H' BUSINESS LAW BY EICHARD S. BOWERS, A.B., LL.B. MEMBER OF THE BOSTON BAR REVISED EDITION New York PRENTICE-HALL, INC. 1936 i
KSSOfi-i: - . U I- ► if*i. «inar'..«F.ff:na<la t»^' &* ^ > t K»./', ?*, -.■^4 * ● 't V ^.3 06 S7?r^bCvtp^' ..iT36 PREFACE ' f K»-‘aa rriHIS book is written with the object of presoating toeollege X students and business men a practical survey of law from the standpoint of a business man. The introduction describes such general matters as the sources of law; law distinguished from equity; grounds of equity jurisdiction; criminaland civil law; the grades, kinds, and functions of courts, both state and Federal; the steps in a lawsuit; business law. The text presents fundamental principles of ten subjects of law, almost two thirds of the subjects that would be covered by a student at law school. Some of the leading principles in the text have footnote references to cases bearing upon those prin ciples, to be found in the second half of the book. The Uniform Sales Act, the Uniform Partnership Act, and the Negotiable Instruments Law have been so widely adopted by the states that these laws have been included in their entirety, following the cases. The reader may find the. inclusion of these laws useful, not only for the purpose of supplementing the text, but also for the purpose of checking the law in situa tions which may arise subsequent to the study of the text. A compilation of forms has also been included at the end of the book in order that the reader may have before him some of the more important instruments and documents referred to in the text. While the student may find many of these forms useful in his business career, the author wishes to remind him that the laws of the states vary as to the form and requisites of legal papers and that he should therefore consult a lawyer before executing important documents. The method employed by the author in writing the text has been that of stating as concisely and clearly as possible the leading, practical principles of the subjects treated, illustrating them with simple examples when they are not self-evident. This method has been employed instead of the 1.7 Copyright, 1932, by RICHARD S. BOWERS Copyright, 1933, by PRENTICE-HATX, INC. ALL KIOHT8 RESERVED. NO PART OF THIS BOOK MAY BE RBPRODOCED IN ANY FORM, BY MIMEOORAFH OR ANT OTHER MEANS, ●WITHOUT PERMISSION IN -WRITINa FROM THE PUBLISHERS. First Printing... Second Printing Third Printing., September, 1933 -T^ebruary, 1936 September, 1936 common PRINTED IN THE UNITED STATES OP AMERICA V J
PREFACE PREFACE vu VI those facts and portions of opinions which bear directly upon the points for which the cases are cited. Procedural points in the cases have in the main been omitted. Consequently, the reader should appreciate that they are more readable and easier to analyze than the ordinary run of cases he would be obliged to consult in investigating points of law in the state reports. The principles of law set forth in this text are intended to represent those sound, leading principles most widely adopted in the states. method of burying principles in wordy explanations of the points involved, because the author believes that a student of business law has so much ground to cover in so short a period that he should not be obliged to spend his time digging out of verbiage in the text the essential principles he is expected to grasp and retain. He may employ this time much profitably in analyzing the fundamental principles and pondering their application to practical situations. This book is adapted to the text system of study, supple mented by the case system. While the author concedes the superiority of the case system, now used in the law schools of higher standing, over the text system, in training students who are to become lawyers, he feels that extracting principles from cases requires considerable time—time that is well spent if the student is to make the determination of law fiom cases his life’s work. But were the student of business law to study exclusively from cases, he would be able, i" his limited time, to cover thoroughly no more ground than about one half of the subject of contracts; and the system, in such limited time, would utterly fail to serve its purpose of developing a legal mind. For the student of business law, it is more important to cover the eight or ten subjects presenting principles likely to be encountered in u^ness than to attempt the development of a legal mind, nd yet the student of business law would utterly fail to grasp the significance of common law if he did not have some con tact with cases—discovering how legal principles are extracted from more In respect to principles about which there is a conflict of authority, the author has endeavored to present only those supported by the weight of authority instead of stating too frequently that some states hold one view and other states another, presenting principles of law, necessary as it is at times, tends to weaken materially the interest of the student of law. In cases in which there is no clear weight of authority or in which there is an important minority authority, the author has alluded to the conflict of authority in the states. This method of presentation is pointed out so that the reader in a particular state will not assume that all the prin ciples set forth in this book are necessarily good law in his As to some of the principles, his state may not be in It is felt that the latter method of in case state, accord with the so-called general principles of American law. If the reader is studying this book under classroom guidance, his instructor will undoubtedly point out to him any discrep ancies between the principles of this text and the law of his cases, learning how these legal principles are applied in actual cases, ascertaining the grounds upon which courts base cu decisions, reading the enlightening opinions of courts deciding actual cases. It is for this reason that the author has supplemented his text with carefully selected cases of the courts of many different states. particular state. The view is sometimes expressed that a business man should not study law because it may influence him to rely on his inadequate learning instead of consulting a lawyer. The observation of the author, from both practice and classroom instruction, is that this view is erroneous. The person who has had no training in law whatsoever is generally totally ignorant of the importance of legal questions that confront him. in ignorance of his legal rights and liabilities does he appreci ate the wisdom of securing expert advice. The person with These cases, it should be pointed out, are not in most instances reproduced in their entirety. As originally published in the state reports, they ^le generally much longer than the extracts given in this text, lo promote economy of space and economy of the student’s time, the author has reproduced from the original cases only Not until he has made some costly error by proceeding
