The Government Class Book by Andrew W. Young

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Sec.4. In some states, the doctrine established by the courts is, that a
continuance of possession is only _prima facie_ evidence of fraud; in
which case the mortgagee or assignee is allowed to show by proof, that
the conveyance was made in good faith and for a valuable consideration.
In other states, the strict rule prevails, that, without a change of
possession, the transaction is fraudulent _in law_; in which case the
assignee, or person claiming the property under the assignment, is not
permitted to show that, in point of _fact_, the transaction was _bona
fide_, (in good faith.)

Sec.5. The rule that holds every conveyance to be fraudulent unless the
property immediately changes hands, often operates to inconvenience and
even injury of honest debtors. A debtor may be obliged to part with
property, however convenient or needful its present use may be to him,
when, but for this stringent rule of law, he might borrow the money to
pay a debt, or procure a postponement of payment, and retain the use of
the property pledged.

Sec.6. In many of the states, this perplexing question has been settled by
statute. In the state of New-York, the law expressly declares, that a
sale or an assignment without immediate delivery and a change of
possession, shall be presumed to be fraudulent and void as against
creditors, unless the party claiming the property under the assignment
shall make it appear that the same was made in good faith, and without
any attempt to defraud. Laws more or less similar to this, and securing
to the assignor the use of the mortgaged property, are believed to exist
in a majority of the states. The instruments conveying the property are
usually called _chattel mortgages_, and are required to be recorded as
deeds; in New-York, and perhaps a few other states, only filed in the
town or county clerk's office.

Sec.7. In the sale of personal property, though there should be a judgment
against the vendor, and the purchaser should have notice of it, that
fact would not of itself render the sale fraudulent. But if the
purchaser, knowing of the judgment, purchases with the view or purpose
to defeat the creditor's execution, the transaction is fraudulent. The
question of fraud depends upon the motive.

Sec.8. Assignments are sometimes made by debtors for the benefit of their
creditors. A person deeply indebted, or in embarrassed circumstances,
assigns his property, in trust, to one or more persons, who are to
dispose of it, and to apply the avails to the payment of his creditors,
or a part of them; for the law does not forbid a debtor's giving a
preference to one or more creditors over others, provided the assignment
is for a sufficient consideration. A debtor may directly assign or
transfer all his property to a single creditor, and the assignment be
valid; but if the value of the property is manifestly excessive, and
disproportionate to the debt which it is intended to cover, the other
creditors have a right to the surplus.

Sec.9. When an embarrassed debtor agrees to pay his creditors a certain
proportion of their claims in consideration of a discharge of their
demands, if he privately agrees to give a better or further security to
one than to others, the contract is void; because the condition upon
which they agree to discharge the debtor is, that they shall share
equally.

Sec.10. A gift, or conveyance founded merely upon a consideration of
affection, or blood, or consanguinity, may be set aside by creditors, if
the grantor was in embarrassed circumstances when he made it; for a man
is bound, both legally and morally, to pay his debts before giving away
his property. But if he is indebted to only a small amount in proportion
to the value of his property, and wholly unembarrassed, the gift is not
rendered voidable by his indebtedness, even though he should afterwards
become insolvent.

Chapter LVII.

Bailment.

Sec.1. The word _bailment_ is from _bail_, French, to deliver. (Chap.
XVIII, Sec.14.) Bailment, in law, is a delivery of goods, in trust, upon
agreement that the trust shall be executed, and the goods restored by
the bailee, when the purpose of the bailment shall have been, answered.

Sec.2. A person who receives goods to be kept and returned without reward,
must keep them with reasonable care, or, if they receive injury, he will
be liable for the damage: in other words, he is responsible only for
gross neglect. Gross neglect is a want of that care which every man of
common sense takes of his own property. A _depositary_, who is a person
with whom goods are deposited, has no right to use the goods intrusted
to him.

Sec.3. A _mandatary_, or one who undertakes to do an act for another
without recompense, in respect to the thing bailed to him, is
responsible for gross neglect, if he undertakes and does the work amiss;
but it is thought that for agreeing to do, and not undertaking or doing
at all, he is not liable for damage.

