PART I

LAW IN GENERAL

=1. Rights.= Men are endowed with certain individual rights. These rights are principally of two classes, personal and property. Men have the right to live in peace and quietude. In so far as it does not interfere with the same privilege on the part of others they have the right to be unmolested in the pursuit of happiness. They have the right to defend themselves against the attacks of others, to satisfy bodily hunger and thirst, and to preserve their bodies in health and strength.

Besides these personal rights, men have the right to acquire and keep property. This right is also subject to the limitation of not interfering with the same privilege on the part of others. Men have the right to acquire property, both chattel and real. For the purpose of rendering their existence and enjoyment secure, they have the right to keep the title and possession of this property in themselves.

In primitive times, property rights were few. Personal rights were recognized and enforced by might. As the requirements of civilized life became more complex, property rights were needed and recognized. Rules of conduct and rules for the holding and transfer of property were recognized and enforced. Might ceased to be the principal method of enforcing rights. Rules began to be recognized and enforced with regard to persons and property. These rules are known as laws.

=2. Law.= Law may be defined to be a rule of human conduct. It may be said to embrace all rules of human conduct recognized by courts of law. Laws are necessary to enable men to enforce and enjoy their rights, both personal and property. Customs of men become rules by which human affairs are regulated. Men may disagree as to what their rights are, or as to their exact scope or limitations. In this event, rules of conduct or laws must determine their scope and limitations. Disputes among men arise about their personal or property rights. The rules recognized by the courts in settling these disputes are laws. These rules or laws relate both to persons and property. A law which prohibits murder is a rule by which the state protects the lives of its citizens; a law which prohibits theft is a rule for the protection of property.

=3. Sources of Law.= Law is derived from the customs of the people and from the written declarations or agreements of the people or their representatives. The customs of the people, constituting a large part of our law, are found principally in the decisions of courts. Each state of this country prints and keeps a permanent record of at least the most important decisions of its court of last resort. Many decisions of lower courts are printed and preserved. Every law library of importance has the printed reports of the supreme court of each state of this country; as well as the reports of the higher courts of most of the countries where the English language is spoken or officially recognized. The reports of the higher courts of England, Ireland, Canada, Australia, and of many of the island possessions of this country and of England, are found in most law libraries. The second source of law is the written declaration of the people or their representatives. These declarations consist of legislative acts, treaties and constitutions. In this country, legislative acts may be either national or state. Many statutes are nothing more than recognized customs enacted into written laws. Other statutes are variations or restrictions of recognized customs. National legislative acts are numbered consecutively, printed and bound into volumes known as the _Federal Statutes_. Each state numbers its statutes consecutively and prints and binds them into volumes known as the _State Statutes_.

=4. Divisions of the Law.= There are two great divisions of the law, _written_ and _unwritten_. The greater portion of the law consists of the customs of the people, as evidenced and preserved by the written decisions of the courts. These customs, to be recognized as law, need not be found in written decisions, but the most important ones have become embodied therein. New customs are necessary and are recognized to meet new and changing conditions. These new customs are continually adding to our unwritten law. While this great portion of the law is called unwritten law, the greater portion of it actually is in writing, and is preserved in permanent form by our court reports, both national and state.

The second division of law is known as written law. It consists of treaties, constitutions, and legislative acts. _Treaties_ are international compacts. _Legislative acts_ are the laws passed by the people or their representatives. In this country they consist of the laws passed by the United States Congress, and by the representative bodies of each state. _Constitutions_, in this country, consist of the State Constitutions and the United States Constitution. In England the constitution is not written, but is a part of the unwritten law of the land.

=5. Classification of Law.= A number of useful classifications of the law are recognized. Any classification is more or less arbitrary, and no classification has been recognized universally.

Law may be classified as _public_, _administrative_, and _private_. Public law embraces the law of nations, called _international law_; the laws regulating the enforcement and recognition of constitutional provisions, called _constitutional law_; and the laws protecting citizens against the actions of dangerous characters, called _criminal laws_.

The public as a unit is said to be interested in public law. Public laws are recognized and enforced in theory, at least, for the benefit of the public and not for any particular individual. For example, if a murder is committed, the state through its officers prosecutes and punishes the criminal on the theory that a wrong has been done the state. The heirs or representatives of the person murdered can sue and recover money compensation, called _damages_, from the murderer, but the state punishes the criminal. This work does not treat of public law.

_Administrative law_, sometimes called _Law of Procedure_, embraces the rules and regulations relating to the enforcement of personal and property rights. The laws relating to courts, the method and manner of starting legal actions, the trial of cases, and the rendering and enforcement of judgments are common examples of Administrative Law. _Private law_ embraces the _law of contracts_ and of _torts_.

Contracts consist of agreements of every nature. The great majority of dealings of men are carried out by means of contracts. This is the most important, as well as the most extensive subject known to the law.

Torts embrace all private wrongs not arising out of contracts. Any injury inflicted by one person upon the person or property of another, which is not a breach of contract, is a tort. Tort is the French word for private wrong. If _A_ carelessly drives his automobile into _B_'s wagon, he commits a tort. If _A_ carelessly drives his horse over _B_'s field, he commits a tort. If _A_ wrongfully strikes _B_, he commits a tort. Torts and crimes frequently over-lap. The same act may constitute a tort and a crime. If _A_ drives his automobile faster than the laws of the state or city permit, and while so doing runs over and injures _B_, he commits both a tort and a crime. He is liable to the state for imprisonment or fine for the crime, and he is liable to _B_ in money for damages for the tort.

The same act may constitute a crime, a breach of contract, and a tort. If _A_, engaged as a chauffeur to operate an automobile carefully and skillfully, violates the speed law, and in so doing runs over and injures _B_, he commits a crime and is liable to the state for punishment or fine. He is also liable in damages to _B_ for the tort committed, and is liable in damages to his employer for breach of contract. This work has largely to do with the law of contracts and torts.

The term _Commercial Law_, applied to this work, is a term used arbitrarily to embrace the laws relating to commercial affairs. It has no distinct place in the general classification of law.

CONTRACTS

=6. Contract, Defined and Discussed.= A contract has been defined to be an agreement between two or more competent parties, enforceable in a court of law, and based upon a sufficient consideration, to do or not to do a particular thing.

The law relating to contracts is the most important, as well as the most extensive, branch of commercial law. It touches, directly or indirectly, most of the dealings of men. It is the legal basis of all business transactions.

In the daily routine of their life, most families make many contracts. By reading the morning paper left at his door, a person impliedly agrees to pay the publisher the customary price. By ordering the daily supply of groceries by telephone, the housewife impliedly contracts to pay for their value, upon delivery, or at the customary time of payment. By purchasing a number of car tickets from the street car conductor, a person makes a contract. By ordering a lunch, a person impliedly agrees to pay the customary price. In the more important business transactions, formal contracts are written out and signed. In these transactions the parties endeavor to define their duties and obligations clearly and expressly, in order that they may understand each other and in order that neither can dishonestly claim that the contract contains a certain provision or condition. Contracts are legal or illegal, void or voidable, depending upon their form and nature. An understanding of the necessary elements of valid contract is the foundation, to the understanding of commercial law.

=7. Offer, Acceptance and Agreement.= To constitute a transaction a valid contract, there must be an offer on the one hand, and an acceptance on the other. This necessitates at least two parties to every contract. One must make a proposition, the other must accept it. The acceptance must be of the exact terms of the offer, to constitute a legal acceptance. If the attempted acceptance is not made in the precise terms of the offer, it constitutes a counter offer, which, to constitute a contract must, in turn, be accepted by the original offeror.

If _A_ offers _B_ one hundred dollars for _B's_ horse, and _B_ in turn agrees to take one hundred dollars, the transaction constitutes a valid contract. If _A_ offers _B_ one hundred dollars for _B's_ horse, and _B_ in turn offers to sell the horse for one hundred and twenty dollars, the transaction does not constitute a contract, for the reason that _A's_ offer has not been accepted. _B_, however, makes a counter offer, which if not assented to by _A_, constitutes no contract. If, however, _A_ agrees to accept _B's_ offer to sell the horse for one hundred and twenty dollars, this constitutes a valid contract, in which _B_ is the offeror and _A_ the acceptor. These counter offers in response to offers may go on indefinitely without constituting contracts. So long as the response to the offer varies the terms of the offer, it constitutes a counter offer, and not an acceptance. To constitute an acceptance, the exact terms of the offer must be agreed to.

Courts lay down the principle that there must be a meeting of the minds of the contracting parties, to constitute the transaction a valid contract. This means that the offer must be accepted in its precise terms. The minds of the contracting parties cannot meet, unless the acceptance is of the exact terms of the offer. This principle is sometimes called _mutuality_. An acceptance must be communicated to the offeror. A mere mental operation, or an attempted acceptance, not communicated to the offeror, does not constitute a legal acceptance.

The offer, or acceptance, may be in the form of an act as well as by verbal or written communication. If a person orders a barrel of flour of his grocer, the order constitutes the offer, and the delivery of the flour and the receipt of same by the purchaser, constitutes the acceptance. The purchaser is bound to pay the market price for the flour, regardless of the fact that the price has not been mentioned.

An offer can be recalled at any time before acceptance. To recall an offer, the offeror must communicate his intention so to do, to the acceptor before acceptance. Agreements to hold offers open for a stipulated time are recognized. These options are, in themselves contracts, and to be binding must contain all the essential elements of a contract.

An offer which has been accepted constitutes an _agreement_. An agreement, as the word suggests, means a meeting of the minds of two or more parties. The word is frequently used as synonymous with contract, but it is merely an element of a contract. While there must be an agreement in every contract, an agreement of itself does not constitute a contract. There may be an agreement between persons under legal age, but this agreement does not constitute a contract.

Besides an agreement, or meeting of the minds, a contract must have competent parties, a legal valuable consideration, and a lawful object. These are often called the elements of a contract.

=8. Parties to a Contract.= A contract must have at least two competent parties. Each party to a contract may consist of one or more persons.

To be competent to make a contract, a party must be of legal age. Legal age is twenty-one years for males, and ordinarily, eighteen for females. Legal age is fixed by statutes of the different states. These statutes differ somewhat as to the legal age of females. Some fix it at twenty-one, others at eighteen, and some even younger than eighteen, in case of marriage. Intoxicated persons, insane persons and idiots are not competent to make contracts. Artificial persons or corporations can make contracts within the scope of the powers given them by the state.

A person who does not voluntarily consent to the terms of a contract is not a party to it. Where fraud or duress is used in obtaining a party's consent to a contract, the contract is at least voidable. It is not enforceable if the defrauded party objects on that ground.

=9. Consideration.= Consideration may be _good_ or _valuable_. Good consideration consists of love and affection existing between near relations. Good consideration is a sufficient consideration to support a deed given by one relative to another. But this is the only kind of contract supported by a good consideration.

Valuable consideration has been defined to consist of some right, interest, profit or benefit, accruing to the promisor, or some forbearance, detriment, loss or responsibility, given, suffered or undertaken by the party, to whom the promise is given. In short it is a benefit to the promisor, or a detriment to the promisee. All contracts, with the exception of sealed instruments, must be supported by a valuable consideration. Sealed instruments, except where abrogated by statute, import a consideration.

_A_ promises to sell his watch to _B_ for ten dollars. _B_ accepts the offer by offering to pay _A_ ten dollars. There is a valuable consideration, consisting of _B's_ promise to pay _A_ ten dollars.

_A_ promises _B_ two dollars if _B_ will guard _A's_ house for two hours. There may be no actual benefit resulting to _A_, since it may have been unnecessary to have the house guarded. But if _B_ guards the house for two hours, _A_ is legally bound to pay him the contract price of two dollars. The valuable consideration is the detriment or responsibility of _B_ in guarding the house for two hours.

Mutual promises constitute a valuable consideration. If _A_ promises _B_ two dollars if _B_ will work for him next Thursday, and _B_ promises _A_ to work for him next Thursday, the contract is mutual, and is supported by a valuable consideration. The consideration consists of the promise on the part of each of the contracting parties.

A past consideration will not support a contract. By a past consideration, is meant a benefit received in the past, for which no legal liability was incurred or exists. _A_ gives _B_, his son, five hundred dollars. One year later, in consideration of the past gift, _B_ promises to construct a dam for _A_. The consideration is past and does not support the attempted contract.

A consideration, to be valuable and sufficient to support a contract, need not be adequate. A mutual promise, no matter how slight or trivial, or the payment of anything valuable to the promisor, is sufficient. Sometimes the inadequacy of the consideration tends to prove fraud in the making of the contract. When it is sought to avoid a contract on the ground of fraud, the inadequacy of the consideration may be considered in connection with the question of fraud. When fraud does not enter into the question, adequacy of the consideration is not questioned.

_A_ sells _B_ one hundred acres of land. The deed recites a consideration of one dollar. The deed of transfer is good and the smallness of the sum named does not affect the contract.

A promise to do something which one is already legally bound to do does not constitute a valuable consideration to a contract. _A_ owes _B_ one hundred dollars upon a promissory note. The note is past due and _A_ fails to pay it. _A_ promises to pay the note within ten days, on condition that _B_ promise to give _A_ a barrel of apples. _B_ agrees. _A_ cannot compel _B_ to deliver the barrel of apples, nor has _A_ any defense to the payment of the promissory note, since his promise to pay the note was a promise to do something he was already bound to do.

An illegal consideration does not support a contract. Any consideration contrary to established law is illegal. _A_ promising to pay _B_ one thousand dollars if _B_ will burn _C's_ barn is an example of illegal consideration.

=10. Express and Implied Contracts.= Some contracts expressly set forth the exact terms and conditions to be performed by both the contracting parties. For example, _A_ makes a contract with _B_, by the terms of which, _B_ is to construct a house for _A_. The contract is carefully prepared in writing, _B_ is to receive five thousand dollars ($5,000.00) when the house is completed, and the contract contains provisions as to the details of the work and materials. Such a contract is called an _express contract_ by reason of the terms having been expressly agreed upon by the parties. A contract need not be in writing to be express. The parties may enter into an express contract orally as well. Few contracts are made, however, in which some things are not implied. For example, in the contract for the building of a house it is practically impossible, or at least, is impracticable, to set forth in exact detail all the duties of the builder. For example, it would be unnecessary to give the size of the nails and number or quantity of same to be used. The contract impliedly requires the builders to use the proper size and quantity. A contract, however, in which the parties endeavor to set forth the principal things to be done, is known as an express contract.