PREFACE training in law, on the other hand, is more apt to perceive the importance of legal questions that arise. His study has impressed upon him the complexity of law and the necessity of checking carefully each set of facts in the light of all the existing law applicable thereto. In consequence, he is more likely to secure expert guidance when legal questions confront him. Also, in the countless legal situations that inevitably in the life of everyone, when there is not sufficient time to consult a lawyer or when the matter does not at first sight appear sufficiently important to warrant consulting a lawyer, the person who has studied law finds that his study stands him in good stead. Vlll GENERAL CONTENTS \ PART PAGS Introduction 1 arise I. Text 17 Contracts Agency Sales Bailments Negotiable instruments Partnerships Corporations Bankruptcy Torts Real property 19 79 101 127 141 Richard S. Bowers. . . 179 203 245 261 273 II. Cases III. Uniform Acts IV. Forms V. Tables of Certain Statutes by States Index 301 399 485 501 511 DC i
1 CONTENTS IN DETAIL INTRODUCTION PAGE SECTIONS 1. Law defined 2. Sources of law 3. Courts of equity distinguished from courts of law 4. Grounds of equity jurisdiction 5. Criminal and civil law 3 3 1 6 7 8 The Courts 8 6. In general. . . . 7. State courts. . . 8. Federal courts. . 9. Steps in a lawsuit 10. Business law. . . 9 10 12 14 PART I—TEXT CONTRACTS Chapter I GENERAL MATTERS 21 1. Definition 2. Essential elements of a contract 3. May be oral or written 4. Formal and simple contracts 5. Express and implied contracts 6. Executed and executory contracts .... 7. Bilateral and unilateral contracts 8. Divisible and indivisible contracts .... 9. Void, voidable, and unenforceable contracts 10. Capacity to contract 21 21 22 22 23 24 24 24 25 Chapter II MUTUAL ASSENT Offer and Acceptance 26 1. Necessity of mutual assent 2. Mutual assent expressed by an offer and an acceptance 3. What constitutes an offer and an acceptance 2G 26 XI i
CONTENTS CONTENTS Xll xm BECTIONS 9. Contracts obtained by duress 10. Innocent misrepresentation . FAOE Offer 43 SECTIONS 4. Offer must be definite 5. Preliminary negotiations are not offers 6. Offer must be communicated 7. Duration of offer 8. Offer may lapse 9. Offer lapses upon death or insanity. . 10. Offer may be revoked by offeror . . . 11. Offer terminates upon rejection. . . . 12. Offer terminates upon acceptance. . . 13. Terms of offer PAGE 43 27 27 Fraud 27 11. Elements of fraud 12. False representation of material existing fact 13. Knowledge of falsity of representation . . . 14. Reasonable reliance 15. Damage 16. Remedies in fraud 17. Fraud in the execution of a contract . . . . 44 28 44 28 45 28 45 28 45 29 46 29 46 29 Mistake Acceptance 18. Mistake of one party only 19. Mutual mistake 20. Reformation of written instruments 46 14. In general 15. Acceptance of unilateral and bilateral offers 16. Communication 17. Time acceptance takes effect 18. Silence as acceptance 30 47 30 47 30 30 Chapter V ILLEGAL CONTRACTS 31 49 1. In general 2. Contracts violating law 3. Sunday contracts 4. Gaming contracts 5. Usurious contracts 6. Contracts in restraint of trade. . . 7. Valid contracts in restraint of trade 8. Contracts against public policy. . . Chapter III 49 49 CONSIDERATION 49 1. Necessity of consideration 2. Promises under seal 3. Consideration defined 4. Adequacy of consideration 5. Past consideration 6. Moral consideration 7. Contractual obligation as consideration 8. Payments received in full settlement . 9. Duty imposed by law as consideration 10. Promises to forbear bringing suit. . . 11. Promise of bankrupt to pay a claim discharged by bankruptcy. . 38 12. Promise to pay a debt upon which Statute of Limitations has run 38 13. Charitable subscriptions 34 50 34 50 34 50 35 51 35 35 Chapter VI STATUTE OF FRAUDS 35 36 37 54 1. In general 2. Text of typical statute 3. Promise of executor 4. Promise to pay debt of another 5. Agreements in consideration of marriage. . . . 6. Contract for sale of land 7. Agreement not to be performed within one year 8. Contract for sale of personal property 9. Sufficiency of writing ; ' ' ● ● 10. Other promises required to be in writing. . . . 37 54 55 55 39 56 56 56 Chapter IV 57 57 VOIDABLE CONTRACTS 57 1. Contracts of minors 2. Avoidance by minor 3. Ratification by minor 4. Liability of parent upon contract of minor child 5. Liability of minor for torts 6. Contracts of insane persons 7. Contracts of drunkards 8. Contracts obtained by undue influence .... 41 41 Chapter VII PARTIES AFFECTED BY CONTRACTS Joint Obligations 42 42 42 42 1. Joint obligations. 2. Several obligations 59 43 59 43
CONTENTS XIV BECTIONS 3. Joint and several obligations 4. Joint obligees CONTENTS XV PAGE PAGE SECTIOK8 3. Discharge by accord and satisfaction 4. Discharge by material alteration. . 6. Discharge by operation of law . . . 59 76 59 . 76 77 Contracts for Benefit of Third Persons 5. Definition and law . 59 AGENCY Chapter I CREATION OF AGENCY Assignments 6. In general 7. What may be assigned 8. Notice of assignment 9. Rights of assignee 10. Assignments by operation of law . 60 60 61 81 1. Definition of an agent 2. Distinction between agent and independent contractor 3. Capacity to be principal and agent 4. What may be performed through an agent 5. Form of appointment 6. Agency by necessity 7. Agency by estoppel 8. Agency by ratification 9. Essentials of ratification ● ● ● 61 81 62 82 82 Chapter VIII CONSTRUCTION AND PERFORMANCE 1. Terms of contract are questions of fact 2. Construction in accordance with intent 3. Rules of construction 4. Parol evidence rule 5. Conditions precedent 6. Concurrent conditions 7. Independent conditions !!!'!! 8. Satisfaction of 9. Payment . . 82 83 83 64 84 64 84 64 65 Chapter II PRINCIPAL AND AGENT Duties of Principal 65 66 67 \ 67 promisee 68 86 1. To compensate 2. Compensation in event of termination by agent 3. Compensation of real estate brokers 4. To reimburse and to indemnify 5. To compensate for personal injuries Duties of Agent 86 Excuses for Non-performance 86 10. Importance 11. Prevention 12. Waiver .... 13. Impossibility 14. Types of impossibility 68 87 68 87 68 69 69 88 6. To obey instructions 7. To use ordinary care 8. To be subordinate 9. To be loyal 10. To perform personally 11. Liability of agent appointing subagent . . . Termination of Agency 88 Chapter IX REMEDIES 1. Specific performance and injunction. . 2. Replevin 3. Rescission 4. Damages 5. Mitigation of damage 6. Liquidated damages 7. Recovery for part performance . . . . 8. Anticipatory breach 9. Interference with contract 88 88 89 71 90 71 . 72 72 12. By terms of original agreement. 13. By act of the parties 14. Agency coupled wth an interest 15. By operation of law 90 73 90 73 91 73 91 74 74 Chapter III PRINCIPAL, AGENT, AND THIRD PARTY" Contracts 1. Liability of principal upon contracts 2. Implied authority Chapter X discharge of CONTRACTS 1. Discharge by performance. 2. Discharge by agreement. . 76 93 76 93 i