Sec.4. The borrower of an article, as a horse, carriage, or book, without
reward, is liable for damage in case of slight neglect. But if the
article is applied only to the use for which it is borrowed, is used
carefully by the borrower only, and returned within the time for which
it was borrowed, he is not liable.

Sec.5. Property taken in pledge as security for a debt or an engagement,
must be kept with ordinary care; in other words, the pawnee is
answerable only for ordinary neglect; and if the goods should then be
lost or destroyed, the pawner is still liable for the debt. If the
pawnee derives any profit from the use of the property, he must apply
the profits, after deducting necessary expenses, toward the debt.

Sec.6. Another kind of bailment is the hiring of property for a reward. If
an article is injured or destroyed without any fault on the part of the
hirer, the loss falls on the owner, for the risk is with him.

Sec.7. If work or care is to be bestowed for a recompense on the thing
delivered, the workman is liable for ordinary neglect; and the work must
be performed with proper skill, or he is answerable for damage. If a
tailor receives cloth to be made into a coat, he is bound to do it in a
workmanlike manner.

Sec.8. Innkeepers are in general responsible for all injuries to the goods
and baggage of their guests, even for thefts. But for loss caused by
unavoidable accident, or by superior force, as robbery, they are not
liable.

Sec.9. A person who carries goods for hire in a particular case, and not as
a common carrier, is answerable only for ordinary neglect, unless he
expressly takes the risk of a common carrier.

Sec.10. A common carrier is one who carries goods for hire as a common
business, whether by land or by water, and is responsible to the owner
of the goods, even if robbed of them. He is in the nature of an insurer,
and is answerable for all losses, except in cases of the act of God, as
by lightning, storms, floods, &c. and public enemies, as in time of war.

Sec.11. A common carrier is bound to receive from any person paying or
tendering the freight charges, such goods as he is accustomed to carry,
and as are offered for the place to which he carries. But he may refuse
to receive them if he is full, or if they are dangerous to be carried,
or for other good reasons. He may refuse to take them unless the charges
are paid; but if he agrees to take payment at the end of the route, he
may retain them there until the freight is paid. A carrier must deliver
freight in a reasonable time; but he is not liable for loss by the
freezing of a river or canal during his voyage, if he has used due
diligence.

Sec.12. Proprietors of a stage coach do not warrant the safety of
passengers as common carriers; and they are not responsible for mere
accidents to the persons of the passengers, but only for the want of due
care. Slight fault, unskillfulness, or negligence, either as to the
sufficiency of the carriage, or to the driving of it, may render the
owner responsible in damages for injury to passengers. But as public
carriers, they are answerable for the loss of a box or parcel of goods,
though ignorant of its contents, unless the owner fraudulently conceals
the value or nature of the article, or deludes the carrier by treating
it as of little or no value. Public carriers are responsible for the
baggage of their passengers, though they advertise it as being at the
risk of the owners.

Chapter LVIII.

Principal and Agent, or Factor; Broker; Lien, &c.

Sec.1. An _agent_, or factor, is a person intrusted with the management of
the business of another, who is called _principal_. The words _agent_
and _factor_ both signify a deputy, a substitute, or a person acting
for another; but _agent_ seems to be the more comprehensive term, being
applied to one who is intrusted by another with any kind of business;
_factor_ more properly denotes an agent employed by merchants residing
in other places to buy and sell, and transact certain other business on
their account. A factor, from his being commissioned or authorized to
act for his principal, and especially if allowed a commission, or a
certain rate per cent, of the value of the goods bought or sold, is
called a _commission merchant_.

Sec.2. If a factor advances money on property intrusted to him, he can hold
it until the money shall be refunded, and all charges paid. If the
actual owner of the property is unknown to the factor, the person in
whose name the goods were shipped, is to be deemed the owner.

Sec.3. The right of a factor to hold property against the owner in
satisfaction of a demand, is called _lien_; and the factor may sell the
goods to satisfy his claim; but he must pay the surplus, if any, to the
principal or owner. A factor can not pledge goods intrusted to him for
sale, as security for his own debts. If he disposes of merchandise
intrusted or consigned to him, and applies the avails to his own use,
with intent to defraud the owner, he may be punished by fine and
imprisonment.