An _implied contract_ is one in which the parties do not expressly agree upon some of the important terms. _A_, a contractor, orders of _B_ one thousand feet (1,000 ft.) of No. 1 white pine ship lap siding. The price is not mentioned. _B_ delivers the lumber and _A_ by implication is obliged to pay _B_ the reasonable value thereof. The greater portion of business contracts are implied. An implied contract should not be confused with uncertain contracts. Uncertain contracts are void by reason of their uncertainty. _A_ offers _B_ one thousand dollars for five acres of land. _B_ accepts the offer. In case the parties had no particular five acres of land in mind, the contract is void by reason of this uncertainty. The parties' minds did not meet on the question of what particular piece of land was to be transferred. In most implied contracts the article to be delivered is a part of a large quantity, and the particular part does not matter. Articles ordered from stock, such as groceries, shingles, slate, cement and lumber are common examples of this principal.

=11. Unilateral and Bilateral, Executory and Executed Contracts.= The mutuality or meeting of the minds, constituting one of the essential elements of the contract, may result from an express promise for a promise, or from an act performed in response to a promise. _A_ promises to sell his automobile to _B_ on the following day for five thousand dollars ($5,000.00). _B_ promises to pay _A_ five thousand dollars ($5,000.00) the following day. The mutuality consists of the mutual promises of _A_ and _B_. Such contracts are known in law as _bilateral_ contracts.

_A_ promises to pay _B_ one thousand dollars ($1,000.00) if _B_ will move his house to the rear of _A's_ lot. _B_, without promising to do so, moves the house. This act on the part of _B_ constitutes the acceptance of the contract and completes the mutuality. Such contracts are known in law as _unilateral_ contracts.

A contract to be performed in the future is known as an _executory_ contract. _A_ promises to pay _B_ seventy-five dollars, if he will work on _A's_ farm during the month of August of the following year. _B_ accepts _A's_ offer and promises to work for _A_ as proposed. The contract is to be performed at a subsequent date, and constitutes an executory contract.

An _executed_ contract is one which is performed. _A_ promises to sell his bicycle to _B_ for fifty dollars ($50.00); _B_ pays the fifty dollars ($50.00) to _A_ and receives the bicycle. This contract is executed.

A contract may be executed as to one party and executory as to the other. If _A_ agrees to sell and deliver his team of horses to _B_ for five hundred dollars ($500.00) and _B_ pays _A_ five hundred dollars ($500.00) but _A_ does not deliver the team to _B_, the contract is executed as to _B_ and executory as to _A_.

=12. Contracts of Infants.= A person under legal age is known in law as an infant. The legal age is fixed by statute in the different states. In most states this age is twenty-one for males and eighteen for females. In some states the legal age for females is under eighteen in case of marriage.

An infant's contracts are voidable. Voidable does not mean that the contract is illegal. It is not contrary to law for an infant to make contracts. He may lawfully make them. The law will not compel him to carry them out. He may carry them out voluntarily if he chooses.

A competent party, contracting with an infant cannot avoid the contract on the general ground of the infancy of the other party to the contract. The infant, however, may avoid the contract by reason thereof.

An infant may ratify his contract after becoming of legal age. This ratification is effected by the infant's accepting benefits under the contract after attaining his majority. Ratification may also be effected by an infant after he has reached his majority by promising to carry out the contract. To have such a promise amount to a ratification the infant must make the promise with knowledge that he may avoid the contract if he chooses.

An infant is liable on his contracts for necessaries. _Necessaries_ is a variable term, depending upon the social position of the infant. Those articles essential to the health and sometimes to the comfort of the infant are considered necessaries. Food and clothing are the most common examples. A person selling an infant necessaries, cannot recover in excess of their reasonable value regardless of the contract price, and cannot recover at all, if the infant is already supplied. Most courts hold that a party selling necessaries to an infant must determine at his peril that the infant is not supplied. Articles which would be luxuries for one infant, might be necessaries for an infant accustomed to wealth.

An infant is not entitled to his wages unless he has been emancipated. The father or guardian is entitled to the wages. Emancipation may be by written declaration to that effect, on the part of the father. It may also be implied from the refusal or failure on the part of the father to treat the infant as his child.

=13. Novation and Contracts for the Benefit of Third Persons.= If _A_ owes _B_ one hundred dollars ($100.00) and _B_ owes _C_ one hundred dollars ($100.00), the three parties may agree that _A_ may pay _C_ one hundred dollars ($100.00), discharging the indebtedness of both _A_ and _B_. This contract is valid in law, and is called _novation_.

Much of our common or unwritten law was taken from the common law of England. The common law of England did not permit a third party, for whose benefit a contract was made, to enforce the contract. For example, if _A_ and _B_ enter into a contract by which _A_ is to pay _C_ some money, _C_ cannot enforce the contract. This kind of a contract is commonly known as a contract for the benefit of a third person. With a few exceptions, the states of this country refuse to follow the English doctrine. The general American doctrine is that a third party may enforce a contract made for his benefit. For example, _A_, a furniture dealer was indebted to _B_ for a bill of goods; _C_ purchased _A's_ business, and in a formal written contract, as part of the consideration, agreed to pay _B_ the amount of _A's_ bill. After the transfer of the business, _A_ became insolvent and _B_, learning of the contract between _A_ and _C_, sued _C_ thereon and was permitted to recover. The general American doctrine will not permit two parties, making a contract for the benefit of a third, to rescind or avoid the contract after the third party has been notified of it, and has assented thereto. Of course, two parties cannot bind a third party to perform any condition of a contract without his consent. This would violate some of the fundamental principles of contracts. There would be no consent, no meeting of the minds, and sometimes no consideration.

=14. Contracts of Insane Persons, Idiots, and Drunkards.= An insane person, or one that does not understand the nature of the contract in question, is not bound by his contracts. He may avoid them. Like an infant, he may ratify them when he becomes sane, if he chooses. Statutes of all the states provide for the determination of insanity by judicial decree. Such a judicial determination is presumed to give notice to all. An idiot's contracts are the same as an insane person's.

A drunkard can avoid a contract made while he was intoxicated, and if the drunkenness amounts to insanity, it is regarded in law as such. Contracts made by a drunkard when not drunk, or by a lunatic during a lucid interval are valid and binding.

=15. Contracts of Married Women.= At common law, upon marriage, the wife lost her legal identity in her husband. Her estate became his, her personal property became his, and she could not thereafter enter into any legal obligation. The statutes of the states generally at the present time permit a married woman to contract as independently as a man, relative to her separate estate. In some states there are a few limitations, such as contracting directly with her husband or as surety for her husband.

=16. Custom and Usage as Part of a Contract.= Parties may enter into any contracts they choose, so long as the terms are legal. If parties expressly agree, either orally or verbally, on the precise terms of a contract, these terms cannot be varied by usage or custom. Usage and custom may be used, however, to explain the intent of the parties. Merchants and traders recognize various trade customs, without which it would be impossible to interpret their contracts. For example, _A_ ordered five thousand barrels of cement of _B_, at eighty-five cents a barrel, to be delivered in sacks F. O. B. Mill. In a suit for the purchase price, the court permitted _B_ to show that there was a well-known custom in the cement trade to add to the invoices forty cents per barrel for sacks, making the invoice selling price of the cement and sacks one dollar and twenty-five cents ($1.25) per barrel.

To constitute a part of the contract, usage and custom must be of such a general nature as to be considered within the contemplation of the parties.

=17. Contracts in Writing.= Parties may make contracts verbally, as well as in writing. A contract is not illegal because it is verbal. It is good business policy to make important contracts in writing. Their terms are easily proven. There is not the temptation to attempt to vary the terms. Parties cannot claim they did not understand each other. It may be laid down as a general rule that oral contracts are as legal as written ones. By the term, _legal_ is meant that the law does not prohibit them. Parties may lawfully make oral contracts, and carry them out if they choose. Some contracts, however, are not enforceable at law unless in writing. These contracts are legal. Parties may lawfully make them and voluntarily carry them out, but they cannot invoke the aid of the law in enforcing their terms.

=18. Statute of Frauds.= The class of contracts, required by law to be in writing in order that they be enforceable, is said to be within the Statute of Frauds.

The Statute of Frauds originated in England in 1677. It was passed for the purpose of preventing frauds and perjuries. It required that certain important contracts must be made in writing, in order to be enforceable at law. The purpose of the statute was to remove the temptation of fraud and perjury in connection with the making and enforcing of certain contracts. Two sections of the English statute apply especially to contracts; the fourth and the seventeenth. The fourth section is as follows:

"No action shall be brought whereby to charge any executor or administrator, upon any special promise to answer damages out of his own estate; or whereby to charge the defendant upon any special promise, to answer for the debt, default, or miscarriage of another person; or to charge any person upon any agreement made upon consideration of marriage; or any contract or sale of lands, tenements or hereditaments, or any interest in or concerning them; or upon any agreement that is not to be performed within the space of one year from the making thereof; unless the agreement upon which such action shall be brought, or some memorandum or note thereof shall be in writing and signed by the party to be charged therewith, or some other person thereunto by him lawfully authorized."

The seventeenth section of the English Statute of Frauds is as follows:

"No contract for the sale of any goods, wares, or merchandise for the price of ten pounds sterling or upwards, shall be allowed to be good except the buyer shall accept part of the goods so sold, and actually receive the same, or give something in earnest to bind the bargain, or in part payment, or some note or memorandum in writing of the said bargain, be made and signed by the parties to be charged by such contract or their agents thereunto lawfully authorized."

The English Statute of Frauds has been enacted in substance in all the states. Reduced to single propositions the statute provides:

1. That an executor or administrator shall not be bound by contract to pay damages out of his own estate, unless the contract be in writing.

For example, _A_ is executor of _B's_ estate. _C_ is a creditor of _B_. _A_ orally promises _C_ to pay _B's_ debt. This contract is not enforceable because not in writing.

2. A party promising to answer for the debt, default or miscarriage of another, shall not be bound unless the contract is in writing.

For example, if _A_ owes _B_ $100 and _C_ promises _B_ to pay _A's_ debt, the contract is not enforceable if not in writing. This clause of the statute is discussed more at length in the chapter on suretyship.

3. A contract made in consideration of marriage is not enforceable unless made in writing.

For example, _A_ orally promised _B_ that if he would marry her, she would convey to him her farm. _B_ married _A_, but could not enforce the contract. A promise to marry is not within this section of the statute.

4. Any contract or sale of lands must be in writing to be enforceable.

For example, _A_ orally promises _B_ to sell his house and lot for ten thousand dollars ($10,000.00). The contract is not enforceable. Most of the states do not require that leases of less than a year's duration be in writing, to be enforceable.

5. An agreement, not to be performed within the space of one year, must be in writing to be enforceable.

For example, _A_ orally promises to work for _B_ as sales agent for three years. This contract is not enforceable.

6. No contract for the sale of goods the price of which exceeds fifty dollars ($50.00) shall be enforceable unless made in writing.

This provision of the English Statute has not been reÎnacted by all the states. About half the states do not require that contracts for the sale of personal property shall be in writing, regardless of the price involved. Some of the states fix the price as high as two hundred dollars ($200.00) and others, as low as thirty dollars ($30.00).

The details of the entire contract need not be in writing to satisfy the provisions of the statute. A memorandum embodying the substance of the agreement, showing the consideration, and signed by the party to be bound, or by his authorized agent, is sufficient.

Contracts called _specialties_, have to be in writing, regardless of the Statute of Frauds. The most common examples are bills and notes, drafts and checks. These special contracts are made to circulate as money, and must be reduced to writing to be enforceable. There can be no such thing as an oral check, or draft, or promissory note. The oral contract for which they are given may be enforced, if not within the provisions of the Statute of Frauds.

=19. Contracts by Correspondence and Telegraph.= Parties need not meet personally to enter into contracts. They may legally make them by telegraph or by letter.

It is well settled by the courts that a party may make an offer by letter, and that in so doing he impliedly gives the party addressed, the right to accept by letter. In law, the contract is complete the moment the letter of acceptance is mailed, regardless of its ever being received.

The offeror may stipulate in his offer by letter, that the contract shall not be made until he is in receipt of a reply. In this event, the acceptor's letter must actually be received by the offerer, before the contract is complete. But if no such stipulation is made, the contract is complete when the letter of acceptance is mailed.

If no time for acceptance is stipulated in the offerer's letter, the acceptor has a reasonable time in which to accept. What is a reasonable time, depends upon the nature of the transaction, and the circumstances surrounding it. If the offeror stipulates in his letter that the offer must be accepted by any stipulated time, the offer, of itself, lapses at the expiration of that time. If _A_ mails a letter to _B_, offering to sell one hundred bushels of wheat for one hundred dollars ($100.00), and the following day _B_ mails a letter, properly addressed, postage prepaid, to _A_, accepting the offer, and the letter is lost, the contract is complete and _B_ may recover from _A_ thereon.

If _A_, by letter offers to sell _B_ one hundred bushels of wheat for one hundred dollars ($100.00), the offer to remain open until Thursday, and _B_ mails his letter of acceptance Wednesday, and the letter is lost, the contract is binding and _A_ is liable thereon. If _A_ by letter offers to sell _B_ one hundred bushels of wheat for one hundred dollars ($100.00), the offer to be accepted upon receipt of _B's_ reply, and _B's_ reply is lost in the mails, there is no contract.

=20. Revocation.= It is a well recognized principle of contracts that an offer may be revoked, or withdrawn, at any time before acceptance. In case of revocation by mail, however, the letter of revocation must be received by the acceptor, before he has mailed his letter of acceptance. For example, _A_ mails _B_ a letter offering to sell _B_ one hundred bushels of wheat for one hundred dollars ($100.00). _B_ mails his letter of acceptance. By the next mail _B_ receives a letter of revocation. The contract is valid since the letter of revocation was not received, until after the letter of acceptance was mailed.

The only offers that cannot be withdrawn at any time before acceptance, are what are known in law as _options_. Options are contracts to keep an offer open for a stipulated length of time. They require a consideration, an agreement and all the elements of an ordinary contract. They are contracts. _A_ agrees by letter to sell _B_ one hundred bushels of wheat, and to keep the offer open three days. On the second day, and before _B_ has mailed his acceptance, _B_ receives a letter from _A_, by which _A_ withdraws his offer. _B_ cannot now accept _A's_ offer, since there was no consideration for _A's_ promise to keep the offer open three days.