CONTENTS CONTENTS xvu XVI PAGE SECTIONS 4. Goods to be put in deliverable state . . 5. Sales on trial 6. Unascertained goods 7. Delivery to buyer or carrier 8. Bills of lading and warehouse receipts. . Conditional Sales SECTIONa 3. Implied authority in particular cases . 4. Apparent authority PAGE 113 94 113 94 113 Disclosed or Undisclosed Principals 114 5. Simple contracts 6. Exceptions to liabilities and rights of undisclosed principal. . . . 7. Sealed and negotiable instruments 8. Election by third party 95 114 96 96 115 9. Definition 10. Distinguished from other transactions 11. Recording of conditional sales . . . . 12. Rights of conditional seller 13. Rights of conditional buyer 97 116 Torts 116 9. Liability for agent’s torts 10. Knowledge of and notice to agent binds principal 11. Notice of revocation of agency 12. Implied warranties of authority and existing, competent principal 98 117 99 117 99 Other Transfers of Title 14. General rule in sales by person not the owner . . 15. By one having voidable title 16. By seller continuing in possession of property sold 17. By factors 18. Sales of goods in bulk 19. Fraudulent conveyances 99 118 SALES Chapter I 118 118 118 THE CONTRACT OF SALE 119 1. Uniform Sales Act . 119 103 Formation of the Contract 2. Definitions 3. Sale distinguished from gift 4. Statute of Frauds Chapter III PERFORMANCE AND REMEDIES 104 104 104 122 1. Law of contracts governs 2. Delivery and payment as concurrent conditions . . 3. Right of buyer to examine goods 4. Acceptance not a bar to an action for damages. . . 5. Buyer not bound to return goods wrongly delivered 6. Buyer refusing to accept delivery Remedies of Seller Subject Matter of Contract . 122 5. Existing and future goods 6. Sale of undivided share 7. Fungible goods 8. Destruction of goods sold 122 105 122 105 . . 122 105 122 lOG I Warranties 9. Express warranty 10. Oral warranties in written contract 11. Implied warranties 12. Implied warranties of title 13. Implied warranty in sale by description 14. Implied warranties in sale by sample ir' warranty of fitness for a particular purpose lb. No other implied warranties of quality 17. Extent of warranties 18. Remedies for breach of warranty 106 123 7. Unpaid seller’s lien 8. Stoppage in transitu 9, Resale by unpaid seller 10. Rescission by unpaid seller 11. Action by seller for price 12. Action for damages for non-acceptance of goods 13. Rescission of contract of sale 123 107 123 107 123 107 123 107 I I 124 107 I . 124 108 108 Remedies of the Buyer 14. Action of replevin or for conversion 15. Action for breach of contract 108 124 109 124 Chapter II BAILMENTS Chapter I IN GENERAL TRANSFER OF TITLE 1. Importance of determining who has title . , 112 Transfer as Between Seller and Buyer 2. Intention determines transfer 3. Specific goods 129 1. Definition 2. Distinction between bailment and sale 112 129 112 1
CONTENTS CONTENTS XVlll XIX SECTIONS 3. Types of bailments 4. Liability of bailor to bailee injured by defects in property. . . . 130 5. Liability of bailee for loss of or damage to property 6. Limitation of liability by contract 7. Liability of bailee for violating contract terms . . Liens PAGE Chapter II 129 FORMATION OF NEGOTIABLE INSTRUMENTS PAGE BECTIOKS 1. In general 2. Writing and signature 3. Promise or order 4. Unconditional promise or order 5. Payable in money 6. A sum certain ' ' 7. Payable on demand or at a fixed or determinable future time . 8. Payable to order or to bearer 9. Language not affecting negotiability 10. Matters not affecting negotiability 11. Rules of construction 12. Completing an incomplete instrument 13. Liability of agent 14. Liability of minors and corporations 130 149 131 149 131 149 150 150 8. In general. . . 9. Particular liens 131 . 151 . 151 132 Pledges 152 10. In general 11. Rights of parties under pledge agreement 12. Rights of parties at common law. . . . 152 132 152 132 152 133 153 Innkeepers 13. Liability of innkeeper for property of guest 14. Innkeepers in general 153 133 153 134 Chapter III CONSIDERATION AND DELIVERY Consideration Chapter II COMMON CARRIERS 1. Definition. . . . 2. Duty to transport 136 136 156 1. Consideration is essential . . . 2. Presumption of consideration . 156 Common Carriers of Goods 3. Liability for safe' carriage 4. Limitation of liability by contract 5. Liability for injuries to passengers 6. Liability for baggage of passenger 7. Limitation of liability by contract 137 Delivery 137 157 3. Delivery is essential 4. Presumptions of delivery 138 157 139 139 Chapter IV ACCEPTANCE, NEGOTIATION, HOLDERS IN DUE COURSE Acceptance NEGOTIABLE INSTRUMENTS Chapter I IN GENERAL 1. The Negotiable Instruments Law. . . . 2. Definition 3. Negotiable instruments distinguished from other contracts. . . . 143 4. Distinction between negotiation and assignment Promissory Notes 159 Definition Implied acceptance General and qualified acceptances . Acceptance of checks (certification) Acceptance; payment for honor . . 1. . . 159 . . 159 2. 143 3. 143 160 4. 160 5. 144 Negotiation 160 5. Definition 6. Kinds of promissory notes. . . . 7. Special forms of promissory notfes Kinds of negotiation . Indorsements in general Kinds of indorsement. . 6. 145 160 7. 145 161 8. 145 Holders in Due Course Bills of Exchange 8. Definition 9. Special forms of bills of exchange 10. Instruments not governed by Negotiable Instruments Law. . . . 147 162 Holders in general - ● ● Requirements of a holder in due course . Paper complete and regular upon its face 146 9. 163 146 10. 163 11. 1
CONTENTS XX CONTENTS XXI SECTIONS 12. Before paper is overdue 13. In good faith and for value 14. Without notice of any infirmity or defect 15. Transferee of holder in due FAOE PARTNERSHIPS Chapter I IN GENERAL 163 163 164 164 course PAGE SECTIONS 1. Types of business organizations 2. Uniform Partnership Act . . . 3. Kinds of partnership 4. Kinds of partners 5. Articles of copartnership . . . 6. Definition of a partnership. . . 181 182 Chapter V 182 183 DEFENSES OF PRIMARY PARTIES AGAINST HOLDERS 1. In general 2. Kinds of personal defenses 3. Kinds of real defenses 183 184 166 166 Tests of Partnership 167 184 7. Effect of sharing profits. . . 8. Effect of coownership. . . . 9. Effect of agency relationship 10. Non-profit organizations. . 11. Partnership by estoppel. . . 185 185 Chapter VI 185 185 OBLIGATIONS OF THE PARTIES Primary Parties Limited Partnerships 186 12. Definition 13. Requirements for formation 14. When limited partner is liable as a general partner 1. Maker of note. 2. Acceptor of bill . 