ON LOST LUMBER.
Question.—Should the railroad in settling claims for shortage of lumber
pay for it at our cost price or at the current market price?
Reply: Unless the contract between the shipper and carrier
provides for some other measure of damages, the principal amount
to be paid by the carrier when the lumber is lost or destroyed
is the market value at destination. If the freight has not been
paid in advance it is to be deducted from market value. There is
to be added, on the other hand, interest at the legal rate from
the day on which delivery should have been made to the day of
settlement; and there is to be added also any incidental expense
to which the consignee may have been put as a direct result of
the carrier’s failure to do his duty. This is the only way in
which the consignee can be placed in as favorable a position as
he would have occupied if the carrier had done his duty, the
only way in which the whole of the loss can be placed upon the
carrier, who has caused it; and this is what the law aims to do
in every case.
=Opinion No. 59.=
SUIT CAN BE INSTITUTED IN NEW JERSEY ON JUDGMENT OBTAINED IN ANOTHER
STATE.
Question.—Some time ago I secured a judgment in Pennsylvania against a
party who now lives in New Jersey, and has some property there. Can I
make collection in New Jersey?
Reply: A judgment of a Pennsylvania court can be enforced by a
levy on property in New Jersey, without regard to the place of
residence of either the plaintiff or defendant. If this judgment
was secured in Pennsylvania it is without force in New Jersey.
In that case, however, another suit can be started in New
Jersey, and the proceedings will be brief and inexpensive; he
will have to prove merely that suit was previously brought in
Pennsylvania, in a court of competent jurisdiction, and judgment
rendered in his favor. Judgment in New Jersey will follow
immediately and as a matter of course; under that judgment he
can levy on property in New Jersey.
=Opinion No. 60.=
NOT ALWAYS NECESSARY FOR CARRIER TO NOTIFY CONSIGNOR THAT SHIPMENT IS
REJECTED BY CONSIGNEE.
Question.—Have we a claim on the transportation company for the invoice
value of the shipment under the following conditions: We made a shipment
of a car of lumber, and when it arrived at destination the railroad
offered it to consignee and he refused it. Some time later the railroad
sold the lumber for what it would bring, which, it appears, was only
about 50 per cent. of our invoice. Is the transportation company under
obligation, in a case of this kind, to notify the shipper that the
lumber is at destination refused and thereby give the shipper an
opportunity to dispose of the lumber without loss?
Reply: If a carrier has no notice to the contrary, he is
entitled to assume that the consignee is owner of the lumber and
that any delivery or disposition of it of which the consignee
cannot complain will be satisfactory to all persons. If the
goods are sent C. O. D. or if the carrier is instructed not to
deliver them to the consignee until they are paid for, or if he
receives any instructions from which he may infer that the
consignor retains title to the goods, in any such case, it
becomes the carrier’s duty to inform the consignor of the
consignee’s refusal to accept the goods. The same result follows
if the carrier is expressly directed to give such notice and if
he accepts the goods under these directions. In any other case
the carrier is not bound to assume that the goods have been sold
and that the consignor is retaining title to them to secure
payment of the purchase price, or that the consignor has any
interest in them at all. He may assume that the consignee has
already paid for them, or that they were the property of the
consignee before shipment. The consignor has put it in the power
of the consignee to take the goods and do as he pleases with
them, and the carrier is bound merely to act in such manner that
the consignee may have no valid ground of complaint. In the
absence of special instructions to the carrier, or of knowledge
on his part that the goods belong to the consignor, the rule is
simply this: That the carrier is not to be expected to deal with
two different persons with reference to a single shipment or the
disposition to be made of it; that he may safely assume such an
understanding between consignor and consignee that they will
keep each other informed, if necessary, and that anything that
satisfies the consignee will satisfy the consignor. There is
nothing in the question asked to show that it was the carrier’s
duty to notify the consignor in this case.