_A_ writes _B_, offering to sell him one hundred bushels of wheat for one hundred dollars ($100.00), and to keep the offer open for ten days. _B_ writes _A_ that he will give him $2.00 if he will keep the offer open ten days. _A_ accepts the offer. On the sixth day _B_ receives a letter from _A_ revoking the offer to sell, and on the following day _B_ mails his letter of acceptance. There is a valid contract in this case, since _B_ had a contract with _A_ based on a valuable consideration to keep the offer open ten days.

Contracts by telegraph are analogous in principle to contracts by letter. An offer by telegraph impliedly authorizes the receiver to accept by telegraph and the offer is accepted when the reply message is deposited with the operator. If lost, or not sent, the contract is not affected in the least.

=21. Contracts under Seal.= Formerly, at common law, contracts under seal were frequent. At the present time few contracts are made under seal. Originally a seal was an impression made in wax placed on a written document. Sealed instruments differ from other written instruments in that they import a consideration. At common law, no consideration need be proven to a sealed instrument. Formerly, private seals were in common use. Later, a scroll made with the pen or a line or any mark designated as a seal was sufficient.

Private seals have been abolished by statute in many of the states, so that their use is now limited. The modern tendency is not to use sealed instruments, or when used, to regard them as different in no respect from other contracts.

=22. Sunday Contracts.= All the states of this country have statutes prohibiting the transaction of business on Sunday. These statutes are based on "the Lord's Day Act" of England. The English statute provides that persons shall not do or exercise any worldly labor, business or work of their ordinary callings, upon the Lord's Day, or any part thereof, works of necessity and charity only excepted.

While the statutes of the different states differ in details, they are based upon the English statutes. Under the English statute, it is difficult to determine in many cases what constitute "works of necessity and charity." The duties of clergymen, physicians and of nurses clearly are covered. It is sometimes stated that a person cannot make contracts, within the ordinary scope of his customary business, on Sunday. This is true, if it does not relate to charity or necessity. Deeds, notes and ordinary contracts, made and delivered on Sunday are void. Subscriptions for church funds may legally be made on Sunday.

=23. Illegal Contracts.= A contract prohibited by law, or made for the purpose of doing something prohibited by law, is illegal, and void. If _A_ promises _B_ one hundred dollars ($100.00) if _B_ will poison _C's_ horse, the contract is contrary to law and illegal. If _B_ poisons _C's_ horse, he cannot recover the one hundred dollars ($100.00) from _A_.

Contracts which are against public policy are illegal and void. Public policy means the public welfare. Marriage brokerage contracts and contracts in restraint of trade come within this provision. Lobbying contracts, contracts to influence votes, and for railroad rebates are against public policy and void.

=24. Wagering or Gambling Contracts.= In England, at common law, wagering or gambling contracts were valid. Gambling contracts were recognized as legal by some of the states at one time. At the present time, by statute the states declare gambling contracts illegal and void.

A contract for the sale of goods, to be delivered in the future, even though the seller does not have possession of the goods at the time the contract of sale is made, but expects to purchase them from a third person, is not regarded as a gambling contract, and is valid.

Contracts for the purchase of stocks or goods in which there is no expectation to deliver, but simply an agreement to pay the difference in price at a certain date according to the state of the market, are gambling contracts, and void.

=25. Fraud and Duress.= Fraud may be said to be misrepresentation of a material fact, known by the party making the misrepresentation to be false, and made for the purpose of influencing the other party to the contract, and acted upon by the other party to his detriment.

For example, _A_ offers to sell _B_ a horse for two hundred and fifty dollars ($250.00). He tells _B_ the horse is sound, knowing that the horse has a disease which renders him worthless. He makes the representation of soundness for the purpose of inducing _B_ to buy. _B_ relies upon the representation, purchases the horse, and afterwards discovers the worthless condition of the horse. _B_ can return the horse and recover the purchase price. This is known as rescinding a contract on the ground of fraud.

A fraudulent contract is not void, but voidable. The defrauded party may avoid the contract if he chooses, but the contract itself, is not without effect, simply by reason of the fraud.

A mere failure to disclose facts or conditions, if not accompanied by active measures to distract the defrauded party's attention from the thing to be concealed, ordinarily does not amount to fraud.

If one party by means of threatened or actual violence compels another to enter into a contract, or to part with something of value, the contract is said to have been obtained by duress. Such contracts may be avoided by the injured party, who may recover what he has lost.

_A_, a police officer, wrongfully arrests and imprisons _B_ and releases him only after _B_ has signed a promissory note for one hundred dollars ($100.00). _A_ cannot recover on the note.

_A_, who is superior in physical strength to _B_, by threats of personal violence, compels _B_ to admit that he is indebted to _A_ for one hundred dollars ($100.00), which _B_ pays _A_. _B_ may recover the money from _A_. The contract is voidable on account of duress.

=26. Mistake.= One of the essential elements of a contract is that there must be a meeting of the minds of the contracting parties. If there is a mutual mistake on the part of the contracting parties, their minds do not meet and no contract results. _A_ offers to sell _B_ his farm for five thousand dollars ($5,000.00). _A_ has two farms. _A_ has one in mind, and _B_ the other. Their minds do not meet and there is no contract.

A mistake as to the legal effect of a contract does not avoid it. This is known as a mistake of law.

A mistake on the part of one of the parties only, ordinarily does not avoid the contract.

=27. Impossible Contracts.= Parties may enter into any kind of a contract they choose, so long as the provisions and conditions are legal. As a general rule, a party is liable in damages to the other party, for failure to observe and carry out the terms of his contract. There is, however, a class of contracts, known in law as impossible contracts. Many contracts are made upon the assumption that the persons making the contract, or the particular thing under consideration will continue to exist until the contract is performed.

_A_ agrees to paint a picture for _B_, for one thousand dollars ($1,000). _A_ fails in health or dies. _A_ or his estate, is not responsible in damages to _B_, since the contract contemplated _A's_ remaining in health and life.

_A_ agrees to make _B_ a chair out of a particular piece of walnut lumber. The lumber is destroyed by fire through no fault of _A_. _A_ is not liable in damages, since the parties contemplated the continued existence of the lumber. If, however, _A_ contracts to build _B_ a walnut chair within ten days for fifty dollars ($50.00) and his factory and walnut lumber are destroyed by fire, _A_ is answerable to _B_ in damages, for failure to deliver the chair. He has entered into a lawful contract, and has not excepted liability on account of fire.

A contract for personal services is rendered of no effect by the failure of health, or by death of the party, who is to perform the services. Where, however, the contract provides for the doing of a certain specific thing, not to be performed by a certain person, and not depending upon the continued existence of a certain thing, the parties are bound to perform, regardless of accident.

Floods, earthquakes or lightning do not excuse performance. These accidents are known in law as _Acts of God_. (See _Acts of God_ chapter on Carriers.) Acts of God do not excuse performance unless expressly provided against in the contract.

A law changed after the contract is made, making it unlawful to perform the contract, excuses performance.

Strikes do not render it impossible to perform contracts, within contemplation of the law. If a party desires to become exempt from performance by reason of strikes, he must put such a provision in his contract.

If the party to the contract, to whom the performance is due, renders performance impossible for the other party, the latter is excused on the ground of impossibility. For example, _A_ contracts to do the wood finishing on _B's_ house within six months, _B_ to construct the masonry work. _B_ fails to construct the masonry work; this exempts _A_ from liability.

=28. Conflict of Laws.= The laws of different states differ in some particulars. Where this difference affects the interpretation or enforcement of a contract, the doctrine of conflict of law applies. If a contract is valid in the state where made, it is usually valid everywhere. This rule is subject to the limitation that a state will not enforce a contract clearly against the policy of its own laws. If a contract is made in one state, to be performed in another, the laws of the latter apply. Otherwise, the laws of the state where the contract is made apply. The laws relating merely to the court procedure or the method of enforcing a contract, belong to the state called upon to enforce the contract, and, even though the laws of the state where the contract was made differ, the former will apply.

The laws of New York permit an express company to limit its liability for loss of goods to fifty dollars ($50.00), if so stipulated in the bill of lading, in case no valuation is fixed by the shipper. The laws of Ohio do not permit an express company to limit its liability in this way. _A_, in New York, shipped goods valued at four hundred dollars ($400.00) to _B_, in Cleveland. _A_ placed no valuation on the goods and accepted a receipt limiting the liability of the express company for loss of the goods, to fifty dollars ($50.00). The goods were lost. _B_ sued the express company in Ohio for the value of the goods. The court held that the law of Ohio held, since, by the terms of the contract, the goods were to be delivered in Ohio.

=29. Assignments of Contracts.= By assignment of a contract, is meant the transfer of one's property rights in the contract. One cannot assign his duties under a contract. For example, _A_ contracts with _B_ to have the latter build him a house, for five thousand dollars ($5,000.00). _B_ cannot transfer to another, the obligation on his part to construct the house. _B_, may, however, transfer to another, his right to recover the money for the house. _A_ may also transfer to another, his right to have the house constructed.

Contracts for personal service such as the painting of a picture, or the writing of a book, cannot be assigned. In such cases the personal work of a particular person is contracted for and cannot be transferred.

An assignment of a contract is a contract for the sale of a property benefit of a contract. The assignment must contain all the elements of a simple contract. The assignor of a contract can transfer only such property rights as he possesses. The other party to the contract retains any defense against the assignee, which he had against the assignor. _A_ agrees to build a house for _B_, for five thousand dollars ($5,000.00), according to certain plans. _A_ constructs the house with variations, subjecting him to a reduction in price of five hundred dollars ($500.00). _A_ assigns his rights in the contract to _C_ and _C_ can compel _A_ to pay him only four thousand five hundred dollars ($4,500.00). The defense of _B_ against _A_ is good against _A's_ assignee, _C_.

Upon assigning a contract, the assignor or assignee must notify the other party to the contract, of the assignment, else payment to the assignor will discharge the other party. For example, _A_ owes _B_ one hundred dollars ($100.00). _B_ assigns the claim to _C_. _C_ does not notify _A_ of the assignment and _A_ pays _B_. _B_ is insolvent and _C_ cannot recover from him. _C_ cannot recover from _A_, since _A_ has received no notice of the assignment.

The following is a recognized legal form of assignment.

For valuable consideration, I hereby assign all my right, title and interest in the annexed (account, contract, or whatever the instrument may be) to______

_____________________ Signature of assignor.

Date_____________

=30. Joint and Several Liability in Contracts.= If _A_ makes a contract with _B_, only two parties are bound by the contract and are liable for its breach. If _A_ and _B_ contract with _C_ and _D_, four parties are bound and are liable. _A_ and _B_ may be liable as one party to _C_ and _D_, or they may be liable as two parties to _C_ and _D_. If the contract shows by its terms that _A_ and _B_ contract as a unit, and not as separate individuals, their contract is said to be _joint_. If the terms of the contract show that _A_ and _B_ intend to contract as individuals, as well as a unit, their contract is said to be _joint_ and _several_. If the terms of the contract show that _A_ and _B_ intend to contract as individuals only, and not as a unit, their liability is said to be _several_.

The importance of this distinction is that in case of a joint obligation, all the joint obligors must be joined when sued, else the case may be dismissed if objection is made; while in case of a joint and several obligation, or of a several obligation, individual obligors may be sued separately.

A promissory note reads, "We promise to pay" and is signed by _A_ and _B_. This is a joint obligation, and in a suit thereon _A_ and _B_ must be joined, or the one sued may have the case dismissed, by reason thereof. If, however, judgment is rendered against both, and they hold no joint property, the creditor may enforce his judgment against either. This is known in law as, _liability in solido_. A promissory note reads, "We or either of us jointly and severally promise to pay," and is signed by _A_ and _B_. _A_ and _B_ are severally, as well as jointly liable, and may be sued separately.

Where two or more parties sign a contract, binding themselves to do one thing of a series of things, the law presumes the obligation to be joint. If the language used shows, that the parties singly, or individually bind themselves to do the thing, or series of things in common, the contract is several, as well as joint. _A_ owes _B_ three hundred dollars ($300.00) upon a promissory note. _C_, _D_ and _E_ sign the following guaranty:

If _A_ fails to pay the note when due, _C_ individually promises to pay _B_ one hundred dollars ($100.00), _D_ individually promises to pay _B_ one hundred dollars ($100.00), _E_ individually promises to pay _B_ one hundred dollars ($100.00).

As to each other _C_, _D_ and _E_, are severally liable. As to _B_,--_C_, _D_ and _E_ respectively are jointly and severally liable, with _A_ for one hundred dollars ($100.00) each.

=31. Discharge of Contract by Performance and Tender.= A contract is terminated, when the parties thereto perform its provisions. The liability of parties ceases by performance of the provisions of the contract. _A_ promises to construct a house for _B_, according to certain specifications, within a year. _B_ promises to pay _A_ five thousand dollars ($5,000.00), upon completion of the house according to contract. _A_, within a year, constructs the house according to the plans and specifications. _A's_ obligation is at an end. _B's_ obligation still requires him to pay _A_ five thousand dollars ($5,000.00), and he is liable to a suit for this amount until it is paid. When _B_ pays _A_ five thousand dollars ($5,000.00), his obligation and the contract are terminated, as to both parties.

Tender of payment is equivalent in law to payment. By _tender_ is meant an offer to pay in recognized legal money. _A_ has an option for the purchase of a house of _B_, for five thousand dollars ($5,000.00). _B_ desires to have the option lapse, having obtained a better offer. If _A_ offers _B_ legal tender before the option expires, the contract is complete in law.

United States statutes stipulate what constitute legal tender. These statutes provide that the following shall constitute legal tender:

1. Gold coin.

2. Silver dollars.

3. Subsidary silver coin up to ten dollars.

4. Nickels and pennies not exceeding twenty-five cents.

5. United States notes, except for duties on imports, and interest on public debts.

Silver certificates, bank notes and private checks are not legal tender.

=32. Discharge of Contract by Subsequent Agreement.= Contracts may be terminated by another contract, made after the contract in question has been entered into. For example, _A_ promises to construct, within one year, a house according to certain plans, for _B_. _B_ promises to pay _A_ five thousand dollars ($5,000.00), upon completion of the house. _A_ completes the excavation of the cellar and _B_ fails in business, and desires not to have the house constructed. He offers _A_ five hundred dollars ($500.00), for the work already done, and to release him from his obligation. _A_ accepts _B's_ proposition. The original contract has been terminated by the subsequent one.

