Part 7

“I desire to state that it is elementary law that if pending the adjustment of a disputed claim, the debtor sends the money to his creditor in full payment of the demand, the latter cannot receive and retain it as a credit upon a larger sum claimed by him, without discharging the debtor as to the whole.

“123 Pa., p. 576. 147 Pa., p. 607. 70 Pa., p. 315.

“These cases have been decided by the Supreme Court of Pennsylvania, the court of the last resort. Therefore it does not lie in the province of your members to cancel the words ‘in full settlement’ without destroying their right in respect to prevailing for the balance.

“I might further state that in the absence of any dispute in respect to any claim, the payment of a smaller amount will not operate to discharge the whole, because there is no accord and satisfaction; the absence of any dispute in respect to the amount being the material circumstances in this regard.”

=Opinion No. 66.=

A CUSTOMER BUYING ON CREDIT MUST KEEP HIS CREDIT GOOD.

Question.—If a bill of lumber is sold on credit and before delivery to the customer the seller considers he has good reason to question the purchaser’s ability to settle when the bill is due, can the seller withhold the delivery and demand either better terms or cash without making him liable for the non-fulfillment of the contract?

Reply: A man who has bought goods on credit is bound, as the courts phrase it, “to keep his credit good.” If he does not do that the seller need not ship the goods; if he has shipped them and then finds that the buyer has not kept his credit good, he may stop the goods and take them back into his own possession at any time before they have actually been delivered to the buyer or his agent. In making his decision the seller must, of course, take his own risks. He has entered into a contract and he must fulfill it or pay the resulting damages unless he has a legal excuse for refusing to go on with it. It is not sufficient that, as the question says, “the seller considers he has good reason to question the purchaser’s ability to settle”; nor that the seller has good grounds for believing that the buyer’s credit is impaired. It is not a question of any man’s belief, but a question of fact. The goods must be shipped unless the buyer is actually insolvent. This does not mean that he must have made an assignment or gone into bankruptcy or made any other public acknowledgment of the fact that he is insolvent. It means he has become unable to pay his debts as they fall due. The seller must be able to show that at least one debt has fallen due against the buyer and that he has not paid it promptly. Of course, it must be a debt the validity of which the buyer himself does not dispute upon any tenable ground. If he has paid his debts as they fell due he has “kept his credit good,” no matter what any one may suspect as to the future; if he has failed to pay any just debt promptly he has not kept his credit good. If the seller has no right to refuse delivery of the goods altogether he has no right to demand better terms than his contract gives him.

=Opinion No. 67.=

DISCOUNT MUST BE IN ACCORDANCE WITH THE CONTRACT.

Question.—We sold to a concern and the terms of sale were “2 per cent. discount for cash in ten days or sixty days net.” The buyer in his settlements has taken fifteen to twenty days’ time and has deducted 2 per cent. discount and has added 6 per cent. per annum for the extra days beyond ten. We claim that this settlement is entirely wrong, and if he wishes the discount in full he must send a check within ten days after the date of the bill.

Reply: No debtor is to be excused from paying the full amount of his debt except in strict accordance with some provision to that effect in his contract. Here is a debtor who would have been bound to pay the full amount immediately if there had been no special provision to the contrary. Any such provision as there may be is a kind of grace to him and it is not to be extended beyond the strict terms in which it is expressed. He may take 2 per cent. off if he pays at any time within ten days. When the ten days are passed the contract stands precisely as if it had said nothing at all about discount for payment within ten days. This debtor had no right to deduct the 2 per cent. He is trying to take an advantage which his contract does not give him. If he were asked to point out a clause in the contract giving him a right to take off the discount later than the tenth day, of course, he could not do it.

=Opinion No. 69.=

A BILL OF LADING TO ORDER RETAINS TITLE TO THE GOODS.

Question.—If a shipper sells a carload of lumber f. o. b. shipping point with draft attached to bill of lading and bills the car to his own order, notify the purchaser, and if the car should be wrecked in transit or should never reach its proper destination, would the buyer who bought the car f. o. b. be compelled to pay the draft and take up the bill of lading and seek recourse against the carriers? Should the shipper bill a car to the order of a bank, notify the f. o. b. purchaser and sell the draft and bill of lading to the bank outright, would the purchaser be compelled to pay for same?