=Opinion No. 61.=
LUMBER IS ACCEPTED UNLESS REJECTED PROMPTLY.
Question.—A retailer goes away leaving his son in charge of the
business. The son asks us to ship a car of lumber and we sell it to him,
acting for his father, invoicing the car and mailing the bill of lading.
The car arrives, the son surrenders the bill of lading to the railroad
and orders the car placed on his father’s siding for unloading. For some
reason the son decides not to unload the car before the arrival of the
father, which will be in about a week. When the father arrives he claims
the lumber is not up to grade and refuses to accept same, unless we make
an allowance. Does not the acceptance of the bill of lading and its
surrender to the railroad constitute a delivery of the lumber and
entitle us to our money without question whether we are right or wrong
about the quality of the lumber? It is possible, of course, that a very
small proportion of this lumber may be a little off, but the difference
is very slight, and would show only the difference that any two
inspectors would make in going over the car of lumber.
Reply: A buyer of goods is bound to inspect them with reasonable
promptness, after he has an opportunity to do so, and then
accept or reject them at once. Reasonable promptness is greater
promptness than was shown in this case, unless there were some
unusual facts in connection with it of which we are not
informed. A buyer is seldom justified in delaying his inspection
beyond the next day after arrival of the goods. If he does not
reject the goods with reasonable promptness, whether he sees fit
to inspect them or not, then he is held to an implied
acceptance. They are placed in his hands. He may do as he likes
about examining them, but he must reject them promptly, if he is
to reject them at all. If he does not reject them promptly any
remedy he may have had is gone unless the goods were sold to him
under a warranty of quality.
=Opinion No. 62.=
NEW YORK INCORPORATION LAW.
In view of a recent decision regarding the corporation law of New York
State and its probable effect upon foreign corporations doing business
in this State, we have asked our attorney in New York for information,
and the following is submitted:
“At the end of January last there was handed down a decision in the
Court of Appeals, which was later printed in 190 N. Y., settling the
disputes which had arisen as to the necessity for obtaining
certificates of license to do business in this State as a condition
precedent to suing here.
“It holds that in compliance with the General Corporation Law it must
be alleged and proved by a foreign corporation in order to establish a
cause of action in the courts of this State. The cases holding
otherwise, should be regarded as overruled and the conflict of
authority ended.
“And it is further held that an objection to a complaint on this ground
is not waived by the failure to raise it in the defendant’s pleadings,
but can be raised at any time.
“A little later the court also held that this rule applied just as much
as to the assignee of a foreign corporation’s claim, except as to
negotiable paper taken in good faith from the corporation before
maturity.
“It follows that any foreign corporation desiring to do business in New
York, whether on a large or small scale, must comply with the statute
and take out a license and pay the franchise at the end of the first
year, and I suggest that this should be brought to the attention of
your foreign lumber corporations.”
(If further information is wanted by any members whose business is
incorporated under a State law other than New York, we shall be pleased
to hear from them.)
=Opinion No. 63.=
NEW JERSEY INCORPORATION LAW.
Question.—Under New Jersey laws a New York corporation doing business in
New Jersey must register in Trenton. We did a large amount of business
before we were aware of this, but ultimately registered. In suing one of
our customers we were nonsuited because we were not registered at the
time the goods were sold, but this was in an inferior court. Does the
fact that we were not registered in Trenton at the time the goods were
sold completely shut us off from recovering in the State of New Jersey?