169 186 169 186 Secondary Parties 3. Drawer of bill 4. Warranties of indorsers 5. Conditional liability of unqualified indorsers 6. Order of liability among indorsers .... 169 Chapter II PARTNERSHIP PROPERTY 170 . 171 171 188 1. Partnership capital 2. Partnership property . . . . 3. Title to partnership property 188 Presentment, Dishonor, and Notice 188 7. In general 8. Time of presentment for payment ..!!!! 9. Manner of presentment for payment 10. When presentment for payment is not required 11. Presentment of bill for acceptance 12. Definition of dishonor 13. Time notice must be given 14. Kind of notice 15. Notice by indorser notified of dishonor . . 16. When notice is not required 171 Property Rights of a Partner 4. Extent of partner’s property rights 5. Nature of partner’s right in specific partnership property .... 189 6. Nature of partner’s interest in partnership. . . , 7. Assignment of a partner’s interest 8. Right of creditor of partner to charge his interest 171 188 172 172 189 173 189 173 190 173 173 174 Chapter III RELATIONS OF PARTNERS TO ONE ANOTHER 1. Agreement governs 2. Rights of contribution and indemnity 3. Right to share in profits and surplus; losses 4. Right in management 5. Right to inspect books and to information 6. Right to an accounting 7. No right to remuneration 8. Continuation of business 9. Fiduciary relationship of partners 10. Suits by partners 174 Protest 191 17. When required, 18. Description of protest 175 191 175 191 192 192 Chapter VII DISCHARGE OF NEGOTIABLE INSTRUMENTS 1. Discharge of instrument itself 2. Discharge of secondary parties 192 192 193 177 193 177 193
CONTENTS CONTENTS xxu xxin SECTIONS 14. Liability upon contracts of promoters 15. Subscription to stock of corporation to be formed PAGE Chapter IV 213 213 RELATIONS OF PARTNERS TO PERSONS DEALING WITH THE PARTNERSPIIP SECTIONS 1. Powers of partner in general 2. Liability of partnership; general rules. 3. Acts requiring authority of all partners 4. Admissions of and notice to partner. 5. Estoppel and ratification 6. Liability for torts 7. Nature of partner’s liability 8. Liability of incoming partner PAGE Chapter II STOCK, BONDS, AND DIVIDENDS Stocks and Bonds 194 194 195 195 1. In general 2. Distinction between capital stock and capital 3. Shares and certificates of stock 4. Corporate bonds 5. Distinctions between shares and bonds . . . 215 196 215 196 215 196 216 196 216 Kinds of Stock Chapter V 6. Common and preferred stock 7. Common preferences of preferred stock 8. Stock with and without par value . . 9. Treasury stock 10. Payment for stock 11. Watered stock 12. Rights of creditors when stock is watered or not fully paid for. . 220 13. Payment on call 14. Method of transferring stock, , . . 15. Liability of transferee to corporation 217 DISSOLUTION 217 1. In general 2. Causes of dissolution 3. Effect of dissolution on authority of partner 4. Liability of partnership to third party upon new contract after dissolution 5. Continuation of business after dissolution caused wrongfully. . . 199 6. Effect of dissolution by death 200 7. Continuation of business after death or retirement of partner . . 200 8. Order for distributing firm assets. 9. Marshaling assets of insolvent firm 218 198 219 198 219 . 199 220 199 221 221 222 201 Dividends 201 222 16. In general 17. Kjnds of dividends 18. Declaration of dividends. . 19. Persons entitled to dividends 222 CORPORATIONS 223 223 CH.A.PTER I IN GENERAL Chapter III STOCKHOLDERS, DIRECTORS, AND EXECUTIVE OFFICERS Stockholders 1. Foreword Definition Distinctions between 205 2. 205 3. . 206 a corporation and a partnership Advantages and disadvantages of incorporation . . 4. 226 207 1. In general 2, Right to dividends 3. Right to inspect books 4. Right to attend meetings and to vote 5. Meetings of stockholders 6. Voting at stockholders’ meetings 7. Right to preference in sale of additional capital stock 8. Right to prevent ultra vires acts 9. Right to enforce claims of the corporation 10. Statutory liability of stockholders to creditors . . . Directors 226 Types of Corporations 226 5. Classification as to purpose De jure and de facto corporations . Corporations sole and aggregate . Domestic and foreign corporations 207 226 6. 208 227 7. 209 228 8. 209 228 228 Formation of Corporation Organization under general laws Procedure for incorporation By-laws Effect of by-laws Promoters.... 229 9. 210 229 10. 210 11. 211 12. 212 229 11. In general 12. Powers of board of directors 13. 212 230
CONTENTS XXIV CONTENTS XXV SECTIONS 13. Fiduciary position of directors 14. Liability of directors to corporation. . . , 15. Liability of directors to third persons . . Executive Officers PAGE BECTION8 8. Trustee 9. Outline of proceeding in bankruptcy 10. Who may become a bankrupt 11. Essentials of an involuntary petition 12. Acts of bankruptcy 13. What property of bankrupt passes to the trustee. 14. Right of trustee to avoid preferences of bankrupt, 15. Validity of attachments made before bankruptcy. 16. Bankrupt may offer composition with creditors, . 17. Debts which may be proved 18. Secured claims 19. Rights of creditor to set off claim 20. Claims which have priority in payment 21. Claims not affected by a discharge in bankruptcy. PAGE 230 249 230 249 231 251 252 252 16. In general 17, Powers of executive officers 231 253 231 253 254 Chapter IV 254 POWERS OF A CORPORATION 254 255 255 255 255 1. In general 2. Express powers in charter. , 3. Implied powers from charter 4. Powers incidental to or expressly conferred upon all corporations 235 5. Particular powers considered 235 6. Notice of powers of corporation 236 7. Who may complain of ultra vires acts 236 8. Enforceability of ultra vires contracts 236 9. Liability of corporation for torts 237 10. Liability of corporation for crimes . 234 234 . 234 Amendment of 1933 22. Compositions and extensions 23. Agricultural compositions and extensions 24. Reorganization of railroads engaged in interstate commerce . . . 257 256 257 TORTS 237 1. Foreword 2. Definition 3. Assault and battery 4. False imprisonment 5. Negligence 6. Deceit (fraud) 7. Conversion 8. Trespass 9. Slander and libel 10. Malicious prosecution; abuse of process 11. Slander of title 12. Interference with contract 13. Misuse of trade name 14. Conspiracy 15. Alienation of affections 16. Nuisance 17. Damage by animals 263 263 Chapter V 263 DISSOLUTION OF CORPORATIONS 264 265 1. Methods of dissolution 2. Effect of dissolution on existing contracts .... 3. Limited existence of a corporation after dissolution 4. Effect of consolidation 239 266 239 266 239 267 240 268 . 269 Chapter VI UNINCORPORATED ASSOCIATIONS 269 269 270 1. In general 2. Non-stock associations , 3. Joint stock companies. 4. Business trusts 241 270 241 270 242 271 242 271 BANKRUPTCY REAL PROPERTY 1. The Bankruptcy Act . 2. Objects of Bankruptcy Act 3. State insolvency laws. 247 Chapter I . 247 247 IN GENERAL Officers of a Bankruptcy Court 1. Real and personal property defined 2. Tests for determining whether chattels have become incorporated into realty 3. Fixtures 4. Reasons for distinguishing between real and personal property. . 277 275 4. Clerk. . 5. Judge. . 6. Referee . 7. Receiver. 248 248 275 248 276 249 i
