Question 4. A past due note, endorsed by the payee, but not marked paid, is found by an administrator among the deceased maker's effects. What is the rule of law as to the presumption of its payment?

Answer: Under these circumstances the presumption is that the note has been paid and the obligations of the maker discharged. [See Negotiable Instruments Law, Section 119 (5).]

BANKRUPTCY

Question 5. Who may take advantage of the Bankruptcy Act voluntarily, and who may be forced into involuntary bankruptcy?

Answer: (a) The following may become voluntary bankrupts: Any natural person, any partnership, and any corporation, except a municipal, railroad, insurance, or banking corporation.

(b) Those who may be forced into involuntary bankruptcy are: Any natural person, except a wage earner or a person engaged chiefly in farming or the tillage of the soil; any unincorporated company; a partnership, during the continuance of the partnership business, or after dissolution and before the final settlement thereof; any moneyed, business, or commercial corporation, except a municipal, railroad, insurance or banking corporation. (Bankruptcy Act, Sections 4 and 5.)

In the case of voluntary bankruptcy the amount of indebtedness is immaterial, and no act of bankruptcy is necessary.

In the case of involuntary bankruptcy the petitioning creditors must allege and prove an indebtedness to them of $500 or over, that the debtor owes debts to the amount of $1,000 or over, and that he has committed an act of bankruptcy. [Section 59 (b).]

Question 6. Mention the principal acts which constitute acts of bankruptcy.

Answer: The acts of bankruptcy are set out in Section 3 (a) of the Bankruptcy Act 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; or

(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 ob-
tain 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.

CONTRACTS

Question 7. What does a seller impliedly warrant in the sale of a chattel?

Answer: In all sales of chattels, unless a contrary intention appears, there exist the following implied warranties of title:

(a) That the seller has the right to sell the goods;
(b) That the buyer shall have and enjoy quiet pos-
session of the goods as against lawful claims
existing at the time of the sale;

(c) That the goods shall be free, at the time of

sale, from any charge or encumbrance in favor of any third person, not known by the buyer at the time of the sale.

If the sale is by description, there is an implied warranty that the goods shall correspond to the description. If by sample, that the bulk shall correspond to the sample in quality. There may also be, in a given case, an implied warranty that the goods are of merchantable quality (free from serious defects or up to the usual standard). There may also be an implied warranty that the goods are fit for the particular purpose for which they were purchased. If the sale is of food, etc., for human consumption, there is an implied warranty that such articles are wholesome and fit for human consumption.

Question 8. When may a creditor enforce a contract with a minor?

Answer: When the goods, services, etc., contracted for are necessaries and have actually been delivered or supplied to and used or consumed by the minor; and, in contracts other than for necessaries, when the minor, after reaching majority, has expressly or impliedly ratified the contract.

Question 9. Explain what is meant by:

(a) An executory contract

(b) An executed contract

(c) A void contract (Give example)
(d) An implied contract (Give ex-
ample)

(e) A voidable contract (Give ex-
ample)

(f) An express contract

(g) A covenant

Answer: (a) An executory contract is one which has not been performed by either party.

(b) An executed contract is one which has been fully performed by all parties.

(c) A void contract is an agreement which lacks one or more of the essential elements of a contract. Example: A contract having an illegal subject matter.

(d) An implied contract is one which the law implies to exist from the conduct of the parties, wholly or in part. Example: A orders certain goods to be delivered to him, saying nothing about the price or payment thereof. It is implied that he has agreed to pay the market or reasonable price for such goods.

(e) A voidable contract is one binding on one party but not on the other. Example: A contract secured under duress or by false statements of material facts.

(f) An express contract is one where all the material terms have been specifically stated and agreed upon either orally or in writing.

(g) A covenant is a written agreement executed under seal.

CORPORATIONS

Question 10. What is meant by cumulative voting? Describe and state when it is frequently practiced.

Answer: Cumulative voting is the right conferred by statute or by-law on a stockholder, which allows him to cast for one candidate as many votes as he has shares of stock, multiplied by the number of directors to be elected, or to distribute his votes on the same basis among as many candidates as he sees fit. The purpose of cumulative voting is to make it possible for the minority group of stockholders to secure representation on the board of directors. Assume a corporation having its capital stock divided into 1,000 shares and that three

directors are to be elected. Four candidates are nominated, one of whom is the minority candidate. Assume further that the minority stockholders control only 251 shares. The minority, by cumulating their votes, can thus cast 753 shares for their candidate. As the majority control only 749 shares, that number, 749, is the highest number of votes they can cast for each of their three candidates. Therefore, the minority are assured of the election of their candidate.

Question 11. The president and secretary of a mercantile corporation, seal, execute and deliver in the company's name a mortgage on the company's real estate, without the authority of the directors. The company receives adequate value therefor. Can the holder foreclose in the case of default? Give reasons.

Answer: The question presented here is the liability of a principal for the unauthorized act of its agents. While a president of a corporation has usually a wide scope of implied or apparent authority, he has no such authority to execute a mortgage on the corporate real estate even for legitimate corporate purposes. On the other hand, the company received adequate value. The question then arises as to whether the directors or stockholders knew all the circumstances surrounding this transaction, namely, the execution by the president and secretary of the mortgage. If they did, and failed to repudiate the unauthorized mortgage, this amounts to a ratification and the holder can foreclose in case of a default. If, on the other hand, the execution of the mortgage was unknown to the directors or stockholders, then the holder cannot foreclose, even though the company received adequate value. However, the company would have to restore the benefit admittedly received. If it failed to do so, the holder of the mortgage could sue the company, but could not foreclose the mortgage.