Reply: We believe that our correspondents will not be allowed to
maintain this suit; they are prevented from maintaining it as
much by the laws of their own State of New York as by those of
New Jersey. The law of the case stands thus: The New Jersey
statute requires all foreign corporations to file certain
documents with the Secretary of State and to take out a
certificate authorizing them to do business in New Jersey. It is
further provided that “until such corporation so transacting
business in this State shall have obtained said certificate of
the Secretary of State, it shall not maintain any action in this
State, upon any contract made by it in this State.” If this were
all our correspondents could take out a certificate any time and
then sue; this section only forbids them to sue before taking
out a certificate. It is further provided, however, that when
another State imposes any greater penalties on New Jersey
corporations than the laws of New Jersey impose upon
corporations of that State, the same penalties shall be imposed
on corporations of such other State doing business in New
Jersey. Now, it is provided by the General Corporation law of
this State (Sec. 16) that foreign corporations must take out
certificates as in New Jersey, and that “no foreign stock
corporation doing business in this State shall maintain any
action in this State upon any contract made by it in this State
unless prior to the making of such contract it shall have
procured such certificates”; that is the reason a New York
corporation doing business in New Jersey is not allowed to sue
in the courts of that State on a contract made therein unless it
had taken out its certificate before the contract was made.
=Opinion No. 64.=
A LARGE CONTRACT SHOULD BE IN WRITING.
Question.—In the summer one of our salesmen sold a car of lumber for
September delivery, the salesman handing the buyer copy of the order at
the time of purchase. On previous purchases made by this same customer
he has been in the habit of sending in a confirmation of the order on
which appear the words “No order valid unless signed by one of the
members of the firm.” No such confirmation was received by us for the
last order placed, the same having been overlooked by us, and we shipped
the goods to them upon the agreed delivery date. And they write us now
that as no confirmation was given they cannot accept the goods and hold
them subject to our order. They write further that their former buyer
brought up the memorandum order for these goods, but that they declined
to confirm; but of this latter act we had no knowledge. Please inform us
where we stand in this matter.
Reply: In nearly every State there is a statute declaring that
the purchaser of goods to the value of $50 or more shall not be
legally liable unless he signs a written contract or part of the
price is paid or part of the goods are accepted. The wording of
the statute in New York State is as follows: “Every agreement,
promise or undertaking is void, unless some note or memorandum
thereof be in writing, and subscribed by the party to be charged
therewith, or by his lawful agent, if such agreement, promise or
undertaking—is a contract for the sale of any goods, chattels or
things in action for the price of $50 or more, and the buyer
does not accept and receive part of such goods, or the
evidences, or some of them, of such things in action, nor at the
time pay any part of the purchase money.”
=Opinion No. 65.=
USING CHECKS MARKED “IN FULL SETTLEMENT.”
In connection with several claims recently handled by our Collection
Department in Pennsylvania and the question of using checks marked “in
full settlement” or “in settlement of all demands to date,” we have the
following communication from a prominent attorney in Pennsylvania:
“I desire to state that it is elementary law that if pending the
adjustment of a disputed claim, the debtor sends the money to his
creditor in full payment of the demand, the latter cannot receive and
retain it as a credit upon a larger sum claimed by him, without
discharging the debtor as to the whole.
“123 Pa., p. 576. 147 Pa., p. 607. 70 Pa., p. 315.
“These cases have been decided by the Supreme Court of Pennsylvania,
the court of the last resort. Therefore it does not lie in the province
of your members to cancel the words ‘in full settlement’ without
destroying their right in respect to prevailing for the balance.
“I might further state that in the absence of any dispute in respect to
any claim, the payment of a smaller amount will not operate to
discharge the whole, because there is no accord and satisfaction; the
absence of any dispute in respect to the amount being the material
circumstances in this regard.”
=Opinion No. 66.=
A CUSTOMER BUYING ON CREDIT MUST KEEP HIS CREDIT GOOD.
Question.—If a bill of lumber is sold on credit and before delivery to
the customer the seller considers he has good reason to question the
purchaser’s ability to settle when the bill is due, can the seller
withhold the delivery and demand either better terms or cash without
making him liable for the non-fulfillment of the contract?