Reply: When a sale is made f. o. b. shipping point the seller can make a valid delivery at that point. If he delivers the goods to a carrier there, takes a bill of lading making them deliverable to the buyer and forwards it to the latter, his full duty is done and the goods are at that moment, in legal effect, delivered to the buyer; they are actually delivered to the buyer’s agent, the carrier, and that is equivalent to a delivery to the buyer himself. This is the kind of delivery the seller is at liberty to make, under the contract, but he may not do so. He might, conceivably, carry the goods in his own arms to the buyer, or he may deliver them to one who is unquestionably his own agent. In either of these cases delivery to the buyer does not occur until the goods reach their destination. If A ships goods to the place in which B resides and takes the bill of lading to his own order the goods are not in any sense delivered to B or to his agent. They are A’s goods. He can stop them where he will and take them back into his own possession. When they reach their destination he can take charge of them or have them delivered to anyone he may choose to name. Those goods could be seized by a creditor of the seller and they could not be seized by a creditor of the buyer. If they are lost in transit it is the seller’s loss. A seller must either deliver the goods or retain them. He cannot do both. He cannot deliver them so as to make the buyer liable in case of loss and still retain them so that they will be his, to do with as he will if there is no loss. The same result follows if the bill of lading is sold to a bank. A bill of lading represents goods in transit and transfer of the bill transfers the goods. The direction to the carrier to “notify” one person or another is of no importance. Goods may be consigned to B and the carrier, for one reason or another or for no reason at all, may be directed to “notify” X or Y or Z of the fact that they have arrived. Notification is not to be substituted for delivery.

=Opinion No. 70.=

ONE WHO BUYS ON CREDIT MUST KEEP HIS CREDIT GOOD.

Question.—A, in New York, has with B, a manufacturer, three separate contracts made in December, February and March, respectively, each contract specifying the grade and price of material, date of delivery and terms of payment. The deliveries called for in the December contract have been completed by A; the date for the first delivery of the February contract is due this month; but B is overdue 30 days on his payment on the first delivery of the December contract and payment on the delivery of balance of the December contract is now due. Because B has failed to comply on his part with the conditions of the first contract, must A deliver the material according to the terms of the second and third contracts, thereby unduly increasing the amount of credit extended to B beyond his general credit limit? From information obtained which would lead A to question the credit of B, such as his taking a contract at a loss (this occurring since the contracts were made) can A demand payment before delivery of the goods, although the contract specifies 30 days from certain dates? Can A cancel the two uncompleted contracts for any of the above reasons, viz., non-fulfillment of the condition of the first contract by B or doubt as to B’s credit? If cancelled by A would B have any legal redress such as buying the quantity and grade of material stipulated by the contracts in the open market and compelling A to pay the difference in price should the present market price be higher than the prices stipulated in the contracts?

Reply: When a man buys goods on credit it is always an implied condition of the contract that he shall “keep his credit good,” as the courts phrase it, till the time of delivery arrives. If he becomes insolvent before that time he cannot demand that the seller shall ship the goods. If the seller does ship them, and then learns of the insolvency, he may stop the goods before they reach the buyer and take them back into his own possession. A buyer on credit has no right to demand that the goods shall be delivered to him at a time when he is insolvent and when there is reason to believe, accordingly, that the goods may have to be sold to pay his other debts. That is the situation in the case our correspondent puts, and the seller is certainly not bound to deliver the merchandise. By insolvency, in a case of this kind, is not meant an actual assignment for creditors; neither does it mean that the buyer has gone into bankruptcy or made any other public acknowledgment of the fact that he is insolvent. It means that he has become unable to pay his debts as they fall due. The seller must be able to show that at least one debt has fallen due against the buyer and that he has not paid it promptly. Of course, it must be a debt the validity of which the buyer himself does not dispute upon any tenable or reasonable ground. The buyer in this case has failed to pay such a debt. The seller has ample proof of the fact because the debt was owing to him. The buyer has not “kept his credit good,” and he has no right to demand that goods sold to him on credit shall be delivered. If they are not delivered he will have no legal ground of complaint or cause of action against the seller. It is not the seller who is guilty of a breach of contract, but the buyer; he is guilty of a breach of the implied condition which enters into all such contracts—the condition that the buyer shall “keep his credit good.”

=Opinion No. 71.=

A SELLER IS BOUND BY HIS OWN MISTAKE UNLESS IT IS OBVIOUS.