Sec.4. How far, in ordinary business, a principal is bound by the acts of
an agent, it is not easy to determine. As a general rule the acts of a
general agent; that is, one who either transacts all kinds of business
for his employer, or who does all acts connected with a particular
business or transaction, or which relate to some particular department
of business, bind his principal, so long as he keeps within the general
scope of his authority, though he may in some special cases act contrary
to his private instructions. But an agent employed for a particular
purpose, if he goes beyond the limits of his power, does not bind his
principal.

Sec.5. An agent is bound, in ordinary cases, to observe the instructions of
his principal, even though an act contrary to such instructions should
be intended for the benefit of the principal. The agent must bear,
personally, all losses growing out of a non-compliance with his orders;
and the profit accruing therefrom goes to the benefit of the principal.
An agent, however, is excused from a strict compliance with his orders,
if, after receiving them, some sudden and unforeseen emergency has
arisen, in consequence of which such compliance would operate as an
injury to the principal, and frustrate his intention.

Sec.6. When an agent receives no instructions, he must conform to the usage
of trade, or to the custom applicable to the particular agency; and any
deviation therefrom, unless justified by the necessity of the case,
renders him solely liable for any loss or injury resulting from it.

Sec.7. An agent is bound to exercise ordinary diligence and reasonable
skill; and he is responsible only for the want thereof. Ordinary
diligence is that which persons of common prudence use in conducting
their own affairs. Reasonable skill is that usually possessed by persons
of common capacity employed in the same business.

Sec.8. If an agent exceed the limits of his authority, he becomes
personally responsible to the person with whom he deals, if the
limitations of his authority are unknown to such person. He is in like
mariner responsible, if he makes a contract in his own name; or if he
does not disclose the name of the principal, so as to enable the party
with whom he deals to have recourse to the principal in case the agent
had authority to bind him. And if the agent even buys in his own name,
but for the principal, and without disclosing his name, the principal
also is bound, provided the goods come to his use. Also if the principal
is under age, or a lunatic, or otherwise incompetent to contract, the
agent is liable.

Sec.9. A _broker_ is an agent employed to negotiate sales between parties
for a compensation in the form of a commission, which is commonly called
_brokerage_. His business consists chiefly in negotiating exchanges; or
in buying and selling stocks, goods, ships, or cargoes; or in procuring
insurances and settling losses; and as he confines himself to one or the
other of these branches, he is called an exchange broker, stock broker,
insurance broker, &c. A broker differs from a factor. He has not the
custody of the goods of his principal. He is merely empowered to effect
the contract of sale; and when this is done, his agency ends. If a
broker executes his duties in such a manner that no benefit results from
them, or is guilty of gross misconduct in selling goods, he is not
entitled to a commission or compensation.

Sec.10. A _lien_, as the claim of a factor upon goods intrusted to him for
sale, has been noticed. (Sec.3.) The right of lien extends to others than
factors. It is intended also for the benefit of manufacturers,
mechanics, and other persons carrying on business for the accommodation
of the public. A tailor has a lien upon the garment made from another's
cloth until he is paid for the making; a shoemaker upon the shoes made
from another's leather; a blacksmith upon the horse he has shod; an
innkeeper upon the horse or goods of his guest; and common carriers upon
the goods they transport. But they cannot hold the property for any
other debt; nor can they sell it to satisfy their claim. Whenever a
person allows property to go out of his possession, he loses his lien.

Chapter LIX.

Partnership.

Sec.1. A partnership is an association formed by contract between two or
more persons, for joining their money, labor, or skill, in lawful
business, the profits to be divided and the loss to be borne by the
partners in certain proportions. It is a partnership if one furnishes
the funds and the other performs the labor; or if, when no money is
necessary, each agrees to do his share of the labor. A partnership or
association of this kind is denominated a _firm_, or _house_.

Sec.2. The act of any one of the firm is considered the act of all, and
binds all; and either of them is liable for all the debts. But if a bill
or note is drawn by one partner in his own name only, without appearing
to be on partnership account, he alone is bound, though it were made for
a partnership purpose. A partner buying goods on his own account for his
individual use, is alone liable; but if they afterward go to the use of
the partnership, all become responsible.