CONTENTS CONTENTS XXVI XXVll PAGB Metliods of Acquiring Title to Real Property Cole V. Cole Cook & Laurie Contracting Co. v. Bell Crowder et al. v. Reed Day V. Caton Derby v. Phelps Friend v. Childs Dining Hall Co Garretzen v. Duenckel Gates V. Tippecanoe Stone Co. et al Hagerstown Brewing Co. v. Gates Hamer v. Sid way Harrison v. Armour Hill V. Morey Hoskinson et al. v. Eliot et al Hun V. Cary Hutchins v. Inhabitants of Penobscot In Re Condon In Re New York Tunnel Co In Re Philpott’s Estate International Textbook Company V. Martin ● . . . Jackson Architectiu'al Iron Works v. Hurlbut Jones V. Morrison Joyce et al. v. Adams et al Law V. Stokes Lawrence v. Shipman ● Lees V. Colgan Lundy v. Southern Bell Telephone & Telegraph Co Manitowoc Steam Boiler Works v. Manitowoc Glue Co Meehan v. Valentine Mobile & Ohio Ry. Co. v. Weiner Moore v. Appleton Moulton V. Kershaw and Another Mueller v. Buch Nagel V. Ham, Yearsley & Ryrie National Bank of Commerce of Lincoln v. Farmers’ and Merchants’ Bank of Lincoln O’Keefe v. Leistikow Palmer v. Courtney Parrott v. Stewart et al People’s Pleasure Park Company (Inc.) and Others v. Rohleder . . . 371 Peter Bent Brigham Hospital v. McClure and Another Prentiss v. Sinclair Prescott V. Jones Quinn V. Burton Raymond v. Portland R. Co Seighortner v. Weissenborn SheffiJl & Wife v. Van Deusen & Wife Spencer v. Spencer Spooner v. Mattoon State V. Stillwell 364 PAGE SECTIONS 5. By deed 6. Formalities attending deeds 7. Examination of title by grantee .... 8. Acquisition of title by will or by descent 9. Acquisition of title by adverse possession 10. Other methods of acquiring title .... 340 278 279 312 303 279 281 313 281 336 282 332 375 373 Estates in Real Estate 11. Estates classified according to duration . . . 12. Hofnestead estate 13. Estates by dower and by curtesy 14. Easements 15. Joint tenancies and tenancies in common . . 282 307 283 374 283 325 283 365 284 379 390 385 Ch.\.pter II LANDLORD AND TENANT 387 353 287 1. Creation of the relationship 2. Kinds of tenancies 3. Liability of landlord to tenant for personal injuries 4. Repairs 5. Liability of tenant for waste 6. Subletting and assignment by tenant 7. Improvements by tenant 8. Liability of tenant for rent 9. Termination of the relationship 316 288 348 288 377 289 340 289 329 289 323 290 308 290 391 291 320 361 349 Chapter III 326 REAL ESTATE MORTGAGES 304 293 1. Definition Form of mortgage Deed of trust Rights and liabilities of mortgagor and mortgagee Liability of grantee of mortgagor Foreclosure Methods of foreclosure Liability of mortgagor for deficiency 355 294 2. 347 295 3. 296 4. 353 296 5. 335 297 6. 355 297 7. 395 299 8. 342 . 369 . 306 PART II—CASES {In Alphabetical Order) 327 Adams v. Ferguson Anderson v. May Bostwick V. Mutual Life Ins. Co Brown and Another v. Winnisimmet Company Burson v. Huntington City of Philadelphia v. Reeves and Cabot. . . 358 389 319 368 311 392 381 363 352 345 314 393
CONTENTS xxviii PAGE 310 Strong V. Foote Upton, Assignee v. Tribilcock Wagner v. Simmons & Co Whitehead t>. Comstock & Company . . . Williams t). West Chicago St. R. Co. . . . Woodbury, Williams & English v. Roberts Worley v. Johnson . 376 368 4 396 305 351 . 356 PART III—UNIFORM ACTS 401 Uniform Sales Act Negotiable Instruments Law Uniform Partnership Act . , . 429 457 PART IV—FORMS 487 1. Simple Contract 2. Power of Attorney 3. Bill of Sale 4. Conditional Sale Agreement . . 5. Chattel Mortgage 6. Chattel Mortgage Note. . . . 7. Collateral Note 8. Promissory Note 9. Bill of Exchange 10. Check 11. Trade Acceptance 12. Notice of Dishonor 13. Articles of Copartnership . . . 14. General Release of all Demands . 487 . 488 . 489 INTRODUCTION. 491 . 493 494 . 496 496 496 497 497 . 497 499 PART V—TABLES OF CERTAIN STATUTES BY STATES . 503 . 504 Limitations of certain actions in the various states. Interest rates and usury laws of the various states. Amounts of Statutes of Frauds relating to sales of goods in the various states 509 . 513 Index I
1 INTRODUCTION § 1. Law defined. The term law is used in a variety of senses. Employed in the sense attached to it wheit we speak of the study of law, the term may be defined as follows: Law is the system of principles and rules of an organized society (such as the state), governing the conduct of its members. More specifically, law consists of those rules which the courts will recognize and enforce in the decision of cases brought before them. ●The principal sources of law in the § 2. Sources of law. United States are as follows: Constitutions. A constitution is the organic and funda mental law of a nation or a state. In American law, a constitution is a written instrument, drawn by the people of a state or of the United States, establishing rules for the departments and the officers of the government and com monly defining the fundamental rights of citizens. The United States has a constitution, as has each state. The United States Constitution is considered a grant to the Federal Government by the states of the powers enumerated therein. Such powers as are not granted, the states are deemed to retain. Thus, Congress does not have power to legislate except when the power is conferred expressly, or by reasonable implication, in the Federal Constitution. For example, the Federal Constitution gives Congress power to “regulate commerce with foreign nations, and among the several States, and with the Indian tribes. Under this provision. Congress inay regulate interstate commerce, but it has no power to regulate intrastate commerce. That power is reserved by the states. Similarly, the states, having given Congress power to regulate interstate commerce, may not themselves regulate It. 3 i