=33. Warranty and Remedies for Breach of Warranty.= A _warranty_ is a contract collateral to the principal contract, by which a party to a contract specifically covenants certain things. Warranties apply especially to sales of personal property. (See _warranty_ under Sales of Personal Property.) _A_ promises to build a house for _B_ and warrants the paint to stand untarnished and uncracked for one year. The covenant on _A's_ part relating to the paint is a warranty.

Breach of warranty ordinarily does not entitle the other party to rescind the contract. That is, it does not permit him to refuse to carry out his part of the contract, but entitles him to bring an action for damages, for its breach.

=34. Recission and Discharge of Contracts by Breach.= If a party fails or refuses to carry out a provision of a contract, he is said to have committed a _breach of contract_. When one party to a contract commits a breach, the other party may accept the breach and sue for damages, or he may refuse to accept the breach and wait until the time for complete performance arrives, and then, if the other party has not performed, sue for damages.

When a party to a contract commits a breach, and notifies the other party of his refusal further to carry out the contract, the other party cannot increase the defaulting party's damages by continuing performance thereafter. For example, _A_ contracts with _B_ to have a fence finished and erected around _A's_ house. After _B_ has half of the fence manufactured and erected, _A_ refuses to go on with the contract. _B_ cannot increase the damages by manufacturing and erecting the balance of the fence. The reason for this is that it would not benefit _B_ at all, but would merely injure _A_. _B_ is entitled to recover his profit for the entire job, when _A_ breaks the contract. He could recover no more by manufacturing and erecting the balance of the fence.

The law does not recognize trivial things. A party cannot claim breach of contract for failure of the opposite party to a contract, to perform an unimportant thing. The law recognizes substantial performance as actual performance. This does not mean that a party cannot put such terms in a contract as he chooses, but means that, in the absence of any provisions of the contract to the contrary, a party is not presumed by law to contract for trivial things. Time of performance is an illustration of this principle. _A_ contracts with _B_ for the building of a house. _B_ promises to complete it in one year. If completed in one year and a day, there is a substantial performance, unless the contract expressly shows that the precise day of performance was regarded as important.

Where contracts provide for separate performances, a failure or refusal to fulfil one performance will not always amount to a refusal or failure to perform the balance. _A_ agrees to ship _B_ five thousand barrels of cement, in car load lots of one hundred and fifty barrels each to be shipped each week. _B_ receives and refuses to pay for the first car. This may not amount to a breach of the entire contract, so as to justify _A_ in refusing to ship the balance. The tendency of American courts, however, is to treat this as as one contract; that is to treat the promises as dependent, and not independent.

The acceptance by one party, of a breach of contract made by the other, and the refusal on the part of the former further to carry out the contract, is known in law as _recission_. To rescind a contract, a party must return what he has received thereunder, called putting the other party _in statu quo_. He must also accept the breach promptly. For example, _A_ promises to sell _B_ three horses to be delivered one each day, upon the three following days. _A_ delivers one and fails to deliver the second. To rescind the contract, _B_ must return promptly to _A_ the horse already delivered. He may then sue _A_ for damages suffered. If _B_ does not promptly return the horse to _A_, he must permit _A_ to go on with the contract, waiving the delay, or pay for the horse already delivered, less damages for _A's_ breach of contract.

=35. Discharge by Bankruptcy.= By a United States' statute, certain persons may become bankrupts and thereby be discharged from their obligations. By the terms of this act, the bankrupt's property is turned over to an officer, called a trustee in bankruptcy who disposes of it, and distributes it _pro rata_ among the bankrupt's creditors. Any person except a corporation, who owes debts, may become a voluntary bankrupt.

The United States statute further provides that certain persons may be declared bankrupts at the instance of their creditors. The United States statute provides that:

"Any natural person, except a wage earner, or a person engaged chiefly in farming or the tillage of the soil, any unincorporated company and any corporation engaged principally in manufacturing, trading, printing, publishing, mining or mercantile pursuits, owing debts to the amount of one thousand dollars ($1,000.00) or over, may be adjudged an involuntary bankrupt, upon default, or on impartial trial and shall be subject to the provisions and entitled to the benefits of this act. Private bankers, but not national banks or banks incorporated under state or territorial laws may be adjudged involuntary bankrupts."

Any of the above enumerated parties may be made an involuntary bankrupt at the instance of creditors if he has committed an act of bankruptcy.

The bankruptcy statute defines an act of bankruptcy as follows:

"Acts of bankruptcy by a person shall consist of his having (1) conveyed, transferred concealed or removed, or permitted to be concealed or removed, any part of his property with intent to hinder, delay or defraud his creditors or any of them; (2) transferred, while insolvent any portion of his property to one or more of his creditors with intent to prefer such creditors over his other creditors; or (3) suffered or permitted, while insolvent, any creditor to obtain a preference through legal proceedings and not having at least five days before a sale or final disposition of any property affected by such preference vacated or discharged such preference; or (4) made a general assignment for the benefit of his creditors, or being insolvent, applied for a receiver or trustee for his property, or because of insolvency a receiver or trustee has been put in charge of his property under the laws of a state, of a territory, or of the United States; or (5) admitted in writing his inability to pay his debts, and his willingness to be adjudged a bankrupt on that ground."

Bankruptcy discharges a bankrupt from his contracts.

=36. Remedies for Breach of Contract.= Originally, at common law, there was no power given a party to a contract, to compel the other party specifically to perform the provisions of the contract. For example, _A_ promises to pay _B_ one thousand dollars ($1,000.00) for one thousand bushels of wheat, to be delivered within ten days. _B_ fails and refuses to deliver the wheat. _A_ could not at common law, and cannot under the present rules of law, compel _B_ to deliver the wheat. _A's_ remedy is an action for damages. _A_ may go into the market at the time and place of delivery, provided for in the contract, and purchase one thousand bushels of wheat of the quality provided for in the contract, and collect as damages from _B_ the advance in price, if any, together with expenses connected therewith. If _A_ is obliged to pay one thousand five hundred dollars ($1,500.00) for the wheat, which by the terms of the contract, he had purchased for one thousand dollars ($1,000.00) from _B_, he may recover five hundred dollars ($500.00) damages from _B_. If _A_ succeeds in obtaining the wheat for nine hundred dollars ($900.00), he can only recover nominal damages from _B_, commonly five cents, for breach of contract. In case _A_ obtains the wheat for nine hundred dollars ($900.00), _B_ cannot recover one hundred dollars ($100.00) from _A_, since he has violated the contract, and cannot take advantage of his own wrong.

Parties frequently fix the amount of damages for a possible breach at the time the contract is made. This is known in law as _liquidated_ damages. If reasonably compensatory, the courts will recognize and enforce liquidated damages; if clearly unreasonable they are regarded as penal, and the courts will not enforce them. For example, _A_ agrees to construct a rolling mill for _B_, for fifty thousand dollars ($50,000.00), and to complete the structure within one year, and to pay damages of two hundred dollars ($200.00) per day, for each and every day consumed, in excess of a year in finishing the structure. If this is a reasonable loss to _B_, for the failure to have the use of the mill, the courts will enforce the provisions; otherwise they will remit the excess over the fair value of _B's_ loss.

=37. Equity and Specific Performance.= Originally, at common law in England, the king and his subordinates heard suits. Certain specified actions or remedies, only, were allowed. It was soon observed that many complaints were made, and disputes arose, which did not come within the scope of these common law actions. The king appointed a chancellor to assist him. It was the duty of the chancellor to hear disputes, not within the scope of the recognized common law action, and to determine and decide these upon equitable principles. This court became known as the court of _chancery_, or court of _equity_. A regular system of courts of chancery grew up in England, with fixed rules of procedure and of recovery. This country has Courts of Equity. In many states, the same judge sits as a court of law, and of equity. Equity does not hear cases where there is a complete and adequate remedy at law. Equity courts have a judge only, and no jury. Courts of equity sometimes specifically enforce contracts in case there is no adequate remedy at law. For example, _A_ purchases a lot of _B_ in a particularly desirable locality. There is no other vacant lot near it. In case _B_, refuses to carry out his contract, by conveying this lot to _A_, equity will compel _B_ to convey the lot to _A_. Here _A_ has no adequate remedy at law. Money damages will not enable him to procure what he contracted for.

Specific performance is rarely granted in case of sales of personal or chattel property. There are a few exceptions. If _A_ purchases "Maud S." from _B_ for ten thousand dollars ($10,000.00), "Maud S." being a two minute race horse, purchased for breeding purposes, and _B_ refuses to deliver her, a court of equity might grant specific performance. Money damages might not enable _A_ to purchase a similar horse. The same principle applies in case of purchases of rare works of art.

While a contract for personal services cannot be specifically enforced by a court of equity, some relief may be granted by injunction. For example, _A_, an actress, agrees to perform for one year for _B_ and later refuses. While a court manifestly cannot compel _A_ to perform for _B_, it will by injunction prevent her performing for others.

=38. Forms of Contracts.= The following is a form of simple contract.

Chicago, Ill., June 23, 1909.

Contract entered into this.... day of........ 1909, by and between _A_, the first party, and _B_, the second party.

In consideration of the promises hereinafter made by the second party, the first party agrees........ (here state first party agreement).

In consideration of the promises of the first party, the second party agrees........ (here state agreement of second party).

Signed............. First Party. Signed............. Second Party.

The following is a form of a formal contract.

Articles of agreement entered into in New York City this.......day of.... 190-by and between _A_, hereinafter designated as the first party, and _B_, hereinafter designated as the second party.

Whereas, the first party is a wholesale dry goods merchant having a place of business in New York City, and is desirous of employing a traveling salesman, and whereas, the second party is a traveling salesman having had ten years' experience in the dry goods business, now, therefore in consideration of the promises hereinafter made by the second party the first party agrees,

First. To pay the second party the sum of $2400 in installments of $200 payable each month for a period of 12 months.

Second. To pay the second party's traveling expenses not to exceed $50.00 per week, to be mailed weekly as ordered by second party.

Third. To furnish second party a full line of samples.

In consideration of the promises of the first party the second party agrees,

First. To devote his entire time and attention to the business of selling goods of the first party.

Second. To furnish lists of customers called upon each day, said lists to be mailed to said first party, New York address, each evening.

Third. To waive his right to any salary in excess of his traveling expenses if his sales do not average $5000 per week.

In witness whereof the parties have affixed their names and seals in duplicate the day and year above written.

.............First Party. .............Second Party.

PRINCIPAL AND AGENT

=39. In General.= _Agency_ is the term applied to the legal relation existing between persons who transact business or perform duties through representatives. Few duties are performed, and few business transactions are completed solely through the personal efforts of the interested parties. Most business dealings are completed in part, at least, by representatives or agents. Much important business is transacted by corporations. Corporations must act through agents. They have no identity apart from officers and agents. Individuals, as well as the smaller business concerns, perform many of their duties and make many of their contracts through representatives or agents. The law relating to agency, next to the law of contracts is probably the broadest as well as the most important branch of commercial law. Its application is almost universal. A distinction is sometimes drawn between representatives appointed to make contracts with third persons, and representatives appointed to perform menial or mechanical work, by calling the one class, agents, and the other servants. There is little reason for any such distinction. The same rules of law apply to both agents and servants. The principal distinction is in the nature of the service, which need not be considered in discussing the general legal principles.

The party appointing another to represent him in his relation to third persons is called the _principal_. The person appointed to act as a representative is called the _agent_. The legal relationship existing between the principal and the agent, and the principal, agent and third person, constitutes the _law of agency_. If a dry goods merchant, _A_, employs _B_, a traveling salesman, to sell his goods, and _B_ sells goods to _C_, _A_ is the principal, _B_ the agent, and _C_, the third person contracting with _A_, through _A's_ agent _B_.

=40. Who May be a Principal.= A principal is one who appoints an agent. _A_, employs _B_ to deliver goods; _A_ is principal and _B_ agent. Any person, natural or otherwise, competent to enter into a contract, may enter into a contract through an agent. There is one possible exception to this rule. It is a well recognized rule of law that an infant cannot appoint an agent. An infant may enter into a contract which is not void at law, but which is merely voidable. (See subject, "Infant" in Chapter on Contracts.) That is, an infant may lawfully make and carry out a contract. The law does not prohibit it. But the law will not compel an infant to carry out his contracts, except for necessaries. When it comes to the appointment of an agent, however, the law refuses to give an infant this power. By an infant is meant a person under legal age.

Any person of legal capacity may appoint an agent. In other words, a person may do through an agent the things he, himself, may do. An insane person, an idiot or a drunken person cannot appoint an agent. A corporation may do business through agents, limited only by its corporate capacity. A partnership may do business through agents, limited only by the purposes for which the partnership is formed.

=41. Who May be an Agent.= Any one, except a very young child and persons whose interests are opposed to those of the principal, may act as agent. A child may be employed to deliver goods, and thus make and complete contracts for his principal. Persons of unsound mind may serve as agents. Persons who cannot act as principal, through lack of capacity to contract, may act as agent for others. For example, _A_, fourteen years old, cannot be bound by a contract with _B_ for the purchase of one hundred bushels of wheat, but _A_ may be employed as agent by _C_, a competent person, to purchase of _B_ one hundred bushels of wheat.

A person whose interests are opposed to those of his principal is disqualified from acting as agent. That is, a person cannot be agent for both parties to the same transaction. For example, if _A_ is employed as traveling salesman by _B_ to sell goods, he cannot serve as agent for _C_ in the purchase of goods from _B_ without the knowledge and consent of both _B_ and _C_.

Artificial persons, such as partnerships and corporations, may act as agents. It is usually held that children under seven years of age cannot act as agents, by reason of tender age.

=42. How Agents May be Appointed.= Agents may be appointed by any act of the principal which shows that it is the principal's will that the agent shall act as the principal's representative.

Agents may be appointed by oral statement, by written document, by conduct on the part of the principal, or by ratification of an unauthorized act.

Most agencies are created by oral authority. Any word by which the will of the principal is manifested is sufficient. _A_ tells _B_ to order a barrel of flour from _C_. This constitutes _B_ an agent for _A_. _B's_ asking _A_ if he shall order a barrel of flour from _C_, to which _A_ nods, constitutes _B_, _A's_ agent. _A_ writes to _B_ and requests him to order a carload of flour from _C_. This constitutes _B_, _A's_ agent. _B_, without any authority from _A_, orders a car load of flour from _C_, which _A_ accepts, and for which he promises to pay. This constitutes _B_, _A's_ agent by ratification.