Question.—We sent an inquiry for certain sizes of lumber to a mill asking for quotations. Our inquiry was delayed in the mails, and, as it did not reach the mill in time enough to quote we placed the order with the mill, but did not specify prices. The mill acknowledged our order, saying, “We have entered your order as per enclosed carbon,” and after each item they named a price. The lumber was shipped and an invoice sent us, but on two of the items a larger amount is charged than specified in the communication from the mill, saying our order had been entered. In remitting we deducted the difference between the prices mentioned in reply from the mill and the invoice, but the mill claims they made a clerical error and that we are bound to pay the invoice price. What is our position in the matter?

Reply: When a seller puts a price on his goods and the buyer accepts them at that price it is then too late for the seller to demand more except in the following case: If the buyer knew that a mistake had been made, or if the mistake was so gross and palpable that he ought to have known it to be a mistake, then it may be corrected. If a seller were to quote $1.25 when all buyers knew that $12.50 was about the market price, the buyer would not be allowed to claim the goods at the quotation without making special inquiry as to its accuracy; if the quotation was only slightly under the market, so that no suspicion attached to it, and if there was nothing else to show that a mistake had been made, and if the buyer had no actual knowledge of the fact, the seller is bound. Taking the whole class of sellers together, it would not be a safe rule to allow them to come around and collect more after a sale had been made and concluded upon the plea that they had not asked as much as they intended to ask.

=Opinion No. 72.=

A CARRIER SHOULD PAY VALUE AT DESTINATION FOR LUMBER LOST.

Question.—On what basis must a railroad company settle a claim by a consignee on lumber damaged or lost? Must the consignee supply the original invoices, or is he entitled to the selling price in his market?

Reply: If the contract does not provide otherwise, a carrier who fails to deliver goods must, as a rule, pay to the consignee the value of the goods at the time and place at which delivery should have been made. The carrier is to retain his freight charges out of this amount, of course, if freight has not been paid in advance. This is the only rule by which the whole of the loss can be placed upon the carrier, where it belongs. If he had done his duty and delivered the goods the consignee could have sold them at the prices there and then prevailing. If the carrier pays the consignee less than this amount the consignee himself must bear part of the burden of the carrier’s negligence. Of course, if the contract provides that settlement shall be upon some other basis, original cost, for example, the contract will be enforced. The only other exception to the rule is that which arises when the goods have already been sold for an amount which is not so great as the market price at the place and time at which delivery ought to have been made. If delivery had been duly made, in such a case the owner of the goods could not have taken advantage of ruling market prices; he had already bound himself to deliver the goods at a price which proves to be less than the market on the day fixed for delivery, and this selling price is all that he can claim. The object in every case, except where there has been a special contract of carriage, is to place the owner of the goods as nearly as possible in the same position he would have occupied if the carrier had done his duty and to put upon the carrier, where it belongs, the whole burden of his negligence and breach of contract.

=Opinion No. 73.=

LIABILITY OF SHIPPER WHERE PART OF SHIPMENT IS ADMITTED BELOW GRADE.

Question.—I received from a customer an order for a carload of lumber of a certain grade. A fair sized car would be 14,000 feet. The car arrives and 2,000 feet of the lumber is admitted by me to be of a grade lower than the order called for. Can I compel my customer to accept the balance of 12,000 feet, which is up to the requirements of the order? He claims that inasmuch as the car I have offered is not all up to grade, I cannot compel him to accept even so large a proportion as 12,000 feet, notwithstanding the fact that 12,000 feet will still be a pretty fair sized car of lumber.

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

=Opinion No. 76.=

NECESSITY OF FOREIGN CORPORATIONS FILING CERTIFICATES.

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

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

=Opinion No. 77.=

COURSE TO PURSUE WHEN LUMBER IS REFUSED ON ARRIVAL.

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

Reply: There are three courses:

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

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

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

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

=Opinion No. 78.=

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

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

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

=Opinion No. 79.=

ACCORD AND SATISFACTION.

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

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

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

=Opinion No. 80.=

ACCEPTANCE IN NEW JERSEY MAY BE AFFECTED BY STATUTE.

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

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

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

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

=Opinion No. 81.=

CONDITIONAL CLAUSES REGARDING TERMS ON LETTERHEADS, INVOICES, ETC.