INTRODUCTION 4 INTRODUCTION 5 The provisions of a constitution control until they are changed by the authority which established them, and any act of a legislative body or any decision of a court which violates such provisions is null and void. A law is said to be uncon stitutional when it violates a provision of a state constitution or of the Federal Constitution. he is a minor, this decision embodies the general principle that a minor may avoid his contract. This principle becomes a part of the common law of the State of Maine. Principles established by an appellate court are regarded as precedents in the jurisdiction for which the appellate court functions and are applied in similar controversies arising. Thus, if the Supreme Judicial Court of Maine should decide in the case of Smith v. Jones that a minor has the right to avoid his contract, as described in the preceding paragraph, all courts of Maine would render a similar decision if subsequently one Brown, a minor, sued for breach of con tract, seeks to avoid Uability on the ground of minority. In such a case, if a lower court in Maine refused to follow the principle established in Smith v. Jones and rendered judgment against Brown, Brown could appeal the case to the Supreme Judicial Court, which would reverse the judg ment of the lower court in conformity with the precedent it had established in Smith v. Jones. The purpose of an appeal is to correct errors committed by the lower courts in the trial of cases. The decisions of an appellate court are not binding upon the courts of another jurisdiction. Thus, the law of Maine giving a minor the right to avoid his contract, as established in the hjqjothetical case of Smith v. Jones, would not be regarded as controlling upon the courts of Rhode Island. But if the appellate court of a state has not previously decided a point of law, it will accord weight to the decisions of appellate courts in other states, the weight depending upon the merit of such other appellate courts, the number of such state courts reaching a similar conclusion, and the soundness of the reason ing supporting the conclusion. Thus, let us suppose the appellate court in Rhode Island has never decided the ques tion of whether a minor has the right to avoid his contract, and the question is presented for the first time in the case of X V. Y, appealed from a lower court. If the appellate courts of forty other states have decided, in accord with Maine law, that a minor has the right to avoid his contract, while five states have decided contra, the Rhode Island court Statute law. The statute law of a particular jurisdiction consists of the statutes enacted by the legislature. Thus, Congress enacts statutes for the United States; state legisla tures enact statutes for their respective states; and legis lative bodies of cities and towns, for their subdivisions of the state. The statutes of a state are generally embodied in several compact volumes, compiled as of a certain date and supplemented by annual volumes of legislative enactments since that date, showing any additions to, or amendments of, the statutes in the general compilation. A number of uniform laws, such as the Negotiable Instru ments Law, the Sales Act, and the Partnership Act, have been drafted by a commission, the members of which are known as the Commissioners on Uniformity of Legislation. These uniform laws have been enacted as statutes by the legislatures of many states. Except for the study of these uniform laws, the student of law spends but little time upon statutes. He studies chiefly common law, principally for the following reasons: (1) Statute law may be easily ascertained, when the need arises, by reference to a few books containing statutes; whereas ascertaining principles of common law involves not only extensive investigation among many hundreds of books, but also skill in applying the principles found to the case presented. (2) The principles of common law of a state are infinitely more numerous than its statutes. Common law. Practically speaking, common law con sists of the principles embodied in decisions of appellate courts. Thus, if the Supreme Judicial Court of Maine, in an appeal raising the question of the right of John Smith, a minor, to avoid a certain contract into which he had entered with one Jones, decides in favor of Smith on the ground that I. M
INTRODUCTION INTRODUCTION 6 7 will be considerably influenced by the weight of authority in permitting a minor to avoid his contract. This classification also represents the order of priority when these three types of law conflict. A statute must not be contrary to a provision of the constitutions; a court decision must not be contrary to a statute. A principle established in a court decision is superseded by a subsequent statute provid ing to the contrary. § 3. Courts of equity distinguished from courts of law.— A court of equity is a court which exercises jurisdiction gen erally for the purpose of affording relief in certain cases in which a party has no adequate remedy in a court of law. The first courts in England were courts of law. mon law developed in England, it gradually became more crystallized and less flexible. Guided by precedents, the law courts would hear cases, coming within certain well-defined classes, in which relief had previously been given, but not cases outside these classes. Thus, a law court would award money damages to a party injured by a breach of contract, but it would not order the party committing such breach to perform his contract, although in certain cases justice might require such relief. In consequence of the deficiencies of the law courts, there evolved in England a high court of chancery (court of equity), the purpose of which was to afford relief and to administer justice in cases for which there was no adequate remedy at law. The term equity was employed because it was descriptive of the fairness and the natural justice which inspired the founding, and invoked the jurisdiction, of courts of equity. The states of this country adopted equity jurisprudence along with the common law of England. In most states one court will hear both law and equity cases; in some states courts of equity are separate and distinct from courts of law; and in a few states the distinction between law and equity has been abolished. The rules followed in both courts of equity and courts of law are rules of law. The two sets of rules, though distinct, are not to be regarded as independent systems of law. The rules of equity are merely a supplement or an appendix to the common law. They assume the existence of the common law, and add something to it. Principles of equity, like principles of common law, have the force of precedents and are binding upon the court which establishes them. § 4. Groimds of equity jurisdiction.—The cases in which equity jurisdiction is entertained generally fall into three classes: (1) Cases in which the subject matter is equitable, as in a controversy relating to the administration of a trust. (2) Cases in which a particular relationship exists, as in suits between partners and coowners of real estate. (3) Cases in which there is a remedy at law, but the remedy is not plain, adequate, and complete. Some illustra tions of this class of cases follow: A party seeks to reform a written instrument because of mistake; to rescind, cancel, or set aside contracts obtained by fraud; to obtain specific performance of contracts for the sale or purchase of land, or for the sale of an article of intrinsic or sentimental value, such as a rare painting; to enjoin (forbid) a party to a contract to break his contract in certain cases—for example, an employee agrees that for one year following termination of his employ ment he will not engage in the same business in a certain locality; to enjoin the commission of threatened torts— for example, a person threatens to cut down a tree on the land of another; to reach and apply property of a debtor which cannot be attached at law—for example, a debtor is alleged to have conveyed property to another with the intent to defraud creditors; and so forth. Many principles recognized by courts of equity are founded upon such maxims as: “Equality is equity”; “Equity regards substance rather than form”; “Equity looks upon that as done which ought to have been done”; “Equity suffers not a right without a remedy”; “Equity delights to do justice and that not by halves”; “He who comes into equity must come with clean hands”; “He who seeks equity must do equity. ” As comk