Some few contracts of agency must be in writing. _A_ employs _B_ to act as his salesman for a period of two years. As between _A_ and _B_, the contract is not enforceable, by reason of the _Statute of Frauds_ (see Statute of Frauds, chapter on Contracts). But as between _A_ and third parties dealt with by _B_ as agent, _A_ cannot refute the agency.

Some contracts which must be made in writing, such as land contracts require the agent's authority to be in writing.

If a person knowingly permits another to act as his agent, he cannot afterwards repudiate the agency. For example, _A_ stands by and watches _B_ sell _A's_ horse to _C_. Although _B_ had no authority to make the sale, _A_, by his conduct, cannot claim there was no agency.

An agent's assertion of agency does not of itself constitute an agency. If _A_, without _B's_ knowledge, claims to _C_ to have authority to sell _B's_ horse and does attempt the sale, title to the horse does not pass to _C_, because _A_ had no authority to make the sale. A mere declaration of authority on the part of the agent without the knowledge or consent of the principal does not create an agency.

=43. Purposes for Which an Agency May be Created.= With the exception of fulfilling contracts for personal services, a person may do, through an agent, anything he may lawfully do by himself. For example, _A_ employs _B_, an artist of fame, to paint a picture. Manifestly _B_ cannot employ a student or another artist to paint the picture. _A_ contracted for _B's_ personal skill and work, and cannot be made to accept the work of another. In the majority of business transactions, however, the personal element does not enter. The thing to be done, or the article to be furnished, is the feature of most contracts. By whom the thing is done, or by whom the article is furnished, does not matter. For example, _A_ purchases one hundred bushels of wheat from _B_. _B_ delivers the wheat through his agent. Ordinarily _A_ cannot, nor does he wish to complain. _A_ contracts with _B_ to have _B_ furnish him an oak chair of given dimensions. _B_ employs _C_ to make and deliver the chair. _A_ cannot complain so long as the chair corresponds to the terms of the contract.

A party cannot do through another what he himself cannot lawfully do. For example, a party cannot employ an agent to purchase votes for him. Neither can a person lawfully corrupt legislators by means of an agent, nor lawfully commit a crime by means of an agent.

=44. Ratification of Agency.= Where a person assumes to act as an agent for another without authority, or in performing an agency, exceeds his authority, he does not bind the person for whom he assumes to act, unless such person subsequently, with knowledge of the fact, consents to be bound thereby. Such assent is known in law as _ratification_.

A person cannot ratify an act which he, himself, has no power to perform. For example, _A_, pretending to act for _B_, offers _C_, a legislator, one hundred dollars ($100.00) to vote against a certain measure. _B_ cannot ratify this act, since he himself cannot lawfully perform it. If however, _A_, knowing that _B_ desires a certain rare picture, finds it and orders it in _B's_ name, _B_ may ratify the act by accepting and paying for the picture.

Much discussion has arisen as to the ability of a person to ratify a forgery of a negotiable instrument. The courts differ on this question. It is, however settled that in case of a forgery, if the alleged principal fails to deny the signature when the paper is presented to him, or by remaining silent, induces another to purchase it, or to injure his position by reason thereof, the alleged principal is estopped from further denying the authenticity of the signature, and may be compelled to pay the instrument. For example, _A_ forges _B's_ name to a promissory note payable to _C_. _C_ presents the note to _B_ for payment. _B_ may refuse to pay the note by reason of forgery. If, however, _A_ forges _B's_ name to a note, payable to _C_, and _D_ shows _B_ the note, saying that he is about to purchase it if it is genuine, and _B_ remains silent and permits _D_ to buy the note, _B's_ silence amounts to a ratification of the forgery and he must pay the note to _D_.

When an alleged principal's attention is called to the fact that an alleged agent has assumed to act as his agent, he must choose between repudiating the act and accepting it. This choice is known in law as the principal's _right of election_.

=45. Classification of Agents.= Agents are usually classified as _universal_, _general_ or _special_. By universal agent is meant an agent empowered to represent his principal in every capacity. A principal could have only one universal agent. In business affairs, a universal agency is seldom, if ever, found. It is useful, however, as a classification to show the different kinds of agents, depending upon the degree of their authority.

A general agent is one authorized to perform all the duties of his principal of a certain kind. _A_, an insurance company, appoints _B_ its sole agent to solicit insurance in the city of Boston. _B_ is a general agent for the purpose of soliciting insurance in the city of Boston. General agencies are common in business practice.

A special agent is one authorized to act for his principal in a particular matter or transaction. For example, _A_ employs _B_, an attorney, to try a certain law suit. _B_ is a special agent.

In practice it is not always easy to determine whether an agent is a general or a special one. A principal does not always limit his agent's powers by actual authority conferred upon the agent. His intention and his instructions to the agent may limit the latter's authority, but third persons may rely upon the apparent authority of the agent, rather than the actual. For example, _A_ employs _B_ as a traveling salesman to sell dry goods. He instructs _B_ not to sell any bills less than five hundred dollars ($500.00) in amount. _B_ sells _C_ a bill amounting to four hundred dollars ($400.00), _C_ does not know of the limitation of _B's_ authority. _A_ is bound by _B's_ sales to _C_. _C_ has the right to rely upon _B's_ apparent authority. _A_ has given _B_ actual authority to sell goods, and this authority carries with it the implied or apparent authority to sell in any reasonable amounts.

Actual authority to do certain things carries with it the right to do those things which impliedly, or from custom or usage apparently accompany the authority conferred.

Third persons dealing with an agent must, on the other hand, ascertain at their peril that an agent has the authority claimed. For example, if _A_, without authority, claims to be agent for _B_, and sells an order of goods to _C_, and collects from _C_ a certain amount, when in fact he is not the agent of _B_, _C_ has no contract with _B_. A third person dealing with an agent must ascertain at his peril, that the alleged agent has authority from his principal to act as agent in a certain capacity. When this is ascertained, the third person has a right to treat the agent as having the authority to do all the things necessarily or customarily belonging to his agency.

=46. Duties of Principal to Agent.= The relation of a principal to his agent arises out of a contract, express or implied. The contract may expressly provide that the agent is to receive a specified sum for his services. In this event, the principal is legally liable to pay this amount to his agent. The principal may have a defense to his contract, the same as to any contract. But if the agent has performed his contract of agency, he can enforce payment therefor. For example, _A_ employs _B_ to sell furniture for a compensation of one hundred dollars ($100.00) per month and expenses, the contract to cover a period of twelve months. When _B_ performs this service, he may, by legal action, compel _B_ to pay him one thousand two hundred dollars ($1,200.00). If _B_ fails to work for _A_ as provided for by the terms of the contract, and at the expiration of six months enters _C's_ employ, in most jurisdictions, he can recover nothing from _A_, since he has not fulfilled his contract. In some jurisdictions, he may recover from _A_ the value of his services, less the damages _A_ has suffered by reason of breach of contract.

Many agencies are created without any express provision as to compensation. In this event, a contract relation exists, as much as in the former case. There is an implied contract that the agent shall receive a reasonable compensation for his services. For example, _A_, a contractor, requests _B_, a teamster, to haul stone for the construction of a bridge. _B_ works for _A_ a week, nothing having been said as to compensation. _B_ can recover from _A_ the reasonable and customary value of his services.

There is also a duty on the part of the principal to protect his agent against unnecessary risks of injury. There is a duty on the part of a master to protect his servant. An agent or servant assumes the risks which naturally belong to the kind of work in which he is engaged. For example, _A_ employs _B_ to work in a saw mill. _B_ assumes the risks incident to the employment. If a log accidentally rolls on him, _A_ is not liable in damages, or if _B_ carelessly cuts his hand on the saw, _A_ is not responsible. But if the boiler explodes through carelessness of _A_, or if the saw flies to pieces on account of wear, and injures _B_, _A_ is liable.

It is said that a principal or master is obliged to furnish his agent or servant with a reasonably safe place in which to work, and with reasonably safe tools and instruments with which to work. If the principal negligently fails to these things, and the servant is injured without negligence and carelessness on his part, the principal is liable to him in damages for any injuries.

=47. Duties and Liabilities of Principal to Third Persons.= When a person employs another to act for him, he is liable to third persons for the acts performed by the agent, so long as the agent acts within his authority. If _A_ appoints _B_ his agent to purchase live stock, _A_ must pay third persons for the live stock purchased in his name by _B_. A person employing another to act as his agent is responsible to third persons for acts performed by the agent, which are within the apparent authority of the agent, as well as for the acts which are within the actual authority. If _A_ appoints _B_ his agent to purchase live stock and instructs him to purchase only hogs, but limits his authority to pay over five cents per pound, and _B_ purchases at five and a half cents from _C_, who does not know of this limitation, _A_ is bound by the contract. In giving an agent authority to do certain things, the agency carries with it the customary or implied authority to perform those acts incident to the general character of the agency. Thus, authority to purchase usually carries with it authority to fix the price. This is especially true of authority to sell.

Notice to an agent is notice to a principal. If an agent is authorized to sell goods, and in making a sale, is notified by the purchaser that the goods are purchased conditionally, in the absence of any special instruction limiting the power of the agent to sell conditionally, brought to the attention of the purchaser, the principal will be bound by the condition.

A principal is liable to third persons for his agent's torts or wrongful acts. If _A_ directs his agent _B_ to destroy _C's_ property, _A_ is liable to _C_ for the damage done. A principal is not only liable to third persons for the damages done under his express direction by his agent, but he is also liable for the acts carelessly done by the agent in the course of his employment. A street car company employs _B_ as motorman. _B_, carelessly and negligently, while operating a car runs over _C_. _A_ is liable for _B's_ negligent act. A principal, however, is not liable for the wrongful acts of his agent, performed outside of his employment. _A_, a street car company, employs _B_ as conductor; _C_, standing on the street insults _B_. _B_ stops his car, gets off and assaults and injures _C_. _A_ is not liable, since _B_ did not commit the act complained of while in the course of his employment, but went outside the course of his employment and acted on his own behalf.

=48. Duties and Liabilities of Agent to Principal.= An agent must obey the instructions of his principal. If he disobeys his instructions, he is liable to his principal for losses sustained. For example, if _A_ employs _B_ to sell flour at four dollars ($4.00) per barrel and _B_ sells one hundred barrels at three dollars and seventy-five cents ($3.75), he must respond in damages to _A_ for twenty-five cents a barrel. If, however, a discretion is given the agent, and he makes a reasonable mistake in using his discretion, he is not liable. If his instructions are not clear, and he carries out what he thinks are his instructions, which prove not to be the desire or intention of his principal, he is not liable.

An agent must account to his principal for money collected, and for moneys or property coming into his possession by reason of his agency. If he deposits money in his own name and it is lost through a bank failure, he is responsible to his principal. If he carefully deposits it in the name of his principal and the bank fails, he is not responsible.

An agent must act carefully in the performance of his principal's work, or as it is usually said, he must not act carelessly or negligently. He must act as a reasonably prudent man would act, under similar circumstances, or be liable to his principal in damages.

An agent must be loyal to his principal's interests. He cannot act secretly for another. He cannot act secretly as agent for both parties to a transaction. If he makes profits in his agency dealings, he must account for them to his principal. _A_ employs _B_ to sell Christmas novelties. _B_, shortly before Christmas receives a large order from _C_, who offers _B_ one hundred dollars ($100.00) in excess of the regular price, if the goods arrive the following day. _B_ succeeds in having the goods reach _C_ the following day. _B_ must account for the extra one hundred dollars ($100.00) to _A_, his principal.

An agent must faithfully carry out his agency. He is responsible for failure to act loyally. _A_ employs _B_ to sell butter. _B_ obtains an offer from _C_, a rival butter manufacturer, to commence work for him on commission two weeks hence. _B_ tells his customers not to purchase for two weeks, at which time he can make them a better price. _B_ is liable to _A_ in damages for this act of disloyalty. He has broken his contract.

An agent, who is employed to perform personal services, cannot transfer his responsibility or agency to another.

One who agrees to act as agent for another without compensation, cannot be forced to fulfil his agency. He is not liable in damages to his principal for failure to act, but if he chooses to act without compensation, he is liable if he acts with great negligence. If _A_ requests _B_ to drive his horse home and _B_ drives the horse and leaves him without tying him, and the horse runs away and destroys the carriage and ruins himself, _B_ is liable for gross negligence.

=49. Rights and Liabilities of Agent to Third Persons.= An agent acting within the scope of his authority, in making contracts with third persons, binds his principal by the contract, but does not bind himself. _A_ is authorized by _B_ to purchase a horse. A purchases a horse from _C_, notifying _C_ that he is purchasing as agent for _B_. _C_ must look to _B_ for the purchase price, since _A_ acted solely as agent and is not personally liable under the contract.

If an agent, intending to act as agent, makes a contract in his own name, without informing the third party with whom he is dealing, of the agency, he binds himself. Under these circumstances, he usually binds his principal also. This question is discussed more at length under the title "Undisclosed Principal." If _A_ is employed by _B_ to purchase a horse, and _A_ purchases a horse from _C_ for two hundred dollars ($200.00), without telling _C_ of the agency, the purchase price to be paid the following day, _A_ binds himself personally to pay _C_ the two hundred dollars ($200.00) and _C_ is not obliged to look to _B_ for payment.

If an agent, honestly believing he has authority to act as agent when he has not, makes a contract as agent for his supposed principal, he binds himself personally and not his principal. _A_ writes to _B_, "Purchase for me _C's_ bay team, if same can be secured for two hundred and fifty dollars ($250.00), half payable in six months." _B_ reads the letter and purchases the team in the name of _A_ for two hundred and fifty dollars cash ($250.00), overlooking the condition in _A's_ letter that half was to be paid in six months. _B_ binds himself to _C_ and does not bind _A_.

When an agent falsely or fraudulently represents himself as agent, he binds himself and not his alleged principal.