Sec.3. Sometimes a person agrees to receive, by way of rent, a portion of
the profits of a farm, a tavern, or a manufactory; or an agent or a
clerk receives a share of the profits for his labor. But as there is in
these cases no partnership, the persons who buy the stock and hire the
labor are alone responsible.

Sec.4. All the partners must unite in suing and being sued. One who should
conceal his name so as not to be known when the debt is contracted, may
be sued when discovered to be a partner, if he shares in the profits of
the trade.

Sec.5. A partner cannot sell his interest to another person, who is to take
his place in the partnership, without the consent of all the partners:
nor can a partner, without such consent, withdraw when he pleases, and
dissolve the partnership, except in cases in which the partnership is
without any definite term. A partnership is dissolved by the death,
insanity, bankruptcy, or other inability of one of the parties.

Sec.6. When a partnership is dissolved by the withdrawal of any of the
partners, notice of dissolution ought to be duly published, or a firm
may be bound by a contract made by one partner in the usual course of
business and in the name of the firm, with a person who contracted on
the faith of the partnership, and who had no notice of the dissolution.
The same notice is necessary to protect a retiring partner from
continued responsibility. And even if due notice is given, yet, if he
willingly suffers his name to continue in the firm, or in the title of
the firm over the door of the shop or store, he may in certain cases be
liable.

Sec.7. In some of the states, a partnership may be formed by a number of
persons, some of whom are to be responsible only to a limited amount;
and their names are not to be used in the firm. Before a partnership of
this kind can do business, a writing and certificate signed by the
parties stating the terms of partnership, and the amount for which the
_special partners_ (as they are called) are to be responsible must be
recorded. The terms of partnership must also be published in a
newspaper.

Sec.8. In these _limited_ partnerships, as they are termed, the special
partners are liable only to the amount stated in the terms of
partnership. The other partners, called _general partners_, whose names
only are used, and who transact the business, are liable for all the
debts contracted, as in ordinary partnerships. If such partnership is to
be dissolved by act of the parties before the expiration of the term for
which it is formed, notice of dissolution must be filed and recorded,
and published in a newspaper. Such is the law in the state of New York;
and it is presumed to agree, in its most essential provisions, with the
laws of the other states in which these partnerships are authorized.

Chapter LX.

Promissory Notes.

Sec.1. A promissory _note_ is a written promise to pay a specified sum at a
certain time, to a person named, or to his order, or to the bearer. A
common form of a note is the following:

$100. Albany, June 9, 1859.

Three months after date, I promise to pay to James Smith, or
bearer, one hundred dollars, value received.

John Brown.

Sec.2. A note thus payable to Smith or bearer, or to him or his order, is
called _negotiable_, because it may be sold or transferred to any other
person, who has the same power to sue for and collect the money, as
Smith, the original promisee. If it were made payable to Smith _or
order_, he must indorse it by writing his name on the back of it, before
it would pass as a negotiable note. The indorsement is considered as the
order of Smith to the maker to pay it to any other person. But, though
not negotiable, it might be transferred; but the holder must sue in the
name of Smith, and Brown might offset any demands which he has against
Smith.

Sec.3. An indorsement, made by writing the name only on the back of a note,
is called a _blank_ indorsement. A full indorsement is one which points
out the person to whom the note is to be paid. A blank indorsement may
be filled up at any time by the holder. For example: A note is payable
to "John Jay or order," or to "the order of John Jay," who indorses it
in blank which makes it payable to any other holder. Now if any holder
or indorsee wishes it paid to any particular person, he fills up the
blank by writing a request to that effect above the name of the
indorser, thus: "Pay to George Bruce," or "Pay to George Bruce or
order;" who, again, may by indorsement order it paid to some particular
person. Or, if he should indorse it in blank, or order it paid "to the
_bearer_," it would again pass, as at first, by mere delivery.

Sec.4. In common business transactions in the country, notes intended to be
negotiable are usually made payable to bearer, as in the form given.
(Sec.1.) The young reader, or other person inexperienced in business, may
not know why they are not always so written. The making of a note
payable to order protects the holder or owner in case the note should be
lost. Take, for example, the note supposed in the preceding section,
indorsed in blank. Suppose the owner resides in Buffalo, and the maker
in Detroit. The owner writes over the name of John Jay, "Pay to George
Bruce," also residing in Detroit, to whom it is sent by mail, to be by
him presented to the maker for payment. And should the note by accident
or fraud fall into the hands of another, it being payable to Bruce only,
or to his order, the parties are protected from loss.