INTRODUCTION § 6. Criminal and civil law.—Criminal law is that division of law which treats of violations of duties an individual owes to the community. Thus, the crime of murder is a violation of the duties the murderer owes to his community, and the law pertaining to this crime and its punishment is known as criminal law. Civil law is that division of law occupied with the exposi tion and enforcement of civil rights. Thus, if a party to a contract breaks such contract, the law regulating the right of the other party to sue for damages is known as civil law. The Courts § 6. In general.—A court is an organ of government, the function of which is the application of law to controversies brought before it, and the public administration of justice. It is manifest that in any society controversies will arise between its members. Perhaps a member vnW commit an offense, such as stealing the property of another member (larceny),which will endanger the welfare of the group as a whole; or perhaps a member will violate the civil rights of another member, as by breaking a contract into which he has entered (breach of contract) or by making defamatory state ments about another (slander). In the controversies which will inevitably arise in any community, the necessity of having a department of government that will adjudicate the disputes between members, and between the community and its members, is obvious. Without such a department, there would be no security for either the community or the rights of its members; members would take into their own hands offenses against the community and violation of private rights, and such action would result in chaos and more serious offenses than those the injured members seek to avenge. A judge is a public officer appointed by a community to preside over, and to administer the law in, a court of justice. The powers of a judge—depending, of course, upon the particular court over which he presides—are far-reaching. In accordance with law, he may deprive a person of his liberty; he may sentence a person to death; he may award a^ 8 INTRODUCTION 9 person’s property to another; he may prevent a person from carrying on his business; he may separate a person from his spouse; he may deny one the custody of his children. The justification for conferring such extensive powers upon judges is the interest of the community in preventing and punishing offenses against it and in protecting the rights of its members. § 7. State courts.—The courts of the states vary with respect to grades, jurisdiction, and names. In general, the courts of a state may be roughly divided into the following three grades: District courts; also called municipal, city, county, and justice of the peace courts. These courts have juris diction over certain cases arising within a particular section, as a city or one of several districts into which a county has been subdivided. Both civil and criminal cases are tried in these courts, but jurisdiction in civil cases is usually limited to suits involving less than a certain amount, as 85,000, and jurisdic tion in criminal cases is usually limited to the less serious crimes. These courts are presided over by a judge sitting without a jury. The constitutional right of defendants in these courts to a trial by jury is preserved by permitting defendants to appeal an adverse decision to a higher court with jury. Superior courts; in various states also called circuit and district courts. These courts have jurisdiction in a particular county or, in some states, in cases arising anywhere in the state. Both civil and criminal cases are tried in these courts, without limitation as to the amount involved or the seriousness of the crime. These courts sit with and without a jury. Cases may be entered in these courts originally, or may be carried there from lower courts by removal or appeal. In most states courts of this grade hear both equity and law cases; in a few states, however, this grade of court is divided into law courts and equity courts. In this grade, also, are probate courts, which have jurisdiction over such matters as the settlement of estates of deceased persons, divorce, appointment of guardians and conservators, and so forth. k
INTRODUCTION 10 INTRODUCTION 11 Courts of this grade and those of the first are known as trial courts. party; controversies between two or more states, between a state and citizens of another state, between citizens of different states, and between a state or the citizens thereof and foreign states, citizens, or subjects. (2) All cases in law and in equity arising under the Consti tution, the statutes, and the treaties of the United States; and all admiralty and maritime cases. There are three grades of Federal courts, as follows: United States District Court The country is divided into some eighty-nine districts, each of which contains a United States district court. Many of the states comprise a single district, while some of the larger states are divided into a number of districts. New York has four such districts. The district court is the trial court of the Federal system and is the lowest of the system. Appeals from its decisions may be taken to higher courts. Examples of cases tried in the district courts are such crimes as violations of the Federal prohibition law, of the internal revenue law, and of postal and copyright laws; , proceedings in bankruptcy; civil suits between citizens of different states. Circuit Court of Appeals. The United States is divided into ten circuits, in each of which is one of these courts. A circuit court of appeals reviews, on appeal or writ of error, decisions of district courts within its circuit. Its decision is final in a large number of cases, such as controversies between aliens and citizens, suits between citizens of different states, and cases arising under patent, revenue, and criminal laws. The opinions of the circuit courts of appeals and the district courts are compiled in what is known as the Federal Reporter. A reference to a case in these reports is in such form as 194 Fed. 26. United States Supreme Court. This is the highest court