If an agent, honestly believing he has authority to act, does not have such authority, but discloses all the facts connected with his authority, to the third person with whom he is dealing, he is not personally bound. _A_, having previously acted as agent for _B_, in purchasing onions by the crate, receives the following wire from _B_, "Purchase one hundred crates, ship at once." _A_, supposing this refers to the purchase of onions, shows the telegram to _C_, and tells him that in the only other transaction in which he acted for _B_ he purchased onions, and that he supposes this wire refers to onions. He purchases one hundred crates of onions from _C_, and later discovers that _B_ intended turnips, instead of onions. _A_ is not bound personally. He has acted honestly and revealed all the facts in his possession to _C_, who must act at his risk as to _A's_ actual authority.

=50. Undisclosed Principal.= A principal, whose agent deals with a third person for his benefit, without disclosing the name of his principal, or perhaps without disclosing the fact of agency, is said to be an _undisclosed principal_. For example, _A_ employs _B_ to purchase one hundred crates of oranges. _B_ purchases the oranges from _C_ for _A_ in his own name, not telling _C_ that the purchase is made for _A_. In this case, _A_ is an undisclosed principal.

As a general rule an undisclosed principal, when discovered, is liable upon the contract of his agent.

In case of an undisclosed principal, the agent is liable personally as well as the undisclosed principal. If _A_ instructs _B_ to purchase for him five cars of coal, and _B_ purchases the coal of _C_ in his own name, without disclosing the fact of his agency, _B_ is personally liable to _C_ for the purchase price.

The undisclosed principal is not liable to a third party if the third party with full knowledge of the agency, elects to hold the agent. If _A_ employs _B_ to purchase goods for him, and _B_ purchases the goods in his own name from _C_, and _C_, before payment, learning that the goods were purchased for _A_, elects to hold the agent _B_, by suing him for the purchase price, or by doing or saying anything that shows his determination to hold the agent, rather than the principal, he cannot thereafter hold _A_.

The undisclosed principal may enforce against third persons the contract of his agent. If _A_ employs _B_ to purchase goods from _C_ and _B_ makes the purchase in his own name for future delivery, _A_ may compel _C_ to deliver the goods to him. This rule applies in all cases where the third party is not injured by its application.

The liability of an undisclosed principal to third persons, upon contracts made by an agent in the agent's name, is subject to the further exception, that when the third party has led the undisclosed principal to believe that he is looking to the agent alone for fulfillment of the contract, and relying upon such conduct the undisclosed principal settles with the agent, he is no longer liable to the third party. In this event the third person is said to be estopped from the right to sue the undisclosed principal. This rule is based upon equitable reasons. There can be no such thing as undisclosed principal in case of a negotiable instrument. No one is liable on a negotiable instrument, such as a note, draft, or check, except the maker, indorser, drawer or acceptor.

=51. Apparent Authority of Agent.= While it is true that an agent must have authority from his principal, before he can bind his principal in the capacity of agent, and while it is equally true that third persons, in dealing with agents, must determine at their peril that the agent has actually received authority to act for his principal, a third party has the right to rely upon the implied and customary powers accompanying an actual authority conferred upon an agent. Few contracts are made express in all their terms. Language is not susceptible of such nicety. In the express or implied contracts used in creating agencies, many things are implied. A third person dealing with an agent, is not limited by the actual authority conferred upon the agent by his principal, if the character of the authority apparently confers other customary or implied powers. Third persons are said to have the right to rely upon the apparent rather than upon the actual authority of the agent. This does not mean that an agent can create an agency and bind his principal without having received any authority from his principal to act as agent, but means that where an authority of a certain character has been conferred upon an agent, third parties dealing with the agent, have a right to rely upon the apparent or customary powers conferred, rather than upon any secret or unexpected limitations upon such authority. For example, an agent has authority to sell silk goods and to make exchanges in silk. This authority is printed on the order sheets furnished the agent. The agent exhibits these order sheets to the customer and exchanges are made. The principal cannot claim that the agent had authority to exchange only goods of the principal's manufacture. The authority conferred upon the agent to make exchanges, apparently was to make exchanges of any silks. The principal cannot complain if third parties rely upon the apparent authority.

=52. Secret Instructions.= So long as the agency is legal, a principal may create an agency of as limited an extent, or of as broad a nature as he desires. So long as the limitations which the principal places upon his agent's authority are not of a nature to mislead third persons, the agent cannot bind his principal by exceeding these limitations. But if a principal confers an authority upon an agent which impliedly embraces a number of powers, the principal cannot limit these powers by secret instructions. The limitations upon an agent's apparent authority must be brought to the attention of the third party. For example, _A_, a wholesale dry goods dealer, may employ _B_, a salesman, to take written orders only. If _B_ attempts to take oral orders, the principal, _A_, will not be bound thereby. But if _A_ gives _B_ authority to take written orders only, and secretly instructs _B_ to take no order less than fifty dollars ($50.00) in amount, or in excess of two thousand dollars ($2,000.00), and _B_ takes _C's_ order for forty-five dollars ($45.00), _C_ not knowing of this limitation, _A_ is bound. If, however, _A_ instructs _B_ to take only written orders, and in amounts ranging only from fifty dollars ($50.00) to two thousand dollars ($2,000.00), and prints these conditions plainly upon the order blank, _C_, in signing one of these order blanks for forty-five dollars ($45.00), does not bind _A_. In this case, _A_ has placed the limitation of _B's_ authority in _C's_ possession.

=53. Wrongful Acts of Agent.= An agent is personally responsible for wrongful acts committed. The fact that he acts in a representative capacity, does not excuse him from committing wrongs, nor does it relieve him from personal liability therefor. The principal, as well as the agent, is liable for the wrong committed, if authorized. If _A_ instructs his agent, _B_, to sell goods by fraudulent representations and _B_, by means of said fraud, sells goods to _C_, _B_ personally, as well as _A_ is liable to _C_, for the wrongful act. In the language of the courts, an agent is liable to third parties for _malfeasance_, but not for _misfeasance_. That is, an agent is liable to a third party for wrongful acts done, but is not liable to third parties for mere failure to observe the terms of his agency. In the latter case, he is liable to his principal only.

=54. Delegation of Authority and Subagents.= Where personal judgment and discretion are required of an agent, he cannot transfer his duties to another, without the consent of his principal. _A_, a wholesale dry goods merchant, employs _B_, an experienced traveling salesman, to sell goods. _B_, by his contract, is bound to give his personal skill to _A_ and cannot employ _C_ to act as salesman for him. _A_ presumptively employs _B_ to use his own skill and judgment. _B_ is not permitted to delegate his authority to another.

Where, however, mere mechanical or ministerial work is to be performed the agent is permitted to employ others to assist him, or to perform the work. For example, _A_ employs _B_, an expressman, to carry his trunk to the depot. _B_ may employ a boy to assist him in performing the work, or may employ another to perform the work. Usage and custom have much to do in determining whether or not an agent is permitted to delegate his authority. The performance of a mere ministerial duty may be delegated. _A_ employs _B_ to act as stenographer in reporting the trial of a case. When it comes to writing out the testimony, _B_ may perform the task himself, or delegate it to another.

When an agent employs a subordinate, or delegates his authority to another on his own responsibility, the agent stands as principal for the sub-agent, and the original principal is not responsible to third persons for the acts of the sub-agent. If, however, the agent is authorized by the principal to appoint a sub-agent, the agent is bound only to exercise care in the selection of such sub-agent, and the original principal is liable to third persons for his acts. The sub-agent is answerable to the principal, and not to the agent for his acts. For example, _A_, a florist, employs _B_ to deliver a box of flowers. _B_ employs _C_. The nature of the duty is such that _B_ may delegate it. But if _C_ is negligent in the performance of the work, _B_ is liable to _A_ for the negligence, for the reason that _A_ did not expressly or impliedly direct _B_ to employ another.

_A_, in Chicago, deposits for collection, a check drawn on a New York bank. _A_ knows that it is the custom of bankers to employ other banks for the purpose of making collections. If the Chicago bank uses due care in selecting another bank to assist in making the collection, and this bank makes the collection and fails before the Chicago bank receives the money, _A_ must stand the loss, and not the Chicago bank. _A_ authorized the employment of a sub-agent. There is some conflict of authority on the legal question involved in the above example.

=55. Agent's Authority to Collect.= An agent authorized to solicit orders is not thereby authorized to make collections on such orders. If, however, the agent is entrusted with the goods, and delivers them at the time the sale is made, he is authorized to receive payment therefor.

An agent authorized to sell, is not authorized to exchange or trade goods. He is authorized to make sales for cash only. If he accepts checks, or sells on credit, he is personally liable for losses. There is a tendency at present to permit the agent to accept checks in payment. The custom of making payment by check is so well recognized in many lines of business, that in some transactions it impliedly gives an agent this authority. This was not formerly the rule, and is still disputed by many courts.

=56. Agent's Signature to Written Instruments.= The proper method for an agent to employ in signing a written instrument, as agent, is to describe himself as agent for his principal in the body of the instrument, and then sign his principal's name at the end thereof, by himself as agent. For example, if _A_, is agent for _B_ in making a contract of sale, the body of the instrument should state that "_B_ by _A_, his agent, agrees," and the signature should be

(_B_..............) (by _A_, his agent)

If the contract is merely signed "_A_, agent," the agent probably binds himself only. This is especially true in case of sealed instruments, such as deeds. In case of promissory notes, an agent who has authority to make such instruments, may make them in the name of his principal without using his own name at all. The more common form, however, is to sign the principal's name, per the agent as agent, or to sign the agent's name as agent for the principal, giving the principal's name. The mere signing of the agent's name as agent is a mere description, and probably binds the agent and not the principal. For example, if _A_ is agent and _B_ the principal, a promissory note executed by the agent should be signed

(_B_..............) (by _A_, his agent)

A simple contract should state in the the body of the instrument that _A_, as agent for _B_, is making the contract, and the contract should be signed

(_B_..............) (by _A_, his agent)

or _A_, agent for _B_. A promissory note or simple contract made and signed in the name of the principal, the agent's name not appearing, is probably binding, but it is not good business practice. The exact condition of affairs should be shown, and the name of the agent, as well as that of the principal, should appear in the document.

=57. Authority of Agent to Warrant.= As to whether or not an agent authorized to sell personal property has implied authority to warrant its quality, is not uniformly settled. If there is any rule on the question, it probably is controlled by usage and custom. If there is a general well known custom to warrant a particular article, the agent has implied authority to warrant the quality of the article sold. If no such usage or custom exists, or if the usage or custom is purely local and not general in its application, the agent has no authority to warrant the quality of the goods sold. It must be remembered that a principal is bound by the general character of authority he confers upon his agent, by the agent's apparent authority rather than by the actual authority, unless the latter is actually brought to the notice of third parties. It has been held that an agent authorized to sell a horse is authorized to warrant the soundness of the horse, and that an agent authorized to sell reapers is authorized to warrant their durability and fitness. It was held that a principal, who authorized an agent to sell goods at a certain price, did not authorize the agent to warrant to third persons that his principal would not sell to others at a less price.

=58. Factors.= A factor, usually called a commission man or consignee, is an agent entrusted with possession of his principal's goods, and ordinarily empowered to sell in his own name. Like any agent who has possession of his principal's goods with power to sell, a factor has power to collect. He differs from a broker in that he has possession of the goods of his principal, and is authorized to sell in his own name, rather than in the name of his principal.

In the absence of contrary custom or express direction, a factor may sell on credit. A factor, until instructed otherwise, may use his discretion as to the time and price of sales, and is entitled to deduct his commission based upon custom in the absence of special contract.

A factor may sue the purchaser in his own name, for the purchase price. The principal may sue in his own name also. Persons dealing with factors may hold the principal responsible for the contracts and representations of the factor, the same as any undisclosed principal. Factors are also personally liable to third persons for their contracts.

A factor must account to his principal for money collected, less his commission and expenses. He is not obliged to keep such money separate from his own, but he must keep accurate account of same, and remit promptly when it is due, according to custom or special contact.

=59. Brokers.= A broker differs primarily from a factor in that ordinarily he does not have possession of the article dealt in, and acts in the name of his principal rather than in his own name. There are many kinds of brokers engaged in common business life. Some of these are insurance brokers, pawnbrokers, bill and note brokers, and merchandise brokers. In the absence or special authority, a broker does not have authority to collect.

=60. Auctioneers.= An auctioneer is a special kind of agent employed to dispose of goods to the highest bidder at a public sale.

Some states provide by statute that auctioneers must be licensed, and that they may charge only certain fees. Most licensed auctioneers are required to give bond. In the absence of statutory regulations, any person competent to perform the duties of an auctioneer may so act. An auctioneer differs from an ordinary agent in that, in some respects, he is agent for both seller and purchaser. He is agent for the seller in offering the goods for sale, and in obtaining bids. When the highest bid is received, however, and the hammer falls, he is deemed to be agent for the purchaser, with authority to complete the sale in the purchaser's name. If the contract of sale is within the Statute of Frauds and required to be in writing, the auctioneer has the authority of the purchaser to sign his name to a memorandum of sale, either by himself or through his clerk. The bidder is bound by this contract, made in his presence at the time and place of the sale.

The owner may fix such reasonable terms as he chooses, and the auctioneer must follow out the terms made by the owner. If an owner advertises the terms of the sale, bidders are deemed to have notice of these terms. These terms cannot be varied by the auctioneer. If, however, the owner publishes no special terms of sale, the auctioneer has implied authority to fix customary and reasonable terms. Bidders have the right to rely on such terms and the principal is bound by them.

In the absence of special instructions to the contrary, an auctioneer must sell for cash. He has possession of the goods, consequently has implied authority to receive payment of the price. He has no implied authority to warrant the goods. He cannot bid in his own interest. If bidders fraudulently combine not to bid against each other, for the purpose of obtaining the goods at a cheap price, no title passes to the highest bidder, by reason of the fraud.

So long as the auctioneer acts within his authority and reveals the name of his principal, he incurs no personal liability. But if he exceeds his authority in making a sale he is liable in damages to his principal. If he does not reveal the name of his principal to bidders, he is liable personally to them.

An auctioneer is entitled to recover from his principal the amount of his compensation, including disbursements and expenses incurred in the sale, care and preservation of the property. He is said to have a _lien_ on the goods or proceeds of the sale, for his compensation. By this is meant that he has a right to retain possession of the goods until his compensation is paid, or in the case of sale, to deduct his charges from the proceeds of the sale.

When authorized to sell goods on credit, in case payments are not made when due, the auctioneer may sue in his own name. He may also sue in his own name for wrongful acts of third parties, whereby the goods are injured. The principal also may bring this action in his own name. The principal is liable for the acts of his auctioneer, committed within the actual or apparent scope of the latter's authority.