Sec.5. As a contract is not binding without a valuable consideration,
(Chap. LIV, Sec.6,) the words "value received" are inserted in notes, as
evidence of such consideration. But where there is no statute requiring
the insertion of these words, a note is good without them. Whether they
are inserted or not, the note is presumed to have been given for a
valuable consideration; and the maker, to avoid his obligation to pay
it, must make it appear that no value was received.

Sec.6. A note made by two or more persons may be joint or joint or several.
When it is written, "We promise to pay," it is only a joint note, and
all must be sued together. If written, "We jointly and severally promise
to pay," they may be sued either jointly or separately. Also if written
"I promise to pay," it is treated as a joint and several note. A note
written, "We promise," and signed, A. B., principal, and C. D.,
security, is the joint note of both; and if written, "I promise," and
signed in the same manner, it is the joint and several note of both.

Sec.7. Any person having in possession a negotiable note, though a mere
agent, is deemed the true owner, and may sue it in his own name, without
showing title. The _bona fide_ holder can recover upon the paper, though
it came to him from a person who had stolen or robbed it from the true
owner; provided he took it innocently in the course of trade for a
valuable consideration before it was due, and with due caution. But if
suspicion is cast upon the title of the holder, by showing that the
instrument has got into circulation by force or fraud, then the holder
must show the consideration he gave for it.

Sec.8. Ordinarily, a person can not convey to another a valid title to
property which is not lawfully his own; and hence the purchaser of
stolen goods must give them up to the lawful owner. The exception to
this rule, in the case of promissory notes, seems to be founded in
reason and good policy. The use of negotiable paper in commercial
transactions is of great public convenience; and it is proper that, for
the sake of trade, protection should be given to the holder of such
paper who receives it fairly in the way of business, though it has been
paid, if he received it before it fell due.

Sec.9. But it is equally material for the interests of trade, that the
owner should have due protection. Hence if a person takes a note from a
stranger without inquiring how he came by it; or does not take it in the
usual course of business, or for some responsibility incurred on the
credit of the note, he takes it at his peril. But the owner, in order to
place his right to relief beyond question, ought to use diligence in
apprising the public of the loss of the note.

Sec.10. A person buying a note after it has become due, takes it at his
peril. Although the holder may sue it in his own name, the maker may
offset any demands which he had against the promisee before it was
transferred, as in the case of notes not negotiable. (Sec.2.) But when
notes in which no day of payment is expressed comes under this rule, is
a question to be determined by circumstances. In New Jersey and
Pennsylvania, the words "without defalcation or discount," or words to
that effect, must be inserted in notes, or they may be met by offsets as
notes that are bought after due.

Sec.11. A note made payable in some commodity is not negotiable. If it is
not paid according to the conditions therein expressed, the maker
becomes liable to pay in cash. But in either case, if it passes to a
third person, he can sue it only in the name of the promisee or payee;
and it may be met by offsets as other notes not negotiable, (Sec.2,) and
notes bought after due. (Sec.10.)

Sec.12. Notes payable _on demand_, or in which no time of payment is
mentioned, are due immediately, and no demand of payment is necessary.
But a note payable _at sight_, or at a specified time after sight, must
be presented for payment before it can be sued. If the words "with
interest" are omitted, interest commences at the time the note becomes
due. If payable on demand, it will draw interest from the time when
payment is demanded.

Sec.13. After the day on which a note is made payable, the maker has three
days in which to make payment, which are called _days of grace_. Hence,
a note payable on the first day of the month is not due and suable until
the fourth. If, however, the last day of grace falls on Sunday, or the
fourth of July, or any other day recognized by law as a holiday, or day
of public rest, the last day of grace would be a day earlier. If the
fourth of July or any other holiday should come on Saturday, the note
would be due on Friday. Or if such day should fall on Monday, the last
day of grace would be Saturday.

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