Reply: A man who has bought goods on credit is bound, as the
courts phrase it, “to keep his credit good.” If he does not do
that the seller need not ship the goods; if he has shipped them
and then finds that the buyer has not kept his credit good, he
may stop the goods and take them back into his own possession at
any time before they have actually been delivered to the buyer
or his agent. In making his decision the seller must, of course,
take his own risks. He has entered into a contract and he must
fulfill it or pay the resulting damages unless he has a legal
excuse for refusing to go on with it. It is not sufficient that,
as the question says, “the seller considers he has good reason
to question the purchaser’s ability to settle”; nor that the
seller has good grounds for believing that the buyer’s credit is
impaired. It is not a question of any man’s belief, but a
question of fact. The goods must be shipped unless the buyer is
actually insolvent. This does not mean that he must have made an
assignment or gone into bankruptcy or made any other public
acknowledgment of the fact that he is insolvent. It means he has
become unable to pay his debts as they fall due. The seller must
be able to show that at least one debt has fallen due against
the buyer and that he has not paid it promptly. Of course, it
must be a debt the validity of which the buyer himself does not
dispute upon any tenable ground. If he has paid his debts as
they fell due he has “kept his credit good,” no matter what any
one may suspect as to the future; if he has failed to pay any
just debt promptly he has not kept his credit good. If the
seller has no right to refuse delivery of the goods altogether
he has no right to demand better terms than his contract gives
him.
=Opinion No. 67.=
DISCOUNT MUST BE IN ACCORDANCE WITH THE CONTRACT.
Question.—We sold to a concern and the terms of sale were “2 per cent.
discount for cash in ten days or sixty days net.” The buyer in his
settlements has taken fifteen to twenty days’ time and has deducted 2
per cent. discount and has added 6 per cent. per annum for the extra
days beyond ten. We claim that this settlement is entirely wrong, and if
he wishes the discount in full he must send a check within ten days
after the date of the bill.
Reply: No debtor is to be excused from paying the full amount of
his debt except in strict accordance with some provision to that
effect in his contract. Here is a debtor who would have been
bound to pay the full amount immediately if there had been no
special provision to the contrary. Any such provision as there
may be is a kind of grace to him and it is not to be extended
beyond the strict terms in which it is expressed. He may take 2
per cent. off if he pays at any time within ten days. When the
ten days are passed the contract stands precisely as if it had
said nothing at all about discount for payment within ten days.
This debtor had no right to deduct the 2 per cent. He is trying
to take an advantage which his contract does not give him. If he
were asked to point out a clause in the contract giving him a
right to take off the discount later than the tenth day, of
course, he could not do it.
=Opinion No. 69.=
A BILL OF LADING TO ORDER RETAINS TITLE TO THE GOODS.
Question.—If a shipper sells a carload of lumber f. o. b. shipping point
with draft attached to bill of lading and bills the car to his own
order, notify the purchaser, and if the car should be wrecked in transit
or should never reach its proper destination, would the buyer who bought
the car f. o. b. be compelled to pay the draft and take up the bill of
lading and seek recourse against the carriers? Should the shipper bill a
car to the order of a bank, notify the f. o. b. purchaser and sell the
draft and bill of lading to the bank outright, would the purchaser be
compelled to pay for same?
Reply: When a sale is made f. o. b. shipping point the seller
can make a valid delivery at that point. If he delivers the
goods to a carrier there, takes a bill of lading making them
deliverable to the buyer and forwards it to the latter, his full
duty is done and the goods are at that moment, in legal effect,
delivered to the buyer; they are actually delivered to the
buyer’s agent, the carrier, and that is equivalent to a delivery
to the buyer himself. This is the kind of delivery the seller is
at liberty to make, under the contract, but he may not do so. He
might, conceivably, carry the goods in his own arms to the
buyer, or he may deliver them to one who is unquestionably his
own agent. In either of these cases delivery to the buyer does
not occur until the goods reach their destination. If A ships
goods to the place in which B resides and takes the bill of
lading to his own order the goods are not in any sense delivered
to B or to his agent. They are A’s goods. He can stop them where
he will and take them back into his own possession. When they
reach their destination he can take charge of them or have them
delivered to anyone he may choose to name. Those goods could be
seized by a creditor of the seller and they could not be seized
by a creditor of the buyer. If they are lost in transit it is
the seller’s loss. A seller must either deliver the goods or
retain them. He cannot do both. He cannot deliver them so as to
make the buyer liable in case of loss and still retain them so
that they will be his, to do with as he will if there is no
loss. The same result follows if the bill of lading is sold to a
bank. A bill of lading represents goods in transit and transfer
of the bill transfers the goods. The direction to the carrier to
“notify” one person or another is of no importance. Goods may be
consigned to B and the carrier, for one reason or another or for
no reason at all, may be directed to “notify” X or Y or Z of the
fact that they have arrived. Notification is not to be
substituted for delivery.