=61. Del Credere Agency.= An agent authorized to sell is not permitted to sell on credit, unless expressly so authorized or unless the custom or usage of the particular kind of agency impliedly carries with it this power.

Some agents are, by their contracts of agency, authorized to sell on credit, on condition that they guarantee to save their principals from losses resulting therefrom. Such an agency is called a _del credere_ commission, and the agent is called a _del credere_ agent. This term means that in consideration of the agreed commission or salary paid the agent, the latter agrees to pay to the principal, when due, the sums which third parties, who buy the principal's goods from the agent, fail to pay.

This agreement to indemnify the principal against losses on credits made by the agent, is regarded as an original promise on the part of the agent, and not a promise to pay the debt of another. By reason of this attitude on the part of the courts in interpreting this contract as an original promise on the part of the _del credere_ agent to pay his own debt, and not the debt of another, the contract does not have to be in writing. (See Statute of Frauds.) For example, _A_, a manufacturer of farm machinery, employs _B_ as agent to sell farm machinery on credit, on condition that _B_ personally guarantees the sales. _B_ sells a mowing machine to _C_, to be paid for within ninety days. _C_ fails to make payment. _A_ may sue and recover the amount of the purchase price from _B_.

=62. Real Estate Brokers.= A real estate broker is one employed to make contracts involving the sale or leasing of real property. The sale of lots, of houses and lots, and farms are common examples.

A real estate broker is seldom authorized to do more than find a purchaser or tenant, not being authorized to make the lease or contract of sale. By reason of this limitation generally placed on a real estate broker's authority, many disputes arise over real estate brokers' rights to compensation. A principal may enter into any kind of contract he desires with a real estate broker, and is liable when the broker has performed his contract, and not before. The difficulty is in determining when the broker has substantially performed his contract. If _A_ hires _B_ to procure a purchaser for his house and lot, and agrees to pay him 2% of the selling price when he obtains the signature of a financially responsible purchaser to a contract of sale, _B_ is not entitled to his commission until he obtains such a party's signature to a contract. The fact that _A_ has entered into this contract with _B_, does not, in the absence of an express stipulation to the contrary, prevent _A_ from selling the property himself, or from employing as many other brokers as he pleases to attempt to make the sale.

Most brokers, however, are employed on certain terms to obtain a purchaser or tenant. If the agent succeeds in obtaining such a purchaser or tenant, the principal must pay the broker the agreed compensation. The owner cannot act unfairly by the broker. If the broker obtains a tenant or purchaser by seeking him out, and by interesting him in the property, the owner cannot avoid the payment of commission by discharging the broker and completing the deal himself. In the absence of an express agreement to give the broker a certain fixed time in which to make the sale or find a tenant, the owner may discharge the agent at any time he sees fit, just as the agent may cease his efforts at any time he chooses. The owner cannot discharge the agent just as the latter is completing the sale, in order to take advantage of the agent's efforts, without paying him the agreed compensation. The agent, in this event is held substantially to have performed his contract. Contracts with real estate brokers should be carefully drawn, and should contain express stipulations as to the powers and limitation of the broker's authority. The temptation is great on the part of both parties to claim that the sale was, or was not made, through the efforts of the broker. The contract of a real estate broker differs not at all from any other contract. The conditions are such, however, that the agreement is frequently indefinite, and it is difficult to determine when a substantial performance has been made.

In the absence of any agreed compensation, the real estate broker is entitled to receive the customary fees. In the absence of any custom regulating the commission, he is entitled to receive a reasonable compensation.

A real estate broker is not permitted to represent both parties, or to receive compensation from both parties. If a broker is promised compensation from the purchaser which he agrees to accept, without the consent of the owner, he cannot receive compensation from either party.

=63. Termination of Agency.= If an agent performs the terms of his agency, the agency is said to be terminated by performance. He ceases to be agent, by reason of having performed his contract.

If an agent is employed to act as agent for a specified time, the lapse of the stipulated time, of itself, terminates the agency.

An agency is a contract, express or implied, and it may be terminated at any time by any act of the parties thereto showing such to be their intention. There is one exception to this rule, and that is, that an agency coupled with an interest cannot be terminated by an act of one of the parties. This exception is discussed in a separate section.

Where an agency is terminated by failure or refusal of the principal, or agent to carry out his terms of the contract, the defaulting party is liable in damages to the other party. This does not prevent the termination of the agency however.

Where an agency is terminated by the failure or refusal of either party to observe the conditions of the contract of agency, the agency still subsists on the part of third persons, who have dealt with the agent, and who have not received notice of the termination. Upon revoking the agent's authority, the principal must notify third persons, who have dealt with the agent, or who have knowledge of the agency contract, and who would be likely to continue to deal with him as agent. If the principal does not give third parties such notice, he is still liable to them on contracts subsequently made by the agent in the principal's name. For example, if _A_, a wholesale druggist, employs _B_ to sell goods for one year and _C_ knows of the contract, and at the expiration of six months, _A_ discharges _B_ for failure to give him his exclusive time, _A_ must notify _C_ of _B's_ discharge, else _B_ can still bind _A_ by making contracts with _C_.

=64. Revocation of Agency by Operation of Law.= When one of the parties to an agency contract dies, becomes insane or bankrupt, the agency is said to terminate _by operation of law_. When the principal dies, the agency terminates. Death of itself, constitutes notice to third persons of the termination of the agency. This is true of all agencies except those coupled with an interest, discussed in another section. If any agent and a third person innocently make a contract in the name of the principal after the death of the principal, and without notice of the principal's death, the contract is not enforceable against the principal's estate. Death of the principal revokes the agency. Death of the agent also revokes the agency.

Insanity of the agent, or of the principal terminates an agency not coupled with an interest. It is regarded the same as death of one of the parties.

An agency is terminated by the bankruptcy of either principal or agent. Mere insolvency on the part of the principal or agent does not, of itself, terminate the agency, but bankruptcy, voluntary or involuntary, terminates it, and is of itself, notice to third persons. An innocent third person who has parted with his money on a contract made with the agent after the agency has been terminated by reason of insanity, or bankruptcy of the principal, may not enforce his contract, but may recover his money. Injury or disability of an agent, rendering it impossible for him to carry out the terms of the agency, terminates the agency.

=65. Agency Coupled with an Interest.= An agency coupled with an interest cannot be terminated by attempted revocation of the principal, nor is it terminated by death, insanity or bankruptcy of the principal or agent.

If the agent has an interest in the subject of the agency outside his interest in his compensation, he is said to have an agency coupled with an interest. Such an agency is irrevocable. _A_ pays _B_ one thousand dollars ($1,000.00) for one eighth interest in a patent, and in consideration of this purchase is given the agency to sell the patented article for a fixed commission. This constitutes an agency coupled with an interest, and is not revoked by an attempted revocation of the principal or by the principal's death. _A_ is indebted to _B_, his attorney, for one hundred dollars ($100.00). _A_ gives _B_ a note for one hundred and fifty dollars ($150.00) to collect, agreeing to pay him 10% of the amount collected, and to permit him to deduct the one hundred dollars ($100.00) indebtedness. This constitutes an agency coupled with an interest, and cannot be revoked by _A_.

To constitute an agency coupled with an interest, the interest must be coupled with the subject matter of the agency, and not merely with the compensation the agent is to receive. For example, if _A_ sends his attorney, _B_, a note to collect, agreeing to give _B_ 25% of the amount collected, this does not constitute an agency coupled with an interest, and may be revoked at any time by _A_.

QUIZ QUESTIONS

LAW IN GENERAL

1. How many classes of rights are there?

2. Name them.

3. How did men derive these rights?

4. What limitations, if any, are there to rights?

5. Have property rights always been recognized?

6. _A_ finds a watch in the street and, without making any attempt to find the owner, keeps it. Is the right of possession in _A_?

7. In primitive times were personal or property rights more generally recognized?

8. How were rights originally enforced?

9. How are rights enforced at present?

10. How did laws originate?

11. Define _law_.

12. What does law embrace?

13. What connection have laws with courts of justice?

14. What connection, if any, have customs to laws?

15. What is the purpose of law?

16. What class of laws is enforced for the benefit of the state?

17. _A_ steals _B's_ horse. _B_, by proper legal action, recovers possession of the horse. Is the law enabling _B_ to recover the horse a law for protection of citizens, or for the protection of property?

18. What are the sources of law?

19. Do decisions of courts form any part of law? If so, what?

20. What are the New York State Reports?

21. What are the Philippine Island Reports?

22. Is the treaty existing between the United States and Japan, law? If so what kind of law?

23. Define statutes. How are statutes enacted?

24. To what classification of law do statutes belong?

25. Is the English Constitution written or unwritten law?

26. Do customs and statutes bear any relation to each other?

27. How is the record of the state statutes kept?

28. What are the general divisions of law?

29. Is any part of the unwritten law written?

30. Is all unwritten law written?

31. Is any written law unwritten?

32. Is unwritten law stable?

33. How, if at all, can the written law of a state or country be changed?

34. Are treaties unwritten law? How, if at all, are the records of Congress kept?

35. Give a general classification of law.

36. Is there a universally recognized classification of law?

37. Define _administrative law_ and give an example.

38. Define _public law_ and give an example.

39. Define _private law_. Classify private law.

40. Define _constitutional law_.

41. Define _criminal law_ and give an example.

42. Can the heir or personal representative of a murdered man ever recover money compensation for the murder?

43. If so, is it by means of private or public law?

44. Is a criminal tried and punished by private or by public law?

45. Define _law of procedure_ and give an example.

46. What do contracts embrace?

47. What does the word _tort_ mean?

48. Give an example of a tort.

49. Does the same act ever constitute a breach of contract, a tort, and a crime?

50. Define _commercial law_.

CONTRACTS

1. Define _contract_.

2. Give an example of a business transaction which constitutes a contract.

3. What is the purpose of putting important contracts in writing?

4. What is meant by _offer_?

5. Give an example of offer.

6. A coat marked $25 is placed by a merchant in a window. Does this constitute an offer?

7. An advertisement is put in a paper advertising chairs for $7.00 each. Does this constitute an offer?

8. What is an _agreement_?

9. Is an agreement a contract?

10. Give an example of an agreement.

11. What is meant by _acceptance_?

12. Give an example of a contract having no acceptance.

13. _A_ offers to sell _B_ his watch for $10.00. _B_ offers _A_ $8.00. Is there an acceptance? Is there a contract in the above case?

14. What is a _counter offer_? Give an example of a counter offer.

15. What is meant by the term _meeting of the minds_?

16. Give an example of an acceptance not of the exact terms of the offer.

17. What is meant by _mutuality_?

18. Distinguish _meeting of the minds_ and _mutuality_.

19. May there be an acceptance of a contract by an act? If the above question is answered in the affirmative, give an example.

20. Must an acceptance be communicated to the offer?

21. _A_ writes _B_, "I will sell you my horse for $150. If I do not hear from you to the contrary by Thursday noon I will consider the horse yours." _B_ does not reply. After Thursday noon, to whom does the horse belong?

22. Define _option_. Give an example of an option.

23. Does an option require a consideration to render it valid?

24. What is an _element_ of a contract?

25. Give the elements of a contract.

26. How many parties to every contract?

27. What is meant by _legal age_?

28. _A_, a male, sixteen years old, contracts with _B_, a female, eighteen years old. Can _B_ avoid the contract on the ground of the infancy of _A_?

29. Is fraud or duress a defense to a contract?

30. How many kinds of consideration are there?

31. Is a good consideration sufficient to support a contract?

32. Define _valuable consideration_.

33. Give an example of a contract which may be supported by a good consideration.

34. What is meant by a _sealed instrument_?

35. Is something beneficial to the promisee a sufficient consideration to a contract?

36. _A_ promises _B_ to pay him $100 if _B_ will promise to work for him for one month. _B_ promises. Is there a consideration to this contract? If so, what is it?

37. Define _mutual promise_.

38. Is a mutual promise a valuable consideration? Give an example of mutual promise.

39. Define _past consideration_. Give an example of past consideration.

40. Does a past consideration support a contract?

41. What is meant by _adequate consideration_?

42. Does a consideration have to be adequate to support a contract?

43. May adequacy of consideration be considered in determining whether or not fraud was used in procuring a contract?

44. Give an example of a promise to do something one is already bound to do.

45. Is a promise to do something one is already bound to do a sufficient consideration to support a contract?

46. Give an example of illegal consideration.

47. Does an illegal consideration support a contract?

48. Do all the terms of a contract have to be express?

49. Define _express contract_.

50. A housewife orders a sack of flour from her grocer by telephone. The flour is delivered and accepted by her. Is this an implied contract?

51. Give an example of an express contract.

52. Do any contracts have every term expressly set forth?

53. Define _implied contract_.

54. Are uncertain contracts void or voidable? Give an example of an uncertain contract.

55. Give the distinction between _unilateral_ and _bilateral_ contracts.

56. _A_ promises to sell his dog to _B_ if _B_ will promise to pay him $5.00 the following day. _B_ promises to pay _A_ $5.00 the following day. Is this contract unilateral or bilateral?

57. _A_ promises to pay _B_ $100 if _B_ will dig a well for _A_. _B_ digs the well. Is the contract unilateral or bilateral?

58. Distinguish _executory_ and _executed_ contracts.

59. _A_ promises to pay _B_ $5,000 if _B_ will deliver to him a deed of his farm. _B_ delivers the deed. Is the contract executed or executory?

60. Is the above contract executed as to _A_? Is it executory as to _B_?

61. Are infants bound by their contracts? Define _infant_.

62. Are infants' contracts void?

63. Distinguish _void_ and _voidable_.

64. Can a competent party contracting with an infant avoid the contract on the ground of infancy of the other party?

65. Can an infant ratify a contract after becoming of legal age?

66. Explain how, if at all, an infant may ratify his contracts.

67. Define the term _necessaries_.

68. _A_, an infant, has not sufficient clothing. _B_, a merchant, sells him a coat worth $7.00, for $14.00. Can _B_ recover anything from _A_? If so, how much?

69. Is an infant entitled to receive his wages?

70. What is meant by _emancipation of an infant_? Is emancipation of an infant ever implied?

71. What is meant by _novation_? Give an example of novation.

72. Are contracts made for the benefit of a third person enforceable by such third person?

73. Are contracts of an insane person enforceable?

74. Are contracts of insane persons, intoxicated persons, and idiots void or voidable?

75. _A_, while intoxicated, purchased a coat from _B_ for $10.00. The following day, when sober, _A_ promises to pay for the coat. Can _B_ enforce the contract?

