goods, title must have passed, the goods must be in the seller's possession or equivalent control, and the price must in some way be due, in whole or in part, except in case of bankruptcy. Possession of part only of the goods gives a lien on that part. A seller's lien may be in favor of a factor or agent and enforced by him as well as by his principal. The lien may be waived, whether unwisely or not does not matter; sometimes this is done by giving credit, sometimes on the guaranty of some third party. Even in these cases, however, insolvency of the buyer revives the lien, and it is revived if the term of credit expires. If at any time the buyer tenders the price, the lien ceases. Stoppage in Transit. In a somewhat similar way, the seller has the right of stoppage in transit; the right, fundamentally, rests on "the custom of merchants"; it is now well established. It is an unusual sort of right. It attaches after the seller has delivered the goods to the carrier, and thus parted with possession; it can be exercised only on the insolvency of the buyer. This is not necessarily insolvency in the technical sense, equivalent to bankruptcy, or a near equivalent. Insolvency here means inability to meet debts as they come due in the ordinary course of business. When it is clear that the buyer will be unable to pay when the price falls due, the right of stoppage in transit may be exercised. The right ceases when the buyer, the consignee, obtains possession; and an arrangement between the buyer and the carrier by which the latter holds the goods as warehouseman, constitutes a control by the consignee which serves the purpose of possession; sufficient so that the right ceases. Superior to Right to Attach. The seller's right of stoppage in transit is held superior to the right of creditors of the buyer to attach the goods; their right is no better than the buyer's; the same is true of a re-sale by the buyer during transit; the purchaser has no better right than the original buyer. But if the seller transfers to the buyer a bill of lading, the latter may then convey by re-sale a title better than the original seller then has; the delivery of the bill of lading has somewhat of the quality of a delivery of the goods, enough at least to protect the third party if the goods were transferred in good faith and for value. Such transference is also effective when made as a pledge or mortgage for security; the extent of the right which the original seller retains in the goods is then limited to such interest, if any, as the original buyer still retains in the goods pledged or mortgaged. Termination of Transit. The termination of transit puts an end to the seller's right of stoppage, and it is not always a simple matter to fix the termination. The seller's right of stoppage applies only to a transit caused by the seller. A later transit caused by the buyer may follow the termination of the original transit. This original transit is ended when the goods reach the buyer's possession or are in an equivalent control by the buyer. Delay by the carrier, or refusal to deliver, prolongs it; the end of the journey with the carrier does not terminate it in all cases, for placing the goods in a warehouse in the name of the seller, or subject to his order, leaves them still under his control. If the goods are placed in the name of the buyer, however, the transit is ended. In a bonded warehouse, it is a question of fact and status whether the goods have passed from the control of the seller; the courts tend to favor the seller in this matter. The buyer may tender performance of his obligation and thus terminate the right of the seller. Exercise of Right. The right of stoppage in transit may be exercised by the seller by taking actual possession, by changing the consignment of goods, or by notice to the carrier or other party in temporary control of them. If the seller exercises his right of stoppage in transit, he must pay the costs of transportation of the goods in question, including redelivery if he orders this. The exercise of this right simply restores the goods to the possession of the seller, subject to such further action as he may deem proper, or subject to tender by the buyer. In the case of perishable goods, the seller must take action to protect the interests of the buyer, and sell at once without notice; and he may do the same with other goods if the buyer is already in default. Authorities differ as to whether, under other circumstances, notice to the buyer is necessary before re-sale. It is the part of wisdom to be on the safe side and to give notice of time and place of re-sale, if practicable, and also to have at hand evidence as to the facts which justified the stoppage in transit. An entirely legal re-sale gives good title. Delay by Buyer. Unreasonable delay on the part of the buyer, rejection of goods which conform to contract, refusal to receive goods after title has passed, all justify a rescission of contract by the seller, and may thus give the seller his right of stoppage in transit. The seller may rightly prefer to retain the goods rather than to re-sell at once, as this leaves him the remedy of damages against the buyer. Sometimes the buyer rejects goods which really conform to contract, refuses to receive them, or takes measures to prolong transit, doing this to protect the seller rather than other creditors, and the courts have sometimes commended such action. THE RISK Relation to Title. The risk of loss or damage normally goes with the title; but, by agreement, the title and the risk may be separated. In general, however, unless otherwise agreed, the risk is in the seller until the title is transferred to the buyer, after which the risk is the buyer's whether delivery has been made or not. The question of title often hinges on delivery. When delivery has been delayed, the rule differs in different States; in some, the party at fault suffers the loss, in others not. In many cases, title passes on acceptance of the goods and receipt is not necessary; in other cases, receipt also may be specified. Shipments specified to be "at buyer's risk" are, nevertheless, held to be at seller's risk if the latter is also the shipper and if improper methods of shipment or defects in cars or vessels are the cause of the damage; but not if he is the seller only, without control over the shipment. Conditional Sales. In the case of conditional sales, if title is reserved in the seller as a matter of security, the risk is the buyer's. The seller has no further duty, but has only to receive the price; the buyer has received his full consideration under the contract. In effect, he has acquired title, and mortgaged back to the seller. This rule, however, is not adopted in all the decisions. It is wise, when possible, to have the terms of the agreement or sale make clear where the risk is to lie. Need of Uniform Sales Act. As has been shown, the laws of different States vary in their application to sales, and the desirability of the adoption of some Uniform Sales Act seems clear, but the adoption of the present act of that name is not yet sufficiently general to allow its use in this chapter as a statement of the law of sales at the present time. In view of this conflict of laws, it is important to note that the interpretation of the sale or contract will be made under the laws of the State where the contract was made, rather than the State where the action is brought, unless otherwise stipulated. CHAPTER X NEGOTIABLE INSTRUMENTS Terms Used. The term "commercial paper" has sometimes been used for a title as an alternative for "negotiable instruments," but the latter is the term more generally accepted by lawyers. Considered together, a better view-point of the subject is secured than by the use of either alone. BILL OF EXCHANGE Description. If a merchant A in London buys goods from, and owes money for them to, B in Paris; and if B in Paris, at the same time, owes money to C in London; it is very clumsy for A to send a bag of gold to B, who at once sends back most of it in a bag to C. It is much simpler for B to write to C, arranging for him to go to A and get the money which A owes B, or part of it. Such a transaction in time became standardized into the "bill of exchange," a request, or rather an order, from B to A to pay a sum named to C, charging this sum to the account of B. Form of Bill. A bill of exchange may be in the following form: $275100 New York,.... Jan. 2, 1917..... 1917.--- Sixty days....after date pay to the order of Alexander Winchester. Two Hundred Seventy Five 100 value received and charge the same to the account of To William Ames, 540 Wɛybosset Street, Providence, R. J. Dollars Henry Jenk...... The person who executes the bill, Henry Jenks, is called the drawer; William Ames, the drawee; and Alexander Winchester, the payee. |