=Opinion No. 70.=
ONE WHO BUYS ON CREDIT MUST KEEP HIS CREDIT GOOD.
Question.—A, in New York, has with B, a manufacturer, three separate
contracts made in December, February and March, respectively, each
contract specifying the grade and price of material, date of delivery
and terms of payment. The deliveries called for in the December contract
have been completed by A; the date for the first delivery of the
February contract is due this month; but B is overdue 30 days on his
payment on the first delivery of the December contract and payment on
the delivery of balance of the December contract is now due. Because B
has failed to comply on his part with the conditions of the first
contract, must A deliver the material according to the terms of the
second and third contracts, thereby unduly increasing the amount of
credit extended to B beyond his general credit limit? From information
obtained which would lead A to question the credit of B, such as his
taking a contract at a loss (this occurring since the contracts were
made) can A demand payment before delivery of the goods, although the
contract specifies 30 days from certain dates? Can A cancel the two
uncompleted contracts for any of the above reasons, viz.,
non-fulfillment of the condition of the first contract by B or doubt as
to B’s credit? If cancelled by A would B have any legal redress such as
buying the quantity and grade of material stipulated by the contracts in
the open market and compelling A to pay the difference in price should
the present market price be higher than the prices stipulated in the
contracts?
Reply: When a man buys goods on credit it is always an implied
condition of the contract that he shall “keep his credit good,”
as the courts phrase it, till the time of delivery arrives. If
he becomes insolvent before that time he cannot demand that the
seller shall ship the goods. If the seller does ship them, and
then learns of the insolvency, he may stop the goods before they
reach the buyer and take them back into his own possession. A
buyer on credit has no right to demand that the goods shall be
delivered to him at a time when he is insolvent and when there
is reason to believe, accordingly, that the goods may have to be
sold to pay his other debts. That is the situation in the case
our correspondent puts, and the seller is certainly not bound to
deliver the merchandise. By insolvency, in a case of this kind,
is not meant an actual assignment for creditors; neither does it
mean that the buyer has gone into bankruptcy or made any other
public acknowledgment of the fact that he is insolvent. It means
that he has become unable to pay his debts as they fall due. The
seller must be able to show that at least one debt has fallen
due against the buyer and that he has not paid it promptly. Of
course, it must be a debt the validity of which the buyer
himself does not dispute upon any tenable or reasonable ground.
The buyer in this case has failed to pay such a debt. The seller
has ample proof of the fact because the debt was owing to him.
The buyer has not “kept his credit good,” and he has no right to
demand that goods sold to him on credit shall be delivered. If
they are not delivered he will have no legal ground of complaint
or cause of action against the seller. It is not the seller who
is guilty of a breach of contract, but the buyer; he is guilty
of a breach of the implied condition which enters into all such
contracts—the condition that the buyer shall “keep his credit
good.”
=Opinion No. 71.=
A SELLER IS BOUND BY HIS OWN MISTAKE UNLESS IT IS OBVIOUS.