76. Can an insane person make a valid contract during a lucid interval?

77. Can married women enter into contracts?

78. Do custom and usage ever enter into a contract?

79. _A_ purchases forty barrels of yellow grease from _B_, like sample furnished. The grease arrives, ranging in color from white to black. _B_ offers to show a custom among grease dealers, known to _A_, that a composite sample is used in selling grease. Can he show this custom as part of the contract?

80. Are oral contracts ever valid? Why, if at all, do some contracts have to be in writing?

81. What is meant by the _statute of frauds_?

82. When and where did this statute originate? What was the purpose of this statute?

83. Does the statute serve any useful purpose at the present time?

84. Do the states of this country have a _statute of frauds_, or is it a part of their unwritten law?

85. By the terms of the _statute of frauds_ what contracts must be in writing?

86. Are contracts covered by the Statute of Frauds illegal if not in writing?

87. _A_ orally promises _B_ to work for him for two years for the consideration of $2,000. Can either party enforce the contract?

88. What is meant by the term _specialty_? Are specialties included in the Statute of Frauds?

89. Can you make an oral promissory note?

90. Can contracts be made by letter and telegraph?

91. _A_, by letter, offers _B_ $1,000 for _B's_ team of horses. _B_ mails a letter of acceptance which is lost in the mails. Is there a valid contract?

92. _A_, by letter, offers _B_ $10 for a harness. By the following mail, _A_ writes revoking the offer. _B_ receives the letter of revocation five minutes after mailing his acceptance. Is the contract revoked?

93. _A_, by letter, offers _B_ $1,000 for his racing horse and says, "I will consider my offer accepted upon receipt of your reply." _B's_ letter of acceptance is lost in the mail. Is there a valid contract?

94. _A_ wires _B_ that he will pay him $100 per share for his Pennsylvania Railroad stock. _B_ hands his telegram of acceptance to the telegraph operator who fails to send it. The following day _A_ wires a revocation of his offer. Is there a valid contract?

95. Does a revocation by wire or letter have to be received to be effected?

96. Does an acceptance by wire or letter have to be received by the offerer to constitute a valid acceptance?

97. In what respect do sealed instruments differ from ordinary contracts?

98. At present what constitutes a seal?

99. At present is it the tendency of the law to favor sealed instruments?

100. Are Sunday contracts void or voidable?

101. What makes Sunday contracts unenforceable?

102. What was _The Lord's Day Act_ of England?

103. What is meant by works of charity and necessity?

104. _A_ makes and delivers a promissory note to _B_ for $100 on Sunday. Is the note enforceable?

105. What makes a contract illegal?

106. Are illegal contracts void or voidable? Give an example of an illegal contract?

107. What is a gambling contract?

108. Are gambling contracts void?

109. Why are gambling contracts illegal?

110. Define _fraud_.

111. Is a false representation made during the formation of a contract known by both parties to be false, a defense to the contract?

112. Give an example of a false misrepresentation which will serve to avoid a contract?

113. Can there be duress without personal violence? Define _duress_.

114. Give an example of duress.

115. Do duress and fraud render a contract void or voidable?

116. Define _mistake_ in connection with making a contract. Define _mistake of fact_.

117. Define _mistake of law_.

118. Does mistake of one party to a contract avoid the contract?

119. Does mistake of law avoid a contract?

120. Does mutual mistake render a contract void or voidable?

121. What is meant by a _contract impossible of performance_? Give an example of a contract impossible of performance.

122. _A_, on April 4, enters into a contract dated April 2, by which he promises to deliver to _B_ within twenty-four hours, five tons of coal. Is _A_ liable on this contract?

123. Do floods, earthquakes, or lightning preventing performance excuse performance?

124. Is a party to a contract excused from performance by reason of a strike?

125. May a party to a contract stipulate against strikes and Acts of God in such a manner as to avoid liability therefor?

126. If a party to a contract renders performance impossible can he force performance?

127. What is meant by _conflict of law_?

128. Does the law of the place where a contract is made, or the law of the place where the contract is enforced, prevail?

129. If a contract is made in one place, to be performed in another, the law of which place prevails in the interpretation of the contract?

130. What is meant by _assignment_ of a contract?

131. _A_, a singer, contracts to sing at _B's_ opera house for one week. Can _A_ assign her contract to _C_, another singer? Can _B_ assign his contract to _D_?

132. What is meant by _giving notice of assignment_?

133. Is an assignment a contract?

134. What are the elements of a valid assignment?

135. Does an assignment require a consideration?

136. Write an assignment of a simple contract.

137. Define _several liability_.

138. Can a party be jointly and severally liable on the same contract?

139. If two parties are jointly liable on a contract can one of them be sued thereon without the other?

140. If two parties are severally liable on the same contract, can both be sued together thereon?

141. Define liability _in solido_. Give an example of liability _in solido_.

142. How may a contract be discharged by performance? Give an example of a contract discharged by performance.

143. What is meant by _tender_? What constitutes legal tender?

144. Does United States statute or a state statute make certain money legal tender?

145. What kinds of money constitute legal tender?

146. _A_ owes _B_ $5.00. He tenders him the amount in nickels. Is the tender good?

147. _A_ owes _B_ $500.00. He tenders him a certified check for the amount. Is the tender good?

148. Can a contract be discharged by a subsequent agreement?

149. _A_ agrees to dig a well for _B_ for $10.00. Before _A_ starts work, _B_ changes his mind, and offers _A_ $1.00 in settlement. Is the contract discharged if _A_ accepts the $1.00?

150. Define _warranty_.

151. Give an example of warranty to a contract. 152. Does breach of warranty discharge the contract?

153. Does breach of warranty give rise to an action for damages?

154. Define _rescission_.

155. Give an example of rescission.

156. Define _statu quo_.

157. Define _breach of contract_.

158. Give an example of breach of contract.

159. In case of breach of contract must the other party wait until the time for performing the entire contract elapses, or may he sue at once?

160. Define _bankruptcy_.

161. By what kind of law is bankruptcy regulated?

162. Does bankruptcy discharge a contract?

163. Define _voluntary bankruptcy_.

164. Who may become a voluntary bankrupt?

165. Define involuntary bankruptcy. Who may become an involuntary bankrupt?

166. Define _act of bankruptcy_.

167. Enumerate acts of bankruptcy.

168. At common law could one party to a contract compel another to perform it specifically? Under present law can a contract for sale of personal property be enforced specifically?

169. What is the measure of damages for failure to deliver merchandise under a contract of sale?

170. How did the court of equity originate?

171. Are juries used in courts of equity?

172. What classes of cases are tried in equity?

173. Does a court of equity have jurisdiction of a case where there is a plain and adequate remedy at law?

174. With what kind of contracts is equity especially concerned?

175. Give an example of a contract which may be enforced specifically by a court of equity.

176. Write a form for a simple contract between _A_ and _B_ for the sale of a horse.

PRINCIPAL AND AGENT

1. What is meant by the term _agency_?

2. Give an example of a transaction completed by an agent.

3. Is there a limitation upon the kinds of business which may be transacted by an agent?

4. Distinguish principal and agent from master and servant.

5. Define and give an example of _principal_.

6. Define and give an example of _agent_.

7. Define and give an example of _agency_.

8. Define _infant_.

9. Is a married woman seventeen years of age an infant?

10. May an infant be a principal?

11. Define and distinguish _void_ and _voidable contracts_.

12. May an idiot, insane, or drunken person act as principal?

13. May a corporation or partnership transact business through agents?

14. May a child eight years of age act as agent?

15. In general, what persons may act as agents?

16. May a person act as agent who is not capable of acting for himself?

17. May a person whose interests are opposed to those of his principal act as agent?

18. May corporations or partnerships serve as agents?

19. Must an agent's authority to act as agent be in writing?

20. May an agent be appointed or authorized to act by implied contract?

21. Define and give an example of _implied contract_.

22. What is meant by _ratifying an act of an agent_.

23. Give an example of a principal's ratification of an unauthorized act of an agent.

24. Give an example of a contract of agency which must be in writing.

25. Why must some contracts be in writing?

26. What are the principal provisions of the Statute of Frauds?

27. Must contracts of agency authorizing an agent to complete a land transfer be in writing?

28. Must a contract authorizing an agent to procure a purchaser for a house and lot be in writing?

29. Can a third party rely upon the statements of an agent that he has authority to act as agent?

30. May a person do through an agent anything which he may lawfully do by himself?

31. _A_ employs _B_ to purchase votes for an act pending in a state legislature. Is _A_ or _B_, or both, guilty of a crime?

32. _A_ employs _B_ to paint a picture, and _B_ employs _C_ to paint the picture. Must _A_ accept the work of _C_?

33. What things are necessary to enable a person to ratify the acts of an alleged agent?

34. May a forgery be ratified?

35. Give a classification of agents.

36. _A_ is employed to deliver a package for _B_. What kind of an agent is _B_?

37. Give an example of a universal agent.

38. Enumerate the duties a principal owes his agent.

39. _A_ employs _B_ to work in his garden. _B_ works for ten days, no compensation having been agreed upon. How much, if anything, can _B_ recover from _A_?

40. If an agent abandons his agency before the time of his agency expires, can he recover anything for work performed? If so, how much?

41. What duty, if any, does a principal owe to his servant as to furnishing a safe place in which to work?

42. What rules, if any, does a servant assume?

43. In general, what are the liabilities of a principal to third persons who deal with an agent?

44. Is a principal liable to a third person who has dealt with an agent, who acted within the apparent but not the actual scope of his authority?

45. Is a principal liable to third persons for lots committed by an agent within the scope of the agent's authority?

46. Give an example of a lot or private wrong committed by an agent while acting for his principal, for which the principal is not liable.

47. Enumerate, in general, the duties an agent owes his principal.

48. Is an agent liable to his principal for mistakes of judgment or discretion?

49. Is an agent who acts without compensation ever liable to his principal for negligence? If so, give an example.

50. Enumerate, in general, the liabilities of an agent to third persons with whom he deals.

51. _A_, an agent for _B_, sells goods to _C_, in his own name. _C_ afterwards discovers that _A_ is agent for _B_. Can _C_ hold _A_?

52. If an agent procures a contract for his principal by means of fraud is the agent liable personally on this contract?

53. If an agent, believing he has authority to act as an agent, where in fact he does not, reveals all the facts of his agency to a third party with whom he is dealing, is he liable personally to such third party if it turns out that he acted without authority?

54. Define and give an example of _undisclosed principal_.

55. Is an undisclosed principal when discovered, liable for the acts of his agent?

56. Is an agent of an undisclosed principal personally liable to third persons for acts of agency after the undisclosed principal is discovered?

57. May there be an undisclosed principal to a negotiable instrument?

58. What is meant by _apparent authority_ of an agent as distinguished from _actual authority_?

59. Give an example of an agency where the apparent authority of the agent conflicts with the actual authority.

60. If an agent appears to have authority to act for another, but in fact never received any authority, can third persons rely upon his apparent authority?

61. Do customary powers belonging to an agent come within the meaning of apparent authority?

62. May a principal limit an agent's apparent authority by printing limitations in the agent's order sheet and in making contracts with third persons? If so, give an example.

63. Define and give an example of _secret instructions_.

64. Can a principal evade responsibility to third persons by secret instructions given to an agent?

65. If a third party dealing with an agent knows of the secret instructions, is he bound by them?

66. Define and give an example of _sub-agent_.

67. Is a sub-agent responsible to the agent?

68. Is an agent ever responsible for the acts of a sub-agent?

69. What matters, if any, may an agent delegate?

70. Define and give examples of _mechanical_ and _ministerial duties_.

71. Distinguish an agency requiring personal skill, discretion, and judgment, from one requiring the performance of ministerial or mechanical duties.

72. When, if at all, is an agent authorized to collect?

73. Is an agent authorized to sell goods, always authorized to collect for them?

74. Is an agent authorized to collect, authorized to take checks?

75. How should an agent authorized to sign a written instrument for his principal, sign?

76. May an agent authorized to sign a promissory note for his principal, sign his principal's name without his own?

77. An agent authorized to sign a written contract for his principal signs his own name followed by the word, _agent_; _e.g._, "_A, Agent._" Is the principal bound?

78. When, if at all, is an agent authorized to warrant the quality of personal property sold?

79. Define _warranty_.

80. Give an example of an agent who is impliedly authorized to warrant.

81. Do usage and custom have anything to do with the agent's implied authority to warrant?

82. Define _factor_, and give an example.

83. Do factors have possession of the goods?

84. Do factors have implied authority to collect?

85. Do factors have the right to sell goods in their own name?

86. Is a commission merchant a factor?

87. Define _broker_.

88. Distinguish _broker_ and _factor_.

89. Give an example of broker.

90. Is a real estate agent a broker, or a factor?

91. In what respect, if any, does an auctioneer differ from an ordinary agent?

92. What is meant by _licensed auctioneers_?

93. Are auctioneers' fees ever regulated by statute?

94. What is meant by _auctioneer's lien_?

95. When, if at all, may an auctioneer sell on credit?

96. May an auctioneer make his own terms of sale? Are all third persons bound by the terms advertised?

97. Define and give an example of _del credere_ agent.

98. Must a _del credere_ agent receive a separate consideration for his guaranty?

99. When is a real estate agent entitled to receive his commission?

100. Does the contract of a real estate broker differ from the contract of any other agent?

101. How may an agency be terminated?

102. Give an example of an agency terminated by lapse of time, and of one terminated by act of parties.

103. May all agencies be terminated at the will of the parties?

104. What is meant by _notice to third persons of termination of an agency_, and when, if at all, is this notice necessary?

105. Explain _termination of agency by operation of law_.

106. In case of termination of agency by death of principal must third parties be notified?

107. Does injury or liability of an agent ever terminate an agency? If so, under what circumstances?

108. Define _agency coupled with an interest_.

109. Is an agency coupled with an interest revocable at the will of either party?

110. _A_ employs an agent at a salary of one hundred dollars per month, promising him 1% commission in addition, on all orders taken in excess of $1,000 per week. Is this an agency coupled with an interest?

111. Give an example of an agency coupled with an interest.

COMMERCIAL LAW