in the Federal system. It hears appeals in certain cases directly from district courts, as in a case involving the constitutionality of a Federal statute; from certain decisions of the circuit courts of appeals; from certain decisions of the appellate courts of Supreme court; also called in various states court of appeals, supreme court of errors, supreme judicial court, supreme court of appeals, and so forth. This is the highest court in a state and, unlike the courts in the first and second classes, it is not a trial court. Cases are not usually originally entered in this court. They are carried there by appeal from the lower, or trial, courts. Generally, there is only one such appellate court in a state, and it is composed of a number of justices, commonly five or seven. The function of this court is to review the record of the proceedings in the lower court, at the request of a party (appellant) aggrieved by a decision there, for the purpose of determining whether any error was committed by the judge in the trial of the case. If the appellate court finds that there judgment of the lower court or dismisses the appeal; if it finds that error was committed, it reverses the judgment of the lower court, usually ordering a new trial. The decisions of an appellate court are embodied in opin ions written for the court by one of the justices whose name is found at the beginning of the opinion. The opinions of the supreme court of a particular state are compiled chronologi cally in a set of reports, such as Califoi*nia Reports, New York Reports, and the like. References to cases appearing in these reports are in such form as 122 Cal. 403. This means that the case referred to will be found on page 403 in Volume 122 of the California Reports. Generally, only the decisions of the appellate court of a state are printed and have the force of law. The decisions of such courts, since inception, constitute in the main the common law in force in a particular state. The decisions of the lower, or trial, courts are not usually compiled in reports and do not have binding force as precedents. The jurisdiction of Federal courts embraces the following persons and matters: (1) Cases affecting ambassadors, other public ministers, and consuls; controversies in which the United States is a no error, it affirms the was § 8. Federal courts. i
INTRODUCTION 12 INTRODUCTION 13 The opinions of the United States Supreme Court are number of days later, the time being governed by statute or rules of court. If the defendant files no answer, he is defaulted and the plaintiff recovers judgment without the necessity of trying his case. Sometimes a defendant files a ● demurrer instead of an answer. A demurrer is an allegation that even if the facts stated in the declaration are taken as true, still the declarationdoes not state a cause of actionupon which the plaintiff can recover, or is otherwise defective as a matter of law. If the court overrules the demurrer, the defendant must file an answer. If the court sustains the demurrer, the defendant prevails in the suit unless the court permits the plaintiff to correct, by amendment, the defect in his declara tion. The foregoing are the most common pleadings, but there are others that the parties may file, depending upon the circumstances of the case and the laws of the particular state. Trial. Since the answer of the defendant is always a denial of the facts alleged in the plaintiff’s declaration, trial of the case is necessary to determine the issues. Either party may mark a pending case for trial. In a lawsuit, trial takes place before a judge and a jury, if either party claims the right to trial by jury. If such right is not claimed, trial takes place before a judge only. In suits of equity, a party is not entitled to trial by jury as a matter of right, although such a trial may be granted in certain cases. If trial is by jury, all questions of fact are submitted to the jury for deter mination in the light of instructions by the judge as to the law applicable to the case. If trial is not by jury, the judge hearing the case makes both findings of fact and rulings of law. The decision of a jury is known as a verdict. The decision of a court based either upon its findings of fact where there is no jury, or upon the verdict where there is a jury, is known as a judgment. A judgment is the final determination by the court of the rights of the parties in the suit. The judgment of a court of equity is called a decree. Appeal. The unsuccessful party in a trial has the right to appeal to an appellate court for the purpose of having such court review the record in the lower court. If the appellate court concludes that the lower court has erred in its states, published in volumes known as the United States Reports. In addition to the foregoing, there are special Federal courts, as the Court of Claims, the function of which is to hear claims against the Federal Government. § 9. Steps in a lawsuit.—A person bringing suit is known as the plaintiff. A person against whom the suit is brought is known as the defendant. The following steps mark the progress of a case in court: Service of summons upon the defendant. A summons is a writ directed to the sheriff or other proper officer requiring him to notify the person named (defendant) that an action has been commenced against him in the court from which the writ issues and that he is required to appear on a day named and to answer the complaint in such action. The sum mons is prepared by the attorney for the plaintiff and is given to a sheriff or constable for service upon the defendant. Service is usually made when a copy of the writ is either handed to the defendant, called service in hand, or left at the last and usual place of abode of the defendant. If the defendant is outside the state but has property within the state, service may sometimes be made by a notice of the writ published in a newspaper. Unless a summons is served upon the defendant as directed by statute, the defendant is not brought within the jurisdiction of the court and the plaintiff will be unable to recover judgment against him. The officer serving a on the defendant indorses on the back of copy of the writ the original writ a statement of the service, including time, place, and kind of service, and either files it himself in the office of the clerk of court on the date named in the writ or gives it to the plaintiff’s attorney for such filing. Filing of pleadings. The pleadings consist of written statements filed by the plaintiff and the defendant in the office of the clerk of court. Those of the plaintiff are generally called a declaration; those of the defendant, plaintiff must file his declaration writ; the defendant must file The an answer, on the date named in the an answer within a certain % i
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