Question.—We sent an inquiry for certain sizes of lumber to a mill
asking for quotations. Our inquiry was delayed in the mails, and, as it
did not reach the mill in time enough to quote we placed the order with
the mill, but did not specify prices. The mill acknowledged our order,
saying, “We have entered your order as per enclosed carbon,” and after
each item they named a price. The lumber was shipped and an invoice sent
us, but on two of the items a larger amount is charged than specified in
the communication from the mill, saying our order had been entered. In
remitting we deducted the difference between the prices mentioned in
reply from the mill and the invoice, but the mill claims they made a
clerical error and that we are bound to pay the invoice price. What is
our position in the matter?
Reply: When a seller puts a price on his goods and the buyer
accepts them at that price it is then too late for the seller to
demand more except in the following case: If the buyer knew that
a mistake had been made, or if the mistake was so gross and
palpable that he ought to have known it to be a mistake, then it
may be corrected. If a seller were to quote $1.25 when all
buyers knew that $12.50 was about the market price, the buyer
would not be allowed to claim the goods at the quotation without
making special inquiry as to its accuracy; if the quotation was
only slightly under the market, so that no suspicion attached to
it, and if there was nothing else to show that a mistake had
been made, and if the buyer had no actual knowledge of the fact,
the seller is bound. Taking the whole class of sellers together,
it would not be a safe rule to allow them to come around and
collect more after a sale had been made and concluded upon the
plea that they had not asked as much as they intended to ask.
=Opinion No. 72.=
A CARRIER SHOULD PAY VALUE AT DESTINATION FOR LUMBER LOST.
Question.—On what basis must a railroad company settle a claim by a
consignee on lumber damaged or lost? Must the consignee supply the
original invoices, or is he entitled to the selling price in his market?
Reply: If the contract does not provide otherwise, a carrier who
fails to deliver goods must, as a rule, pay to the consignee the
value of the goods at the time and place at which delivery
should have been made. The carrier is to retain his freight
charges out of this amount, of course, if freight has not been
paid in advance. This is the only rule by which the whole of the
loss can be placed upon the carrier, where it belongs. If he had
done his duty and delivered the goods the consignee could have
sold them at the prices there and then prevailing. If the
carrier pays the consignee less than this amount the consignee
himself must bear part of the burden of the carrier’s
negligence. Of course, if the contract provides that settlement
shall be upon some other basis, original cost, for example, the
contract will be enforced. The only other exception to the rule
is that which arises when the goods have already been sold for
an amount which is not so great as the market price at the place
and time at which delivery ought to have been made. If delivery
had been duly made, in such a case the owner of the goods could
not have taken advantage of ruling market prices; he had already
bound himself to deliver the goods at a price which proves to be
less than the market on the day fixed for delivery, and this
selling price is all that he can claim. The object in every
case, except where there has been a special contract of
carriage, is to place the owner of the goods as nearly as
possible in the same position he would have occupied if the
carrier had done his duty and to put upon the carrier, where it
belongs, the whole burden of his negligence and breach of
contract.
=Opinion No. 73.=
LIABILITY OF SHIPPER WHERE PART OF SHIPMENT IS ADMITTED BELOW GRADE.
Question.—I received from a customer an order for a carload of lumber of
a certain grade. A fair sized car would be 14,000 feet. The car arrives
and 2,000 feet of the lumber is admitted by me to be of a grade lower
than the order called for. Can I compel my customer to accept the
balance of 12,000 feet, which is up to the requirements of the order? He
claims that inasmuch as the car I have offered is not all up to grade, I
cannot compel him to accept even so large a proportion as 12,000 feet,
notwithstanding the fact that 12,000 feet will still be a pretty fair
sized car of lumber.
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.
OHIO.—Foreign corporations are forbidden to do business until they have
procured from the Secretary of State certificate that they have
complied with the requirements of law which authorize them to do
business in the State, and until said companies shall have caused the
proportion of their capital stock employed within the State to be
determined by the Secretary of the State, and shall have paid to him a
fee of one-tenth of one per cent. upon such amount and obtained his
certificate of such payment. No foreign corporation doing business in
the State can maintain any action upon any contract made by it in the
State until it has procured such certificate. The corporation must file
with the Secretary of State due copy of its charter and statement under
seal of the amount of its stock, the nature of its business and state
which is to be its principal place of business, designating a person
upon whom process against such corporation may be served. The person so
designated must have an office where the corporation is to have its
principal place of business within the State. Corporations complying
with these requirements are exempt from attachment on the ground that
they are foreign corporations.
MICHIGAN.—Foreign corporations filing in the office of the Secretary of
State certified copy of articles of incorporation and an appointment of
an agent in this State for service of processes may carry on their
business in Michigan. Foreign corporations may bring suits on
furnishing security for costs.
NEW YORK.—No foreign corporation shall do business without first
procuring from the Secretary of State certificate that it has complied
with requirements of law. License fee shall be paid. No foreign
corporation can do business in New York or sue on contract made there
unless it has procured such certificate prior to the making of the
contract. Selling goods through a factor within the State is not
covered by this prohibitive clause. Before granting such certificate
foreign corporation must file with Secretary of State copy of its
charter and a statement setting forth its business, its principal place
of business within the State and designating the person upon whom
processes may be served. Such person must have an office within the
State, where the principal place of business of such corporation is
located. Foreign corporations must pay to State Treasurer a license fee
of one-eighth of one per cent. for privilege of exercising its
corporate franchise in New York, to be computed upon the amount of
capital stock employed within the State during its first year of
business.
=Opinion No. 106.=
CONTRACTS FOR CARLOADS SEPARABLE.
Where a contract was made for three carloads of a company’s No. 1 white
cedar shingles and the purchaser accepted and paid for two carloads, but
refused to accept the third because of alleged inferior grade and
quality, and because the shingles were not made by said company, the
Supreme Court of Minnesota holds that the contract as to the three
carloads was separable, so that the purchaser’s payment and the seller’s
acceptance of payment for two carloads did not prevent the seller from
beginning an action to recover the purchase price of the third carload
nor the purchaser from defending therein. The court also holds that a
buyer, seeking to reject an article as not in accordance with the
contract of sale, must do nothing after he discovers the true condition
inconsistent with the seller’s ownership of the property.—Duluth Log.
Co. vs. John C. Hill Co., 124 N. W., 967.
=Opinion No. 107.=
WARRANTY SURVIVES ACCEPTANCE.
Where one attempting to sell shingles stated in a letter that “They are
mighty good shingles, they are as good as you could get anywhere,” it
was a warranty of their quality. Where a buyer of shingles accepts
shingles which he knows are of a grade inferior to what the seller
warranted, the buyer does not waive the warranty, and he can defend
against an action for the price on that ground. (Texas Court of Civil
Appeals.) Harroll vs. McDuffie, 128 S. W. Rep., 1149.
=Opinion No. 108.=
ACCEPTANCE OF LESS THAN INVOICE PRICE.
On arrival of a carload of shingles, the buyer complained of their
quality, and for the purpose of securing an immediate settlement and
avoiding further negotiations the seller agreed to accept a less amount
for them than the full price if payment was made before a specified
time. The buyer failed to make payment within such specified time and in
a suit to recover for the full amount of the invoice it was held by the
court that the seller could require payment under the circumstances of
the full price. (Texas Court of Civil Appeals.) Harroll vs. McDuffie,
128 S. W. Rep., 1149.
=Opinion No. 109.=
PRESS OF
JOHN A. PHILLIPS
NEW YORK
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TRANSCRIBER’S NOTES
1. Silently corrected typographical errors and variations in spelling.
2. Retained anachronistic, non-standard, and uncertain spellings as
printed.
3. Enclosed italics font in _underscores_.
4. Enclosed bold font in =equals=.
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